10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended November 30, 2014

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

For the transition period from _______ to _______

Commission File No. 000-52892

Hawker Energy, Inc.

(Exact name of registrant as specified in its charter)

Nevada	98-0511130
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

326 S. Pacific Coast Highway, Suite 102 Redondo Beach CA	90277
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (310) 438-7997

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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.

ý Yes           ☐No

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

ý Yes    ☐No (Not required)

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	ý

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

☐Yes    ý No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

75,980,403 shares of common stock as of January 6, 2014.

HAWKER ENERGY, INC.

FOR THE FISCAL QUARTER ENDED

NOVEMBER 30, 2014

INDEX TO FORM 10-Q

PART I		Page
Item 1	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4	Controls and Procedures	39
PART II
Item 1	Legal Proceedings	40
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3	Defaults Upon Senior Securities	41
Item 4	Mine Safety Disclosures	41
Item 5	Other Information	41
Item 6	Exhibits	43
	Signatures	44

2

PART I

Item 1 Financial Statements

HAWKER ENERGY, INC.

 CONDENSED CONSOLIDATED BALANCE SHEETS

 (Unaudited)

	November 30, 2014			August 31, 2014
ASSETS
Current assets:
Cash	$	6,604		$	13,207
Accounts receivable		40,672			42,815
Inventory		6,452			6,092
Prepaid expenses		3,763			22,389
Secured subordinated loan receivable, short term		1,505,451			1,298,322
Total current assets		1,562,942			1,382,825
Fixed assets:
Fixed assets, net of accumulated
depreciation of $20,815 and $19,605, respectively		22,311			14,269
Other assets:
Capitalized oil and gas properties, net of accumulated
depletion of $93,176 and $86,193, respectively		723,063			730,046
Deposits		5,000			5,000
Total assets	$	2,313,316		$	2,132,140
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	1,272,854		$	813,438
Accrued bonuses		480,000			480,000
Net profits interest payable, current portion		20,570			20,065
Loans payable to related parties, short term		332,182			226,876
Convertible notes payable, short term		1,030,178			951,599
Total current liabilities		3,135,784			2,491,978
Long term liabilities:
Asset retirement obligations		171,682			168,110
Net profits interest payable, long term portion		143,704			149,039
Total long term liabilities		315,386			317,149
Total liabilities		3,451,170			2,809,127
Stockholders' equity (deficit):
Common stock; $0.001 par value; 750,000,000
shares authorized, 74,674,703 and 41,174,703
shares issued and outstanding, respectively		74,675			41,175
Common stock payable		-			50,000
Additional paid in capital		2,328,899			1,224,300
Accumulated deficit		(3,676,897	)		(2,047,462	)
Total stockholders' equity (deficit)		(1,273,323	)		(731,987	)
Non-controlling interest		135,469			55,000
Total equity (deficit)		(1,137,854	)		(676,987	)
Total liabilities and equity (deficit)	$	2,313,316		$	2,132,140

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

3

HAWKER ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended
	November 30, 2014			November 30, 2013
Revenue:
Oil revenues	$	10,294		$	25,764
Expenses:
Direct operating costs		15,996			12,972
Depletion, depreciation and amortization		11,036			8,110
Professional fees		430,563			71,071
General and administrative expenses		74,527			6,231
Equity compensation expense		1,088,179			-
Total expenses		1,620,301			98,384
Net operating (loss)		(1,610,007	)		(72,620	)
Other (income) expense:
Interest (income)		(10,504	)		-
Interest expense		39,463			3,413
Total other expense		28,959			3,413
Loss before income taxes		(1,638,966	)		(76,033	)
Provision for income taxes		-			-
Net loss		(1,638,966	)		(76,033	)
Net loss attributable to non-controlling interest		9,531			-
Net loss attributable to the Company	$	(1,629,435	)	$	(76,033	)
Net loss per common share - basic and diluted	$	(0.03	)	$	-
Weighted average common shares outstanding -
basic and diluted		60,064,813			17,654,293

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

4

HAWKER ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months Ended
	November 30, 2014			November 30, 2013
Cash flows from operating activities:
Net loss before loss attributable to
non-controlling interest	$	(1,638,966	)	$	(76,033	)
Depletion, depreciation and amortization		7,464			5,915
Accretion of asset retirement obligation		3,572			2,195
Accretion of net profits interest liability		4,104			3,041
Equity compensation expense		1,088,179			-
Other		13,000			-
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Accounts receivable		2,143			(1,493	)
Inventory		369			3,427
Prepaid expenses		5,626			2,295
Accounts payable and accrued expenses		487,717			71,101
Net cash (used in) provided by operating activities		(26,792	)		10,448
Cash flows from investing activities:
Cash acquired in Hawker acquisition		-			6,004
Purchase of fixed assets		(9,252	)		-
Secured subordinated loan receivable		(196,625	)		-
Net cash (used in) provided by investing activities		(205,877	)		6,004
Cash flows from financing activities:
Loans from related parties, short term		105,000			-
Repayment of loans from related parties, short term		(10,000	)		-
Payments on net profits interest agreement		(8,934	)		(5,957	)
Proceeds from convertible notes		50,000			-
Proceeds from sale of non-controlling interest		90,000			-
Net cash provided by (used in) financing activities		226,066			(5,957	)
Net change in cash		(6,603	)		10,495
Cash, beginning		13,207			8,298
Cash, end	$	6,604		$	18,793
Supplemental disclosure of cash flow information:
Interest paid	$	4,104		$	3,041

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

5

HAWKER ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

 (Unaudited)

																				Total
	Common Stock				Common Stock Payable						Additional			Accumulated			Non-Controlling			Equity
	Shares		Amount		Shares			Amount			Paid-in Capital			(Deficit)			Interest			(Deficit)
Balance, August 31, 2013		-	$	-		-		$	-		$	350,000		$	(351,226	)	$	-		$	(1,226	)
Recapitalization on completion of acquisition of SCNRG		25,961,983		25,962		2,000,000			2,000			(26,336	)		-			-			1,626
Issued to acquire Hawker Energy (Rincon), LLC		3,000,000		3,000		-			-			(138,199	)		-			-			(135,199	)
Issuance of common stock payable		2,000,000		2,000		(2,000,000	)		(2,000	)		-			-			-			-
Net proceeds from unit offering		10,212,720		10,213		-			-			970,075			-			-			980,288
Proceeds received for common stock payable		-		-		500,000			50,000			-			-			-			50,000
Stock option compensation		-		-		-			-			68,760			-			-			68,760
Sale of non-controlling interest		-		-		-			-			-			-			55,000			55,000
Net loss attributable to the Company		-		-		-			-			-			(1,696,236	)		-			(1,696,236	)
Balance, August 31, 2014		41,174,703		41,175		500,000			50,000			1,224,300			(2,047,462	)		55,000			(676,987	)
Proceeds received for common stock payable		500,000		500		(500,000	)		(50,000	)		49,420			-			-			(80	)
Equity compensation pursuant to HERLLC Option
Agreement		33,000,000		33,000		-			-			997,500			-			-			1,030,500
Stock option compensation		-		-		-			-			57,679			-			-			57,679
Sale of non-controlling interest		-		-		-			-			-			-			90,000			90,000
Net loss attributable to non-controlling interest		-		-		-			-			-			-			(9,531	)		(9,531	)
Net loss attributable to the Company		-		-		-			-			-			(1,629,435	)		-			(1,629,435	)
Balance, November 30, 2014		74,674,703	$	74,675		-		$	-		$	2,328,899		$	(3,676,897	)	$	135,469		$	(1,137,854	)

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

6

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

1.           DESCRIPTION OF BUSINESS

Hawker Energy, Inc. (“we”, “our”, “us”, “Hawker” or “the Company”) was incorporated under the laws of the State of Nevada on June 12, 2006, under the name of Uventus Technologies Corp. On September 23, 2009, we merged with our wholly-owned subsidiary and changed our name to Sara Creek Gold Corp.  Subsequently, on September 11, 2014, we changed our name to Hawker Energy, Inc.

On October 25, 2013, we closed on the Agreement and Plan of Reorganization with SCNRG, LLC (“SCNRG”), a California limited liability company, whereby we acquired 100% of the membership interest in SCNRG, resulting in SCNRG becoming our wholly-owned subsidiary, in exchange for 14.0 million shares of our common stock issued to the members of SCNRG (see Note 4).  For accounting purposes, our acquisition of SCNRG has been accounted for as a reverse acquisition whereby SCNRG is the accounting acquirer effectuating a recapitalization of Hawker.  Accordingly, SCNRG is considered the acquirer for accounting purposes and, therefore, the historical financial statements of SCNRG are presented and consolidated with Hawker’s beginning October 25, 2013.  As a result of this transaction, Hawker changed its business direction and is now in the oil and gas industry.   Our goal is to acquire and develop mature leases, interests and other rights to oil and gas producing properties with proven undeveloped potential.

2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis Of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information.

The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended August 31, 2014, which contains the audited financial statements and notes thereto for Hawker.

Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.  Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.  It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.  The interim results for the three months ended November 30, 2014, are not necessarily indicative of results for the full fiscal year.

Principles Of Consolidation

The acquisition of SCNRG by Hawker on October 25, 2013, has been accounted for as a reverse acquisition whereby SCNRG is the accounting acquirer effectuating a recapitalization of Hawker.  Therefore, our condensed consolidated financial statements include the historic accounts of SCNRG, and consolidated with Hawker’s beginning October 25, 2013.

On January 1, 2014, we acquired all of the membership interests of Hawker Energy, LLC, which has a wholly-owned subsidiary, Punta Gorda Resources, LLC (see Note 5).  Hawker Energy, LLC changed its name to Hawker Energy (Rincon), LLC on October 22, 2014.  Our condensed consolidated financial statements include the accounts of these entities beginning January 1, 2014.

All significant intercompany balances and transactions have been eliminated.

7

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

Use Of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates included in the financial statements are: (1) depreciation and depletion; (2) accrued assets and liabilities; (3) asset retirement obligations; and (4) net profits interest payable.  Recorded amounts are based on estimates of oil reserves, retirement costs and dates.  By their nature, these estimates including the estimates of future prices and costs, and the related future cash flows are subject to measurement uncertainty, and the impact in the consolidated financial statements of future periods could be material.  Although management believes these estimates are reasonable, changes in facts and circumstances or discovery of new information may result in revised estimates.  Actual results could differ from those estimates.

Changes In Accounting Policies

The Company has not had any changes in accounting policies during the three months ended November 30, 2014.

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-9, Revenue From Contracts With Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to receive in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is not permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared based on the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.  The Company has not conducted its analysis to determine whether it will adopt the new standard early or not.

3.           GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of November 30, 2014, the Company had total current assets of $1,562,942 but a working capital deficit in the amount of $1,572,842. The Company incurred a net loss of $1,629,435 for the three months ended November 30, 2014 and an accumulated net loss of $3,676,897 since inception.  The Company has earned insufficient revenues since inception and its cash resources are insufficient to meet its planned business objectives.

8

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain additional financing or sale of its common stock as may be required and ultimately to attain profitability.

Management’s plan in this regard is to complete the acquisition of TEG Oil & Gas U.S.A., Inc. (see Note 7), the further development of which is dependent on financing, and to raise capital through a combination of equity and debt financing sufficient to finance continuing operations for the next twelve months.  However, there can be no assurance that the Company will be successful in completing such financing.  

4.           ACQUISITION OF SCNRG

As described in Note 1, on October 25, 2013, we acquired 100% of the membership interest in SCNRG, resulting in SCNRG becoming a wholly-owned subsidiary of Hawker, in exchange for 14.0 million shares of our common stock issued to the members of SCNRG.  For accounting purposes, the acquisition of SCNRG by Hawker has been accounted for as a reverse acquisition effectuating a recapitalization of SCNRG.  Accordingly, SCNRG is considered the acquirer for accounting purposes and, therefore, the historical financial statements of SCNRG are brought forward and consolidated with Hawker’s beginning October 25, 2013.  

The 14.0 million common shares issued in the transaction had an estimated fair value of $14,000.  The following is a summary of the fair value of consideration transferred in exchange for the estimated fair value of net assets acquired on October 25, 2013:

Fair value of consideration transferred:
14,000,000 shares of Hawker restricted common stock	$	14,000
Fair value of net assets acquired:
Cash	$	6,004
Accounts receivable		1,553
Oil properties		26,500
Deposit		5,000
Accounts payable and accrued liabilities		(37,431	)
Net assets acquired	$	1,626

The difference between the estimated fair value of the common shares issued and the net assets acquired was recorded to additional paid-in capital.

5.           ACQUISITION OF HAWKER ENERGY (RINCON), LLC

On January 1, 2014, we exercised our option to acquire all of the membership interests in Hawker Energy (Rincon), LLC (“HERLLC”) from Darren Katic (who was also a seller in our transaction with SCNRG) and Charles Moore (collectively the “HERLLC Sellers”), pursuant to an Amended and Restated Option Agreement (“Option Agreement”) dated November 20, 2013.  We issued 3,000,000 shares of our common stock to the HERLLC Sellers as consideration for the acquisition and, as described below, were required to issue up to an additional 33,000,000 shares of our common stock to the HERLLC Sellers upon us or HERLLC consummating certain follow-on transactions described below (“Potential Follow-On Transactions”).  In addition, we assumed $135,199 in net liabilities of HERLLC.  The terms for the issuance of additional shares were revised on October 10, 2014 as described below.

9

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

HERLLC, through its wholly-owned subsidiary Punta Gorda Resources, LLC (“Punta Gorda”), claims oil production and development rights of coastal lease PRC 145.1 just offshore Ventura County in the Rincon Field and ownership rights to an associated on-shore drilling and production site, which rights are being challenged in court by the lease’s operator of record.  HERLLC has also engaged in preliminary discussions with various third parties concerning the Potential Follow-On Transactions, none of which were deemed by us to be reasonably possible as of January 1, 2014 (the date of our acquisition of HERLLC) due to the preliminary status of those discussions and lack of certainty around HERLLC’s or Hawker’s ability to finance one or more of these Potential Follow-On Transactions.  Other than its contested interest in PRC 145.1 and its preliminary discussions concerning the Potential Follow-On Transactions, HERLLC had no assets or operations as of January 1, 2014.  PRC 145.1 and the Potential Follow-On Transactions are discussed in greater detail below.

PRC 145.1 is subject to 24.5% in overriding royalties, primarily to the State of California. A single active well on PRC 145.1 produced an average of 11 barrels of oil per day (gross production before royalties) for the nine months September 30, 2014. This lease has ten other non-active wells, one or more of which may be recompleted or re-drilled.  Although initial technical work has been done on PRC 145.1 to develop a preliminary understanding of the resource and opportunity, no reserve reports done to SEC standards have been completed to date.

All rights claimed by HERLLC to PRC 145.1 are being challenged in court by the lease’s operator of record -- Case No. 56-2013-00440672-CU-BC-VTA pending in Ventura County Superior Court.  HERLLC is currently not receiving any net proceeds from production on this lease pending resolution of this matter in our favor.

After we exercised our option to acquire HERLLC on January 1, 2014, the Option Agreement provided that the HERLLC Sellers were entitled to additional shares of our common stock upon the consummation of Potential Follow-On Transactions as follows:

(a) 2,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of California Oil Independents or its oil and gas interests being the “Doud” leases, comprised of approximately 340 acres, 20 wells and two tank batteries, located in the Monroe Swell Field, near Greenfield, California;

(b) 2,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of a participation in South Coast Oil – Huntington Beach CA oil and gas interests comprised of approximately 340 acres, and 20 wells (of which 9 are active) and 4 tank batteries, and known as the “Town Lot”;

(c) 5,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of all of the oil and gas leases held by Christian Hall (or affiliates) in the Midway-Sunset field located between the towns of Taft and McKittrick in Kern County, CA;

(d) 10,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of TEG Oil & Gas USA, Inc. (or certain oil and gas interests held by it, being all leases located in the Tapia Field, Los Angeles County, California);

(e) 7,000,000 shares of our common stock shall be issued upon the conveyance to us or HERLLC of certain assets and rights regarding PRC 145.1 Lease held by Rincon Island Limited Partnership or settlement in lieu of such conveyance; and

(f) 7,000,000 shares of our common stock shall be issued upon the conveyance to us or HERLLC of certain mineral rights regarding PRC 427 Lease held by ExxonMobil, a lease that is adjacent to PRC 145.1 Lease above.

The Potential Follow-On Transactions described above were dependent on a number of variables that were not within our control and, as a result, none of the transactions were deemed by us to be reasonably possible as of January 1, 2014 (the date of our acquisition of HERLLC).  Each of the Potential Follow-On Transactions described above, if consummated, would constitute a transaction separate and independent from our acquisition of HERLLC pursuant to the option.  Any shares of our common stock that may be issued upon the consummation of any of the Potential Follow-On Transactions (or pursuant to the terms of the October 10, 2014, amendment described below) will constitute expensed costs incurred concurrently with consummation of the applicable follow-on transaction (as opposed to incremental consideration for our acquisition of HERLLC).

10

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

The assets and liabilities of HERLLC at the date of acquisition were recorded at their fair values of:

Cash	$	1,214
Prepaid expenses		16,625
Less:
Accounts payable		(123,413	)
Loan payable to related party, short term		(29,625	)
Net liabilities assumed	$	135,199

The $138,199 difference between the par value of the common stock issued, $3,000, and the net liabilities assumed, $135,199, was recorded to paid in capital as there is no objective evidence of the value of HERLLC’s assets, which consist of the disputed claim to coastal lease PRC 145.1, and inability to determine a probability of success of the litigation.  As a result and in an effort to fairly represent and not overstate the consolidated assets of Hawker, a decrease in capital was deemed appropriate.

On October 10, 2014, Hawker authorized an amendment (the “Amendment”) to the Option Agreement.  Under the original terms of the Option Agreement, Messrs. Katic and Moore were entitled to, in the aggregate, up to 33,000,000 additional shares of our common stock upon the consummation of certain Potential Follow-on Transactions. The Amendment waived all of the follow-on transaction requirements and authorized the immediate issuance to Messrs. Katic and Moore of the full 33,000,000 shares (16,500,000 each). Of those shares, we hold 19,000,000 shares in escrow, to be released as follows: (i) 10,000,000 shares upon completion of the acquisition of the assets of TEG Oil & Gas, Inc. (located in the Tapia Field, Los Angeles County, California), and (ii) 9,000,000 shares upon completion, on or before December 31, 2017, of any one of the transactions evaluated by HERLLC, our wholly-owned subsidiary, prior to its reorganization with Hawker, including a transaction resulting in Hawker ownership of oil and gas lease interests in any one of the following unique oil fields:

(a) Cat Canyon (leases Tognazzini, Wickenden, Los Alamos, GWP, and those immediately adjacent to, in each case, in Santa Barbara County);

(b) Santa Maria (T 11N, R 36W extending southeast through T9N R33W in Santa Barbara County);

(c) Casmalia (leases Tompkins, Peshine, and those immediately adjacent to, in each case, in Santa Barbara County);

(d) North Lost Hills (Sections 12 & 13, T25S, R19E, and Sections 7 & 18, T25S, R 20E, totaling 1,500 acres in Kern County CA);

(e) Maricopa (McFarland and Jameson leases totaling 40 acres in Kern County);

(f) Pine Meadows (Section 1 Township 31 South Range 22E in Kern County); or

(g) Torrance (Joughin and South Torrance Units totaling 900 acres in Los Angeles County).

Waiver of the Potential Follow-On Transaction requirements and the immediate issuance of the remaining shares is meant to simplify our common shareholding structure and share count and to assist in our capital raising efforts.

11

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

With respect to 14,000,000 shares of our common stock that were issued as a result of the Amendment, an equity compensation expense of $1,011,500 recorded based on the fair value of the shares at the date of issuance.  With respect to the 19,000,000 shares of our common stock that are in escrow, an equity compensation expense of $19,000 was recorded based on the par value of the shares at the date of issuance.  Total expense was $1,030,500, which was recorded in the three months ended November 30, 2014.  As and when subsequently released from escrow, a further expense will be recorded based on the fair value of the 19,000,000 shares (less amounts previously expensed based on par value) concurrently with consummation of the applicable follow-on transaction.  All of these amounts are not considered for accounting purposes to be incremental consideration for our acquisition of HERLLC.

Pursuant to a separate agreement dated November 13, 2014, between Messrs. Katic, Moore and Tywoniuk, Mr. Tywoniuk (a significant shareholder of Hawker) holds warrants to acquire 9.7222% of any shares of Hawker acquired by Messrs. Katic and Moore pursuant to the Amendment above.  This agreement amended a December 27, 2013, agreement entitling Mr. Tywoniuk to acquire 5% of any shares of Hawker acquired by Messrs. Katic and Moore pursuant to the Option Agreement.

6.           ACQUISITION OF AN ADDITIONAL 33.33% WORKING INTEREST IN DEEP LEASE

As a result of two transactions (described below) through our wholly-owned subsidiary SCNRG, we acquired the remaining 33.33% working interest in the DEEP Lease in the year ended August 31, 2014.

On February 4, 2014, SCNRG completed the acquisition of additional 20.5108% working interest in the DEEP Lease for $200,000 in cash plus assumed asset retirement obligations and net profits interest liabilities aggregating to an estimated fair value of $69,729, for total consideration of $269,729.  SCNRG’s working interest increased from 66.67% to 87.18% as a result of the purchase, effective February 1, 2014.  Our condensed consolidated financial statements include the increased working interest beginning February 1, 2014.  The purchase price was allocated $3,529 to machinery and equipment, and $266,200 to oil properties based on estimated fair values.

On May 15, 2014, SCNRG completed the acquisition of the remaining 12.8192% working interest in the DEEP Lease for $125,000 in cash plus assumed asset retirement obligations and net profits interest liabilities aggregating to an estimated fair value of $43,081, for total consideration of $168,081.  SCNRG’s working interest increased from 87.18% to 100.0% as a result of the purchase, effective May 15, 2014.  Our condensed consolidated financial statements include the increased working interest beginning May 15, 2014.  The purchase price was allocated $2,010 to machinery and equipment, and $166,071 to oil properties based on estimated fair values.

The operator, Caleco, LLC, will continue to operate the DEEP Lease on SCNRG’s behalf during a transitional period until SCNRG qualifies with the regulatory agency as an operator.

7.           SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM

Between April 18, 2014 and January 15, 2015, we and our wholly-owned subsidiary, Tapia Holdings, LLC (“Tapia Holdings”), made a number of advances to TEG Oil & Gas U.S.A., Inc. (“TEG”), pursuant to several secured subordinated notes and related security agreements, all as amended and restated into a Secured Subordinated Note dated January 12, 2015 (the “Note”), and a Fourth Amended and Restated Security Agreement dated January 12, 2015 (the “Security Agreement”), each executed by TEG, and a Limited Recourse Guarantee (“Guarantee”) and a Pledge Agreement (“Pledge Agreement”), each executed by Sefton Resources, Inc. (“Sefton”) (collectively, the “Loan Receivable Agreements”). The Loan Receivable Agreements and an Intercreditor Agreement (defined below) were entered into in connection with what ultimately became an executed Share Purchase Agreement to acquire TEG.

12

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

Share Purchase Agreement To Purchase All Of The Outstanding Shares Of Capital Stock Of TEG

On January 12, 2015, we entered into a Share Purchase Agreement (“Share Purchase Agreement”) with Sefton pursuant to which we agreed to purchase, and Sefton agreed to sell, 100% of the issued and outstanding shares of capital stock of Sefton’s wholly-owned subsidiary, TEG.  The principal terms of the Share Purchase Agreement are as follows: we will purchase all of the shares of TEG for $1.00 in cash plus the issuance of 3,000,000 shares of our common stock and a five-year warrant to purchase up to an additional 5,000,000 shares of our common stock for $0.25 per share.

Between April 18, 2014 and January 15, 2015, we and our wholly-owned subsidiary, Tapia Holdings, made a number of advances to TEG, pursuant to the Loan Receivable Agreements. These advances totaled approximately $1,637,352 as of January 15, 2015 (described further under “Secured Subordinated Loan Receivable, Short Term” below), plus accrued interest.  This amount constitutes additional consideration for the acquisition, as this loan receivable will not be settled prior to the closing of our acquisition of TEG.

The transactions contemplated by the Share Purchase Agreement are subject to several customary conditions, most notably that the purchase and sale must be approved by Sefton’s shareholders.

Bank of the West (“BOTW”), Sefton’s senior lender, has consented to our acquisition of TEG and has agreed to forbear taking enforcement action against TEG on the senior loan provided that (i) Hawker lend TEG not less than $350,000 within 90 days, (ii) interest on TEG's obligations to BOTW be increased to 9%, with a monthly pay rate of 5% and the remaining deferred 4% of unpaid interest compounded monthly, (iii) the proceeds of any sale, assignment, licensing or other transfer of any real or personal property rights which serve as collateral for TEG's obligations to BOTW be remitted directly to BOTW, and (iv) commencing no later than the first month after which the California Midway-Sunset First Purchase Price as published by the U.S. Energy Information Administration exceeds $60 per barrel, TEG will begin making outstanding property tax payments to the County of Los Angeles of at least $15,000 per month.

As a result of a significant decline in oil prices and other factors, the transaction described above amends and replaces the transaction described in our Annual Report on Form 10-K filed November 24, 2014 to acquire 80% interest in the assets of TEG pursuant to a non-binding letter of intent dated June 18, 2014.

TEG’s assets comprise four oil and gas leases encompassing the Tapia Canyon field (the “Tapia Assets”) and one lease west of the Tapia Canyon field (the “Eureka Assets”), and the accompanying production equipment.

Secured Subordinated Loan Receivable, Short Term

Under the terms of the Loan Receivable Agreements, TEG agreed to pay us the principal sum of $2,100,000, or such lesser amount as may be outstanding from time to time, with interest on the unpaid principal amount at the rate of 3.0% per annum.  We advanced $196,625 to TEG during the three months ended November 30, 2014, for a total at November 30, 2014, of $1,487,352, and an additional $150,000 subsequent to November 30, 2014, for a total at January 15, 2015 of $1,637,352, not including accrued interest.  Further advances are subject to our sole and absolute discretion. The loan receivable matures on December 31, 2015, at which time all outstanding principal and accrued interest is due and payable in full.  The assets of TEG secure the Note, which is also guaranteed on a limited recourse basis by Sefton. Sefton’s Guarantee is secured by a pledge of all of the outstanding shares of TEG.  TEG’s assets are located in the Tapia and Eureka Fields, Los Angeles and Ventura Counties, California. The Note and our security interest in the assets of TEG are subordinate to senior indebtedness of TEG, pursuant to an Amended and Restated Subordination and Intercreditor Agreement (“Intercreditor Agreement”) dated January 1, 2015, as amended, by and among Tapia Holdings, Hawker, TEG, Sefton, TEG’s affiliate TEG MidContinent, Inc., BOTW, and us.

13

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

The Security Agreement and the Pledge Agreement also provide that it is a default under those agreements if the transactions contemplated by the Share Purchase Agreement are not consummated by January 31, 2015 (including if Sefton’s shareholders have not approved the transactions by that date). TEG further agreed to cease and terminate any solicitation or encouragement of a third party acquisition proposal; provided, that, if TEG receives an unsolicited, bona fide acquisition proposal that is found to be superior to the terms of the Share Purchase Agreement, to the extent we decline to renegotiate the Share Purchase Agreement terms or to otherwise match the terms of the third party acquisition proposal, TEG may pursue such third party acquisition proposal. The Security Agreement, Pledge Agreement and Guarantee also contain other representations, warranties and covenants of both parties that are customary for agreements of these types.

The period end balance of the secured subordinated note receivable is comprised of the following:

	November 30, 2014		August 31, 2014
Principal	$	1,487,352	$	1,290,727
Accrued interest		18,099		7,595
Total	$	1,505,451	$	1,298,322

14

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

8.           FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES

The asset categories of fixed assets and capitalized oil and gas properties at November 30, 2014 and August 31, 2014 were as follows:

	November 30, 2014
	Cost		Accumulated Depletion, Depreciation and Amortization		Net Book Value
Machinery and equipment	$	33,874	$	20,815	$	13,059
Other fixed assets		9,252		-		9,252
Total fixed assets		43,126		20,815		22,311
Capitalized oil and gas properties		816,239		93,176		723,063
Total	$	859,365	$	113,991	$	745,374

	August 31, 2014
	Cost		Accumulated Depletion, Depreciation and Amortization		Net Book Value
Fixed assets: machinery and   equipment	$	33,874	$	19,605	$	14,269
Capitalized oil and gas properties		816,239		86,193		730,046
Total	$	850,113	$	105,798	$	744,315

15

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

9.           LOANS PAYABLE TO RELATED PARTIES, SHORT TERM

Loans payable to related parties, short term, consist of the following at November 30, 2014, and August 31, 2014:

	November 30,		August 31,
	2014		2014
Darren Katic	$	151,000	$	161,000
Manhattan Holdings, LLC		90,000		60,000
Gerald Tywoniuk		60,000		-
Kristian Andresen		18,525		-
Total short-term loans		319,525		221,000
Accrued interest payable		12,657		5,876
Loans payable to related parties, short term	$	332,182	$	226,876

Loans payable to related parties are unsecured and bear interest at 10% per annum.  Mr. Katic’s loan is due on demand.  Of the Manhattan Holdings, LLC loan balance, $60,000 was originally due on October 31, 2014, but the maturity date on that portion was extended to January 31, 2015, in combination with an additional $30,000 loan.  Other loans are due January 31, 2015.  Accordingly, all loans from related parties above have been treated as short-term loans.  Mr. Katic is an officer, director and significant shareholder.  Manhattan Holdings, LLC and Gerald Tywoniuk are significant shareholders.  Kristian Andresen is a director and significant shareholder.

16

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

10.           CONVERTIBLE NOTES PAYABLE, SHORT TERM

Between May 13, 2014, and November 30, 2014, we issued a number of convertible notes payable (“CNP”).   All were issued in amounts equal to the cash we received, and bear simple interest on the unpaid principal balance at 12% per annum, which is payable on maturity.

Convertible notes payable, short term, consist of the following at November 30, 2014, and August 31, 2014; conversion features, security provisions and warrants to acquire common stock of Hawker are also set forth below:

	Issue Date	Maturity Date	November 30, 2014		August 31, 2014
CNP 1 (1) (2) (3)	June 25, 2014	November 30, 2014	$	350,000	$	350,000
CNP 2 (1) (2) (3)	May 30, 2014	November 30, 2014		250,000		250,000
CNP 3 (1) (3) (4)	July 17, 2014	June 30, 2015		100,000		100,000
CNP 4 (1) (2) (3) (4) (5)	July 17, 2014	July 10, 2015		100,000		100,000
CNP 5 (6)	May 13, 2014	May 13, 2016		50,000		50,000
CNP 6 (1) (2) (3) (4)	July 25, 2014	July 25, 2015		50,000		50,000
CNP 7 (1) (2) (3) (4)	August 28, 2014	July 25, 2015		30,000		30,000
CNP 8 (1)(3)(4)	September 26, 2014	September 26, 2015		25,000		-
CNP 9 (1)(2)(3)	November 3, 2014	May 3, 2015		25,000		-
				980,000		930,000
Accrued interest payable				50,178		21,599
Convertible notes payable, short term			$	1,030,178	$	951,599

(1) Convertible at any time at the option of the investor into “Conversion Units.” Each Conversion Unit consists of one share of common stock of Hawker and one warrant to purchase one-half share of common stock of Sara Creek at an exercise price of $0.25 per share. The number of Conversion Units into which the note is convertible is computed by dividing all of the then outstanding principal and accrued interest under the note by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events).  Each warrant has a five-year life from the date the convertible note payable was issued.  In the event Hawker sells common stock for less than $0.10 per share, the conversion rate for CNP 1 and 9 shall be adjusted to that price.  In the case of CNP 1 and 2, the notes were amended September 18, 2014, to limit the conversion of a part or the entire convertible note payable at any one time to a maximum beneficial ownership in Hawker of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion.  CNP 9 is similarly limited.

(2) Hawker granted a security interest to the investor in all of its assets.

(3) The proceeds were required to be used solely for the purpose of allowing Tapia Holdings to make advances to TEG under the terms of the secured subordinated loan receivable described in Note 7.  Any repayment of such advances by TEG to Tapia Holdings must be used by us to immediately first repay convertible notes payable to the holder of CNP 1, 2 and 3, and second to repay other convertible notes payable pro rata.

17

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

(4) Conversion of unpaid principal into Conversions Units pursuant to the terms in (1) above is mandatory in the event Hawker closes the Proposed TEG Acquisition described in Note 7.  Conversion of unpaid interest into Conversion Units is at the election of Hawker.

(5) The holder is related to Darren Katic, who is an officer, director and significant shareholder.

(6) Unpaid principal and accrued interest is convertible at any time at the option of the holder into Conversion Units in an amount computed by dividing the amount converted by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events).  Repayment of the convertible note payable is required on collection of the secured subordinated loan receivable described in Note 7 if earlier than the maturity date above.  As Hawker expects to receive repayment on the secured subordinated loan receivable or close on the TEG acquisition within one year, this convertible note payable has been classified as a short term liability.

See Note 19 for subsequent events concerning convertible notes payable.

11.           ASSET RETIREMENT OBLIGATIONS

Our asset retirement obligations relate to the abandonment of oil wells and related surface facilities. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates.

The following shows the changes in asset retirement obligations for the three months ended November 30, 2014 and the year ended August 31, 2014:

	Three Months Ended November 30, 2014		Year Ended August 31, 2014
Asset retirement obligations, beginning	$	168,110	$	103,299
Liabilities acquired during the period		-		53,963
Liabilities settled during the period		-		-
Current period accretion		3,572		10,848
Asset retirement obligations, ending	$	171,682	$	168,110

12.           NET PROFITS INTEREST (“NPI”) PAYABLE

In connection with SCNRG’s December 1, 2009 Purchase and Sale Agreement for the DEEP Lease, and as part of the purchase price consideration, SCNRG entered into an Assignment of Net Profit Interest with Christian Hall Petroleum. Pursuant to the agreement, SCNRG is required to make monthly payments to the holder in an amount equal to 40% of SCNRG’s share of net profit (as defined in the agreement) from production.

Until February 1, 2014, SCNRG’s working interest in the DEEP property was 66.67%, and the NPI agreement called for a minimum monthly payment of $1,985 (SCNRG’s 66.67% share).  Beginning February 1, 2014, SCNRG’s working interest in the DEEP Lease increased to 87.18%, and its share of the minimum monthly payment became $2,596. Beginning May 15, 2014, SCNRG’s working interest in the DEEP Lease increased to 100.0%, and its share of the minimum monthly payment became $2,978.  Payments are required until SCNRG and other working interest owners have made NPI payments in aggregate between $347,000 and $357,410 on or before December 31, 2022 (the actual maximum amount within this range is dependent on when SCNRG and other working interest owners satisfy their aggregate NPI payment obligations).  As of November 30, 2014, SCNRG and other working interest owners have made NPI payments totaling $134,135.  SCNRG has paid its 66.67% working interest share of this amount through February 1, 2014, its subsequent 87.18% share through May 15, 2014, and its subsequent 100.0% share through November 30, 2014.

18

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

Given its terminating nature, the discounted present value of the minimum monthly NPI payments was recorded as a liability at SCNRG’s December 1, 2009, acquisition date of a 66.67% working interest in the DEEP Lease, and this liability was increased pro rata when its working interest increased to 87.18% on February 1, 2014, and again on May 14, 2014 when its working interest increased to 100.0%.  The discount rate used in all cases was 10.0% per annum.

Changes in SCNRG’s share of the NPI liability are as follows for the three months ended November 30, 2014 and the year ended August 31, 2014:

	Three Months Ended November 30, 2014			Year Ended August 31, 2014
NPI liability, beginning of period	$	169,104		$	124,597
Liabilities assumed in connection with       acquisition of additional DEEP Lease    working interests		-			58,847
Current period accretion		4,104			14,104
Payments made		(8,934	)		(28,444	)
NPI liability, end of period		164,274			169,104
Less: current portion		20,570			20,065
NPI liability, long-term portion	$	143,704		$	149,039

13.           INCOME TAXES

There was no current or deferred income tax expense (benefit) for the three months ended November 30, 2014 and 2013.  A valuation allowance has been established against net operating losses where it is more likely than not that such losses will expire before they are utilized.

14.           FAIR VALUE MEASUREMENTS

We hold certain financial assets, which assets are required to be measured at fair value on a recurring basis in accordance with the Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (“ASC Topic 820-10”).   ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.

The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

§ Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.  We believe accounts receivable, accounts payable and accrued expenses and accrued bonuses approximate fair value at November 30, 2014 and August 31, 2014.

19

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

§ Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs which are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

§ Level 3 - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider secured subordinated loan receivable, depleting assets, loans payable to related parties, convertible notes payable, asset retirement obligations and net profit interest liability to be Level 3. We determine the fair value of Level 3 assets and liabilities utilizing various inputs, including oil price quotations and contract terms.

	Fair Value Measurement
	Level 1		Level 2		Level 3
November 30, 2014
Assets:
Secured subordinate loan receivable	$	-	$	-	$	1,505,451
Capitalized oil and gas properties, net		-		-		723.063
Liabilities:
Loans payable to related parties, short term		-		-		(332,182	)
Convertible notes payable, short term		-		-		(1,030,178	)
Net profit interest liability		-		-		(164,274	)
Asset retirement obligation		-		-		(171,682	)
Total	$	-	$	-	$	530,198

	Fair Value Measurement
	Level 1		Level 2		Level 3
August 31, 2014
Assets:
Secured subordinate loan receivable	$	-	$	-	$	1,298,322
Capitalized oil and gas properties, net		-		-		730,046
Liabilities:
Loans payable to related parties, short term		-		-		(226,876	)
Convertible notes payable, short term		-		-		(951,599	)
Net profit interest liability		-		-		(169,104	)
Asset retirement obligation		-		-		(168,110	)
Total	$	-	$	-	$	512,679

20

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

15.           COMMITMENTS AND CONTINGENCIES

Commitments

Oil production from the DEEP Lease is subject to a 1% overriding royalty.  Additionally, production is also subject to an aggregate additional 19.92% royalty for total royalties of 20.92%.

Further, on December 1, 2009, SCNRG entered into an Operating Agreement with Caleco, LLC (“Caleco”) for a term equal to the life of the DEEP Lease wells.  As the operator, Caleco incurs production and other costs, which are subsequently billed to SCNRG for its share through a joint interest billing process; and the operator distributes to SCNRG its share of revenue received from production, less royalties and NPI obligations. All expenses and revenue presented by the operator represent the pro rata share of the revenue earned and expenses incurred.  In accordance with the terms of the agreement, the operator is entitled to a fee for services but has instead elected to bill SCNRG based on actual time and materials.  As described in Note 6, SCNRG increased its working interest in the DEEP Lease from 66.67% to 100.0% during the year ended August 31, 2014; Caleco continues to operate the DEEP Lease on SCNRG’s behalf during a transitional period until SCNRG qualifies with the regulatory agency as an operator.

Contingencies

We are 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 owners for the cost of pollution cleanup resulting from operations and subject the owners to liability for pollution damages. In some instances, the operator may be directed to suspend or cease operations in the affected area.  As of November 30, 2014, and August 31, 2014, we have no reserve for environmental remediation and are not aware of any environmental claims.

16.           EQUITY

Common Stock

During the three months ended November 30, 2014, we issued an aggregate of 500,000 Units to three investors in consideration of an aggregate of $50,000 in cash received prior to August 31, 2014, and shown as common stock payable as of that date.  No commissions were paid or payable.  Other transaction costs were $80.  The price of each Unit was $0.10. Each Unit was comprised of one share of our common stock, together with a warrant to acquire an additional one-half share of our common stock on payment of $0.20 per share. The warrants expire five years from the closing date.

Related party transactions are set forth in Note 17.  See also subsequent events in Note 19.

21

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

Shares Of Common Stock Potentially Issuable Pursuant To Warrants, Convertible Notes Payable And Options

Pursuant to warrants issued in our private placements of securities from January 10, 2014 through November 30, 2014, described above, up to 5,356,360 shares of our common stock would be issuable upon payment to us of $0.20 per share.  The warrants expire five years from the date of each private placement.

Up to 15,186,156 shares of common stock could be issued pursuant to the convertible notes payable described in Note 10, as follows:

· Up to 9,800,000 shares of common stock would be issuable if investors elect or are required to convert all of the $980,000 aggregate principal amount on or prior to maturity, with the number of shares issuable on conversion computed at a rate of $0.10 per share.

· Up to an additional 4,650,000 shares of common stock would be issuable pursuant to warrants created if investors elect or are required to convert certain convertible note payables prior to or on maturity (which notes payable are included in the preceding paragraph) and pay us $0.25 per share on exercise.

· An additional amount of up to approximately 501,784 shares of common stock would be issuable determined based on the amount of any accrued interest payable as of November 30, 2014, if investors elect or are required to convert their notes payable into common stock, based on a conversion rate of $0.10 per share.  Conversion of accrued interest into common stock would create warrants to acquire up to a further 234,372 shares at an exercise price of $0.25 per share.

On May 14, 2014, 5,950,000 common stock options were issued to our officers and other key consultants.

· Each option has a life of 10 years and a strike price of $0.10 per share.  One million stock options vested on December 15, 2014, with the balance of 4,950,000 stock options vesting one-third on each of May 13, 2015, 2016 and 2017.  There are no other options outstanding.

· These options were granted pursuant to the 2014 Stock Plan approved by written consent of a majority of our stockholders on March 18, 2014, which authorized 15% of our outstanding shares of common stock to be available for grant in the form of options or stock purchase rights.  At November 30, 2014, 15% of our outstanding common stock is 11,201,205 shares, of which we have granted 5,950,000 stock options as stated above.

· The fair value of each stock option award was estimated on the date of grant using the Black-Scholes option pricing method.  Compensation costs related to the options granted are recognized on a straight-line basis over the vesting period.  The expected life assumption was 10 years, the same as the contract life, as we do not have historical data upon which to base an expected term assumption.  No forfeitures were assumed, as we have no historical data.  Expected volatility was based on historical volatility of our common stock.  The risk-free interest rate was derived from the U.S. Treasury yields in effect at the time of grant and the dividend yield was zero, based on historical experience and expected future changes. 

· Equity compensation expense relating to stock options was $57,679 for the three months ended November 30, 2014.  There was no equity compensation expense for the three months ended November 30, 2013.  The total compensation cost relating to unvested stock option grants not yet recognized at November 30, 2014, was $284,000, and the weighted average period over which this cost is expected to be recognized, as of November 30, 2014, is approximately 2.4 years.

Non-Controlling Interest

We report non-controlling interest in Tapia Holdings in these unaudited interim financial statements pursuant to paragraph ASC No. 810-10-65-1.  The non-controlling interest of $135,469 reported on the balance sheet as of November 30, 2014, represents the non-controlling interest holders' proportionate share of the equity of the Tapia Holdings.  Of this amount, $145,000 represents capital contributions received, which has been reduced by $9,531 for the non-controlling interest share of losses for the three months ended November 30, 2014.

22

HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

17.           RELATED PARTY TRANSACTIONS

The following information sets forth related party transactions, being transactions with:

· Mr. Kristian Andresen is a director of Hawker and a significant shareholder.  Until October 25, 2013, he was also our CEO, and from October 25, 2013, until July 17, 2014, he was Secretary of Hawker.  Mr. Andresen has been actively providing services to Hawker since October 25, 2013.

· Mr. Darren Katic is a director and Chief Executive Officer and Chief Financial Officer of Hawker.  He was a member of SCNRG, which we acquired on October 25, 2013, and at which point Mr. Katic became a director, officer and a significant shareholder of Hawker.

· Manhattan Holdings, LLC (“Manhattan”) was a member of SCNRG, which Hawker acquired on October 25, 2013, at which point Manhattan became a significant shareholder of Hawker.

· Mr. Charles Moore was a managing member of HERLLC until Hawker acquired his interest on January 1, 2014, at which point he became a significant shareholder of Hawker.  Mr. Moore has been actively providing services to Hawker since that date.

· Mr. Gerald Tywoniuk was a member of SCNRG, which Hawker acquired on October 25, 2013, at which point he became a significant shareholder of Hawker.  Mr. Tywoniuk has been actively providing services to Hawker since that date.

HERLLC

On January 1, 2014, Hawker exercised its option to acquire all of the membership interests in HERLLC from Mr. Katic and Mr. Moore (collectively the “HERLLC Sellers”), as described in Note 5.  Hawker issued 3,000,000 shares of our common to the HERLLC Sellers as consideration for the acquisition, 1,500,000 shares to each HERLLC Seller.  Hawker also assumed net liabilities of $135,199, including $29,625 owing to Mr. Katic.

The HERLLC option was originally entered into with Hawker on October 15, 2013 and amended on November 20, 2013 to (a) extend the term of the option, (b) revise the option consideration payable upon consummation of certain transactions described in the Agreement and (c) provide for additional option consideration in the event of the consummation of certain transactions not previously contemplated by the parties.  On October 10, 2014, the Board of Hawker waived all of the follow-on transaction requirements and authorized the immediate issuance to Messrs. Katic and Moore of 33,000,000 shares (16,500,000 each). Of those shares, we hold 19,000,000 shares in escrow, to be released in accordance with the provisions described in Note 5, Acquisition of Hawker Energy (Rincon), LLC.

Loan Payable To Related Parties, Short Term

The components of $332,182 of loans payable to related parties, short term, are disclosed in Note 9.  Interest expense on such loans was $6,781 and $0 for the three months ended November 30, 2014 and 2013 respectively.

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HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

Loans Payable To Related Parties, Long Term

SCNRG received various loans from its former members from its inception totaling $89,833 as of August 31, 2013: Mr. Katic ($38,500), Manhattan ($38,500) and Mr. Tywoniuk ($12,833).  Each loan was originally unsecured, non-interest bearing and due on demand. On September 18, 2013, each loan was formalized through the issuance of an amended and restated promissory note to each former member. The amended and restated promissory notes were unsecured, bore interest at a rate of 1.66% per annum and matured no later than September 18, 2018. The unpaid principal and interest were payable upon the earlier of their maturity or upon the issuance of new debt or equity securities in a transaction or series of transactions resulting in aggregate gross proceeds to Hawker of a minimum of $5 million.  Hawker assumed these loans payable upon its acquisition of SCNRG on October 25, 2013.  On April 9, 2014, the related parties agreed to convert the short- and long-term loans payable to related parties into common stock and warrants on the same terms as the unit offering described in Note 16.

Interest expense on such loans was $0 and $372 for the three months ended November 30, 2014 and 2013 respectively.

Convertible Notes Payable

As of November 30, 2014, pursuant to a convertible note payable, we owed a relative of Mr. Darren Katic, $100,000 plus accrued interest of $4,701, all as described in Note 10.

Interest expense on this convertible note payable was $2,992 for the three months ended November 30, 2014.

Unit Issuances

As part of the common stock payable amounts outstanding on August 31, 2014 as described in Note 16, $20,000 was received from each of Messrs. Katic and Tywoniuk, for which 200,000 Units were issued to each during the three months ended November 30, 2014.  The price of each Unit was $0.10. Each Unit was comprised of one share of our common stock, together with a warrant to acquire an additional one-half share of our common stock on payment of $0.20 per share. The warrants expire five years from the closing date.

Other

A portion of the non-controlling interest in Tapia Holdings is held by Mr. Moore, being $45,000 out of the $145,000 of capital received.  See Note 16.

On behalf of a company controlled by Mr. Katic, the Company has been paying rent to a third party for its office space, beginning January 1, 2014.  No formal assumption agreement has been completed to assign the leases with the landlord from Mr. Katic’s company to Hawker.  Mr. Katic provided a personal guarantee to the landlord.  For the three months ended November 30, 2014, these payments totaled $9,617.

