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| Nevada                                                                            |   |   |   | 20-8428738                                    |
|-----------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------|
| (State or other jurisdiction          of incorporation or           organization) |   |   |   | (IRS Employer Identification          Number) |
|                                                                                   |   |        |   |                                               |
| 3880 Hulen St., Ste          500, Fort Worth, TX  | 76107      |
|---------------------------------------------------|------------|
| (Address of principal          executive offices) | (Zip Code) |

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

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| **PART I**                                                                                                                     | **Page No.** |
|--------------------------------------------------------------------------------------------------------------------------------|--------------|
| Item 1.      Business                                                                                                          | 1            |
| Item      1A. Risk Factors                                                                                                     | 8            |
| Item      1B. Unresolved Staff Comments                                                                                        | 14           |
| Item 2.      Properties                                                                                                        | 14           |
| Item 3.      Legal Proceedings                                                                                                 | 17           |
| Item 4.      Submission of Matters to a Vote of Security Holders                                                               | 17           |
|                                                                                                                           |              |
| **PART II**                                                                                                                    |              |
| Item 5.      Market for Registrant's Common Equity, Related Stockholder Matters and Issuer      Purchases of Equity Securities | 17           |
| Item 6.      Selected Financial Data                                                                                           | 18           |
| Item 7.      Management's Discussion and Analysis of Financial Condition and Results      of Operations                        | 18           |
| Item      7A. Quantitative and Qualitative Disclosures About Market Risk                                                       | 25           |
| Item 8.      Financial Statements and Supplementary Data                                                                       | F-1          |
| Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial      Disclosure                         | 26           |
| Item      9A(T). Controls and Procedures                                                                                       | 26           |
| Item      9B. Other Information                                                                                                | 26           |
|                                                                                                                           |         |
| **PART III**                                                                                                                   |              |
| Item      10. Directors, Executive Officers and Corporate Governance                                                           | 26           |
| Item      11. Executive Compensation                                                                                           | 26           |
| Item      12. Security Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters              | 26           |
| Item      13. Certain Relationships and Related Transactions and Director Independence                                         | 26           |
| Item      14. Principal Accountant Fees and Services                                                                           | 26           |
| Item      15. Exhibits and Financial Statement Schedules                                                                       | 26           |
|                                                                                                                           |         |
| **SIGNATURES**                                                                                                                 | 29           |
| Consent      of Forest Garb & Associates                                                                                       |         |
| Certification      by the President and CEO Pursuant to Section 302                                                            |         |
| Certification      by the CFO Pursuant to Section 302                                                                          |         |
| Certification      by the President and CEO Pursuant to Section 906                                                            |         |
| Certification      by the CFO Pursuant to Section 906                                                                          |         |

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|   | • | Barnett Shale. Our      main area of interest in the Barnett Shale play is located in the "oil window"      of the Barnett in southwest Cooke County, Texas.       We completed, and began production in the seven wells that were in process      as of March 31, 2008. We also drilled, completed, and began production in      six wells. Two other wells were drilled that we anticipate will be completed      in the second quarter of fiscal year 2010. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | Corsicana Enhanced Oil      Recovery (EOR) Project. We began injecting surfactant polymer in phase      I of the project in mid-June 2007 and continued injection throughout the      current fiscal year. We initiated phase II of the project by drilling 12      wells in June 2008 in an area immediately south of our injection facility      adjacent to the phase I wells.                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | Corsicana deeper zone      exploration. We drilled four deeper exploratory wells in the Corsicana      acreage. The first two, a Glen Rose well and a Pecan Gap well were dry holes.      In December 2008, we successfully completed two Pecan Gap wells.                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | Eagle Ford Shale.      In March 2009, we entered into a non-binding letter of intent to acquire      a 100% working interest (75% net revenue interest) in 13,000 acres of leasehold      in South Texas. The acreage is in the Edwards trend and has both Edwards      and Eagle Ford Shale prospects.                                                                                                                                                        |

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|                                                              |   | March 31, |   |   | March 31, |   | December 31, |      |
|-------------------------------------------------------------------|--------|-----------|--------|--------|-----------|--------|--------------|-----------|
|         Years      Ending |   | 2009      |   |   | 2008      |   |         | 2006      |   |   | 2005 |   |
| Production                                                        |   |      |   |   |      |   |         |      |   |   |   |   |
|         Oil      (Bbl)    |   | 45,105    |   |   | 33,602    |   |         | 34,607    |   |   | 8,965 |   |
|         Gas      (Mcf)    |   | 479,180   |   |   | 351,538   |   |         | 199,282   |   |   | 94,358 |   |
|                                                              |   |           |   |   |           |   |         |           |   |   |  |   |
| Revenues                                                          |   |           |   |   |           |   |         |           |   |   |  |   |
|         Crude      Oil    | $      | 4,034,376 |   | $      | 2,704,468 |   | $            | 1,772,649 |   | $ | 555,097 |   |
|         Gas               |   | 2,523,693 |   |   | 2,197,604 |   |         | 1,101,642 |   |   | 554,102 |   |
|         Total             |   | 6,558,069 |   |   | 4,902,072 |   |         | 2,874,291 |   |   | 1,109,199 |   |
|                                                              |   |           |   |   |           |   |         |           |   |   |  |   |
| Average Sale Price per      Bbl                                   |   | 89.44     |   | $      | 80.49     |   | $            | 51.22     |   | $ | 61.92 |   |
| Average Sale Price per MCF                                        |   | 5.27      |   | $      | 6.25      |   | $            | 5.53      |   | $ | 5.87 |   |
|                                                              |   |           |   |   |           |   |         |           |   |   |  |   |
| Lease Operating Costs (per BOE)                                   |   | 20.79     |   | $      | 23.05     |   | $            | 16.68     |   | $ | 22.59 |   |
| Severance Taxes (per BOE)                                         |   | 3.00      |   | $      | 3.13      |   | $            | 2.41      |   | $ | 2.67 |   |
|                                                              |   |           |   |   |           |   |         |           |   |   |  |   |
| Average Sale Price (per      BOE)                                 |   | 52.48     |   | $      | 53.17     |   | $            | 42.38     |   | $ | 44.92 |   |
| Average Sale Price (per MCFE)                                     |   | 8.75      |   | $      | 8.86      |   | $            | 7.06      |   | $ | 7.49 |   |

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|   | • | the domestic and foreign supply      of oil and gas;            |
|--------|--------|-----------------------------------------------------------------|
|   | • | the price and availability of      alternative fuels;           |
|   | • | weather conditions;                                             |
|   | • | the level of consumer demand;                                   |
|   | • | the price of foreign imports;                                   |
|   | • | world-wide economic conditions;                                 |
|   | • | political conditions in oil and      gas producing regions; and |
|   | • | domestic and foreign governmental      regulations.             |

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|   | • | injury or loss of life;                                                             |
|--------|--------|-------------------------------------------------------------------------------------|
|   | • | severe damage to or destruction      of property, natural resources, and equipment; |
|   | • | pollution or other environmental      damage;                                       |
|   | • | clean-up responsibilities;                                                          |
|   | • | regulatory investigations and      penalties; or                                    |
|   | • | suspension of operations.                                                           |

