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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2015~~2021

o £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ______________.

Commission File Number ~~001~~000-~~35241~~27563

SARATOGA RESOURCES, INC.

(Exact name of registrant as specified in its charter)

Texas		76-0314489
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

~~9225~~1304 ~~Katy~~Alta ~~Freeway~~Vista, ~~Suite 100~~Austin, ~~Houston,~~ Texas ~~77024~~78704 (Address of principal executive offices)(Zip Code)

(~~713~~512) ~~458~~940-~~1560~~1948 (Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

~~Indicate~~Securities byregistered ~~check~~pursuant ~~mark whether the registrant (1) has filed all reports required~~ to beSection ~~filed by section 13 or 15~~12(db) 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 ¨None

~~Indicate~~Title ~~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~~each ~~S-T~~class ~~(§232.405~~Trading ~~of this chapter~~Symbol(s) ~~during~~Name ~~the~~of ~~preceding~~each 12exchange ~~months~~on ~~(or~~which ~~for~~registered ~~such~~None ~~shorter~~None ~~period that the registrant was required to submit and post such files). Yes x No ¨~~None

Indicate by check mark whether the registrant is(1) ahas filed ~~large~~all ~~accelerated~~reports ~~filer,~~required anto ~~accelerated~~be ~~filer,~~filed aby ~~non-accelerated~~section ~~filer~~13 or a15(d) ~~smaller~~of ~~reporting~~the ~~company.~~Securities ~~See~~Exchange ~~definition~~Act of ~~“large~~1934 ~~accelerated~~during ~~filer,”~~the ~~“accelerated~~preceding ~~filer”~~12 ~~and~~months ~~“smaller~~(or for ~~reporting~~such ~~company”~~shorter inperiod ~~Rule~~that ~~12b-~~the registrant was required to file such reports), and (2) ofhas been subject to such filing requirements for the ~~Exchange~~past ~~Act~~90 days. ~~(Check one):~~Yes ¨ No x

~~Large~~Indicate ~~accelerated~~by ~~filer~~check ¨mark ~~Accelerated~~whether ~~filer~~the ¨registrant has ~~Non~~submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-~~accelerated~~T ~~filer~~(§232.405 of ¨this ~~Smaller~~chapter) ~~reporting~~during ~~company~~the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large ~~shell~~accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company ~~(as~~or ~~defined~~an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act). ~~Yes~~ ~~¨ No~~(Check xone):

~~Indicate~~Large byaccelerated ~~check~~filer ~~mark~~¨ ~~whether~~Accelerated ~~the~~filer ~~registrant~~¨ ~~has~~Non-accelerated ~~filed~~Filer ~~all~~x ~~documents~~Smaller ~~and~~reporting ~~reports~~company ~~required~~x toEmerging begrowth ~~filed~~company ~~by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No~~ ¨

AsIf ofan ~~November~~emerging ~~13,~~growth ~~2015~~company, weindicate ~~had~~by ~~30,986,601~~check ~~shares~~mark if ofthe ~~$0.001~~registrant ~~par~~has ~~value~~elected ~~Common~~not ~~Stock~~to ~~outstanding~~use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 x No ¨

As of October 28, 2021, we had 36,687,022 shares of $0.001 par value common stock outstanding.

SARATOGA RESOURCES, INC.

FORM 10-Q

INDEX

		Page No.
PART I FINANCIAL INFORMATION		3
PART I.	FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)		3
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	3
	Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020	3
	Consolidated Statements of Operations and Other Comprehensive Loss for the three and nine months ended September 30, 2015 and 2014	4
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014	5
	Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	5
	Notes to Consolidated Financial Statements	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)	6
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
	Notes to Consolidated Financial Statements (Unaudited)	7
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
ITEM 4. Controls and Procedures		27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
PART II OTHER INFORMATION		28
Item 4.	Controls and Procedures	11
ITEM 6. Exhibits		28
PART II	OTHER INFORMATION
Item 6.	Exhibits	12

PART I - FINANCIAL INFORMATION

ITEM 1 Financial Statements

~~Financial~~SARATOGA ~~Statements~~RESOURCES, INC.

SARATOGA RESOURCES, INC. (DEBTOR AND DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
	September 30,		December 31,
	2015		2014
ASSETS
Current assets:
Cash and cash equivalents	$	6,002,537	$	10,911,070
Accounts receivable		2,444,893		3,778,808
Prepaid expenses and other		830,038		1,006,758
Other current asset		150,000		150,000
Total current assets		9,427,468		15,846,636
Property and equipment:
Oil and gas properties - proved (successful efforts method)		302,312,119		301,399,079
Other		1,031,779		1,031,779
		303,343,898		302,430,858
Less: Accumulated depreciation, depletion and amortization		(252,661,165)		(226,716,401)
Total property and equipment, net		50,682,733		75,714,457
Other assets, net		17,430,094		20,350,655
Total assets	$	77,540,295	$	111,911,748
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	2,856,124	$	6,722,116
Revenue and severance tax payable		2,057,438		2,711,229
Accrued liabilities		29,677,961		13,006,617
Derivative liabilities – short term		-		117
Short-term notes payable		347,067		329,964
First lien notes, net of unamortized discount of $151,169 at December 31, 2014		54,600,000		54,448,831
Second lien notes, net of unamortized discount of $847,947 at December 31, 2014		125,200,000		124,352,053
Total current liabilities		214,738,590		201,570,927
Long-term liabilities:
Asset retirement obligation		18,102,798		16,397,804
Total long-term liabilities		18,102,798		16,397,804
Liabilities subject to compromise		2,815,298		-
Commitment and contingencies (see notes)
Stockholders' equity:
Common stock, $0.001 par value; 100,000,000 shares authorized 30,986,601 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		30,987		30,987
Additional paid-in capital		78,836,247		78,754,854
Retained deficit		(236,983,625)		(184,842,824)
Total stockholders' deficit		(158,116,391)		(106,056,983)
Total liabilities and stockholders' deficit	$	77,540,295	$	111,911,748

CONSOLIDATED BALANCE SHEETS

~~The accompanying notes are an integral part of these unaudited consolidated financial statements~~(Unaudited)

	September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash	$	32,299		$	25
Total current assets		32,299			25
Total assets	$	32,299		$	25

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	52,175		$	29,974
Accrued liabilities		1,831,534			1,667,558
Total current liabilities		1,883,709			1,697,532
Total liabilities		1,883,709			1,697,532

Commitments and contingencies

Stockholders’ deficit:
Common stock, par value $0.001; 100,000,000 shares authorized; 36,687,022 and 30,986,601 shares issued and outstanding, respectively		36,687			30,987
Additional paid-in capital		79,096,726			78,872,398
Accumulated deficit		(80,984,823	)		(80,600,892	)
Total stockholders’ deficit		(1,851,410	)		(1,697,507	)
Total liabilities and stockholders’ deficit	$	32,299		$	25

The accompanying notes are an integral part of these unaudited consolidated financial statements.

SARATOGA RESOURCES, INC. (DEBTOR AND DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(Unaudited)
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Revenues:
Oil and gas revenues	$	5,472,269	$	15,948,797	$	19,146,889	$	41,672,505
Oil and gas hedging		-		644,190		117		1,503,857
Other revenues		18,261		21,682		488,519		170,283
Total revenues		5,490,530		16,614,669		19,635,525		43,346,645
Operating Expense:
Lease operating expense		3,674,935		6,642,635		11,628,607		18,439,907
Workover expense		4,976		1,750,760		137,696		4,050,528
Exploration expense		271,942		225,949		310,263		647,599
Depreciation, depletion and amortization		2,464,832		4,839,858		7,867,033		12,089,913
Impairment expense		18,077,731		-		18,077,731		-
Accretion expense		595,562		448,466		1,786,685		1,345,399
General and administrative		1,460,285		2,401,158		5,358,119		7,456,116
Severance taxes		598,756		1,058,787		1,930,660		2,869,129
Arbitration loss		-		3,400,000		-		3,400,000
Total operating expenses		27,149,019		20,767,613		47,096,794		50,298,591
Operating income (loss)		(21,658,489)		(4,152,944)		(27,461,269)		(6,951,946)
Other income (expense):
Interest income		4		(2,174)		63		31,174
Interest expense		(5,930,580)		(6,084,572)		(22,203,686)		(18,138,276)
Total other expense		(5,930,576)		(6,086,746)		(22,203,623)		(18,107,102)
Net loss before reorganization expense and income taxes		(27,589,065)		(10,239,690)		(49,664,892)		(25,059,048)
Reorganization expense		2,390,409		-		2,398,209		-
Net loss before income taxes		(29,979,474)		(10,239,690)		(52,063,101)		(25,059,048)
Income tax expense (benefit)		26,700		33,795		77,700		156,060
Net loss	$	(30,006,174)	$	(10,273,485)	$	(52,140,801)	$	(25,215,108)
Other comprehensive loss
Unrealized gain (loss) on derivative instruments		-		12,451		-		-
Total comprehensive loss	$	(30,006,174)	$	(10,261,034)	$	(52,140,801)	$	(25,215,108)
Net loss per share:
Basic	$	(0.97)	$	(0.33)	$	(1.68)	$	(0.81)
Diluted	$	(0.97)	$	(0.33)	$	(1.68)	$	(0.81)
Weighted average number of common shares outstanding:
Basic		30,986,601		30,986,601		30,986,601		30,961,106
Diluted		30,986,601		30,986,601		30,986,601		30,961,106

SARATOGA RESOURCES, INC.

~~The~~CONSOLIDATED ~~accompanying~~STATEMENTS ~~notes~~OF ~~are an integral part of these unaudited consolidated financial statements~~OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020

Operating Expense:
General and administrative expense	$	101,647		$	72,164		$	292,681		$	223,175
Total operating expense		101,647			72,164			292,681			223,175

Operating loss		(101,647	)		(72,164	)		(292,681	)		(223,175	)

Other Expense
Interest expense		(31,979	)		(25,729	)		(91,250	)		(72,500	)
Total other expense		(31,979	)		(25,729	)		(91,250	)		(72,500	)

Net loss		(133,626	)		(97,893	)		(383,931	)		(295,675	)

Net loss per common share
Basic	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

Weighted average number of common shares outstanding
Basic		36,687,022			30,986,601			34,492,280			30,986,601
Diluted		36,687,022			30,986,601			34,492,280			30,986,601

The accompanying notes are an integral part of these unaudited consolidated financial statements.

SARATOGA RESOURCES, INC. (DEBTOR AND DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Nine Months Ended
	September 30,
	2015		2014
Cash flows from operating activities:
Net loss	$	(52,140,801)	$	(25,215,108)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization		7,867,033		12,089,913
Impairment expense		18,077,731		-
Accretion expense		1,786,685		1,345,399
Amortization of debt issuance costs		4,077,060		1,845,865
Amortization of debt discount		999,116		444,924
Stock-based compensation		81,393		420,154
Unrealized gain on hedges		(117)		(1,593,301)
Changes in operating assets and liabilities:
Accounts receivable		1,333,915		(358,512)
Prepaids and other		1,143,813		1,066,692
Accounts payable		(129,870)		(163,841)
Revenue and severance tax payable		(653,791)		223,107
Payments to settle asset retirement obligations		(81,691)		-
Accrued liabilities		16,671,344		(558,992)
Net cash used in operating activities		(968,180)		(10,453,700)
Cash flows from investing activities:
Additions to oil and gas property		(1,833,864)		(13,313,612)
Additions to other property and equipment		-		(139,085)
Other assets		(1,156,499)		(932,111)
Net cash used in investing activities		(2,990,363)		(14,384,808)
Cash flows from financing activities:
Proceeds from issuance of common stock		-		61,200
Repayment of short-term notes payable		(949,990)		(1,120,882)
Debt issuance costs of long term debt		-		(266,929)
Net cash used in financing activities		(949,990)		(1,326,611)
Net decrease in cash and cash equivalents		(4,908,533)		(26,165,119)
Cash and cash equivalents - beginning of period		10,911,070		32,547,380
Cash and cash equivalents - end of period	$	6,002,537	$	6,382,261
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	-	$	156,060
Cash paid for interest		1,398,214		19,749,428
Non-cash investing and financing activities:
Accounts payable for oil and gas additions		-		(1,406,089)
Accrued liabilities for oil and gas additions		-		50,685
Prepaid insurance financed with debt		967,093		1,607,279

SARATOGA RESOURCES, INC.

~~The~~CONSOLIDATED ~~accompanying~~STATEMENTS ~~notes~~OF ~~are~~CHANGES anIN ~~integral part of these unaudited consolidated financial statements~~STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Unaudited)

Common Stock

Additional Paid-in Capital

Net (Loss)

					Additional					Total
	Common Stock				Paid-in		Net			Stockholders’
	Shares		Amount		Capital		(Loss)			Deficit
Balance, December 31, 2020		30,986,601	$	30,987	$	78,872,398	$	(80,600,892	)	$	(1,697,507	)

Stock-based employee compensation		—		—		560		—			560

Common stock issued for cash		3,000,000		3,000		117,000		—			120,000

Net loss		—		—		—		(120,480	)		(120,480	)

Balance, March 31, 2021		33,986,601	$	33,987	$	78,989,958	$	(80,721,372	)	$	(1,697,427	)

Stock-based employee compensation		—		—		1,337		—			1,337

Common stock issued for accrued liabilities		2,700,421		2,700		105,317		—			108,017

Net loss		—		—		—		(129,825	)		(129,825	)

Balance, June 30, 2021		36,687,022	$	36,687	$	79,096,612	$	(80,851,197	)	$	(1,717,898	)

Stock-based compensation		—		—		115		—			115

Net loss		—		—		—		(133,626	)		(133,626	)

Balance, September 30, 2021		36,687,022	$	36,687	$	79,096,727	$	(80,984,823	)	$	(1,851,410	)

					Additional					Total
	Common Stock				Paid-in		Net			Stockholders’
	Shares		Amount		Capital		(Loss)			Deficit
Balance, December 31, 2019		30,986,601	$	30,987	$	78,868,683	$	(80,190,635	)	$	(1,290,965	)

Stock-based employee compensation		—		—		1,126		—			1,126

Net loss		—		—		—		(101,258	)		(101,258	)

Balance, March 31, 2020		30,986,601	$	30,987	$	78,869,809	$	(80,291,893	)	$	(1,391,097	)

Stock-based employee compensation		—		—		672		—			672

Net loss		—		—		—		(96,524	)		(96,524	)

Balance, June 30, 2020		30,986,601	$	30,987	$	78,870,481	$	(80,388,417	)	$	(1,486,949	)

Stock-based employee compensation		—		—		901		—			901

Net loss		—		—		—		(97,893	)		(97,893	)

Balance, September 30, 2020		30,986,601	$	30,987	$	78,871,382	$	80,486,310		$	1,583,941

The accompanying notes are an integral part of these unaudited consolidated financial statements.

