----

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| Nevada(State or Other Jurisdiction of Incorporation or Organization) | 68-0427395(IRS Employer Identification No.) |
|----------------------------------------------------------------------|---------------------------------------------|

| Class                         |   | Outstanding at February 2, 2011 |
|-------------------------------|--------|---------------------------------|
| Common Stock, $.001 par value |   | 29,262,190                      |

----

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|  PART I  | FINANCIAL INFORMATION                                                                                                       |     |
|---------------|-----------------------------------------------------------------------------------------------------------------------------|----------|
|  ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS:                                                                                          |     |
|          | Consolidated Balance Sheets — December 31, 2010 (Unaudited) and March 31, 2010                                        |  3  |
|          | Consolidated Statements of  Operations (Unaudited) — Three and Nine months ended December 31, 2010 and 2009 |  4  |
|          | Consolidated Statements of Stockholders’ Equity (Deficit) — Nine months ended December 31, 2010                 |  5  |
|          | Consolidated Statements of Cash Flows (Unaudited) —Nine months ended December 31, 2010 and 2009                       |  6  |
|          | Notes to Consolidated Financial Statements                                                                                  | 7        |
| ITEM 2.       | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                       |  12 |
|  ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                  |  16 |
|  ITEM 4. | CONTROLS AND PROCEDURES                                                                                                     |  16 |
|          |                                                                                                                        |     |
|  PART II | OTHER INFORMATION                                                                                                           |  16 |
| ITEM 1.       | LEGAL PROCEEDINGS                                                                                                           | 16       |
| ITEM 2.       | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                                 | 16       |
| ITEM 3.       | DEFAULTS UPON SENIOR SECURITIES                                                                                             | 16       |
|  ITEM 4. | (REMOVED AND RESERVED)                                                                                                      |  16 |
| ITEM 5.       | OTHER INFORMATION                                                                                                           | 16       |
|  ITEM 6. | EXHIBITS                                                                                                                    |  17 |

----

|                                                                                                                                                                                                                                               | December 31, |   |       | March 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|--------|------------|-----------|--------|
|                                                                                                                                                                                                                                               | 2010         |   |       | 2010      |   |
| ASSETS                                                                                                                                                                                                                                             | (Unaudited)  |   |       |      |   |
| Current assets                                                                                                                                                                                                                                     |         |   |       |      |   |
|    Cash and equivalents                                                                                                                                                                                                             |         | $      | 982,251    |      |   | $ | 1,642,006 |   |
|    Due from affiliate                                                                                                                                                                                                               |         |   | 25,437     |      |   |   | - |   |
|    Prepaid expenses                                                                                                                                                                                                                 |         |   | 22,506     |      |   |   | 4,294 |   |
| Total current assets                                                                                                                                                                                                                               |         |   | 1,030,194  |      |   |   | 1,646,300 |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
|    Fixed assets, net of accumulated depreciation                                                                                                                                                                                    |         |   | 36,838     |      |   |   | 31,074 |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
|    Intangible assets, net                                                                                                                                                                                                           |         |   | 753,530    |      |   |   | - |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
| Total assets                                                                                                                                                                                                                                       |         | $      | 1,820,562  |      |   | $ | 1,677,374 |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                                               |         |   |       |      |   |
| Current liabilities                                                                                                                                                                                                                                |         |   |       |      |   |   |   |   |
|     Accounts payable                                                                                                                                                                                                           |         | $      | 21,657     |      |   | $ | 32,008 |   |
|     Accrued expenses                                                                                                                                                                                                                |         |   | -          |      |   |   | 30,000 |   |
|                                                                                                                                                                                                                                     |         |   |       |      |   |   |   |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
| Total current liabilities                                                                                                                                                                                                                          |         |   | 21,657     |      |   |   | 62,008 |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
| Commitments and contingencies                                                                                                                                                                                                                      |         |   |       |      |   |   |   |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
| Shareholders' equity                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
|     Preferred stock, 10,000 shares authorized, no shares issued and                                                                                                                                                            |         |   |       |      |   |   |   |   |
|        outstanding, no rights or privileges designated                                                                                                                                                          |         |   | -          |      |   |   | - |   |
|     Common stock, $.001 par value, 150,000,000 shares authorized 29,262,190 and 28,262,190        shares issued and outstanding at December 31, 2010 and March 31, 2010, respectively. |         |   | 29,262     |      |   |   | 28,262 |   |
|    Additional paid in capital                                                                                                                                                                                                       |         |   | 5,608,454  |      |   |   | 4,451,915 |   |
|    Accumulated deficit                                                                                                                                                                                                              |         |   | (3,838,811 | )         |   |   | (2,864,811 | ) |
| Total shareholders' equity                                                                                                                                                                                                                         |         |   | 1,798,905  |      |   |   | 1,615,366 |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
| Total liabilities and shareholders' equity                                                                                                                                                                                                         |         | $      | 1,820,562  |      |   | $ | 1,677,374 |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
|                                                                                                                                                                                                                                               |         |   |       |      |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements.                                                                                                                                                            |         |

