----

----

| Nevada                                              | 88-0456274                                |
|-----------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation) | (I.R.S.      Employer Identification No.) |
|                                                |                                      |
| 2121      Sage Road, Suite 200, Houston, Texas      | 77056                                     |
| (Address      of principal executive offices)       | (Zip      code)                           |

| Large      accelerated filer o | Accelerated      filer o                         |
|--------------------------------|--------------------------------------------------|
| Non-accelerated      filer o   | Smaller      reporting Company  þ |

----

| PART        I.  FINANCIAL INFORMATION                                                                                                                                                                                              |        Page |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|
|                                                                                                                                                                                                                                              |        No.  |
| Item      1. Financial Statements                                                                                                                                                                                                                 |             |
|                                                                                                                                                                                                                                              |             |
| Balance      Sheets as of January 31, 2010  and  July 31, 2009       (Unaudited).                                                                                                                                             | 3                |
|                                                                                                                                                                                                                                              |             |
| Statements      of Operations for the three months ended January 31, 2010 and 2009, for      the six months ended January 31, 2010 and 2009 and for the period from      October 21, 2002 (Inception) to January 31, 2010       (Unaudited). | 4                |
|                                                                                                                                                                                                                                              |             |
| Statements      of Cash Flows for the six months ended January 31, 2010 and      2009  and for the period from October 21, 2002 (Inception) to      January 31, 2010  (Unaudited).                                                 | 5                |
|                                                                                                                                                                                                                                              |             |
|  Notes      to the Financial Statements (Unaudited)                                                                                                                                                                                          |  6          |
|                                                                                                                                                                                                                                              |             |
| Item      2. Management's Discussion and Analysis of Financial Condition and Results      of Operations                                                                                                                                           | 10               |
|                                                                                                                                                                                                                                              |             |
| Item      3. Quantitative and Qualitative Disclosures about Market    Risk                                                                                                                                                                        | 12               |
|                                                                                                                                                                                                                                              |             |
| Item      4. Controls and Procedures                                                                                                                                                                                                              | 12               |
|                                                                                                                                                                                                                                              |             |
| PART      II. OTHER INFORMATION                                                                                                                                                                                                                   |             |
|                                                                                                                                                                                                                                              |             |
| Item      1. Legal Proceedings                                                                                                                                                                                                                    | 12               |
|                                                                                                                                                                                                                                              |             |
| Item      2. Recent Sales of Unregistered Securities                                                                                                                                                                                              | 13               |
|                                                                                                                                                                                                                                              |             |
| Item      3. Defaults Upon Senior Securities                                                                                                                                                                                                      | 13               |
|                                                                                                                                                                                                                                              |             |
| Item      4. Submission of Matters to a Vote of Security Holders                                                                                                                                                                                  | 13               |
|                                                                                                                                                                                                                                              |             |
| Item      5. Other Information                                                                                                                                                                                                                    | 13               |
|                                                                                                                                                                                                                                              |             |
| Item      6. Exhibits                                                                                                                                                                                                                             | 14               |
|                                                                                                                                                                                                                                              |             |
| Signatures                                                                                                                                                                                                                                        | 15               |

