Sable Natural Resources Corp - FORM 10-K

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Sable Natural Resources Corp	Financial_Report.xls
EX-10.3 - 2014 12% CONVERTIBLE DEBENTURE - Sable Natural Resources Corp	fy201310-k103.htm
EX-10.1 - EMPLOYMENT AGREEMENT - GALVIS - Sable Natural Resources Corp	fy201310-k101.htm
EX-31.1 - CERTIFICATION OF CEO - SECTION 302 - Sable Natural Resources Corp	fy201310-k311.htm
EX-10.2 - EMPLOYMENT AGREEMENT - HALL - Sable Natural Resources Corp	fy201310-k102.htm
EX-21 - LIST OF SUBSIDIARIES OF REGISTRANT - Sable Natural Resources Corp	fy201310-k21.htm
EX-10.4 - 2014 DEBENTURE WARRANT - Sable Natural Resources Corp	fy201310-k104.htm
EX-23.1 - CONSENT OF WHITLEY PENN LLP - Sable Natural Resources Corp	fy201310-k231.htm
EX-32.1 - CERTIFICATION OF CEO - 18 U.S.C. 1350 - Sable Natural Resources Corp	fy201310-k321.htm
EX-10.5 - SECURITIES PURCHASE AGREEMENT - HALL - Sable Natural Resources Corp	fy201310-k105.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

Securities Exchange Act of 1934

For the fiscal year ended December 31, 2013

Commission File Number: 53915

NYTEX ENERGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



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



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

972-770-4700

(Registrant’s telephone number, including area code)

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

None

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

Common Stock, $0.001 par value per share

(Title of class)

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

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

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

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

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

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



Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

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

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 28, 2013 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $2.2 million assuming a market value of $0.16 per share.

As of June 30, 2014, the registrant had 34,877,501 shares of common stock outstanding.

__________________________________________________

Documents Incorporated by Reference

None

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TABLE OF CONTENTS



		Page
PART I

Item 1.	Business	4

Item 1A.	Risk Factors	12

Item 1B.	Unresolved Staff Comments	21

Item 2.	Properties	21

Item 3.	Legal Proceedings	25

Item 4.	Mine Safety Disclosures	25

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26

Item 6.	Selected Financial Data	27

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 8.	Financial Statements and Supplementary Data	38

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	39

Item9A.	Controls and Procedures	39

Item 9B.	Other Information	39

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	40

Item 11.	Executive Compensation	42

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44

Item 13.	Certain Relationships and Related Transactions and Director Independence	44

Item 14.	Principal Accounting Fees and Services	45

PART IV

Item 15.	Exhibits and Financial Statement Schedules	46

Signatures		47

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FORWARD-LOOKING STATEMENTS

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

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PART I

Item 1. Business

NYTEX Energy Holdings, Inc. d/b/a Sable Natural Resources (“Sable”) is an energy holding company with principal operations centralized in its wholly-owned subsidiary, NYTEX Petroleum, Inc. which changed its' name to Sable Operating Company, Inc. ("Sable Operating") on July 16, 2014. Sable Operating is an early-stage exploration and production ("E&P") company engaged in the acquisition, development, and production of oil and natural gas reserves from low-risk, high rate-of-return wells in carbonate reservoirs. Sable Operating also provides land services to its customers by identifying landowners and performing such services as analyzing land and mineral title reports, leasehold title analysis and reports, land title runsheets, sourcing, negotiating and acquiring leases, document preparation, and performing title curative functions.

Prior to April 30, 2013, Sable owned 100% of the interests in Petro Staffing Group, LLC ("Petro Staffing"), a full-service executive recruiting and placement agency that provided the energy marketplace with full-time professionals. Prior to November 5, 2012, Sable owned 80% of Petro Staffing resulting in a non-controlling interest. On November 5, 2012, Sable acquired the remaining 20% interest in Petro Staffing and accordingly, Petro Staffing became a wholly-owned subsidiary of Sable. On April 30, 2013, the Company elected to cease the operations of its Petro Staffing business.

Prior to May 4, 2012, Sable, through its wholly-owned subsidiary, NYTEX FDF Acquisition, Inc. (“Acquisition Inc.”), owned a 100% membership interest in New Francis Oaks, LLC (“New Francis Oaks”) and its wholly-owned operating subsidiary, Francis Drilling Fluids, Ltd. (“Francis Drilling Fluids,” or “FDF” and, together with New Francis Oaks, the “Francis Group”), a full-service provider of drilling, completion, and specialized fluids, dry drilling and completion products, technical services, industrial cleaning services, and equipment rental for the oil and gas industry. On May 4, 2012, certain subsidiaries of ours entered into an Agreement and Plan of Merger (the “Merger Agreement”) with an unaffiliated third party, FDF Resources Holdings LLC (the “Purchaser”). Pursuant to the Merger Agreement, New Francis Oaks was merged into the Purchaser and, as a result, FDF is now owned by an unaffiliated third party. See below for further discussion.

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

General Information

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

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

Our Strategy

The principal components of our strategy include:


•	Grow reserves and production through exploration, appraisal and development

We plan to continue to produce and further develop our interests in North Texas and in the Texas Permian Basin, while evaluating both existing and recently discovered oil and natural gas play opportunities throughout Texas and North America. In the event of a declaration of commerciality and approval of a plan of development, we intend to develop these discoveries to grow proved reserves and production. We also plan to drill in our prospect portfolio, with the intent to further grow proved reserves and production should discoveries be made.


•	Apply technically-proven drilling and completion technologies to continue our successful exploration and development program

We believe our management and technical team are pivotal to the success of our business strategy. We have created an environment that enables them to focus their knowledge, skills and experience on finding and developing oil and natural gas fields. Culturally, we have an open, team-oriented work environment that fosters both creative and contrarian thinking. This approach allows us to fully consider and understand risk and reward and to deliberately

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and collectively pursue strategies that maximize value. We used this philosophy and approach to develop the Marble Falls formation in the Fort Worth Basin using unconventional technology, a significant new petroleum system the industry previously did not consider either prospective or commercially viable.


•	Identify, access and explore emerging oil and liquids rich resources

We will continue to utilize our systematic and proven geologically-focused approach to emerging petroleum systems where geological data suggests hydrocarbon accumulations are likely to exist and early-stage commercial development has been made. We believe this approach reduces the exploratory risk in poorly understood, under-explored or otherwise overlooked hydrocarbon areas that offer significant oil and natural gas potential. This was the case with respect to the Marble Falls formation in the Fort Worth Basin, the area in which we chose to build our exploration portfolio beginning in 2011.

This approach and focus provides a competitive advantage in identifying and accessing new strategic growth opportunities. We expect to continue to seek new opportunities where oil and natural gas has not been produced in meaningful quantities by leveraging the skills of our experienced technical team. This includes our existing areas of interest as well as selectively expanding into other regions.


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

We believe our success is grounded in our purpose, core values, and conduct demonstrated each day through ethical business practices, commitment to our employees, and our culture. Our Code of Business Conduct provides all employees with detailed guidance on the right way to conduct business.

Oil and Natural Gas — Sable Operating

Sable Operating is engaged in the acquisition, development, and resale of oil and natural gas leasehold properties in Texas. We also acquire overriding royalty and working interests in the leasehold properties’ production of oil and natural gas reserves. In addition, we provide land services to third party oil and natural gas companies whereby, through the use of contract landmen, we acquire oil and natural gas leases in areas specified by the customers. Our growth initiatives focus on the acquisition of leasehold acreage within early-stage tight rock oil and natural gas resource plays. We believe these plays exist and can be developed uniformly over expansive geographical areas with a high rate of success due to the recent advancements in horizontal drilling and multi-stage hydraulic fracturing technologies. Since beginning these activities in early 2011, Sable has acquired overriding and working interests in nearly 87,000 leasehold acres primarily in the Fort Worth Basin of North Texas.

Other Business Data

Our Competitive Edge

Our strategy is to enter early into emerging oil resource plays. Now that the technology in the shales has extended to conventional tight rock limestone and carbonate reservoirs, the same horizontal drilling and multi-stage shale fracture stimulation technologies are being applied to increase daily production rates and ultimate recoveries of oil and natural gas. In the last year, we have been able to acquire significant acreage positions in oil resource plays at low costs and utilize our extensive network of associates, landmen, partners, and customers within the oil and gas industry working in these plays. We access funding for our leasehold acreage acquisitions through land bank partners, develop our geology, and either sell the high-graded leasehold properties to industry partners to drill and develop the properties while retaining a promoted interest, or, through our operator-partners, drill and develop the properties. By originating acquisitions, we generate upfront transaction fees, retain carried working interests in the leases and wells, and retain overriding royalties. As a result, we do not take exploration risk in our early-stage development of oil and natural gas properties.

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Our Wells

Information about our wells is summarized in the following table.



Well Name	County/State	Sable Working Interest
Non-Operated
Leach R-1	Jack, TX	9.0	%	⁽¹⁾
Leach R-2	Jack, TX	10.2	%	⁽¹⁾
Leach R-3	Jack, TX	12.6	%	⁽¹⁾
Virgil Maxwell	Jack, TX	8.7	%	⁽¹⁾
Gahagan Burns	Jack, TX	12.5	%	⁽¹⁾
Frank N-1	Jack, TX	15.3	%	⁽¹⁾
JO Hester #1D	Jack, TX	25.0	%
Liberty Farms 2ST	Liberty, TX	5.1	%
Oakwood Dome	Leon, TX	6.3	%
Sand Hill C-3	Leon, TX	6.3	%
West Chablis	Ship Shoal Parish, LA	0.3	%
Germany #1	Palo Pinto, TX	0.5% Overriding Royalty
Farmer	Young, TX	10.2	%
Thunder A-965 1	Young, TX	3.8	%
Remuda A-154 #1H	Throckmorton, TX	1% Overriding Royalty
Newman 1	Jack, TX	25.2	%
Coley 1	Jack, TX	25.2	%

(1) Wells were impaired during 2013 as discussed in Item 2. Properties, Oil and Natural Gas Reserves, but the Company retains its working interest in the wells.

Our Prospects

Information about our prospects we hold for future development is summarized in the following table.



Tract	County/State	Gross Acres	Sable Working Interest		Net Acres
San Andres	Howard, TX	4,515.0	10.0	%	451.5
Matlock	Clay, TX	90.5	33.3	%	30.2
Newman	Jack, TX	218.4	25.2	%	55.0
Coley	Jack, TX	160.0	25.2	%	40.3
Crum	Jack, TX	252.4	33.3	%	84.1
Peterson	Jack, TX	147.7	50.0	%	73.9
Briscoe	Jack, TX	107.3	50.0	%	53.6
Barnett	Young, TX	2,261.0	12.0	%	271.3
		7,752.3			1,059.9

Governmental Regulation

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

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

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

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

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

In addition, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all similarly situated shippers requesting service on the same terms and under the same rates. When oil pipelines operate at full capacity, access is generally governed by prorationing provisions set forth in the pipelines’ published tariffs. Accordingly, we believe access to oil pipeline transportation services generally will be available to us to the same extent as to our similarly situated competitors.

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

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

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

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

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

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

Competition and Other External Factors

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

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

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


•	The domestic and foreign supply of natural gas and oil


•	Overall economic conditions


•	The level of consumer product demand


•	Weather conditions


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


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


•	The level of oil and natural gas imports

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•	Domestic and foreign governmental regulations

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

Operating Hazards and Risks

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

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

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

Hydraulic Fracturing

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

The fluid injected into the rock is mostly water. Various types of proppant are added, such as silica sand, resin-coated sand, and fired bauxite clay (man-made ceramics), depending on the type of permeability or grain strength needed. Chemical additives are sometimes applied by the driller/well operator to tailor the injected material to the specific geological situation, protect the well, and improve its operation, though chemical additives typically make up less than 1% of the total composition of the injected fluid, varying slightly based on the type of well.

Seasonality

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

Customers

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

Employees

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As of June 30, 2014, we had six employees between our Oil and Gas business and corporate holding company. Our employees are not represented by a labor union and are not covered by collective bargaining agreements.

Disposition of FDF

On May 4, 2012, (the “Closing Date”), our subsidiary, Acquisition Inc., together with New Francis Oaks, entered into the Merger Agreement with the Purchaser. Pursuant to the terms of the Merger Agreement, New Francis Oaks merged with and into the Purchaser, and the Purchaser continued as the surviving entity after the merger (the “Disposition” or the “Merger”). As a result, New Francis Oaks owned 100% of the outstanding shares of FDF and FDF was no longer a subsidiary of ours.

The total consideration for the Merger paid by the Purchaser on the Closing Date was $62,500,000 (the “Merger Proceeds”). After: (i) an adjustment to the amount of the Merger Proceeds based upon the level of estimated working capital of the Francis Group on the Closing Date; (ii) the payment or provision for payment of all indebtedness of the Francis Group on the Closing Date; (iii) the payment of all indebtedness of Acquisition Inc. on the Closing Date (including under its senior secured credit facility with PNC Bank); (iv) the payment of the Put Payment Amount (as defined below) due to WayPoint Nytex, LLC (“WayPoint”) under the WayPoint Purchase Agreement (as defined below); (v) the payment of all transaction expenses relating to the Merger; (vi) the payment to the Company of $812,500 of accrued management fees and $110,279 of expense reimbursement due and payable to the Company under the Management Services Agreement, dated November 23, 2010, between the Company and FDF (the “Management Agreement”); (vii) the payment of certain transaction bonuses payable to certain FDF employees; and (viii) the Purchaser’s delivery of $6,250,000 of the Merger Proceeds (the “Escrow Fund”) to The Bank of New York Mellon Trust Company, N.A., as escrow agent, to be held in escrow under the Escrow Agreement (as defined below), Acquisition Inc. received on the Closing Date remaining cash transaction proceeds in the amount of approximately $4,481,000. The Merger Agreement provided that, to the extent the final amount of working capital of the Francis Group on the Closing Date was greater than the estimated amount of working capital, as determined under the Merger Agreement, the Purchaser would pay to Acquisition Inc. the amount of such working capital surplus, provided that, pursuant to the Omnibus Agreement (as defined below), WayPoint would be entitled to receive 87.5% of any such working capital surplus payment. To the extent the final amount of working capital of the Francis Group on the Closing Date was less than the estimated amount of working capital, Acquisition Inc. would pay to the Purchaser the amount of such working capital deficit, which payment would be made out of the Escrow Fund, provided that, pursuant to the Omnibus Agreement, WayPoint would be obligated to pay to Acquisition Inc. 87.5% of the amount of any such working capital deficit.

In connection with the consummation of the Merger, we entered into an Omnibus Agreement (the “Omnibus Agreement”) with WayPoint and the Francis Group. The Omnibus Agreement became effective upon the consummation of the Merger.

Pursuant to the Omnibus Agreement, upon the consummation of the Merger:


(i)	the Management Agreement was terminated;


(ii)	Waypoint paid $150,000 to the Company out of the Put Payment Amount due and payable to WayPoint;


(iii)	the Company was paid $812,500 from the Merger Proceeds, which sum represented accrued management fees due and payable to the Company from FDF under the Management Agreement; and


(iv)	the Company was paid $110,279 from the Merger Proceeds, which sum represented reimbursement by FDF of certain expenses previously incurred by the Company in respect of certain professional services provided, and which reimbursement was due and payable to the Company from FDF under the Management Agreement.