----

|                                                               |   | Three months ended December 31, |       |   |  Nine months ended December 31, |   |       | March 15, 1990 (Inception) to December 31, |   |
|--------------------------------------------------------------------|--------|---------------------------------|------------|--------|--------------------------------------|--------|------------|--------------------------------------------|--------|
|                                                               |   | 2010                            |       |   | 2009                                 |   |       | 2010                                       |   |   | 2009 |   |   | 2010 |   |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |
| Revenue, net                                                       |   | $                               | -          |   |                                 | $      | -          |                                       |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenue                                                    |   |                            | -          |   |                                 |   | -          |                                       |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |                            | -          |   |                                 |   | -          |                                       |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|    General & administrative expenses            |   |                            | 283,271    |   |                                 |   | 785,284    |                                       |   |   | 987,065 |   |   |   | 1,722,347 |   |   |   | 3,855,128 |   |
|        Total operating expenses |   |                            | 283,271    |   |                                 |   | 785,284    |                                       |   |   | 987,065 |   |   |   | 1,722,347 |   |   |   | 3,855,128 |   |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                               |   |                            | (283,271   | )      |                                 |   | ( 785,284  | )                                          |   |   | (987,065 | ) |   |   | (1,722,347 | ) |   |   | (3,855,128 | ) |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger fee, net                                                    |   |                            | -          |   |                                 |   | -          |                                       |   |   | - |   |   |   | - |   |   |   | 80,000 |   |
| Interest income / (expense) and other, net                         |   |                            | 5,291      |   |                                 |   | 3,852      |                                       |   |   | 13,065 |   |   |   | (939 | ) |   |   | (63,683 | ) |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss applicable to common stockholders                         |   | $                               | (277,980   | )      |                                 | $      | (781,432   | )                                          |   | $ | (974,000 | ) |   | $ | (1,723,286 | ) |   | $ | (3,838,811 | ) |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic & Diluted Loss per share                                 |   | $                               | (0.01      | )      |                                 | $      | (0.03      | )                                          |   | $ | (0.03 | ) |   | $ | (0.08 | ) |   |   |   |   |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding                                |   |                            | 29,262,190 |   |                                 |   | 26,449,328 |                                       |   |   | 28,844,735 |   |   |   | 22,999,670 |   |   |   |   |   |
|                                                               |   |                            |       |   |                                 |   |       |                                       |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                           |   | Preferred Stock |       |   | Common Stock |   |     |   |   |   |       |   |   |                       |   |
|----------------------------------------------------------------|--------|-----------------|------------|--------|--------------|--------|----------|--------|--------|--------|------------|--------|--------|----------------------------|--------|
|                                                           |   | Shares          |       |   | Amount       |   |     | Shares |   |   | Amount     |   |   | Additional Paid in Capital |   |   | Accumulated Deficit |   |   | Total |   |