----

|                                                                                                                                                                                               |   | January      31, 2010 |        |    | July      31, 2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|-------------|---------|--------------------|--------|
| ASSETS                                                                                                                                                                                             |   |                  |        |    |
| Current      Assets:                                                                                                                                                                               |   |                  |        |    |
| Cash                                                                                                                                                                                               |   |                  | 1,321       |    |               |   | 3 |   |
| Accounts      Receivable                                                                                                                                                                           |   |                  | 13,144      |    |               |   | - |   |
| Other      Current Assets                                                                                                                                                                          |   |                  | 11,194      |    |               |   | 8,561 |   |
| Total      Current Assets                                                                                                                                                                          |   |                  | 25,659      |    |               |   | 8,564 |   |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| Furniture,      fixtures and equipment, net                                                                                                                                                        |   |                  | 343,707     |    |               |   | 395,338 |   |
| Other      Assets:                                                                                                                                                                                 |   |                  |        |    |               |   |   |   |
| Patents,      net                                                                                                                                                                                  |   |                  | -           |    |               |   | 1 |   |
| Intangibles,      net                                                                                                                                                                              |   |                  | 13,452      |    |               |   | 6,568 |   |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| TOTAL      ASSETS                                                                                                                                                                                  |   |                  | 382,818     |    |               |   | 410,471 |   |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' DEFICIT                                                                                                                                                         |   |                  |        |    |               |   |   |   |
| Current      Liabilities:                                                                                                                                                                          |   |                  |        |    |               |   |   |   |
| Accounts      Payable                                                                                                                                                                              |   |                  | 516,993     |    |               |   | 432,621 |   |
| Accounts      Payable-Stockholders                                                                                                                                                                 |   |                  | 65          |    |               |   | 2,594 |   |
| Accrued      Liabilities                                                                                                                                                                           |   |                  | 1,951,923   |    |               |   | 314,964 |   |
| Advances      from Stockholders                                                                                                                                                                    |   |                  | 700,437     |    |               |   | 875,081 |   |
| Note      Payable                                                                                                                                                                                  |   |                  | 50,000      |    |               |   | 30,000 |   |
| Secured      Notes Payable                                                                                                                                                                         |   |                  | 90,000      |    |               |   | - |   |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| Deferred      Income                                                                                                                                                                               |   |                  | -           |    |               |   | 1,400 |   |
| Total      Current Liabilities                                                                                                                                                                     |   |                  | 3,309,418   |    |               |   | 1,656,660 |   |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| TOTAL      LIABILITIES                                                                                                                                                                             |   |                  | 3,309,418   |    |               |   | 1,656,660 |   |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| STOCKHOLDERS'      DEFICIT                                                                                                                                                                         |   |                  |        |    |               |   |   |   |
| Preferred      stock:                                                                                                                                                                              |   |                  |        |    |               |   |   |   |
| Series      A convertible preferred stock, $0.001 par, 2,500,000 shares authorized,      1,378 and 1,378 shares issued and outstanding as of January 31, 2010 and      July 31, 2009, respectively |   |                  | 1           |    |               |   | 1 |   |
|  Series      E convertible preferred stock, $0.001 par, 0 and  0 shares      issued and outstanding as of January 31, 2010 and July 31, 2009,      respectively                     |   |                  | -           |    |               |   | -- |   |
| Common      stock, $0.001 par value, 500,000,000 shares authorized,      392,635,554and      460,664,395 shares issued and outstanding at January 31, 2010 and July 31      2009, respectively     |   |                  | 392,635     |    |               |   | 460,664 |   |
| Additional      paid-in capital                                                                                                                                                                    |   |                  | 16,693,377  |    |               |   | 14,481,168 |   |
| Deficit      accumulated during development stage                                                                                                                                                  |   |                  | (20,012,613 | )  |               |   | (16,188,022 | ) |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| Total      stockholders' deficit                                                                                                                                                                   |   |                  | (2,926,600  | )       |               |   | (1,246,189 | ) |
|                                                                                                                                                                                               |   |                  |        |    |               |   |   |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                   |   |                  | 382,818     |    |               |   | 410,471 |   |

