| þ |   | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|--------|--------|-----------------------------------------------------------------------------------|

|  ̈ |   | Transition report under Section 13 or 15(d) of the Exchange Act |
|--------|--------|-----------------------------------------------------------------|

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

|                                                                             | Large Accelerated filer          |  ̈ | Accelerated Filer      ̈              |
|----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|
|                                                                             |                                                                                    |   |                                                                    |
|                                                                             | Non-Accelerated Filer                 |  ̈ | Smaller Reporting Company     þ |
| (Do not check if a smaller reporting company) |                                                                                    |

----

|                                                                                                                                                                |         | Page   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|--------|
| Part I. Financial Information                                                                                                                                       |         | 2      |
|                                                                                                                                                                |    |   |
| Item 1: Financial Statements (Unaudited)                                                                                                                            |         | 2      |
|                                                                                                                                                                |         |   |
| Condensed Consolidated Balance Sheets at June 30, 2011 (Unaudited) and December 31, 2010                                                                       |         | 2      |
|                                                                                                                                                                |    |   |
| Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2011 and 2010 (with cumulative totals since inception) (Unaudited) |         | 3      |
|                                                                                                                                                                |         |   |
| Condensed Consolidated Statement of Changes in Stockholders’ Equity for the period December 28, 2008 (Inception) through June 30, 2011 (Unaudited)            |         | 4      |
|                                                                                                                                                                |         |   |
| Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2011 and 2010 (with cumulative totals since inception) (Unaudited)                |         | 5      |
|                                                                                                                                                                |         |   |
| Notes to Condensed Consolidated Financial Statements                                                                                                                |         | 6      |
|                                                                                                                                                                |         |   |
| Item 2: Management’s Discussion and Analysis                                                                                                                  |         | 11     |
|                                                                                                                                                                |         |   |
| Item 3: Quantitative and Qualitative Disclosures About Market Risk                                                                                                  |         | 14     |
|                                                                                                                                                                |         |   |
| Item 4:  Controls and Procedures                                                                                                                          |         | 14     |
|                                                                                                                                                                |         |   |
| Part II. Other Information                                                                                                                                          |         | 15     |
|                                                                                                                                                                |         |   |
| Item 1: Legal Proceedings                                                                                                                                           |         | 15     |
|                                                                                                                                                                |         |   |
| Item 1A: Risk Factors                                                                                                                                               |         | 15     |
|                                                                                                                                                                |         |   |
| Item 2: Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                 |         | 15     |
|                                                                                                                                                                |         |   |
| Item 3: Defaults Upon Senior Securities                                                                                                                             |         | 15     |
|                                                                                                                                                                |         |   |
| Item 4: Removed and Reserved                                                                                                                                        |         | 15     |
|                                                                                                                                                                |         |   |
| Item 5: Other Information                                                                                                                                           |         | 15     |
|                                                                                                                                                                |         |   |
| Item 6: Exhibits                                                                                                                                                    |         | 15     |
|                                                                                                                                                                |         |   |
| Signatures                                                                                                                                                          |         | 16     |

