----

| Delaware                                                            |   | 44-0651207                                   |
|---------------------------------------------------------------------|--------|----------------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification Number) |

| Large accelerated filer  o                 | Accelerated filer                     o |
|-------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|  Non-accelerated filer    o |  Smaller reporting company  x                                                                                                     |

----

| Item 1.  Financial Statements                                | 3      |                                                                                                                  |
|-------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|
|                                                              |   |                                                                                                                  |   |   |
|                                                              |   | Consolidated Balance Sheets (Unaudited) as of March 31, 2010 and December 31, 2009                                    |       3 |   |
|                                                              |   | Consolidated Statements of Operations (Unaudited) for the three month periods ended March 31, 2010 and March 31, 2009 | 4 |   |
|                                                              |   | Consolidated Statements of Cash Flows (Unaudited) for the three month periods ended March 31, 2010 and March 31, 2009 | 5 |   |
|                                                              |   | Notes to Consolidated Financial Statements (Unaudited)                                                                | 6 |   |
| Item 2.                                                      |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                           | 15 |   |
| Item 4T.                                                          |   | Controls and Procedures                                                                                               | 18 |   |
|                                                              |   |                                                                                                                  |   |   |
| Part II - Other Information                                       | 20     |                                                                                                                  |
|                                                              |   |                                                                                                                  |   |   |
| Item 1.                                                           |   | Legal Proceedings                                                                                                | 20 |   |
| Item 2.                                                           |   | Unregistered Sales of Equity Securities and Use of Proceeds                                                      | 20 |   |
| Item 3.                                                           |   | Defaults Upon Senior Securities                                                                                  | 20 |   |
| Item 4.                                                           |   | (Removed and Reserved)                                                                                           | 20 |   |
| Item 5.                                                           |   | Other Information                                                                                                | 20 |   |
| Item 6.                                                           |   | Exhibits                                                                                                         | 20 |   |
|                                                              |   |                                                                                                                  |   |   |
| Signatures                                                        |   |                                                                                                                  | 21 |   |
|                                                              |   |                                                                                                                  |   |   |   |   |   |   |
| Certification of Robert Panico Pursuant to Section 302            |   |                                                                                                                  |   |   |   |   |
| Certification of Christopher M. Rasmussen Pursuant to Section 302 |   |                                                                                                                  |   |   |   |   |
| Certification of Robert Panico Pursuant to Section 906            |   |                                                                                                                  |   |   |   |   |
| Certification of Christopher M. Rasmussen Pursuant to Section 906 |   |                                                                                                                  |   |   |   |   |
|                                                              |   |                                                                                                                  |   |   |   |   |   |   |
|                                                              |   |                                                                                                                  |   |   |   |   |   |   |