In the Omnibus Agreement, the Company, WayPoint, and the Francis Group also agreed to mutual releases from and to each other, and their related parties, relating to facts existing on or before the Closing Date that relate to the Merger, the WayPoint Purchase Agreement, the related documents, and the relations among the parties. The releases also covered claims that any of the parties could assert against any employees of the FDF Group. In addition, the parties agreed that WayPoint would bear 87.5% of any post-closing working capital deficit under the Merger Agreement and WayPoint would receive 87.5% of any post-closing working capital surplus under the Merger Agreement.

Further, in connection with the consummation of the Merger, we entered into a Settlement Agreement (the “Settlement Agreement”) with WayPoint, the Francis Group, and Michael G. Francis and Bryan Francis (together, the “Francises”). The Settlement Agreement became effective upon the consummation of the Merger.

Pursuant to the Settlement Agreement, upon the consummation of the Merger:

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(i)	WayPoint paid out of the Put Payment Amount a $100,000 bonus to Michael G. Francis, the President of NYTEX Acquisition, and a $25,000 bonus to Jude N. Gregory, the Vice President and Chief Financial Officer of Acquisition Inc.;

(ii)

(A) the Company caused the release of the $1,800,000 of Escrowed Cash (as defined in the Escrow Agreement, dated as of November 23, 2010, by and among Acquisition Inc., Bryan Francis and The F&M Bank & Trust Company (the “Francis Escrow Agreement”)) then being held in escrow pursuant to the Francis Escrow Agreement, in accordance with the terms of the Francis Escrow Agreement, and (B) Michael G. Francis transferred and assigned back to the Company 625,000 shares of common stock of the Company ("NYTEX Common Stock") then owned by Michael G. Francis and originally issued to him pursuant to the Membership Interest Purchase Agreement, dated as of November 23, 2010 (the “Francis Purchase Agreement”), and then being held in escrow pursuant to the Francis Escrow Agreement;

(iii)

(A) Michael G. Francis transferred and assigned back to the Company all of the remaining 2,197,063 shares of common stock then owned by him and originally issued to him pursuant to the Francis Purchase Agreement, and (B) Bryan Francis transferred and assigned back to the Company all of the 381,607 shares of common stock originally issued to him pursuant to the Francis Purchase Agreement, as well as all of the 27,225 shares of NYTEX Common Stock issued to him in connection with his employment by FDF;


(iv)	the employment agreements of Michael G. Francis and Bryan Francis terminated and they became at-will employees of the FDF Group;


(v)	each of the three designees of WayPoint then serving as directors of Acquisition Inc., which included John Henry Moulton, Thomas Drechsler and Lee Buchwald, resigned as directors of Acquisition Inc., effective immediately upon the consummation of the Merger; and

(vi)

in exchange for receipt by WayPoint of the Put Payment Amount (which consisted of $30,000,000, less an aggregate of $306,639 of dividends previously received by WayPoint on account of the WayPoint Senior Series A Redeemable Preferred Stock, less an aggregate of $275,000 payable by WayPoint to the Company, Michael G. Francis and Jude N. Gregory pursuant to the Settlement Agreement, less an additional $449,072 (representing 87.5% of the estimated working capital deficit of the Francis Companies on the Closing Date, but subject to the right of WayPoint to subsequently receive 87.5% of any final working capital surplus of the Francis Companies on the Closing Date and the obligation of WayPoint to subsequently pay 87.5% of any final working capital deficit of the Francis Companies on the Closing Date, pursuant to the Omnibus Agreement); the “Put Payment Amount”), WayPoint transferred and assigned (A) the Senior Series A Redeemable Preferred Stock back to Acquisition Inc., (B) the Purchaser Warrant and the Control Warrant back to the Company, and (C) the WayPoint Series B Share back to the Company, and all such securities were cancelled.

In the Settlement Agreement, the Company, WayPoint, the Francis Group, and the Francises also agreed to mutual releases from and to each other, and their related parties, relating to facts existing on or before the Closing Date that relate to the Merger, the WayPoint Purchase Agreement, the related documents, and the relations among the parties, including in connection with any employment agreements or arrangements of the Francises. The releases also covered claims that any of the parties could assert against any employees of the FDF Group.

In August 2012, the Purchaser delivered a proposed final closing statement, which included, among other things, a calculation of the final closing date net working capital, to the Company. Under the terms of the Omnibus Agreement, WayPoint agreed to bear 87.5% of any post-closing working capital deficit and conversely, we granted to WayPoint the authority to make all decisions, including the right to dispute any item contained in the final closing date net working capital, on our behalf with regards to the proposed final closing statement and final closing date net working capital.

In November 2012, WayPoint delivered to the Purchaser a notice of disagreement disputing certain items in the proposed closing statement and calculation of the final closing date net working capital. In January 2013, NYTEX, WayPoint, and the Purchaser agreed in principal to the final closing statement amounts, along with the calculation of the final closing date net working capital. Part of this agreement in principal included the planned release of funds from the Escrow Fund to the Purchaser in the amount of $1,936,762 (“Net Payment to Purchaser from Escrow”).

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NYTEX’s settlement with WayPoint and the release from escrow of the Net Payment to Purchaser from Escrow existed as of December 31, 2012, the amount paid by WayPoint of $1,075,000 has been recognized as a receivable on the accompanying consolidated balance sheet at December 31, 2012. In addition, the amount of funds to be released from the Escrow Fund of $1,936,762 has been recognized as a reserve against the restricted cash balance on the accompanying consolidated balance sheet at December 31, 2012. The difference between the $1,936,762 and $1,075,000 has been recognized as an additional loss on discontinued operations on the accompanying consolidated statement of operations as of December 31, 2012.

Additional Information

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

Item 1A. Risk Factors

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

Our business model substantially changed as a result of the sale of FDF.

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

Our historical financial results are not indicative of future results as a result of the sale of FDF.

Prior to its sale on May 4, 2012, FDF represented the most significant proportion of our assets and revenues. Because FDF was sold to satisfy our obligations to WayPoint, our historical financial results provide only a limited basis for you to assess our business and our historical financial results are not indicative of future financial results.

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

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

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our results of operations will materially improve in either the short-term or long-term and accordingly, we may be unable to meet our obligations as they become due.

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

Our independent registered public accounting firm issued its report dated August 6, 2014 in connection with the audit of our consolidated financial statements as of December 31, 2013 and 2012, which included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. Reports of independent auditors questioning a company’s ability to continue as a going concern are generally viewed unfavorably by analysts and investors. This report, along with our recent net losses and our accumulated deficit, may make it difficult for us to raise additional debt or equity financing necessary to conduct our operations. If we are not able to continue as a going concern, it is likely that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

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


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


•	the timing and amount of required capital expenditures;


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


•	the approval of other participants in drilling wells; and


•	the operator’s selection of suitable technology.

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

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

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


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


•	the actions of OPEC;


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


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


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


•	the level of global oil and natural gas inventories;


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


•	weather conditions and natural disasters;


•	domestic and foreign governmental regulations;

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


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


•	technological advances affecting energy consumption; and


•	the price and availability of alternative fuels.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


•	unexpected drilling conditions;


•	title problems;


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


•	pressure or geologic irregularities in formations;


•	engineering and construction delays;


•	equipment failures or accidents;


•	compliance with environmental and other governmental requirements; and


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

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

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

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

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

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

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

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

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

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


•	personal injury or loss of life;


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


•	suspension of our operations; and


•	lost profits.

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk factors relating to an investment in our securities

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

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

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As of December 31, 2013, we had outstanding (i) 3,724,004 shares of Series A Preferred Stock which are convertible into an aggregate of 3,724,004 shares of our common stock at $1.00 per share, and (ii) warrants to purchase 4,748,690 shares of our Common Stock at a weighted average exercise price of $1.18 per share.

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

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

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

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

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

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

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

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

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


•	variations in our operating results;


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


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


•	additions or departures of key personnel;


•	future sales of our common stock; and


•	general economic and political conditions.

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

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

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

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

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

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

We do not anticipate paying any dividends.

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

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

We have a total of 200,000,000 shares of common stock authorized for issuance. As of December 31, 2013, we had 172,270,264 shares of common stock available for issuance. We have reserved 3,724,004 shares for conversion of our Series A Preferred Stock, 4,748,690 shares for issuance upon the exercise of outstanding warrants held by various security holders, and 4,853,632 shares for issuance under the 2013 Equity Incentive Plan. We may seek financing that could result in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock. We may also make acquisitions that result in issuances of additional shares of our capital stock. Furthermore, the book value per share of our common stock may be reduced.

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

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

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Other risk factors

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

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

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

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

Item 1B. Unresolved Staff Comments

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

Item 2. Properties

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

The following is a summary of our interest in oil and natural gas wells:



Well Name	County/State	Sable Working Interest
Non-Operated
Leach R-1	Jack, TX	9.0	%	⁽¹⁾
Leach R-2	Jack, TX	10.2	%	⁽¹⁾
Leach R-3	Jack, TX	12.6	%	⁽¹⁾
Virgil Maxwell	Jack, TX	8.7	%	⁽¹⁾
Gahagan Burns	Jack, TX	12.5	%	⁽¹⁾
Frank N-1	Jack, TX	15.3	%	⁽¹⁾
JO Hester #1D	Jack, TX	25.0	%
Liberty Farms 2ST	Liberty, TX	5.1	%
Oakwood Dome	Leon, TX	6.3	%
Sand Hill C-3	Leon, TX	6.3	%
West Chablis	Ship Shoal Parish, LA	0.3	%
Germany #1	Palo Pinto, TX	0.5	%	⁽²⁾
Farmer	Young, TX	12.5	%
Thunder A-965 1	Young, TX	5.0	%
Remuda A-154 #1H	Throckmorton, TX	1.0	%	⁽²⁾
Newman 1	Jack, TX	25.2	%
Coley 1	Jack, TX	25.2	%

(1) Wells were impaired during 2013 as discussed further below, but the Company retains its working interest in the wells.

(2) Overriding royalty only.

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The following is a summary of our interest in undeveloped properties:



Tract	County/State	Gross Acres	Sable Working Interest		Net Acres
San Andres	Howard, TX	4,515.0	10.0	%	451.5
Matlock	Clay, TX	90.5	33.3	%	30.2
Newman	Jack, TX	218.4	25.2	%	55.0
Coley	Jack, TX	160.0	25.2	%	40.3
Crum	Jack, TX	252.4	33.3	%	84.1
Peterson	Jack, TX	147.7	50.0	%	73.9
Briscoe	Jack, TX	107.3	50.0	%	53.6
Barnett	Young, TX	2,261.0	12.0	%	271.3
		7,752.3			1,059.9

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Oil and Natural Gas Reserves

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



	2013		2012
Production
Oil Revenue	$	116,126	$	137,119
Natural Gas Revenue	$	103,034	$	45,354
Gross oil production (bbl)	29,929		63,442
Net oil production (bbl)	1,060		1,502
Gross natural gas production (mcf)	213,549		242,768
Net natural gas production (mcf)	16,847		10,565
Average oil sales price per bbl	$	96.31	$	94.38
Average natural gas sales price per mcf	$	4.71	$	3.79
Average gross daily production (BOED)	144		320
Average net daily production (BOED)	8		11
Average gross daily production (mcfs)	1,491		1,399
Average net daily production (mcfs)	128		80

Productive wells - oil
Gross	13		10
Net	1		1
Productive wells - natural gas
Gross	12		8
Net	1		1
Developed acreage
Gross	378		667
Net	95		106
Undeveloped acreage
Gross	7,752		5,740
Net	1,091		2,417
Drilling activity
Net productive exploratory wells drilled	—		—
Net dry exploratory wells drilled	—		—

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

During 2013, we drilled and completed only two wells. Reserve information for 2013 related to our two proved developed producing properties is based on estimates prepared internally by Sable.

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

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natural gas reserves are stated in thousands of cubic feet.

The PV-10 value was prepared utilizing the twelve-month un-weighted arithmetic average of the first day of the month price for the period January through December 2013, discounted at 10% per annum on a pretax basis, and is not intended to represent the current market value of the estimated oil and natural gas reserves owned by Sable Operating. For further information concerning the present value of future net revenues from these proved reserves, see Supplemental Oil & Gas Data to the Notes to Consolidated Financial Statements.

We maintain internal controls designed to provide reasonable assurance that the estimates of proved reserves are computed and reported in accordance with the rules and regulations provided by the SEC. Michael Galvis, our CEO, is primarily responsible for overseeing the preparation of the reserve estimates and has over 30 years of experience in the oil and gas industry. Numerous uncertainties exist in estimating quantities of proved reserves. Reserve estimates are imprecise and subjective and may change at any time as additional information becomes available. Furthermore, estimates of oil and natural gas reserves are projections based on engineering data. There are uncertainties inherent in the interpretation of this data as well as the projection of future rates of production. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As of December 31, 2013 and 2012, we did not have any delivery commitments.

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

The following tables set forth our estimated net proved oil and natural gas reserves and the PV-10 value of such reserves as of December 31, 2013. Table 1 shows Sable’s net proved oil and natural gas reserves and future discounted net revenues. This table includes the Newman #1 and Coley #1 wells. Table 1A shows the same reserves but with a barrel of oil equivalent calculation (BOE equals 6 Mcf to 1 Bbl).

Table 1

TOTAL PROVED RESERVES (12/31/2013 as of date)

Net Proved Developed

Net Proved Undeveloped

Net Total Proved

PDP & PDnP

PU/D

PDP, PDnP, & PU/D

Oil (bbl)

Gas (mcf)

PV 10

($)

(1)(2)

Oil (bbl)

Gas (mcf)

PV 10

($)

(1)(2)

Oil (bbl)

Gas (mcf)

PV 10

($)

(1)(2)

Newman - Coley

7,500

188,533

616,705

—

7,500

188,533

616,705

Table 1A

TOTAL PROVED RESERVES WITH BOE (12/31/2013 as of date, 6 mcf per barrel of oil)

Net Proved Developed

Net Proved Undeveloped

Net Total Proved

PDP & PDnP

PU/D

PDP, PDnP, & PU/D

Oil (bbl)

Gas (mcf)

BOE

Oil (bbl)

Gas (mcf)

BOE

Oil (bbl)

Gas (mcf)

BOE

Newman - Coley

7,500

188,533

38,922

—

7,500

188,533

38,922

(1)

The PV-10 value as of December 31, 2013 is pre-tax and was determined utilizing the twelve-month un-weighted arithmetic average of the first day of the month price for the period January through December 2013. Natural gas prices are referenced to a Henry Hub (HH) price of $3.68 per MMBtu, as published in Platts Gas Daily, and are adjusted for energy content, transportation fees, and regional price differentials. Oil and NGL prices are referenced to a West Texas Intermediate (WTI) crude oil price of $96.60 per barrel, as posted by Plains Marketing, L.P., and are adjusted for gravity, crude quality, transportation fees, and regional price differentials. These reference prices are held constant in accordance with SEC guidelines. Management believes that the presentation of PV-10 value may be considered a non-GAAP financial measure as defined in Item 10(e) of Regulation S-K. Therefore, we have included a reconciliation of the measure to the most directly comparable GAAP financial measure (standardized measure of discounted future net cash flows in footnote (2) below). Management believes that the presentation of PV-10 value provides useful information to investors because it is widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. Because many factors that are unique to each individual company may impact the amount of future income taxes to be paid, the use of the pre-tax measure provides greater comparability when evaluating companies. It is relevant and useful to investors for evaluating the relative monetary significance of Sable Operating's oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of Sable Operating’s reserves to other companies. Management also uses this pre-tax measure when assessing the potential return on investment related to its oil and natural

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gas properties and in evaluating acquisition candidates. The PV-10 value is not a measure of financial or operating performance under GAAP, nor is it intended to represent the current market value of the estimated oil and natural gas reserves owned by Sable Operating. PV-10 value should not be considered in isolation or as a substitute for the standardized measure of discounted future net cash flows as defined under GAAP.


