RICHFIELD OIL & GAS 10Q 2012 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-54576

RICHFIELD OIL & GAS COMPANY

(Exact name of registrant as specified in its charter)

Nevada	35-2407100
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

15 W. South Temple, Suite 1050

Salt Lake City, UT 84101

(Address of principal executive offices)

(801) 519-8500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

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

Large Accelerated Filer¨		Accelerated Filer¨
Non-Accelerated Filer¨ (Do not check if a smaller reporting company)		Smaller Reporting Companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes¨ Nox

The issuer had 28,758,363 shares of common stock outstanding as of November 14, 2012.

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION		2

Item 1.	Financial Statements (Unaudited)	2

	Condensed Consolidated Balance Sheets (Unaudited) September 30, 2012 and December 31, 2011	2
	Condensed Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended September 30, 2012 and 2011	3
	Condensed Consolidated Statement of Stockholder's Equity (Unaudited) For the Nine Months Ended September 30, 2012	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2012 and 2011	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION		34

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6.	Exhibits	47

SIGNATURES		48

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

September 30, 2012 and December 31, 2011

	September 30,			December 31,
	2012			2011
ASSETS
Current assets
Cash and cash equivalents	$	151,754		$	37,157
Accounts receivables (net of allowances of $192,332 and $0)		514,587			341,568
Deposits and prepaid expenses		445,134			295,829
Other current assets		813			16,245
Total current assets		1,112,288			690,799


Properties and equipment, at cost - successful efforts method:
Proved properties, including wells and related equipment		4,963,637			3,998,069
Unproved properties		10,191,552			11,936,824
Accumulated depletion, depreciation and amortization		(862,442	)		(702,982	)
		14,292,747			15,231,911

Other properties and equipment		211,049			197,615
Accumulated depreciation		(179,806	)		(156,565	)
		31,243			41,050

Other assets		-			30,018

Total assets	$	15,436,278		$	15,993,778

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	1,499,053		$	1,478,493
Accrued expenses and other payables		842,169			879,484
Current portion of notes payable		323,898			2,277,497
Current portion of convertible notes payable		1,452,560			1,945,060
Current portion of capital leases		27,929			35,479
Due to directors		-			27,934
Due to related parties		14,865			245,740
Total current liabilities		4,160,474			6,889,687

Long-term liabilities
Notes payable, net of current portion		1,817,142			30,143
Capital lease obligation, net of current portion		-			15,748
Asset retirement obligations		349,826			350,243
Series A convertible preferred stock, par value $0.001; 10% cumulative dividends; 5,000,000 shares and 0 shares authorized; and 258,000 shares and 0 shares issued and outstanding at 9/30/2012 and 12/31/2011, respectively		380,000			-
Total long-term liabilities		2,546,968			396,134

Total liabilities	$	6,707,442		$	7,285,821

Commitments and contingencies

Stockholders' equity
Preferred stock, par value $.001; 45,000,000 shares and 50,000,000 shares authorized; 0 shares and 0 shares issued and outstanding at 9/30/2012 and 12/31/2011, respectively	$	-		$	-
Common stock, par value $.001; 250,000,000 authorized; 28,624,110 shares and 27,088,744 shares issued and outstanding at 9/30/2012 and 12/31/2011, respectively		28,623			27,089
Additional paid-in capital - common stock		35,287,488			31,232,334
Accumulated deficit		(26,587,275	)		(22,551,466	)
Total stockholders' equity	$	8,728,836		$	8,707,957

Total liabilities and stockholders' equity	$	15,436,278		$	15,993,778

See the accompanying notes to condensed consolidated financial statements

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2012 and 2011

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Revenues
Oil and natural gas sales	$	217,852		$	185,910		$	666,750		$	579,953
Other		-			-			-			6,017
Total revenues		217,852			185,910			666,750			585,970

Operating expenses
Production expenses		214,664			244,320			580,679			851,159
Production taxes		7,915			11,517			24,069			35,718
Exploration		28,239			99,258			108,638			167,617
Lease expiration		7,261			3,768			21,431			117,064
Depletion, depreciation, amortization and accretion		72,824			47,511			186,506			133,217
General and administrative expenses		778,812			4,841,290			3,643,019			7,846,134
Gain on sale of assets		(7,954	)		(380	)		(433,849	)		(90,794	)
Total expenses		1,101,761			5,247,284			4,130,493			9,060,115

Loss from operations		(883,909	)		(5,061,374	)		(3,463,743	)		(8,474,145	)

Other income (expenses)
Gain on settlement of liabilities		3,570			-			20,769			522,878
Interest and finance expenses		(238,516	)		(186,301	)		(644,773	)		(435,983	)
Interest income		31			-			52,338			-
Total other income (expenses)		(234,915	)		(186,301	)		(571,666	)		86,895

Loss before income taxes		(1,118,824	)		(5,247,675	)		(4,035,409	)		(8,387,250	)

Income tax provision		-			-			(400	)		-

Net loss	$	(1,118,824	)	$	(5,247,675	)	$	(4,035,809	)	$	(8,387,250	)

Net loss per common share - basic and diluted	$	(0.04	)	$	(0.22	)	$	(0.14	)	$	(0.41	)

Weighted average shares outstanding – basic and diluted		28,584,164			24,039,369			28,138,646			20,458,505

See the accompanying notes to condensed consolidated financial statements

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Condensed Consolidated Statement of Stockholders' Equity (Unaudited)

For the Nine Months Ended September 30, 2012

	Preferred Stock						Common Stock
					Additional								Additional						Total
					Paid-In								Paid-In			Accumulated			Stockholders'
	Shares		Par		Capital		Shares			Par			Capital			Deficit			Equity

Balance - December 31, 2011		-	$	-	$	-		27,088,744		$	27,089		$	31,232,334		$	(22,551,466	)	$	8,707,957

Issued 208,133 common stock for oil and gas properties and JIBs (valued at $2.50 per share)		-		-		-		208,133			208			520,125			-			520,333

Issued 555,200 common stock for directors', employees and consultants' compensation (valued between $01.60 and $2.50 per share)		-		-		-		555,200			555			1,378,445			-			1,379,000

Sale of 790,275 common stock and 672,888 warrants for cash (valued between $1.60 and $2.50 per share)		-		-		-		790,275			790			1,763,960			-			1,764,750

Issued 47,200 common stock as settlement of accounts payables including accrued interest (valued at $2.50 per share)		-		-		-		47,200			47			117,953			-			118,000

Issued 1,000 common stock relating to an oil and gas lease renewal (valued at $2.50 per share)		-		-		-		1,000			1			2,499			-			2,500

Issued 151,365 common stock as settlement of notes payable (valued between $2.20 and $2.50 per share)		-		-		-		151,365			151			374,849			-			375,000

Issued 7,193 common stock for related party payment of interest and exercise of warrants (warrants exercised at $1.60 per share)		-		-		-		7,193			7			11,502			-			11,509

Return of 25,000 common stock for cancellation from related party (valued at $2.50 per share)		-		-		-		(25,000	)		(25	)		(62,475	)		-			(62,500	)

Return of 200,000 common stock for cancellation from an unaffiliated investor related to the exchange of oil and gas properties in the Moroni Project (valued at $2.50 per share)		-		-		-		(200,000	)		(200	)		(499,800	)		-			(500,000	)

Issued 1,017,301 common stock warrants (see note 14)		-		-		-		-			-			448,096			-			448,096

Net loss for the nine month period		-		-		-		-			-			-			(4,035,809	)		(4,035,809	)

Balance - September 30, 2012		-	$	-	$	-		28,624,110		$	28,623		$	35,287,488		$	(26,587,275	)	$	8,728,836

See the accompanying notes to condensed consolidated financial statements

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2012 and 2011

	Nine Months Ended
	September 30,
	2012			2011
Cash flows from operating activities:
Net loss	$	(4,035,809	)	$	(8,387,250	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depletion, depreciation, amortization and accretion		187,560			133,218
Gain on settlement of liabilities		(35	)		(522,878	)
Capitalized interest on notes payable		8,456			85,597
Amortization of pre-paid interest		83,256			38,482
Lease expirations		21,431			117,064
Gain on sale of assets		(433,849	)		(90,794	)
Amortization of debt discounts		221,467			-
Return of common stock to pay professional fees		(62,500	)		-
Issuance of common stock for interest		58,728			69,778
Issuance of common stock and warrants for services and other expenses		1,411,010			6,999,297

Changes in operating assets and liabilities:
Decrease (increase) in accounts receivables		(153,458	)		492,313
Decrease (increase) in deposits and prepaid expenses		-			51,723
Decrease (increase) in other assets		(112,111	)		(45,572	)
Increase (decrease) in accounts payable		486,824			116,899
Increase (decrease) in accrued expenses and other payables		115,342			(51,482	)
Increase (decrease) in due to directors		(27,934	)		(19,658	)
Increase (decrease) in due to related parties		(61,246	)		60,021
Net cash used in operating activities		(2,292,868	)		(953,242	)

Cash flows from investing activities:
Cash received from acquisition of Freedom Oil & Gas , Inc.		-			1,485
Investment in oil and gas properties, including wells and related equipment		(1,344,976	)		(495,628	)
Investment in other properties and equipment		(13,434	)		-
Proceeds from sale of assets		2,271,678			68,494
Net cash provided by (used in) investing activities		913,268			(425,649	)

Cash flows from financing activities:
Proceeds from notes and convetible notes payable		100,000			496,250
Payments on notes and convertible notes payable		(649,461	)		(96,639	)
Proceeds from related party notes payable		50,000			101,000
Payments on related party notes payable		(304,909	)		-
Payments on capital lease obligation		(23,298	)		(21,299	)
Proceeds from issuance of convertible preferred stock		285,000			-
Proceeds from issuance of warrants		272,115			-
Proceeds from issuance of common stock - net of iss uance costs		1,764,750			880,416
Net cash provided by financing activities		1,494,197			1,359,728

Net increase in cash and cash equivalents		114,597			(19,163	)

Cash and cash equivalents - beginning of period		37,157			31,333

Cash and cash equivalents - end of period	$	151,754		$	12,170

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	84,758		$	24,217

Non-cash financing and investing activities:
Redemption of preferred stock and payment of preferred stock dividends through issuance of common stock	$	-		$	233,704
Purchase of oil and gas properties and conversion of JIB receivables billed to working interest holders through issuance of common stock and warrants	$	547,363		$	320,500
Purchase of oil and gas properties through exchange of property and reduction of notes payable	$	230,000		$	5,535
Sale of oil and gas properties for return of common stock and accounts receivable	$	539,277		$	-
Cancellation of lease in full satisfaction of accounts payable	$	180,000		$	-
Payment of pre-paid expenses, payables, and notes payable through issuance of common stock	$	550,000		$	2,276,227
Conversion of accounts payable and other payables through issuance of note payable	$	186,229		$	283,824
Conversion of notes payable through issuance of convertible notes payable	$	1,328,000		$	-
Conversion of convertible notes payable through iss uance of notes payable	$	1,117,500		$	-
Retirement of treasury shares	$	-		$	46,015
Capitalized asset retirement obligations	$	-		$	89,171
Capitalized accrued interest on notes payable	$	152,657		$	-
Settlement of litigation through exchange of property and issuance of common stock and warrants	$	-		$	1,461,644
Acquisition of Freedom Oil & Gas, Inc. in exchange for common stock	$	-		$	5,973,819

See the accompanying notes to condensed consolidated financial statements

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 ORGANIZATION AND NATURE OF BUSINESS

Richfield Oil & Gas Company (the “Company,” “Richfield” or “RFO”) is a Nevada corporation headquartered in Salt Lake City, Utah which was incorporated on April 8, 2011. The Company is engaged in the exploration, development and production of oil and gas in the states of Kansas, Oklahoma, Utah and Wyoming.

Contemporaneously with RFO’s incorporation, the Company merged (the “HPI Merger”) with its predecessor company, Hewitt Petroleum, Inc., a Delaware corporation which was incorporated on May 17, 2008 (“HPI”). In connection with the HPI Merger, HPI was merged out of existence and the Company assumed all of the assets and liabilities of HPI and the Company became the parent company of HPI’s two wholly owned subsidiaries, Hewitt Energy Group, Inc., a Texas corporation (“HEGINC”), Hewitt Operating, Inc., a Utah corporation (“HOPIN”). The Plan of Merger required that all HPI common stock be exchanged on a one-for-one basis for RFO common stock and that RFO assume all of the liabilities of HPI as of the effective date of the HPI Merger. As a result, the Company’s historical financial statements are a continuation of the financial statements of HPI. In addition, effective March 31, 2011, HPI entered into a Stock Exchange Agreement with Freedom Oil & Gas, Inc., a Nevada corporation (“Freedom”), which called for the exchange of stock in HPI for all of the outstanding stock of Freedom (the “Freedom Acquisition”). Upon completion of the Freedom Acquisition, it became a wholly owned subsidiary of the Company from March 31, 2011 until June 20, 2011 when Freedom was merged into RFO with RFO being the surviving entity.

On July 27, 2012 the Company formed a new wholly owned subsidiary, HR Land Group, LLC, a Utah Limited Liability Company, (“HR Land”). HR Land’s purpose is to acquire oil and gas leases and there was no activity in this company as of September 30, 2012.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Hewitt Energy Group, Inc., a Texas corporation (“HEGINC”), Hewitt Operating, Inc., a Utah corporation (“HOPIN”), and HR Land. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company has been involved in leasing, exploring and drilling in Kansas, Oklahoma, Utah and Wyoming since its formation. The Company is participating in over 33,000 acres of leasehold, seismic surveys, and numerous drilling projects in these states. The Company uses proven technologies and drilling and production methods that are both efficient and environmentally sound.

NOTE 2 GOING CONCERN

The Company’s condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. The Company has incurred substantial losses from operations causing negative working capital, in that current liabilities exceed current assets, and the Company has negative operating cash flows, which raise substantial doubt about the Company’s ability to continue as a going concern. The Company sustained a net loss for the nine months ended September 30, 2012 of $4,035,809 and a net loss for the year ended December 31, 2011 of $9,613,034, and has an accumulated deficit of $26,587,275 as of September 30, 2012.