----

| GATEWAY ENERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                           |        |   |              |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|-------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | March 31,    2010      |        |   | December 31, 2009 |   |
|  ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | (Unaudited)                                                    |        |   |              |   |
|  Current Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |
| Cash and cash equivalents                                                                                                                                               |   | $                                                              | 1,654,030   |   |              | $      | 2,086,787 |   |
| Restricted cash                                                                                                                                                         |   |                                                           | 250,000     |   |              |   | 900,000 |   |
| Accounts receivable trade, net                                                                                                                                          |   |                                                           | 851,712     |   |              |   | 1,101,100 |   |
| Notes receivable                                                                                                                                                        |   |                                                           | 149,314     |   |              |   | 148,088 |   |
| Prepaid expenses and other assets                                                                                                                                       |   |                                                           | 191,998     |   |              |   | 41,941 |   |
|            Total current assets                                                                                                                |   |                                                           | 3,097,054   |   |              |   | 4,277,916 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
|  Property and Equipment, at cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                           |        |   |              |   |   |   |
| Gas gathering, processing and transportation                                                                                                                            |   |                                                           | 11,359,163  |   |              |   | 8,855,967 |   |
| Net profits production interest                                                                                                                                         |   |                                                           | 701,482     |   |              |   | 701,482 |   |
| Office furniture and other equipment                                                                                                                                    |   |                                                           | 150,500     |   |              |   | 150,500 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           | 12,211,145  |   |              |   | 9,707,949 |   |
| Less accumulated depreciation, depletion and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                           | (2,934,365  | )      |              |   | (2,785,241 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           | 9,276,780   |   |              |   | 6,922,708 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
|  Other Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                           |        |   |              |   |   |   |
| Deferred tax assets, net                                                                                                                                                |   |                                                           | 1,457,913   |   |              |   | 1,295,455 |   |
| Intangible assets, net of accumulated amortization of $393,775 and   $345,567 as of March 31, 2010 and December 31, 2009, respectively                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                           | 1,749,334   |   |              |   | 563,032 |   |
| Other                                                                                                                                                                   |   |                                                           | 56,323      |   |              |   | 36,803 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           | 3,263,570   |   |              |   | 1,895,290 |   |
|            Total assets                                                                                                                        |   | $                                                              | 15,637,404  |   |              | $      | 13,095,914 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
|  LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                           |        |   |              |   |   |   |
|  Current Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                           |        |   |              |   |   |   |
| Accounts payable                                                                                                                                                        |   | $                                                              | 752,635     |   |              | $      | 660,504 |   |
| Accrued expenses and other liabilities                                                                                                                                  |   |                                                           | 320,010     |   |              |   | 305,549 |   |
| Insurance notes payable                                                                                                                                                 |   |                                                           | 156,803     |   |              |   | - |   |
| Current maturities of capital lease                                                                                                                                     |   |                                                           | 3,651       |   |              |   | 9,188 |   |
| Total current liabilities                                                                                                                                                                             |   |                                                           | 1,233,099   |   |              |   | 975,241 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
| Long term debt, less current maturities                                                                                                                  |   |                                                           | 2,500,000   |   |              |   | - |   |
| Total liabilities                                                                                                                                                                                     |   |                                                           | 3,733,099   |   |              |   | 975,241 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
|  Commitments and contingencies                                                                                                                 |   |                                                           | -           |   |              |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
|  Stockholders' Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                           |        |   |              |   |   |   |
| Preferred stock – $1.00 par value; 10,000 shares authorized;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                           |        |   |              |   |   |   |
| no shares issued and outstanding                                                                                                                                                            |   |                                                           | -           |   |              |   | - |   |
| Common stock – $0.25 par value; 35,000,000 shares authorized;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                           |        |   |              |   |   |   |
| 19,402,853 and 19,397,125 shares issued and outstanding  at March 31, 2010 and December 31, 2009, respectively                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                           | 4,850,713   |   |              |   | 4,849,281 |   |
| Additional paid-in capital                                                                                                                                              |   |                                                           | 17,412,421  |   |              |   | 17,395,828 |   |
| Accumulated deficit                                                                                                                                                     |   |                                                           | (10,358,829 | )      |              |   | (10,124,436 | ) |
|            Total stockholders’ equity                                                                                                    |   |                                                           | 11,904,305  |   |              |   | 12,120,673 |   |
|            Total liabilities and stockholders’ equity                                                                                    |   | $                                                              | 15,637,404  |   |              | $      | 13,095,914 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                           |        |   |              |   |   |   |
| The accompanying notes are an integral part of these financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |

