UNITED
STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington, D.C.
20549
  FORM
10-Q/A
 (Mark One)
 þ
              
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008.
 OR
 o
              
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE
 
 ACT
OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ____________.
 
 COMMISSION
FILE NO. 333-121070
 
 ABC
FUNDING, INC.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
              
              56-2458730(State
      or other jurisdiction of
                incorporation or
      organization)
              
              (I.R.S.
      Employer
                Identification
      No.)
 
 6630
Cypresswood Drive, Suite 200
 Spring,
Texas 77379
 (Address
of principal executive offices, including zip code)
 
 (832)
559-6060
 (Registrant’s
telephone number, including area code)
  4606
FM 1960 West, Suite 400, Houston, Texas 77379
 (Former Name or Former Address,
if Changed Since Last Report)
 
 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 þNo
o
 
 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. (Check one):
 
 Large
      accelerated filer o
              Accelerated
      filer o
              Non-accelerated
      filer o
                (Do
      not check if a smaller reporting company)
              Smaller
      reporting company þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule12b-2
of the Exchange Act).
 Yes oNo
þ
 
 At
November 18, 2008, the number of outstanding shares of the issuer’s common stock
was 24,885,397.
 
 
 
 Introductory
Note
 
 This
amendment is being filed (i) to modify the presentation in our financial
statements and under Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 2) to reflect the financial
statements and results of operations of Voyager Gas Corporation, as a
Predecessor, following our acquisition of and succession to substantially all of
the business operations of Voyager Gas Corporation on September 2, 2008 and (ii)
to restate our financial statements to correct our prior erroneous accounting of
stock warrants issued on September 2, 2008 in connection with our term loan
credit facility as an expense under "change in fair value of derivatives."
 We have determined that the fair value of these warrants should have been
recoreded as a discount to the related term loan and amortized over the life of
the loan using the effective interest rate method.   We have also
conformed Exhibits 31.1 and 31.2 to the format provided in Item 601of Regulation
S-K.  Other than with respect to the foregoing, no modifications have been
made to this Quarterly Report as originally filed on November 19,
2008.
  ABC FUNDING, INC.
 INDEX
TO QUARTERLY REPORT ON FORM 10-Q/A
 FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
 
 PagePART I – FINANCIAL
      INFORMATIONItem
      1.
              Financial
      Statements
              3Unaudited
      Consolidated Balance Sheets as of September 30, 2008, September 2, 2008
      (predecessor) and December 31, 2007 (predecessor)
              3Unaudited
      Consolidated Statements of Operations for the Periods July 1 through
      September 30, 2008 and September 2, 2008 (predecessor) and July 1 through
      September 30, 2007 (predecessor)
              4Unaudited
      Consolidated Statements of Cash Flows for the Periods July 1 through
      September 30, 2008 and September 2, 2008 (predecessor) and July 1 through
      September 30, 2007 (predecessor)
              5Notes
      to Unaudited Consolidated Financial Statements
              7Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              20Item
      4T.
              Controls
      and Procedures
              27PART
      II – OTHER INFORMATIONItem
      6.
              Exhibits
              30SIGNATURES
              31INDEX
      TO EXHIBITSEXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1EXHIBIT
      32.2
 
 
 2
 PART
I.  FINANCIAL INFORMATION
 Item
1.                      Financial
Statements.


ABC
FUNDING, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (Unaudited)
 Successor
              
              
              PredecessorSeptember
      30,
                2008
              
              
              September
      2,
                2008
              
              
              December
      31,
                2007ASSETS
              
              (Restated)Current
      assets:Cash
      and cash equivalents
              
              $
              774,805
              
              
              $
              1,794,956
              
              
              $
              --Restricted
      cash
              
              
              50,000
              
              
              
              802,719
              
              
              
              --Accounts
      receivable:Accrued
      oil and gas production revenue, net of allowance of $0
              
              
              1,059,541
              
              
              
              1,365,827
              
              
              
              1,791,519Other
              
              
              92,116
              
              
              
              49,200
              
              
              
              --Option
      contracts
              
              
              --
              
              
              
              --
              
              
              
              205,639Prepaid
      expenses and other current assets
              
              
              26,984
              
              
              
              9,124
              
              
              
              7,933Total
      current assets
              
              
              2,003,446
              
              
              
              4,021,826
              
              
              
              2,005,091Oil
      and gas properties, using successful efforts method:Proved
      properties
              
              
              33,447,300
              
              
              
              35,488,597
              
              
              
              34,412,680Unevaluated
      properties
              
              
              7,291,249
              
              
              
              13,336,340
              
              
              
              13,299,340Less
      accumulated depletion
              
              
              (205,959
              )
              
              
              (11,388,581
              )
              
              
              (8,936,029
              )Net
      oil and gas properties
              
              
              40,532,590
              
              
              
              37,436,356
              
              
              
              38,775,991Fixed
      assets, net
              
              
              9,461
              
              
              
              18,198
              
              
              
              22,456Deferred
      financing costs, net of accumulated amortization of
      $45,485
              
              
              1,864,865
              
              
              
              --Derivative
      assets
              
              
              634,528
              
              
              
              --Other
      assets
              
              
              --
              
              
              
              --
              
              
              
              16,7282,508,854
              
              
              
              18,198
              
              
              
              39,184Total
      assets
              
              $
              45,044,890
              
              
              $
              41,476,380
              
              
              $
              40,820,266LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable and accrued liabilities
              
              $
              1,626,796
              
              
              $
              2,221,905
              
              
              $
              1,517,811Accounts
      payable – related parties
              
              
              10,671
              
              
              
              --
              
              
              
              --Bank
      overdraft
              
              
              --
              
              
              
              --
              
              
              
              316,239Earnest
      money deposit
              
              
              --
              
              
              
              802,719
              
              
              
              --Convertible
      debt
              
              
              25,000
              
              
              
              --
              
              
              
              --Notes
      payable, net
              
              
              542,948
              
              
              
              11,239,193
              
              
              
              --Current
      income taxes payable
              
              
              --
              
              
              
              686,115
              
              
              
              771,352Derivative
      liabilities
              
              
              28,717,058
              
              
              
              --
              
              
              
              --Total
      current liabilities
              
              
              30,922,473
              
              
              
              14,649,932
              
              
              
              2,605,402Credit
      facility – revolving loan
              
              
              10,500,000
              
              
              
              --
              
              
              
              15,116,287Credit
      facility - term loan, net of unamortized discount
      of  $10,022,642
              
              
              11,977,358
              
              
              
              --
              
              
              
              --Deferred
      income taxes
              
              
              --
              
              
              
              4,876,267
              
              
              
              4,876,267Asset
      retirement obligations
              
              
              765,658
              
              
              
              765,658
              
              
              
              --Total liabilities
              
              
              54,165,489
              
              
              
              20,291,857
              
              
              
              22,597,956Commitments
      and contingencies
              
              
              --
              
              
              
              --
              
              
              
              --Series
      C Preferred stock , $0.001 par value, 1,000 shares authorized and
      outstanding atSeptember
      30, 2008, with mandatory redemption
              
              
              100,000
              
              
              
              --
              
              
              
              --Stockholders’ equity
      (deficit):Preferred
      stock, $0.001 par value, 1,000,000 shares authorized, 842,505
      undesignatedauthorized
      at September 30, 2008Series
      A Preferred stock, $0.001 par value, 99,395 shares authorized and
      outstanding atSeptember
      30, 2008
              
              
              99
              
              
              
              --
              
              
              
              --Series
      B Preferred stock, $0.001 par value, 37,100 shares authorized and
      outstanding atSeptember
      30, 2008
              
              
              37
              
              
              
              --
              
              
              
              --Series
      D Preferred stock, $0.001 par value, 10,000 shares authorized and
      outstanding atSeptember
      30, 2008
              
              
              10
              
              
              
              --
              
              
              
              --Series
      E Preferred stock, $0.001 par value, 10,000 shares authorized and
      outstanding atSeptember
      30, 2008
              
              
              10
              
              
              
              --
              
              
              
              --Common
      stock, $0.001 par value, 24,000,000 shares authorized, 24,709,198
      issuedand outstanding at September 30, 2008
              
              
              24,709
              
              
              
              --
              
              
              
              --Additional
      paid-in capital
              
              
              12,560,783
              
              
              
              7,140,000
              
              
              
              7,140,000Retained
      earnings (deficit)
              
              
              (21,806,247
              )
              
              
              13,744,523
              
              
              
              11,082,310Total
      stockholders’ equity (deficit)
              
              
              (9,220,599
              )
              
              
              20,884,523
              
              
              
              18,222,310Total
      liabilities and stockholders' equity (deficit)
              
              $
              45,044,890
              
              
              $
              41,476,380
              
              
              $
              40,820,266
 
 The
accompanying notes are an integral part of these financial
statements.
 3
  ABC
FUNDING, INC.
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
 
 Successor
              
              
              PredecessorPeriod
      from July 1,
                Through
              
              
              Period
      from July 1
                ThroughSeptember
      30,
                2008
              
              
              September
      2,
                2008
              
              
              September
      30,
                2007(Restated)Oil
      and gas revenue
              
              $
              794,184
              
              
              $ 3,851,191`
              
              
              $
              2,556,516Operating
      costs and expenses:Lease
      operating expenses
              
              
              154,373
              
              
              
              242,516
              
              
              
              598,339Production
      taxes
              
              
              55,361
              
              
              
              290,295
              
              
              
              156,970General
      and administrative expenses
              
              
              707,345
              
              
              
              158,306
              
              
              
              192,669Depreciation,
      depletion and amortization
              
              
              206,451
              
              
              
              758,151
              
              
              
              1,774,952Total
      operating costs and expenses
              
              
              1,123,530
              
              
              
              1,449,268
              
              
              
              2,722,930Income
      (loss) from operations
              
              
              (329,346
              )
              
              
              2,401,923
              
              
              
              (166,414
              )Other
      income (expense):Interest
      income
              
              
              1,397
              
              
              
              --
              
              
              
              --Interest
      expense
              
              
              (1,297,426
              )
              
              
              (237,412
              )
              
              
              (194,782
              )Risk
      management
              
              
              683,391
              
              
              
              --
              
              
              
              --Loss
      on extinguishment of debt
              
              
              (804,545
              )
              
              
              --
              
              
              
              --Change
      in fair value of derivatives
              
              
              (7,970,436
              )
              
              
              --
              
              
              
              --Total
      other income (expense)
              
              
              (9,387,619
              )
              
              
              (237,412
              )
              
              
              (194,782
              )Income
      (loss) before taxes
              
              
              (9,716,965
              )
              
              
              2,164,511
              
              
              
              (361,196
              )Income
      tax expense
              
              
              --
              
              
              
              (757,579
              )
              
              
              --Net
      income (loss)
              
              $
              (9,716,965
              )
              
              $
              1,406,932
              
              
              $
              (361,196
              )Net
      loss per share:basic
      and diluted
              
              $
              (0.40
              )Weighted
      average common shares outstanding:basic
      and diluted
              
              
              24,487,451
 
 The
accompanying notes are an integral part of these financial
statements.
 