SARATOGA RESOURCES, INC.

~~(DEBTOR~~CONSOLIDATED ~~AND~~STATEMENTS ~~DEBTOR-IN-POSSESSION)~~OF CASH FLOWS

~~Notes~~FOR toTHE ~~Consolidated~~NINE ~~Financial~~MONTHS ~~Statements~~ENDED SEPTEMBER 30, 2021 AND 2020

September 30, 2015

(Unaudited)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION


	For the Nine Months Ended September 30,
	2021			2020

Cash flows from operating activities:
Net loss	$	(383,931	)	$	(295,675	)
Adjustments to reconcile net loss to net cash used in operations:
Stock-based compensation		2,012			2,699
Changes in operating assets and liabilities:
Accounts payable		22,201			(9,862	)
Accrued liabilities		270,782			287,901
Net cash used in operating activities		(88,936	)		(14,937	)

Cash flows from financing activities
Advances from related party		1,210			14,053
Common stock issued for cash		120,000			—
Net cash provided by financing activities		121,210			14,053

Net increase (decrease) in cash and cash equivalents		32,274			(884	)
Cash and cash equivalents, beginning of period		25			901
Cash and cash equivalents, end of period	$	32,299		$	17

Supplemental disclosure of cash flow information:
Interest paid	$	—		$	—
Taxes paid	$	—		$	—

Supplemental non-cash operating and financing activities
Common stock issued for accrued liabilities	$	108,017		$	—

~~Organization~~The accompanying notes are an integral part of these unaudited consolidated financial statements.

Saratoga Resources, Inc. (“Saratoga” or the “Company”) is an independent oil and natural gas company engaged in the acquisition, development, exploitation and production of natural gas and crude oil properties.

Chapter 11 Bankruptcy and Going Concern

On June 18, 2015, the Company and its subsidiaries, The Harvest Group, LLC, LOBO Operating, Inc., LOBO Resources, Inc. and Harvest Oil & Gas, LLC (together the “Debtors”) each filed a voluntary petition under Chapter 11 in the United States Bankruptcy Court for the Western District of Louisiana (the “Bankruptcy Court”) to restructure our obligations and capital structure. The Chapter 11 cases are being jointly administered for procedural purposes by the Bankruptcy Court under the caption Harvest Oil & Gas, LLC, ET AL, Case No. 15-50748 (Jointly Administered).

The Debtors are currently operating our business as debtors in possession in accordance with the applicable provisions of title 11 of the United States Code (the “Bankruptcy Code”). Since the Chapter 11 filings, the Bankruptcy Court has entered all orders sufficient to enable the Debtors to conduct normal business activities, including orders to, among other things and subject to applicable caps for pre-petition items, pay employee wages and benefits, pay certain critical vendors, and forward funds belonging to third parties, including royalty holders, as well as the approval of the Debtors’ use of their secured lenders’ cash collateral and collateral, and the provision of adequate protection related thereto. While the Debtors are subject to Chapter 11, all transactions outside the ordinary course of their business will require the prior approval of the Bankruptcy Court.

Appointment of Creditors Committee. On July 24, 2015, the United States Trustee appointed the Creditors Committee. The Creditors Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to the Debtors. There can be no assurance that the Creditors Committee will support the Debtors’ positions on matters presented to the Bankruptcy Court, including any plan of reorganization. Disagreements between the Debtors and the Creditors Committee could protract the Chapter 11 proceedings, negatively impact the Debtors’ ability to operate, and delay the Debtors’ emergence from the Chapter 11 proceedings.

Appointment of Equity Committee. On August 26, 2015, the United States Trustee appointed the Equity Committee. The Equity Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to the Debtors. There can be no assurance that the Equity Committee will support the Debtors’ positions on matters presented to the Bankruptcy Court, including any plan of reorganization. Disagreements between the Debtors and the Equity Committee could protract the Chapter 11 proceedings, negatively impact the Debtors’ ability to operate, and delay the Debtors’ emergence from the Chapter 11 proceedings.

Magnitude of Potential Claims. The Debtors have filed with the Bankruptcy Court Schedules and Statements setting forth, among other things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. The Schedules and Statements may be subject to further amendment or modification. Certain holders of pre-petition claims are required to file proofs of claim. Differences between amounts scheduled by the Debtors and claims by creditors will be investigated and resolved in connection with the claims resolution process. The ultimate number and amount of allowed claims is not presently known, nor can the ultimate recovery with respect to allowed claims be presently ascertained.

Costs of Reorganization. Debtors have incurred and will continue to incur significant costs associated with the reorganization. The amount of these costs, which are being expensed as incurred, are expected to significantly affect our results of operations.

Process for Plan of Reorganization. In order to successfully exit bankruptcy, the Debtors will need to propose, and obtain confirmation by the Bankruptcy Court of, a plan (or plans) of reorganization that satisfies the requirements of the Bankruptcy Code. A plan of reorganization would, among other things, resolve the Debtors’ pre-petition obligations, set forth the revised capital and debt structure of the newly reorganized entity and provide for corporate governance subsequent to exit from bankruptcy.

~~The~~SARATOGA timing of filing a plan of reorganization by the Debtors will depend on the timing and outcome of numerous other ongoing matters in the Chapter 11 proceedings. Although the Debtors may file a plan of reorganization that provides for our emergence from bankruptcy as a going concernRESOURCES, there can be no assurance at this time that the Debtors will be able to successfully develop, confirm and consummate one or more plans of reorganization or other alternative restructuring transactions, including a sale of all or substantially all of the Debtors’ assets, that satisfies the conditions of the Bankruptcy Code and is confirmed by the Bankruptcy Court, or that any such plan will be implemented successfullyINC.

~~For~~Notes ~~the duration of our Chapter 11 proceedings, our operations and our ability~~ to ~~develop~~Consolidated ~~and~~Financial execute our business plan are subject to the risks and uncertainties associated with the Chapter 11 process, including uncertainty associated with our current operations under a short-term order allowing continued use of cash collateral and a short-term order extending our exclusive right to file a plan of reorganization. As a result of these risks and uncertainties, the number of our outstanding shares and our stockholders, assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of our operations, properties and capital plans included in this Quarterly Report may not accurately reflect our operations, properties and capital plans following the Chapter 11 process.Statements

(Unaudited)

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Principles of Consolidation

Saratoga Resources, Inc. is a “blank check” company seeking the acquisition and/or development of profitable, or potentially profitable, business opportunities with a focus on energy resources to meet 21^st century energy demands. The company historically operated as an oil and gas operating company but no longer conducts any oil and gas operations or holds any material oil and gas assets. The company’s current focus is seeking a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The company has not selected any specific business combination target and has not initiated any substantive discussions with any business combination target.

Our financial statements include the accounts of Saratoga Resources, Inc., a Texas corporation, and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Unless otherwise specified or the context otherwise requires, all references in these notes to “Saratoga”, “Company” “we,” “us” or “our” are to Saratoga Resources, Inc., and its subsidiaries.

Financial Statements Presented

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information ~~and with the instructions to Form 10-Q~~. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for a complete financial presentation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.

~~The~~Loss ~~Company~~Per ~~utilizes the successful efforts method of accounting for oil and gas producing activities.~~Share

~~These~~Basic ~~financial~~loss ~~statements~~per ~~should~~share beis ~~read~~computed inon ~~conjunction~~the ~~with~~basis of the ~~financial~~weighted-average ~~statements~~number of ~~and~~common ~~footnotes~~shares ~~which~~outstanding ~~are~~during ~~included~~the asperiods. ~~part~~Diluted loss per share is computed based upon the weighted-average number of common shares plus the ~~Company’s~~assumed ~~Form~~issuance ~~10-K~~of common shares for ~~the~~all ~~year~~potentially ~~ended~~dilutive ~~December~~securities ~~31,~~(see ~~2014~~Note 5 – “Common Stock”).

AsNOTE a result of sustained losses and our Chapter 11 proceedings, the realization of assets and satisfaction of liabilities, without substantial adjustments and/or changes in ownership, are subject to uncertainty2. ~~Given~~GOING ~~the uncertainty surrounding our Chapter 11 proceedings, there is substantial doubt about our ability to continue as a going concern.~~CONCERN

The accompanying unaudited consolidated financial statements dohave been ~~not~~prepared ~~purport~~in toconformity ~~reflect~~with oraccounting ~~provide~~principles ~~for~~accepted in the ~~consequences~~United States of ~~our~~America ~~Chapter~~which 11contemplate ~~proceedings.~~the Incontinuation ~~particular,~~ of the ~~financial~~Company ~~statements~~as doa ~~not~~going ~~purport~~concern. toSince ~~show~~exiting ~~(i)~~bankruptcy asin ~~to assets~~2016, ~~their~~the ~~realizable~~Company ~~value~~has onhad ano ~~liquidation~~material ~~basis~~operations, orhas ~~their~~incurred ~~availability~~ongoing tolosses and ~~satisfy~~has ~~liabilities;~~no ~~(ii)~~material asoperating toassets. ~~pre-petition~~The ~~liabilities,~~Company ~~the~~incurred ~~amounts~~a ~~that~~loss ~~may~~from beoperations ~~allowed~~of $383,931 for ~~claims~~the ornine ~~contingencies,~~months orended ~~the~~September ~~status~~30, 2021 and ~~priority~~has ~~thereof;~~a ~~(iii)~~working ascapital todeficit ~~stockholders’~~of ~~equity accounts~~$1,851,410 ~~the~~at ~~effect~~September of30, ~~any~~2021. ~~changes~~These ~~that~~conditions ~~may~~raise besubstantial ~~made~~doubt inas ~~our~~to ~~capitalization;~~the orCompany’s ability ~~(iv)~~to continue as toa ~~operations,~~going ~~the~~concern. ~~effect~~These offinancial statements do not include any ~~changes~~adjustments that ~~may~~might be ~~made~~necessary if the Company is unable to ~~our~~continue ~~business~~as a going concern.

InThe ~~accordance~~Company’s ~~with~~principal ~~GAAP,~~officer wehas ~~have~~advanced ~~applied~~funds ~~ASC~~from ~~852~~time to ~~“Reorganizations,”~~time inas ~~preparing~~necessary ~~our~~to ~~consolidated~~support ~~financial~~basic ~~statements. ASC~~corporate ~~852~~functions ~~requires~~but ~~that~~ the ~~financial~~Company ~~statements,~~lacks ~~for~~revenues ~~periods~~and ~~subsequent~~lacks resources to ~~the~~support ~~Chapter~~any 11material ~~filing,~~operations in ~~distinguish~~the ~~transactions~~absence ~~and~~of ~~events~~ongoing ~~that~~funding ~~are directly associated with the reorganization~~ from ~~the~~its ~~ongoing~~principal ~~operations~~officer ofor ~~the~~other ~~business~~sources. ~~Accordingly,~~To ~~certain~~address ~~revenues,~~these ~~expenses~~matters, ~~realized gains and losses and provisions for losses that are realized or incurred in~~ the ~~bankruptcy~~Company, ~~proceedings are recorded~~ in ~~reorganization~~March ~~items~~2021, ~~net~~secured $120,000 ~~in the accompanying condensed consolidated statements~~ of ~~income~~funding ~~(loss)~~from ~~and comprehensive income (loss). In addition, pre-petition obligations that may be impacted by~~ the ~~bankruptcy~~sale ~~reorganization~~of ~~process~~common ~~have~~stock ~~been~~to ~~classified~~support onefforts ~~our condensed consolidated balance sheets at September 30, 2015 in Liabilities Subject~~ to ~~Compromise.~~return ~~These liabilities are reported at~~ the ~~amounts~~Company ~~expected~~ to bereporting ~~allowed~~status byas ~~the~~a ~~Bankruptcy~~public ~~Court, even if they may be settled for lesser amounts~~company.

~~While~~Chief ~~operating~~Executive as debtors in possession under Chapter 11 of the Bankruptcy Code, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities in amounts other than those reflected in our consolidated financial statements, subject to the approval of the Bankruptcy Court or otherwise as permitted in the ordinary course of business. Further, a plan of reorganization could materially change the amounts and classifications in our historical consolidated financial statements.Officer

Approximately $187,500 of the loss incurred during the nine-month period ended September 30, 2021, and approximately $1,600,500 of the accrued liabilities, and working capital deficit, reflected at September 30, 2021, related to deferred salary, and interest accrued on deferred salary, owed to the Company’s Chief Executive Officer. Until such time as the Company’s board of directors determines that the Company has adequate financial resources to pay deferred accrued salary owing the Chief Executive Officer, none of such salary and accrued interest is payable.

