----

----

----

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

|   | o | For the transition period from __________________________ to _____________________________ |
|--------|---|--------------------------------------------------------------------------------------------|

| Delaware                                                            |   | 22-3328734                           |
|---------------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |

| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o                                   | Smaller reporting company x |
|---------------------------|---------------------|-----------------------------------------------------------|-----------------------------|
|                      |                | (Do not check if a smaller reporting company)   |                        |

----

----

|                           |                                                                                                                                                                                    |   | Page     |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                           |                                                                                                                                                                                    |   |     |
| Explanatory Note               |                                                                                                                                                                                    |   |   3 |
|                           |
| PART I - FINANCIAL INFORMATION |
|                           |                                                                                                                                                                                    |   |     |
| Item 1.                        | Unaudited Financial Statements                                                                                                                                                          |   |     |
|                           |                                                                                                                                                                                    |   |     |
|                           | Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009 (restated)                                                                                         |   | 4        |
|                           |                                                                                                                                                                                    |   |     |
|                           | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 and cumulative period from December 23, 2008 through September 30, 2010 |   | 5        |
|                           |                                                                                                                                                                                    |   |     |
|                           | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 and the cumulative period from December 23, 2008 through September 30, 2010       |   | 6        |
|                           |                                                                                                                                                                                    |   |     |
|                           | Condensed Consolidated Statement of Changes in Stockholders’ Deficiency for the period of inception through September 30, 2010 (restated)                                         |   | 7        |
|                           |                                                                                                                                                                                    |   |     |
|                           | Notes to Condensed Consolidated Financial Statements                                                                                                                                    |   | 8        |
|                           |                                                                                                                                                                                    |   |     |
| Item 2.                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                                             |   | 18       |
|                           |                                                                                                                                                                                    |   |     |
| PART II - OTHER INFORMATION    |
|                           |                                                                                                                                                                                    |   |     |
| Item 6.                        | Exhibits                                                                                                                                                                                |   | 20       |
|                           |                                                                                                                                                                                    |   |     |
|                           | Signatures                                                                                                                                                                              |   | 21       |

----

----

|                                                                                                                           |   | September 30, 2010(restated) |        |   | December 31, 2009(restated) |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|--------|---------------------------------------|--------|
| ASSETS                                                                                                                         |   |                                   |        |   |                                  |   |
|                                                                                                                           |   |                                   |        |   |                                  |   |
| Assets                                                                                                                         |   |                                   |        |   |                                  |   |
| Current assets:                                                                                                                |   |                                   |        |   |                                  |   |
| Cash and cash equivalents                                                                                                      |   | $                                      | 428,921     |   |                                  | $      | 165,750 |   |
| Trading securities                                                                                                             |   |                                   | 737,026     |   |                                  |   | 354,972 |   |
| Prepaid and other current assets                                                                                               |   |                                   | 805         |   |                                  |   | - |   |
| Total current assets                                                                                                           |   |                                   | 1,166,752   |   |                                  |   | 520,722 |   |
|                                                                                                                           |   |                                   |        |   |                                  |   |   |   |
| Oil and gas properties, unproven                                                                                               |   |                                   | 22,810,303  |   |                                  |   | 24,141,518 |   |
|                                                                                                                           |   |                                   |        |   |                                  |   |   |   |
| Total assets                                                                                                                   |   |                                   | 23,977,055  |   |                                  |   | 24,662,240 |   |
|                                                                                                                           |   |                                   |        |   |                                  |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)                                                                              |   |                                   |        |   |                                  |   |   |   |
|                                                                                                                           |   |                                   |        |   |                                  |   |   |   |
| Current Liabilities:                                                                                                           |   |                                   |        |   |                                  |   |   |   |
| Account payable and accrued expenses                                                                                           |   | $                                      | 63,949      |   |                                  | $      | - |   |
| Line of credit                                                                                                                 |   |                                   | 8,329       |   |                                  |   | 1,335 |   |
| Accrued interest                                                                                                               |   |                                   | 1,536,356   |   |                                  |   | - |   |
| Convertible debentures, net of discount                                                                                        |   |                                   | 6,058,396   |   |                                  |   | - |   |
| Derivative liability                                                                                                           |   |                                   | 9,475,000   |   |                                  |   | - |   |
| Total current liabilities                                                                                                      |   |                                   | 17,142,030  |   |                                  |   | 1,335 |   |
|                                                                                                                           |   |                                   |        |   |                                  |   |   |   |
| Senior secured convertible debenture, net of discount                                                                          |   |                                   | 19,512,378  |   |                                  |   | - |   |
| Total Liabilities                                                                                                              |   |                                   | 36,654,408  |   |                                  |   | 1,335 |   |
|                                                                                                                           |   |                                   |        |   |                                  |   |   |   |
| Stockholders' Equity (Deficiency):                                                                                             |   |                                   |        |   |                                  |   |   |   |
| Preferred stock, $0.0001 par value, 1,000,000 shares authorized                                                                |   |                                   |        |   |                                  |   |   |   |
| Series C Voting Convertible, 921,890 and 972,042 shares issued and outstanding                                                 |   |                                   | 921         |   |                                  |   | 972 |   |
| Common stock, $0.0001 par value; 10,000,000,000 shares authorized; 2,879,307,140 and 482,842,103 shares issued and outstanding |   |                                   | 287,931     |   |                                  |   | 48,284 |   |
| Additional Paid-in Capital                                                                                                     |   |                                   | (9,872,115  | )      |                                  |   | 24,824,759 |   |
| Accumulated deficiency during exploration stage                                                                                |   |                                   | (3,094,090  | )      |                                  |   | (213,110 | ) |
| Total stockholders' equity (deficiency)                                                                                        |   |                                   | (12,677,353 | )      |                                  |   | 24,660,905 |   |
| Total liabilities and stockholders' equity (deficiency)                                                                        |   | $                                      | 23,977,055  |   |                                  | $      | 24,662,240 |   |