  4
  ABC
FUNDING, INC.
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Unaudited)
 Successor
              
              
              PredecessorPeriod
      from July 1,
                Through
              
              
              Period
      from July 1,
                ThroughSeptember
      30,
                2008
              
              
              September
      2,
                2008
              
              
              September
      30,
                2007Cash
      flows from operating activities:
              
              (Restated)Net
      income (loss)
              
              $
              (9,716,965
              )
              
              $
              1,406,932
              
              
              $
              (361,196
              )Adjustments
      to reconcile net income (loss) to cash provided by operatingactivities:Depreciation,
      depletion and amortization
              
              
              206,450
              
              
              
              758,151
              
              
              
              1,774,952Share
      based compensation
              
              
              337,984
              
              
              
              --
              
              
              
              --Amortization
      of deferred financing costs
              
              
              188,956
              
              
              
              --
              
              
              
              --Amortization
      of debt discounts
              
              
              916,481
              
              
              
              --
              
              
              
              --Change
      in fair value of derivatives
              
              
              7,970,436
              
              
              
              --
              
              
              
              --Loss
      on extinguishment of debt
              
              
              804,545
              
              
              
              --
              
              
              
              --(Gain)
      loss on derivatives
              
              
              (634,528
              )
              
              
              (1,850,081
              )
              
              
              122,045Changes
      in assets and liabilities:Accounts
      receivable
              
              
              (1,191,068
              )
              
              
              (838,813
              )
              
              
              98,537Prepaid
      and other current assets
              
              
              610
              
              
              
              --
              
              
              
              --Accounts
      payable, related parties and accrued liabilities
              
              
              1,598,781
              
              
              
              1,092,503
              
              
              
              93,269Bank
      overdraft
              
              
              --
              
              
              
              --
              
              
              
              (294,396
              )Income
      taxes payable
              
              
              --
              
              
              
              (3,000
              )
              
              
              2,191Other
      assets
              
              
              --
              
              
              
              48,364
              
              
              
              --Net
      cash provided by operating activities
              
              
              481,682
              
              
              
              2,184,421
              
              
              
              1,435,402Cash
      flows from investing activities:Cash
      paid for acquisition of oil and gas properties, net of acquisition
      costs
              
              
              (30,590,707
              )
              
              
              --
              
              
              
              --Oil
      and gas properties capital investment
              
              
              --
              
              
              
              (99,357
              )
              
              
              (1,102,116
              )Purchase
      of fixed assets
              
              
              (2,071
              )
              
              
              --
              
              
              
              --Restricted
      cash
              
              
              (50,000
              )
              
              
              1,525
              
              
              
              --Net
      cash used in investing activities
              
              
              (30,642,778
              )
              
              
              (97,832
              )
              
              
              (1,102,116
              )Cash
      flows from financing activities:Proceeds
      from issuance of mandatorily redeemable preferred
stock
              
              
              100,000
              
              
              
              --
              
              
              
              --Repayment
      of convertible debenture
              
              
              (450,000
              )
              
              
              --
              
              
              
              --Proceeds
      from credit facility
              
              
              33,500,000
              
              
              
              --
              
              
              
              --Repayment of credit facility
              
              
              (1,000,000
              )
              
              
              (1,000,000
              )
              
              
              (333,286
              )Debt
      issuance costs
              
              
              (1,226,257
              )
              
              
              --
              
              
              
              --Net
      cash provided by (used in) financing activities
              
              
              30,923,743
              
              
              
              (1,000,000
              )
              
              
              (333,286
              )Net
      increase in cash
              
              
              762,647
              
              
              
              1,086,589
              
              
              
              --Cash
      at beginning of period
              
              
              12,158
              
              
              
              708,367
              
              
              
              --Cash
      at end of period
              
              $
              774,805
              
              
              $
              1,794,956
              
              
              $
              --Supplemental
      information:Cash
      paid for interest
              
              $
              15,768
              
              
              176,894
              
              
              819,454Cash
      paid for income taxes
              
              
              --
              
              
              
              3,000
              
              
              
              --
 
 The
accompanying notes are an integral part of these financial
statements.
  5
  ABC
FUNDING, INC.
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Unaudited)
 (Continued)
 
 Successor
              
              
              PredecessorPeriod
      from July 1,
                Through
              
              
              Period
      from July 1,
                ThroughSeptember
      30,
                2008
              
              
              September
      2,
                2008
              
              
              September
      30,
                2007(Restated)Non-cash
      investing and financing activities:Preferred
      shares issued for acquisition of oil and gas
properties
              
              $
              9,100,000
              
              
              $
              --
              
              
              $
              --Current
      assets acquired with acquisition
              
              
              43,032
              
              
              
              --
              
              
              
              --Current
      liabilities assumed with acquisition
              
              
              531,132
              
              
              
              --
              
              
              
              --Preferred
      shares issued in payment of convertible debenture
              
              
              450,000
              
              
              
              --
              
              
              
              --Note
      issued for debt issuance costs
              
              
              557,500
              
              
              
              --
              
              
              
              --Removal
      of derivative liability due to repayment of debt
              
              
              1,099,287
              
              
              
              --
              
              
              
              --Debt
      discount due to imputed interest
              
              
              16,977
              
              
              
              --
              
              
              
              --Debt
      discount due to overriding revenue royalty interest
              
              
              206,000
              
              
              
              --
              
              
              
              --Asset
      retirement obligation assumed
              
              
              765,658
              
              
              
              --
              
              
              
              --Debt
      issuance costs accrued
              
              
              143,569
              
              
              
              --
              
              
              
              --Debt discount due to warrant issued with debt
              
              
              9,952,336
              
              
              
              --
              
              
              
              --
 
 The
accompanying notes are an integral part of these financial
statements.
 
  6
  ABC
FUNDING, INC.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 
 NOTE
1.                      
ORGANIZATION AND BASIS OF PREPARATION
 
 Headquartered
in Houston, Texas, ABC Funding, Inc. (the “Company” or “ABC”), is incorporated
under the laws of the State of Nevada, with its primary business focus to engage
in the acquisition, exploitation and development of properties for the
production of crude oil and natural gas.  The Company intends to
explore for oil and gas reserves through the drill bit and acquire established
oil and gas properties.  ABC intends then to exploit such properties
through the application of conventional and specialized technology to increase
production, ultimate recoveries, or both, and participate in joint venture
drilling programs with repeatable low risk results.
 
 The
Company’s stock is traded on the OTC Bulletin Board (“OTCBB”) under the ticker
symbol AFDG.  Upon the effectiveness of an amendment to its Articles
of Incorporation increasing the number of authorized shares of common stock that
it may issue and changing its name (the “Charter Amendment”), the Company will
change its name to Cross Canyon Energy Corp. and obtain a new ticker symbol for
trading of its stock on the OTCBB.  The name change will better
reflect its business model.
 
 On
September 2, 2008, the Company consummated the acquisition of Voyager Gas
Corporation, a Delaware corporation, (the “Voyager Acquisition”), whereby it
purchased all of the outstanding capital stock of Voyager Gas Corporation and
succeeded to substantially all of the business operations and properties of
Voyager Gas Corproation, including working and other interests in oil and gas
lease blocks located in Duval County, Texas, producing wells, and properties,
together with rights under related operating, marketing, and service contracts
and agreements, seismic exploration licenses and rights, and personal property,
equipment and facilities.  Upon the completion of the Voyager
Acquisition, Voyager Gas Corporation became a wholly-owned subsidiary of
ABC  (See Note. 3) and the Company no longer qualified as a
development stage enterprise as defined under SFAS No. 7 “Accounting and
Reporting by Development State Enterprises”.
 
 The acquisition of Voyager Gas
Corporation described in Note 3 is referred to as the Voyager
Acquisition.  The term “Successor” refers to ABC funding, Inc.
following the Voyager Acquisition and the term “Predecessor” refers to Voyager
Gas Corporation prior to the acquisition date on September 2,
2008.
 
 As of
September 30, 2008, the Company has two subsidiaries, Energy Venture, Inc., and
Voyager Gas Corporation.  Energy Venture, Inc. currently has no
operations, assets or liabilities.  However, the Company has begun
using this subsidiary as an operating company to perform the operations of its
oil and gas business.
 
 The
consolidated financial statements herein have been prepared in accordance with
generally accepted accounting principles (“GAAP”) and include the accounts of
ABC Funding, Inc. and its subsidiaries, which are wholly owned.  All
inter-company transactions are eliminated upon consolidation.
 
 NOTE
2.                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 Interim Financial
Statements.The accompanying unaudited interim financial
statements of the Company have been prepared in accordance with accounting
principles generally accepted in the Unites States of America for interim
financial information and with the instructions to Form 10-Q as prescribed by
the SEC for smaller reporting companies and do not include all of the financial
information and disclosures required by GAAP.  The financial
information as of September 2 and 30, 2008, and for the periods from July 1
through September 2 and 30, 2008 and the three months ended September 30, 2007,
is unaudited.  In the opinion of management, such information contains
all adjustments, consisting only of normal recurring accruals, considered
necessary for a fair presentation of the results of the interim
periods.  The results of operations for the periods presented are not
necessarily indicative of the results of operations that will be realized for
the fiscal year ended June 30, 2009.  The interim financial statements
should be read in conjunction with the financial statements as of June 30, 2008,
and notes thereto, included in the Company’s Amendment No. 1 to Form 10-KSB/A
filed with the SEC on November 28, 2008 and Voyager’s audited financial
statements for the years ended December 31, 2007 and 2006, included elsewhere in
this filing..
 
 7
  Use of
Estimates.The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from these
estimates.  Significant estimates affecting these financial statements
include estimates for quantities of proved oil and gas reserves, period end oil
and gas sales and expenses and asset retirement obligations, and are subject to
change.
 
 Cash and Cash
Equivalents.For purposes of the statement of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
 
 Revenue and Cost
Recognition.The Company uses the sales method of accounting
for oil and natural gas revenues.  Under this method, revenues are
recognized based on the actual volumes of natural gas and oil sold to
purchasers.  The volume sold may differ from the volumes to which the
Company is entitled based on its interest in the properties.  Costs
associated with production are expensed in the period incurred.
 
 Income
Taxes.  Pursuant to Statement of Financial Accounting Standards
(“SFAS”) No. 109, “Accounting for Income Taxes,” (“SFAS No. 109”), the Company
follows the asset and liability method of accounting for income taxes, under
which the Company recognizes deferred tax assets and liabilities for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which the
Company expects to recover or settle those temporary differences.
 
 As
changes in tax laws or rates are enacted, deferred income tax assets and
liabilities are adjusted through the provision for income
taxes.  Deferred tax assets are reduced by a valuation allowance if,
based on available evidence, it is more likely than not that some portion or all
of the deferred tax assets will not be realized.  The classification
of current and noncurrent deferred tax assets and liabilities is based primarily
on the classification of the assets and liabilities generating the
difference.
 
 Basic and Diluted Net Loss per
Share.The Company computes net income (loss) per share
pursuant to SFAS No. 128 “Earnings per Share”.  Basic net income
(loss) per share is computed by dividing income or loss applicable to common
shareholders by the weighted average number of shares of the Company’s common
stock outstanding during the period.  Diluted net income (loss) per
share is determined in the same manner as basic net income (loss) per share
except that the number of shares is increased assuming exercise of dilutive
stock options, warrants and convertible debt using the treasury stock method and
dilutive conversion of the Company’s convertible preferred stock.
 
 Stock Based
Compensation.  In December 2004, the Financial Accounting
Standards Board (“FASB”) issued SFAS No. 123R, "Share-Based
Payments".  The Company adopted the disclosure requirements of SFAS
123R as of July 1, 2006, using the modified prospective transition method
approach as allowed under SFAS 123R.  SFAS 123R establishes standards
for the accounting for transactions in which an entity exchanges its equity
instruments for goods or services.  SFAS 123R focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions.  SFAS 123R requires that the fair
value of such equity instruments be recognized as expense in the historical
financial statements as services are performed.  The Company did not
issue any stock options or restricted stock awards during the quarterly period
ended September 30, 2008.
 
  Oil and Natural Gas
Properties.The Company follows the successful efforts method
for accounting for its oil and gas properties.  Oil and gas
exploration and production companies choose one of two acceptable accounting
methods, successful efforts or full cost.  The most significant
difference between the two methods relates to the accounting treatment of
drilling costs for unsuccessful exploration wells and exploration
costs.  Under the successful efforts method, exploration costs and dry
hole costs (the primary uncertainty affecting this method) are recognized as
expenses when incurred and the costs of successful exploration wells are
capitalized as oil and gas properties.  Entities that follow the full
cost method capitalize all drilling and exploration costs including dry hole
costs into one pool of total oil and gas property costs.
  8
  The
calculation of depreciation, depletion and amortization of capitalized costs
under the successful efforts method of accounting differs from the full cost
method in that the successful efforts method requires the Company to calculate
depreciation, depletion and amortization expense on individual properties rather
than one pool of costs.  In addition, under the successful efforts method
the Company assesses its properties individually for impairment compared to one
pool of costs under the full cost method.
  Depreciation, Depletion and
Amortization of Oil and Gas Properties.The unit-of-production
method of depreciation, depletion and amortization of oil and gas properties
under the successful efforts method of accounting is applied pursuant to the
simple multiplication of units produced by the costs per unit on a field by
field basis.  Leasehold cost per unit is calculated by dividing the
total cost by the estimated total proved oil and gas reserves associated with
that field.  Well cost per unit is calculated by dividing the total
cost by the estimated total proved producing oil and gas reserves associated
with that field.  The volumes or units produced and asset costs are
known and while the proved reserves have a high probability of recoverability,
they are based on estimates that are subject to some
variability.
  Impairment of Oil and Gas
Properties. The Company tests for
impairment of its properties based on estimates of proved reserves.  Proved
oil and gas properties are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable.  The Company estimates the future undiscounted cash flows
of the affected properties to judge the recoverability of the carrying amounts.
 Initially this analysis is based on proved reserves.  However, when
the Company believes that a property contains oil and gas reserves that do not
meet the defined parameters of proved reserves, an appropriately risk adjusted
amount of these reserves may be included in the impairment evaluation.
 These reserves are subject to much greater risk of ultimate
recovery.  An asset would be impaired if the undiscounted cash flows were
less than its carrying value.  Impairments are measured by the amount by
which the carrying value exceeds its fair value.
  Impairment
analysis is performed on an ongoing basis.  In addition to using estimates
of oil and gas reserve volumes in conducting impairment analysis, it is also
necessary to estimate future oil and gas prices.  The impairment evaluation
triggers include a significant long-term decrease in current and projected
prices, or reserve volumes, an accumulation of project costs significantly in
excess of the amount originally expected, and historical and current negative
operating losses.  Although the Company evaluates future oil and gas prices
as part of the impairment analysis, it does not view short-term decreases in
prices, even if significant, as impairment triggering events.
 