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HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

18.           PRO FORMA FINANCIAL INFORMATION

The following table presents unaudited pro forma consolidated information, adjusted for the reverse acquisition of Hawker (Note 4) and the acquisition of an additional 33.33% interest in DEEP Lease (Note 6), as if the acquisitions had occurred on September 1, 2013:

	Three Months Ended November 30, 2013
Revenue	$	40,178
Net loss attributable to the Company	$	(89,670	)
Loss per share	$	-

These amounts have been calculated after applying our accounting policies and adjusting the results to reflect the recapitalization of Hawker.  The unaudited pro forma adjustments are based on available information and certain assumptions we believe are reasonable.  It was determined that HERLLC was not a business and therefore there is no pro forma adjustment for the acquisition of HERLLC (Note 5).

19.           SUBSEQUENT EVENTS

Share Purchase Agreement To Purchase All Of The Outstanding Shares Of Capital Stock Of TEG, And Secured Subordinated Loan Receivable, Short Term

On January 12, 2015, we entered into a Share Purchase Agreement with Sefton pursuant to which we agreed to purchase, and Sefton agreed to sell, 100% of the issued and outstanding shares of capital stock of Sefton’s wholly-owned subsidiary, TEG.  The principal terms of the Share Purchase Agreement are as follows: we will purchase all of the shares of TEG for $1.00 in cash plus the issuance of 3,000,000 shares of our common stock and a five-year Warrant to purchase up to an additional 5,000,000 shares of our common stock for $0.25 per share.

Between April 18, 2014 and January 15, 2015, we and our wholly-owned subsidiary, Tapia Holdings, made a number of advances to TEG, pursuant to the Loan Receivable Agreements. These advances totaled approximately $1,637,352, not including accrued interest, as of January 15, 2015, including $150,000 advanced subsequent to November 30, 2014.  This amount constitutes additional consideration for the TEG acquisition, as this loan receivable will not be settled prior to the closing of our acquisition of TEG.

The transactions contemplated by the Share Purchase Agreement are subject to several customary conditions, most notably that the purchase and sale must be approved by Sefton’s shareholders.

As a result of a significant decline in oil prices and other factors, the transaction described above amends and replaces the transaction described in our Annual Report on Form 10-K filed November 24, 2014 to acquire the assets of TEG pursuant to a non-binding letter of intent dated June 18, 2014.

See Note 7 for further information about the Loan Receivable Agreements and BOTW’s consent to our acquisition of TEG.

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HAWKER ENERGY, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED NOVEMBER 30, 2014

UNAUDITED

Term Sheet For A Third Amended and Restated Secured Convertible Note Payable

On January 14, 2015, we executed a term sheet to provide for a Third Amended and Restated Secured Convertible Promissory Note to an outside investor (the “Secured Convertible Note Payable”), in the aggregate principal amount of $1,000,000, to mature in two years.

The Secured Convertible Note Payable will be issued in consideration of additional gross proceeds to us in the amount of up to $335,000 (of which $200,000 was funded January 15, 2015, and $135,000 is to be funded within 120 days at the investor’s option) and cancellation of previously issued notes to the investor in the amounts of $250,000, $350,000, and $25,000 (as well as accrued interest on each), the first two of which had maturity dates of November 30, 2014, and the latter of which had a maturity date of May 3, 2015. The Secured Convertible Note Payable will bear interest on the unpaid principal balance of the Secured Convertible Note Payable at the rate of 12% per annum.  Interest payments will become payable quarterly on the six-month anniversary.  The Secured Convertible Note Payable will be convertible at any time at the option of the investor into “Conversion Shares,” computed by dividing all of the then outstanding principal and accrued interest under the Secured Convertible Note by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events) (the “Conversion Rate”). However, if we subsequently sell securities comprising the Conversion Shares at a price lower than the Conversion Rate (subject to customary exclusions), then the Conversion Rate then in effect will be automatically reduced to the lower price. We will at all times reserve and keep available out of our authorized but unissued shares a sufficient number of shares of common stock to give effect to the conversion of the Secured Convertible Note Payable.  Unless notified in advance by the investor, conversion of a part or the entire Secured Convertible Note Payable is limited at any one time to a maximum beneficial ownership interest in Hawker of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion.  The proceeds from the Secured Convertible Note Payable are to be used for the purpose of allowing us to make advances to TEG, under the terms of a note receivable from TEG, and for general working capital.  Any repayment by TEG of the advances under the terms of the note receivable must be used by us to immediately make repayment to the investor under the terms of the Secured Convertible Note Payable. To secure our obligations under the Secured Convertible Note Payable, we will grant a security interest to the investor in all of our right, title and interest under the TEG note receivable, our second priority security interest in TEG’s assets and in the interest of our subsidiary SCNRG, LLC in the oil-producing property known as the DEEP Lease. The Secured Convertible Note Payable will also contain other terms and covenants that are customary for a promissory note of this type.  In addition, we will grant to the investor a 2.5% or 3.5% overriding royalty interest, depending on the lease, in oil sales from the TEG Assets, effective with the closing of the acquisition.  Such amount would be accrued until TEG’s lender, BOTW, has been paid in full; however, payment of royalties shall begin within twelve months or an event of default under the Secured Convertible Note Payable will occur.  While interest and royalties are being accrued, no cash payments can be made to repay loans made to Hawker by Mr. Katic, nor can Hawker repurchase any non-controlling interest owned by Mr. Moore nor pay any salaries to Messrs. Katic and Moore.

Additional Unit Issuances

On December 12, 2014, Hawker and Kristian Andresen agreed to convert a $120,000 accrued bonus into Units on the same terms as described in Note 16, resulting in 1,200,000 shares of common stock being issued to Mr. Andresen, together with five-year warrants to acquire 600,000 shares upon payment of an exercise price of $0.20 per share.  In addition, a vendor agreed to convert a $10,570 accounts payable balance into Units on the same terms as described in Note 16, resulting in 105,700 shares of common stock being issued, together with five-year warrants to acquire 52,850 shares upon payment of an exercise price of $0.20 per share.

On January 8, 2015, we received $115,000 in cash proceeds from two investors for Units on the same terms as described in Note 16, which, when closed, will result in 1,150,000 shares of common stock being issued, together with five-year warrants to acquire 575,000 shares upon payment of an exercise price of $0.20 per share.

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Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our unaudited interim financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.  Various statements have been made herein that may constitute “forward-looking statements”.  Forward-looking statements may also be made in the Company’s other reports filed with or furnished to the United States Securities and Exchange Commission (the “SEC”) and in other documents.  In addition, the Company through its management may make oral forward-looking statements.

Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from such statements.  The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar expressions are intended to identify forward-looking statements.  These statements are not guarantees of future performance and, therefore, you should not put undue reliance upon them.  Some of the statements that are forward-looking include: our ability to successfully implement our business plan; our ability to finance and consummate contemplated transactions; our estimates of revenues and of other expenses associated with our operations; our ability to explore and develop our properties; our reserve estimates; and our ability to generate sufficient cash flows and maintain adequate sources of liquidity to finance our ongoing operations and capital expenditures.  We undertake no obligation to update any forward-looking statements.

Organizational History and Overview

Hawker Energy, Inc. was incorporated under the laws of the State of Nevada on June 12, 2006, under the name of Uventus Technologies Corp.  On September 23, 2009, we merged with our wholly owned subsidiary and changed our name to Sara Creek Gold Corp. Subsequently, on September 29, 2014, we changed our name to Hawker Energy, Inc. (“we”, “our”, “us”, “Hawker”, or “the Company”).

We are now in the oil and gas exploitation and production business and our goal is to acquire and develop mature leases, interests and other rights to oil and gas producing properties with proven undeveloped potential.

Our recent history is as follows:

· We were a public shell company until July 18, 2013.

· On October 25, 2013, we acquired SCNRG, LLC (“SCNRG”), an entity that owned a 66.67% working interest in the DEEP Lease in California (we increased our ownership to 100% subsequently).  Mr. Darren Katic, a managing member of SCNRG, became a director, Chief Executive Officer and Chief Financial Officer of Hawker, and a significant shareholder of Hawker, upon our acquisition of SCNRG.

· On January 1, 2014, we acquired all of the membership interests in Hawker Energy, LLC, an entity owned by Mr. Katic and Mr. Charles Moore. Hawker Energy, LLC changed its name to Hawker Energy (Rincon), LLC (“HERLLC”) on October 22, 2014.  HERLLC, through its wholly-owned subsidiary Punta Gorda Resources, LLC (“Punta Gorda”), claims oil production and development rights of coastal lease PRC 145.1 just offshore Ventura County in the Rincon Field and ownership rights to an associated on-shore drilling and production site, which rights are being challenged in court by the lease’s operator of record (see Part II, Item 1, “Legal Proceedings”).  HERLLC had also engaged in preliminary discussions with various third parties concerning potential acquisitions.

· On January 12, 2015, we entered into a Share Purchase Agreement (“Share Purchase Agreement”) with Sefton Resources, Inc. (“Sefton”) pursuant to which we agreed to purchase, and Sefton agreed to sell, 100% of the issued and outstanding shares of capital stock of Sefton’s wholly-owned subsidiary, TEG Oil & Gas U.S.A., Inc. (“TEG”).  The principal terms of the Share Purchase Agreement are as follows: we will purchase all of the shares of TEG for $1.00 in cash plus the issuance of 3,000,000 shares of our common stock and a five-year Warrant to purchase up to an additional 5,000,000 shares of our common stock for $0.25 per share.  The transactions contemplated by the Share Purchase Agreement are subject to several customary conditions, most notably that the purchase and sale must be approved by Sefton’s shareholders.  As a result of a significant decline in oil prices and other factors, the transaction described above amends and replaces the transaction described in our Annual Report on Form 10-K filed November 24, 2014 to acquire an 80% interest in the assets of TEG pursuant to a non-binding letter of intent dated June 18, 2014.  TEG owns four oil and gas producing leases encompassing the Tapia Canyon field (“Tapia Assets”) and one development lease west of the Tapia Canyon field (“Eureka Assets”), and the accompanying production equipment, all located in California.

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· We have made advances of $1,637,352 through January 15, 2015, to TEG in connection with this proposed acquisition.  Repayment of these advances is secured by a second priority security interest in the Tapia Assets, Eureka Assets and equipment described above, subordinate to loans made to Sefton by TEG’s senior lender, Bank of the West (“BOTW”). This amount constitutes additional consideration for the acquisition, as this loan receivable will not be settled prior to the closing of our acquisition of TEG.

· During the three months ended November 30, 2014, we raised additional funds as follows: $50,000 of additional convertible notes payable, $95,000 of additional loans from related parties and $90,000 from the sale of non-controlling interest in our subsidiary Tapia Holdings, LLC (“Tapia Holdings”).  Subsequent to November 30, 2014, we raised $115,000 through the sale of additional Units, creditors converted $130,570 of amounts payable into Units comprised of stock and warrants, and we executed a term sheet to provide for up to an additional $335,000 through an amended and restated convertible note payable.

These events are described in more detail below.

Our consolidated financial statements, including our wholly-owned subsidiaries SCNRG, HERLLC, Punta Gorda and Tapia Holdings, consist of SCNRG’s historical results consolidated with our results beginning October 25, 2013, as a result of SCNRG being considered the acquirer for accounting purposes, together with HERLLC’s (and its subsidiary Punta Gorda’s) results commencing with its acquisition on January 1, 2014, and Tapia Holdings’ results beginning with its formation in April 2014.

Recent Business Developments

Share Purchase Agreement To Purchase All Of The Outstanding Shares Of Capital Stock Of TEG

On January 12, 2015, we entered into a Share Purchase Agreement with Sefton pursuant to which we agreed to purchase, and Sefton agreed to sell, 100% of the issued and outstanding shares of capital stock of Sefton’s wholly-owned subsidiary, TEG.  The principal terms of the Share Purchase Agreement are as follows: we will purchase all of the shares of TEG for $1.00 in cash plus the issuance of 3,000,000 shares of our common stock and a five-year warrant to purchase up to an additional 5,000,000 shares of our common stock for $0.25 per share.

Between April 18, 2014 and January 15, 2015, we and our wholly-owned subsidiary, Tapia Holdings, made a number of advances to TEG, pursuant to several secured subordinated notes and related security agreements, all as amended and restated into a Secured Subordinated Note dated January 12, 2015 (the “Note”), and a Fourth Amended and Restated Security Agreement dated January 12, 2015 (the “Security Agreement”), each executed by TEG, and a Limited Recourse Guarantee (“Guarantee”) and a Pledge Agreement (“Pledge Agreement”), each executed by Sefton (collectively, the “Loan Receivable Agreements”). These advances totaled approximately $1.6 million as of January 15, 2015 (described further under “Secured Subordinated Loan Receivable, Short Term” below).  This amount constitutes additional consideration for the acquisition, as this loan receivable will not be settled prior to the closing of our acquisition of TEG.

The transactions contemplated by the Share Purchase Agreement are subject to several customary conditions, most notably that the purchase and sale must be approved by Sefton’s shareholders.

BOTW has consented to our acquisition of TEG and has agreed to forbear taking enforcement action against TEG on the senior loan provided that (i) Hawker lend TEG not less than $350,000 within 90 days, (ii) interest on TEG's obligations to BOTW be increased to 9%, with a monthly pay rate of 5% and the remaining deferred 4% of unpaid interest compounded monthly, (iii) the proceeds of any sale, assignment, licensing or other transfer of any real or personal property rights which serve as collateral for TEG's obligations to BOTW be remitted directly to BOTW, and (iv) commencing no later than the first month after which the California Midway-Sunset First Purchase Price as published by the U.S. Energy Information Administration exceeds $60 per barrel, TEG will begin making outstanding property tax payments to the County of Los Angeles of at least $15,000 per month.

As a result of a significant decline in oil prices and other factors, the transaction described above amends and replaces the transaction described in our Annual Report on Form 10-K filed November 24, 2014 to acquire an 80% interest in the assets of TEG pursuant to a non-binding letter of intent dated June 18, 2014.

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Secured Subordinated Loan Receivable, Short Term

Under the terms of the Loan Receivable Agreements, TEG agreed to pay us the principal sum of $2,100,000, or such lesser amount as may be outstanding from time to time, with interest on the unpaid principal amount at the rate of 3.0% per annum.  We advanced $196,625 to TEG during the three months ended November 30, 2014, for a total at November 30, 2014, of $1,487,352, and an additional $150,000 subsequent to November 30, 2014, for a total at January 15, 2015 of $1,637,352, not including accrued interest.  Further advances are subject to our sole and absolute discretion. The loan receivable matures on December 31, 2015, at which time all outstanding principal and accrued interest is due and payable in full.  The assets of TEG secure the Note, which is also guaranteed on a limited recourse basis by Sefton. Sefton’s Guarantee is secured by a pledge of all of the outstanding shares of TEG.  TEG’s assets are located in the Tapia and Eureka Fields, Los Angeles and Ventura Counties, California. The Note and our security interest in the assets of TEG are subordinate to senior indebtedness of TEG, pursuant to an Amended and Restated Subordination and Intercreditor Agreement (“Intercreditor Agreement”) dated January 1, 2015, as amended, by and among Tapia Holdings, Hawker, TEG, Sefton, TEG’s affiliate TEG MidContinent, Inc., BOTW, and us.

The Security Agreement and the Pledge Agreement also provide that it is a default under those agreements if the transactions contemplated by the Share Purchase Agreement are not consummated by January 31, 2015 (including if Sefton’s shareholders have not approved the transactions by that date). TEG further agreed to cease and terminate any solicitation or encouragement of a third party acquisition proposal; provided, that, if TEG receives an unsolicited, bona fide acquisition proposal that is found to be superior to the terms of the Share Purchase Agreement, to the extent we decline to renegotiate the Share Purchase Agreement terms or to otherwise match the terms of the third party acquisition proposal, TEG may pursue such third party acquisition proposal. The Security Agreement, Pledge Agreement and Guarantee also contain other representations, warranties and covenants of both parties that are customary for agreements of these types.

See “Acquisition of Hawker Energy (Rincon), LLC” below for a description of common stock to be released from escrow to the HERLLC Sellers (also defined below), should the Share Purchase Agreement transaction be consummated.

Description of Tapia Assets

The Tapia Canyon field covers an area of approximately 383 acres located about 40 miles north of the Los Angeles, California metropolitan area. The Tapia Canyon field was discovered in 1957, when the Yule No. 2 well tested at 120 barrels per day of 18-degree API oil. The Tapia Canyon field commenced production in August 1957. Based on information provided to us by TEG, the Tapia Assets produced 79 barrels of oil per day (gross) in October 2014 from 17 wells at a reservoir depth of just over 1,000 feet.  The Tapia Assets benefit from relatively low royalty burdens, which average approximately seven percent. Production is from the Yule reservoir, which is, on average, greater than 100 feet thick over the majority of the oil field, and comprised of sand and silts.

Based on information provided to us by TEG, the field operator built a small steam generator for testing purposes in 2007 and has completed 31 steam injection cycles of various sizes to assist in field modeling. The field operator has confirmed the value of thermal EOR (enhanced oil recovery) at Tapia. According to TEG, during the last full-time cyclic steam test in October 2013, production reached 170 barrels of oil per day (gross). Extensive infrastructure exists currently in the field to facilitate steaming operations going forward, and for oil gathering and storage purposes.

Although we have performed initial technical work on the Tapia Assets to develop a preliminary understanding of the resource and opportunity, no reserve reports done to Securities and Exchange Commission (“SEC”) standards have been completed by us to date.

Description of Eureka Assets

The Eureka Assets cover an area of approximately 1,600 acres located about 25 miles west of the Tapia Canyon field in Ventura County, California. According to TEG, the Eureka Assets produced six barrels of oil per day (gross) in October 2014.

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Although we have performed initial technical work on the Eureka Assets to develop a preliminary understanding of the resource and opportunity, no reserve reports done to SEC standards have been completed by us to date.

All acreage, production and well information described above are gross figures.

Term Sheet For A Third Amended and Restated Secured Convertible Note Payable

On January 14, 2015, we executed a term sheet to provide for a Third Amended and Restated Secured Convertible Promissory Note to an outside investor (the “Secured Convertible Note Payable”), in the aggregate principal amount of $1,000,000, to mature in two years.

The Secured Convertible Note Payable will be issued in consideration of additional gross proceeds to us in the amount of up to $335,000 (of which $200,000 was funded January 15, 2015, and $135,000 is to be funded within 120 days at the option of the investor) and cancellation of previously issued notes to the investor in the amounts of $250,000, $350,000, and $25,000 (as well as accrued interest on each), the first two of which had maturity dates of November 30, 2014, and the latter of which had a maturity date of May 3, 2015. The Secured Convertible Note Payable will bear interest on the unpaid principal balance of the Secured Convertible Note Payable at the rate of 12% per annum.  Interest payments will become payable quarterly on the six-month anniversary.  The Secured Convertible Note Payable will be convertible at any time at the option of the investor into “Conversion Shares,” computed by dividing all of the then outstanding principal and accrued interest under the Secured Convertible Note by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events) (the “Conversion Rate”). However, if we subsequently sell securities comprising the Conversion Shares at a price lower than the Conversion Rate (subject to customary exclusions), then the Conversion Rate then in effect will be automatically reduced to the lower price. We will at all times reserve and keep available out of our authorized but unissued shares a sufficient number of shares of common stock to give effect to the conversion of the Secured Convertible Note Payable.  Unless notified in advance by the investor, conversion of a part or the entire Secured Convertible Note Payable is limited at any one time to a maximum beneficial ownership interest in Hawker of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion.  The proceeds from the Secured Convertible Note Payable are to be used for the purpose of allowing us to make advances to TEG, under the terms of a note receivable from TEG, and for general working capital.  Any repayment by TEG of the advances under the terms of the note receivable must be used by us to immediately make repayment to the investor under the terms of the Secured Convertible Note Payable. To secure our obligations under the Secured Convertible Note Payable, we will grant a security interest to the investor in all of our right, title and interest under the TEG note receivable, our second priority security interest in TEG’s assets and in the interest of our subsidiary SCNRG, LLC in the oil-producing property known as the DEEP Lease. The Secured Convertible Note Payable will also contain other terms and covenants that are customary for a promissory note of this type.  In addition, we will grant to the investor a 2.5% or 3.5% overriding royalty interest, depending on the lease, in oil sales from the TEG Assets, effective with the closing of the acquisition.  Such amount would be accrued until TEG’s lender, BOTW, has been paid in full; however, payment of royalties shall begin within twelve months or an event of default under the Secured Convertible Note Payable will occur.  While interest and royalties are being accrued, no cash payments can be made to repay loans made to Hawker by Mr. Katic, nor can Hawker repurchase any non-controlling interest owned by Mr. Moore nor pay any salaries to Messrs. Katic and Moore.

Although the term sheet to provide for the Secured Convertible Note Payable sets forth terms that have been negotiated and agreed upon by the parties and the forms of agreements have generally been prepared and agreed upon, the term sheet does not represent a binding agreement or commitment of either party and no form of agreement has yet been signed. While we already received gross proceeds of $200,000, as noted above, until the forms of agreements have been executed there can be no assurance that the proposed transaction will be consummated on the terms described above.

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Sale of Common Stock and Warrant Units, Convertible Notes Payable and Other Financings

Between September 1 and November 30, 2014, we closed private placements for an aggregate of 500,000 units for gross proceeds of $50,000 which were received in August 2014 in advance of the closing.  The price of each unit was $0.10.  Each unit is comprised of one share of our common stock, together with a warrant to acquire an additional one-half share of our common stock at $0.20 per share.  The warrants expire five years from each closing date. Net proceeds were $50,000 less $80 of transaction costs.

In addition, during the quarter ended November 30, 2014, we issued convertibles notes payable for $50,000, and received a $95,000 in short-term loans from related parties (net of a $10,000 repayment), as described in Notes 9 and 10 to the unaudited interim financial statements included elsewhere in this report.

We also sold additional non-controlling interest in our subsidiary Tapia Holdings for $90,000 during the three months ended November 30, 2014, as described in Note 16 to the unaudited interim financial statements included elsewhere in this report.

Subsequent to November 30, 2014, we received proceeds of $200,000 pursuant to a term sheet for an amended additional convertible note payable as described in “Term Sheet For A Third Amended And Restated Secured Convertible Note Payable” above, $115,000 for additional Units comprised of stock and warrants on the same terms as described above, and creditors converted $130,570 of amounts payable into Units comprised of stock and warrants also on the same terms as above.

Included in the above private placements and other financings are various related party transactions as set forth in Note 17 to the unaudited interim financial statements included elsewhere in this report.

Acquisition of Hawker Energy (Rincon), LLC

On January 1, 2014, we exercised our option to acquire all of the membership interests in Hawker Energy (Rincon), LLC (“HERLLC”) from Darren Katic (who was also a seller in our transaction with SCNRG) and Charles Moore (collectively the “HERLLC Sellers”), pursuant to an Amended and Restated Option Agreement (“Option Agreement”) dated November 20, 2013.  We issued 3,000,000 shares of our common stock to the HERLLC Sellers as consideration for the acquisition and, as described below, were required to issue up to an additional 33,000,000 shares of our common stock to the HERLLC Sellers upon us or HERLLC consummating certain follow-on transactions described below (“Potential Follow-On Transactions”).  In addition, we assumed $135,199 in net liabilities of HERLLC.  The terms for the issuance of additional shares were revised on October 10, 2014 as described below.

HERLLC, through its wholly-owned subsidiary Punta Gorda Resources, LLC (“Punta Gorda”), claims oil production and development rights of coastal lease PRC 145.1 just offshore Ventura County in the Rincon Field and ownership rights to an associated on-shore drilling and production site, which rights are being challenged in court by the lease’s operator of record.  HERLLC has also engaged in preliminary discussions with various third parties concerning the Potential Follow-On Transactions, none of which were deemed by us to be reasonably possible as of January 1, 2014 (the date of our acquisition of HERLLC) due to the preliminary status of those discussions and lack of certainty around HERLLC’s or Hawker’s ability to finance one or more of these Potential Follow-On Transactions.  Other than its contested interest in PRC 145.1 and its preliminary discussions concerning the Potential Follow-On Transactions, HERLLC had no assets or operations as of January 1, 2014.  PRC 145.1 and the Potential Follow-On Transactions are discussed in greater detail below.

PRC 145.1 is subject to 24.5% in overriding royalties, primarily to the State of California. A single active well on PRC 145.1 produced an average of 11 barrels of oil per day (gross production before royalties) for the nine months ended September 30, 2014. This lease has ten other non-active wells, one or more of which may be recompleted or re-drilled.  Although initial technical work has been done on PRC 145.1 to develop a preliminary understanding of the resource and opportunity, no reserve reports done to SEC standards have been completed to date.

All rights claimed by HERLLC to PRC 145.1 are being challenged in court by the lease’s operator of record -- Case No. 56-2013-00440672-CU-BC-VTA pending in Ventura County Superior Court.  HERLLC is currently not receiving any net proceeds from production on this lease pending resolution of this matter in our favor.

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After we exercised our option to acquire HERLLC on January 1, 2014, the Option Agreement provided that the HERLLC Sellers were entitled to additional shares of our common stock upon the consummation of Potential Follow-On Transactions as follows:

(a) 2,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of California Oil Independents or its oil and gas interests being the “Doud” leases, comprised of approximately 340 acres, 20 wells and two tank batteries, located in the Monroe Swell Field, near Greenfield, California; 

(b) 2,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of a participation in South Coast Oil – Huntington Beach CA oil and gas interests comprised of approximately 340 acres, and 20 wells (of which 9 are active) and 4 tank batteries, and known as the “Town Lot”;

(c) 5,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of all of the oil and gas leases held by Christian Hall (or affiliates) in the Midway-Sunset field located between the towns of Taft and McKittrick in Kern County, CA;

(d) 10,000,000 shares of our common stock shall be issued upon our or HERLLC’s acquisition of TEG Oil & Gas USA, Inc. (or certain oil and gas interests held by it, being all leases located in the Tapia Field, Los Angeles County, California);

(e) 7,000,000 shares of our common stock shall be issued upon the conveyance to us or HERLLC of certain assets and rights regarding PRC 145.1 Lease held by Rincon Island Limited Partnership or settlement in lieu of such conveyance; and

(f) 7,000,000 shares of our common stock shall be issued upon the conveyance to us or HERLLC of certain mineral rights regarding PRC 427 Lease held by ExxonMobil, a lease that is adjacent to PRC 145.1 Lease above.

The Potential Follow-On Transactions described above were dependent on a number of variables that were not within our control and, as a result, none of the transactions were deemed by us to be reasonably possible as of January 1, 2014 (the date of our acquisition of HERLLC).  Each of the Potential Follow-On Transactions described above, if consummated, would constitute a transaction separate and independent from our acquisition of HERLLC pursuant to the option.  Any shares of our common stock that may be issued upon the consummation of any of the Potential Follow-On Transactions (or pursuant to the terms of the October 10, 2014, amendment described below) will constitute expensed costs incurred concurrently with consummation of the applicable follow-on transaction (as opposed to incremental consideration for our acquisition of HERLLC).

On October 10, 2014, Hawker authorized an amendment (the “Amendment”) to the Option Agreement.  Under the original terms of the Option Agreement, Messrs. Katic and Moore were entitled to, in the aggregate, up to 33,000,000 additional shares of our common stock upon the consummation of certain Potential Follow-On Transactions. The Amendment waived all of the follow-on transaction requirements and authorized the immediate issuance to Messrs. Katic and Moore of the full 33,000,000 shares (16,500,000 each). Of those shares, we hold 19,000,000 shares in escrow, to be released as follows: (i) 10,000,000 shares upon completion of the acquisition of the assets of TEG Oil & Gas, Inc. (located in the Tapia Field, Los Angeles County, California), and (ii) 9,000,000 shares upon completion, on or before December 31, 2017, of any one of the transactions evaluated by HERLLC, our wholly-owned subsidiary, prior to its reorganization with Hawker, including a transaction resulting in Hawker ownership of oil and gas lease interests in any one of the following unique oil fields:

(a) Cat Canyon (leases Tognazzini, Wickenden, Los Alamos, GWP, and those immediately adjacent to, in each case, in Santa Barbara County);

(b) Santa Maria (T 11N, R 36W extending southeast through T9N R33W in Santa Barbara County);

(c) Casmalia (leases Tompkins, Peshine, and those immediately adjacent to, in each case, in Santa Barbara  County);

(d) North Lost Hills (Sections 12 & 13, T25S, R19E, and Sections 7 & 18, T25S, R 20E, totaling 1,500 acres in Kern County CA);

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(e) Maricopa (McFarland and Jameson leases totaling 40 acres in Kern County);

(f) Pine Meadows (Section 1 Township 31 South Range 22E in Kern County); or

(g) Torrance (Joughin and South Torrance Units totaling 900 acres in Los Angeles County).

Waiver of the Potential Follow-On Transaction requirements and the immediate issuance of the remaining shares is meant to simplify our common shareholding structure and share count and to assist in our capital raising efforts.

With respect to 14,000,000 shares of our common stock that were issued as a result of the Amendment, an equity compensation expense of $1,011,500 was recorded in the three months ended November 30, 2014 based on the fair value of the shares at the date of issuance.  With respect to the 19,000,000 share of our common stock that are in escrow, an equity compensation expense of $19,000 was recorded based on the par value of the shares at the date of issuance.  Total expense was $1,030,500 in the three months ended November 30, 2014.  As and when subsequently released from escrow, a further expense will be recorded based on the fair value of the 19,000,000 shares (less amounts previously expensed based on par value) concurrently with consummation of the applicable follow-on transaction.  All of these amounts are not considered for accounting purposes to be incremental consideration for our acquisition of HERLLC.

Hawker agreed to these potential additional share issuances as a result of the HERLLC Sellers’ work on the Potential Follow-On Transactions to the date of our acquisition of HERLLC and based on our belief that significant value may accrue to Hawker in the event one or more of these Potential Follow-On Transactions is consummated and the properties further developed.  The HERLLC Sellers’ work to the date of Hawker’s acquisition of HERLLC consisted of opportunity identification and screening, resource evaluation through hiring of third-party technical consultants, preliminary financial analyses, preliminary discussions with the potential sellers around value and other evaluation work.  Furthermore, it was important to Hawker that all of the HERLLC Sellers’ oil growth opportunities be acquired by Hawker, not just the PRC 145.1 opportunity, so that the business interests of the HERLLC Sellers (each of whom is now actively involved with Hawker) be more directly aligned with interests of the Company.  Although technical work has been done on each of the Potential Follow-On Transaction’s underlying properties to develop an initial understanding of the resource and opportunity, no reserve reports done to SEC standards have been completed to date.

As of January 6, 2015, Mr. Katic beneficially owns 25,397,365 shares (or 33.15%) of our outstanding common stock (including 9,500,000 shares held in escrow) and Mr. Moore beneficially owns 17,500,000 shares (or 23.03%) of our outstanding common stock (including 9,500,000 shares held in escrow).  These assumed percentage ownership figures do not consider any potential common stock issuances to fund any of the transactions required to release shares from escrow, but do include warrants exercisable within 60 days.

Pursuant to a separate agreement dated November 13, 2014, between Messrs. Katic, Moore and Gerald Tywoniuk, Mr. Tywoniuk (a significant shareholder of Hawker) holds warrants to acquire 9.7222% of any shares of Hawker issued to Messrs. Katic and Moore in connection with the Amendment.  This agreement amended a December 27, 2013, agreement entitling Mr. Tywoniuk to acquire 5% of any shares of Hawker issued to Messrs. Katic and Moore in connection with the Option Agreement.

Results of Operations

The following discussion of the financial condition and results of operations should be read in conjunction with the Financial Statements and related notes appearing elsewhere in this report. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

As noted above, as a result of completion of our acquisition of SCNRG, the condensed consolidated financial statements of Hawker, including SCNRG, consist of SCNRG’s historical results consolidated with Hawker’s results beginning October 25, 2013.  In addition, on January 1, 2014, we acquired all of the membership interests of HERLLC, and its wholly-owned subsidiary Punta Gorda Resources, LLC, and our condensed consolidated financial statements include the accounts of these entities beginning January 1, 2014.  Finally, SCNRG increased its working interest in the oil-producing property known as the DEEP Lease from 66.67% to 87.18% on February 1, 2014, and to 100.0% on May 15, 2014.

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Three months ended November 30, 2014 and 2013

Net loss attributable to the Company of $1,629,435 for the three months ended November 30, 2014, was largely the result of being a development stage oil production company.  The loss is largely attributable to a non-cash equity compensation expense of $1,088,179, which includes $1,030,500 for stock issued to the HERLLC Sellers as described above.  In addition, we incurred professional fees of $430,563 largely for pursuing the Tapia and Eureka oil properties’ acquisition and for the litigation described in Part II, Item 1 (“Legal Proceedings”).  This loss compares to a $76,033 loss in the comparable prior year quarter.

Revenue was $10,294 for the three months ended November 30, 2014, compared to $25,764 in the year ago quarter. Net oil sales from our working interest in the DEEP Lease to our account (after royalties) from the current three producing wells averaged 2.6 net barrels per day for the three months ended November 30, 2014, and realized $71.05 per barrel before royalties, compared to 2.7 net barrels per day to realize $91.12 per barrel for the three months ended November 30, 2013.   Our working interest was greater in the 2014 period, more than offsetting lower gross production, but this benefit was offset by an inventory build in the 2014 period compared to 2013.  After considering the royalty impact, the lower sales volume impact was a $870 reduction in revenues, and the oil price reduction (due to a change in world oil price) meant a $6,357 reduction in revenues.  Net revenues for the three months ended November 30, 2014 also includes a reduction of $11,473 related to the operator’s royalty computations for prior fiscal year.  Finally, oil sales revenue attributable to a 2.5% working interest in the DF#15 well in the Sawtelle Field, Los Angeles, increased $3,230.  The November 30, 2014 quarter includes this working interest for the entire quarter, whereas in the comparable November 30, 2013 period, results reflect only a partial period as Hawker was included in our results beginning October 25, 2013, when SCNRG acquired Hawker.

Direct operating costs were $15,996 for the three months ended November 30, 2014, compared to $12,972 for the three months ended November 30, 2013.  The increase  corresponds to the increase in our working interest in the DEEP Lease.

Depletion, depreciation and amortization expense were $11,036 for the three months ended November 30, 2014, compared to $8,110 for the three months ended November 30, 2013.  Depletion expense varies with oil sales volumes.  In addition, our working interest in the DEEP Lease increased from 66.67% to 87.18% on February 1, 2014, and to 100.0% on May 15, 2014, which increases our share of the accretion on the asset retirement obligation.  Finally, our 2.5% working interest in the DF#15 well was included in our results beginning October 25, 2013.

Revenue, direct operating costs, and depletion, depreciation and amortization expenses vary with oil prices, downtime, repair and other operating costs, expensed workover programs, investments in drilling for new production and proved reserve estimates.

Professional fees for the three months ended November 30, 2014, were $430,563, increased from $71,071 for the three months ended November 30, 2013.  Included in the 2014 period is $209,065 for litigation costs associated with HERLLC’s claim to coastal lease PRC 145.1, $162,466 legal, audit and diligence costs related to the potential acquisition of an interest in the assets of TEG and related potential financing, and $59,032 for costs associated with being a public company including the annual audit and preparation of Form 10-K.  Professional fees for the 2013 period were primarily due to professional fees incurred in connection with: the acquisition of, and preparation of audited financial statements for, SCNRG; acquisition of HERLLC, and start-up expenses resulting from our acquisition of SCNRG, which closed October 25, 2013, and public company costs for the period October 25, 2013 through November 30, 2013.  Professional fees can vary substantially from period-to-period going forward depending on financing activity, business development and property evaluation costs, litigation expenses associated with coastal lease PRC 145.1 and costs associated with being a public company.

Other general and administrative expenses for the three months ended November 30, 2014 were $74,527 compared to $6,231 for the three months ended November 30, 2013 reflecting investor relations activities, outsourced accounting services, costs associated with being a public company, rent and increased activity.

Equity compensation expense was $1,088,179 for the three months ended November 30, 2014, compared to $0 for the three months ended November 30, 2013.  Included in the 2014 period is $1,030,500 for non-cash equity compensation expense of $1,030,500 for stock issued to the HERLLC Sellers as described above, and $57,679 related to stock options granted on May 14, 2014.

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Interest income of $10,504 for the three months ended November 30, 2014, compared to $0 for the year ago period.  Interest income is primarily from a secured subordinated loan receivable from TEG.  See Note 7 to the unaudited interim financial statements included elsewhere in this report.

Interest expense amounted to $39,463 for the three months ended November 30, 2014, compared to $3,413 for the three months ended November 30, 2013.   Included in the 2014 amount is $28,579 for interest expense on convertible notes payable, as described in Note 10 to the unaudited interim financial statements included elsewhere in this report.  There was no comparable amount in the 2013 period.  Also included in the fiscal 2014 period is $6,780 for interest accrued on loans payable to related parties, short term; there was none in the fiscal 2013 period.  In addition, interest on loans payable to related parties, long term, was $0 and $372 for the three months ended November 30, 2014 and 2013 respectively.  Finally, included in interest expense for the three month ended November 30, 2014 is $4,104 compared to $3,041 for the year ago period for accretion of interest on the DEEP net profits interest payable.  Our share of the net profits interest payable increased from 66.67% to 87.18% on February 1, 2014, and to 100.0% on May 15, 2014 as a result of acquiring additional working interest.  Going forward, interest expense on the NPI will remain relatively constant unless there is a reduction in the expected timeframe for repayment of the NPI, which would cause interest accretion to accelerate.

The share of net loss attributable to non-controlling interest is $9,531 for the three months ended November 30, 2014 compared to none for the three months ended November 30, 2013.  The 2014 amount reflects the non-controlling interest share of the professional fees expense incurred in pursuing the Tapia and Eureka Assets acquisition.

Cash Flows

Operating Activities

During the three months ended November 30, 2014, we used cash in the amount of $26,792 for operating activities, compared to $10,448 cash provided by operating activities in the corresponding year ago period.  Although the loss increased from $76,033 to $1,638,966 (before the loss attributable to non-controlling interest), $1,088,179 of equity compensation expense (as discussed above) in the current period did not involve a cash outlay.  There were significant professional fees, $430,563, and we incurred other general administrative costs of $74,527, for the three months ended November 30, 2014, as discussed above; these amounts compare to $71,071 and $6,231 respectively for the three months ended November 30, 2013.  However, these increases in cash expenses were mostly offset by an increase of $487,717 in accounts payable (largely for professional fees) for the three months ended November 30, 2014, compared to an increase in accounts payable of $71,101 for the three months ended November 30, 2013 .  We anticipate that the accounts payable will be paid from proceeds from private placements or other financings that we may undertake.

Investing Activities

Cash flows used in investing activities were $205,877 for the three months ended November 30, 2014, compared to cash flows provided by investing activities of $6,004 for the year ago period.

During the three months ended November 30, 2014, we advanced a further $196,625 to TEG pursuant to a secured subordinated loan and we launched our website costing $9,252.  In the comparable 2013 period, the reverse merger of SCNRG with Hawker meant we acquired Hawker’s cash balance of $6,004.

Financing Activities

Cash flows provided by financing activities were $226,066 for the three months ended November 30, 2014, compared to cash flows used in financing activities of $5,957 for the year ago period.

During the three months ended November 30, 2014, we generated net cash proceeds of $105,000 from related party loans, $50,000 from convertible notes payable, and $90,000 from the sale of a non-controlling interest in Tapia Holdings.  During the three months ended November 30, 2014 we used cash of $10,000 for partial repayment of a loan from a related party and paid $8,934 on the DEEP net profits interest liability.  During the three months ended November 30, 2013, we paid $5,957 required under this same DEEP liability when our working interest was 66.67% compared to 100% in the current quarter.

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Liquidity and Financial Condition

As of November 30, 2014, we had cash of $6,604, current assets of $1,562,942, current liabilities of $3,135,784 and a working capital deficit of $1,572,842.  During the three months ended November 30, 2014, the Company had a net loss attributable to the Company of $1,629,435, largely attributable to:

· non-cash equity compensation expense of $1,030,500 for common stock issued to the HERLLC Sellers as described above;

· other non-cash equity compensation of $57,679 representing the periodic expense for stock options granted in the prior fiscal year;

· $430,563 in professional fees including $162,466 for the proposed TEG acquisition and $209,065 for HERLLC litigation;

· and $74,527 of other general administrative costs.

Despite the large loss, cash flow used in operating activities was just $26,792, reflecting the non-cash nature of the equity compensation expense ($1,088,179 in total) and a growth in accounts payable and accrued expenses of $487,717.

To date, we have relied on investor capital to fund our operating and investing activities, as described in the cash flow discussion above, and also have seen a significant increase in our outstanding accounts payable balance.

In addition to completing the proposed TEG acquisition and beginning the further development of the Tapia Assets, management’s business plan for fiscal 2015 is to continue to pursue HERLLC’s claim to coastal lease PRC 145.1 (see Part II, Item 1, “Legal Proceedings”), conduct further technical work on the DEEP property if funds permit and pursue other opportunities. We currently do not have sufficient financial resources to fund this plan.  We will also require further financial resources to further develop the Tapia Assets, the Eureka Assets and the DEEP Lease, to exploit coastal lease PRC 145.1 (assuming we are successful in securing our claim in the lease) and close other opportunities in future years.

We presently do not have any available credit, financing or other external sources of liquidity.  In order to obtain future capital, we anticipate needing to sell additional shares of common stock or borrow funds from private lenders.  We have no assurance that future financings will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Equity financing could result in additional dilution to existing shareholders and any downturn in the U.S. stock and debt markets is likely to make it more difficult to obtain financing through the issuance of equity or debt securities.  The current low oil price also makes fund raising more difficult, although it may result in new opportunities.  There can be no assurance that we will be successful in obtaining additional funding.

Even if we are able to raise the funds required, it is possible that operations do not perform as expected, we could incur unexpected costs and expenses, fail to consummate contemplated transactions, or experience unexpected cash requirements that would force us to seek alternative financing.

Business Plan and Funding Needs

There is limited historical financial information about us upon which to base an evaluation of our performance. We are in the development stage of our business and have generated minimal revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the implementation of our plan of operations or difficulties with closing and achieving expected acquisition results, production and commodity price declines, extended periods of low oil prices and possible cost overruns due to price and cost increases in services.

We have no assurance that future financings will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations or complete acquisitions. Equity financing could result in additional dilution to existing stockholders.

For these reasons, our auditors stated in their report for our last fiscal year that they have substantial doubt we will be able to continue as a going concern.

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Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of November 30, 2014, we had total current assets of $1,562,942 and a working capital deficit in the amount of $1,572,842. We incurred a net loss attributable to the Company of $1,629,435 during the three months ended November 30, 2014, and an accumulated net loss of $3,676,897 since the inception of SCNRG in December 2009.

The financial statements contained elsewhere in this report do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain additional financing or sale of our common stock as may be required and ultimately to attain profitability.

Summary of Significant Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.  

Our significant accounting policies are summarized in Note 2 of our Financial Statements contained elsewhere in this report. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.

We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our financial statements:

Secured Subordinated Loan Receivable, Short Term

This receivable is recorded at cost, plus accrued interest.  We have conducted extensive due diligence on the underlying security.  We regularly evaluate the balance, and incorporate its subordinated nature, to determine if any reserve for uncollectible amount should be established.  To date, no such reserve is required.

Oil Properties

We follow the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We also capitalize internal costs that can be directly identified with our acquisition and exploration and development activities.  We do not capitalize any costs related to production, general corporate overhead or similar activities.  Surface equipment on a property is also part of the amounts capitalized.

Under the full-cost method, capitalized costs are depleted (amortized) on a composite unit-of-production method based on proved oil reserves.  If we maintain the same level of production year over year, the depletion expense may be significantly different if our estimate of remaining reserves changes significantly. Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized. The costs of unproved properties are excluded from amortization until the properties are evaluated.  We review all of our unevaluated properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties, and if impairment has occurred.  Unevaluated properties are assessed individually when individual costs are significant.

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We review the carrying value of our oil properties under the full-cost accounting rules of the SEC on a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net revenues, current SEC regulations require us to utilize prices at the end of the appropriate quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues. Revisions to estimates of oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues. Any excess of the net book value, less deferred income taxes, is generally written off as an expense. Under SEC regulations, the excess above the ceiling is not expensed (or is reduced) if, subsequent to the end of the period, but prior to the release of the financial statements, oil prices increase sufficiently such that an excess above the ceiling would have been eliminated (or reduced) if the increased prices were used in the calculations.

The estimates of proved crude oil reserves utilized in the preparation of the financial statements are estimated in accordance with guidelines established by the SEC and the Financial Accounting Standards Board (“FASB”), which require that reserve estimates be prepared under existing economic and operating conditions using a 12-month average price with no provision for price and cost escalations in future years except by contractual arrangements. Actual results could differ materially from these estimates. 

Long-Lived Assets 

Impairment of long-lived assets is recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying value.  The carrying value of the assets is then reduced to their estimated fair value that is usually measured based on an estimate of future discounted cash flows.

Asset Retirement Obligations

Asset retirement obligations relate to the plug and abandonment costs when our wells are no longer useful, and for the cost of removing related surface facilities. We determine the value of the liability by reviewing operator estimates and estimate the increase we will face in the future. We then discount the future value based on an intrinsic interest rate that is appropriate for us. If costs rise more than what we have expected there could be additional charges in the future, however, we monitor the costs of the abandoned wells quarterly and we will adjust this liability if necessary. 

Net Profits Interest

A Net Profits Interest (“NPI”) on the DEEP property calls for 40% of the net cash flow, as defined in the Assignment of Net Profit Interest, to be paid each month to the owner of the NPI.  If net cash flow is negative, such losses carry forward to be deducted against future positive net cash flow.  There is a minimum monthly payment.  See Note 12 to the Financial Statements contained elsewhere in this report.

Given its terminating nature, the discounted present value of the minimum monthly NPI payments was recorded as a liability at SCNRG’s December 1, 2009, acquisition date of a 66.67% working interest in the DEEP property, and this liability was increased pro rata when our working interest increased to 87.18% on February 1, 2014, and again on May 15, 2014 when our working interest increased to 100.0% .  The discount rate used in all cases was 10.0% per annum.

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Equity Compensation Expense

We record equity compensation expense for stock option grants based on the estimated grant-date fair value over the period the officers or consultants are required to provide services to earn the awards.  We also record equity compensation expense for shares issued to the HERLLC sellers as described above.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-9, Revenue From Contracts With Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to receive in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is not permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared based on the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.  The Company has not conducted its analysis to determine whether it will adopt the new standard early or not.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3 Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this report, we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures were not effective as of November 30, 2014.

Management identified the following material weaknesses:

1. Lack of an audit committee, comprised of independent directors, of our Board of Directors, and lack of independent directors on our Board.

2. Inadequate number of accounting and finance personnel or consultants sufficiently trained to address some of the complex accounting and financial reporting matters that arise from time-to-time, and an insufficient number of management and accounting personnel for effective segregation of duties.

3. Lack of control procedures and documentation thereof.

As we increase the size and scale of our operations, we intend to remediate the foregoing material weaknesses.

