UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)





x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended September 30, 2009





 ̈ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE ACT





For the
transition period from ____________ to_________________





Commission
file number 000-51108





TOT Energy,
Inc.


(Exact
name of registrant as specified in its charter)




Delaware
                
                20-0715816(State or other jurisdiction of incorporation or organization)
                
                (IRS Employer Identification
      No.)





12100 NE
16 Ave


Suite
210


Miami, FL
33161


(Address
of principal executive offices)





(305)
891-2288


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





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





Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.) Yes   ̈  No  x





The
number of outstanding shares of common stock, $.001 par value, of the registrant
as of November 14, 2009 was 310,815,297.





TOT
ENERGY, INC.


Form
10-Q


For
the Quarter Ended September 30, 2009


INDEX





PageNo.PART
      I — FINANCIAL INFORMATIONItem
      1.
                
                Financial
      Statements
                
                3UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEETS – AS OF SEPTEMBER 30, 2009 AND
      MARCH 31, 2009
                
                3UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – FOR THE THREE AND
      SIX MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
                
                4UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – FOR THE SIX MONTHS
      ENDED SEPTEMBER 30, 2009 AND 2008
                
                5Notes
      to Unaudited Condensed Consolidated Financial Statements
                
                6Item
      2.
                
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                
                11Item 4T.
                
                Controls
      and Procedures
                
                17PART
      II — OTHER INFORMATIONItem
      1.
                
                Legal
      Proceedings
                
                18Item
      2.
                
                Unregistered
      Sales of Equity Securities
                
                18Item
      6.
                
                Exhibits
                
                19Signatures
                
                21References
      in this Form 10-Q to “we”, “us”, “our”, the “Company” and “TOT Energy”
      refers to TOT Energy, Inc. and its consolidated subsidiaries, unless
      otherwise noted.


2


PART I —
FINANCIAL INFORMATION





Item 1.
Financial Statements.





TOT
ENERGY, INC.


UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS





September 30, 2009
                  
                  
                  March 31, 2009ASSETSCurrent
      assetsCash
                  
                  $
                  95,950
                  
                  
                  $
                  99,971Deposits
                  
                  
                  8,000
                  
                  
                  
                  6,000Inventory
      of raw materials
                  
                  
                  37,426
                  
                  
                  
                  31,174Prepaid
      expenses and other assets
                  
                  
                  11,521
                  
                  
                  
                  2,220Total
      current assets
                  
                  
                  152,897
                  
                  
                  
                  139,365Fixed
      assetsBuilding
                  
                  
                  181,981
                  
                  
                  
                  160,649Machinery
      and equipment
                  
                  
                  3,457,981
                  
                  
                  
                  3,053,933Less:
      accumulated depreciation
                  
                  
                  (715,793
                  )
                  
                  
                  (308,452
                  )Total
      fixed assets (net)
                  
                  
                  2,924,169
                  
                  
                  
                  2,906,130Total
      assets
                  
                  $
                  3,077,066
                  
                  
                  $
                  3,045,495LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIENCY) IN ASSETSCurrent
      liabilitiesAccounts
      payable
                  
                  $
                  91,210
                  
                  
                  $
                  51,130Accrued
      expenses
                  
                  
                  1,472,685
                  
                  
                  
                  853,743Total
      liabilities
                  
                  
                  1,563,895
                  
                  
                  
                  904,873COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITYPreferred
      stock ($.001 par value, 100,000,000 shares authorized and no shares issued
      and outstanding)
                  
                  
                  -
                  
                  
                  
                  -Common
      stock ($.001 par value, 800,000,000 shares authorized and 310,815,297 and
      300,583,108 shares issued and outstanding)
                  
                  
                  310,815
                  
                  
                  
                  300,583Treasury
      stock, at cost; 250,000 shares
                  
                  
                  (62,500
                  )
                  
                  
                  (62,500
                  )Paid
      in capital
                  
                  
                  23,553,775
                  
                  
                  
                  19,940,319Accumulated
      other comprehensive income (loss)
                  
                  
                  (848,614
                  )
                  
                  
                  (1,176,614
                  )Accumulated
      deficit
                  
                  
                  (21,136,174
                  )
                  
                  
                  (16,722,953
                  )Noncontrolling
      interest
                  
                  
                  (304,132
                  )
                  
                  
                  (138,213
                  )Total
      equity
                  
                  
                  1,513,171
                  
                  
                  
                  2,140,622Total
      liabilities and stockholders' equity
                  
                  $
                  3,077,066
                  
                  
                  $
                  3,045,495





See
accompanying notes.


3


TOT
ENERGY, INC.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS





Three Months Ended
                                
                                
                                Three Months Ended
                                
                                
                                Six Months Ended
                                
                                
                                Six Months EndedSeptember 30, 2009
                                
                                
                                September 30, 2008
                                
                                
                                September 30, 2009
                                
                                
                                September 30, 2008Sales
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -Cost
      of sales
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Gross
      Profit
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Operating
      ExpensesGeneral
      and administrative
                                
                                
                                2,639,159
                                
                                
                                
                                2,185,744
                                
                                
                                
                                4,565,638
                                
                                
                                
                                2,489,032Loss
      from operations
                                
                                
                                (2,639,159
                                )
                                
                                
                                (2,185,744
                                )
                                
                                
                                (4,565,638
                                )
                                
                                
                                (2,489,032
                                )Non-operating
      expenseOther
      expense
                                
                                
                                -
                                
                                
                                
                                (309
                                )
                                
                                
                                (55
                                )
                                
                                
                                (309
                                )Loss
      before income tax provision
                                
                                
                                (2,639,159
                                )
                                
                                
                                (2,186,053
                                )
                                
                                
                                (4,565,693
                                )
                                
                                
                                (2,489,341
                                )Income
      tax provision
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Net
      Loss
                                
                                
                                (2,639,159
                                )
                                
                                
                                (2,186,053
                                )
                                
                                
                                (4,565,693
                                )
                                
                                
                                (2,489,341
                                )Add:
      Net loss attributable to the noncontrolling interest
                                
                                
                                81,418
                                
                                
                                
                                25,792
                                
                                
                                
                                165,921
                                
                                
                                
                                25,792Net
      loss attributable to TOT Energy, Inc.
                                
                                
                                (2,557,742
                                )
                                
                                
                                (2,160,261
                                )
                                
                                
                                (4,399,773
                                )
                                
                                
                                (2,463,549
                                )Other
      comprehensive incomeForeign
      currency translation gain (loss)
                                
                                
                                91,273
                                
                                
                                
                                (15,920
                                )
                                
                                
                                307,465
                                
                                
                                
                                (15,920
                                )Comprehensive
      loss
                                
                                $
                                (2,466,469
                                )
                                
                                $
                                (2,176,181
                                )
                                
                                $
                                (4,092,308
                                )
                                
                                $
                                (2,479,469
                                )Net
      loss per share - basic and diluted
                                
                                $
                                (0.01
                                )
                                
                                $
                                (0.01
                                )
                                
                                $
                                (0.01
                                )
                                
                                $
                                (0.01
                                )Weighted
      average number of common shares outstanding - basic and
      diluted
                                
                                
                                305,370,458
                                
                                
                                
                                217,238,413
                                
                                
                                
                                303,323,673
                                
                                
                                
                                215,873,093





See
accompanying notes.


