| x      | Quarterly report pursuant to Section 13 or      15(d) of the Securities Exchange Act of 1934  |
|--------|-----------------------------------------------------------------------------------------------|
|   |                                                                                          |
|   | For the quarterly period ended September 30,      2008                                        |
|   |                                                                                          |
| o      | Transition report pursuant to Section 13 or      15(d) of the Securities Exchange Act of 1934 |
|   |                                                                                          |
|   | For the transition period from ______________to      ______________.                          |
|   |                                                                                          |
|   |                                                                                          |

| **Nevada**                                                              |   |   |   | **20-8428738**                       |
|-------------------------------------------------------------------------|--------|--------|--------|--------------------------------------|
| (State or other jurisdiction of          incorporation or organization) |   |   |   | (I.R.S. Employer Identification No.) |
|                                                                         |   |        |   |                                      |

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

|                                     Class                                     | Outstanding at November 5, 2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                            |
| Common Stock, par value $0.001 per          share                                                                                                                                                                                                                                                                                                                                                                                                     | 80,181,310                      |

----

|   |   | Page |
|--------|--------|------|

|                            | ITEM 1-- FINANCIAL STATEMENTS                                                                       |   1 |
|---------------------------------|-----------------------------------------------------------------------------------------------------|---------------|
|                            |                                                                                                |          |
|                            | ITEM 2-- MANAGEMENT'S DISCUSSION      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |   6 |
|                            |                                                                                                |          |
|                            | ITEM 3-- QUANTITATIVE AND QUALITATIVE      DISCLOSURES ABOUT MARKET RISK                            | 13            |
|                            |                                                                                                |          |
|                            | ITEM 4T-- CONTROLS AND PROCEDURES                                                                   | 13            |
|                            |                                                                                                |          |
|                            |                                                                                                |          |
| **PART II - OTHER INFORMATION** |                                                                                                |
|                            |                                                                                                |          |
|                            | ITEM 1-- LEGAL PROCEEDINGS                                                                          | 14            |
|                            |                                                                                                |          |
|                            | ITEM 1A-- RISK FACTORS                                                                              | 14            |
|                            |                                                                                                |          |
|                            | ITEM 2-- UNREGISTERED SALES      OF EQUITY SECURITIES AND USE OF PROCEEDS                           | 14            |
|                            |                                                                                                |          |
|                            | ITEM 3-- DEFAULTS UPON SENIOR      SECURITIES                                                       | 14            |
|                            |                                                                                                |          |
|                            | ITEM 4-- SUBMISSION OF MATTERS      TO A VOTE OF SECURITY HOLDERS                                   | 14            |
|                            |                                                                                                |          |
|                            | ITEM 5-- OTHER INFORMATION                                                                          | 14            |
|                            |                                                                                                |          |
|                            | ITEM 6-- EXHIBITS                                                                                   | 14            |
|                            |                                                                                                |          |
|                            | SIGNATURES                                                                                          | 15            |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                      | **September        30, 2008        (unaudited)** |            | **March        31, 2008** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|------------|---------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                |                                             |            |                      |   |  |   |
| Current      Assets:                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |       |                      |   |   |   |
|          Cash                                                                                                                                                                                                                                                                                                                                                                                | $                                                | 284,932    |                      | $      | 592,665 |   |
|          Accounts      Receivable:                                                                                                                                                                                                                                                                                                                                                           |                                             |       |                      |   |   |   |
|                   Oil      & Gas - Related Party                                                                                                                                                                                                                                                                                                |                                             | 1,212,377  |                      |   | 868,406 |   |
|                   Other      - Related Party                                                                                                                                                                                                                                                                                                    |                                             | 1,149,370  |                      |   | - |   |
|          Inventory                                                                                                                                                                                                                                                                                                                                                                           |                                             | 8,731      |                      |   | 4,748 |   |
|          Hedging      Account                                                                                                                                                                                                                                                                                                                                                                |                                             | 6,316      |                      |   | 13,062 |   |