----

|                                                            |   | Three      MonthsEndedJanuary      31,2010 |        |    | ThreeMonthsEndedJanuary      31,2009 |    |        | Six      MonthsEndedJanuary      31,2010 |   |    | Six      MonthsEndedJanuary      31,2009 |    |   | Inception(October      21,2002)to January      31,2009 |        |
|-----------------------------------------------------------------|--------|--------------------------------------------|-------------|---------|--------------------------------------|---------|-------------|------------------------------------------|--------|---------|------------------------------------------|---------|--------|-------------------------------------------------------------|-------------|
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |
| Revenues                                                        |   |                                       | 10,520      |    |                                 |    | -           |                                     |   |    | 14,420                                   |    |   |                                                        | -           |   |   |   | 14,420 |   |
| Cost      Of Revenues                                           |   |                                       | 6,162       |    |                                 |    | -           |                                     |   |    | 15,219                                   |    |   |                                                        | -           |   |   |   | 29,876 |   |
| Net      Revenue/Gross Loss                                     |   |                                       | 4,358       |    |                                 |    | -           |                                     |   |    | (799                                     | )       |   |                                                        |        |   |   |   | (15,456 | ) |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
|  General      & Administrative                         |   | $                                     | 698,907     |    |                                 | $  | 179,816     |                                     |   | $  | 1,852,263                                |    |   | $                                                      | 338,562     |   |   | $  | 6,530,440 |   |
| Depreciation      and amortization                              |   |                                       | 30,468      |    |                                 |    | 26,431      |                                     |   |    | 59,248                                   |    |   |                                                        | 47,216      |   |   |   | 187,584 |   |
| Professional      Fees                                          |   |                                       | 63,066      |    |                                 |    | 552,079     |                                     |   |    | 198,135                                  |    |   |                                                        | 955,575     |   |   |   | 4,410,472 |   |
| Payroll      Expenses                                           |   |                                       | 1,429,763   |    |                                 |    | 482,694     |                                     |   |    | 1,703,057                                |    |   |                                                        | 794,164     |   |   |   | 7,583,205 |   |
| Loss      on Disposal of Assets                                 |   |                                       | -           |    |                                 |    | -           |                                     |   |    | -                                        |    |   |                                                        | -           |   |   |   | 9,855 |   |
| Loss      on Impairment of Assets                               |   |                                       | -           |    |                                 |    | -           |                                     |   |    | -                                        |    |   |                                                        | -           |   |   |   | 50,591 |   |
| Research      and Development                                   |   |                                       | 14,580      |    |                                 |    | 11,110      |                                     |   |    | 35,674                                   |    |   |                                                        | 11,110      |   |   |   | 1,226,757 |   |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Total      Operating Expenses                                   |   |                                       | 2,236,784   |    |                                 |    | 1,252,130   |                                     |   |    | 3,848,377,                               |    |   |                                                        | 2,146,627   |   |   |   | 19,998,904 |   |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Loss      from Operations                                       |   |                                       | (2,232,426  | )       |                                 |    | (1,252,130  | )                                   |   |    | (3,849,176                               | )  |   |                                                        | (2,146,627  | )  |   |   | (20,014,360 | ) |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Other      Income (Expense):                                    |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Gain      on Derivatives                                        |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        | -           |   |   |   | 100,000 |   |
| Gain  on      sale of patent and impairment of patent |   |                                       | (56,250     | )       |                                 |    |        |                                     |   |    | 38,750                                   |    |   |                                                        |        |   |   |   | 38,750 |   |
| Gain      on Extinguishment of AP                               |   |                                       | -           |    |                                 |    |        |                                     |   |    | -                                        |    |   |                                                        |        |   |   |   | 84,065 |   |
| Gain      on Extinguishment of Note                             |   |                                       | 3,000       |    |                                 |    |        |                                     |   |    | 3,000                                    |    |   |                                                        | -           |   |   |   | 10,137 |   |
| Discontinued      Operations-Net Loss on Oil and Gas Wells      |   |                                       | (22,009     | )       |                                 |    |        |                                     |   |    | (22,009                                  | )  |   |                                                        |        |   |   |   | (22,009 | ) |
| Discontinued      Operations-Gain on Disposition                |   |                                       | 22,009      |    |                                 |    |        |                                     |   |    | 22,009                                   |    |   |                                                        |        |   |   |   | 22,009 |   |
| Interest      Income                                            |   |                                       | -           |    |                                 |    | 129         |                                     |   |    | -                                        |    |   |                                                        | 1,452       |   |   |   | 3,578 |   |
| Interest      Expense                                           |   |                                       | (16,301     |    |                                 |    | (412        | )                                        |   |    | (17,165                                  | )       |   |                                                        | (1,037      | ) |   |   | (234,783 | ) |
| Total      Other Income (Expenses)                              |   |                                       | (69,578     | )       |                                 |    | (283        |                                     |   |    | 24,585                                   |    |   |                                                        | 415         |   |   |   | 1,747 |   |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Loss      Before Income Taxes                                   |   |                                       | (2,302,004  | )       |                                 |    | (1,252,413  | )                                        |   |    | (3,824,591                               | )  |   |                                                        | (2,146,212  | )  |   |   | (20,012,613 | ) |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Provision      for Income Taxes                                 |   |                                       | -           |    |                                 |    | -           |                                     |   |    | -                                        |    |   |                                                        | -           |   |   |   | - |   |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Net      Loss                                                   |   | $                                     | (2,302,004  | )  |                                 | $  | (1,252,413  | )                                   |   | $  | (3,824,591                               |    |   | $                                                      | (2,146,212  | )  |   | $  | (20,012,613 | ) |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Basic      and diluted                                          |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Net      loss per common share-basic and diluted                |   | $                                     | (0.00       | )  |                                 | $  | (0.00       | )                                   |   | $  | (0.00                                    | )  |   | $                                                      | (0.01       | )  |   |   |   |   |
|                                                            |   |                                       |        |    |                                 |    |        |                                     |   |    |                                     |    |   |                                                        |        |   |   |   |   |   |
| Weighted      average shares outstanding-basic and diluted      |   |                                       | 471,229,176 |    |                                 |    | 402,447,715 |                                     |   |    | 421,239,740                              |    |   |                                                        | 400,646,350 |   |   |   |   |   |