The Company intends to make its planned capital expenditures in order to continue its drilling programs, but does not have sufficient realized revenues or operating cash flows in order to finance these activities internally. As a result, the Company intends to seek financing in order to fund its working capital and capital expenditure needs.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company has been able to meet its short-term needs through loans from officers and third parties; sales of working interest in its oil and gas properties; and private placements of equity securities. The Company may seek additional funding through sales of working interest in its oil and gas properties; the issuance of debt; preferred stock; common stock; or a combination of these items. Any proceeds received from these items could provide the needed funds for continued operations and drilling programs. The Company can provide no assurance that it will be able to obtain sufficient additional financing that it needs to develop its properties and alleviate doubt about its ability to continue as a going concern. If the Company is able to obtain sufficient additional financing proceeds, the Company cannot be certain that this additional financing will be available on acceptable terms, if at all. To the extent the Company raises additional funds by issuing equity securities, the Company’s stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company’s ability to conduct business. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 SIGNIFICANT ACCOUNTING POLICIES

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The financial statements included herein were prepared from the records of the Company in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Regulation S-X and S-K. In the opinion of management, all adjustments, of a normal recurring nature that are considered necessary for a fair presentation of the interim financial information, have been included. However, operating results for the periods presented are not necessarily indicative of the results that may be expected for a full year. The Company’s Form 10 includes certain definitions and a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. Except as disclosed herein, there have been no material changes to the information disclosed in the notes to the consolidated financial statements included in the Company��s Form 10.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of oil and gas reserves, assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ from these estimates. The Company evaluates its estimates on an on-going basis and bases its estimates on historical experience and on various other assumptions the Company believes to be reasonable under the circumstances. Although actual results may differ from these estimates under different assumptions or conditions, the Company believes that its estimates are reasonable. The Company’s activities are accounted for under the successful efforts method.

Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation. Such reclassifications had no impact on net loss, statements of cash flows, working capital or equity previously reported.

Accounts Receivable

Accounts receivable, which are primarily amounts owed by other working interest holders, are recorded at the invoiced amount and do not bear interest. The Company uses the specific identification method and routinely reviews outstanding accounts receivable balances for the likelihood of collection. The Company records a reserve for amounts not expected to be fully recovered. Actual balances are not applied against the reserve until substantially all collection efforts have been exhausted. The Company recorded and allowance for doubtful accounts of $192,332 and $0 at September 30, 2012 and December 31, 2012, respectively.

Reverse Stock Split

As more fully described in Note 17, effective October 23, 2012, the Company implemented a 1-for-10 reverse stock split of its issued and outstanding common stock. Under the guidance of FASB ASC 505-10, all common share and per common share information in the accompanying condensed consolidated financial statements and these notes to the financial statements have been retroactively restated to reflect the reverse common stock split.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Loss Per Common Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) (the numerator) by the weighted-average number of common shares outstanding for the period (the denominator). Diluted EPS is computed by dividing net income (loss) by the weighted-average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include common shares to be issued related to warrants outstanding, convertible debentures, and convertible preferred stock. The number of potential common shares outstanding is computed using the treasury stock method.

As the Company has incurred losses for the three and nine months ended September 30, 2012 and 2011, the potentially dilutive shares are anti-dilutive and are thus not added into the loss per share calculations. As of September 30, 2012 and 2011, there were 3,553,591 and 1,466,665 potentially dilutive shares, respectively.

Income Taxes

The Company accounts for income taxes under FASB ASC 740. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is more likely than not that some component or all of the benefits of deferred tax assets will not be realized.

The tax effects from an uncertain tax position can be recognized in the consolidated financial statements only if it is more likely than not that the position will be sustained if challenged by a taxing authority. The Company has examined the tax positions taken in its tax returns and determined that there are no uncertain tax positions. As a result, the Company has recorded no uncertain tax liabilities in its consolidated balance sheet.

Financial Instruments and Concentration of Risks

The Company’s financial instruments include cash and cash equivalents, accounts receivable and accounts payable. The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of their immediate or short-term maturities.

Substantially all of the Company’s accounts receivable result from oil and gas sales and joint interest billings (“JIBs”) to third parties in the oil and gas industry. This concentration of customers and joint interest owners may impact the Company’s overall credit risk in that these entities may be similarly affected by changes in economic and other conditions. As of September 30, 2012, 30% of the accounts receivable balance resulted from one entity. For the nine months ended September 30, 2012 and 2011, all of the revenues resulted from producing wells in Kansas.

Jumpstart Our Business Startups Act (“JOBS Act”), adopted January 3, 2012

The Company qualifies as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”) as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, the Company is permitted to rely on exemptions from various reporting requirements including, but not limited to, the requirement to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, and the requirement to submit certain executive compensation matters to shareholder advisory votes such as “say on pay” and “say on frequency.”

In addition, Section 107 of the JOBS Act also 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. The Company has elected to take advantage of the benefits of this extended transition period. The Company’s financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited

The Company will remain an emerging growth company up to the fifth anniversary of its first registered sale of common equity securities, or until the earliest of (a) the last day of the first fiscal year in which its annual gross revenues exceed $1 billion, (b) the date that it becomes a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of its common stock held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter, or (c) the date on which it has issued more than $1 billion in non-convertible debt during the preceding three-year period.

NOTE 4 ACQUISITION OF FREEDOM OIL & GAS, INC.

On March 4, 2011, HPI entered into a Stock Exchange Agreement with Freedom Oil & Gas, Inc., a Nevada corporation (“Freedom”), which called for the exchange of stock in HPI for all of the outstanding stock of Freedom (the “Freedom Acquisition”) that HPI did not already own (prior to the acquisition, the Company owned 100,000 shares of Freedom common shares) which resulted in HPI acquiring the remaining 99.83% of Freedom shares. The Freedom Acquisition was approved by HPI’s Board of Directors and a majority of the stockholders of Freedom as required by Nevada law, and the exchange took place effective March 31, 2011. The Freedom Acquisition provided the Company with additional oil exploitation opportunities through its ownership of complimentary properties in the Company’s Utah core area. Pursuant to the Stock Exchange Agreement, the Company assumed all of Freedom’s assets and liabilities.

The Company acquired 100% of all outstanding common stock of Freedom by the acquisition of 59,738,189 shares (99.83%) that the Company did not previously own in exchange for 5,973,819 shares of restricted common stock of the Company, plus 200,000 warrants for the purchase of the Company’s common stock valued at $11,977 exercisable at $2.50 per share to expire January 31, 2013.

The total purchase price of $5,995,796 was determined based upon the fair market value of $1.00 per share of common stock plus the $11,977 value for the warrants effective as of March 31, 2011. Goodwill has been recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired. The final allocation of the purchase price is as follows:

Assets Acquired:
Cash	$	1,485
Receivables		164,171
Oil and gas properties		6,904,067
Other		6,750
Goodwill		75,481
Liabilities Assumed:
Current liabilities		(1,156,158	)
Total	$	5,995,796

Value of 200,000 New Warrants Issued on March 31, 2011	$	11,977
Value of 5,973,819 New Common Stock Issued on March 31, 2011		5,973,819
Value of 10,000 Common Stock Owned Prior to March 31, 2011		10,000
Total Consideration	$	5,995,796

Upon completion of the acquisition, Freedom became a wholly-owned subsidiary of the Company. On June 20, 2011, Freedom was merged into the Company with the Company being the surviving entity.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 5 OIL AND NATURAL GAS PROPERTIES

Acquisitions for the nine months ended September 30, 2012

In January 2012, the Company purchased a 1.00% working interest in the Fountain Green Project located in Sanpete County, Utah from two unaffiliated investors for a value totaling $141,857 in exchange for the issuance of 50,000 shares of common stock for a value of $125,000, or $2.50 per share plus the cancelation of $16,857 of JIBs accounts receivable owed to the Company by the investors.

In January 2012, the Company purchased a 0.25% working interest in the Liberty #1 Well located in Juab County, Utah from an unaffiliated investor for a value totaling $22,307 in exchange for the issuance of 4,853 shares of common stock for a value of $12,133, or $2.50 per share plus the cancelation of $10,174 of JIBs accounts receivable owed to the Company by the investor.

In March 2012, the Company acquired leases for the Fountain Green Project located in Sanpete County, Utah from an unaffiliated investor, at that time, for a value totaling $383,200 in exchange for the issuance of 153,280 shares of common stock for a value of $383,200, or $2.50 per share. The Company capitalized $289,316 as a result of having a 75.50% working interest and the remaining balance of $93,884 was billed to the other 24.50% Fountain Green Project working interest holders. On March 31, 2012, this unaffiliated investor, Joseph P. Tate, became a Director of the Company.

In June 2012, the Company acquired an additional 10.00% working interest in the Perth Project located in Sumner County, Kansas, whereby the Company’s working interest will increase from 75.00% to 85.00% upon the completion of a certain work plan in the Perth Project. The acquisition was from three unaffiliated investors in exchange for an agreement to provide the investors with an aggregate 15.00% total carried interest in the work plan that includes drilling one new well, three well recompletions, and work on a salt water disposal well. The work plan is scheduled to be implemented in the fourth quarter of 2012. As part of the consideration for this transaction, one of the 5.00% carried interest investors also agreed to reduce his note payable by $80,000 and exchanged a 50.00% working interest in a salt water disposal well that was valued at $150,000.

Divestitures for the nine months ended September 30, 2012

In January, February and March 2012, the Company sold a 2.50% working interest in the Moroni #1-AXZH Well and the 320 acres leasehold for cash of $193,903 to an unaffiliated investor and two related parties (See Note 15).

In February and March 2012, the Company sold a 5.50% working interest in the Koelsch Field, including the requirement to participate in the Koelsch #25-1 Well, for cash of $16,665 to an unaffiliated investor and two related parties (see Note 15).

In May 2012, the Company sold a 3.00% carried interest in the first well to be drilled in the shallow zone on the Fountain Green Project in exchange for $100,000 in cash and a return of a 2.00% working interest in the Moroni #1-AXZH Well and the 320 acre leasehold. There were two parties to this transaction, one was an unaffiliated investor, the other was a related party, Zions Energy Corporation (see Note 15). The Zions Energy Corporation transaction was completed on the same terms as the unaffiliated investor transaction.

In May 2012, the Company sold a 21.00% working interest in the Prescott Lease, including the requirement to participate in the Prescott #25-6 Well located in the Koelsch Project and 229,801 warrants to purchase common stock at $2.50 per share for total cash of $619,500 to unaffiliated investors.

In May 2012, the Company determined that a lease in the Fountain Green Project was not valid as there were issues regarding the title of the property, and the lease term expired and, as a result, the lessor agreed to cancel the balance owing by the Company on this lease in the amount of $180,000.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In June 2012, the Company entered into an agreement (the “Skyline Oil Agreement”) with Skyline Oil, LLC (“Skyline Oil”), whereby the Company gave Skyline Oil (i) all of its interest in the Chad Wood Lease located in Central Utah; (ii) a 44.50% working interest in the Moroni #1-AXZH Well plus 320 surrounding acres; and (iii) a 15.00% working interest in 4,680 acres of the Independence Project, and in exchange Skyline Oil gave the Company (i) $1.6 million in cash; (ii) 200,000 shares of the Company’s common stock valued at $500,000 or $2.50 per share; and (iii) a 5.00% working interest in an additional 15,000 acres in a new Independence Project. The $500,000 from the return of 200,000 shares of common stock was treated as a return of capital and the remaining Independence Project unproved properties are now valued at $422,865. Following this transaction, the Company now owns a 5.00% working interest in 19,680 acres in the new Independence Project and a 5.00% working interest in the Moroni #1-AXZH Well plus 320 surrounding acres.

NOTE 6 NOTES PAYABLE

Notes Payable consists of the following:

	September 30			December 31,
	2012			2011
Note Payable, interest at 12.0% per annum, due June 2012, secured by 5.00% working interest in certain Fountain Green Project Leases.	$	-		$	1,080,000

Note Payable, interest at 10.0% per annum, monthly payments of $7,500, due October 2013, secured by a 5.00% working interest in certain Fountain Green Project Leases.		746,376			-

Note Payable, interest at 18.0% per annum, due on demand, secured by Mai, Johnson and Gorham, Kansas Leases.		-			90,000

Note Payable, interest at 10.0% per annum, monthly payments of $3,200, due June 2014, unsecured.		367,159			-

Note Payable, interest at 7.5% per annum, monthly payments of $1,949, due January 2014, secured by vehicle.		29,994			43,650

Note Payable, interest at 10.0% per annum, due June 2012, unsecured.		-			248,000

Note Payable, interest at 10.0% per annum, monthly payments of $15,000, due June 2014, secured by 10.00% working interest in certain Fountain Green Project Leases.		743,023			700,000

Note Payable, for $152,514 with interest at 2.0% monthly, due April 2012, unsecured - net of discount.		-			121,694

Note Payable, interest at 10.0% per annum, monthly payments of $5,000, due June 2014, unsecured		99,570			-

Note Payable, interest at 0.0% per annum, monthly payments of $1,500, due May 2013, unsecured		11,714			24,296

Note Payable, interest at 8.0% per annum, monthly payments of $10,000, due December 2013, unsecured		143,204			-

Total Notes Payable		2,141,040			2,307,640
Less: Current Portion (includes demand notes)		(323,898	)		(2,277,497	)
Long-Term Portion	$	1,817,142		$	30,143

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 7 CONVERTIBLE NOTES PAYABLE

Convertible Notes Payable consists of the following:

	September 30,			December 31,
	2012			2011
Note Payable interest at 8.0% per annum, due June 2012, convertible into common shares of the Company, at a conversion rate of $2.50 per common share, unsecured	$	-		$	367,500

Note Payable interest at 12.0% per annum, due on demand, convertible into common shares of the Company at a conversion rate of $2.50 per common share, unsecured.		52,560			52,560

Note Payable interest at 10.0% per annum, due on demand, convertible into common shares of the Company at a conversion rate of $2.50 per common share, secured by certain Kansas Leases and 10% working interest in certain Fountain Green Project Leases		1,300,000			1,300,000

Note Payable interest at 10.0% per annum, due June 2012, convertible into common shares of the Company at a conversion rate of $2.50 per common share, unsecured.		-			100,000

Note Payable interest at 5.0% per annum, due on demand, convertible into common shares of the Company at a conversion rate of CAD $1.60 (which was USD $1.67 at the time of loan) per common share, unsecured.		-			50,000

Note Payable interest at 5.0% per annum, due on demand, convertible into common shares of the Company at a conversion rate of CAD $1.60 (which was USD $1.67 at the time of loan) per common share, unsecured.		100,000			50,000

Note Payable interest at 0.0% per annum, due on demand, convertible into common shares of the Company at a conversion rate of $2.20 per common share, unsecured.		-			25,000

Total Convertible Notes Payable		1,452,560			1,945,060
Less: Current Portion (includes demand notes)		(1,452,560	)		(1,945,060	)
Long-Term Portion	$	-		$	-

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 8 CAPITAL LEASE OBLIGATION

The Company leases well equipment under a capital lease agreement. The term of the capital lease is for 5 years, bears interest at 9.0%, with monthly payments of $3,200 per month with the final payment due on May 20, 2013. As of September 30, 2012 and December 31, 2011, the remaining capital lease obligation was $27,929 and $51,227, respectively.

As of September 30, 2012 and December 31, 2011, well equipment acquired under capital leases totaled $154,155 and accumulated depreciation was $100,934 and $84,418, respectively.

NOTE 9 OPERATING LEASES

The Company leases office space in Salt Lake City, Utah (“Premises Lease”) which consists of approximately 3,903 square feet. The Company has a prepaid security deposit of $8,954. The Company entered into a one-year lease agreement effective September 1, 2011 with an option to renew annually for two additional years. The Company renewed the Premises Lease for an additional year effective September 1, 2012 with an annualized lease obligation of $110,167. The option to renew for the period September 1, 2013 to August 31, 2014 is an annualized obligation of $112,902. For the nine months ended September 30, 2012 and 2011, the Premises Lease payments were $80,827 and $49,830, respectively.

