UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

Securities Exchange Act of 1934

For the quarterly period ended June 30, 2015

Commission File Number: 53915

SABLE NATURAL RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

972-770-4700

(Registrant’s telephone number, including area code)

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 ¨

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 ¨

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.

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

As of July 31, 2015 the registrant had 35,157,501 shares of common stock outstanding.

TABLE OF CONTENTS

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 and credit environment, 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, our ability to continue as a going concern, 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, the ability to obtain financing for drilling activities, competition in the oil and natural 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 our Form 10-K for the year ended December 31, 2014 filed with the U.S. Securities and Exchange Commission.  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.

PART I

Item 1.  Financial Statements

SABLE NATURAL RESOURCES CORPORATION

Consolidated Balance Sheets

See accompanying Notes to Consolidated Financial Statements

SABLE NATURAL RESOURCES CORPORATION

Consolidated Statements of Operations

(Unaudited)

See accompanying Notes to Consolidated Financial Statements

SABLE NATURAL RESOURCES CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

See accompanying Notes to Consolidated Financial Statements

SABLE NATURAL RESOURCES CORPORATION

Consolidated Statement of Stockholders’ Equity (Deficit)

(Unaudited)

See accompanying Notes to Consolidated Financial Statements

SABLE NATURAL RESOURCES CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying Notes to Consolidated Financial Statements

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

General

Sable Natural Resources Corporation (“Sable”) is an independent oil and gas company focused on the acquisition and exploitation of unconventional liquids rich gas and oil reserves in the Fort Worth Basin. The company's strategy is to increase production and expand oil and gas reserves through unconventional recompletions and restimulations of existing conventional wells and the drilling of low risk, high rate-of-return gas and oil wells.

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

Basis of Presentation

The consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  These financial statements include the accounts of Sable and entities in which it holds a controlling interest.  All intercompany accounts and transactions have been eliminated in consolidation.  Certain prior-period amounts have been reclassified to conform to the current year classification.

The interim financial data as of June 30, 2015 and for the six months ended June 30, 2015 and 2014 is unaudited; in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to a fair statement of the results for the interim periods.  The consolidated results of operations for the six months ended June 30, 2015 and 2014 are not necessarily indicative of the results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto as filed in our Annual Report on Form 10-K for the year ended December 31, 2014.  Due to time and financial constraints, this report has not been reviewed by our independent auditors.

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 six months ended June 30, 2015, we incurred a net loss of $2,736,494, and have an accumulated deficit totaling $26,543,992, 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 energy & natural resources industry and improvements to results from existing operations. We are currently in default on substantially all of our debt obligations, and are seeking ways to restructure the company to satisfy our creditors. 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.

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Restricted cash

On May 4, 2012, (the “Closing Date”), we entered into an agreement with a third party, FDF Resources Holdings LLC (the” Purchaser”), which resulted in the sale of 100% of the outstanding interests of FDF. The total consideration for the sale was $62.5 million. In accordance with the Merger Agreement, $6,250,000 of the total consideration was set aside to be held in escrow. The funds held in escrow were subject to distribution in accordance with terms set forth in the Merger Agreement. As of December 31, 2014 the balance of $2,986,154 remained for redemption of the Series A convertible preferred stock after May 4, 2015, less any future claims asserted by the buyer pursuant to the terms of the escrow agreement and vetted by Sable, along with direct costs and third party legal fees associated with preserving the escrow fund incurred by Sable.

On May 4, 2015 a final claim of $60,000 was presented by the buyer and was vetted by Sable. The remaining escrow balance of $2,926,204 was released to Sable and after reimbursement of $173,479 for legal fees and direct costs, $2,752,725 was available for distribution to the Series A convertible preferred stockholders. As of June 30, 2015 a total of $2,356,331 had been redeemed.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, including those related to proved reserves; the value of properties and equipment; goodwill; intangible assets; asset retirement obligations; litigation liabilities; environmental liabilities; pension assets, liabilities, and costs; income taxes; and fair values. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates.