----

|                                                                                  |   | Six      Months Ended January 31, |                                    | Six      Months Ended January 31, |   | October 21,      2002 (Inception) to January 31, |
|---------------------------------------------------------------------------------------|--------|----------------------------------------|-----------------------------------------|----------------------------------------|--------|-------------------------------------------------------|
|                                                                                  |   | 2010                                   |                                    | 2009                                   |   | 2010                                                  |
| CASH      FLOWS FROM OPERATING ACTIVITIES                                             |   |                                   |                                    |                                   |   |                                                  |
| Net      Loss                                                                         |   | $                                      | (3,824,591)                             |                                   | $      | (2,146,212)                                           |   | $ | (20,012,613) |
| Adjustments      to reconcile net loss to net cash used in operating      activities: |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| Shares      issued for services                                                       |   |                                   | 1,688,368                               |                                   |   | 549,307                                               |   |   | 5,390,622 |
| Warrant      issued for consulting services                                           |   |                                   | -                                       |                                   |   | -                                                     |   |   | 446,660 |
| Loss      on disposal of assets                                                       |   |                                   | -                                       |                                   |   | -                                                     |   |   | 9,856 |
| Loss      on impairment of assets                                                     |   |                                   | -                                       |                                   |   | -                                                     |   |   | 50,591 |
| Depreciation      and amortization                                                    |   |                                   | 59,248                                  |                                   |   | 47,216                                                |   |   | 187,585 |
| Share-based      compensation                                                         |   |                                   | 6,112                                   |                                   |   | 13,192                                                |   |   | 2,902,889 |
| (Gain)      Loss on derivative                                                        |   |                                   | -                                       |                                   |   | -                                                     |   |   | 5,000 |
| Gain      on debt conversion                                                          |   |                                   | (3,000)                                 |                                   |   | -                                                     |   |   | (10,137) |
| (Gain)Loss      on accounts payable                                                   |   |                                   | -                                       |                                   |   | -                                                     |   |   | (84,065) |
| (Gain)Loss      on sale of patent                                                     |   |                                   | (38,750)                                |                                   |   | -                                                     |   |   | (38,750) |
| Contributed      capital                                                              |   |                                   | 12,911                                  |                                   |   | -                                                     |   |   | 75,433 |
| Amortization      of debt discount                                                    |   |                                   | -                                       |                                   |   | -                                                     |   |   | 80,000 |
| Changes      in operating assets and  liabilities                           |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| Prepaid      and other current assets                                                 |   |                                   | (2,633)                                 |                                   |   | 53,420                                                |   |   | (11,194) |
| Accounts      payable                                                                 |   |                                   | 84,372                                  |                                   |   | 309,945                                               |   |   | 636,916 |
| Accounts      receivable                                                              |   |                                   | (13,144)                                |                                   |   | -                                                     |   |   | (13,144) |
| Accrued      expenses                                                                 |   |                                   | 1,636,959                               |                                   |   | 72,785                                                |   |   | 3,705,090 |
| Deferred      income                                                                  |   |                                   | (1,400)                                 |                                   |   | -                                                     |   |   | - |
| Accounts      payables to stockholders                                                |   |                                   | 11                                      |                                   |   | -                                                     |   |   | 2,605 |
| NET      CASH USED IN OPERATING ACTIVITIES                                            |   |                                   | (395,537)                               |                                   |   | (1,100,347                                            | ) |   | (6,676,656      ) |
|                                                                                  |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| CASH      FLOW FROM INVESTING ACTIVITIES                                              |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| Proceeds      from sale of patents                                                    |   |                                   | -                                       |                                   |   | -                                                     |   |   | - |