The Company leases a printer, copier and fax machine. The term of the lease is for 37 months commencing March 23, 2010. The monthly lease payment is $255. For the nine months ended September 30, 2012 and 2011, the lease payments were $2,295 for both periods.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 10 OIL AND GAS PROPERTY LEASES

The following table sets forth the oil and gas property lease acreage with an expiration date within the next three years (September 30, 2015). The Company intends to renew or place into production all of these oil and gas property leases prior to their expiration.

	Gross¹		Net²
	Acreage		Acreage

Utah/Wyoming		6,844		5,116
Kansas/Oklahoma		640		579
Total		7,484		5,695

1- "Gross" means the total number of acres in which we have a working interest.

2- "Net" means the aggregate of the percentage working interests of the Company.

NOTE 11 ASSET RETIREMENT OBLIGATIONS

FASB ASC 410 requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred and becomes determinable. Under this method, when liabilities for dismantlement and abandonment costs, excluding salvage values, are initially recorded, the carrying amount of the related oil and gas properties is increased. The fair value of the ARO asset and liability is measured using expected future cash outflows discounted at the Company’s credit-adjusted risk-free interest rate. Accretion of the liability is recognized each period using the interest method of allocation, and the capitalized cost is depleted using the units of production method. Should either the estimated life or the estimated abandonment costs of a property change materially upon the Company’s periodic review, a new calculation is performed using the same methodology of taking the abandonment cost and inflating it forward to its abandonment date and then discounting it back to the present using the Company’s credit-adjusted-risk-free rate. The carrying value of the asset retirement obligation is adjusted to the newly calculated value, with a corresponding offsetting adjustment to the asset retirement cost.

The following table summarizes the Company’s asset retirement obligation transactions recorded in accordance with the provisions of FASB ASC 410 during the nine months ended September 30, 2012 and the year ended December 31, 2011:

	September 30,			December 31,
	2012			2011
Beginning asset retirement obligation	$	350,243		$	348,742
Liabilities incurred for new wells placed into production		10,187			106,507
Liabilities decreased for wells sold or plugged		(14,409	)		(109,620	)
Accretion of discount on asset retirement obligations		3,805			4,614
Ending asset retirement obligations	$	349,826		$	350,243

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 12 CONVERTIBLE PREFERRED STOCK

On August 31, 2012, the Company filed a Certificate of Designation with the Nevada Secretary of State, designating 5,000,000 shares of the Company’s authorized shares of preferred stock as “Series A Preferred Stock.” All shares of common stock rank junior to the Series A Preferred Stock in regards to payment of dividends, liquidation, dissolution, and winding up of the Company.

The Series A Preferred Stock is convertible, at the option of the holders, into shares of common stock of the Company, at a per share conversion price determined by dividing the stated value of each share of Series A Preferred Stock by the average price at which shares of the Company’s common stock were sold over the 30-day period prior to the conversion, minus a 25.0% discount to such 30-day average price (the “Conversion Price”). Notwithstanding the foregoing, at no time shall the Conversion Price be less than $1.00 or greater than $3.70 per share.

The Company may redeem all or any portion of the Series A Preferred Stock at any time after August 31, 2014, or at any time if the Company’s common stock has traded at a rate of more than 10,000 shares per day for at least 30 consecutive days and the average trading price of the common stock (based on a 30-day moving average) is greater than $5.00 per share. The Series A Preferred Stock shall be redeemed by conversion into common stock of the Company. The Series A Preferred Stock redeemed shall be converted into shares of common stock of the Company at a per share conversion price determined by dividing the stated value of each share of Series A Preferred Stock by the Conversion Price. Notwithstanding the foregoing, at no time shall the Conversion Price used to determine the rate at which the Series A Preferred Stock shall be redeemed be less than $1.00 or greater than $3.70 per share. The holders of the Series A Preferred Stock shall have no voting rights, except as provided by Nevada law.

The holders of the Series A Preferred Stock shall be entitled to receive cumulative dividends on the Series A Preferred Stock at the rate of ten percent (10.0%) of the stated value per share per annum, payable quarterly.

As of September 30, 2012, the Company has completed the sale of 285,000 units (the “Units”), each unit consisting of one share of Series A Preferred Stock, with a stated value of $1.00 per share and one warrant exercisable to acquire one-tenth of a share of the Company’s common stock at a price of $3.70 per share for a period of 3 years from the closing date, in exchange for gross proceeds of $285,000.

If all the preferred stock outstanding were converted at September 30, 2012, we would issue 152,000 shares of common stock at a fair value of $380,000 or $2.50 per share. If the fair value of the common stock increases by $1.00 to $3.50 per share, we would only issue 108,571 shares of common stock. The maximum number of shares of common stock that could be required to be issued upon conversion of the preferred stock is 285,000 shares. No other contracts exist that could limit the number of shares we could be required to issue.

The convertible preferred stock is recorded as a liability at fair value in accordance with FASB ASC 480 “Distinguishing Liabilities from Equity”, with the difference between the fair value and the gross proceeds treated as a component of interest expense in the statement of operations. The related dividend payments will also be treated as a component of interest expense in the statement of operations as they are incurred.

NOTE 13 COMMON STOCK

In January 2012, the Company issued 234,375 shares of common stock to unaffiliated and existing investors for cash of $375,000 or $1.60 per share. In addition, the Company granted warrants to purchase up to 117,188 shares of common stock with an exercise price of $2.50 per share, which expire in January 2013.

In January 2012, the Company issued 10,000 shares of common stock to a consultant as compensation for services valued at $16,000 or $1.60 per share. The shares issued were fully vested and the entire amount was expensed on the date of grant.

Since February 2012, the Company issued 555,900 shares of common stock to unaffiliated and existing investors for cash of $1,389,750 or $2.50 per share. In addition, the Company granted warrants to purchase up to 555,700 shares of common stock with an exercise price ranging from $2.50 to $5.00 per share, which expire between February 2013 and July 2015.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Since February 2012, the Company issued 545,200 shares of common stock to directors, employees, and consultants, as compensation for services valued at $1,363,000 or $2.50 per share. The shares issued were fully vested and the entire amount of each stock award was expensed on the date of grant, with the exception of one grant valued at $75,000 that is for future services and will be expensed over the 6 month term of the agreement.

During the first quarter 2012, the Company issued 208,133 shares of common stock to unaffiliated and existing investors for a value of $520,333 or $2.50 per share relating to oil and gas properties consisting of lease acquisitions and a purchase of a 1.00% working interest in the Fountain Green Project located in Sanpete County, Utah and the purchase of a 0.25% working interest in the Liberty #1 Well located in Juab County, Utah.

In March 2012, the Company issued 47,200 shares of common stock to an existing investor for settlement of a $100,000 other payable plus $18,000 of accrued interest for a total value of $118,000 or $2.50 per share. The shares issued were fully vested and the $18,000 accrued interest was expensed on the date of grant.

In March 2012, the Company issued 1,000 shares of common stock to an unaffiliated investor for an oil and gas lease renewal valued at $2,500 or $2.50 per share. The shares issued were fully vested and the entire amount was expensed on the date of grant.

During the second quarter 2012, note holders exercised rights to convert $375,000 in convertible notes payable ranging from $2.20 to $2.50 per share into 151,365 shares of common stock. The shares issued were fully vested on the date of grant.

In May 2012, J. David Gowdy, a former officer and director of the Company voluntarily agreed to return to the Company, 25,000 shares of the Company’s common stock valued at $62,500 or $2.50 per share, to offset a portion of the independent audit fees recently incurred by the Company to complete the 2010 audit of Freedom required by Rule 8-04 of Regulation S-X of the Exchange Act. The shares were returned to the Company as treasury shares and subsequently cancelled.

In June 2012, the Company issued 7,193 shares of common stock to MacKov Investments Limited (“MacKov”), a related party, related to the exercise of warrants in settlement of interest outstanding on a note payable. The exercise price was $11,509 or $1.60 per share (see Note 15).

In June 2012, the Company entered into an agreement (the “Skyline Oil Agreement”) with Skyline Oil, LLC (“Skyline Oil”), whereby the Company gave Skyline Oil (i) all of its interest in the Chad Wood Lease located in Central Utah; (ii) a 44.50% working interest in the Moroni #1-AXZH Well plus 320 surrounding acres; and (iii) a 15.00% working interest in 4,680 acres of the Independence Project, and in exchange Skyline Oil gave the Company (i) $1.6 million in cash; (ii) 200,000 shares of the Company’s common stock valued at $500,000 or $2.50 per share; and (iii) a 5.00% working interest in an additional 15,000 acres in a new Independence Project. The 200,000 shares were returned to the Company as treasury shares and were subsequently cancelled.

NOTE 14 WARRANTS TO PURCHASE COMMON STOCK

During the nine months ended September 30, 2012, warrants totaling 1,017,301 shares of common stock were granted in conjunction with the issuance and settlement of notes payable, certain consulting agreements, oil and gas property sold by the Company, and private placements of preferred stock. These warrants are accounted for by the Companyunder the provisions of FASB ASC 718 and FASB ASC 505. These standards require the Company to record an expense associated with the fair value of stock-based payments. The Company uses the Black-Scholes option valuation model to calculate the fair value of stock-based payments at the date of grant. Warrant pricing models require the input of highly subjective assumptions, including the expected price volatility. For warrants granted in 2012, the Company used a variety of comparable and peer companies to determine the expected volatility. The Company believes the use of peer company data fairly represents the expected volatility it would experience if the Company was publicly traded in the oil and gas industry over the contractual term of the warrants. Changes in these assumptions can materially affect the fair value estimate. There were 511,051warrants that were fully vested as of September 30, 2012 and 506,250 warrants that will vest over time through June 2014. All of these warrants remained outstanding as of September 30, 2012. The Company has determined the fair value of the warrants granted to be $752,503 of which $448,096 has been expensed as of September 30, 2012 and $304,407 will be expensed in future periods.The following is the weighted average of the assumptions used in calculating the fair value of the warrants granted using the Black-Scholes model:

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Fair market value	$	2.46
Exercise price	$	5.83

Risk free rates		0.36	%
Dividend yield		0.00	%
Expected volatility		72.96	%
Contractual term		2.89 Years

The weighted-average fair market value at the date of grant for warrants granted, are as follows:

Fair value per warrant	$	0.7397
Total warrants granted		1,017,301
Total fair value of warrants granted	$	752,503

During the nine months ended September 30, 2012, an additional 672,888 warrants for shares of common stock were granted in conjunction with private placements of common stock for cash proceeds (see Note 13) that have an exercise price between $2.50 and $5.00 per share and expire one to three years from the date of grant.

There were warrants to purchase 2,952,686 shares of common stock outstanding as of September 30, 2012 exercisable between $1.60 and $12.50 per share that expire at various times between October 20, 2012 and September 24, 2015. The following table summarizes the Company’s warrant activity for the nine months ended September 30, 2012:

							Weighted-
							Average
				Weighted-			Remainder
				Average			Contractual
	Warrants			Exercise Price			Term in Years

Warrants outstanding as of December 31, 2011		1,269,690		$	2.22			0.96
Granted		1,690,189		$	5.30			2.80
Exercised		(7,193	)	$	(1.60	)		-
Forfeited/Expired		-			-			-
Warrants outstanding as of September 30, 2012		2,952,686		$	4.00			1.43

NOTE 15 RELATED PARTY TRANSACTIONS

Douglas C. Hewitt, Sr., an Officer and Chairman of the Board of the Company

Douglas C. Hewitt, Sr., an officer and Director of the Company, is a beneficiary in the Mountain Home Petroleum Business Trust, a Utah Business Trust (“MHPBT”), and Zions Energy Corporation (“Zions”) is a wholly owned subsidiary of MHPBT. In addition, The D. Mack Trust (“D Mack Trust”), is a trust in which Mr. Hewitt receives beneficial interest and is entitled to receive overriding royalty interest (“ORRI”) up to 1.00% in all newly acquired leases by the Company. MHPBT, Zions and D Mack Trust have had related party transactions with the Company.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of September 30, 2012, MHPBT has working interests in oil and gas properties that the Company controls which include a 0.50% before payout interest (“BPO”) and a 20.50% after payout interest (“APO”) in the Liberty #1 Well and Liberty Project and a 50.00% working interest in the shallow zones of the Fountain Green Project as previously defined. All of the working interest owned by MHPBT in the Company’s Liberty #1 Well, Liberty Project and Fountain Green Project properties were acquired by MHPBT from third parties prior to the formation of the Company.

As of September 30, 2012, Zions has working interests in oil and gas properties that the Company controls which include, a 1.50% carried interest in the first well to be drilled in the shallow zone on the Fountain Green Project and a 2.00% working interest in the Koelsch Field. All of the carried and working interests owned by Zions were acquired from the Company in 2012 on the same terms as other independent third party transactions as disclosed below in Note 15 (A) (ii) and 15 (A) (iii). For the nine months ended September 30, 2012, Zions has received $4,662 in revenues from oil sales from the Koelsch Field. As of September 30, 2012 the Liberty Project and Fountain Green Project remain undeveloped and no royalty revenues have been generated from these properties.

As of September 30, 2012, the D. Mack Trust receives ORRIs ranging from 0.25% to 1.50% on certain Kansas leases and MHPBT owns 6.00% ORRIs in Liberty #1 Well and Liberty Project. For the nine months ended September 30, 2012, the D. Mack Trust has received $12,489 in royalties relating to ORRIs from the Kansas leases.

The following related party transactions occurred with Zions or MHPBT during the nine months ended September 30, 2012:

In February and March 2012, the Company sold a 1.00% working interest in the Moroni #1-AXZH Well and the 320 acres leasehold for cash of $77,561 to Zions. This purchase was made on the same terms as other third party transactions that were completed in December 2011 and January 2012.

ii.

In February and March 2012, the Company sold a 3.00% working interest in the Koelsch Field, including the requirement to participate in the Koelsch #25-1 Well, for cash of $9,090 to Zions. This purchase was made on the same terms as other third party transactions that were completed in December 2011 and March 2012.

iii.

In May 2012, the Company received $50,000 in cash plus it acquired a 1.00% working interest in the Moroni #1-AXZH Well and the 320 acres leasehold by exchanging a 1.50% carried interest in the first well to be drilled in the shallow zone on the Fountain Green Project. This exchange was made on the same terms as another third party transaction that was completed in May 2012.

iv.

In August 2012, Zions loaned $50,000 to the Company and the Company issued a Note Payable to Zions at 6.0% per annum, due September 30, 2012. In conjunction with the loan, the Company granted 15,000 warrants for shares of common stock, exercisable at $5.00 per share and expiring on September 29, 2013. The warrants were valued at $3.68 using the Black-Scholes option valuation model and were expensed on the date of grant. The note was paid by the Company in September 2012 and $247 in interest was paid to Zions.