Changes in Internal Control over Financial Reporting

During the first quarter ended November 30, 2014, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting

PART II

Item 1 Legal Proceedings

Punta Gorda Resources, LLC vs. Windsor Energy US Corporation, Rincon Island Limited Partnership, Ron Klarc, James P. Garten, and Skiff Lake Holdings, South Coast Oil Corporation, Case No. 56-2013-00440672-CU-BC-VTA, Superior Court of California, Ventura County.  On June 4, 2013, Punta Gorda Resources, LLC (a wholly owned subsidiary of HERLLC) filed a complaint for specific performance, breach of contract and declaratory relief in the United States Bankruptcy Court against the named defendants seeking to compel them to transfer lease rights and interests and overriding royalty interests provided in a Bankruptcy Court-approved Settlement Agreement concerning coastal lease PRC 145.1 just offshore Ventura County in the Rincon Field.  The complaint was dismissed on procedural grounds and re-filed by Punta Gorda in the Ventura County Superior Court.  Defendant Rincon now holds all of the subject rights and interests, except the Garten overriding royalty interest.  Punta Gorda has been appointed as Special Administrator of the Garten Estate for the purpose of bringing the Garten interest into the litigation and making it subject to a judgment.  Deposition, document and written discovery have commenced.  On June 19, 2014, defendant Rincon filed a motion for summary judgment, which we intend to oppose.  The hearing date for the summary judgment motion is scheduled for March 2, 2015.  Although we intend to vigorously pursue Punta Gorda’s rights in this case, the outcome of this matter is not determinable as of the date of this report.

In addition to the pending matters described above, we are, from time to time, involved in various legal proceedings incidental to the conduct of our business. We are unable to predict the ultimate outcome of these matters.

Item 1A Risk Factors

Not required for a smaller reporting company.

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Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended November 30, 2014, we issued an aggregate of 500,000 “Units” to three investors for gross proceeds of $50,000, received in August 2014.  This amount includes $20,000 from each of Darren Katic, an officer, director and significant shareholder and Gerald Tywoniuk, a significant shareholder.  The price of each Unit was $0.10. Each Unit was comprised of one share of our common stock, together with a warrant to acquire an additional half-share of our common stock on payment of $0.20 per share. The warrants expire five years from the closing date.

In addition, we issued convertible notes payable for $50,000 and sold additional non-controlling interest in our subsidiary Tapia Holdings for $90,000 as described in notes 10 and 16 to the unaudited interim financial statements included in this report.

The issuances of the securities described above were made in reliance upon the exemption from registration available under Section 4(2) of the Securities Act of 1933, as amended (“Securities Act”), including Regulation D promulgated thereunder, as transactions not involving a public offering. The exemption was claimed on the basis that the transactions did not involve any public offering and the purchasers were accredited investors. In each case, appropriate investment representations were obtained and stock certificates were issued with restrictive legends.

Item 3 Defaults upon Senior Securities

None.

Item 4 Mine Safety Disclosures

Not applicable.

Item 5 Other Information

Material Agreements

As discussed elsewhere in this Form 10-Q, on January 12, 2015, (i) we entered into the Share Purchase Agreement with Sefton, and (ii) we and Tapia Holdings entered into or otherwise consummated or evidenced the transactions contemplated by the Loan Receivable Agreements. The foregoing disclosures are intended to meet our disclosure requirements under Current Report on Form 8-K, Item 1.01.

Unregistered Sale of Equity Securities

On December 12, 2014, we issued an aggregate of 1,305,700 “Units” to two investors in consideration of extinguishment of $130,5700 of debt owing by us or our subsidiaries. 1,200,000 Units were issued to Kristian Andresen, one of our directors and significant stockholders. The price of each Unit (including the value used to determine the cancellation of debt) was $0.10. Each Unit was comprised of one share of our common stock, together with a warrant to acquire an additional half-share of our common stock on payment of $0.20 per share. The warrants expire five years from the closing date.

On January 8, 2015, we received proceeds of $115,000 from two investors for additional Units on the same terms as described above.  On closing, 1,150,000 shares of common stock will be issued, together with warrants to acquire an additional 575,000 shares of our common stock on payment of $0.20 per share.  The warrants expire five years from the closing date.

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The foregoing disclosures are intended to meet our disclosure requirements under Current Report on Form 8-K, Item 3.02.

The issuances of the securities described above were made in reliance upon the exemption from registration available under Section 4(2) of the Securities Act of 1933, as amended (“Securities Act”), including Regulation D promulgated thereunder, as transactions not involving a public offering. The exemption was claimed on the basis that the transactions did not involve any public offering and the purchasers were accredited investors. In each case, appropriate investment representations were obtained and stock certificates were issued with restrictive legends.

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Item 6 Exhibits

Number	Exhibit
3.1	Articles of Incorporation (1), as amended by the Certificate of Amendment (2)
3.2	Bylaws (3)
10.1	Form of Warrant (U.S. Investor) for Unit Sale (4)
10.2	Form of Warrant (Non-U.S. Investor) for Unit Sale (5)
10.3	Second Amended and Restated Secured Convertible Promissory Note issued by Hawker Energy, Inc. in favor of Oceanside Strategies dated September 18, 2014 in the aggregate amount of $250,000
10.4	Second Amended and Restated Secured Convertible Promissory Note issued by Hawker Energy, Inc. in favor of Oceanside Strategies dated September 18, 2014 in the aggregate amount of $350,000
10.5	Limited Recourse Guarantee by Sefton Resources, Inc. in favor of Hawker Energy, Inc. dated January 12, 2015.
10.6	Third Amended and Restated Security Agreement, by and among Tapia Holdings, LLC and TEG Oil & Gas U.S.A., Inc. dated August 29, 2014 (6)
10.7	Subordination and Intercreditor Agreement by and among Tapia Holdings, LLC, TEG Oil & Gas U.S.A., Inc., Sefton Resources, Inc., TEG MidContinent, Inc., and Bank of the West dated June 2, 2014 (7)
10.8	Share Purchase Agreement, dated January 12, 2015, by and among Hawker Energy, Inc., Sefton Resources, Inc. and TEG Oil & Gas U.S.A., Inc.
10.9	Pledge Agreement, dated January 12, 2015, made by Sefton Resources, Inc. in favor of Hawker Energy, Inc.
10.10	Fourth Amended and Restated Security Agreement, dated January 12, 2015, made by TEG Oil & Gas U.S.A., Inc. in favor of Hawker Energy, Inc.
10.11	Amended and Restated Subordination and Intercreditor Agreement by and among Tapia Holdings, LLC, Hawker Energy, Inc., TEG Oil & Gas U.S.A., Inc., Sefton Resources, Inc., TEG MidContinent, Inc., and Bank of the West dated January 1, 2015
31	Rule 13a-14(a) Certification of Chief Executive and Chief Financial Officer
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive and Chief Financial Officer
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

(1)	Incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form SB-2 filed on October 22, 2007.
(2)	Incorporated by reference to Appendix A of the Company’s Definitive Information Statement on Schedule 14C filed on August 20, 2014.
(3)	Incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form SB-2 filed on October 22, 2007.
(4)	Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on January 16, 2014.
(5)	Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on January 16, 2014.
(6)	Incorporated by reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K filed on November 24, 2014.
(7)	Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on June 5, 2014.

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SIGNATURES

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

	Hawker Energy, Inc.
Date:  January 16, 2015	/s/ Darren Katic
	Darren Katic Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer)

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EX-10.3

Exhibit 10.3

THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

$250,000	Redondo Beach, California
	September 18, 2014

SECOND AMENDED AND RESTATED

SECURED CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, the undersigned, HAWKER ENERGY, INC., a Nevada corporation (the “Company”), promises to pay to Oceanside Strategies (“Holder”), at Georgetown, Grand Cayman, or at such other location as is designated by Holder in writing hereunder, the sum of $250,000, bearing simple interest on the unpaid principal balance of this Note, from the date of this Note until this Note is paid in full, at the rate of 12% per annum. Interest shall accrue until the Due Date (as defined below). All principal and accrued but unpaid interest will be due and payable on November 30, 2014 (the “Due Date”). All payments shall be made in lawful money of the United States, without offset, deduction, or counterclaim of any kind.

1.             Prior Note. This Note supersedes and replaces in its entirety the Amended and Restated Secured Convertible Promissory Note dated June 19, 2014 (“Prior Note”), which Prior Note shall be automatically cancelled and of no further force and effect upon execution of this Note by the Company and delivery of the executed original of this Note to Holder.

2.             Prepayment. This Note may be prepaid, in whole or in part, by the Company at any time without penalty or premium.

3.             Events of Default. Any of the following events shall constitute an “Event of Default” under this Note:

(a)           Failure to Pay. The Company fails to pay all amounts owed on the Due Date as required under the terms of this Note.

(b)           Voluntary Bankruptcy or Insolvency Proceedings. The Company (i) applies for or consents to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) is unable, or admit in writing its inability, to pay its debts generally as they come due, (iii) makes a general assignment for the benefit of its creditors, (iv) is dissolved or liquidated in full or in part, (v) commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) takes any action for the purpose of effecting any of the foregoing, and an order for relief entered or the proceeding is not dismissed, discharged or stayed within 45 days of commencement.

(c)           Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect are commenced, and an order for relief entered or the proceeding is not dismissed, discharged or stayed within 45 days of commencement.

(d)           Breach. Any material breach by the Company of this Note.

4.           Acceleration. If an Event of Default (other than an Event of Default specified in Section 3(b) or (c)) with respect to the Company occurs and is continuing, then Holder may declare the outstanding principal and accrued interest on this Note and all other payments payable hereunder to be forthwith due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company, to the fullest extent permitted by applicable law. If an Event of Default specified in Section 3(b) or (c) occurs and continues, then the outstanding principal and accrued interest on this Note and all other payments payable hereunder shall become and be immediately due and payable without any declaration or other act on the part of Holder. Holder by notice to the Company may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived. No rescission shall affect any subsequent default or impair any right thereto.

5.             Use of Proceeds. The Company shall use the proceeds of this Note to allow its subsidiary, Tapia Holdings, LLC, to advance funds to TEG Oil & Gas USA, Inc., a Colorado corporation (“TEG”), pursuant to a Secured Subordinated Note due July 18, 2014 secured by a second priority security interest in all of TEG’s personal property assets (the “Deposit”). If, at any time, the Deposit is repaid to the Company in immediately available funds (e.g., cash), the Company shall immediately use the proceeds of that repayment to prepay this Note.

6.             Conversion of Note. This Note is convertible into units consisting of shares of Common Stock and Warrants to purchase Common Stock of the Company, in substantially the form attached as Exhibit A hereto (“Conversion Units”), upon the terms and conditions set forth below.

(a)           Voluntary Conversion. All or any portion of the then outstanding principal and accrued interest under this Note may be converted, at any time at the option of Holder, into a number of Conversion Units computed by dividing that amount by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events, the “Conversion Rate”) to arrive at the number of shares of Common Stock to be issued, and for each share of Common Stock received, Holder shall also receive a Warrant to purchase one-half (1/2) share of Common Stock for an exercise price of $0.25 per share.

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(b)           Conversion Procedure. Before Holder is entitled to receive certificate for Conversion Units, or any other instruments in connection with a conversion hereunder, Holder shall surrender the original of this Note, duly endorsed, at the principal office of the Company. At its expense, the Company shall, as soon as practicable thereafter, issue and deliver to Holder at the principal office certificates for the number of Conversion Units to which Holder is entitled upon conversion (bearing any legends that are required by the terms of the conversion and applicable state and federal securities law in the opinion of counsel to the Company), together with any other securities and property to which Holder is entitled upon conversion under the terms of this Note and, if the conversion is for less than all of the then outstanding balance of principal and interest on this Note, a replacement Note of like tenor in the proper denomination.

(c)           No Fractional Shares. No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to Holder upon the conversion of this Note, the Company shall pay to Holder an amount in cash equal to the product obtained by multiplying the Conversion Rate applied to effect the conversion by the fraction of a share not issued pursuant to the previous sentence. Upon conversion of all principal of and accrued interest on this Note and/or payment of all principal and accrued interest, the Company shall be forever released from all its obligations and liabilities under this Note.

(d)           Reservation of Stock Issuable Upon Conversion and Upon Exercise. The Company shall at all times reserve and keep available out of its authorized but unissued shares solely for the purpose of effecting the conversion of the Note such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Note and the exercise of the Warrants issued upon conversion of this Note; and if at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversion of this Note and the exercise of the Warrants, then, in addition to any other remedies available to Holder, the Company will use its best efforts to take whatever corporate action is, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to a number of shares of Common Stock sufficient for those purposes.

(e)           Beneficial Ownership. The Company shall not effect any conversion of this Note, and Holder shall not have the right to convert any portion of this Note pursuant to Section 6(a), to the extent that after giving effect to such conversion, Holder (together with Holder's affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by Holder and its affiliates includes, without limitation, the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but excludes the number of shares of Common Stock that would be issuable upon (i) conversion of the remaining, nonconverted portion of this Note beneficially owned by Holder or any of its affiliates, and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other convertible notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 6(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. 

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7.             Security Interest. The Company hereby grants to Holder a security interest in and to all of its right, title and interest in and to the following, wherever located, whether now existing or hereafter from time to time arising or acquired:

(a)           all fixtures and personal property of every kind and nature including all accounts, goods (including inventory and equipment), documents (including, if applicable, electronic documents), instruments, promissory notes, chattel paper (whether tangible or electronic), letters of credit, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), securities and all other investment property, general intangibles (including all payment intangibles), money, deposit accounts, and any other contract rights or rights to the payment of money; and

(b)           all proceeds and products of each of the foregoing, all books and records relating to the foregoing, all supporting obligations related thereto, and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, and any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Company from time to time with respect to any of the foregoing.

8.             Attorneys’ Fees. If any action is instituted on this Note, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which the party or parties may be entitled. Diligence, demand, presentment, notice of dishonor, and protest are waived by the Company, and any and all makers, sureties, guarantors, and endorsers of this Note, and their successors and assigns. Time is of the essence for every obligation under this Note.

9.             Usury. It is the express intent of the Company and Holder that the payment of all or any portion of the outstanding principal amount of and accrued interest under this Note be exempt from the application of any applicable usury or similar laws under any state, federal or foreign jurisdiction. The Company hereby irrevocably waives, to the fullest extent permitted by law, any objection or defense which the Company may now or hereafter have to the payment when due of any and all Note principal or accrued interest arising out of or relating to a claim of usury or similar laws and the Company hereby agrees that neither it nor any of its affiliates shall in the future bring, commence, maintain, prosecute or voluntarily aid in any action at law, proceeding in equity or other legal proceeding against Holder based on a claim that the Company’s payment obligations under this Note violate the usury or similar laws of any state, federal or foreign jurisdiction. Notwithstanding the foregoing, if any interest paid on this Note is deemed to be in excess of the then legal maximum rate, that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

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10.           Unconditional Obligation; Waivers.

(a)           No forbearance, indulgence, delay or failure to exercise any right or remedy with respect to this Note shall operate as a waiver, nor as an acquiescence in any default, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof.

(b)           The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, notice of dishonor, protest, notice of protest, bringing of suit, and diligence in taking any action to collect amounts called for hereunder, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission with respect to the collection of any amount called for hereunder or in connection with any right at any and all times which Holder had or is existing hereunder.

11.           Notices. All notices and other communications provided for hereunder shall be in writing and delivered, mailed or transmitted by any standard form of electronic communication. Notices and other communications to the Company shall be directed to it at 326 S. Pacific Coast Highway, Suite 102, Redondo Beach, California 90277, attention: Darren Katic, President, dkatic@hawkerenergyllc.com; and notices and other communications to Holder shall be directed to it at its address at __________________________________, _______@_______.com; or, as to each party, at such other address as shall be designated by that party in a written notice to the other party pursuant hereto. Any notice or other communication shall be deemed to have been duly given (a) when sent by Federal Express or other overnight delivery service of recognized standing, on the business day following deposit with that service; (b) when mailed by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when e-mailed, upon confirmation of receipt. Any party may by notice so given change its address for future notice hereunder.

12.           Payment. Payment shall be made in lawful tender of the United States.

13.           No Third Party Rights. Nothing expressed in or to be implied from this Note is intended to give, or shall be construed to give, any person, other than the parties hereto and their permitted successors and assigns, any benefit or legal or equitable right, remedy or claim under or by virtue of this Note.

14.           Replacement of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (or any security issued on conversion of this Note), the Company will issue a replacement instrument, at Holder’s expense, in lieu of the lost, stolen, destroyed or mutilated instrument, provided that Holder indemnifies the Company for any losses incurred by the Company with respect to this Note.

15.           Amendment. Except as expressly provided herein, neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Note and signed by the Company and Holder.

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16.           Governing Law. This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the United States of America and the State of California, without application of conflicts of law principles.

IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the day and year and at the place first above written.

HAWKER ENERGY, INC.
By:	/s/ Darren Katic
	Darren Katic, President

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Exhibit A

Form of Warrant

(see attached)

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  AS SUCH, THE SECURITIES REPRESENTED BY THIS WARRANT ARE “RESTRICTED SECURITIES” AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF OTHER THAN (A) (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT UNDER THE SECURITIES ACT, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT, OR (IV) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (B) PURSUANT TO THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF APPLICABLE STATE, PROVENTIAL AND FOREIGN SECURITIES LAWS OR PURSUANT TO ONE OR MORE EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS, AND (C) IF THE CORPORATION REQUESTS, BASED ON AN OPINION SATISFACTORY TO THE CORPORATION WITH RESPECT TO FOREGOING (A) AND (B) HAS BEEN RENDERED BY COUNSEL.  THE HOLDER HEREOF AGREES THAT (X) ANY HEDGING TRANSACTION WITH RESPECT TO THE SECURITIES REPRESENTED BY THIS WARRANT WILL BE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT AND (Y) IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS WARRANT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION” AND “UNITED STATES” HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN REGULATION S UNDER THE SECURITIES ACT.

WARRANT

(Non-U.S. Investor)

Warrant Certificate No.: [●]

Original Issue Date: [●]

FOR VALUE RECEIVED, Hawker Energy, Inc., a Nevada corporation (the “Company”), hereby certifies that _________________, a ______________, or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company _____________ (_________) duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $0.25 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used in this Warrant are defined in Section 1.

This Warrant has been issued pursuant to the terms of that certain Second Amended and Restated Secured Convertible Promissory Note, dated as of September __, 2014 (the “Convertible Note”), issued by the Company in favor of the Holder.

1.             Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“$” means United States dollars.

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3, multiplied by (b) the Exercise Price in effect as of the Exercise Date.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday on which banking institutions in the city of Los Angeles, California, are authorized or obligated by law or executive order to close.

“Common Stock” means the common stock, par value $0.001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the Original Issue Date.

“Company” has the meaning set forth in the preamble of this Warrant.

“Convertible Note” has the meaning set forth in the preamble of this Warrant.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., Los Angeles, California time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, this Warrant and the Aggregate Exercise Price.

“Exercise Agreement” means an Exercise Agreement in the form attached to this Warrant as Exhibit A.

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble of this Warrant.

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“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined by the Board in its reasonable discretion.

“Holder” has the meaning set forth in the preamble of this Warrant.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” has the meaning set forth on the cover page to this Warrant.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Sale Event”means (i) any sale of Common Stock (excluding issuances of Common Stock by the Company) in a single transaction or a series of related transactions in which the holders of Common Stock immediately prior to such sale of Common Stock do not, directly or indirectly, own at least a majority of the Common Stock outstanding immediately after such sale of Common Stock, (ii) any merger, consolidation, reorganization or other business combination of the Company with or into any other corporation or other entity in which the holders of Common Stock immediately prior to such merger, consolidation, reorganization or business combination do not, directly or indirectly, own capital stock of the entity surviving such merger, consolidation, reorganization or business combination representing at least a majority of the combined voting power of the outstanding securities of such entity immediately after such merger, consolidation, reorganization or business combination, or (iii) a sale, lease or other disposition of all or substantially all of the assets of the Company to an unrelated person or entity by means of a single transaction or a series of related transactions.

“Securities Act” has the meaning set forth in the legend endorsed on the cover page of this Warrant.

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“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other securities then purchasable upon exercise of this Warrant, as the same may be adjusted in accordance with the terms of this Warrant.

2.             Term of Warrant. Subject to the terms and conditions of this Warrant, at any time or from time to time after the date hereof and prior to 5:00 p.m., Los Angeles, California time, on the five (5) year anniversary of the Original Issue Date or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder.

3.             Exercise of Warrant.

(a)           Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i)           surrender of this Warrant to the Company at its then principal executive offices (or an indemnification in accordance with Section 9 in the case of the loss, theft, destruction or mutilation of this Warrant), together with a duly completed (including specifying the number of Warrant Shares for which this Warrant is being exercised) and executed Exercise Agreement; and

(ii)           payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b)           Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price.

(c)           Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a)), the Company shall, as promptly as reasonably practicable, and in any event within ten (10) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d). The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or (subject to compliance with Section 7) any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

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(d)           Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of this Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

(e)           Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f)           Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees that:

(i)             This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii)            All Warrant Shares issuable upon the exercise of this Warrant in compliance with the terms of this Warrant shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii)           The Company shall use commercially reasonable efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

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(iv)           The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to the Holder or to any other Person permitted to receive Warrant Shares upon exercise of this Warrant, and no such issuance or delivery shall be made unless and until the Holder or such Person has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g)           Conditional Exercise. Notwithstanding any other provision of this Warrant, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a Sale Event, such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h)           Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4.           Adjustment to Exercise Price and Number of Warrant Shares. The Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4.

(a)           Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, then the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(a) shall become effective concurrent at the time such dividend, subdivision or combination becomes effective.

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(b)           Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than (x) a change in par value, from par value to no par value, or from no par value to par value, or (y) as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(a)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise; and, in such case, appropriate adjustment (in form and substance determined by the Board in its reasonable discretion) shall be made with respect to the Holder’s rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. Subject to Section 5, the Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. With respect to any corporate event or other transaction contemplated by the provisions of this Section 4(b), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 3 instead of giving effect to the provisions contained in this Section 4(b) with respect to this Warrant.

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(c)           Certain Events. If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided, that no such adjustment pursuant to this Section 4(c) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4.

(d)           Certificate as to Adjustment.

(i)             As promptly as reasonably practicable following any adjustment of the Exercise Price that results in an increase or decrease of the Exercise Price of $0.01 or more, but in any event not later than twenty (20) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii)             As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant; provided that the Holder may only exercise its rights pursuant to this Section 4(d)(ii) once during any twelve consecutive month period.

(e)           Notices. In the event:

(i)             that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(ii)             of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

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(iii)           of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

 then, and in each such case, the Company shall send or cause to be sent to the Holder at least twenty (20) days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution or other right or action, and a description of such dividend, distribution or other right, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

5.           Sale Event.  Notwithstanding anything in this Warrant to the Contrary, the Company shall have the right (exercisable in the sole and absolute discretion of the Board), but not the obligation, in connection with a Sale Event to make or provide for a cash payment to Holder, in exchange for the cancellation of this Warrant, in an amount equal to the difference between (a) the value as determined by the Board of the consideration payable, or otherwise to be received by stockholders, per share of Common Stock pursuant to a Sale Event multiplied by the number of Warrant Shares then issuable under this Warrant and (b) the Aggregate Exercise Price of all such Warrant Shares, subject to the other terms and conditions of the Sale Event (such as representations and warranties, holdback and escrow amounts, indemnification obligations and purchase price adjustments) to the extent applicable to Common Stock holders.

6.           Restrictions on Exercise.  Notwithstanding anything in this Warrant to the contrary, this Warrant may not be exercised if the issuance of Warrant Shares upon such exercise or if the method of payment for such Warrant Shares would constitute a violation of any applicable laws or regulations, including, without limitation, applicable United States, foreign, provincial and state securities laws and regulations.  The Company may require Holder to make any representations and warranties to the Company as may be required by any applicable law or regulation (including, without limitation, applicable United States, foreign, provincial and state securities laws and regulations) before allowing this Warrant to be exercised.  Without limiting the generality of the foregoing, Warrant Shares issued upon exercise of this Warrant may not be issued in the name of any Person other than Holder unless the transfer conditions referred to in the legend endorsed on the cover page of this Warrant have been complied with to the satisfaction of the Company.  In addition, no Warrant Shares will be issued pursuant to the exercise of this Warrant unless such issuance and such exercise comply with all relevant requirements of any stock exchange upon which the Common Stock may then be listed.

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7.           Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed on the cover page of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(iv) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

8.           Holder Not Deemed a Stockholder; Limitations on Liability. Prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

9.           Replacement on Loss; Division and Combination.

(a)           Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to the Company and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

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(b)           Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment that may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment that may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

10.           Compliance with the Securities Act.

(a)           Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 10 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that that Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act or applicable United States, foreign, provincial or state securities laws and regulations. This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  AS SUCH, THE SECURITIES REPRESENTED BY THIS WARRANT ARE “RESTRICTED SECURITIES” AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF OTHER THAN (A) (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT UNDER THE SECURITIES ACT, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT, OR (IV) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (B) PURSUANT TO THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF APPLICABLE STATE, PROVENTIAL AND FOREIGN SECURITIES LAWS OR PURSUANT TO ONE OR MORE EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENT, AND (C) IF THE CORPORATION REQUESTS, BASED ON AN OPINION SATISFACTORY TO THE CORPORATION WITH RESPECT TO FOREGOING (A) AND (B) HAS BEEN RENDERED BY COUNSEL.  THE HOLDER HEREOF AGREES THAT (X) ANY HEDGING TRANSACTION WITH RESPECT TO THE SECURITIES REPRESENTED BY THIS WARRANT WILL BE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT AND (Y) IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS WARRANT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION” AND “UNITED STATES” HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN REGULATION S UNDER THE SECURITIES ACT.”

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(b)           Representations of the Holder. In connection with the issuance of this Warrant and each exercise of this Warrant, the Holder specifically represents, as of the Original Issue Date and each Exercise Date, to the Company as follows:

(i)           The Holder (A) is not a “U.S. Person” as defined in Rule 902 of Regulation S promulgated under the Securities Act and (B) is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and all Warrant Shares issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii)           The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Regulation S and Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii)           The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. Subject to Section 10(b)(iv), the Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

(iv)           The Holder acknowledges and agrees that neither the Company, nor any officer, director, employee or representative of the Company, nor any other Person has made or is making any representations or warranties of any kind or nature whatsoever, express or implied, beyond those expressly given by the Company in this Warrant and in the Convertible Note.

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11.           Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of this Warrant and any transfers of this Warrant. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

12.           Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF (or similar electronic format) document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the fourth day after the date mailed, by USPS certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12).

If to the Company:	Hawker Energy, Inc. 326 South Pacific Coast Highway Suite 102 Redondo Beach, CA 90277 E-mail: dkatic@hawkerenergyllc.com Attn:  President
with a copy to (which shall not constitute notice):	Rutan & Tucker, LLP 611 Anton Blvd., Suite 1400 Costa Mesa, CA 92626 E-mail: gamber@rutan.com Attn:  Gregg Amber, Esq. and E-Mail: gsleichter@rutan.com Attn: Garett Sleichter, Esq.
If to the Holder:	E-mail:        Attn:

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13.           Cumulative Remedies. The rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

14.           Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

15.           Entire Agreement. This Warrant, together with the Convertible Note, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the provisions of this Warrant and the provisions of the Convertible Note, the provisions of this Warrant shall control.

16.           Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

17.           No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

18.           Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

19.           Amendment and Modification; Waiver. This Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

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20.           Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

21.           Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Nevada.

22.           Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of California in each case located in the city of Los Angeles and County of Los Angeles, California, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

23.           Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, to the fullest extent permitted by law, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

24.           Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

25.           No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

15

[SIGNATURE PAGE FOLLOWS]

16

IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

Hawker Energy, Inc.

By:

Name:

Title:

Accepted and agreed,

[HOLDER NAME]

By:

Name:

Title:

Signature Page to Warrant

EXHIBIT A

EXERCISE AGREEMENT

TO:           HAWKER ENERGY, INC.

The undersigned Holder hereby exercises the right to purchase _______________ shares of Common Stock of the Company pursuant to the terms of the attached Warrant.

The Aggregate Exercise Price for the purchase of such shares of Common Stock calculated in accordance with the Warrant equals: $_______________.  The undersigned Holder has either (a) enclosed herewith a certified or official bank check payable to the order of the Company in the full amount of such Aggregate Exercise Price or (b) prior to or on the date of this Exercise Agreement paid the full amount of such Aggregate Exercise Price by wire transfer of immediately available funds to an account designated in writing by the Company.

Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

The undersigned Holder represents that it is acquiring the shares upon exercise of the Warrant for its own account and not with a view toward, or for resale in connection with, the public sale or distribution of those shares, except pursuant to sales registered or exempted under the Securities Act of 1933, as amended (the “Securities Act”), and that as of the date hereof, the undersigned (A) is not a “U.S. Person” as defined in Rule 902 of Regulation S promulgated under the Securities Act and (B) is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act.

Name of Holder:

Signature of Holder:

Name of Authorized

Signatory (if an entity):  

Title of Authorized

Signatory (if an entity):

Dated:

EXHIBIT B

ASSIGNMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase shares of Common Stock of Hawker Energy, Inc. into which the within Warrant relates specified under the headings “Number of Warrants Transferred,” respectively, opposite the name(s) of such person(s) and appoints each and any officer of the Corporation as attorney to transfer the undersigned’s respective right on the register of warrants maintained by the Corporation with full power of substitution in the premises.

Transferees	Address	Number of Warrants Transferred
_________________	_________________	_________________
_________________	_________________	_________________
_________________	_________________	_________________

Dated:
	(Signature must conform to name of Holder as specified on the face of the Warrant)
	Address:
	Signature Guarantee

ACCEPTED AND AGREED:

[TRANSFEREE]

(Name)

The signature of the Holder to this Assignment must correspond exactly with the name of the Holder as set forth on the face of the Warrant in every particular and the signature must be guaranteed by a U.S. chartered bank or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program.

EX-10.4

Exhibit 10.4

THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

$350,000	Redondo Beach, California
	September 18, 2014

SECOND AMENDED AND RESTATED

SECURED CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, the undersigned, HAWKER ENERGY, INC., a Nevada corporation (the “Company”), promises to pay to Oceanside Strategies (“Holder”), at Georgetown, Grand Cayman, or at such other location as is designated by Holder in writing hereunder, the sum of $350,000, bearing simple interest on the unpaid principal balance of this Note, from the date of this Note until this Note is paid in full, at the rate of 12% per annum. Interest shall accrue until the Due Date (as defined below). All principal and accrued but unpaid interest will be due and payable on November 30, 2014 (the “Due Date”). All payments shall be made in lawful money of the United States, without offset, deduction, or counterclaim of any kind.

1.             Prior Note. This Note supersedes and replaces in its entirety the Amended and Restated Secured Convertible Promissory Note dated June 25, 2014 (“Prior Note”), which Prior Note shall be automatically cancelled and of no further force and effect upon execution of this Note by the Company and delivery of the executed original of this Note to Holder.

2.             Prepayment. This Note may be prepaid, in whole or in part, by the Company at any time without penalty or premium.

3.             Events of Default. Any of the following events shall constitute an “Event of Default” under this Note:

(a)           Failure to Pay. The Company fails to pay all amounts owed on the Due Date as required under the terms of this Note.

(b)           Voluntary Bankruptcy or Insolvency Proceedings. The Company (i) applies for or consents to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) is unable, or admit in writing its inability, to pay its debts generally as they come due, (iii) makes a general assignment for the benefit of its creditors, (iv) is dissolved or liquidated in full or in part, (v) commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) takes any action for the purpose of effecting any of the foregoing, and an order for relief entered or the proceeding is not dismissed, discharged or stayed within 45 days of commencement.

(c)           Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect are commenced, and an order for relief entered or the proceeding is not dismissed, discharged or stayed within 45 days of commencement.

(d)           Breach. Any material breach by the Company of this Note.

4.             Acceleration. If an Event of Default (other than an Event of Default specified in Section 3(b) or (c)) with respect to the Company occurs and is continuing, then Holder may declare the outstanding principal and accrued interest on this Note and all other payments payable hereunder to be forthwith due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company, to the fullest extent permitted by applicable law. If an Event of Default specified in Section 3(b) or (c) occurs and continues, then the outstanding principal and accrued interest on this Note and all other payments payable hereunder shall become and be immediately due and payable without any declaration or other act on the part of Holder. Holder by notice to the Company may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived. No rescission shall affect any subsequent default or impair any right thereto.

5.             Use of Proceeds. The Company shall use the proceeds of this Note to allow its subsidiary, Tapia Holdings, LLC, to advance funds to TEG Oil & Gas USA, Inc., a Colorado corporation (“TEG”), pursuant to a Secured Subordinated Note due December 29, 2014 secured by a second priority security interest in all of TEG’s personal property assets (the “Deposit”). If, at any time, the Deposit is repaid to the Company in immediately available funds (e.g., cash), the Company shall immediately use the proceeds of that repayment to prepay this Note.

6.             Conversion of Note. This Note is convertible into units consisting of shares of Common Stock and Warrants to purchase Common Stock of the Company, in substantially the form attached as Exhibit A hereto (“Conversion Units”), upon the terms and conditions set forth below.

(a)           Voluntary Conversion. All or any portion of the then outstanding principal and accrued interest under this Note may be converted, at any time at the option of Holder, into a number of Conversion Units computed by dividing that amount by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events, the “Conversion Rate”) to arrive at the number of shares of Common Stock to be issued, and for each share of Common Stock received, Holder shall also receive a Warrant to purchase one-half (1/2) share of Common Stock for an exercise price of $0.25 per share.

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(b)           Conversion Procedure. Before Holder is entitled to receive certificate for Conversion Units, or any other instruments in connection with a conversion hereunder, Holder shall surrender the original of this Note, duly endorsed, at the principal office of the Company. At its expense, the Company shall, as soon as practicable thereafter, issue and deliver to Holder at the principal office certificates for the number of Conversion Units to which Holder is entitled upon conversion (bearing any legends that are required by the terms of the conversion and applicable state and federal securities law in the opinion of counsel to the Company), together with any other securities and property to which Holder is entitled upon conversion under the terms of this Note and, if the conversion is for less than all of the then outstanding balance of principal and interest on this Note, a replacement Note of like tenor in the proper denomination.

(c)           No Fractional Shares. No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to Holder upon the conversion of this Note, the Company shall pay to Holder an amount in cash equal to the product obtained by multiplying the Conversion Rate applied to effect the conversion by the fraction of a share not issued pursuant to the previous sentence. Upon conversion of all principal of and accrued interest on this Note and/or payment of all principal and accrued interest, the Company shall be forever released from all its obligations and liabilities under this Note.

(d)           Reservation of Stock Issuable Upon Conversion and Upon Exercise. The Company shall at all times reserve and keep available out of its authorized but unissued shares solely for the purpose of effecting the conversion of the Note such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Note and the exercise of the Warrants issued upon conversion of this Note; and if at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversion of this Note and the exercise of the Warrants, then, in addition to any other remedies available to Holder, the Company will use its best efforts to take whatever corporate action is, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to a number of shares of Common Stock sufficient for those purposes.

(e)           Adjustment to Number of Conversion Units.

(i)           In order to prevent dilution of the conversion rights granted under this Note, the number of Conversion Units issuable upon conversion of this Note shall be subject to adjustment from time to time as provided in this Section 6(e) (in each case, after taking into consideration any prior adjustments pursuant to this Section 6(e)).

(ii)           Except in the case of an event described in Section 6(e)(iii), if the Company shall, at any time or from time to time after the date of this Note, issue or sell any Common Stock (which, for avoidance of doubt, includes any bundling of securities of the Company that are in part comprised of Common Stock), or any security of the Company that is readily convertible into Common Stock, without consideration or for consideration per share of Common Stock less than the Conversion Rate, then immediately upon such issuance or sale, the Conversion Rate in effect immediately prior to such issuance or sale shall be reduced (and in no event increased) to a Conversion Rate equal to the lowest price per share of Common Stock at which any such share has been issued or sold; provided, that if such issuance or sale was without consideration, then the Company shall be deemed to have received consideration of $0.01 per share.

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(iii)           There shall be no adjustment to the Conversion Rate with respect to any security of the Company  issued or sold:

(A)           upon conversion of this Note;

(B)           to officers, directors or employees of, or consultants to, the Company pursuant to stock option or stock purchase plans or agreements on terms approved by the Board of Directors of the Company;

(C)           as a dividend or distribution on Common Stock;

(D)           upon exercise or conversion of option or warrants outstanding as of the date of this Note;

(E)           upon any stock split, stock combination or other capital reorganization or the Company;

(F)           upon consolidation or merger of the Company with or into another person;

(G)           upon or in connection with the sale of all or substantially all of the assets of the Company to another person; or

(H)           upon or in connection with any lender financing, equipment leasing or similar transaction.

(f)           Beneficial Ownership. The Company shall not effect any conversion of this Note, and Holder shall not have the right to convert any portion of this Note pursuant to Section 6(a), to the extent that after giving effect to such conversion, Holder (together with Holder's affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by Holder and its affiliates includes, without limitation, the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but excludes the number of shares of Common Stock that would be issuable upon (i) conversion of the remaining, nonconverted portion of this Note beneficially owned by Holder or any of its affiliates, and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other convertible notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 6(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. 

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7.             Security Interest. The Company hereby grants to Holder a security interest in and to all of its right, title and interest in and to the following, wherever located, whether now existing or hereafter from time to time arising or acquired:

(a)           all fixtures and personal property of every kind and nature including all accounts, goods (including inventory and equipment), documents (including, if applicable, electronic documents), instruments, promissory notes, chattel paper (whether tangible or electronic), letters of credit, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), securities and all other investment property, general intangibles (including all payment intangibles), money, deposit accounts, and any other contract rights or rights to the payment of money; and

(b)           all proceeds and products of each of the foregoing, all books and records relating to the foregoing, all supporting obligations related thereto, and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, and any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Company from time to time with respect to any of the foregoing.

8.             Attorneys’ Fees. If any action is instituted on this Note, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which the party or parties may be entitled. Diligence, demand, presentment, notice of dishonor, and protest are waived by the Company, and any and all makers, sureties, guarantors, and endorsers of this Note, and their successors and assigns. Time is of the essence for every obligation under this Note.

9.             Usury. It is the express intent of the Company and Holder that the payment of all or any portion of the outstanding principal amount of and accrued interest under this Note be exempt from the application of any applicable usury or similar laws under any state, federal or foreign jurisdiction. The Company hereby irrevocably waives, to the fullest extent permitted by law, any objection or defense which the Company may now or hereafter have to the payment when due of any and all Note principal or accrued interest arising out of or relating to a claim of usury or similar laws and the Company hereby agrees that neither it nor any of its affiliates shall in the future bring, commence, maintain, prosecute or voluntarily aid in any action at law, proceeding in equity or other legal proceeding against Holder based on a claim that the Company’s payment obligations under this Note violate the usury or similar laws of any state, federal or foreign jurisdiction. Notwithstanding the foregoing, if any interest paid on this Note is deemed to be in excess of the then legal maximum rate, that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

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10.           Unconditional Obligation; Waivers.

(a)           No forbearance, indulgence, delay or failure to exercise any right or remedy with respect to this Note shall operate as a waiver, nor as an acquiescence in any default, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof.

(b)           The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, notice of dishonor, protest, notice of protest, bringing of suit, and diligence in taking any action to collect amounts called for hereunder, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission with respect to the collection of any amount called for hereunder or in connection with any right at any and all times which Holder had or is existing hereunder.

11.           Notices. All notices and other communications provided for hereunder shall be in writing and delivered, mailed or transmitted by any standard form of electronic communication. Notices and other communications to the Company shall be directed to it at 326 S. Pacific Coast Highway, Suite 102, Redondo Beach, California 90277, attention: Darren Katic, President, dkatic@hawkerenergyllc.com; and notices and other communications to Holder shall be directed to it at its address at __________________________________, _______@_______.com; or, as to each party, at such other address as shall be designated by that party in a written notice to the other party pursuant hereto. Any notice or other communication shall be deemed to have been duly given (a) when sent by Federal Express or other overnight delivery service of recognized standing, on the business day following deposit with that service; (b) when mailed by registered or certified mail, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d) when e-mailed, upon confirmation of receipt. Any party may by notice so given change its address for future notice hereunder.

12.           Payment. Payment shall be made in lawful tender of the United States.

13.           No Third Party Rights. Nothing expressed in or to be implied from this Note is intended to give, or shall be construed to give, any person, other than the parties hereto and their permitted successors and assigns, any benefit or legal or equitable right, remedy or claim under or by virtue of this Note.

14.           Replacement of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (or any security issued on conversion of this Note), the Company will issue a replacement instrument, at Holder’s expense, in lieu of the lost, stolen, destroyed or mutilated instrument, provided that Holder indemnifies the Company for any losses incurred by the Company with respect to this Note.

15.           Amendment. Except as expressly provided herein, neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Note and signed by the Company and Holder.

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16.           Governing Law. This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the United States of America and the State of California, without application of conflicts of law principles.

IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the day and year and at the place first above written.

HAWKER ENERGY, INC.
By:	/s/ Darren Katic
	Darren Katic, President

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Exhibit A

Form of Warrant

(see attached)

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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  AS SUCH, THE SECURITIES REPRESENTED BY THIS WARRANT ARE “RESTRICTED SECURITIES” AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF OTHER THAN (A) (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT UNDER THE SECURITIES ACT, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT, OR (IV) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (B) PURSUANT TO THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF APPLICABLE STATE, PROVENTIAL AND FOREIGN SECURITIES LAWS OR PURSUANT TO ONE OR MORE EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS, AND (C) IF THE CORPORATION REQUESTS, BASED ON AN OPINION SATISFACTORY TO THE CORPORATION WITH RESPECT TO FOREGOING (A) AND (B) HAS BEEN RENDERED BY COUNSEL.  THE HOLDER HEREOF AGREES THAT (X) ANY HEDGING TRANSACTION WITH RESPECT TO THE SECURITIES REPRESENTED BY THIS WARRANT WILL BE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT AND (Y) IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS WARRANT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION” AND “UNITED STATES” HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN REGULATION S UNDER THE SECURITIES ACT.

WARRANT

(Non-U.S. Investor)

Warrant Certificate No.: [●]

Original Issue Date: [●]

FOR VALUE RECEIVED, Hawker Energy, Inc., a Nevada corporation (the “Company”), hereby certifies that _________________, a ______________, or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company _____________ (_________) duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $0.25 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used in this Warrant are defined in Section 1.

This Warrant has been issued pursuant to the terms of that certain Second Amended and Restated Secured Convertible Promissory Note, dated as of September __, 2014 (the “Convertible Note”), issued by the Company in favor of the Holder.

Signature Page to Warrant

1.             Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“$” means United States dollars.

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3, multiplied by (b) the Exercise Price in effect as of the Exercise Date.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday on which banking institutions in the city of Los Angeles, California, are authorized or obligated by law or executive order to close.

“Common Stock” means the common stock, par value $0.001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the Original Issue Date.

“Company” has the meaning set forth in the preamble of this Warrant.

“Convertible Note” has the meaning set forth in the preamble of this Warrant.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., Los Angeles, California time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, this Warrant and the Aggregate Exercise Price.

“Exercise Agreement” means an Exercise Agreement in the form attached to this Warrant as Exhibit A.

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble of this Warrant.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined by the Board in its reasonable discretion.

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“Holder” has the meaning set forth in the preamble of this Warrant.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” has the meaning set forth on the cover page to this Warrant.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Sale Event”means (i) any sale of Common Stock (excluding issuances of Common Stock by the Company) in a single transaction or a series of related transactions in which the holders of Common Stock immediately prior to such sale of Common Stock do not, directly or indirectly, own at least a majority of the Common Stock outstanding immediately after such sale of Common Stock, (ii) any merger, consolidation, reorganization or other business combination of the Company with or into any other corporation or other entity in which the holders of Common Stock immediately prior to such merger, consolidation, reorganization or business combination do not, directly or indirectly, own capital stock of the entity surviving such merger, consolidation, reorganization or business combination representing at least a majority of the combined voting power of the outstanding securities of such entity immediately after such merger, consolidation, reorganization or business combination, or (iii) a sale, lease or other disposition of all or substantially all of the assets of the Company to an unrelated person or entity by means of a single transaction or a series of related transactions.

“Securities Act” has the meaning set forth in the legend endorsed on the cover page of this Warrant.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other securities then purchasable upon exercise of this Warrant, as the same may be adjusted in accordance with the terms of this Warrant.

2.           Term of Warrant. Subject to the terms and conditions of this Warrant, at any time or from time to time after the date hereof and prior to 5:00 p.m., Los Angeles, California time, on the five (5) year anniversary of the Original Issue Date or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder.

3.           Exercise of Warrant.

(a)           Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i)             surrender of this Warrant to the Company at its then principal executive offices (or an indemnification in accordance with Section 9 in the case of the loss, theft, destruction or mutilation of this Warrant), together with a duly completed (including specifying the number of Warrant Shares for which this Warrant is being exercised) and executed Exercise Agreement; and

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(ii)           payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b)           Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price.

(c)           Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a)), the Company shall, as promptly as reasonably practicable, and in any event within ten (10) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d). The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or (subject to compliance with Section 7) any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d)           Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of this Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

(e)           Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f)           Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees that:

(i)             This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

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(ii)            All Warrant Shares issuable upon the exercise of this Warrant in compliance with the terms of this Warrant shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii)           The Company shall use commercially reasonable efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(iv)           The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to the Holder or to any other Person permitted to receive Warrant Shares upon exercise of this Warrant, and no such issuance or delivery shall be made unless and until the Holder or such Person has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g)           Conditional Exercise. Notwithstanding any other provision of this Warrant, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a Sale Event, such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h)           Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4.           Adjustment to Exercise Price and Number of Warrant Shares. The Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4.

(a)           Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, then the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(a) shall become effective concurrent at the time such dividend, subdivision or combination becomes effective.

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(b)           Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than (x) a change in par value, from par value to no par value, or from no par value to par value, or (y) as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(a)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise; and, in such case, appropriate adjustment (in form and substance determined by the Board in its reasonable discretion) shall be made with respect to the Holder’s rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. Subject to Section 5, the Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. With respect to any corporate event or other transaction contemplated by the provisions of this Section 4(b), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 3 instead of giving effect to the provisions contained in this Section 4(b) with respect to this Warrant.

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(c)           Certain Events. If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided, that no such adjustment pursuant to this Section 4(c) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4.

(d)           Certificate as to Adjustment.

(i)             As promptly as reasonably practicable following any adjustment of the Exercise Price that results in an increase or decrease of the Exercise Price of $0.01 or more, but in any event not later than twenty (20) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii)            As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant; provided that the Holder may only exercise its rights pursuant to this Section 4(d)(ii) once during any twelve consecutive month period.

(e)           Notices. In the event:

(i)             that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(ii)            of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

(iii)           of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

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 then, and in each such case, the Company shall send or cause to be sent to the Holder at least twenty (20) days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution or other right or action, and a description of such dividend, distribution or other right, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

5.           Sale Event.  Notwithstanding anything in this Warrant to the Contrary, the Company shall have the right (exercisable in the sole and absolute discretion of the Board), but not the obligation, in connection with a Sale Event to make or provide for a cash payment to Holder, in exchange for the cancellation of this Warrant, in an amount equal to the difference between (a) the value as determined by the Board of the consideration payable, or otherwise to be received by stockholders, per share of Common Stock pursuant to a Sale Event multiplied by the number of Warrant Shares then issuable under this Warrant and (b) the Aggregate Exercise Price of all such Warrant Shares, subject to the other terms and conditions of the Sale Event (such as representations and warranties, holdback and escrow amounts, indemnification obligations and purchase price adjustments) to the extent applicable to Common Stock holders.

6.           Restrictions on Exercise.  Notwithstanding anything in this Warrant to the contrary, this Warrant may not be exercised if the issuance of Warrant Shares upon such exercise or if the method of payment for such Warrant Shares would constitute a violation of any applicable laws or regulations, including, without limitation, applicable United States, foreign, provincial and state securities laws and regulations. The Company may require Holder to make any representations and warranties to the Company as may be required by any applicable law or regulation (including, without limitation, applicable United States, foreign, provincial and state securities laws and regulations) before allowing this Warrant to be exercised.  Without limiting the generality of the foregoing, Warrant Shares issued upon exercise of this Warrant may not be issued in the name of any Person other than Holder unless the transfer conditions referred to in the legend endorsed on the cover page of this Warrant have been complied with to the satisfaction of the Company.  In addition, no Warrant Shares will be issued pursuant to the exercise of this Warrant unless such issuance and such exercise comply with all relevant requirements of any stock exchange upon which the Common Stock may then be listed.