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|   | • | we may be      required to dedicate a substantial portion of our cash flows from operations      to the payment of our indebtedness, reducing the funds available for our      operations; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | a portion      of our borrowings are at variable rates of interest, making us vulnerable      to increases in interest rates;                                                              |
|   | • | we may be      more highly leveraged than some of our competitors, which could place us      at a competitive disadvantage;                                                                |
|   | • | our degree      of leverage may make us more vulnerable to a downturn in our business or      the general economy;                                                                         |
|   | • | the terms      of our credit arrangements could contain numerous financial and other restrictive      covenants;                                                                           |
|   | • | our debt level      could limit our flexibility in planning for, or reacting to, changes in      our business and the industry in which we operate; and                                    |
|   | • | we may have      difficulties borrowing money in the future.                                                                                                                               |

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|   | • | changes in oil and natural gas      prices;                                                |
|--------|--------|--------------------------------------------------------------------------------------------|
|   | • | variations in quarterly drilling,      re-completions, acquisitions and operating results; |
|   | • | changes in financial estimates      by securities analysts;                                |
|   | • | changes in market valuations      of comparable companies;                                 |
|   | • | additions or departures of key      personnel; or                                          |
|   | • | future sales of our stock.                                                                 |

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| **Estimated      Proved Reserves**                                   |   | ***Barnett         Shale*** |   | ***Corsicana        Field*** |   | ***E. Texas         Field*** |   | ***Total*** |   |
|----------------------------------------------------------------------|--------|-----------------------------|--------|------------------------------|--------|------------------------------|--------|-------------|--------|
| Proved Developed      (MBOE)                                         |   | 688                         |   | 187                          |   | 13                           |   | 888         |   |
| Proved Undeveloped (MBOE)                                            |   | 2,072                       |   | 33                           |   | -                            |   | 2,105       |   |
| Total      Proven Reserves at March 31, 2009                         |   | 2,760                       |   | 220                          |   | 13                           |   | 2,993       |   |
|                                                                 |   |                        |   |                         |   |                         |   |        |   |
| Benchmark      Pricing                                               |   |                        |   |                         |   |                         |   |        |   |
|        Natural      Gas per mmbtu |   | $3.58                       |   |                         |   |                         |   |        |   |
|        Crude      Oil per barrel  |   | $49.65                      |   |                         |   |                         |   |        |   |

|   | • | customary royalty interests;                                       |
|--------|--------|--------------------------------------------------------------------|
|   | • | liens incident to operating agreements      and for current taxes; |
|   | • | obligations or duties under applicable      laws;                  |
|   | • | development obligations under      oil and gas leases; or          |
|   | • | burdens such as net profit interests.                              |

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| Fiscal 2009 | High   |   | Low    |
|-------------|--------|--------|--------|
| 30-Jun-08   | $0.95  |   | $0.20  |
| 30-Sep-08   | $0.74  |   | $0.20  |
| 31-Dec-08   | $0.50  |   | $0.10  |
| 31-Mar-09   | $0.30  |   | $0.05  |
|        |   |   |   |
| Fiscal 2008 | High   |   | Low    |
| 30-Jun-07   | $1.28  |   | $1.05  |
| 30-Sep-07   | $1.30  |   | $1.02  |
| 31-Dec-07   | $1.42  |   | $0.80  |
| 31-Mar-08   | $1.04  |   | $0.62  |

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|                                                                        |   | Fiscal year ended March        31 |   |   |      |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------|--------|--------|------|--------|
| In thousands                                                                |   | 2010                              |   |   | 2011 |   |   | 2012 |   |   | Thereafter |   |
|         Office      Lease           | $      | 131,000                           |   | $      | -    |   | $ | - |   | $ | - |   |
|         Senior      Credit Facility |   | -                                 |   |   | -    |   |   | 9,800,000 |   |   | - |   |
| Related Party Notes                                                         |   | -                                 |   |   | -    |   |   | - |   |   | 3,518,924 |   |