4


TOT
ENERGY, INC.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS





Six Months
                    
                    
                    Six MonthsEnded
                    
                    
                    EndedSeptember30, 2009
                    
                    
                    September30, 2008Cash
      flows from operating activities:Net
      loss
                    
                    $
                    (4,399,774
                    )
                    
                    $
                    (2,458,513
                    )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Depreciation
                    
                    
                    366,980
                    
                    
                    
                    51,755Amortization
      of software license
                    
                    
                    -
                    
                    
                    
                    1,197Decrease
      in noncontrolling interests
                    
                    
                    (165,923
                    )
                    
                    
                    (18,807
                    )Share
      Based Compensation
                    
                    
                    3,434,223
                    
                    
                    
                    1,789,600Changes
      in assets and liabilities, net of acquistions and the effect of
      consolidation of equity affiliates:Prepaid
      expenses
                    
                    
                    (9,246
                    )
                    
                    
                    1,235Costs
      in excess of billings
                    
                    
                    -
                    
                    
                    
                    (176,869
                    )Due
      to related parties
                    
                    
                    (9,393
                    )
                    
                    
                    303,542Deposits
                    
                    
                    (2,000
                    )
                    
                    
                    (6,000
                    )Inventory
      of raw materials
                    
                    
                    (2,113
                    )
                    
                    
                    (44,631
                    )Accounts
      payable
                    
                    
                    35,157
                    
                    
                    
                    7,566Accrued
      expenses
                    
                    
                    573,516
                    
                    
                    
                    399,629Total
      adjustments
                    
                    
                    4,221,201
                    
                    
                    
                    2,308,217Net
      cash provided (used) in operating activities
                    
                    
                    (178,573
                    )
                    
                    
                    (150,296
                    )Cash
      flows from investing activities:Purchase
      of equipment
                    
                    
                    -
                    
                    
                    
                    (2,010
                    )Net
      cash used in investing activities
                    
                    
                    -
                    
                    
                    
                    (2,010
                    )Cash
      flows from financing activities:Contributed
      capital from equity investors
                    
                    
                    189,466
                    
                    
                    
                    103,152Contributed
      capital for Korlea-TOT joint venture
                    
                    
                    -
                    
                    
                    
                    37,926Net
      cash provided by financing activities
                    
                    
                    189,466
                    
                    
                    
                    141,078Effect
      of exchange rate changes on cash
                    
                    
                    (14,977
                    )
                    
                    
                    18,564Net
      (decrease) increase in cash
                    
                    
                    (4,021
                    )
                    
                    
                    7,336Cash
      at beginning of period
                    
                    
                    99,971
                    
                    
                    
                    88,007Cash
      at end of period
                    
                    $
                    95,950
                    
                    
                    $
                    95,343Supplemental
      Disclosure of Cash Flow InformationCash
      paid during the year for:Interest
                    
                    $
                    -
                    
                    
                    $
                    -Income
      taxes
                    
                    $
                    -
                    
                    
                    $
                    -Non-cash
      investing and financing activities:Common
      stock issued pursuant to subscription agreement
                    
                    $
                    3,341,393
                    
                    
                    $
                    1,729,656Common
      stock issued to form joint venture TOT-SIBBNS
                    
                    $
                    -
                    
                    
                    $
                    4,375,480Common
      stock issued for services provided in formation of joint venture
      Korlea-TOT
                    
                    $
                    -
                    
                    
                    $
                    45,500





See
accompanying notes.


5


TOT
ENERGY, INC.





NOTES TO
CONDENSED FINANCIAL STATEMENTS





NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization
and Basis of Presentation





TOT
Energy, Inc. (the “Company”), formerly Splinex Technology, Inc., was organized
on February 6, 2004 under the laws of the State of Delaware as a wholly-owned
subsidiary of Splinex, LLC, a Florida limited liability company, and was the
surviving entity pursuant to a merger with Ener1 Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Ener1, Inc., a Florida corporation.
The Company initially intended to develop advanced technologies in the
three-dimensional or 3D computer graphics industry. Under an agreement effective
April 1, 2004 (the “Contribution Agreement”), Splinex, LLC contributed
substantially all of its assets, liabilities and operations to the Company. The
Company began its development stage activity on October 28, 2003
(“Inception”), the date of formation of Splinex, LLC, and ended development
stage activity on July 16, 2008 when we acquired a 75% interest in the
TOT-SIBBNS joint venture and began operations in the oil and gas service
industry.





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission for reporting on Form 10-Q. Accordingly,
certain information and footnotes required for complete financial statements are
not included herein. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation of
the results for the interim periods presented have been included. These results
have been determined on the basis of generally accepted accounting principles
and practices applied consistently with those used in the preparation of the
Company's Annual Financial Statements for the year ended March 31, 2009.
Operating results for the three and six months ended September 30, 2009 are not
necessarily indicative of the results that may be expected for any particular
quarterly period or the year ending March 31, 2010. It is recommended that the
accompanying condensed consolidated financial statements be read in conjunction
with the financial statements and notes for the year ended March 31, 2009
included in the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission.





Basis of
Consolidation





The
interim financial statements include the accounts of TOT Energy, Inc., the
accounts of our 75% joint venture, TOT- SIBBNS, a limited liability company
formed under the laws of Russia (also known as the Russian Federation) and the
accounts of our 51% joint venture, Korlea-TOT, a limited liability company
formed under the laws of the Czech Republic. All material intercompany accounts
and transactions have been eliminated in this consolidation.





Business
Activity





TOT
Energy, Inc. is working to acquire a portfolio of energy related assets. To this
end, from time to time, the Company may be engaged in various discussions to
acquire businesses or formulate joint venture or other arrangements with energy
companies located around the world. Where appropriate, acquisitions will be
financed with equity shares and this may result in substantial dilution to
existing stockholders.  Prior to 2008, the Company developed computer
software products.





TOT-SIBBNS
provides exploration services to oil exploration and production companies
located in and around Novosibirsk, Russia. TOT-SIBBNS owns and operates four
oil-drilling rigs that generate the majority of the revenues of TOT-SIBBNS.
TOT-SIBBNS uses this equipment for drilling exploratory wells for fees. In
addition, TOT-SIBBNS provides engineering services and well remediation services
on a contract fee basis.





KORLEA-TOT
is our 51% joint venture with Korlea Invest Holding AG of Switzerland (“Korlea”)
who is a provider and trader of electricity in the Czech Republic. Korlea-TOT
was expected to assist in the marketing of oil assets sourced by other
TOT-Energy companies and contacts. There has been no activity to date with this
joint venture.


6


Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
balance sheet date and the reported amounts of expenses for the period
presented. Actual results could differ from those estimates.





Cash and
Cash Equivalents





Cash and
cash equivalents include highly liquid money market investments purchased with
an original maturity of three months or less. At September 30, 2009 and March
31, 2009, the Company had no cash equivalents. The Company maintains its U.S.
Dollar-denominated cash in a bank deposit account, the balance of which, at
times, may exceed federally insured limits. Bank accounts in the United States
are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to a
limit of $250,000.  At September 30, 2009, and March 31, 2009, the
United States bank balances did not exceed the FDIC limit.  The
Company also maintains bank balances in Russia and the Czech Republic and at
September 30, 2009, the balances were $0 and $92,192 respectively.  At
March 31, 2009, bank balances in Russia and the Czech Republic were $0 and
$76,656, respectively.  The non-United States bank balances are not
insured and there is risk of loss in the event such banks should
fail.





Foreign
Currency Transactions





The
Company’s primary operations are conducted outside the United States and we use
foreign currencies to operate our consolidated foreign subsidiaries. Quarterly
income and expense items are translated into U.S. dollars using the average
interbank rate for the three-month period. Assets and liabilities are translated
into U.S. dollars using the interbank rate as of the balance sheet date. Equity
items are translated at their historical rate. The Company does not engage in
any currency hedging activities.





Revenue
Recognition





The
Company recognizes revenues from its contract on the completed contract method
due to uncertainty in counterparty performance and collections under its
terms.  Under the completed contract method, revenues and costs are
included in operations when the contract is completed.  Any losses
expected to be incurred are charged to operations in the period that such losses
are probable.





Net Loss
Per Share





Basic net
loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted-average number of common shares outstanding during
the period. Diluted net loss per common share is determined using the
weighted-average number of common shares outstanding during the period, adjusted
for the dilutive effect of common stock equivalents, consisting of shares
issuable upon exercise of common stock options or warrants. In periods when
losses are reported, the weighted-average number of common shares outstanding
excludes common stock equivalents because their inclusion would be
anti-dilutive.





The
Company did not issue any new options for the six months ended September 30,
2009, but recorded a compensation expense of $16,945 for options that vested
during the period.  During the quarter ended September 30, 2009, the
Company issued 5,395,600 shares of common stock and warrants to purchase
2,697,800 shares of common stock in exchange for $107,912 pursuant to the terms
of its subscription agreement with TGR Energy, LLC (see Notes 6 and
7).  In addition, the Company issued 110,417 shares of common stock in
lieu of compensation (see Note 6).





