U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)
T QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal quarter ended March 31, 2013

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

RIO BRAVO OIL, INC.

(Exact name of small business issuer as specified in its charter)


Nevada	000-54564	42-1771917
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5858 Westheimer, Suite 699, Houston, TX 77057
(Address of principal executive offices) (Zip code)

Issuer’s telephone number: (713) 787-9060
Securities registered under Section 12(g) of the Exchange Act:

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 T 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes T No o

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 (Do not check if a smaller reporting company)	Smaller reporting company T

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

There were 32,291,657 shares outstanding of registrant’s common stock, par value $0.001 per share, as of May 1, 2013.

Transitional Small Business Disclosure Format (check one): Yes o No T

TABLE OF CONTENTS

PART I
Item 1.	Financial Statements	Page
	Condensed Consolidated Balance Sheets – unaudited	3
	Condensed Consolidated Statements of Operations – unaudited	4
	Condensed Consolidated Statements of Cash Flows – unaudited	6
	Notes to the Condensed Consolidated Financial Statements – unaudited	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	19
Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4	Controls and Procedures	27
PART II
Item 1	Legal Proceedings	28
Item 1A	Risk Factors	28
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3	Defaults Upon Senior Securities	30
Item 4.	(Removed and Reserved)	30
Item 5.	Other Information	30
Item 6.	Exhibits	30

SIGNATURES		31

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

RIO BRAVO OIL, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

	Successor
	March 31,			December 31,
	2013			2012*
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,165		$	18,738
Other receivables		3,443			6,747
Prepaid expenses		2,855			25,185
TOTAL CURRENT ASSETS		10,463			50,670
PROPERTY AND EQUIPMENT
Proved oil and gas properties, net of accumulated depletion		17,720,580			17,716,719
Furniture, fixtures and equipment, net of accumulated depreciation		571,368			595,239
		18,291,948			18,311,958
Deferred loan costs, net of amortization		218,578			244,565
TOTAL ASSETS	$	18,520,989		$	18,607,193

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	759,908		$	346,362
Accrued expenses		831,046			749,386
Advances payable – related party		90,704			90,704
Rio Bravo assets purchase payable		6,968			6,968
Eagle Ford asset purchase payable		190,000			190,000
Due to CalTex Bankruptcy Estate		123,202			123,202
Loan from former director		3,332			3,332
Short term notes payable		2,395,000			1,935,000
Bridge notes payable		350,000			350,000
TOTAL CURRENT LIABILITIES		4,750,160			3,794,954
NON CURRENT LIABILITIES
Notes payable		3,113,829			3,113,829
Caltex Bankruptcy Option B Liability		787,254			771,717
Asset retirement obligation		2,534,707			2,485,007
TOTAL LIABILITIES		11,185,950			10,165,507
Commitments and contingencies
REDEEMABLE SERIES A PREFERRED STOCK		5,389,000			5,500,000
REDEEMABLE SERIES C PREFERRED STOCK		492,000			492,000
STOCKHOLDERS’ EQUITY
Series B Preferred Stock, $0.001 par value, 5,000,000. Authorized 3,250,000 issued and outstanding shares as of March 31, 2013 and December 31, 2012		3,250			3,250
Common Stock, $0.001 par value, 120,000,000 Authorized
32,502,657 and 32,291,657 Issued and outstanding shares as of
March 31, 2013 and December 31, 2012, respectively		32,503			32,391
Additional paid-in capital		6,190,688			6,079,799
Stockholders’ deficit accumulated in the exploratory stage		(4,772,402	)		(3,665,754	)
Stockholders’ Equity		1,454,039			2,449,686
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	18,520,989		$	18,607,193

* Derived from audited information

See accompanying notes to the Condensed Consolidated Financial Statements (unaudited)

RIO BRAVO OIL, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Successor
							From
	Three Months			Three Months			Inception
	Ended			Ended			Through
	March 31,			March 31,			March 31,
	2013			2012			2013

REVENUES
Revenues from sale of oil and gas	$	8,712		$	-		$	110,268

OPERATING EXPENSES
Leasehold operating and workover expense		617,976			-			1,417,362
General and administrative		137,577			174,902			1,016,976
Professional fees		98,968			232,382			1,372,398
Depreciation expense		25,154			3,935			122,638
Total operating expenses		879,675			411,219			3,929,374

LOSS FROM OPERATIONS		(870,963	)		(411,219	)		(3,819,106	)

OTHER INCOME AND EXPENSE
Interest expense		(194,435	)		(84,376	)		(762,421	)
Total other income		(194,435	)		(84,376	)		(762,421	)

NET LOSS		(1,065,398	)		(495,595	)		(4,581,527	)

Preferred dividends		41,250			20,625			185,625

Net loss to common stockholders	$	(1,106,648	)	$	(516,220	)	$	(4,767,152	)

Basic and diluted loss per common share	$	(0.03)		$	(0.01	)	$	(0.07	)

Basic and diluted weighted average common
shares outstanding		32,465,657			94,805,571			69,698,573

See accompanying notes to the Condensed Consolidated Financial Statements (unaudited)

RIO BRAVO OIL, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Predecessor Business Period from 1/1/2012 through February 14,
	2012

REVENUES
Revenues from sale of oil and gas	$	-

OPERATING EXPENSES:
Leasehold operating and workover expense		-
General and administrative		108,972
Professional fees		54,649
Impairment of oil & gas interests		-
Depreciation expense		3,311
Total operating expenses		166,932

LOSS FROM OPERATIONS		(166,932	)

OTHER INCOME AND EXPENSE
Interest income		-
Interest expense		-
Total other income		-

NET LOSS		(166,932	)

Preferred dividends		-

Net loss to common stockholders	$	(166,932	)

Basic and diluted loss per common share	$	(0.00	)

Basic and diluted weighted average common shares
outstanding		95,264,795

See accompanying notes to the Condensed Consolidated Financial Statements (unaudited)

RIO BRAVO OIL, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Successor
							From
	Three Months			Three Months			Inception
	Ended			Ended			Through
	March 31,			March 31,			March 31,
	2013			2012			2013
CASH FLOWS FROM OPERATING ACTIVITES
Net loss	$	(1,065,398	)	$	(495,595	)	$	(4,581,527	)
Adjustments to reconcile net loss to cash used in
operations
Depreciation, depletion and amortization		25,154			3,937			122,638
Non cash interest expense		91,224			31,250			395,999
Stock based compensation		-			-			119,650
Changes in assets and liabilities
Prepaid expenses		25,635			22,175			22,625
Accounts payable		413,546			(215,426	)		142,137
Accrued expenses		40,410			31,104			343,626

Net cash used by operations		(469,429	)		(622,555	)		(3,434,852	)

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for oil and gas property		(5,144	)		(30,000	)		(1,636,225	)
Cash paid to acquire Pan American Oil Company, LLC,
net of cash acquired		-			(565,143	)		(495,656	)
Cash paid to acquire leasehold interest from Eagle Ford
Oil Company, Inc.		-			(548,000	)		(1,094,193	)