The funds on hand at September 30, 2021 are not adequate to support any material operations and the Company continues to require additional funding to support any material operations going forward. There can be no assurance that the Company will be successful in its efforts.

~~Reclassifications~~NOTE of3. ~~Prior~~RELATED ~~Period~~PARTY ~~Statements~~TRANSACTIONS

~~Certain~~On ~~reclassifications~~January 25, 2017, the Company entered into an employment agreement with its Chairman and Chief Executive Officer. The agreement provides for a base salary of ~~prior~~$250,000 ~~period~~annually, ~~consolidated~~has ~~financial~~a ~~statement~~three-year ~~balances~~term, ~~have~~and ~~been~~automatically renews ~~made~~for additional one-year terms thereafter unless either party provides notice of non-renewal at least thirty days in advance of the end of the then current term. The employment agreement includes a deferral and accrual provision under which the base salary started to ~~conform~~accrue from May 26, 2016, the date of rejection of the officer’s prior employment agreement, and all base salary accruing from that date accrue and payment is deferred until such time as the Company’s board determines that the Company has adequate financial resources to pay such deferred amounts and current ~~reporting~~base ~~practices~~salary, in part or in whole. Salary deferred under such provision bears simple interest at ten percent per annum. At September 30, 2021, $1,320,833 of deferred salary under the agreement, and $279,667 in interest payable on the deferred salary was included in accrued liabilities in the accompanying consolidated financial statements. During the three and nine months ended September 30, 2021, the Company expensed $31,979 and $91,250, respectively, in interest expense on deferred salary under the agreement.

~~Concentration~~The Chief Executive Officer, Thomas Cooke, provides office space free of charge ~~Credit~~and ~~Risk~~has advanced to us $1,210 as of September 30, 2021 to cover certain routine costs of maintaining our corporate existence, records and other routine items. Advances by Mr. Cooke are repayable on demand and do not bear interest.

~~Financial~~The ~~instruments~~Company ~~that~~and ~~potentially~~its ~~subject~~two ~~the~~previous ~~Company~~independent tomembers aof ~~concentration~~the Board of ~~credit~~Directors agreed ~~risk~~to ~~include~~defer ~~cash,~~the ~~cash~~board ~~equivalents~~members’ ~~and~~compensation ~~any~~until ~~marketable~~such ~~securities.~~time ~~The~~as the Company’s ~~had~~board ~~cash~~determines ~~deposits~~that ofthe ~~approximately~~Company ~~$5.8~~has ~~million~~adequate financial inresources ~~excess~~to ofpay ~~FDIC~~such ~~insured~~deferred ~~limits~~amounts, atin ~~the~~part ~~period~~or ~~end~~in whole. The independent directors served as directors of the Company ~~has~~until their ~~not~~passing ~~experienced~~in ~~any~~2020 ~~losses~~and on2021, ~~its~~respectively. ~~deposits~~At September 30, 2021, $190,508 of ~~cash~~deferred ~~and~~compensation ~~cash~~was ~~equivalents~~included in accrued liabilities in the accompanying consolidated financial statements.

NOTE 24. –COMMITMENTS ~~OIL~~ AND ~~GAS PROPERTIES~~CONTINGENCIES

~~Proved~~At ~~oil~~September ~~and~~30, ~~natural~~2021 ~~gas~~the ~~properties~~Company’s ~~are~~management ~~reviewed~~was ~~for~~not ~~impairment~~aware, ~~when events~~ and as ~~circumstances indicate a possible decline in the recoverability~~ of the ~~carrying~~date ~~value~~ of ~~such~~this ~~properties.~~report ~~The~~is ~~factors used to determine fair value include, but are~~ not ~~limited~~aware ~~to, estimates~~ of ~~proved~~any ~~reserves,~~commitments ~~future~~and ~~commodity~~/ ~~prices,~~or ~~the~~contingencies ~~timing~~that ofcould ~~future~~have ~~production and capital expenditures and~~ a ~~discount~~material ~~rate~~adverse ~~commensurate~~effect ~~with~~on ~~the~~its results ~~risk reflective~~ of ~~the~~operations, ~~lives~~cash ~~remaining~~flows ~~for~~or ~~the~~financial ~~respective oil and gas properties~~condition.

WeNOTE ~~recorded an impairment expense for the quarter ended September 30, 2015 of $18,077,731 relating primarily to our Grand Bay field~~5. ~~The~~ ~~impairment~~COMMON ~~expense was a result of the continuing decline in commodity prices which resulted in lower than expected future net cash flows at the producing field level.~~STOCK

~~NOTE~~Loss 3per –Common ~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES~~Share

~~Objective~~For the nine months ended September 30, 2021 and ~~Strategies~~2020, ~~for~~the ~~Using~~following ~~Commodity~~options ~~Derivative~~to ~~Instruments~~purchase shares of common stock were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive:

~~The~~Common ~~Company~~Stock ~~periodically~~- ~~enters~~Schedule into commodity derivative instruments, primarily fixed price swaps, to manage its exposure to oil and gas price volatility. The oil and gas reference prices upon which the price hedging instruments are based reflect various market indices that have a high degree of ~~historical~~Anti-dilutive Securities ~~correlation~~Excluded ~~with actual prices received by the Company. The fixed price swap contracts entitle us (floating price payor) to receive settlement~~ from ~~the~~Computation counterparty (fixed price payor) for each calculation period in amounts, if any, by which the settlement price for the scheduled trading days applicable for each calculation period is less than the fixed strike price. We would pay the counterparty if the settlement price for the scheduled trading days applicable for each calculation period is more than the fixed strike price. The amount payable by us, if the floating price is above the fixed price, is the product of ~~the~~Net ~~notional~~Loss ~~quantity~~Per per calculation period and the excess of the floating price over the fixed price with respect to each calculation period. The amount payable by the counterparty, if the floating price is below the fixed price, is the product of the notional quantity per calculation period and the excess of the fixed price over the floating price with respect to each calculation period. We receive proceeds for the sale of crude oil call options which carry a strike price. The call option, when combined with the Company’s long production position, represents a “covered call” and creates a ceiling, at the strike price, on the price to be received during the covered period for the related production.Share

While these instruments mitigate the cash flow risk of future reductions in commodity prices, they may also curtail benefits from future increases in commodity prices.

Stock Options	Nine Months Ended
	September 30,
	2021		2020
Stock options		635,000		735,000
Totals		635,000		735,000

~~See~~A ~~Note~~reconciliation 4of –the ~~“Fair~~components ~~Value Measurements” for a discussion~~ of ~~the~~basic ~~methods~~loss ~~and~~per ~~assumptions~~common ~~used~~share tois ~~estimate~~presented in the ~~fair~~tables ~~values~~below: ~~of our commodity derivative instruments.~~

~~The~~Common ~~Company~~Stock ~~utilizes~~- ~~hedge~~Schedule of ~~accounting~~Earnings ~~for~~Per ~~our~~Share ~~commodity derivative instruments, which are designated as cash flow hedges.~~Basic

Counterparty Credit Risk


	Nine Months Ended
	September 30,
	2021			2020
Loss attributable to common stock	$	(383,931	)	$	(295,675	)

Weighted average number of shares outstanding, basic		34,492,280			30,986,601

Loss per share, basic		(0.01	)		(0.01	)

Number of antidilutive stock options and warrants excluded from calculation above		635,000			735,000

Commodity derivative instruments expose us to counterparty credit risk. Our commodity derivative instruments were with one counterparty at December 31, 2014. We monitor and manage our level of financial exposure with respect to the counterparties we use. Our commodity derivative contracts are executed under master agreements which allow us, in the event of default, to elect early termination of all contracts with the defaulting counterparty. If we choose to elect early termination, all asset and liability positions with the defaulting counterparty would be net settled at the time of election.

We monitor the creditworthiness of our commodity derivatives counterparties. However, we are not able to predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, we may be limited in our ability to mitigate an increase in counterparty credit risk.

AsCommon ofStock ~~September 30, 2015, the Company had no hedge contracts outstanding.~~Activity

~~The~~In ~~following~~March ~~table~~2021, ~~presents~~ the ~~fair~~Company ~~value~~entered ofinto Securities Purchase Agreements with two unaffiliated accredited investors pursuant to which the Company’s ~~commodity~~sold, ~~derivative~~the ~~instruments~~investors atpurchased, ~~September~~an 30aggregate of 3,000,000 ~~2015~~shares of ~~and~~common ~~December~~stock 31at $0.04 per share, ~~2014:~~or an aggregate of $120,000.

	September 30,		December 31,
Description	2015		2014
Current liabilities:
Commodity derivatives	$	-	$	117
	$	-	$	117

In June 2021, the Company entered into Debt Conversion Agreements with its Chief Executive Officer and with the Company’s legal counsel. Pursuant to the Debt Conversion Agreement with the Company’s Chief Executive Officer, 2,358,421 shares of restricted common stock were issued in full settlement of $69,337 of advances to the Company and $25,000 of accrued interest owing with respect to deferred and accrued salary, or an aggregate of $94,337, representing a conversion price of $0.04 per share. Pursuant to the Debt Conversion Agreement with the Company’s legal counsel, 342,000 shares of restricted common stock were issued in full settlement of $13,680 of accrued legal fees.

~~The~~NOTE ~~following~~6 ~~tables~~– ~~present~~STOCK-BASED ~~the~~COMPENSATION ~~effect of commodity derivative instruments on our consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2015 and 2014:~~EXPENSE

	For the Three months Ended September 30,				For the Nine months Ended September 30,
Description	2015		2014		2015		2014
Unrealized mark-to-market gain (loss)	$	-	$	533,782	$	-	$	1,593,301
Realized gain (loss) on settlements		-		110,408		117		(89,444)
Total gain (loss) on commodity derivative instruments	$	-	$	644,190	$	117	$	1,503,857

	For the Three months Ended September 30,				For the Nine months Ended September 30,
Description	2015		2014		2015		2014
Unrealized mark-to-market gain (loss) in other comprehensive income	$	-	$	12,451	$	-	$	-
Total other comprehensive income (loss)	$	-	$	12,451	$	-	$	-

NOTE 4 – FAIR VALUE MEASUREMENTS

The Company has various financial instruments that are measured at fair value in the financial statements, including commodity derivatives. The Company’s financial assets and liabilities are measured using input from three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liability and inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market corroborated inputs).

Level 3 – Unobservable inputs that reflect the Company’s judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, using internal and external data.

The Company had no assets or liabilities recognized in the consolidated balance sheet and measured at fair value on a recurring basis as of September 30, 2015.

The following table presents the Company’s assets and liabilities recognized in the consolidated balance sheet and measured at fair value on a recurring basis as of December 31, 2014:

	Level 1		Level 2		Level 3		Total
December 31, 2014
Liabilities:
Commodity derivatives	$	-	$	117	$	-	$	117
	$	-	$	117	$	-	$	117

The Company uses various commodity derivative instruments, including fixed price swaps. We consider the fair value of our commodity derivative instruments to be level 2 on the fair value hierarchy. The fair value of commodity derivatives is determined using adjusted exchange prices, prices provided by brokers or pricing service companies that are all corroborated by market data.

NOTE 5 – OTHER ASSETS

Other assets consist of the following:

	September 30,		December 31,
	2015		2014
Site specific trust accounts - P&A escrow	$	5,564,129	$	5,564,129
Debt issuance cost, net		-		4,077,060
Restricted cash – P&A bond		10,628,903		10,628,903
Other		1,237,062		80,563
	$	17,430,094	$	20,350,655

Site Specific Trust Accounts – P&A Escrow

The Company maintains an escrow agreement that has been established for the purpose of assuring maintenance and administration of a performance bond which secures certain plugging and abandonment obligations assumed in the acquisition of oil and gas properties in certain fields. Changes in the escrow accounts reflect additional contributions and interest earned during 2014. See Note 9 – “Asset Retirement Obligations”.

Debt Issuance Costs, Net

The Company capitalizes certain debt issuance costs and amortizes those costs as additional interest expense over the lives of the associated debt. Net debt issuance costs at December 31, 2014 reflect the issuance of the 12½% Second Lien Notes in December 2012 and July 2011 and the issuance of the 10% First Lien Notes in November 2013. See Note 11 – “Debt”.

Restricted Cash – P&A Bond

Restricted Cash – P&A Bond consists of cash collateral held in escrow to assure maintenance and administration of performance bonds which secures certain plugging and abandonment obligations imposed by state law. The cash collateral is reflected as a long term asset to correspond with the expected timing of the related asset retirement obligation liability. See Note 10 – “Asset Retirement Obligations”.

NOTE 6 – LIABILITIES SUBJECT TO COMPROMISE

As a result of the Chapter 11 Filings, the payment of prepetition indebtedness may be subject to compromise or other treatment under the Debtors’ plan of reorganization. Generally, actions to enforce or otherwise effect payment of prepetition liabilities are stayed. Refer to Note 1, Chapter 11 Bankruptcy and Going Concern.

The Debtors have been paying and intend to continue to pay undisputed post-petition claims in the ordinary course of business. In addition, the Debtors may reject prepetition executory contracts and unexpired leases with respect to the Debtors’ operations, with the approval of the Court. Damages resulting from rejection of executory contracts and unexpired leases are treated as general unsecured claims and will be classified as liabilities subject to compromise.

ASC 852 requires prepetition liabilities that are subject to compromise to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. The amounts currently classified as liabilities subject to compromise may be subject to future adjustments depending on Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, or other events.