|  Balance at March 15, 1990                                |   |            |       |   | $            | -      |     |   |   | 40     |       |   | $      | -                          |   |   | $ | 370 |   |   | $ | (295 | ) |   | $ | 75 |   |
|  Common stock issued for services                         |   |            |       |   |         |   |     |   |   | 352    |       |   |   |                       |   |   |   | 2,424 |   |   |   |   |   |   |   | 2,424 |   |
| Acquire oil and gas properties                                 |   |            | 7,000      |   |         |   | 280,000  |   |   |   | 493        |   |   |                       | 1      |   |   |   | 82,807,828 |   |   |   |   |   |   |   | 83,087,829 |   |
| Additional capital contributed                                 |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 22,286 |   |   |   |   |   |   |   | 22,286 |   |
| Fair value of salaries donated                                 |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 151,500 |   |   |   |   |   |   |   | 151,500 |   |
| Reclassify common stock for repurchase obligation              |   |            |       |   |         |   |     |   |   |   |       |   |   |                       | (1     | ) |   |   | (212,500 | ) |   |   |   |   |   |   | (212,500 | ) |
| Rescission of oil and gas purchase:                            |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock shares not returned in lieu of services           |   |            | (7,000     | )      |         |   | (280,000 | )      |   |   |       |   |   |                       |   |   |   |   | (82,804,200 | ) |   |   |   |   |   |   | (83,084,200 | ) |
| Cancellation of repurchase obligation                          |   |            |       |   |         |   |     |   |   |   |       |   |   |                       | 1      |   |   |   | 212,500 |   |   |   |   |   |   |   | 212,500 |   |
| Issuance of preferred stock for services                       |   |            | 1,100,000  |   |         |   | 2,200    |   |   |   |       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   | 2,200 |   |
| Common stock for services                                      |   |            |       |   |         |   |     |   |   |   | 27,741     |   |   |                       | 28     |   |   |   | 9,972 |   |   |   |   |   |   |   | 10,000 |   |
| Conversion of preferred stock                                  |   |            | (1,100,000 | )      |         |   | (2,200   | )      |   |   | 44,874     |   |   |                       | 45     |   |   |   | 2,155 |   |   |   |   |   |   |   |   |   |
| Stockholder advances contributed as additional paid in capital |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 22,725 |   |   |   |   |   |   |   | 22,725 |   |
| Issuance of shares for acquisition of Mobile Nation, Inc.      |   |            |       |   |         |   |     |   |   |   | 3,520,000  |   |   |                       | 3,520  |   |   |   | 31,680 |   |   |   |   |   |   |   | 35,200 |   |
| Common stock for services                                      |   |            |       |   |         |   |     |   |   |   | 480,000    |   |   |                       | 480    |   |   |   | 4,320 |   |   |   |   |   |   |   | 4,800 |   |
| Shares returned to treasury                                    |   |            |       |   |         |   |     |   |   |   | (3,520,000 | )      |   |                       | (3,520 | ) |   |   | (31,680 | ) |   |   |   |   |   |   | (35,200 | ) |
| Common stock for services                                      |   |            |       |   |         |   |     |   |   |   | 20,000     |   |   |                       | 20     |   |   |   | 1,980 |   |   |   |   |   |   |   | 2,000 |   |
| Additional capital contributed                                 |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 600 |   |   |   |   |   |   |   | 600 |   |
| Net loss                                                       |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   |   |   |   |   | (450,598 | ) |   |   | (450,598 | ) |
| Net income                                                     |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   |   |   |   |   | 42,231 |   |   |   | 42,231 |   |
| Balance at March 31, 2008                                      |   |            |       |   |         |   | -        |   |   |   | 573,500    |   |   |                       | 574    |   |   |   | 221,960 |   |   |   | (408,662 | ) |   |   | (186,128 | ) |
| Issuance of shares, July 2008                                  |   |            |       |   |         |   |     |   |   |   | 19,426,500 |   |   |                       | 19,426 |   |   |   | 188,074 |   |   |   |   |   |   |   | 207,500 |   |