| Proceeds      from sale of property                                                   |   |                                   | -                                       |                                   |   |                                                  |   |   | - |
| Investment      in patents                                                            |   |                                   | 95,000                                  |                                   |   | -                                                     |   |   | 27,767 |
| Investment      in intangible assets                                                  |   |                                   | (6,283)                                 |                                   |   | -                                                     |   |   | (22,283) |
| Investment      in property and equipment                                             |   |                                   | (8,217)                                 |                                   |   | (206,159)                                             |   |   | (466,715) |
| NET      CASH USED IN INVESTING ACTIVITIES                                            |   |                                   | 80,500                                  |                                   |   | (206,159)                                             |   |   | (461,231) |
|                                                                                  |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                                             |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| Proceeds      from sale of stock                                                      |   |                                   | 142,000                                 |                                   |   | -                                                     |   |   | 5,425,200 |
| Advances      from stockholders                                                       |   |                                   | 115,355                                 |                                   |   | 543,000                                               |   |   | 1,543,936 |
| Proceeds      from warrants exercised                                                 |   |                                   | 9,000                                   |                                   |   | -                                                     |   |   | 546,502 |
| Repayment      of advances from stockholders                                          |   |                                   | -                                       |                                   |   | -                                                     |   |   | (501,430) |
| Convertible      Promissory Notes proceeds                                            |   |                                   | 30,000                                  |                                   |   | -                                                     |   |   | 210,000 |
| Proceeds      from third party debt, net                                              |   |                                   | 20,000                                  |                                   |   | -                                                     |   |   | (85,000) |
| NET      CASH PROVIDED BY FINANCING ACTIVITIES                                        |   |                                   | 316,355                                 |                                   |   | 533,000                                               |   |   | 7,139,208 |
|                                                                                  |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| NET      CHANGE IN CASH AND CASH EQUIVALENTS                                          |   |                                   | 1,318                                   |                                   |   | (763,506)                                             |   |   | 1,321 |
| Cash      and cash equivalents at beginning of period                                 |   |                                   | 3                                       |                                   |   | 767,338                                               |   |   | - |
| Cash      and cash equivalents at end of period                                       |   | $                                      | 1,321                                   |                                   | $      | 3,832                                                 |   | $ | 1,321 |
|                                                                                  |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| SUPPLEMENTAL      DISCLOSURES                                                         |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| Cash      paid for interest                                                           |   | $                                      | 1,695                                   |                                   | $      | 1,037                                                 |   |   |   |
| Cash      paid for income taxes                                                       |   |                                   |                                    |                                   |   | -                                                     |   |   |   |
|                                                                                  |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| NON-CASH      TRANSACTIONS                                                            |   |                                   |                                    |                                   |   |                                                  |   |   |   |
| Conversion      of Preferred Shares to Common Shares                                  |   |                                   | -                                       |                                   |   | 2,078                                                 |   |   |   |
| Shares      Returned and Cancelled                                                    |   | $                                      | 128,069                                 |                                   | $      | -                                                     |   |   |   |
| Acquisition      of oil & gas wells – debt and stock issued                 |   | $                                      |      5,867,361 |                                   |   |                                                  |   |   |   |
| Disposition      of oil & gas wells – debt and stock canceled               |   | $                                      | 5,867,361                               |                                   |   |                                                  |   |   |   |
| Debt      Forgiveness                                                                 |   | $                                      | 202,539                                 |                                   |   |                                                  |   |   |   |
| Stock      issued for patent buyback                                                  |   | $                                      | 56,250                                  |                                   |   |                                                  |   |   |   |
| Conversion      of Note Payable to stock                                              |   | $                                      | 27,000                                  |                                   |   |                                                  |   |   |   |