|          Total      Current Assets                                                                                                                                                                                                                                                                                                                                                           |                                             | 2,661,726  |                      |   | 1,478,881 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |            |                      |   |  |   |
| Note      Receivable                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             | 1,348,617  |                      |   | 1,355,228 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |            |                      |   |  |   |
| Oil      and Gas Properties - successful efforts method                                                                                                                                                                                                                                                                                                                                                                                   |                                             | 22,713,212 |                      |   | 17,832,931 |   |
|          Less      Accumulated Depletion and Depreciation                                                                                                                                                                                                                                                                                                                                    |                                             | (4,827,430 | )                         |   | (4,139,337 | ) |
|                   Oil      & Gas Properties (net)                                                                                                                                                                                                                                                                                               |                                             | 17,885,782 |                      |   | 13,693,594 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |            |                      |   |  |   |
| Other      Depreciable Assets:                                                                                                                                                                                                                                                                                                                                                                                                            |                                             | 2,007,742  |                      |   | 1,641,806 |   |
|          Less      Accumulated Depreciation                                                                                                                                                                                                                                                                                                                                                  |                                             | (215,656   | )                         |   | (121,113 | ) |
|                   Other      Depreciable Assets (net)                                                                                                                                                                                                                                                                                           |                                             | 1,792,086  |                      |   | 1,520,693 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |            |                      |   |  |   |
| Other      Related Party Receivable                                                                                                                                                                                                                                                                                                                                                                                                       |                                             | 80,395     |                      |   | 80,395 |   |
| Leasehold      Held for Sale                                                                                                                                                                                                                                                                                                                                                                                                              |                                             | 1,680,813  |                      |   | 1,680,813 |   |
| Investment      in Equity Method Investment                                                                                                                                                                                                                                                                                                                                                                                               |                                             | -          |                      |   | 142,395 |   |
| Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                              | $                                                | 25,449,419 |                      | $      | 19,951,999 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |       |                      |   |   |   |
| **LIABILITIES**                                                                                                                                                                                                                                                                                                                                                                                                                           |                                             |       |                      |   |   |   |
| Current      Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                 |                                             |       |                      |   |   |   |
|          Accounts      Payable                                                                                                                                                                                                                                                                                                                                                               | $                                                | 312,464    |                      | $      | 103,479 |   |
|          Notes      Payable to Related Party                                                                                                                                                                                                                                                                                                                                                 |                                             | 500,000    |                      |   | 324,330 |   |
|          Payable      to Related Parties                                                                                                                                                                                                                                                                                                                                                     |                                             | 3,717,266  |                      |   | 1,547,136 |   |
|          Royalties      Payable                                                                                                                                                                                                                                                                                                                                                              |                                             | 86,947     |                      |   | 57,485 |   |
|          Accrued      Expenses                                                                                                                                                                                                                                                                                                                                                               |                                             | 1,250,333  |                      |   | 857,887 |   |
|          Accrued      Expenses - Related Party                                                                                                                                                                                                                                                                                                                                               |                                             | 168,762    |                      |   | 171,788 |   |
|          Short      Term Notes Payable                                                                                                                                                                                                                                                                                                                                                       |                                             | 525,000    |                      |   | - |   |