| Stock compensation                                             |   |            |       |   |         |   |     |   |   |   | 300,000    |   |   |                       | 300    |   |   |   | 2,791 |   |   |   |   |   |   |   | 3,091 |   |
| Issuance of options                                            |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 13,407 |   |   |   |   |   |   |   | 13,407 |   |
| Issuance of shares, March 2009                                 |   |            |       |   |         |   |     |   |   |   | 50,000     |   |   |                       | 50     |   |   |   | 49,950 |   |   |   |   |   |   |   | 50,000 |   |
| Net loss                                                       |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   |   |   |   |   | (215,864 | ) |   |   | (215,864 | ) |
| Balance at March 31, 2009                                      |   |            |       |   |         |   | -        |   |   |   | 20,350,000 |   |   |                       | 20,350 |   |   |   | 476,182 |   |   |   | (624,526 | ) |   |   | (127,994 | ) |
| Capital contribution                                           |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 386,578 |   |   |   |   |   |   |   | 386,578 |   |
| Issuance of shares for services, May 2009                      |   |            |       |   |         |   |     |   |   |   | 1,350,000  |   |   |                       | 1,350  |   |   |   | 648,650 |   |   |   |   |   |   |   | 650,000 |   |
| Issuance of shares, September 2009                             |   |            |       |   |         |   |     |   |   |   | 3,095,000  |   |   |                       | 3,095  |   |   |   | 1,545,017 |   |   |   |   |   |   |   | 1,548,112 |   |
| Issuance of shares, October 2009                               |   |            |       |   |         |   |     |   |   |   | 2,084,000  |   |   |                       | 2,084  |   |   |   | 1,049,641 |   |   |   |   |   |   |   | 1,051,725 |   |
| Issuance of shares for services, November 2009                 |   |            |       |   |         |   |     |   |   |   | 1,100,000  |   |   |                       | 1,100  |   |   |   | 448,900 |   |   |   |   |   |   |   | 450,000 |   |
| Issuance of shares for services, March 2010                    |   |            |       |   |         |   |     |   |   |   | 283,190    |   |   |                       | 283    |   |   |   | 198,078 |   |   |   |   |   |   |   | 198,361 |   |
| Issuance of options                                            |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 56,887 |   |   |   |   |   |   |   | 56,887 |   |
| Offering costs related to share issuance                       |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | (358,018 | ) |   |   |   |   |   |   | (358,018 | ) |
| Net loss                                                       |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   |   |   |   |   | (2,240,285 | ) |   |   | (2,240,285 | ) |
| Balance at March 31, 2010                                      |   |            |       |   |         |   | -        |   |   |   | 28,262,190 |   |   |                       | 28,262 |   |   |   | 4,451,915 |   |   |   | (2,864,811 | ) |   |   | 1,615,366 |   |
| Issuance of options                                            |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | 66,539 |   |   |   |   |   |   |   | 66,539 |   |
| Issuance of shares, July 2010                                  |   |            |       |   |         |   |     |   |   |   | 400,000    |   |   |                       | 400    |   |   |   | 499,600 |   |   |   |   |   |   |   | 500,000 |   |
| Issuance of shares, August 2010                                |   |            |       |   |         |   |     |   |   |   | 600,000    |   |   |                       | 600    |   |   |   | 605,400 |   |   |   |   |   |   |   | 606,000 |   |
| Offering costs related to issuance                             |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   | (15,000 | ) |   |   |   |   |   |   | (15,000 | ) |
| Net loss                                                       |   |            |       |   |         |   |     |   |   |   |       |   |   |                       |   |   |   |   |   |   |   |   | (974,000 | ) |   |   | (974,000 | ) |
| Balance at December 31, 2010                                   |   |            | -          |   |         | $      | -        |   |   |   | 29,262,190 |   |   | $                          | 29,262 |   |   | $ | 5,608,454 |   |   | $ | (3,838,811 | ) |   | $ | 1,798,905 |   |