----

|                                                                 |   |                    Three Months Ended March 31,                                                                                                                                                                                                             |
|----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                 |   |                  2010                                         2009 |
| Operating revenues                                                   |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |
| Sales of natural gas                                                 |   | $                                                                                                                                                                                                                                                                                                                                                          | 1,407,489 |   |   | $ | 1,153,910 |   |   |
| Transportation of natural gas and liquids                            |   |                                                                                                                                                                                                                                                                                                                                                       | 383,648 |   |   |   | 678,067 |   |   |
| Treating and other                                                   |   |                                                                                                                                                                                                                                                                                                                                                       | 59,952 |   |   |   | 45,456 |   |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       | 1,851,089 |   |   |   | 1,877,433 |   |   |
| Operating costs and expenses                                         |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Cost of natural gas purchased                                        |   |                                                                                                                                                                                                                                                                                                                                                       | 1,264,376 |   |   |   | 1,025,018 |   |   |
| Operation and maintenance                                            |   |                                                                                                                                                                                                                                                                                                                                                       | 99,769 |   |   |   | 95,532 |   |   |
| General and administrative                                           |   |                                                                                                                                                                                                                                                                                                                                                       | 467,049 |   |   |   | 669,130 |   |   |
| Acquisition costs                                                    |   |                                                                                                                                                                                                                                                                                                                                                       | 43,453 |   |   |   | - |   |   |
| Consent proxy revocation fees                                        |   |                                                                                                                                                                                                                                                                                                                                                       | 98,870 |   |   |   | - |   |   |
| Depreciation, depletion and amortization                             |   |                                                                                                                                                                                                                                                                                                                                                       | 197,331 |   |   |   | 196,284 |   |   |
| Operating loss                                                       |   |                                                                                                                                                                                                                                                                                                                                                       | (319,759 | ) |   |   | (108,531 | ) |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Other income (expense)                                               |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Interest income                                                      |   |                                                                                                                                                                                                                                                                                                                                                       | 7,901 |   |   |   | 4,898 |   |   |
| Interest expense                                                     |   |                                                                                                                                                                                                                                                                                                                                                       | (41,344 | ) |   |   | (40,424 | ) |   |
| Other income (expense), net                                          |   |                                                                                                                                                                                                                                                                                                                                                       | (14,569 | ) |   |   | 9,343 |   |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       | (48,012 | ) |   |   | (26,183 | ) |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Loss from operations before income taxes and discontinued operations |   |                                                                                                                                                                                                                                                                                                                                                       | (367,771 | ) |   |   | (134,714 | ) |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Income tax benefit                                                   |   |                                                                                                                                                                                                                                                                                                                                                       | 133,378 |   |   |   | 48,496 |   |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Loss from continuing operations                                      |   |                                                                                                                                                                                                                                                                                                                                                       | (234,393 | ) |   |   | (86,218 | ) |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Discontinued operations, net of tax                                  |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Loss from discontinued operations, net of tax                        |   |                                                                                                                                                                                                                                                                                                                                                       | - |   |   |   | (49,220 | ) |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Net loss                                                             |   | $                                                                                                                                                                                                                                                                                                                                                          | (234,393 | ) |   | $ | (135,438 | ) |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Basic and diluted loss per share:                                    |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Continuing operations                                                |   |                                                                                                                                                                                                                                                                                                                                                       | (0.01 | ) |   |   | (0.01 | ) |   |
| Discontinued operations                                              |   |                                                                                                                                                                                                                                                                                                                                                       | - |   |   |   | - |   |   |
| Net loss                                                             |   | $                                                                                                                                                                                                                                                                                                                                                          | (0.01 | ) |   | $ | (0.01 | ) |   |
|                                                                 |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding:                |   |                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| Basic                                                                |   |                                                                                                                                                                                                                                                                                                                                                       | 19,400,689 |   |   |   | 19,207,249 |   |   |
| Diluted                                                              |   |                                                                                                                                                                                                                                                                                                                                                       | 19,400,689 |   |   |   | 19,207,249 |   |   |