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|                                                                                      | Page   |
|-------------------------------------------------------------------------------------------|--------|
|                                                                                      |   |
| Report of Independent      Registered Public Accounting Firm                              | F-2    |
|                                                                                      |   |
| Consolidated Balance      Sheet, March 31, 2009                                           | F-3    |
|                                                                                      |   |
| Consolidated Statements      of Operations, Years Ended March 31, 2008 and 2009           | F-4    |
|                                                                                      |   |
| Consolidated Statements      of Stockholders' Equity, Years Ended March 31, 2008 and 2009 | F-5    |
|                                                                                      |   |
| Conolidated Statements      of Cash Flows, Years Ended March 31, 2008 and 2009            | F-6    |
|                                                                                      |   |
| Notes to Financial Statements                                                             | F-8    |
|                                                                                      |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | **March 31, 2009** |       | **March 31, 2008** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|------------|--------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               |       |               |   |   |   |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |       |               |   |   |   |   |
|           Cash                                                                                                                                                                                                                                                                                                                                                                                                                       | $                  | 426,430    |               |   | $ | 592,665 |   |
|           Accounts      Receivable:                                                                                                                                                                                                                                                                                                                                                                                                  |               |            |               |   |   |  |   |
|                     Oil      & Gas - Related Party                                                                                                                                                                                                                                                                                                                                 |               | 337,879    |               |   |   | 868,406 |   |
|                     Related      Party                                                                                                                                                                                                                                                                                                                                             |               | 1,107,854  |               |   |   | - |   |
|                     Other                                                                                                                                                                                                                                                                                                                                                          |               | 15,760     |               |   |   | - |   |
|           Inventory                                                                                                                                                                                                                                                                                                                                                                                                                  |               | 7,514      |               |   |   | 4,748 |   |
|           Other      Current Assets                                                                                                                                                                                                                                                                                                                                                                                                  |               | 6,317      |               |   |   | 13,062 |   |
|           Total      Current Assets                                                                                                                                                                                                                                                                                                                                                                                                  |               | 1,901,754  |               |   |   | 1,478,881 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
| Note Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               | 553,536    |               |   |   | 1,355,228 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
| Oil and Gas Properties - successful efforts      method                                                                                                                                                                                                                                                                                                                                                                                                                                |               | 25,254,777 |               |   |   | 17,832,931 |   |
|           Less      Accumulated Depletion and Depreciation                                                                                                                                                                                                                                                                                                                                                                           |               | (6,206,558 | )                  |   |   | (4,139,337 | ) |
|                     Oil      & Gas Properties (net)                                                                                                                                                                                                                                                                                                                                |               | 19,048,219 |               |   |   | 13,693,594 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
| Other Depreciable Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                              |               | 2,171,654  |               |   |   | 1,641,806 |   |
|           Less      Accumulated Depreciation                                                                                                                                                                                                                                                                                                                                                                                         |               | (315,093   | )                  |   |   | (121,113 | ) |
|                     Other      Depreciable Assets (net)                                                                                                                                                                                                                                                                                                                            |               | 1,856,561  |               |   |   | 1,520,693 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
| Other Related Party Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                         |               | -          |               |   |   | 80,395 |   |
| Leasehold Held for Sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                |               | 150,000    |               |   |   | 1,680,813 |   |
| Investment in Equity Method Investment                                                                                                                                                                                                                                                                                                                                                                                                                                                 |               | -          |               |   |   | 142,395 |   |
| Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $                  | 23,510,070 |               |   | $ | 19,951,999 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |       |               |   |   |   |   |
| **LIABILITIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |            |               |   |   |  |   |
| Current Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
|           Accounts      Payable                                                                                                                                                                                                                                                                                                                                                                                                      | $                  | 22,033     |               |   | $ | 103,479 |   |
|           Notes      Payable to Related Parties                                                                                                                                                                                                                                                                                                                                                                                      |               | -          |               |   |   | 324,330 |   |
|           Payable      to Related Parties                                                                                                                                                                                                                                                                                                                                                                                            |               | 148,550    |               |   |   | 1,547,136 |   |
|           Accrued      Expenses                                                                                                                                                                                                                                                                                                                                                                                                      |               | 106,141    |               |   |   | 915,372 |   |
|           Accrued      Expenses - Related Parties                                                                                                                                                                                                                                                                                                                                                                                    |               | 130,870    |               |   |   | 171,788 |   |
|           Current      Portion of Long-Term Debt                                                                                                                                                                                                                                                                                                                                                                                     |               | -          |               |   |   | 14,960 |   |
|                     Total      Current Liabilities                                                                                                                                                                                                                                                                                                                                 |               | 407,594    |               |   |   | 3,077,065 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
|           Notes      Payable                                                                                                                                                                                                                                                                                                                                                                                                         |               | 8,955,202  |               |   |   | 1,647,769 |   |
|           Notes      Payable - Related Parties                                                                                                                                                                                                                                                                                                                                                                                       |               | 3,518,924  |               |   |   | 3,194,594 |   |
|           Other      Related Party Payables                                                                                                                                                                                                                                                                                                                                                                                          |               | -          |               |   |   | 490,840 |   |
|           Less      Current Portion of Notes Payable                                                                                                                                                                                                                                                                                                                                                                                 |               | -          |               |   |   | (14,960 | ) |
|                     Total      Long-Term Debt                                                                                                                                                                                                                                                                                                                                      |               | 12,474,126 |               |   |   | 5,318,243 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
|           Asset      Retirment Obligation                                                                                                                                                                                                                                                                                                                                                                                            |               | 344,079    |               |   |   | - |   |
|           Deferred      Tax Liability                                                                                                                                                                                                                                                                                                                                                                                                |               | 1,702,782  |               |   |   | 2,163,183 |   |
|                     Total      Liabilities                                                                                                                                                                                                                                                                                                                                         |               | 14,928,581 |               |   |   | 10,558,491 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |            |               |   |   |  |   |
|           Commitments      & Contingencies:                                                                                                                                                                                                                                                                                                                                                                                          |               |            |               |   |   |  |   |
|                     Contingent      Stock Based Compensation                                                                                                                                                                                                                                                                                                                       |               | -          |               |   |   | 214,976 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |       |               |   |   |   |   |
| **Stockholders' Equity**                                                                                                                                                                                                                                                                                                                                                                                                                                                               |               |       |               |   |   |   |   |
|           Common      Stock, $.001 par,200,000,000 shares authorized and                           80,353,912      and 80,181,310 shares outstanding on                           March      31, 2009 and 2008, respectively |               | 80,353     |               |   |   | 80,181 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |               |            |               |   |   |  |   |
|           Additional      Paid-In-Capital                                                                                                                                                                                                                                                                                                                                                                                            |               | 10,959,965 |               |   |   | 9,553,346 |   |
|           Retained      Deficit                                                                                                                                                                                                                                                                                                                                                                                                      |               | (2,458,829 | )                  |   |   | (454,995 | ) |
|                     Total      Stockholders' Equity                                                                                                                                                                                                                                                                                                                                |               | 8,581,489  |               |   |   | 9,178,532 |   |
|                     Total      Liabilities & Stockholders' Equity                                                                                                                                                                                                                                                                                                                  | $                  | 23,510,070 |               |   | $ | 19,951,999 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |       |               |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                       | **Years Ended**   |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|------------|
|                                                                                                                                                                                                                                                                                                                            | **Mar. 31, 2009** |       | **Mar. 31, 2008** |   |
| **Revenues**                                                                                                                                                                                                                                                                                                               |              |       |   |   |   |   |   |
|          Oil      & Gas Sales                                                                                                                                                                                                                                                 | $                 | 6,558,069  |   |   | $ | 4,902,072 |   |
|          Sale      of Leases                                                                                                                                                                                                                                                  |              | 18,005     |   |   |   | 307,028 |   |
|          Other      Income                                                                                                                                                                                                                                                    |              | 458,365    |   |   |   | 281,231 |   |
|                                                                                                                                                                                                                                  |              | 7,034,439  |   |   |   | 5,490,331 |   |
|                                                                                                                                                                                                                                                                                                                       |              |            |   |   |   |  |   |
| Costs and Expenses ****                                                                                                                                                                                                                                                                                                    |              |            |   |   |   |  |   |
|          Oil      & Gas Lease Operating Expenses                                                                                                                                                                                                                              |              | 2,598,208  |   |   |   | 2,125,261 |   |
|          Workover      Expenses                                                                                                                                                                                                                                               |              | 114,683    |   |   |   | 356,342 |   |
|          Severance      & Ad Valorem Taxes                                                                                                                                                                                                                                    |              | 427,307    |   |   |   | 318,785 |   |
|          Geologic      & Geophysical                                                                                                                                                                                                                                          |              | -          |   |   |   | 8,993 |   |
|          Delay      Rentals                                                                                                                                                                                                                                                   |              | 2,975      |   |   |   | 52,186 |   |
|          Plugging      Costs & Expired Leases                                                                                                                                                                                                                                 |              | 433,976    |   |   |   | 290,959 |   |
|          Depletion      & Depreciation                                                                                                                                                                                                                                        |              | 3,487,440  |   |   |   | 1,520,406 |   |
|          General      & Administrative:                                                                                                                                                                                                                                       |              |            |   |   |   |  |   |
|             Salaries      & Benefits                                                                                                                                                                                                                           |              | 874,418    |   |   |   | 1,104,785 |   |
|             Legal      & Professional                                                                                                                                                                                                                          |              | 720,771    |   |   |   | 584,765 |   |
|             Other      General & Administrative                                                                                                                                                                                                                |              | 701,687    |   |   |   | 332,009 |   |
|          Interest,      net of capitalized interest of $537,024 and                $488,299 for the years      ended March 31, 2009 and                March 31, 2008, respectively |              | 3,780      |   |   |   | - |   |
|                                                                                                                                                                                                                                  |              | 9,365,245  |   |   |   | 6,694,491 |   |
|                                                                                                                                                                                                                                                                                                                       |              |            |   |   |   |  |   |
| Other Income (Expense)                                                                                                                                                                                                                                                                                                     |              |            |   |   |   |  |   |
|          Interest      Income                                                                                                                                                                                                                                                 |              | 79,876     |   |   |   | 210,938 |   |
|          Other      Expense                                                                                                                                                                                                                                                   |              | (6,745     | ) |   |   | (16,938 | ) |
|          Loss      on Equity Method Investments                                                                                                                                                                                                                               |              | (206,561   | ) |   |   | (32,605 | ) |
|                                                                                                                                                                                                                                                                                                                       |              |            |   |   |   |  |   |
| (Loss) from continuing operations      before income taxes and                discontinued operations                                                                                                                                                                         |              | (2,464,236 | ) |   |   | (1,042,765 | ) |
|                                                                                                                                                                                                                                                                                                                       |              |            |   |   |   |  |   |
| Income Tax Benefit                                                                                                                                                                                                                                                                                                         |              | 460,402    |   |   |   | 364,930 |   |
| Loss before discontinued operations                                                                                                                                                                                                                                                                                        |              | (2,003,834 | ) |   |   | (677,835 | ) |
| Income from discontinued      operations, net of income taxes:                                                                                                                                                                                                                                                             |              |            |   |   |   |  |   |
|          Pipeline      Income                                                                                                                                                                                                                                                 |              | -          |   |   |   | 22,930 |   |
|          Gain      on Sale of Pipeline                                                                                                                                                                                                                                        |              | -          |   |   |   | 1,450,805 |   |
|          Income      from discontinued operations                                                                                                                                                                                                                             |              | -          |   |   |   | 1,473,735 |   |
| Net Income (Loss)                                                                                                                                                                                                                                                                                                          | $                 | (2,003,834 | ) |   | $ | 795,900 |   |
|                                                                                                                                                                                                                                                                                                                       |              |       |   |   |   |   |   |
| **Basic & Diluted (Loss)      Income per Common Share:**                                                                                                                                                                                                                                                                   |              |       |   |   |   |   |   |
|          Loss      from continuing operations                                                                                                                                                                                                                                 | $                 | (0.02      | ) |   | $ | (0.01 | ) |
|          Income      from discontinued operations                                                                                                                                                                                                                             | $                 | -          |   |   | $ | 0.02 | ) |
|          Net      Income (Loss) per Common Share                                                                                                                                                                                                                              | $                 | (0.02      | ) |   | $ | 0.01 |   |
|                                                                                                                                                                                                                                                                                                                       |              |       |   |   |   |   |   |
| **Weighted Average Common Shares Outstanding**                                                                                                                                                                                                                                                                             |              | 80,300,804 |   |   |   | 78,800,618 |   |
|                                                                                                                                                                                                                                                                                                                       |              |       |   |   |   |   |   |