----

|                                                                                                                                                                                                          |   |     |      |   | March 15, 1990(Inception) to December 31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|--------|-------------------------------------------|--------|
|                                                                                                                                                                                                          |   | 2010     |      |   | 2009                                      |   |   | 2010 |   |
| Cash flows from operating activities:                                                                                                                                                                         |   |     |      |   |                                      |   |   |   |   |
|    Net loss                                                                                                                                                                                    |   | $        | (974,000) |   |                                      | $      | (1,723,286 | ) |   | $ | (3,838,811 | ) |
|    Adjustments to reconcile net loss to net cash used in operating activities:                                                                                                                 |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                                                                                  |   |     | 5,817     |   |                                      |   | 4,051 |   |   |   | 12,149 |   |
| Stock issued for services                                                                                                                                                                                     |   |     | -         |   |                                      |   | 1,147,453 |   |   |   | 1,326,504 |   |
|        Options issued for services                                                                                                                                         |   |     | 66,539    |   |                                      |   | - |   |   |   | 136,833 |   |
|        Fair value of salaries donated as capital                                                                                                                           |   |     | -         |   |                                      |   | - |   |   |   | 151,500 |   |
|    Changes in operating assets and liabilities:                                                                                                                                                |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Due from affiliate                                                                                                                                                                                            |   |     | (25,437)  |   |                                      |   | - |   |   |   | (25,437) |   |
| Prepaid expenses                                                                                                                                                                                              |   |     | (18,213)  |   |                                      |   | (18,837) |   |   |   | (22,506) |   |
| Accounts payable and accrued expenses                                                                                                                                                                         |   |     | (40,351)  |   |                                      |   | 52,701 |   |   |   | 22,108 |   |
| Accrued interest payable – related parties                                                                                                                                                              |   |     | -         |   |                                      |   | 5,009 |   |   |   | 15,456 |   |
|     Non-refundable deposits                                                                                                                                                               |   |     | -         |   |                                      |   | - |   |   |   | (100,000 | ) |
| Net cash used in operating activities                                                                                                                                                                         |   |     | (985,644) |   |                                      |   | (532,909) |   |   |   | (2,322,203) |   |
|                                                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Cash flows from investing activities :                                                                                                                                                                        |   |     |      |   |                                      |   |   |   |   |   |   |   |
|    Advances to former stockholders                                                                                                                                                             |   |     | -         |   |                                      |   | - |   |   |   | (14,018 | ) |
|    Repayment of advances from former stockholders                                                                                                                                              |   |     | -         |   |                                      |   | - |   |   |   | 14,018 |   |
|    Advances from stockholders, net                                                                                                                                                             |   |     | -         |   |                                      |   | - |   |   |   | 22,725 |   |
|    Capital equipment purchases                                                                                                                                                                 |   |     | (11,581)  |   |                                      |   | (35,348) |   |   |   | (48,987) |   |
|    Cash paid for acquisition of intangible                                                                                                                                                     |   |     | (147,530) |   |                                      |   | - |   |   |   | (147,530) |   |