 Asset Retirement
Obligations.The Company records a liability for legal
obligations associated with the retirement of tangible long-lived assets in the
period in which they are incurred in accordance with SFAS No. 143 “Accounting
for Asset Retirement Obligations.”  Under this method, when
liabilities for dismantlement and abandonment costs (“ARO”) are initially
recorded, the carrying amount of the related oil and natural gas properties are
increased.  Accretion of the liability is recognized each period using
the interest method of allocation, and the capitalized cost is depleted over the
useful life of the related asset.  Revisions to such estimates are
recorded as adjustments to the ARO, capitalized asset retirement costs and
charges to operations during the periods in which they become
known.  At the time the abandonment cost is incurred, the Company will
be required to recognize a gain or loss if the actual costs do not equal the
estimated costs included in ARO.
 
 Valuation of the Embedded and
Warrant Derivatives.The valuation of the Company’s embedded
derivatives and warrant derivatives is determined primarily by a lattice model
using probability weighted discounted cash flow based upon future projections
over a range of potential outcomes and the Black-Scholes option pricing
model.  An embedded debenture derivative is a derivative instrument
that is embedded within a contract, which under the convertible debenture (the
host contract) includes the right to convert the debenture by the holder, reset
provisions with respect to the conversion provisions, call/redemption options
and liquidated damages.  In accordance with SFAS No. 133, as amended,
“Accounting for Derivative Instruments and Hedging Activities”, these embedded
derivatives are marked-to-market each reporting period, with a corresponding
non-cash gain or loss charged to the current period.  A warrant
derivative liability is determined in accordance with Emerging Issues Task Force
Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company’s Own Stock” (“EITF
00-19”).  Based on EITF 00-19, warrants which are determined to be
classified as derivative liabilities are marked-to-market each reporting period,
with a corresponding non-cash gain or loss charged to the current
period.  The practical effect of this has been that when the Company’s
stock price increases so does its derivative liability, resulting in a non-cash
loss charge that reduces earnings and earnings per shares.  When the
Company’s stock price declines, it records a non-cash gain, increasing its
earnings and earnings per share.
 
 9
 To determine
the fair value of its embedded derivatives, management evaluates assumptions
regarding the probability of certain events.  Other factors used to
determine fair value include the Company’s period end stock price, historical
stock volatility, risk free interest rate and derivative term.  The
fair value recorded for the derivative liability varies from period to
period.  This variability may result in the actual derivative
liability for a period either above or below the estimates recorded on the
Company’s consolidated financial statements, resulting in significant
fluctuations in other income or expense because of the corresponding non-cash
gain or loss recorded.
 
 Fair Value of Financial
Instruments.  The Company’s financial instruments consist of
cash and cash equivalents, accounts receivable, accounts payable, notes payable
and derivative liabilities/assets associated with the Company’s oil and gas
hedging activities and certain instruments issued by the Company that are
convertible into common stock (see Note 5).  The carrying amounts of
cash and cash equivalents, accounts receivable, accounts payable and notes
payable approximate fair value due to the highly liquid nature of these
short-term instruments.  The derivative liabilities/assets have been
marked-to-market as of September 30, 2008.
 
 New Accounting
Pronouncements.  In March 2008, the FASB issued SFAS No. 161,
“Disclosures about Derivative Instruments and Hedging Activities – an amendment
of SFAS No. 133” (“SFAS No. 161”).  SFAS No. 161 requires additional
disclosures about derivative and hedging activities and is effective for fiscal
years and interim periods beginning after November 15, 2008.  The
Company is evaluating the impact the adoption of SFAS No. 161 will have on its
financial statement disclosures.  The Company’s adoption of SFAS No.
161 will not affect its current accounting for derivative and hedging
activities.
 
 In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations”.  This statement requires assets acquired and
liabilities assumed to be measured at fair value as of the acquisition date,
acquisition-related costs incurred prior to the acquisition to be expensed and
contractual contingencies to be recognized at fair value as of the acquisition
date.  This statement is effective for financial statements issued for
fiscal years beginning after December 15, 2008.  The Company is
currently assessing the impact, if any, the adoption of this statement will have
on its financial position, results of operations or cash flows.
 
 NOTE
3.  RESTATEMENT
  In connection with
our review of the financing transaction with CIT on September 2, 2008, we
identified an error in the accounting for stock warrants issued in connection
with our term loan credit facility. The fair value of these warrants was
initially recorded as an expense under “Change in fair value of derivatives.” We
determined that the fair value of these warrants should have been recorded as a
discount to the related term loan and amortized over the life of the loan using
the effective interest rate method.
 The effects
of the restatement on reported amounts for the three months ended September 30,
2008 are presented below in the following tables:
 
 
 Three
      months ended September 30, 2008As Reported
                
                
                
                Adjustments
                
                
                
                As RestatedOther
      income (expense):Interest
      expense
                
                $
                (1,167,454)
                
                
                $
                (129,972)
                
                
                $
                (1,297,426)Change
      in fair value of derivatives
                
                
                (17,922,772)
                
                
                
                9,952,336
                
                
                
                (7,970,436)Total
      other expense
                
                
                (19,209,983)
                
                
                
                9,822,364
                
                
                
                (9,387,619)Net
      loss
                
                $
                (19,539,329)
                
                
                $
                9,822,364
                
                
                $
                (9,716,965)Net
      loss per share:Basic
      and diluted
                
                $
                (0.80)
                
                
                $
                0.40
                
                
                $
                (0.40)Weighted
      average common shares outstanding:Basic
      and diluted
                
                
                24,487,451
                
                
                
                24,487,451
                
                
                
                24,487,451
  September
      30, 2008As Reported
                
                
                Current Year
                  Adjustments
                
                As RestatedLIABILITIES
      AND STOCKHOLDERS’ EQUITYCredit
      facility – term loan, net of unamortized discount of
      $10,022,642
                
                $
                21,799,722
                
                
                $
                (9,822,364)
                
                $
                11,977,358Total
      liabilities
                
                
                63,987,853
                
                
                
                (9,822,364)
                
                
                54,165,489Stockholders’
      deficitRetained
      earnings (deficit)
                
                
                (31,628,611)
                
                
                
                9,822,364
                
                
                (21,806,247Total
      stockholders’ deficit
                
                
                (19,042,963)
                
                
                
                9,822,364
                
                
                (9,220,599)Total
      liabilities and stockholders’ deficit
                
                $
                45,044,890
                
                
                $
                -
                
                $
                45,044,890
  
 NOTE
4.                      ACQUISITION
OF BUSINESS
 
 On
September 2, 2008, the Company consummated the acquisition of Voyager Gas
Corporation, a Delaware corporation, (the “Voyager Acquisition”), whereby it
purchased all of the outstanding capital stock of Voyager Gas Corporation, the
owner of interests in oil and gas lease blocks located in Duval County, Texas,
including working and other interests in oil and gas leases, producing wells,
and properties, together with rights under related operating, marketing, and
service contracts and agreements, seismic exploration licenses and rights, and
personal property, equipment and facilities.
 
 Upon the
completion of the Voyager Acquisition, Voyager Gas Corporation became a
wholly-owned subsidiary of ABC.  The newly acquired subsidiary’s
properties consist of approximately 14,300 net acres located in Duval County,
Texas.  The purchase price also included a proprietary 3-D seismic
data base covering a majority of the acquired properties.
 
 The
purchase price paid in the Voyager Acquisition consisted of cash consideration
of $35.0 million and 10,000 newly issued shares of the Company’s preferred stock
designated as Series D preferred stock having an agreed upon value of $7.0
million.  The Company performed a fair value valuation of the
preferred on the date of the acquisition and recorded the fair value of the
preferred stock at $9.1 million.  Upon the effectiveness of an
amendment to the Company’s Articles of Incorporation increasing the number of
shares of common stock that it may issue (the “Charter Amendment”), the Series D
Preferred will automatically convert into 17.5 million shares of ABC’s common
stock.
 
 The
acquired properties have established production over a substantial acreage
position with proved reserves from over ten different horizons located at depths
ranging from 4,000 to 7,500 feet.  As of April 1, 2008, the Duval
County Properties had independently engineered proved reserves of 16.2
Bcfe.  By category, this includes 5.2 Bcfe of proved developed
producing, 5.6 Bcfe of proved developed non-producing, and 5.4 Bcfe of proved
undeveloped reserves.  Approximately 69% of total proved reserves is
natural gas.  In addition to proved reserves, the Company’s management
has identified additional exploration opportunities on the acquired acreage
utilizing its acquired 3-D seismic data base. Depletion expense
per equivalent Mcf for the periods presented was $2.35 for the three months
ended September 30, 2008, $4.01 for the period July 1 through September 2, 2008,
and $5.88 for the period July 1 through September 30, 2007.
  The
preliminary allocation of the purchase price and the estimated fair market
values of the assets acquired and liabilities assumed are subject to
modification and are shown below.
 
 Cash
              
              $
              1,864,446Accounts
      receivables
              
              
              39,410Security
      deposit
              
              
              3,622Oil
      and gas property
              
              
              40,738,549Total assets acquired
              
              
              42,646,027Severance
      tax payable
              
              
              65,418Royalties
      payable
              
              
              405,714Ad
      valorem taxes payable
              
              
              60,000Asset
      retirement obligations
              
              
              765,658Total liabilities assumed
              
              
              1,296,790Net assets acquired
              
              $
              41,349,237
  The following summary
presents unaudited pro forma consolidated results for the three months ended
September 30, 2008 and 2007, respectively, as if the Voyager Acquisition had
occurred as of July 1, 2007.  The pro forma results are for
illustrative purposes only and include adjustments in addition to the
pre-acquisition historical results, such as increased depreciation, depletion
and amortization expense resulting from the allocation of fair value to oil and
gas properties acquired.  The unaudited pro forma information is not
necessarily indicative of the operating results that would have occurred if the
acquisition had been consummated at that date, nor is it necessarily indicative
of future operating results.
 Pro
      FormaThree
      Months Ended September 30,2008
                
                
                2007(Restated)Revenues
                
                $
                4,645,375
                
                
                $
                2,556,515Operating
      costs and expenses
                
                
                2,189,797
                
                
                
                1,866,534Income
      from operations
                
                
                2,455,578
                
                
                
                689,981Other
      income (expense)
                
                
                (10,177,606
                )
                
                
                (1,343,270
                )Net loss
                
                $
                (7,722,028
                )
                
                $
                (653,289
                )Loss
      per share – basic and diluted
                
                $
                (0.32
                )
                
                $
                (0.03
                )Production
      volumes:Natural
      gas (Mcf)
                
                
                166,041
                
                
                
                259,291Oil
      (Bbls)
                
                
                11,868
                
                
                
                7,129Mcfe
                
                
                237,249
                
                
                
                302,065Mcfe/day
                
                
                2,579
                
                
                
                3,283
  
  NOTE
5.                      ACCRUED
LIABILITIES
 
 Accrued
liabilities consisted of the following at September 30 and June 30,
2008:
 
 September
      30,
                2008Royalties
      payable
              
              $
              610,392Severance
      taxes payable
              
              
              108,815Accrued
      interest payable
              
              
              176,492Accrued
      ad valorem taxes payable
              
              
              166,178Other
              
              
              389$
              1,062,266
  NOTE
6.                      NOTES
PAYABLE
 
 Notes
payable consisted of the following at September 30:
 
 September
      30,
                20082006
      convertible notes, convertible at $0.25 into 50,000 shares of common
      stock due February 28, 2008
              
              $
              25,000Senior
      secured convertible debentures due September 29, 2008
              
              
              --Short-term,
      interest free note payable due March 15, 2009
              
              
              557,500First
      lien revolving credit facility with CIT Capital USA Inc., as
      administrative agent, bearing interest at an adjusted rate as defined
      in the agreement (5.31313% at September 30, 2008) payable quarterly,
      principal and unpaid interest due on August 31, 2011, collateralized
      by a first mortgage on the Company’s oil and gas
      properties.
              
              
              10,500,000Second
      lien term credit facility with CIT Capital USA Inc., as administrative
      agent, bearing interest at an adjusted rate as defined in the
      agreement (7.81313% at September 30, 2008) payable quarterly,
      principal and unpaid interest due on March 31, 2012, collateralized
      by a second mortgage on the Company’s oil and gas
      properties.
              