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**Table of Contents**

|                                                                                                                | Common Stock            |   |   |   |   |   |   |   |                   |   |   |   |                     |   |
|---------------------------------------------------------------------------------------------------------------------|-------------------------|--------|--------|--------|--------|--------|--------|--------|------------------------|--------|--------|--------|--------------------------|--------|
|                                                                                                                | Number of        Shares |   |        |   | Amount |   |        |   | Paid-In        Capital |   |        |   | Retained         Deficit |   |  |   | Total |   |
| Balance, March 31,      2007                                                                                        | 71,954,262              |   |   | $      | 71,954 |   |   | $      | 1,970,795              | )      |   | $      | (1,250,895               | )      |   | $ | 791,854 | ) |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Sale of Common Stock                                                                                                | 7,637,048               |   |   |   | 7,637  |   |   |   | 6,877,717              |   |   |   | -                        |   |   |   | 6,885,354 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Common Stock Issued      for Wilson Energy Acquisition                                                              | 240,000                 |   |   |   | 240    |   |   |   | 298,560                |   |   |   | -                        |   |   |   | 298,800 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Common Stock Issued      for Employee Compensation                                                                  | 350,000                 |   |   |   | 350    |   |   |   | 406,274                |   |   |   | -                        |   |   |   | 406,624 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Net Income 2008                                                                                                     | -                       |   |   |   | -      |   |   |   | -                      |   |   |   | 795,900                  |   |   |   | 795,900 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Balance, March 31,      2008                                                                                        | 80,181,310              |   |   |   | 80,181 |   |   |   | 9,553,346              |   |   |   | (454,995                 | )      |   |   | 9,178,532 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Common Stock Issued      for Penalty Shares                                                                         | 172,602                 |   |   |   | 172    |   |   |   | 172,430                |   |   |   | -                        |   |   |   | 172,602 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Warrants Issued for      short-term note payable                                                                    | -                       |   |   |   | -      |   |   |   | 36,967                 |   |   |   | -                        |   |   |   | 36,967 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Warrants Issued in      connection with consulting contract                                                         | -                       |   |   |   | -      |   |   |   | 300,000                |   |   |   | -                        |   |   |   | 300,000 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Warrants Issued for      success fee related to senior             secured credit facility | -                       |   |   |   | -      |   |   |   | 375,000                |   |   |   | -                        |   |   |   | 375,000 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Employee and director      stock options granted                                                                    | -                       |   |   |   | -      |   |   |   | 522,222                |   |   |   | -                        |   |   |   | 522,222 |   |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Net Loss 2009                                                                                                       | -                       |   |   |   | -      |   |   |   | -                      |   |   |   | (2,003,834               | )      |   |   | (2,003,834 | ) |
|                                                                                                                |                         |   |   |   |        |   |   |   |                        |   |   |   |                          |   |   |   |  |   |
| Balance, March 31, 2009                                                                                             | 80,353,912              |   |   | $      | 80,353 |   |   | $      | 10,959,965             |   |   | $      | (2,458,829               | )      |   | $ | 8,581,489 |   |
|                                                                                                                |                    |   |   |   |   |   |   |   |                   |   |   |   |                     |   |   |   |   |   |

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**Table of Contents**

|                                                                                                                             | **Fiscal Year Ended** |        |
|-----------------------------------------------------------------------------------------------------------------------------|-----------------------|-------------|
| **Operating Activities:**                                                                                                   | **Mar. 31, 2009**     |        | **Mar. 31, 2008** |   |
|             Net Income (Loss)                                                                 | $                     | (2,003,834  | ) |   | $ | 795,900 |   |
|             Adjustments to reconcile net income to net cash from operating activities:        |                  |             |   |   |   |  |   |
|             Discontinued      Operations                        |                  | -           |   |   |   | (22,930 | ) |
|             Deferred      Income Tax Expense                    |                  | (460,402    | ) |   |   | (364,930 | ) |
|             Depletion,      Depreciation, & Amortization        |                  | 3,487,440   |   |   |   | 1,520,406 |   |
|             Expired      Leases                                 |                  | 433,976     |   |   |   | 280,400 |   |
|             Non-employee      stock based compensation          |                  | 300,000     |   |   |   | - |   |
|             Stock      based compensation                       |                  | 307,240     |   |   |   | 621,600 |   |
|             Penalty      shares                                 |                  | 172,602     |   |   |   | - |   |
|             Loss      on Equity Method Investment               |                  | 206,561     |   |   |   | 32,605 |   |
|             Gain      on Sale of Pipeline (net of income taxes) |                  | -           |   |   |   | (1,450,805 | ) |
|             Gain      on Leases Sold                            |                  | -           |   |   |   | (307,028 | ) |
|       Changes      in Operating Assets and Liabilities                                        |                  |             |   |   |   |  |   |
|             Changes      in Accrued Liabilities                 |                  | (685,671    | ) |   |   | 25,514 |   |
|             Change      in Inventory                            |                  | (2,766      | ) |   |   | (4,748 | ) |
|             Change      in Related Party Receivables/Payables   |                  | (1,369,752  | ) |   |   | (10,000 | ) |
|             Changes      in Other Receivables                   |                  | (15,760     | ) |   |   | 63,389 |   |
|             Changes      in Other Current Assets                |                  | 6,745       |   |   |   | (13,062 | ) |
|             Change      in Revenue Receivables                  |                  | 530,527     |   |   |   | (373,206 | ) |
|             Changes      in Accounts Payable                    |                  | (81,446     | ) |   |   | (406,061 | ) |
|       Net      Cash provided by (used in) Operating Activities                                |                  | 825,460     |   |   |   | 387,044 |   |
|       Net Cash      provided by (used in) Discontinued Operations                             |                  | -           |   |   |   | 79,373 |   |
|                                                                                                                        |                  |             |   |   |   |  |   |
| **Investing Activities:**                                                                                                   |                  |             |   |   |   |  |   |
|       Oil      & Gas Drilling, Completing and Leasehold Acquisition Costs                     |                  | (8,706,952  | ) |   |   | (7,748,556 | ) |
|       Change      in Related Party Payable related to drilling                                |                  | (1,547,136  | ) |   |   | (2,073,212 | ) |
|       Proceeds      from the Sale of Leases                                                   |                  | -           |   |   |   | 412,913 |   |
|       Investment      in Other Depreciable Assets                                             |                  | (534,287    | ) |   |   | (1,641,806 | ) |
|       Investment      in Equity Method Investment                                             |                  | (64,166     | ) |   |   | (175,000 | ) |
|       Note Receivable      Collections                                                        |                  | 801,692     |   |   |   | 258,990 |   |
|       Net      Cash provided by (used in) Continuing Activities                               |                  | (10,050,849 | ) |   |   | (10,966,671 | ) |
|       Net Cash      provided by (used in) Discontinued Activities                             |                  | -           |   |   |   | 14,002,552 |   |
|                                                                                                                        |                  |             |   |   |   |  |   |
| **Financing Activities**                                                                                                    |                  |             |   |   |   |  |   |
|       Financing      Activities Notes Payable Advances Net of Loan Fees                       |                  | 10,401,254  |   |   |   | 54,898 |   |
|       Notes Payable      Principal Payments                                                   |                  | (1,342,100  | ) |   |   | (2,153,066 | ) |
|       Changes      in Notes Payable Related Party                                             |                  | -           |   |   |   | (100,000 | ) |
|       Net cash      received from common stock subscriptions                                  |                  | -           |   |   |   | 6,885,353 |   |
|       Net      Cash provided by (used in) Continuing Activities                               |                  | 9,059,154   |   |   |   | 4,687,185 |   |
|       Net Cash      provided by (used in) Discontinued Activities                             |                  | -           |   |   |   | (7,809,073 | ) |
| Net Increase (Decrease) in      Cash                                                                                        |                  | (166,235    | ) |   |   | 380,410 |   |
| Cash - Beginning of the Year                                                                                                |                  | 592,665     |   |   |   | 212,254 |   |
| Cash - End of the Year                                                                                                      | $                     | 426,430     |   |   | $ | 592,664 |   |
|                                                                                                                        |                  |        |   |   |   |   |   |