At
September 30, 2009, the Company had outstanding vested stock options to purchase
582,407 shares of common stock and warrants to purchase 46,098,818 shares of
common stock.  For the three and six months ended September 30, 2009,
these securities are excluded from the earnings per share calculation because
their inclusion would be anti-dilutive.





At
September 30, 2008, the Company had 582,407 stock options outstanding that
were not included in the calculation of earnings per share as they were
anti-dilutive.


7


Fair
Value of Financial Instruments





The
Company’s financial instruments consist mainly of cash deposits, short-term
payables and borrowings under related party payables. The Company believes that
the carrying amounts of third-party financial instruments approximate fair
value, due to their short-term maturities and the related party payables are
interest bearing and payable on demand.





Impairment
of Long-Lived Assets





The
Company reviews its long-lived assets for impairment whenever events or changes
indicate that the carrying amount of an asset or group of assets may not be
recoverable. No impairment losses were recorded during the three and six month
periods ended September 30, 2009 and 2008.





Subsequent
Events





For the
purposes of determining whether a post-balance sheet event should be evaluated
to determine whether it has an effect on the financial statements
for the period ending September 30, 2009, subsequent events were evaluated by
the Company as of November 16, 2009, the date on which the
unaudited consolidated financial statements at and for the period ended
September 30, 2009, were available to be issued.





NOTE 2.
GOING CONCERN CONSIDERATIONS





The
Company’s financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company had been in the
development stage until the second quarter of 2008 and has had minimal revenues
since Inception. Management recognizes that the Company must raise capital
sufficient to fund business activities until such time as it can generate
sufficient revenues and net cash flows in amounts necessary to enable it to
continue in existence. These factors include our history of net losses and that
minimal revenues have been earned to date. The Company is dependent upon TGR
Energy, LLC or Mike Zoi to fund its operations.  TGR Energy, LLC
remains obligated to invest up to $120,614 remaining from the $2,000,000
subscription agreement.  The Company’s independent auditors’ report on
its financial statements for the year ended March 31, 2009 contains an
explanatory paragraph about our ability to continue as a going concern.
Management believes that its current operating strategy, as described herein,
provides the opportunity for the Company to continue as a going concern;
however, there is no assurance this will occur.





NOTE 3.
SEGMENT INFORMATION





The
Company’s sole reportable business segment is the oil and gas service sector.
The Company’s accounting policies for segments are the same as those described
in the summary of significant accounting policies.





NOTE 4.
CONTRACT ACCOUNTING





The
Company accounts for its long-term contracts using the completed contract method
of revenue recognition due to increasing uncertainties relating to its sole
customer’s ability to continue to finance the existing contract to
completion.  The completed contract method recognizes income only when
the contract is substantially complete.  Project costs and related
revenues are accumulated and are reflected in operations only when an estimated
loss is probable.  The contract will be deemed complete when our
customer agrees that each milestone contained in the contract has been
met.





Billed
contract receivables consist of amounts due under our sole contract, which has
been suspended due to lack of financing by our customer.   We
have fully reserved for uncollected billings and for costs in excess of billings
in the amount of $429,486.   There are no revenues or costs charged to
operations for the periods ended September 30, 2009 or September 30, 2008 under
the completed contract method. For more information, see Note 1
–  “Summary of Significant Accounting Policies – Revenue Recognition”
above.





NOTE 5.
ACCRUED EXPENSES





Accrued
expenses represent expenses that are owed at the end of the period and either
have not been billed by the provider or are expenses that are estimated for
services provided. At September 30, 2009 and March 31, 2009, accrued expenses
consisted of the following:




September 30, 2009
                                                    
                                                    
                                                    March 31, 2009Accrued
      accounting fees
                                                    
                                                    
                                                    15,218
                                                    
                                                    
                                                    
                                                    29,968Accrued
      legal fees
                                                    
                                                    
                                                    8,635
                                                    
                                                    
                                                    
                                                    10,000Accrued
      Taxes
                                                    
                                                    
                                                    287,242
                                                    
                                                    
                                                    
                                                    104,535Accrued
      payroll
                                                    
                                                    
                                                    719,020
                                                    
                                                    
                                                    
                                                    509,090Other
      accrued expenses
                                                    
                                                    
                                                    442,570
                                                    
                                                    
                                                    
                                                    200,150$
                                                    1,472,685
                                                    
                                                    
                                                    $
                                                    853,743




8


NOTE 6.
STOCKHOLDERS’ EQUITY





The
Company is authorized to issue 800,000,000 shares of common stock, par value of
$0.001 per share. Each holder of common stock is entitled to one vote for each
share held. The Company is authorized to issue 100,000,000 shares of preferred
stock, par value $0.001 per share, which may be divided into series with the
designations, powers, preferences, and relative rights and any qualifications,
limitations or restrictions as determined by the Company’s board of
directors.





Under an
Exchange Agreement dated December 18, 2007, the Company agreed to issue
113,500,000 newly issued shares of common stock of the Company to TGR Energy,
LLC, of which 8,500,000 shares were issued to Bzinfin, S.A., a British Virgin
Islands limited corporation that is indirectly owned by an affiliate of the
Ener1 Group, and 2,125,000 shares were issued to Alexander Malovik, a principal
of Splinex, LLC, in exchange for the Bzinfin and Ener1 Group notes totaling
$3,688,132.  TGR Energy, LLC owned 98,157,334 shares of common stock
of the Company as of December 17, 2007, and after the completion of the Exchange
Agreement transactions owned an aggregate of 201,032,334 shares of common stock
of the Company as of December 18, 2007. The Company had a total of 100,757,773
shares of common stock outstanding at December 17, 2007 and 214,507,773 shares
of common stock outstanding at December 18, 2007.





On August
7, 2008, the Board of Directors approved a Subscription Agreement dated August
7, 2008 (the “ Subscription Agreement”) with TGR Energy, LLC (“TGR”), wherein
TGR committed to invest up to $2,000,000 in exchange for up to 100,000,000
shares of the Company's common stock for $0.02 per share. In addition, the
Company granted TGR warrants to purchase up to 50,000,000 shares of common stock
for $0.05 per share. These warrants may be exercised within five years from the
date of grant. The shares and warrants are issuable under the Subscription
Agreement upon the funding from time to time by TGR. The valuation date to
determine the appropriate compensation charge is the last day of the quarter
then ended.





For the
quarter and year to date ended September 30, 2009, the Company recorded
compensation expense of $0.10 per share or $8,519 and  $16,945,
respectively for options of Mr. New issued on August 13, 2008 that vested during
the quarter and the six month period ended September 30, 2009.





Up until
May 15, 2009, Mr. New’s base salary was $140,000 with a $30,000 bonus payable
quarterly for meeting agreed upon objectives.  On May 15, 2009, Mr.
New’s base salary was reduced from $140,000 to $91,000 and his bonus was reduced
from $30,000 to $19,500 annually. To partially offset the reduction in salary,
the Company provided Mr. New with 25,000 shares of fully vested common stock in
lieu of his March 31, 2009 cash bonus and 200,000 shares of common stock which
vest monthly from April 1, 2009 to September 30, 2009.  A compensation
charge of $12,500 was recorded for the quarter ended June 30, 2009 and a
compensation charge of $10,000 was recorded for the quarter ended September 30,
2009, which reflects the market value per share ($0.10) on the first trading day
after the date of grant.





Other
employees (other than officers and directors) receiving salary reductions were
granted a total of 50,000 shares of common stock vesting monthly between April
1, 2009 and September 30, 2009.  The Company recorded a compensation
charge of $2,347 for the quarter ended June 30, 2009 and a compensation expense
of $1,042 for the quarter ended September 30, 2009, to reflect the market value
of stock provided in lieu of cash compensation.  Both of these charges
were calculated using the price per share of common stock ($0.10) on the first
trading date after the date of grant.





For the
quarter ended June 30, 2009, the Company accrued an expense of $64,285 relating
to stock expected to be issued in exchange for services to be provided by
Olympus Securities.  The Company is currently negotiating a revised
contract for such services.  Given the unstable equity markets last
year, the Company and Olympus are working together to find a solution that
provides value for both parties going forward.  There were no charges
for this agreement for the three months ended September 30, 2009.