Cash flow used in investing activities		(5,144	)		(1,143,143	)		(3,226,074	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stockholder loan								200,000
Repayment of stockholder loan		-			(200,000	)		(200,000	)
Proceeds from debt issuance		460,000			2,500,000			5,648,704
Proceeds from director loan								3,332
Loan fees paid		-			(250,000	)		(360,000	)
Loan repayments		-			-			(206,943	)
Repayments of bridge notes		-			(1,250,000	)		(1,550,000	)
Proceeds from sale of common stock and warrants
net of offering costs paid		-			2,615,999			2,637,998
Proceeds from Series C preferred stock offering		-			(40,000	)		492,000

Cash provided by financing activities		460,000			3,375,999			6,665,091

Increase (decrease) in cash and cash equivalents		(14,573	)		1,610,301			4,165
Cash and cash equivalents, beginning of quarter		18,738			172,500			-

Cash and cash equivalents, end of period	$	4,165		$	1,782,801		$	4,165

Cash paid for interest and taxes	$	-		$	19,167		$	19,167

See accompanying notes to the Condensed Consolidated Financial Statements (unaudited)

RIO BRAVO OIL, INC.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Predecessor Business From January 1, 2012 through February 14,
	2012
CASH FLOWS FROM OPERATING ACTIVITES
Net loss		(166,932	)
Adjustments to reconcile net loss to cash used in operations
Depreciation		3,311
Changes in assets and liabilities
Prepaid expenses		(12,175	)

Net cash used by operations		(175,796	)

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for oil and gas property		(30,000	)
Cash advanced to Pan American Oil Company, LLC,
net of cash acquired		615,250
Loans to Eagle Ford Oil Company, Inc.		(409,506	)

Cash flow used in investing activities		175,744

CASH FLOWS FROM FINANCING ACTIVITIES
Bridge notes proceeds		245,000
Repayment of bridge notes		(200,000	)

Cash provided by financing activities		45,000

Increase (decrease) in cash and cash equivalents		44,948
Cash and cash equivalents, beginning of year		5,159

Cash and cash equivalents, end of year	$	50,107

Cash paid for interest and taxes	$	-

See accompanying notes to the Condensed Consolidated Financial Statements (unaudited)

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION AND GOING CONCERN

Nature of Operations and Presentation

These financial statements include the accounts of Rio Bravo Oil, Inc. (the “Company”), formerly Soton Holdings Group, Inc., which was formed on June 9, 2010 in the state of Nevada and its wholly-owned subsidiary Pan American Oil Company, LLC. Except where the context otherwise requires, the “Company,” “we,” “our” and “us” refers to Rio Bravo Oil, Inc. and our wholly-owned subsidiary Pan American Oil Company, LLC.

As described in more detail later in this document, the Company acquired Pan American Oil Company, LLC on February 14, 2012. Prior to that acquisition the Company was a shell company with limited or no operations. Under Securities and Exchange Commission (the “SEC”) rules when a registrant succeeds to substantially all of the business (or a separately identifiable line of business) of another entity (or group of entities) and the registrant's own operations before the succession appear insignificant relative to the operations assumed or acquired - the registrant is required to present financial information for the acquired entity (the “predecessor”) for all comparable periods prior to the date of acquisition being presented before the succession.

Therefore we are providing certain additional information in our financial statements regarding the predecessor businesses for periods prior to February 14, 2012. Pan American Oil Company, LLC, is considered a predecessor, Also, Pan American Oil Company, LLC purchased certain oil and gas leasehold interests from Rio Bravo Oil, LLC on February 13, 2012 prior to being acquired by the Company and therefore those leasehold interests are also considered a predecessor. Collectively, Pan American Oil Company, LLC and the leasehold interests acquired from Rio Bravo Oil, LLC is referred to as the “Predecessor Business” This financial information (for which intercompany transactions between the predecessors have been eliminated) for the period prior to February 14, 2012 is labeled “Predecessor Business” and the Company has placed a heavy black line between it and the Company’s (also referred to as the successor) information to differentiate it from the Company’s financial information.

The consolidated condensed financial statements included herein are unaudited. Such consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature except for those related to the acquisition of Pan American Oil Company, LLC on February 14, 2012 as described later in this document. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2013 or for any other period. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the interim information presented not misleading. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as filed with the SEC on April 16, 2013.

Going Concern

The Company has incurred significant operating losses since its inception and has an accumulated deficit at March 31, 2013 of $4,772,402. In addition, as of March 31, 2013, the Company had a working capital deficit of $4.7 million and is currently unable to satisfy its debt obligations when they come due. Management expects that significant on-going operating and drilling expenditures will be necessary to successfully implement the Company’s drilling plans. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. Implementation of the Company’s plans and its ability to continue as a going concern depend upon its securing substantial additional financing.

The Company has only enough cash to operate into June 2013 and at the time of these financial statements, the production levels for the #4H and #3 tiller wells are currently unknown as they are undergoing flow testing. Management’s plans include efforts to obtain additional capital, although no assurances can be given about the Company’s ability to obtain such capital. If the Company is unable to obtain adequate additional financing or generate additional hydrocarbon production, it will be unable to continue its drilling plans and other activities and may be forced to cease operations. The consolidated financial statements presented herein do not include any adjustments that might result from the outcome of this uncertainty.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - MERGER WITH PAN AMERICAN OIL COMPANY, LLC

On February 14, 2012, the Company completed the acquisition of all of the outstanding member interests of Pan American Oil Company, LLC (“Pan Am”) at which time Pan Am became a wholly owned subsidiary of the Company. The purchase price of the member interests of Pan Am was 5,500,000 shares of Series A Preferred stock (see Note 8) plus the assumption of certain liabilities of Pan Am. Liabilities that were not assumed by the Company primarily consisted of a liability to deliver $500,000 worth of preferred shares, from an earlier acquisition by Pan Am (see below). This liability was distributed to the members of Pan Am immediately prior to the acquisition of Pan Am by the Company. The acquisition of Pan Am allowed the Company to enter the oil and gas industry and gain access to oil and gas leaseholds covering approximately 4,500 acres gross (2,143 net) within the Edwards formation in Texas. The Company acquired an approximate 63.5%/57% working interest (before/after pay out) and approximate 38% net revenue interest (after pay out) in the Edwards formation leaseholds in Caldwell and Guadeloupe counties in Texas. Immediately following the acquisition the Company changed its year end to December 31 to conform with that of Pan Am.

Immediately prior to the merger with the Company, Pan Am consummated an acquisition of oil and gas leasehold interests in the Edwards formation from Rio Bravo Oil, LLC (“Rio LLC”), a company with common ownership and control with Pan Am. The purchase price of the leasehold interests was $1.6 million which consisted of approximately $966,000 of cash and payment of expenses on behalf of Rio LLC, a payable to Rio LLC of approximately $120,000 (of which $113,000 was paid in 2012) and assumption of a payable to the operator of the Edwards formation leaseholds of approximately $364,000. Because the two companies were under common control, the acquisition of these assets were reflected at their historical basis of Rio LLC by Pan Am, with the excess consideration being treated as a distribution to a member of Rio LLC as reflected under the Predecessor Business caption on the balance sheet presented in this document. As a result of application of the purchase method of accounting, which is based on the amount of consideration paid, these same assets are reflected using a stepped up basis in the Company’s balance sheet. Thus the Company’s financial statements from the periods prior to the transaction date are not directly comparable to the financial statements for periods subsequent to the transaction date.