|          Current      Portion of Long-Term Debt                                                                                                                                                                                                                                                                                                                                              |                                             | 16,320     |                      |   | 14,960 |   |
|                   Total      Current Liabilities                                                                                                                                                                                                                                                                                                |                                             | 6,577,092  |                      |   | 3,077,065 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |       |                      |   |  |   |
|          Notes      Payable                                                                                                                                                                                                                                                                                                                                                                  |                                             | 1,521,940  |                      |   | 1,647,769 |   |
|          Notes      Payable - Related Parties                                                                                                                                                                                                                                                                                                                                                |                                             | 3,769,674  |                      |   | 3,194,594 |   |
|          Other      Related Party Payables                                                                                                                                                                                                                                                                                                                                                   |                                             | 240,090    |                      |   | 490,840 |   |
|          Less      Current Portion of Notes Payable                                                                                                                                                                                                                                                                                                                                          |                                             | (16,320    | )                         |   | (14,960 | ) |
|                   Total      Long-Term Debt                                                                                                                                                                                                                                                                                                     |                                             | 5,515,384  |                      |   | 5,318,243 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                             |       |                      |   |   |   |
|          Deferred      Tax Liability                                                                                                                                                                                                                                                                                                                                                         |                                             | 2,796,083  |                      |   | 2,163,183 |   |
|                   Total      Liabilities                                                                                                                                                                                                                                                                                                        |                                             | 14,888,559 |                      |   | 10,558,491 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |       |                      |   |   |   |
|          Commitments      & Contingencies:                                                                                                                                                                                                                                                                                                                                                   |                                             |       |                      |   |   |   |
|                   Contingent      Stock Based Compensation                                                                                                                                                                                                                                                                                      |                                             | 268,856    |                      |   | 214,976 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |       |                      |   |   |   |
| **Stockholders'      Equity**                                                                                                                                                                                                                                                                                                                                                                                                             |                                             |       |                      |   |   |   |
|          Common      Stock, $.001 par,200,000,000 shares authorized and                         80,181,310      shares outstanding on September 30,                         2008      and March 31, 2008 |                                             | 80,181     |                      |   | 80,181 |   |
|          Additional      Paid-In-Capital                                                                                                                                                                                                                                                                                                                                                     |                                             | 9,590,313  |                      |   | 9,553,346 |   |
|          Retained      Deficit                                                                                                                                                                                                                                                                                                                                                               |                                             | 621,510    |                      |   | (454,995 | ) |
|                   Total      Stockholders' Equity                                                                                                                                                                                                                                                                                               |                                             | 10,292,004 |                      |   | 9,178,532 |   |
|                   Total      Liabilities & Stockholders' Equity                                                                                                                                                                                                                                                                                 | $                                                | 25,449,419 |                      | $      | 19,951,999 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                             |       |                      |   |   |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | **Three          Months Ended**                      |       |                                               |   | **Six          Months Ended** |                                           |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|------------|----------------------------------------------------|--------|-------------------------------|------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | **September          30, 2008          (unaudited)** |       | **September          30, 2007****(unaudited)****** |   |                          | **September          30, 2008****(unaudited)** |   | **September 30, 2007********(unaudited)** |   |
| **Revenues**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                               |   |                          |                                           |   |   |   |   |   |   |   |
|          Oil        & Gas Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $                                                    | 2,282,048  |                                               | $      | 1,019,222                     |                                           |   | $ | 5,034,795 |   | $ | 1,833,146 |   |