7.           Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed on the cover page of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(iv) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

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8.           Holder Not Deemed a Stockholder; Limitations on Liability. Prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

9.           Replacement on Loss; Division and Combination.

(a)           Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to the Company and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

(b)           Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment that may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment that may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

10.           Compliance with the Securities Act.

(a)           Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 10 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that that Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act or applicable United States, foreign, provincial or state securities laws and regulations. This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

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“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  AS SUCH, THE SECURITIES REPRESENTED BY THIS WARRANT ARE “RESTRICTED SECURITIES” AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF OTHER THAN (A) (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT UNDER THE SECURITIES ACT, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT, OR (IV) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (B) PURSUANT TO THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF APPLICABLE STATE, PROVENTIAL AND FOREIGN SECURITIES LAWS OR PURSUANT TO ONE OR MORE EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENT, AND (C) IF THE CORPORATION REQUESTS, BASED ON AN OPINION SATISFACTORY TO THE CORPORATION WITH RESPECT TO FOREGOING (A) AND (B) HAS BEEN RENDERED BY COUNSEL.  THE HOLDER HEREOF AGREES THAT (X) ANY HEDGING TRANSACTION WITH RESPECT TO THE SECURITIES REPRESENTED BY THIS WARRANT WILL BE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT AND (Y) IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS WARRANT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION” AND “UNITED STATES” HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN REGULATION S UNDER THE SECURITIES ACT.”

(b)           Representations of the Holder. In connection with the issuance of this Warrant and each exercise of this Warrant, the Holder specifically represents, as of the Original Issue Date and each Exercise Date, to the Company as follows:

(i)           The Holder (A) is not a “U.S. Person” as defined in Rule 902 of Regulation S promulgated under the Securities Act and (B) is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and all Warrant Shares issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

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(ii)           The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Regulation S and Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii)           The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. Subject to Section 10(b)(iv), the Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

(iv)           The Holder acknowledges and agrees that neither the Company, nor any officer, director, employee or representative of the Company, nor any other Person has made or is making any representations or warranties of any kind or nature whatsoever, express or implied, beyond those expressly given by the Company in this Warrant and in the Convertible Note.

11.           Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of this Warrant and any transfers of this Warrant. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

12.           Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF (or similar electronic format) document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the fourth day after the date mailed, by USPS certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12).

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If to the Company:	Hawker Energy, Inc. 326 South Pacific Coast Highway Suite 102 Redondo Beach, CA 90277 E-mail: dkatic@hawkerenergyllc.com Attn:  President
with a copy to (which shall not constitute notice):	Rutan & Tucker, LLP 611 Anton Blvd., Suite 1400 Costa Mesa, CA 92626 E-mail: gamber@rutan.com Attn:  Gregg Amber, Esq. and E-Mail: gsleichter@rutan.com Attn: Garett Sleichter, Esq.
If to the Holder:	E-mail:        Attn:

13.           Cumulative Remedies. The rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

14.           Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

15.           Entire Agreement. This Warrant, together with the Convertible Note, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the provisions of this Warrant and the provisions of the Convertible Note, the provisions of this Warrant shall control.

16.           Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

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17.           No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

18.           Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

19.           Amendment and Modification; Waiver. This Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

20.           Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

21.           Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Nevada.

22.           Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of California in each case located in the city of Los Angeles and County of Los Angeles, California, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

23.           Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, to the fullest extent permitted by law, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

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24.           Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

25.           No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

Hawker Energy, Inc.

By:

Name:

Title:

Accepted and agreed,

[HOLDER NAME]

By:

Name:

Title:

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EXHIBIT A

EXERCISE AGREEMENT

TO:           HAWKER ENERGY, INC.

The undersigned Holder hereby exercises the right to purchase _______________ shares of Common Stock of the Company pursuant to the terms of the attached Warrant.

The Aggregate Exercise Price for the purchase of such shares of Common Stock calculated in accordance with the Warrant equals: $_______________.  The undersigned Holder has either (a) enclosed herewith a certified or official bank check payable to the order of the Company in the full amount of such Aggregate Exercise Price or (b) prior to or on the date of this Exercise Agreement paid the full amount of such Aggregate Exercise Price by wire transfer of immediately available funds to an account designated in writing by the Company.

Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

The undersigned Holder represents that it is acquiring the shares upon exercise of the Warrant for its own account and not with a view toward, or for resale in connection with, the public sale or distribution of those shares, except pursuant to sales registered or exempted under the Securities Act of 1933, as amended (the “Securities Act”), and that as of the date hereof, the undersigned (A) is not a “U.S. Person” as defined in Rule 902 of Regulation S promulgated under the Securities Act and (B) is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act.

Name of Holder:

Signature of Holder:

Name of Authorized

Signatory (if an entity):  

Title of Authorized

Signatory (if an entity):

Dated:

EXHIBIT B

ASSIGNMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase shares of Common Stock of Hawker Energy, Inc. into which the within Warrant relates specified under the headings “Number of Warrants Transferred,” respectively, opposite the name(s) of such person(s) and appoints each and any officer of the Corporation as attorney to transfer the undersigned’s respective right on the register of warrants maintained by the Corporation with full power of substitution in the premises.

Transferees	Address	Number of Warrants Transferred
_________________	_________________	_________________
_________________	_________________	_________________
_________________	_________________	_________________

Dated:
	(Signature must conform to name of Holder as specified on the face of the Warrant)
	Address:
	Signature Guarantee

ACCEPTED AND AGREED:

[TRANSFEREE]

(Name)

The signature of the Holder to this Assignment must correspond exactly with the name of the Holder as set forth on the face of the Warrant in every particular and the signature must be guaranteed by a U.S. chartered bank or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program.

EX-10.5

Exhibit 10.5

LIMITED RECOURSE GUARANTEE

THIS LIMITED RECOURSE GUARANTEE (this “Guarantee”), dated as of January 12, 2015, is made in favor of and for the benefit of Hawker Energy, Inc., a Nevada corporation (“Lender”), and its successors and assigns, by Sefton Resources, Inc., a British Virgin Islands corporation (“Guarantor”).

R E C I T A L S

A.           Pursuant to a Secured Subordinated Note Due December 31, 2015, dated the date hereof (the “Note”), Lender has loaned or committed to loan to TEG Oil & Gas U.S.A., Inc., a Colorado corporation (“Borrower”), up to $2,100,000 (the “Loan”). Borrower’s obligations under the Note are secured by a Fourth Amended and Restated Security Agreement dated the date hereof (the “Security Agreement”), and Guarantor’s obligations under this Guarantee are secured by a Pledge Agreement dated the date hereof (the “Pledge Agreement”).

B.           Guarantor owns 100% of the issued and outstanding shares of capital stock of Borrower and has agreed to guarantee repayment of the Loan on a limited recourse basis.

C.           Lender has required, as a condition to the Loan, that Guarantor execute and deliver this Guarantee to Lender.

D.           Guarantor, as the parent company of Borrower, will derive substantial direct and indirect economic benefit from the Loan by Lender and Lender is willing to make the Loan, but only upon the condition, among others, that Guarantor has executed and delivered this Guarantee in favor of Lender.

A G R E E M E N T

NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and to induce Lender to make the Loan, it is agreed as follows:

1.             Definitions; Certain Matters of Construction. For the purpose of this Guarantee, (a) capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the recitals above, in the Note, in the Pledge Agreement or in the Security Agreement and (b) the following terms have the respective meanings set forth below:

“Charge” means any Federal, state, county, city, municipal, local, foreign or other governmental (including Pension Benefit Guaranty Corporation or any Person succeeding to the functions thereof) tax at the time due and payable, levy, assessment, charge, lien, claim or encumbrance upon or relating to: (i) the Obligations or the Guarantee Obligations; (ii) the employees, payroll, income or gross receipts of Guarantor; (iii) the ownership or use of any of the assets of Guarantor; or (iv) any other aspect of the business of Guarantor.

“Guarantor” has the meaning specified in the preamble to this Guarantee.

“Guarantee” means this Continuing Limited Recourse Guarantee, including any and all amendments, modifications and supplements, and refers to this Continuing Limited Recourse Guarantee as it may be in effect at the time the reference becomes operative.

“Guarantee Obligations” means all liabilities and obligations of Guarantor to Lender as set forth in this Guarantee, whether now existing or hereafter arising.

“Guarantee Termination Date” means the earlier of (i) the date on which all Obligations cease to be outstanding and the Obligations and Guarantee Obligations have been indefeasibly satisfied in full and all Obligations in the nature of a performance obligation have been performed, or (ii) the date on which Guarantor assigns, transfers and conveys to Lender all of Guarantor’s equity interests and rights to equity interests in Borrower, free of all Liens, claims, restrictions and security interests, pursuant to documentation satisfactory in form and substance to Lender, or (iii) the date on which the Pledge Agreement is terminated in accordance with its terms, subject to the rights to reinstatement provided for thereunder and hereunder.

“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien (including judgment liens, liens of mechanics, suppliers and other Persons for the provision of goods or services, and all other liens arising under statute, common law or judicial interpretation), liens securing any Charge, claim (including reclamation claims), security interest, easement or encumbrance, preference, priority or other security agreement or other preferential arrangement of any kind or nature whatsoever intended or having the effect of providing security for an obligation (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction).

“Loan” has the meaning specified in the recitals to this Guarantee.

“Obligations” means all liabilities and obligations of Borrower under the Note and under the Security Agreement.

“Person” means any individual, trustee, sole proprietorship, partnership, limited liability company or partnership, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).

“Subordinated Indebtedness” has the meaning specified in Section 2.9(a).

“Transferee” has the meaning specified in Section 9.9.

2.             The Guarantee.

2.1           Guarantee of the Obligations.

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(a)           In consideration of the extensions of credit pursuant to the Note and all other financial accommodations to or for the benefit of Borrower, and for other valuable consideration, the receipt of which Guarantor hereby acknowledges, Guarantor unconditionally and irrevocably guarantees to Lender and its successors, endorsees, transferees and assigns the prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of the Obligations, whether now or hereafter existing, and whether for principal, interest, fees, expenses or otherwise, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent or now or hereafter existing or due or to become due (including in all cases all amounts which would become due but for the operation of the provisions of any bankruptcy law).

(b)           This Guarantee constitutes a guarantee of payment and performance when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that Lender or any of its successors, endorsees, transferees or assigns assert any claim or demand or enforce any remedy whatsoever against Borrower or any other Person before or as a condition to the obligations of Guarantor under this Guarantee.

(c)           Guarantor’s payment and performance of the Guarantee Obligations hereunder are secured by the Pledge Agreement. Notwithstanding the foregoing or any other provisions of this Guarantee, the Pledge Agreement or any other agreement or instrument to which Guarantor is a party, it is agreed and understood that the liability of Guarantor hereunder, and Lender’s sole recourse against Guarantor hereunder, shall be limited solely to Guarantor’s interest in the “Collateral” as defined and described in the Pledge Agreement and the proceeds thereof, and there shall be no other recourse against Guarantor or any other assets or property of Guarantor, except to the extent and as a result of actual fraud on the part of Guarantor. In the event of actual fraud on the part of Guarantor, Guarantor’s liability shall, nonetheless, be limited to an amount equal to the fair value of the “Collateral” as defined and described in the Pledge Agreement (without giving effect to any reduction in the value thereof resulting from Guarantor’s fraudulent conduct). In the event of any conflict between the provisions of this Section 2.1(c) and any other provision of this Guarantee, this Section 2.1(c) shall govern and control.

2.2           Absolute Guarantee. The Guarantee Obligations shall remain in full force and effect without regard to, and shall not be impaired or affected by, or be deemed to be satisfied by, nor shall Guarantor be exonerated, discharged or released (by virtue of the provisions of Sections 2809, 2819, 2845, 2848, 2849 or 2850 of the California Civil Code or any other law, rule, arrangement or relationship) by, any of the following events:

(a)           Lender’s exercise or enforcement of, or failure or delay in exercising or enforcing, legal proceedings to collect the Obligations or the Guarantee Obligations or any power, right, or remedy with respect to any of the Obligations or the Guarantee Obligations, including: (i) any suspension of Lender’s right to enforce against Borrower, Guarantor or any other guarantor of the Obligations or the Guarantee Obligations; or (ii) any change in the time, manner, or place of payment of, or in any other term of, any or all of the Obligations, or any other amendment to, or waiver of, the Note, the Pledge Agreement or any other agreement or instrument governing or evidencing any of the Obligations or the Guarantee Obligations;

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(b)           any insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, assignment for the benefit of creditors, appointment of a receiver or trustee for all or any part of Borrower’s or Guarantor’s assets or of the assets of any other guarantor of the Obligations, liquidation, winding-up or dissolution of Borrower, Guarantor or any other guarantor of the Obligations;

(c)           any limitation, discharge, cessation or partial satisfaction of the Obligations, the Guarantee Obligations or the obligations of any other guarantor of the Obligations, whether by operation of any statute, regulation or rule of law or otherwise (but other than full satisfaction) regardless of the intervention or omission of Lender, or any invalidity, voidability, unenforceability or irregularity, or future change to or amendment of, in whole or in part, this Guarantee, the Note, the Pledge Agreement or any other document evidencing any Obligations or Guarantee Obligations;

(d)           any merger, acquisition, consolidation or change in structure of Borrower, Guarantor or any other guarantor of the Obligations; or any sale, lease, transfer or other disposition of any or all of the assets or equity interests of Borrower, Guarantor or any other guarantor of the Obligations;

(e)           any assignment or other transfer, in whole or in part, of Lender’s interest in and rights under the Note, the Pledge Agreement or this Guarantee, or of Lender’s interest in the Obligations or the Guarantee Obligations;

(f)            any claim, defense, counterclaim or setoff on the part of Borrower or any guarantor of the Obligations including, but not limited to, any defense or incapacity, disability or lack of corporate or other authority to execute any documents relating to the Obligations, the Guarantee Obligations or any other guaranty of the Obligations;

(g)           any cancellation, renunciation or surrender of any pledge, guaranty or any debt instrument evidencing the Obligations, the Guarantee Obligations or any other guaranty of the Obligations other than full satisfaction of the Obligations, the Guarantee Obligations and any other guaranty of the Obligations;

(h)           Lender’s vote, claim, distribution, election, acceptance, action or inaction in any bankruptcy or reorganization case related to the Obligations, the Guarantee Obligations or any other guaranty of the Obligations;

(i)            any other action or circumstances that might otherwise constitute a defense available to, or a legal or equitable discharge of, any surety, guarantor or pledgor other than Guarantor; or

(j)            the fact that any of the Obligations or the Guarantee Obligations may arise out of any agreement or transaction that may be unenforceable in whole or in part, it being agreed by Guarantor that the Guarantee Obligations shall not be discharged until the Guarantee Termination Date (and then after the Guarantee Termination Date, the Guarantee Obligations shall be subject to reinstatement under Section 5).

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2.3           Demand by Lender. In addition to and subject to the terms set forth in Sections 2.1 and 2.2 (including, without limitation, Section 2.1(c)), and in no manner imposing any limitation on those terms, it is expressly understood and agreed that, if any of the Obligations are declared to be or otherwise become immediately due and payable, then Guarantor shall, upon demand in writing therefor by Lender to Guarantor and subject to Section 2.1(c), immediately pay the Guarantee Obligations to Lender. Payment by Guarantor shall be made to Lender to be credited and applied to the Obligations, in immediately available funds in lawful money of the United States of America to an account designated by Lender at 326 S. Pacific Coast Highway, Suite 102, Redondo Beach, California 90277 or at any other address that may be specified in writing from time to time by Lender. Any payment received by Lender with respect to the Obligations shall reduce the Guarantee Obligations by the amount of the payment.

2.4           Guarantor Waivers. In addition to any other waivers contained herein, Guarantor waives and agrees, subject to Section 2.1(c), as follows:

(a)           The Guarantee Obligations are the immediate, direct, primary, and absolute liabilities of Guarantor, and are independent of, and not co-extensive with, the Obligations or the obligations of any other guarantor. Guarantor expressly waives any right it may now or in the future have (pursuant to Sections 2845 and 2850 of the California Civil Code or any other law, rule, arrangement or relationship) to require Lender to, and Lender shall not have any obligations to, first pursue or enforce against Borrower, any of the properties or assets of Borrower or any other security, guaranty or pledge that may now or hereafter be held by Lender for the Obligations, any guaranty of the Obligations or for the Guarantee Obligations, or to apply the security, guaranty or pledge to the Obligations or to the Guarantee Obligations, or to pursue any other remedy in Lender’s power that Guarantor may or may not be able to pursue himself or herself and that may lighten Guarantor’s burden. Guarantor agrees that any notice or directive given at any time to Lender that is inconsistent with the waiver in the immediately preceding sentence shall be null and void and may be ignored by Lender, and, in addition, may not be pleaded or introduced as evidence in any litigation or other dispute resolution procedure relating to this Guarantee for the reason that the pleading or introduction would be at variance with the written terms of this Guarantee, unless Lender has specifically agreed otherwise in writing. Guarantor shall remain liable for the Guarantee Obligations, notwithstanding any judgment Lender may obtain against Borrower, Guarantor, any other guarantor of the Obligations or any other Person, or any modification, extension or renewal with respect thereto.

(b)           Guarantor has entered into this Guarantee based solely on its independent knowledge of Borrower’s financial condition and Guarantor assumes full responsibility for obtaining any further information with respect to Borrower or the conduct of its business. Guarantor represents that it is now, and during the term of this Guarantee will be, responsible for ascertaining the financial condition of Borrower. Guarantor hereby waives any duty on the part of Lender to disclose to Guarantor, and agrees that Guarantor is not relying upon or expecting Lender to disclose to Guarantor, any fact known or learned by Lender relating to the operation or condition of Borrower or its business or relating to the existence, liability or financial condition of any other guarantor of the Obligations. Guarantor knowingly accepts the full range of risk encompassed in a contract of continuing guaranty, which risk includes the possibility that Borrower may incur Obligations after Borrower’s financial condition or its ability to pay its debts as they mature has deteriorated.

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(c)           Lender shall not be under any obligation to marshal any assets in favor of Guarantor or in payment of any or all of the Obligations or the Guarantee Obligations.

(d)           Except as specifically provided in Section 2.3 or as otherwise provided for in this Guarantee or applicable law, Guarantor waives, to the fullest extent permitted by applicable law: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of the Note, the Pledge Agreement or any notes, commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Guarantor may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard; (ii) all rights to notice and a hearing prior to Lender’s taking possession or control of, or to Lender’s replevy, attachment or levy upon, or any bond or security which might be required by any court prior to allowing Lender to exercise any of its remedies; (iii) the benefit of all evaluation, appraisal and exemption laws; (iv) notice of any extension, modification, renewal or amendment of any of the terms of the Note, the Pledge Agreement or any guaranty of the Obligations; (v) notice of the occurrence of any default or event of default with respect to the Obligations, the Guarantee Obligations or otherwise; and (vi) notice of any exercise or non-exercise by Lender of any right, power or remedy with respect to the Obligations or the Guarantee Obligations.

(e)           Guarantor acknowledges that Guarantor has been advised by counsel of Guarantor’s choice with respect to this Guarantee, the Note, the Guarantee Obligations and the Pledge Agreement and the transactions evidenced hereby and thereby.

(f)           Guarantor agrees that until the Guarantee Termination Date Guarantor shall have no right of subrogation, reimbursement, indemnity or contribution, all of which Guarantor expressly waives.

(g)           If Lender, under applicable law, proceeds to realize its benefits under the Note or the Pledge Agreement, then Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Guarantee. If Lender bids at any foreclosure or trustee’s sale or at any public or private sale permitted by law, Lender may bid all or less than the amount of the Obligations or the Guarantee Obligations and the amount of the bid need not be paid by Lender but shall be credited and applied as set forth in Section 7. The amount of the successful bid at any sale, whether Lender or any other party (including Guarantor) is the successful bidder, shall be deemed to be prima facie evidence of the fair market value of the assets purchased and the amount remaining after application of the bid amount in the manner set forth in Section 7 shall be deemed to be prima facie evidence of the amount of the Guarantee Obligations guaranteed under this Guarantee, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Lender might otherwise be entitled but for the bidding at any such sale.

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(h)           Guarantor agrees that: (i) the Obligations and Guarantee Obligations are and shall be (or have been) incurred by Borrower and Guarantor for business and commercial purposes only; (ii) any claim of Lender against Guarantor arising out of this Guarantee arises out of the conduct by Guarantor of its trade, business or profession; (iii) Guarantor undertakes all the risks encompassed in the Note and the Pledge Agreement as they may be now or are hereafter agreed upon by the parties thereto; and (iv) prior to the Guarantee Termination Date (and for any period of reinstatement of this Guarantee after the Guarantee Termination Date pursuant to Section 5), Lender, in the manner and on terms and at the time it deems best, and with or without notice to Guarantor, may release, add, subordinate or substitute security for the Obligations or the Guarantee Obligations.

(i)           Guarantor waives and agrees that Guarantor shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by Guarantor of the Guarantee Obligations or the enforcement by Lender of this Guarantee.

(j)           A separate action or actions may be brought and prosecuted by Lender against Guarantor whether or not an action is brought against Borrower, or whether Borrower is joined in any action or actions. Without limiting the generality of the foregoing, Guarantor expressly waives the benefit of any statute of limitations affecting the Obligations and expressly agrees that the running of a period of limitation on, or Lender’s delay or omission in, any action by Lender against Borrower or for the enforcement of any rights shall not exonerate or affect Guarantor’s liability to pay and perform the Guarantee Obligations.

2.5           Additional Waivers. Guarantor expressly acknowledges that:

(a)           In addition to the waivers set forth in Section 2.4, Guarantor also expressly, knowingly and intentionally waives and relinquishes any and all rights, defenses or benefits that Guarantor may have based upon an election of remedies by Lender which in any manner impairs, affects, reduces, releases, destroys or extinguishes Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower or against any other Person or any security for the Guarantee Obligations by way of subrogation, indemnity, contribution, reimbursement or otherwise. In particular, Guarantor agrees that this Guarantee will remain fully effective and that Guarantor will be liable to Lender for any Guarantee Obligations, subject to Section 2.1(c), even if Lender enforces any Lien that secures the Obligations by means of a nonjudicial foreclosure, trustee’s sale or power of sale foreclosure and the effect of the sale is to prevent Guarantor from taking any action against Borrower to recover any amounts paid by Guarantor to Lender under this Guarantee or otherwise limits or destroys Guarantor’s right of subrogation.

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(b)           Until all Obligations have been satisfied in full, Guarantor shall have no right to subrogation, and Guarantor expressly waives (i) any right (pursuant to Section 2848 of the California Civil Code or any other law, rule, arrangement or relationship) to enforce any remedy which Lender now has or may hereafter have against Borrower and (ii) any benefit of, and any right to participate in (pursuant to Section 2849 of the California Civil Code or any other law, rule, arrangement or relationship), any security now or hereafter held by Lender.

Guarantor also agrees that this Guarantee will remain fully effective and Guarantor will be liable to Lender for any Guarantee Obligations, subject to Section 2.1(c), even if Lender sells real property by judicial foreclosure action and Guarantor’s rights against Borrower are limited by the operation of law.

2.6           Waivers of Defenses. Guarantor waives any defense based upon or arising by reason of: (a) any disability or other defense of Borrower or any other Person, other than payment in full; (b) the cessation of liability or limitation from any cause whatsoever of the Obligations or any portion thereof, other than payment in full; (c) any lack of authority of any agent or other person acting or purporting to act on behalf of Borrower, or any defect in the formation of Borrower; (d) the application by Borrower of the proceeds of the Obligations for purposes other than the purposes represented to, or intended or understood by, Lender or Guarantor; (e) any act or omission by Lender that directly or indirectly results in or aids the discharge of Borrower or any portion of the Obligations by operation of law or otherwise, other than gross negligence or willful misconduct; or (f) any modification of the Obligations in any form whatsoever, including the renewal, extension, acceleration or other change in time for payment of the Obligations, or other change in the terms of the Obligations or any part thereof, including increase or decrease of the rate of interest thereon; provided, however, that nothing herein shall result in or effectuate an increase in the amount of the Obligations or Guarantee Obligations for which Guarantor shall be responsible beyond which is contemplated by this Guarantee and the Pledge Agreement as in effect on the date hereof absent consent of Guarantor.

2.7           Benefits of Guarantee. The provisions of this Guarantee are for the benefit of Lender and its successors, transferees, endorsees and assigns, and nothing herein shall impair, as among Borrower, Guarantor and Lender, the Obligations. No transfer, endorsement or assignment shall increase or diminish any of the Guarantee Obligations hereunder. This Guarantee binds Guarantor, and Guarantor may not assign, transfer or endorse this Guarantee. If all or any part of the Obligations are transferred, endorsed or assigned by Lender to any Person or Persons, any reference to “Lender” herein shall be deemed to refer equally to that Person or Persons.

2.8           Continuing Guarantee. Guarantor agrees that (a) this is a continuing guarantee, (b) this Guarantee shall remain in full force and effect until the Guarantee Termination Date (and may be reinstated after the Guarantee Termination Date pursuant to Section 5) and (c) the Guarantee Obligations hereunder shall extend to each and every extension or renewal, if any, of the Obligations; provided, however, that nothing herein shall result in or effectuate an increase in the amount of the Obligations or Guarantee Obligations for which Guarantor shall be responsible beyond which is contemplated by this Guarantee and the Pledge Agreement as in effect on the date hereof absent consent of Guarantor.

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2.9           Subordination.

(a)           Guarantor agrees that, until the Guarantee Termination Date (and for any period during which this Guarantee is reinstated pursuant to Section 5), all obligations and all indebtedness of Borrower to Guarantor and any and all present and future indebtedness regardless of its nature or manner of origination now or hereafter to become due and owing by Borrower to Guarantor (collectively, the “Subordinated Indebtedness”), are hereby subordinated and postponed and shall be inferior, in all respects, to the Guarantee Obligations.

(b)           In no circumstance shall any Subordinated Indebtedness be entitled to any collateral security; provided, that if any collateral security exists, Guarantor agrees that any now existing or hereafter arising Lien upon any of the assets of Borrower in favor of Guarantor, whether created by contract, assignment, subrogation, reimbursement, indemnity, operation of law, principles of equity or otherwise, shall be junior and inferior to, and is hereby subordinated in priority to any now existing or hereafter arising Liens in favor of Lender, regardless of the time, manner or order of creation, attachment or perfection of the respective Liens.

(c)           Guarantor agrees that Guarantor shall not: (i) assert, collect, accept payment on or enforce any of the Subordinated Indebtedness or take collateral or other security to secure payment of the Subordinated Indebtedness until the Guarantee Termination Date (and for any period during which this Guarantee is reinstated pursuant to Section 5); (ii) demand payment of, accelerate the maturity of or declare a default or event of default under the Subordinated Indebtedness until the Guarantee Termination Date (and for any period during which this Guarantee is reinstated pursuant to Section 5); (iii) cause or permit Borrower to make or give, or receive or accept, payment in any form (direct or indirect, including by transfer to an affiliate or subsidiary of Borrower or Guarantor) on account of the Subordinated Indebtedness, or make any transfers in respect of the Subordinated Indebtedness, or give any collateral security for the Subordinated Indebtedness. Any payment, transfer or collateral security so made or given by Borrower and received or accepted by Guarantor shall be held in trust by Guarantor for Lender, and Guarantor shall immediately turn over, in kind, any such payment to Lender for application in reduction of, or (in the case of property other than cash) as security for, the Guarantee Obligations.

2.10           No Setoff, Defense or Counterclaim. Guarantor represents, warrants and agrees that, as of the date of this Guarantee, the Guarantee Obligations are not subject to any setoff or defense of any kind against Lender or Borrower, and Guarantor specifically waives its rights to assert any such defense or right of setoff. Guarantor further agrees that the Guarantee Obligations shall not be subject to any counterclaims or setoffs against Lender or counterclaims, setoffs or defenses against Borrower that may arise in the future.

2.11           Representations and Warranties. Guarantor represents and warrants as follows:

(a)           The execution, delivery and performance by Guarantor of this Guarantee are within its authority, do not and will not contravene any law or governmental regulation or any contractual restriction binding on or affecting Guarantor or any of its property, and do not and will not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its property.

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(b)           No authorization or approval or other action by, and no notice to or filing with, any governmental authority is required for the due execution, delivery and performance by Guarantor of this Guarantee.

(c)           This Guarantee is a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, subject to the effect of any bankruptcy, insolvency, moratorium or similar laws affecting the rights of creditors generally.

(d)           There is no action, suit or proceeding pending or, to Guarantor’s knowledge, threatened against or otherwise affecting Guarantor before any court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality that may adversely affect Guarantor’s ability to perform its obligations hereunder.

3.             Further Assurances. Guarantor agrees that it will, at its expense, upon the reasonable written request of Lender, from time to time, promptly execute and deliver to Lender any additional instruments or documents considered necessary by Lender to cause this Guarantee to be, become or remain valid and effective in accordance with its terms.

4.             Limited Recourse. Notwithstanding any other provisions of this Guarantee, Lender’s recourse under this Guarantee shall be strictly limited to recourse under the Pledge Agreement as set forth in Section 2.1(c).

5.             Reinstatement. This Guarantee shall remain in full force and effect and continue to be effective, as the case may be, if at any time payment or performance of the Obligations or the Guarantee Obligations, or any part thereof, is, pursuant to applicable law, avoided, rescinded or reduced in amount, or must otherwise be restored or returned by Lender, or any other obligee of the Obligations or the Guarantee Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though the payment or performance had not been made. If any payment or part thereof is avoided, rescinded, reduced, restored or returned, the Obligations or the Guarantee Obligations, as the case may be, shall be reinstated and deemed reduced only by the amount paid and not so avoided, rescinded, reduced, restored or returned.

6.             Defaults and Remedies. Upon the occurrence and during the continuance of an Event of Default, Lender may declare all of the Guarantee Obligations, immediately and without demand, notice or legal process of any kind, to be, and the Guarantee Obligations shall immediately become, due and payable, and then, or at any subsequent time, subject to the provisions of Section 2.1(c), Lender may exercise any or all of its rights and remedies under this Guarantee, the Note or the Pledge Agreement and under applicable law, and may, in addition:

(a)           make demand upon Guarantor for the payment of the Guarantee Obligations; and

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(b)           resort to collateral pledged by Guarantor for payment of the Guarantee Obligations, without notice, declaration or demand by Lender to the extent not prohibited by applicable law; provided, that upon the occurrence of an Event of Default specified in paragraph (b) or (c) of Section 4 of the Note, the Guarantee Obligations shall become immediately due and payable without declaration, notice or demand.

7.             Application of Payments. Any payment made by Guarantor under this Guarantee shall be applied by Lender first to the payment of Obligations with respect to accrued but unpaid interest on the Note, then to the payment of the principal amount of the Note, and finally to all other outstanding Obligations.

8.             Miscellaneous.

8.1           Entire Agreement; Amendments. This Guarantee, together with the Note and the Pledge Agreement (a) constitutes the entire agreement between the parties with respect to the subject matter hereof and (b) may not be amended or supplemented except by a writing signed by Lender and Guarantor.

8.2           Section Titles. The section titles contained in this Guarantee are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

8.3           Severability. If any one or more of the provisions contained in this Guarantee is determined to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of that provision or provisions in every other respect, and the remaining provisions of this Guarantee, shall not be in any way impaired.

8.4           Conflict of Terms. Except for the terms of Section 2.1(c) and its application throughout this Guarantee, if any provision of this Guarantee is inconsistent with any provision of the Note or the Pledge Agreement, the provision of the Note or the Pledge Agreement, as the case may be, shall govern and control.

8.5           Non-Waiver. None of the liabilities of Guarantor, and no right or remedy of Lender under this Guarantee, shall be deemed to have been suspended or waived by Lender, nor shall Lender be estopped from asserting any right or remedy, by Lender’s conduct or oral statements, but any suspension or waiver of any right or remedy by Lender must be in writing and signed by Lender. Any suspension or waiver by Lender of any of its rights or remedies under this Guarantee shall not suspend or waive any prior or subsequent right or remedy, whether of the same or of a different type.

8.6           Guarantee Termination Date. This Guarantee is a continuing guarantee that shall remain in full force and effect until the Guarantee Termination Date, at which time this Guarantee shall terminate and be of no further force and effect, subject to the reinstatement provisions of Section 5.

8.7           Limitation of Liability. Neither Lender nor any of its officers, directors, partners, employees, agents or counsel shall be liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Guarantee except to the extent arising out of their gross negligence or willful misconduct.

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8.8           Governing Law. In all respects, including all matters of construction, validity and performance, this Guarantee and the obligations arising hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of California applicable to contracts made and performed in that state, without regard to principles of conflicts of laws.

8.9           Successors and Assigns. All covenants and agreements in this Guarantee by or on behalf of any of the parties shall bind and inure to the benefit of the respective successors and assigns of the parties (“Transferee”). Lender may assign any and all of its rights under this Guarantee, the Note and the Pledge Agreement to any Transferee in connection with any assignment of all or any portion of the Note and upon assignment the Transferee shall be entitled to all of the rights of Lender hereunder and under the Pledge Agreement to the same extent as if the Transferee were an original party to this Guarantee. Guarantor may not assign or transfer its obligations under this Guarantee.

IN WITNESS WHEREOF, Guarantor has caused this Continuing Limited Recourse Guarantee to be executed and delivered as of the date first set forth above.

SEFTON RESOURCES, INC., a
British Virgin Islands corporation
By:	/s/ Tom Milne
	Tom Milne, Director

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EX-10.8

Exhibit 10.8

SHARE PURCHASE AGREEMENT

dated January 12, 2015

by and among

TEG OIL & GAS U.S.A., INC.,

a Colorado corporation

as “TEG”

SEFTON RESOURCES, INC.

a British Virgin Islands corporation

as “Sefton”

HAWKER ENERGY, INC.,

a Nevada corporation

as “Hawker”

TABLE OF CONTENTS

			Page
1.	Certain Definitions		3
2.	Purchase and Sale of Shares		6
3.	Closing		6
	3.1	Conditions	6
	3.2	Deliveries by Sefton	6
	3.3	By Hawker	6
4.	Representations and Warranties of Sefton		7
	4.1	Organization and Power	7
	4.2	Authorization	7
	4.3	Shares	7
	4.4	Capitalization	7
	4.5	Title to Operating Interests	7
	4.6	Bonding Matters	7
	4.7	Hedging Transactions	8
	4.8	Take-or-Pay	8
	4.9	Bonus Payments	8
	4.10	Property Operation	8
	4.11	Solvency	8
5.	Representations and Warranties of Hawker		8
	5.1	Organization	8
	5.2	Authorization	8
	5.3	Hawker Stock	9
6.	Additional Agreements		9
	6.1	Further Actions	9
	6.2	No Dispositions	9
	6.3	Regulatory Approvals	9
	6.4	Additional Financial Information	9
7.	Indemnification		9
8.	General Release of Claims		10
9.	Miscellaneous		11
	9.1	Assignment	11
	9.2	Further Assurances	11
	9.3	Survival	11
	9.4	Amendment	11
	9.5	Notices	11
	9.6	Attorneys’ Fees	12
	9.7	Entire Agreement	12

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9.8	Governing Law; Consent to Jurisdiction	12
9.9	Forum and Venue	12
9.10	Successors and Assigns	12
9.11	Captions	12
9.12	Severability	13
9.13	Counterparts	13
9.14	No Third Party Beneficiaries	13
9.15	Representation by Counsel	13

SCHEDULES

Schedule 1	Leases and Wells
Schedule 4.6	Bonds
Schedule 4.10	Abandoned Wells and Abandonment Obligations
Schedule 6.2	Personal Property Assets

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SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT (“Agreement”) is made and entered into on January 12, 2015, by and among TEG Oil & Gas U.S.A., Inc., a Colorado corporation (“TEG”), Sefton Resources, Inc., a British Virgin Islands corporation (“Sefton”) and Hawker Energy, Inc., a Nevada corporation (“Hawker”).

RECITALS

A.           Sefton is the record owner of 100,000 shares of Common Stock of TEG, representing 100% of the issued and outstanding shares of capital stock (the “Shares”) of TEG.

B.           Sefton desires to sell, and Hawker desires to acquire, at the Closing, all of the Shares.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and subject to all of the terms and conditions set forth herein, the parties agree as follows:

1.             Certain Definitions.  Capitalized terms used in this Agreement and not otherwise defined herein have the same meanings as in the CA. In addition, the following terms have the following meanings:

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with that Person.

“Agreement” has the meaning specified in the preamble.

“Annual Financial Statements” has the meaning specified in Section 6.4.

“Bankruptcy or Insolvency Proceeding” has the meaning specified in Section 4.11.

“Business Day” means any day except Saturday, Sunday and any day which either is a legal holiday under the laws of the State of California or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

“Closing” has the meaning specified in Section 3.

“Closing Date” means the date on which the Closing occurs.

“Defensible Title” means right, title and interest that is evidenced by an instrument or instruments filed of record in accordance with the conveyance and recording laws of the applicable jurisdiction to the extent necessary to give Hawker, through ownership of the Shares, the right to enjoy the benefits of possession of the Operating Interests.

“Encumbrances” means any lien (statutory or other), claim, charge, security interest, mortgage, deed of trust, pledge, hypothecation, assignment, conditional sale or other title retention agreement, preference, priority or other security agreement or preferential arrangement of any kind, and any easement, encroachment, covenant, restriction, right of way, defect in title or other encumbrance of any kind.

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“GAAP” means generally accepted accounting principles in the United States which, unless otherwise indicated, are applied on a consistent basis.

“Governmental Authority” means any federal, state or local, or any supra-national or non-U.S., government, political subdivision, governmental, regulatory or administrative authority, instrumentality, agency body or commission, court, tribunal or judicial or arbitral body.

“Hawker Stock” has the meaning specified in Section 2.

“Hydrocarbons” means oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons.

“Indemnified Party” has the meaning specified in Section 7.

“Interim Financial Statements” has the meaning specified in Section 6.4.

“Knowledge” means the actual knowledge of Sefton after (and assuming) reasonable inquiry.

“Law” means any federal, state, provincial, municipal, local or foreign law, statute, rule, writ, order, decree, ordinance, code or regulation.

“Leases” means the oil and gas leases, oil, gas and mineral leases, subleases and other leaseholds, royalties, overriding royalties, net profit interests, mineral fee interests, carried interests and other properties and interests and the lands covered thereby and any and all oil, gas, water or injection wells thereon or applicable thereto (the “Wells”) held by TEG and listed on Schedule 1.

“Losses” has the meaning specified in Section 7.

“Operating Interest or Operating Interests” means all of the following:

(a)           all of TEG’s interest in and to all facilities, machinery, fixtures, facilities, improvements, desks, office furniture and other miscellaneous personal property or equipment located at TEG’s corporate office at 21 South California Street, Suite 305, Ventura, or located at its Leases located at 26480 Tapia Canyon Road, Castaic and in Eureka Canyon with survey coordinates Section 34 T4N/R18W in Ventura County, California and/or used in connection with the use or operation of the Operating Interests, together with all data and Records associated therewith that are fairly attributable to the Operating Interests, together with any other Records relating to the Operating Interests (or the ownership, use, operation, maintenance, repair or disposition thereof);

(b)           all right, title and interest in, to and under all contracts relating to the operation of the Leases;

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(c)           the Leases; and

(d)           all of TEG’s right, title and interest in, to and under any Software, computer hardware, computer systems, computer servers, and other intellectual property, whether owned or licensed, or electronic data or files relating to or used in connection with the Operating Interests.

“Person” means an individual, limited liability company, partnership, tenancy-in-common, joint tenancy, joint venture, firm, corporation, trust, charitable institution or other business or legal entity.

“Prevailing Party” includes a party who: (a) agrees to dismiss an action or proceeding upon (i) the other party’s payment of all or a substantial portion of the sums allegedly due or (ii) the other party’s performance of the covenants allegedly breached; or (b) obtains a substantial portion of the relief sought by that party.

“Purchase Price” has the meaning specified in Section 2.

“Record or Records” means all books and records, files, data, correspondence, studies, surveys, reports, maps, and other files in any way related to the Operating Interests, including Hydrocarbon sales contract files, gas processing files, geologic, proprietary geophysical and seismic data (including raw data and any interpretative data or information relating to such geologic, geophysical and seismic data) and other data (in each case whether in written or electronic format) in TEG’s possession or control and relating to the Operating Interests, including all title records, prospect information, title opinions, title insurance reports, abstracts, property ownership reports, customer lists, supplier lists, sales materials, well logs, well tests, maps, engineering data and reports, health, environmental and safety information and records, lease and land files, title files, third-party licenses, promotional materials, operational records, technical records, service and warranty records, reserve estimates and economic estimates; production and processing records, division order, lease, land and right-of-way files, accounting and financial files, tax records and contract files (including all files regarding the Contracts and related files); together with any engineering designs, technical plans, drawings, analysis, maintenance and inspection reports relating to all Wells or used in connection with the Operating Interests.

“SEC” means the United States Securities and Exchange Commission.

“Shares” has the meaning specified in Recital A.

“Software” means computer software programs and software systems, including databases, compilations, tool sets, compilers, higher level or “proprietary” languages and related documentation and materials, whether in source code, object code or human readable form.

“Third Party” means, whether that term is capitalized or not, a Person other than Hawker, Sefton, TEG and their Affiliates.

“Warrant” has the meaning specified in Section 2.

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“Wells” has the meaning specified in the definition of “Lease(s)”.

2.             Purchase and Sale of Shares.  Subject to the terms and conditions of this Agreement, at the Closing, Sefton shall sell to Hawker, and Hawker shall purchase from Sefton, the Shares for (i) $1.00 plus (ii) the issuance by Hawker to Sefton of 3,000,000 shares (the “Hawker Stock”) of Hawker’s common stock, plus (iii) the issuance by Hawker of a five year warrant (the “Warrant”) to purchase up to 5,000,000 shares of Hawker’s common stock for $0.25 per share (collectively, the “Purchase Price”).

3.             Closing.  Within one day after satisfaction of the conditions set forth in Section 3.1, the following events will occur (the “Closing”), each event under the control of one party being a further condition precedent to the events under the control of the other party, and the parties will treat each event as if it occurred simultaneously with the other events.

3.1           Conditions.  The following conditions must be satisfied before the Closing can occur:

(a)           the indebtedness of TEG and its affiliates to BOTW that is secured by first priority liens on TEG’s assets must have been made subject to a forbearance by BOTW on terms satisfactory to Hawker;

(b)           no breach of a representation, warranty or covenant by Sefton shall have occurred unless waived in writing by Hawker;

(c)           no breach of a representation, warranty or covenant by Hawker shall have occurred unless waived in writing by Sefton; and

(d)           Hawker must have obtained equity financing on terms satisfactory to Hawker.

3.2           Deliveries by Sefton.  At the Closing, Sefton shall deliver to Hawker:

(a)           evidence, satisfactory to Hawker, that the shareholders of Sefton have approved the transactions contemplated by this Agreement in accordance with the rules of the London Stock Exchange’s AIM;

(b)           Stock certificate no. 001 representing the Shares, duly endorsed for transfer to Hawker, or accompanied by an appropriate, fully executed stock power or stock transfer instrument satisfactory to Hawker.

3.3           By Hawker.  At the Closing, Hawker shall deliver to Sefton:

(a)           $1.00, in immediately available funds;

(b)           duly executed share certificate representing the Hawker Stock; and

(c)           duly executed Warrant.

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4.             Representations and Warranties of Sefton.  Sefton hereby make the following representations and warranties to Hawker:

4.1           Organization and Power.  TEG is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado.

4.2           Authorization.  TEG and Sefton have all required power and authority to consummate the transactions contemplated by this Agreement, including all necessary shareholder and board approvals. This Agreement, when executed and delivered by TEG and Sefton, will constitute valid and binding obligations of TEG and Sefton, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

4.3           Shares.  Sefton holds of record and legally and beneficially owns the Shares free and clear of all Encumbrances. Sefton has the full and unrestricted power to sell, assign, transfer and deliver the Shares in accordance with the terms of this Agreement, free and clear of all Encumbrances. Neither Sefton nor TEG is a party to any option, warrant, purchase right, or other contract or commitment that could require Sefton or TEG to issue, sell, transfer, or otherwise dispose of the Shares, except as exist in favor of Hawker. Sefton is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of the Shares, except as exist in favor of Hawker. There are no claims or actions pending with respect to the title of the Shares. Upon the purchase of the Shares pursuant to this Agreement, Hawker will receive good and marketable title to all of the Shares, free and clear of all Encumbrances.

4.4           Capitalization.  The authorized equity ownership of TEG consists solely of common stock, which are owned 100% of record and beneficially, free and clear of any Encumbrances, by Sefton, and have been duly authorized and validly issued, and are fully paid and non-assessable. There are no outstanding options, subscriptions, warrants, calls, commitments, pre-emptive rights or other rights obligating TEG to issue or sell any shares of capital stock or any securities convertible into or exercisable for any shares of capital stock, or otherwise requiring TEG or Sefton to give any Person the right to receive any benefits or rights similar to any rights enjoyed by or accruing to the holders of TEG capital stock or any rights to participate in the equity or net income of TEG.

4.5           Title to Operating Interests.  TEG has Defensible Title to the Operating Interests. All proceeds from the sale of TEG’s share of the Hydrocarbons produced from the Operating Interests have been and are currently being paid in full to TEG by the purchasers thereof on a timely basis, and none of the proceeds are currently being held in suspense by the purchaser or any other party.

4.6           Bonding Matters.  Schedule 4.6 lists all of the bonds and other security arrangements that TEG maintains as to the Operating Interests or any portion thereof. No claim has been made by any Governmental Authority that TEG has failed to comply with any law or regulation governing the requirements of bonds as to TEG’s operations of the Operating Interests.

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4.7           Hedging Transactions.  TEG is not currently engaged in any futures, hedge, swap, collar, put, call, floor, cap, option or other contract that is intended to benefit from, relate to or reduce or eliminate the risk of fluctuations in the price of commodities, including Hydrocarbons, interest rates, currencies or securities.

4.8           Take-or-Pay.  TEG is not obligated, under a take-or-pay or similar arrangement, or by virtue of an election to non-consent or not participate in a past or current operation on any of the Operating Interests pursuant to the applicable operating agreement, to produce Hydrocarbons, or allow Hydrocarbons to be produced, without receiving full payment at the time of delivery in an amount that corresponds to TEG’s interest in and to all production of Hydrocarbons saved, produced and sold from the Operating Interests.

4.9           Bonus Payments.  No Third Party has any right, retained, springing or otherwise, to production, cash bonus payments or profits or other rights in the Operating Interests including rights retained by prior owners at the time of the sale of the Operating Interests to TEG to receive production, cash bonus payments or profits from the Operating Interests if the price of oil exceeds a threshold amount.

4.10           Property Operation.  Except as set forth on Schedule 4.10, as to Wells operated by TEG and, to Sefton’s Knowledge, as to Wells operated by Third Parties, there is no Well that TEG is currently obligated by Law or contract or agreement to plug and abandon because the Well is not currently capable of producing in commercial quantities. Schedule 4.10 also sets forth an estimate of TEG’s plugging and abandonment obligations for its Wells.

4.11           Solvency.  To the Knowledge of Sefton, (i) the fair value of the property of TEG is greater than the total amount of known liabilities, including contingent liabilities, of TEG, (ii) the present fair salable value of the assets of TEG, as part of a going concern, is not less than the amount that will be required to pay the probable liabilities of TEG on its debts as they become absolute and matured and (iii) TEG does not intend to, and does not believe that it will, incur debts or liabilities beyond TEG’s ability to pay as those debts and liabilities mature. There has been no bankruptcy, civil rehabilitation, corporate reorganization or special liquidation proceeding (“Bankruptcy or Insolvency Proceeding”) instituted by or against TEG, and there is no suspension of payment, insolvency, or other event that would become a cause of petition for any of any Bankruptcy or Insolvency Proceeding.