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma statement of operations data presents the combined results of the Company as if its acquisition of Pan Am had occurred on January 1, 2012.

The unaudited pro forma information is based on various assumptions and presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place at the beginning of 2012.

	Three Months
	Ended March 31,
	2012

Pro forma net sales	$	-
Pro forma net loss to common stockholders	$	(683,152	)
Pro forma basic and diluted loss per share	$	(0.01	)

Initial accounting for the acquisition was incomplete and provisional amounts were recorded in the initial interim periods after the acquisition. The amounts in the table above reflect updated information. The changes subsequent to the provisional information were a reduction of prepaid expenses of $150,000 and a corresponding reduction in accounts payable of $150,000.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Exploration Stage Enterprise

The Company has been devoting most of its efforts to exploring for and developing its oil and gas assets and, consequently, meets the definition of An Exploration Stage Enterprise, under the Accounting Standards Codification “Accounting and Reporting for Development Stage Enterprises.” Certain additional financial information is required to be included in the financial statements for the period from inception of the Company to the current balance sheet date.

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and natural gas operations. Under this method all productive and nonproductive costs incurred in connection with the acquisition, exploration, and development of oil and natural gas reserves are capitalized on a country-by-country basis into an individual country “cost pool.” The Company has operations in the United States and, consequently, only has one cost pool. No gains or losses are recognized upon the sale or other disposition of oil and natural gas properties except in transactions that would significantly alter the relationship between capitalized costs and proved reserves. The costs of unevaluated oil and natural gas properties are excluded from the amortizable base until the time that either proven reserves are found or it has been determined that such properties are impaired. As properties become evaluated, the related costs are transferred to the proved oil and natural gas properties cost pool using full cost accounting.

Under the full cost method the net book value of oil and natural gas properties, less related deferred income taxes, may not exceed the estimated after-tax future net revenues from proved oil and natural gas properties, discounted at 10% (the “Ceiling Limitation”). In arriving at estimated future net revenues, estimated lease operating expenses, development costs, and certain production-related and ad valorem taxes are deducted. In calculating future net revenues, prices and costs are held constant indefinitely, except for changes that are fixed and determinable by existing contracts. Prices are determined using a simple arithmetic average of the first day of each month during the most recent twelve month period presented herein. The net book value is compared to the Ceiling Limitation on a quarterly and yearly basis. The excess, if any, of the net book value above the Ceiling Limitation is charged to expense in the period in which it occurs and is not subsequently reinstated.

Unit-of-production depletion is applied to capitalized costs of the full cost pool. Unit-of-production rates are based on the amount of proved reserves (both developed and undeveloped) of oil, gas and other minerals that are estimated to be recoverable from existing facilities using current operating methods.

The costs of investments in unproved properties and portions of costs associated with major development projects are excluded from the depreciation, depletion and amortization calculation until the project is evaluated.

Unproved property costs include leasehold costs, seismic costs and other costs incurred during the exploration phase. In areas where proved reserves are established, significant unproved properties are evaluated periodically, but not less than annually, for impairment. If a reduction in value has occurred, these property costs are considered impaired and are transferred to the related full cost pool. Unproved properties whose acquisition costs are not individually significant are aggregated, and the portion of such costs estimated to be ultimately nonproductive, based on experience, and is amortized to the full cost pool over an average holding period.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates

The preparation of the Company’s financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management believes that the following material estimates affecting the financial statements could significantly change in the coming year.

The most significant estimates pertain to proven oil and natural gas reserves and related cash flow estimates used in impairment tests of long-lived assets, estimates of future development, dismantlement and abandonment costs. Certain of these estimates require assumptions regarding future costs and expenses and future production rates. Actual results could differ from those estimates.

The Company’s revenue, profitability and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, which are dependent upon numerous factors beyond their control such as economic, political and regulatory developments and competition from other energy sources. The energy markets have historically been very volatile and there can be no assurance that oil and natural gas prices will not be subject to wide fluctuations in the future. A substantial or extended decline in oil and natural gas prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced.

Estimates of oil and natural gas reserves and their values, future production rates and future costs and expenses are inherently uncertain for numerous reasons, including many factors beyond the Company’s control. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of data available and of engineering and geological interpretation and judgment. In addition, estimates of reserves may be revised based on actual production, results of subsequent exploration and development activities, prevailing commodity prices, operating cost and other factors. These revisions may be material and could materially affect future depletion, depreciation and amortization expense, dismantlement and abandonment costs, and impairment expense.

Concentrations

Upon acquisition of oil and gas field interests, the Company also became a party to joint operating agreements (“JOA’s”) that define the rights and responsibilities third party operators and passive interest holders. Under the JOA, the third party operator is responsible for acquiring customers to sell the oil and gas produced and to either performing or contracting out to other third parties to perform services necessary to continue and maintain undeveloped acreage. Currently all of the Company’s leasehold interests have as their third party operator Eagle Ford Oil Co. Inc. which is controlled by the former managing member of both Pan American Oil Co., LLC and Rio Bravo Oil, LLC.

Concentrations and Market Risks

The future results of the company’s oil and natural gas operations will be affected by the market prices of oil and natural gas. The availability of a ready market for oil and natural gas products in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of oil, natural gas and liquid products, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty.

The Company operates in the exploration, development and production sector of the oil and gas industry. While certain of these customers and joint venture partners are affected by periodic downturns in the economy in general or in their specific segment of the oil and natural gas industry, the Company believes that its level of credit-related losses due to such economic fluctuations has been and will continue to be immaterial to the Company’s results of operations over the long-term.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. During the year the amount of bank deposits that exceeded Federal Deposit Insurance Corporation (“FDIC”) insurance can be material.

Net Loss Per Share

Basic loss per share is calculated based on the weighted-average number of outstanding common shares. Diluted loss per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares, using the treasury stock method. The Company’s calculation of diluted net loss per share excludes potential common shares as of December 31, 2012 and 2011 as the effect would be anti-dilutive (i.e. would reduce the loss per share). At March 31, 2013, warrants and preferred stock that were convertible into 12,528,453 shares of common stock were not included in the net loss per share calculation.

In accordance with SEC Accounting Series Release 280, the Company computes its income or loss applicable to common stock holders by subtracting dividends on preferred stock, including undeclared or unpaid dividends if cumulative, from it reported net loss and reports the same on the face of its statement of operations.

NOTE 4 – ACQUISITION OF LEASEHOLD INTERESTS FROM NUMA LULING, LLC AND EAGLE FORD OIL CO, INC.