|          Sale        of Leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                 | 18,005     |                                               |   | 307,028                       |                                           |   |   | 18,005 |   |   | 307,028 |   |
|          Other        Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                 | 109,568    |                                               |   | 79,367                        |                                           |   |   | 208,983 |   |   | 79,432 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                 | 2,409,621  |                                               |   | 1,405,617                     |                                           |   |   | 5,261,783 |   |   | 2,219,606 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                 |            |                                               |   |                               |                                           |   |   |  |   |   |  |   |
| **Costs        and Expenses**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                 |            |                                               |   |                               |                                           |   |   |  |   |   |  |   |
|          Oil        & Gas Lease Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                 | 789,234    |                                               |   | 491,703                       |                                           |   |   | 1,385,267 |   |   | 825,224 |   |
|          Workover        Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                 | 87,982     |                                               |   | -                             |                                           |   |   | 160,407 |   |   | - |   |
|          Severance        & Ad Valorem Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                 | 132,125    |                                               |   | 59,947                        |                                           |   |   | 286,237 |   |   | 108,883 |   |
|          Delay        Rentals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                 | -          |                                               |   | 8,571                         |                                           |   |   | - |   |   | 52,186 |   |
|          Depletion        & Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                 | 381,660    |                                               |   | 332,245                       |                                           |   |   | 782,636 |   |   | 618,376 |   |
|          General        & Administrative:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                 |            |                                               |   |                               |                                           |   |   |   |   |   |   |   |
|                   Salaries        & Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                 | 135,068    |                                               |   | 249,533                       |                                           |   |   | 321,613 |   |   | 483,012 |   |
|                   Legal        & Professional                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                 | 193,129    |                                               |   | 121,953                       |                                           |   |   | 313,639 |   |   | 279,802 |   |
|                   Other        General & Administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                 | 40,295     |                                               |   | 101,751                       |                                           |   |   | 211,784 |   |   | 161,166 |   |
|          Interest,        net of capitalized interest of                  $151,343        and$126,676        for the three          months        ended 9/30/08 and 9/30/07,          respectively        and $312,919 and          $267,688for        the six months ended          9/30/08        and9/30/07,        respectively |                                                 | 2,900      |                                               |   | -                             |                                           |   |   | 2,900 |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                 | 1,762,393  |                                               |   | 1,365,703                     |                                           |   |   | 3,464,483 |   |   | 2,528,649 |   |
| Interest        Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                 | 40         |                                               |   | 70,930                        |                                           |   |   | 61,246 |   |   | 94,262 |   |
| Loss        on Equity Method Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                 | (142,395   | )                                                  |   | -                             |                                           |   |   | (142,395 | ) |   | - |   |
| Hedging        Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                 | (93        | )                                                  |   | -                             |                                           |   |   | (6,746 | ) |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                 |            |                                               |   |                               |                                           |   |   |   |   |   |   |   |
| Income        (Loss) from continuing operations                         before        incometaxes        and                 discontinued        operations                                                                                                                                                                                                                                                                                       |                                                 | 504,780    |                                               |   | 110,844                       |                                           |   |   | 1,709,405 |   |   | (214,781 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                 |            |                                               |   |                               |                                           |   |   |   |   |   |   |   |
| Income        Tax Provision                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                 | (211,323   | )                                                  |   | (38,796                       | )                                              |   |   | (632,941 | ) |   | 75,173 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                 |            |                                               |   |                               |                                           |   |   |   |   |   |   |   |
| Income        from discontinued operations,                 net        of income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                 |            |                                               |   |                               |                                           |   |   |  |   |   |  |   |
|          Pipeline        Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 | -          |                                               |   | -                             |                                           |   |   | - |   |   | 22,930 |   |
|          Gain        on Sale of Pipeline                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                 | -          |                                               |   | (5,169                        | )                                              |   |   | - |   |   | 1,453,658 |   |
|          Income        from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                 | -          |                                               |   | (5,169                        | )                                              |   |   | - |   |   | 1,476,588 |   |
| Net        Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | $                                                    | 293,457    |                                               | $      | 66,879                        |                                           |   | $ | 1,076,464 |   | $ | 1,336,980 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                 |       |                                               |   |                          |                                           |   |   |   |   |   |   |   |
| **Basic        & Diluted Loss per**                **Common        Share**                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $                                                    | 0.00       |                                               | $      | 0.00                          |                                           |   | $ | $0.01 |   | $ | 0.02 |   |
| **Weighted        Average Common                 Shares        Outstanding**                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 | 80,181,310 |                                               |   | 79,711,310                    |                                           |   |   | 80,181,310 |   |   | 77,907,148 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                 |       |                                               |   |                          |                                           |   |   |   |   |   |   |   |