|    Sale of assets to MongSource net of cash on hand                                                                                                                                            |   |     | -         |   |                                      |   | (88,567) |   |   |   | (90,119) |   |
| Net cash used in investing activities                                                                                                                                                                         |   |     | (159,111) |   |                                      |   | (123,915 | ) |   |   | (263,911) |   |
|                                                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Cash flows from financing activities                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
|    Proceeds from issuance of common stock                                                                                                                                                      |   |     | 500,000   |   |                                      |   | 2,600,937 |   |   |   | 3,644,193 |   |
|    Offering costs                                                                                                                                                                              |   |     | (15,000)  |   |                                      |   | (358,018) |   |   |   | (365,518 | ) |
|    Net proceeds from issuance of note payable                                                                                                                                                  |   |     | -         |   |                                      |   | 205,724 |   |   |   | 459,690 |   |
|    Repayment of debt                                                                                                                                                                           |   |     | -         |   |                                      |   | - |   |   |   | (170,000 | ) |
| Net cash provided by financing activities                                                                                                                                                                     |   |     | 485,000   |   |                                      |   | 2,448,643 |   |   |   | 3,568,365 |   |
|                                                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Net change in cash and equivalents                                                                                                                                                                            |   |     | (659,755) |   |                                      |   | 1,791,819 |   |   |   | 982,251 |   |
|                                                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Cash and equivalents - beginning balance                                                                                                                                                                      |   |     | 1,642,006 |   |                                      |   | 145,436 |   |   |   | - |   |
|                                                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Cash and equivalents - ending balance                                                                                                                                                                         |   | $        | 982,251   |   |                                      | $      | 1,937,255 |   |   | $ | 982,251 |   |
|                                                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Supplemental disclosures of cash flows information:                                                                                                                                                           |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Cash received/(paid) during the period for:                                                                                                                                                                   |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Interest                                                                                                                                                                                                      |   | $        | -         |   |                                      | $      | - |   |   | $ | - |   |
| Income taxes                                                                                                                                                                                                  |   | $        | -         |   |                                      | $      | - |   |   | $ | - |   |
| Stockholder Advances forgiven and converted to additional paid in capital                                                                                                                                     |   | $        | -         |   |                                      | $      | - |   |   | $ | 22,725 |   |
| Non-Cash Financing Activity:                                                                                                                                                                                  |   |     |      |   |                                      |   |   |   |   |   |   |   |
| Forgiveness of debt in exchange for all ownership interest in AuraSource, LLC, a Mongolian subsidiary                                                                                                         |   | $        | -         |   |                                      | $      | - |   |   | $ | 386,578 |   |
|                                                                                                                                                                                                          |   |     |      |   |                                      |   |   |   |   |   |   |   |
|  Non-Cash Investing Activity:                                                                                                                                                                            |   |     |      |   |                                      |   |   |   |   |   |   |   |
| The Company issued 600,000 shares of common stock for the acquisition of intangibles.    The shares issued in connection with the intangibles were valued at $1.01 per share or $606,000. |   |   $ | -         |   |                                      | $      | - |   |   | $ | - |   |