----

----

| Expected      volatility     |   |   | 174%-      243%    |   |
|------------------------------|--------|--------|--------------------|--------|
| Term      (years)            |   |   | 1.5      – 3 |   |
| Risk-free      interest rate |   |   | 1.16%      - 3.01% |   |
| Expected      dividend yield |   |   | 0%                 |   |

|                               |   | Options |       |   | Weighted      Average Exercise Price |   |
|------------------------------------|--------|---------|------------|--------|--------------------------------------|--------|
| Outstanding      July 31, 2009     |   |    | 20,225,000 |   |                                 |   | 0.28 |   |
| Granted                            |   |    | 25,000     |   |                                 |   | - |   |
| Expired                            |   |    | 12,650,000 |   |                                 |   | 0.25 |   |
| Exercised                          |   |    | -          |   |                                 |   | - |   |
| Outstanding,      January 31, 2010 |   |    | 7,600,000  |   |                                 | $      | 0.35 |   |

| Number      of Common Stock Equivalents |      | Expiration      Date |      | Remaining      Contracted Life (Years) |   |   | Exercise      Price |   |
|-----------------------------------------|-----------|----------------------|-----------|----------------------------------------|--------|--------|---------------------|--------|
|                                    | 25,000    |                 | 4/1/2012  |                                   |   | 2.17   |                |   |   | 0.25 |   |
|                                    | 25,000    |                 | 4/1/2013  |                                   |   | 3.17   |                |   |   | 0.25 |   |
|                                    | 25,000    |                 | 4/1/2014  |                                   |   | 4.17   |                |   |   | 0.25 |   |
|                                    | 25,000    |                 | 4/1/2015  |                                   |   | 5.17   |                |   |   | 0.25 |   |
|                                    | 2,500,000 |                 | 12/1/2013 |                                   |   | 3.83   |                |   |   | 0.15 |   |
|                                    | 1,500,000 |                 | 12/1/2013 |                                   |   | 3.83   |                |   |   | 0.25 |   |
|                                    | 1,500,000 |                 | 12/1/2013 |                                   |   | 3.83   |                |   |   | 0.40 |   |
|                                    | 1,000,000 |                 | 12/1/2013 |                                   |   | 3.83   |                |   |   | 0.50 |   |
|                                    | 1,000,000 |                 | 12/1/2013 |                                   |   | 3.83   |                |   |   | 0.75 |   |
|                                    | 7,600,000 |                 |      |                                   |   | 3.82   |                |   |   | 0.35 |   |

----

|                                       |   | OPTIONS |     |
|--------------------------------------------|--------|---------|----------|
| Non-vested      shares at July 31, 2009    |   |    | 278,385  |   |
| Granted                                    |   |    | 0        |   |
| Vested                                     |   |    | -        |   |
| Expired                                    |   |    | (203,385 | ) |
| Exercised                                  |   |    | -        |   |
| Non-vested      shares at January 31, 2010 |   |    | 75,000   |   |

| Warrants      Outstanding and Exercisable |   | Warrants |       |   | Weighted      Average Exercise Price |   |
|-------------------------------------------|--------|----------|------------|--------|--------------------------------------|--------|
| Outstanding,      July 31, 2009           |   |     | 15,994,284 |   |                                 | $      | 0.47 |   |
| Granted                                   |   |     | -          |   |                                 |   | - |   |
| Expired                                   |   |     | -          |   |                                 |   | - |   |
| Exercised                                 |   |     | (150,000)  |   |                                 |   |   (0.06) |   |
| Outstanding,      January 31, 2010        |   |     | 15,844,284 |   |                                 | $      | 0.41 |   |

| Number      of Common Stock Equivalents |      | Expiration      Date |       | Remaining      Contracted Life (Years) |   |   | Exercise      Price |   |
|-----------------------------------------|-----------|----------------------|------------|----------------------------------------|--------|--------|---------------------|--------|
|                                    | 2,902,500 |                 | 10/31/2010 |                                   |   | 0.75   |                |   | $ | 0.20 |   |
|                                    | 50,000    |                 | 7/31/2011  |                                   |   | 1.50   |                |   | $ | 0.25 |   |
|                                    | 5,400,000 |                 | 12/31/2011 |                                   |   | 1.67   |                |   | $ | 1.00 |   |
|                                    | 1,600,000 |                 | 4/30/2012  |                                   |   | 2.00   |                |   | $ | 0.03 |   |
|                                    | 825,000   |                 | 6/1/2012   |                                   |   | 2.08   |                |   | $ | 0.03 |   |
|                                    | 2,075,000 |                 | 6/4/2012   |                                   |   | 2.08   |                |   | $ | 0.03 |   |
|                                    | 83,333    |                 | 6/12/2012  |                                   |   | 2.08   |                |   | $ | 0.03 |   |
|                                    | 1,408,451 |                 | 6/29/2012  |                                   |   | 2.17   |                |   | $ | 0.03 |   |
|                                    | 1,500,000 |                 | 9/24/2012  |                                   |   | 2.42   |                |   | $ | 0.30 |   |