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. There is no dilution effect on earnings due to the net loss for the period, however the Company has the following potentially dilutive securities outstanding:

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Property and equipment, which includes our oil and gas properties at June 30, 2015 and December 31, 2014 consist of the following: 

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

At June 30, 2015, we had two derivative liabilities on our consolidated balance sheet related to the warrants issued to the holders of the Company’s Series A Convertible Preferred Stock and the 13% Secured Notes.  The agreements setting forth the terms of the warrants includes 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 per share.  Accordingly, we consider the warrants to be a derivative.  The activity for the six months ended June 30, 2015 for these derivatives is as follows:

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

A summary of our outstanding debt obligations as of June 30, 2015 and December 31, 2014 is presented as follows: 

The Company is in default on all debt obligations except the 7.5% secured equipment loans. Accordingly, no interest has been accrued at June 30, 2015 and all debt has been classified as current.

On June 18, 2015 the Company entered into a note payable to Cory Hall, former President and COO to secure advances made to purchase the Panther Creek property and to fund operations. The note is secured by the Company’s non-operated properties and bears interest at prime +.75% and matures June 18, 2017.

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Leases

The Company leases office space and office equipment under non-cancelable operating leases which provide for minimum annual rentals.  At June 30, 2015, future minimum obligations under these lease agreements are as follows:

Total lease rental expense for the six months ended June 30, 2015 and 2014 was $81,964 and $43,876 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.

Warrants

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 six months ended June 30, 2015 and 2014 is as follows:

The following table shows the weighted average assumptions used in the Monte Carlo simulation of the fair value of the warrants issued in the six months ended June 30, 2015:

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.

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Stock Options

We utilize the Black-Scholes option pricing model to measure the fair value of stock options granted to employees and directors. Forfeitures are recognized as a reversal of expense of any unvested amounts in the period incurred.

The following table summarizes our stock option activity for the six months ended June 30, 2015:

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.  Forfeitures are recognized as a reversal of expense of any unvested amounts in the period incurred.

The following table summarizes our restricted stock activity for the six months ended June 30, 2015

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 carrying value of certain long-term debt instruments approximates fair value since these instruments bear market rates of interest. Additional non-interest bearing long-term instruments have been reduced by a market interest rate. They approximate fair value as a result of this imputed interest.

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.

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

As discussed in Note 3, we consider the warrants issued to the holders of the Company’s 13% Secured Notes and the Series A Convertible Preferred Stock 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.

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

Included below is a summary of the changes in our Level 3 fair value measurements:

Income tax provision for the six months ended June 30, 2015 and 2014 was $0 and $0, respectively.  At June 30, 2015 and December 31, 2014 we have no deferred tax assets or liabilities included in the consolidated balance sheets.

The balance of the valuation allowance as of December 31, 2014 was $11,199,275.  The anticipated effective income tax rate is expected to continue to differ from the Federal statutory rate primarily due to the effect of state income taxes, permanent differences between book and taxable income, changes to the valuation allowance, and certain discrete items.

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Additional cash flow information was as follows for the six months ended June 30, 2015 and 2014:

On July 8, 2015 Sable Operating Company received a notice of default and intent to accelerate that certain loan agreement originally dated October 14, 2014 from the holders of the 13% Secured Notes. The notice specifies three events of default; mineral contractor’s lien affidavits having been filed by three vendors, failure to make the required note payment due April 15, 2015 to RKJ Holdings, LLC (a related party controlled by the company’s former President and COO, Cory R. Hall), and failure to maintain the lease in good repair and operating condition due to numerous shut-in wells. The Secured Note holders were due quarterly interest payments on July 15, 2015 that have not been paid as well.

On August 4, 2015 Jonathan Rich resigned as Director of the Company. Mr. Rich’s resignation was not due to any disagreements with us on any of our policies or practices.

On August 6, 2015 Sable Operating Company received notice of acceleration and foreclosure sale on September 1, 2015 from the holders of the 13% Secured notes. The Company remains in default on substantially all of its debt obligations.