----

| GATEWAY ENERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                         |       |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | Three Months Ended March 31, |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2010                         |       |   | 2009   |   |
| Cash flows from operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |
| Loss from continuing operations                                                                                                                                |   | $                            | (234,393   | )      |   | $      | (86,218 | ) |
| Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                         |       |   |   |   |   |   |
| Depreciation, depletion and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                         | 197,331    |   |   |   | 196,284 |   |
| Deferred tax benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         | (163,504   | )      |   |   | (40,698 | ) |
| Stock based compensation expense                                                                                                                                                   |   |                         | 18,713     |   |   |   | 22,973 |   |
| Amortization of deferred loan costs                                                                                                                                                |   |                         | 7,091      |   |   |   | 32,890 |   |
| Change in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                         |       |   |   |   |   |   |
| Accounts receivable trade                                                                                                                                                                              |   |                         | 249,388    |   |   |   | (134,448 | ) |
| Prepaid expenses and other assets                                                                                                                                                                      |   |                         | 45,026     |   |   |   | (81,243 | ) |
| Accounts payable                                                                                                                                                                                       |   |                         | 91,443     |   |   |   | (276,309 | ) |
| Accrued expenses and other liabilities                                                                                                                                                                 |   |                         | 14,460     |   |   |   | 10,651 |   |
| Net cash provided by (used in) operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                         | 225,555    |   |   |   | (356,118 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Cash flows from investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Capital expenditures                                                                                                                                                               |   |                         | -          |   |   |   | (25,409 | ) |
| Acquisitions                                                                                                                                                                       |   |                         | (3,737,705 | )      |   |   | - |   |
| Net cash used in investing activities                                                                                                                                                                                           |   |                         | (3,737,705 | )      |   |   | (25,409 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Cash flows from financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Payments on borrowings                                                                                                                                                             |   |                         | (43,996    | )      |   |   | (7,174 | ) |
| Proceeds from borrowings                                                                                                                                                           |   |                         | 2,500,000  |   |   |   | - |   |
| Change in restricted cash                                                                                                                                                          |   |                         | 650,000    |   |   |   | - |   |
| Deferred finance charges                                                                                                                                                           |   |                         | (26,611    | )      |   |   | (18,139 | ) |
| Net cash provided by (used in) financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                         | 3,079,393  |   |   |   | (25,313 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Net decrease in cash and cash equivalents from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         | (432,757   | )      |   |   | (406,840 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Discontinued operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                         |       |   |   |   |   |   |
| Net cash provided by discontinued operating activities                                                                                                         |   |                         | -          |   |   |   | 1,824,234 |   |
| Net cash used in discontinued investing activities                                                                                                             |   |                         | -          |   |   |   | (2,700 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Net increase in cash and cash equivalents from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                         | -          |   |   |   | 1,821,534 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                                            |   |                         | (432,757   | )      |   |   | 1,414,694 |   |
| Cash and cash equivalents at beginning of period                                                                                                |   |                         | 2,086,787  |   |   |   | 1,789,029 |   |
| Cash and cash equivalents at end of period                                                                                                      |   | $                            | 1,654,030  |   |   | $      | 3,203,723 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                         |       |   |   |   |   |   |
| Cash paid for interest                                                                                                                                                             |   | $                            | 24,446     |   |   | $      | 17,416 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
| Supplemental schedule of noncash investing and financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
|          Trade note payable for insurance premiums                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                            | 195,263    |   |   | $      | 328,938 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                         |       |   |   |   |   |   |
|          Exercise of stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                            | 1,432      |   |   | $      | - |   |

----

|    |   |
|--------------|--------|

----

|              |   | Three Months Ended March 31, |   |
|-------------------|--------|------------------------------|--------|
|              |   | 2010                         |   |   | 2009 |   |
|              |   |                         |   |   |   |   |
| Beginning balance |   | $                            | -      |   |   | $ | 2,318,315 |   |
| Accretion         |   |                         | -      |   |   |   | 34,775 |   |
| Ending balance    |   | $                            | -      |   |   | $ | 2,353,090 |   |