              
              22,000,000Unamortized
      discount on senior secured convertible debentures
              
              
              --Unamortized
      discount on second lien term credit facility
              
              
              (10,022,642
              )Unamortized
      discount on short-term note payable due March 15, 2009
              
              
              (14,552
              )$
              23,045,306
 
 CIT
Credit Facility
 
 On
September 2, 2008, the Company entered into (i) a credit agreement (the
“Revolving Loan”) among the Company, CIT Capital USA Inc. (“CIT Capital”), as
Administrative Agent and the lender named therein and (ii) a second lien term
loan agreement (the “Term Loan”) among the Company, CIT Capital and the
lender. The Revolving Loan and Term Loan are collectively referred to
herein as the “CIT Credit Facility.”
 
 The
Revolving Loan provides for a $50.0 million senior secured revolving credit
facility which is subject to an initial borrowing base of $14.0 million, or an
amount determined based on semi-annual review of the Company’s proved oil and
gas reserves. As of September 30, 2008, the Company had $10.5 million
borrowed to finance the Voyager Acquisition, to repay the related bridge loan
and transaction expenses, and to fund capital expenditures
generally. Monies advanced under the Revolving Loan mature on September 1,
2011, and bear interest at a rate equal to LIBOR plus 1.75% to 2.50%, as the
case may be.
 
 The Term
Loan provides for a one-time advance to the Company of $22.0 million. The
Company drew down the full amount on September 2, 2008 to finance the Voyager
Acquisition and to repay the related bridge loan and transaction
expenses. Monies borrowed under the Term Loan mature on March 1, 2012, and
bear interest at a rate equal to LIBOR plus 5% during the first twelve months
after closing and LIBOR plus 7.50%, thereafter.  In connection with the
Term Loan the Company issued CIT Capital 24,199,996 warrants to purchase the
Company's common stock at an exercise price of $0.35 per share.  The
Company recorded a discount to the Term Loan of 9,952,336 and is amortizing the
debt discount over the life of the loan using the effective interest rate
method.
 
 
  The loan
instruments evidencing the Revolving Loan contain various restrictive covenants,
including financial covenants requiring that the Company will not: (i) as of the
last day of any fiscal quarter, permit its ratio of EBITDAX for the period of
four fiscal quarters then ending to interest expense for such period to be less
than 2.0 to 1.0; (ii) at any time permit its ratio of total debt as of such time
to EBITDAX for the four fiscal quarters ending on the last day of the fiscal
quarter immediately preceding the date of determination for which financial
statements are available to be greater than 4.0 to 1.0; and (iii) permit, as of
the last day of any fiscal quarter, its ratio of (a) consolidated current assets
(including the unused amount of the total commitments, but excluding non-cash
assets under FASB Statement No. 133) to (b) consolidated current liabilities
(excluding non-cash obligations under FAS 133 and current maturities under the
CIT Credit Facility) to be less than 1.0 to 1.0.
 
 The loan
instruments evidencing the Term Loan contain various restrictive covenants,
including financial covenants requiring that the Company will not: (i) permit,
as of the last day of any fiscal quarter, its ratio of (a) consolidated current
assets (including the unused amount of the total commitments, but excluding
non-cash assets under FASB Statement No. 133) to (b) consolidated current
liabilities (excluding non-cash obligations under FAS 133 and current maturities
under the CIT Credit Facility) to be less than 1.0 to 1.0; and (ii) as of the
date of any determination permit its ratio of total reserve value as in effect
on such date of determination to total debt as of such date of determination to
be less than 2.0 to 1.0
 
 Upon the
Company’s failure to comply with covenants, the lender has the right to refuse
to advance additional funds under the revolver and/or declare any outstanding
principal and interest immediately due and payable. As of September 30,
2008, the Company is in compliance with all of the restrictive covenants of the
CIT Credit Facility.
  All
borrowings under the Revolving Loan are secured by a first lien on all of the
Company’s assets and those of its subsidiaries. All borrowings under the
Term Loan are secured by a second lien on all of the Company’s assets and those
of its subsidiaries.
 
 Under the
CIT Credit Facility, the Company was required to enter into hedging arrangements
mutually agreeable between the Company and CIT Capital.  On September
2, 2008, the Company entered into hedging arrangements with a bank whereby
effective October 1, 2008, the Company hedged 65% of its proved developed
producing natural gas production and 25% of its proved developed producing oil
production through December 2011 at $7.82 per Mmbtu and $110.35 per barrel,
respectively. (See Note 6).
 
 CIT
Capital is entitled to one percent (1%) overriding royalty interest of the
Company’s net revenue interest in the oil and gas properties acquired in the
Voyager Acquisition. The overriding royalty interest is applicable to any
renewal, extension or new lease taken by the Company within one year after the
date of termination of the ORRI Properties, as defined in the overriding
royalty agreement covering the same property, horizons and minerals. The
Company recorded a discount of $206,000 based upon the estimated fair value of
the overriding royalty interest that was conveyed to the lender upon
closing. The Company is amortizing this discount to interest expense over
the term of the Term Loan. As of September 30, 2008, $5,722 of this
discount had been amortized as a component of interest expense.
 
 CIT
Capital also received, and is entitled to receive in its capacity as
administrative agent, various fees from the Company while monies advanced or
loaned remain outstanding, including an annual administrative agent fee of
$20,000 for each of the Revolving Loan and Term Loan and a commitment fee
ranging from 0.375% to 0.5% of any unused portion of the borrowing base
available under the Revolving Loan.
 
 In
connection with the Company’s entering into the CIT Credit Facility, upon
closing the Voyager Acquisition, the Company paid its investment banker, Global
Hunter Securities, LLC (“GHS”), the sum of $557,500 and delivered to GHS a
non-interest bearing promissory note, payable on or before March 15, 2009, in
the principal amount of $557,500.
 
 The
Company incurred debt issuance costs of $1,910,350 associated with the CIT
Credit Facility. These costs were capitalized as deferred financing costs
and are being amortized over the life of the CIT Credit Facility using the
effective interest method. Amortization expense related to the CIT Credit
Facility was $45,485 for the period September 2, 2008 (inception) through
September 30, 2008.
 
 13
  Convertible
Debentures
 
 On May
21, 2008, the Company entered into a Securities Purchase Agreement with those
purchasers identified therein (the “Bridge Financing”), whereby the Company
received proceeds of $800,000 evidenced by senior secured convertible debentures
(the “Debentures”). The proceeds from the Debentures were used to fund the
Company’s payment of the deposit for the Voyager Acquisition.
 
 The
Debentures were to mature the earlier of September 29, 2008, or the closing date
under the Voyager Agreement, and were to be satisfied in full by the Company’s
payment of the aggregate redemption price of $900,000 or, at the election of the
purchasers, by the conversion of the Debentures into shares of the Company’s
common stock (the “Conversion Shares”), at an initial conversion price of $0.33,
subject to adjustments and full-ratchet protection under certain
circumstances.
  As
additional consideration for the bridge loan evidenced by the Debentures, the
Company issued common stock purchase warrants to the purchasers and their
affiliates, exercisable to purchase up to 3,000,000 shares of the Company’s
common stock (the “Warrant Shares”), based upon an initial exercise price of
$0.33 subject to adjustments and full-ratchet protection under certain
circumstances.  These warrants remain outstanding as of September 30,
2008.
 
 The
Company incurred debt issuance costs of $199,343 associated with the issuance of
the Debentures. These costs were capitalized as deferred financing costs
and were being amortized over the life of the Debentures using the effective
interest method. Amortization expense related to the deferred financing
costs was $55,871 for the period May 21, 2008 (inception) through June 30, 2008
and the remaining balance of $143,472 was charged to expense during the three
months ended September 30, 2008.
 
 The
Debentures and the other outstanding convertible instruments of the Company,
specifically the Series A, B, D and E Preferred and the convertible note, if
converted, would exceed the number of authorized shares the Company has
available for issuance. In addition, the Debentures contain more than one
embedded derivative feature which would individually warrant separate accounting
as derivative instruments under SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities” and EITF 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company's Own
Stock”. The Company evaluated the application of SFAS No. 133 and EITF
00-19 and determined the various embedded derivative features have been bundled
together as a single, compound embedded derivative instrument that has been
bifurcated from the debt host contract, and referred to as the "Single Compound
Embedded Derivatives within Convertible Note". The single compound embedded
derivative features include the conversion feature with the reset provisions
within the Debentures, the call/redemption options, the interest rate adjustment
and liquidated damages. The value of the single compound embedded
derivative liability was bifurcated from the debt host contract and recorded as
a derivative liability, which results in a reduction of the initial carrying
amount (as unamortized discount) of the Debentures of the value at
inception. The value of the embedded derivative at issuance exceeded the
notional amount of the loan, and the excess amount was expensed to interest in
the amount of $1,468,316. The unamortized discount has been amortized to
interest expense using the effective interest method over the life of the
Debentures. At June 30, 2008, $121,638 had been amortized and the remaining
balance of $778,362 was charged to expense during the three months ended
September 30, 2008.
 
 Due to
the insufficient unissued authorized shares to settle the Debentures, other
outstanding convertible instruments of the Company, specifically the Series A,
B, D and E Preferred, convertible note and non-employee stock options, have been
classified as derivative liabilities under SFAS No. 133. Each reporting
period, this derivative liability is marked-to-market with the non-cash gain or
loss recorded in the period as a gain or loss on derivatives. At September
30, 2008, the aggregate derivative liability was $28,717,058.
 
 On
September 2, 2008, the Company satisfied in full the Debentures by repayment of
$450,000 of principal with funds advanced under the CIT Credit Facility and by
delivery of shares of the Company’s Series E Preferred in exchange for the
principal amount of $450,000, which shares of preferred stock automatically
convert into an aggregate of 1,363,636 shares of the Company’s common stock,
based upon an implied conversion price of $0.33 per share of common stock upon
the effectiveness of the Charter Amendment. The fair value of the
underlying shares of common stock on August 31, 2008, the date of the conversion
into Series E Preferred exceeded the conversion price of $0.33 per share and the
company recorded a loss on the extinguishment of debt of $804,545 during the
three months ended September 30, 2008.
  14
 
 Probability
- Weighted Expected Cash Flow Methodology
 
 Assumptions: Single
Compound Embedded Derivative within Debentures
 
 Inception
              
              
              As
      ofMay
      21, 2008
              
              
              September
      30, 2008Risk
      free interest rate
              
              
              4.53
              %
              
              
              4.43
              %Timely
      registration
              
              
              95.00
              %
              
              
              95.00
              %Default
      status
              
              
              5.00
              %
              
              
              5.00
              %Alternative
      financing available and exercised
              
              
              0.00
              %
              
              
              0.00
              %Trading
      volume, gross monthly dollars monthly rate increase
              
              
              1.00
              %
              
              
              1.00
              %Annual
      growth rate stock price
              
              
              29.14
              %
              
              
              29.05
              %Future
      projected volatility
              
              
              150.00
              %
              
              
              60.00
              %
 
 The stock
purchase warrants are freestanding derivative financial instruments which were
valued using the Black-Scholes method. The fair value of the derivative
liability of the compound embedded derivatives, the warrants issued with the
Debentures and the other tainted convertible instruments was recorded at
$1,470,868 and $5,967,587, respectively, on May 21, 2008. The unamortized
discount was accreted to interest expense using the effective interest method
over the life of the Debentures. The total accretion expense was $1,060,366
for the period May 21, 2008 through September 30, 2008. The remaining value
of $1,468,316 was expensed at inception to interest expense since the total fair
value of the derivatives at inception exceeded the face value of the
Debentures. The effective interest rate on the Debentures was
1,551.9%.
 
 The
Debentures were settled in September 2008; however, as long as the other
outstanding convertible instruments of the Company, specifically the Series A,
B, D and E Preferred and the convertible note are outstanding, they are
potentially convertible into an unlimited number of common shares, resulting in
the Company no longer having the control to physically or net share settle
existing non-employee stock options. Thus under EITF 00-19, all
non-employee stock options that are exercisable during the period that these
instruments are outstanding are required to be treated as derivative liabilities
and recorded at fair value until the provisions requiring this treatment have
been settled.
 
 As of the
date of issuance of the Debentures on May 21, 2008, the fair value of options to
purchase 8,900,000 shares and other tainted convertible instruments totaling
$5,856,395 was reclassified to the liability caption “Derivative liabilities”
from additional paid-in capital. The change in fair value of $17,922,772 as
of September 30, 2008, has been included in earnings under the caption “Change
in fair value of derivatives.”
 
 Variables
used in the Black-Scholes option-pricing model include: (1) 4.53% to 4.59%
risk-free interest rate; (2) expected warrant life is the actual remaining life
of the warrant as of each period end; (3) expected volatility is 150.00%; and
(4) zero expected dividends.
 
 Both the
embedded and freestanding derivative financial instruments were recorded as
liabilities in the consolidated balance sheet and measured at fair
value. These derivative liabilities will be marked-to-market each quarter
with the change in fair value recorded as either a gain or loss in the income
statement.
 