(2)	Future income taxes and present value discounted (10%) future income taxes were $371,787 and $215,847, respectively. Accordingly, the after-tax PV-10 value of Net Total Proved Reserves (or “Standardized Measure of Discounted Future Net Cash Flows”) is $400,858.

Item 3. Legal Proceedings

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

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

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

Market Information

A public trading market for our common stock began trading on April 1, 2011, and our common stock is now traded in very limited quantities under the symbol “NYTE” on the OTCQB market tier, an interdealer quotation system operated by OTC Markets Group, Inc. The range of closing prices for our common stock, as reported during each quarter during the years ended December 31, 2013 and 2012 was as follows.



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

2012 Quarter Ended	High	Low
March 31, 2012	$1.00	$0.50
June 30, 2012	$0.80	$0.27
September 30, 2012	$0.51	$0.20
December 31, 2012	$0.40	$0.20

These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. As of June 30, 2014, the closing price of our common stock was $0.10 per share.

Holders

As of June 30, 2014, we had approximately 34,877,501 shares of common stock outstanding held by a total of 209 stockholders of record.

Dividends

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

Securities Authorized For Issuance Under Equity Compensation Plans

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


•	increase the interest of such persons in our welfare,


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


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

In addition, we have granted performance-based stock awards to certain employees of the Company and its subsidiaries pursuant to terms negotiated under individual employment agreements for such employees with no exercise price. The following table sets forth the number of shares of restricted common stock outstanding under such plans and the number of shares that remain available for issuance under such plans, as of June 30, 2014:

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	Total Securities to be Issued Upon Exercise of Outstanding Options or Vesting of Restricted Stock
Plan Category	Number (a)	Weighted-average exercise price (b)		Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	—	—		—
Equity compensation plans not approved by security holders	130,000	$	0.42	4,853,632
Total	130,000	$	0.42	4,853,632

Recent Sales of Unregistered Securities

Share Repurchase Program

In April 2013, our Board of Directors approved the repurchase of up to an aggregate of 2.7 million shares of our common stock, or approximately 10% of outstanding common shares. The repurchases will be made from time-to-time on the open market at prevailing market prices. The repurchase program is expected to continue over the next twelve months unless extended or shortened by the Board of Directors. The timing and amount of any repurchase will depend on economic and market conditions, the trading price and other factors and any purchases will be executed in compliance with applicable laws and regulations. The plan does not obligate the Company to acquire any particular amount of common stock and can be implemented, suspended or discontinued at any time without prior notice at the Company’s sole discretion. The share repurchase program will be funded with the Company’s available working capital. During the year ended December 31, 2013, the Company acquired a total of 1,450 shares at an average price per share of $0.24. Based on the average of daily high / low price per share for the year ended December 31, 2013, or $0.23 per share, the approximate dollar value of shares that may yet be purchased under the plan is $621,000. We did not have a share repurchase plan for the year ended December 31, 2012.

Series A Preferred Stock Restructuring

In October 2012, in connection with the restructuring of our outstanding Series A Convertible Preferred Stock, we issued to the holders of our Series A Convertible Preferred Stock 768,090 shares of our common stock in exchange for all accrued and unpaid dividends as of June 15, 2012 and also 2,463,214 shares of our common stock in consideration for eliminating the liquidation preference associated with the Series A Convertible Preferred Stock.

Issuance and Sale of Securities

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

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

In February 2014, we initiated a $1,000,000 offering of convertible debt ("12% Convertible Debenture") to fund our ongoing working capital needs. Terms of the 12% Convertible Debenture were as follows: (i) $100,000 per unit with interest at a rate of 12% per annum payable monthly with a maturity of three years from the date of issuance; (ii) convertible at any time prior to maturity at $0.50 per share of the Company's common stock; and, (iii) each unit includes a three-year warrant to purchase up to 50,000 shares of the Company's common stock at an exercise price of $0.50 per share for a period of three years from the effective date of the warrant. As of June 30, 2014, we had raised $900,000 under the 12% Convertible Debenture offering including warrants to purchase up to 450,000 shares of the Company's common stock.

Item 6. Selected Financial Data

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

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

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

Overview

Our strategy is to enhance value for our shareholders by:


•	Growing reserves and production through exploration, appraisal and development;


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


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


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

We are an energy holding company consisting of one operating segment represented by the operations of our wholly-owned subsidiary, Sable Operating Company, Inc. (“Sable Operating”), an exploration and production company engaged in the acquisition, development and production of oil and natural gas reserves from low-risk, high rate-of-return wells in carbonate reservoirs. By focusing on early, low and no-cost entry into “tight oil” resource plays in North Texas, using multiple entry methods, Sable Operating has acquired overriding and working interests in nearly 87,000 leasehold acres primarily in the Fort Worth Basin of North Texas. We believe these plays can be developed uniformly over expansive geographical areas with a high rate of success due to the recent advancements in horizontal drilling and multi-stage hydraulic fracturing technologies.

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

Discontinued Operations — Oilfield Services

Disposition of FDF

As more fully reported on our Form 8-K filed on May 10, 2012, on May 4, 2012, (the “Closing Date”), Acquisition Inc., together with New Francis Oaks, LLC, a Delaware limited liability company (“New Francis Oaks”, formerly Francis Oaks, LLC ) and a wholly-owned subsidiary of Acquisition Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) with an unaffiliated third party, FDF Resources Holdings LLC, a Delaware limited liability company (the “Purchaser”). Pursuant to the terms of the Merger Agreement, New Francis Oaks merged with and into the Purchaser, and the Purchaser continued as the surviving entity after the merger (the “Disposition” or the “Merger”). New Francis Oaks owns 100% of the outstanding shares of FDF, and, as a result of the Disposition, we no longer own FDF.

The total consideration for the Merger paid by the Purchaser on the Closing Date was $62,500,000 (the “Merger Proceeds”). After: (i) an adjustment to the amount of the Merger Proceeds based upon the level of estimated working capital of the Francis Group on the Closing Date; (ii) the payment or provision for payment of all indebtedness of the Francis Group on the Closing Date; (iii) the payment of all indebtedness of Acquisition Inc. on the Closing Date (including under its senior secured credit facility with PNC Bank; (iv) the payment of the Put Payment Amount (as defined below) due to WayPoint Nytex, LLC (“WayPoint”) under the WayPoint Purchase Agreement (as defined below); (v) the payment of all transaction expenses relating to the Merger; (vi) the payment to the Company of $812,500 of accrued management fees and $110,279 of expense reimbursement due and payable to the Company under the Management Services Agreement, dated November 23, 2010, between the Company and FDF (the “Management Agreement”); (vii) the payment of certain transaction bonuses payable to certain FDF employees; and (viii) the Purchaser’s delivery of $6,250,000 of the Merger Proceeds (the “Escrow Fund”) to The Bank of New York Mellon Trust Company, N.A., as escrow agent, to be held in escrow under the Escrow Agreement (as defined below), Acquisition Inc. received on the Closing Date remaining cash transaction proceeds in the amount of approximately $4,481,000. The Merger Agreement provides that, to the extent that the final amount of working capital of the Francis Group on the Closing Date is greater than the estimated amount of working capital, as determined under the Merger Agreement, the Purchaser will pay to Acquisition Inc. the amount of such working capital surplus, provided that, pursuant to the Omnibus Agreement (as defined below), WayPoint is entitled to receive 87.5% of any such working capital surplus payment. To the extent that the final amount of working capital of the Francis Group on the Closing Date is less than the estimated amount of working capital, Acquisition Inc. will pay to the Purchaser the

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amount of such working capital deficit, which payment will be made out of the Escrow Fund, provided that, pursuant to the Omnibus Agreement, WayPoint is obligated to pay to Acquisition Inc. 87.5% of the amount of any such working capital deficit.

In connection with the consummation of the Merger, we entered into an Omnibus Agreement (the “Omnibus Agreement”) with WayPoint and Francis Group. The Omnibus Agreement became effective upon the consummation of the Merger.

Pursuant to the Omnibus Agreement, upon the consummation of the Merger:


(i)	the Management Agreement was terminated;


(ii)	Waypoint paid $150,000 to the Company out of the Put Payment Amount due and payable to WayPoint;


(iii)	the Company was paid $812,500 from the Merger Proceeds, which sum represented accrued management fees due and payable to the Company from FDF under the Management Agreement; and


(iv)	the Company was paid $110,279 from the Merger Proceeds, which sum represented reimbursement by FDF of certain expenses previously incurred by the Company in respect of certain professional services provided, and which reimbursement was due and payable to the Company from FDF under the Management Agreement.

Pursuant to the Settlement Agreement, upon the consummation of the Merger:


(i)	WayPoint paid out of the Put Payment Amount a $100,000 bonus to Michael G. Francis, the President of NYTEX Acquisition, and a $25,000 bonus to Jude N. Gregory, the Vice President and Chief Financial Officer of Acquisition Inc.;

(ii)

(A) the Company caused the release of the $1,800,000 of Escrowed Cash (as defined in the Escrow Agreement, dated as of November 23, 2010, by and among Acquisition Inc., Bryan Francis and The F&M Bank & Trust Company (the “Francis Escrow Agreement”)) then being held in escrow pursuant to the Francis Escrow Agreement, in accordance with the terms of the Francis Escrow Agreement, and (B) Michael G. Francis transferred and assigned back to the Company 625,000 shares of NYTEX Common Stock then owned by Michael G. Francis and originally issued to him pursuant to the Membership Interest Purchase Agreement, dated as of November 23, 2010 (the “Francis Purchase Agreement”), and then being held in escrow pursuant to the Francis Escrow Agreement;

(iii)

(A) Michael G. Francis transferred and assigned back to the Company all of the remaining 2,197,063 shares of NYTEX Common Stock then owned by him and originally issued to him pursuant to the Francis Purchase Agreement, and such shares were cancelled, and (B) Bryan Francis transferred and assigned back to the Company all of the 381,607 shares of NYTEX Common Stock originally issued to him pursuant to the Francis Purchase Agreement, as well as all of the 27,225 shares of NYTEX Common Stock issued to him in connection with his employment by FDF;


(iv)	the employment agreements of Michael G. Francis and Bryan Francis terminated and they became at-will employees of the FDF Group;


(v)	each of the three designees of WayPoint then serving as directors of Acquisition Inc., which included John Henry Moulton, Thomas Drechsler and Lee Buchwald, resigned as directors of Acquisition Inc., effective immediately upon the consummation of the Merger; and


(vi)	in exchange for receipt by WayPoint of the Put Payment Amount (which consisted of $30,000,000, less an aggregate of $306,639 of dividends previously received by WayPoint on account of the WayPoint Senior Series A Redeemable Preferred Stock, less an aggregate of $275,000 payable by WayPoint to the Company, Michael

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G. Francis and Jude N. Gregory pursuant to the Settlement Agreement, less an additional $449,072 (representing 87.5% of the estimated working capital deficit of the Francis Companies on the Closing Date, but subject to the right of WayPoint to subsequently receive 87.5% of any final working capital surplus of the Francis Companies on the Closing Date and the obligation of WayPoint to subsequently pay 87.5% of any final working capital deficit of the Francis Companies on the Closing Date, pursuant to the Omnibus Agreement); the “Put Payment Amount”), WayPoint transferred and assigned (A) the Senior Series A Redeemable Preferred Stock back to Acquisition Inc., (B) the Purchaser Warrant and the Control Warrant back to the Company, and (C) the WayPoint Series B Share back to the Company, and all such securities were cancelled.

A dispute between NYTEX and WayPoint arose with regards to the amounts due under the Omnibus Agreement to NYTEX with respect to WayPoint’s obligation to bear 87.5% of the Net Payment to Purchaser from Escrow. Following substantial negotiations, on March 8, 2013, NYTEX and WayPoint agreed to settle this dispute such that WayPoint would pay to NYTEX $1,075,000 to satisfy its obligation under the Omnibus Agreement. On March 14, 2013, NYTEX was paid $1,075,000 and on March 15, 2013, the Net Payment to Purchaser from Escrow was released to the Purchaser. As the events that gave rise to both NYTEX’s settlement with WayPoint and the release from escrow of the Net Payment to Purchaser from Escrow existed as of December 31, 2012, the amount paid by WayPoint of $1,075,000 has been recognized as a receivable on the accompanying consolidated balance sheet at December 31, 2012. In addition, the amount of funds to be released from the Escrow Fund of $1,936,762 has been recognized as a reserve against the restricted cash balance on the accompanying consolidated balance sheet at December 31, 2012. The difference between the $1,936,762 and $1,075,000 has been recognized as an additional loss on discontinued operations on the accompanying consolidated statement of operations as of December 31, 2012.

Discontinued Operations — Staffing Services

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Results of Operations

Selected Data



	December 31,
	2013			2012
Financial Results
Revenues - Land services	$	434,906		$	3,816,810
Revenues - Oil and Natural Gas sales	219,160			182,473
Sale of oil and natural gas interests	276,092			2,006,922

Total revenues	930,158			6,006,205

Operating expenses	(3,486,876		)	(1,679,385		)
Interest expense, net	(60,656		)	(311,047		)
Loss on sale of marketable securities	(27,755		)	—
Other (expense) income	—			2,375

Income (loss) from continuing operations before income taxes	(2,645,129		)	4,018,148
Income tax provision	(64,829		)	(20,401		)

Income (loss) from continuing operations	$	(2,709,958	)	$	3,997,747

Basic earnings per share:
Earnings (loss) from continuing operations	$	(0.10	)	$	0.15
Earnings (loss) from discontinued operations	—			(0.35		)
Net loss	$	(0.10	)	$	(0.20	)
	.
Net loss attributable to common stockholders	$	(0.10	)	$	(0.22	)

Diluted earnings per share:
Earnings (loss) from continuing operations	$	(0.10	)	$	0.15
Earnings (loss) from discontinued operations	—			(0.35		)
Net loss	$	(0.10	)	$	(0.20	)

Net income (loss) attributable to common stockholders	$	(0.10	)	$	(0.20	)

Weighted average shares outstanding:
Basic	26,704,835			25,863,313
Diluted	26,704,835			26,277,045

Year ended December 31, 2013 compared to the year ended December 31, 2012

Revenues.

•

Land Services. Revenues from land services decreased 89% to $434,906 for the year ended December 31, 2013 compared to the prior year of $3,816,810 as our customers slowed their mineral lease purchases in our primary buy area of North Texas as they fulfilled their budgeted acreage purchases prior to initiating drilling activities. We continue to identify potential new oil and natural gas development plays and align mineral / lease owners with oil and gas companies desiring to acquire and build significant positions in lease plays throughout Texas. For our customers, our land services generate land and mineral title reports, leasehold title analysis, and land title run sheets as well as source, negotiate, and acquire leases, prepare documents, and provide title curative functions.

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•

Oil and Natural Gas Sales. Oil and natural gas sales increased 20% to $219,160 for the year ended December 31, 2013 compared to the prior year of $182,473 primarily due to timing of drilling / production principally in the prior year fourth quarter and related wells not generating production until 2013. In addition, two new wells, Newman 1 and Coley 1 were drilled, completed, and began producing during the latter half of 2013. In the future, we plan to continue to produce and further develop our interests in North Texas and the Permian, while evaluating both existing and recently discovered oil and natural gas play opportunities throughout Texas and North America. In the event of a declaration of commerciality and approval of a plan of development, we intend to develop these discoveries to grow proved reserves and production. We also plan to drill in our prospect portfolio, with the intent to grow proved reserves and production should discoveries be made.