In August 2012, MHBPT sold a 1.50% BPO and a 1.50% APO in the Liberty #1 Well and Liberty Project to a third party investor together with 22,500 shares of the Company’s stock for the sum of $187,000. The Company was not a party to this transaction.

vi.

In September 2012, MHBT sold a 1.00% working interest in the Koelsch #25-1 Well and 640 acre leasehold and a 1.00% working interest in the Prescott #25-6 Well and 80 acre leasehold, both located in Stafford County, Kansas. The transfer also included the right to 15,000 warrants for shares of the Company’s common stock at $5.00 per share which expires on September 30, 2013. The Company was not a party to this transaction and the purchase price was not disclosed to the Company.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of September 30, 2012, the Company has $0 due to the Company’s director, Douglas C. Hewitt, Sr. and as of December 31, 2011, the Company had $27,934 due to Mr. Hewitt. These amounts are non-interest bearing and have no set terms of repayment.

J. David Gowdy, a Former Officer and Director of the Company and Greater than 5% Shareholder

J. David Gowdy, an officer and director of the Company from March 31, 2011 to December 12, 2011 and a beneficial owner of more than 5% of the outstanding shares of our common stock, is also a beneficiary in MHPBT and Zions described above. Prior to March 31, 2011, Mr. Gowdy was an officer and director of Freedom, which was acquired by the Company on March 31, 2011 (see Note 4). Mr. Gowdy is a trustee of MHPBT and the President of Zions. MHPBT and Zions’ related party transactions during the nine months ended September 30, 2012 are described above. In addition, Mr. Gowdy had the following related party transactions with the Company.

As per his December 12, 2011 letter agreement, Mr. Gowdy received $50,000 as compensation for transitional related consulting services from January 1, 2012 to April 30, 2012. Mr. Gowdy’s formal service contract with the Company ended April 30, 2012. The Company may continue to use Mr. Gowdy for consulting services as needed in the future which consulting services will be billed at an hourly rate.

ii.

In May 2012, Mr. Gowdy voluntarily agreed to return to the Company, 25,000 shares of the Company’s common stock valued at $62,500 or $2.50 per share, to offset a portion of the independent audit fees recently incurred to complete the 2010 audit of Freedom which was required by Rule 8-04 of Regulation S-X of the Exchange Act. The shares were returned to the Company as treasury shares and subsequently cancelled.

Glenn G. MacNeil, an Officer and Director of the Company

MacKov Investments Limited (“MacKov”), a company which is a Canadian controlled private corporation in which Glenn G. MacNeil, an officer and director of the Company, and his spouse have 100% of the ownership interests, has had related party transactions with the Company. As of September 30, 2012, MacKov has working interests in oil and gas properties that the Company controls which include the following: (i) MacKov owns a 0.50% working interest in the deep zones and a 0.25% working interest in the shallow zones of the Fountain Green Project which was purchased from the Company prior to Mr. MacNeil becoming the CFO and a director of the Company on the same terms as other independent third party transactions; (ii) MacKov owns a 3.25% BPO and a 2.75% APO working interest in the Liberty #1 Well and Liberty Project of which a 2.25% BPO and a 1.75% APO were purchased from third parties in 2009 through 2011 prior to Mr. MacNeil becoming CFO and a Director; a 0.50% BPO and a 0.50% APO were purchased from the Company prior to Mr. MacNeil becoming the CFO and a director on the same terms as other independent third party transactions in 2010; and a 0.50% BPO and a 0.50% APO were purchased from the Company in December 2011 on the same terms as other independent third party transactions as previously disclosed in 2011. In addition, MacKov owns a 1.00% ORRI in the Liberty #1 Well and Liberty Project which was purchased from a third party in 2010 and 2011; (iii) MacKov owns a 5.00% working interest in the Koelsch Field of which a 3.50% working interest was purchased from the Company in December 2011 on the same terms as other independent third party transactions as previously disclosed and a 1.50% working interest was purchased from the Company in February 2012 on the same terms as other independent third party transactions as disclosed in Note 15 (C) (i) below; and (iv) MacKov owns ORRI ranging from 0.25% to 2.25% on certain Kansas leases which were purchased from the Company in March 2011 prior to Mr. MacNeil becoming the CFO and a director. For the nine months ended September 30, 2012, MacKov has received $11,547 in royalties relating to ORRI and oil sales from working interest from the Kansas leases including the Koelsch Field. As of September 30, 2012 the Liberty Project and Fountain Green Project remain undeveloped and no revenues have been generated from these properties. The following related party transactions occurred with MacKov during the nine months ended September 30, 2012:

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In February 2012, the Company sold a 1.50% working interest in the Koelsch Field, including the requirement to participate in the Koelsch #25-1 Well, for cash of $4,545 to MacKov. This purchase was made on the same terms as other Company independent third party transactions that were completed in December 2011.

ii.

In February 2012, the Company sold a 0.50% working interest in the Moroni #1-AXZH Well and the 320 acres leasehold for cash of $38,781 to MacKov. This purchase was made on the same terms as other Company independent third party transactions that were completed in December 2011 and January 2012.

iii.

From January 1, 2012 to September 30, 2012, MacKov’s billings for fees for services to the Company totaled $103,500, which have been partially paid.

iv.

On June 30, 2012, MacKov settled the $254,909 note payable with the Company (plus accrued interest for $287,712) for consideration consisting of cash and the exercise of 7,193 warrants at $11,509 or $1.60 per share.

On June 30, 2012, in connection with the Company’s sale of its interest in the Moroni #1-AXZH Well and the surrounding 320 acres to Skyline Oil, MacKov sold its 0.50% working interest in the Moroni #1-AXZH Well and the surrounding 320 acres to Skyline Oil for the sum of $54,231.

As of September 30, 2012, the Company has $0 due to the Company’s director, Glenn G. MacNeil and as of December 31, 2011, the Company had $0 due to Mr. MacNeil. The Company has a due to related party payable to MacKov in the amounts of $14,865 and $245,740 at September 30, 2012 and December 31, 2011, respectively. The September 30, 2012 balance of $14,865 consists of outstanding fees and unreimbursed travel allowances. The December 31, 2011 balance of $245,740 consisted of $43,307 outstanding fees and unreimbursed travel allowances and a $254,909 note payable, net of debt discount of $52,476.

Joseph P. Tate, a Director of the Company

Joseph P. Tate became a director of the Company effective March 31, 2012. As of September 30, 2012, Mr. Tate is a beneficial landowner of two oil and gas leases totaling 1,816 acres within the Fountain Green Project which the Company controls and negotiated lease terms with Mr. Tate prior to him becoming a director. Mr. Tate received $383,200 as compensation for these five year leases through the issuance of 153,280 shares of common stock of the Company valued at $2.50 per share. In addition to this compensation, Mr. Tate is entitled to the 12.50% landowner royalty-interest revenues related to hydrocarbons produced by the Company on these oil and gas leases. During the nine months ended September 30, 2012, no landowner royalty interest revenues were earned by Mr. Tate from these undeveloped new Fountain Green Project leases. Also prior to Mr. Tate becoming a director, he negotiated a settlement of $100,000 debt owed to him by the Company to include $18,000 of interest for the period of the debt outstanding which was settled through the issuance of 47,200 shares of common stock valued at $2.50 per share.

All related party transactions have been reviewed and approved by a majority vote of our Board of Directors and were completed on the same terms and conditions as other independent third party transactions. With respect to transactions in which the related party is also a member of our Board of Directors, such Directors abstained from voting to approve the transactions.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 16 LEGAL PROCEEDINGS

TX Holdings, Inc. v. Hewitt Energy Group LLC

On January 10, 2012, TX Holdings, Inc. (“TX Holdings”) filed an amended complaint against HEGLLC, a predecessor of the Company, Douglas C. Hewitt, Sr., Dexter & Dexter Attorneys at Law, P.C. and Michael Cederstrom in the United States District Court for the District of Utah (the “Utah Action”). The complaint arises out of a claimed agreement between HEGLLC and TX Holdings (the “Perth Sale Agreement”) pursuant to which HEGLLC agreed to sell to TX Holdings an interest in the Perth Project located in Kansas (the “Perth Interest”). TX Holdings’ complaint alleges certain causes of action, including, among others, unjust enrichment, breach of contract and breach of fiduciary duty. The complaint alleges that HEGLLC breached the Perth Sale Agreement by failing to deliver the Perth Interest to TX Holdings. TX Holdings seeks the Perth Interest and an unspecified amount of damages from the named parties. The Company does not believe it is obligated to deliver the Perth Interest to TX Holdings because it is the Company’s belief that TX Holdings breached the Perth Sale Agreement by, among other things, failing to pay the purchase price. A similar complaint was filed by TX Holdings in February 2010 in Florida State Court in the District of Miami, Dade County (the “Florida Action”). On July 5, 2011, the Florida court dismissed the claims against HEGLLC and Douglas C. Hewitt, Sr. in the Florida Action for lack of personal jurisdiction. TX Holdings appealed the decision dismissing the claims against HEGLLC and Douglas C. Hewitt, Sr. However, on April 24, 2012 TX Holdings filed a voluntary dismissal of that appeal. As a result of the voluntary dismissal, the only action remaining by TX Holdings against HEGLLC and Douglas C. Hewitt, Sr. was the Utah action. On August 9, 2012 TX Holdings submitted a stipulation of dismissal, with prejudice, to the United States District Court for the District of Utah, which has resolved all matters in this dispute.

Nostra Terra Oil & Gas Company v. Richfield Oil & Gas Company

On February 1, 2012, Nostra Terra Oil & Gas Company (“NTOG”) filed an action against the Company, HPI, HEGINC, and HEGLLC in the Twenty-Third Judicial District Court of Russell County, Kansas. The complaint alleges that the Company defaulted on its repayment obligations under a note and security agreement, dated April 13, 2011, in the principal amount of $1.3 million and accrued interest at 10% per annum. The complaint seeks foreclosure on two of the Company’s property leases located in Kansas. The note was due on January 31, 2012. On January 31, 2012, the Company requested the loan payoff and documents relating to the release of collateral from NTOG’s representatives. The Company followed up on this request with a written request on February 1, 2012. On or about March 19, 2012 the Company filed an answer to the Complaint and a Cross-Complaint against NTOG for tortious interference with business. The previously set trial date has been cancelled and no trial date currently exists. The Company intends to vigorously defend against this foreclosure action and repay any amount that is ultimately determined to be outstanding.

The obligations due and owing under this note and security agreement are fully accounted for in the Company’s financial statements.

Litigation in the Ordinary Course

We may become involved in litigation from time to time relating to claims arising in the ordinary course of our business. We do not believe that the ultimate resolution of such claims would have a material effect on our business, results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material effect on our business, results of operations, financial condition and cash flows.

NOTE 17 SUBSEQUENT EVENTS

On October 19, 2012, the stockholders of the Company voted to approve an amendment to the Company’s Articles of Incorporation to, among other things, effect a reverse stock split of the Company’s outstanding Common Stock at an exchange ratio of between 1-for-5 and 1-for-10, decrease the number of authorized shares of the Common Stock to 250,000,000 shares, and clarify and amend certain language in Article V (Directors) and Article VII (Indemnification), subject to the authority of the Company’s board of directors to abandon such amendment. On October 22, 2012, the Board approved the reverse stock split of the Company’s outstanding Common Stock at an exchange ratio of 1-for-10. The Board also authorized the amendment to the Company’s Articles of Incorporation, and the Company filed a Certificate of Amendment to effect such amendment with the Secretary of State of the State of Nevada on October 23, 2012. The Certificate of Amendment provides that it is effective as of 8:00 a.m., Pacific Time, on October 23, 2012, at which time every ten (10) shares of issued and outstanding common stock will be automatically combined into one (1) issued and outstanding share of the common stock, without any change in the par value per share. The Company will not issue fractional shares in connection with the reverse stock split. Holders of the common stock will be entitled to receive from the Company’s transfer agent, in lieu of any fractional share, the number of shares rounded up to the next whole number. Under the guidance of FASB ASC 505-10, all common share and per common share information in the accompanying condensed consolidated financial statements and these notes to the financial statements have been retroactively restated to reflect the reverse common stock split.

RICHFIELD OIL & GAS COMPANY

Formerly Hewitt Petroleum, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

On October 20, 2012, the Company elected to extend the expiration date of 332,842 warrants from October 20, 2012 to December 31, 2012. The warrant holders include MacKov, a related party, holding warrants to purchase up to 132,529 shares of common stock and certain other unaffiliated investors holding warrants to purchase up to an aggregate of 200,313 shares of common stock.

In October 2012, MacKov exercised warrants totaling 110,280 shares of the Company’s common stock for $176,445 or $1.60 per share. Contemporaneously with the exercise of the warrants, MacKov sold the shares of the Company’s common stock to affiliated and unaffiliated investors for $199,800 or $1.80 per share and granted a short-term loan to the Company totaling $23,335.

In October 2012, the Company issued 4,000 shares of common stock to an existing investor for services of $10,000 or $2.50 per share.

In October 2012, the Company issued a note payable for $250,000 to an existing investor. The note payable bears an interest rate of 10% per annum and matures on September 30, 2014. The interest for the term of the note was prepaid by issuing 19,973 shares of common stock valued at $49,932 or $2.50 per share.

In October 2012, the Company issued a convertible note payable for $425,000 to an existing investor. The convertible note payable bears an interest rate of 6% per annum, matures on February 1, 2014 and converts into 170,000 shares of common stock at $2.50 per share. The interest for the term of the note was prepaid by assigning 1.50% ORRI in the Company’s South Haven Project, Kansas that was valued at $32,000.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist in understanding our results of operations and our financial condition. Our consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q contains additional information that should be referred to when reviewing this material. Certain statements in this discussion may be forward-looking. These forward-looking statements involve risks and uncertainties, which could cause actual results to differ from those expressed in this report.

Forward-Looking Statements

This report may contain forward-looking statements. These statements include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. These forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include but are not limited to the following:

·	questions on the part of our auditors regarding our ability to continue as a going concern;
·	our limited operating history and negative operating cash flows;
·	our substantial capital requirements that, if not met, may hinder our growth and operations;
·	loss of our directors or key management and technical personnel or our ability to attract and retain experienced technical personnel;
·	our ability to acquire or develop additional reserves;
·	our dependence on drilling partners for successful development and exploitation of certain oil properties in which we hold an interest;
·	lack of insurance against all of the operating hazards to which our business is exposed;
·	title claims to which our properties may be subject;
·	our exposure to third party credit risk and defaults by third parties;
·	our issuance of additional indebtedness in the future;
·	our ability to realize anticipated benefits of acquisitions and dispositions;
·	our ability to adequately manage growth;
·	unforeseen economic events and the state of the global economy;
·	concentration of our producing properties in two major geographic areas;
·	our election, as an emerging growth company, to delay the adoption of new or revised accounting standards;
·	uncertainties involved in drilling for and producing oil and gas;
·	market conditions or operational impediments that may hinder our access to oil and gas markets or delay production;
·	the effect of the market price of oil and gas on our profitability and cash flow;
·	shortages of rigs, equipment, supplies and personnel and any resulting delays in our production;
·	uncertainty relating to estimates of our possible reserves and proven reserves;
·	complex laws and regulations, including environmental regulations, that can materially increase the cost, manner and feasibility of doing business;
·	intense competition in the oil and gas industry;
·	delays in business operations that could reduce cash flows and subject us to credit risk;
·	recently proposed legislation relating to changes in income taxation of independent producers;
·	seasonal weather conditions and other factors affecting our drilling operations;
·	proposals to increase U.S. federal income taxation of independent producers;
·	proposed legislation related to climate changes and global warming;
·	loss of leases or increases in lease renewal costs due to failure to drill acreage prior to lease expiration; and
·	alternatives to and changing demand for petroleum products.