In June 2012, the Company completed the acquisition of all of the leasehold interests held by Numa Luling, LLC (“Numa”). The purchase price of the leasehold interests acquired from Numa was 3,250,000 shares of Series B Preferred stock (see Note 8) plus the assumption of certain liabilities of Numa. The stock was valued at its then fair value upon issuance at $3,466,667. The acquisition of Numa increased the Company’s ownership interest in the Edwards formation leaseholds covering approximately 4,500 acres gross (2,143 net) in Texas. The Company acquired an approximate 25% working interest and approximate 18.75% net revenue interest (after pay out) in the Edwards formation leaseholds in Caldwell and Guadeloupe counties in Texas. The results of operation of Numa are included herein starting on June 1, 2012.

In May 2012, the Company completed the acquisition of 80% of the leasehold interests and approximately 500 wells held by Eagle Ford Oil Co, Inc. (“Eagle Ford”). The purchase price of the leasehold interests and wells acquired was approximately $2 million in cash plus a note for $225,000 plus the assumption of certain liabilities. Prior to the acquisition, Pan Am advanced Eagle Ford approximately $906,000 which was deducted from the $2 million cash payment required to be made to Eagle Ford. The Company assumed Eagle Ford’s liabilities to the previous leaseholders, the bankruptcy estate of Caltex Swabbing Co. Those liabilities were primarily $295,000 of the original upfront cash purchase price paid that was still owing to the bankruptcy estate and “Option B” liability that requires the Company to pay to the bankruptcy estate $5,000 per well drilled for the first 200 wells and in the event that 200 wells are not drilled on or before March 16, 2016, the difference between $1 million and the amount paid per well becomes immediately due. In 2012, the Company paid $171,798 of the $295,000 assumed liability. The Company recorded the fair value amount of the debt at the time of acquisition in the amount of $726,921 using an 8% risk free rate. As of December 31, 2012 the amount of the debt was $771,717. The Company acquired 80% working interest and approximate 60% net revenue interest in the same acreage as the Edwards formation, but for all depths below and above the Edwards formation. Eagle Ford retained the third party operating rights to the Fields and also has 20% of its interest carried by the Company for all drilling and swabbing operations. The swabbing operation currently holds production for the entire leasehold. The results of operation for Eagle Ford are included herein starting on April 1, 2012.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - OIL AND GAS PROPERTIES

Oil and gas properties consisted of the following as of:

	March 31,			December 31,
	2013			2012

Proved properties	$	17,746,240		$	17,741,096
Unproved properties		-			-
		17,746,240			17,741,096
Accumulated depletion, depreciation and impairment		(25,660	)		(24,377	)
	$	17,720,580		$	17,716,719

In 2012, the third party operator for the Company’s leasehold interests commenced several drilling and work-over programs targeting three different depths within the Buda and Edwards formations. The first program started by the third party operator was an attempt to test for recompleting the wells drilled in the 2010 drilling program that were all dry holes that were acquired by the Company with their purchase of Pan American Oil Co, LLC and Numa Luling, LLC (see Notes 2 and 4). During 2012 the Company began recomplete work on the #1H and the #3H wells. As of December 31, 2012, the Company had incurred drilling costs of approximately $232,000 in regards to this first program. The #1H well is still being tested, while the #3H well will go into production after proper pump size has been determined. The Company expects to be able to report production test results in the second quarter of 2013.

The second program started was a small work-over program covering 4 previously inactive wells in the Austin chalk formation that were acquired in the purchase of the leasehold interest acquired from Eagle Ford Oil Co. Inc. (see Note 4). During 2012 the Company incurred work-over costs of approximately $98,000.

The third drilling program was the drilling of a new horizontal well nearby to the wells drilled in the 2010 drilling program noted above, the Tiller #4H well. The Company incurred drilling costs of approximately $1.38 million for this well, which was undergoing testing as of December 31, 2012. As of the date of these financial statements the well was undergoing flow testing and the Company expects to be able to report production test results in the second quarter of 2013.

Depletion expense amounted to $1,283 and $0 for the three ended March 31, 2013 and 2012, respectively.

NOTE 6 - FURNITURE, FIXTURES AND EQUIPMENT

Furniture, fixtures and equipment consisted of the following as of:

	March 31,			December 31,
	2013			2012

Salvaged equipment from Luling Edwards exploration	$	668,346		$	668,346
Accumulated depreciation		(96,978	)		(73,107	)
	$	571,368		$	595,239

Depreciation expense was $23,871 and $3,935 for the three months ended March 31, 2013 and 2012, respectively.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - NOTES AND ADVANCES PAYABLE

In connection with the acquisition of Pan Am the Company acquired certain advances payable and short term bridge notes in the principal amount of $1,900,000 from two unaffiliated entities. Of the $1,900,000 borrowed, $600,000 was evidenced by an unsecured promissory note, had an interest rate of 10% per annum and was repaid March 2012. The remaining $1,300,000 borrowed was evidenced by a series of loan agreements all with essentially the same terms; interest at the rate of 6% per annum, unsecured, and due on the earlier of December 31, 2012 or upon demand. As of March 31, 2013, $350,000 was due on this loan. The Company is currently in negotiations with the lender to extend the maturity date of the loan and expects to complete the extension in the second quarter of 2013.

In addition, in 2011 Pan Am was advanced approximately $90,000 by a then related party. The advance is non-interest bearing, is unsecured and due on demand and as of March 31, 2013 the balance the Company owed is $90,704.

On February 24, 2012, the Company received gross proceeds of $2.5 million from the sale of two promissory notes to two unrelated entities. The notes mature on December 31, 2014, bear interest at the rate of 8% per annum, are unsecured and are convertible into up to 2.5 million shares of the Company’s common stock, subject to certain adjustments, at the option of the holders. In addition, should the Company’s common stock trade above $2.50 for a period of 30 or more consecutive trading days, the notes and all accrued and unpaid interest automatically convert into common stock of the Company, at the conversion rate then in effect. The Company determined that at issuance, no beneficial conversion feature was present. As of March 31, 2013, the entire principal amounts of these loans was outstanding.

In connection with the $2.5 million notes noted above, the Company paid a 10% fee to and unrelated third party who helped facilitate the transaction. The fee is being amortized on a straight line basis over the life of the loans. Through March 31, 2013 the Company amortized approximately $95,588 to interest expense.

On April 30, 2012, the Company received gross proceeds of $750,000 from the sale of a promissory note that matures on April 30, 2017, is unsecured and bears interest at the rate of 3% per annum. The note contains conversion privileges such that the holder may convert at any time into common stock of the Company at a conversion rate of $0.75 per share. The conversion feature includes standard anti-dilution provisions. The Company recorded a discount of $150,000 as a result of the beneficial conversion feature, and amortized approximately $13,829 of the discount through March 31, 2013. The balance owed at March 31, 2013 was $750,000 although the amount reflected in the balance sheet is $613,829 due to debt discount which is offset against it and being amortized off.

In combination with the $750,000 note described above, the Company paid fees totaling $110,000 to acquire these loans. The fee amortized to interest expense through March 31, 2013 was $45,834. The amount owed at December 31, 2012 and March 31, 2013 was $300,000.

On May 21, 2012, the Company received gross proceeds of $300,000 from the sale of a promissory note that originally matured on the earlier of December 31, 2012 or upon the Company raising $1,500,000 in debt or equity after the sale of the note, bears interest at the rate of 6% per annum and is unsecured. On December 24, 2012, the maturity date of the note was extended until March 31, 2013. The Company is still in negotiations with the lender to extend that maturity date and expects to complete extension in the second quarter of 2013.