Liabilities subject to compromise consist of the following at September 30, 2015:

Accounts payable	$	2,815,298
Accrued liabilities		-
Total liabilities subject to compromise	$	2,815,298

NOTE 7 – STOCK-BASED COMPENSATION EXPENSE

The Company periodically grants restricted stock and stock options to employees, directors and consultants. The Company is required to make estimates of the fair value of the related instruments and recognize expense over the period benefited, usually the vesting period.

Compensation Plan

In September 2011, the Company’s board of directors adopted, and in June 2012 the Company’s stockholders approved, the Saratoga Resources, Inc. 2011 Omnibus Equity Plan (the “2011 Plan”). The 2011 Plan reserves a total of 3,000,000 shares for issuance to eligible employees, officers, directors and other service providers pursuant to grants of options, restricted stock, performance stock and other equity based compensation agreements.

Stock Option Activity

InStock ~~February~~based ~~2015,~~compensation ~~the~~expense ~~Company’s~~attributable ~~board of directors approved a stock option grant~~ to ~~purchase~~common anshares ~~aggregate~~and grants of ~~30,000 shares of common stock to an executive officer. The~~ options ~~are~~was ~~exercisable for a term of seven years at~~ $~~0.21~~2,012 ~~per share~~ and ~~vest~~$2,699, ~~1/3~~during ~~after~~the ~~six~~nine months ~~and~~ended ~~1/3~~September on30, ~~each~~2021 ofand ~~the~~2020, ~~first two grant date anniversaries~~respectively. The ~~grant~~unamortized ~~date~~amount ~~value~~ of ~~the options was $3,900. The options were valued using the Black~~stock-~~Scholes~~based compensation ~~model~~that ~~with~~had ~~the~~not ~~following~~been ~~assumptions:~~recorded ~~84%~~was ~~volatility;~~$0 ~~4.1~~and ~~year~~$3,027 ~~estimated~~as ~~life;~~of ~~zero~~September ~~dividends; 1.28% discount rate; and~~30, ~~quoted~~2021 ~~stock price~~ and ~~exercise~~2020, ~~price of $0~~respectively.~~21.~~

InThere ~~February~~were ~~2015~~25,000 ~~the Company’s management approved a~~ stock ~~option~~options ~~grant~~granted, ~~to purchase an aggregate of 30~~125,000 ~~shares of common~~ stock ~~to a non-executive employee. The~~ options ~~are exercisable for a term of seven years at $0.21 per share~~ forfeited and ~~vest~~none ~~1/3 after six months and 1/3 on each of the first two grant date anniversaries. The grant date value of the options was $3,900. The options~~ were ~~valued~~exercised ~~using~~during ~~the~~nine ~~Black-Scholes~~months ~~model~~ended ~~with~~September ~~the following assumptions: 84% volatility; 4.1 year estimated life; zero dividends; 1.28% discount rate; and~~30, ~~quoted stock price and exercise price of $0~~2021.~~21.~~

In ~~February~~June ~~2015~~2021, the Company’s ~~management~~granted ~~approved~~to an unaffiliated consultant as partial consideration for services a stock option ~~grant~~ to purchase ~~an aggregate of 15~~25,000 shares of our common stock toat $0.04 per share for a ~~non-executive~~term ~~employee~~of ten years. ~~The~~ The options are exercisable for a term of ~~seven~~ten years at $0.2704 per share and ~~vest~~vested ~~1/3~~in full on ~~each of the first three~~ grant date ~~anniversaries~~. The grant date value of the options was $21,~~700~~000. The options were valued using the Black-Scholes model with the following assumptions: 86296% volatility; 4.5.0 year estimated life; zero dividends; 10.5774% discount rate; and, quoted stock price and exercise price of $0.2704.

In April 2015, the Company’s management approved a stock option grant to purchase an aggregate of 60,000 shares of common stock to a non-executive employee. The options are exercisable for a term of seven years at $0.23 per share and vest 1/3 on each of the first three grant date anniversaries. The grant date value of the options was $9,000. The options were valued using the Black-Scholes model with the following assumptions: 86% volatility; 4.5 year estimated life; zero dividends; 1.19% discount rate; and, quoted stock price and exercise price of $0.23.

	Number of Shares Underlying Options			Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2020		735,000		$	0.28	$	0.24		2.7	$	—
Granted		25,000			0.04		0.04		9.7		—
Exercised		—			—		—		—		—
Forfeited		(125,000	)		0.66		0.40		—		—
Outstanding at September 30, 2021		635,000			0.20		0.20		1.8		—
Exercisable at September 30, 2021		635,000		$	0.20	$	0.20		1.8	$	—

(1) The ~~following~~intrinsic ~~table~~value ~~summarizes~~of ~~information~~an ~~about~~option is the amount by which the market value of our common stock ~~option~~at ~~activity~~the ~~and~~indicated ~~related~~date, ~~information~~or ~~for~~at the ~~nine~~time ~~months~~of ~~ended~~exercise, ~~September~~exceeds 30the exercise price of the option. On June 4, ~~2015:~~2019, the last reported sales price of our common stock was $0.02 per share.

	Number of Shares Underlying Options		Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2014		1,652,500	$	2.59	$	1.81	4.8	$	-
Granted		135,000		0.23		0.14	6.4		-
Exercised		-		-		-	-		-
Forfeited		(177,500)		1.54		1.30	-		-
Outstanding at September 30, 2015		1,610,000	$	2.51	$	1.73	4.2	$	-
Exercisable at September 30, 2015		1,310,000	$	2.86	$	1.94	3.8	$	-

~~(1)~~ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The intrinsic value of an option is the amount by which the market value of our common stock at the indicated date, or at the time of exercise, exceeds the exercise price of the option. On September 30, 2015, the last reported sales price of our common stock on the OTC Pink marketplace was $0.03 per share.

Share-Based Compensation Expense

The following table reflects share-based compensation recorded by the Company for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Share-based compensation expense included in reported net income	$	26,928	$	173,871	$	81,393	$	420,154
Basic earnings per share effect of share-based compensation expense	$	0.00	$	(0.01)	$	(0.00)	$	(0.01)

As of September 30, 2015, total unrecognized stock-based compensation expense related to non-vested stock options was $0.1 million. The unrecognized expense is expected to be recognized over a weighted average period of 0.4 years.

NOTE 8 – EQUITY

Common Stock Activity

There was no common stock activity during the nine months ended September 30, 2015.

Warrant Activity

The following table summarizes information about stock warrant activity and related information for the nine months ended September 30, 2015:

	Number of Shares Underlying Warrants		Weighted Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2014		146,998	$	6.64	$	5.33	0.36	$	-
Granted		-		-		-	-		-
Exercised		-		-		-	-		-
Forfeited		(146,998)		6.64		5.33	-		-
Outstanding at September 30, 2015		-	$	-	$	-	-	$	-
Exercisable at September 30, 2015		-	$	-	$	-	-	$	-

(1)

The intrinsic value of a warrant is the amount by which the market value of our common stock at the indicated date, or at the time of exercise, exceeds the exercise price of the warrant. On September 30, 2015, the last reported sales price of our common stock on the OTC Pink marketplace was $0.03 per share.

NOTE 9 – EARNINGS (LOSS) PER SHARE

A reconciliation of the components of basic and diluted net loss per common share is presented in the tables below:

	For the Three Months Ended September 30,
	2015					2014
	Income (Loss)		Weighted Average Common Shares Outstanding	Per Share		Income (Loss)		Weighted Average Common Shares Outstanding	Per Share
Basic:
Loss attributable to common stock	$	(30,006,174)	30,986,601	$	(0.97)	$	(10,273,485)	30,986,601	$	(0.33)
Effect of Dilutive Securities:
Stock options and other			-					-
Diluted:
Loss attributable to common stock, including assumed conversions	$	(30,006,174)	30,986,601	$	(0.97)	$	(10,273,485)	30,986,601	$	(0.33)

	For the Nine Months Ended September 30,
	2015					2014
	Income (Loss)		Weighted Average Common Shares Outstanding	Per Share		Income (Loss)		Weighted Average Common Shares Outstanding	Per Share
Basic:
Loss attributable to common stock	$	(52,140,801)	30,986,601	$	(1.68)	$	(25,215,108)	30,961,106	$	(0.81)
Effect of Dilutive Securities:
Stock options and other			-					-
Diluted:
Loss attributable to common stock, including assumed conversions	$	(52,140,801)	30,986,601	$	(1.68)	$	(25,215,108)	30,961,106	$	(0.81)

NOTE 10 – ASSET RETIREMENT OBLIGATIONS

The Company accounts for plugging and abandonment costs in accordance with FASB Accounting Standards Codification 410-20, Accounting for Asset Retirement Obligations.

A reconciliation of the beginning and ending aggregate carrying amount of asset retirement obligations are as follows:

Balance at December 31, 2014	$	16,397,804
Accretion expense		1,786,685
Additions		-
Revisions		-
Settlements		(81,691)
Balance at September 30, 2015	$	18,102,798

NOTE 11 – DEBT

Debt consists of the following:

	September 30,		December 31
	2015		2014
10% First Lien Notes due 2015	$	54,600,000	$	54,600,000
12 ½% Second Lien Notes due 2016		125,200,000		125,200,000
Less unamortized discount		-		(999,116)
	$	179,800,000	$	178,800,884

10.0% First Lien Notes

In November 2013, the Company, and its wholly-owned subsidiaries (the “Guarantors”), issued $54.6 million in aggregate principal amount of 10.0% Senior Secured Notes due 2015 (the “First Lien Notes”) to two institutional accredited investors (the “Purchasers”).

The First Lien Notes were issued pursuant to Purchase Agreements (the “Purchase Agreement”), and under an Indenture (the “First Lien Indenture”), by and among the Company, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (the “First Lien Trustee”). The First Lien Notes are our senior secured obligations and are fully and unconditionally guaranteed (the “Guarantees”) on a senior secured basis by the Guarantors and will rank equally in right of payment with our, and the Guarantors’, existing and future senior indebtedness and senior in right of payment to Second Lien Notes (as defined below).

The purchase price for the First Lien Notes and Guarantees was 100% of their principal amount. We received net proceeds from the issuance and sale of the First Lien Notes of approximately $25.4 million, after commissions and estimated offering expenses, and the surrender for retirement by the Purchasers of $27.3 million in face amount of 12½% Senior Secured Notes (the “Second Lien Notes”).

The First Lien Notes mature on December 31, 2015, and interest, accruing at 10% per annum, is payable on the First Lien Notes on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2013.

The First Lien Indenture includes customary events of default and places restrictions on the Company and certain of its subsidiaries with respect to additional indebtedness, liens, dividends and other payments to shareholders, repurchases or redemptions of the Company’s common stock, redemptions of senior notes, investments, acquisitions, mergers, asset dispositions, transactions with affiliates, hedging transactions and other matters.

The Company has the option to redeem all or a portion of the First Lien Notes at any time at 100% of the principal amount to be redeemed plus accrued and unpaid interest. Upon the occurrence of a change of control, we are required to offer to purchase the First Lien Notes at a price equal to 101% of the aggregate principal amount of First Lien Notes repurchased plus accrued and unpaid interest. Further, upon the occurrence of certain asset sales, we are required to provide notice of the same and are required to offer to purchase a defined portion of the First Lien Notes at a price equal to 100% of the principal amount of First Lien Notes repurchased plus accrued and unpaid interest.

In connection with the issuance and sale of the First Lien Notes, the Company, the First Lien Trustee and The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee and collateral under the Second Lien Documents (as defined below)(the “Second Lien Trustee”) entered into an Intercreditor Agreement (the “Intercreditor Agreement”). Pursuant to the Intercreditor Agreement, parties agreed that the lien with respect to collateral securing the First Lien Indenture and related First Lien Notes and Guarantees (the “First Lien Obligations”) shall be senior in right, priority, operation, effect and all other respects to any lien with respect to collateral securing the obligations under that certain Indenture dated as of June 12, 2011, as supplemented or amended from time to time thereafter (the “Second Lien Indenture”), by and among our company, the Guarantors named therein and the Second Lien Trustee, and the related Second Lien Notes in the aggregate amount of $125.2 million (the “Second Lien Obligations”).

Interest accrued and owing as of December 31, 2014, in the amount of $1,365,000, was not paid as of the due date. Such interest was subsequently paid in connection with a Forbearance Agreement to First Lien Indenture (see below). Interest accrued and owing as of March 31, 2015, June 30, 2015 and September 30, 2015, in the amount of $4,095,000, has not been paid and, as a result, the First Lien Notes are in default and are included as a current liability in the accompany consolidated financial statements. The unpaid interest payments accrue interest computed at the default rate of 12%. The debt discount and debt issuance costs associated with the notes have been fully amortized as the amortization period was reduced to reflect the forbearance period.

12½% Second Lien Notes

In July 2011, the Company and the Guarantors entered into a Purchase Agreement with Imperial Capital, LLC (the “Initial Purchaser”), relating to the issuance and sale of $127.5 million in aggregate principal amount of 12½% Senior Secured Notes due 2016. The Second Lien Notes were sold at 98.221% of par in a transaction exempt from the registration requirements of the Securities Act and were resold to qualified institutional buyers in reliance on Rule 144A of the Securities Act and to persons outside of the U.S. pursuant to Regulation S.

In December 2012, the Company and the Guarantors entered into another Purchase Agreement with the Initial Purchaser, relating to the issuance and sale of an additional $25 million in aggregate principal amount of the Second Lien Notes. The Second Lien Notes were sold at 98.58% of par in a transaction exempt from the registration requirements of the Securities Act and were resold to qualified institutional buyers in reliance on Rule 144A of the Securities Act and to persons outside of the U.S. pursuant to Regulation S.