----

----

|                                                                                                           |   | June 30, 2011 |        |   | December 31, 2010 |   |
|----------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                                                                                                           |   |          |        |   |              |   |
| ASSETS                                                                                                         |   |          |        |   |              |   |
| Assets                                                                                                         |   |          |        |   |              |   |
| Current assets:                                                                                                |   |          |        |   |              |   |
| Cash and cash equivalents                                                                                      |   | $             | 42,928      |   |              | $      | 180,030 |   |
| Restricted cash                                                                                                |   |          | 286,800     |   |              |   | 461,259 |   |
| Trading securities - Restricted                                                                                |   |          | 457,685     |   |              |   | 276,686 |   |
| Prepaid and other current assets                                                                               |   |          | 21,398      |   |              |   | 206 |   |
| Total current assets                                                                                           |   |          | 808,811     |   |              |   | 918,181 |   |
|                                                                                                           |   |          |        |   |              |   |   |   |
| Oil and gas properties, unproven                                                                               |   |          | 21,100,000  |   |              |   | 21,100,000 |   |
|                                                                                                           |   |          |        |   |              |   |   |   |
|                                                                                                           |   |          |        |   |              |   |   |   |
| Total assets                                                                                                   |   | $             | 21,908,811  |   |              | $      | 22,018,181 |   |
|                                                                                                           |   |          |        |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                                                       |   |          |        |   |              |   |   |   |
|                                                                                                           |   |          |        |   |              |   |   |   |
| Current Liabilities:                                                                                           |   |          |        |   |              |   |   |   |
| Senior secured convertible debenture, net of discount                                                          |   | $             | 26,699,096  |   |              | $      | 25,895,212 |   |
| Account payable and accrued expenses                                                                           |   |          | 234,950     |   |              |   | 125,000 |   |
| Line of credit                                                                                                 |   |          | 8,584       |   |              |   | 8,407 |   |
| Convertible debentures                                                                                         |   |          | 5,354,026   |   |              |   | 4,586,026 |   |
| Promissory notes                                                                                               |   |          | 30,000      |   |              |   | - |   |
| Accrued interest                                                                                               |   |          | 3,995,147   |   |              |   | 2,421,861 |   |
| Derivative liability                                                                                           |   |          | 2,033,000   |   |              |   | 4,611,000 |   |
| Total current liabilities                                                                                      |   |          | 38,354,803  |   |              |   | 37,647,506 |   |
|                                                                                                           |   |          |        |   |              |   |   |   |
| Stockholders' Deficiency:                                                                                      |   |          |        |   |              |   |   |   |
| Preferred stock, $0.001 par value; 1,000,000 shares authorized;                                                |   |          |        |   |              |   |   |   |
| Series C Voting Convertible, 921,890 shares issued and outstanding                                             |   |          | 921         |   |              |   | 921 |   |
| Common stock, $0.0001 par value; 10,000,000,000 shares authorized; 2,879,307,140 shares issued and outstanding |   |          | 287,931     |   |              |   | 287,931 |   |
| Additional paid-in capital                                                                                     |   |          | (9,872,115  | )      |              |   | (9,872,115 | ) |
| Accumulated deficiency during exploration stage                                                                |   |          | (6,862,729  | )      |              |   | (6,046,062 | ) |
| Total stockholders' deficiency                                                                                 |   |          | (16,445,992 | )      |              |   | (15,629,325 | ) |
| Total liabilities and stockholders' deficiency                                                                 |   | $             | 21,908,811  |   |              | $      | 22,018,181 |   |

----

|                                                               |   | Three Months Ended June 30, |          |   | Six Months Ended June 30, |   |          |   |   |
|-------------------------------------------------------------------------|--------|-----------------------------|---------------|--------|---------------------------|--------|---------------|--------|--------|
|                                                                    |   | 2011                        |          |   | 2010                      |   |          | 2011   |   |   | 2010 |   |   | Cumulative Period fromDecember 23, 2008(inception) to June 30, 2011 |   |
| Net sales                                                               |   | $                           | -             |   |                      | $      | -             |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Cost of sales                                                           |   |                        | -             |   |                      |   | -             |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                    |   |                        | -             |   |                      |   | -             |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses                                                      |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impairment loss                                                         |   |                        | -             |   |                      |   | -             |   |   |   | - |   |   |   | 1,331,215 |   |   |   | 3,041,518 |   |
| General and administrative expenses                                     |   |                        | 219,004       |   |                      |   | 152,757       |   |   |   | 369,642 |   |   |   | 190,760 |   |   |   | 1,380,766 |   |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total operating expenses                                                |   |                        | 219,004       |   |                      |   | 152,757       |   |   |   | 369,642 |   |   |   | 1,521,975 |   |   |   | 4,422,284 |   |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                    |   |                        | (219,004      | )      |                      |   | (152,757      | )      |   |   | (369,642 | ) |   |   | (1,521,975 | ) |   |   | (4,422,284 | ) |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income (expense)                                               |   |                        | (1,536,357    | )      |                      |   | (10           | )      |   |   | (3,064,877 | ) |   |   | 20 |   |   |   | (6,131,722 | ) |
| Change in fair value of derivative liability                            |   |                        | 151,000       |   |                      |   | -             |   |   |   | 2,623,000 |   |   |   | - |   |   |   | 3,697,000 |   |
| Gains (Losses)  from trading securities                       |   |                        | (4,860        | )      |                      |   | 681           |   |   |   | (5,148 | ) |   |   | 32 |   |   |   | (5,723 | ) |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss before income tax provision                                        |   |                        | (1,609,221    | )      |                      |   | (152,086      | )      |   |   | (816,667 | ) |   |   | (1,521,923 | ) |   |   | (6,862,729 | ) |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision                                                    |   |                        | -             |   |                      |   | -             |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                |   | $                           | (1,609,221    | )      |                      | $      | (152,086      | )      |   | $ | (816,667 | ) |   | $ | (1,521,923 | ) |   | $ | (6,862,729 | ) |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per common share                                 |   | $                           | -             |   |                      | $      | -             |   |   | $ | - |   |   | $ | - |   |   |   |   |   |
|                                                                    |   |                        |          |   |                      |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding, basic and diluted |   |                        | 2,879,307,000 |   |                      |   | 2,060,133,970 |   |   |   | 2,879,307,000 |   |   |   | 1,721,943,803 |   |   |   |   |   |