In October 2012 through December 2012 the Company received gross proceeds of $ 1,635,000 from the sale of promissory notes that mature on the earlier of December 31, 2013 or upon the Company raising $1,500,000 in debt or equity after the sale of the notes. The notes bear interest at the rate of 6% per annum and are unsecured. The amount owed at December 31, 2012 and March 31, 2013 was $1,635,000.

On May 25, 2012 the Company issued a note as part of the purchase price to acquire the 80% interest in the Eagle Ford Oil Co., Inc. oil and gas leaseholds (see Note 4) in the amount of $225,000 that matured on December 31, 2012, was unsecured and bears interest at the rate 5% per annum. As of December 31, 2012 and March 31, 2013 the unpaid balance of the loan was $190,000. The Company is currently in negotiations with the lender to extend the maturity date of the loan and expects to complete the extension in the second quarter of 2013.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On January 16, 2013, the Company received gross proceeds of $150,000 and issued a promissory note to DIT Equity Holdings, LLC in the same amount. The note bears interest at the rate of 6% per annum, is unsecured and is due on the earlier of 1 year from the date of issuance of the note or when the Company raises gross proceeds of $1.5 million in a debt or equity offering. The note was repaid in full on January 29, 2013.

On January 25, 2013, the Company received gross proceeds of $40,000 and issued a promissory note to DIT Equity Holdings, LLC in the same amount. The note bears interest at the rate of 6% per annum, is unsecured and is due on the earlier of February 3, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

On February 26, 2013, the Company received gross proceeds of $10,000 and issued a promissory note to DIT Equity Holdings, LLC in the same amount. The note bears interest at the rate of 6% per annum, is unsecured and is due on the March 7, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

On February 26, 2013, the Company received gross proceeds of $45,000 and issued a promissory note to DIT Equity Holdings, LLC in the same amount. The note bears interest at the rate of 6% per annum, is unsecured and is due on the March 7, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

On March 20, 2013, the Company received gross proceeds of $65,000 and issued a promissory note to Wiltomo Redemption Foundation in the same amount. The note bears interest at the rate of 6% per annum, is unsecured and is due on the March 20, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

Interest has been accrued on all of the debt listed in this footnote and is recorded in a separate account.

In January 2013, the Company and 0947388 BC Ltd. (“094”) entered into a letter of intent for 094 to farm into the Edwards formation assets acquired through its acquisition of Pan American Oil Company, LLC (see Note 2) and Numa Luling, LLC (see Note 4) and also the 80% interest in certain leasehold interests acquired from Eagle Ford Oil Co., Inc. (see Note 4). The letter of intent specifies that upon completion of the #4H Tiller well currently being completed by the Company, 094 will drill 10 wells within the Edwards formation of which 100% of the costs shall be borne by 094. At the end of the 10 well program, 094 has the option to extend the program for a further 5 wells, borne at the sole cost of 094 or acquire 100% of the Company’s interest in the Edwards formation leasehold interests for $45 million, which price is reduced on a pro rata basis should oil prices drop below $85 per barrel down to a minimum of $30 million. Should 094 decide not to purchase 100% of the Company’s interest in the Edwards formation leasehold interests, then 094 will earn 80% of revenue from those 10 wells drilled by 094 until such time as it has recouped its costs, at which point its revenue interest reverts to 60%. In addition, 094 will also drill 5 wells within the Buda formation at its sole costs. At completion, 094 has the option to acquire 30% of the interest held by the Company in the entire leasehold through payment of $7.5 million to the Company. In the event 094 chooses not pay the final option price it will earn only a 30% interest in the 5 wells drilled by 094. At the time of entering the letter of intent, 094 paid a refundable deposit of $300,000. The Company and 094 are still in negotiations and no agreement has been finalized.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - PREFERRED STOCK

Series A

In connection with the acquisition of Pan Am, the Company issued 5,500,000 shares of Series A preferred stock as partial consideration for the purchase. The Series A preferred stock had an initial issue price of $1 per share and accrues a dividend quarterly to each holder at the rate of 3% per annum based on the original issue price, payable quarterly in cash or in kind. Series A preferred holders are required to have received all dividends before any dividend on common stock may be issued. The Series A preferred ranks senior to common stock in the event of a liquidation or winding up of the Company. The Series A preferred may be converted in whole or in part at any time at the option of the holder at the rate of 1 common share for each Series A Preferred, subject to adjustments as defined in the Series A certificate of designation. In addition, should the common stock of the Company trade in any over the counter market above $1.75 per share for a period of at least 30 consecutive trading days, the Company have an initial public offering of any class of securities in which gross proceeds are in excess of $50 million or consummate a merger in which the existing Company shareholders obtain less than 50% of the voting control of the combined entity, then the Series A preferred will automatically convert into the number of shares of common stock as the then conversion rate indicates. In the event that holders elect not to convert their Series A preferred or no automatic conversion is triggered, on January 31, 2019, the Series A preferred will become mandatorily redeemable for cash at its original issue price plus any unpaid dividends accrued as of that date. On the date of issuance, the Company determined that no beneficial conversion feature was present. As of March 31, 2013, the Company accrued $175,625 of Series A dividends.

In March 2012, the Company commenced a separate offering of up to 10 million shares of Series A preferred stock in a private placement. As of March 31, 2013, no funds had yet been raised under the offering.

In first quarter of 2013, 111,000 of Series A preferred stock was converted into 111,000 shares of common stock.

Series C

The Corporation shall mandatorily redeem all shares of Series C Preferred Stock which remain issued and outstanding at January 31, 2019 (“Redemption Date”) at a price equal to the sum of the Original Issue Price and the aggregate amount of any unpaid Cumulative Preferred Dividends attributable to such shares. Such redemption shall be made only to the extent the Corporation has funds legally available for such redemption as of the Redemption Date.

NOTE 9 - COMMON STOCK

In May 2012 the Board of Directors adopted a stock compensation plan. The plan allows the Company to issue shares of common stock, options to purchase common stock or stock appreciation rights to employees, directors and consultants employed by the Company. The number of shares of common stock issuable under the plan is determined each January 1, such that the plan may issue shares of common stock or instruments to acquire common stock of the Company up to 15% of the then outstanding common stock of the Company. No awards were granted or outstanding during the period ending March 31, 2013.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

General

There have been significant changes in the U.S. economy, oil and gas prices and the finance industry which have adversely affected and may continue to adversely affect the Company in its attempt to obtain financing or in its process to produce commercially feasible gas exploration or production.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Federal, state and local authorities regulate the oil and gas industry. In particular, gas and oil production operations and economies are affected by environmental protection statutes, tax statutes and other laws and regulations relating to the petroleum industry, as well as changes in such laws, changing administrative regulations and the interpretations and application of such laws, rules and regulations. The Company believes it is in compliance with all federal, state and local laws, regulations, and orders applicable to the Company and its properties and operations, the violation of which would have a material adverse effect on the Company or its financial condition.