•

Sale of oil and natural gas interests. Sales of oil and natural gas interests were down 86% to $276,092 for the year ended December 31, 2013 compared to the prior year of $2,006,922 as we have shifted our focus toward holding and developing properties. Further, the sale of oil and natural gas interests in the prior year related to one large transaction. In December 2012, we entered into and completed the sale of a 15% interest in approximately 17,000 leasehold acres including two producing wells and carried interest in seven additional drilling prospects that resulted in a net sale of approximately $2 million.

Oil & natural gas lease operating expenses. Lease operating expenses decreased 17%, or $17,902 in the current year ended December 31, 2013 compared to the prior year ended December 31, 2012 due principally to efficiencies gained with operating wells in the North Texas area including water disposal. We expect lease operating expenses to increase in the future as we drill additional wells.

Depreciation, depletion, and amortization. Depreciation, depletion, and amortization increased in the current year ended December 31, 2013 compared to the prior year period due primarily to an increase in overall depreciable assets including depletion recognized on the Newman and Coley wells totaling approximately $27,900. We did not have any depletion expense in 2012.

General and administrative expenses. General and administrative (“G&A”) expenses from continuing operations increased 29%, or approximately $667,785 for the year ended December 31, 2013 compared to the prior year due primarily to an increase in legal costs associated with the dispute between the Company and WayPoint involving amounts due to the Company by WayPoint under the Omnibus Agreement, accounting, and other professional fees during 2013, increase in bad debt expense related to the 2012 six-well program as well as amounts due to us for services provided by our land services business totaling $549,818, increases in land services-related costs on leases held in inventory, offset by a decreases in salary, wages, and benefit costs of approximately $234,000. G&A consists primarily of accounting, legal, salary and wages, contract labor, professional fees, land services costs, lease rental costs, fuel, and insurance costs.

Impairment loss. During the fourth quarter of 2013, we recognized an impairment charge totaling $355,865 related to the non-operated six wells in Jack County, Texas that we drilled in 2012 due to on-going legal, financial, and operating difficulties of the wells' third-party operator.

Interest expense. Interest expense from continuing operations decreased for the year ended December 31, 2013 compared to the prior year period due primarily to the retirement of the 9% and 12% debentures as well as the write-off of certain deferred financing costs and associated amortization related to the disposition of FDF during 2012, which was accounted for as interest expense.

Loss on sale of marketable securities. In the fourth quarter of 2013, we sold all of our marketable securities consisting of fixed-income mutual funds and recognized a loss on sale totaling $27,755. Proceeds from the sale of the marketable securities were used to pay in full the outstanding balance of our revolving line of credit totaling $325,000.

Adjusted EBITDA

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

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



	December 31,
	2013			2012
Reconciliation of Adjusted EBITDA to GAAP Net Income (Loss):
Net loss	$	(2,676,629	)	$	(5,156,891	)
Discontinued operations	(33,329		)	9,154,638
Income tax provision (benefit)	64,829			20,401
Interest expense, net	60,656			311,047
Impairment loss	355,865			—
Loss on sale of marketable securities	27,755			—
DD&A	100,207			32,746
Consolidated Adjusted EBITDA	$	(2,100,646	)	$	4,361,941

Liquidity and Capital Resources

Our working capital needs have historically been satisfied through operations, equity and debt investments from private investors, loans with financial institutions, and through the sale of assets. Historically, our primary use of cash has been to pay for acquisitions and investments, service our debt, and for general working capital requirements. As of December 31, 2013, we have cash and cash equivalents totaling $93,728 on hand.

We cannot be certain that our existing sources of cash will be adequate to meet our liquidity requirements including cash requirements that may be due under existing debt obligations as well as amounts due to our vendors in the normal course of business. For the year ended December 31, 2013, we incurred a net loss from continuing operations of $2,709,958 and have an accumulated deficit totaling $19,348,528, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

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

On July 11, 2012, we entered into a revolving line of credit agreement with a commercial bank providing for loans up to $325,000. The revolving credit line bears an annual interest rate based on the 30 day LIBOR plus 1.95% and matures on July 11, 2014. The line of credit is secured by our marketable securities. We pay no fee for the unused portion of the revolving line of credit. In the fourth quarter of 2013, we paid in full the outstanding balance on the revolving line of credit totaling $325,000 with proceeds from the sale of our marketable securities. Following the pay off of the revolving line of credit, we terminated the credit agreement.

At December 31, 2013, we had outstanding long term debt obligations totaling $418,698, of which $289,891 is determined to be due in one year or less. None of our debt obligations have negative covenant requirements.

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

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

Cash Flows

The following table summarizes our cash flows and has been derived from our audited financial statements for the years ended December 31, 2013 and 2012.



	December 31,
	2013			2012
Cash flows provided by (used in) operating activities	$	(210,102	)	$	3,936,339
Cash flow provided by investing activities	1,222,534			3,984,119
Cash flow (used in) financing activities	(2,403,090		)	(6,446,889		)

Net increase (decrease) in cash and cash equivalents	(1,390,658		)	1,473,569
Beginning cash and cash equivalents	1,484,386			10,817

Ending cash and cash equivalents	$	93,728		$	1,484,386

Cash flows from operating activities decreased from a cash inflow of $3,936,339 for the year ended December 31, 2012 to a cash outflow of $210,102 for the year ended December 31, 2013 mainly due to a $2,068,926 decrease in net working capital changes from $3,611,469 cash inflow in the prior year ended December 31, 2012 compared to a cash inflow of $1,542,543 in the current year. The decrease in cash inflows was further offset by changes in non-cash adjustments affecting earnings including a $3,059,276 decrease in depreciation, depletion, and amortization, a $4,269,510 decrease in change of fair value of derivatives as there was no change in fair value of the one remaining derivative for the year ended December 31, 2013, and a loss on disposal of discontinued operations of $31,892 (disposal of our former staffing business – PSG) for the year ended December 31, 2013 compared to a loss on disposal totaling $1,470,007 for the year ended December 31, 2012. These decreases in non-cash adjustments were offset by a decrease in net loss for the year ended December 31, 2013 of $2,676,629 compared to a net loss of $5,156,891 for the prior year ended December 31, 2012.

Cash flows provided from investing activities decreased by $2,761,585 for the year ended December 31, 2013 compared to the year ended December 31, 2012 primarily as a result of cash received as part of the disposition of FDF in May 2012. During 2013, we had only $41,295 of additions to property and equipment compared to $317,039 for the prior year ended December 31, 2012; and proceeds from the sale of our marketable securities totaling $494,625 for the current year as compared to purchases of marketable securities totaling $509,050 in the prior year. We purchased only $8,136 in marketable securities in the current year ended December 31, 2013. During 2013, Escrow reported as restricted cash on the accompanying Consolidated Balance Sheet was reduced by $1,193,650 as $1,039,907 was released from Escrow and was used to redeem 1,039,907 shares of Series A Convertible Preferred Stock and $154,178 was disbursed from Escrow to the Purchaser of FDF related to certain indemnification claims identified by the Purchaser under the Merger Agreement, and $435 of interest was earned by the Escrow account. The Escrow was established in 2012 as part of the sale of FDF. Further, during 2013, we collected $1,322,143 in proceeds from sales of oil and gas properties and used cash totaling $1,738,453 to acquire oil and gas properties.

Cash flows used in financing activities was $2,403,090 for the current year ended December 31, 2013 compared to $6,446,889 for the year ended December 31, 2012; a decrease of $4,043,799. This change was primarily a result of the redemption

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of the convertible debentures during 2012 of $3,208,014 as well as an overall reduction in payments under notes payables of $1,184,127 when compared to the prior year. During 2013, we redeemed a total of 2,039,865 shares of Series A Convertible Preferred Stock. We did not redeem any shares of Series A Convertible Preferred Stock in 2012.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

Use of Estimates

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

Cash and Cash Equivalents

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

Accounts Receivable

Marketable Securities

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

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

Property and equipment

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

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

Long-lived Assets

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

We evaluate impairment of our oil and natural gas properties on a property-by-property basis and estimate the fair value based on discounted cash flows expected to be generated from the production of proved reserves. During the 2013, we recognized an impairment charge totaling $355,865 related to our non-operated interest in six wells in Jack County, Texas. We did not have any impairment charges for the year ended December 31, 2012.

Deposits Held in Trust

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

Asset Retirement Obligations

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

Fair Value Measurements

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

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

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

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Revenue Recognition

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

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

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

•Sale of oil and natural gas interests - As there is a very competitive market to purchase oil and natural gas lease interests, especially in newer oil and natural gas plays with increasing acreage costs, Sable may purchase undeveloped leasehold acreage from landowners and take title to the leasehold. However, holding the leasehold acreage is generally short term in nature (less than 90 days) as we only acquire the undeveloped property when an identified customer has already agreed to the 100% re-purchase of the leasehold acreage from Sable. Accordingly, we do not acquire the leasehold acreage on a speculative basis nor for our own development. There is no substantial performance obligation or retained interest by Sable as all land services have been performed and Sable sells 100% of the leasehold interest. The difference between the sale price and the amount (cost) paid for the lease by Sable is recognized as a gain on sale in accordance with ASC 932-360-55-8. Such gains are not deemed to be incidental or peripheral transactions as providing land services and facilitating the purchase of oil and natural gas leasehold interest for its customers are transactions that are part of Sable’s principal ongoing operations, thus reported within the Company’s revenues.

Discontinued Operation

The consolidated financial statements present the operations of our former staffing service segment, PSG, and our former oilfield services segment, FDF, as discontinued operations in accordance with ASC 205-20-55 for all periods presented.

Share Based Compensation

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

Income Taxes

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

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measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the years ended December 31, 2013 and 2012. There were no interest and penalties related to unrecognized tax positions for the years ended December 31, 2013 and 2012. The tax years subject to examination by tax jurisdictions in the United States are 2010 to 2012.

Earnings Per Common Share

Basic earnings (loss) per share amounts have been computed based on the average number of shares of common stock outstanding for the period. Diluted loss per share is calculated using the treasury stock method to reflect the potential dilution that could occur if dilutive share-based instruments were exercised.

Reportable Segments

Following the disposition of our oilfield services and staffing services businesses in 2012 and 2013, respectively, we have determined that we have one reportable segment with activities related to the acquisition, exploration, and development of oil and natural gas resources. Such activities generated 100% of our consolidated revenues from continuing operations for the years ended December 31, 2013 and 2012.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-02 (“ASU 2013-02”), Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The update clarifies how to report the effect of significant reclassifications out of accumulated other comprehensive income. ASU 2013-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012 and is to be applied prospectively. Our adoption of this ASU did not materially change the presentation of our consolidated financial statements.

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

The FASB has issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in the ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance in U.S. GAAP. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. This disclosure will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. Early adoption is permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

Item 8. Financial Statements and Supplementary Data

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

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

None.

Item 9A. Controls and Procedures

Management’s Annual Report on Internal Control Over Financial Reporting

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

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

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

Changes in Internal Control Over Financial Reporting

Other than as described above, there have not been any other changes in our internal control over financial reporting during the year ended December 31, 2013, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers

Our named executive officers include:



Name	Age	Position
Michael K. Galvis	57	President, Chief Executive Officer and Director of Sable
Bryan A. Sinclair	49	Former Vice President and Chief Financial Officer of Sable

Michael K. Galvis has been the President and Chief Executive Officer and a director of the Company since October 31, 2008. He has also been the President and Chief Executive Officer and a director of Sable Operating Company, Inc., a wholly-owned subsidiary of the Company, since October 31, 2008. From March 2006 through October 2008, he was President, Treasurer and Secretary of NYTEX Petroleum, LLC, the predecessor to Sable Operating Company, Inc. From 1994 through February 2006 he was a Consultant for PetroQuest Exploration, Inc., a privately held Texas corporation engaged in the acquisition and development of oil and natural gas reserves in the U.S. He has been in the oil and gas industry since 1983 with extensive experience in the drilling, operating and participating in onshore and offshore oil and natural gas wells in Texas, Louisiana, Arkansas, Oklahoma, Colorado, Mississippi, Illinois, North Dakota, and New Mexico. During that period his experience included generating and funding drilling prospects and evaluating and acquiring drill-ready prospects, producing oil and natural gas properties, oil field service companies and facilities, as well as managing and providing consulting services regarding such assets.

Bryan A. Sinclair was appointed Vice President and Chief Financial Officer effective November 14, 2011. Mr. Sinclair joined the Company in March 2011 as Vice President of Finance. Prior to joining Sable, Mr. Sinclair worked at Behringer Harvard as Chief Accounting Officer for Behringer Harvard Opportunity REIT I, Inc. and Behringer Harvard Opportunity REIT II, Inc. from 2007 to 2010. Prior to joining Behringer Harvard, Mr. Sinclair worked at Celanese Corporation (CE:NYSE) as Director-Global SOX Risk and Control from 2005 to 2007. From 2002 to 2005, Mr. Sinclair served as Corporate Controller for Lone Star Technologies, Inc., a Dallas-based provider of oilfield tubulars and services. From 1993 to 2002, Mr. Sinclair worked in the Dallas office of PricewaterhouseCoopers, the last three years serving as a manager in their audit/attestation practice. Mr. Sinclair received a Bachelor of Sciences — Finance degree from Arizona State University and a Bachelor of Arts — Accounting degree from the University of Arizona. Mr. Sinclair is a certified public accountant in the State of Texas. On April 30, 2014, Mr. Sinclair resigned from Sable to pursue other interests.

Members of Our Board of Directors

During 2013, our directors included:



Name	Age	Position
Michael K. Galvis	57	President, Chief Executive Officer and Director of Sable
William G. Brehmer	55	Director
Jonathan Rich	45	Director

Michael K. Galvis. See “Executive Officers” for biographical information about Mr. Galvis.

William G. Brehmer has been director of the Company since October 31, 2008. Mr. Brehmer acted as Chief Operating Officer and Vice President of the Company from October 31, 2008 to March 24, 2010, and also has served in such capacities for Sable Operating Company, Inc. since October 31, 2008. Mr. Brehmer has over 25 years of experience in the oil and gas industry in the areas of contract administration, natural gas marketing, natural gas processing, natural gas liquids marketing, business planning, funding and implementation of oil and natural gas drilling projects, technology marketing and sales and commercial fuel marketing and operations. From April 1, 2006, through October 31, 2008, he was a Consulting Analyst and Contract Administrator for NYTEX Petroleum, LLC. From November 1, 2005, through March 31, 2006, he was an Analyst and Contract Administrator for Petro-Quest Exploration, Inc., a privately held Texas corporation engaged in the acquisition and development of oil and natural gas reserves in the U.S. From December 12, 2003, through October 31, 2005, he was President of Petro-Frac Corporation, a privately held Texas corporation focused on identifying, acquiring and developing Austin Chalk oil reserves in East Texas. Mr. Brehmer graduated from the University of South Dakota with a B.S. in Business Administration.

Jonathan Rich has served as director since November 2010. Mr. Rich was appointed as director per the terms of the Series A Preferred Stock of the Company. Mr. Rich has been the Executive Vice President and Head of Investment Banking of

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National Securities Corporation, a full-service investment banking firm, since July 2008. Mr. Rich had been the Executive Vice President and Director of Investment Banking of vFinance Investments, Inc. since July 2005, and assumed his current position with National Securities when vFinance was acquired by National Securities in July 2008. Mr. Rich had previously served as Senior Vice President and Managing Director of Corporate Finance at First Colonial Financial Group since January 2001. First Colonial Financial was, in turn, acquired by vFinance in July 2005. Mr. Rich graduated from Tulane University with an interdisciplinary major in economics, political science, history and philosophy and received a joint J.D. / M.B.A. degree from Fordham University with a concentration in corporate finance.