 The
impact of the application of SFAS No. 133 and EITF 00-19 in regards to the
derivative liabilities on the balance sheet and statements of operations as of
inception (May 21, 2008) and through September 30, 2008 are as
follows:
  15
  
 Transaction
                Date
              
              
              Liability
                As
      ofMay
      21, 2008
              
              
              Sept.
      30, 2008Derivative
      liability – single compound embedded derivatives within the
      debentures
              
              $
              797,447
              
              
              $
              --Derivative
      liability – other tainted convertible instruments
              
              
              7,438,455
              
              
              
              10,794,286Derivative
      liability - warrants issued in connection with Term Loan
              
              
              --
              
              
              
              9,952,336Net
      change in fair value of derivatives
              
              
              --
              
              
              
              7,970,436Derivative
      liabilities
              
              $
              8,235,902
              
              
              $
              28,717,058
 
 2006
Convertible Notes
 
 During
2006, EV Delaware sold $1,500,000 of convertible promissory notes (the "2006
Notes") which were expressly assumed by the Company in the May 2006 merger of EV
Delaware into our wholly-owned subsidiary. The 2006 Notes had an original
maturity date of August 31, 2007, carried an interest rate of 10% per annum,
payable in either cash or shares, and were convertible into shares of Common
Stock at a conversion rate of $0.50 per share at the option of the
investor. Each investor also received a number of shares of Common Stock
equal to 20% of his or her investment divided by $0.50. Thus, a total of
600,000 shares were initially issued to investors in the 2006 Notes. The
relative fair value of these shares was $250,000 and was recorded as a debt
discount and as additional paid-in capital. The debt discount was amortized
over the original term of the notes payable using the effective interest
method. The original issue discount rate was 23.44%. During the period
from February 21, 2006 (inception) to August 31, 2007, the entire discount of
$250,000 was amortized and recorded as interest expense.
 
 The
Company evaluated the application of SFAS No. 133 and EITF 00-19. Based on
the guidance of SFAS No. 133 and EITF 00-19, the Company concluded that these
instruments were not required to be accounted for as derivatives.
 
 On August
31, 2007 (the original Maturity Date), the Company repaid in cash six of the
holders of the 2006 Notes an aggregate amount of $424,637, of which $410,000
represented principal and $14,637 represented accrued interest. On
September 4, 2007, an additional $44,624 of accrued and current period interest
was repaid through the issuance of 89,248 shares of Common Stock.  The
remaining holders of the 2006 Notes entered into an agreement with the Company
whereby the maturity date of the 2006 Notes was extended to February 28, 2008
and, beginning September 1, 2007 until the 2006 Notes are paid in full, the
interest rate on the outstanding principal increased to 12% per annum. In
addition, the Company agreed to issue to the remaining holders of the 2006
Notes, 218,000 shares of Common Stock with a value of $98,100 as consideration
for extending the 2006 Note's maturity date.  The Company evaluated the
application of EITF 96-19, "Debtor's Accounting for a Modification or Exchange
of Debt Instruments" and concluded that the revised terms constituted a debt
modification rather than a debt extinguishment and accordingly, the value of the
common stock has been treated as interest expense in the accompanying statements
of operations.
 
 On
February 28, 2008, $1,090,000 of the 2006 Notes came due and the Company was
unable to repay them.  The Company continued to accrue interest on the
notes at 12%, the agreed upon rate for the extension period. On March 6,
2008, the Company issued 130,449 shares of common stock in lieu of cash in
payment of $65,221 of accrued and current period interest to the holders of 2006
Notes. On April 22, 2008, the Company repaid $100,000 principal amount
in cash to one of the holders of the notes. During May 2008, the Company
exchanged 99,395 shares of its Series A Preferred in full satisfaction of its
obligation under the notes to pay $965,000 of principal and $28,950 of interest,
with each share of such preferred stock being automatically convertible into 20
shares of the Company’s common stock, for an aggregate of 1,987,900 shares of
its common stock. The Series A Preferred will automatically convert into
shares of the Company’s Common Stock upon the effectiveness of the Charter
Amendment. At September 30, 2008, the Company has outstanding $25,000
principal amount of the 2006 Notes with one note holder.
  
 NOTE
7. FAIR
VALUE
  Due to the
insufficient unissued authorized shares to settle the Debentures, other
outstanding convertible instruments of the Company, specifically the Series
A, B, D and E Preferred, convertible note and non-employee stock options, have
been classified as derivative liabilities under SFAS No. 133.  Each
reporting period, this derivative liability is marked-to-market with the
non-cash gain or loss recorded in the period as a gain or loss
on derivatives.  At September 30, 2008, the aggregate derivative
liability was $28,717,058.  The valuation of the Company's embedded
derivatives and warrant derivatives are determined primarily by the
Black-Scholes option pricing model.
  Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 157,
Fair Value measurements, for all financial instruments. SFAS 157 establishes a
three-level valuation hierarchy for disclosure of fair value measurements. The
valuation hierarchy is based upon the transparency of inputs to the valuation of
an asset or liability as of the measurement date. The three levels are defined
as follows:
 
 Level
      1
                Quoted
      prices (unadjusted) for identical assets or liabilities in active
      markets.
 Level
      2
                Quoted
      prices for similar assets or liabilities in active markets; quoted prices
      for identical or similar assets or liabilities in markets that are not
      active; and model-derived valuations whose inputs or significant value
      drivers are observable.
 Level
      3
                Significant
      inputs to the valuation model are
  unobservable.
  Level
      1
                
                Level
      2
                
                Level
      3
                
                TotalLiabilitiesDerivative
      liabilities
                -
                
                $
                28,717,058
                
                -
                
                $
                28,717,058
  NOTE
8.                      DERIVATIVE
FINANCIAL INSTRUMENTS
 
 The
Company, in an effort to manage its natural gas and crude oil commodity price
risk exposures utilizes derivative financial instruments. The Company, from
time to time, enters into over-the-counter swap transactions that convert its
variable-based oil and natural gas sales arrangements to fixed-price
arrangements. The Company accounts for its derivative instruments in
accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” as amended. SFAS No. 133 requires the recognition of all
derivatives as either assets or liabilities in the consolidated balance sheet
and the measurement of those instruments at fair value. The Company entered
into various derivative instruments during the period ended September 30,
2008. These swap contracts are not being accounted for as cash flow hedges
under SFAS No. 133, but are recognized as derivatives and fair
valued.
 
 The
Company marks-to-market its open swap positions at the end of each period and
records the net unrealized gain or loss during the period in derivative gains or
losses in the consolidated statements of operations. For the three months
ended September 30, 2008, the Company recorded gains of $634,528, related to its
swap contracts in the consolidated statements of operations. These swap
contracts were related to an agreement entered into on September 2, 2008, with
Macquarie Bank Limited, and were entered into as a condition of the CIT Credit
Facility. In the first contract the Company agreed to be the floating price
payer (based on Inside FERC Houston Ship Channel) on specific quantities of
natural gas over the period beginning October 1, 2008 through December 31, 2011
and receive a fixed payment of $7.82 per MMBTU. In the second contract the
Company agreed to be the floating price payer (based on the NYMEX WTI Nearby
Month Future Contract) on specific monthly quantities of crude oil over the
period beginning October 1, 2008 through December 31, 2011 and receive a fixed
payment of $110.35 per barrel.
 
 Fair
value is estimated based on forward market prices and approximates the net gains
and losses that would have been realized if the contracts had been closed out at
period-end. When forward market prices are not available, they are
estimated using spot prices adjusted based on risk-free rates, carrying costs,
and counterparty risk.
 
 As of
September 30, 2008, the Company had the following hedge contracts
outstanding:
 
 Instrument
              Beginning
                Date
              Ending
                Date
              
              Fixed
              
              
              TotalBbls
                2008
              
              
              TotalBbls
                2009
              
              
              TotalBbls
                2010
              
              
              TotalBbls
                2011Swap
              Oct-08
              Dec-11
              
              $
              110.35
              
              
              
              3,522
              
              
              
              10,762
              
              
              
              7,575
              
              
              
              5,712Indexed
      to NYMEX WTI
 
 Instrument
              Beginning
                Date
              Ending
                Date
              
              Fixed
              
              
              TotalMMBtu
                2008
              
              
              TotalMMBtu
                2009
              
              
              TotalMMBtu
                2010
              
              
              TotalMMBtu
                2011Swap
              Oct-08
              Dec-11
              
              $
              7.82
              
              
              
              131,781
              
              
              
              427,953
              
              
              
              328,203
              
              
              
              262,080Indexed
      to Inside FERC Houston Ship Channel
  17
 
 NOTE
9.                      PREFERRED
STOCK AND COMMON STOCK
 
 Preferred
Stock
 
 On August
20, 2008 the Company issued 500 shares of its newly designated Series C
Preferred to Alan D. Gaines, the Company’s largest stockholder and a director of
the Company, in exchange for the cancellation of a promissory note made by the
Company in favor of Mr. Gaines, in the principal amount of $50,000. In
addition to these shares of Series C Preferred, on August 20, 2008, the Company
also issued an additional 500 shares of Series C Preferred to Mr. Gaines for
cash consideration of $50,000. The Series C Preferred are automatically
redeemable by the Company at the rate of $100 for every one (1) share of Series
C Preferred being redeemed upon the closing of a debt or equity financing
whereby the Company realizes gross proceeds in excess of $5,000,000. The
Company’s lender in the CIT Credit Facility did not permit the Company to redeem
the Series C Preferred upon funding, with the understanding that, based upon the
success of the Company’s workover program and increased production resulting
from the Voyager Acquisition, the lender would permit a subsequent distribution
to Mr. Gaines for his Series C Preferred.
 
 As set
forth above in Note. 3, the Company issued 10,000 shares of Series D Preferred
to the seller in the Voyager Acquisition. As set forth in the Certificate
of Designations filed with the State of Nevada on August 27, 2008 with respect
to the Series D Preferred, upon the effectiveness of the Charter Amendment, each
share of Series D Preferred will automatically convert into 1,750 shares of
common stock for an aggregate of 17,500,000 shares of the Company’s common
stock.
 
 Concurrent
with the closing of the Voyager Acquisition, the Company issued 10,000 shares of
its newly designated Series E Preferred to the former holder of a $450,000
Debenture in satisfaction of the Company’s obligations under such Debenture. As
set forth in the Certificate of Designations filed with the State of Nevada on
August 29, 2008, with respect to  the Series E Preferred, upon the
effectiveness of the Charter Amendment, each share of Series E Preferred will
automatically convert into 136.3636 shares of common stock for an aggregate of
1,363,636 shares of the Company’s common stock.
 
 The
shares of Series D and Series E Preferred rank senior to all other shares of the
Company’s capital stock and are on parity with each other.
  Common
Stock
 
 On March
4, 2008, the Company’s Board of Directors approved the Charter Amendment
providing for, among other things, an increase in the number of authorized
common shares that the Company may issue from 24,000,000 to 149,000,000
shares. The holders of a majority of the Company’s outstanding shares of
common stock consented to the Charter Amendment on March 4, 2008, which consent
was subsequently ratified on August 29, 2008. As of November 19, 2008, the
number of authorized shares of common stock that the Company may issue remained
at 24,000,000 shares, pending the effectiveness of the Charter
Amendment.
 
 NOTE
10.                      GRANTS
OF WARRANTS AND OPTIONS
 
 The
Company uses the Black-Scholes option-pricing model to estimate option fair
values.  The option-pricing model requires a number of assumptions, of
which the most significant are: expected stock price volatility, the expected
pre-vesting forfeiture rate and the expected option term (the amount of time
from the grant date until the options are exercised or expire).
 
 Volatilities are based on the historical volatility of the Company’s closing
common stock price. Expected term of options and warrants granted
represents the period of time that options and warrants granted are expected to
be outstanding. The risk-free rate for periods within the contractual life
of the options and warrants is based on the comparable U.S. Treasury rates in
effect at the time of each grant.
 
 None of
the stock options or warrants which have been granted are exercisable until such
time as the Company files its Charter Amendment with the State of Nevada to
increase its authorized shares of common stock from the current authorized of
24,000,000 shares to 149,000,000 shares.
 
 As part
of the consideration for entry into the CIT Credit Facility, on September 2,
2008 the Company granted CIT Capital a warrant, exercisable for up to 24,199,996
shares of the Company’s common stock, at an exercise price of $0.35 per share
(the “CIT Warrant”). The CIT Warrant expires on September 2, 2013 and is
exercisable upon the effectiveness of the Charter Amendment.
 
 18
  NOTE
11.                      ASSET
RETIREMENT OBLIGATIONS
 
 The
Company’s asset retirement obligations relate to estimated future plugging and
abandonment expenses or disposal of its oil and gas properties and related
facilities. These obligations to abandon and restore properties are based
upon estimated future costs which may change based upon future inflation rates
and changes in statutory remediation rules. The following table provides a
summary of the Company’s asset retirement obligations:
 
 Three
      Months EndedSeptember
      30, 2008Balance
      as of June 30, 2008
              
              $
              --Liabilities
      incurred in current period
              
              
              --Liabilities
      assumed in business combination
              
              
              765,658Accretion
      expense
              
              
              --Balance
      September 30, 2008
              
              $
              765,658
 
 NOTE
12.                      RELATED
PARTY TRANSACTION
 
 See
Note. 9 for a discussion of Series C Preferred stock issued to a director
for cash consideration of $100,000.
 