----

|                                                                  |   | Three Months Ended September 30, |          |   | Nine Months Ended September 30, |   |
|-----------------------------------------------------------------------|--------|------------------------------------------------------|---------------|--------|-----------------------------------------------------|--------|
|                                                                  |   | 2010                                                 |          |   | 2009                                                |   |   | 2010 |   |   | 2009 |   |
| Net Sales                                                             |   | $                                                    | -             |   |                                                | $      | - |   |   | $ | - |   |   | $ | - |   |
| Cost of Sales                                                         |   |                                                 | -             |   |                                                |   | - |   |   |   | - |   |   |   | - |   |
|                                                                  |   |                                                 | -             |   |                                                |   | - |   |   |   | - |   |   |   | - |   |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Operating Expenses                                                    |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Impairment loss                                                       |   |                                                 | -             |   |                                                |   | - |   |   |   | 1,331,215 |   |   |   | - |   |
| General and administrative expenses                                   |   |                                                 | 162,669       |   |                                                |   | 70,532 |   |   |   | 488,006 |   |   |   | 211,595 |   |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Total Operating Expenses                                              |   |                                                 | 162,669       |   |                                                |   | 70,532 |   |   |   | 1,819,221 |   |   |   | 211,595 |   |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                  |   |                                                 | (162,669      | )      |                                                |   | (70,532 | ) |   |   | (1,819,221 | ) |   |   | (211,595 | ) |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                      |   |                                                 | (354,047      | )      |                                                |   | (499 | ) |   |   | (1,062,140 | ) |   |   | (1,498 | ) |
| Unrealized trading gains from trading securities                      |   |                                                 | 94            |   |                                                |   | - |   |   |   | 381 |   |   |   | - |   |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Loss before Income tax provision                                      |   |                                                 | (516,622      | )      |                                                |   | (71,031 | ) |   |   | (2,880,980 | ) |   |   | (213,093 | ) |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision                                                  |   |                                                 | -             |   |                                                |   | - |   |   |   | - |   |   |   | - |   |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss                                                              |   | $                                                    | (516,622      | )      |                                                | $      | (71,031 | ) |   | $ | (2,880,980 | ) |   | $ | (213,093 | ) |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per common share                               |   |                                                 | (0.00         | )      |                                                |   | (0.00 | ) |   |   | (0.00 | ) |   |   | (0.00 | ) |
|                                                                  |   |                                                 |          |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average share of common stock outstanding, basic and diluted |   |                                                 | 2,879,307,140 |   |                                                |   | 313,287,800 |   |   |   | 2,110,578,724 |   |   |   | 198,826,036 |   |