For the
fiscal year ended March 31, 2009, TGR was issued an aggregate of 82,725,335
shares of common stock of the Company and fully vested warrants to purchase
41,362,168 shares of common stock of the Company at an exercise price of $0.05
per share pursuant to the terms of the Subscription Agreement.  These
issuances were in exchange for financings under the Subscription Agreement in
the aggregate amount of $1,654,507 of which $1,017,097 was cash and $637,410
related to refinancing of previously outstanding notes payable.  A
compensation charge of $8,812,774 was recorded for the fiscal year ended March
31, 2009.  This amount is calculated as the difference between the
market price of our common stock at the end of each quarter in which shares were
issued and the subscription price of the common shares ($0.02) multiplied by the
number of shares issued, plus the Black-Scholes valuation of the warrants issued
as calculated at the end of each quarter.





For the
quarter ended June 30, 2009, TGR was issued 4,077,700 shares of common stock of
the Company and fully vested warrants to purchase 2,038,850 shares of common
stock of the Company for $0.05 per share in exchange for funding of $81,554
provided during the quarter under the terms of the Subscription Agreement. A
compensation charge of $1,264,087 was recorded for the quarter ended June 30,
2009 as an officer of the Company is also a principal of TGR and the securities
issued were below market value as of the issue date.





For the
quarter ended September 30, 2009, TGR was issued 5,395,600 shares of common
stock of the Company and fully vested warrants to purchase 2,697,800 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$107,912 provided during the quarter under the terms of the Subscription
Agreement. A compensation charge of $2,077,306 was recorded for the quarter
ended September 30, 2009 as an officer of the Company is also a principal of TGR
and the securities issued were below market value as of the issue
date.





The
Company entered into a Sponsorship Agreement with American Speed Factory dated
April 22, 2009, whereby the Company receives certain promotional services and
sponsorship rights to display the Company’s logo in connection with the 2009
Ferrari Challenge racing season in exchange for the issuance of 500,000 shares
of restricted stock of the Company.  This arrangement is valued at
$50,000, which amount was recorded as an advertising expense for the quarter
ended June 30, 2009.


9


At
September 30, 2009, the Company had options to purchase 1,200,000 shares of
common stock outstanding under its stock option plan, of which options to
purchase 582,407 shares of common stock are vested, with an exercise price of
$0.25 per share and with a remaining weighted average contractual term of 5.36
years. The Company also had warrants to purchase 46,098,818 shares of common
stock outstanding at September 30, 2009 with a strike price of $0.05 per share
and a remaining average contractual term of 4.31 years.





NOTE 7.
RELATED PARTY TRANSACTIONS





On August
7, 2008, the Company and TGR, which holds 95% of the Company’s outstanding
common stock, entered into the Subscription Agreement described above pursuant
to which TGR has agreed to provide funding of up to $2,000,000 (the “Investment
Amount”) in exchange for up to 100,000,000 shares of the Company’s common stock
and warrants to purchase up to 50,000,000 shares of the Company’s common stock
at an exercise price of $0.05 per share. Pursuant to the Subscription Agreement,
TGR will fund the Investment Amount as required in the Company’s operational
budget. TGR’s obligation to fund the Investment Amount will be reduced by any
future third party funding or investments in the Company on terms no less
favorable than those contained in the Subscription Agreement.





See Note
6 for Equity securities issued to TGR Energy, LLC under the terms of the
subscription agreement.




NOTE 8:
RECLASSIFICATION





Certain
reclassifications have been made to the March 31, 2009 financial statements to
conform to the September 30, 2009 presentation.  The following
reclassifications we made to the March 31, 2009 balance sheet and the change had
no effect on the statement of operations or cash flows.




March 31, 2009
                    
                    
                    June 30, 2009Shareholders’
      equity (Deficit)Non
      controlling InterestAs
      Reported
                    
                    $
                    88,614
                    
                    
                    $
                    77,442Adjustment
                    
                    
                    (226,827
                    )
                    
                    
                    (289,483
                    )As
      Adjusted (Pro forma)
                    
                    
                    (138,213
                    )
                    
                    
                    (212,041
                    )
 Accumulated
      DeficitAs
      reported
                      
                      
                      (16,949,780
                      )
                      
                      
                      (18,876,314
                      )Adjustments
                      
                      
                      226,827
                      
                      
                      
                      289,483As
      adjusted (pro forma)
                      
                      
                      (16,722,953
                      )
                      
                      
                      (18,586,831
                      )Total
      Shareholders’ equity (Deficit)As
      reported
                      
                      
                      2,140,623
                      
                      
                      
                      1,858,552Adjustments
                      
                      
                      -
                      
                      
                      
                      -As
      adjusted (pro forma)
                      
                      
                      2,140,623
                      
                      
                      
                      1,858,552


10


Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.





This Quarterly Report on Form 10-Q contains forward
-looking statements. These statements relate to our expectations, hopes,
beliefs, intentions or strategies regarding future events or future financial
performance.  Any statements contained in this report that are not
statements of historical fact may be deemed forward-looking statements. In some
cases, forward-looking statements can be identified by terminology such as
“may,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,”
“estimate,” “predict,” “potential” or “continue,” or the negative of such terms
or other comparable terminology. Forward-looking statements include but are not
limited to statements regarding: our future business plans; future sales of our
products and services; introduction of new products and services; expected
hiring levels; marketing plans; increases of selling, general and administrative
costs; financing requirements and capital raising plans; successful integration
and development of acquired businesses; regulatory and economic factors
affecting the oil and gas business and other factors that may impact our
acquisition and development strategy, some of which are beyond our control and
difficult to predict.  These statements are only predictions and are
subject to a number of assumptions, risks and uncertainties that could cause
actual results to differ materially from those expressed or implied in the
forward-looking statements. The following important factors, in addition to
those discussed in our other filings with the Securities and Exchange Commission
(the “Commission”) from time to time, and other unforeseen events or
circumstances, could affect our future results and could cause those results or
other outcomes to differ materially from those expressed or implied in our
forward-looking statements: general economic conditions; competition; weather;
our ability to raise capital; our ability to control costs; changes within our
industries; new and upgraded products and services by us or our competitors;
employee retention; sovereign risk; legal and regulatory issues; changes in
accounting policies or practices; currency translation and exchange risks; and
the market price of oil.





All forward-looking
statements are based on
information available to us on the date of this filing, and we assume no obligation to update such statements, although we will
continue to comply with our obligations under the securities
laws.





The following discussion should be
read in conjunction with our audited financial statements and
notes contained in our Annual Report on Form 10-K for the fiscal year ended
March 31, 2009 filed with the Commission and the consolidated interim financial statements and related
notes included in this Report.





General





We are
working to build a diversified portfolio of energy assets.   To
this end, from time to time, we may be engaged in various discussions to acquire
businesses or formulate joint venture or other arrangements with energy
companies located around the world. Our policy is not to disclose discussions or
potential transactions until definitive agreements have been executed. Where
appropriate, acquisitions will be financed with equity shares and this may
result in substantial dilution to existing stockholders.





On July
16, 2008, we entered into a Joint Venture Agreement (the “JV
Agreement”) with Evgeny Bogorad (“Bogorad”), owner of Sibburnefteservis, Ltd. of
Novosibirsk, Russia, an oil service company (“SIBBNS”). Pursuant to the JV
Agreement, Bogorad has contributed certain of SIBBNS assets and personnel to a
joint venture company named TOT-SIBBNS, Ltd., a Russian corporation
(“TOT-SIBBNS”). An independent appraisal company has appraised the contributed
assets at $6,221,881.





At the
closing on July 16, 2008, we issued to Bogorad 3,000,000 shares of our common
stock in exchange for a 75% interest in TOT-SIBBNS. We are obligated to issue to
Bogorad 2,000,000 additional shares of common stock upon TOT-SIBBNS obtaining
$10,000,000 in gross revenue during the three-year period following the closing.
If TOT-SIBBNS achieves this gross revenue target and Bogorad continues to hold
the shares issued pursuant to the JV Agreement on the third anniversary of the
closing and the stock price is less than $1.00 per share, then we, in our sole
discretion, must either make an additional payment in cash or additional shares
of stock to Bogorad in an amount equal to the difference in the value per share
and $1.00 multiplied by the total number of shares held by Bogorad, or, if we
decline to make such payment, Bogorad may require us to return our interest in
TOT-SIBBNS in exchange for a payment to us of the fair market value of any
assets acquired directly by TOT-SIBBNS (other than the assets initially
contributed to the Joint Venture by Bogorad pursuant to the JV Agreement) and
75% of the retained earnings, accounts receivable and cash of TOT-SIBBNS.
Bogorad will act as the manager of TOT-SIBBNS. We have the ability to appoint a
majority of the Board of Directors of TOT-SIBBNS.