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| Level 1: |    | Quoted prices in active markets for identical or similar assets and liabilities.                                                                                                                              |
|---------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |         |
| Level 2: |    | Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities. |
|          |         |
| Level 3: |    | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.                                                               |

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|                         |   |        |           |
|------------------------------|--------|-------------|----------------|
| Dividend yield               |   |        | 0.0%           |   |
| Volatility                   |   |        | 25% to 155%    |   |
| Average expected option life |   | 10.00 years |           |
| Risk-free interest rate      |   |        | 1.76% to 2.59% |   |

|                         |   | Number ofShares |    |   | Weighted Average Price Per Share |   |
|------------------------------|--------|-----------------|---------|--------|----------------------------------|--------|
| Balance at March 31, 2010    |   |            | 60,000  |   |                             | $      | 3.50 |   |
| Granted                      |   |            | 60,000  |   |                             |   | 1.00 |   |
| Balance at December 31, 2010 |   |            | 120,000 |   |                             |   | 2.25 |   |

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|                         |   | Options Outstanding                      |    | Options Exercisable                        |   |
|------------------------------|--------|------------------------------------------|---------|--------------------------------------------|--------|
| Range of Exercise Prices     |   | Number Outstanding at September 30, 2010 |    | Weighted Average Remaining ContractualLife |   | Weighted Average Exercise Price |   | Number Exercisable at December 31, 2010 |   | Weighted Average Exercise Price |   |
|                         |   |                                     |    |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| $3.50                        |   |                                     | 60,000  |                                       |   | 9.00 |   |   | $3.50 |   |   | 60,000 |   |   | $3.50 |   |
| $1.00                        |   |                                     | 60,000  |                                       |   | 10.00 |   |   | $1.00 |   |   | 30,000 |   |   | $1.00 |   |
| Balance at December 31, 2010 |   |                                     | 120,000 |                                       |   | 9.50 |   |   | $2.25 |   |   | 90,000 |   |   | $2.67 |   |

|                                       |   | Nine months Ended December 31, |    |
|--------------------------------------------|--------|--------------------------------|---------|
|                                       |   | 2010                           |    |   | 2009 |   |
| Weighted average common stock equivalents: |   |                           |    |   |   |   |
| Non-Plan Stock Options                     |   |                           | 120,000 |   |   |   | 60,000 |   |

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| · | license HCF technology to international clients in applicable industries, such as coal producers and power plants;                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | develop strategic partnerships to deliver consulting services with respect to design, engineering, procurement and construction for HCF applications; |
| · | enter into joint ventures with coal producers to supply HCF treated coal to power plants;                                                             |
| · | process coal using HCF technology and sell such coal to end users at a marked-up price;                                                               |
| · | assist customers to convert their plants to HCF rather than oil, gas or other natural resources in order to save energy costs; and                    |
| · | establish centers for processing coal with our HCF technology to supply power plants and other customers.                                             |

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|    · | reduce harmful emissions and energy costs;                                               |
|---------------------|------------------------------------------------------------------------------------------|
|    · | reduce and/or eliminate the need for scrubbers;                                          |
|    · | reduce a power plant’s need for related precipitators and/or sulfur acceptors; and |
|    · | enable a power plant to effectively manage its carbon emissions.                         |

| 1)   | Crushing. Before retorting, raw oil shale is crushed into fine particles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2)   | Retorting. The AuraFuel process uses an annular rotary retort that heats raw oil shale. Due to the rotating feature, the retorting is a continuous process. The annular retort consists of several zones, including heating zone, reaction zone and heat recovery zone. Incoming raw shale goes into the heating zone in which the shale is heated. Then the shale enters the reaction zone in which pyrolysis of oil shale happens. Most of the pyrolysis is complete in the reaction zone. In the heat recovery zone, the spent shale is cooled and waste heat is recycled. After one cycle of motion, the retorting process is complete and spent shale is discharged. |
| 3)   | Post-processing. Produced oil vapors and gases are cleaned and delivered to a condensation system where oil condenses and non-condensable gases are fed back to the retort as energy sources. The oil goes through a distillation process to produce gasoline, diesel or residual oil.                                                                                                                                                                                                                                                                                                                                                                                    |

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|   ITEM 2 | - UNREGISTERED SALES OF EQUITY SECURITIES |
|--------------------|-------------------------------------------|

|   ITEM 3 | - DEFAULTS UPON SENIOR SECURITIES |
|--------------------|-----------------------------------|

| ITME 5 |  - OTHER INFORMATION |
|--------|---------------------------|

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| Exhibit |   | Description                                                                                                                                                                                        |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1    |   | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                     |
| 31.2    |   | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                     |
| 32      |   | Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

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|                   | AURASOURCE, INC.                    |   |
|------------------------|-------------------------------------|--------|
|                   |                                |   |
|                   |                                |   |
| Date: February 2, 2011 | /s/  PHILIP LIU                |   |
|                   | Name: Philip                        |   |
|                   | Title: Chief Executive Officer |   |
|                   |                                |   |
| Date: February 2, 2011 | /s/  ERIC STOPPENHAGEN         |   |
|                   | Name: Eric Stoppenhagen             |   |
|                   | Title: Chief Financial Officer |   |

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| Exhibit |   | Description                                                                                                                                                                                        |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1    |   | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                     |
| 31.2    |   | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                     |
| 32      |   | Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|    |   |                                                                                                                                                                                               |

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