----

|                                                                                                                                                                                                                                                                 | **Six Months Ended**                                 |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|------------|
| ****                                                                                                                                                                                                                                                                 | ****September        30, 2008**        (unaudited)** |       | ******September 30, 2007****        (unaudited)** |   |
| **Operating      Activities:**                                                                                                                                                                                                                                       |                                                 |       |   |   |   |   |
|                Net Income                                                                                                                                                                                               | $                                                    | 1,076,464  |   | $ | 1,336,980 |   |
|                   Adjustments      to reconcile net income to cash from operating activities:                                                                              |                                                 |            |   |   |  |   |
|                   Income      Tax Expense                                                                                                                                  |                                                 | 632,941    |   |   | 719,913 |   |
|                   Depletion,      Depreciation, & Amortization                                                                                                             |                                                 | 782,636    |   |   | 618,376 |   |
|                   Loss      on Equity Method Investment                                                                                                                    |                                                 | 142,395    |   |   | - |   |
|                   Stock      based compensation                                                                                                                            |                                                 | 53,880     |   |   | 309,451 |   |
|                   Joint      Venture Partner Expense                                                                                                                       |                                                 | -          |   |   | 3,080,400 |   |
|                   Gain      on Sale of Pipeline                                                                                                                            |                                                 | -          |   |   | (5,272,701 | ) |
|          Changes      in Operating Assets and Liabilities                                                                                                                                                               |                                                 |       |   |   |   |   |
|                   Changes      in Accrued Liabilities                                                                                                                      |                                                 | 86,086     |   |   | 124,366 |   |
|                   Change      in Inventory                                                                                                                                 |                                                 | (3,983     | ) |   | - |   |
|                   Change      in Related Party Receivables/Payables                                                                                                        |                                                 | (1,149,370 | ) |   | (392,168 | ) |
|                   Changes      in Other Receivables                                                                                                                        |                                                 | -          |   |   | (674,524 | ) |
|                   Changes      in Hedging Account                                                                                                                          |                                                 | 6,746      |   |   | - |   |
|                   Changes      in Royalties Payable                                                                                                                        |                                                 | 29,462     |   |   | 13,834 |   |
|                   Change      in Revenue Receivables                                                                                                                       |                                                 | (343,971   | ) |   | (142,099 | ) |
|                   Changes      in Accounts Payable                                                                                                                         |                                                 | 208,985    |   |   | 67,875 |   |
|          Net      Cash provided (used) from operating activities                                                                                                                                                        |                                                 | 1,522,271  |   |   | (210,297 | ) |
|          Net      Cash provided (used) from discontinued operations                                                                                                                                                     |                                                 | -          |   |   | 6,802,113 |   |
|          Net      Cash provided (used) by operating activities and                               discontinued      operations |                                                 | 1,522,271  |   |   | 6,591,816 |   |
|                                                                                                                                                                                                                                                                 |                                                 |            |   |   |  |   |
| **Investing      Activities:**                                                                                                                                                                                                                                       |                                                 |            |   |   |  |   |
|          Oil      & Gas Drilling, Completing and Leasehold Acquisition Costs                                                                                                                                            |                                                 | (4,843,315 | ) |   | (2,813,409 | ) |
|          Change      in Capitalized Note Accretion                                                                                                                                                                      |                                                 | -          |   |   | 70,000 |   |
|          Change      in Related Party Payable related to drilling                                                                                                                                                       |                                                 | 2,170,131  |   |   | (4,120,568 | ) |
|          Investment      in Other Depreciable Assets                                                                                                                                                                    |                                                 | (365,936   | ) |   | (1,372,717 | ) |
|          Note      Receivable Collections (Advances)                                                                                                                                                                    |                                                 | 6,611      |   |   | 148,794 |   |
|          Net      Cash used in investing activities                                                                                                                                                                     |                                                 | (3,032,509 | ) |   | (8,087,900 | ) |
|                                                                                                                                                                                                                                                                 |                                                 |            |   |   |  |   |
| **Financing      Activities**                                                                                                                                                                                                                                        |                                                 |            |   |   |  |   |
|          Notes      Payable (Payments) Advances                                                                                                                                                                         |                                                 | 702,505    |   |   | (2,029,603 | ) |
|          Related      Party Note Advances                                                                                                                                                                               |                                                 | 500,000    |   |   | - |   |
|          Net      cash received from common stock subscriptions                                                                                                                                                         |                                                 | -          |   |   | 6,885,353 |   |
|          Net      Cash provided (used) from financing activities.                                                                                                                                                       |                                                 | 1,202,505  |   |   | 4,855,750 |   |
| Net      Increase (Decrease) in cash                                                                                                                                                                                                                                 |                                                 | (307,733   | ) |   | 3,359,666 |   |
| Cash      - Beginning of the period                                                                                                                                                                                                                                  |                                                 | 592,665    |   |   | 212,254 |   |
| Cash      - End of the period                                                                                                                                                                                                                                        | $                                                    | 284,932    |   | $ | 3,571,920 |   |
|                                                                                                                                                                                                                                                                 |                                                 |       |   |   |   |   |