The Second Lien Notes were issued pursuant to the Second Lien Indenture among the Company, the Guarantors named therein and Second Lien Trustee, as trustee and collateral agent and, with respect to the Second Lien Notes issued in 2012, a First Supplemental Indenture, dated December 4, 2012. The Second Lien Notes are the senior secured obligations of the Company and are fully and unconditionally guaranteed on a senior secured basis by the Guarantors and will rank equally in right of payment with the Company’s and the Guarantors’ existing and future senior indebtedness, subject, however, to the Intercreditor Agreement pursuant to which the First Lien Notes are senior in right, priority, operation and effect to the lien securing the Second Lien Notes.

The Second Lien Notes mature on July 1, 2016, and interest is payable on January 1 and July 1 of each year.

The Second Lien Indenture includes customary events of default and places restrictions on the Company and certain of its subsidiaries with respect to additional indebtedness, liens, dividends and other payments to shareholders, repurchases or redemptions of the Company’s common stock, redemptions of senior notes, investments, acquisitions, mergers, asset dispositions, transactions with affiliates, hedging transactions and other matters.

The Company has the option to redeem all or a portion of the Second Lien Notes at any time on or after January 1, 2014 at the redemption prices specified in the Indenture plus accrued and unpaid interest.

Interest accrued and owing as of January 1, 2015 and July 1, 2015, in the amount of $15,650,000, has not been paid and, as a result, the Second Lien Notes are in default and are included as a current liability in the accompanying consolidated financial statements. The unpaid interest payments accrue interest at the default rate of 14.5%. The Company and the principal holders of the Second Lien Notes entered into a Forbearance Agreement to Second Lien Debenture in January 2015. See below. The debt discount and debt issuance costs associated with the notes have been fully amortized as the amortization period was reduced to reflect the forbearance period.

Forbearance Agreements

On January 30, 2015, the Company, along with its subsidiaries, Lobo Operating, Inc., Lobo Resources, Inc., Harvest Oil & Gas, LLC and The Harvest Group, LLC entered into a forbearance agreement (the “First Lien Forbearance Agreement”) with the holders (the “First Lien Lenders”) of certain notes (the “First Lien Notes”) issued under that certain Indenture dated as of November 22, 2013 (the “First Lien Indenture”), by and among the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “First Lien Trustee”). Also on January 30, 2015, the Company entered into a forbearance agreement (the “Second Lien Forbearance Agreement” and, together with the First Lien Forbearance Agreement, the “Forbearance Agreements”) with the holders (the “Second Lien Lenders”) of seventy-five percent (75%) or more in principal amount of the notes (the “Second Lien Notes”) issued under that certain Indenture dated as of July 12, 2011 (as supplemented or amended, the “Second Lien Indenture”), by and among the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Second Lien Trustee”).

The Forbearance Agreements were entered into following (i) the Company’s failure to pay to the First Lien Lenders an interest installment in the amount of $1.3 million scheduled for payment on December 31, 2014, and constituting a default if not paid by January 30, 2015 (the “Anticipated First Lien Default”), and (ii) the Company’s failure to pay to the Second Lien Lenders an interest installment in the amount of $7.9 million scheduled for payment on January 1, 2015, and constituting a default if not paid by February 2, 2015 (the “Anticipated Second Lien Default,” and, together with the Anticipated First Lien Default, the “Specified Defaults”).

The Company received confirmation from the First Lien Lenders that they hold more than 75% of the principal amount of the outstanding Second Lien Notes and each agreed, during the Forbearance Period (as defined below), not to provide any direction to the Second Lien Trustee or to take any steps to enforce any rights of the Second Lien Trustee or the holders of Second Lien Notes occasioned by the failure of the Company to make the January 1, 2015 interest payment.

Pursuant to the First Lien Forbearance Agreement, the First Lien Lenders agreed to forbear, until the earlier of March 16, 2015 or the occurrence of certain defaults defined in the First Lien Forbearance Agreement (the “Forbearance Period”), from exercising certain of their default-related rights and remedies against the Company with respect to the Specified Defaults in order to permit the Company an opportunity to effectuate a restructuring/refinancing or implement operational improvements.

Under the terms of the First Lien Forbearance Agreement, among other things, the Company agreed to (i) pay, by February 2, 2015, the December 31, 2014 interest payment owing to the First Lien Lenders, with interest at the default rate, in the amount of $1,378,650; (ii) pay expenses incurred by the First Lien Lenders in connection with the Forbearance Agreement, including paying a retainer to counsel for the First Lien Lenders; (iii) retain, by March 2, 2015, a financial advisor acceptable to the First Lien Lenders on terms acceptable to the First Lien Lenders; (iv) deliver to the First Lien Lenders a 6-week operating budget in form and methodology acceptable to the First Lien Lenders and to abide by that budget within permitted variances; (v) deliver to the First Lien Lenders, not later than March 2, 2015, certain financial, operating and other information and, not later than March 15, 2015, a two year business plan and 2015 budget; and (vi) cause its officers, financial advisors, investment bankers and others to furnish information reasonably requested by the First Lien Lenders.

Any breach by the Company of any covenant in the First Lien Forbearance Agreement, or the commencement of any bankruptcy, insolvency or creditor relief proceedings by or with respect to the Company, would have constituted an event of default under the First Lien Forbearance Agreement.

Pursuant to the Second Lien Forbearance Agreement, the Second Lien Lenders agreed to forbear, during the Forbearance Period, from exercising certain of their default-related rights and remedies against the Company with respect to the Specified Defaults in order to permit the Company an opportunity to effectuate a restructuring/refinancing or implement operational improvements. Second Lien Forbearance Agreement is substantially identical to the First Lien Forbearance Agreement except that the January 1, 2015 interest payment on the First Lien Notes was not required to be made.

On March 16, 2015, the Company entered into amendments to the Forbearance Agreements extending the Forbearance Period to April 30, 2015.

On April 30, 2015, the Company entered into amendments to the Forbearance Agreements extending the Forbearance Period to May 8, 2015 subject to a further extension of the Forbearance Period to May 11, 2015 if the Company paid an additional retainer to legal counsel for the First Lien Lenders in the amount of $200,000 and subject to a further extension of the Forbearance Period to May 22, 2015 if the Company appoints an additional independent director designated by the First Lien Lenders. The payment of an additional legal fee retainer and appointment of an additional director both occurred by the designated dates and the Forbearance Period was extended until May 22, 2015.

On May 18, 2015, the Company entered into further amendments to the Forbearance Agreements extending the Forbearance Period to June 5, 2015.

Appointment of Director

Pursuant to the terms of the April 30, 2015 amendment to the Forbearance Agreements, on May 11, 2015, the Company appointed an additional independent director to the Company’s board of directors and to the independent committee of the board.

Advisory Agreement

In March 2015, pursuant to the terms of the Forbearance Agreements, the Company entered into an engagement letter (the “Engagement Letter”) with Conway MacKenzie Management Services, LLC (“CMS”). Pursuant to the Engagement Letter, the Company appointed principals of CMS to the Interim Chief Financial Officer and Strategic Alternatives Officer positions. Those officers are engaged to assist the Company in connection with its efforts to restructure or repay the First Lien Notes and Second Lien Notes. The Company agreed to pay CMS a fee of $50,000 per month for services of the Interim Chief Financial Officer and hourly fees for services of other CMS personnel. The Engagement Letter was subsequently amended to provide that all services of CMS personnel, including the Interim Chief Financial Officer, would be billed at hourly rates.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Contingencies

From time to time the Company may become involved in litigation in the ordinary course of business. At September 30, 2015, except for the bankruptcy filing described in Note 1 and as described below, the Company’s management was not aware, and as of the date of this report is not aware, of any such litigation that could have a material adverse effect on its results of operations, cash flows or financial condition.

The Company, as an owner or lessee and operator of oil and gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. The Company maintains insurance coverage, which it believes is customary in the industry, although the Company is not fully insured against all environmental risks. The Company is not aware of any environmental claims existing as of September 30, 2015, which have not been provided for, covered by insurance or otherwise have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change, or past non-compliance with environmental laws will not be discovered on the Company’s properties.

ITEM 2

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

Forward-Looking Information

This Form 10-Q quarterly report of Saratoga Resources, Inc. (the “Company”) for the three months ended September 30, 2015, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that there are statements that are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement, where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.

The actual results or events may differ materially from those anticipated and as reflected in forward-looking statements included herein. Factors that may cause actual results or events to differ from those anticipated in the forward-looking statements included herein include the Risk Factors described in Item 1A of our Form 10-K for the year ended December 31, 2014.

Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-Q to be accurate as of the date hereof. Changes may occur after that date, and we will not update that information except as required by law in the normal course of our public disclosure practices.

Additionally, the following discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and related notes contained in Item 1 of Part 1 of this Form 10-Q, as well as the Risk Factors in Item 1A and the financial statements in Item 8 of Part II of our Form 10-K for the fiscal year ended December 31, 2014.

Chapter 11 Bankruptcy and Going Concern

On June 18, 2015, the Company and its subsidiaries, The Harvest Group, LLC, LOBO Operating, Inc., LOBO Resources, Inc. and Harvest Oil & Gas, LLC (together the “Debtors”) each filed a voluntary petition Chapter 11 in the United States Bankruptcy Court for the Western District of Louisiana (the “Bankruptcy Court”) to restructure our obligations and capital structure. The Chapter 11 cases are being jointly administered for procedural purposes by the Bankruptcy Court under the caption Harvest Oil & Gas, LLC, ET AL, Case No. 15-50748 (Jointly Administered).

connection with the claims resolution process. The ultimate number and amount of allowed claims is not presently known, nor can the ultimate recovery with respect to allowed claims be presently ascertained.

The timing of filing a plan of reorganization by the Debtors will depend on the timing and outcome of numerous other ongoing matters in the Chapter 11 proceedings. Although the Debtors may file a plan of reorganization that provides for our emergence from bankruptcy as a going concern, there can be no assurance at this time that the Debtors will be able to successfully develop, confirm and consummate one or more plans of reorganization or other alternative restructuring transactions, including a sale of all or substantially all of the Debtors’ assets, that satisfies the conditions of the Bankruptcy Code and is confirmed by the Bankruptcy Court, or that any such plan will be implemented successfully.

For the duration of our Chapter 11 proceedings, our operations and our ability to develop and execute our business plan are subject to the risks and uncertainties associated with the Chapter 11 process, including uncertainty associated with our current operations under a short-term order allowing continued use of cash collateral and a short-term order extending our exclusive right to file a plan of reorganization. As a result of these risks and uncertainties, the number of our outstanding shares and our stockholders, assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of our operations, properties and capital plans included in this Quarterly Report may not accurately reflect our operations, properties and capital plans following the Chapter 11 process.

Overview

WeSince ~~are~~our anexit ~~independent~~from ~~oil~~bankruptcy in 2016, we have had no material operations and ~~natural~~we ~~gas~~presently ~~company~~have ~~engaged~~no inmaterial ~~the~~operating ~~acquisition,~~assets. ~~development,~~Our ~~exploitation,~~current ~~exploration~~business ~~and~~objective ~~production~~is ofto ~~crude~~seek ~~oil~~a ~~and~~business ~~natural~~combination ~~gas~~with ~~properties~~an operating company. ~~Our~~ ~~lease~~We ~~holdings~~intend ~~totaled~~to ~~approximately~~use ~~51,500~~our ~~acres~~limited atfinancial ~~September~~resources ~~30,~~in ~~2015,~~connection ~~comprised~~with ofsuch ~~our~~activities. ~~principal~~We ~~producing~~expect ~~properties~~to ~~covering~~utilize ~~approximately~~our 31capital stock,~~700~~ debt ~~acres~~or ina ~~the~~combination ~~transitional~~of ~~coastline~~capital stock and ~~protected~~debt, in~~-bay~~ ~~environment~~effecting ona ~~parish~~business ~~and~~combination. ~~state~~It ~~leases~~may ofbe ~~south~~expected ~~Louisiana~~that ~~and~~entering ~~approximately~~into ~~19,800~~a ~~acres~~business combination ofwill ~~leases~~involve in the ~~shallow~~issuance ~~Gulf~~of restricted shares of ~~Mexico~~capital ~~shelf~~stock. The issuance of additional shares of our capital stock:

At● ~~September~~may ~~30,~~significantly ~~2015,~~reduce we operated or had interests in 105 producing wells and our principal properties covered approximately 51,500 gross/net acres, more than half of which were held by production without near-term lease expirations, across 13 fields in the ~~transitional~~equity ~~coastline~~interest ~~and protected in-bay environment on parish and state leases in south Louisiana as well as in the shallow Gulf~~ of ~~Mexico. We own approximately 100% working interest in all~~ our ~~properties,~~stockholders; ~~with~~● ~~the~~will ~~only~~likely ~~exception~~cause ~~being~~ a ~~single~~change ~~well~~in ~~where~~control weif ~~have~~a ansubstantial ~~overriding~~number ~~royalty~~of ~~interest. Our net revenue interests in~~ our ~~properties~~shares ~~range~~of ~~from~~capital ~~69%~~stock toare ~~82%~~issued, ~~with~~and ~~our~~most ~~average~~likely ~~net~~will ~~revenue~~also ~~interest~~result onin athe ~~net~~resignation ~~acreage~~or ~~leasehold~~removal ~~basis being approximately 75%. We operate over 99%~~ of ~~the wells that comprise~~ our ~~PV-10,~~present ~~enabling~~officer usand todirector; ~~effectively~~and ~~exercise~~● ~~management~~may ~~control~~adversely ofaffect ~~our operating costs, capital expenditures and~~ the ~~timing~~prevailing ~~and~~market ~~method~~price offor ~~development of~~ our ~~properties~~common stock.