TOT-SIBBNS
provides exploration services to oil exploration and production companies
located in and around Novosibirsk, Russia. TOT-SIBBNS owns and operates four
oil-drilling rigs that have generated the majority of the revenues of
TOT-SIBBNS. TOT-SIBBNS uses this equipment for drilling exploratory wells for
fees. In addition, TOT-SIBBNS provides engineering services and well remediation
services on a contract fee basis.





On April
2, 2009, TOT-SIBBNS, our joint venture servicing the oil and gas industry in
Russia, determined there would be no further oil drilling operations under its
existing contract for the prior drilling season. TOT-SIBBNS has furloughed most
employees (114 field and professional positions) until further notice. It is
uncertain when or if drilling services under the existing contract will
recommence. The contract for drilling services was temporarily suspended in
January 2009 due to the inability of the customer to obtain necessary
funding.  During the quarter ended September 30, 2009, TOT-SIBBNS
incurred additional expenses to rig, maintain and secure equipment on the job
site in order to ensure our customer was granted an extension of their
license.  TOT-SIBBNS incurred total expenses of $104,475 relating to
this contract for the quarter ended September 30, 2009 and $156,378 for the six
months ended September 30, 2009.





11





As
previously disclosed, the oil production business in Russia is seasonal and
cyclical and was experiencing a down cycle in large part due to the lower prices
relating to the selling price for a barrel of crude oil. While we are hopeful
that drilling service demand will increase as prices currently remain stable in
the $80 per barrel range (or higher) and/or the Russian government adjusts
drilling license regulations and fee structures, we can provide no assurance
that this will be the case. We our currently marketing drilling operations for
the upcoming drilling season (November – April) and we continue to advance
rigging on our one, non-paying contract in order to allow our customer to retain
their drilling license (see Note 4) and continue on the project.





KORLEA-TOT
is our 51% joint venture with Korlea Invest Holding AG of Switzerland (“Korlea”)
who is a provider and trader of energy assets in the Czech Republic. The new
joint venture, Korlea-TOT, established as of July 17, 2008, is expected to
assist in the marketing of oil assets sourced by other TOT-Energy companies and
contacts.  There has been no activity to date with this joint
venture.





Short
term financing is provided by TGR Energy, LLC (“TGR”) as we require additional
working capital, pursuant to a Subscription Agreement dated August 7, 2008 (the
“Subscription Agreement”). TGR has agreed to provide up to $2,000,000 (the
“Investment Amount”) in exchange for up to 100,000,000 shares of common stock
and warrants to purchase up to 50,000,000 shares of common stock at an exercise
price of $0.05 per share. Pursuant to the Subscription Agreement, TGR will fund
the Investment Amount as required in our operational budget. TGR’s obligation to
fund the Investment Amount will be reduced by any future third party funding or
investment on terms no less favorable than those contained in the Subscription
Agreement.





For the
fiscal year ended March 31, 2009, TGR was issued an aggregate of 82,725,335
shares of common stock of the Company and fully vested warrants to purchase
41,362,168 shares of common stock of the Company at an exercise price of $0.05
per share pursuant to the terms of the Subscription Agreement.  These
issuances were in exchange for financings under the Subscription Agreement in
the aggregate amount of $1,654,507 of which $1,017,097 was cash and $637,410
related to refinancing of previously outstanding notes payable.  A
compensation charge of $8,812,774 was recorded for the fiscal year ended March
31, 2009.  This amount is calculated as the difference between the
market price of our common stock at the end of each quarter in which shares were
issued and the subscription price of the common shares ($0.02) multiplied by the
number of shares issued, plus the Black-Scholes valuation of the warrants issued
as calculated at the end of each quarter.





For the
quarter ended June 30, 2009, TGR was issued 4,077,700 shares of common stock of
the Company and fully vested warrants to purchase 2,038,850 shares of common
stock of the Company for $0.05 per share in exchange for funding of $81,554
provided during the quarter under the terms of the Subscription Agreement. A
compensation charge of $1,264,087 was recorded for the quarter ended June 30,
2009 as an officer of the Company is also a principal of TGR and the securities
issued were below market value as of the issue date.





For the
quarter ended September 30, 2009, TGR was issued 5,395,600 shares of common
stock of the Company and fully vested warrants to purchase 2,697,800 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$107,912 provided during the quarter under the terms of the Subscription
Agreement. A compensation charge of $2,077,306 was recorded for the quarter
ended September 30, 2009 as an officer of the Company is also a principal of TGR
and the securities issued were below market value as of the issue
date.





The
Company entered into a Sponsorship Agreement with American Speed Factory dated
April 22, 2009, whereby the Company would receive certain promotional services
and sponsorship rights to display the Company’s logo in connection with the 2009
Ferrari Challenge racing season in exchange for the issuance of 500,000 shares
of restricted stock of the Company.  This arrangement is valued at
$50,000, which amount was recorded as an advertising expense for the quarter
ended June 30, 2009.





Up until
May 15, 2009, Mr. New’s base salary was $140,000 with a $30,000 bonus payable
quarterly for meeting agreed upon objectives.  On May 15, 2009, Mr.
New’s base salary was reduced from $140,000 to 91,000 and his bonus was reduced
from $30,000 to $19,500 annually. To partially offset the reduction in salary,
the Company provided Mr. New with 25,000 shares of fully vested common stock in
lieu of his March 31, 2009 cash bonus and 200,000 shares of common stock which
vest monthly from April 1, 2009 to September 30, 2009.  A compensation
charge of $12,500 was recorded for the quarter ended June 30, 2009 and a
compensation charge of $10,000 was recorded for the quarter ended September 30,
2009, which reflects the market value per share ($0.10) on the first trading day
after the date of grant.





Other
employees (other than officers and directors) receiving salary reductions were
granted a total of 50,000 shares of common stock vesting monthly between April
1, 2009 and September 30, 2009.  The Company recorded a compensation
expense of $2,347 for the quarter ended June 30, 2009 and a compensation expense
of  $1,042 for the quarter ended September 30, 2009, to reflect the
market value of stock provided in lieu of cash compensation.  Both of
these charges were calculated using the price per share of common stock ($0.10)
on the first trading date after the date of grant.





For the
quarter ended June 30, 2009, the Company accrued an expense of $64,285 relating
to stock expected to be issued in exchange for services to be provided by
Olympus Securities.  The Company is currently negotiating a revised
contract for such services.  Given the unstable equity markets over
the last year, the Company and Olympus are working together to find a solution
that provides value for both parties.  There were no charges relating
to this agreement for the quarter ended September 30, 2009.




12





Several
factors raise significant doubt as to our ability to continue operating as a
going concern. These factors include our history of net losses and that we have
recently commenced operations and, until the second quarter of 2008, have earned
minimal revenues. We are dependent upon TGR Energy, LLC or Mike Zoi to fund our
operations. Our independent auditors’ report on our financial statements for the
year ended March 31, 2009 contains an explanatory paragraph about our
ability to continue as a going concern. Management believes that our current
operating strategy, as described in the preceding paragraphs, provides the
opportunity for us to continue as a going concern; however, there is no
assurance this will occur.




Results
of Operations for the Three-Month Periods Ended September 30, 2009 and
2008





We
reported a net loss of  $2,557,742 or $(0.01) per share for the three
months ended September 30, 2009, compared to a net loss of $2,160,261 or $(0.01)
per share for the quarter ended September 30, 2008. Weighted average shares
outstanding were 305,370,458 and 217,238,413 for the quarters ended September
30, 2009 and 2008, respectively.





The net
loss for the three month period ended September 30, 2009 was negatively impacted
by the non-cash compensation expense of $2,077,306 related to shares and
warrants issued pursuant to the Subscription Agreement with TGR as compared with
a non-cash compensation expense of $1,729,656 for the three months ended
September 30, 2008.