----

|                                                                                                                                                                                                                                                                                                                                            |   | Three Months Ended                  March 31,      2010                2009 |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Weighted average number of common shares outstanding                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                 | 19,400,689 |   |   |   | 19,207,249 |   |
| Effect of dilutive securities                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                 | -          |   |   |   | - |   |
| Weighted average dilutive common shares outstanding                                                                                                                                                                                                                                                                                             |   |                                                                                                                                                                                                                                                                 | 19,400,689 |   |   |   | 19,207,249 |   |
|                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                 |       |   |   |   |   |   |
| Net loss from continuing operations                                                                                                                                                                                                                                                                                                             |   | $                                                                                                                                                                                                                                                                    | (234,393   | ) |   | $ | (86,218 | ) |
| Net loss from discontinued operations                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                 | -          |   |   |   | (49,220 | ) |
| Net loss                                                                                                                                                                                                                                                                                                                                        |   | $                                                                                                                                                                                                                                                                    | (234,393   | ) |   | $ | (135,438 | ) |
|                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                 |       |   |   |   |   |   |
| Basic and diluted loss per common share:                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                 |       |   |   |   |   |   |
| Continuing operations                                                       |   | $                                                                                                                                                                                                                                                                    | (0.01      | ) |   | $ | (0.01 | ) |
| Discontinued operations                                                     |   |                                                                                                                                                                                                                                                                 | -          |   |   |   | - |   |
| Net loss                                                                    |   | $                                                                                                                                                                                                                                                                    | (0.01      | )  |   | $ | (0.01 | )  |

----

| (3)   | Business Combinations |
|-----------------|-----------------------|

| Three months ended March 31, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                          HICKORY  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | GEC |   |   | CREEK |   |   | TOTAL |   |
| Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $ | 1,877,433 |   |   | $ | 51,007 |   |   | $ | 1,928,440 |   |
| Operating costs and other (income) expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |  2,012,147 |   |   |   |  30,305 |   |   |   |  2,042,452 |   |
| Income (loss) from continuing operations before taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | (134,714 | ) |   |   | 20,702 |   |   |   | (114,012 | ) |
| Income tax benefit (expense)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 48,496 |   |   |   | (7,039 | ) |   |   | 41,457 |   |
|  Loss from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | (49,220 | ) |   |   |  - |   |   |   | (49,220 | ) |
| Net income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $ | (135,438 | ) |   | $ | 13,663 |   |   | $ | (121,775 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $ | (0.01 | ) |   | $ |  - |   |   | $ | (0.01 | ) |

----

| (4)   | Discontinued Operations |
|-----------------|-------------------------|

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Quarter Ended March 31, |                      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2010                    |                      |   | 2009 |   |
| Operating revenues (1)                                                                                                           |   | $                       | -                         |   |   | $ | 56,990 |   |
| Operating costs and expenses (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                    | -                         |   |   |   | 133,896 |   |
| Income (loss) from discontinued operations, net of taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                    | -                         |   |   |   | (49,220 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                    |                      |   |   |   |   |   |
| Basic and diluted income (loss) per share from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $                       | -                         |   |   | $ | - |   |
| Basic and diluted income per share from gain on disposal of discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                    |     - |   |   |   |    - |   |
| Total                                                                                                                            |   | $                       | -                         |   |   | $ | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                    |                      |   |   |   |   |   |
| Weighted average number of common shares outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                    |                      |   |   |   |   |   |
| Basic                                                                                                                                                                                                                                     |   |                    | 19,400,689                |   |   |   | 19,207,249 |   |
| Diluted                                                                                                                                                                                                                                   |   |                    | 19,400,689                |   |   |   | 19,207,249 |   |

| (1)   | This revenue is based on billings to producers for transportation services. |
|-----------------|-----------------------------------------------------------------------------|

| (2)   | This cost is comprised of operations and maintenance expense, depreciation expense, and accretion expenses. |
|-----------------|-------------------------------------------------------------------------------------------------------------|