5.             Representations and Warranties of Hawker.  Hawker hereby makes the following representations and warranties to TEG as of the date of this Agreement and as of the Closing:

5.1           Organization.  Hawker is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware. Hawker has all requisite limited liability company power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

5.2           Authorization.  Hawker has all required power and authority to consummate the issuance and sale contemplated by this Agreement. This Agreement, when executed and delivered by Hawker, will constitute valid and binding obligations of Hawker, enforceable in accordance with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

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5.3           Hawker Stock.  The Hawker Stock, when issued and delivered in compliance with the provisions of this Agreement, will be validly issued and will be fully paid and nonassessable.

6.             Additional Agreements.

6.1           Further Actions.  At any time from and after the Closing, at the request of a party and without further consideration, each other party shall execute and deliver such further agreements, certificates, instruments and documents and perform such other actions as the requesting party may reasonably request in order to fully consummate the transactions contemplated hereby and carry out the purposes and intent of this Agreement.

6.2           No Dispositions.  TEG shall transfer, assign or otherwise dispose of any of its assets (except sales of Hydrocarbons in the ordinary course of business), including, without limitation, the Operating Interests and the personal property assets listed on Schedule 6.2.

6.3           Regulatory Approvals.  Each party shall cooperate and use its reasonable best efforts to promptly prepare and file all necessary documentation to effect all necessary applications, notices, petitions, filings and other documents, and use all commercially reasonable efforts to obtain (and will cooperate with each other in obtaining) any consent, acquiescence, authorization, order or approval of, and any exemption or nonopposition by, any Governmental Authority required to be obtained or made by Sefton, TEG or Hawker or any of their respective Affiliates in connection with the transactions contemplated hereby.

6.4           Additional Financial Information.  Within 60 days following Hawker’s filing of a Form 8-K pertaining to the transactions contemplated hereby with the SEC following the Closing, Sefton shall provide, at Hawker’s expense, (i) the audited balance sheet for TEG as of December 31, 2014, together with the related audited statement of income, owners’ equity and cash flows for the twelve months ended December 31, 2014 and 2013 (collectively, the “Annual Financial Statements”) and (ii) the unaudited statements of income for TEG for the six months ended June 30, 2014 and 2013, and for the three months ended December 31, 2014 (collectively, the “Interim Financial Statements”). The Annual Financial Statements and Interim Financial Statements will present fairly in all material respects the financial position of TEG as of the dates indicated, and the results of operations for TEG for the respective periods indicated. The Annual Financial Statements and Interim Financial Statements will be prepared in conformity with GAAP. In addition, Sefton shall cooperate with Hawker and TEG after the Closing to assist in providing, at Hawker’s expense, any additional financial information regarding TEG that Hawker may require for inclusion in Hawker’s SEC filings.

7.             Indemnification.  Hawker hereby indemnifies and holds each of Sefton and its Affiliates, officers, directors, employees and agents (each an “Indemnified Party”) harmless from and against any and all claims, judgments, causes of action, liabilities, obligations, guarantees, damages, losses, deficiencies, costs, penalties, interest and expenses, including without limitation, cost of investigation and defense, and reasonable attorneys’ fees and expenses, net of any collected insurance proceeds (collectively, “Losses”) arising out of, based upon, attributable to or resulting from the Amended and Restated Credit Agreement dated October 21, 2008, among Bank of the West, Sefton, TEG and TEG Midcontinent, Inc., as amended and the Loan Documents (as defined therein).

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(a)           If Bank of the West asserts any claim against an Indemnified Party, the Indemnified Party shall give notice of the claim to Hawker and Hawker shall have the right to assume the defense and, subject to Section 7(b), settlement of the claim at its expense by representatives of its own choosing acceptable to the Indemnified Party (which acceptance shall not be unreasonably withheld). The failure of the Indemnified Party to notify Hawker of the claim shall not relieve Hawker of any liability that Hawker may have with respect to the claim, except to the extent that the defense is materially prejudiced by that failure. The Indemnified Party shall have the right to participate in the defense of the claim at its expense (which expense shall not be deemed to be a Loss), in which case Hawker shall cooperate in providing information to and consulting with the Indemnified Party about the claim. If Hawker fails or does not assume the defense of the claim within 20 days after written notice of the claim has been given by the Indemnified Party to Hawker, the Indemnified Party may defend against or, subject to Section 7(b), settle the claim with counsel of its own choosing at the expense (to the extent reasonable under the circumstances) of Hawker.

(b)           If Hawker does not assume the defense of a claim involving the asserted liability of the Indemnified Party under this Section 7, no settlement of the claim shall be made by the Indemnified Party without the prior written consent of Hawker, which consent shall not be unreasonably withheld or delayed. If Hawker assumes the defense of the claim, (i) no settlement may be effected by Hawker without the Indemnified Party’s consent unless (A) there is no finding or admission of any violation of Law or any violation of the rights of any Person and no effect on any other claim that may be made against the Indemnified Party, (B) the sole relief provided is monetary damages that have been paid in full by Hawker and (C) the settlement includes, as an unconditional term, the giving by the claimant or the plaintiff to the Indemnified Party of a release in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of the claim, and (ii) the Indemnified Party shall have no liability with respect to any compromise or settlement thereof effected without its consent.

8.             General Release of Claims.  Except for the obligations expressly created by this Agreement, (i) Sefton hereby releases and forever discharges and covenants not to sue TEG or Hawker and (ii) Hawker hereby releases and forevers discharge and covenants not to sue Sefton, from any and all causes of action in law or equity, suits, debts, liens, contracts, agreements, liability, claims, demands, damages, loss, costs, attorney’s fees, or expenses, of any nature whatsoever, known or unknown. This general release is intended by the parties to be as broad as the law will allow, and it is to be so interpreted, construed and applied. With respect to the claims that are being released herein, the parties expressly waive any and all rights under Section 1542 of the Civil Code of the State of California which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

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Each party expressly waives and releases any right or benefit which it has or may have under any similar law or rule of any other jurisdiction.

9.             Miscellaneous.

9.1           Assignment.  Neither this Agreement nor any rights or obligations hereunder shall be assigned or delegated by any party without the prior written consent of the other parties.

9.2           Further Assurances.  The parties shall execute any and all documents necessary and appropriate to adhere to, to give, effect, or otherwise to obtain approval for the terms and undertakings set forth in this Agreement.

9.3           Survival.  The representations, warranties and covenants of Hawker and TEG contained herein shall survive the execution and delivery of this Agreement and the Closing.

9.4           Amendment.  This Agreement may not be modified, amended or terminated orally. No modification, amendment or termination or any claimed waiver of any provision of this Agreement shall be binding unless the same is in writing and signed by the person against whom such modification, amendment or waiver is sought to be enforced. The waiver of any breach of this Agreement shall not operate or be construed as a waiver of any other, prior or subsequent breach of this Agreement.

9.5           Notices.  Except as otherwise provided for herein, all notices and other communications provided for hereunder shall be in writing (including electronic mail) and mailed (via registered or certified mail) or delivered:

if to Sefton, at:	2050 S. Oneida St., Suite 102
	Denver, Colorado  80224
	Attention:  Kris Short
	E-mail:  kshort@seftonresources.com
and if to Hawker or TEG, at	326 S. Pacific Coast Highway, Suite 102
	Redondo Beach, California  90277
	Attention: President
	E-mail: dkatic@hawkerenergyllc.com
with a copy to:	Rutan & Tucker, LLP
	611 Anton Boulevard, 14th Floor
	Costa Mesa, California  92626
	Attention: Gregg Amber
	E-mail: gamber@rutan.com

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or, as to each party, at such other address as designated by that party in a written notice to the other party. All notices and communications shall be deemed to have been validly served, given or delivered (i) if personally delivered, upon receipt or refusal to accept delivery, (ii) if sent by a commercial overnight courier for delivery on the next Business Day, on the first Business Day after deposit with the courier service (or the second Business Day if sent to an address not in the United States), (iii) if sent by registered or certified mail, three days after deposit thereof in the United States mail, or (iv) if sent by electronic mail, one Business Day after transmission when directed to the appropriate e-mail address (provided that the party giving notice must verify the e-mail address of the recipient prior to transmission).

9.6           Attorneys’ Fees.  If any party brings an action or proceeding for any relief against any other party, declaratory or otherwise, to enforce the terms of this Agreement or to declare rights hereunder, the Prevailing Party shall be entitled to recover as part of any such action or proceeding its reasonable attorneys’ fees and costs, including any fees and costs incurred in bringing and prosecuting the action or proceeding and/or enforcing any order, judgment, ruling or award granted as part of the action or proceeding.

9.7           Entire Agreement.  This Agreement, its Disclosure Schedules and the other documents executed on the Closing constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, oral and written, between the parties with respect to the subject matter of this Agreement. No representation, warranty, promise, inducement or statement of intention has been made by any party that is not embodied in this Agreement or such other documents, and no party shall be bound by, or be liable for, any alleged representation, warranty, promise, inducement or statement of intention not embodied herein or therein.

9.8           Governing Law; Consent to Jurisdiction.  This Agreement is entered into in Los Angeles County, California and shall be governed by, and construed in accordance with, the internal laws of the State of California without regard to conflict of law principles that would result in the application of any law other than the law of the State of California. Each party acknowledges and consents to the personal jurisdiction of the State and Federal courts in the State of California with respect to any action or proceeding arising out of or in connection with any provision of this Agreement.

9.9           Forum and Venue.  The State of California shall be the sole and exclusive forum for any claim or suit between or among the parties involving this Agreement or any transactions contemplated hereby. All claims or suits shall be filed only in Los Angeles County, California, which shall be the sole and exclusive venue for all such matters.

9.10           Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, assigns, heirs and legatees. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns, and Third Parties who are expressly given rights hereunder, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

9.11           Captions.  Captions contained in this Agreement in no way define, limit or extend the scope or intent of this Agreement.

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9.12           Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, rule or regulation, such provision shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof. The remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

9.13           Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together constitute one and the same instrument. This Agreement may be (i) transmitted for reproduction and execution by any means now known or hereafter devised, including facsimile or electronic file transmission, and (ii) converted from its original software program to another and/or printed on different paper formats or in different fonts, any or all of which may result in variations to the pagination and appearance of the counterpart versions of this Agreement. The execution and delivery of counterparts of this Agreement, by facsimile, by electronic file transmission or by original manual signature, regardless of the means or any variation in pagination or appearance, shall be binding upon the parties. Any party delivering an executed counterpart of this Agreement by facsimile or by electronic file transmission shall also deliver a manually executed counterpart of this Agreement to each other party, but failure to do so shall not affect the validity, enforceability or binding effect of this Agreement.

9.14           No Third Party Beneficiaries.  Nothing in this Agreement is intended or shall be construed to confer upon or to give to any Person other than the parties (and their permitted assignees) any right, remedy or claim under or by reason of this Agreement. All terms and conditions in this Agreement shall be for the sole and exclusive benefit of the parties and their respective successors and assigns.

9.15           Representation by Counsel.  Each party has been represented by its own counsel with respect to all aspects of this Agreement. Each and every provision of this Agreement has been thoroughly negotiated and bargained for by the parties with the benefit of counsel. The parties have thoroughly read and understood the terms of this Agreement, conferred with their attorneys on any questions in regard to this Agreement and voluntarily entered into this Agreement. If a court or other tribunal determines that any term or provision in this Agreement is ambiguous, the interpretation of that provision will not in any way include a consideration or determination of who may actually have drafted the this Agreement and/or the term or condition, and that shall not be a relevant consideration in the interpretation of this Agreement.

[Signatures on following page]

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IN WITNESS WHEREOF, the parties have executed this Share Purchase Agreement as of the first date set forth above.

TEG:	TEG OIL & GAS U.S.A., INC., a Colorado corporation
	By:	/s/ Tom Milne
		Tom Milne, Director of Sefton Resources, Inc.,
		its sole shareholder
SEFTON:	SEFTON RESOURCES, INC., a British Virgin Islands corporation
	By:	/s/ Tom Milne
		Tom Milne, Director
HAWKER:	Hawker Energy, Inc., a Nevada corporation
	By:	/s/ Darren Katic
		Darren Katic, President

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EX-10.9

Exhibit 10.9

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (this “Agreement”), dated January 12, 2015, is made by Sefton Resources, Inc., a British Virgin Islands corporation (“Sefton”), in favor of Hawker Energy, Inc., a Nevada corporation (“Hawker”).

RECITALS

A.           Pursuant to a Secured Subordinated Note Due December 31, 2015, dated the date hereof (the “Note”), Lender has loaned or committed to loan to TEG Oil & Gas U.S.A., Inc., a Colorado corporation (“Borrower”), up to $2,100,000 (the “Loan”).

B.           Sefton owns 100% of the outstanding capital stock of Borrower, and has guaranteed repayment of the Loan pursuant to a Limited Recourse Guarantee dated the date hereof (the “Guarantee”).

C.           Borrower’s obligations under the Note are secured by a Fourth Amended and Restated Security Agreement dated the date hereof (the “Security Agreement”)

D.           Hawker has required, as a condition to the Loan, that Sefton execute and deliver this Agreement to Hawker.

E.           Hawker’s rights under the Note, the Security Agreement, the Guarantee and this Pledge Agreement are subordinated to the rights of Bank of the West (“BOTW”) and its assignees pursuant to the terms of an Amended and Restated Subordination and Intercreditor Agreement dated as of January 1, 2015 among Sefton, Hawker, BOTW and the other parties named therein (the “Intercreditor Agreement”).

F.           Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Note, in the Security Agreement or in the Guarantee.

AGREEMENT

In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Hawker and Sefton agree as follows:

1.             Pledge. As security for the prompt and complete payment and performance of the obligations of Hawker hereunder and under the Note (collectively, the “Obligations”), Sefton pledges to Hawker, and grants a security interest to Hawker in, the following:

(a)           100,000 shares of Common Stock of Borrower, represented by stock certificate no. 001, which comprise 100% of the issued and outstanding shares of capital stock of Borrower (the “Pledged Shares”); and

(b)           All dividends and other distributions received by Sefton from Borrower with respect to the Pledged Shares, subject to the provisions of Section 6.

The Pledged Shares and any dividends or distributions with respect thereto are hereinafter collectively referred to as the “Collateral.” Sefton hereby appoints Hawker as its attorney-in-fact to arrange at Hawker’ option for the transfer, subject to Section 4, upon or at any time after the occurrence and during the continuance of an Event of Default, of the Collateral on the books of Borrower to the name of Hawker or to the name of Hawker’ nominee.

2.             Delivery of Collateral; Financing Statements. Sefton shall deliver stock certificate no. 001, representing the Pledged Shares, simultaneously with the execution hereof, to Hawker, duly endorsed in blank. In addition, Sefton hereby authorizes Hawker to file financing statements in the State of California, the District of Columbia, the British Virgin Islands and in any other jurisdictions Hawker deems necessary in order to perfect its security interest in the Collateral, and agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement to the extent complying with applicable law.

3.             Voting Rights. During the term of this Agreement, and so long as there does not occur or exist an Event of Default, Sefton shall have the right to vote the Pledged Shares on all matters on which the Pledged Shares are entitled to vote; provided, however, that no vote shall be cast, or consent, waiver or ratification given, or any action taken, that would materially impair the value of the Collateral or be inconsistent with or violate any provision of this Agreement or the Note. Upon the occurrence and during the continuance of an Event of Default, subject to Section 4, Hawker shall thereafter be entitled to exercise all voting powers pertaining to the Collateral, and Sefton shall not be entitled to vote the Pledged Shares at any time after an Event of Default has occurred, including, without limitation, upon the taking of any action described in clause (vii) of the definition of “Event of Default” in the Security Agreement.

4.             Representations and Warranties. Sefton represents, warrants and agrees as follows:

(a)           Sefton is the beneficial owner of the Pledged Shares;

(b)           Sefton has full power and authority to enter into this Agreement;

(c)           There are no restrictions upon the voting rights associated with, or upon the transfer of, any of the Collateral except as set forth in the governing documents of Tapia; and

(d)           Sefton has the unrestricted right to vote, pledge and grant a security interest in or otherwise transfer the Collateral free of any liens, claims and encumbrances.

5.             Limitation on Liens and Dispositions. Sefton will not create, permit or permit to exist, and will defend the Collateral against and take such other action as is necessary to remove, any lien on the Collateral (other than liens in favor of Hawker) and will defend the right, title and interest of Hawker in and to any of Sefton’s right, title and interest in and to the Collateral against the claims and demands of all other persons. Except for liens in favor of Hawker, Sefton will not, without the prior written consent of Hawker, sell, assign, exchange, grant a security interest in, transfer, encumber or otherwise dispose of any of the Collateral, or attempt or contract to do so.

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6.             Subsequent Changes Affecting Collateral. Hawker represents to Sefton that it has made its own arrangements for keeping informed of changes or potential changes affecting the Collateral (including, but not limited to, rights to convert, rights to subscribe, payment of distributions, reorganization or other exchanges, tender offers and voting rights), and Hawker agrees that Sefton shall not have any responsibility or liability for informing Hawker of any changes or potential changes or for taking any action or omitting to take any action with respect thereto. Hawker may, upon or at any time after the occurrence and during the continuance of an Event of Default, without notice and at its option, transfer or register the Collateral or any part thereof into its or its nominee’s name with or without any indication that the Collateral is subject to the security interest hereunder.

7.             Distributions.

(a)           Unless and until Sefton has received written notice from Hawker that an Event of Default has occurred and is continuing, Sefton shall be entitled to receive all cash distributions paid with respect to any Pledged Shares, free of any security interest in favor of Sefton hereunder. Upon the occurrence and during the continuance of any Event of Default, Hawker shall be entitled to receive any and all cash distributions, and Sefton, upon learning of the Event of Default, shall immediately deliver to Hawker any cash dividends that it receives. Hawker shall hold any cash distributions as Collateral pursuant to this Agreement or, at Holding’s election, may apply any cash distributions to the reduction of any Obligations.

(b)           Nothing contained in this Section 6 or elsewhere in this Agreement shall be deemed to restrict the right of Sefton to receive distributions on account of its or its members’ income taxes.

8.             Power of Attorney. Sefton irrevocably constitutes and appoints Hawker its true and lawful attorney-in-fact, subject to its compliance with all other terms and conditions hereof, with full power of substitution, for it and in its name, place and stead, upon the occurrence and during the continuance of an Event of Default, to ask, demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all sums or properties which may be or become due, payable or distributable on or in respect of the Collateral or which constitute a part thereof, with full power to settle, adjust or compromise any claim thereunder or therefor as fully as Sefton could itself do, and to endorse or sign the name of Sefton on all commercial paper given in payment or in part payment thereof and on all documents of satisfaction, discharge or receipt required or requested in connection therewith, and in its discretion, to file any claim or take any other action or proceeding, either in its own name or in the name of Sefton, or otherwise, that Hawker may deem necessary or appropriate (subject to Section 8(a)) to collect or otherwise realize upon any and all of the Collateral, or effect a transfer thereof, or which may be necessary or appropriate to protect and preserve the right, title and interest of Hawker in and to the Collateral and the security intended to be afforded hereby.

9.             Remedies. Subject in all respects to BOTW’s (and its assignees’) rights and Hawker’s obligations under the Intercreditor Agreement, Hawker shall have the following rights and be entitled to the following remedies as a junior secured creditor:

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(a)           Upon the occurrence or existence of an Event of Default, subject to Section 4, Hawker shall have, in addition to any other rights given by law or hereunder, all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code as it may from time to time be in effect in the State of California (“Code”), including, without limitation, the rights set forth in Section 9620 of the Code. In addition, with respect to the Collateral, or any part thereof, which shall then be or shall thereafter come into the possession or custody of Hawker, Hawker may in its sole discretion, without notice except as specified below, sell or cause the Collateral to be sold at any exchange, broker’s board or at public or private sale, in one or more sales or lots, at such price as Hawker may deem best, and for cash or on credit or for future delivery, without assumption of any credit risk, and the purchaser of any or all of the Collateral so sold shall thereafter hold the Collateral, absolutely free from any claim, encumbrance or right of any kind whatsoever. Hawker may, in its own name, or in the name of an assignee or nominee, buy the Collateral at any public sale and, if permitted by applicable law, buy the Collateral at any private sale. Sefton hereby waives all of its rights of redemption from any sale or other disposition of the Collateral. Sefton will pay to Hawker all expenses (including, without limitation, court costs and reasonable attorneys’ and paralegals’ fees and expenses) of, or incident to, the enforcement of any of the provisions hereof. Neither Hawker nor any party acting as its attorney shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct. Hawker agrees to return to Sefton (or to the Persons legally entitled thereto) any proceeds of the sale of the Collateral that exceed the then outstanding balance of the Obligations and the expenses described above.

(b)           Unless any of the Collateral threatens to decline speedily in value or is or becomes of a type sold on a recognized market, Hawker will give Sefton reasonable notice of the time and place of any public sale thereof, or of the time after which any private sale or other intended disposition is to be made. Any sale of the Collateral conducted in conformity with reasonable commercial practices of banks, commercial finance companies, insurance companies or other financial institutions disposing of property similar to the Collateral shall be deemed to be commercially reasonable. Notwithstanding any provisions to the contrary contained herein, any requirements of reasonable notice shall be met if the notice is received by Sefton as provided in Section 18, at least seven days before the time of the sale of disposition. Any other requirement of notice, demand or advertisement for sale is, to the extent permitted by law, waived.

(c)           In view of the fact that federal and state securities laws may impose certain restrictions on the method by which a sale of the Collateral may be effected after an Event of Default, Sefton agrees that, upon the occurrence and during the continuance of an Event of Default, Hawker may, from time to time, attempt to sell all or any part of the Collateral by means of a private placement restricting the bidder and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, Hawker may solicit offers to buy the Collateral, or any part of it, for cash, from a limited number of investors deemed by Hawker, in its reasonable judgment, to be respectable parties who might be interested in purchasing the Collateral, and if Hawker solicits such offers from not less than three such investors, and from Sefton (if permitted by applicable law and so long as Sefton does not unreasonably delay any such sale by withholding or conditioning its offer or otherwise), then the acceptance by Hawker of the highest offer obtained therefrom shall be deemed to be a commercially reasonable method of disposition of Collateral.

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10.           Security Interest, etc. The pledge and security interests herein created and provided for stand as direct and primary security for all of the Obligations. No application of any sums received by Hawker in respect of the Collateral or any disposition thereof to the reduction of the Obligations or any part thereof shall in any manner entitle Sefton to any right, title or interest in or to the Obligations or any collateral security therefor unless and until all Obligations have been fully paid and satisfied. Sefton acknowledges and agrees that the pledge and security interests hereby created are absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Hawker or any other holder of any of the Obligations (other than their gross negligence or willful misconduct), and without limiting the generality of the foregoing, the pledge and security hereof shall not be impaired by any acceptance by Hawker or any other holder of any of the Obligations of any other security for or guarantors upon any of the Obligations or by any failure, neglect or omission on the part of Hawker or any other holder of any of the Obligations to realize upon or protect any of the Obligations (except as otherwise provided herein) or any collateral security therefor (except as provided herein or in any other agreement with respect to any such collateral security). The pledge and security hereof shall not in any manner be impaired or affected by (and Hawker, without notice to anyone is hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the Obligations, or of any collateral security therefor, or of any guarantee thereof, or of any loan agreement executed in connection therewith; provided, however, that nothing herein shall result in or effectuate an increase in the amount of the Obligations for which Sefton shall be responsible beyond which is contemplated by this Agreement and the Note.

11.           Waivers and Consents. Except as otherwise provided herein, upon the occurrence and during the continuance of an Event of Default, Hawker may enforce this Agreement independently of any other remedy or security Hawker at any time may have or hold in connection with the Obligations, and it shall not be necessary for Hawker to proceed upon or against and/or exhaust any other security or remedy before proceeding to enforce this Agreement. Sefton expressly waives any right to require Hawker to proceed against any other person or entity or any collateral provided by any other person or entity. Hawker may proceed against Sefton and/or any other person or entity and/or the Collateral in whatever order it determines in its sole and absolute discretion. Hawker may file a separate action or separate actions against Sefton, whether brought or prosecuted with respect to any other security or against any other person or entity, or whether any other person or entity is joined in any action or actions. Hawker and any affiliate of Hawker, and Sefton and any affiliate of Sefton, may deal with each other in connection with the Obligations or otherwise, or alter any contracts or agreements now or hereafter existing between any of them, in any manner whatsoever, all without in any way altering or affecting the liens created or granted under this Agreement. Holdings’ rights hereunder shall be reinstated and revived, and the enforceability of this agreement shall continue, with respect to any amount at any time paid on account of the Obligations which thereafter shall be required to be restored or returned by Hawker (whether as a “voidable preference,” “fraudulent conveyance,” or otherwise) upon the bankruptcy, insolvency or reorganization of Sefton, or otherwise, all as though the amount had not been paid. Sefton expressly waives any and all defenses now or hereafter arising or asserted by reason of (i) any failure of Hawker to give notice of sale or other disposition of Collateral to any person or entity (except Sefton) or any defect in any notice that may be given to any person or entity (except Sefton) in connection with any sale or disposition of Collateral, (ii) any failure of Hawker to file or enforce a claim in any bankruptcy or other proceeding with respect to any person or entity, (iii) the election by Hawker, in any bankruptcy proceeding of any person or entity, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code, (iv) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code, (v) any use of cash collateral under Section 363 of the United States Bankruptcy Code, (vi) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any parson or entity, (vii) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against any person or entity, including any discharge of, or bar or stay against collecting, all or any of the Obligations (or any interest thereon) in or as a result of any such proceeding or (viii) any action taken by Hawker that is authorized by this Section 11 or any other provision of this Agreement or the Note, except to the extent any action taken by Hawker constitutes gross negligence or willful misconduct. Sefton expressly waives all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Obligations (except as otherwise required by Section 9(b) or elsewhere herein), and all notices of acceptance of this Agreement.

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12.           Understanding With Respect To Waivers And Consents. Each of the waivers and consents set forth in this Agreement are made after consultation with legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights that Sefton otherwise may have against Hawker or others or against the Collateral, and that, under the circumstances, the waivers and consents given are reasonable and not contrary to public policy or law. These waivers and consents shall be effective to the maximum extent permitted by law.

13.           Term. This Agreement shall remain in full force and effect throughout the term of the Note and until all of the Obligations have been fully paid and satisfied and the Note has been terminated. Upon the termination of this Agreement as provided above (other than as a result of the sale of the Collateral), Hawker will release the security interest and lien created hereunder.

14.           Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Hawker, Sefton and their respective successors and assigns. Sefton’s successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Sefton.

15.           Further Assurances. Sefton will cooperate with Hawker and will execute and deliver, or cause to be executed and delivered, all stock powers, proxies, instruments and documents, and will take all other action, including, without limitation, the filing of financing statements, as Hawker may reasonably request from time to time in order to carry out the provisions and purposes of this Agreement.

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16.           Governing Law; Consent to Jurisdiction. This Agreement is entered into in Orange County, California and shall be governed by, and construed in accordance with, the internal laws of the State of California without regard to conflict of law principles that would result in the application of any law other than the law of the State of California. Each party acknowledges and consents to the personal jurisdiction of the State and Federal courts in the State of California with respect to any action or proceeding arising out of or in connection with any provision of this Agreement.

17.           Forum and Venue. The State of California shall be the sole and exclusive forum for any claim or suit between or among the parties involving this Agreement or any transactions contemplated hereby. All claims or suits shall be filed only in Orange County, California, which shall be the sole and exclusive venue for all such matters.

18.           No Obligation. Hawker shall not be under any obligation to take any steps necessary to preserve rights in the Collateral against any other parties but may do so at its option, and all expenses incurred in connection therewith shall be for the sole account of Hawker.

19.           Notices. Except as otherwise provided for herein, all notices and other communications provided for hereunder shall be in writing (including electronic mail) and mailed (via registered or certified mail), e-mailed or delivered:

if to Hawker, at:	c/o Hawker Energy
	326 S. Pacific Coast Highway, Suite 102
	Redondo Beach, California 90277
	Attention: Darren Katic
	E-mail: dkatic@hawkerenergyllc.com
with a copy to:	Rutan & Tucker, LLP
	611 Anton Boulevard, 14th Floor
	Costa Mesa, California  92626
	Attention: Gregg Amber
	E-mail: gamber@rutan.com
and if to Sefton, at	Sefton Resources, Inc.
	2050 S. Oneida Street, Suite 102
	Denver, Colorado 80224
	Attention: Kris Short
	E-mail: kshort@seftonresources.com

or, as to each party, at such other address as designated by that party in a written notice to the other party. All notices and communications shall be deemed to have been validly served, given or delivered (i) if personally delivered, upon receipt or refusal to accept delivery, (ii) if sent by a commercial overnight courier for delivery on the next business day, on the first business day after deposit with such courier service (or the second business day if sent to an address not in the United States), (iii) if sent by registered or certified mail, three days after deposit thereof in the United States mail, or (iv) if sent by electronic mail, one business day after transmission when directed to the appropriate e-mail address (provided that the party giving notice must verify the e-mail address of the recipient prior to transmission).

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20.           Section Headings. The section headings herein are for convenience of reference only, and shall not affect in any way the interpretation of any of the provisions of this Agreement.

21.           Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument, respectively. This Agreement may be transmitted for reproduction and execution by any means now known or hereafter devised, including facsimile or electronic file transmission, may be converted from its original software program to another and/or printed on different paper formats or in different fonts, any or all of which may result in variations to the pagination and appearance of the counterpart versions of this Agreement. The execution and delivery of counterparts of this Agreement, by facsimile or by original manual signature, regardless of the means or any such variation in pagination or appearance, shall be binding upon the parties executing this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile shall also deliver a manually executed counterpart of this Agreement to each other party, but failure to do so shall not affect the validity, enforceability or binding effect of this Agreement.

IN WITNESS WHEREOF, the parties executed and delivered this Agreement as of the date first written above.

Hawker:	Hawker Energy, Inc., a Nevada corporation
	By:	/s/ D. Katic
		Darren Katic, President
Sefton:	Sefton Resources, Inc., a British Virgin Islands corporation
	By:	/s/ T. Milne
		Tom Milne, Director

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EX-10.10

Exhibit 10.10

FOURTH AMENDED AND RESTATED SECURITY AGREEMENT

This FOURTH AMENDED AND RESTATED SECURITY AGREEMENT, dated as of January 12, 2015 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this “Agreement”), made by TEG Oil & Gas U.S.A., Inc., a Colorado corporation (the “Debtor”), in favor of Hawker Energy, Inc., a Nevada corporation, (the “Secured Party”).

WHEREAS, the Debtor and the Secured Party’s subsidiary, Tapia Holdings, LLC, a Delaware limited liability company (“Holdings”), are parties to a Third Amended and Restated Security Agreement dated August 29, 2014 (as amended, the “Original Security Agreement”);

WHEREAS, Holdings assigned its rights under the Original Security Agreement to the Secured Party;

WHEREAS, the Debtor has requested that the Secured Party advance additional funds to the Debtor; and

WHEREAS, the Secured Party is willing to advance additional funds on condition that the Debtor execute and deliver this Agreement, which shall supersede in its entirety the Original Security Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.             Definitions.

(a)           Unless otherwise specified herein, all references to Sections are to Sections of this Agreement.

(b)           Unless otherwise defined in this Agreement, terms that are defined in the UCC shall have the meanings assigned to them in the UCC. However, if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has the meaning specified in Article 9.

(c)           For purposes of this Agreement, the following terms have the following meanings:

“Acquisition Proposal” means any offer or proposal, including any proposal made under Section 363 of the Bankruptcy Code or as part of a Plan of Reorganization under the Bankruptcy Code, concerning any (i) merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction involving Sefton or the Debtor, (ii) sale, lease or other disposition of assets of Sefton or the Debtor representing 50% or more of the assets of Sefton or the Debtor, (iii) issuance or sale by Sefton or the Debtor of equity interests representing 50% or more of the voting power (or 50% or more of the aggregate number of all outstanding shares or capital stock) of Sefton or the Debtor, (iv) transaction in which any Person will acquire beneficial ownership or the right to acquire beneficial ownership or any group has been formed which beneficially owns or has the right to acquire beneficial ownership of, equity interests representing 50% or more of the voting power (or 50% or more of the aggregate number of all outstanding shares of capital stock) of Sefton or the Debtor or (v) any combination of the foregoing (in each case, other than by the Secured Party or an affiliate of the Secured Party).

“Alternative Acquisition Agreement” has the meaning set forth in Section 7(a)(ii).

“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101 et seq.), as amended, and any successor or similar foreign statute or law pertaining to the relief of debtors.

“Collateral” has the meaning set forth in Section 2.

“Event of Default” means any of the following:

(i)           the failure of the Debtor to pay any part of the principal of, or interest on, the Note, when due, whether at stated maturity, by acceleration or otherwise;

(ii)          a breach by the Debtor of any representation, warranty or covenant made by the Debtor under this Agreement;

(iii)         any default under, breach of any provisions pertaining to, or acceleration of any Superior Indebtedness;

(iv)         all or substantially all of the assets of the Debtor, or the Collateral or any material portion thereof, is attached, seized, subject to a writ of distress warrant, or levied upon, or comes into the possession of any receiver, trustee, custodian or assignee for the benefit of creditors without being vacated, stayed, dismissed or set aside within 30 days after the occurrence thereof;

(v)          Sefton ceases to own 100% of the outstanding equity securities and voting power of the Debtor except through sale of those securities to the Secured Party or an affiliate of the Secured Party;

(vi)         Sefton fails to obtain the requisite approval of shareholders as required by the Share Purchase Agreement and consummate the transactions contemplated thereby by January 31, 2015;

(vii)        The Debtor or Sefton (A) applies for or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (B) makes a general assignment for the benefit of its creditors, (C) commences a voluntary case under the Bankruptcy Code (as now or hereafter in effect), (D) files a petition seeking to take advantage of any other law providing for the relief of debtors, (E) fails to controvert in a timely or appropriate manner, or acquiesces in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, (F) takes any action under the laws of its jurisdiction of organization analogous to any of the foregoing, (G) takes any requisite action for the purpose of effecting any of the foregoing, or (H) fails to notify the Secured Party in writing at least 72 hours prior to the occurrence of any of the foregoing; or

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(viii)       a proceeding or case is commenced, without the application or consent of the Debtor or Sefton in any court of competent jurisdiction, seeking (A) the liquidation, reorganization, dissolution, winding up, or composition or readjustment of its debts, (B) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets or (C) similar relief in respect of it, under any law providing for the relief of debtors, and the proceeding or case continues undismissed, or unstayed and in effect, for a period of 45 days against the Debtor or Sefton; or action under the laws of the jurisdiction of organization of the Debtor or Sefton analogous to any of the foregoing is taken with respect to the Debtor or Sefton and continues undismissed, or unstayed and in effect, for a period of 45 days.

“Loans” means all advances under the Note and any other loans or extensions of credit made by the Secured Party to the Debtors, including any loans or advances that may be made after the date hereof.

“Note” means the Secured Subordinated Note Due December 31, 2015, dated January 12, 2015 made by the Debtor in favor of the Secured Party.

“Notice Period” has the meaning set forth in Section 7(a)(iv)(A).

“Other Interested Party” has the meaning set forth in Section 7(a)(iii).

“Person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization or other entity.

“Proceeds” means “proceeds” as that term is defined in Section 9102 of the UCC and, in any event, includes, without limitation, all dividends or other income from the Collateral, collections thereon or distributions with respect thereto.

“Representatives” means a party’s directors, officers, employees, accountants, consultants, legal counsel, advisors, agents and other representatives.

“Secured Obligations” has the meaning set forth in Section 3.

“Secured Party’s Proposal” means the proposal by the Secured Party to acquire the outstanding shares of the Debtor pursuant to a Share Purchase Agreement dated January 6, 2015 among the Secured Party, the Debtor and Sefton.

“Sefton” means Sefton Resources, Inc., a British Virgin Islands corporation and the parent company of the Debtor.

“Superior Indebtedness” has the meaning set forth in the Note.

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“Superior Proposal” means a written and bona fide Acquisition Proposal made by a third party that Sefton’s board of directors has determined in its good faith judgment, after consultation with its outside legal counsel and with its financial advisors, is reasonably likely to be consummated in accordance with its terms, taking into account all legal, financial (including the availability of committed financing) and regulatory aspects of the proposal and the Person making the proposal and would, if consummated, result in a transaction that is more favorable to Sefton’s shareholders, from a financial point of view, than the Secured Party’s Proposal (after giving effect to all adjustments to the terms thereof that may be irrevocably offered by the Secured Party).

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of California or, when the laws of any other state govern the method or manner of the perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial Code as in effect from time to time in that state.

2.             Grant of Security Interest. The Debtor hereby reaffirms its pledge and grant of a security interest under the Original Security Agreement, and pledges and grants to the Secured Party, and hereby creates a continuing lien and security interest in favor of the Secured Party in and to all of its right, title and interest in and to the following, wherever located, whether now existing or hereafter from time to time arising or acquired (collectively, the “Collateral”):

(a)           all fixtures and personal property of every kind and nature including all accounts, goods (including inventory and equipment), documents (including, if applicable, electronic documents), instruments, promissory notes, chattel paper (whether tangible or electronic), letters of credit, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), securities and all other investment property, general intangibles (including all payment intangibles), money, deposit accounts, and any other contract rights or rights to the payment of money; and

(b)           all Proceeds and products of each of the foregoing, all books and records relating to the foregoing, all supporting obligations related thereto, and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, and any and all Proceeds of any insurance, indemnity, warranty or guaranty payable to the Debtor from time to time with respect to any of the foregoing.

3.             Secured Obligations. The Collateral secures the payment and performance of:

(a)           the obligations of the Debtor from time to time arising under the Note, this Agreement or otherwise with respect to the due and punctual payment of (i) the principal of and premium, if any, and interest on the Loans (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in that proceeding), when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, attorneys’ fees and disbursements, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in that proceeding), of the Debtor under the Loan Agreement and this Agreement; and

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(b)           the due and punctual performance of all covenants, agreements, duties, debts, obligations and liabilities of the Debtor under or pursuant to the Note and this Agreement (all such obligations, liabilities, sums and expenses set forth in Section 3 being herein collectively called the “Secured Obligations”).

4.             Perfection of Security Interest and Further Assurances.

(a)           The Debtor shall, from time to time, as may be required by the Secured Party with respect to all Collateral, immediately take all actions as may be requested by the Secured Party to perfect the security interest of the Secured Party in the Collateral, including, with respect to all Collateral over which control may be obtained within the meaning of Sections 8106, 9104, 9105, 9106 and 9107 of the UCC, as applicable, the Debtor shall, upon the request of the Secured Party, take all actions as may be requested from time to time by the Secured Party so that control of such Collateral is obtained and at all times held by the Secured Party. All of the foregoing shall be at the sole cost and expense of the Debtor.

(b)           The Debtor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any relevant jurisdiction any financing statements and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral, including any financing or continuation statements or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by the Debtor hereunder, without the signature of the Debtor where permitted by law, including the filing of a financing statement describing the Collateral as all assets now owned or hereafter acquired by the Debtor, or words of similar effect. The Debtor shall provide all information required by the Secured Party pursuant to this Section 4(b) promptly to the Secured Party upon request.

(c)           If the Debtor at any time holds or acquires any certificated securities, promissory notes, tangible chattel paper, negotiable documents or warehouse receipts relating to the Collateral, the Debtor shall endorse, assign and deliver those documents or instruments to the Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as the Secured Party may from time to time specify.

(d)           If any Collateral is at any time in the possession of a bailee, the Debtor shall promptly notify the Secured Party and, at the Secured Party’s request and option, shall promptly obtain an acknowledgment from the bailee, in form and substance satisfactory to the Secured Party, that the bailee holds that Collateral for the benefit of the Secured Party and the bailee agrees to comply, without further consent of the Debtor, at any time with instructions of the Secured Party as to that Collateral.

(e)           The Debtor shall, at any time and from time to time, at the expense of the Debtor, promptly execute and deliver all further instruments and documents, obtain such agreements from third parties, and take all further action, that may be necessary or desirable, or that the Secured Party may reasonably request, in order to perfect and protect any security interest granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder or under any other agreement with respect to any Collateral.

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5.             Representations and Warranties. The Debtor represents and warrants as follows:

(a)           (i) the Debtor’s exact legal name is that indicated on the signature page, (ii) the Debtor is a Colorado corporation, and (iii) the Debtor’s place of business (or, if more than one, its chief executive office), and its mailing address are as set forth on the signature page.

(b)           None of the account debtors or other persons obligated on any of the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or like federal, state or local statute or rule in respect of the Collateral.

(c)           The Debtor has at all times operated its business in compliance with all applicable provisions of the federal Fair Labor Standards Act, as amended, and with all applicable provisions of federal, state and local statutes and ordinances dealing with the control, shipment, storage or disposal of hazardous materials or substances.

(d)           At the time the Collateral becomes subject to the lien and security interest created by this Agreement, the Debtor will be the sole, direct, legal and beneficial owner thereof, free and clear of any lien, security interest, option, adverse claim, setoff, default, defense, condition precedent or other encumbrance except for the security interest created by this Agreement and liens securing Superior Indebtedness.

(e)           The pledge of the Collateral pursuant to this Agreement creates a valid and perfected security interest in the Collateral, securing the payment and performance when due of the Secured Obligations.

(f)            It has full power, authority and legal right to borrow the Loans and pledge the Collateral pursuant to this Agreement.

(g)           Each of this Agreement and the Note has been duly authorized, executed and delivered by the Debtor and constitutes a legal, valid and binding obligation of the Debtor enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and subject to equitable principles (regardless of whether enforcement is sought in equity or at law).

(h)           No authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the borrowing of the Loans and the pledge by the Debtor of the Collateral pursuant to this Agreement or for the execution and delivery of the Note and this Agreement by the Debtor or the performance by the Debtor of its obligations thereunder.

(i)            The execution and delivery of the Note and this Agreement by the Debtor and the performance by the Debtor of its obligations under the Note and this Agreement will not violate any provision of any applicable law or regulation or any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, applicable to the Debtor or any of its property, or the organizational or governing documents of the Debtor or any agreement or instrument to which the Debtor is party or by which it or its property is bound.

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6.             Receivables. If any Event of Default has occurred and is on-going, the Secured Party may, or at the request and option of the Secured Party the Debtor shall, notify account debtors and other persons obligated on any of the Collateral of the security interest of the Secured Party in any account, chattel paper, general intangible, instrument or other Collateral and that payment thereof is to be made directly to the Secured Party.

7.             Covenants. The Debtor covenants as follows:

(a)           The Debtor acknowledges that the Loans are being made in contemplation of, and as partial consideration for, the Secured Party’s Proposal. Except as permitted by this Section 7(a), the Debtor will, and it will cause its Representatives to:

(i)           (A) immediately cease and cause to be terminated any solicitation, encouragement, activities, discussions or negotiations with any Persons that may be ongoing with respect to any Acquisition Proposal, (B) take the necessary steps to promptly inform such Persons of the obligations set forth in this Section 7(a), (C) immediately instruct each Person that has previously executed a confidentiality agreement in connection with that Person’s consideration of an Acquisition Proposal to return to the Debtor or destroy any non-public information previously furnished to such Person or to any Person’s Representatives by or on behalf of the Debtor, and (D) enforce (and not release, waive, amend or modify the provisions of) any confidentiality, non-solicit, non-use or standstill agreements entered into with any Person; and

(ii)          not, directly or indirectly: (A) solicit, initiate, seek or knowingly encourage or facilitate or take any action to solicit, initiate or seek or knowingly encourage or facilitate any inquiry, expression of interest, proposal or offer that constitutes or would reasonably be expected to lead to an Acquisition Proposal, (B) enter into, participate in, maintain or continue any discussions or negotiations relating to, any Acquisition Proposal with any Person other than the Secured Party, (C) furnish to any Person other than the Secured Party any information that the Debtor believes or should reasonably expect would be used in connection with, or for the purposes of formulating, any Acquisition Proposal, (D) enter into any agreement, letter of intent, memorandum of understanding, agreement in principle or contract providing for or otherwise relating to any Acquisition Proposal (each, an “Alternative Acquisition Agreement”) or (E) submit any Acquisition Proposal or any matter related thereto to the vote of the stockholders of the Company.

(iii)         From and after the date of this Agreement, the Debtor will promptly (and in any event within 24 hours) provide the Secured Party with: (A) a written description of any inquiry, expression of interest, proposal or offer relating to an Acquisition Proposal (including any modification thereto), or any request for information that would reasonably be expected to lead to an Acquisition Proposal, that is received by the Debtor or any of its Representatives from any Person (other than the Secured Party) including in the description the identity of the Person from which the inquiry, expression of interest, proposal, offer or request for information was received (the “Other Interested Party”); and (B) a copy of each material written communication and a summary of each material oral communication transmitted by or on behalf of the Other Interested Party or any of its Representatives to the Debtor or any of its Representatives or transmitted on behalf of the Debtor or any of its Representatives to the Other Interested Party or any of its Representatives. Without limiting the foregoing, the Debtor will promptly (and in any event within 24 hours) notify the Secured Party orally and in writing if the Debtor determines to begin providing information or to engage in discussions or negotiations concerning an Acquisition Proposal.

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(iv)         Notwithstanding anything to the contrary contained in this Section 7(a), if the Debtor has received a bona fide written Acquisition Proposal from a third party that was not solicited, initiated, encouraged or facilitated in material breach of the provisions of this Agreement and that Sefton’s board of directors determines in good faith, after consultation with outside counsel and its financial advisors, constitutes a Superior Proposal, after giving effect to all of the adjustments to the terms and conditions of this Agreement that have been delivered to the Debtor by the Secured Party in writing during the Notice Period provided pursuant to this Section 7(a)(iv), that are binding and have been irrevocably committed to by the Secured Party in writing, then the Debtor may accept the Superior Proposal; provided that:

(A)           the Debtor has provided prior written notice to the Secured Party, at least ten days in advance (the “Notice Period”), of the Debtor’s intention to take action with respect to the Superior Proposal, which notice will specify the material terms and conditions of the Superior Proposal, (including the identity of the party making the Superior Proposal) and the Debtor has contemporaneously provided a copy of the relevant proposed transaction agreements with the party making the Superior Proposal, including any definitive agreement with respect to the Superior Proposal; and

(B)           prior to entering into an Alternative Acquisition Agreement with respect to the Superior Proposal, the Debtor negotiates, and causes its Representatives to negotiate, with the Secured Party in good faith (to the extent the Secured Party desires to negotiate) to make such adjustments in the terms and conditions of Secured Party’s Proposal so that the Acquisition Proposal ceases to constitute a Superior Proposal;

(C)           after the expiration of the Notice Period, Sefton’s board of directors determines in good faith, after consultation with its financial advisors and its outside counsel, and after taking into account any amendments to the Secured Party’s Proposal that the Secured Party has irrevocably agreed in writing to make, that (x) the Acquisition Proposal constitutes a Superior Proposal and (y) causing the Debtor to enter into a definitive agreement with respect to the Superior Proposal is necessary in order for the members of Sefton’s board of directors to comply with their fiduciary duties under applicable law; and

(D)           at or prior to the Closing of the transaction constituting the Superior Proposal, the Debtor shall pay or cause to be paid to the Secured Party an amount in cash equal to the sum of (i) the full amount of Secured Obligations outstanding (which amount shall be applied to and shall retire the Note) and (ii) all reasonable out-of-pocket costs and expenses (including reasonable out-of-pocket legal fees, reserve engineering fees and other consulting fees) incurred by the Secured Party in connection with the Secured Party’s Proposal, including costs incurred in connection with due diligence, negotiation and preparation of all documents contemplated by the Secured Party’s Proposal.