Director Compensation

In March 2013, each director was granted 5,000 shares of restricted stock and 12,000 non-qualified stock options for their services as directors to the Company. The Company does not pay its directors any cash-based compensation for their services to the Company. Both the restricted stock and non-qualified stock options vest over a three year service period. The Company did not compensate its directors during the year ended December 31, 2012. The following table summarizes the compensation of the non-named executive officer members of the board of directors of the Company for the year ended December 31, 2013.



Name	Fees Earned or Paid in Cash		Restricted Stock Awards (1)(2)		Option Awards (1)(3)		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation		Total ($)
William G. Brehmer	$	—	$	700	$	2,316	$	—	$	—	$	—	$	3,016
Jonathan Rich	$	—	$	700	$	2,316	$	—	$	—	$	—	$	3,016

(1)

Amounts shown in the these columns reflect the aggregate fair value of each award as of the grant date of such award computed in accordance with Financial Accounting Standards Board ("FASB") ASC Topic 718 and do not reflect whether the recipient has actually realized a financial benefit from the awards. The fair value of options awards was estimated using the Black-Scholes-Merton option pricing model in accordance with FASB ASC Topic 718. Pursuant to SEC rules, amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions, if any. For information on the valuation assumptions used for the calculation of these awards, see Note 10, Stock Based Compensation, in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for the year ended December 31, 2013.


(2)	As of December 31, 2013, the aggregate outstanding number of restricted stock awards held by our directors is as follows: Mr. Brehmer, 6,667 shares, which includes 3,334 shares granted to Mr. Brehmer as an employee of the Company; and, Mr. Rich, 3,333 shares.


(3)	As of December 31, 2013, the aggregate outstanding number of non-qualified option awards held by our directors is as follows: Mr. Brehmer, 48,000 shares, which includes 36,000 shares granted to Mr. Brehmer as an employee of the Company; and, Mr. Rich, 12,000 shares.

Code of Ethics

The Company’s Code of Business Conduct and Ethics can be found on the Company’s website located at http://www.nytexenergyholdings.com/PoliciesAndProcedures.asp. Any stockholder may request a printed copy of the Code of Ethics by submitting a written request to the Company’s Corporate Secretary. If the Company amends the Code of Ethics or grants a waiver, including an implicit waiver, from the Code of Ethics, the Company will disclose the information on its website. The waiver information will remain on the website for at least 12 months after the initial disclosure of such waiver.

Corporate Governance

Board Meetings and Committees; Annual Meeting Attendance

During 2013, the Company’s Board held five regular and special meetings. None of the members of our Board of Directors attended less than 75 percent of the total number of meetings of the Board of Directors held during 2013.

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Audit Committee

At present, we do not have a separately standing audit committee and our entire board of directors acts as our audit committee. None of the members of our board of directors meet the definition of “audit committee financial expert” as defined in Item 407(d) of Regulation S-K promulgated under the Act.

Nominating and Corporate Governance Committee

The Company does not have a standing Nominating and Corporate Governance Committee. Given the small size of the Company’s Board of Directors, it is the Company’s view that it is appropriate for the entire Board to serve the functions which would otherwise be served by a Nominating and Corporate Governance Committee. The Board does not currently have in place specific procedures by which security holders may recommend nominees to the Board of Directors.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers to file reports of ownership and changes in ownership of our equity securities with the SEC. To our knowledge, based solely on information furnished to us by such persons, all of our directors and executive officers complied with their filing requirements in 2013.

Item 11. Executive Compensation

Summary Compensation Table

The following table summarizes the compensation of the named executive officers of the Company and its subsidiaries for the years ended December 31, 2013 and 2012:



Name and Principal Position	Year	Salary		Bonus (1)		Restricted Stock Awards (2)(3)		All Other Compensation (4)		Total
Michael K. Galvis, President and CEO	12/31/2013	$	290,000	$	56,470	$	2,100	$	9,342	$	348,570
Michael K. Galvis, President and CEO	12/31/2012	$	250,000	$	203,950	$	—	$	9,900	$	463,850

Bryan A. Sinclair, VP & CFO(5)	12/31/2013	$	175,000	$	27,310	$	19,500	$	—	$	221,810
Bryan A. Sinclair, VP & CFO(5)	12/31/2012	$	160,000	$	84,000	$	17,000	$	—	$	261,000

________________________________________________________


(1)	All bonuses are discretionary based on each individual executive’s performance as determined by the Company.

(2)


(3)	Restricted stock awards granted to Mr. Galvis in 2013 are valued at a weighted average of $0.42 per share of common stock and represent the aggregate value of Mr. Galvis' stock awards vested during 2013. Restricted stock awards granted to Mr. Sinclair in 2013 and 2012 are valued at a weighted average of $0.42 per share and $0.41 per share of common stock, respectively.


(4)	Mr. Galvis’ employment agreement contemplates a car allowance which equals in the aggregate approximately $825 per month.


(5)	Mr. Sinclair resigned from the Company on April 30, 2014.

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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

A summary of the Employment Agreements of our Named Executive Officers follows:

Agreements with Michael K. Galvis. On June 20, 2014 the Company entered into an employment agreement with Mr. Galvis. The employment greement provides for an annual base salary of at least $375,000 per year, an auto allowance of $825 per month and incentive compensation to be determined from time to time by the Company’s board of directors. Any award of restricted stock made to Mr. Galvis is subject to non-transferability and forfeitability, and vests over a three year period in equal amounts per year.

Agreement with Bryan A. Sinclair. On March 5, 2011, the Company entered into an employment agreement with Mr. Sinclair. The employment agreement provided for an annual base salary of at least $160,000 per year and incentive compensation to be determined from time to time by the Company’s board of directors. In addition, Mr. Sinclair received a signing bonus of $24,000 on execution of the agreement. In addition to the base and bonus compensation set forth above, the employment agreement provided for stock awards of 50,000 shares of Common Stock of the Company upon execution of the employment agreement, and 75,000 shares of Common Stock of the Company for each calendar year 2012 and 2013, provided Mr. Sinclair met certain performance criteria set forth by management of the Company. Any award of restricted stock made to Mr. Sinclair was subject to non-transferability and forfeitability, and vests over a three year period in equal amounts per year. Mr. Sinclair resigned from the Company on April 30, 2014, and all unvested and/or unexercised stock-based compensation was forfeited accordingly.

Outstanding Equity Awards at Fiscal Year-End Table

The following table provides information about unexercised options and restricted stock that has not vested for each of the named executive officers as of December 31, 2013.



			Option Awards					Restricted Stock Awards
Name	Option / Stock Award Grant Date		Number of Securities Underlying Unexercised Options Exercisable	Number of Securities Underlying Unexercised Options Unexercisable	Option Exercise Price		Option Expiration Date	Number of Shares or Units That Have Not Vested	Market Value of Shares or Units of Stock That Have Not Vested (1)		Number of Unearned Shares, Units or Other Rights That Have Not Vested	Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Michael K. Galvis	3/22/2013	(2)	—	60,000	$	0.42	3/22/2023
President and CEO	3/22/2013	(3)						10,000	$	800	—	$	—

Bryan A. Sinclair	6/22/2012	(4)						25,000	$	2,000	—	$	—
VP and CFO	3/22/2013	(5)	—	36,000	0.42		3/22/2023
	3/22/2013	(6)						50,000	$	4,000	—	$	—

________________________________________________________


(1)	Market value of restricted stock that has not vested is computed by multiplying the number of shares or units that have not vested by $0.08, the closing market price of our stock on December 31, 2013.


(2)	Shares subject to this option vest and become exercisable as to 1/3 of the shares on March 22, 2014, and vest as to 1/3 of the shares each anniversary thereafter.


(3)	Shares subject to this award vested as to 1/3 of the shares on the grant date, March 22, 2013, and vest as to 1/3 of the shares each anniversary thereafter.


(4)	Shares subject to this award vested as to 1/3 of the shares on the grant date, June 22, 2012, and vested as to 1/3 of the shares each anniversary thereafter. Mr. Sinclair resigned from the Company on April 30, 2014, and any remaining unvested shares were forfeited.


(5)	Shares subject to this award vested as to 1/3 of the shares on the grant date, March 22, 2013, and vest as to 1/3 of the shares each anniversary thereafter.

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(6)	Shares subject to this option vest and become exercisable as to 1/3 of the shares on March 22, 2014, and vest as to 1/3 of the shares each anniversary thereafter. Mr. Sinclair resigned from the Company on April 30, 2014, and all unexercised and unvested options were forfeited.

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

The following table lists stock ownership of the Company’s common stock as of June 30, 2014. The information includes beneficial ownership by (i) holders of more than 5% of common stock, (ii) each of the directors who beneficially own shares of common stock and executive officers and (iii) all directors and executive officers as a group. Each person or entity named in the table has sole voting and investment power with respect to all shares of common stock beneficially owned.



Title of class	Name and address of beneficial owner	Amount and nature of beneficial ownership		Percent of class
Beneficial Owners of More than 5% of Company’s Equity
Common Stock	Diana Istre Francis 416 North Avenue K Crowley, LA 70526	2,058,125		5.9	%

Common Stock	Buccel, LLC 9 Hidden Hollow Terrace Holmdel, NJ 07733	1,976,179		5.7	%

Executive Officers and Directors of the Company
Common Stock	Michael K. Galvis CEO of Sable 12222 Merit Drive Suite 1850 Dallas, TX 75251	8,078,902	(1)	23.2	%

Common Stock	Cory Hall President and COO of Sable (4) 12222 Merit Drive Suite 1850 Dallas, TX 75251	8,013,902		23.0	%

Common Stock	William Brehmer Director of Sable 12222 Merit Drive Suite 1850 Dallas, TX 75251	1,067,004	(2)	3.1	%

Common Stock	Jonathan Rich Director of Sable 10 Park Avenue, 13th Floor New York, NY 10022	25,473	(3)	<0.1

	All officers and directors as a group (4 persons)	17,185,281		49.3	%

________________________________________________________


(1)	Includes 5,000 shares of restricted stock subject to vesting and stock options to acquire 60,000 shares, of which 20,000 shares are exercisable.


(2)	Includes 3,334 shares of restricted stock subject to vesting and stock options to acquire 48,000 shares, of which 16,000 shares are exercisable.


(3)	Includes 1,666 shares of restricted stock subject to vesting and stock options to acquire 12,000 shares, of which 4,000 shares are exercisable.


(4)	Effective June 23, 2014

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

Director Independence

The standards relied upon by the Company in determining whether a director is “independent” are those of the NASDAQ. NASDAQ Rules define an “Independent Director” as a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Examples of persons who would not be considered independent include: (a) a director who is an employee, or whose immediate family member (defined as a spouse, parent, child, sibling, father- and mother-in-law, son- and daughter-in-law and anyone, other than a domestic employee, sharing the director’s home) is an executive officer of the Company, would not be independent for a period of three years after termination of such relationship; (b) a director who receives, or whose immediate family member receives, compensation of more than $120,000 during any period of twelve consecutive months from the Company, except for certain permitted payments, would not be independent for a period of three years after ceasing to receive such amount; (c) a director who is or who has an immediate family member who is, a current partner of the Company’s outside auditor or who was, or who has an immediate family member who was, a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years would not be independent until a period of three years after the termination of such relationship; (d) a director who is, or whose immediate family member is, employed as an executive officer of another company where any of the Company’s present executive officers serve on the other company’s compensation committee would not be independent for a period of three years after the end of such relationship; and (e) a director who is, or who has an immediate family member who is, a partner in, or a controlling shareholder or an executive officer of any organization that makes payments to, or receives payments from, the Company for property or services in an amount that, in any single fiscal year, exceeds the greater of $200,000, or 5% of such other company’s consolidated gross revenues, would not be independent until a period of three years after falling below such threshold.

In applying the above-referenced standards, our Board has determined that only Mr. Jonathan Rich is independent.

Item 14. Principal Accounting Fees and Services

Independent Registered Public Accounting Firm

Whitley Penn LLP has served as our independent registered public accounting firm since October 2009. Our management believes that it is knowledgeable about our operations and accounting practices and well qualified to act as our independent registered public accounting firm.

Audit and Other Fees

The following table presents fees for professional services rendered by our independent registered public accounting firm, Whitley Penn LLP, for the audit of our annual financial statements for the years ended December 31, 2013 and 2012:



	2013		2012
Audit fees(1)	$	90,450	$	108,000
Audit-related fees	—		—
Tax fees(2)	42,600		35,000
All other fees	—		—
Total Fees	$	133,050	$	143,000

________________________________________________________

(1)Audit fees consisted of professional services performed in connection with the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q and other related regulatory filings.

(2) Tax fees consist principally of assistance with matters related to tax compliance, tax planning, and tax advice.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) EXHIBITS

1. The Consolidated Financial Statements of NYTEX Energy Holdings, Inc. are listed on the Index set forth on page F-1.

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

(b) FINANCIAL STATEMENT SCHEDULES

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

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SIGNATURES

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



	NYTEX Energy Holdings, Inc.

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

August 14, 2014

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



/s/ Michael K. Galvis	Chief Executive Officer, and Director	August 14, 2014
Michael K. Galvis	(Principal Accounting Officer)


/s/ Cory R. Hall	Director	August 14, 2014
Cory R. Hall


/s/ William G. Brehmer	Director	August 14, 2014
William G. Brehmer


/s/ Jonathan Rich	Director	August 14, 2014
Jonathan Rich

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page

Financial Statements

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2013 and 2012	F-3

Consolidated Statements of Operations for the Years Ended December 31, 2013 and 2012	F-4

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2013 and 2012	F-6

Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2013 and 2012	F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012	F-8

Notes to Consolidated Financial Statements	F-9

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

NYTEX Energy Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Nytex Energy Holdings, Inc. and subsidiaries (the “Company”), as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NYTEX Energy Holdings, Inc. and subsidiaries, as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

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

/s/ Whitley Penn LLP

Dallas, Texas

August 14, 2014

F-2

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NYTEX ENERGY HOLDINGS, INC.