 NOTE 13.                      COMMITMENTS
AND CONTINGENCIES
 
 Commencing
August 1, 2008, Voyager Gas Corporation (“Tenant”) entered into an office lease
agreement with GPI Tollway – Madison, LLC (“Landlord”) to provide office space
in Addison, Texas. The lease provides for approximately 2,173 rentable
square feet at monthly rental rates ranging from $3,622 to $3,803 per month and
terminates on October 31, 2011. Effective November 1, 2008, Voyager Gas
Corporation executed an Assignment of Lease between Voyager Gas Corporation as
Tenant, GPI Tollway – Madison, LLC as Landlord and Addison Oil, LLC as Assignee
pursuant to which Addison Oil, LLC assumed and agreed to make all payments and
to perform and keep all promises, covenants and conditions and agreements
of the lease by Tenant to be made, kept and performed from and after the
assignment date. Pursuant to the Assignment of Lease, Voyager Gas
Corporation does hereby remain liable for the performance of all covenants,
agreements and conditions contained in the lease should Addison Oil LLC default
on its obligations.
  NOTE
14.                      SUBSEQUENT
EVENTS
 
 Repayment
of Note Payable
 
 On
October 6, 2008, pursuant to a mutual agreement between the Company and Global
Hunter Securities, LLC, (“GHS”) the Company made a cash payment in the amount of
$300,000 as full settlement of the non-interest bearing promissory note in the
principal amount of $575,500 originally due March 15, 2009.
 
 2008
Stock Incentive Plan
 
 On
September 19, 2008, the Company’s Board of Directors authorized the adoption of
the ABC Funding, Inc. 2008 Stock Incentive Plan (the “2008 Plan”). The 2008
Plan was approved by holders of a majority of the Company’s outstanding shares
of common stock on September 19, 2008, effective on the twenty-first (21st ) day
after mailing to all stockholders of record the Company’s definitive Information
Statement on Schedule 14C relating to adoption of the 2008 Plan, in compliance
with Regulation 14C under the Securities Exchange Act of 1934, as
amended. The 2008 Plan provides for the issuance of up to 8,500,000 shares
of the Company’s common stock to employees, non-employee directors and
consultants through the issuance of stock options, restricted stock awards,
stock appreciation rights and bonus stock. The Company’s Board of Directors
feel the stock options and stock-based incentives offered under the 2008 Plan
play an important role in retaining the services of outstanding personnel and in
encouraging such personnel, together with existing employees, to have a greater
financial investment in the Company.
 
 Issuance
of Stock Options and Restricted Stock Awards
 
 On
October 1, 2008, the Company entered into an employment agreement pursuant to
which the Company, effective as of October 1, 2008, engaged Jim B. Davis, to
serve as its Senior Vice President of Operations. The Company also entered
into a restricted stock agreement and option agreements with Mr. Davis, pursuant
to which the Company has agreed to issue up to an aggregate of 1,750,000 shares
of its common stock to Mr. Davis, subject to the effectiveness of the Charter
Amendment in the State of Nevada.


19
 
 Item
2.                      Management's
Discussion and Analysis of Financial Condition and Results of
Operations
  Cautionary
Notice Regarding Forward Looking Statements
 
 This
Form 10-Q/A contains a number of forward-looking statements that reflect
management's current views and expectations with respect to our business,
strategies, future results and events and financial performance. All
statements made in this prospectus other than statements of historical fact,
including statements that address operating performance, events or developments
that management expects or anticipates will or may occur in the future,
including statements related to future reserves, cash flows, revenues,
profitability, adequacy of funds from operations, statements expressing general
optimism about future operating results and non-historical information, are
forward-looking statements. In particular, the words "believe," "expect,"
"intend," " anticipate," "estimate," "may," "will," variations of such words and
similar expressions identify forward-looking statements, but are not the
exclusive means of identifying such statements and their absence does not mean
that the statement is not forward-looking. These forward-looking statements
are subject to certain risks and uncertainties, including those discussed
below. Our actual results, performance or achievements could differ
materially from historical results as well as those expressed in, anticipated or
implied by these forward-looking statements. We do not undertake any
obligation to revise these forward-looking statements to reflect any future
events or circumstances.
  Readers
should not place undue reliance on these forward-looking statements, which are
based on management's current expectations and projections about future events,
are not guarantees of future performance, are subject to risks, uncertainties
and assumptions (including those described below) and apply only as of the date
of this Registration Statement. Our actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to those discussed
elsewhere in this report, and the risks discussed in our press releases and
other communications to shareholders issued by us from time to time, which
attempt to advise interested parties of the risks and factors that may affect
our business. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
  General
Overview
 
 On
September 2, 2008, we completed the Voyager Acquisition, whereby Voyager was
designated as our predecessor and we succeeded to substantially all of its
business operations and properties, including ownership interests in oil and
natural gas lease blocks in the Duval County, Texas (the “Duval County
Properties”) covering approximately 14,300 net acres.  We paid cash
consideration of $35.0 million, plus 10,000 shares of our Series D Preferred,
having an agreed upon value of $7.0 million, in the Voyager
Acquisition.  We fair valued the preferred stock on September 2, 2008,
and recorded the fair value of the preferred stock of $9.1
million.
 
 Having
consummated the Voyager Acquisition, we intend to engage in the exploration,
production, development, acquisition and exploitation of the crude oil and
natural gas properties located in the Duval County Properties.  We
believe that these properties and other assets acquired in the Voyager
Acquisition will provide us a number of opportunities to realize increased
production and revenues.  We also believe that the reserve base
located in the Duval County Properties can be further developed through infill
and step-out drilling of new wells, workovers targeting proved reserves and
stimulating existing wells.  As such, we plan to investigate and
evaluate various formations therein to potentially recover significant
incremental oil and natural gas reserves and to create new drilling programs to
exploit the full reserve potential of the reservoirs located
therein.
 
 To date,
management has identified four non-productive wells with immediate capital
recompletion or expense workover potential to new and/or existing
formations.  We have prepared capital recompletion and expense
workover procedures on three of these non-productive wells and have begun
operations to return them to a productive status.  In addition, we
have identified two currently producing wells whereby we intend to add
additional perforations to the currently producing and/or new zones in
anticipation of increasing production.  Our total estimated cost to
perform the well work on these five identified projects is approximately
$410,000.  Our estimated capital expenditures for the one remaining
capital recompletion we have identified is $100,000.  In addition to
the recompletions and workovers, we have identified drilling opportunities for
six proved undeveloped locations and seven potential exploratory
locations.  Total estimated capital expenditures for drilling of these
13 wells is $11.7 million.  These recompletions and drilling
opportunities will be funded through a combination of cash flow from the Duval
County Properties and borrowings under our Credit Facility.
 
 We
intend to utilize 3-D seismic analysis from our acquired seismic database and
other modern technologies and production techniques to enhance our production
and returns, and, although seismic indications of hydrocarbon saturation are
generally not reliable indicators of productive reservoir rock and other modern
technologies such as well logs are not always reliable indicators of hydrocarbon
productivity, we believe use of such technologies and production techniques in
exploring for, developing and exploiting oil and natural gas properties will
help us reduce drilling risks, lower finding costs and provide for more
efficient production of oil and natural gas from our
properties.
 
 We will
continue to review opportunities to acquire additional producing properties,
leasehold acreage and drilling prospects that are located in and around the
Duval County Properties, or which might result in the establishment of new
drilling areas.  When identifying acquisition candidates, we focus
primarily on underdeveloped assets with significant growth
potential.  We seek acquisitions which allow us to absorb, enhance and
exploit properties without taking on significant geologic, exploration or
integration risk.
 
 
  The
implementation of our foregoing strategy will require that we make significant
capital expenditures in order to replace current production and find and develop
new oil and gas reserves.  In order to finance our capital program, we
will depend on cash flow from anticipated operations, cash or cash equivalents
on hand, or committed credit facilities, as discussed below in “Liquidity and Capital
Resources.”
 
 If we are
unable to raise additional capital from conventional sources, including lines of
credit and sales of stock in the future, we may be forced to curtail or cease
our business operations.  We may also be required to seek additional
capital by selling debt or equity securities, selling assets, or otherwise be
required to bring cash flows in balance when we approach a condition of cash
insufficiency.  We cannot assure you, however, that financing will be
available in amounts or on terms acceptable to us, or at all.  This is
particularly a concern in light of the current illiquidity in the credit
markets, as well as the current suppressed oil and natural gas pricing
levels.  Even if we are able to continue our operations, the failure
to obtain sufficient financing could have a substantial adverse effect on our
business prospects and financial results.
  Our
forecasted operating needs and funding requirements, as well as our projected
ability to obtain adequate financial resources, involve risks and uncertainties,
and actual results could vary as a result of a number of factors.
 
 Our
business and prospects must also be considered in light of the risks and
uncertainties frequently encountered by companies in the oil and gas
industry.  The successful development of oil and natural gas fields is
highly uncertain and we cannot reasonably estimate or know the nature, timing
and estimated expenses of the efforts necessary to complete the development of,
or the period in which material net cash inflows are expected to commence from,
any oil and natural gas production from our existing fields or other fields, if
any, acquired in the future.  Risks and uncertainties associated with
oil and natural gas production include:
 
 ·
                reservoir
      performance and natural field decline;·
                changes
      in operating conditions and costs, including costs of third party
      equipment or services such as drilling rigs and
  shipping;·
                the
      occurrence of unforeseen technical difficulties, including technical
      problems that may delay start-up or interrupt
  production;·
                the
      outcome of negotiations with co-venturers, governments, suppliers, or
      other third party operators;·
                our
      ability to manage expenses successfully;·
                regulatory
      developments, such as deregulation of certain energy markets or
      restrictions on exploration and production under laws and regulations
      related to environmental or energy security matters;
and·
                volatility
      in crude oil and natural gas prices, actions taken by the Organization of
      Petroleum Exporting Countries to increase or decrease production and
      demand for oil and gas affected by general economic growth rates and
      conditions, supply disruptions, new supply sources and the competitiveness
      of alternative hydrocarbon or other energy
  sources.
 
 Revenue
and Expense Drivers
 
 Revenue
Drivers
 
 Crude Oil and Natural Gas
Sales.  Our revenues are generated from production of crude oil
and natural gas which are substantially dependent upon prevailing
prices.  Our future production is impacted by our drilling success,
acquisitions and decline curves on our existing production.  Prices
for oil and natural gas are subject to large fluctuations in response to
relatively minor changes in the supply of or demand for oil and natural gas,
market uncertainty and a variety of additional factors beyond our
control.  We enter into derivative instruments for a portion of our
oil and natural gas production to achieve a more predictable cash flow and to
reduce our exposure to adverse fluctuations in the prices of oil and natural
gas.
 
 We
generally sell our oil and natural gas at current market prices determined at
the wellhead.  We are required to pay gathering, compression and
transportation costs with respect to substantially all of our products or incur
such costs to deliver our products to a sales point.  We market our
products in several different ways depending upon a number of factors, including
the availability of purchasers for the product at the wellhead, the availability
and cost of pipelines near the well, market prices, pipeline constraints and
operational flexibility.
 
 Operating
Expenses
 
 Our
operating expenses primarily involve the expense of operating and maintaining
our wells.
 
 ·
                Lease
      OperatingOur lease operating expenses include repair
      and maintenance costs, contract labor and supervision, salt water disposal
      costs, expense workover costs, compression, electrical power and fuel
      costs and other expenses necessary to maintain our
      operations.  Our lease operating expenses are driven in part by
      the type of commodity produced and the level of maintenance
      activity.  Ad valorem taxes represent property taxes on our
      properties.·
                Production
      Taxes.  Production taxes represent the taxes paid on
      produced oil and gas on a percentage of market (our price received from
      the purchaser) or at fixed rates established by federal, state or local
      taxing authorities.·
                General and Administrative
      Expenses.General and administrative expenses include
      employee compensation and benefits, professional fees for legal,
      accounting and advisory services and corporate
overhead.·
                Depreciation, Depletion and
      Amortization.  Depreciation, depletion and amortization
      represent the expensing of the capitalized cost of our oil and gas
      properties using the unit of production method and our other property and
      equipment.
 
 21
  Other
Income and Expenses
 
 Other
income and expenses consist of the following:
 
 Interest
Income.We generate interest income from our cash
deposits.
 
 Interest
Expense Our interest expense reflects our borrowings
under our CIT Credit Facility, other short-term notes and amortization of debt
discounts.
 