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**Table of Contents**

|                                                                                      | **Year Ended**    |    |
|--------------------------------------------------------------------------------------|-------------------|---------|
|                                                                                 | **Mar. 31, 2008** |    |   | **Mar. 31, 2008** |   |
| **Supplemental Disclosure      of Cash Flow Information**                            |              |    |   |   |   |   |   |
|       Cash      paid during period for:                |              |         |   |   |   |  |   |
|             Interest     | $                 | 466,792 |   |   | $ | 204,217 |   |
|                                                                                 |              |    |   |   |   |   |   |
|                  Income Taxes | $                 | -       |   |   | $ | - |   |
|                          |              |    |   |   |   |   |   |
| Non Cash Investing and Financing Activities                                          |              |    |   |   |   |   |   |
|                               |              |         |   |   |   |  |   |
|       Stock Based      Property Acquisition            | $                 | -       |   |   | $ | 298,800 |   |
|                                                   |              |    |   |   |   |   |   |
|       Stock Based      Loan Costs                      | $                 | 375,000 |   |   | $ | - |   |
|                                                                                 |              |    |   |   |   |   |   |
|       Stock Based      Interest Payment                | $                 | 36,967  |   |   | $ | - |   |
|                                                                                 |              |    |   |   |   |   |   |
|       Stock Based      Compensation                    | $                 | 522,222 |   |   | $ | 406,624 |   |
|                          |              |    |   |   |   |   |   |
|       Stock      Based Consulting Fees                 | $                 | 300,000 |   |   | $ | - |   |
|                                                                                 |              |    |   |   |   |   |   |

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|                                 |   | March 31,                                     |   |
|--------------------------------------|--------|-----------------------------------------------|--------|
|                                      |   | 2009                                          |   |   | 2008 |   |
| Federal Statutory Tax Rate           |   | 35%        |   |   | 35%        |   |
| State                                |   | 0%              |   |   | 0%        |   |
| Consolidated Effective Tax      Rate |   | 35%        |   |   | 35%        |   |
|                                 |   |                                          |   |   |   |   |

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**Table of Contents**

|                                                                                                               |   | Years Ended March 31, |   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|--------|
|                                                                                                                    |   | 2009                  |   |   |   | 2008 |   |   |
| Current income tax expense                                                                                         |   |                  |   |   |   |   |   |   |
|        Federal                                                                  | $      | -                     |   |   |   | - |   |   |
|        State                                                                    |   | -                     |   |   |   | - |   |   |
|               Total      current tax expense |   | -                     |   |   |   | - |   |   |
|                                                                                                               |   |                       |   |   |   |  |   |   |
| Deferred income tax      (benefit) from continuing operations                                                      |   |                       |   |   |   |  |   |   |
|        Federal                                                                  |   | (460,402              | )      |   |   | (364,930 | ) |   |
|        State                                                                    |   | -                     |   |   |   | - |   |   |
| Total income tax (benefit) from continuing      operations                                                         |   | (460,402              | )      |   |   | (364,930 | ) |   |
| Income tax (expense)      from discontinued operations                                                             |   | -                     |   |   |   | 793,550 |   |   |
| Total income tax (benefit) expense                                                                                 | $      | (460,402              | )      |   | $ | 428,620 | ) |   |
|                                                                                                               |   |                  |   |   |   |   |   |   |

|                                                            |   | Years Ended March 31, |   |   |
|-----------------------------------------------------------------|--------|-----------------------|--------|--------|
|                                                                 |   | 2009                  |   |   |   | 2008 |   |   |
| Rate                                                            |   | 35%                   |   |   |   | 35% |   |   |
| Tax on Income from Continuing Operations at      Statutory Rate | $      | (862,483              | )      |   | $ | (364,968 | ) |   |
|                                                            |   |                       |   |   |   |  |   |   |
| Increase (decrease) resulting from:                             |   |                       |   |   |   |  |   |   |
| Permanent differences                                           |   | 402,081               |   |   |   | 38 |   |   |
| Income tax (benefit) from continuing operations                 |   | (460,402              | )      |   |   | (364,930 | ) |   |
| Income tax expense from discontinued      operations            |   | -                     |   |   |   | 793,550 |   |   |
| Income Tax (Benefit) Provision                                  | $      | (460,402              | )      |   | $ | 428,620 |   |   |
|                                                            |   |                  |   |   |   |   |   |   |

|                                                                                                                                                         |   | March 31, |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|
|                                                                                                                                                              |   | 2009      |   |   |   | 2008 |   |   |
| Deferred Tax Assets:                                                                                                                                         |   |      |   |   |   |   |   |   |
|               Net      Operating Loss Carryforward                                     | $      | 751,045   |   |   | $ | 2,188 |   |   |
|               Other      Deferred Tax Assets                                           |   | -         |   |   |   | - |   |   |
|                      Total      Deferred Tax Assets |   | 751,045   |   |   |   | 2,188 |   |   |
|                                                                                                                                                         |   |           |   |   |   |  |   |   |
| Deferred Tax Liabilities                                                                                                                                     |   |           |   |   |   |  |   |   |
|               Oil      & Gas Properties Basis                                          |   | 2,086,984 |   |   |   | 1,922,321 |   |   |
|               Other      Deferred Tax Liabilities                                      |   | 366,843   |   |   |   | 243,050 |   |   |
|                      Total      Deferred Liabilites |   | 2,453,827 |   |   |   | 2,165,371 |   |   |
| Net Deferred Tax Liability                                                                                                                                   | $      | 1,702,782 |   |   | $ | 2,163,183 |   |   |
|                                                                                                                                                         |   |      |   |   |   |   |   |   |