----

|                                                                        |   | NINE MONTHS ENDED SEPTEMBER 30, |       |   | Cumulative Period fromDecember 23, 2008 (inception) |   |
|-----------------------------------------------------------------------------|--------|--------------------------------------|------------|--------|-----------------------------------------------------|--------|
|                                                                        |   | 2010                                 |       |   | 2009                                                |   |   | to September 30, 2010 |   |
| Operating activities:                                                  |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Net Loss                                                                    |   | $                                    | (2,880,980 | )      |                                                | $      | (213,093 | ) |   | $ | (3,094,090 | ) |
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Impairment of long-lived assets                                             |   |                                 | 1,331,215  |   |                                                |   | - |   |   |   | 1,331,215 |   |
| Changes in Assets and Liabilities                                           |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Prepaid and other current assets                                            |   |                                 | (805       | )      |                                                |   | - |   |   |   | (805 | ) |
| Increase in accounts payable and accrued expenses                           |   |                                 | 63,949     |   |                                                |   | - |   |   |   | 63,949 |   |
| Increase in accrued interest                                                |   |                                 | 1,054,199  |   |                                                |   | - |   |   |   | 1,054,199 |   |
| Net cash used in operating activities                                       |   |                                 | (432,422   | )      |                                                |   | (213,093 | ) |   |   | (645,532 | ) |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Investing activities:                                                       |   |                                 | -          |   |                                                |   |   |   |   |   |   |   |
| Proceeds from sale of trading securities                                    |   |                                 | 355,000    |   |                                                |   | - |   |   |   | (737,026 | ) |
| Purchases of trading securities                                             |   |                                 | (737,054   | )      |                                                |   | (461,901 | ) |   |   |   |   |
|                                                                        |   |                                 | (382,054   | )      |                                                |   | (461,901 | ) |   |   | (737,026 | ) |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Financing activities                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Line of credit                                                              |   |                                 | 6,994      |   |                                                |   | - |   |   |   | 8,329 |   |
| Proceeds from advances                                                      |   |                                 | -          |   |                                                |   | 691,302 |   |   |   | - |   |
| Proceeds from issuance of senior secured convertible debenture              |   |                                 | 650,000    |   |                                                |   | - |   |   |   | 650,000 |   |
| Capital contribution                                                        |   |                                 | 420,653    |   |                                                |   | 1,051 |   |   |   | 1,153,150 |   |
| Net cash provided by financing activities                                   |   |                                 | 1,077,647  |   |                                                |   | 692,353 |   |   |   | 1,811,479 |   |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Increase in cash                                                            |   |                                 | 263,171    |   |                                                |   | 17,359 |   |   |   | 428,921 |   |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                              |   |                                 | 165,750    |   |                                                |   | - |   |   |   | - |   |
| Cash and cash equivalents, end of period                                    |   | $                                    | 428,921    |   |                                                | $      | 17,359 |   |   | $ | 428,921 |   |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Supplemental cash flow information:                                         |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Interest paid                                                               |   | $                                    | -          |   |                                                | $      | - |   |   | $ | - |   |
| Income tax expense                                                          |   | $                                    | -          |   |                                                | $      | - |   |   | $ | - |   |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| NONCASH INVESTING AND FINANCING ACTIVITIES                                  |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Oil and gas properties, unproven                                            |   | $                                    | -          |   |                                                | $      | - |   |   | $ | 24,141,518 |   |
| Debt discount                                                               |   |                                 | 9,475,000  |   |                                                |   | - |   |   |   | 9,475,000 |   |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Reverse merger liabilities and equity adjustments                           |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Accrued interest                                                            |   |                                 | 1,154,193  |   |                                                |   | - |   |   |   | 1,154,193 |   |
| Senior secured convertible debenture                                        |   |                                 | 18,209,712 |   |                                                |   | - |   |   |   | 18,209,712 |   |
| Convertible debentures                                                      |   |                                 | 6,039,026  |   |                                                |   | - |   |   |   | 6,039,026 |   |
|                                                                        |   |                                 |       |   |                                                |   |   |   |   |   |   |   |
| Total                                                                       |   | $                                    | 34,877,931 |   |                                                | $      | - |   |   | $ | 59,019,449 |   |