~~2015~~Similarly, ~~Developments~~if we issued debt securities, it could result in:

~~Commodity~~● ~~Prices~~default and foreclosure on our assets if our operating revenues after a business combination were insufficient to pay our debt obligations; ● acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contained covenants that required the maintenance of certain financial ratios or reserves and any such covenants were breached without a waiver or renegotiations of such covenants; ● our immediate payment of all principal and accrued interest, if any, if the debt security was payable on demand; and ● our inability to obtain additional financing, if necessary, if the debt security contained covenants restricting our ability to obtain additional financing while such security was outstanding.

During the nine months ended September 30, 2015, we continued to be subject to a sharp decline in commodity prices that began during the second half of 2014 with average prices realized from the sale of crude being down to $49.42 per barrel during the nine months ended September 30, 2015 as compared to $100.85 per barrel during the nine months ended September 30, 2014 and average prices realized from the sale of natural gas being down to $2.97 per mcf during the nine months ended September 30, 2015 as compared to $4.99 per mcf during the nine months ended September 30, 2014.

Drilling and Development Activities

Drilling, development and infrastructure project operations to date in 2015 are summarized as follows:

Development Drilling. We did not drill any developmental wells during the nine months ended September 30, 2015.

Exploratory Drilling. We did not drill any exploratory wells during the nine months ended September 30, 2015.

Recompletion and Workover Program. During the nine months ended September 30, 2015, we invested $0.5 million in 4 recompletions, 3 of which were successfully completed during the period, and an additional $0.1 million on 2 workovers, both of which were successfully completed during the period.

Infrastructure Program. During the nine months ended September 30, 2015, we invested $0.4 million in infrastructure improvements and additions to support existing production and anticipated increases in production.

Drilling and Development Plans. We have an extensive inventory of drilling opportunities, including numerous proved behind pipe and proved undeveloped opportunities as well as a number of exploratory opportunities. With the drop in commodity prices we have put efforts to drill these prospects on hold. We expect to resume efforts to seek partners to drill at such time as commodity prices support such efforts.

For the nine months ended September 30, 2015, we had approximately 105 gross, and 104 net, wells in production.

Compensation

During the nine months ended September 30, 2015, we granted 30,000 stock options to an executive officer at an exercise price of $0.21 per share and a total of 105,000 stock options to three employees at exercise prices ranging from $0.21 to 0.27 per share.

We recorded $81,393 of compensation charges that is reflected in general and administrative expense for the nine months ended September 30, 2015 and is attributable to equity grants during 2015 and prior years.

As of September 30, 2015, total compensation cost relating to unvested stock option awards not yet recognized in earnings was approximately $0.1 million, which is expected to be recognized over a weighted average period of approximately 0.4 years.

Operating Costs

During the nine months ended September 30, 2015, we continued a program, begun during the fourth quarter of 2014, to decrease lease operating expenses and general and administrative expenses. Cost reduction measures have focused on bringing contract employees in-house, eliminating redundant positions, managing marine transportation, optimizing our chemical program, lowering communications costs, replacing/modifying our compressors, downsizing our Houston office, curtailing expenditures on certain longer term projects and tightening discretionary spending. Those cost cutting measures are targeted to reduce lease operating expenses and general and administrative expenses by $13.3 million (a 39% decrease), in the aggregate, during 2015 as compared to 2014. The anticipated cost reductions will be partially offset by additional legal fees, consulting and other expenses incurred pursuant to the Forbearance Agreements, our ongoing efforts to restructure/refinance existing debt, and the cost of the chapter 11 bankruptcy.

Forbearance Agreements

On January 30, 2015, we, along with our subsidiaries, Lobo Operating, Inc., Lobo Resources, Inc., Harvest Oil & Gas, LLC and The Harvest Group, LLC (collectively, the “Borrowers”) entered into a forbearance agreement (the “First Lien Forbearance Agreement”) with the holders (the “First Lien Lenders”) of certain notes (the “First Lien Notes”) issued under that certain Indenture dated as of November 22, 2013 (the “First Lien Indenture”), by and among the Borrowers and The Bank of New York Mellon Trust Company, N.A., as trustee (the “First Lien Trustee”). Also on January 30, 2015, the Borrowers entered into a forbearance agreement (the “Second Lien Forbearance Agreement” and, together with the First Lien Forbearance Agreement, the “Forbearance Agreements”) with the holders (the “Second Lien Lenders”) of seventy-five percent (75%) or more in principal amount of the notes (the “Second Lien Notes”) issued under that certain Indenture dated as of July 12, 2011 (as supplemented or amended, the “Second Lien Indenture”), by and among the Borrowers and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Second Lien Trustee”).

The Forbearance Agreements were entered into following (i) the Borrower’s failure to pay to the First Lien Lenders an interest installment in the amount of $1.4 million scheduled for payment on December 31, 2014, and constituting a default if not paid by January 30, 2015 (the “Anticipated First Lien Default”), and (ii) the Borrower’s failure to pay to the Second Lien Lenders an interest installment in the amount of $7.9 million scheduled for payment on January 1, 2015, and constituting a default if not paid by February 2, 2015 (the “Anticipated Second Lien Default,” and, together with the Anticipated First Lien Default, the “Specified Defaults”).

We received confirmation from the First Lien Lenders that they held more than 75% of the principal amount of the outstanding Second Lien Notes and each agreed, during the Forbearance Period (as defined below), not to provide any direction to the Second Lien Trustee or to take any steps to enforce any rights of the Second Lien Trustee or the holders of Second Lien Notes occasioned by the failure of the Borrowers to make the January 1, 2015 interest payment.

Pursuant to the First Lien Forbearance Agreement, the First Lien Lenders agreed to forbear, until the earlier of March 16, 2015 or the occurrence of certain defaults defined in the First Lien Forbearance Agreement (the “Forbearance Period”), from exercising certain of their default-related rights and remedies against the Borrowers with respect to the Specified Defaults in order to permit the Borrowers an opportunity to effectuate a restructuring/refinancing or implement operational improvements.

Under the terms of the First Lien Forbearance Agreement, among other things, we agreed to (i) pay, by February 2, 2015, the December 31, 2014 interest payment owing to the First Lien Lenders, with interest at the default rate, in the amount of $1,378,650; (ii) pay expenses incurred by the First Lien Lenders in connection with the Forbearance Agreement, including paying a retainer to counsel for the First Lien Lenders; (iii) retain, by March 2, 2015, a financial advisor acceptable to the First Lien Lenders on terms acceptable to the First Lien Lenders; (iv) deliver to the First Lien Lenders a 6-week operating budget in form and methodology acceptable to the First Lien Lenders and to abide by that budget within permitted variances; (v) deliver to the First Lien Lenders, not later than March 2, 2015, certain financial, operating and other information and, not later than March 15, 2015, a two year business plan and 2015 budget; and (vi) cause our officers, financial advisors, investment bankers and others to furnish information reasonably requested by the First Lien Lenders.

Any breach by the Borrowers of any covenant in the First Lien Forbearance Agreement, or the commencement of any bankruptcy, insolvency or creditor relief proceedings by or with respect to the Borrowers, would have constituted an event of default under the First Lien Forbearance Agreement.

Pursuant to the Second Lien Forbearance Agreement, the Second Lien Lenders agreed to forbear, during the Forbearance Period, from exercising certain of their default-related rights and remedies against the Borrowers with respect to the Specified Defaults in order to permit the Borrowers an opportunity to effectuate a restructuring/refinancing or implement operational improvements. Second Lien Forbearance Agreement is substantially identical to the First Lien Forbearance Agreement except that the January 1, 2015 interest payment on the First Lien Notes was not required to be made.

On March 16, 2015, we entered into amendments to the Forbearance Agreements extending the Forbearance Period to April 30, 2015.

On April 30, 2015, we entered into further amendments to the Forbearance Agreements extending the Forbearance Period to May 8, 2015 subject to a further extension of the Forbearance Period to May 11, 2015 if we paid an additional retainer to legal counsel for the First Lien Lenders in the amount of $200,000 and subject to a further extension of the Forbearance Period to May 22, 2015 if we appoint an additional independent director designated by the First Lien Lenders. The payment of an additional legal fee retainer and appointment of an additional director both occurred by the designated dates and the Forbearance Period was extended until May 22, 2015.

On May 18, 2015, the Company entered into further amendments to the Forbearance Agreements extending the Forbearance Period to June 5, 2015.

With our default in payment of interest as the same came due, since January 1, 2015, interest on the unpaid interest amounts on both our First Lien Notes and Second Lien Notes is accruing at the default rate, which is two percentage points higher than the stated rate of interest on each note.

Advisory Agreement

In March 2015, pursuant to the terms of the Forbearance Agreements, we entered into an engagement letter (the “Engagement Letter”) with Conway MacKenzie Management Services, LLC (“CMS”). Pursuant to the Engagement Letter, we appointed principals of CMS to the Interim Chief Financial Officer and Strategic Alternatives Officer positions. Those officers are engaged to assist in connection with our efforts to restructure or repay the First Lien Notes and Second Lien Notes. We agreed to pay CMS a fee of $50,000 per month for services of the Interim Chief Financial Officer and hourly fees for services of other CMS personnel. The Engagement Letter was subsequently amended to provide that all services of CMS personnel, including the Interim Chief Financial Officer, would be billed at hourly rates.

Independent Committee and Appointment of Director

In connection with our efforts to restructure our existing debt, our board established an independent committee charged with carrying out the restructuring process. Pursuant to the terms of the April 30, 2015 amendment to the Forbearance Agreements, on May 11, 2015, we appointed an additional independent director to our board of directors and to the independent committee of our board.

Results of Operations

~~Oil~~We have had no material operations and ~~Gas~~had ~~Revenue~~no operating revenues during the three and nine months ended September 30, 2021 and 2020.

~~Oil~~During ~~and gas revenue for~~ the ~~quarter~~three months ended September 30, ~~2015~~2021 ~~decreased~~and by2020, ~~65.7%~~we toreported net ~~$5.5~~losses ~~million~~of ~~from~~ $~~15.9~~133,626 ~~million~~and in$97,893, ~~the 2014 quarter~~respectively. For the nine ~~month~~months ~~period~~ ended September 30, ~~2015~~2021 ~~oil~~ and ~~gas~~2020, ~~revenue~~we ~~decreased~~reported bynet ~~54.1%~~losses toof $19383,931 and $295,675, respectively.1 ~~million~~The losses during each of those periods arose from ~~$41.7~~corporate ~~million~~maintenance incosts, ~~the~~salary ~~2014~~accrued ~~period~~to our sole officer and accrued director fees.

~~For~~In ~~the quarter ended September 30~~2021, ~~2015,~~we ~~the~~incurred ~~decrease~~one-time inexpenses ~~revenue~~associated ~~was~~with ~~attributable~~preparation toand filing aof ~~65.9%~~our ~~decline~~Form in10 ~~oil~~registration ~~revenues~~statement, onincluding alegal, ~~26.2%~~accounting, ~~decrease~~auditing inand ~~oil~~other ~~production~~costs ~~volumes~~of ~~with~~our ~~average~~efforts ~~oil~~to ~~prices~~resume ~~realized~~public ~~declining~~trading in byour ~~53.9%~~common ~~and a 63~~stock.0% ~~decline~~With inthe ~~gas~~effectiveness ~~revenues~~of onour aForm ~~42.4%~~10 ~~decrease~~registration statement, in ~~gas~~September ~~production~~2021, ~~volumes~~we ~~with~~anticipate ~~average~~that ~~gas~~our ~~prices~~expenses will ~~realized~~increase ~~declining by 35.7%, each~~ as ~~compared~~a toresult ~~the~~of ~~2014~~being ~~quarter. For~~a ~~the~~public ~~nine~~company ~~months~~(for ~~ended~~legal, ~~September~~financial 30reporting, ~~2015~~accounting, ~~the~~auditing ~~decrease~~and inassociated ~~revenue~~costs), ~~was~~our ~~attributable~~ efforts to aresume ~~54.4%~~trading ~~decline~~ in ~~oil~~our ~~revenues~~common onstock aand ~~6.9%~~our ~~decrease~~efforts into ~~oil~~identify ~~production volumes with average oil prices realized declining by 51.0%~~ and aconsummate ~~50.3% decline in gas revenues on~~ a ~~16.4%~~transaction ~~decrease in gas production volumes~~ with ~~average~~prospective ~~gas~~business ~~prices~~combination ~~realized declining by 40~~candidates.~~5%, each as compared to the 2014 period.~~

~~The~~Until ~~following~~such ~~table~~time, ~~discloses~~if ~~the oil and gas sales revenues~~ever, ~~net~~as ~~oil~~we ~~and~~consummate ~~natural~~a ~~gas~~transaction ~~production~~with ~~volumes~~a ~~and~~business combination ~~average~~candidate, ~~sales~~we ~~prices~~do ~~for~~not ~~the~~expect ~~three~~to ~~and~~realize ~~nine~~any ~~months~~operating ~~ended September 30, 2015 and 2014:~~revenues.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Revenues
Oil	$	4,985,343	$	14,633,397	$	17,418,341	$	38,194,493
Gas		486,926		1,315,400		1,728,548		3,478,012
Total oil and gas revenues	$	5,472,269	$	15,948,797	$	19,146,889	$	41,672,505
Production
Oil (Bbls)		110,504		149,695		352,450		378,711
Gas (Mcf)		167,736		291,441		582,754		697,327
Total production (Boe)		138,460		198,268		449,576		494,932
Average sales price
Oil (per Bbl)	$	45.11	$	97.75	$	49.42	$	100.85
Gas (per Mcf)		2.90		4.51		2.97		4.99
Total average sales price (per Boe)	$	39.52	$	80.44	$	42.59	$	84.20

Oil production was down 39.2 MBbl, or 26.2%, and gas production was down 123.7 MMcf, or 42.4%, for the quarter ended September 30, 2015 as compared to the 2014 quarter. For the nine months ended September 30, 2015, oil production was down 26.3 MBbl, or 6.9%, and gas production was down 114.6 MMcf, or 16.4%, as compared to the 2014 period. The decrease in production for the quarter was primarily due to flow line and minor mechanical issues at the Grand Bay field which have subsequently been resolved.