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

Overview

Sable Natural Resources Corporation (“Sable”) is an independent oil and gas company focused on the acquisition and exploitation of unconventional liquids rich gas and oil reserves in the Fort Worth Basin. The company's strategy is to increase production and expand oil and gas reserves through unconventional recompletions and restimulations of existing conventional wells and the drilling of low risk, high rate-of-return gas and oil wells.

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

Results of Operations

Selected Data

(1)See Results of Operations—Adjusted EBITDAX for a description of Adjusted EBITDAX, which is not a U.S. Generally Accepted Accounting Principles (“GAAP”) measure, and a reconciliation of Adjusted EBITDAX to net loss, which is presented in accordance with GAAP.

Three months ended June 30, 2015 compared to the three months ended June 30, 2014

Revenues.  Revenues decreased $94,320 for the three months ended June 30, 2015, compared to the prior year period. This was primarily due to decrease in land lease revenues of $185,617 partially offset by an increase in revenues from oil & gas sales of $110,589 as our production volumes increased following our acquisition of the Panther Creek properties on October 15, 2014.

Oil & gas lease operating expenses.  Lease operating expenses increased significantly by $292,896 for the three months ended June 30, 2015 compared to three months ended June 30, 2014.  This was due to increased field operations following the acquisition of Panther Creek properties.

Exploration.  Exploration costs for the three months ended June 30, 2015 has increased by $350 over the prior period due to the shift in focus towards retaining and developing properties. 

Depreciation, depletion, and amortization.  Depreciation, depletion, and amortization (“DD&A”) for the three months ended June 30, 2015, increased by $265,840 over the prior period due to the addition of the Panther Creek properties.

Selling, general, and administrative expenses.  Selling, general, and administrative (“SG&A”) expenses decreased $155,311 for the three months ended June 30, 2015 compared to the three months ended June 30, 2014.  This decrease was due to an overall initiative to reduce overhead during the period with management layoffs and closing of the Midland office.

Interest expense.  Interest expense decreased $388 for the three months ended June 30, 2015 compared to the prior year period primarily due to the suspension of interest accruals on the 13% Secured Notes and the 12% convertible debentures as the Company has been unable to make the required interest payments in June and July and is now in default on these debt obligations. 

Income tax benefit (provision).  The income tax benefit (provision) for the three months ended June 30, 2015 and 2014 of $0 and $0, respectively, is the result of utilizing existing and current net operating losses to offset taxable income generated by our oil and gas segment. 

Six months ended June 30, 2015 compared to the six months ended June 30, 2014

Revenues.  Revenues increased $90,363 for the six months ended June 30, 2015, compared to the prior year period. This was primarily due to an increase in revenues from oil & gas sales of $322,277 as our production volumes increased following our acquisition of the Panther Creek properties on October 15, 2014. This increase was partially offset by a decrease in land lease revenues of $185,362 and a decrease in the sale of oil and gas interests of $46,552.  We anticipate revenues from land services and sale of oil and gas interests will decrease over time as we continue to focus on operating Panther Creek.  

Oil & gas lease operating expenses.  Lease operating expenses increased significantly by $786,315 for the six months ended June 30, 2015 compared to six months ended June 30, 2014.  This was due to increased field operations following the acquisition of Panther Creek properties.

Exploration.  Exploration costs for the six months ended June 30, 2015 has increased by $8,674 over the prior period due to the shift in focus towards retaining and developing properties. 

Depreciation, depletion, and amortization.  Depreciation, depletion, and amortization (“DD&A”) for the six months ended June 30, 2015, increased by $710,408 over the prior period due to the addition of the Panther Creek properties.

Selling, general, and administrative expenses.  Selling, general, and administrative (“SG&A”) expenses increased $220,669 for the six months ended June 30, 2015 compared to the six months ended June 30, 2014.  This increase was due to an overall increase in professional fees and expenses including accounting and legal costs, and increases in payroll related costs due in part to an increase in personnel.  This increase was partially offset by an overall initiative to reduce overhead at the end of the period with management layoffs and closing of the Midland office.