Additionally
the Company recorded a non-cash compensation charge of $19,561 for shares issued
and options vested during the three months ended September 30, 2009 as compared
with a non-cash compensation charge of $14,444 during the three month period
ended September 30, 2008.





For the
quarter ended September 30, 2008, there were no operations until mid-July when
we purchased a 75% interest in TOT-SIBBNS. TOT-SIBBNS
accounts for projects using the completed contract method where all costs are
capitalized on the balance sheet as Project Costs.  Contract billings
are recorded as a reduction to Project Costs and revenue will only be recognized
once amounts collected exceed costs incurred.  We reported
no revenue from contracts during the three months ended September 30, 2009
and we had no revenue for the three months ended September 30, 2008.
Additionally, pursuant to the completed contract method, costs incurred for our
existing oil drilling contract were $104,475 for the quarter ended September 30,
2009 and related primarily to the rigging, on-going maintenance and security, of
equipment, which is reflected in general and administrative costs.


13





General
and administrative expenses for the three months ended September 30, 2009, were
$2,639,159 of which $325,572 were attributable to TOT-SIBBNS and $2,313,537 were
attributable to TOT Energy primarily relating to non-cash compensation
expense.  The following table details the major expense items by
category for the Company for the three months ended September 30, 2009 compared
to the three months ended September 30, 2008:





September30,2009
                          
                          
                          September30,2008
                          
                          
                          VariancesCompensation
      expense for TGR Energy, LLC Subscription Agreement
                          
                          $
                          2,077,306
                          
                          
                          $
                          1,729,656
                          
                          
                          $
                          347,650Consulting
      fees
                          
                          
                          4,893
                          
                          
                          
                          55,756
                          
                          
                          
                          (50,863
                          )Compensation
      expense recorded for options issued
                          
                          
                          8,519
                          
                          
                          
                          14,444
                          
                          
                          
                          (5,925
                          )TOT
      SIBBNS General and Administrative
                          
                          
                          325,572
                          
                          
                          
                          102,859
                          
                          
                          
                          222,713Salaries
      and Benefits
                          
                          
                          148,675
                          
                          
                          
                          159,855
                          
                          
                          
                          (11,180
                          )Professional
      Fees
                          
                          
                          23,606
                          
                          
                          
                          41,479
                          
                          
                          
                          (17,873
                          )Other
                          
                          
                          50,588
                          
                          
                          
                          81,695
                          
                          
                          
                          (31,107
                          )TOTAL
                          
                          $
                          2,639,159
                          
                          
                          $
                          2,185,744
                          
                          
                          $
                          453,415





During
the three months ended September 30, 2009, we obtained funding of an aggregate
of $107,912 under the Subscription Agreement with TGR and recognized a non-cash
compensation expense of $2,077,306. This charge is the result of an intrinsic
value calculation that measures the difference between fair value on date of
issuance of the shares and the purchase price per share under the Subscription
Agreement, which amounted to a compensation expense of $1,348,900. Additionally,
the warrants to purchase 2,697,800 shares of common stock issued in connection
with these fundings resulted in a corresponding compensation expense of $728,406
based on a Black-Scholes valuation model. The total compensation charge for the
three month period ended September 30, 2008 was $1,729,656.





Professional
fees were $17,873 lower for the quarter ended September 30, 2009 as compared
with the same period in 2008. For the three months ended September 30, 2009,
consulting expenses for U.S. operations were $50,863 lower and payroll was
$11,180 lower as compared with the three months ended September 30,
2008.





Other
expenses of $50,558 for the three months ended September 30, 2009 were
considerably lower than other expenses of $81,695 for the three months ended
September 30, 2008 as a result of lower state tax accrual and lower rent and
filing fee expenses.





TOT-SIBBNS
general and administrative expenses were $222,713 higher during the three months
ended September 30, 2009 as compared with the same period in 2008. For the
quarter ended September 30, 2009, all expenses and contract project costs are
charged to operations as compared to the quarter ended September 30, 2008 where
TOT-SIBBNS capitalized $148,928 in project costs. Additionally, general and
administrative costs were favorably impacted by the difference in the number of
days included in each quarterly period. The 2008 quarterly period was 75 days
due to the establishment of the joint venture in July 2008 as compared with a
full 90 day quarterly period in 2009.





Other
expense was $0 and $309 for the three months ended September 30, 2009 and 2008
respectively.





The
non-controlling interest relating to the TOT-SIBBNS and Korlea-TOT joint
ventures were $81,393 and $25, respectively, for the three months ended
September 30, 2009 as compared with $25,792 and $0, respectively, for the three
months ended September 30, 2008. The joint venture non-controlling interest
reflects the joint venture partner’s ownership of each joint
venture.





Results
of Operations for the Six-Month Periods Ended September 30, 2009 and
2008





We
reported a net loss of $4,339,773 or $(0.01) per share for the six months ended
September 30, 2009, compared to a net loss of $2,463,549 or $(0.01) per share
for the six months ended September 30, 2008. Weighted average shares outstanding
were 303,323,673 and 215,873,093 for the quarters ended September 30, 2009 and
2008, respectively.





During
the six months ended September 30, 2009, we obtained funding of an aggregate of
$189,466 under the Subscription Agreement with TGR and recognized a non-cash
compensation expense of $3,341,393. This charge is the result of an intrinsic
value calculation that measures the difference between fair value on date of
issuance of the shares and the purchase price per share under the Subscription
Agreement, which amounted to a compensation expense of $2,164,440. Additionally,
the warrants to purchase 4,736,650 shares of common stock issued in connection
with these fundings resulted in a corresponding compensation expense of
$1,176,953 based on a Black-Scholes valuation model. For the six months ended
September 30, 2008, we incurred a total compensation charge of $1,729,656 in
connection with fundings under the Subscription Agreement.


14





TOT-SIBBNS
general and administrative expenses were $663,472 for the six months ended
September 30, 2009 as compared with $102,859 reported for the six months ended
September 30, 2008. The $102,859 represents only 75 days of general and
administrative expenses as we formed the TOT-SIBBNS joint venture on July 16,
2008. The $663,472 represents a full six months of operating
expenses.





Investor
relations expense was $83,535 for the six months ended September 30, 2009 and
$36,268 for the same period in 2008. The $47,267 in additional expense was a
result of $64,285 accrued for expected stock based investor relations
compensation (see Note 6). Rent expense decreased due to relocating U.S.
operations to cheaper office space. Additionally, consulting fees paid in 2008
of $45,500 relating to the formation of Korlea-TOT joint venture were not
reproduced in 2009. Professional fees decreased by $75,914 in 2009 when compared
to the six month period ended September 30, 2008 as a result of lower
consulting, legal and accounting fees for the six months ended September 30,
2009.





The
following table summarizes general and administrative expenses for the six
months ended September 30, 2009 and 2008:





September 30, 2009
                          
                          
                          September 30, 2008
                          
                          
                          VariancesCompensation
      expense for TGR Energy, LLC Subscription Agreement
                          
                          $
                          3,341,393
                          
                          
                          $
                          1,729,656
                          
                          
                          $
                          1,611,737TOT-SIBBNS
      general and administrative (Russia)
                          
                          
                          663,472
                          
                          
                          
                          102,859
                          
                          
                          
                          560,613Investor
      relations
                          
                          
                          83,535
                          
                          
                          
                          36,268
                          
                          
                          
                          47,267All
      other general and administrative expenses for TOT USA
                          
                          
                          74,412
                          
                          
                          
                          53,646
                          
                          
                          
                          20,766Salaries
      and benefits (USA)
                          
                          
                          303,130
                          
                          
                          
                          289,888
                          
                          
                          
                          13,242Compensation
      expense recorded for options issued
                          
                          
                          16,945
                          
                          
                          
                          14,444
                          
                          
                          
                          2,501Insurance
      - Directors and Officers
                          
                          
                          7,556
                          
                          
                          
                          7,792
                          
                          
                          
                          (236
                          )Costs
      associated with public filings
                          
                          
                          5,191
                          
                          
                          
                          11,905
                          
                          
                          
                          (6,714
                          )Travel
                          
                          
                          21,256
                          
                          
                          
                          42,019
                          
                          
                          
                          (20,763
                          )Rent
                          
                          
                          4,000
                          
                          
                          