Operating Hazards and Insurance

The gas and oil business involves a variety of operating risks, including the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formation, and environmental hazards such as oil spills, gas leaks, ruptures or discharges of toxic gases, the occurrence of any of which could result in substantial losses to the Company due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties, and suspension of operations.

The Company is a passive working and net revenue interest owner and operator in the oil and gas industry. As such, the Company to date has not acquired its own insurance coverage over its passive interests in the properties; instead the Company has relied on the third party operators for its properties to maintain insurance to cover its operations.

There can be no assurance that insurance, if any, will be adequate to cover any losses or exposure to liability. Although the Company believes the policies obtained by the third party operators provide coverage in scope and in amounts customary in the industry, they do not provide complete coverage against all operating risks. An uninsured or partially insured claim, if successful and of significant magnitude, could have a material adverse effect on the Company and its financial condition via its contractual liability to the prospect.

Title to Properties

The Company’s practice has been to acquire or have its members contribute ownership or leasehold rights to oil and natural gas properties from third parties. The Company’s existing rights are dependent on those previous third parties having obtained valid title to the properties. Prior to the commencement of oil or gas drilling operations on those properties, the third parties customarily conduct a title examination. The Company generally does not conduct examinations of title prior to obtaining its interests in its operations, but rely on representations from the third parties that they have good, valid and enforceable title to the oil and gas properties. Based upon the foregoing, the Company believes it has satisfactory title to their producing properties in accordance with customary practices in the oil and gas industry. The Company is not aware of any title deficiencies as of the date of these financial statements.

Potential Loss of Oil and Gas Interests/Cash Calls

The Company has agreed to be bound by the existing joint operating agreements with various operators for the drilling of oil and gas properties, and still owes certain operator payments on drilling wells. In addition, the Company might be subject to future cash calls due to (1) the drilling of any new well or wells on drilling sites; (2) rework or recompletion of a well; and (3) deepening or plugging back of dry holes, etc. If the Company does not pay delinquent amounts due or its share of future authorization for expenditures invoices, it may forfeit all of its rights in certain of its interests on the applicable prospects and any related profits. If one or more of the other members of the prospects fail to pay their share of the prospect costs, the Company may need to pay additional funds to protect its investments.

RIO BRAVO OIL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - NON CASH DISCLOSURES NOT MADE ELSEWHERE

No amounts were paid for interest or income taxes in the three months ended March 31, 2013.

NOTE 12 – SUBSEQUENT EVENTS

On April 2, 2013, the Company received gross proceeds of $45,000 and issued a promissory note to Wiltomo Redemption Foundation in the same amount. The note bears interest at the rate of 6% per annum, is unsecured and is due on the April 2, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

On April 24, 2013, the Company received gross proceeds of $50,000 and issued a promissory note to DIT Equity Holdings, LLC in the same amount. The note bears interest of 6% per annum, is unsecured and is due on the earlier of April 24, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

On May 2, 2013, the Company received gross proceeds of $25,000 and issued promissory note to DIT Equity Holdings, LLC in the same amount. The note bears interest of 6% per annum, is unsecured and is due on the earlier of May 31, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

On May 10, 2013, the Company received gross proceeds of $200,000 and issued promissory note to DIT Equity Holdings, LLC in the same amount. The note bears interest of 6% per annum, is unsecured and is due on the earlier of May 31, 2014 or when the Company raises gross proceeds of $1.5 million in a debt or equity offering.

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

Forward Looking Statements

This Interim Report on Form 10-Q contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PLSRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding Rio Bravo Oil, Inc. (the “Company” or “Rio Bravo,” also referred to as “us”, “we” or “our”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties. Forward-looking statements include statements regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans and (e) our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” as well as in this Form 10-Q generally. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

Any or all of our forward-looking statements in this report may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise. We intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

Overview

In January 2012, Rio Bravo Oil, Inc. (f/k/a/ Soton Holdings Group, Inc.), a Nevada corporation (the “Company”) determined to change its business plan to focus on the oil and gas industry and to seek, investigate, and, if warranted, acquire one or more properties or businesses in the oil and gas industry, and to pursue other related activities intended to enhance shareholder value. The acquisition of the oil and gas assets described herein was undertaken in furtherance of that strategy.

The Management of the Company has adopted a strategy of developing a growth-oriented independent energy and production company with a focus on development of proven undeveloped reservoirs and expansion of fields through unconventional methods of resource development. The Company has begun to execute this strategy through it’s acquisitions and aggregation of certain working interests located within the Luling Edwards, Darst Creek Luling Branyon, and Salt Flat fields in Texas, (collectively referred to as the “Luling Edwards Fields”). It has been the Company’s strategy to acquire certain significant working interests and assets within productive Edwards reservoirs, to additionally acquire additional rights associated with its targeted leases and to obtain secondary development opportunities.

Material Events

Operations:

In July 2011, Pan American Oil Company, LLC (“Pan American”) entered into a preliminary purchase and sale agreement with Rio Bravo Oil, LLC in which Pan American agreed to purchase all of Rio Bravo Oil LLC’s right, title and interest in its approximate 27% working interest and 23% net revenue interest in certain leaseholds in the Luling-Edwards Field. The purchase price was approximately $1.5 million in cash with a requirement to close on or before November 30, 2011. The agreement was subsequently modified to include Rio Bravo’s approximate 3.345% working interest and 12.5% net revenue interest (after overrides) in certain leaseholds in the Bateman Field and the purchase price was increased to include approximately an additional $1.7 million in cash with the acquisition date extended until Pan American was able to arrange funding. In February 2012 the agreement was modified again such that the assets included in the amended purchase and sale agreement included the original Luling-Edwards Field leaseholds and an option to purchase the Bateman Field leaseholds. This transaction closed on February 13, 2012. In November 2011, Pan American Oil Company, LLC entered into two separate purchase and sale agreements with entities that were sold partial interests in the Luling-Edwards field by Rio Bravo Oil, LLC in March 2010. The agreements called for Pan American to purchase approximately 20.75% net revenue interest and 30% working interest in the leaseholds in the Luling-Edwards field and had a combined purchase price of $300,000 in cash and the requirement of Pan American to deliver $500,000 worth of the shares of preferred stock Pan American receives in connection with a sale of its interests to a public company.

On February 13, 2012, the Company entered into a share exchange agreement with Pan American. Pursuant to the Agreement, Pan American exchanged its outstanding membership interests for 5,500,000 shares of Rio Bravo’s Series A Preferred stock and the assumption of approximately $3.3 million of liabilities.