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**Table of Contents**

|                                        |   | March 31,  |   |   |
|---------------------------------------------|--------|------------|--------|--------|
|                                             |   | 2009       |   |   |   | 2008 |   |   |
| Numerator                                   |   |       |   |   |   |   |   |   |
| Net Income (Loss)                           | $      | (2,003,834 | )      |   | $ | 795,900 |   |   |
| Denominator                                 |   |       |   |   |   |   |   |   |
| Weighted Average Shares Outstanding - Basic |   | 80,300,804 |   |   |   | 78,800,618 |   |   |
|                                        |   |            |   |   |   |  |   |   |
| Basic - Net Income                          | $      | (0.02      | )      |   | $ | 0.01 |   |   |

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|                           | Fiscal Years Ending March 31, |   |   |   |   |   |   |
|--------------------------------|-------------------------------|--------|--------|--------|--------|--------|--------|
|                                |                          | 2010   |   |   | 2011   |   |   | 2012 |   |   | 2013 |   |   | Thereafter |   |   | Total |
| Note Payable - Shareholder     | $                             | -      |   | $      | -      |   | $      | - |   | $ | 324,330 |   | $ | - |   | $ | 324,330 |
| Note Payable - Shareholder     |                          | -      |   |   | -      |   |   | - |   |   | 3,194,594 |   |   | - |   |   | 3,194,594 |
| Senior Secured Credit Facility |                          | -      |   |   | -      |   |   | 9,800,000 |   |   | - |   |   | - |   |   | 9,800,000 |
|                           | $                             | -      |   | $      | -      |   | $      | 9,800,000 |   | $ | 3,518,924 |   | $ | - |   | $ | 13,318,924 |
|                           |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                            | Shares Outstanding |   |
|---------------------------------------------------------------------------------|--------------------|--------|
| Shares Outstanding March 31, 2007                                               | 71,954,262         |   |
| Private Placement shares issued                                                 | 7,637,048          |   |
| Shares issued for Vern Wilson      Energy acquisition                           | 240,000            |   |
| Shares issued for employment compensation                                       | 350,000            |   |
| Balance at March 31, 2008                                                       | 80,181,310         |   |
| Shares issued as penalty for late registration      of private placement shares | 172,602            |   |
|                                                                                 | 80,353,912         |   |
|                                                                            |               |   |

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**Table of Contents**

|   | • | Level 1 - Quoted prices for identical      instruments in active markets;                                                                                                                                                                                                                                  |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Level 2 - Quoted prices for similar      instruments in active markets, quoted prices for identical or similar instruments      in markets that are not active, and model-derived valuations in which all      significant inputs and significant value drivers are observable in active      markets; and |

----

**Table of Contents**

|   | • | Level 3 - Valuations derived from      valuation techniques in which one or more significant inputs or significant      value drivers are unobservable. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | **Quoted Prices        in Active         Markets for         Identical         Assets** |   |   |   | **Significant        Other        Observable        Inputs** |   |        |   | **Significant         Unobservable         Inputs** |   |   |   |      |   |
|---------------------------------|--------|-----------------------------------------------------------------------------------------|--------|--------|--------|--------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------|--------|--------|--------|-----------|--------|
|                            |   | (Level 1)                                                                               |   |   |   | (Level 2)                                                    |   |   |   | (Level 3)                                           |   |   |   | Total     |   |
| Options and Warrants            | $      | -                                                                                       |   |   | $      | 1,234,189                                                    |   |   | $      | -                                                   |   |   | $      | 1,234,189 |   |
| Long-lived Assets Held For Sale | $      | -                                                                                       |   |   | $      | 150,000                                                      |   |   | $      | -                                                   |   |   | $      | 150,000   |   |

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| Total Proceeds                              | $      | 15,000,000 |   |   |
|---------------------------------------------|--------|------------|--------|--------|
| Closing adjustment for unpaid capital calls |   | (900,000   | )      |   |
| Net Proceeds                                |   | 14,100,000 |   |   |
| Basis in the pipeline                       |   | (8,827,299 | )      |   |
| Total Gain on sale                          |   | 5,272,701  |   |   |
| Less Allocations to Minority Interest       |   | (3,040,693 | )      |   |
| Less Income Tax on Gain                     |   | (781,203   | )      |   |
| Net Gain on Sale of Pipeline                | $      | 1,450,805  |   |   |
|                                        |   |       |   |   |

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**Table of Contents**

|                                         |   | Year Ended         March 31, 2008 |   |   |
|----------------------------------------------|--------|-----------------------------------|--------|--------|
| Pipeline Revenue                             | $      | 125,801                           |   |   |
| Pipeline Operating Expenses                  |   | (46,428                           | )      |   |
| Minority Interest Expense                    |   | (44,096                           | )      |   |
| Income Tax Expense                           |   | (12,347                           | )      |   |
| Net Income from Discontinued      Operations | $      | 22,930                            |   |   |
|                                         |   |                              |   |   |

|                                                            |   | Fiscal Year Ended March 31, |   |   |
|-----------------------------------------------------------------|--------|-----------------------------|--------|--------|
|                                                            |   | 2009                        |   |   |   | 2008 |   |   |
| Unproved oil and gas      properties                            | $      | 484,198                     |   |   | $ | 2,445,556 |   |   |
| Proved oil and gas properties                                   |   | 23,920,960                  |   |   |   | 14,456,967 |   |   |
| Support Equipment      and facilities                           |   | -                           |   |   |   | - |   |   |
| Capitalized Interest                                            |   | 999,620                     |   |   |   | 930,408 |   |   |
| Total Capitalized      Cost of Oil and Gas Properties           |   | 25,404,778                  |   |   |   | 17,832,931 |   |   |
|                                                            |   |                        |   |   |   |   |   |   |
| Less accumulated depletion,      depreciation, and amortization |   | (6,206,558                  | )      |   |   | (4,139,337 | ) |   |
| Net Capitalized Costs                                           | $      | 19,198,220                  |   |   | $ | 13,693,594 |   |   |
|                                                            |   |                        |   |   |   |   |   |   |

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**Table of Contents**

|                                                             |   | Fiscal Year Ended March 31, |   |   |
|------------------------------------------------------------------|--------|-----------------------------|--------|--------|
|                                                             |   | 2009                        |   |   |   | 2008 |   |   |
| Property Acquisition Costs                                       |   |                        |   |   |   |   |   |   |
|       Proved                       | $      | 427,676                     |   |   | $ | 1,814,718 |   |   |
|       Unproved                     |   | 15,472                      |   |   |   | 271,151 |   |   |
| Exploration Costs                                                |   | 267,212                     |   |   |   | 4,933,277 |   |   |
| Development Costs                                                |   | 7,393,929                   |   |   |   | 696,594 |   |   |
| Asset retirement costs recognized according      to SFAS No. 143 |   | 344,079                     |   |   |   | - |   |   |
| Total Costs Incurred                                             | $      | 8,448,368                   |   |   | $ | 7,715,740 |   |   |
|                                                             |   |                        |   |   |   |   |   |   |

|                   |      | Oil & Gas Production |             |
|-------------------|-----------|----------------------|------------------|
|              |      |                 | Oil        (Bbl) |   | Gas         (Mcf) |   | Total        BOE |   |
| Fiscal Year Ended | 3/31/2008 |                 | 33,602           |   | 351,538 |   | 92,192 |   |
| Fiscal Year Ended | 3/31/2009 |                 | 45,105           |   | 479,180 |   | 124,968 |   |

|                                                                                                                    |   | Fiscal Year Ended March 31, |   |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|
|                                                                                                                    |   | 2009                        |   |   |   | 2008 |   |   |
| Oil & Gas Revenue                                                                                                       | $      | 6,558,069                   |   |   | $ | 4,902,072 |   |   |
| Gain on Sale of Oil & Gas Leases                                                                                        |   | 18,005                      |   |   |   | 307,028 |   |   |
| Production Costs                                                                                                        |   | 3,140,198                   |   |   |   | 2,800,388 |   |   |
| Exploration Costs                                                                                                       |   | 2,975                       |   |   |   | 61,179 |   |   |
| Expired Leases and Plugging      Costs                                                                                  |   | 433,969                     |   |   |   | 290,959 |   |   |
| Depreciation, Depletion, & Amortization                                                                                 |   | 4,591,131                   |   |   |   | 1,399,293 |   |   |
|                                                                                                                    |   | (1,592,199                  | )      |   |   | 657,281 |   |   |
| Income Taxes                                                                                                            |   | 557,270                     |   |   |   | (230,048 | ) |   |
| Results of operations for      oil and gas producing activities      (excluding corporate overhead and financing costs) | $      | (1,034,929                  | )      |   | $ | 427,233 |   |   |
|                                                                                                                    |   |                        |   |   |   |   |   |   |