Interest expense.  Interest expense increased $448,241 for the six months ended June 30, 2015 compared to the prior year period primarily due to the addition of the 13% Secured Notes and the 12% convertible debentures.  Interest expense was $567,111 for the six months ended June 30, 2015 compared to $118,870 for the same period in the prior year. The increase was partially offset by the suspension of interest accruals on the 13% Secured Notes and the 12% convertible debentures at the end of the period as the Company has been unable to make the required interest payments in June and July and is now in default on these debt obligations. 

 Income tax benefit (provision).  The income tax benefit (provision) for the six months ended June 30, 2015 and 2014 of $0 and $0, respectively, is the result of utilizing existing and current net operating losses to offset taxable income generated by our oil and gas segment. 

Adjusted EBITDAX

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

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

Reconciliation of Adjusted EBITDAX to GAAP Net Loss:

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 June 30, 2015, we have cash and cash equivalents totaling $640,500, and negative working capital of $(14,695,514).

We do not currently generate sufficient cash flow from operations, and so we are continuing to raise additional capital through equity and/or debt financings to support and expand our drilling activities until such time as we can fully implement our plan of future operations and generate sufficient cash flow. We are currently in default on substantially all of our debt obligations, and are seeking ways to restructure the Company to satisfy our creditors.

Cash Flows

The following table summarizes our cash flows and has been derived from our unaudited financial statements for the six months ended June 30, 2015 and 2013.

Cash flows used in operating activities increased for the six months ended June 30, 2015 by $309,555 compared to cash flows from operating activities for the six months ended June 30, 2014. This increase was mainly due to LOE costs associated with the Panther Creek properties.

Cash flows used in investing activities for the six months ended June 30, 2015 increased by $767,427 compared to the six months ended June 30, 2014.  The change is primarily due to an $795,216 increase in cash outflows used in the investment in oil & gas properties.

Cash flows provided by financing activities increased by $714,852 for the six months ended June 30, 2015 compared to the six months ended June 30, 2014.  The increase was due primarily to the $1,675,000 provided by the issuance of 13% Secured Notes.  

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

Preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain.  Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2014, describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements.  Actual results in these areas could differ from management’s estimates.  Other than the clarification to our revenue recognition policy described below, there have been no significant changes in our critical accounting estimates and policies during the six months ended June 30, 2015.

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 gas revenues. Under this method, revenues are recognized based on the actual volumes of 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 gas properties are recorded once a formal agreement has been reached and the agreement has been consummated through the exchange of consideration.

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

Disclosure Controls and Procedures

Our management performed an evaluation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and to ensure that the information required to be disclosed by us in reports that we file under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, management has concluded that the Company’s disclosure controls and procedures are not effective as of June 30, 2015.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting were made during the six months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

At June 30, 2015, the Company was a party to lawsuits that were incurred in the normal course of business, none of which individually or in the aggregate is considered material by management in relation to the Company’s financial position or results of operations.  In management’s opinion, the Company’s consolidated financial statements would not be materially affected by the outcome of these legal proceedings, commitments, or asserted claims.

There have been no material changes in the Company’s risk factors from those disclosed in Part I, Item 1A, Risk Factors, in the Company’s Form 10-K for the year ended December 31, 2014.

13% Secured Notes

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

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

RKJ Holdings, LLC is one of the Lenders under the Loan Agreement as of October 14, 2014. RKJ Holdings, LLC is owned and managed by Mr. Cory R. Hall, the President and Chief Operating Officer of Sable and a member of the Sable Board of Directors. As a Lender, RKJ Holdings loaned Sable $2,850,000 at closing and an additional $150,000 during the three months ended March 31, 2015.

As of June 30, 2015 we had raised $11,325,000 under the 13% Secured Notes offering including warrants to purchase up to 6,228,750 shares of the Company's common stock.

The proceeds were used to acquire the Panther Creek property, begin remedial and recompletion operations along with general corporate overhead.

None

None

None

The exhibits set forth on the accompanying Exhibit Index have been filed as part of this Form 10-Q.

SIGNATURES

Pursuant to the requirements 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.

EXHIBIT INDEX