 Risk
ManagementThe results of operations and operating cash flows
are impacted by changes in market prices for oil and natural gas.  To
mitigate a portion of this exposure, we have entered into certain derivative
instruments which have not been elected to be designated as cash flow hedges for
financial reporting purposes.  Generally, our derivative instruments
are comprised of fixed price swaps as defined in the
instrument.  These instruments are recorded at fair value and changes
in fair value, including settlements, have been reported as risk management in
the statements of operations.
 
 Change in Fair Value of
Derivatives.We mark-to-market our derivative liabilities each
reporting period and record the change in the derivative liability to change in
fair value of derivatives in the statements of operations.
 
 Oil
and Natural Gas Properties – Impact of Petroleum Prices on Ceiling
Test
 
 We review
the carrying value of our oil and natural gas properties under the successful
efforts accounting rules of the SEC on a quarterly and annual
basis.  This review is referred to as a ceiling test.  Under
the ceiling test, capitalized costs, less accumulated depletion and related
deferred income taxes, may not exceed an amount equal to the sum of the present
value of estimated future net revenues less estimated future expenditures to be
incurred in developing and producing the proved reserves, less any related
income tax effects.  Any excess of the net book value, less deferred
income taxes, is generally written off to expense as an impairment.
 
 Results
of Operations
 
 Three
Months Ended September 30, 2008 vs. Three Months Ended September 30,
2007
   Successor
                  
                  
                  Predecessor
                  
                  
                  Combined
                  
                  
                  PredecessorPeriod
      July 1, Through
                    September
      30,
                    2008
                  
                  
                  Period
      July 1, Through
                    September
      2,
                    2008
                  
                  
                  Period
      July 1, Through September 30, 2008
                  
                  
                  Period
      July 1, Through
                    September
      30,
                    2007(Restated)Oil
      and gas revenue
                  
                  $
                  794,184
                  
                  
                  $ 3,851,191`
                  
                  
                  $
                  4,645,375
                  
                  
                  $
                  2,556,516Operating
      costs and expenses:Lease
      operating expenses
                  
                  
                  154,373
                  
                  
                  
                  242,516
                  
                  
                  
                  396,889
                  
                  
                  
                  598,339Production
      taxes
                  
                  
                  55,361
                  
                  
                  
                  290,295
                  
                  
                  
                  345,656
                  
                  
                  
                  156,970General
      and administrative expenses
                  
                  
                  707,345
                  
                  
                  
                  158,306
                  
                  
                  
                  865,651
                  
                  
                  
                  192,669Depreciation,
      depletion and amortization
                  
                  
                  206,451
                  
                  
                  
                  758,151
                  
                  
                  
                  964,602
                  
                  
                  
                  1,774,952Total
      operating costs and expenses
                  
                  
                  1,123,530
                  
                  
                  
                  1,449,268
                  
                  
                  
                  2,572,798
                  
                  
                  
                  2,722,930Income
      (loss) from operations
                  
                  
                  (329,346
                  )
                  
                  
                  2,401,923
                  
                  
                  
                  2,072,577
                  
                  
                  
                  (166,414Other
      income (expense):Interest
      income
                  
                  
                  1,397
                  
                  
                  
                  --
                  
                  
                  
                  1,397
                  
                  
                  
                  --Interest
      expense
                  
                  
                  (1,297,426
                  )
                  
                  
                  (237,412
                  )
                  
                  
                  (1,534,838
                  )
                  
                  
                  (194,782
                  )Risk
      management
                  
                  
                  683,391
                  
                  
                  
                  --
                  
                  
                  
                  683,391
                  
                  
                  
                  --Loss
      on extinguishment of debt
                  
                  
                  (804,545
                  )
                  
                  
                  --
                  
                  
                  
                  (804,545
                  )
                  
                  
                  --Change
      in fair value of derivatives
                  
                  
                  (7,970,436
                  )
                  
                  
                  --
                  
                  
                  
                  (7,970,436
                  )
                  
                  
                  --Total
      other income (expense)
                  
                  
                  (9,387,619
                  )
                  
                  
                  (237,412
                  )
                  
                  
                  (9,625,031
                  )
                  
                  
                  (194,782
                  )Net
      income (loss)
                  
                  $
                  (9,716,965
                  )
                  
                  $
                  2,164,511
                  
                  
                  $
                  (7,552,454
                  )
                  
                  $
                  (361,196
                  )
 
 22
 Revenues.  Combined revenue for the
three months ended September 30, 2008, was $4,645,375 compared to $2,556,516 for
the three months ended September 30, 2007, an increase of $2,088,859, or
82%.  Sales of oil for the 2008 period increased over the 2007 period,
primarily due to the successful recompletion of the Marchbanks-Cadena "B"
Well No. 15 during the fourth quarter of 2007.  Sales of natural gas for
the three months ended September 30, 2008 decreased when compared to the 2007
period, primarily due to normal production declines from the Duval County
Properties.  We also experienced an increase in prices received for both
oil and natural gas during the 2008 period when compared to the 2007
period.
  Lease Operating
Expenses.  Lease operating expenses for the three months ended
September 30, 2008, were $396,889.  The primary components of lease
operating expenses are salt water disposal, natural gas compression and
generla lease and well maintenance and repair.
 
 Production
Taxes.Production taxes for the three months ended September
30, 2008 were $345,656 compared to $156,970 for the 2007 period. 
Production taxes increased due to the increase in revenue.  All of our
revenue is attributable to the State of Texas.  Severance taxes in the
State of Texas are based upon the value of crude oil sold and natural gas
produced.  Crude oil is taxed at the rate of 4.6% of the value sold
and natural gas is taxed at the rate of 7.5% of the natural gas
produced.
  Depreciation,
depletion and amortization.  Depreciation, depletion and
amortization for the three months ended September 30, 2008 was $964,602 compared
to $1,774,952 for the 2007 period.  We experienced a decrease in the
depletion rate per Mcfe during the 2008 period as a result of additions to our
reserves during the fourth quarter of 2007.
 
 General and Administrative
Expenses.General and administrative expenses were $865,651
for the three months ended September 30, 2008, compared to $192,669 for the
three months ended September 30, 2007.  We experienced an increase in
payroll and related costs when compared to the 2007 period due to the addition
of three employees during the 2008 period.  In addition, during the
2008 period we incurred $337,984 for non-cash stock expense pursuant to stock
options and restricted stock awards granted to our CEO and CFO.  We
incurred professional fees during the 2008 period of $161,336 comprised of
legal, accounting and engineering fees.  The increase in professional
fees was a result of increased activity primarily attributable to the Voyager
Acquisition and public company reporting.
  Interest
Expense.  Interest expense for the three months ended September
30, 2008, totaled $1,534,838 and was comprised of interest expense incurred
pursuant to our CIT Credit Facility of $190,375, amortization of deferred
financing costs and amortization of debt discounts.  Interest
expense for the 2007 period was $194,782 which was comprised of accrued interest
on Voyager's credit facility.
 
 Risk
Management.  The gain recorded from our risk management
position for the three months ended September 30, 2008, was
$683,391.  We mark-to-market our open swap positions at the end of
each period and record the net unrealized gain or loss during the period in
derivative gains or losses in our statements of operations.  For the
three months ended September 30, 2008, we recorded gains of $634,528, related to
our swap contracts.  These swap contracts are related to an agreement
entered into on September 2, 2008, with Macquarie Bank Limited.  In
the first contract we agreed to be the floating price payer (based on Inside
FERC Houston Ship Channel) on specific quantities of natural gas over the period
beginning October 1, 2008 through December 31, 2011 and receive a fixed payment
of $7.82 per MMBTU.  In the second contract we agreed to be the
floating price payer (based on the NYMEX WTI Nearby Month Future Contract) on
specific monthly quantities of oil over the period beginning October 1, 2008
through December 31, 2011 and receive a fixed payment of $110.35 per
barrel.
  Fair
value is estimated based on forward market prices and approximates the net gains
and losses that would have been realized if the contracts had been closed out at
period-end.  When forward market prices are not available, they are
estimated using spot prices adjusted based on risk-free rates, carrying costs,
and counterparty risk.
 
 23
  In
addition to the above, we were required to unwind Voyager Gas Corporation’s
hedge positions upon closing of the Voyager Acquisition on September 2,
2008.  We recorded a gain from unwinding Voyager’s hedge position of
$48,863.
 
 Loss on Extinguishment of
Debt.  On August 31, 2008, we converted $450,000 principal
amount of the Debentures to 10,000 shares of our Series E Preferred stock which
will convert into 1,363,636 shares of our common stock upon the effectiveness of
our Charter Amendment to be filed with the State of Nevada.  We fair
valued the common stock at August 31, 2008, and recorded a loss on
extinguishment of debt of $804,545.
 
 Change in Fair Value of
Derivatives.We mark-to-market our derivative liabilities each
period to report the change in fair value.  For the three months ended
September 30, 2008, the change in fair value of our derivative liabilities was a
loss of $7,970,436.  The derivative liabilities exist because we have
insufficient authorized and unissued shares of our common stock to settle our
contracts including the outstanding preferred stock (Series A, B, D, and E), our
outstanding warrants and stock options and our outstanding convertible
debt.  Upon the effectiveness of the Charter Amendment to increase our
number of authorized shares of common stock from 24,000,000 to 149,000,000, we
will have sufficient authorized and unissued shares to settle these
contracts.  At that point, the derivative liability will be eliminated
and we will record a gain on the change in fair value of
derivatives.
  Liquidity
and Capital Resources
 
 Our main
sources of liquidity and capital resources for the fiscal year 2009 will be
cash, short-term cash equivalent investments on hand , anticipated internally
generated cash flows from operations following the Voyager Acquisition and
committed credit facilities.
 
 Credit
Facility
 
 On
September 2, 2008 we entered into the Credit Facility, consisting of a $50
million senior secured revolving loan (“Revolving Loan”) and a $22 million term
loan (“Term Loan”).
 
 The
Revolving Loan is subject to an initial borrowing base of $14.0 million, or an
amount determined based on semi-annual reviews of our proved oil and gas
reserves.  As of September 2, 2008, we had borrowed $11.5 million
under the Revolving Loan to finance the Voyager Acquisition, to repay the
related bridge loan and transaction expenses, and to fund capital expenditures
generally.  Monies advanced under the Revolving Loan mature on
September 1, 2011 and bear interest at a rate equal to LIBOR plus 1.75% to
2.50%, as the case may be.  On September 4, 2008, we obtained a three
month LIBOR rate expiring December 4, 2008, resulting in an annual interest rate
of 5.31%.  On September 30, 2008, we repaid $1 million of principal on
the Revolving Loan and on October 22, 2008, we borrowed $1 million on the
Revolving Loan.
 
 The Term
Loan provides for a one-time advance to us of $22.0 million.  We drew
down the full amount on September 2, 2008, to finance the Voyager Acquisition
and to repay the related bridge loan and transaction expenses.  Monies
borrowed under the Term Loan mature on March 1, 2012 and bear interest at a rate
equal to LIBOR plus 5% during the first twelve months after closing and LIBOR
plus 7.50%, thereafter.  On September 4, 2008, we obtained a three
month LIBOR rate expiring December 4, 2008, resulting in an annual interest rate
of 7.81%.
 
 All
borrowings under the Revolving Loan are secured by a first lien on all of our
assets and those of our subsidiaries.  All borrowings under the Term
Loan are secured by a second lien on all of our assets and those of our
subsidiaries.
 
 The loan
instruments evidencing the Revolving Loan contain various restrictive covenants,
including financial covenants requiring that we will not: (i) as of the last day
of any fiscal quarter, permit our ratio of EBITDAX for the period of four fiscal
quarters then ending to interest expense for such period to be less than 2.0 to
1.0; (ii) at any time permit our ratio of total debt as of such time to EBITDAX
for the four fiscal quarters ending on the last day of the fiscal quarter
immediately preceding the date of determination for which financial statements
are available to be greater than 4.0 to 1.0; and (iii) permit, as of the last
day of any fiscal quarter, our ratio of (a) consolidated current assets
(including the unused amount of the total commitments, but excluding non-cash
assets under FAS 133) to (b) consolidated current liabilities (excluding
non-cash obligations under SFAS No. 133 and current maturities under the Credit
Facility) to be less than 1.0 to 1.0.
 
 The loan
instruments evidencing the Term Loan also contain various restrictive covenants,
including financial covenants requiring that we will not: (i) permit, as of the
last day of any fiscal quarter, our ratio of (a) consolidated current assets
(including the unused amount of the total commitments, but excluding non-cash
assets under SFAS No. 133) to (b) consolidated current liabilities (excluding
non-cash obligations under FAS 133 and current maturities under the Credit
Facility) to be less than 1.0 to 1.0; and (ii) as of the date of any
determination permit our ratio of total reserve value as in effect on such date
of determination to total debt as of such date of determination to be less than
2.0 to 1.0
 
 24
  Upon our
failure to comply with covenants, the lender has the right to refuse to advance
additional funds under the revolver and/or declare any outstanding principal and
interest immediately due and payable.  We were in compliance with all
covenants as of September 30, 2008.
 