Consolidated Balance Sheets



	At December 31,
	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	93,728		$	1,461,718
Accounts receivable, net	76,696			2,492,976
Marketable securities	—			514,244
Prepaid expenses and other	82,027			114,589
Deferred tax asset, net	—			3,452
Assets from discontinued operations	—			73,895
Total current assets	252,451			4,660,874

Restricted cash, net of reserve of $0 and $1,936,762 at December 31, 2013 and 2012, respectively (Note 3)	3,119,949			4,313,599
Property and equipment, net	934,486			677,328
Deferred financing costs	—			12,500
Deposits and other	56,134			9,296
Total assets	$	4,363,020		$	9,673,597

Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable and accrued expenses	$	597,830		$	722,206
Revenues payable	7,837			230,947
Debt - current portion	289,891			299,767
Liabilities from discontinued operations	—			21,658
Total current liabilities	895,558			1,274,578

Other liabilities:
Debt	128,807			416,016
Derivative liabilities	2,510			2,510
Asset retirement obligation	7,199			—
Deferred tax liabilities	—			3,452
Total liabilities	1,034,074			1,696,556

Commitments and contingencies (Note 8)

Mezzanine equity:
Preferred stock, Series A convertible, $0.001 par value; redemption value of $3,724,004 and $5,763,869 at December 31, 2013 and 2012, respectively	3,724,004			5,763,869

Stockholders’ equity (deficit):
Common stock, $0.001 par value; 200,000,000 shares authorized; 27,729,736 issued and 26,728,695 outstanding at December 31, 2013; and, 27,652,749 issued and 26,653,158 outstanding at December 31, 2012	27,730			27,653
Additional paid-in capital	20,615,409			20,546,744
Treasury stock, at cost: 1,001,041 and 999,591 shares at December 31, 2013 and December 31, 2012, respectively	(1,860,233		)	(1,859,890		)
Accumulated deficit	(19,172,770		)	(16,506,529		)
Accumulated other comprehensive income	(5,194		)	5,194
Total stockholders’ equity (deficit)	(395,058		)	2,213,172
Total liabilities and stockholders’ equity (deficit)	$	4,363,020		$	9,673,597

See accompanying Notes to Consolidated Financial Statements

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NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Operations



	Years Ended December 31,
	2013			2012
Revenues:
Land services	$	434,906		$	3,816,810
Oil and natural gas sales	219,160			182,473
Sale of oil and natural gas interests	276,092			2,006,922
Total revenues	930,158			6,006,205

Operating expenses:
Lease operating expenses	86,740			104,642
Depreciation, depletion, and amortization	100,207			32,746
General and administrative expenses	2,944,064			2,276,279
Gain on settlement of accounts payables	—			(314,448		)
Gain on sale of assets, net	—			(419,834		)
Impairment loss	355,865			—
Total operating expenses	3,486,876			1,679,385

Income (loss) from operations	(2,556,718		)	4,326,820

Other income (expense):
Interest and dividend income	11,029			13,885
Interest expense	(71,685		)	(324,932		)
Loss on sale of marketable securities	(27,755		)	—
Change in fair value of derivative liabilities	—			(2,510		)
Other	—			4,885
Total other income (expense)	(88,411		)	(308,672		)

Income (loss) from continuing operations before taxes	(2,645,129		)	4,018,148
Income tax provision	(64,829		)	(20,401		)

Income (loss) from continuing operations	(2,709,958		)	3,997,747

Discontinued Operations:
Loss from discontinued operations, before taxes	(110,537		)	(9,067,948		)
Loss on sale of discontinued operation	(31,892		)	(1,470,007		)
Income tax benefit	175,758			1,383,317
Income (loss) from discontinued operations	33,329			(9,154,638		)

Net loss	(2,676,629		)	(5,156,891		)
Non-controlling interest	—			65,015
Net loss attributable to NYTEX Energy Holdings, Inc.	(2,676,629		)	(5,091,876		)
Preferred stock dividends	—			(643,829		)

Net loss to common stockholders	$	(2,676,629	)	$	(5,735,705	)

Basic earnings per share:
Income (loss) from continuing operations	$	(0.10	)	$	0.15
Loss from discontinued operations	—			(0.35		)
Net loss	$	(0.10	)	$	(0.20	)

Net loss attributable to common stockholders	$	(0.10	)	$	(0.22	)

Diluted earnings per share:
Income (loss) from continuing operations	$	(0.10	)	$	0.15
Loss from discontinued operations	—			(0.35		)
Net loss	$	(0.10	)	$	(0.20	)

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Net loss attributable to common stockholders	$	(0.10	)	$	(0.20	)

Weighted average shares outstanding
Basic	26,704,835			25,863,313
Diluted	26,704,835			26,277,045

See accompanying Notes to Consolidated Financial Statements

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NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Comprehensive Income (Loss)



	Years Ended December 31,
	2013			2012
Net loss to common stockholders	$	(2,676,629	)	$	(5,735,705	)

Other comprehensive income:
Unrealized holding gains on securities available-for-sale	(10,388		)	5,194
Reclassification adjustment for losses included in net loss	10,388			—

Other comprehensive income	—			5,194

Comprehensive loss to common stockholders	$	(2,676,629	)	$	(5,730,511	)

See accompanying Notes to Consolidated Financial Statements

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NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)



	Series A Convertible Preferred Stock					Common Stock			Additional Paid-In			Treasury Stock					Accumulated			Accumulated Other Comprehensive
	Shares		Amounts			Shares	Amounts		Capital			Shares		Amounts			Deficit			Income			Total
Balance at December 31, 2011	5,761,028		5,761			27,467,723	$	27,468	$	25,974,600		—		$	—		$	(10,775,161	)	$	—		15,232,668

Shares issued for debt						20,000	20		32,980														33,000
Shares issued for share based compensation and services						165,026	165		106,780														106,945
Treasury Shares acquired												4,230,895		(2,732,342		)							(2,732,342		)
Stock dividend declared on Series A convertible preferred stock									258,504			(3,231,304	)	872,452									1,130,956
Shares of Series A Convertible Preferred Stock issued for warrants converted	2,841		3																				3
Acquisition of noncontrolling interest									(68,015		)						65,015						(3,000		)
Return of equity investment in sub																	4,337						4,337
Reclass of Series A Convertible Preferred Stock to mezzanine equity	(5,763,869	)	(5,764		)				(5,758,105		)												(5,763,869		)
Comprehensive income (loss):
Unrealized gain on marketable securities																				5,194			5,194
Dividends declared																	(643,829		)				(643,829		)
Net loss																	(5,156,891		)				(5,156,891		)
Comprehensive loss to common stockholders																							(5,795,526		)
Balance at December 31, 2012	—		$	—		27,652,749	$	27,653	$	20,546,744		999,591		$	(1,859,890	)	$	(16,506,529	)	$	5,194		$	2,213,172

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

See accompanying Notes to Consolidated Financial Statements

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NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Cash Flows



	Years Ended December 31,
	2013			2012
Cash flows from operating activities:
Net loss	$	(2,676,629	)	$	(5,156,891	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, depletion, and amortization	99,713			3,158,989
Bad debt expense	549,818			(42,895		)
Share-based compensation	68,742			106,948
Deferred income taxes	—			(2,236,043		)
Accretion of discount on asset retirement obligations	495			—
Amortization of debt discount	65,796			59,611
Amortization of deferred financing fees	—			137,343
Accretion of Senior Series A redeemable preferred stock liability	—			1,299,495
Change in fair value of derivative liabilities	—			4,269,510
Gain on settlement of accounts payables	—			(314,448		)
Sale of oil and natural gas interest	(276,092		)	(2,006,922		)
Loss on sale of assets, net	—			(419,834		)
Loss on sale of marketable securities	27,755			—
Impairment loss	355,865			—
Loss on disposal of discontinued operations	31,892			1,470,007
Change in working capital:
Accounts receivable	1,913,463			729,599
Inventories	—			(219,055		)
Prepaid expenses and other	(1,775		)	1,405,491
Accounts payable and accrued expenses	(145,666		)	1,652,020
Deposits held in trust	(369		)	(30,496		)
Other liabilities	(223,110		)	73,910
Net cash provided by (used in) operating activities	(210,102		)	3,936,339
Cash flows from investing activities:
Additions to property and equipment	(41,295		)	(317,039		)
Proceeds from sale of assets	1,322,143			28,530
Investments in oil and natural gas properties	(1,738,453		)	(618,747		)
Disposition of FDF	—			11,653,786
Restricted cash	1,193,650			(6,250,361		)
Purchase of marketable securities	(8,136		)	(509,050		)
Proceeds from sale of marketable securities	494,625			—
Acquisition of noncontrolling interest	—			(3,000		)
Net cash provided by investing activities	1,222,534			3,984,119
Cash flows from financing activities:
Redemption of convertible debentures	—			(3,208,014		)
Redemption of Series A convertible preferred stock	(2,039,865		)	—
Borrowings under senior facility	—			29,345,714
Payments under senior facility	—			(31,112,386		)
Borrowings under notes payable	273,535			348,341
Payments on notes payable	(636,417		)	(1,820,544		)
Purchase of treasury stock	(343		)	—
Net cash used in financing activities	(2,403,090		)	(6,446,889		)
Net increase (decrease) in cash and cash equivalents	(1,390,658		)	1,473,569
Cash and cash equivalents at beginning of year	1,484,386			10,817
Cash and cash equivalents at end of year	$	93,728		$	1,484,386

See accompanying Notes to Consolidated Financial Statements

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

NOTE 1. NATURE OF BUSINESS

Prior to April 30, 2013, through its wholly-owned subsidiary, Petro Staffing Group, LLC ("PSG"), NYTEX Energy operated a full-service executive recruiting and placement agency providing the energy marketplace with full-time professionals. PSG, operating under the name of KS Energy Search Group ("KS Search") sourced and delivered candidates to address the demand for personnel within the oil & gas industry. Prior to November 5, 2012, Sable owned 80% of PSG resulting in a non-controlling interest. On November 5, 2012, Sable acquired the remaining 20% interest in PSG. On April 30, 2013, Sable elected to cease operations of its staffing services business, PSG, to focus on its principal business of oil and natural gas exploration and development.

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

Sable and its subsidiaries are headquartered in Dallas, Texas.

Liquidity

We cannot be certain that our existing sources of cash will be adequate to meet our liquidity requirements including cash requirements that may be due under existing debt obligations as well as amounts due to our vendors in the normal course of business. For the year ended December 31, 2013, we incurred a net loss from continuing operations of $2,709,958 and have an accumulated deficit totaling $19,172,770, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

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

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. The consolidated financial statements include the accounts of Sable and entities in which it holds a controlling

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

interest. All intercompany transactions have been eliminated. Certain prior-period amounts have been reclassified to conform to the current-year presentation.

Use of Estimates

Cash and Cash Equivalents

Accounts Receivable

We provide credit in the normal course of business to our customers and perform ongoing credit evaluations of those customers. We maintain an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. A portion of our receivables are from the operators of producing wells in which we maintain ownership interests. These operators market our share of crude oil and natural gas production. The ability to collect is dependent upon the general economic conditions of the purchasers/participants and the oil and gas industry. Our Allowance for doubtful accounts was $554,401 and $7,960 as of December 31, 2013 and 2012, respectively. During the year ended December 31, 2013, we recognized $549,818 in bad debt expense which is reported in general and administrative expenses on the accompanying Consolidated Statement of Operations.

Marketable Securities

Property and equipment

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

are capitalized when incurred, pending determination of whether additional proved reserves are found. If an exploratory well does not find additional reserves, the costs of drilling the well are charged to expense. The costs of development wells, whether productive or nonproductive, are capitalized. Geological and geophysical costs on exploratory prospects and the costs of carrying and retaining unproved properties are expensed as incurred.

Long-lived Assets

We evaluate impairment of our oil and natural gas properties on a property-by-property basis and estimate the fair value based on discounted cash flows expected to be generated from the production of proved reserves. During 2013, we recognized an impairment charge totaling $355,865 related to our non-operated interest in six wells in Jack County, Texas. We did not have any impairment charges for the year ended December 31, 2012.

Deposits Held in Trust

Asset Retirement Obligations

Fair Value Measurements

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

31, 2013 and 2012, we estimate the fair value of our debt to be $418,698 and $715,783, respectively. See Note 11 for fair value measurements included in our accompanying consolidated balance sheets.

Revenue Recognition

Discontinued Operation

General and Administrative Expenses

General and administrative expenses from continuing operations are summarized below for the years ended December 31, 2013 and 2012:



	December 31,
	2013		2012
Salary, wages, and benefits	$	1,205,352	$	1,436,843
Legal, accounting, and professional fees	706,703		514,161
Rent and operating lease expenses	85,352		87,973
Insurance	129,243		172,805
Bad debt expense	549,818		17,010
Other	267,596		47,487
	$	2,944,064	$	2,276,279

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

Share Based Compensation

Income Taxes

We recognize the financial statement effects of tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the years ended December 31, 2013 and 2012. There were no interest and penalties related to unrecognized tax positions for the years ended December 31, 2013 and 2012. The tax years subject to examination by tax jurisdictions in the United States are 2008 to 2013.

Earnings Per Common Share

Basic earnings per share amounts have been computed based on the average number of shares of common stock outstanding for the period. Diluted earnings per share is calculated using the treasury stock method to reflect the potential dilution that could occur if dilutive share-based instruments were exercised.

Reportable Segments

Recently Issued Accounting Standards

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

NOTE 3. DISPOSITION OF FDF

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

In connection with the consummation of the Merger Agreement, we entered into an Omnibus Agreement (the “Omnibus Agreement”) with WayPoint Nytex, LLC ("WayPoint") and the Francis Group. The Omnibus Agreement became effective upon the consummation of the Merger Agreement.

Pursuant to the Omnibus Agreement, upon the consummation of the Merger Agreement:

(i) the management agreement between the Company and FDF was terminated;

(ii) Waypoint paid $150,000 to the Company out of amounts due and payable to WayPoint;

(iii) the Company was paid $812,500 from the Merger Proceeds, which sum represented accrued management fees due and payable to the Company from FDF under the terminated management agreement; and

(iv) the Company was paid $110,279 from the Merger Proceeds, which sum represented reimbursement by FDF of certain expenses previously incurred by the Company in respect of certain professional services provided, and which reimbursement was due and payable to the Company from FDF under the terminated management agreement.

Pursuant to the Settlement Agreement, upon the consummation of the Merger:

(i) WayPoint paid out of the Put Payment Amount a $100,000 bonus to Michael G. Francis, the President of NYTEX Acquisition, and a $25,000 bonus to Jude N. Gregory, the Vice President and Chief Financial Officer of Acquisition Inc.;

(ii) (A) the Company caused the release of the $1,800,000 of Escrowed Cash (as defined in the Escrow Agreement, dated as of November 23, 2010, by and among Acquisition Inc., Bryan Francis and The F&M Bank & Trust Company (the “Francis Escrow Agreement”)) then being held in escrow pursuant to the Francis Escrow Agreement, in accordance with the terms of the Francis Escrow Agreement, and (B) Michael G. Francis transferred and assigned back to the Company 625,000 shares of common stock of the Company then owned by Michael G. Francis and originally issued to him pursuant to the Membership Interest Purchase Agreement, dated as of November 23, 2010 (the “Francis Purchase Agreement”), and then being held in escrow pursuant to the Francis Escrow Agreement;

(iii) (A) Michael G. Francis transferred and assigned back to the Company all of the remaining 2,197,063 shares of common stock then owned by him and originally issued to him pursuant to the Francis Purchase Agreement, and (B) Bryan Francis transferred and assigned back to the Company all of the 381,607 shares of common stock originally issued to him pursuant to the Francis Purchase Agreement, as well as all of the 27,225 shares of NYTEX Common Stock issued

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

to him in connection with his employment by FDF;

(iv) the employment agreements of Michael G. Francis and Bryan Francis terminated and they became at-will employees of the FDF Group;

(v) each of the three designees of WayPoint then serving as directors of Acquisition Inc., which included John Henry Moulton, Thomas Drechsler and Lee Buchwald, resigned as directors of Acquisition Inc., effective immediately upon the consummation of the Merger; and

(vi) in exchange for receipt by WayPoint of the Put Payment Amount (which consisted of $30,000,000, less an aggregate of $306,639 of dividends previously received by WayPoint on account of the WayPoint Senior Series A Redeemable Preferred Stock, less an aggregate of $275,000 payable by WayPoint to the Company, Michael G. Francis and Jude N. Gregory pursuant to the Settlement Agreement, less an additional $449,072 (representing 87.5% of the estimated working capital deficit of the Francis Companies on the Closing Date, but subject to the right of WayPoint to subsequently receive 87.5% of any final working capital surplus of the Francis Companies on the Closing Date and the obligation of WayPoint to subsequently pay 87.5% of any final working capital deficit of the Francis Companies on the Closing Date, pursuant to the Omnibus Agreement); the “Put Payment Amount”), WayPoint transferred and assigned (A) the Senior Series A Redeemable Preferred Stock back to Acquisition Inc., (B) the Purchaser Warrant and the Control Warrant back to the Company, and (C) the WayPoint Series B Share back to the Company, and all such securities were cancelled.