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(v)          The provisions of this Section 7(a) shall survive payment or prepayment in full of the Note and termination of any other provisions of this Agreement until December 31, 2015.

(b)           The Debtor will not, without providing at least 30 days’ prior written notice to the Secured Party, change its legal name, identity, type of organization, jurisdiction of organization, corporate structure, location of its chief executive office or its principal place of business or its organizational identification number. The Debtor will, prior to any change described in the preceding sentence, take all actions required by the Secured Party to maintain the perfection of the Secured Party’s security interest in the Collateral.

(c)           The Debtor shall, at its own cost and expense, defend title to the Collateral and the lien and security interest of the Secured Party therein against the claim of any person claiming against or through the Debtor and shall maintain and preserve such perfected security interest for so long as this Agreement remains in effect.

(d)           The Debtor will not sell, offer to sell, dispose of, convey, assign or otherwise transfer, grant any option with respect to, restrict, or grant, create, permit or suffer to exist any mortgage, pledge, lien, security interest, option, right of first offer, encumbrance or other restriction or limitation of any nature whatsoever on, any of the Collateral or any interest therein.

(e)           The Debtor will keep the Collateral in good order and repair and will not use the Collateral in violation of law or any policy of insurance thereon. The Debtor will permit the Secured Party, or its designee, to inspect the Collateral at any reasonable time, wherever located.

(f)            The Debtor will pay promptly when due all taxes, assessments, governmental charges, and levies upon the Collateral or incurred in connection with the use or operation of the Collateral or incurred in connection with this Agreement.

(g)           The Debtor will continue to operate its business in compliance with all applicable provisions of the federal Fair Labor Standards Act, as amended, and with all applicable provisions of federal, state and local statutes and ordinances dealing with the control, shipment, storage or disposal of hazardous materials or substances.

(h)           The Debtor shall not enter into (or renew or amend), directly or indirectly, or permit any subsidiary (if any) to enter into (or renew or amend), directly or indirectly, any transaction with any officer, director, employee, shareholder or affiliate (including Sefton) of the Debtor, or any relative of any officer, director, shareholder or affiliate of the Debtor, except transactions made in the ordinary course of business and upon fair and reasonable terms which are no less favorable to the Debtor than would be obtained in a comparable arm’s-length transaction with a person not an affiliate of the Debtor and are fully disclosed to Lender in advance; or pay, or permit any subsidiary to pay, compensation or fees (including, without limitation, management fees) to any shareholder or affiliate of the Debtor.

(i)           The Debtor shall not, and shall not permit any subsidiary (if any) to, directly or indirectly, declare or pay any dividends or otherwise upstream any funds in any manner, purchase or otherwise acquire for value any of its equity interests now or hereafter outstanding, or make any distribution of assets to its equityholders (including Sefton) prior to the repayment in full of the Note, except that any wholly-owned subsidiary of the Debtor may pay dividends and make distributions to, or purchase its outstanding equity interests from, the Debtor or any other wholly-owned subsidiary of the Debtor.

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(j)            The Debtor shall not enter into, or permit any subsidiary to enter into, any transaction of merger or consolidation, and will not, and will not cause or permit any subsidiary to, liquidate, wind up or dissolve itself (or permit any liquidation or dissolution), or convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or assets (including, without limitation, sale and leaseback arrangements and the sale or discount of its accounts receivable), whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all of the business, property or assets of, or any shares or other evidence of beneficial interest in, any Person; provided that the Debtor and its subsidiaries (if any) may sell or otherwise dispose of obsolete or worn-out property in the ordinary course of business and fixtures and furnishings of the Debtor’s offices which may be closed in the ordinary course of business. If any such transaction is permitted by Lender, all cash proceeds of the transaction shall be immediately paid to Lender and applied to the Note, and any non-cash proceeds of the transaction shall be immediately pledged to Lender as additional Collateral.

(k)           The Debtor shall not make or permit to exist, or permit any subsidiary to make or permit to exist, loans to any person or entity (including Sefton) or investments in any person or entity (including Sefton), except investments in (i) direct obligations of the United States Government maturing not more than six months after acquisition thereof, (ii) certificates of deposit, bankers acceptances and other obligations, each maturing not more than one year after acquisition thereof, issued by a domestic bank which is a member of the Federal Reserve System and has total capital and surplus and undivided profits in excess of $500,000,000 or (iii) commercial paper maturing not more than one year after the date of acquisition thereof assigned the highest credit rating by Moody’s Investors Service, Inc. or Standard and Poor’s Corporation.

(l)            The Debtor will pay its lease royalty payments and lease operating expenses currently and in the ordinary course out of cash revenues collected for hydrocarbon sales. Any remaining cash balances will be used to the extent required to reserve for or make the next contractual payment for both current interest and principal reduction to Bank of the West pursuant to the Second Stipulation to Extend Time dated July 14, 2014.

(m)           At any time that any Secured Obligations remain outstanding, upon the request of the Secured Party, the Debtor shall execute, notarize and deliver to the Secured Party, in form and substance suitable for recording in the appropriate jurisdictions, Deeds of Trust covering the Debtor’s oil and gas leases and the production therefrom (including as extracted collateral) as additional collateral security for repayment of the Secured Obligations.

(n)           From and after the date of this Agreement, all Loan advances under the Note and all revenues from hydrocarbon sales shall be deposited into a bank account established by the Debtor with Wells Fargo Bank in the State of California approved in writing by the Secured Party, and the Debtor shall notify Plains and any other production purchasers in writing to make payments directly to that account. The authorized signatory(ies) for that account must be approved in writing by the Secured Party, and shall initially be Darren Katic.

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8.             Secured Party Appointed Attorney-in-Fact. The Debtor hereby appoints the Secured Party the Debtor’s attorney-in-fact, with full authority in the place and stead of the Debtor and in the name of the Debtor or otherwise, from time to time during the continuance of an Event of Default in the Secured Party’s discretion to take any action and to execute any instrument that the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement (but the Secured Party shall not be obligated to and shall have no liability to the Debtor or any third party for failure to do so or take action). This appointment, being coupled with an interest, shall be irrevocable. The Debtor hereby ratifies all that the attorneys-in-fact shall lawfully do or cause to be done by virtue of this appointment.

9.             Secured Party May Perform. If the Debtor fails to perform any obligation contained in this Agreement, the Secured Party may itself perform, or cause performance of, such obligation, and the expenses of the Secured Party incurred in connection therewith shall be payable by the Debtor; provided that the Secured Party shall not be required to perform or discharge any obligation of the Debtor.

10.           Reasonable Care. The Secured Party shall have no duty with respect to the care and preservation of the Collateral beyond the exercise of reasonable care. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property, it being understood that the Secured Party shall not have any responsibility for (a) ascertaining or taking action with respect to any claims, the nature or sufficiency of any payment or performance by any party under or pursuant to any agreement relating to the Collateral or other matters relative to any Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any parties with respect to any Collateral. Nothing set forth in this Agreement, nor the exercise by the Secured Party of any of the rights and remedies hereunder, shall relieve the Debtor from the performance of any obligation on the Debtor’s part to be performed or observed in respect of any of the Collateral.

11.           Remedies Upon Default. If any Event of Default has occurred and is on-going:

(a)           The Secured Party, without any other notice to or demand upon the Debtor, may assert all rights and remedies of a secured party under the UCC or other applicable law, including, without limitation, the right to take possession of, hold, collect, sell, lease, deliver, grant options to purchase or otherwise retain, liquidate or dispose of all or any portion of the Collateral. If notice prior to disposition of the Collateral or any portion thereof is necessary under applicable law, written notice mailed to the Debtor at its notice address as provided in Section 15 ten days prior to the date of such disposition shall constitute reasonable notice, but notice given in any other reasonable manner shall be sufficient. So long as the sale of the Collateral is made in a commercially reasonable manner, the Secured Party may sell the Collateral on such terms and to such purchaser(s) as the Secured Party in its absolute discretion may choose, without assuming any credit risk and without any obligation to advertise or give notice of any kind other than that necessary under applicable law. Without precluding any other methods of sale, the sale of the Collateral or any portion thereof shall have been made in a commercially reasonable manner if conducted in conformity with reasonable commercial practices of creditors disposing of similar property. At any sale of the Collateral, if permitted by applicable law, the Secured Party may be the purchaser, licensee, assignee or recipient of the Collateral or any part thereof and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold, assigned or licensed at such sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price of the Collateral or any part thereof payable at such sale. To the extent permitted by applicable law, the Debtor waives all claims, damages and demands it may acquire against the Secured Party arising out of the exercise by it of any rights hereunder. The Debtor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Secured Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Secured Party or any custodian may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Secured Party nor any custodian shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing, nor shall it be under any obligation to take any action whatsoever with regard thereto.

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(b)           Any cash held by the Secured Party as Collateral and all cash Proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in whole or in part by the Secured Party to the payment of expenses incurred by the Secured Party in connection with the foregoing, including reasonable attorneys’ fees, and the balance of such proceeds shall be applied or set off against all or any part of the Secured Obligations in such order as the Secured Party elects. Any surplus of cash or cash Proceeds held by the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to the Debtor or to whomsoever may be lawfully entitled to receive the surplus. The Debtor shall remain liable for any deficiency if the cash and cash Proceeds of any sale or other realization of the Collateral are insufficient to pay the Secured Obligations and the fees and other charges of any attorneys employed by the Secured Party to collect such deficiency.

(c)           If the Secured Party decides to exercise its rights to sell all or any of the Collateral pursuant to this Section 11, the Debtor will, upon request of the Secured Party and at its own expense, do or cause to be done all such acts and things as may be necessary to make the sale of the Collateral or any part thereof valid and binding and in compliance with applicable law.

12.           No Waiver and Cumulative Remedies. The Secured Party shall not by any act (except by a written instrument pursuant to Section 14), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. All rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies provided by law.

13.           Security Interest Absolute. All rights of the Secured Party and liens and security interests hereunder, and all Secured Obligations of the Debtor hereunder, shall be absolute and unconditional irrespective of:

(a)           any illegality or lack of validity or enforceability of any Secured Obligation or any related agreement or instrument;

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(b)           any change in the time, place or manner of payment of, or in any other term of, the Secured Obligations, or any rescission, waiver, amendment or other modification of the Note, this Agreement or any other agreement, including any increase in the Secured Obligations resulting from any extension of additional credit or otherwise;

(c)           any taking, exchange, substitution, release, impairment or non-perfection of any Collateral or any other collateral, or any taking, release, impairment, amendment, waiver or other modification of any guaranty, for all or any of the Secured Obligations;

(d)           any manner of sale, disposition or application of proceeds of any Collateral or any other collateral or other assets to all or part of the Secured Obligations;

(e)           any default, failure or delay, wilful or otherwise, in the performance of the Secured Obligations;

(f)            any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to, or be asserted by, the Debtor against the Secured Party; or

(g)           any other circumstance (including, without limitation, any statute of limitations) or manner of administering the Loans or any existence of or reliance on any representation by the Secured Party that might vary the risk of the Debtor or otherwise operate as a defense available to, or a legal or equitable discharge of, the Debtor or any other grantor, guarantor or surety.

14.           Amendments. None of the terms or provisions of this Agreement may be amended, modified, supplemented, terminated or waived, and no consent to any departure by the Debtor therefrom shall be effective unless the same shall be in writing and signed by the Secured Party and the Debtor, and then such amendment, modification, supplement, waiver or consent shall be effective only in the specific instance and for the specific purpose for which made or given.

15.           Addresses For Notices. All notices and other communications provided for in this Agreement shall be in writing and shall be given in the manner and become effective as set forth in the Note, and addressed to the respective parties at their addresses as specified on the signature page or as to either party at such other address as shall be designated by that party in a written notice to the other party.

16.           Continuing Security Interest; Further Actions. This Agreement shall create a continuing lien and security interest in the Collateral and shall (a) subject to Section 17, remain in full force and effect until payment and performance in full of the Secured Obligations, (b) be binding upon the Debtor, its successors and assigns, and (c) inure to the benefit of the Secured Party and its successors, transferees and assigns; provided that the Debtor may not assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the Secured Party. Without limiting the generality of the foregoing clause (c), any assignee of the Secured Party’s interest in any agreement or document which includes all or any of the Secured Obligations shall, upon assignment become vested with all the benefits granted to the Secured Party with respect to the Secured Obligations.

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17.           Termination; Release. On the date on which all Secured Obligations have been paid and performed in full, the Secured Party will, at the request and sole expense of the Debtor, (a) duly assign, transfer and deliver to or at the direction of the Debtor (without recourse and without any representation or warranty) such of the Collateral as may then remain in the possession of the Secured Party, together with any monies at the time held by the Secured Party hereunder, and (b) execute and deliver to the Debtor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement.

18.           Original Security Agreement. Effective upon full execution and delivery of this Agreement by the Secured Party and the Debtor, the Original Security Agreement shall be superseded in its entirety by this Agreement, at and after which time the Original Security Agreement shall cease to have any force and effect.

19.           Governing Law. This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of California.

20.           Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement and the Note constitute the entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto.

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

TEG Oil & Gas U.S.A., Inc., a Colorado corporation, as the Debtor
By:	/s/ T. Milne
	Tom Milne, Director
	Sefton Resources Inc.
	100% owner of TEG Oil & Gas U.S.A., Inc.
Address for Notices:
21 S. California St., #305
Ventura, California 93001
With a copy to:
Kris Short, Business Manager
Sefton Resources, Inc.
2050 S. Oneida St., Suite 102
Denver, Colorado 80224

Hawker Energy, Inc., a Nevada corporation, as the Secured Party
By:	/s/ D. Katic
	Darren Katic, President
Address for Notices:
326 S. Pacific Coast Hwy, Suite 102
Redondo Beach, CA 90277

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EX-10.11

Exhibit 10.11

AMENDED AND RESTATED SUBORDINATION AND INTERCREDITOR AGREEMENT

THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this “Agreement”) is entered into as of this 1st day of January, 2015, by and among TAPIA HOLDINGS, LLC, a Delaware limited liability company (“Tapia”), Hawker Energy, Inc., a Nevada corporation (“Hawker” and together with Tapia the “Subordinated Obligee”), TEG OIL & GAS U.S.A., INC., a Colorado corporation (“TEG”), SEFTON RESOURCES, INC., a British Virgin Islands corporation (“Parent”), TEG MIDCONTINENT, INC., a Colorado corporation (“TEGMC”, and, together with Parent and TEG, “Borrowers”) and BANK OF THE WEST, a California corporation (“BOTW”), or such then present holder or holders of the Senior Loan (as hereinafter defined) as may from time to time exist (collectively with BOTW, the “Senior Lenders”).

RECITALS

A.            Borrowers and the Senior Lenders have entered into an Amended and Restated Credit Agreement dated as of October 21, 2008 (as amended and hereafter as the same may be amended, supplemented or otherwise modified from time to time, the “Senior Loan Agreement”) and a Forbearance Agreement  made as of April 30, 2014 which has been amended on several occasions the most recent being a Fifth Amendment to Forbearance Agreement (“Fifth Amendment”) executed concurrently with this Agreement and effective January 1, 2015(collectively with all amendments the “Forbearance Agreement”) pursuant to which, among other things, Senior Lenders have agreed, subject to the terms and conditions set forth in the Senior Loan Agreement, to make certain loans and financial accommodations to Borrowers and the other Loan Parties. All of Borrowers’ obligations to the Senior Lenders under the Senior Loan Agreement and the other Senior Loan Documents (as hereinafter defined) are secured by liens on and security interests in substantially all of the now existing and hereafter acquired real and personal property of Borrowers (all collateral, real and personal, now or hereafter encumbered by the lien of any Senior Loan Document is herein referred to collectively as the “Collateral”). Borrowers and any other Obligated Person (as defined in the Senior Loan Agreement) may each be referred to herein as a “Loan Party” and collectively as “Loan Parties”. All other capitalized terms used but not defined herein shall have the meanings set forth in the Senior Loan Agreement.

B.            TEG and Tapia previously entered into that certain Secured Subordinated Note in the original principal amount of $1,500,000 which as amended is due December 29, 2014 (the “Subordinated Note”), As of January 1, 2015, TEG owes Tapia  under the Subordinated Note principal of $1,487,352.69, together with interest, fees and costs thereon..

C.             The Forbearance Agreement as previously amended by a Fourth Amendment to Forbearance Agreement dated November 20, 2014 required Payment in Full of all amounts owed under the Senior Loan Documents by December 1, 2014.  It was contemplated that Hawker would seek and obtain financing for its acquisition of the TEG assets by that date with the assistance of third party financing.

D.            Borrowers and Hawker subsequently advised BOTW that due in part to the dramatic drop in oil prices worldwide that they did not have the funds necessary to make the Payment in Full due December 1, 2014 and/or the funds needed to comply with their obligations under the Fourth Amendment and that TEG did not have sufficient operating funds to continue its operations for more than a few weeks.

E.             Hawker has advised BOTW that it is willing to advance further funds to TEG for operating capital under certain conditions some of which are set forth in the Fifth Amendment, that its subsidiary Tapia would be assigning the Subordinated Note to Hawker, and that subject to receipt of requisite approvals Sefton would assign 100% of the shares of TEG to Hawker and failing to receive such approvals could foreclose upon a pledge by Sefton of TEG’s shares to secure a Limited Recourse Guaranty that such approvals would be received. Sefton and Hawker have advised BOTW that after assignment of the Secured Subordinated Note by Tapia to Hawker, the stated principal amount of the Secured Subordinated Note will be increased to $2,100,000.00 with a stated maturity date of December 31, 2015.

F.             The Senior Lenders have required the execution and delivery of this Agreement by the Subordinated Obligee and Borrowers as a condition to the execution of the Fifth Amendment in order to reaffirm and further set forth the relative rights and priorities of the Senior Lenders and the Subordinated Obligee under the Senior Loan Documents and the Subordinated Note Documents (as hereinafter defined) during the extended Forbearance Period as provided in the Fifth Amendment.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby covenant and agree as follows:

1.             Definitions. In addition to the terms defined elsewhere in this Agreement or in the recitals hereto, the following terms shall have the following meanings in this Agreement:

“Bankruptcy Code” means Title 11 of the United States Code, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.

“Business Day” means any day on which commercial banks are open for commercial banking business in New York, New York and San Francisco, California.

“Distribution” means, with respect to any indebtedness, (a) any payment or distribution by any Person of cash, securities or other property, by set-off or otherwise, on account, or as a payment or reduction of such indebtedness or obligation, including, without limitation, at maturity of such indebtedness or obligation or (b) any redemption, purchase or other acquisition of such indebtedness or obligation by any Person.

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“Enforcement Action” means to (a) take from or for the account of any Loan Party or any guarantor of the Subordinated Obligations, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by any Loan Party or any such guarantor with respect to the Subordinated Obligations; (b) sue for payment of, or to initiate or participate with others in any suit, action or proceeding against any Loan Party or any such guarantor to (i) enforce payment of or to collect the whole or any part of the Subordinated Obligations (which shall include, for the avoidance of doubt, any demand or collection of payment at maturity), or (ii) commence judicial enforcement of any of the rights and remedies under the Subordinated Note Documents or applicable law with respect to the Subordinated Obligations; (c) accelerate the Subordinated Obligations; (d) exercise any put option or to cause any Loan Party or any such guarantor to honor any redemption or mandatory prepayment obligation under any Subordinated Note Document; (e) notify account debtors or directly collect accounts receivable or other payment rights of any Loan Party or any such guarantor; or (f)take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell any property or assets of any Loan Party or any such guarantor including the Collateral.

“Paid in Full” or “Payment in Full” means, with respect to the Senior Loans, the full and indefeasible payment in cash and satisfaction in full of all of the obligations under the Senior Loan Documents (other than inchoate indemnity obligations for which a claim has not yet been made in writing and any other obligations which, by their terms, are to survive the termination of the Senior Loan Documents), and the termination of all obligations of BOTW and Senior Lenders under the Senior Loan Documents (including, without limitation, any commitment to lend), and the termination of the Senior Loan Documents.

 “Person”means any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

“Proceeding” means any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

“Senior Loan(s)” means all obligations, liabilities and indebtedness of every nature of any Loan Party from time to time owed to the Senior Lenders under the Senior Loan Documents, whether now existing or hereafter created, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code, together with (a) any amendments, modifications, renewals or extensions thereof, and (b) any interest accruing thereon after the commencement of a Proceeding, without regard to whether or not such interest is an allowed claim.

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“Senior Loan Documents” means the promissory note or other instruments evidencing the Senior Loan or the obligation to pay the Senior Loan, any guaranty with respect to the Senior Loan, any security agreement or other collateral document securing the Senior Loan (including, without limitation, the Senior Loan Agreement) and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the Senior Loan including but not limited to those documents and agreements identified in the Forbearance Agreement and those documents and exhibits attached as exhibits and referenced in that certain lawsuit now pending in the Superior Court for the County of Ventura between BOTW and Borrowers Case Number 56-2014-00451934-CU-BC-VTA (the “Action”).

 “Subordinated Note Documents” means the Subordinated Notes and any other agreement, promissory note or other instrument evidencing the Subordinated Obligations or the obligation to pay the Subordinated Obligations, any guaranty or security agreement with respect to the Subordinated Obligation and all other documents, agreements and instruments now existing or hereafter entered into evidencing or pertaining to all or any portion of the Subordinated Obligations, including, without limitation, the Subordinated Notes.

“Subordinated Obligations” means all obligations, liabilities and indebtedness of every nature of any Loan Party from time to time owed to the Subordinated Obligee or any of its affiliates, whether now existing or hereafter created, including, without limitation, all amounts owned under the Secured Subordinated Note as it may be amended or replaced from time to time, the principal amount of all debts, claims (including, without limitation, indemnification rights arising in Subordinated Obligee’s capacity as a shareholder, officer, director, member and/or partner of any Loan Party and any right of the Subordinated Obligee to a return of any capital contributed to any Loan Party) and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with any amendments, modifications, renewals or extensions thereof.

2.             Subordination.

2.1.           Subordination of Subordinated Obligations to Senior Loans. Each Loan Party covenants and agrees, and the Subordinated Obligee likewise covenants and agrees, notwithstanding anything to the contrary contained in any of the Subordinated Note Documents, including but not limited to a Pledge Agreement between Sefton and Hawker executed on or about January 12, 2015 (“Pledge Agreement”) securing a Limited Recourse Guaranty from Sefton to Hawker securing the transfer of TEG stock to Hawker, that the payment of any and all of the Subordinated Obligations shall be subordinate and subject in right and time of payment, to the extent and in the manner hereinafter set forth, to the Payment in Full of all Senior Loans. Each holder of the Senior Loans, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired the Senior Loans in reliance upon the provisions contained in this Agreement. Until the date that the Senior Loan has been Paid in Full, TEG shall not make and the Subordinated Obligee shall not accept any Distribution, whether in cash, securities or other property, on account of any Subordinated Obligations. In addition, each Loan Party and the Subordinated Obligee acknowledges and agrees that the Senior Loans constitute “Superior Indebtedness” under and as such terms are used in the Subordinated Note Documents.

2.2.           Intentionally Deleted.

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2.3.           Subordinated Obligation Standstill. Until the Senior Loans are Paid in Full, the Subordinated Obligee shall not, without the prior written consent of BOTW, take any Enforcement Action with respect to the Subordinated Obligations. Notwithstanding the foregoing, the parties have expressly agreed that any exercise by Hawker of its pledge of TEG shares pursuant to a Limited Recourse Guaranty from Sefton and the Pledge Agreement is not an Enforcement Action as defined herein provided that Hawker acquires the TEG shares and such exercise of Hawker’s secured rights does not amend, modify or otherwise alter or affect the complete subordination of the rights of Subordinated Obligee to the Senior Lenders’ senior priority rights in the Collateral as provided in the Senior Loan Documents, the Forbearance Agreement and this Agreement.

2.4.           Incorrect Payments. If any Distribution on account of the Subordinated Obligations not permitted to be made by any Loan Party or accepted by the Subordinated Obligee under this Agreement is made and received by the Subordinated Obligee, such Distribution shall not be commingled with any of the assets of the Subordinated Obligee, shall be held in trust by the Subordinated Obligee for the benefit of Senior Lenders and shall be promptly paid over to the Senior Lenders for application in accordance with the Senior Loan Documents to the payment of the Senior Loans then remaining unpaid, until the Senior Loans are Paid in Full.

2.5.           Subordination of Liens and Security Interests; Agreement Not to Contest; Agreement to Release any Liens. Until the Senior Loans have been Paid in Full, all liens and security interests of the Subordinated Obligee in the Collateral, if any, shall be and hereby are subordinated for all purposes and in all respects to the liens and security interests of the Senior Lenders in the Collateral, regardless of the time, manner or order of perfection of any such liens and security interests and regardless of any failure, whether intervening or continuing, of the Senior Lenders’ liens and security interests to be perfected. The Subordinated Obligee agrees that it will not at any time contest the validity, perfection, priority or enforceability of the Senior Loans, the Senior Loan Documents, or the liens and security interests of Senior Lenders in the Collateral securing the Senior Loans.

2.6.           Application of Proceeds from Sale or other Disposition of the Collateral. In the event of any sale, transfer or other disposition (including a casualty loss or taking through eminent domain) of the Collateral, which may occur only subject to the prior written agreement of Senior Lenders, the proceeds resulting therefrom (including insurance proceeds) shall be applied in accordance with the terms of the Senior Loan Documents or as otherwise consented to by Senior Lenders until after the Senior Loans are Paid in Full.

2.7.           Sale, Transfer or other Disposition of Subordinated Obligation.

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(a)           Except as expressly provided in the Fifth Amendment, the Subordinated Obligee shall not sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Subordinated Obligation or any Subordinated Note Document or the TEG shares of stock, unless, prior to the consummation of any such action, the transferee thereof or holder of such security interest or participation shall execute and deliver to the Senior Lenders a joinder to this Agreement in the form of Annex I hereto or an agreement substantially identical to this Agreement, providing for the continued subordination of the Subordinated Obligations to the Senior Loans as provided herein, Senior Lenders consent to any transfer of ownership of TEG,  and for the continued effectiveness of all of the rights of the Senior Lenders arising under this Agreement and the Senior Loan Documents.

(b)           Notwithstanding the failure of any transferee to execute or deliver a joinder or agreement substantially identical to this Agreement, the subordination effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Subordinated Obligations or TEG stock, and the terms of this Agreement shall be binding upon the successors and assigns of the Subordinated Obligee, as provided in Section 11.

2.8.           No Disposition of Collateral.

Until such time as the Senior Loans are Paid in Full, except as otherwise expressly provided in the Fifth Amendment, the Subordinated Obligee will not consent to or take any steps to further encumber, sell, move, transfer or otherwise encumber the Collateral or exercise any of its rights as Subordinated Obligee.

2.9.           Liquidation, Dissolution, Bankruptcy. In the event of any Proceeding involving Sefton and/or TEG:

(a)           The parties expressly acknowledge the enforceability of this Agreement in an insolvency proceeding to the same extent that this Agreement is enforceable under applicable nonbankruptcy law as is provided in Section 510(a) of the Bankruptcy Code.  Further, this Agreement shall be effective before, during and after the commencement of a Proceeding.

(b)           Any Distribution, whether in cash, securities or other property which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Subordinated Obligations shall be paid or delivered directly to BOTW or Senior Lenders (to be held and/or applied by BOTW or Senior Lenders in accordance with the terms of the Senior Loan Documents) until after the Senior Loans are Paid in Full. The Subordinated Obligee irrevocably authorizes, empowers and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority, to pay or otherwise deliver all such Distributions to BOTW or Senior Lenders. The Subordinated Obligee also irrevocably authorizes and empowers BOTW or Senior Lenders, in the name of the Subordinated Obligee, to demand, sue for, collect and receive any and all such Distributions.

(c)           The Subordinated Obligee agrees that  Senior Lenders may consent to the use of cash collateral or provide financing to any Loan Party on such terms and conditions and in such amounts as Senior Lenders, in its sole discretion, may decide and, in connection therewith, any Loan Party may grant to  Senior Lenders for the benefit of Senior Lenders’ liens and security interests upon all of the property of any Loan Party, which liens and security interests (i) shall secure payment of the Senior Loans (whether such Senior Loans arose prior to the commencement of any Proceeding or at any time thereafter) and all other financing provided by Senior Lenders during the Proceeding, and (ii) shall be superior in priority to the liens and security interests, if any, in favor of the Subordinated Obligee on the property of any Loan Party. The Subordinated Obligee shall not, directly or indirectly, assert or support the assertion of, and hereby waives any right that it may assert or support the assertion of any claim under Section 506(c) or “equities of the case” exception of Section 552(b) of the Bankruptcy Code as against Senior Lenders or any of the Collateral.

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(d)           The Subordinated Obligee agrees that it will not provide, or offer to provide any debtor in possession financing to Borrowers without the prior written consent of Senior Lenders unless the debtor in possession is expressly junior in all respects to the Senior Loan.  The Subordinated Obligee agrees not to assert any right it may have to “adequate protection” of the Subordinated Obligee’s interest in any Collateral in any Proceeding and agrees that it will not seek to have the automatic stay lifted with respect to any Collateral without the prior written consent of Senior Lenders. The Subordinated Obligee waives any claim it may now or hereafter have arising out of Senior Lenders’ election, in any Proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code by TEG, as debtor in possession. The Subordinated Obligee further agrees that it will not seek to participate or participate on any creditor’s committee without Senior Lenders’ prior written consent, and waives any right it may now or hereafter may have to object to a motion for relief from stay by Senior Lenders or to the sale or other disposition of the Collateral.

(e)           Notwithstanding anything contained herein to the contrary, the Subordinated Obligee may file proofs of claim against the Borrower in any Proceeding involving TEG so long as Subordinated Obligee does not contest the priority right to payment of the Senior Loans to any amounts owed in satisfaction of such approved claims. The Subordinated Obligee agrees to execute, verify, deliver and file any proofs of claim in respect of the Subordinated Obligations requested by Senior Lenders in connection with any such Proceeding and hereby irrevocably authorizes, empowers and appoints Senior Lenders its agent and attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim upon the failure of the Subordinated Obligee promptly to do so prior to thirty (30) days before the expiration of the time to file any such proof of claim, and (ii) vote such claim in any such Proceeding upon the failure of the Subordinated Obligee to do so prior to fifteen (15) days before the expiration of the time to vote any such claim; provided, however, that Senior Lenders shall have no obligation to execute, verify, deliver, file and/or vote any such proof of claim. In the event that Senior Lenders votes any claim in accordance with the authority granted hereby, the Subordinated Obligee shall not be entitled to change or withdraw such vote. The Subordinated Obligee hereby assigns to Senior Lenders or its nominee (and will, upon request of Senior Lenders, reconfirm in writing the assignment to Senior Lenders or its nominee of) all rights of the Subordinated Obligee under such claims.

(f)           The Senior Loans shall continue to be treated as the Senior Loans and the provisions of this Agreement shall continue to govern the relative rights and priorities of Senior Lenders and the Subordinated Obligee even if all or part of the Senior Loans or the security interests securing the Senior Loans are subordinated, set aside, avoided, invalidated or disallowed in connection with any such Proceeding, and this Agreement shall be reinstated if at any time any payment of any of the Senior Loans is rescinded or must otherwise be returned by any holder of the Senior Loans or any representative of such holder.

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3.             Modifications.

3.1.           Modifications to Senior Loan Documents. The Senior Lenders may at any time and from time to time without the consent of or notice to the Subordinated Obligee, without incurring liability to the Subordinated Obligee and without impairing or releasing the obligations of the Subordinated Obligee under this Agreement, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the Senior Loans, or amend in any manner any agreement, note, guaranty or other instrument evidencing or securing or otherwise relating to the Senior Loans; provided, however, that no such modification may increase the aggregate principal amount of the Senior Loans or commitments therefor to an amount in excess of the amount owing on the date of this Agreement without the written consent of the Subordinated Obligee.

3.2.           Modifications to Subordinated Note Documents. Until the Senior Loans have been Paid in Full, and notwithstanding anything to the contrary contained in the Subordinated Note Documents, the Subordinated Obligee shall not, without the prior written consent of Senior Lenders, agree to any amendment, modification or supplement to the Subordinated Note Documents or the payment of the Subordinated Obligations that is adverse to the interests of the Borrowers or Senior Lenders, including, without limitation, any amendment, modification or supplement which would(A) increase the principal amount of the Subordinated Obligations (except as a result of the addition to principal of accrued interest), (B) increase the interest rate applicable to the Subordinated Obligations in effect on the date hereof, except in connection with the imposition of a default rate of interest in accordance with the terms of the Subordinated Note Documents as in effect on the date hereof, (C) change (to earlier dates) any dates upon which payments of principal or interest are due thereon, (D) modify any event of default (other than to eliminate any such event of default or increase any grace period related thereto), or add any event of default, (E) modify or add any new financial maintenance, negative or affirmative covenant, (F) modify the prepayment or redemption provisions of the Subordinated Obligations or any Subordinated Note Documents or add any mandatory prepayments or redemptions thereto, (G) subordinate any Subordinated Obligations to any other indebtedness or obligation or (H) obtain any guaranties or credit support from any Person other than the Loan Parties unless a corresponding guaranty or credit support is offered to the Senior Lenders. Nothing herein shall be construed to imply BOTW’s or the Senior Lenders’ consent to the making of any other loans or other advances by the Subordinated Obligee (other than the Subordinated Obligations made pursuant to the Subordinated Note Documents).

4.             Waiver of Certain Rights by Subordinated Obligee.

4.1.           Marshaling. TheSubordinated Obligee hereby waives any rights it may have under applicable law to assert the doctrine of marshaling or to otherwise require BOTW or the Senior Lenders to marshal any property of any Loan Party or any guarantor of the Senior Loans for the benefit of the Subordinated Obligee.

4.2.           Rights Relating to BOTW’s Actions with respect to the Collateral. The Subordinated Obligee hereby waives, to the extent permitted by applicable law, any rights which it may have to enjoin or otherwise obtain a judicial or administrative order preventing BOTW or Senior Lenders from taking, or refraining from taking, any action with respect to all or any part of the Collateral. Without limitation of the foregoing, the Subordinated Obligee hereby agrees (a) that it has no right to direct or object to the manner in which BOTW or Senior Lenders enforces its rights and remedies with respect to, or applies the proceeds of, the Collateral resulting from the exercise by BOTW or Senior Lenders of rights and remedies under the Senior Loan Documents to the Senior Loans, and (b) that BOTW or Senior Lenders has not assumed any obligation to act as the agent for the Subordinated Obligee with respect to the Collateral.

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4.3.           Rights Relating to Disclosures. TheSubordinated Obligee hereby agrees that the Senior Lenders have not assumed any obligation or duty to disclose information regarding any Loan Party or the Senior Loans to the Subordinated Obligee, and the Senior Lenders shall have no special or fiduciary relationship to the Subordinated Obligee. The Subordinated Obligee hereby fully waives and releases Senior Lenders from any affirmative disclosures which may be required of Senior Lenders under applicable law.

5.           Senior Lenders’ Remedies. Subordinated Obligee acknowledges, agrees and affirms that in the event of a beach of the obligations of the Borrowers and Hawker under the Fifth Amendment BOTW or Senior Lenders may immediately and without further opportunity to cure seek  the appointment of a Receiver and/or the continued prosecution of the pending Action in accordance with the provisions of the Forbearance Agreement, prior to the Senior Lenders exercising any other rights and remedies under the Senior Loan Agreement.

6.           Construction. The terms of this Agreement were negotiated among business persons sophisticated in the area of business finance, and accordingly, in construing the terms of this Agreement, no rule or law which would require that this instrument be construed against the party who drafted this instrument shall be given any force or effect.

7.           Modification of this Agreement. Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by BOTW or Senior Lenders and the Subordinated Obligee, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on any party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder. For the avoidance of doubt, Borrower’s signature shall not be required to amend or otherwise modify this Agreement.

8.           Additional Subordinated Obligees; Further Assurances. To the extent requested by BOTW or Senior Lenders, the Subordinated Obligee and any Loan Party shall cause each shareholder, director, officer, member or partner in any Loan Party to join in and execute this Agreement. Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.

9.           Continuing Agreement. This is a continuing agreement and will remain in full force and effect until after all of the obligations under the Senior Loan Documents have been Paid in Full. This Agreement will continue to be effective or will be reinstated, as the case may be, if at any time payment of all or any part of the Senior Loan Documents or the obligations thereunder is rescinded or must otherwise be returned by BOTW and/or the Senior Lenders upon insolvency, bankruptcy, or reorganization of any Loan Party or otherwise, all as though such payment had not been made.

-9-

10.           Notices. Any notice or other communication required or permitted under this Agreement shall be in writing and personally delivered, mailed by registered or certified mail (return receipt requested and postage prepaid), sent by electronic mail (with a confirming copy sent by regular mail), or sent by prepaid overnight courier service, and addressed to the relevant party at its address set forth below, or at such other address as such party may, by written notice, designate as its address for purposes of notice under this Agreement:

If to Senior Lenders, to BOTWat:

Bank of the West

Attention: Angie Coro, Vice President SAD Portfolio

300 South Grand

Los Angeles, CA 90071

Telephone: 213-972-0415

E-mail:angeles.coro@bankofthewest.com

With copy to:

Mark Williams, Esq.

Sherman & Howard, LLC

633 17th Street

Denver, CO 80202

Telephone: 303-299-8211

E-Mail: mwilliams@shermanhoward.com

And

Michael L. Wachtell, Esq.

Buchalter Nemer APC

1000 Wilshire Boulevard

Suite 1500

Los Angeles, CA 90017

Telephone: 213-891-5460

E-Mail: mwachtell@buchalter.com

If to Borrowers or any other Loan Party, at:

Sefton Resources, Inc.

2050 S. Oneida St., Suite 102

Denver, CO  80224

Attention: Kris Short

Telephone: 303.759.2700

E-mail: kshort@seftonresources.com

-10-

With a copy to the Subordinated Obligee and its counsel

If to the Subordinated Obligee:

 Hawker Energy, Inc.326 S. Pacific Coast Highway, Suite 102

Redondo Beach, CA 90277

Attention: Darren Katic

Telephone: (310) 316-3623

E-mail: dkatic@hawkerenergyllc.com

With copy to:

Gregg Amber, Esq.

Rutan & Tucker, LLP

611 Anton Blvd., 14th Floor

Costa Mesa, CA 92626

Telephone: 714-641-3425

E-mail: gamber@rutan.com

If mailed, notice shall be deemed to be given five (5) days after being sent, and if sent by personal delivery, electronic mail or prepaid courier, notice shall be deemed to be given when delivered.

11.           Successors and Assigns. This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of the Senior Lenders, the Subordinated Obligee and the Loan Parties; provided, however, that neither the Subordinated Obligee nor any Loan Party may assign this Agreement or the Subordinated Note Documents in whole or in part without the prior written consent of BOTW. The Senior Lenders may, from time to time, without notice to the Subordinated Obligee, assign or transfer any or all of the Senior Loans or any interest therein to any Person and, notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Loans shall, subject to the terms hereof, be and remain the Senior Loans for purposes of this Agreement, and every permitted assignee or transferee of any of the Senior Loans or of any interest therein shall, to the extent of the interest of such permitted assignee or transferee in the Senior Loans, be entitled to rely upon the subordination provided under this Agreement and shall be entitled to enforce the terms and provisions hereof to the same extent as if such assignee or transferee were initially a party hereto.

12.           No Waiver or Novation. No waiver shall be deemed to have been made by any party to this Agreement of any of its rights under this Agreement unless the same shall be in writing and duly signed by its duly authorized officers, and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of any party to this Agreement in any other respect at any time. No executory agreement shall be effective to change, modify or to discharge, in whole or in part, this Agreement, unless such executory agreement is in writing and duly signed by the duly authorized officers of each party to this Agreement.

-11-

13.           CONSENT TO JURISDICTION. EACH OF THE LOAN PARTIES AND THE SUBORDINATED OBLIGEE HEREBY CONSENTS TO THE JURISDICTION OF THE COURT THEN HANDLING THE ACTION OR SHOULD THAT ACTION NO LONGER BE PENDING, ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF VENTURA, STATE OF CALIFORNIA, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY, FOR ITSELF, IN CONNECTION WITH ITS PROPERTIES AND ON BEHALF OF THE RESPECTIVE PARTIES IT REPRESENTS, IRREVOCABLY (A) ACCEPTS GENERALLY AND UNCONDITIONALLY THE JURISDICTION AND VENUE OF THE AFORESAID COURTS; (B) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (C) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10; AND (D) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (C) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.

14.           Miscellaneous.

14.1.           Conflict. In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of the Subordinated Note Documents, the provisions of this Agreement shall control and govern.

14.2.           Headings. The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.

14.3.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, but in making proof hereof, it shall only be necessary to produce one such counterpart containing signatures pages signed by each party.

14.4.           Severability. If any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.

14.5.           Governing Law. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

-12-

14.6.           Relative Rights. This Agreement shall define the relative rights of the Senior Lenders and the Subordinated Obligee. Nothing in this Agreement shall (a) impair, as between the Loan Parties and the Senior Lenders, the obligation of the Loan Parties with respect to the payment of the Senior Loans and the Subordinated Obligations in accordance with their respective terms, or (b) affect the relative rights of the Senior Lenders or the Subordinated Obligee with respect to any other creditors of the Loan Parties.

14.7.           Subrogation. Subject to the Payment in Full of all Senior Loans, the Subordinated Obligee shall be subrogated to the rights of BOTW and/or Senior Lenders to receive Distributions with respect to the Senior Loans until the Subordinated Obligations are paid in full. The Subordinated Obligee agrees that if all or any part of a payment made with respect to the Senior Debt is recovered from the holders of the Senior Loans in a Proceeding or otherwise, any Distribution received by the Subordinated Obligee with respect to the Subordinated Obligations at any time after the date on which the Subordinated Obligee is notified by BOTW or Senior Lenders that such payment has been recovered, whether pursuant to the right of subrogation provided for in this Agreement or otherwise, shall be deemed to have been received by the Subordinated Obligee in trust as property of BOTW and/or the Senior Lenders and the Subordinated Obligee shall promptly upon receipt of such notice by the Subordinated Obligee deliver the same to BOTW for the benefit of the Senior Lenders for application to the Senior Loans until the Senior Loans are Paid in Full. A Distribution made pursuant to this Agreement to BOTW or the Senior Lenders which otherwise would have been made to a Subordinated Obligee is not, as between the Borrowers and the Subordinated Obligee, a payment by the Borrowers to or on account of the Senior Loans.

14.8.           Entire Agreement. This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

-13-

IN WITNESS WHEREOF, intending to be legally bound, and intending that this Agreement constitute an instrument executed and delivered under seal, the parties have caused this Agreement to be executed under seal as of the date first written above.

SENIOR LENDER:
BANK OF THE WEST
By:	/s/ Dennis Boesen
Name:	Dennis Boesen
Title:	Vice President

BORROWERS:
TEG OIL & GAS U.S.A, INC.
By:	/s/ Thomas Milne
Name:	Thomas Milne
Title:	Director

SEFTON RESOURCES, INC.
By:	/s/ Thomas Milne
Name:	Thomas Milne
Title:	Director

TEG MIDCONTINENT, INC.
By:	/s/ Thomas Milne
Name:	Thomas Milne
Title:	Director
[Signatures continue on following page]

SUBORDINATED OBLIGEE:
TAPIA HOLDINGS, LLC
By:	/s/ Darren Katic
Name:	Darren Katic
Title:	President

HAWKER ENERGY, INC.
By:	/s/ Darren Katic
Name:	Darren Katic
Title:	President

EX-31.1

Exhibit 31

CERTIFICATION

I, Darren Katic, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hawker Energy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. As the registrant’s sole certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. As the registrant’s sole certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  January 16, 2015	/s/ Darren Katic
	Darren Katic Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer)

EX-32.1

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hawker Energy, Inc. (the “Company”) on Form 10-Q for the quarter ended November 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darren Katic, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  January 16, 2015	/s/ Darren Katic
	Darren Katic Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting and Financial Officer)

XML

ACQUISITION OF SCNRG (Narrative) (Details) (USD $)	12 Months Ended	1 Months Ended
	Aug. 31, 2014	Oct. 25, 2013
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Stock issued during period for acquisition	$ 1,626
SCNRG [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of shares issued for acquisition		14,000,000
Stock issued during period for acquisition		$ 14,000
Acquisition of share interest		100.00%

XML

INCOME TAXES (Narrative) (Details) (USD $)	3 Months Ended
	Nov. 30, 2014	Nov. 30, 2013
INCOME TAXES [Abstract]
Current income tax expense (benefit)	$ 0	$ 0
Deferred income tax expense (benefit)	$ 0	$ 0

XML

LOANS PAYABLE TO RELATED PARTIES, SHORT TERM (Schedule of Loans from Related Parties) (Details) (USD $)	Nov. 30, 2014	Aug. 31, 2014
Loans payable to related parties, short term
Total short-term loans	$ 319,525	$ 221,000
Accrued interest payable	12,657	5,876
Loans payable to related parties, short term	332,182	226,876
Darren Katic [Member]
Loans payable to related parties, short term
Total short-term loans	151,000	161,000
Manhattan Holdings, LLC [Member]
Loans payable to related parties, short term
Total short-term loans	90,000	60,000
Gerald Tywoniuk [Member]
Loans payable to related parties, short term
Total short-term loans	60,000
Kristian Andresen [Member]
Loans payable to related parties, short term
Total short-term loans	$ 18,525

XML

FAIR VALUE MEASUREMENTS (Details) (USD $)	Nov. 30, 2014	Aug. 31, 2014
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured subordinate loan receivable
Capitalized oil and gas properties, net
Loans payable to related parties, short term
Convertible notes payable, short term
Net profit interest liability
Asset retirement obligation
Total
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured subordinate loan receivable
Capitalized oil and gas properties, net
Loans payable to related parties, short term
Convertible notes payable, short term
Net profit interest liability
Asset retirement obligation
Total
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured subordinate loan receivable	1,505,451	1,298,322
Capitalized oil and gas properties, net	723,063	730,046
Loans payable to related parties, short term	(332,182)	(226,876)
Convertible notes payable, short term	(1,030,178)	(951,599)
Net profit interest liability	(164,274)	(169,104)
Asset retirement obligation	(171,682)	(168,110)
Total	$ 530,198	$ 512,679

XML

FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES (Details) (USD $)	Nov. 30, 2014	Aug. 31, 2014
Fixed assets and capitalized oil and gas properties [Line Items]
Cost	$ 859,365	$ 850,113
Accumulated Depletion, Depreciation and Amortization	113,991	105,798
Net Book Value	745,374	744,315
Machinery and equipment [Member]
Fixed assets and capitalized oil and gas properties [Line Items]
Cost	33,874	33,874
Accumulated Depletion, Depreciation and Amortization	20,815	19,605
Net Book Value	13,059	14,269
Other fixed assets [Member]
Fixed assets and capitalized oil and gas properties [Line Items]
Cost	9,252
Accumulated Depletion, Depreciation and Amortization
Net Book Value	9,252
Total fixed assets [Member]
Fixed assets and capitalized oil and gas properties [Line Items]
Cost	43,126
Accumulated Depletion, Depreciation and Amortization	20,815
Net Book Value	22,311
Capitalized oil and gas properties [Member]
Fixed assets and capitalized oil and gas properties [Line Items]
Cost	816,239	816,239
Accumulated Depletion, Depreciation and Amortization	93,176	86,193
Net Book Value	$ 723,063	$ 730,046

XML

ASSET RETIREMENT OBLIGATIONS (Tables)

3 Months Ended

Nov. 30, 2014

ASSET RETIREMENT OBLIGATIONS [Abstract]

Schedule of Changes in Asset Retirement Obligation

The following shows the changes in asset retirement obligations for the three months ended November 30, 2014 and the year ended August 31, 2014:

	Three Months		Year
	Ended		Ended
	November 30,		August 31,
		2014		2014
Asset retirement obligations, beginning	$	168,110	$	103,299
Liabilities acquired during the period		-		53,963
Liabilities settled during the period		-		-
Current period accretion		3,572		10,848
Asset retirement obligations, ending	$	171,682	$	168,110

XML

EQUITY (Details) (USD $)	0 Months Ended	3 Months Ended		12 Months Ended
	May 14, 2014	Nov. 30, 2014	Nov. 30, 2013	Aug. 31, 2014
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Cash received from units issued				$ 980,288
Warrant exercise price		$ 0.25
Price per unit		$ 0.10
Maximum number of shares covered by warrant		234,372
Common stock issuable		5,356,360
Stock option compensation		1,088,179		68,760
Unrecognized balance of compensation expenses		284,000
Expected life of options		2 years
Option life	10 years
Shares of stock issued for the conversion of debt		9,800,000
Convertible debt		980,000
Conversion price		$ 0.10
Options granted	5,950,000
Options outstanding		5,950,000
Stock options vesting first		1,000,000
Maximum option available for issuance		11,201,205
Stock options vesting in subsequent periods		4,950,000
Potential additional shares issuable		501,784
Non-controlling interest		135,469		55,000
Non-controlling interest share of losses		9,531
Tapia Holdings, LLC [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Capital contributions received in contemplation of the pending acquisition		145,000
Non-controlling interest share of losses		9,531
Convertible Note [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Shares of stock issued for the conversion of debt		15,186,156
Secured Convertible Note [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Warrant exercise price		$ 0.25
Potential additional warrants issuable		4,650,000
Common Stock [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Units issued (in shares)				10,212,720
Cash received from units issued				10,213
Warrant exercise price		$ 0.20
Price per unit		$ 0.10
Stock option compensation
Non-controlling interest share of losses
Common Stock Payable [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Units issued (in shares)		500,000
Number of investors whose units are issued		3
Cash received from units issued		50,000
Other transaction costs		80
Price per unit		$ 0.10
Stock option compensation
Non-controlling interest share of losses

XML

SUBSEQUENT EVENTS

3 Months Ended

Nov. 30, 2014

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

19.              SUBSEQUENT EVENTS

Share Purchase Agreement To Purchase All Of The Outstanding Shares Of Capital Stock Of TEG, And Secured Subordinated Loan Receivable, Short Term

On January 12, 2015, we entered into a Share Purchase Agreement with Sefton pursuant to which we agreed to purchase, and Sefton agreed to sell, 100% of the issued and outstanding shares of capital stock of Sefton's wholly-owned subsidiary, TEG.  The principal terms of the Share Purchase Agreement are as follows: we will purchase all of the shares of TEG for $1.00 in cash plus the issuance of 3,000,000 shares of our common stock and a five-year Warrant to purchase up to an additional 5,000,000 shares of our common stock for $0.25 per share.