The decrease in realized oil and natural gas prices reflect the steep drop in global hydrocarbon prices during the second half of 2014. While prices stabilized during the first quarter of 2015, prices further weakened during the third quarter of 2015 and, for both the three and nine month periods ended September 30, 2015, remained at levels that were significantly lower than in the comparable period in 2014.

Other Revenues

Other revenue consists principally of production handling fees and contract operator fees received.

Operating Expenses

Operating expenses increased by 30.7% to $27.1 million for the quarter ended September 30, 2015 from $20.8 million in the 2014 quarter. Noncash components of operating expenses, consisting of depreciation, depletion and amortization, impairment expense and accretion expense, comprised 77.9% of operating expenses for the 2015 quarter. Cash components of operating expenses decreased 50.2% to $6.0 million for the quarter ended September 30, 2015 from $12.1 million in the 2014 quarter. The following table sets forth the components of operating expenses for the 2015 and 2014 quarters:

	Three Months Ended				Three Months Ended
	September 30, 2015				September 30, 2014
	Total		Per Boe		Total		Per Boe
Lease operating expense	$	3,674,935	$	26.54	$	6,642,635	$	33.51
Workover expense		4,976		0.04		1,750,760		8.83
Exploration expense		271,942		1.96		225,949		1.14
Depreciation, depletion and amortization		2,464,832		17.80		4,839,858		24.41
Impairment expense		18,077,731		130.56		-		-
Accretion expense		595,562		4.30		448,466		2.26
General and administrative		1,460,285		10.55		2,401,158		12.11
Severance taxes		598,756		4.32		1,058,787		5.34
Arbitration loss		-		-		3,400,000		17.15
	$	27,149,019	$	196.07	$	20,767,613	$	104.75

Operating expenses decreased by 6.4% to $47.1 million for the nine months ended September 30, 2015 from $50.3 million in the 2014 period. Noncash components of operating expenses, consisting of depreciation, depletion and amortization, impairment expense and accretion expense, comprised 58.9% of operating expenses 2015 period. Cash components of operating expenses decreased 42.3% to $19.4 million for the nine months ended September 30, 2015 from $33.5 million in the 2014 period. The following table sets forth the components of operating expenses for the 2015 and 2014 periods:

	Nine Months Ended				Nine Months Ended
	September 30, 2015				September 30, 2014
	Total		Per Boe		Total		Per Boe
Lease operating expense	$	11,628,607	$	25.87	$	18,439,907	$	37.26
Workover expense		137,696		0.31		4,050,528		8.18
Exploration expense		310,263		0.69		647,599		1.31
Depreciation, depletion and amortization		7,867,033		17.50		12,089,913		24.43
Impairment expense		18,077,731		40.21		-		-
Accretion expense		1,786,685		3.97		1,345,399		2.72
General and administrative		5,358,119		11.92		7,456,116		15.06
Severance taxes		1,930,660		4.29		2,869,129		5.80
Arbitration loss		-		-		3,400,000		6.87
	$	47,096,794	$	104.76	$	50,298,591	$	101.63

The changes in operating expenses were primarily attributable to the factors discussed below.

Lease Operating Expense

Lease operating expenses for the quarter ended September 30, 2015 decreased 44.7% to $3.7 million from $6.6 million in the 2014 quarter and, on a per BOE basis, decreased 20.8% to $26.54 per BOE from $33.51 per BOE, in the 2014 quarter. Lease operating expenses for the nine months ended September 30, 2015 decreased 36.9% to $11.6 million from $18.4 million in the 2014 period and, on a per BOE basis, decreased 30.6% to $25.86 per BOE from $37.26 per BOE. The decrease in lease operating expenses was primarily due to (i) contract labor and repair and maintenance charges associated with our production optimization initiative that were included in lease operating expense for the 2014 periods (ii) one-time contract construction labor and building repair and maintenance expenses for the living quarters in Grand Bay Field incurred during 2014; and (iii) a reduction in our reliance on, and cost of, contract operating personnel. The decreases in lease operating expenses for the nine months ended September 30, 2015 were partially offset by significant non-recurring expenses incurred during the quarter relating to (i) cleaning the sales line in the Breton Sound 32 field (ii) compressor station clean up at the Grand Bay field; and (iii) an overhaul of the compressor and 3 phase separator in the Breton Sound 18 field. We are negotiating reduced rates with many of our vendors and expect our lease operating expenses will continue to decrease if hydrocarbon prices continue to remain at lower levels during the remainder of the year.

Operating costs in our fields have historically been relatively high due to water handling, the need for gas lift to maintain oil production and due to the need for marine transportation in the shallow water, bay environment. The decrease in lease operating expenses on a per BOE basis for the quarter was higher on a percentage basis than the overall decrease in lease operating expense primarily due to the increases in production volumes and the fixed nature of certain lease operating expenses.

Workover Expense

Workover expense for the quarter ended September 30, 2015 decreased to $4,976 from $1,750,760 in the 2014 quarter and decreased to $137,696 from $4,050,528 for the nine months ended September 30, 2015 from the 2014 period. The change in workover expense was attributable to variances in the number of workovers undertaken during the respective periods.

Exploration Expense

Exploration expense for the quarter ended September 30, 2015 increased slightly to $271,942 from $225,949 in the 2014 quarter. Exploration expense for the nine months ended September 30, 2015 decreased to $310,263 from $647,599 in the 2014 period. Exploration expense during the quarter consisted primarily of delay rentals on our Gulf of Mexico shelf acreage. The decrease in exploration expenses for the nine month period was principally due to a reduction in field studies related to our Gulf of Mexico shelf acreage.

Depreciation, Depletion and Amortization (DD&A)

Depreciation, depletion and amortization for the quarter ended September 30, 2015 decreased to $2,464,832 from $4,839,858 in the 2014 quarter and to $17.80 per BOE from $24.41 per BOE in the 2014 quarter. Depreciation, depletion and amortization for the nine months ended September 30, 2015 decreased to $7,867,033 from $12,089,913 in the 2014 period and decreased to $17.50 per BOE from $24.43 per BOE in the 2014 period. The decreases in DD&A, on both an absolute dollar and a per BOE basis, were primarily due to a lower cost base as a result of impairments recorded during 2014.

We utilize the successful efforts method of accounting for oil and gas producing activities. Under this method, DD&A is computed on the units-of-production method separately on each individual property and includes the accrual of future plugging and abandonment costs.

Impairment Expense

We recorded an impairment expense for the quarter ended September 30, 2015 of $18,077,731 relating primarily to our Grand Bay field. The impairment expense was a result of the continuing decline in commodity prices which resulted in lower than expected future net cash flows at the producing field level.

Accretion Expense

Accretion expense relating to our asset retirement obligations increased to $595,562 from $448,466 for the quarter ended September 30, 2015 as compared to the 2014 quarter and increased to $1,786,685 from $1,345,399 for the nine months ended September 30, 2015 as compared to the 2014 period.

The increase in accretion expense was attributable to changes in the anticipated plugging dates and discount rates used in calculating the asset retirement obligation for certain fields.

General and Administrative

General and administrative (“G&A”) expense for the quarter ended September 30, 2015 decreased 39.2% to $1,460,285 as compared to $2,401,158 in the 2014 quarter, and decreased 28.1% for the nine months ended September 30, 2015 to $5,358,119 as compared to $7,456,116 in the 2014 period. The decreases in G&A expenses were primarily due to decreased salaries and benefits and a decrease in non-cash stock compensation expense.

Severance Taxes

Severance taxes for the quarter ended September 30, 2015 decreased to $598,756 from $1,058,787 in the 2014 quarter and decreased to $1,930,660 for the nine months ended September 30, 2015 from $2,869,129 for the 2014 period. The decreases were primarily attributable to the declines in oil and natural gas revenues, which were partially offset by the fact that in 2014 we received refunds totaling $0.5 million for taxes paid in prior periods. We continue to receive the horizontal well severance tax exemptions for our Rocky and Zeke wells and the deep well severance tax exemption for our Mesa Verde well.

Arbitration Loss

As a result of the arbitration award granted to a third party in a binding arbitration hearing during 2014, we recorded an arbitration award expense of $3.4 million during the third quarter of 2014.

Other Income (Expense), Net

Net other expense increased to $5.9 million in for the quarter ended September 30, 2015 from $6.1 million for the 2014 quarter and increased to $22.2 million for the nine months ended September 30, 2015 from $18.1 million in the 2014 period.

Interest expense reflects interest incurred on debt under our 10% First Lien Notes and 12.5% Second Lien Notes. The increases in interest expense were primarily attributable to the penalty interest on both the First and Second Lien Notes, which was partially offset by the fact that the debt discount and debt issuance costs associated with the notes were fully amortized during the second quarter of 2015 as the amortization period was reduced to reflect the forbearance period.

Income Tax Expense (Benefit)

For the quarter ended September 30, 2015 we recorded an income tax expense of $26,700 compared to $33,795 during the 2014 quarter. For the nine months ended September 30, 2015 we recorded an income tax expense of $77,700 as compared to $156,060 for the 2014 period.

The decrease in income tax expense is primarily due to the fact that we expect lower state taxes during 2015 as a result of decreased revenues.

Our effective tax rates were different than our federal statutory tax rate due to Louisiana state income taxes associated with income from various locations in which we have operations. Estimates of future taxable income can be significantly affected by changes in oil and natural gas prices, the timing, amount, and location of future production and future operating expenses and capital costs.

Financial Condition

Liquidity and Capital Resources

~~Our~~As ~~principal~~of ~~requirements~~September ~~for~~30, ~~capital~~2021 ~~are~~and toDecember ~~fund~~31, ~~our day-to-day operations and exploration~~2020, ~~development~~we ~~and~~had ~~acquisition~~no ~~activities~~business operations and tolimited ~~satisfy~~cash ~~our contractual obligations, primarily for the repayment of debt~~resources.

~~During~~As ~~2014~~of ~~and~~September ~~2015~~30, 2021, we ~~funded~~a ~~operations~~cash ~~out~~balance of ~~operating~~$32,299. ~~cash~~At ~~flow~~that ~~and~~date, ~~cash~~we had ona ~~hand~~deficit in working capital of $1. We9 ~~did~~million, ~~not~~principally ~~have~~reflecting ~~access~~accrued salary owed to ~~available~~our ~~capital~~sole ~~under~~officer a($1,320,833), ~~revolving~~interest on ~~credit~~accrued ~~agreement~~salary owed to our sole officer ($279,667) and doaccrued ~~not~~director atfees ~~this~~payable ~~time~~to ~~have~~our aformer ~~revolving~~non-employee ~~credit~~directors ~~facility~~($190,508).

We developed, and beginning in 2011 commenced, a layered, multi-faceted development and maintenance program designed to achieve short-, mid- and long-term objectives. Short-term objectives are focused on restoration of shut-in and curtailed production through investments in infrastructure and deferred maintenance and recompletions, workovers and thru-tubing plugbacks each designed to increase or restore production volumes from wells producing below capacity and an inventory of proved developed nonproducing opportunities. Mid-term, following or in conjunction with execution of short-term opportunities, our focus is on the development of an inventory of proved undeveloped opportunities within our inventory of proved undeveloped wells targeting normally pressured oil and gas. Long-term, following or in conjunction with the execution of our short- and mid-term opportunities, our focus is on continuing development of our reserves and exploratory drilling of deep shelf opportunities. During 2014, while continuing to advance short-term objectives associated with continual investment in our infrastructure, we focused on our mid-term objectives through drilling proved undeveloped opportunities.10

AsIn aearly ~~result~~2021, ofwe ~~sharply~~sold ~~lower commodity prices~~3,000,000 ~~and~~shares ~~resulting~~of ~~operating~~common ~~losses~~stock ~~and~~to ~~declines~~two inunaffiliated investors ~~cash~~for ~~flows~~$120,000. ~~our~~We ~~liquidity~~have ~~position~~used ~~deteriorated substantially during 2014 and~~ the ~~first~~proceeds ~~nine months~~ of ~~2015.~~that Instock ~~late~~issuance ~~2014,~~principally weto ~~began~~support ~~implementing cost cutting measures and curtailed development of~~ our ~~proved~~efforts ~~undeveloped opportunities in favor of building our cash position~~ to, ~~among~~resume ~~other~~public ~~things,~~trading ~~support~~ in our ~~scheduled~~common ~~payments~~stock ofand ~~interest~~commence onefforts ~~outstanding~~to ~~debt~~identify and ~~support~~consummate ~~basic~~a ~~operations~~transaction inwith a ~~low~~business ~~commodity~~combination ~~price environment~~candidate. In ~~January~~Such costs ~~2015~~have included, webut ~~entered~~are ~~into~~not ~~forbearance~~limited ~~agreements with our lenders~~to, paying ~~only~~ the ~~interest~~costs onof ~~first~~bringing ~~lien~~our ~~indebtedness~~financial ~~but~~statements ~~not~~current ~~paying interest on second lien indebtedness~~ and, inauditing ~~June~~the ~~2015~~same, wepayment of ~~filed~~legal ~~for~~fees ~~Chapter~~and 11other ~~bankruptcy~~costs ~~protection. Cash~~associated onfiling ~~hand~~our atForm ~~September~~10 ~~30,~~registration ~~2015~~statement, ~~together~~payment ~~with~~of ~~operating~~transfer ~~cash~~agent ~~flows, is expected to be adequate to support basic operations~~ and maintenance but, absent increased commodity prices and/or production, is not expected to be adequate to support development activities or debt service obligations over the next twelve months and may not be adequate to support all bankruptcy related ~~costs over the course of the case~~fees. WeOur ~~are~~Form 10 ~~presently~~registration ~~using~~statement ~~cash~~was oncompleted, ~~hand~~filed ~~pursuant to a short-term cash collateral order which imposes substantial restrictions on our ability to use cash~~ and ~~imposes~~became ~~certain~~effective ~~corporate~~in ~~governance~~September ~~requirements~~2021. ~~Our ability to continue to support operations is subject to ongoing use of cash collateral or securing financing to support operations and exit from~~

24In June 2021, we issued (i) to our Chief Executive Officer 2,358,421 shares of common stock in full settlement of $69,337 of advances and $25,000 of interest on accrued salaries, and (ii) to legal counsel 342,000 shares of common stock in full settlement of $13,680 of accrued legal fees.