In June 2012, the Company consummated two transactions to acquire additional leasehold rights to acreage in Guadeloupe and Caldwell Counties, Texas. In the first agreement, the Company entered into a purchase and sale agreement with Numa Luling, LLC in which the Company acquired all of Numa Luling, LLC’s right, title and interest (25% working interest and 25% net revenue interest, subject to 25% ORRI) in leasehold rights to the same formation, the Edwards formation, held by the Company. The purchase price for the acquisition of interests held by Numa Luling, LLC was 3,250,000 shares of Series B Preferred stock, which the Company valued at $3.466 million. The second acquisition was an asset purchase agreement with Eagle Ford Oil Co, Inc. in which the Company acquired 80% of the leasehold interests held by Eagle Ford Oil Co, Inc.. The leaseholds acquired are for depths other than the Edwards formation on the same acreage as the leaseholds owned by the Company. As part of the agreement, the Company agreed to carry the remaining 20% interest for drilling and swabbing operations, but not for leasehold operating expenses. The purchase price was payment of approximately $2 million in cash plus a note in the amount of $225,000 plus the assumption of certain payment obligations to the bankruptcy estate of the previous owner of the leasehold rights. One of the payment obligations calls for the Company to pay to the bankruptcy estate $5,000 per well drilled to a maximum of 200 wells and if that total is not met a balloon payment is due on March 16, 2016 for the difference between $1 million and the per well amount funded through March 16, 2016.

In 2012, the third party operator for the Company’s leasehold interests commenced several drilling and work-over programs targeting three different depths within the Buda and Edwards formations. The first program started by the third party operator was an attempt to test for recompleting the wells drilled in the 2010 drilling program that were all dry holes that were acquired by the Company with their purchase of Pan American Oil Co, LLC and Numa Luling, LLC. During 2012 the Company began recomplete work on the #1H and the #3H wells. As of December 31, 2012, the Company had incurred drilling costs of approximately $232,000 in regards to this first program. The #1H well is still being tested, while the #3H well will go into production after proper pump size has been determined. The Company expects to be able to report production test results in the second quarter of 2013.

The second program started was a small workover program covering 4 previously inactive wells in the Austin chalk formation that were acquired in the purchase of the leasehold interest acquired from Eagle Ford Oil Co. Inc. During 2012 the Company incurred work-over costs of approximately $98,000.

The third drilling program was the drilling of a new horizontal well nearby to the wells drilled in the 2010 drilling program noted above, the Tiller #4H well. The Company incurred drilling costs of approximately $1.38 million for this well, which was undergoing testing as of March 31, 2013. As of the date of this annual report, the well was undergoing flow testing and the Company expects to be able to report production test results in the second quarter of 2013.

In January 2013, the Company and 0947388 BC Ltd. (“094”) entered into a letter of intent for 094 to farm into the Edwards formation assets acquired through its acquisition of Pan American Oil Company, LLC (see Note 2) and Numa Luling, LLC (see Note 4) and also the 80% interest in certain leasehold interests acquired from Eagle Ford Oil Co., Inc. (see Note 4). The letter of intent specifies that upon completion of the #4H Tiller well currently being completed by the Company, 094 will drill 10 wells within the Edwards formation of which 100% of the costs shall be borne by 094. At the end of the 10 well program, 094 has the option to extend the program for a further 5 wells, borne at the sole cost of 094 or acquire 100% of the Company’s interest in the Edwards formation leasehold interests for $45 million, which price is reduced on a pro rata basis should oil prices drop below $85 per barrel down to a minimum of $30 million. Should 094 decide not to purchase 100% of the Company’s interest in the Edwards formation leasehold interests, then 094 will earn 80% of revenue from those 10 wells drilled by 094 until such time as it has recouped its costs, at which point its revenue interest reverts to 60%. In addition, 094 will also drill 5 wells within the Buda formation at 50% cost to earn 40% before payout and 30% after payout. At completion, 094 has the option to acquire 10% of the interest held by the Company in the entire leasehold through payment of $7.5 million to the Company. In the event 094 chooses not pay the final option price it will earn only a 30% interest in the 5 wells drilled by 094. At the time of entering the letter of intent, 094 paid a deposit of $300,000. The Company and 094 are still in negotiations and no agreement has been finalized.

Finance:

Debt:

On December 22, 2011, the Company issued an unsecured promissory note in the amount of $200,000 to Michael J. Garnick, a stockholder. The promissory note accrued interest at 10% per annum and was due on February 15, 2012. As a condition for issuing the promissory note, the Company was obligated to issue 90,000 shares of its common stock to Michael J. Garnick. The note was repaid in full in March 2012.

In connection with the acquisition of Pan American, the Company acquired certain advances payable and short term bridge notes in the principal amount of $1,900,000 from two unaffiliated entities. Of the $1,900,000 borrowed, $600,000 was evidenced by an unsecured promissory note, had an interest rate of 10% per annum and was repaid March 2012. The remaining $1,300,000 borrowed was evidenced by a series of loan agreements all with essentially the same terms; interest at the rate of 6% per annum, unsecured, and due on the earlier of December 31, 2012 or upon demand. As of December 31, 2012, $350,000 plus accrued interest was due on this loan. The Company is currently in negotiations with the lender to extend the maturity date of the loan and expects to complete the extension in the second quarter of 2013.

In 2011, Pan American was advanced approximately $90,000 by a then related party. The advance is non-interest bearing, is unsecured and due on demand and as of December 31, 2012 the balance the Company owed is $90,704.

On February 24, 2012, the Company received gross proceeds of $2.5 million from the sale of two promissory notes to two unrelated entities. The notes mature on December 31, 2014, bear interest at the rate of 8% per annum, are unsecured and are convertible into up to 2.5 million shares of the Company’s common stock, subject to certain adjustments, at the option of the holders. In addition, should the Company’s common stock trade above $2.50 for a period of 30 or more consecutive trading days, the notes and all accrued and unpaid interest automatically convert into common stock of the Company, at the conversion rate then in effect. In connection with the $2.5 million notes noted above, the Company paid a 10% fee to and unrelated third party who helped facilitate the transaction. At December 31, 2012, the balance the Company owed was $2.5 million.

On May 25, 2012 the Company issued a note as part of the purchase price to acquire the 80% interest in the Eagle Ford Oil Co., Inc. oil and gas leaseholds in the amount of $225,000 that matured on December 31, 2012, was unsecured and bears interest at the rate 5% per annum. As of December 31, 2012 the unpaid balance of the loan was $190,000. The Company is currently in negotiations with the lender to extend the maturity date of the loan and expects to complete the extension in the second quarter of 2013.

On October 11, 2012, the Company received gross proceeds of $185,000 from the sale of a Promissory Note to DIT Equity Holdings, LLC in the face amount of $185,000. The Note is unsecured, bears interest at a rate of six percent (6%) per annum and is due on the earlier to occur of the Company raising an additional $1,500,000 in new capital or December 31, 2013.

On November 1, 2012, the Company received gross proceeds of $300,000 from the sale of a Promissory Note to RMS Advisors, Inc. in the face amount of $300,000. The Note is unsecured, bears interest at a rate of six percent (6%) per annum and is due on the earlier to occur of the Company raising an additional $1,500,000 in new capital or December 31, 2013.

On November 7, 2012, the Company received gross proceeds of $400,000 from the sale of a Promissory Note to RMS Advisors, Inc. in the face amount of $400,000. The Note is unsecured, bears interest at a rate of six percent (6%) per annum and is due on the earlier to occur of the Company raising an additional $1,500,000 in new capital or December 31, 2013.