You can often identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “estimates,” “intends,” “potential,” “projected,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.

These statements are based on current expectations and assumptions regarding future events and business performance and involve known and unknown risks, uncertainties and other factors that may cause industry trends or our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this quarterly report. For a more detailed discussion of the principal factors that could cause actual results to be materially different, you should read our risk factors included below under “Item 1A. Risk Factors.”

Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We will assume no obligation to update any of the forward-looking statements after the effective date of this quarterly report to conform these statements to actual results or changes in our expectations, except as required by law. You should not place undue reliance on these forward-looking statements, which apply only as of the effective date of this report.

Business Overview

We are an oil and gas exploration and production company with ten projects in Utah, Kansas, Oklahoma and Wyoming. We are currently producing oil from four projects in Kansas. We are currently completing one well in Juab County, Utah which we refer to as the “Liberty #1 Well,” and is in the completion stage of development. The focus of our business is acquiring, retrofitting, and operating or selling oil and gas production. We have two strategic directions:

We used our research technology to identify properties in Kansas that were initially developed between the 1920s and 1950s. We identified significant oil and gas reserves from these early exploration properties, which were previously underdeveloped due to inefficient and antiquated exploration and production methods and low commodity prices. In most cases these wells were developed and left fallow by major oil and gas companies. Using current technology and methodologies, we successfully developed both production and proved reserves within these fields and others, and we intend to continue to develop our Kansas properties, where we are participating in approximately 3,000 acres.

We have conducted a limited amount of exploration for oil and gas reserves in the Central Utah Overthrust region, where we are participating in over 30,000 acres, of these, we are currently the operator of approximately 10,000 acres. We lease or own 100% of the mineral rights on these properties. We intend to conduct drilling operations on some of our Utah properties, and to conduct additional exploration activities.

We use a systematic approach for the acquisition of leases and development of drilling programs. Our approach focuses on three areas of development planning:

Activities involving the identification, acquisition and development of leases of property in which oil or gas is known to exist. This represents approximately 20% of our development planning.

Activities involving low or moderate exploration and development risk. These include leases of property where oil and gas has been produced in the past but there are no existing wells. This represents approximately 20% of our development planning.

Activities involving the acquisition of projects where it is reasonably believed that potential hydrocarbon values exist based on analysis involving geochemical, radiometric, gravitational and supportable seismic data. This may include projects that have never been drilled or tested for oil and gas in the past. This represents approximately 60% of our development planning.

We have initiated the development of ten projects to date resulting in four oil-producing projects. Our development plans may be delayed and are dependent on certain conditions, including, the receipt of necessary permits, the ability to obtain adequate financing and weather conditions. Uncertainties associated with these factors could result in unexpected delays. In addition, the feasibility of a number of the projects described below is still subject to further geological testing and/or drilling to determine whether commercial quantities of hydrocarbons are present.

In addition to the projects currently under development, we intend to initiate the development of additional projects from time to time. However, the number of projects we initiate each year will depend on a number of factors, including the availability of adequate financing, the availability of mineral leases, the demand for oil and gas, the number of projects we have under development, and our available resources to devote to our project development efforts.

Production History

The following table presents information about our produced oil volumes during the three months and nine months ended September 30, 2012 compared to the three months and nine months ended September 30, 2011. We did not produce natural gas during either of the three months or nine months ended September 30, 2012 or 2011. As of September 30, 2012, we were selling oil from a total of 14 gross wells (12.3 net wells), compared to 11 gross wells (10.5 net wells) as of September 30, 2011. All data presented below is derived from accrued revenue and production volumes for the relevant period indicated.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Net Production:
Oil (Bbl)		2,271		1,861		7,451		5,767
Natural Gas (Mcf)		-		-		-		-
Barrel of Oil Equivalent (Boe)		2,271		1,861		7,451		5,767

Average Sales Prices:
Oil (Bbl)	$	95.93	$	99.90	$	89.48	$	100.56

Average Production Costs:
Oil (per Bbl)	$	94.52	$	131.28	$	77.93	$	147.59

Depletion of Oil and Gas Properties

Our depletion expense is driven by many factors, including certain exploration costs involved in the development of producing reserves, production levels and estimates of proved reserve quantities and future developmental costs. The following table presents our depletion expenses per barrel of oil for the three months and nine months ended September 30, 2012 compared to the three months and nine months ended September 30, 2011.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011

Depletion of Oil	$	14.09	$	9.61	$	10.75	$	9.61

Results of Operations

Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

The following presents an overview of our results of operations for the three months ended September 30, 2012 compared to the three months ended September 30, 2011.

As of September 30, 2012, we had established oil production from 14 gross (12.3 net) wells in which we hold working interests compared to 11 gross (10.5 net) wells which had established production as of September 30, 2011. Our net oil production for the three months ended September 30, 2012 averaged approximately 25 Bopd compared to approximately 20 Bopd for the three months ended September 30, 2011. We had no natural gas production during the three months ended September 30, 2012 and 2011. The increase in production in 2012 over 2011 is primarily due to the new well added in the Koelsch project resulting in an increase of an average of 5 Bopd.

Our revenues from oil sales increased for the three months ended September 30, 2012 compared to the three months ended September 30, 2011 by 17.2% or $31,492 from $185,910 for the three months ended September 30, 2011 to $217,852 for the three months ended September 30, 2012. The increase in revenue is due to an increase of 410 barrels of net oil produced, or $40,957, offset by a decrease in our average realized crude oil prices of $3.97 Bopd or $9,015 for the 2012 period.

We realized a net loss of $1,118,824 (representing a net loss of approximately $(0.04) per basic and diluted share of common stock) for the three months ended September 30, 2012 compared to a net loss of $5,247,675 (representing a net loss of approximately $(0.22) per basic and diluted share of common stock) for the three months ended September 30, 2011. The decrease in net loss of 78.7% or $4,128,851 or was primarily due to a decrease in our operating expenses. The loss per share for the three months ended September 30, 2012 decreased compared to the same period 2011 due to an increase in our shares of common stock outstanding and a decrease in our net loss.

Total operating expenses decreased 79.0% or $4,145,523 from $5,247,284 for the three months ended September 30, 2011 to $1,101,761for the three months ended September 30, 2012. The decrease in operating expenses was due primarily to a decrease in general and administrative expenses and production expenses.

General and administrative expenses decreased 83.9% or $4,062,478 from $4,841,290 for the three months ended September 30, 2011 to $778,812 for the three months ended September 30, 2012. The decrease is primarily attributable to a $3,304,197 decrease in stock based compensation and payroll of consultants, employees and directors of the Company, a $750,000 decrease in a contract cancellation penalty associated with the Company’s initial plans to go public in Canada in 2011, and a net decrease of $8,281in other expenses.

Production expenses decreased 12.1% or $29,656 to $214,664 or $94.52 per barrel of oil (Bbl) for the three months ended September 30, 2012 from $244,320 or $131.28 Bbl for the three months ended September 30, 2011. The decrease is due mainly to reduced work required by the Kansas Corporation Commission (“KCC”) and general maintenance on the wells.

During the three months ended September 30, 2012, we incurred production taxes of $7,915 compared to $11,517 during the three months ended September 30, 2011. The 31.3% or $3,602 decrease in production taxes was due to the decrease in the average effective tax rates in the counties where the oil was produced in 2012 offset by the increase in oil sales revenue.

Exploration expenses decreased 71.5% or $71,019 from $99,258 for the three months ended September 30, 2011 to $28,239 for the three months ended September 30, 2012. This decrease is due to a decrease in exploration costs in our Utah projects.

Lease expiration expenses increased 92.7% or $3,493 from $3,768 for the three months ended September 30, 2011 to $7,261 for the three months ended September 30, 2012. This increase is due to unsuccessful efforts to extend a lease in Kansas that was up for renewal in the three month period ended September 30, 2012.

We recorded depletion, depreciation, amortization and accretion of $72,824 during the three months ended September 30, 2012 compared to depletion, depreciation, amortization and accretion of $47,511 during the three months ended September 30, 2011. The $25,313 or 53.3% increase was primarily due to the increase in the depletion expense due to a change in our proved oil reserve balances and an increase in depreciation on well related equipment purchased in the past 12 months that are now being depreciated. Depletion expense for the three months ended September 30, 2012 was $14.09 per barrel produced compared to $9.61 per barrel produced for the three months ended September 30, 2011.

Interest and finance expenses increased 28.0% or $52,215 from $186,301 for the three months ended September 30, 2011 to $238,516 for the three months ended September 30, 2012. The increase in interest expense is due mainly to the issuance of convertible preferred stock, resulting in a $112,838 interest charge, partially offset by a $60,623 decrease in interest and finance charges on notes payable, convertible notes payable, and other debt.

Nine months ended September 30, 2012 Compared to the Nine months ended September 30, 2011

The following presents an overview of our results of operations for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011.

As of September 30, 2012, we had established oil production from 14 gross (12.3 net) wells in which we hold working interests compared to 11 gross (10.5 net) wells which had established production as of September 30, 2011. Our net oil production for the nine months ended September 30, 2012 averaged approximately 27 Bopd compared to approximately 21 Bopd for the nine months ended September 30, 2011. We had no natural gas production during the nine months ended September 30, 2012 and 2011. The increase in production in 2012 over 2011 is primarily due to the new well added in the Koelsch project resulting in an increase of an average of 5 Bopd, partially offset by a decrease in production due to a sale in the first quarter of 2011 or our working interest in the Chase Silica Field.

Our revenues from oil sales increased for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011. Revenues increased by $86,797 from $579,953 for the nine months ended September 30, 2011 to $666,750 for the nine months ended September 30, 2012. The increase in revenue is due to an increase of 1,684 barrels of net oil produced, or $169,343, during the 2012 period and a decrease in our average realized crude oil prices of $11.08 per Bopd or $82,546 for the 2012 period.

We realized a net loss of $4,035,809 (representing a net loss of approximately $(0.14) per basic and diluted share of common stock) for the nine months ended September 30, 2012 compared to a net loss of $8,387,250 (representing a net loss of approximately $(0.41) per basic and diluted share of common stock) for the nine months ended September 30, 2011. The decrease in net loss of 51.9% or $4,351,441 was primarily due to a decrease in our operating expenses and an increase in the gain on sale of assets. The decrease in the loss per share for the nine months ended September 30, 2012 compared to the same period 2011 was due to an increase in our shares of common stock outstanding and a decrease in our net loss.

Total operating expenses decreased 54.4% or $4,929,622 from $9,060,115 for the nine months ended September 30, 2011 to $4,130,493 for the nine months ended September 30, 2012. The decrease in operating expenses was due primarily to a decrease in general and administrative, production, and lease exploration expenses and an increase in gain on sale of assets.

General and administrative expenses decreased 53.6% or $4,203,115 from $7,846,134 for the nine months ended September 30, 2011 to $3,643,019 for the nine months ended September 30, 2012. The decrease is primarily attributable to a $3,436,846 decrease in stock based compensation and payroll of consultants, employees and directors of the Company, a $750,000 decrease in a contract cancellation penalty associated with the Company’s initial plans in 2011 to go public in Canada, a $414,277 decrease in other expenses due to a one time stock issuance penalty awarded to certain shareholders during the nine months ended September 30, 2011, offset by a $192,332 increase in bad debt allowance, and a $205,538 increase in all other expenses.

Production expenses decreased 31.8% or $270,480 to $580,679 or $77.93 per barrel of oil (Bbl) for the nine months ended September 30, 2012 from $851,159 or $147.59 Bbl for the nine months ended September 30, 2011. The decrease is due mainly to reduced work required by the Kansas Corporation Commission (“KCC”) and general maintenance on the wells, partially offset by increased field operating expenses related to our Perth project due to removal, repair, and reinstallation of a submersible pump.

During the nine months ended September 30, 2012, we incurred production taxes of $24,069 compared to $35,718 during the nine months ended September 30, 2011. This 32.6% or $11,649 decrease in production taxes was due to the decrease in the average effective tax rates in the counties where the oil was produced in 2012 offset by the increase in oil sales revenue.

Exploration expenses decreased 35.2% or $58,979 from $167,617 for the nine months ended September 30, 2011 to $108,638 for the nine months ended September 30, 2012. This decrease is mainly due reduced costs associated with the Utah projects, partially offset by costs associated with increased working ownership interest in our oil and gas properties including the Freedom Acquisition.

Lease expiration expenses decreased 81.7% or $95,633 from $117,064 for the three months ended September 30, 2011 to $21,431 for the three months ended September 30, 2012. This decrease is due to extending most of the leases that were up for renewal in the nine month period ended September 30, 2012.

We recorded depletion, depreciation, amortization and accretion of $186,506 during the nine months ended September 30, 2012 compared to depletion, depreciation, amortization and accretion of $133,217 during the nine months ended September 30, 2011. The $53,289 or 40.0% increase in depletion, depreciation, amortization and accretion was primarily due to the increase in the depletion expense due to a change in our proved oil reserve balances and an increase in depreciation on well related equipment purchased in the past 12 months that are now being depreciated. Depletion expense for the nine months ended September 30, 2012 was $10.75 per barrel produced compared to $9.61 per barrel produced for the nine months ended September 30, 2011.

The gain on sale of assets increased from $90,794 for the nine months ended September 30, 2011 to $433,849 for the nine months ended September 30, 2012. This increase of 377.8% or $343,055 is due mainly to selling a 21% working interest in the Prescott Lease and a 5% carried interest in the Perth Project to unaffiliated investors.

The gain on the settlement of liabilities decreased 96.0% or $502,109 to $20,769 during the nine months ended September 30, 2012 from $522,878 during the nine months ended September 30, 2011. This decrease is due to a one time gain in 2011 created as a result of settling disputed amounts of trade and other payables for lower than carrying values.

Interest and finance expenses increased 47.9% or $208,790 from $435,983 for the nine months ended September 30, 2011 to $644,773 for the nine months ended September 30, 2012. The increase in interest expense is due mainly to the issuance of convertible preferred stock, resulting in a $112,838 interest charge, higher interest rates charged on the Company’s debt and interest on the debt assumed on the Freedom Acquisition.

Interest Income increased $52,338 from $0 for the nine months ended September 30, 2011 to $52,338 for the nine months ended September 30, 2012. The increase in interest income is due to interest being assessed on past due accounts receivable balances.