                          34,393
                          
                          
                          
                          (30,393
                          )Consulting
      fees (non-cash) paid in stock re Korlea-TOT formation
                          
                          
                          -
                          
                          
                          
                          45,500
                          
                          
                          
                          (45,500
                          )Professional
      Fees (accounting, legal, consulting and other)
                          
                          
                          44,748
                          
                          
                          
                          120,662
                          
                          
                          
                          (75,914
                          )Total
      General and Administrative Expenses
                          
                          $
                          4,565,638
                          
                          
                          $
                          2,489,032
                          
                          
                          $
                          2,076,606





Liquidity and capital
resources





At
September 30, 2009, we had an accumulated deficit of $21,136,174 and cash of
$95,950. We are dependent upon receiving funds from our controlling stockholder,
TGR Energy, LLC, which is controlled by our president, Mike Zoi. Pursuant to the
Subscription Agreement, TGR is obligated to invest up to $2,000,000 to fund
short term working capital requirements in exchange for up to 100,000,000 shares
of our common stock and warrants to purchase up to 50,000,000 shares of common
stock with an exercise price of $0.05. The shares and warrants will be issued
quarterly and we will record an appropriate compensation expense as necessary
based on the fair value of the securities on the last day of each fiscal quarter
(the date of issuance). At September 30, 2009, the remaining investment
obligation is $120,614.





For the
fiscal year ended March 31, 2009, TGR was issued an aggregate of 82,725,335
shares of common stock of the Company and fully vested warrants to purchase
41,362,168 shares of common stock of the Company at an exercise price of $0.05
per share pursuant to the terms of the Subscription Agreement. These issuances
were in exchange for financings under the Subscription Agreement in the
aggregate amount of $1,654,507 of which $1,017,097 was cash and $637,410 related
to refinancing of previously outstanding notes payable. A compensation charge of
$8,812,774 was recorded for the fiscal year ended March 31, 2009. This amount is
calculated as the difference between the market price of our common stock at the
end of each quarter in which shares were issued and the subscription price of
the common shares ($0.02) multiplied by the number of shares issued, plus the
Black-Scholes valuation of the warrants issued as calculated at the end of each
quarter.





For the
quarter ended June 30, 2009, TGR was issued 4,077,700 shares of common stock of
the Company and fully vested warrants to purchase 2,038,850 shares of common
stock of the Company for $0.05 per share in exchange for funding of $81,554
provided during the quarter under the terms of the Subscription Agreement. A
compensation charge of $1,264,087was recorded for the quarter ended June 30,
2009 as an officer of the Company is also a principal of TGR and the securities
issued were below market value. This amount is calculated as the difference
between the market price of our common stock at the end of each quarter in which
shares were issued and the subscription price of the common shares ($0.02)
multiplied by the number of shares issued, plus the Black-Scholes valuation of
the warrants issued as calculated at the end of each quarter.





For the
quarter ended September 30, 2009, TGR was issued 5,395,600 shares of common
stock of the Company and fully vested warrants to purchase 2,697,800 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$107,912 provided during the quarter under the terms of the Subscription
Agreement. A compensation charge of $2,077,306 was recorded for the quarter
ended September 30, 2009 as an officer of the Company is also a principal of TGR
and the securities issued were below market value as of the issue date. This
amount is calculated as the difference between the market price of our common
stock at the end of each quarter in which shares were issued and the
subscription price of the common shares ($0.02) multiplied by the number of
shares issued, plus the Black-Scholes valuation of the warrants issued as
calculated at the end of each quarter.


15





Off-balance
sheet arrangements





At
September 30, 2009, we did not have any off-balance sheet arrangements as
defined in item 303(a)(4) of Regulation S-K.





Recently
Issued Accounting Pronouncements




In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
TM
and the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Statement No. 162.” SFAS No. 168 sets forth the FASB Accounting Standards
Codification (the “Codification”) as the single source of authoritative
nongovernmental GAAP. The Codification was launched on July 1, 2009 and is the
official source of authoritative, nongovernmental U.S. GAAP, superseding
existing FASB, American Institute of Certified Public Accountants (AICPA), EITF,
and related literature. After the Codification was launched on July 1, 2009,
only one level of authoritative U.S. GAAP exists, other than guidance issued by
the Securities and Exchange Commission. All other accounting literature excluded
from the Codification will be considered non-authoritative. The Codification is
effective for interim and annual periods ending after September 15, 2009 and was
adopted by the Company for the three month period ended September 30, 2009. The
adoption of this statement did not have a material impact on the Company’s
consolidated financial statements.





In May
2008, the FASB issued Accounting Standards Codification (“ASC”) 855, Subsequent
Events (formerly SFAS No. 165), which establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued.
Adoption of this Statement did not result in a change in current
practice.





In
September 2006, the FASB issued FASB Accounting Standards Codification 820, Fair
Value Measurements and Disclosureswhich defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. The
Company adopted FASB Accounting Standards Codification 820, Fair Value
Measurements and Disclosures(formerly SFAS 157) effective April 1, 2008 for all financial assets and
liabilities and any other assets and liabilities that are recognized or
disclosed at fair value on a recurring basis (see “NOTE 10 — Fair Value
Measurement”). The adoption of this statement on April 1, 2008, did not have a
significant impact on the Company’s consolidated financial position, results of
operations or cash flows.





FASB ASC
820 provides a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair value hierarchy
under ASC 820 are described below:





Level
      1
            Inputs
      to the valuation methodology are unadjusted quoted prices for identical
      assets or liabilities in active markets that the Plan has the ability to
      access.





Level
      2
            Inputs
      to the valuation methodology
include:


Quoted
prices for similar assets or liabilities in active markets;


Quoted
prices for identical or similar assets or liabilities in inactive
markets;


Inputs
other than quoted prices that are observable for the asset or
liability;


Inputs
that are derived principally from or corroborated by observable market data by
correlation or other means.





If the
asset or liability has a specified (contractual) term, the Level 2 input must be
observable for substantially the full term of the asset or
liability.





Level
      3
            Inputs
      to the valuation methodology are unobservable and significant to the fair
      value measurement.





The
asset’s or liability’s fair value measurement level within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. Valuation techniques used need to maximize the use of
observable inputs and minimize the use of unobservable inputs.





Following
is a description of the valuation methodologies used for assets measured at fair
value. There have been no changes in the methodologies used at September 30,
2009 and 2008.





Stock Options and Warrants:Options and warrants are Level 2 in the valuation framework. Options and
warrants are granted to employees, vendors and others for incentive purposes or
in exchange for services. The Company values options and warrants using a
Black-Scholes valuation model that considers the Company’s stock volatility,
stock price, dividends, option/warrant term, option/warrant exercise price and a
bond equivalent yield. Using the inputs above, an option or warrant value is
determined using the Black-Scholes formula and this value is multiplied by the
number of securities provided in order to determine a fair value charge for the
particular options or warrants under valuation.


16





Common Stock:Valued at the
quoted closing price reported on the over the counter bulletin board (OTCBB)
exchange as of the first day after the stock is granted that the stock trades
less any compensation received for common stock. Common stock is treated as
Level 1 in the valuation framework above.





The
methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values.
Furthermore, while the Company believes its valuation methods are appropriate
and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting
date.





Item
4. Controls and Procedures.





Our
disclosure controls and procedures are designed to provide reasonable assurance
that information required to be disclosed in our reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate, to allow for timely decisions regarding required disclosure . In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.





As of
September 30, 2009, we continue to develop our core activities and focus our
resources on the acquisition of assets in the energy sector. Our disclosure
controls and procedures are currently inadequate because there are a limited
number of personnel employed and we cannot have an adequate segregation of
duties. Management works to mitigate this risk by being personally involved in
all substantive transactions. We are in the process of reviewing and, where
necessary, modifying controls and procedures throughout the Company as resources
permit. We expect this process to continue through the fiscal 2010 and
2011.




During
the quarter ended September 30, 2009, there were no changes in internal controls
over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.


17





PART
II — OTHER INFORMATION





Item
1. Legal proceedings





We are
not currently a party to any such proceedings the outcome of which would have a
material effect on our financial condition or results of
operations.