----

|                                              |   | Series C Voting       |    |   |                |   |   |             |   |   |               |   |   |                |    |   |   |   |
|---------------------------------------------------|--------|-----------------------|---------|--------|---------------------|--------|--------|------------------|--------|--------|--------------------|--------|--------|---------------------|---------|--------|--------|--------|
|                                              |   | Convertible preferred |    |   |                |   |   |             |   |   |               |   |   | Deficit Accumulated |    |   | Total  |   |
|                                              |   | stock issued          |    |   | Common Stock Issued |   |   | Additional Paid- |   |   | During Exploration |   |   | Stockholders'       |    |
|                                              |   | Shares                |    |   | Amount              |   |   | Shares           |   |   | Amount             |   |   | in Capital          |    |   | Stage  |   |   | Deficiency |   |
| December 23, 2008 contribution of assets          |   |                  | -       |   |                | $      | -      |             |   |   | -                  |   |   | $                   | -       |   |   | $      | 24,141,518 |   |   | $ | - |   |   | $ | 24,141,518 |   |
|                                              |   |                  |    |   |                |   |   |             |   |   |               |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reverse merger recapitalization                   |   |                  | 805,767 |   |                |   | 806    |             |   |   | 127,279,406        |   |   |                | 12,728  |   |   |   | (13,534 | ) |   |   | - |   |   |   | - |   |
| Balance, December 31, 2008                        |   |                  | 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                        |   |                  | 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                                          |   |                  | -       |   |                |   | -      |             |   |   | -                  |   |   |                | -       |   |   |   | - |   |   |   | (5,832,952 | ) |   |   | (5,832,952 | ) |
| Balance, December 31, 2010                        |   |                  | 921,890 |   |                |   | 921    |             |   |   | 2,879,307,140      |   |   |                | 287,931 |   |   |   | (9,872,115 | ) |   |   | (6,046,062 | ) |   |   | (15,629,325 | ) |
|                                              |   |                  |    |   |                |   |   |             |   |   |               |   |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                          |   |                  | -       |   |                |   | -      |             |   |   | -                  |   |   |                | -       |   |   |   | - |   |   |   | (816,667 | ) |   |   | (816,667 | ) |
| Balance, June 30, 2011                            |   |                  | 921,890 |   |                | $      | 921    |             |   |   | 2,879,307,140      |   |   | $                   | 287,931 |   |   | $      | (9,872,115 | ) |   | $ | (6,862,729 | ) |   | $ | (16,445,992 | ) |