----

|   | · | $3.0      million in total existing debt. |
|--------|--------|-------------------------------------------|

|   | · | $1.5      million 5-year, 7.5% convertiblenote. |
|--------|--------|-------------------------------------------------|

|   | · | 1,163,000      shares of Series E Convertible Preferred Stock, valued at      $974,286. |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | 3,000,000      common shares valued at $120,000. |
|--------|--------|--------------------------------------------------|

|   | · | $273,075      assumed asset retirement obligation |
|--------|--------|---------------------------------------------------|

| 10/22/2009      to 1/13/2010                |   |   |    |
|---------------------------------------------|--------|--------|---------|
|                                        |   |   |    |
| Revenue      – sales of oil & gas |   | $      | 81,031  |   |
| EXPENSES                                    |   |   |    |   |
| Depletion      Expense                      |   |   | 21,282  |   |
| Expenses      of Wells                      |   |   | 53,633  |   |
| Interest      on $1.5m Note                 |   |   | 28,125  |   |
| Total      Expenses                         |   |   | 103,040 |   |
|                                        |   |   |    |   |
| Net      Income on Wells                    |   | $      | (22,009 | ) |

----

|   | · | We      released ExoDetectTM at the end of June 2009.  This first product      is an affordable, software-as-a-service (SaaS) data leak detection (DLD)      software solution that discovers and rates the risk of unauthorized “data      in the wild.”  ExoDetectTM reports on the knowledge needed to      tighten an organization’s data leak prevention (DLP) controls, while      providing the first step in mitigating the financial and legal risks      associated with stolen or misappropriated confidential      information.  ExoDetect TM performs scans for compromised data on      any exposed area in the Internet Cloud; classifies the discovered      information according to confidence and severity ratings; and captures the      forensic evidence needed to address the breach, including litigation or      prosecution. We have an ongoing process of updating and refining the      ExoDetectTM product and have released the latest version 1.8 during the      quarter. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Company is focused on marketing to its clients its current products,      ExoDetectTM and ExoWatchTM and developing its other proprietary      technology. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ITEM 3. | QUALITATIVE AND QUANTITATIVE      DISCLOSURES ABOUT MARKET RISK |
|---------|-----------------------------------------------------------------|

| ITEM 1. | LEGAL  PROCEEDINGS |
|---------|--------------------|

----

| ITEM      1A. | RISK      FACTORS |
|---------------|-------------------|

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

| ITEM 4. | SUBMISSION OF MATTERS TO A VOTE      OF SECURITY HOLDERS |
|---------|----------------------------------------------------------|

|   ITEM      5. |   OTHER      INFORMATION |
|--------------------------|------------------------------------|

----

|   | (a) | Exhibits |
|--------|-----|----------|

| EXHIBIT      NUMBER | DESCRIPTION      OF EXHIBIT                                                                                                                                  |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                | Certification      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                 |
| 31.2                | Certification      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002                                                 |
| 32.1                | Certification      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted      Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 |
| 32.2                | Certification      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted      Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 |

----

| Dated:      March 30, 2010 | By:  /s/      Richard J. Kampa  |
|----------------------------|-------------------------------------------|
|                       | Richard      J. Kampa                     |
|                       | Chief      Executive Officer and Director |
|                       | (Principal      Executive Officer)        |

| Dated:      March 30, 2010 | By:      /s/ Michael G. Wirtz                     |
|----------------------------|---------------------------------------------------|
|                       | Michael      G. Wirtz                             |
|                       | Chief      Financial Officer                      |
|                       | (Principal      Financial and Accounting Officer) |

----