~~bankruptcy.~~ We ~~have~~are ~~undertaken~~dependent ~~extensive~~upon ~~efforts~~the tofunding ~~seek~~provided ~~out~~by ~~financing~~our ~~and~~2021 ~~strategic~~common ~~alternatives~~stock sale and toany ~~negotiate~~interim afunding ~~consensual~~that ~~plan~~may ofbe ~~reorganization,~~provided ~~but~~by domanagement ~~not~~or ~~presently~~an ~~have~~affiliated ~~any~~party ~~commitments~~ to ~~provide~~support ~~financing,~~our ~~undertake~~costs ~~any~~through ~~strategic~~consummation ~~transaction~~of ora ~~support~~transaction with a ~~plan~~business ofcombination ~~reorganization~~candidate. ~~that~~There iscan ~~acceptable~~be ~~to all constituencies and there is~~ no assurance that ~~any~~the ~~additional~~funds ~~financing will be~~ provided orby ~~strategic~~our ~~transactions~~2021 ~~consummated~~common onstock ~~acceptable~~sale ~~terms~~will ~~or at all or that any plan of reorganization can~~ be ~~developed that is supported by all constituencies. Should we be unable~~ adequate to ~~reach~~support ~~acceptable accommodations with~~ our ~~lenders~~efforts to ~~facilitate~~complete aresumption ~~satisfactory~~of ~~reorganization~~trading ~~and/or~~in ~~are~~our ~~unable~~common tostock ~~secure additional financing~~ or ~~other~~complete ~~strategic~~a ~~alternatives~~transaction towith ~~support~~a ~~operations,~~business ~~generally,~~combination ~~and~~candidate or ~~development~~that ~~of our assets, specifically,~~ we ~~may~~can ~~face~~secure ~~any~~additional ~~number of adverse consequences (including~~funding, ~~among~~if ~~others~~needed, ~~possible foreclosure of assets, substantial dilution or elimination of equity, liquidation, lack of financial resources~~ to ~~support~~complete ~~operations)~~those ~~that could threaten our ability to continue as a going concern~~efforts.

~~Cash,~~Our ~~Cash~~audited ~~Flows~~consolidated financial statements for the years ended December 31, 2020 and ~~Working~~2019 ~~Capital~~include a qualification for “going concern,” reflecting a risk that we will not be able to sustain operations for the next twelve months.

We had a cash balance of $6.0 million and a working capital deficit of $208.1 million at September 30, 2015 as compared to a cash balance of $10.9 million and a working capital deficit of $185.7 million at December 31, 2014. The decrease in cash on hand was primarily attributable to reductions in operating cash flow and investments in our development program. The decrease in our working capital was primarily attributable to an increase in accrued interest on our First and Second Lien notes which was partially offset by the transfer of unsecured amounts relating to the period prior to the filing of Chapter 11 bankruptcy out of current liabilities.

Operations used cash flow of $1.0 million for the nine months ended September 30, 2015 as compared to using cash of $10.5 million for the nine months ended September 30, 2014. The change in operating cash flows during 2015 was principally attributable to changes in our operating assets and liabilities, principally accrued liabilities, partially offset by reduced profitability resulting from lower commodity prices.

Investing activities used cash totaling $3.0 million during the nine months ended September 30, 2015 as compared to $14.4 million used during the 2014 period. The decrease in cash used in investing activities was primarily due a reduction in development activities.

Financing activities used cash flows of $0.9 million during the nine months ended September 30, 2015 as compared to $1.3 million during the 2014 period. Cash flows used by financing activities during both periods primarily related to repayments on our short-term notes payable.

Debt

At September 30, 2015, we had $179.8 million of indebtedness outstanding, consisting of $54.6 million in face amount of 10% First Lien Notes and $125.2 million in face amount of 12½% Senior Secured Notes due 2016.

We had no letters of credit outstanding at September 30, 2015 that were not fully collateralized by cash.

10% First Lien Notes. In November 2013, we issued $54.6 million in aggregate principal amount of our 10.0% Senior Secured Notes due 2015 (the “First Lien Notes”).

The 10% First Lien Notes are our senior secured obligations and are fully and unconditionally guaranteed on a senior secured basis by the Guarantors and will rank equally in right of payment with our, and the Guarantors’, existing and future senior indebtedness and senior in right of payment to 12½% Second Lien Notes.

The 10% First Lien Notes mature on December 31, 2015, and interest, accruing at 10% per annum, is payable on the notes on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 2013.

We have the option to redeem all or a portion of the 10% First Lien Notes at any time at 100% of the principal amount to be redeemed plus accrued and unpaid interest. Upon the occurrence of a change of control, we are required to offer to purchase the 10% First Lien Notes at a price equal to 101% of the aggregate principal amount of 10% First Lien Notes repurchased plus accrued and unpaid interest. Further, upon the occurrence of certain asset sales, we are required to provide notice of the same and are required to offer to purchase a defined portion of the 10% First Lien Notes at a price equal to 100% of the principal amount of 10% First Lien Notes repurchased plus accrued and unpaid interest.

In connection with the issuance and sale of the 10% First Lien Notes, we, the First Lien Trustee and Second Lien Trustee entered into an Intercreditor Agreement. Pursuant to the Intercreditor Agreement, the parties agreed that the lien with respect to collateral securing the First Lien Indenture and related First Lien Obligations shall be senior in right, priority, operation, effect and all other

respects to any lien with respect to collateral securing the obligations under Second Lien Indenture, by and among our company, the Guarantors named therein and the Second Lien Trustee, and the related 12½% Second Lien Notes.

12½% Second Lien Notes. In July 2011, we issued $127.5 million of our 12½% Second Lien Notes and retired all obligations owing under our prior credit facilities and all outstanding letter of credit obligations. In December 2012, we issued an additional $25.0 million of our 12½% Second Lien Notes. In November 2013, we retired $27.3 million in face amount of our 12½% Second Lien Notes pursuant to the issuance of a like amount of 10% First Lien Notes described above.

The 12½% Second Lien Notes are our senior secured obligations and are fully and unconditionally guaranteed on a senior secured basis by the Guarantors and will rank equally in right of payment with our and the Guarantors’ existing and future senior indebtedness, subject, however, to the Intercreditor Agreement pursuant to which the 10% First Lien Notes are senior in right, priority, operation and effect to the lien securing the 12½% Second Lien Notes. The 12½% Second Lien Notes mature on July 1, 2016, and interest is payable on the notes on January 1 and July 1 of each year. We have the option to redeem all or a portion of the 12½% Second Lien Notes at any time on or after January 1, 2014 at the redemption prices specified in the Second Lien Indenture pursuant to which the 12½% Second Lien Notes were issued plus accrued and unpaid interest.

In January 2015, we entered into forbearance agreements with respect to both the First Lien Notes and the Second Lien Notes and were in default under those notes, including being default on the payment of interest owing as of January 1, 2015 with respect to the Second Lien Notes in the amount of $7.8 million.

In March 2015, we entered into amendments to the forbearance agreements which extended the forbearance period to April 30, 2015.

In April 2015, we entered into further amendments to the forbearance agreements which extended the forbearance period to May 22, 2015.

On May 18, 2015, we entered into further amendments to the Forbearance Agreements extending the Forbearance Period to June 5, 2015.

With our default in payment of interest as the same came due, since January 1, 2015, interest on the unpaid interest amounts on both our First Lien Notes and Second Lien Notes is accruing at the default rate, which is two percent higher than the stated rate of interest on each note.

Capital Expenditures and Commitments

Our capital spending for the nine months ended September 30, 2015 was $1.0 million relating primarily to development of our oil and gas properties, including 4 recompletions ($0.5 million), 2 workovers ($0.1 million) and investments in multiple infrastructure projects ($0.4 million). Capital expenditures were down from $16.0 million during the 2014 period.

As noted, we have the operational flexibility to react quickly with our capital expenditures to changes in our cash flows from operations. Actual levels of capital expenditures in any year may vary significantly due to many factors, including the extent to which properties are acquired, drilling results, oil and gas prices, industry conditions and the prices and availability of goods and services.

Risk Management Activities – Commodity Derivative Instruments

We periodically enter into price-risk management transactions (e.g., swaps, and floors) for a portion of our oil and natural gas production. In certain cases, this allows us to achieve a more predictable cash flow, as well as to reduce exposure from price fluctuations. The commodity derivative instruments apply to only a portion of our production, and provide only partial price protection against declines in oil and natural gas prices, and partially limit our potential gains from future increases in prices. None of these instruments have been used for trading purposes. At September 30, 2015 we had no hedge contracts outstanding.

Off-Balance Sheet Arrangements

WeAs ~~had~~of noSeptember 30, 2021, we did not have any off-balance sheet arrangements as ordefined ~~guarantees~~in Item 303(a)(4)(ii) of ~~third~~Regulation ~~party~~S-K ~~obligations~~promulgated atunder ~~September~~the ~~30,~~Securities ~~2015~~Act of 1934.

~~Inflation~~Contractual Obligations and Commitments

WeAs ~~believe~~of ~~that~~September ~~inflation~~30, ~~has~~2021, ~~not~~our ~~had~~only acontractual ~~significant~~obligation ~~impact~~was onan ~~our~~employment agreement ~~operations~~with ~~since~~our ~~inception~~sole officer.

26Critical Accounting Policies

~~ITEM~~Our 3significant accounting policies are described in the notes to our audited consolidated financial statements for the years ended December 31, 2019 and 2020, and are included in our Form 10 registration statement. None of our accounting policies are considered critical accounting policies.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Commodity~~Not ~~Price Risk~~applicable.

~~Our~~ITEM ~~major~~4 ~~market-risk~~CONTROLS ~~exposure~~AND is the commodity pricing applicable to our oil and natural gas production. Realized commodity prices received for such production are primarily driven by the prevailing worldwide price for crude oil and spot prices applicable to natural gas. Prices have fluctuated significantly during the last five years and such volatility is expected to continue, and the range of such price movement is not predictable with any degree of certainty. In the normal course of business we periodically enter into commodity derivative transactions, including fixed price and ratio swaps to mitigate exposure to commodity price movements, but not for trading or speculative purposes.PROCEDURES

As of September 30, 2015, we had no hedge contracts outstanding.

We are exposed to market risk on derivative instruments to the extent of changes in market prices of crude oil. However, the market risk exposure on these derivative contracts is generally offset by the gain or loss recognized upon the ultimate sale of the commodity. Unrealized gains and losses, at fair value, are included on our consolidated balance sheets as current or non-current assets or liabilities based on the anticipated timing of cash settlements under the related contracts. The change in the fair value of our commodity derivative contracts that are effective are recorded to Accumulated Other Comprehensive Income (Loss) in Stockholders’ Equity in the Consolidated Balance Sheet. The ineffective portion of the change in fair market value of derivatives is recorded currently in earnings as a component of Oil and Gas Hedging in the Consolidated Statements of Operations. We estimate the fair values of swap contracts based on the present value of the difference in exchange-quoted forward price curves and contractual settlement prices multiplied by notional quantities

Interest Rate Risk

All of our debt has a fixed interest rate, and we are not presently exposed to interest rate risk. In the event that we establish a new revolving credit facility we expect that such facility will provide for interest at a floating rate and that borrowing under such facility will expose us to risk of changing interest rates.

ITEM 4

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of September 30, ~~2015~~2021 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of September 30, ~~2015~~2021. Such conclusion reflects the assumption of duties of principal financial officer by our chief executive officer and the resulting lack of segregation of duties. Until we are able to remedy these material weaknesses, we are relying on third party consultants and our accounting firm to assist with financial reporting.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended September 30, ~~2015~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 6 EXHIBITS

EXHIBITS

Exhibit Number		Description

31.1		Certification of CEO and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of CEO and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, were formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Stockholders’ Deficit, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104		Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL.

Exhibit No.		Description
31.1		Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of CEO 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 CFO 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 Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Labels Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized.

	SARATOGA RESOURCES, INC.
Date: November 16, 2015
Date: October 29, 2021
	By:	/s/ Thomas Cooke
		Thomas Cooke
		Chief Executive Officer
		CEO and President (Principal Executive Officer and Principal Financial Officer)
	By:	/s/ Randal B. McDonald, Jr.
		Randal B. McDonald, Jr.
		Vice President –Finance and Accounting

2913

Filing Compare · SARATOGA RESOURCES INC /TX