Item
2. Unregistered Sales of Equity Securities





For the
quarter ended September 30, 2009, TGR was issued 5,395,600 shares of common
stock of the Company and fully vested warrants to purchase 2,697,800 shares of
common stock of the Company for $0.05 per share in exchange for funding of
$107,912 provided during the quarter under the terms of the Subscription
Agreement.





During
the quarter ended September 30, 2009, the Company issued an aggregate of 110,417
shares of common stock in lieu of salaries and bonuses to employees of the
Company.





We
believe that each of the foregoing securities transactions were exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, by virtue of Section 4(2) of the Securities Act which exempts
transactions by an issuer not involving any public offering.


18





Item
6. Exhibits





Exhibit
                Number
              
              Description2.1
              
              Agreement
      and Plan of Merger among Ener1 Acquisition Corp., Registrant and Ener1,
      Inc., dated as of June 9, 2004, incorporated herein by reference to
      Exhibit 2.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)2.2
              
              First
      Amendment to Agreement and Plan of Merger among Ener1 Acquisition Corp.,
      Registrant and Ener1, Inc., dated as of October 13, 2004,
      incorporated herein by reference to Exhibit 2.2 to Amendment No, 1 to
      Splinex’s Registration Statement on Form S-1 filed with the Commission on
      October 15, 2004 (Registration No. 333-116817)2.3
              
              Second
      Amendment to Agreement and Plan of Merger among Ener1 Acquisition Corp.,
      Splinex and Ener1, Inc., dated as of December 23, 2004, incorporated
      herein by reference to Exhibit 2.3 to Amendment No. 3 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on December
      27, 2004 (Registration No. 333-116817)3.1
              
              Certificate
      of Incorporation of Splinex, incorporated herein by reference to Exhibit
      3.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)3.2
              
              Certificate
      of Merger of Splinex, incorporated herein by reference to Exhibit 3.2 to
      Amendment No. 3 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on December 27, 2004 (Registration No.
      333-116817)3.3
              
              Bylaws
      of Splinex, incorporated herein by reference to Exhibit 3.3 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No. 333-116817)3.4
              
              Certificate
      of Amendment of Articles of Incorporation, incorporated herein by
      reference to Appendix A to Schedule 14C filed with the Commission on
      February 11, 2009.10.1
              
              Bridge
      Loan Agreement between Registrant and Ener1 Group, Inc. dated November 2,
      2004 incorporated herein by reference to Exhibit 10.13 to Amendment No. 2
      to Splinex’s Registration Statement on Form S-1 filed with the Commission
      on December 3, 2004 (Registration No. 333-116817)3.4
              
              Certificate
      of Amendment of Articles of Incorporation herin filed by reference to
      Appendix A to Schedule 14C filed with the Commission on February 11,
      2009.10.1
              
              Bridge
      Loan Agreement between Registrant and Ener1 Group, Inc. dated November 2,
      2004 incorporated herein by reference to Exhibit 10.13 to Amendment No. 2
      to Splinex’s Registration Statement on Form S-1 filed with the Commission
      on December 3, 2004 (Registration No. 333-116817)10.2
              
              Amendment
      to Bridge Loan Agreement between Registrant and Ener1 Group, Inc. dated
      November 17, 2004 incorporated herein by reference to Exhibit 10.14 to
      Amendment No. 2 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on December 3, 2004 (Registration No.
      333-116817)10.3
              
              Employment
      Agreement between Christian Schormann and Splinex dated January 12, 2005,
      incorporated herein by reference to Exhibit 10.15 of the Current Report on
      Form 8-K filed with the Commission on January 25, 2005.10.4
              
              Revolving
      Debt Funding Commitment Agreement between Bzinfin, S.A. and Registrant,
      dated as of June 9, 2004, incorporated herein by reference to Exhibit
      10.1 to Splinex’s Registration Statement on Form S-1 filed with the
      Commission on June 24, 2004 (Registration No.
  333-116817)10.5
              
              2004
      Stock Option Plan of Registrant, incorporated herein by reference to
      Exhibit 10.2 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on June 24, 2004 (Registration No.
    333-116817)10.6
              
              Form of
      Stock Option Agreement of Registrant, incorporated herein by reference to
      Exhibit 10.3 to Splinex’s Registration Statement on Form S-1 filed with
      the Commission on June 24, 2004 (Registration No.
    333-116817)10.7
              
              Sublease
      Agreement between Ener1 Group, Inc. and Splinex, LLC, dated as of
      November 1, 2003, assigned to Registrant as of April 1, 2004,
      incorporated herein by reference to Exhibit 10.4 to Splinex’s Registration
      Statement on Form S-1 filed with the Commission on June 24, 2004
      (Registration No.
333-116817)


19





10.8
              
              Contribution
      Agreement between Splinex, LLC and Registrant, dated as of April 1,
      2004, incorporated herein by reference to Exhibit 10.5 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No. 333-116817)10.9
              
              Assignment
      and Assumption of Employment Agreements between Splinex, LLC and
      Registrant, dated as of April 1, 2004, incorporated herein by
      reference to Exhibit 10.6 to Splinex’s Registration Statement on Form S-1
      filed with the Commission on June 24, 2004 (Registration No.
      333-116817)10.10
              
              Global
      Bill of Sale and Assignment and Assumption Agreement between Splinex, LLC
      and Registrant, dated as of April 1, 2004, incorporated herein by
      reference to Exhibit 10.7 to Splinex’s Registration Statement on Form S-1
      filed with the Commission on June 24, 2004 (Registration No.
      333-116817)10.11
              
              Employment
      letter between Gerard Herlihy and Registrant, dated May 20, 2004,
      incorporated herein by reference to Exhibit 10.8 to Splinex’s Registration
      Statement on Form S-1 filed with the Commission on June 24, 2004
      (Registration No. 333-116817)10.12
              
              Consulting
      Agreement between Dr. Peter Novak and Registrant, dated
      January 1, 2004, incorporated herein by reference to Exhibit 10.9 to
      Splinex’s Registration Statement on Form S-1 filed with the Commission on
      June 24, 2004 (Registration No. 333-116817)10.13
              
              Form
      of Employee Innovations and Proprietary Rights Assignment Agreement,
      incorporated herein by reference to Exhibit 10.10 to Splinex’s
      Registration Statement on Form S-1 filed with the Commission on June 24,
      2004 (Registration No. 333-116817)10.14
              
              Form
      of Indemnification Agreement, incorporated herein by reference to Exhibit
      10.11 to Amendment No. 3 to Splinex’s Registration Statement on Form S-1
      filed with the Commission on December 27, 2004 (Registration No.
      333-116817)10.15
              
              Employment
      Agreement between Michael Stojda and Registrant, dated September 1,
      2004, incorporated herein by reference to Exhibit 10.12 to Amendment No. 1
      to Splinex’s Registration Statement on Form S-1 filed with the Commission
      on October 15, 2004 (Registration No. 333-116817)10.16
              
              Reseller
      Agreement between Waterloo Maple Inc. and TOT Energy, Inc. dated May 27,
      2005., incorporated herein by reference to Exhibit 10.1 to Splinex’s
      Current Report on Form 8-K, filed with the Commission on June 3,
      200510.17
              
              Severance
      Agreement dated November 21, 2005 by and between Splinex and Michael
      Stojda, incorporated by reference to Exhibit 10.1 to Splinex’s Current
      Report on Form 8-K, filed with the Commission on November 21,
      200510.18
              
              Termination
      Agreement dated October 17, 2005 by and between Splinex and Christian
      Schormann, incorporated by reference to Exhibit 10.2 to Splinex’s Current
      Report on Form 8-K, filed with the Commission on November 21,
      200510.19
              
              First
      Amendment to Splinex Technology, Inc. 2004 Stock Option Plan incorporated
      by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on June 30, 200914
              
              Code
      of Ethics incorporated by reference to Exhibit 10.2 to Splinex’s Annual
      Report on Form 10-K for the year ended March 31, 2005, filed with the
      Commission on June 30, 200531.1*
              
              Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2*
              
              Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1*
              
              Certification
      of Principal Executive Officer and Principal Financial Officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002





* Filed
herewith.


20





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





TOT
      Energy, Inc.RegistrantDate:
      November 16, 2009
              By:
              /s/
      Jonathan NewName:
      Jonathan NewTitle:
      Chief Financial Officer


21