----

|  (5) | Stock-Based Compensation Plans |
|-----------|--------------------------------|

| ·   | The risk-free interest rate is based on the five-year Treasury bond at date of grant. |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | The dividend yield on the Company’s common stock is assumed to be zero since the Company does not pay   dividends and has no current plans to do so in the future. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The market price volatility of the Company’s common stock is based on daily, historical prices for the last three years. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| ·   | The term of the grants is based on the simplified method as described in ASC Topic 718. |
|--------------------|-----------------------------------------------------------------------------------------|

----

|                                     |   | Shares |      |   | Weighted Average Exercise Price |   |   | Weighted Average Contractual Terms (in years) |   |   | Intrinsic Value of Options as of March 31, 2010 |   |
|------------------------------------------|--------|--------|-----------|--------|---------------------------------|--------|--------|-----------------------------------------------|--------|--------|-------------------------------------------------|--------|
| Options outstanding, beginning of period |   |   | 1,278,947 |   |                            | $      | 0.53   |                                          |   |   | 3.43                                            |   |   |   |   |
| Options granted                          |   |   | -         |   |                            |   | -      |                                          |   |   | -                                               |   |   |   |   |
| Options canceled                         |   |   | -         |   |                            |   | -      |                                          |   |   | -                                               |   |   |   |   |
| Options exercised                        |   |   | (25,000   | )      |                            |   | 0.25   |                                          |   |   | -                                               |   |   |   |   |
| Options outstanding, end of period       |   |   | 1,253,947 |   |                            | $      | 0.46   |                                          |   |   | 2.73                                            |   |   | $ | 88,250 |   |
| Options exercisable, end of period       |   |   | 744,649   |   |                            | $      | 0.45   |                                          |   |   | 1.96                                            |   |   | $ | 37,517 |   |

| (6)   | Debt |
|-----------------|------|

|                                     Trade note payable – Insurance |   | $      | 156,803   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|
|                                     Revolving credit facility       |   |   | 2,500,000 |   |
|                                                                                                                                                                                                                                                    |   |   | 2,656,803 |   |
|                                     Less current maturities              |   |   | (156,803  | )      |
|                                                                                                                                                                                                                                                    |   | $      | 2,500,000 |   |

| (7)   | Change in Estimate |
|-----------------|--------------------|

----

| (8)   | Commitments and Contingencies |
|-----------------|-------------------------------|

| (9)   | Financial Instruments |
|-----------------|-----------------------|

| (10)   | Segments, Major Customers and Concentrations |
|------------------|----------------------------------------------|