In August 2012, the Purchaser delivered a proposed final closing statement, which included, among other things, a calculation of the final closing date net working capital, to the Company. Under the terms of the Omnibus Agreement we entered into at the Closing Date with WayPoint, Waypoint agreed to bear 87.5% of any post-closing working capital deficit and conversely, we granted to WayPoint the authority to make all decisions, including the right to dispute any item contained in the final closing date net working capital, on our behalf with regards to the proposed final closing statement and final closing date net working capital.

A dispute between NYTEX and WayPoint arose with regards to the amounts due under the Omnibus Agreement to NYTEX with respect to WayPoint’s obligation to bear 87.5% of the Net Payment to Purchaser from Escrow. Following substantial negotiations, on March 8, 2013, NYTEX and WayPoint agreed to settle this dispute such that WayPoint would pay to NYTEX $1,075,000 to satisfy its obligation under the Omnibus Agreement. On March 14, 2013, NYTEX was paid $1,075,000 and on March 15, 2013, the Net Payment to Purchaser from Escrow was released to the Purchaser. As the events that gave rise to both NYTEX’s settlement with WayPoint and the release from escrow of the Net Payment to Purchaser from Escrow existed as of December 31, 2012, the amount paid by WayPoint of $1,075,000 was recognized as a receivable on the accompanying consolidated balance sheet at December 31, 2012. In addition, the amount of funds to be released from the Escrow Fund of $1,936,762 was recognized as a reserve against the restricted cash balance on the accompanying consolidated balance sheet at December 31, 2012.

During the year ended December 31, 2013, three disbursements totaling $154,178 were made from Escrow to the Purchaser related to certain indemnification obligations identified by the Purchaser under the Merger Agreement.

NOTE 4. ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 2013 and 2012 consist of the following:

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements



	December 31,
	2013			2012
Trade receivables	$	627,652		$	1,385,295
Waypoint receivable	—			1,075,000
Other	3,445			40,641
Total accounts receivable	631,097			2,500,936
Allowance for doubtful accounts	(554,401		)	(7,960		)

Accounts receivable, net	$	76,696		$	2,492,976

NOTE 5. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2013 and 2012 consist of the following:



	December 31,
	2013			2012
Equipment	$	138,378		$	97,084
Oil and natural gas properties	1,073,497			757,920

Total property & equipment	1,211,875			855,004
Accumulated depreciation & depletion	(277,389		)	(177,676		)

Property & equipment, net	$	934,486		$	677,328

Depreciation and depletion from continuing operations related to our property and equipment was $99,713 and $32,746 for the years ended December 31, 2013 and 2012, respectively.

NOTE 6. DERIVATIVE LIABILITIES

At December 31, 2013, we had one derivative on our consolidated balance sheet which was related to the warrants issued to the holders of the Company’s Series A Convertible Preferred Stock. The agreement setting forth the terms of the warrants issued to the holders of the Company’s Series A Convertible Preferred Stock include an anti-dilution provision that requires a reduction in the instrument’s exercise price should subsequent at-market issuances of the Company’s common stock be issued below the instrument’s original exercise price of $2.00 per share. Accordingly, we consider the warrants to be a derivative; and, as a result, the fair value of the derivative is included as a derivative liability on the accompanying consolidated balance sheets. At December 31, 2013 and December 31, 2012, the fair value of the warrants issued to the holders of the Series A Convertible Preferred Stock was $2,510 for both periods presented.

Changes in fair value of the derivative liabilities are included as a separate line item within other income (expense) in the accompanying consolidated statement of operations for the years ended December 31, 2013 and 2012, and are not taxable or deductible for income tax purposes.

NOTE 7. DEBT

A summary of our outstanding debt obligations at December 31, 2013 and 2012 is presented as follows:

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements



	December 31,
	2013			2012
5.74% Insurance Financing due August 2014	45,211			55,484
Revolving Line of Credit due July 2014	—			108,355
Francis Promissory Note (non-interest bearing) due October 2015	200,051			292,938
Promissory Note (non-interest bearing) due December 2015	160,969			241,453
7.5% Secured Equipment Loan due March 2016	12,467			17,553

Total debt	418,698			715,783
Less: current maturities	(289,891		)	(299,767		)

Total long-term debt	$	128,807		$	416,016

Carrying values in the table above include net unamortized debt discount of $117,313 and $183,109 at December 31, 2013 and 2012, respectively, which is amortized to interest expense over the terms of the related debt.

Debt maturities as of December 31, 2013, excluding discounts, are as follows:



2014	$	289,891
2015	245,108
2016	1,012
2017	—
2018	—
2019 and thereafter	—
Unamortized Discount	(117,313		)
	$	418,698

Francis Promissory Note

In connection with the FDF acquisition, on November 23, 2010, we entered into a promissory note payable to a former interest holder of FDF (“Francis Promissory Note”) in the face amount of $750,000. The Francis Promissory Note is an unsecured, non-interest bearing loan that requires quarterly payments of $37,500 and matures October 1, 2015. For the years ended December 31, 2013 and 2012, we have recorded the Francis Promissory Note as a discounted debt of $200,051 and $292,938, respectively, using an imputed interest rate of 9%.

Revolving Line of Credit

In July 2012, we entered into a revolving line of credit agreement with a commercial bank providing for loans up to $325,000. The revolving credit line bore an annual interest rate based on the 30 day LIBOR plus 1.95% and matured on July 11, 2014. Payments of interest only were payable monthly with any outstanding principal and interest due in full, at maturity. The revolving line of credit was secured by our marketable securities. We pay no fee for the unused portion of the revolving line of credit nor were there any prepayment penalties. In September 2012, we drew $108,355 from the revolving line of credit, primarily to pay in full, the 6% Related Party Loan. During third quarter of 2013, we fully drew down the revolving line of credit. In November 2013, we paid in full the outstanding balance of $325,000 using proceeds from the sale of our marketable securities and terminated the revolving line of credit. Following the pay off of the revolving line of credit, we terminated the credit agreement.

Other Loans

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

In December 2012, we entered into an unsecured, non-interest bearing promissory note with a former vendor in the amount of $342,500 as a settlement for outstanding payables due to the former vendor. The promissory note required an initial payment of $75,000 with monthly payments of $7,431 due through maturity, on December 31, 2015. For the year ended December 31,

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

2013 and 2012, we have recorded the promissory note as a discounted debt of $160,969 and $241,453, respectively, using an imputed interest rate of 7.5%.

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

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

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

NOTE 8. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain equipment and office space under non-cancelable operating leases which provide for minimum annual rentals. Future minimum obligations under these lease agreements at December 31, 2013 are as follows:



2014	$	81,583
2015	71,791
2016	58,283
2017	—
2018	—
Thereafter	—
	$	211,657

Total lease rental expense from continuing operations for the years ended December 31, 2013 and 2012 was $85,352 and $87,973 respectively.

Litigation

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

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

Environmental

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

NOTE 9. STOCKHOLDERS’ EQUITY

The authorized capital of Sable consists of 200 million shares of common stock, par value $0.001 per share; and 10 million shares of Series A Convertible Preferred Stock, par value $0.001 per share. The holders of Series A Convertible Preferred Stock have the same voting rights and powers as the holders of common stock. Each holder of Series A Convertible Preferred Stock may, at any time, convert their shares of Series A Convertible Preferred Stock into shares of common stock at an initial conversion ratio of one-to-one. For the years ended December 31, 2013 and 2012, there were no conversions to shares of common stock related to the Company’s Series A Convertible Preferred Stock.

Private Placement — Common Stock

In August 2008, we initiated a private placement of our common stock, offering 2,200,000 common shares at $2.00 per share along with a three-year warrant exercisable at $1.00 per share. In April 2009, the private placement offering of our common stock was expanded to $5,900,000 and further expanded in February 2010 to $8,000,000. On July 22, 2010, we concluded the sale of 2,966,551 shares of our common stock pursuant to the private placement for total net proceeds of $5,900,000. In addition, 110,275 shares of common stock were issued to certain holders as an inducement to purchase our common stock. For the year ended December 31, 2010, we issued a total of 91,200 common shares under the private placement for net proceeds of approximately $181,100, along with warrants to purchase up to 91,200 shares of our common stock. The warrants are exercisable at $1.00 per share for a period of three years from the effective date of the warrant. During the first quarter 2012, we extended the exercise dates on these warrants for an additional 24 months from the original effective date of the warrant.

Other Common Stock Issuances

For the years ended December 31, 2013 and 2012, we issued 76,987 and 165,026 shares, respectively, of our common stock to certain employees and individuals. The fair value of the shares for the years ended December 31, 2013 and 2012 of approximately $61,106 and $106,945, respectively, was recorded as professional fees or stock-based compensation in the accompanying consolidated statements of operations.

Restructuring of Series A Convertible Preferred Stock

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


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

(ii)

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


(iii)	The original terms of the Series A Convertible Preferred Stock also provided for a liquidation preference of $1.50 per share which would have been payable on a liquidation event involving the Company. As part of the

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

Restructuring and in consideration for reducing the liquidation preference to $1.00 per share and eliminating the right to declare a deemed liquidation event, in October 2012 the Company issued to the Series A Holders, as of the Record Date, shares of our common stock at a rate of 0.42735 shares for each share of Series A Preferred held by them, or an aggregate of approximately 2,463,214 common shares (the “Liquidation Adjustment Common Shares”);


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

(v)

At any time following the Effective Date of the Restructuring, the Company has the right to redeem any or all of the outstanding shares of Series A Convertible Preferred Stock at the original purchase price of $1.00 per share. Further, the Company is required to redeem outstanding shares of Series A Convertible Preferred Stock, from time-to-time, upon any release to the Company of any portion of the $6,250,361 currently being held in the post-closing escrow fund (reported as restricted cash on the accompanying consolidated balance sheet at December 31, 2012) in connection with the sale of FDF on May 4, 2012, which mandatory redemption would be made by the Company out of funds legally available therefor to the extent of 100% of the amount of funds released at that time. Each redemption would be applied pro rata among all Series A Holders.

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

Redemption of Series A Convertible Preferred Stock

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

On November 15, 2013, we provided notice to the holders of our Series A Convertible Preferred Stock of our election to redeem on December 17, 2013 an additional $1,039,907 in aggregate principal amount of outstanding shares of the Series A Convertible Preferred Stock at a redemption price of $1.00 per share. On December 17, 2013, we redeemed a total of 1,039,907 shares of Series A Convertible Preferred Stock.

Treasury Stock

As more fully discussed in Note 3, on May 4, 2012, in accordance with the Settlement Agreement effective with the disposition of FDF, we received as an assignment a total of 3,230,895 shares of the Company’s common stock. On June 5, 2012, Michael K. Galvis, the Company’s President and Chief Executive Officer, surrendered one million shares of common stock pursuant to an agreement entered into with the Company on November 23, 2010. All such shares are being held as treasury stock at cost. In October 2012, 3,231,304 shares were re-issued from treasury to Series A Holders in connection with the Restructuring described above.

In April 2013, our Board of Directors approved the repurchase of up to an aggregate of 2.7 million shares of our common stock, or approximately 10% of our outstanding common shares. The repurchases will be made from time-to-time on the open market at prevailing market prices. The repurchase program is expected to continue over the next twelve months unless extended or shortened by the Board of Directors. The timing and amount of any repurchase will depend on economic and market conditions, the trading price and other factors and any purchases will be executed in compliance with applicable laws and regulations. The plan does not obligate the Company to acquire any particular amount of common stock and can be implemented, suspended or discontinued at any time without prior notice at the Company’s sole discretion. The share repurchase program will be funded with the Company’s available working capital. During the year ended December 31, 2013, we repurchased a total of 1,450 shares of our common stock on the open market. These shares were purchased at an average cost of $0.24 per share, for a total cost of $343.

Warrants

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

In connection with the private placement offering of Series A Convertible Preferred Stock, during the year ended December 31, 2011, we issued warrants to the holders to purchase up to 126,000 shares of common stock at an exercise price of $2.00 per share. The warrants may be exercised for a period of three years from the date of grant. There were no warrants issued or exercised during the years ended December 31, 2013 and 2012.

In addition, during the year ended December 31, 2011, we issued warrants to purchase up to 16,800 shares of Series A Convertible Preferred Stock to the placement agent of the private placement offering of Series A Convertible Preferred Stock. The warrants may be exercised for a period of three years from date of grant at an exercise price of $1.00 per share. The aggregate fair value of these warrants on the date of grant was approximately $15,792 using the Monte Carlo simulation.

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

On May 4, 2012, as a condition to the disposition of FDF, the Purchaser and Control Warrants held by WayPoint were forfeited and terminated.

The fair value of our warrants is determined using the Black-Scholes option pricing model and the Monte Carlo simulation. The expected term of each warrant is estimated based on the contractual term or an expected time-to-liquidity event. The volatility assumption is estimated based on expectations of volatility over the term of the warrant as indicated by implied volatility. The risk-free interest rate is based on the U.S. Treasury rate for a term commensurate with the expected term of the warrant. A summary of warrant activity for the years ended December 31, 2013 and 2012 is as follows:



	For the Years Ended December
	2013			2012
	Warrants	Weighted Average Exercise Price		Warrants		Weighted Average Exercise Price
Outstanding at beginning of period	4,748,690	$	1.18	46,335,949		$	0.13
Issued	—	—		—		—
Exercised	—	—		(3,600	)	1.27
Forfeited or expired	—	—		(41,583,659	)	0.01
Outstanding at end of period	4,748,690	$	1.18	4,748,690		$	1.18

NOTE 10. STOCK BASED COMPENSATION

In November 2012, the Board of Directors adopted the 2013 Equity Incentive Plan for the purpose of attracting and retaining the services of key employees, consultants, and non-employee members of the Board of Directors and to provide such persons with a proprietary interest in the Company through the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and/or other awards.

In March 2013, the Company granted to its executive officers, Board of Directors, and certain key employees nonqualified stock options and restricted stock under the 2013 Equity Incentive Plan. Nonqualified stock options to purchase an aggregate 227,000 shares of the Company’s common stock at $0.42 per share were awarded; these options vest ratably over a service period of three years. A total of 136,200 shares of restricted stock were granted and such awards vest over a three year period. The total grant date fair value of all of these awards was approximately $101,000. At December 31, 2013, the unrecognized stock-based compensation expense related to all awards which is expected to be recognized over a weighted average period of 1.7 years is approximately $58,200.

Stock Options

We utilize the Black-Scholes-Merton option pricing model to measure the fair value of stock options granted to employees and directors. For the year ended December 31, 2013, we recognized $11,354 in stock-based compensation related to stock options. We did not have any stock-based compensation expense related to stock options for the year ended December 31, 2012.

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

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Notes to Consolidated Financial Statements



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term (Yrs)
Outstanding, December 31, 2012	—		$	—	$	—
Granted	227,000		$	0.42	$	0.19
Exercised	—		$	—	$	—
Canceled / Forfeited	(18,000	)	$	0.42	$	0.19
Outstanding, December 31, 2013	209,000		$	0.42	$	0.19	9.2
Options exercisable at December 31, 2013	—		$	—	$	—

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



Expected dividend yield	—	%
Volatility	47.3	%
Risk-free interest rate	1.3	%
Expected life	6.0 Years

Restricted Stock

Restricted stock awards are awards of common stock that are subject the restrictions on transfer and to a risk of forfeiture if the awardee terminates employment with the Company prior to the lapse of the restrictions. The fair value of such stock was determined using the closing price on the grant date and compensation expense is recorded over the applicable vesting periods. For the years ended December 31, 2013 and 2012, we recognized $56,194 and $100,992, respectively, of stock-based compensation expense related to restricted stock awards. The following table summarizes our restricted stock activity for the year ended December 31, 2013:



	Shares		Weighted Average Grant Date Fair Value Per Share
Nonvested, December 31, 2012	116,666		$	0.48
Granted	136,200		$	0.42
Vested	(103,733	)	$	0.55
Canceled / Forfeited	(53,333	)	$	0.26
Nonvested, December 31, 2013	95,800		$	0.44

NOTE 11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Our financial instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, derivative liabilities, and long-term debt. Because of their short maturity, the carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value. The fair value of debt is the estimated amount we would have to pay to repurchase our debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at each balance sheet date. Debt fair values are based on quoted market prices for identical instruments, if available, or based on valuations of similar debt instruments. As of December 31, 2013 and 2012, we estimate the fair value of our debt to be $418,698 and $715,783, respectively.