Between April 18, 2014 and January 15, 2015, we and our wholly-owned subsidiary, Tapia Holdings, made a number of advances to TEG, pursuant to the Loan Receivable Agreements. These advances totaled approximately $1,637,352, not including accrued interest, as of January 15, 2015, including $150,000 advanced subsequent to November 30, 2014.  This amount constitutes additional consideration for the TEG acquisition, as this loan receivable will not be settled prior to the closing of our acquisition of TEG. 

The transactions contemplated by the Share Purchase Agreement are subject to several customary conditions, most notably that the purchase and sale must be approved by Sefton's shareholders.

As a result of a significant decline in oil prices and other factors, the transaction described above amends and replaces the transaction described in our Annual Report on Form 10-K filed November 24, 2014 to acquire the assets of TEG pursuant to a non-binding letter of intent dated June 18, 2014. 

See Note 7 for further information about the Loan Receivable Agreements and BOTW's consent to our acquisition of TEG.

Term Sheet For A Third Amended and Restated Secured Convertible Note Payable

On January 14, 2015, we executed a term sheet to provide for a Third Amended and Restated Secured Convertible Promissory Note to an outside investor (the “Secured Convertible Note Payable”), in the aggregate principal amount of $1,000,000, to mature in two years.

The Secured Convertible Note Payable will be issued in consideration of additional gross proceeds to us in the amount of up to $335,000 (of which $200,000 was funded January 15, 2015, and $135,000 is to be funded within 120 days at the investor's option) and cancellation of previously issued notes to the investor in the amounts of $250,000, $350,000, and $25,000 (as well as accrued interest on each), the first two of which had maturity dates of November 30, 2014, and the latter of which had a maturity date of May 3, 2015. The Secured Convertible Note Payable will bear interest on the unpaid principal balance of the Secured Convertible Note Payable at the rate of 12% per annum. Interest payments will become payable quarterly on the six-month anniversary. The Secured Convertible Note Payable will be convertible at any time at the option of the investor into “Conversion Shares,” computed by dividing all of the then outstanding principal and accrued interest under the Secured Convertible Note by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events) (the “Conversion Rate”). However, if we subsequently sell securities comprising the Conversion Shares at a price lower than the Conversion Rate (subject to customary exclusions), then the Conversion Rate then in effect will be automatically reduced to the lower price. We will at all times reserve and keep available out of our authorized but unissued shares a sufficient number of shares of common stock to give effect to the conversion of the Secured Convertible Note Payable.Unless notified in advance by the investor, conversion of a part or the entire Secured Convertible Note Payable is limited at any one time to a maximum beneficial ownership interest in Hawker of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion.The proceeds from the Secured Convertible Note Payable are to be used for the purpose of allowing us to make advances to TEG, under the terms of a note receivable from TEG, and for general working capital Any repayment by TEG of the advances under the terms of the note receivable must be used by us to immediately make repayment to the investor under the terms of the Secured Convertible Note Payable. To secure our obligations under the Secured Convertible Note Payable, we will grant a security interest to the investor in all of our right, title and interest under the TEG note receivable, our second priority security interest in TEG's assets and in the interest of our subsidiary SCNRG, LLC in the oil-producing property known as the DEEP Lease. The Secured Convertible Note Payable will also contain other terms and covenants that are customary for a promissory note of this type.  In addition, we will grant to the investor a 2.5% or 3.5% overriding royalty interest, depending on the lease, in oil sales from the TEG Assets, effective with the closing of the acquisition.  Such amount would be accrued until TEG's lender, BOTW, has been paid in full; however, payment of royalties shall begin within twelve months or an event of default under the Secured Convertible Note Payable will occur.  While interest and royalties are being accrued, no cash payments can be made to repay loans made to Hawker by Mr. Katic, nor can Hawker repurchase any non-controlling interest owned by Mr. Moore nor pay any salaries to Messrs. Katic and Moore.

Additional Unit Issuances

On December 12, 2014, Hawker and Kristian Andresen agreed to convert a $120,000 accrued bonus into Units on the same terms as described in Note 16, resulting in 1,200,000 shares of common stock being issued to Mr. Andresen together with five-year warrants to acquire 600,000 shares upon payment of an exercise price of $0.20 per share.In addition, a vendor agreed to convert a $10,570 accounts payable balance into Units on the same terms as described in Note 16, resulting in 105,700 shares of common stock being issued, together with five-year warrants to acquire 52,850 shares upon payment of an exercise price of $0.20 per share.

On January 8, 2015, we received $115,000 in cash proceeds from two investors for Units on the same terms as described in Note 16, which, when closed, will result in 1,150,000 shares of common stock being issued, together with five-year warrants to acquire 575,000 shares upon payment of an exercise price of $0.20 per share.

XML

CONVERTIBLE NOTES PAYABLE, SHORT TERM (Summary of Changes in Convertible Notes Payable) (Details) (USD $)	3 Months Ended
	Nov. 30, 2014		Aug. 31, 2014
Debt Instrument [Line Items]
Convertible notes payable	$ 319,525		$ 221,000
Accrued interest payable	12,657		5,876
Convertible notes payable, short term	1,030,178		951,599
Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Convertible notes payable	980,000		930,000
Accrued interest payable	50,178		21,599
Convertible notes payable, short term	1,030,178		951,599
CNP 1 [Member]
Debt Instrument [Line Items]
Maturity date	Nov. 30, 2014
Convertible notes payable	350,000	[1],[2],[3]	350,000	[1],[2],[3]
CNP 2 [Member]
Debt Instrument [Line Items]
Maturity date	Nov. 30, 2014
Convertible notes payable	250,000	[1],[2],[3]	250,000	[1],[2],[3]
CNP 3 [Member]
Debt Instrument [Line Items]
Maturity date	Jun. 30, 2015
Convertible notes payable	100,000	[1],[2],[4]	100,000	[1],[2],[4]
CNP 4 [Member]
Debt Instrument [Line Items]
Maturity date	Jul. 10, 2015
Convertible notes payable	100,000	[1],[2],[3],[4],[5]	100,000	[1],[2],[3],[4],[5]
CNP 5 [Member]
Debt Instrument [Line Items]
Maturity date	May 13, 2016
Convertible notes payable	50,000	[6]	50,000	[6]
CNP 6 [Member]
Debt Instrument [Line Items]
Maturity date	Jul. 25, 2015
Convertible notes payable	50,000	[1],[2],[3],[4]	50,000	[1],[2],[3],[4]
CNP 7 [Member]
Debt Instrument [Line Items]
Maturity date	Jul. 25, 2015
Convertible notes payable	30,000	[1],[2],[3],[4]	30,000	[1],[2],[3],[4]
CNP 8 [Member]
Debt Instrument [Line Items]
Maturity date	Sep. 26, 2015
Convertible notes payable	25,000	[1],[2],[4]		[1],[2],[4]
CNP 9 [Member]
Debt Instrument [Line Items]
Maturity date	May 03, 2015
Convertible notes payable	$ 25,000	[1],[2],[3]		[1],[2],[3]

[1] Convertible at any time at the option of the investor into “Conversion Units.” Each Conversion Unit consists of one share of common stock of Hawker and one warrant to purchase one-half share of common stock of Sara Creek at an exercise price of $0.25 per share. The number of Conversion Units into which the note is convertible is computed by dividing all of the then outstanding principal and accrued interest under the note by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events). Each warrant has a five-year life from the date the convertible note payable was issued. In the event Hawker sells common stock for less than $0.10 per share, the conversion rate for CNP 1 and 9 shall be adjusted to that price. In the case of CNP 1 and 2, the notes were amended September 18, 2014, to limit the conversion of a part or the entire convertible note payable at any one time to a maximum beneficial ownership in Hawker of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion. CNP 9 is similarly limited.

[2] The proceeds were required to be used solely for the purpose of allowing Tapia Holdings to make advances to TEG under the terms of the secured subordinated loan receivable described in Note 7. Any repayment of such advances by TEG to Tapia Holdings must be used by us to immediately first repay convertible notes payable to the holder of CNP 1, 2 and 3, and second to repay other convertible notes payable pro rata.

[3] Hawker granted a security interest to the investor in all of its assets.

[4] Conversion of unpaid principal into Conversions Units pursuant to the terms in (1) above is mandatory in the event Hawker closes the Proposed TEG Acquisition described in Note 7. Conversion of unpaid interest into Conversion Units is at the election of Hawker.

[5] The holder is related to Darren Katic, who is an officer, director and significant shareholder.

[6] Unpaid principal and accrued interest is convertible at any time at the option of the holder into Conversion Units in an amount computed by dividing the amount converted by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events). Repayment of the convertible note payable is required on collection of the secured subordinated loan receivable described in Note 7 if earlier than the maturity date above. As Hawker expects to receive repayment on the secured subordinated loan receivable or close on the TEG acquisition within one year, this convertible note payable has been classified as a short term liability.

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ACQUISITION OF HAWKER ENERGY (RINCON), LLC (Schedule of Assets and Liabilities Acquired) (Details) (Hawker Energy Rincon Llc [Member], USD $)	Jan. 01, 2014
Hawker Energy Rincon Llc [Member]
Business Acquisition [Line Items]
Cash	$ 1,214
Prepaid expenses	16,625
Accounts payable and accrued liabilities	(123,413)
Loan payable to related party, short term	(29,625)
Net liabilities assumed	$ 135,199

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DESCRIPTION OF BUSINESS (Details) (SCNRG [Member])	1 Months Ended
	Oct. 25, 2013
SCNRG [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Acquisition of share interest	100.00%
Number of shares issued for acquisition	14,000,000

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NET PROFITS INTEREST ("NPI") PAYABLE (Narrative) (Details) (USD $)	0 Months Ended	3 Months Ended
	Dec. 01, 2009	Nov. 30, 2014	May 14, 2014	May 15, 2014	Feb. 01, 2014
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Percentage of monthly payments equal to net profit		40.00%
Maturity date		Dec. 31, 2022
Interest rate utilizing a discount rate		10.00%
NPI payments		$ 134,135
Minimum NPI payment requirement		347,000
Maximum NPI payment requirement		357,410
SCNRG [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Stated minimum monthly payment	$ 1,985	$ 2,978	$ 2,596
Ownership interest	66.67%			100.00%	87.18%

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SUBSEQUENT EVENTS (Narrative) (Details) (USD $)	3 Months Ended		0 Months Ended
	Nov. 30, 2014	Nov. 30, 2013	Jan. 01, 2014	Jan. 08, 2015 item	Dec. 12, 2014	Jan. 14, 2015	Jan. 15, 2015	Dec. 02, 2014	Jan. 12, 2015	Aug. 31, 2014	Jan. 31, 2015
Subsequent Event [Line Items]
Exercise price of warrants (in dollars per share)	$ 0.25
Accrued bonus converted into units	$ 480,000									$ 480,000
Advances	1,505,451									1,298,322
Gross proceeds from issuance of debt	50,000
Secured Subordinated Loan Receivable, Short Term [Member]
Subsequent Event [Line Items]
Advances	1,505,451									1,298,322
TEG [Member]
Subsequent Event [Line Items]
Advances	1,487,352
Subsequent advances	196,625
Darren Katic [Member]
Subsequent Event [Line Items]
Shares of common stock issued			1,500,000
Interest rate	10.00%
Subsequent Event [Member]
Subsequent Event [Line Items]
Shares of common stock that can be purchased from warrants				575,000	52,850
Exercise price of warrants (in dollars per share)				$ 0.20	$ 0.20
Warrants expire term				5 years	5 years
Accounts payable balance converted					10,570
Net proceeds from unit offering				115,000
Number of investors to whom units issued				2
Units issued (in shares)				1,150,000	105,700
Subsequent Event [Member] | Secured Convertible Note Payable [Member]
Subsequent Event [Line Items]
Aggregate principal amount						1,000,000
Maturity term						2 years
Interest rate							12.00%
Amount divided by outstanding principal and accrued interest to calculate shares to be issued							$ 0.10
Period after which interest payments would become payable quarterly							6 months
Subsequent Event [Member] | Secured Convertible Note Payable [Member] | Maximum [Member]
Subsequent Event [Line Items]
Gross proceeds from issuance of debt							335,000
Subsequent Event [Member] | Secured Convertible Note Payable [Member] | Note issued to Oceanside Strategies maturing on November 30, 2014, one
Subsequent Event [Line Items]
Debt cancelled							250,000
Subsequent Event [Member] | Secured Convertible Note Payable [Member] | Note issued to Oceanside Strategies maturing on November 30, 2014, two
Subsequent Event [Line Items]
Debt cancelled							350,000
Subsequent Event [Member] | Secured Convertible Note Payable [Member] | Note issued to Oceanside Strategies maturing on May 3, 2015
Subsequent Event [Line Items]
Debt cancelled							25,000
Subsequent Event [Member] | Secured Convertible Note Payable [Member] | Funded January 15, 2015 [Member]
Subsequent Event [Line Items]
Gross proceeds from issuance of debt							200,000
Subsequent Event [Member] | Secured Convertible Note Payable [Member] | Funded within 120 days at the investor's option [Member]
Subsequent Event [Line Items]
Gross proceeds from issuance of debt							135,000
Maximum Period within which Balance Amount to be Lent to Acquiree							120 days
Subsequent Event [Member] | Hawker and Kristian Andresen [Member]
Subsequent Event [Line Items]
Shares of common stock that can be purchased from warrants					600,000
Exercise price of warrants (in dollars per share)					$ 0.20
Accrued bonus converted into units					120,000
Warrants expire term					5 years
Units issued (in shares)					1,200,000
Subsequent Event [Member] | TEG [Member]
Subsequent Event [Line Items]
Advances							1,637,352
Subsequent advances							150,000	150,000
Maximum beneficial ownership interest which can be acquired upon conversion							4.99%
Period within which payment of royalties shall begin							12 months
Subsequent Event [Member] | TEG [Member] | Maximum [Member]
Subsequent Event [Line Items]
Overriding royalty interest											3.50%
Subsequent Event [Member] | TEG [Member] | Minimum [Member]
Subsequent Event [Line Items]
Overriding royalty interest							2.50%
Subsequent Event [Member] | TEG [Member] | Share Purchase Agreement with Sefton [Member]
Subsequent Event [Line Items]
Percentage of issued and outstanding shares of capital stock purchased									100.00%
Cash paid to purchase all of the shares of acquiree									1.00
Shares of common stock issued									3,000,000
Warrant term									5 years
Shares of common stock that can be purchased from warrants									5,000,000
Exercise price of warrants (in dollars per share)									$ 0.25
Warrants expire term									5 years
Subsequent Event [Member] | TEG [Member] | Secured Subordinated Loan Receivable, Short Term [Member] | Share Purchase Agreement with Sefton [Member]
Subsequent Event [Line Items]
Advances							$ 1,637,352

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LOANS PAYABLE TO RELATED PARTIES, SHORT TERM (Narrative) (Details) (USD $)	3 Months Ended
	Nov. 30, 2014
Darren Katic [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Interest rate	10.00%
Manhattan Holdings Llc [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Amount of loans to related party whose maturity date was extended to January 31, 2015	$ 60,000
Additional loans	$ 30,000

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GOING CONCERN

3 Months Ended

Nov. 30, 2014

GOING CONCERN

GOING CONCERN

3.                 GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of November 30, 2014, the Company had total current assets of $1,562,942 but a working capital deficit in the amount of $1,572,842. The Company incurred a net loss of $1,629,435 for the three months ended November 30, 2014 and an accumulated net loss of $3,676,897 since inception.  The Company has earned insufficient revenues since inception and its cash resources are insufficient to meet its planned business objectives.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to obtain additional financing or sale of its common stock as may be required and ultimately to attain profitability.

Management's plan in this regard is to complete the acquisition of TEG Oil & Gas U.S.A., Inc. (see Note 7), the further development of which is dependent on financing, and to raise capital through a combination of equity and debt financing sufficient to finance continuing operations for the next twelve months.  However, there can be no assurance that the Company will be successful in completing such financing.  

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ACQUISITION OF AN ADDITIONAL 33.33% WORKING INTEREST IN DEEP LEASE (Details) (SCNRG [Member], USD $)	0 Months Ended
	May 15, 2014	Feb. 04, 2014	Aug. 31, 2014	Feb. 01, 2014	Dec. 01, 2009
SCNRG [Member]
Business Acquisition [Line Items]
Ownership interest	100.00%			87.18%	66.67%
Cash paid for business acquisition	$ 125,000	$ 200,000
Assumed liabilities	43,081	69,729
Machinery and equipment	2,010	3,529
Oil properties	166,071	266,200
Purchase price of entity	$ 168,081	$ 269,729
Acquisition of additional working interest in DEEP lease	12.8192%	20.5108%	33.33%

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SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM (Tables)

3 Months Ended

Nov. 30, 2014

SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM [Abstract]

Schedule of period end balance of the secured subordinated note receivable

The period end balance of the secured subordinated note receivable is comprised of the following:

	November 30,		August 31,
		2014		2014
Principal	$	1,487,352	$	1,290,727
Accrued interest		18,099		7,595
Total	$	1,505,451	$	1,298,322

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ACQUISITION OF HAWKER ENERGY (RINCON), LLC (Tables) (Hawker Energy Rincon Llc [Member])

3 Months Ended

Nov. 30, 2014

Hawker Energy Rincon Llc [Member]

Business Acquisition [Line Items]

Schedule of Fair Value of the Assets Acquired and Liabilities Assumed

The assets and liabilities of HERLLC at the date of acquisition were recorded at their fair values of:

Cash	$	1,214
Prepaid expenses		16,625
Less:
Accounts payable		(123,413	)
Loan payable to related party, short term		(29,625	)
Net liabilities assumed	$	135,199

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COMMITMENTS AND CONTINGENCIES (Narrative) (Details)	3 Months Ended
	Nov. 30, 2014	Aug. 31, 2014	Dec. 01, 2009
Long-term Purchase Commitment [Line Items]
Overriding royalty percentage	1.00%
Aggregate additional royalty percentage subject to production	19.92%
Total royalties	20.92%
DEEP Property [Member]
Long-term Purchase Commitment [Line Items]
Working interest		100.00%	66.67%

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SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM (Narrative) (Details) (USD $)	0 Months Ended		3 Months Ended	0 Months Ended
	Jan. 08, 2015	Dec. 12, 2014	Nov. 30, 2014	Jun. 18, 2014 item	Jan. 15, 2015	Dec. 02, 2014	Jan. 12, 2015	Aug. 31, 2014	Nov. 24, 2014
Debt Instrument [Line Items]
Exercise price of warrants (in dollars per share)			$ 0.25
Advances			$ 1,505,451					$ 1,298,322
Promissory note receivable			2,100,000
Subsequent Event [Member]
Debt Instrument [Line Items]
Warrants expire term	5 years	5 years
Shares of common stock that can be purchased from warrants	575,000	52,850
Exercise price of warrants (in dollars per share)	$ 0.20	$ 0.20
TEG [Member]
Debt Instrument [Line Items]
Advances			1,487,352
Outstanding advances			196,625
TEG [Member] | Tapia Holdings, LLC [Member] | Tapia Canyon field [Member]
Debt Instrument [Line Items]
Number of oil and gas leases contributed				4
TEG [Member] | Tapia Holdings, LLC [Member] | West of the Tapia Canyon field [Member]
Debt Instrument [Line Items]
Number of oil and gas leases contributed				1
TEG [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Advances					1,637,352
Outstanding advances					150,000	150,000
Secured Subordinated Loan Receivable, Short Term [Member]
Debt Instrument [Line Items]
Advances			1,505,451					1,298,322
Interest rate			3.00%
Share Purchase Agreement with Sefton [Member] | TEG [Member]
Debt Instrument [Line Items]
Potential acquisition of membership interest									80.00%
Share Purchase Agreement with Sefton [Member] | TEG [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Percentage of issued and outstanding shares of capital stock purchased							100.00%
Cash paid to purchase all of the shares of acquiree							1.00
Shares of common stock issued							3,000,000
Warrants expire term							5 years
Shares of common stock that can be purchased from warrants							5,000,000
Exercise price of warrants (in dollars per share)							$ 0.25
Share Purchase Agreement with Sefton [Member] | Secured Subordinated Loan Receivable, Short Term [Member] | TEG [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Advances					1,637,352
Share Purchase Agreement with Sefton [Member] | Bank of the West [Member] | Secured Subordinated Loan Receivable, Short Term [Member] | TEG [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Amount to be lent to acquiree					350,000
Maximum period within which remaining amount to be lent to acquiree					90 days
Interest rate					9.00%
Monthly pay rate					5.00%
Deferred interest rate, unpaid interest compounded monthly					4.00%
Per barrel price used in condition to take forebear enforcement action against the acquiree					60
Minimum monthly outstanding property tax payments which will be paid by acquiree					$ 15,000

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FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES (Tables)

3 Months Ended

Nov. 30, 2014

FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES

Schedule of asset categories of fixed assets and capitalized oil and gas properties

The asset categories of fixed assets and capitalized oil and gas properties at November 30, 2014 and August 31, 2014 were as follows:

	November 30, 2014
	Cost		Accumulated		Net Book
			Depletion,		Value
			Depreciation and
			Amortization
Machinery and equipment	$	33,874	$	20,815	$	13,059
Other fixed assets		9,252		-		9,252
Total fixed assets		43,126		20,815		22,311
Capitalized oil and gas properties		816,239		93,176		723,063
Total	$	859,365	$	113,991	$	745,374

	August 31, 2014
	Cost		Accumulated		Net Book
			Depletion,		Value
			Depreciation and
			Amortization
Fixed assets: machinery and equipment	$	33,874	$	19,605	$	14,269
Capitalized oil and gas properties		816,239		86,193		730,046
Total	$	850,113	$	105,798	$	744,315

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LOANS PAYABLE TO RELATED PARTIES, SHORT TERM (Tables)

3 Months Ended

Nov. 30, 2014

LOANS PAYABLE TO RELATED PARTIES, SHORT TERM [Abstract]

Schedule of loans payable to related parties, short term

Loans payable to related parties, short term, consist of the following at November 30, 2014, and August 31, 2014:

	November 30,		August 31,
	2014		2014
Darren Katic	$	151,000	$	161,000
Manhattan Holdings, LLC		90,000		60,000
Gerald Tywoniuk		60,000		-
Kristian Andresen		18,525		-
Total short-term loans		319,525		221,000
Accrued interest payable		12,657		5,876
Loans payable to related parties, short term	$	332,182	$	226,876

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Nov. 30, 2014

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis Of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information.

The unaudited interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended August 31, 2014, which contains the audited financial statements and notes thereto for Hawker. 

Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.  Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.  It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.  The interim results for the three months ended November 30, 2014, are not necessarily indicative of results for the full fiscal year.

Principles Of Consolidation

The acquisition of SCNRG by Hawker on October 25, 2013, has been accounted for as a reverse acquisition whereby SCNRG is the accounting acquirer effectuating a recapitalization of Hawker.  Therefore, our condensed consolidated financial statements include the historic accounts of SCNRG, and consolidated with Hawker's beginning October 25, 2013. 

On January 1, 2014, we acquired all of the membership interests of Hawker Energy, LLC, which has a wholly-owned subsidiary, Punta Gorda Resources, LLC (see Note 5).  Hawker Energy, LLC changed its name to Hawker Energy (Rincon), LLC on October 22, 2014.  Our condensed consolidated financial statements include the accounts of these entities beginning January 1, 2014. 

All significant intercompany balances and transactions have been eliminated. 

Use Of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates included in the financial statements are: (1) depreciation and depletion; (2) accrued assets and liabilities; (3) asset retirement obligations; and (4) net profits interest payable.  Recorded amounts are based on estimates of oil reserves, retirement costs and dates.  By their nature, these estimates including the estimates of future prices and costs, and the related future cash flows are subject to measurement uncertainty, and the impact in the consolidated financial statements of future periods could be material.  Although management believes these estimates are reasonable, changes in facts and circumstances or discovery of new information may result in revised estimates.  Actual results could differ from those estimates.

Changes In Accounting Policies

The Company has not had any changes in accounting policies during the three months ended November 30, 2014.

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-9, Revenue From Contracts With Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to receive in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is not permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which is intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared based on the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management's responsibility to evaluate whether there is substantial doubt about the organization's ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization's management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.  The Company has not conducted its analysis to determine whether it will adopt the new standard early or not.

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CONVERTIBLE NOTES PAYABLE, SHORT TERM (Tables)

3 Months Ended

Nov. 30, 2014

CONVERTIBLE NOTES PAYABLE, SHORT TERM [Abstract]

Summary of convertible notes payable, short term

Convertible notes payable, short term, consist of the following at November 30, 2014, and August 31, 2014; conversion features, security provisions and warrants to acquire common stock of Hawker are also set forth below:

	Issue	Maturity	November 30,		August 31,
	Date	Date	2014		2014
CNP 1
(1)(2)(3)	June 25, 2014	November 30, 2014	$	350,000	$	350,000
CNP 2
(1)(2)(3)	May 30, 2014	November 30, 2014		250,000		250,000
CNP 3
(1)(3)(4)	July 17, 2014	June 30, 2015		100,000		100,000
CNP 4
(1)(2)(3)(4)(5)	July 17, 2014	July 10, 2015		100,000		100,000
CNP 5
(6)	May 13, 2014	May 13, 2016		50,000		50,000
CNP 6
(1)(2)(3)(4)	July 25, 2014	July 25, 2015		50,000		50,000
CNP 7
(1)(2)(3)(4)	August 28, 2014	July 25, 2015		30,000		30,000
CNP 8
(1)(3)(4)	September 26, 2014	September 26, 2015		25,000		-
CNP 9
(1)(2)(3)	November 3, 2014	May 3, 2015		25,000		-
				980,000		930,000
Accrued interest payable				50,178		21,599
Convertible notes payable, short term			$	1,030,178	$	951,599

(1) Convertible at any time at the option of the investor into “Conversion Units.” Each Conversion Unit consists of one share of common stock of Hawker and one warrant to purchase one-half share of common stock of Sara Creek at an exercise price of $0.25 per share. The number of Conversion Units into which the note is convertible is computed by dividing all of the then outstanding principal and accrued interest under the note by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events).  Each warrant has a five-year life from the date the convertible note payable was issued.  In the event Hawker sells common stock for less than $0.10 per share, the conversion rate for CNP 1 and 9 shall be adjusted to that price.  In the case of CNP 1 and 2, the notes were amended September 18, 2014, to limit the conversion of a part or the entire convertible note payable at any one time to a maximum beneficial ownership in Hawker of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion.  CNP 9 is similarly limited.

(2) Hawker granted a security interest to the investor in all of its assets.

(3) The proceeds were required to be used solely for the purpose of allowing Tapia Holdings to make advances to TEG under the terms of the secured subordinated loan receivable described in Note 7.  Any repayment of such advances by TEG to Tapia Holdings must be used by us to immediately first repay convertible notes payable to the holder of CNP 1, 2 and 3, and second to repay other convertible notes payable pro rata.

(4) Conversion of unpaid principal into Conversions Units pursuant to the terms in (1) above is mandatory in the event Hawker closes the Proposed TEG Acquisition described in Note 7.  Conversion of unpaid interest into Conversion Units is at the election of Hawker.

(5) The holder is related to Darren Katic, who is an officer, director and significant shareholder.

(6) Unpaid principal and accrued interest is convertible at any time at the option of the holder into Conversion Units in an amount computed by dividing the amount converted by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events).  Repayment of the convertible note payable is required on collection of the secured subordinated loan receivable described in Note 7 if earlier than the maturity date above.  As Hawker expects to receive repayment on the secured subordinated loan receivable or close on the TEG acquisition within one year, this convertible note payable has been classified as a short term liability.

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ACQUISITION OF SCNRG (Schedule of Net Assets Acquired) (Details) (SCNRG [Member], USD $)	Oct. 25, 2013
SCNRG [Member]
Business Acquisition [Line Items]
Cash	$ 6,004
Accounts receivable	1,553
Oil properties	26,500
Deposit	5,000
Accounts payable and accrued liabilities	(37,431)
Net assets acquired	$ 1,626

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NET PROFITS INTEREST ("NPI") PAYABLE (Schedule of Changes in NPI Liability) (Details) (USD $)	3 Months Ended		12 Months Ended
	Nov. 30, 2014	Nov. 30, 2013	Aug. 31, 2014
NET PROFITS INTEREST ("NPI") PAYABLE [Abstract]
NPI liability, beginning of period	$ 169,104	$ 124,597	$ 124,597
Liabilities assumed in connection with acquisition of additional DEEP lease working interests			58,847
Current period accretion	4,104	3,041	14,104
Payments made	(8,934)	(5,957)	(28,444)
NPI liability, end of period	164,274		169,104
Less: current portion	20,570		20,065
NPI liability: long-term portion	$ 143,704		$ 149,039

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Nov. 30, 2014	Aug. 31, 2014
Current assets:
Cash	$ 6,604	$ 13,207
Accounts receivable	40,672	42,815
Inventory	6,452	6,092
Prepaid expenses	3,763	22,389
Secured subordinated loan receivable, short term	1,505,451	1,298,322
Total current assets	1,562,942	1,382,825
Fixed assets:
Fixed assets, net of accumulated depreciation of $20,815 and $19,605, respectively	22,311	14,269
Other assets:
Capitalized oil and gas properties, net of accumulated depletion of $93,176 and $86,193, respectively	723,063	730,046
Deposits	5,000	5,000
Total assets	2,313,316	2,132,140
Current liabilities:
Accounts payable and accrued expenses	1,272,854	813,438
Accrued bonuses	480,000	480,000
Net profits interest payable, current portion	20,570	20,065
Loans payable to related parties, short term	332,182	226,876
Convertible notes payable, short term	1,030,178	951,599
Total current liabilities	3,135,784	2,491,978
Long term liabilities:
Asset retirement obligations	171,682	168,110
Net profits interest payable, long term portion	143,704	149,039
Total long term liabilities	315,386	317,149
Total liabilities	3,451,170	2,809,127
Stockholders' equity (deficit):
Common stock; $0.001 par value; 750,000,000 shares authorized, 74,674,703 and 41,174,703 shares issued and outstanding, respectively	74,675	41,175
Common stock payable		50,000
Additional paid in capital	2,328,899	1,224,300
Accumulated deficit	(3,676,897)	(2,047,462)
Total stockholders' equity (deficit)	(1,273,323)	(731,987)
Non-controlling interest	135,469	55,000
Total equity (deficit)	(1,137,854)	(676,987)
Total liabilities and equity (deficit)	$ 2,313,316	$ 2,132,140

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SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM (Schedule of Secured Subordinated Loan Receivable, Short Term) (Details) (USD $)	Nov. 30, 2014	Aug. 31, 2014
Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	$ 1,505,451	$ 1,298,322
Subordinated Debt [Member]
Receivable [Line Items]
Notes Receivable, Related Parties, Current	1,487,352	1,290,727
Interest Receivable, Current	18,099	7,595
Notes, Loans and Financing Receivable, Gross, Current	$ 1,505,451	$ 1,298,322

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CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock [Member]	Common Stock Payable [Member]	Additional Paid-in Capital [Member]	Accumulated (Deficit) [Member]	Non-Controlling Interest [Member]
Balance at Aug. 31, 2013	$ (1,226)			$ 350,000	$ (351,226)
Balance, shares at Aug. 31, 2013
Recapitalization on completion of acquisition of SCNRG	1,626	25,962	2,000	(26,336)
Recapitalization on completion of acquisition of SCNRG, shares		25,961,983	2,000,000
Issued to acquire Hawker Energy (Rincon), LLC	(135,199)	3,000		(138,199)
Issued to acquire Hawker Energy (Rincon), LLC, shares		3,000,000
Issuance of common stock payable		2,000	(2,000)
Issuance of common stock payable, shares		2,000,000	(2,000,000)
Net proceeds from unit offering	980,288	10,213		970,075
Net proceeds from unit offering, shares		10,212,720
Proceeds received for common stock payable	50,000		50,000
Proceeds received for common stock payable, shares			500,000
Stock option compensation	68,760			68,760
Sale of non-controlling interest	55,000					55,000
Net loss attributable to the Company	(1,696,236)				(1,696,236)
Balance at Aug. 31, 2014	(676,987)	41,175	50,000	1,224,300	(2,047,462)	55,000
Balance, shares at Aug. 31, 2014	41,174,703	41,174,703	500,000
Net proceeds from unit offering			50,000
Net proceeds from unit offering, shares			500,000
Proceeds received for common stock payable	(80)	500	(50,000)	49,420
Proceeds received for common stock payable, shares		500,000	(500,000)
Equity compensation pursuant to HERLLC Option Agreement	1,030,500	33,000		997,500
Equity compensation pursuant to HERLLC Option Agreement, shares		33,000,000
Stock option compensation	1,088,179			57,679
Sale of non-controlling interest	90,000					90,000
Net loss attributable to non-controlling interest	(9,531)					(9,531)
Net loss attributable to the Company	(1,629,435)				(1,629,435)
Balance at Nov. 30, 2014	$ (1,137,854)	$ 74,675		$ 2,328,899	$ (3,676,897)	$ 135,469
Balance, shares at Nov. 30, 2014	74,674,703	74,674,703

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PRO FORMA FINANCIAL INFORMATION (Narrative) (Details) (SCNRG [Member])	Aug. 31, 2014	May 15, 2014	Feb. 04, 2014
SCNRG [Member]
Pro forma information related to acquisition of Hawker [Line items]
Acquisition of additional working interest in DEEP lease	33.33%	12.8192%	20.5108%

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Nov. 30, 2014

FAIR VALUE MEASUREMENTS [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis

	Fair Value Measurement
	Level 1		Level 2		Level 3
November 30, 2014
Assets:
Secured subordinate loan receivable	$	-	$	-	$	1,505,451
Capitalized oil and gas properties, net		-		-		723,063
Liabilities:
Loans payable to related parties, short term		-		-		(332,182	)
Convertible notes payable, short term		-		-		(1,030,178	)
Net profit interest liability		-		-		(164,274	)
Asset retirement obligation		-		-		(171,682	)
Total	$	-	$	-	$	530,198

	Fair Value Measurement
	Level 1		Level 2		Level 3
August 31, 2014
Assets:
Secured subordinate loan receivable	$	-	$	-	$	1,298,322
Capitalized oil and gas properties, net		-		-		730,046
Liabilities:
Loans payable to related parties, short term		-		-		(226,876	)
Convertible notes payable, short term		-		-		(951,599	)
Net profit interest liability		-		-		(169,104	)
Asset retirement obligation		-		-		(168,110	)
Total	$	-	$	-	$	512,679

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EQUITY

3 Months Ended

Nov. 30, 2014

EQUITY [Abstract]

EQUITY

16.              EQUITY

Common Stock

During the three months ended November 30, 2014, we issued an aggregate of 500,000 Units to three investors in consideration of an aggregate of $50,000 in cash received prior to August 31, 2014, and shown as common stock payable as of that date.  No commissions were paid or payable. Other transaction costs were $80. The price of each Unit was $0.10. Each Unit was comprised of one share of our common stock, together with a warrant to acquire an additional one-half share of our common stock on payment of $0.20 per share. The warrants expire five years from the closing date.

Related party transactions are set forth in Note 17.  See also subsequent events in Note 19.

Shares Of Common Stock Potentially Issuable Pursuant To Warrants, Convertible Notes Payable And Options 

Pursuant to warrants issued in our private placements of securities from January 10, 2014 through November 30, 2014, described above, up to 5,356,360 shares of our common stock would be issuable upon payment to us of $0.20 per share.  The warrants expire five years from the date of each private placement.

Up to 15,186,156 shares of common stock could be issued pursuant to the convertible notes payable described in Note 10, as follows:

• Up to 9,800,000 shares of common stock would be issuable if investors elect or are required to convert all of the $980,000 aggregate principal amount on or prior to maturity, with the number of shares issuable on conversion computed at a rate of $0.10 per share.
• Up to an additional 4,650,000 shares of common stock would be issuable pursuant to warrants created if investors elect or are required to convert certain convertible note payables prior to or on maturity (which notes payable are included in the preceding paragraph) and pay us $0.25 per share on exercise.
• An additional amount of up to approximately 501,784 shares of common stock would be issuable determined based on the amount of any accrued interest payable as of November 30, 2014, if investors elect or are required to convert their notes payable into common stock, based on a conversion rate of $0.10 per share.  Conversion of accrued interest into common stock would create warrants to acquire up to a further 234,372 shares at an exercise price of $0.25 per share.

On May 14, 2014, 5,950,000 common stock options were issued to our officers and other key consultants. 

• Each option has a life of 10 years and a strike price of $0.10 per share.  One million stock options vested on December 15, 2014, with the balance of 4,950,000 stock options vesting one-third on each of May 13, 2015, 2016 and 2017.  There are no other options outstanding.
• These options were granted pursuant to the 2014 Stock Plan approved by written consent of a majority of our stockholders on March 18, 2014, which authorized 15% of our outstanding shares of common stock to be available for grant in the form of options or stock purchase rights.  At November 30, 2014, 15% of our outstanding common stock is 11,201,205 shares, of which we have granted 5,950,000 stock options as stated above.
• The fair value of each stock option award was estimated on the date of grant using the Black-Scholes option pricing method.  Compensation costs related to the options granted are recognized on a straight-line basis over the vesting period.  The expected life assumption was 10 years, the same as the contract life, as we do not have historical data upon which to base an expected term assumption.  No forfeitures were assumed, as we have no historical data.  Expected volatility was based on historical volatility of our common stock.  The risk-free interest rate was derived from the U.S. Treasury yields in effect at the time of grant and the dividend yield was zero, based on historical experience and expected future changes.  
• Equity compensation expense relating to stock options was $57,679 for the three months ended November 30, 2014.  There was no equity compensation expense for the three months ended November 30, 2013.  The total compensation cost relating to unvested stock option grants not yet recognized at November 30, 2014, was $284,000, and the weighted average period over which this cost is expected to be recognized, as of November 30, 2014, is approximately 2.4 years.

Non-Controlling Interest

We report non-controlling interest in Tapia Holdings in these unaudited interim financial statements pursuant to paragraph ASC No. 810-10-65-1.  The non-controlling interest of $135,469 reported on the balance sheet as of November 30, 2014, represents the non-controlling interest holders' proportionate share of the equity of the Tapia Holdings.  Of this amount, $145,000 represents capital contributions received , which has been reduced by $9,531 for the non-controlling interest share of losses for the three months ended November 30, 2014.  

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PRO FORMA FINANCIAL INFORMATION (Tables)

3 Months Ended

Nov. 30, 2014

PRO FORMA FINANCIAL INFORMATION [Abstract]

Schedule of Unaudited Pro Forma Consolidated Information

	Three Months
	Ended
	November 30,
	2013
Revenue	$	40,178
Net loss attributable to the Company	$	(89670	)
Loss per share	$	-

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PRO FORMA FINANCIAL INFORMATION

3 Months Ended

Nov. 30, 2014

PRO FORMA FINANCIAL INFORMATION [Abstract]

PRO FORMA FINANCIAL INFORMATION

18.               PRO FORMA FINANCIAL INFORMATION

The following table presents unaudited pro forma consolidated information, adjusted for the reverse acquisition of Hawker (Note 4) and the acquisition of an additional 33.33% interest in DEEP Lease (Note 6), as if the acquisitions had occurred on September 1, 2013:

	Three Months
	Ended
	November 30,
	2013
Revenue	$	40,178
Net loss attributable to the Company	$	(89670	)
Loss per share	$	-

These amounts have been calculated after applying our accounting policies and adjusting the results to reflect the recapitalization of Hawker.  The unaudited pro forma adjustments are based on available information and certain assumptions we believe are reasonable.  It was determined that HERLLC was not a business and therefore there is no pro forma adjustment for the acquisition of HERLLC (Note 5).

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DESCRIPTION OF BUSINESS

3 Months Ended

Nov. 30, 2014

DESCRIPTION OF BUSINESS [Abstract]

DESCRIPTION OF BUSINESS

1.              DESCRIPTION OF BUSINESS

Hawker Energy, Inc. (“we”, “our”, “us”, “Hawker” or “the Company”) was incorporated under the laws of the State of Nevada on June 12, 2006, under the name of Uventus Technologies Corp. On September 23, 2009, we merged with our wholly-owned subsidiary and changed our name to Sara Creek Gold Corp.  Subsequently, on September 11, 2014, we changed our name to Hawker Energy, Inc.

On October 25, 2013, we closed on the Agreement and Plan of Reorganization with SCNRG, LLC (“SCNRG”), a California limited liability company, whereby we acquired 100% of the membership interest in SCNRG, resulting in SCNRG becoming our wholly-owned subsidiary, in exchange for 14.0 million shares of our common stock issued to the members of SCNRG (see Note 4).  For accounting purposes, our acquisition of SCNRG has been accounted for as a reverse acquisition whereby SCNRG is the accounting acquirer effectuating a recapitalization of Hawker.  Accordingly, SCNRG is considered the acquirer for accounting purposes and, therefore, the historical financial statements of SCNRG are presented and consolidated with Hawker's beginning October 25, 2013.  As a result of this transaction, Hawker changed its business direction and is now in the oil and gas industry.   Our goal is to acquire and develop mature leases, interests and other rights to oil and gas producing properties with proven undeveloped potential. 

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Nov. 30, 2014	Aug. 31, 2014
CONDENSED CONSOLIDATED BALANCE SHEETS [Abstract]
Accumulated depreciation of fixed asets	$ 20,815	$ 19,605
Capitalized oil and gas properties accumulated depletion	$ 93,176	$ 86,193
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	74,674,703	41,174,703
Common stock, shares outstanding	74,674,703	41,174,703

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ASSET RETIREMENT OBLIGATIONS

3 Months Ended

Nov. 30, 2014

ASSET RETIREMENT OBLIGATIONS [Abstract]

ASSET RETIREMENT OBLIGATIONS

11.              ASSET RETIREMENT OBLIGATIONS 

Our asset retirement obligations relate to the abandonment of oil wells and related surface facilities. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates.

The following shows the changes in asset retirement obligations for the three months ended November 30, 2014 and the year ended August 31, 2014:

	Three Months		Year
	Ended		Ended
	November 30,		August 31,
		2014		2014
Asset retirement obligations, beginning	$	168,110	$	103,299
Liabilities acquired during the period		-		53,963
Liabilities settled during the period		-		-
Current period accretion		3,572		10,848
Asset retirement obligations, ending	$	171,682	$	168,110

XML

Document and Entity Information	3 Months Ended
	Nov. 30, 2014	Jan. 06, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Nov. 30, 2014
Entity Registrant Name	HAWKER ENERGY, INC.
Entity Central Index Key	0001415286
Current Fiscal Year End Date	--08-31
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		75,980,403
Entity Current Reporting Status	Yes

XML

NET PROFITS INTEREST ("NPI") PAYABLE

3 Months Ended

Nov. 30, 2014

NET PROFITS INTEREST ("NPI") PAYABLE [Abstract]

NET PROFITS INTEREST ("NPI") PAYABLE

12.              NET PROFITS INTEREST (“NPI”) PAYABLE

In connection with SCNRG's December 1, 2009 Purchase and Sale Agreement for the DEEP Lease, and as part of the purchase price consideration, SCNRG entered into an Assignment of Net Profit Interest with Christian Hall Petroleum. Pursuant to the agreement, SCNRG is required to make monthly payments to the holder in an amount equal to 40% of SCNRG's share of net profit (as defined in the agreement) from production. 

Until February 1, 2014, SCNRG's working interest in the DEEP property was 66.67%, and the NPI agreement called for a minimum monthly payment of $1,985 (SCNRG's 66.67% share).  Beginning February 1, 2014, SCNRG's working interest in the DEEP Lease increased to 87.18%, and its share of the minimum monthly payment became $2,596. Beginning May 15, 2014, SCNRG's working interest in the DEEP Lease increased to 100.0%, and its share of the minimum monthly payment became $2,978.  Payments are required until SCNRG and other working interest owners have made NPI payments in aggregate between $347,000 and $357,410 on or before December 31, 2022 (the actual maximum amount within this range is dependent on when SCNRG and other working interest owners satisfy their aggregate NPI payment obligations).  As of November 30, 2014, SCNRG and other working interest owners have made NPI payments totaling $134,135.  SCNRG has paid its 66.67% working interest share of this amount through February 1, 2014, its subsequent 87.18% share through May 15, 2014, and its subsequent 100.0% share through November 30, 2014.

Given its terminating nature, the discounted present value of the minimum monthly NPI payments was recorded as a liability at SCNRG's December 1, 2009, acquisition date of a 66.67% working interest in the DEEP Lease, and this liability was increased pro rata when its working interest increased to 87.18% on February 1, 2014, and again on May 14, 2014 when its working interest increased to 100.0%.  The discount rate used in all cases was 10.0% per annum.