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**Table of Contents**

|                                |   | Oil        (MBBL) |   |   |   | Gas        (MMCF) |   |   |
|-------------------------------------|--------|-------------------|--------|--------|--------|-------------------|--------|--------|
|                                |   |              |   |   |   |              |   |   |
| Reserves at March 31, 2007          |   | 11,677            |   |   |   | 3,392             |   |   |
| Correction of Error                 |   | (11,293           | )      |   |   | -                 |   |   |
| Revisions of previous estimates     |   | 323               |   |   |   | (133              | )      |   |
| Improved recovery                   |   | 124               |   |   |   | 4,786             |   |   |
| Purchases of minerals in place      |   | 24                |   |   |   | 525               |   |   |
| Extensions and discoveries          |   | 590               |   |   |   | 10,591            |   |   |
| Production                          |   | (34               | )      |   |   | (351              | )      |   |
| Sales of minerals in place          |   | -                 |   |   |   | -                 |   |   |
| Reserves at March 31, 2008          |   | 1,411             |   |   |   | 18,809            |   |   |
| Revisions of previous estimates     |   | (739              | )      |   |   | (11,269           | )      |   |
| Improved recovery                   |   | -                 |   |   |   | -                 |   |   |
| Purchases of minerals in      place |   | 1                 |   |   |   | 25                |   |   |
| Extensions and discoveries          |   | 397               |   |   |   | 4,725             |   |   |
| Production                          |   | (45               | )      |   |   | (479              | )      |   |
| Sales of minerals in place          |   | -                 |   |   |   | -                 |   |   |
| Reserves at March 31, 2009          |   | 1,025             |   |   |   | 11,811            |   |   |
|                                |   |              |   |   |   |              |   |   |

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**Table of Contents**

|                                        | **Barnett Shale Project** |   | **Corsicana        Project** |   | **East Texas        Project**               |
|----------------------------------------|---------------------------|--------|------------------------------|--------|---------------------------------------------|
|                                        | Crude Oil        (MBBL)   |   | Natural Gas        (MMCF)    |   | Crude Oil         Equivalents        (MBOE) |   | Crude Oil        (MBBL) |   | Crude Oil         Equivalents        (MBOE) |
| Proved Developed Producing             | 94                        |   | 2,812                        |   | 563                                         |   | 100 |   | 11 |
| Proved Developed Non-Producing         | 43                        |   | 494                          |   | 125                                         |   | 87 |   | 2 |
| Proved Undeveloped                     | 655                       |   | 8,505                        |   | 2,073                                       |   | 33 |   | - |
| Total Proved Reserves at April 1, 2009 | 792                       |   | 11,811                       |   | 2,761                                       |   | 220 |   | 13 |
|                                   |                      |   |                         |   |                                        |   |   |   |   |

|   | • | Estimates are made of quantities      of proved reserves and future amounts expected to be produced based on current      year-end economic conditions.                                                                  |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Estimated future cash inflows      are calculated by applying current year-end prices of natural gas and oil      relating to our proved reserves to the quantities of those reserves produced      in each future year. |
|   | • | Future cash flows are reduced      by estimated production costs, costs to develop and produce the proved reserves      and abandonment costs, all based on current year-end economic conditions.                        |
|   | • | The resulting future net cash      flows are discounted to present value by applying a discount rate of 10%.                                                                                                             |

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**Table of Contents**

|                                                         |   | As of March 31, |   |   |
|--------------------------------------------------------------|--------|-----------------|--------|--------|
| In thousands                                                 |   | 2009            |   |   |   | 2008 |   |   |
| Future Cash Inflows                                          | $      | 90,391          |   |   | $ | 311,067 |   |   |
| Future Production and Development Costs                      |   | (55,865         | )      |   |   | (107,195 | ) |   |
| Income Taxes                                                 |   | (12,084         | )      |   |   | (71,355 | ) |   |
| Future Net Cash Flows                                        |   | 22,442          |   |   |   | 132,517 |   |   |
| 10% Annual Discount                                          |   | (12,120         | )      |   |   | (64,216 | ) |   |
| Standardized Measure of Discounted Future Net      Cash Flow | $      | 10,322          |   |   | $ | 68,301 |   |   |
|                                                         |   |            |   |   |   |   |   |   |

|                                                     |   | Year Ended March 31, |   |   |
|----------------------------------------------------------|--------|----------------------|--------|--------|
| In thousands                                             |   | 2009                 |   |   |   | 2008 |   |   |
| Balance at beginning of      year                        | $      | 68,301               |   |   | $ | 117,629 |   |   |
| Correction of error                                      |   | -                    |   |   |   | (451,003 | ) |   |
| Net change in prices and      production costs           |   | (194,933             | )      |   |   | 19,348 |   |   |
| Net changes in future development costs                  |   | 6,807                |   |   |   | (14,805 | ) |   |
| Sales of oil & gas produced      net of production costs |   | (3,533               | )      |   |   | (2,458 | ) |   |
| Extensions and discoveries                               |   | 23,664               |   |   |   | 98,476 |   |   |
| Previously estimated development      costs incurred     |   | 8,243                |   |   |   | 2,188 |   |   |
| Revisions of previous quantity estimates                 |   | (10,020              | )      |   |   | 78,631 |   |   |
| Purchases of reserves                                    |   | 427                  |   |   |   | 1,815 |   |   |
| Net change in income taxes                               |   | 59,271               |   |   |   | 93,733 |   |   |
| Accretion of discount                                    |   | 52,095               |   |   |   | 124,747 |   |   |
| End of Year                                              | $      | 10,322               |   |   | $ | 68,301 |   |   |
|                                                     |   |                 |   |   |   |   |   |   |

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**Table of Contents**

|                                                               |   | **Total**     |   |   |   | **Barnett         Project** |   |   |   | **Corsicana         Project** |   |   |   | **East Texas         Project** |   |
|---------------------------------------------------------------|--------|---------------|--------|--------|--------|-----------------------------|--------|--------|--------|-------------------------------|--------|--------|--------|--------------------------------|--------|
| In thousands                                                  |   | April 1, 2009 |   |   |   | April 1, 2009               |   |   |   | April 1, 2009                 |   |   |   | April 1, 2009                  |   |
| Future Cash Inflows                                           | $      | 90,391        |   |   | $      | 79,631                      |   |   | $      | 10,095                        |   |   | $      | 665                            |   |
| Future Production and Development Costs                       |   | (55,865       | )      |   |   | (48,034                     | )      |   |   | (7,588                        | )      |   |   | (243                           | )      |
| Income Taxes                                                  |   | (12,084       | )      |   |   | (11,059                     | )      |   |   | (878                          | )      |   |   | (147                           | )      |
| Future Net Cash Flows                                         |   | 22,442        |   |   |   | 20,538                      |   |   |   | 1,629                         |   |   |   | 275                            |   |
| 10% Annual Discount                                           |   | (12,120       | )      |   |   | (11,366                     | )      |   |   | (668                          | )      |   |   | (86                            | )      |
| Standardized Measure of Discounted       Future Net Cash Flow | $      | 10,322        |   |   | $      | 9,172                       |   |   | $      | 961                           |   |   | $      | 189                            |   |
|                                                          |   |          |   |   |   |                        |   |   |   |                          |   |   |   |                           |   |