----

|                                                                                    |   | Six Months Ended |       |   | Cumulative Period from |   |
|-----------------------------------------------------------------------------------------|--------|------------------|------------|--------|------------------------|--------|
|                                                                                    |   | June 30,         |       |   | December 23, 2008      |   |
| Operating activities:                                                                   |   | 2011             |       |   | 2010                   |   |   | (inception) to June 30, 2011 |   |
| Net Loss                                                                                |   | $                | (816,667   | )      |                   | $      | (1,521,923 | ) |   | $ | (6,862,729 | ) |
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:             |   |             |       |   |                   |   |   |   |   |   |   |   |
| Impairment of long-lived assets                                                         |   |             | -          |   |                   |   | 1,331,215 |   |   |   | 3,041,518 |   |
| Change in fair value of derivative liability                                            |   |             | (2,623,000 | )      |                   |   | - |   |   |   | (3,697,000 | ) |
| Unrealized losses on marketable securities                                              |   |             | 4,980      |   |                   |   | 694 |   |   |   | 5,750 |   |
| Amortization of debt discount                                                           |   |             | 1,496,884  |   |                   |   | - |   |   |   | 3,289,384 |   |
| Changes in Assets and Liabilities                                                       |   |             |       |   |                   |   |   |   |   |   |   |   |
| Increase in prepaid and other current assets                                            |   |             | (21,192    | )      |                   |   | - |   |   |   | (21,398 | ) |
| Increase in accounts payable and accrued expenses                                       |   |             | 109,950    |   |                   |   | - |   |   |   | 234,950 |   |
| Increase in accrued interest                                                            |   |             | 1,573,463  |   |                   |   | - |   |   |   | 2,841,131 |   |
| Net cash used in operating activities                                                   |   |             | (275,582   | )      |                   |   | (190,014 | ) |   |   | (1,168,394 | ) |
|                                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| Investing activities:                                                                   |   |             |       |   |                   |   |   |   |   |   |   |   |
| Restricted cash                                                                         |   |             | 174,459    |   |                   |   | (170,380 | ) |   |   | (286,800 | ) |
| Proceeds from sale of trading securities                                                |   |             | 276,075    |   |                   |   | 354,319 |   |   |   | 1,090,471 |   |
| Purchases of trading securities                                                         |   |             | (462,054   | )      |                   |   | (459,687 | ) |   |   | (1,553,906 | ) |
| Net cash used in investing activities                                                   |   |             | (11,520    | )      |                   |   | (275,748 | ) |   |   | (750,235 | ) |
|                                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| Financing activities                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| Line of credit                                                                          |   |             | -          |   |                   |   | - |   |   |   | 8,407 |   |
| Proceeds from advances                                                                  |   |             | -          |   |                   |   | - |   |   |   | 732,497 |   |
| Proceeds from issuance of senior secured convertible debenture                          |   |             | 120,000    |   |                   |   | - |   |   |   | 770,000 |   |
| Proceeds from issuance of promissory notes                                              |   |             | 30,000     |   |                   |   | - |   |   |   | 30,000 |   |
| Capital contribution                                                                    |   |             | -          |   |                   |   | 435,770 |   |   |   | 420,653 |   |
| Net cash provided by financing activities                                               |   |             | 150,000    |   |                   |   | 435,770 |   |   |   | 1,961,557 |   |
|                                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| (Decrease) Increase in cash                                                             |   |             | (137,102   | )      |                   |   | (29,992 | ) |   |   | 42,928 |   |
|                                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                          |   |             | 180,030    |   |                   |   | 56,743 |   |   |   | - |   |
| Cash and cash equivalents, end of period                                                |   | $                | 42,928     |   |                   | $      | 26,751 |   |   | $ | 42,928 |   |
|                                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| NONCASH INVESTING AND FINANCING ACTIVITIES                                              |   |             |       |   |                   |   |   |   |   |   |   |   |
| Oil and gas properties, unproven                                                        |   | $                | -          |   |                   | $      | - |   |   | $ | 24,141,518 |   |
| Debt discount derived from derivative liability - Convertible debentures                |   |             | -          |   |                   |   | - |   |   |   | 406,000 |   |
| Debt discount derived from derivative liability - Senior Secured convertible debentures |   |             | 45,000     |   |                   |   | - |   |   |   | 5,324,000 |   |
|                                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| Reverse merger liabilities and equity adjustments                                       |   |             |       |   |                   |   |   |   |   |   |   |   |
| Accrued interest                                                                        |   |             | -          |   |                   |   | - |   |   |   | 1,154,193 |   |
| Senior secured convertible debenture                                                    |   |             | -          |   |                   |   | - |   |   |   | 27,640,712 |   |
| Convertible debentures                                                                  |   |             | -          |   |                   |   | - |   |   |   | 6,083,026 |   |
|                                                                                    |   |             |       |   |                   |   |   |   |   |   |   |   |
| Total                                                                                   |   | $                | 45,000     |   |                   | $      | - |   |   | $ | 64,749,449 |   |