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

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Notes to Consolidated Financial Statements


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


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


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

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

For the years ended December 31, 2013 and 2012, the fair value of the derivative liabilities from continuing operations increased by an aggregate of $0 and $2,510, respectively. These amounts were recorded within other income (expense) in the accompanying consolidated statements of operations.

We classify our marketable securities as available-for-sale, which are reported at fair value. Unrealized holding gains and losses, net of the related income tax effect, if any, on available-for-sale securities are excluded from income and are reported as accumulated other comprehensive income in stockholders’ equity. Realized gains and losses from securities classified as available-for-sale are included in income. We measure the fair value of our marketable securities based on quoted prices for identical securities in active markets, or Level 1 inputs. The realized earnings from our marketable securities portfolio include realized gains and losses, based upon specific identification, and dividend and interest income. During the fourth quarter of 2013, we sold all of our marketable securities for total gross proceeds of $494,625 resulting in a realized loss of $27,755 on sale of marketable securities as presented in our consolidated statement of operations for the year ended December 31, 2013. In addition, $10,388 of net unrealized losses were reclassified out of accumulated other comprehensive income into earnings for the year ended December 31, 2013. Realized earnings were $11,737 for the year ended December 31, 2012.

In accordance with ASC Topic 320, Investments — Debt and Equity Securities, we review our marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary. Should the decline be considered other than temporary, we write down the cost basis of the security and include the loss in current earnings as opposed to an unrealized holding loss. No losses for other than temporary impairments in our marketable securities portfolio were recognized during the years ended December 31, 2013 and 2012.

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



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



	Carrying Amount		Level 1		Level 2		Level 3
December 31, 2012
Marketable securities	$	514,244	$	514,244	$	—	$	—
Derivative liabilities	$	2,510	$	—	$	—	$	2,510

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements



Balance, December 31, 2011	$	—
Change in derivative liabilities	2,510
Issuance of warrant derivative	—
Balance, December 31, 2012	$	2,510

There was no change in the fair value of the derivative liability for the year ended December 31, 2013.

NOTE 12. INCOME TAXES

For the years ended December 31, 2013 and 2012, we had a loss from continuing operations before income taxes of $2,645,129 and income from continuing operations before income taxes of $4,018,148, respectively. The components of the income tax benefit (provision) from continuing operations are as follows:



	December 31,
	2013			2012
Current:
Federal	$	—		$	(163,642	)
State	(64,829		)	(22,226		)
	(64,829		)	(185,868		)
Deferred:
Federal	—			165,467
State	—			—
	—			165,467
Income tax provision from continuing operations	$	(64,829	)	$	(20,401	)

At December 31, 2013, we have accumulated net operating losses totaling $14,929,747. The net operating loss carryforwards will begin to expire in 2028 if not utilized. Based upon all available objective evidence, including the Company’s loss history, management believes it is more likely than not that the net deferred assets related to our net operating losses will not be fully realized. Accordingly, we have provided a valuation allowance against those deferred tax assets at December 31, 2013 and 2012.

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



	December 31,
	2013			2012
Expected income tax benefit (expense) based on U.S. statutory rate	$	925,795		$	(1,287,380	)
State income taxes (net of federal income tax benefit)	(64,829		)	(22,226		)
Permanent differences	(3,426		)	(2,083		)
Other	1,283,175			32,519
Valuation allowance	(2,205,544		)	1,258,769
Income tax benefit (provision)	$	(64,829	)	$	(20,401	)

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

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements



	December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	5,225,412		$	2,378,324
Impairment of oil and natural gas properties	176,169			51,617
Bad debt allowance	194,040			—
Fair value of derivative	—			1,075
Accretion expense	1,405			1,232
Other	31,743			373,939
Capital loss carryforward	3,983,279			4,612,359
Valuation allowance on deferred tax assets	(9,477,067		)	(7,271,523		)
Total deferred tax assets	134,981			147,023

Deferred tax liabilities:
Property, plant, and equipment	(115,010		)	(133,178		)
Fair value of derivative	—			2,947
Other	(19,971		)	(16,792		)
Total deferred tax liabilities	(134,981		)	(147,023		)

Net deferred tax liability	$	—		$	—

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



	December 31,
	2013		2012
Current deferred tax asset, net	$	—	$	3,452
Non-current deferred tax liability, net	—		(3,452		)
	$	—	$	—

We are subject to income taxes in the U.S. federal jurisdiction and various states jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. federal, state and/or local income tax examinations by authorities for the tax years before 2010.

NOTE 13. EARNINGS PER SHARE

The following table reconciles net income (loss) and common shares outstanding used in the calculations of basic and diluted earnings (loss) per share.

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements



	December 31,
	2013			2012
Basic net income (loss) per share:
Net income (loss) from continuing operations	$	(2,709,958	)	$	3,997,747
Net income (loss) from discontinued operations	33,329			(9,154,638		)

Net loss	(2,676,629		)	(5,156,891		)
Noncontrolling interest	—			65,015
Attributable to preferred stockholders	—			(643,829		)

Net loss attributable to common stockholders	$	(2,676,629	)	$	(5,735,705	)

Weighted average common shares outstanding, basic	26,704,835			25,863,313

Basic earnings per share:
Continuing operations	$	(0.10	)	$	0.15
Discontinued operations	—			(0.35		)

Net income (loss)	(0.10		)	(0.20		)
Net loss attributable to noncontrolling interest	—			—
Attributable to preferred shareholders	—			(0.02		)

Net income (loss) attributable to common stockholders	$	(0.10	)	$	(0.22	)

Diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(2,709,958	)	$	3,997,747
Net income (loss) from discontinued operations	33,329			(9,154,638		)

Net loss	(2,676,629		)	(5,156,891		)
Noncontrolling interest	—			65,015

Net loss attributable to common stockholders	$	(2,676,629	)	$	(5,091,876	)

Weighted average common shares outstanding, basic	26,704,835			25,863,313
Plus: incremental shares from assumed conversions
Effect of dilutive warrants	—			413,732

Shares used in calculating diluted loss per share	26,704,835			26,277,045

Diluted earnings per share:
Continuing operations	$	(0.10	)	$	0.15
Discontinued operations	—			(0.35		)

Net income (loss)	(0.10		)	(0.20		)
Noncontrolling interest	—			—

Net income (loss) attributable to common stockholders	$	(0.10	)	$	(0.20	)

Basic earnings per share amounts are computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share amounts are computed by dividing net income or loss by the weighted average number of common shares and dilutive common share equivalents outstanding during the period. Diluted

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

earnings per share amounts assume the conversion, exercise, or issuance of all potential common stock instruments unless the effect is anti-dilutive, thereby reducing the loss or increasing the income per common share.

A total of 8,777,494 and 10,089,315 shares of common stock equivalents were excluded from the calculation of diluted earnings per share for the years ended December 31, 2013 and 2012, respectively, as the effect of including such shares was antidilutive.

NOTE 14. DISCONTINUED OPERATIONS

Petro Staffing Group dba KS Energy Search

On April 30, 2013, the Company elected to cease the operations of its staffing services business, PSG. We recognized a net after-tax loss of approximately $114,000 from the disposition, which represents the excess of the book value of the assets disposed over our investment in PSG.

We determined that the disposition of PSG meets the definition of a discontinued operations. Accordingly, the business has been presented as a discontinued operation for all periods presented with no assets or liabilities as of December 31, 2013. Financial information for the discontinued operation was as follows:



	For the Years Ended December
	2013(1)			2012
Revenues
Staffing services	$	—		$	117,433

Total revenues	—			117,433

Expenses
General and administrative expenses	110,183			456,894
Depreciation and amortization	354			459

Total expenses	110,537			457,353

Loss before income taxes	$	(110,537	)	$	(339,920	)

________________________________________________________

(1) Activity for 2013 is through April 30, 2013, the date PSG ceased operations.



	April 30, 2013		December 31, 2012
Current assets	$	45,951	$	69,668
Property and equipment, net	3,873		4,227
Total assets	$	49,824	$	73,895

Current liabilities	$	765	$	21,658
Stockholder's equity	49,059		52,237
Total liabilities and stockholder's equity	$	49,824	$	73,895

Francis Drilling Fluids

On May 4, 2012, Acquisition Inc., together with New Francis Oaks, a wholly-owned subsidiary of Acquisition Inc., entered into the Merger Agreement with an unaffiliated third party, FDF Resources Holdings LLC, a Delaware limited liability company (“Purchaser”). Pursuant to the terms of the Merger Agreement, New Francis Oaks merged with and into FDF Resources,

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

and FDF Resources continued as the surviving entity after the Disposition. New Francis Oaks owns 100% of the outstanding shares of FDF, and, as a result of the disposition, we no longer own FDF.

We recognized a loss of approximately $1,470,000 from the sale transaction during the second quarter of 2012, which represents the excess of the book value of the assets sold over the sale price.

We determined that the disposition of FDF met the definition of a discontinued operation. As a result, this business has been presented as a discontinued operation for all periods presented. Financial information for the discontinued operation was as follows:



	For the Year Ended December 31,
	2012 (1)
Revenues
Oilfield Services	$	24,077,027
Drilling Fluids	3,576,111

Total revenues	27,653,138

Expenses
Cost of goods sold - drilling fluids	1,325,674
Depreciation and amortization	3,126,243
Selling, general, and administrative expenses	24,605,436
Loss on sale of assets	75,692
Interest expense	1,687,504
Change in fair value of derivative liabilities	4,267,000
Accretion of preferred stock liability	1,299,495
Other	(5,878		)

Total expenses	36,381,166

Loss before income taxes	$	(8,728,028	)

________________________________________________________

(1) Activity for 2012 is through May 4, 2012, the date of the FDF disposition.



	May 4, 2012

Current Assets	$	16,434,891
Property, plant, and equipement, net	38,627,582
Goodwill / intangible assets	17,959,829
Deferred financing cost	554,538
Other assets	173,148
Total assets	$	73,749,988

Current liabilities	$	41,733,594
Long-term debt	810,244
Senior Series A redeemable preferred stock	5,428,535
Deferred income taxes	13,486,361
Stockholder’s equity (deficit)	12,291,254
Total liabilities and stockholder’s equity	$	73,749,988

NOTE 15. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is summarized below.

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements



	Years Ended December 31,
	2013		2012
Supplemental disclosures of cash flow information:
Total cash paid for interest	$	6,040	$	250,455
Total cash paid for taxes	$	70,000	$	189,372
Cash paid for interest — related party	$	—	$	6,598

Supplemental disclosure of non-cash information:
Exchange of accounts payable for debt	$	—	$	342,500
Treasury shares received	$	—	$	2,732,342
Shares issued to retire debt	$	—	$	33,000
Dividend declared	$	—	$	643,829
Stock dividend	$	—	$	487,127
Waypoint receivable	$	—	$	1,075,000

NOTE 16. SUBSEQUENT EVENTS

On June 20, 2014, the Board of Directors of the Company approved the sale and issuance of 8,013,902 shares of Common Stock of the Company to Cory R. Hall in exchange for $1,001,737.75 in accordance with that certain Securities Purchase Agreement executed on June 20, 2014 between the Company and Mr. Hall (the “Offering”). The Offering was made in reliance on the exemption provided by Rule 506(b) promulgated under the Securities Act of 1933, as amended, and certain provisions of Regulation D thereunder based on Mr. Hall’s status as an accredited investor.

On June 23, 2014, the Company entered into an employment agreement with Mr. Hall. The employment Agreement providees for an annual base salary of at least $375,000 per year, an auto allowance of $825 per month and incentive compensation to be determined from time to time by the Company’s board of directors. Any award of restricted stock made to Mr. Hall is subject to non-transferability and forfeitability, and vests over a three year period in equal amounts per year.

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

SUPPLEMENTAL DISCLOSURE OF OIL & GAS OPERATIONS (Unaudited)

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

Costs Incurred

A summary of costs incurred in oil and natural gas property acquisition, development, and exploration activities (both capitalized and charged to expense) for the years ended December 31, 2013 and 2012, is as follows.



	2013		2012
Acquisition of proved properties	$	—	$	—
Acquisition of unproved properties	$	970,336	$	518,682
Development costs	$	768,117	$	100,065
Exploration costs	$	—	$	—

Results of Operations for Producing Activities

The following table presents the results of operations for our oil and natural gas producing activities for the years ended December 31, 2013 and 2012.



	2013			2012
Revenues	$	219,160		$	182,473
Production costs	(86,740		)	(104,642		)
Exploration expenses	—			—
Depreciation, depletion and valuation provisions	(27,875		)	(12,058		)
	104,545			65,773

Income tax expenses	(64,829		)	(22,226		)
Results of operations from producing activities	$	39,716		$	43,547

Reserve Quantity Information

During 2013, we drilled and completed only two wells. Reserve information for 2013 related to our two proved developed producing properties is based on estimates prepared internally by Sable. We maintain internal controls designed to provide reasonable assurance that the estimates of proved reserves are computed and reported in accordance with the rules and regulations provided by the SEC. Michael Galvis, our CEO, is primarily responsible for overseeing the preparation of the reserve estimates and has over 30 years of experience in the oil and gas industry. Numerous uncertainties exist in estimating quantities of proved reserves.

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

The following table, which presents a standardized measure of discounted future net cash flows (“standardized measure”)

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

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

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

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



	2013
Future cash inflow	$	1,418,346
Future production and development costs	(356,096		)
Future income taxes	(371,787		)
Future net cash flows	690,463
10% annual discount for estimated timing of cash flows	(289,605		)
Standardized measure of discounted net cash flows	$	400,858

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



	2013
Beginning of year	$	—
Net change in prices and production costs	400,858
End of year	$	400,858

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EXHIBIT INDEX



Exhibit		Document

2.1		Agreement and Plan of Merger, dated as of May 4, 2012, by and among FDF Resources Holdings LLC, New Francis Oaks, LLC and NYTEX FDF Acquisition, Inc. (filed as Exhibit 2.1 to the Registrant’s Form 8-K filed May 10, 2012 and incorporated herein by reference)

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

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

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

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

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

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

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

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

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

10.1		Employment Agreement - Galvis

10.2		Employment Agreement - Hall

10.3		NYTEX Energy Holdings, Inc. 2014 12% Convertible Debenture

10.4		NYTEX Energy Holdings, Inc. 2014 Debenture Warrant

10.5		Securities Purchase Agreement - Hall

21*		List of Subsidiaries of Registrant

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23.1*		Consent of Whitley Penn LLP

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

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

101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase

101.DEF**		XBRL Taxonomy Extension Definition Linkbase

101.LAB**		XBRL Taxonomy Extension Label Linkbase

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase

________________________________________________________

* Filed herewith

** Furnished herewith

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

Attached files

Sable Natural Resources Corp Reports

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