 CIT
Capital, as lender, is entitled to a one percent (1%) overriding royalty
interest (“ORRI”) of our net revenue interest in the oil and gas properties
acquired in the Voyager Acquisition.  The overriding royalty interest
is applicable to any renewal, extension or new lease taken by us within one year
after the date of termination of the ORRI Properties, as defined in the
overriding royalty agreement covering the same property, horizons and
minerals.
 
 CIT
Capital also received, and is entitled to receive in its capacity as
administrative agent, various fees from us while monies advanced or loaned
remain outstanding, including an annual administrative agent fee of $20,000 for
each of the Revolving Loan and Term Loan and a commitment fee ranging from
0.375% to 0.5% of any unused portion of the borrowing base available under the
Revolving Loan.
 
 Under the
Credit Facility, we were required to enter into hedging arrangements mutually
agreeable between us and CIT Capital.  On September 2, 2008 and
effective October 1, 2008, we entered into hedging arrangements with a bank
whereby we hedged 65% of our proved developed producing natural gas production
and 25% of our proved developed producing oil production from October 1, 2008
through December 31, 2011 at $7.82 per Mmbtu and $110.35 per barrel,
respectively.
 
 Convertible
Debentures (Bridge Loan)
 
 On May
21, 2008, we entered into the Bridge Loan, whereby we issued the Debentures and
used the proceeds to fund our payment of the deposit required under the Voyager
Acquisition.
 
 The
Debentures matured the earlier of September 29, 2008 and the completion of the
Voyager Acquisition, and may be satisfied in full by our payment of the
aggregate redemption price of $900,000 or, at the election of the purchasers, by
the conversion of the Debentures into shares of our common stock, at an initial
conversion price of $0.33 subject to adjustments and full-ratchet protection
under certain circumstances.
 
 On
September 2, 2008, we repaid $450,000 principal amount of the Debentures in cash
from our Credit Facility and issued, in full satisfaction of our obligation with
respect to the other $450,000 principal amount, 10,000 shares of our Series E
Preferred.  Each share of preferred stock automatically converted into
136.3636 shares of our common stock, for an aggregate of 1,363,636 shares of our
common stock, on the Charter Amendment Effective Date, as provided by the
Certificate of Designation governing the Series E Preferred.
 
 2007
Convertible Notes
 
 On
November 1, 2007, we sold $350,000 in convertible notes (the "2007 Notes"),
which 2007 Notes mature on October 31, 2008 and bear interest at 10% per annum,
payable in either cash or shares of our common stock based upon a conversion
price of $0.35 per share.  The investors in the 2007 Notes also
received 200,004 shares of common stock.  During May 2008, we
exchanged 37,100 shares of our Series B Preferred in full satisfaction of our
obligation under the 2007 Notes to pay $350,000 of principal and $21,000 of
interest, with each share of such preferred stock becoming convertible into
28.58 shares of our common stock, for an aggregate of 1,060,318 shares of our
common stock, on the Charter Amendment Effective Date.
 
 25
  2006
Convertible Notes
 
 As a
result of the May 2006 Merger, we assumed $1,500,000 of convertible promissory
notes (the "2006 Notes") previously sold by Energy Venture.  The 2006
Notes had an original maturity date of August 31, 2007, carried an interest rate
of 10% per annum, payable in either cash or shares, and were convertible into
shares of common stock at a conversion price of $0.50 per share at the option of
the investor.  Each investor also received a number of shares of
common stock equal to 20% of his or her investment divided by
$0.50.  Thus, a total of 600,000 shares were initially issued to
investors in the 2006 Notes.
 
 On August
31, 2007 (the original maturity date), we repaid in cash six of the holders of
the 2006 Notes an aggregate amount of $424,637, of which $410,000 represented
principal and $14,637 represented accrued interest.  On September 4,
2007, an additional $44,624 of accrued and current period interest was repaid
through the issuance of 89,248 shares of our common stock.  The
remaining holders of the 2006 Notes entered into an agreement with us whereby
the maturity date of the 2006 Notes was extended to February 28, 2008 and,
beginning September 1, 2007 until the 2006 Notes are paid in full, the interest
rate on the outstanding principal increased to 12% per annum.  In
addition, we agreed to issue to the remaining holders of the 2006 Notes, 218,000
shares of our common stock with a value of $98,100 as consideration for
extending the 2006 Note's maturity date.
 
 On
February 28, 2008, $1,090,000 of the 2006 Notes came due and we were unable to
repay them.  We continued to accrue interest on the notes at 12%, the
agreed upon rate for the extension period.  On March 6, 2008, we
issued 130,449 shares of common stock in lieu of cash in payment of $65,221 of
accrued and current period interest to holders of 2006 Notes.  On
April 22, 2008, we repaid $100,000 principal amount in cash to one of the
holders of the 2006 Notes in satisfaction thereof.  During May 2008,
we exchanged 99,395 shares of our Series A Preferred for the remaining 2006
Notes in payment of the $965,000 of principal and $28,950 of interest
thereunder.  Each share of Series A Preferred is automatically
convertible into 20 shares of our common stock, for an aggregate of 1,987,900
shares of our common stock, upon the Charter Amendment Effective Date, as
provided by the Certificate of Designation with respect to the Series A
Preferred filed with the State of Nevada on May 15, 2008.  At
September 30, 2008, $25,000 principal amount of the 2006 Notes held by one note
holder remained outstanding.
 
 We
believe our short-term and long-term liquidity is adequate to fund operations,
including capital expenditures and interest during our fiscal year ending June
30, 2009.
 
 Should
our estimated capital needs prove to be greater than we currently anticipate,
our cash flow from operating activities be less than we currently anticipate or
should we change our current operations plan in a manner that will increase or
accelerate our anticipated costs and expenses, the depletion of our working
capital would be accelerated.  Although we anticipate that adequate
funds will remain available to us under the Credit Facility, if we were unable
to access such funding by reason of our failure to satisfy borrowing covenants
thereunder we would have to use other alternative resources.  To the
extent it becomes necessary to raise additional cash in the future if our
current cash and working capital resources are depleted, we will seek to raise
it through the public or private sale of debt or our equity securities, funding
from joint venture or strategic partners, or a combination of the
foregoing.  We may also seek to satisfy indebtedness without any cash
outlay through the private issuance of debt or equity securities.  The
sale of additional equity securities or convertible debt securities would result
in dilution to our shareholders.  We cannot give you any assurance
that we will be able to secure the additional cash or working capital we may
require to continue our operations in such circumstances.  Any
assurance as to our present ability to raise additional capital outside of our
existing credit facility and business operations is particularly uncertain given
the current instability in the financial and equity markets and current oil and
natural gas pricing levels.
 
 Recent
Accounting and Reporting Pronouncements
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities – an amendment of FASB Statement No. 133” (SFAS No.
161”).  SFAS No. 161 requires additional disclosures about derivative
and hedging activities and is effective for fiscal years and interim periods
beginning after November 15, 2008.  The Company is evaluating the
impact the adoption of SFAS No. 161 will have on its financial statement
disclosures.  The Company’s adoption of SFAS No. 161 will not affect
its current accounting for derivative and hedging activities.
 
 In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations”.  This statement requires assets acquired and
liabilities assumed to be measured at fair value as of the acquisition date,
acquisition-related costs incurred prior to the acquisition to be expensed and
contractual contingencies to be recognized at fair value as of the acquisition
date.  This statement is effective for financial statements issued for
fiscal years beginning after December 15, 2008.  The Company is
currently assessing the impact, if any, the adoption of this statement will have
on its financial position, results of operations or cash flows.
 
 Off-Balance-Sheet
Arrangements.
 
 We
currently have no off balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to any investor in
our securities.
 26
 
 Item
4T.                      Controls
and Procedures
  Evaluation
of Disclosure Controls and Procedures
  Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Securities Exchange Act of 1934, as
amended (the "Act") is accumulated and communicated to the issuer's management,
including its principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.  As of the end of the period covered by this
Quarterly Report, we carried out an evaluation, under the supervision and with
the participation of our Chief Executive Officer and Chief Financial Officer of
the effectiveness of the design and operation of our disclosure controls and
procedures.  Based on this evaluation, our CEO and CFO have concluded
that our disclosure controls and procedures are not effective because of the
identification of a material weakness in our internal control over financial
reporting which is identified below, which we view as an integral part of our
disclosure controls and procedures.
 
  Evaluation
of Internal Controls over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act.  Our internal control system was
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes, in
accordance with generally accepted accounting principles.  Because of
inherent limitations, a system of internal control over financial reporting may
not prevent or detect misstatements.  Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate due to change in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
 
 Our
management carried out an assessment of the effectiveness of the Company’s
internal control over financial reporting as of September 30, 2008, using the
criteria set forth in the framework in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).  Based on that assessment, management concluded that our
internal control over financial reporting was not effective as of September 30,
2008.  This conclusion results from the continued existence of
material weaknesses in our internal control over financial reporting first
reported in our annual report on Form 10-KSB for the period ended June 30,
2008.  A material weakness is a deficiency, or a combination of
control deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the Company’s
annual or interim financial statements will not be prevented or detected on a
timely basis.
 
 As noted
in our annual report, the material weaknesses in our internal control over
financial reporting relates to the lack of segregation of duties in financial
reporting because currently our financial reporting and all accounting functions
continue to be performed by the same officer, our Chief Financial Officer hired
on May 22, 2008, and prior to then, by one external consultant.  Our
Chief Executive Officer does not possess accounting expertise and we presently
do not have an audit committee.
 
 These
weaknesses stem primarily from our lack of business operations and related
working capital to hire additional staff during the periods covered by this
report and our last report on Form 10-KSB.  With the completion of the
Voyager Acquisition, there is an ever greater risk that a material misstatement
of the financial statements could be caused, or at least not detected in a
timely manner, due to our limited staff and insufficient segregation of
duties.
 
 In light
of the foregoing and our recent completion of the Voyager Acquisition, as a
result of which we emerged from “shell company” status, during the current
fiscal quarter, we intend to implement a number of measures to remediate such
ineffectiveness and strengthen our internal controls
environment.  Planned action includes our initial retention of an
outside consulting firm to assist us in the evaluation and testing of our
internal control system and the identification of opportunities to improve the
efficacy of our accounting and financial reporting
processes.  Additional anticipated remedial action will involve
organizational and process changes to address the identified deficiencies,
including (i) hiring additional personnel to assist with financial reporting and
business operations as soon as our finances will allow, (ii) establishing and
complying with delegation of authority guidelines to be prepared for approval by
the Board of Directors, (iii) modifying analytical procedures to ensure the
accurate, timely and complete reconciliation of all major accounts; (iv)
ensuring proper segregation of duty controls throughout our company, and (v)
implementing formal processes requiring periodic self-assessments and
independent tests.
 
 27
  Along
these lines, and as previously reported, on October 1, 2008, we retained a
senior officer of operations and, as a result, separated the responsibility of
CFO to pay operational invoices from the review and approval of such invoices, a
process now within the purview of the senior operating officer just
retained.  Recently, we have also approached potential candidates to
serve as additional members to our Board of Directors, including candidates
having accounting backgrounds to form an audit committee.
 
 At this
time, our management recognizes that many of the intended actions and
enhancements will require continual monitoring and evaluation for effectiveness,
and will necessarily evolve as we continue to evaluate and improve our internal
controls over financial reporting.  Management will accordingly review
progress on activities taken on a consistent and ongoing basis at the CEO and
senior management level in conjunction with our Board of Directors.
 
 Changes
in Internal Controls over Financial Reporting
 
 Aside
from undertaking certain activity in anticipation of implementing remedial steps
during the current and subsequent quarters, there have been no changes in our
internal controls over financial reporting during the fiscal quarter just ended
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.
 
 28
 
 PART
II.  OTHER INFORMATION
 
 Item
6.              Exhibits
 
 No.
              Description
      of Exhibit31.1
              Certification
      by the Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
              Certification
      by the Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
              Certification
      by the Chief Executive Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
              Certification
      by the Chief Financial Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
 
 
 29
 
 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.
 
 ABC FUNDING, INC.(Registrant)Date:  February
      12, 2009
              By:
              /s/  Robert
      P. MunnRobert
      P. Munn
                President
      and Chief Executive Officer
                (Principal
      Executive Officer)Date:  February
      12, 2009
              By:
              /s/  Carl
      A. ChaseCarl
      A. Chase
                Chief
      Financial Officer
                (Principal
      Accounting and Financial Officer)
 
 
 30
 
 INDEX
TO EXHIBITS
 
 No.
              Description
      of Exhibit31.1
              Certification
      by the Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
              Certification
      by the Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
              Certification
      by the Chief Executive Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
              Certification
      by the Chief Financial Officer Pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002