----

| 1.  | Basis of Presentation and Nature of Organization |
|----------|--------------------------------------------------|

| 2.  | Summary of Significant Accounting Policies |
|----------|--------------------------------------------|

----

| 2.  | Summary of Significant Accounting Policies (Continued) |
|----------|--------------------------------------------------------|

| Balance of derivative liability as of December 31, 2010 |   | $      | 4,611,000  |   |
|---------------------------------------------------------|--------|--------|------------|--------|
|                                                    |   |   |       |   |
| Additional liability incurred                           |   |   | 45,000     |   |
|                                                    |   |   |       |   |
| Change in fair value during period                      |   |   | (2,623,000 | )      |
|                                                    |   |   |       |   |
| Balance at June 30, 2011                                |   | $      | 2,033,000  |   |

|                                       |   | Three Months Ended |          |   | Six Months Ended |   |
|--------------------------------------------|--------|--------------------|---------------|--------|------------------|--------|
|                                       |   | June 30, 2011      |          |   | June 30, 2010    |   |   | June 30, 2011 |   |   | June 30, 2010 |   |
|                                       |   |               |          |   |             |   |   |   |   |   |   |   |
| Loss attributable to common stockholders   |   | $                  | (1,609,000    | )      |             | $      | (152,000 | ) |   | $ | (817,000 | ) |   | $ | (1,522,000 | ) |
| Weighted-average common shares outstanding |   |               | 2,879,307,000 |   |             |   | 2,060,134,000 |   |   |   | 2,879,307,000 |   |   |   | 1,721,944,000 |   |
|                                       |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per share           |   | $                  | -             |   |             | $      | - |   |   | $ | - |   |   | $ | - |   |

|                                  |   | June 30, 2011 |            |   | June 30, 2010 |   |
|---------------------------------------|--------|---------------|-----------------|--------|---------------|--------|
|                                  |   |          |            |   |          |   |
| Warrants                              |   |          | 2,250,000       |   |          |   | - |   |
|                                  |   |          |            |   |          |   |   |   |
| Senior secured convertible debentures |   |          | 100,691,000,000 | *      |          |   | - |   |
|                                  |   |          |            |   |          |   |   |   |
| Convertible debentures                |   |          | 65,908,000,000  | *      |          |   | - |   |

----

| 3.  | Oil and Gas Properties, Unproven |
|----------|----------------------------------|

|                            |   | Acquisition Costs |       |   | Impairment |   |       | Total  |   |
|---------------------------------|--------|-------------------|------------|--------|------------|--------|------------|--------|--------|
| Coos Bay Basin Property         |   |              |       |   |       |   |       |   |   |
| Year ended 2008                 |   | $                 | 24,141,000 |   |       | $      | -          |   |   | $ | 24,141,000 |   |
| Year ended 2009                 |   |              | -          |   |       |   | -          |   |   |   | - |   |
| Year ended 2010                 |   |              | -          |   |       |   | (3,041,000 | )      |   |   | (3,041,000 | ) |
| 6 months ended June 30, 2011    |   |              | -          |   |       |   | -          |   |   |   | - |   |
|                            |   |              | -          |   |       |   | -          |   |   |   | - |   |
| Inception through June 30, 2011 |   | $                 | 24,141,000 |   |       | $      | (3,041,000 | )      |   | $ | 21,100,000 |   |

| 4.  | Environmental Matters |
|----------|-----------------------|

| 5.  | Convertible Debentures, Derivative Liability, and Debt Discount |
|----------|-----------------------------------------------------------------|