Liquidity and Capital Resources

Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through the issuance of common and preferred stock, short-term borrowings and selling working interests in our oil and gas properties. In the future, we expect to generate cash from sales of crude oil from our existing properties. Until cash provided by our operations is sufficient to cover our expenses and execute our development plans, we intend to continue to finance our operations through additional debt or equity financings, if available.

The following table summarizes our total current assets, total current liabilities and working capital deficiency as of September 30, 2012 and December 31, 2011:

	September 30,			December 31,
	2012			2011
Current Assets	$	1,112,288		$	690,799
Current Liablities		4,160,474			6,889,687
Working Capital Deficiency	$	(3,048,186	)	$	(6,198,888	)

Cash and cash equivalents were $151,754 as of September 30, 2012, compared to $37,157 as of December 31, 2011. Changes in the net cash provided by and (used in) our operating, investing and financing activities are set forth in the following table:

	Nine Months Ended						Net Cash
	September 30,						Increase
	2012			2011			(Decrease)
Net cash used in operating activities	$	(2,292,868	)	$	(953,242	)	$	(1,339,626	)
Net cash provided by (used in) investing activties	$	913,268		$	(425,649	)	$	1,338,917
Net cash provided by financing activities	$	1,494,197		$	1,359,728		$	134,469
Increase (decrease) in cash and cash equivalents	$	114,597		$	(19,163	)	$	133,760

Net Cash from operating activities is derived from the production of our oil reserves and changes in the balances of receivables, payables or other non-oil property asset account balances. For the nine months ended September 30, 2012, we had negative net cash from operating activities of $2,292,868 compared to negative net cash of $953,242 for the nine months ended September 30, 2011. This increase in net cash used of $1,339,626 was primarily due to a reduction in the issuance of common stock for services and other expenses as well as an increase in cash based expenditures for the nine months ended September 30, 2012 in comparison to the nine months ended September 30, 2011.

Net Cash from investing activities is derived from changes in oil and gas property and other property and equipment account balances. For the nine months ended September 30, 2012, we had positive net cash from investing activities of $913,268 compared to negative net cash of $425,649 for the nine months ended September 30, 2011. This increase in net cash of $1,338,917 was primarily due cash obtained in the Skyline Oil Agreement partially offset by sales and purchases of working interests in other oil and gas property for the nine months ended September 30, 2012.

Net Cash from financing activities is derived from the changes in long term liability account balances or in equity account balances, excluding retained earnings. For the nine months ended September 30, 2012, we had positive net cash from financing activities of $1,494,197 compared to positive net cash of $1,359,728 for the nine months ended September 30, 2011. This increase in net cash of $134,469 was primarily due an increase in the issuance of common stock for cash, offset by increased payments on notes payable for the nine months ended September 30, 2012 in comparison to the nine months ended September 30, 2011.

Satisfaction of our cash obligations for the next 12 months and our ability to continue as a going concern

We need additional funding to continue as a going concern and to execute our business plan. Although we hope to generate cash from our operations and become profitable in the future, we will continue to depend on cash provided by equity financings and debt financings and/or credit facilities, and the possible sale of working interest in our properties. In the event we cannot obtain the necessary capital to pursue our plans, we may have to cease or significantly curtail our operations, including our plans to acquire additional acreage positions and development activities. Our ability to raise additional capital is critical to our ability to continue to operate our business.

Since our inception, we have financed our cash flow requirements through the issuance of common and preferred stock, short and long-term borrowings and selling working interests in our oil and gas properties for cash and services. As we expand operational activities, we expect to continue to experience net negative cash flows from operations, pending the receipt of oil and gas sales or development fees. As a result, we will need to obtain additional financing to fund our operations. We intend to seek financing from time to time to provide working capital.

Our ability to secure liquidity in the form of additional financing or otherwise is crucial for the execution of our plans and our ability to continue as a going concern. Our current cash balance, together with cash anticipated to be provided by operations, will not be sufficient to satisfy our anticipated cash requirements for normal operations and capital expenditures for the foreseeable future. Economic conditions continue to be weak and global financial markets continue to experience significant volatility and liquidity challenges. These conditions may make it more difficult for us to obtain financing.

Our independent registered public accounting firm’s report on our 2011 financial statements expresses doubt about our ability to continue as a going concern. The report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern due to substantial losses from operations, negative working capital, negative cash flow, and the lack of sufficient capital, as of the date the report was issued, to support our planned capital expenditures to continue our drilling programs through 2012 or later. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should we be unable to continue as a going concern.

We are not currently generating significant revenues, and our cash and cash equivalents will continue to be depleted by our ongoing development efforts as well as our general and administrative expenses. Until we are in a position to generate significant revenues, we will need to continue to raise additional funds to continue operating as a going concern. We may seek this additional funding through the issuance of debt, preferred stock, equity, or a combination of these instruments. We may also seek to obtain financing through the sale of working interests in one or more of our projects. We cannot be certain that funding from any of these sources will be available on reasonable terms or at all. If we are unable to secure adequate funds on a timely basis on terms acceptable to us, we may have to cease or significantly curtail our operations including our plans to acquire additional acreage positions and development activities.

Over the next twelve months, we do not expect our existing capital and anticipated funds from operations to be sufficient to sustain our planned expansion. Consequently, we intend to seek additional capital to fund growth and expansion through equity financings, debt financings or credit facilities. We have no assurance that such financing will be available, and if available, the terms under which such financing would be given.

Our lack of significant operating history makes predictions of future operating results difficult. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in an early stage of development, particularly companies in the oil and gas exploration industry. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and attract, retain and motivate qualified personnel. We have no assurance that we will be successful in addressing such risks, and the failure to do so would have a material adverse effect on our business prospects, financial condition and results of operations.

Effects of Inflation and Pricing

The oil and gas industry is very cyclical and the demand for goods and services by oil field companies, suppliers and others associated with the industry put significant pressure on the economic stability and pricing structure within the industry. Typically, as prices for oil and gas increase all other associated costs increase as well. Conversely, in a period of declining prices, associated cost declines are likely to lag and may not adjust downward in proportion to the declining prices. Material changes in prices also impact our current revenue stream, estimates of future reserves, impairment assessments of oil and gas properties, and values of properties in purchase and sale transactions. Material changes in prices can impact the value of oil and gas companies and their ability to raise capital, borrow money and retain personnel. While we do not currently expect business costs to materially increase, higher prices for oil and gas could result in increases in the costs of materials, services and personnel.

Critical Accounting Policies

The establishment and consistent application of accounting policies is a vital component of accurately and fairly presenting our consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”), as well as ensuring compliance with applicable laws and regulations governing financial reporting. While there are rarely alternative methods or rules from which to select in establishing accounting and financial reporting policies, proper application often involves significant judgment regarding a given set of facts and circumstances and a complex series of decisions.

Asset Retirement Obligations

We have significant obligations to plug and abandon our oil and gas wells and related equipment. Liabilities for asset retirement obligations are recorded at fair value in the period incurred. The related asset value is increased by the same amount. Asset retirement costs included in the carrying amount of the related asset are subsequently allocated to expense as part of our depletion calculation.

Estimating future asset retirement obligations requires us to make estimates and judgments regarding timing, existence of a liability, as well as what constitutes adequate restoration. We use the present value of estimated cash flows related to our asset retirement obligations to determine the fair value. Present value calculations inherently incorporate numerous assumptions and judgments, which include the ultimate retirement and restoration costs, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the present value of our existing asset retirement obligation liability, a corresponding adjustment will be made to the carrying cost of the related asset.

Revenue Recognition

Revenue from the sale of crude oil, natural gas and natural gas liquids is recorded when the significant risks and rewards of ownership of the product is transferred to the buyer, which is usually when legal title passes to the external party. For crude oil and natural gas liquids, delivery generally occurs upon pick up at the field tank battery and natural gas delivery occurs at the pipeline delivery point. Revenue is not recognized for the production in tanks, or oil in pipelines that has not been delivered to the purchaser. Revenue is measured net of discounts and royalties. Royalties and severance taxes are incurred based on the actual price received from the sales. We use the sales method of accounting for natural gas balancing of natural gas production, and we would recognize a liability if the existing proven reserves were not adequate to cover the current imbalance situation. For all periods reported, we had no natural gas production.

Stock-Based Compensation

We have accounted for stock-based compensation under the provisions of FASB Accounting Standards Codification (ASC) 718. This standard requires us to record an expense associated with the fair value of stock-based compensation. We use the Black-Scholes option valuation model to calculate the value of options and warrants at the date of grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.

Stock Issuance

We record the stock-based awards issued to consultants and other external entities for goods and services at either the fair market value of the goods received or services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505-50.

Income Taxes

We account for income taxes under FASB ASC 740. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized.

The tax effects from an uncertain tax position can be recognized in the consolidated financial statements only if the position is more likely than not of being sustained if the position were to be challenged by a taxing authority. We have examined the tax positions taken in our tax returns and determined that there are no uncertain tax positions. As a result, we have recorded no uncertain tax liabilities in our consolidated balance sheet.

Oil and Gas Properties

We account for oil and gas properties by the successful efforts method. Under this method of accounting, costs relating to the acquisition of and development of proved areas are capitalized when incurred. The costs of development wells are capitalized whether productive or non-productive. Leasehold acquisition costs are capitalized when incurred. If proved reserves are found on an unproved property, leasehold costs are transferred to proved properties. Exploration dry holes are charged to expense when it is determined that no commercial reserves exist. Other exploration costs, including personnel costs, geological and geophysical expenses and delay rentals for oil and gas leases, are charged to expense when incurred. The costs of acquiring or constructing support equipment and facilities used in oil and gas producing activities are capitalized. Production costs are charged to expense as incurred and are those costs incurred to operate and maintain our wells and related equipment and facilities.

Depletion of producing oil and gas properties is recorded based on units of production. Acquisition costs of proved properties are depleted on the basis of all proved reserves, developed and undeveloped, and capitalized development costs (wells and related equipment and facilities) are depleted on the basis of proved developed reserves. As more fully described below, proved reserves are estimated by our independent petroleum engineer and are subject to future revisions based on availability of additional information. Asset retirement costs are recognized when the asset is placed in service, and are depleted over proved reserves using the units of production method.

Oil and gas properties are reviewed for impairment when facts and circumstances indicate that their carrying value may not be recoverable. We compare net capitalized costs of proved oil and gas properties to estimated undiscounted future net cash flows using management’s expectations of future oil and gas prices. These future price scenarios reflect our estimation of future price volatility. If net capitalized costs exceed estimated undiscounted future net cash flows, the measurement of impairment is based on estimated fair value, using estimated discounted future net cash flows based on management’s expectations of future oil and gas prices. We have recorded no impairment on any of our properties.

Unproven properties that are individually significant are assessed for impairment and if considered impaired are charged to expense when such impairment is deemed to have occurred.

The sale of a partial interest in a proved oil and gas property is accounted for as normal retirement and no gain or loss is recognized as long as this treatment does not significantly affect the units-of-production depletion rate. If the units-of-production rate is significantly affected, then the sale is accounted for as the sale of an asset, and a gain or loss is recognized. The unamortized cost of the property or group of properties is apportioned to the interest sold and interest retained on the basis of the fair values of those interests. A gain or loss is recognized for all other sales of producing properties and is included in the results of operations. The sale of a partial interest in an unproved property is accounted for as a recovery of cost when substantial uncertainty exists as to recovery of the cost applicable to the interest retained. A gain on the sale is recognized to the extent the sales price exceeds the carrying amount of the unproved property. A gain or loss is recognized for all other sales of nonproducing properties and is included in the results of operations.

Oil and Gas Reserves

The determination of depreciation, depletion and amortization expense as well as impairments that are recognized on our oil and gas properties are highly dependent on the estimates of the proved oil and gas reserves attributable to our properties. Our estimate of proved reserves is based on the quantities of oil and gas which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in the future years from known reservoirs under existing economic and operating conditions. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation, and judgment. For example, we must estimate the amount and timing of future operating costs, production taxes and development costs, all of which may in fact vary considerably from actual results. In addition, as the prices of oil and gas and cost levels change from year to year, the economics of producing our reserves may change and therefore the estimate of proved reserves may also change. Any significant variance in these assumptions could materially affect the estimated quantity and value of our reserves.

The information regarding present value of the future net cash flows attributable to our proved oil and gas reserves are estimates only and should not be construed as the current market value of the estimated oil and gas reserves attributable to our properties. Thus, such information includes revisions of certain reserve estimates attributable to our properties included in the prior year’s estimates. These revisions reflect additional information from subsequent activities, production history of the properties involved and any adjustments in the projected economic life of such properties resulting from changes in oil and gas prices. Any future downward revisions could adversely affect our financial condition, our borrowing ability, our future prospects and the value of our common stock.

Use of Estimates

The preparation of financial statements under GAAP in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to proved oil and gas reserve volumes, certain depletion factors, future cash flows from oil and gas properties, estimates relating to certain oil and gas revenues and expenses, valuation of equity-based compensation, valuation of asset retirement obligations, estimates of future oil and gas commodity pricing and the valuation of deferred income taxes. Actual results may differ from those estimates.

Jumpstart Our Business Startups Act (“JOBS Act”), adopted January 3, 2012

We qualify as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are permitted to rely on exemptions from various reporting requirements including, but not limited to, the requirement to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes–Oxley Act of 2002, and the requirement to submit certain executive compensation matters to shareholder advisory votes such as “say on pay” and “say on frequency.”

In addition, Section 107 of the JOBS Act also 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 of 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 have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company up to the fifth anniversary of our first registered sale of common stock equity securities, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

Off-Balance Sheet Arrangements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we have elected not to provide the disclosures required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission (“SEC”) rules and forms. Such controls include those designed to ensure that information for disclosure is accumulated and communicated to management, including the Chairman and Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2012. Based on this evaluation, the CEO and CFO have concluded that, as of September 30, 2012, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal control over financial reporting

There were no changes made in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended September 30, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations inherent in all controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their stated goals under all potential future conditions.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

TX Holdings, Inc. v. Hewitt Energy Group LLC

Nostra Terra Oil & Gas Company v. Richfield Oil & Gas Company

The obligations due and owing under this note and security agreement are fully accounted for in the Company’s financial statements.

Litigation in the Ordinary Course

ITEM 1A. RISK FACTORS

Our business operations and the implementation of our business strategy are subject to significant risks inherent in our business, including, without limitation, the risks and uncertainties described below. The occurrence of any one or more of the risks or uncertainties described below could have a material adverse effect on our consolidated financial condition, results of operations and cash flows and could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this quarterly report. While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our business, operations, industry, financial position and financial performance in the future. Because of the following risks and uncertainties, as well as other variables affecting our operating results, past financial performance should not be considered a reliable indicator of future performance and historical trends may not be consistent with results or trends in future periods. Our consolidated financial statements and the notes thereto and the other information contained in this quarterly report should be read in connection with the risk factors discussed below.

Risks Related to Our Business

Our independent registered public accounting firm’s report on our financial statements questions our ability to continue as a going concern.