----

|                                                                                                                          | **Six        Months Ended**                      |    |
|-------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|---------|
|                                                                                                                          | **September        30, 2008        (unaudited)** |    | ****September 30, 2007**        (unaudited)** |   |
| **Supplemental      Disclosure of Cash Flow Information**                                                                     |                                             |    |   |   |   |   |
|                Cash paid during period for:                                      |                                             |    |   |   |   |   |
|                   Interest          | $                                                | 195,386 |   | $ | 64,330 |   |
|                                                                                                                          |                                             |    |   |   |   |   |
|                   Income      Taxes | $                                                | -       |   | $ | - |   |
|                                                                                                                          |                                             |    |   |   |   |   |
| **Non      Cash Investing and Financing Activities**                                                                          |                                             |    |   |   |   |   |
|          Warrants      Issued                                                    | $                                                | 36,967  |   | $ | - |   |
|                                                                                                                          |                                             |    |   |   |   |   |
|          Stock      Based Property Acquisition                                   | $                                                | -       |   |   | 298,800.00 |   |
|                                                                                                                          |                                             |    |   |   |   |   |

----

----

|                           | Year        Ending March 31, |   |
|--------------------------------|------------------------------|--------|
|                           |                         | 2009   |   |   | 2010 |   |   | 2011 |   |
| Restricted Stock Compensation  | $                            | 48,564 |   | $ | - |   | $ | - |   |
| Stock      Option Compensation |                         | 5,316  |   |   | 186,719 |   |   | 82,423 |   |
|                                | $                            | 53,880 |   | $ | 186,719 |   | $ | 82,423 |   |

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|                                            | Fiscal        Years Ending March 31, |    |   |   |      |   |   |
|-------------------------------------------------|--------------------------------------|---------|--------|--------|-----------|--------|--------|
|                                            |                                 | 2009    |   |   | 2010      |   |   | 2011 |   |   | 2012 |   |   | Thereafter |   |   | Total |
| Office      Lease Payments                      | $                                    | 75,000  |   | $      | 160,000   |   | $      | - |   | $ | - |   | $ | - |   | $ | 235,000 |
| Construction      Loan **                       |                                 | 8,160   |   |   | 16,320    |   |   | 16,320 |   |   | 16,320 |   |   | 179,720 |   |   | 236,840 |
| Notes      Payable - Related Parties *          |                                 | -       |   |   | 3,518,924 |   |   | - |   |   | 250,750 |   |   | - |   |   | 3,769,674 |
| Short Term      Note Payable - Related Party ** |                                 | -       |   |   | 500,000   |   |   | - |   |   | - |   |   | - |   |   | 500,000 |
| Line      of Credit **                          |                                 | 525,000 |   |   | -         |   |   | - |   |   | - |   |   | - |   |   | 525,000 |
| Lease Notes      Payable                        |                                 | -       |   |   | -         |   |   | - |   |   | - |   |   | 1,285,100 |   |   | 1,285,100 |
|                                                 | $                                    | 608,160 |   | $      | 4,195,244 |   | $      | 16,320 |   | $ | 267,070 |   | $ | 1,464,820 |   | $ | 6,551,614 |

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| EXHIBIT      NUMBER |   | DESCRIPTION                                                                                                                          |
|---------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                 |
| 31.1                |   | CEO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 31.2                |   | CFO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 32.1                |   | CEO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2                |   | CFO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |

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|                   | **REOSTAR      ENERGY CORPORATION**                                                                                                                                                                                                     |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |                                                                                                                                                                                                                                    |
| November      18, 2008 |                                                                                                                                                                                                                                    |
|              | By    /s/      Scott D. Allen                                 |
|                   |      Scott      D. Allen, Chief Financial Officer            (Principal Financial Officer and duly authorized      signatory)                                                         |
|                   |                                                                                                                                                                                                                                    |
|                   |                                                                                                                                                                                                                                    |

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| EXHIBIT      NUMBER |   | DESCRIPTION                                                                                                                          |
|---------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                 |
| 31.1                |   | CEO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 31.2                |   | CFO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 32.1                |   | CEO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2                |   | CFO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |

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