----

|                                           |   | Series C VotingConvertible preferredstock issued |    |   | Common Stock Issued |   |   | Additional Paid- |   |   | Deficit AccumulatedDuring Exploration |   |   | Total Stockholders' |    |
|-----------------------------------------------------|--------|----------------------------------------------------------------------|---------|--------|-------------------------------|--------|--------|-----------------------|--------|--------|-------------------------------------------------|--------|--------|--------------------------|---------|
|                                                |   | Shares                                                               |    |   | Amount                        |   |   | Shares                |   |   | Amount                                          |   |   | in Capital          |    |   | Stage |   |   | Deficiency |   |
| December 23, 2008 contribution of assets (restated) |   |                                                                 | -       |   |                          | $      | -      |                  |   |   | -                                               |   |   | $                        | -       |   |   | $ | 24,141,518 |   |   | $ | - |   |   | $ | 24,141,518 |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reverse merger recapitalization                     |   |                                                                 | 805,767 |   |                          |   | 806    |                  |   |   | 127,279,406                                     |   |   |                     | 12,728  |   |   |   | (13,534 | ) |   |   | - |   |   |   | - |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008 (restated)               |   |                                                                 | 805,767 |   |                          |   | 806    |                  |   |   | 127,279,406                                     |   |   |                     | 12,728  |   |   |   | 24,127,984 |   |   |   | - |   |   |   | 24,141,518 |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued prior to reverse merger by acquiree   |   |                                                                 | 166,275 |   |                          |   |   |                  |   |   | 355,562,697                                     |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital contribution                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   | 732,497 |   |   |   | - |   |   |   | 732,497 |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reverse merger recapitalization                     |   |                                                                 |    |   |                          |   | 166    |                  |   |   |                                            |   |   |                     | 35,556  |   |   |   | (35,722 | ) |   |   |   |   |   |   | - |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                            |   |                                                                 | -       |   |                          |   | -      |                  |   |   | -                                               |   |   |                     | -       |   |   |   | - |   |   |   | (213,110 | ) |   |   | (213,110 | ) |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009 (restated)               |   |                                                                 | 972,042 |   |                          |   | 972    |                  |   |   | 482,842,103                                     |   |   |                     | 48,284  |   |   |   | 24,824,759 |   |   |   | (213,110 | ) |   |   | 24,660,905 |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued prior to reverse merger by acquiree   |   |                                                                 | (50,152 | )      |                          |   | -      |                  |   |   | 2,396,465,037                                   |   |   |                     | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital contribution                                |   |                                                                 | -       |   |                          |   | -      |                  |   |   | -                                               |   |   |                     | -       |   |   |   | 420,653 |   |   |   | - |   |   |   | 420,653 |   |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reverse merger recapitalization                     |   |                                                                 | -       |   |                          |   | (51    | )                     |   |   | -                                               |   |   |                     | 239,647 |   |   |   | (35,117,527 | ) |   |   | - |   |   |   | (34,877,931 | ) |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                            |   |                                                                 | -       |   |                          |   | -      |                  |   |   | -                                               |   |   |                     | -       |   |   |   | - |   |   |   | (2,880,980 | ) |   |   | (2,880,980 | ) |
|                                                |   |                                                                 |    |   |                          |   |   |                  |   |   |                                            |   |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, September 30, 2010 (restated)              |   |                                                                 | 921,890 |   |                          | $      | 921    |                  |   |   | 2,879,307,140                                   |   |   | $                        | 287,931 |   |   | $ | (9,872,115 | ) |   | $ | (3,094,090 | ) |   | $ | (12,677,353 | ) |