----

|                                             |   | Three Months Ended March 31, |       |
|--------------------------------------------------|--------|------------------------------|------------|
|                                             |   | 2010                         |       |   | 2009 |   |
| Onshore Operations                               |   |                         |       |   |   |   |
| Revenues                                         |   | $                            | 1,673,156  |   |   | $ | 1,217,040 |   |
| Cost of natural gas purchased                    |   |                         | 1,264,376  |   |   |   | 1,025,018 |   |
| Operation and maintenance expense                |   |                         | 57,914     |   |   |   | 57,215 |   |
|      Operating margin   |   |                         | 350,866    |   |   |   | 134,807 |   |
| Depreciation and amortization expense            |   |                         | 87,467     |   |   |   | 47,803 |   |
|      Operating income   |   |                         | 263,399    |   |   |   | 87,004 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Interest expense                                 |   |                         | 313        |   |   |   | 1,077 |   |
| Capital expenditures                             |   |                         | 3,737,705  |   |   |   | 6,420 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Total assets                                     |   | $                            | 8,494,136  |   |   | $ | 4,181,463 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Offshore Operations                              |   |                         |       |   |   |   |   |   |
| Revenues                                         |   | $                            | 177,933    |   |   | $ | 646,852 |   |
| Operation and maintenance expense                |   |                         | 41,855     |   |   |   | 38,317 |   |
|     Operating margin         |   |                         | 136,078    |   |   |   | 608,535 |   |
| Depreciation and amortization expense            |   |                         | 102,014    |   |   |   | 140,879 |   |
|      Operating income   |   |                         | 34,064     |   |   |   | 467,656 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Interest expense                                 |   |                         | -          |   |   |   | - |   |
| Capital expenditures                             |   |                         | -          |   |   |   | - |   |
|                                             |   |                         |       |   |   |   |   |   |
| Total assets                                     |   | $                            | 4,413,761  |   |   | $ | 7,629,356 |   |
|                                             |   |                         |       |   |   |   |   |   |
|                                             |   |                         |       |   |   |   |   |   |
|                                             |   |                         |       |   |   |   |   |   |
| Net Profits Interest                             |   |                         |       |   |   |   |   |   |
| Revenues                                         |   | $                            | -          |   |   | $ | 13,541 |   |
|     Operating margin         |   |                         | -          |   |   |   | 13,541 |   |
| Depletion expense                                |   |                         | 6,090      |   |   |   | 5,755 |   |
|      Operating income   |   |                         | (6,090     | ) |   |   | 7,786 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Interest expense                                 |   |                         | -          |   |   |   | - |   |
| Capital expenditures                             |   |                         | -          |   |   |   | 15,513 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Total assets                                     |   | $                            | 660,147    |   |   | $ | 791,427 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Corporate Operations                             |   |                         |       |   |   |   |   |   |
|                                             |   |                         |       |   |   |   |   |   |
| General and administrative expenses              |   | $                            | 467,049    |   |   | $ | 669,130 |   |
| Acquisition costs                                |   |                         | 43,453     |   |   |   | - |   |
| Consent proxy revocation fees                    |   |                         | 98,870     |   |   |   | - |   |
| Depreciation and amortization expense            |   |                         | 1,760      |   |   |   | 1,847 |   |
|     Operating loss           |   |                         | (611,132   | ) |   |   | (670,977 | ) |
|                                             |   |                         |       |   |   |   |   |   |
| Interest expense                                 |   |                         | 41,031     |   |   |   | 39,347 |   |
| Capital expenditures                             |   |                         | -          |   |   |   | 3,476 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Total assets                                     |   | $                            | 2,069,360  |   |   | $ | 4,066,870 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Total                                            |   |                         |       |   |   |   |   |   |
| Revenues                                         |   | $                            | 1,851,089  |   |   | $ | 1,877,433 |   |
| Cost of natural gas purchased                    |   |                         | 1,264,376  |   |   |   | 1,025,018 |   |
| Operation and maintenance expense                |   |                         | 99,769     |   |   |   | 95,532 |   |
|      Operating margin   |   |                         | 486,944    |   |   |   | 756,883 |   |
| General and administrative expenses              |   |                         | 467,049    |   |   |   | 669,130 |   |
| Acquisition costs                                |   |                         | 43,453     |   |   |   | - |   |
| Consent proxy revocation fees                    |   |                         | 98,870     |   |   |   | - |   |
| Depreciation, depletion and amortization expense |   |                         | 197,331    |   |   |   | 196,284 |   |
|     Operating loss           |   |                         | (319,759   | ) |   |   | (108,531 | ) |
|                                             |   |                         |       |   |   |   |   |   |
| Interest expense                                 |   |                         | 41,344     |   |   |   | 40,424 |   |
| Capital expenditures                             |   |                         | 3,737,705  |   |   |   | 25,409 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Total assets                                     |   | $                            | 15,637,404 |   |   | $ | 16,669,116 |   |
|                                             |   |                         |       |   |   |   |   |   |
| Reconciliation to Net Loss                       |   |                         |       |   |   |   |   |   |
| Operating margin                                 |   | $                            | 486,944    |   |   | $ | 756,883 |   |
|  Less:                                      |   |                         |       |   |   |   |   |   |
| Depreciation, depletion and amortization         |   |                         | 197,331    |   |   |   | 196,284 |   |
| General and administrative expenses              |   |                         | 467,049    |   |   |   | 669,130 |   |
| Acquisition costs                                |   |                         | 43,453     |   |   |   | - |   |
| Consent proxy revocation fees                    |   |                         | 98,870     |   |   |   | - |   |
| Interest expense                                 |   |                         | 41,344     |   |   |   | 40,424 |   |
| Plus:                                            |   |                         |       |   |   |   |   |   |
| Interest income                                  |   |                         | 7,901      |   |   |   | 4,898 |   |
| Income tax benefit                               |   |                         | 133,378    |   |   |   | 48,496 |   |
| Discontinued operations, net of tax              |   |                         | -          |   |   |   | (49,220 | ) |
| Other income (expense), net                      |   |                         | (14,569    | ) |   |   | 9,343 |   |
| Net loss                                         |   | $                            | (234,393   | ) |   | $ | (135,438 | ) |