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**Tableof Contents**

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**Table of Contents**

| **Number** |   | **Exhibit      Description**                                                                                                                                                                                                                                        |
|------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(i).1     |   | Articles of Incorporation      filed with the Nevada Secretary of State on November 29, 2004. (Incorporated      by reference from the registrant's registration statement on Form SB-2 filed      on September 8, 2005.)                                           |
|       |   |                                                                                                                                                                                                                                                                |
| 3(i).2     |   | Certificate of Change      filed with the Nevada Secretary of State on November 21, 2006. (Incorporated      by reference from the registrant's registration statement on Form 8-K filed      on November 30, 2006.)                                                |
|       |   |                                                                                                                                                                                                                                                                |
| 3(i).3     |   | Certificate of Amendment      filed with the Nevada Secretary of State on February 7, 2007. (Incorporated      by reference from the registrant's registration statement on Form SB-2 filed      on August 1, 2007.)                                                |
|       |   |                                                                                                                                                                                                                                                                |
| 3(ii).1    |   | Bylaws. (Incorporated      by reference from the registrant's registration statement on Form SB-2 filed      on August 1, 2007.)                                                                                                                                    |
|       |   |                                                                                                                                                                                                                                                                |
| 10.1       |   | Purchase and Sale      Agreement by and between the registrant and United Texas Petroleum, Inc.      dated December 4, 2007. (Incorporated by reference from the registrant's      current report on Form 8-K filed on December 7, 2007.)                           |
|       |   |                                                                                                                                                                                                                                                                |
| 10.2       |   | Contribution Agreement      by and among the registrant, JMT Resources, Ltd., REO Energy, Ltd., and      Benco Operating, Inc. dated February 1, 2007. (Incorporated by reference      from the registrant's current report on Form 8-K filed on February 6, 2007.) |
|       |   |                                                                                                                                                                                                                                                                |
| 10.3       |   | Private Placement      Subscription Agreement. (Incorporated by reference from the registrant's      registration statement on Form SB-2 filed on August 1, 2007.)                                                                                                  |
|       |   |                                                                                                                                                                                                                                                                |
| 10.4       |   | Common Stock Purchase      Warrant. (Incorporated by reference from the registrant's registration statement      on Form SB-2 filed on August 1, 2007.)                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                |
| 10.5       |   | Joint Operating      Agreement dated February 1, 2007 by Rife Energy Operating, Inc. and the      registrant. (Incorporated by reference from the registrant's registration      statement on Form SB-2 filed on August 1, 2007.)                                   |
|       |   |                                                                                                                                                                                                                                                                |
| 10.6       |   | Joint Operating      Agreement by and between the registrant and Texas MOR, Inc. dated February      1, 2007. (Incorporated by reference from the registrant's registration statement      on Form SB-2 filed on August 1, 2007.)                                   |
|       |   |                                                                                                                                                                                                                                                                |
| 10.7       |   | Employee Confidentiality      and Property Agreement by and between the registrant and Scott Allen. (Incorporated      by reference from the registrant's registration statement on Form SB-2 filed      on August 1, 2007.)                                        |

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**Table of Contents**

|   |   |                                                                                                                                                                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.8   |   | Employee Confidentiality      and Property Agreement by and between the registrant and Mark S. Zouvas.      (Incorporated by reference from the registrant's registration statement      on Form SB-2 filed on August 1, 2007.)        |
|   |   |                                                                                                                                                                                                                                   |
| 10.9   |   | Employee Confidentiality      and Property Agreement by and between the registrant and Brett Bennett.      (Incorporated by reference from the registrant's registration statement      on Form SB-2 filed on August 1, 2007.)         |
|   |   |                                                                                                                                                                                                                                   |
| 10.10  |   | Purchase and Sale      Agreement by and between Cimmarron Gathering, LP. and the registrant dated      June 6, 2007. (Incorporated by reference from the registrant's current report      on Form 8-K filed on June 7, 2007.)          |
|   |   |                                                                                                                                                                                                                                   |
| 10.11  |   | Purchase and Sale      Agreement by and between the registrant and Vern Wilson Energy, Inc. dated      September 28, 2007. (Incorporated by reference from the registrant's current      report on Form 8-K filed on October 4, 2007.) |
|   |   |                                                                                                                                                                                                                                   |
| 10.12  |   | Purchase and Sale      Agreement by and between the registrant and United Texas Petroleum, Inc.      dated December 4, 2007. (Incorporated by reference from the registrant's      Form 8-K filed on December 7, 2007.)                |
|   |   |                                                                                                                                                                                                                                   |
| 21.1   |   | List of Subsidiaries      of the Registrant. (Incorporated by reference from the registrant's Form      10-K filed on July 14, 2009).                                                                                                  |
|   |   |                                                                                                                                                                                                                                   |
| 23.1   |   | Consent      of Forest Garb & Associates.                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                   |
| 31.1   |   | Certification      by the CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                   |
| 31.2   |   | Certification      by the CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                   |
| 32.1   |   | Certification      by the CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                   |
| 32.2   |   | Certification      by the CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                   |

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**Table of Contents**

|                       |   | **REOSTAR ENERGY CORPORATION**                       |
|----------------------------|--------|------------------------------------------------------|
|                       |   |                                                 |
|                       |   |                                                 |
| Date:   April 9, 2010 | By:    | /s/      Mark S. Zouvas                              |
|                       |   | Mark S. Zouvas                                       |
|                       |   | President, Chief Executive Officer      and Director |

| **SIGNATURE**                                       |        | **TITLE**                                               |        | **DATE**      |
|-----------------------------------------------------|--------|---------------------------------------------------------|--------|---------------|
|                                                |        |                                                         |        |               |
| /s/Mark S. Zouvas                                   |        | President, Chief Executive Officer      and Director    |        | April 9, 2010 |
|      Mark      S. Zouvas        |        | (Principal Executive Officer)                           |        |               |
|                                                |        |                                                    |        |               |
| /s/Scott      Allen                                 |        | Chief Financial Officer and Director      July 14, 2008 |        | April 9, 2010 |
|      Scott      Allen           |        | (Principal Financial Officer)                           |        |               |
|                                                |        |                                                         |        |               |
| /s/M.      O. Rife III                              |        | Chairman of the Board of Directors                      |        | April 9, 2010 |
|      M. O.      Rife III        |        |                                                         |        |               |
|                                                |        |                                                         |        |               |
| /s/Jean-Baptiste      Heinzer                       |        | Director                                                |        | April 9, 2010 |
|      Jean-Baptiste      Heinzer |        |                                                         |        |               |
|                                                |        |                                                         |        |               |
| /s/Alan Rae                                         |        | Director                                                |        | April 9, 2010 |
|      Alan      Rae              |   |                                                    |   |          |
|                                                |   |                                                    |   |          |

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