----

| 1. | Restatement of Previously Issued Financial Statements |
|----|-------------------------------------------------------|

| 2. | Basis of Presentation and Nature of Organization |
|----|--------------------------------------------------|

----

| Recognized Amounts of Identifiable Liabilities Assumed |   |
|--------------------------------------------------------|--------|
| Accrued interest                                       |   | $ | 1,154,193 |   |
| Convertible debentures                                 |   |   | 6,083,026 |   |
| Total identifiable liabilities                         |   | $ | 7,237,219 |   |

----

| 2. | Basis of Presentation and Nature of Organization (Continued) |
|----|--------------------------------------------------------------|

| 3. | Summary of Significant Accounting Policies |
|----|--------------------------------------------|

----

| 3. | Summary of Significant Accounting Policies (Continued) |
|----|--------------------------------------------------------|

|                          |   | Unrealized |   |   | Realized |   |   | Fair Value              |   |   | Fair Value             |   |
|-------------------------------|--------|------------|--------|--------|----------|--------|--------|------------------------------|--------|--------|-----------------------------|--------|
| Trading securities       |   | Gains      |   |   | Losses   |   |   | September 30, 2010 |   |   | December 31, 2009 |   |
|                          |   |       |   |   |     |   |   |                         |   |   |                        |   |
| United States Treasury Strips |   | $          | 259    |   |     | $      | -      |                         |   | $      | 459,917                     |   |   | $ | - |   |
| United States Treasury Notes  |   | $          | 94     |   |     | $      | 28     |                         |   | $      | 277,109                     |   |   | $ | 354,972 |   |

----

| 3. | Summary of Significant Accounting Policies (Continued) |
|----|--------------------------------------------------------|

----

| 3. | Summary of Significant Accounting Policies (Continued) |
|----|--------------------------------------------------------|

| Balance of derivative liability as of December 31, 2009        |   | $      | -         |   |
|----------------------------------------------------------------|--------|--------|-----------|--------|
|                                                           |   |   |      |   |
| Value of derivative liabilities upon adoption, August 17, 2010 |   |   | 9,475,000 |   |
| Change in fair value during period                             |   |   | -         |   |
|                                                           |   |   |      |   |
| Balance at September 30, 2010                                  |   | $      | 9,475,000 |   |

|                             |   | Three Months Ended |           |   | Nine Months Ended |   |
|----------------------------------|--------|------------------------------|----------------|--------|-----------------------------|--------|
|                             |   | September 30,           |           |   | September 30,          |   |
|                             |   | 2010                         |           |   | 2009                        |   |   | 2010 |   |   | 2009 |   |
| Potentially dilutive securities: |   |                         |           |   |                        |   |   |   |   |   |   |   |
| Convertible notes                |   |                         | 94,736,500,000 |   |                        |   | - |   |   |   | 94,736,500,000 |   |   |   | - |   |
| Warrants                         |   |                         | 2,250,000      |   |                        |   | - |   |   |   | 2,250,000 |   |   |   | - |   |

| 4. | Oil and Gas Properties, Unproven |
|----|----------------------------------|

----

| 4. | Oil and Gas Properties, Unproven (Continued) |
|----|----------------------------------------------|