| Current portion of convertible debentures:                               |   |   |      |
|--------------------------------------------------------------------------|--------|--------|-----------|
| Convertible debenture payable to YA Global due December 2010 – 5%  |   | $      | 592,000   |   |
| Convertible debenture payable to YA Global due December 2010 – 12% |   |   | 570,000   |   |
| Convertible debenture payable to YA Global due December 2010 – 5%  |   |   | 921,000   |   |
| Convertible debenture payable to YA Global due December 2011– 12%  |   |   | 4,000,000 |   |
| Debt discount (original debt discount of $2,685,000)                     |   |   | (729,000  | ) |
| Total current convertible debentures                                     |   | $      | 5,354,000 |   |

----

| 5.  | Convertible Debentures, Derivative Liability and Debt Discount (Continued) |
|----------|----------------------------------------------------------------------------|

| Current portion of senior secured convertible debentures:                                       |   |   |       |
|-------------------------------------------------------------------------------------------------|--------|--------|------------|
| Senior secured convertible debenture payable to YA Global due August  2012 – 9% |   | $      | 27,641,000 |   |
| Senior secured convertible debenture payable to YA Global due August 2012 – 9%            |   |   | 650,000    |   |
| Senior secured convertible debenture payable to YA Global due August 2012 – 9%            |   |   | 120,000    |   |
| Debt discount (original debt discount of $3,045,000)                                            |   |   | (1,712,000 | ) |
| Total current senior secured convertible debentures                                             |   | $      | 26,699,000 |   |

|                          |   | December 31, |   |   | June 30,      |   |
|-------------------------------|--------|--------------|--------|--------|---------------|--------|
|                          |   | 2010         |   |   | 2011          |   |
|                          |   |         |   |   |          |   |
|                          |   |         |   |   |          |   |
| Risk Free Interest Rate       |   |         | 2.5    | %      |          |   | 1 | % |
| Volatility                    |   |         | 100    | %      |          |   | 75 | % |
| Term                          |   | 1.00 years   |   |   | .5 years |   |
| Dividend Rate                 |   |         | 0      | %      |          |   | 0 | % |
| Closing Price of Common Stock |   | $            | 0.0001 |   |          | $      | 0.0001 |   |

| 6.  | Promissory Note |
|----------|-----------------|

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

----

| 8.  | Subsequent Events |
|----------|-------------------|

----

----

----

----

|   | •  | lack of documented policies and procedures; and |
|--------|---------------|-------------------------------------------------|

|   | • | there is no effective separation of duties, which includes monitoring controls, between the members of management. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------|

|   | • | lack of resources to account for complex and unusual transactions |
|--------|---------|-------------------------------------------------------------------|

----

| 31.1   |   | Section 302 Certification of Chief Executive Officer.                             |
|--------|--------|-----------------------------------------------------------------------------------|
|   |   |                                                                              |
| 31.2   |   | Section 302 Certification of Chief Financial Officer.                             |
|   |   |                                                                              |
| 32.1   |   | Section 906 Certification of Chief Executive Officer and Chief Financial Officer. |

----

|                   | CARBONICS CAPITAL CORPORATION |                                      |
|------------------------|-------------------------------|-------------------------------------------|
|                   |                          |                                      |
| Date: November 3, 2011 | By:                           | /s/ Stephen J. Schoepfer                  |   |
|                   |                          | Name:  Stephen J. Schoepfer     |   |
|                   |                          | Title:  Chief Executive Officer |   |
|                   |                          |                                      |   |
| Date: November 3, 2011 | By:                           | /s/ Stephen J. Schoepfer                  |   |
|                   |                          | Name:  Stephen J. Schoepfer     |   |
|                   |                          | Title:  Chief Financial Officer |   |

----

| 31.1   |   | Section 302 Certification of Chief Executive Officer                             |
|--------|--------|----------------------------------------------------------------------------------|
|   |   |                                                                             |
| 31.2   |   | Section 302 Certification of Chief Financial Officer                             |
|   |   |                                                                             |
| 32.1   |   | Section 906 Certification of Chief Executive Officer and Chief Financial Officer |

----