Our independent registered public accounting firm’s report on our financial statements for the years ended December 31, 2011 and 2010 expresses doubt about our ability to continue as a going concern. The report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern due to substantial losses from operations, negative working capital, negative cash flow, and the lack of sufficient capital, as of the date the report was issued, to support our planned capital expenditures to continue our drilling programs.

We can provide no assurance that we will be able to obtain sufficient additional financing that we need to develop our properties and alleviate doubt about our ability to continue as a going concern. If we are able to obtain sufficient additional financing proceeds, we cannot be certain that this additional financing will be available on acceptable terms, if at all. To the extent we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct business. Inclusion of a “going concern qualification” in the report of our independent accountants or any future report may have a negative impact on our ability to obtain financing and may adversely impact our stock price.

We have a limited operating history and negative operating cash flows, which may make it difficult to evaluate our business prospects.

An investment in our securities is subject to certain risks related to the nature of our business in the acquisition, exploration, development and production of oil resources in the United States and our early stage of development. Our business operations must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in the oil and gas industry. We first generated revenues from operations in the fiscal year ended December 31, 2009. There can be no assurance that our business operations will prove to be successful in the long-term. Our future operating results will depend on many factors, including:

our ability to raise adequate working capital;

success of our development and exploration;

demand for oil and gas;

the level of our competition;

our ability to attract and maintain key management and employees; and

our ability to efficiently explore, develop and produce sufficient quantities of marketable oil or gas in a highly competitive and speculative environment while maintaining quality and controlling costs.

To sustain profitable operations in the future, we must, alone or with others, successfully manage the factors stated above, as well as continue to develop ways to enhance our production efforts. Despite our best efforts, we may not be successful in our exploration or development efforts, or obtain required regulatory approvals. There is a possibility that some of our wells may never produce oil or gas.

We will have substantial capital requirements that, if not met, may hinder our growth and operations.

Our future growth depends on our ability to make large capital expenditures for the exploration and development of our oil and gas properties. Future cash flows and the availability of financing will be subject to a number of variables, such as:

the success of drilling and exploration;

success in locating and producing new reserves; and

prices of oil and gas.

Additional financing sources may be required in the future to fund developmental and exploratory drilling. Issuing equity securities to satisfy our financial requirements could cause substantial dilution to our existing stockholders and may result in a change of control. Debt financing could lead to:

a substantial portion of operating cash flow being dedicated to the payment of principal and interest;

increased vulnerability to competitive pressures and economic downturns; and

restrictions on our operations.

Financing might not be available in the future, or we might not be able to obtain necessary financing on acceptable terms, if at all. If sufficient capital resources are not available, we might be forced to curtail drilling and other activities or be forced to sell some assets on an untimely or unfavorable basis, which could have a material adverse affect on our business, financial condition and results of operations.

The loss of our directors or key management and technical personnel or our inability to attract and retain experienced technical personnel could adversely affect our ability to operate our business.

We depend, to a large extent, on the efforts and continued employment of our senior management team. At this time, the loss of certain key individuals could adversely affect our business operations. Successful exploration, development and commercialization of oil and gas interests rely on a number of factors, including the technical skill of the personnel involved. Our success will depend, in part, on the performance of our key managers and consultants. Failure to attract and retain managers, consultants and other key personnel with the necessary skills and experience could have a materially adverse effect on our growth and profitability.

We may be unable to acquire or develop additional reserves, in which case our results of operations and financial condition would be adversely affected.

In general, production from oil and gas properties declines over time as reserves are depleted, with the rate of decline depending on reservoir characteristics. If we are not successful in our exploration and development activities or in acquiring additional properties containing proved reserves, our proved reserves will decline as reserves are produced. Our future oil and gas production is highly dependent upon our ability to economically find, develop or acquire reserves in commercial quantities.

To the extent cash flow from operations is reduced, either due to a decrease in prevailing prices for oil and gas or an increase in exploration and development costs, and external sources of capital become limited or unavailable, our ability to make the necessary capital investment to maintain or expand our asset base of oil and gas reserves would be impaired. Even with sufficient available capital, our future exploration and development activities may not result in additional proved reserves, and we might not be able to drill productive wells at acceptable costs.

Our oil and gas reserves, production, and cash flows to be derived therefrom are highly dependent on our ability to successfully acquire or discover new reserves. Without the continual addition of new reserves, any existing reserves we may have at any particular time and the production therefrom will decline over time as such existing reserves are exploited. A future increase in our reserves will depend not only on our ability to develop any properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or projects. There can be no assurance that our future exploration and development efforts will result in the discovery and development of additional commercial accumulations of oil and gas. Competition may also be presented by alternate fuel sources.

Our projects may be adversely affected by risks outside of our control including labor unrest, civil disorder, war, subversive activities or sabotage, fires, floods, explosions or other catastrophes, epidemics or quarantine restrictions.

We depend on drilling partners for the successful development and exploitation of certain oil and gas properties in which we hold an interest.

While we operate a majority of our oil and gas properties, we do not operate all oil and gas properties in which we hold an interest. As a result, we have limited influence and control over the operation of properties we do not operate. The success and timing of drilling, development and exploitation activities on properties operated by others depend on a number of factors that are beyond our control, including the operator’s expertise and financial resources, approval of other participants for drilling wells and utilization of appropriate technology. If our drilling partners are unable or unwilling to perform, our financial condition and results of operation could be adversely affected.

We may not be insured against all of the operating hazards to which our business is exposed.

The ownership and operation of oil and gas wells, pipelines and facilities involve a number of operating and natural hazards which may result in blowouts, environmental damage and other unexpected or dangerous conditions resulting in damage to our properties and potential liability to third parties. We intend to employ prudent risk-management practices and maintain suitable liability insurance, where available. We may become liable for damages arising from such events against which we cannot insure or against which we may elect not to insure because of high premium costs or other reasons. Costs incurred to repair such damage or pay such liabilities could have a material adverse effect on us, our operations and financial condition.

Our properties may be subject to title claims in the future.

Title to oil and gas interests is often not capable of conclusive determination without incurring substantial expense. While it is our practice to make appropriate inquiries into the title of properties and other development rights we acquire, title defects may exist. In addition, we may be unable to obtain adequate insurance for title defects, on a commercially reasonable basis or at all. If title defects do exist, it is possible that we may lose all or a portion of our right, title and interests in and to the properties to which the title defects relate. If our property rights are reduced, our ability to conduct our exploration, development and production activities may be impaired.

We may be exposed to third party credit risk and defaults by third parties could adversely affect us.

We are or may be exposed to third party credit risk through our contractual arrangements with our current or future joint venture partners, marketers of our petroleum production and other parties. In the event such entities fail to meet their contractual obligations to us, such failures could have a material adverse effect on us and our funds from operations.

Issuance of debt may adversely affect operating results.

From time to time, we may enter into transactions to acquire the assets or ownership interests of other companies. These transactions may be financed partially or wholly with debt, which may increase our debt levels above industry standards. Neither our articles of incorporation nor our by-laws limit the amount of indebtedness that we may incur. The level of our indebtedness from time to time could impair our ability to obtain additional financing, on a timely basis, needed to take advantage of business opportunities that may arise.

We may fail to realize anticipated benefits of acquisitions and dispositions.

We may make acquisitions and dispositions of businesses and assets in the ordinary course of business. Achieving the benefits of acquisitions depends, in part, on successfully consolidating functions and integrating operations and procedures in a timely and efficient manner as well as the ability to realize the anticipated growth opportunities and synergies from combining the acquired businesses and operations with ours. The integration of acquired businesses may require substantial management effort, time and resources and may divert management’s focus from other strategic opportunities and operational matters. Management continually assesses the value and contribution of services provided and assets required to provide such services. In this regard, non-core assets are periodically disposed of, so that we can focus our efforts and resources more efficiently. Depending on the state of the market for such non-core assets, certain of our non-core assets, if disposed of, could be expected to realize less than their carrying value on our financial statements.

Failure to adequately manage growth could have an adverse effect on business and operations.

We may be subject to growth-related risks including capacity constraints and pressure on our internal systems and controls. Our ability to manage growth effectively will require us to continue to implement and improve our operations and financial systems and to expand, train and manage our employee base. Our inability to deal with this growth could have a material adverse impact on our business, operations and prospects.

The global economy has not fully recovered and unforeseen events may negatively impact our financial condition.

Market events and conditions including disruptions in the international credit markets and other financial systems and the deterioration of global economic conditions caused significant volatility to commodity prices over the last few years. The credit crisis and related turmoil in the global financial system may adversely impact our business and our financial condition. Our ability to access the capital markets may be restricted at a time when we would need to raise capital, which could adversely affect our ability to react to changing economic and business conditions. If the economic climate in the U.S. or the world generally deteriorates further, demand for petroleum products could diminish and prices for oil and gas could decrease, which could adversely impact our results of operations, liquidity and financial condition.

Substantially all of our producing properties and operations are located in the west and mid-west of the United States, making us vulnerable to risks associated with operating in two major geographic areas.

All of our proved reserves and all of our expected oil and gas production are located in Oklahoma, Kansas, Utah and Wyoming. As a result, we may be disproportionately exposed to the impact of delays or interruptions of production from these wells caused by transportation capacity constraints, curtailment of production, availability of equipment, facilities, personnel or services, significant governmental regulation, natural disasters, adverse weather conditions, plant closures for scheduled maintenance or interruption of transportation of oil or gas produced from the wells in these areas. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and gas producing areas which may cause these conditions to occur with greater frequency or magnify the effect of these conditions on us. Due to the concentrated nature of our portfolio of properties, a number of these properties could experience any of the same conditions at the same time, resulting in a relatively greater impact on our results of operations than they might have on other companies that have a more diversified portfolio of properties. Such delays or interruptions could have a material adverse effect on our financial condition and results of operations.

We are an emerging growth company, and have elected to delay the adoption of new or revised accounting standards until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

We qualify as an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are permitted to rely on exemptions from various reporting requirements including, but not limited to, the requirement to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, and the requirement to submit certain executive compensation matters to shareholder advisory votes such as “say on pay” and “say on frequency.”

In addition, Section 107 of the JOBS Act also 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 have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company up to the fifth anniversary of our first registered sale of common equity securities, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

During the period in which we qualify as an emerging growth company and elect to provide more limited disclosure as allowed by the JOBS Act, we cannot predict if investors will find our common stock less attractive as a result. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Risks Related to our Industry

Drilling for and producing oil and gas are high-risk activities with many uncertainties that could adversely affect our business, financial condition or results of operation.

Oil operations involve many risks, many of which are beyond our control. Our long-term commercial success depends on our ability to find, acquire, develop and commercially produce oil and gas reserves. Without the continual addition of new reserves, our existing reserves and the production therefrom will decline over time as such reserves are exploited. A future increase in our reserves 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 projects. We can give no assurance that we will continue to locate satisfactory properties for acquisition or participation. Moreover, if we identify suitable properties for acquisition or participation, we may determine that current markets, terms of acquisition and participation or pricing conditions make such acquisitions or participations uneconomic. We have no assurance that we will discover or acquire further commercial quantities of oil and gas.

Future oil and gas exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the production from successful wells. These conditions include:

unexpected drilling conditions,

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 oil exploration, development and production activities are subject to all the risks and hazards typically associated with such activities, including hazards such as fire, explosion, blowouts, cratering, sour gas releases and spills. Each of these hazards could result in personal injury or death, or substantial damage to oil and gas wells, production facilities, other property and the environment. In accordance with industry practice, we are not fully insured against all of these risks, nor are all such risks insurable. Although we maintain liability insurance in an amount that is considered consistent with industry practice, the nature of these risks is such that liabilities could exceed policy limits, in which event we could incur significant costs that could have a material adverse effect upon our financial condition. Our oil and gas production activities are also subject to all the risks typically associated with such activities, including encountering unexpected formations or pressures, premature decline of reservoirs and the invasion of water into producing formations. Losses resulting from the occurrence of any of these risks could have a material adverse effect on our future results of operations, liquidity and financial condition.

Upon a commercial discovery, market conditions or operational impediments may hinder our access to oil and gas markets or delay its production.

Upon a commercial discovery, the marketability of our production depends in part upon the availability, proximity and capacity of pipelines, trucks, railways, storage, gathering systems and processing facilities. This dependence is heightened where this infrastructure is less developed. Therefore, if drilling results are positive in certain areas, we would need to build production facilities to handle the potential volume of oil and gas produced. We might be required to shut in wells, at least temporarily, due to the inadequacy or unavailability of transportation facilities. If that were to occur, we would be unable to realize revenue from those wells until we could make arrangements to deliver production to market.

Our ability to produce and market oil and gas is affected and also may be harmed by:

the lack of transportation, storage, pipeline transmission facilities or carrying capacity;

government regulation of oil and gas production;

government transportation, tax and energy policies;

changes in supply and demand; and

general economic conditions.

Profitability and cash flow of our operations will be dependent upon the market price of oil and gas. Prices for oil and gas have fluctuated widely, particularly in recent years and are likely to continue to be volatile in the future.

Oil and gas prices fluctuate significantly in response to regional, national and global supply and demand factors beyond our control. These factors include, but are not limited to, the following:

changes in global supply and demand for oil and gas;

the actions of the Organization of Petroleum Exporting Countries;

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

political and economic conditions, including embargoes, in crude oil-producing countries or affecting other crude oil-producing activity;

the level of global oil and gas exploration and production activity;

the level of global oil and gas inventories;

weather conditions;

technological advances affecting energy consumption;

domestic and foreign governmental regulations;

proximity and capacity of oil and gas pipelines and other transportation facilities;

the price and availability of competitors’ supplies of oil and gas in captive market areas; and

the price and availability of alternative fuels.

As an independent oil and gas producer, our revenue, profitability and future rate of growth are substantially dependent on prevailing prices of natural gas, natural gas liquids and crude oil. Historically, the energy markets have been very volatile and it is likely that oil and gas prices will continue to be subject to wide fluctuations in the future. A substantial or extended decline in oil and gas prices could have a material adverse effect on our financial position, results of operations, cash flows and access to capital, and on the quantities of oil and gas reserves that can be economically produced.

Shortages of rigs, equipment, supplies and personnel could delay or otherwise adversely affect our cost of operations or our ability to operate according to our business plan.

Oil and gas exploration and development activities are dependent on the availability of drilling and related equipment and qualified personnel in the particular areas where such activities will be conducted. Demand for such equipment and qualified personnel may affect our access to such equipment and qualified personnel and may delay our exploration and development activities. In addition, the costs of qualified personnel and equipment in the area where our assets are located may be very high due to the availability of, and demands for, such qualified personnel and equipment in the area.

The possible reserves reported herein are estimates only and there is no certainty that it will be economically or technically viable to produce any portion of the reported possible reserves.

The possible reserves reported herein are estimates only and there is no certainty that any portion of the reported possible reserves will be discovered and that, if discovered, it will be economically viable or technically feasible to produce.

Reserve estimates are inherently uncertain, are based on a number of variables and actual production will vary from estimates.