On November 9, 2012, the Company received gross proceeds of $100,000 from the sale of a Promissory Note to RMS Advisors, Inc. in the face amount of $100,000. The Note is unsecured, bears interest at a rate of six percent (6%) per annum and is due on the earlier to occur of the Company raising an additional $1,500,000 in new capital or December 31, 2013.

On November 1, 2012, the Company received gross proceeds of $200,000 from the sale of a Promissory Note to RMS Advisors, Inc. in the face amount of $200,000. The Note is unsecured, bears interest at a rate of six percent (6%) per annum and is due on the earlier to occur of the Company raising an additional $1,500,000 in new capital or December 31, 2013.

On November 20, 2012, the Company received gross proceeds of $150,000 from the sale of a Promissory Note to RMS Advisors, Inc. in the face amount of $150,000. The Note is unsecured, bears interest at a rate of six percent (6%) per annum and is due on the earlier to occur of the Company raising an additional $1,500,000 in new capital or December 31, 2013.

On December 5, 2012, the Company received gross proceeds of $300,000 from the sale of a Promissory Note to RMS Advisors, Inc. in the face amount of $300,000. The Note is unsecured, bears interest at a rate of six percent (6%) per annum and is due on the earlier to occur of the Company raising an additional $1,500,000 in new capital or December 31, 2013.

Equity:

COMMON STOCK:

In July 2012, the Company issued 100,000 shares of its common stock as compensation for investor relations services.

On March 11, 2013, Marvin Markman converted 100,000 shares of Series A Preferred Stock into 111,000 shares of Common Stock.

We will need substantial additional capital to support our proposed future energy operations. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales or royalty income, and could fail in business as a result of these uncertainties.

Decisions regarding future participation in exploration wells or geophysical studies or other activities will be made on a case-by-case basis. We may, in any particular case, decide to participate or decline participation. If participating, we may pay our proportionate share of costs to maintain our proportionate interest through cash flow or debt or equity financing. If participation is declined, we may elect to farmout, non-consent, sell or otherwise negotiate a method of cost sharing in order to maintain some continuing interest in the prospect.

Comparison of the three months ended March 31, 2013 to the three months ended March 31, 2012

Preface.

Our operating results are not comparable to the prior period for the following reasons:

·	In the prior period we had little if any operations and prior to February 14, 2012, the Company had only nominal assets and operated with a completely different ownership and management.
·	In February 2012 we consummated an acquisition of Pan American where we acquired leasehold interests and are now focused on the oil and gas industry.
·	Amounts labeled as “predecessor business” represent operations that were not owned by us during the time period presented in our financial statements - some of which was under a different cost basis or fair value than how we reflect them after we acquired Pan American.

The Company acquired Pan American Oil Company, LLC on February 14, 2012. Prior to that acquisition the Company was engaged in an entirely different business with limited operations and assets. Under Securities and Exchange Commission (the “SEC”) rules when a registrant succeeds to substantially all of the business (or a separately identifiable line of business) of another entity (or group of entities) and the registrant's own operations before the succession appear insignificant relative to the operations assumed or acquired - the registrant is required to present financial information for the acquired entity (the “predecessor”) for all comparable periods being presented before the succession.

In June 2012, the Company consummated two transactions to acquire additional leasehold rights as described elsewhere in this document.

The consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as filed with the SEC.

Comparison of the three months ended March 31, 2013 to March 31, 2012

In the three months ended March 31, 2013 we had revenues of approximately $8,712 which are revenue from the sales of oil and gas attributable to our acquisition of leasehold rights from Eagle Ford Oil Co, Inc. We had no revenues prior to the acquisition of leasehold rights from Eagle Ford Oil Co, Inc in the second quarter of 2012. Our leasehold operating costs, increased to $617,976 in the three months ended March 31, 2013 from nil in the three months ended March 31, 2012. The increase is attributable to the acquisitions we made in the second quarter of 2012.

In the three months ended March 31, 2013, our general and administrative expenses decreased by approximately $37,000 to $137,577 from approximately $174,900 in the three months ended March 31, 2012. The decrease was due to one-time charges incurred in the prior year due to the acquisition of Pan American Oil Company, LLC. We expect to increase our general and administrative expenses in future periods as we hire additional staff and develop our business.

In the three months ended March 31, 2013, our professional fee expenses decreased to $98,968 from $232,382 in the three months ended March 31, 2012. The decrease was due to one-time charges incurred in the prior year due to the acquisition of Pan American Oil Company, LLC.

Depletion, Depreciation and Amortization expense increased in the three month ended March 31, 2013 to $25,154 from $3,935 for the three months ended March 31, 2012. The increase resulted from our acquisition of Pan American Oil Company, LLC. In the future, should we be successful in our drilling program our depreciation, depletion and amortization will increase as we deplete our costs in the oil and gas property cost pool over our estimated total reserves.

Interest expense increased in the three months ended March 31, 2013 to $194,435 from $84,376 in the three months ended March 31, 2012. The increase was the result of our increased borrowings plus the assumption of certain bridge notes from our acquisition of Pan American Oil Company, LLC with the related amortization of deferred loan fees and the accretion from the asset retirement obligation we incurred in connection with the purchase of the leasehold rights from Eagle Ford Oil Co, Inc.

Liquidity and Capital Resources

Liquidity

As of March 31, 2013 we had approximately $4,000 in cash, a working capital deficit of approximately $4,739,697 and an accumulated deficit of approximately $4,772,402. Total Stockholders’ equity at March 31, 2013 was approximately $1,454,039. Total debt at March 31, 2013, excluding the discount on the Option B liability, was approximately $7,409,000, a change of $460,000 from approximately $6,949,000 at December 31, 2012. Our operating activities used approximately $469,429 in cash for the three months ended March 31, 2013. Our investing activities used $5,144. We believe that we do not have sufficient cash on hand to fund all of our projected development activities for the next twelve months. If we are unable to raise sufficient cash, we may need to curtail certain development activities.

Critical Accounting Policy - Uses of estimates in the preparation of financial statements

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimated. To the extent management’s estimates prove to be incorrect, financial results for future periods may be adversely affected. Significant estimates and assumptions contained in the accompanying consolidated financial statements include management’s estimate of the allowance for uncollectible accounts receivable, amortization of intangible assets, and the fair values of options and warrant included in the determination of debt discounts and share based compensation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of March 31, 2013. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are not designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes.

Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

(b) Changes in Internal Controls

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

The Company’s management, including the Company’s CEO and CFO, does not expect that the Company’s internal control over financial reporting will prevent errors and fraud. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

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

The proceeds from each of the above-indicated Promissory Notes were used for general working capital purposes.

On March 11, 2013, Marvin Markman converted 100,000 shares of Series A Preferred Stock into 111,000 shares of Common Stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Index to Exhibits

Exhibit No.		Description

31.1		Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 20, 2013.



	RIO BRAVO OIL, INC.

	By:	/s/ Thomas Bowman
		Thomas Bowman
		Chief Executive Officer and
		Director (Principal Executive Officer)

	By:	/s/ Carlos M. Buchanan, II
		Carlos E. Buchanan II
		Chief Financial Officer and
		Director (Principal Financial Officer)

Rio Bravo Oil, Inc. 10-Q