Changes in SCNRG's share of the NPI liability are as follows for the three months ended November 30, 2014 and the year ended August 31, 2014: 

	Three Months
	Ended			Year Ended
	November 30,			August 31,
	2014			2014
NPI liability, beginning of period	$	169,104		$	124,597
Liabilities assumed in connection with    acquisition of additional DEEP Lease working interests		-			58,847
Current period accretion		4,104			14,104
Payments made		(8,934	)		(28,444	)
NPI liability, end of period		164,274			169,104
Less: current portion		20,570			20,065
NPI liability, long-term portion	$	143,704		$	149,039

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended
	Nov. 30, 2014	Nov. 30, 2013
Revenue:
Oil revenues	$ 10,294	$ 25,764
Expenses:
Direct operating costs	15,996	12,972
Depletion, depreciation and amortization	11,036	8,110
Professional fees	430,563	71,071
General and administrative expenses	74,527	6,231
Equity compensation expense	1,088,179
Total expenses	1,620,301	98,384
Net operating (loss)	(1,610,007)	(72,620)
Other (income) expense:
Interest (income)	(10,504)
Interest expense	39,463	3,413
Total other expense	28,959	3,413
Loss before income taxes	(1,638,966)	(76,033)
Provision for income taxes
Net loss	(1,638,966)	(76,033)
Net loss attributable to non-controlling interest	9,531
Net loss attributable to the Company	$ (1,629,435)	$ (76,033)
Net loss per common share - basic and diluted	$ (0.03)
Weighted average common shares outstanding - basic and diluted	60,064,813	17,654,293

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ACQUISITION OF AN ADDITIONAL 33.33% WORKING INTEREST IN DEEP LEASE

3 Months Ended

Nov. 30, 2014

ACQUISITION OF AN ADDITIONAL 33.33% WORKING INTEREST IN DEEP LEASE [Abstract]

ACQUISITION OF AN ADDITIONAL 33.33% WORKING INTEREST IN DEEP LEASE

6.                ACQUISITION OF AN ADDITIONAL 33.33% WORKING INTEREST IN DEEP LEASE

As a result of two transactions (described below) through our wholly-owned subsidiary SCNRG, we acquired the remaining 33.33% working interest in the DEEP Lease in the year ended August 31, 2014.

On February 4, 2014, SCNRG completed the acquisition of additional 20.5108% working interest in the DEEP Lease for $200,000 in cash plus assumed asset retirement obligations and net profits interest liabilities aggregating to an estimated fair value of $69,729, for total consideration of $269,729.  SCNRG's working interest increased from 66.67% to 87.18% as a result of the purchase, effective February 1, 2014.  Our condensed consolidated financial statements include the increased working interest beginning February 1, 2014.  The purchase price was allocated $3,529 to machinery and equipment, and $266,200 to oil properties based on estimated fair values.

On May 15, 2014, SCNRG completed the acquisition of the remaining 12.8192% working interest in the DEEP Lease for $125,000 in cash plus assumed asset retirement obligations and net profits interest liabilities aggregating to an estimated fair value of $43,081, for total consideration of $168,081.  SCNRG's working interest increased from 87.18% to 100.0% as a result of the purchase, effective May 15, 2014.  Our condensed consolidated financial statements include the increased working interest beginning May 15, 2014.  The purchase price was allocated $2,010 to machinery and equipment, and $166,071 to oil properties based on estimated fair values.

The operator, Caleco, LLC, will continue to operate the DEEP Lease on SCNRG's behalf during a transitional period until SCNRG qualifies with the regulatory agency as an operator.

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ACQUISITION OF HAWKER ENERGY (RINCON), LLC

3 Months Ended

Nov. 30, 2014

ACQUISITION OF HAWKER ENERGY (RINCON), LLC [Abstract]

ACQUISITION OF HAWKER ENERGY (RINCON), LLC

5.                ACQUISITION OF HAWKER ENERGY (RINCON), LLC 

On January 1, 2014, we exercised our option to acquire all of the membership interests in Hawker Energy (Rincon), LLC (“HERLLC”) from Darren Katic (who was also a seller in our transaction with SCNRG) and Charles Moore (collectively the “HERLLC Sellers”), pursuant to an Amended and Restated Option Agreement (“Option Agreement”) dated November 20, 2013.  We issued 3,000,000 shares of our common stock to the HERLLC Sellers as consideration for the acquisition and, as described below, were required to issue up to an additional 33,000,000 shares of our common stock to the HERLLC Sellers upon us or HERLLC consummating certain follow-on transactions described below (“Potential Follow-On Transactions”).  In addition, we assumed $135,199 in net liabilities of HERLLC.  The terms for the issuance of additional shares were revised on October 10, 2014 as described below. 

HERLLC, through its wholly-owned subsidiary Punta Gorda Resources, LLC (“Punta Gorda”), claims oil production and development rights of coastal lease PRC 145.1 just offshore Ventura County in the Rincon Field and ownership rights to an associated on-shore drilling and production site, which rights are being challenged in court by the lease's operator of record.  HERLLC has also engaged in preliminary discussions with various third parties concerning the Potential Follow-On Transactions, none of which were deemed by us to be reasonably possible as of January 1, 2014 (the date of our acquisition of HERLLC) due to the preliminary status of those discussions and lack of certainty around HERLLC's or Hawker's ability to finance one or more of these Potential Follow-On Transactions.  Other than its contested interest in PRC 145.1 and its preliminary discussions concerning the Potential Follow-On Transactions, HERLLC had no assets or operations as of January 1, 2014.  PRC 145.1 and the Potential Follow-On Transactions are discussed in greater detail below.

PRC 145.1 is subject to 24.5% in overriding royalties, primarily to the State of California. A single active well on PRC 145.1 produced an average of 11 barrels of oil per day (gross production before royalties) for the nine months September 30, 2014. This lease has ten other non-active wells, one or more of which may be recompleted or re-drilled.  Although initial technical work has been done on PRC 145.1 to develop a preliminary understanding of the resource and opportunity, no reserve reports done to SEC standards have been completed to date.

All rights claimed by HERLLC to PRC 145.1 are being challenged in court by the lease's operator of record -- Case No. 56-2013-00440672-CU-BC-VTA pending in Ventura County Superior Court.  HERLLC is currently not receiving any net proceeds from production on this lease pending resolution of this matter in our favor.

After we exercised our option to acquire HERLLC on January 1, 2014, the Option Agreement provided that the HERLLC Sellers were entitled to additional shares of our common stock upon the consummation of Potential Follow-On Transactions as follows:

(a) 2,000,000 shares of our common stock shall be issued upon our or HERLLC's acquisition of California Oil Independents or its oil and gas interests being the “Doud” leases, comprised of approximately 340 acres, 20 wells and two tank batteries, located in the Monroe Swell Field, near Greenfield, California;

(b) 2,000,000 shares of our common stock shall be issued upon our or HERLLC's acquisition of a participation in South Coast Oil – Huntington Beach CA oil and gas interests comprised of approximately 340 acres, and 20 wells (of which 9 are active) and 4 tank batteries, and known as the “Town Lot”;

(c) 5,000,000 shares of our common stock shall be issued upon our or HERLLC's acquisition of all of the oil and gas leases held by Christian Hall (or affiliates) in the Midway-Sunset field located between the towns of Taft and McKittrick in Kern County, CA;

(d) 10,000,000 shares of our common stock shall be issued upon our or HERLLC's acquisition of TEG Oil & Gas USA, Inc. (or certain oil and gas interests held by it, being all leases located in the Tapia Field, Los Angeles County, California);

(e) 7,000,000 shares of our common stock shall be issued upon the conveyance to us or HERLLC of certain assets and rights regarding PRC 145.1 Lease held by Rincon Island Limited Partnership or settlement in lieu of such conveyance; and

(f) 7,000,000 shares of our common stock shall be issued upon the conveyance to us or HERLLC of certain mineral rights regarding PRC 427 Lease held by ExxonMobil, a lease that is adjacent to PRC 145.1 Lease above.

The Potential Follow-On Transactions described above were dependent on a number of variables that were not within our control and, as a result, none of the transactions were deemed by us to be reasonably possible as of January 1, 2014 (the date of our acquisition of HERLLC).  Each of the Potential Follow-On Transactions described above, if consummated, would constitute a transaction separate and independent from our acquisition of HERLLC pursuant to the option.  Any shares of our common stock that may be issued upon the consummation of any of the Potential Follow-On Transactions (or pursuant to the terms of the October 10, 2014, amendment described below) will constitute expensed costs incurred concurrently with consummation of the applicable follow-on transaction (as opposed to incremental consideration for our acquisition of HERLLC).

The assets and liabilities of HERLLC at the date of acquisition were recorded at their fair values of:

Cash	$	1,214
Prepaid expenses		16,625
Less:
Accounts payable		(123,413	)
Loan payable to related party, short term		(29,625	)
Net liabilities assumed	$	135,199

The $138,199 difference between the par value of the common stock issued, $3,000, and the net liabilities assumed, $135,199, was recorded to paid in capital as there is no objective evidence of the value of HERLLC's assets, which consist of the disputed claim to coastal lease PRC 145.1, and inability to determine a probability of success of the litigation.  As a result and in an effort to fairly represent and not overstate the consolidated assets of Hawker, a decrease in capital was deemed appropriate.

On October 10, 2014, Hawker authorized an amendment (the “Amendment”) to the Option Agreement.  Under the original terms of the Option Agreement, Messrs. Katic and Moore were entitled to, in the aggregate, up to 33,000,000 additional shares of our common stock upon the consummation of certain Potential Follow-on Transactions. The Amendment waived all of the follow-on transaction requirements and authorized the immediate issuance to Messrs. Katic and Moore of the full 33,000,000 shares (16,500,000 each). Of those shares, we hold 19,000,000 shares in escrow, to be released as follows: (i) 10,000,000 shares upon completion of the acquisition of the assets of TEG Oil & Gas, Inc. (located in the Tapia Field, Los Angeles County, California), and (ii) 9,000,000 shares upon completion, on or before December 31, 2017, of any one of the transactions evaluated by HERLLC, our wholly-owned subsidiary, prior to its reorganization with Hawker, including a transaction resulting in Hawker ownership of oil and gas lease interests in any one of the following unique oil fields:

(a)Cat Canyon (leases Tognazzini, Wickenden, Los Alamos, GWP, and those immediately adjacent to, in

each case, in Santa Barbara County);

(b)Santa Maria (T 11N, R 36W extending southeast through T9N R33W in Santa Barbara County);

(c)Casmalia (leases Tompkins, Peshine, and those immediately adjacent to, in each case, in Santa Barbara

       County);

(d)North Lost Hills (Sections 12 & 13, T25S, R19E, and Sections 7 & 18, T25S, R 20E, totaling 1,500 acres in Kern County CA);

(e)Maricopa (McFarland and Jameson leases totaling 40 acres in Kern County);

(f)Pine Meadows (Section 1 Township 31 South Range 22E in Kern County); or

(g)Torrance (Joughin and South Torrance Units totaling 900 acres in Los Angeles County).

Waiver of the Potential Follow-On Transaction requirements and the immediate issuance of the remaining shares is meant to simplify our common shareholding structure and share count and to assist in our capital raising efforts. 

With respect to 14,000,000 shares of our common stock that were issued as a result of the Amendment, an equity compensation expense of $1,011,500 recorded based on the fair value of the shares at the date of issuance.  With respect to the 19,000,000 shares of our common stock that are in escrow, an equity compensation expense of $19,000 was recorded based on the par value of the shares at the date of issuance.  Total expense was $1,030,500, which was recorded in the three months ended November 30, 2014. As and when subsequently released from escrow, a further expense will be recorded based on the fair value of the 19,000,000 shares (less amounts previously expensed based on par value) concurrently with consummation of the applicable follow-on transaction.  All of these amounts are not considered for accounting purposes to be incremental consideration for our acquisition of HERLLC.

Pursuant to a separate agreement dated November 13, 2014, between Messrs. Katic, Moore and Tywoniuk, Mr. Tywoniuk (a significant shareholder of Hawker) holds warrants to acquire 9.7222% of any shares of Hawker acquired by Messrs. Katic and Moore pursuant to the Amendment above.  This agreement amended a December 27, 2013, agreement entitling Mr. Tywoniuk to acquire 5% of any shares of Hawker acquired by Messrs. Katic and Moore pursuant to the Option Agreement.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Nov. 30, 2014

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

17.               RELATED PARTY TRANSACTIONS

The following information sets forth related party transactions, being transactions with:

• Mr. Kristian Andresen is a director of Hawker and a significant shareholder.  Until October 25, 2013, he was also our CEO, and from October 25, 2013, until July 17, 2014, he was Secretary of Hawker.  Mr. Andresen has been actively providing services to Hawker since October 25, 2013.
• Mr. Darren Katic is a director and Chief Executive Officer and Chief Financial Officer of Hawker.  He was a member of SCNRG, which we acquired on October 25, 2013, and at which point Mr. Katic became a director, officer and a significant shareholder of Hawker.
• Manhattan Holdings, LLC (“Manhattan”) was a member of SCNRG, which Hawker acquired on October 25, 2013, at which point Manhattan became a significant shareholder of Hawker.
• Mr. Charles Moore was a managing member of HERLLC until Hawker acquired his interest on January 1, 2014, at which point he became a significant shareholder of Hawker.  Mr. Moore has been actively providing services to Hawker since that date.
• Mr. Gerald Tywoniuk was a member of SCNRG, which Hawker acquired on October 25, 2013, at which point he became a significant shareholder of Hawker.  Mr. Tywoniuk has been actively providing services to Hawker since that date.

HERLLC

On January 1, 2014, Hawker exercised its option to acquire all of the membership interests in HERLLC from Mr. Katic and Mr. Moore (collectively the “HERLLC Sellers”), as described in Note 5.  Hawker issued 3,000,000 shares of our common to the HERLLC Sellers as consideration for the acquisition, 1,500,000 shares to each HERLLC Seller.  Hawker also assumed net liabilities of $135,199, including $29,625 owing to Mr. Katic.

The HERLLC option was originally entered into with Hawker on October 15, 2013 and amended on November 20, 2013 to (a) extend the term of the option, (b) revise the option consideration payable upon consummation of certain transactions described in the Agreement and (c) provide for additional option consideration in the event of the consummation of certain transactions not previously contemplated by the parties.

On October 10, 2014, the Board of Hawker waived all of the follow-on transaction requirements and authorized the immediate issuance to Messrs. Katic and Moore of 33,000,000 shares (16,500,000 each). Of those shares, we hold 19,000,000 shares in escrow, to be released in accordance with the provisions described in Note 5, Acquisition of Hawker Energy (Rincon), LLC. 

Loan Payable To Related Parties, Short Term

The components of $332,182 of loans payable to related parties, short term, are disclosed in Note 9.  Interest expense on such loans was $6,781 and $0 for the three months ended November 30, 2014 and 2013 respectively.

Loans Payable To Related Parties, Long Term

SCNRG received various loans from its former members from its inception totaling $89,833 as of August 31, 2013: Mr. Katic ($38,500), Manhattan ($38,500) and Mr. Tywoniuk ($12,833).  Each loan was originally unsecured, non-interest bearing and due on demand. On September 18, 2013, each loan was formalized through the issuance of an amended and restated promissory note to each former member. The amended and restated promissory notes were unsecured, bore interest at a rate of 1.66% per annum and matured no later than September 18, 2018. The unpaid principal and interest were payable upon the earlier of their maturity or upon the issuance of new debt or equity securities in a transaction or series of transactions resulting in aggregate gross proceeds to Hawker of a minimum of $5 million.  Hawker assumed these loans payable upon its acquisition of SCNRG on October 25, 2013.  On April 9, 2014, the related parties agreed to convert the short- and long-term loans payable to related parties into common stock and warrants on the same terms as the unit offering described in Note 16.

Interest expense on such loans was $0 and $372 for the three months ended November 30, 2014 and 2013 respectively.

Convertible Notes Payable

As of November 30, 2014, pursuant to a convertible note payable, we owed a relative of Mr. Darren Katic, $100,000 plus accrued interest of $4,701, all as described in Note 10.

Interest expense on this convertible note payable was $2,992 for the three months ended November 30, 2014.

Unit Issuances

As part of the common stock payable amounts outstanding on August 31, 2014 as described in Note 16, $20,000 was received from each of Messrs. Katic and Tywoniuk, for which 200,000 Units were issued to each during the three months ended November 30, 2014.  The price of each Unit was $0.10. Each Unit was comprised of one share of our common stock, together with a warrant to acquire an additional one-half share of our common stock on payment of $0.20 per share. The warrants expire five years from the closing date.

Other

A portion of the non-controlling interest in Tapia Holdings is held by Mr. Moore, being $45,000 out of the $145,000 of capital received.  See Note 16.

On behalf of a company controlled by Mr. Katic, the Company has been paying rent to a third party for its office space, beginning January 1, 2014.  No formal assumption agreement has been completed to assign the leases with the landlord from Mr. Katic's company to Hawker.  Mr. Katic provided a personal guarantee to the landlord.  For the three months ended November 30, 2014, these payments totaled $9,617.

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INCOME TAXES

3 Months Ended

Nov. 30, 2014

INCOME TAXES [Abstract]

INCOME TAXES

13.              INCOME TAXES

There was no current or deferred income tax expense (benefit) for the three months ended November 30, 2014 and 2013.  A valuation allowance has been established against net operating losses where it is more likely than not that such losses will expire before they are utilized. 

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LOANS PAYABLE TO RELATED PARTIES, SHORT TERM

3 Months Ended

Nov. 30, 2014

LOANS PAYABLE TO RELATED PARTIES, SHORT TERM [Abstract]

LOANS PAYABLE TO RELATED PARTIES, SHORT TERM

9.              LOANS PAYABLE TO RELATED PARTIES, SHORT TERM 

Loans payable to related parties, short term, consist of the following at November 30, 2014, and August 31, 2014:

	November 30,		August 31,
	2014		2014
Darren Katic	$	151,000	$	161,000
Manhattan Holdings, LLC		90,000		60,000
Gerald Tywoniuk		60,000		-
Kristian Andresen		18,525		-
Total short-term loans		319,525		221,000
Accrued interest payable		12,657		5,876
Loans payable to related parties, short term	$	332,182	$	226,876

Loans payable to related parties are unsecured and bear interest at 10% per annum.  Mr. Katic's loan is due on demand.  Of the Manhattan Holdings, LLC loan balance, $60,000 was originally due on October 31, 2014, but the maturity date on that portion was extended to January 31, 2015, in combination with an additional $30,000 loan.  Other loans are due January 31, 2015.  Accordingly, all loans from related parties above have been treated as short-term loans.  Mr. Katic is an officer, director and significant shareholder.  Manhattan Holdings, LLC and Gerald Tywoniuk are significant shareholders.  Kristian Andresen is a director and significant shareholder.

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PRO FORMA FINANCIAL INFORMATION (Schedule of Unaudited Pro Forma Consolidated Information) (Details) (USD $)	3 Months Ended
	Nov. 30, 2013
PRO FORMA FINANCIAL INFORMATION [Abstract]
Revenue	$ 40,178
Net loss attributable to the Company	$ (89,670)
Loss per share

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SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM

3 Months Ended

Nov. 30, 2014

SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM [Abstract]

SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM

7.             SECURED SUBORDINATED LOAN RECEIVABLE, SHORT TERM

Between April 18, 2014 and January 15, 2015, we and our wholly-owned subsidiary, Tapia Holdings, LLC (“Tapia Holdings”), made a number of advances to TEG Oil & Gas U.S.A., Inc. (“TEG”), pursuant to several secured subordinated notes and related security agreements, all as amended and restated into a Secured Subordinated Note dated January 12, 2015 (the “Note”), and a Fourth Amended and Restated Security Agreement dated January 12, 2015 (the “Security Agreement”), each executed by TEG, and a Limited Recourse Guarantee (“Guarantee”) and a Pledge Agreement (“Pledge Agreement”), each executed by Sefton Resources, Inc. (“Sefton”) (collectively, the “Loan Receivable Agreements”). The Loan Receivable Agreements and an Intercreditor Agreement (defined below) were entered into in connection with what ultimately became an executed Share Purchase Agreement to acquire TEG.  

Share Purchase Agreement To Purchase All Of The Outstanding Shares Of Capital Stock Of TEG

On January 12, 2015, we entered into a Share Purchase Agreement (“Share Purchase Agreement”) with Sefton pursuant to which we agreed to purchase, and Sefton agreed to sell, 100% of the issued and outstanding shares of capital stock of Sefton's wholly-owned subsidiary, TEG.  The principal terms of the Share Purchase Agreement are as follows: we will purchase all of the shares of TEG for $1.00 in cash plus the issuance of 3,000,000 shares of our common stock and a five-year warrant to purchase up to an additional 5,000,000 shares of our common stock for $0.25 per share.

Between April 18, 2014 and January 15, 2015, we and our wholly-owned subsidiary, Tapia Holdings, made a number of advances to TEG, pursuant to the Loan Receivable Agreements. These advances totaled approximately $1,637,352 as of January 15, 2015 (described further under “Secured Subordinated Loan Receivable, Short Term” below), plus accrued interest.  This amount constitutes additional consideration for the acquisition, as this loan receivable will not be settled prior to the closing of our acquisition of TEG. 

The transactions contemplated by the Share Purchase Agreement are subject to several customary conditions, most notably that the purchase and sale must be approved by Sefton's shareholders.

Bank of the West (“BOTW”), Sefton's senior lender, has consented to our acquisition of TEG and has agreed to forbear taking enforcement action against TEG on the senior loan provided that (i) Hawker lend TEG not less than $350,000 within 90 days, (ii) interest on TEG's obligations to BOTW be increased to 9%, with a monthly pay rate of 5% and the remaining deferred 4% of unpaid interest compounded monthly, (iii) the proceeds of any sale, assignment, licensing or other transfer of any real or personal property rights which serve as collateral for TEG's obligations to BOTW be remitted directly to BOTW, and (iv) commencing no later than the first month after which the California Midway-Sunset First Purchase Price as published by the U.S. Energy Information Administration exceeds $60 per barrel, TEG will begin making outstanding property tax payments to the County of Los Angeles of at least $15,000 per month.

As a result of a significant decline in oil prices and other factors, the transaction described above amends and replaces the transaction described in our Annual Report on Form 10-K filed November 24, 2014 to acquire 80% interest in the assets of TEG pursuant to a non-binding letter of intent dated June 18, 2014. 

TEG's assets comprise four oil and gas leases encompassing the Tapia Canyon field (the “Tapia Assets”) and one lease west of the Tapia Canyon field (the “Eureka Assets”), and the accompanying production equipment.

Secured Subordinated Loan Receivable, Short Term 

Under the terms of the Loan Receivable Agreements, TEG agreed to pay us the principal sum of $2,100,000, or such lesser amount as may be outstanding from time to time, with interest on the unpaid principal amount at the rate of 3.0% per annum.  We advanced $196,625 to TEG during the three months ended November 30, 2014, for a total at November 30, 2014, of $1,487,352, and an additional $150,000 subsequent to November 30, 2014, for a total at January 15, 2015 of $1,637,352, not including accrued interest.  Further advances are subject to our sole and absolute discretion. The loan receivable matures on December 31, 2015, at which time all outstanding principal and accrued interest is due and payable in full.  The assets of TEG secure the Note, which is also guaranteed on a limited recourse basis by Sefton. Sefton's Guarantee is secured by a pledge of all of the outstanding shares of TEG.  TEG's assets are located in the Tapia and Eureka Fields, Los Angeles and Ventura Counties, California. The Note and our security interest in the assets of TEG are subordinate to senior indebtedness of TEG, pursuant to an Amended and Restated Subordination and Intercreditor Agreement (“Intercreditor Agreement”) dated January 1, 2015, as amended, by and among Tapia Holdings, Hawker, TEG, Sefton, TEG's affiliate TEG MidContinent, Inc., BOTW, and us.

The Security Agreement and the Pledge Agreement also provide that it is a default under those agreements if the transactions contemplated by the Share Purchase Agreement are not consummated by January 31, 2015 (including if Sefton's shareholders have not approved the transactions by that date). TEG further agreed to cease and terminate any solicitation or encouragement of a third party acquisition proposal; provided, that, if TEG receives an unsolicited, bona fide acquisition proposal that is found to be superior to the terms of the Share Purchase Agreement, to the extent we decline to renegotiate the Share Purchase Agreement terms or to otherwise match the terms of the third party acquisition proposal, TEG may pursue such third party acquisition proposal. The Security Agreement, Pledge Agreement and Guarantee also contain other representations, warranties and covenants of both parties that are customary for agreements of these types.
 

The period end balance of the secured subordinated note receivable is comprised of the following:

	November 30,		August 31,
		2014		2014
Principal	$	1,487,352	$	1,290,727
Accrued interest		18,099		7,595
Total	$	1,505,451	$	1,298,322

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FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES

3 Months Ended

Nov. 30, 2014

FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES

FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES

8.               FIXED ASSETS; CAPITALIZED OIL AND GAS PROPERTIES

The asset categories of fixed assets and capitalized oil and gas properties at November 30, 2014 and August 31, 2014 were as follows:

	November 30, 2014
	Cost		Accumulated		Net Book
			Depletion,		Value
			Depreciation and
			Amortization
Machinery and equipment	$	33,874	$	20,815	$	13,059
Other fixed assets		9,252		-		9,252
Total fixed assets		43,126		20,815		22,311
Capitalized oil and gas properties		816,239		93,176		723,063
Total	$	859,365	$	113,991	$	745,374

	August 31, 2014
	Cost		Accumulated		Net Book
			Depletion,		Value
			Depreciation and
			Amortization
Fixed assets: machinery and equipment	$	33,874	$	19,605	$	14,269
Capitalized oil and gas properties		816,239		86,193		730,046
Total	$	850,113	$	105,798	$	744,315

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CONVERTIBLE NOTES PAYABLE, SHORT TERM

3 Months Ended

Nov. 30, 2014

CONVERTIBLE NOTES PAYABLE, SHORT TERM [Abstract]

CONVERTIBLE NOTES PAYABLE, SHORT TERM

10.              CONVERTIBLE NOTES PAYABLE, SHORT TERM

Between May 13, 2014, and November 30, 2014, we issued a number of convertible notes payable (“CNP”).   All were issued in amounts equal to the cash we received, and bear simple interest on the unpaid principal balance at 12% per annum, which is payable on maturity.

Convertible notes payable, short term, consist of the following at November 30, 2014, and August 31, 2014; conversion features, security provisions and warrants to acquire common stock of Hawker are also set forth below:

	Issue	Maturity	November 30,		August 31,
	Date	Date	2014		2014
CNP 1
(1)(2)(3)	June 25, 2014	November 30, 2014	$	350,000	$	350,000
CNP 2
(1)(2)(3)	May 30, 2014	November 30, 2014		250,000		250,000
CNP 3
(1)(3)(4)	July 17, 2014	June 30, 2015		100,000		100,000
CNP 4
(1)(2)(3)(4)(5)	July 17, 2014	July 10, 2015		100,000		100,000
CNP 5
(6)	May 13, 2014	May 13, 2016		50,000		50,000
CNP 6
(1)(2)(3)(4)	July 25, 2014	July 25, 2015		50,000		50,000
CNP 7
(1)(2)(3)(4)	August 28, 2014	July 25, 2015		30,000		30,000
CNP 8
(1)(3)(4)	September 26, 2014	September 26, 2015		25,000		-
CNP 9
(1)(2)(3)	November 3, 2014	May 3, 2015		25,000		-
				980,000		930,000
Accrued interest payable				50,178		21,599
Convertible notes payable, short term			$	1,030,178	$	951,599

(1) Convertible at any time at the option of the investor into “Conversion Units.” Each Conversion Unit consists of one share of common stock of Hawker and one warrant to purchase one-half share of common stock of Sara Creek at an exercise price of $0.25 per share. The number of Conversion Units into which the note is convertible is computed by dividing all of the then outstanding principal and accrued interest under the note by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events).  Each warrant has a five-year life from the date the convertible note payable was issued.  In the event Hawker sells common stock for less than $0.10 per share, the conversion rate for CNP 1 and 9 shall be adjusted to that price.  In the case of CNP 1 and 2, the notes were amended September 18, 2014, to limit the conversion of a part or the entire convertible note payable at any one time to a maximum beneficial ownership in Hawker of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion.  CNP 9 is similarly limited.

(2) Hawker granted a security interest to the investor in all of its assets.

(3) The proceeds were required to be used solely for the purpose of allowing Tapia Holdings to make advances to TEG under the terms of the secured subordinated loan receivable described in Note 7.  Any repayment of such advances by TEG to Tapia Holdings must be used by us to immediately first repay convertible notes payable to the holder of CNP 1, 2 and 3, and second to repay other convertible notes payable pro rata.

(4) Conversion of unpaid principal into Conversions Units pursuant to the terms in (1) above is mandatory in the event Hawker closes the Proposed TEG Acquisition described in Note 7.  Conversion of unpaid interest into Conversion Units is at the election of Hawker.

(5) The holder is related to Darren Katic, who is an officer, director and significant shareholder.

(6) Unpaid principal and accrued interest is convertible at any time at the option of the holder into Conversion Units in an amount computed by dividing the amount converted by $0.10 (as appropriately adjusted for any stock splits, stock combinations or similar events).  Repayment of the convertible note payable is required on collection of the secured subordinated loan receivable described in Note 7 if earlier than the maturity date above.  As Hawker expects to receive repayment on the secured subordinated loan receivable or close on the TEG acquisition within one year, this convertible note payable has been classified as a short term liability.

See Note 19 for subsequent events concerning convertible notes payable.

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NET PROFITS INTEREST ("NPI") PAYABLE (Tables)

3 Months Ended

Nov. 30, 2014

NET PROFITS INTEREST ("NPI") PAYABLE [Abstract]

Schedule of Changes in NPI Liability

Changes in SCNRG's share of the NPI liability are as follows for the three months ended November 30, 2014 and the year ended August 31, 2014: 

	Three Months
	Ended			Year Ended
	November 30,			August 31,
	2014			2014
NPI liability, beginning of period	$	169,104		$	124,597
Liabilities assumed in connection with    acquisition of additional DEEP Lease working interests		-			58,847
Current period accretion		4,104			14,104
Payments made		(8,934	)		(28,444	)
NPI liability, end of period		164,274			169,104
Less: current portion		20,570			20,065
NPI liability, long-term portion	$	143,704		$	149,039

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ASSET RETIREMENT OBLIGATIONS (Details) (USD $)	3 Months Ended		12 Months Ended
	Nov. 30, 2014	Nov. 30, 2013	Aug. 31, 2014
ASSET RETIREMENT OBLIGATIONS [Abstract]
Asset retirement obligations, beginning	$ 168,110	$ 103,299	$ 103,299
Liabilities acquired during the period			53,963
Liabilities settled during the period
Current period accretion	3,572	2,195	10,848
Asset retirement obligations, ending	$ 171,682		$ 168,110

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Nov. 30, 2014

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

15.              COMMITMENTS AND CONTINGENCIES

Commitments

Oil production from the DEEP Lease is subject to a 1% overriding royalty.  Additionally, production is also subject to an aggregate additional 19.92% royalty for total royalties of 20.92%.

Further, on December 1, 2009, SCNRG entered into an Operating Agreement with Caleco, LLC (“Caleco”) for a term equal to the life of the DEEP Lease wells.  As the operator, Caleco incurs production and other costs, which are subsequently billed to SCNRG for its share through a joint interest billing process; and the operator distributes to SCNRG its share of revenue received from production, less royalties and NPI obligations. All expenses and revenue presented by the operator represent the pro rata share of the revenue earned and expenses incurred.  In accordance with the terms of the agreement, the operator is entitled to a fee for services but has instead elected to bill SCNRG based on actual time and materials.  As described in Note 6, SCNRG increased its working interest in the DEEP Lease from 66.67% to 100.0% during the year ended August 31, 2014; Caleco continues to operate the DEEP Lease on SCNRG's behalf during a transitional period until SCNRG qualifies with the regulatory agency as an operator.  

Contingencies

We are 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 owners for the cost of pollution cleanup resulting from operations and subject the owners to liability for pollution damages. In some instances, the operator may be directed to suspend or cease operations in the affected area.  As of November 30, 2014, and August 31, 2014, we have no reserve for environmental remediation and are not aware of any environmental claims.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Nov. 30, 2014

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of Presentation

Basis Of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information.

The unaudited interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended August 31, 2014, which contains the audited financial statements and notes thereto for Hawker. 

Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.  Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.  It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.  The interim results for the three months ended November 30, 2014, are not necessarily indicative of results for the full fiscal year.

Principles of Consolidation

Principles Of Consolidation

The acquisition of SCNRG by Hawker on October 25, 2013, has been accounted for as a reverse acquisition whereby SCNRG is the accounting acquirer effectuating a recapitalization of Hawker.  Therefore, our condensed consolidated financial statements include the historic accounts of SCNRG, and consolidated with Hawker's beginning October 25, 2013. 

On January 1, 2014, we acquired all of the membership interests of Hawker Energy, LLC, which has a wholly-owned subsidiary, Punta Gorda Resources, LLC (see Note 5).  Hawker Energy, LLC changed its name to Hawker Energy (Rincon), LLC on October 22, 2014.  Our condensed consolidated financial statements include the accounts of these entities beginning January 1, 2014. 

All significant intercompany balances and transactions have been eliminated. 

Use of Estimates

Use Of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates included in the financial statements are: (1) depreciation and depletion; (2) accrued assets and liabilities; (3) asset retirement obligations; and (4) net profits interest payable.  Recorded amounts are based on estimates of oil reserves, retirement costs and dates.  By their nature, these estimates including the estimates of future prices and costs, and the related future cash flows are subject to measurement uncertainty, and the impact in the consolidated financial statements of future periods could be material.  Although management believes these estimates are reasonable, changes in facts and circumstances or discovery of new information may result in revised estimates.  Actual results could differ from those estimates.

Changes in Accounting Policy

Changes In Accounting Policies

The Company has not had any changes in accounting policies during the three months ended November 30, 2014.

New Accounting Pronouncements

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-9, Revenue From Contracts With Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to receive in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is not permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which is intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared based on the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management's responsibility to evaluate whether there is substantial doubt about the organization's ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization's management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The new guidance is effective for the interim and annual periods beginning after December 15, 2016; early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.  The Company has not conducted its analysis to determine whether it will adopt the new standard early or not.

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CONVERTIBLE NOTES PAYABLE, SHORT TERM (Narrative) (Details) (USD $)	0 Months Ended	3 Months Ended
	Sep. 18, 2014	Nov. 30, 2014	Jan. 08, 2015	Dec. 12, 2014
Debt Instrument [Line Items]
Warrant exercise price		$ 0.25
Price per unit		$ 0.10
Subsequent Event [Member]
Debt Instrument [Line Items]
Warrant exercise price			$ 0.20	$ 0.20
Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Interest rate		12.00%
Warrant exercise price		$ 0.25
Price per unit		$ 0.10
Term of warrants		5 years
Maximum beneficial ownership interest after conversion of debt (as a percent)	4.99%

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ACQUISITION OF HAWKER ENERGY (RINCON), LLC (Narrative) (Details) (USD $)	3 Months Ended		12 Months Ended	0 Months Ended
	Nov. 30, 2014	Nov. 30, 2013	Aug. 31, 2014	Jan. 08, 2015	Dec. 12, 2014	Oct. 10, 2014	Jan. 01, 2014	Nov. 13, 2014	Dec. 27, 2013
Business Acquisition [Line Items]
Overriding royalty percentage	1.00%
Equity compensation expense recorded based on the fair value of the shares at the date of issuance	$ 1,088,179		$ 68,760
Option Agreement [Member]
Business Acquisition [Line Items]
Shares to be held in escrow till on or before December 31, 2017						9,000,000
Subsequent Event [Member]
Business Acquisition [Line Items]
Stock issued (in shares)				1,150,000	105,700
Hawker Energy Rincon Llc [Member]
Business Acquisition [Line Items]
Overriding royalty percentage	24.50%
Par value	138,199
Additional paid-in capital	3,000
Hawker Energy Rincon Llc [Member] | Option Agreement [Member]
Business Acquisition [Line Items]
Stock issued (in shares)						14,000,000
Equity compensation expense recorded based on the fair value of the shares at the date of issuance	1,030,500
Hawker Energy Rincon Llc [Member] | Kern County CA [Member] | Option Agreement [Member]
Business Acquisition [Line Items]
Area of land						1,500
Hawker Energy Rincon Llc [Member] | Kern County [Member] | Option Agreement [Member]
Business Acquisition [Line Items]
Area of land						40
Hawker Energy Rincon Llc [Member] | Los Angeles County [Member] | Option Agreement [Member]
Business Acquisition [Line Items]
Area of land						900
Hawker Energy Rincon Llc [Member] | Shares of common stock that were issued as a result of the Amendment [Member] | Option Agreement [Member]
Business Acquisition [Line Items]
Equity compensation expense recorded based on the fair value of the shares at the date of issuance						1,011,500
Hawker Energy Rincon Llc [Member] | Shares of common stock that are in escrow [Member] | Option Agreement [Member]
Business Acquisition [Line Items]
Equity compensation expense recorded based on the fair value of the shares at the date of issuance						19,000
California Oil Independents [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition	2,000,000
South Coast Oil [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition	2,000,000
Christian Hall [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition	5,000,000
TEG Oil & Gas, Inc. [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition	10,000,000
TEG Oil & Gas, Inc. [Member] | Option Agreement [Member]
Business Acquisition [Line Items]
Shares to be held in escrow till acquisition						10,000,000
Rincon Island Limited Partnership [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition	7,000,000
ExxonMobil [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition	7,000,000
Darren Katic [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition							1,500,000
Darren Katic [Member] | Hawker Energy Rincon Llc [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition						16,500,000
Sellers [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition							3,000,000
Possible additional shares required to issue							33,000,000
Charles Moore [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition							1,500,000
Charles Moore [Member] | Hawker Energy Rincon Llc [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition						16,500,000
Messrs. Katic and Moore [Member] | Hawker Energy Rincon Llc [Member]
Business Acquisition [Line Items]
Number of shares issued for acquisition						33,000,000
Shares to be held in escrow						19,000,000
Mr. Tywoniuk [Member] | Hawker Energy Rincon Llc [Member]
Business Acquisition [Line Items]
Warrants to purchase percentage of shares of common stock held by a significant shareholder								9.7222%	5.00%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Nov. 30, 2014	Nov. 30, 2013
Cash flows from operating activities:
Net loss before loss attributable to non-controlling interest	$ (1,638,966)	$ (76,033)
Depletion, depreciation and amortization	7,464	5,915
Accretion of asset retirement obligation	3,572	2,195
Accretion of net profits interest liability	4,104	3,041
Equity compensation expense	1,088,179
Other	13,000
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Accounts receivable	2,143	(1,493)
Inventory	369	3,427
Prepaid expenses	5,626	2,295
Accounts payable and accrued expenses	487,717	71,101
Net cash (used in) provided by operating activities	(26,792)	10,448
Cash flows from investing activities:
Cash acquired in Hawker acquisition		6,004
Purchase of fixed assets	(9,252)
Secured subordinated loan receivable	(196,625)
Net cash (used in) provided by investing activities	(205,877)	6,004
Cash flows from financing activities:
Loans from related parties, short term	105,000
Repayment of loans from related parties, short term	(10,000)
Payments on net profits interest agreement	(8,934)	(5,957)
Proceeds from convertible notes	50,000
Proceeds from sale of non-controlling interest	90,000
Net cash provided by (used in) financing activities	226,066	(5,957)
Net change in cash	(6,603)	10,495
Cash, beginning	13,207	8,298
Cash, end	6,604	18,793
Supplemental disclosure of cash flow information:
Interest paid	$ 4,104	$ 3,041

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ACQUISITION OF SCNRG

3 Months Ended

Nov. 30, 2014

ACQUISITION OF SCNRG [Abstract]

ACQUISITION OF SCNRG

4.                ACQUISITION OF SCNRG

As described in Note 1, on October 25, 2013, we acquired 100% of the membership interest in SCNRG, resulting in SCNRG becoming a wholly-owned subsidiary of Hawker, in exchange for 14.0 million shares of our common stock issued to the members of SCNRG.  For accounting purposes, the acquisition of SCNRG by Hawker has been accounted for as a reverse acquisition effectuating a recapitalization of SCNRG.  Accordingly, SCNRG is considered the acquirer for accounting purposes and, therefore, the historical financial statements of SCNRG are brought forward and consolidated with Hawker's beginning October 25, 2013.  

The 14.0 million common shares issued in the transaction had an estimated fair value of $14,000.  The following is a summary of the fair value of consideration transferred in exchange for the estimated fair value of net assets acquired on October 25, 2013:

Fair value of consideration transferred:
14,000,000 shares of Hawker restricted common stock	$	14,000
Fair value of net assets acquired:
Cash	$	6,004
Accounts receivable		1,553
Oil properties		26,500
Deposit		5,000
Accounts payable and accrued liabilities		(37,431	)
Net assets acquired	$	1,626

The difference between the estimated fair value of the common shares issued and the net assets acquired was recorded to additional paid-in capital.

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RELATED PARTY TRANSACTIONS (Details) (USD $)	1 Months Ended	3 Months Ended		12 Months Ended	0 Months Ended
	Sep. 18, 2013	Nov. 30, 2014	Nov. 30, 2013	Aug. 31, 2014	Jan. 08, 2015	Dec. 12, 2014	Jan. 01, 2014	Oct. 10, 2014	Aug. 31, 2013
Related Party Transaction [Line Items]
Loans payable to related parties, short term		$ 332,182		$ 226,876
Interest expense		39,463	3,413
Warrant exercise price		$ 0.25
Price per unit		$ 0.10
Loans payable									89,833
Gross proceeds received to trigger repayment of loans to related party	5,000,000
Amount owed to related party		319,525		221,000
Accrued interest payable		12,657		5,876
Net proceeds from unit offering				980,288
Non-controlling interest		135,469		55,000
Proceeds from sale of non-controlling interest		90,000		55,000
Common Stock Payable [Member]
Related Party Transaction [Line Items]
Price per unit		$ 0.10
Net proceeds from unit offering		50,000
Net proceeds from unit offering, shares		500,000
Unit comprised ratio into common stock		1
Unit comprised ratio into additional common stock to acquire warrant		0.5
Share price to acquire warrant (in dollars per share)		$ 0.20
Warrants expire term		5 years
Proceeds from sale of non-controlling interest
Loan From Related Parties, Short Term [Member]
Related Party Transaction [Line Items]
Interest expense		6,781	0
Loans From Related Parties, Long Term [Member]
Related Party Transaction [Line Items]
Interest expense		0	372
Convertible notes payable
Related Party Transaction [Line Items]
Interest expense		2,992
Warrant exercise price		$ 0.25
Price per unit		$ 0.10
Interest rate		12.00%
Amount owed to related party		980,000		930,000
Accrued interest payable		50,178		21,599
Relative Of Darren Katic [Member] | Convertible notes payable
Related Party Transaction [Line Items]
Amount owed to related party		100,000
Accrued interest payable		4,701
Tapia Holdings, LLC [Member]
Related Party Transaction [Line Items]
Proceeds from sale of non-controlling interest		145,000
Hawker Energy (Rincon), LLC [Member]
Related Party Transaction [Line Items]
Liabilities assumed							(135,199)
Subsequent Event [Member]
Related Party Transaction [Line Items]
Warrant exercise price					$ 0.20	$ 0.20
Net proceeds from unit offering, shares					1,150,000	105,700
Warrants expire term					5 years	5 years
Darren Katic [Member]
Related Party Transaction [Line Items]
Number of shares issued for acquisition							1,500,000
Due to related party							(29,625)
Loans payable									(38,500)
Interest rate		10.00%
Amount owed to related party		151,000		161,000
Payments for Rent		9,617
Darren Katic [Member] | Hawker Energy (Rincon), LLC [Member]
Related Party Transaction [Line Items]
Number of shares issued for acquisition								16,500,000
Manhattan Holdings, LLC [Member]
Related Party Transaction [Line Items]
Loans payable									(38,500)
Amount owed to related party		90,000		60,000
Total advances		30,000
Sellers [Member]
Related Party Transaction [Line Items]
Number of shares issued for acquisition							3,000,000
Gerald Tywoniuk [Member]
Related Party Transaction [Line Items]
Loans payable									(12,833)
Amount owed to related party		60,000
Gerald Tywoniuk [Member] | Common Stock Payable [Member]
Related Party Transaction [Line Items]
Net proceeds from unit offering		20,000
Net proceeds from unit offering, shares		200,000
Charles Moore [Member]
Related Party Transaction [Line Items]
Number of shares issued for acquisition							1,500,000
Charles Moore [Member] | Tapia Holdings, LLC [Member]
Related Party Transaction [Line Items]
Non-controlling interest		45,000
Charles Moore [Member] | Hawker Energy (Rincon), LLC [Member]
Related Party Transaction [Line Items]
Number of shares issued for acquisition								16,500,000
Messrs. Katic and Moore [Member] | Hawker Energy (Rincon), LLC [Member]
Related Party Transaction [Line Items]
Number of shares issued for acquisition								33,000,000
Shares to be held in escrow								19,000,000
Messrs. Katic [Member] | Common Stock Payable [Member]
Related Party Transaction [Line Items]
Net proceeds from unit offering		$ 20,000
Net proceeds from unit offering, shares		200,000

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ACQUISITION OF SCNRG (Tables) (SCNRG [Member])

3 Months Ended

Nov. 30, 2014

SCNRG [Member]

Business Acquisition [Line Items]

Schedule of Net Assets Acquired

The following is a summary of the fair value of consideration transferred in exchange for the estimated fair value of net assets acquired on October 25, 2013:

Fair value of consideration transferred:
14,000,000 shares of Hawker restricted common stock	$	14,000
Fair value of net assets acquired:
Cash	$	6,004
Accounts receivable		1,553
Oil properties		26,500
Deposit		5,000
Accounts payable and accrued liabilities		(37,431	)
Net assets acquired	$	1,626

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GOING CONCERN (Details) (USD $)	3 Months Ended		12 Months Ended
	Nov. 30, 2014	Nov. 30, 2013	Aug. 31, 2014
GOING CONCERN
Total current assets	$ 1,562,942		$ 1,382,825
Working capital deficit	1,572,842
Net loss attributable to the Company	(1,629,435)	(76,033)	(1,696,236)
Accumulated net loss	$ (3,676,897)		$ (2,047,462)

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FAIR VALUE MEASUREMENTS

3 Months Ended

Nov. 30, 2014

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

14.              FAIR VALUE MEASUREMENTS

We hold certain financial assets, which assets are required to be measured at fair value on a recurring basis in accordance with the Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (“ASC Topic 820-10”).   ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.

The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

• Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.  We believe accounts receivable, accounts payable and accrued expenses and accrued bonuses approximate fair value at November 30, 2014 and August 31, 2014.

• Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs which are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

• Level 3 - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider secured subordinated loan receivable, depleting assets, loans payable to related parties, convertible notes payable, asset retirement obligations and net profit interest liability to be Level 3. We determine the fair value of Level 3 assets and liabilities utilizing various inputs, including oil price quotations and contract terms.

	Fair Value Measurement
	Level 1		Level 2		Level 3
November 30, 2014
Assets:
Secured subordinate loan receivable	$	-	$	-	$	1,505,451
Capitalized oil and gas properties, net		-		-		723,063
Liabilities:
Loans payable to related parties, short term		-		-		(332,182	)
Convertible notes payable, short term		-		-		(1,030,178	)
Net profit interest liability		-		-		(164,274	)
Asset retirement obligation		-		-		(171,682	)
Total	$	-	$	-	$	530,198

	Fair Value Measurement
	Level 1		Level 2		Level 3
August 31, 2014
Assets:
Secured subordinate loan receivable	$	-	$	-	$	1,298,322
Capitalized oil and gas properties, net		-		-		730,046
Liabilities:
Loans payable to related parties, short term		-		-		(226,876	)
Convertible notes payable, short term		-		-		(951,599	)
Net profit interest liability		-		-		(169,104	)
Asset retirement obligation		-		-		(168,110	)
Total	$	-	$	-	$	512,679