There are numerous uncertainties inherent in estimating quantities of oil and gas reserves and cash flows to be derived therefrom, including many factors beyond our control. The information concerning reserves and associated cash flow set forth in this quarterly report represents estimates only. In general, estimates of economically recoverable oil reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, including the following, all of which may vary from actual results:

historical production from the properties,

production rates,

ultimate reserve recovery,

timing and amount of capital expenditures,

marketability of oil and gas,

royalty rates, and

the assumed effects of regulation by governmental agencies and future operating costs.

For those reasons, estimates of the economically recoverable oil and 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 therefrom 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 thereof and such variations could be material. Further, evaluations are based, in part, on the assumed success of the exploitation activities intended to be undertaken in future years. The reserves and estimated cash flows to be derived therefrom contained in such evaluations will be reduced to the extent that such exploitation activities do not achieve the level of success assumed in the evaluation.

Estimates of proved 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. Many of our producing wells have a limited production history and thus there is less historical production on which to base the reserves estimates. In addition, a significant portion of our reserves may be attributable to a limited number of wells and, therefore, a variation in production results or reservoir characteristics in respect of such wells may have a significant impact upon our reserves.

In accordance with applicable disclosure regulations of the SEC, Pinnacle Energy Services, L.L.C. (“Pinnacle”) has used forecast price and cost estimates in calculating reserve quantities. Actual future net cash flows will be affected by other factors such as actual production levels, supply and demand for oil and gas, curtailments or increases in consumption by oil and gas purchasers, changes in governmental regulation or taxation and the impact of inflation on costs. Actual production and cash flows derived therefrom will vary from the estimates contained in the Pinnacle Reserve Report, and such variations could be material. The Pinnacle Reserve Report is based in part on the assumed success of activities we intend to undertake in future years. The reserves and estimated cash flows to be derived therefrom contained in the Pinnacle Reserve Report will be reduced to the extent that such activities do not achieve the level of success assumed in the Pinnacle Reserve Report.

The Pinnacle Reserve Report sets forth estimates of our reserves as of January 1, 2012 and has not been updated and thus does not reflect changes in our resources since that date.

We are subject to complex laws and regulations, including environmental regulations, that can have a material adverse effect on the cost, manner and feasibility of doing business.

Oil and gas operations (exploration, production, pricing, marketing and transportation) are subject to extensive controls and regulations imposed by various levels of government and may be amended from time to time. Our operations may require licenses from various governmental authorities. There can be no assurance that we will be able to obtain all necessary licenses and permits that may be required to carry out exploration and development at our projects.

The oil and gas industry is subject to environmental regulations pursuant to local, state and federal legislation. A breach of such legislation may result in the imposition of fines or other penalties. Should we be unable to fully fund the cost of remedying an environmental liability, we might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy. 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, 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. Although we believe that we are in material compliance with current applicable environmental regulations, we can give no assurance 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.

The oil and gas industry is subject to regulation, enforcement and intervention by governments in such matters as:

awarding and licensing of exploration and production interests,

imposition of specific drilling obligations,

imposition of pollution controls and environmental protection,

regulation of health and safety effects and offshore activity and operations,

control over the development, decommissioning and abandonment of fields (including restrictions on production), and

cancellation of contract rights.

Governments may also regulate or intervene with respect to price, taxes, royalties and the exploration of oil and gas. Such regulation may be changed from time to time in response to economic or political conditions. The implementation of new legislation or regulations or the modification of existing legislation or regulations affecting the oil and gas industry could reduce demand for crude oil, increase costs and may have a material adverse impact on us. Export sales are subject to the authorization of government agencies and the corresponding governmental policies of foreign countries.

Competition in the oil and gas industry is intense, and many of our competitors have greater financial, technological and other resources than we do, which may adversely affect our ability to compete.

Competition relating to all aspects of the oil and gas industry is intense. We will actively compete for capital, skilled personnel, access to rigs and other equipment, access to processing facilities and pipeline and refining capacity and in all other aspects of our operations with a substantial number of other organizations, many of which will have greater technical and financial resources.

Delays in business operations may reduce cash flows and subject us to credit risks.

In addition to the usual delays in payments by purchasers of oil and gas to us or to the operators, and the delays by operators in remitting payment to us, payments between these parties may be delayed due to restrictions imposed by lenders, accounting delays, delays in the sale of delivery of products, delays in the connection of wells to a gathering system, adjustment for prior periods, or recovery by the operator of expenses incurred in the operation of the properties. Any of these delays could reduce the amount of cash flow available for our business in a given period and expose us to additional third-party credit risks.

Changes in legislation may adversely affect our operations and our financial performance.

Independent oil and gas exploration activities and access to capital have historically been dependent to some degree on the availability of intangible drilling cost deductions under existing tax laws. There can be no assurance that income tax laws, other laws or government incentive programs relating to the oil and gas industry will not be changed in a manner which will adversely affect us. There can be no assurance that tax authorities having jurisdiction will agree with our method of calculating our income for tax purposes or that such tax authorities will not change their administrative practices to our detriment.

Seasonal weather conditions and other factors could adversely affect our ability to conduct drilling activities.

The level of activity in the oil and gas industry of the west and mid-west of the U.S. is influenced by seasonal weather patterns. In some climates, drilling and oil and gas activities cannot be conducted as effectively during the winter months. In other climates, a mild winter or wet spring may result in limited access and, as a result, reduced operations or a cessation of operations. Municipalities and state transportation departments enforce road bans that restrict the movement of drilling rigs and other heavy equipment during periods of wet weather, thereby reducing activity levels. Seasonal factors and unexpected weather patterns may lead to declines in exploration and production activity and corresponding declines in the demand for our oil and gas.

Severe weather conditions limit and may temporarily halt the ability to operate during such conditions. These constraints and the resulting shortages or high costs could delay or temporarily halt our oil and gas operations and materially increase our operating and capital costs, which could have a material adverse effect on our business, financial condition and results of operations.

Proposals to increase U.S. federal income taxation of independent producers may negatively affect our results.

Recently, U.S. federal budget proposals would potentially increase and accelerate the payment of federal income taxes of independent producers of oil and gas. Proposals that would significantly affect us would repeal the expensing of intangible drilling costs, repeal the percentage depletion allowance and increase the amortization period of geological and geophysical expenses. These changes, if enacted, will make it more costly to explore for and develop oil and gas resources. We are unable to predict whether any changes, or other proposals to such laws, ultimately will be enacted. Any such changes could negatively impact our cash flows and future operating results.

Possible regulation related to climate change and global warming could have a negative impact on our business.

Federal and state governments are considering enacting new legislation and promulgating new regulations governing or restricting the emission of greenhouse gases from certain stationary sources common in our industry. The EPA has made findings and issued proposed regulations that could lead to the imposition of restrictions on greenhouse gas emissions from certain stationary sources and that could require us to establish and report an inventory of greenhouse gas emissions. In addition, the U.S. Congress is in the process of considering various bills that would establish an economy-wide cap-and-trade program to reduce U.S. emissions of greenhouse gases, including carbon dioxide and methane. Such a program, if enacted, could require phased reductions in greenhouse gas emissions over a number of years and could result in the issuance of a declining number of tradable allowances to sources that emit greenhouse gases into the atmosphere. Legislation and regulatory proposals for restricting greenhouse gas emissions or otherwise addressing climate change could require us to incur additional operating costs and could adversely affect demand for our oil and gas. Potential increases in operating costs could include new or increased costs to obtain permits, operate and maintain equipment and facilities, install new emission controls on equipment and facilities, acquire allowances to authorize greenhouse gas emissions, pay taxes related to greenhouse gas emissions and administer and manage a greenhouse gas emissions program. Moreover, incentives to conserve energy or use alternative energy sources could reduce demand for oil and gas.

Acreage must be drilled before lease expiration, generally within two to five years, in order to hold the acreage by production. In the highly competitive market for acreage, failure to drill sufficient wells in order to hold acreage will result in a substantial lease renewal cost or if renewal is not feasible, loss of our lease and prospective drilling opportunities.

If we acquire leasehold interests that are not held by production, we must establish production prior to the expiration of the applicable lease or the lease for such acreage will expire. The cost to renew leases may increase significantly, and we may not be able to renew such leases on commercially reasonable terms or at all.

Alternatives to and changing demand for petroleum products.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and gas and technological advances in fuel economy and energy generation devices could reduce the demand for crude oil and other liquid hydrocarbons. We cannot predict the impact of changing demand for oil and gas products, and any major changes may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Related to our Common Stock

There is currently no public or private market for our common stock.

Our common stock is not currently publicly traded or quoted on any stock exchange or other electronic trading facility. We cannot assure you that a trading market for our common stock will develop. Our common stock has not been registered for resale under the federal securities laws or the securities laws of any state. The holders of shares of our common stock, and persons who may wish to purchase shares of our common stock in any trading market that might develop in the future, should be aware that significant federal and state securities laws and regulations may exist which could limit the ability of our stockholders to sell their shares.

Shares of our common stock are subject to dilution.

As of November 14, 2012, 28,758,363 shares of our common stock were issued and outstanding. In addition warrants to purchase 2,842,406 shares of our common stock were outstanding, notes convertible into approximately 770,905 shares of our common stock were outstanding and preferred stock convertible into approximately 152,000 shares of our common stock were outstanding . If we issue additional shares of common stock to new investors in the future, such issuance will result in dilution to each current stockholder by reducing the stockholder’s percentage ownership of the total outstanding shares of our common stock.

The value of our common stock may be affected by matters not related to our operating performance.

The value of our common stock may be affected by matters not related to our operating performance for reasons that may include the following:

U.S. and worldwide supplies and prices of and demand for oil and gas;

political conditions and developments in the United States;

political conditions in oil and gas producing regions;

investor perception of the oil and gas industry;

limited trading volume of our common stock;

change in environmental and other governmental regulations;

the prices of oil and gas;

announcements relating to our business or the business of our competitors;

our liquidity; and

our ability to raise additional funds.

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and our results of operations and financial condition.

Our operating results may fluctuate significantly, and these fluctuations may cause the price of our common stock to decline.

Our operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, including the coming to market of oil and gas reserves that we are able to discover and develop, expenses that we incur, the prices of oil and gas in the commodities markets and other factors. If our results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline.

We have never paid a common stock dividend and will not pay any dividends for the foreseeable future.

We have never paid a dividend nor made a distribution on our common stock. Further, we may never achieve a level of profitability that would permit payment of dividends or making other forms of distributions to common stockholders. In any event, given the stage of our development, it will likely be a long period of time before we could be in a position to pay dividends or distributions to our investors. The payment of any future dividends will be at the sole discretion of the Board. In this regard, we currently intend to retain earnings to finance the expansion of our business and do not anticipate paying dividends in the foreseeable future.

We may issue additional stock without stockholder consent.

Our Board of Directors has authority, without action or vote of the stockholders, to issue all or part of our authorized but unissued shares. Additional shares may be issued in connection with future financing, acquisitions, employee stock plans, or otherwise. Any such issuance will dilute the percentage ownership of existing stockholders.

We have issued preferred stock and we may issue additional preferred stock in the future, which may adversely affect the rights of holders of our common stock and the value of such common stock.

Our Board of Directors is authorized to issue classes or series of preferred stock, without any action on the part of the stockholders. The Board of Directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred stock, including voting rights, dividend rights and preferences over the common stock with respect to dividends or upon the liquidation, dissolution or winding-up of our business and other terms. We recently issued preferred stock convertible into 152,000 shares of our common stock, and we may issue additional preferred stock in the future. The outstanding preferred stock and any additional preferred stock we issue in the future will have a preference over the common stock, with respect to the payment of dividends or upon liquidation, dissolution or winding-up. Also, although our outstanding preferred stock has no voting rights except as provided under Nevada law, future issuances of preferred stock may include voting rights that dilute the voting power of the common stock, which would adversely affect the rights of holders of the common stock or the value of the common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following summarizes all sales of our unregistered securities during the quarterly period ended September 30, 2012. The securities listed in each of the below referenced transactions were (i) issued without registration and (ii) were issued in reliance on the private offering exemptions contained in Sections 4(2), 4(5) and/or 3(b) of the Securities Act and on Regulation D promulgated thereunder, and in reliance on similar exemptions under applicable state laws as a transaction not involving a public offering. No placement or underwriting fees were paid in connection with these transactions. Proceeds from the sales of these securities were used for general working capital purposes. The securities are deemed restricted securities for purposes of the Securities Act.

Effective October 23, 2012, the Company implemented a 1-for-10 reverse stock split of its issued and outstanding common stock. All common share and per common share information in the transactions described below has been retroactively restated to reflect the reverse common stock split.

Sales of Common Stock

In July 2012, the Company issued 10,000 shares of common stock to an existing investor for cash of $25,000 or $2.50 per share.

In August 2012, the Company issued 10,000 shares of common stock to a consultant of the Company for consulting services valued at $25,000 or $2.50 per share. The shares were fully vested on the date of grant. The entire amount of this issuance was expensed in August 2012.

In August 2012, the Company issued 5,000 shares of common stock to a consultant of the Company for consulting services valued at $12,500 or $2.50 per share. The shares were fully vested on the date of grant. The entire amount of this issuance was expensed in August 2012.

In September 2012, the Company issued 30,000 shares of common stock to a consultant of the Company for future services for six months valued at $75,000 or $2.50 per share. These shares were fully vested on the date of grant. The amount of this issuance will be expensed over the six-month period.

Warrant Issuances

In July 2012, the Company granted warrants to an existing investor to purchase up to 10,000 shares of common stock with an exercise price of $5.00 per share, which expire on July 14, 2015.

In August 2012, the Company granted warrants to a related party to purchase up to 15,000 shares of common stock with an exercise price of $5.00 per share, which expire on September 29, 2013.

In September 2012, the Company granted warrants to unaffiliated investors to purchase up to 25,000 shares of common stock with an exercise price of $3.70 per share, which expire on September 4, 2015.

In September 2012, the Company granted warrants to unaffiliated investors to purchase up to 2,000 shares of common stock with an exercise price of $3.70 per share, which expire on September 20, 2015.

In September 2012, the Company granted warrants to unaffiliated investors to purchase up to 1,500 shares of common stock with an exercise price of $3.70 per share, which expire on September 24, 2015.

ITEM 6. EXHIBITS

The list of exhibits in the Exhibit Index to this quarterly report is incorporated herein by reference.

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 thereunto duly authorized.

	RICHFIELD OIL & GAS COMPANY

Dated: November 14, 2012	By:	/s/ DOUGLAS C. HEWITT, SR.
		Douglas C. Hewitt, Sr.
		Chief Executive Officer

Dated: November 14, 2012	By:	/s/ GLENN G. MACNEIL
		Glenn G. MacNeil.
		Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description

3.1	Certificate of Designation (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed on September 10, 2012).

3.2	Certificate of Amendment to Articles of Incorporation of Richfield Oil & Gas Company (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed on October 25, 2012).

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

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema Document

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 and 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

RICHFIELD OIL & GAS (ROIL) Inactive 10-Q2012 Q3 Quarterly report

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