|                                 |   |                          |       |   | Exploration Costs |   |   |                       |   |   |                           |   |
|--------------------------------------|--------|-------------------------------|------------|--------|------------------------|--------|--------|----------------------------|--------|--------|--------------------------------|--------|
|                                 |   |   Acquisition Costs |       |   | Seismic andLand   |   |   | Drilling andGathering |   |   | Geological andGeophysical |   |   | DevelopmentCosts |   |   | Total |   |
| Coos Bay Basin Property              |   |                          |       |   |                   |   |   |                       |   |   |                           |   |   |   |   |   |   |   |
| Year ended 2008                      |   | $                             | 22,810,303 |   |                   | $      | -      |                       |   | $      | -                              |   |   | $ | - |   |   | $ | - |   |   | $ | 22,810,303 |   |
| Year ended 2009                      |   |                          | -          |   |                   |   | -      |                       |   |   | -                              |   |   |   | - |   |   |   |   |   |   |   | - |   |
| Year ended 2010                      |   |                          | -          |   |                   |   | -      |                       |   |   | -                              |   |   |   | - |   |   |   |   |   |   |   | - |   |
| Inception through September 30, 2010 |   |                          | -          |   |                   |   | -      |                       |   |   | -                              |   |   |   | - |   |   |   |   |   |   |   | - |   |
| Total                                |   | $                             | 22,810,303 |   |                   | $      | -      |                       |   | $      | -                              |   |   | $ | - |   |   | $ | - |   |   | $ | 22,810,303 |   |

----

| 5. | Environmental Matters |
|----|-----------------------|

| 6. | Convertible Debentures, Derivative Liability and Debt Discount |
|----|----------------------------------------------------------------|

| Current portion of convertible debentures:                                             |   |   |      |
|----------------------------------------------------------------------------------------|--------|--------|-----------|
| Convertible debenture payable to YA Global Investments issued October 2005 – 5%  |   | $      | 592,360   |   |
| Convertible debenture payable to YA Global Investments issued July 2007 – 12%    |   |   | 570,000   |   |
| Convertible debenture payable to YA Global Investments issued February 2006 – 5% |   |   | 920,666   |   |
| Convertible debenture payable to YA Global Investments issued June 2009 – 12%    |   |   | 4,000,000 |   |
| Debt discount                                                                          |   |   | (24,630   | ) |
| Total current convertible debentures                                                   |   | $      | 6,058,396 |   |

----

| 6. | Convertible Debentures, Derivative Liability and Debt Discount (Continued) |
|----|----------------------------------------------------------------------------|

|                          |   | Issuance               |     |   | September, 30     |   |
|-------------------------------|--------|------------------------|----------|--------|------------------------|--------|
|                          |   | Date                   |     |   | 2010                   |   |
|                          |   |                   |     |   |                   |   |
| Exercise Price                |   | Range $0.0003 to $0.10 |     |   | Range $0.0003 to $0.10 |   |
| Risk Free Interest Rate       |   |                   | 2.5      | %      |                   |   | 2.5 | % |
| Volatility                    |   |                   | 80 - 120 | %      |                   |   | 80 - 120 | % |
| Term                          |   | 2 years                |     |   | 1.92 years             |   |
| Dividend Rate                 |   |                   | 0        | %      |                   |   | 0 | % |
| Closing Price of Common Stock |   | $                      | 0.0001   |   |                   | $      | 0.0001 |   |

| 7. | Line of Credit |
|----|----------------|

| 8. | Stockholders’ Deficiency |
|----|--------------------------------|

----

| 8. | Stockholders’ Deficiency (Continued) |
|----|--------------------------------------------|

| 9. | Income Taxes |
|----|--------------|

----

----

----

| Exhibit |   |                                      |
|---------|--------|-------------------------------------------|
| Number  |   |                                      |
|    |   |                                      |
| 31.1    |   | Certification of Chief Executive Officer. |
|    |   |                                      |
| 31.2    |   | Certification of Chief Financial Officer. |

----

|                | CARBONICS CAPITAL CORPORATION |                                            |
|---------------------|-------------------------------|-------------------------------------------------|
|                |                          |                                            |
| Date: June 17, 2011 | By:                           | /s/ Stephen J. Schoepfer                        |   |
|                |                          |  Name:  Stephen J. Schoepfer     |   |
|                |                          |  Title:  Chief Executive Officer |   |
|                |                          |                                            |   |
| Date: June 17, 2011 | By:                           | /s/ Stephen J. Schoepfer                        |   |
|                |                          |  Name:  Stephen J. Schoepfer     |   |
|                |                          |  Title:  Chief Financial Officer |   |

----