----

----

|                                                                                                                                                                                                                                                                                                                               |   | Three Months Ended March 31, |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                               |   | 2010                         |      |   | 2009 |   |
| Revenues                                                            |   | $                            | 1,851,089 |   |   | $ | 1,877,433 |   |
| Operating margin                                                    |   |                         | 486,944   |   |   |   | 756,883 |   |
| Depreciation, depletion and amortization                                                                                                                                                                                                                                                                                           |   |                         | 197,331   |   |   |   | 196,284 |   |

|                                                                                                                                                                                                                                                                                                                                |   | Three Months Ended March 31, |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                |   | 2010                         |      |   | 2009 |   |
| Revenues                                                                       |   | $                            | 1,673,156 |   |   | $ | 1,217,040 |   |
| Operating margin                                                               |   |                         | 350,866   |   |   |   | 134,807 |   |
| Depreciation and amortization                                                  |   |                         | 87,467    |   |   |   | 47,803 |   |

----

|                                                                                                                                                                                                                                                                                                                                            |   | Three Months Ended March 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                            |   | 2010                         |    |   | 2009 |   |
| Revenues                                                                         |   | $                            | 177,933 |   |   | $ | 646,852 |   |
| Operating margin                                                                 |   |                         | 136,078 |   |   |   | 608,535 |   |
| Depreciation and amortization                                                    |   |                         | 102,014 |   |   |   | 140,879 |   |

|                                                                                                                                                                                                                                                                                                                               |   | Three Months Ended March 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                               |   | 2010                         |   |   | 2009 |   |
| Revenues                                                            |   | $                            | -      |   |   | $ | 13,541 |   |
| Operating margin                                                    |   |                         | -      |   |   |   | 13,541 |   |
| Depletion                                                           |   |                         | 6,090  |   |   |   | 5,755 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                    |          | Quarter Ended March 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|-------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 2010                    |    |   | 2009 |   |
| Salaries and employee related costs                                                               |                                             | $                       | 183,998 |   |   | $ | 217,523 |   |
| Accounting, tax, and legal costs                                                                                                                                                                                                                                                                                                                                                                                        |                                             |                    | 94,011  |   |   |   | 127,118 |   |
| Insurance costs                                                                                   |                                             |                    | 54,240  |   |   |   | 134,253 |   |
| Investor relation costs                                                                           |                                             |                    | 27,784  |   |   |   | 27,961 |   |
| Other general and administrative costs                                                                                                                                                                                                                                                                                                                                                                                  |                                             |                    | 106,016 |   |   |   | 162,275 |   |
| Total general and administrative costs                                                                                                                                                                                                                                                                                                                                                                                  |                                             | $                       | 467,049 |   |   | $ | 669,130 |   |

----

----

----

| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
|---------|-------------------------------------------------------------|

| Item 3. | Defaults Upon Senior Securities |
|---------|---------------------------------|

----

----