UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 FORM
10-Q
  (Mark
      One)[X]
        QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED:MARCH 31,
      2009[
        ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
      THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM _________ TO __________Commission
      file number: 333-142105CONSOLIDATION
      SERVICES, INC.(Exact
      name of smaller reporting company as specified in its
    charter)
  Delaware
                20-8317863(State
      or other jurisdiction of
                (IRS
      Employerincorporation
      or organization)
                Identification
      No.)
  2756
N. Green Valley Parkway, Suite 225
 Henderson,
NV  89014
 (Address
of principal executive offices)
  (702)
614-5333
 (Issuer’s
telephone number)
  N/A
 (Former
name, former address and former fiscal year, if changed since last
report)
  Check
whether the issuer (1) filed all reports required to filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]     No
  [
  ]
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.  (Check
one):
  Large
      accelerated filer
                [
        ]
                Accelerated
      filer
                [
        ]Non-accelerated
      filer
                [
        ]
                Smaller
      reporting company
                [X](Do
      not check if a smaller reporting company)
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes: [
  ]     No: [X]
   
  APPLICABLE
ONLY TO CORPORATE ISSUERS
  State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:  There were a total of15,093,970 shares of the
registrant’s common stock, par value $.001 per share, outstanding as of May 11,
2009 and no other classes of common stock.
             
 
 
 
 
    2
  Consolidation
Services, Inc.
 Quarterly
Report on Form 10-Q
 Period
Ended March 31, 2009
  Table
of Contents
 
 PagePART I .  FINANCIAL INFORMATION
                4Item 1.  Financial Statements:
                4Consolidated Balance Sheets as of March 31, 2009 (Unaudited)
      and December 31, 2008 (Audited)
                4Consolidated Statement of Operations for the three months
      ended March 31, 2009, the three months ended March 31, 2008, and for the
      period from Inception on January 26, 2007 through March 31, 2009
      (Unaudited)
                5Consolidated Statements of Stockholders' Equity (Deficit)
      for the period from Inception on January 26, 2007 through March 31, 2009
      (Unaudited)
                6Consolidated Statements of Cash Flow for the three months
      ended March 31, 2009, the three months ended March 31, 2008, and the
      period from Inception on January 26, 2007 through March 31,
      2009  (Unaudited)
                7Notes to Consolidated Financial Statements
      (Unaudited)
                8Item 2.  Management's Discussion and Analysis of
      Financial Condition and Results of Operations
                12Item 3.  Quantitative and Qualitative Disclosures
      About Market Risk
                16Item 4T.  Controls and
Procedures
                16PART II .  OTHER INFORMATION
                16Item 1.  Legal Proceedings
                16Item 1A Risk Factors
                16Item 2.  Unregistered Sales of Equity Securities
      and Use of Proceeds
                17Item 3.  Defaults Upon Senior
      Securities
                17Item 4.  Submission of Matters to a Vote of
      Security Holders
                17Item 5.  Other Information
                17Item 6.  Exhibits
                18SIGNATURES
                19EXHIBIT INDEX
                20
    3
  
 CONSOLIDATION SERVICES, INC.(A Development Stage Company)Consolidated Balance SheetsASSETSMarch
      31,
                      
                      December
      31,2009
                      
                      2008(unaudited)CURRENT
      ASSETSCash
                      
                      $
                      16,569
                      
                      
                      $
                      83,099Total
      Current Assets
                      
                      
                      16,569
                      
                      
                      
                      83,099PROPERTY
      AND EQUIPMENT, NET
                      
                      
                      6,983,041
                      
                      
                      
                      6,907,289TOTAL
      ASSETS
                      
                      $
                      6,999,610
                      
                      
                      $
                      6,990,388LIABILITIES AND
      STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                      
                      $
                      441,339
                      
                      
                      $
                      353,311Notes
      payable-related parties
                      
                      
                      1,076,624
                      
                      
                      
                      776,623Notes
      payable
                      
                      
                      977,581
                      
                      
                      
                      1,221,847Total
      Current Liabilities
                      
                      
                      2,495,544
                      
                      
                      
                      2,351,781STOCKHOLDERS'
      EQUITYCommon
      stock; 220,000,000 sharesauthorized
      at $0.001 par value, 15,093,970shares
      issued and outstanding
                      
                      
                      15,094
                      
                      
                      
                      15,094Additional
      paid-in capital
                      
                      
                      5,658,746
                      
                      
                      
                      5,658,746Non
      controlling interest
                      
                      
                      561,874
                      
                      
                      
                      562,915Stock
      subscription receivable
                      
                      
                      (871,000
                      )
                      
                      
                      (880,000
                      )Deficit
      accumulated during the development stage
                      
                      
                      (860,648
                      )
                      
                      
                      (718,148
                      )Total
      Stockholders' Equity
                      
                      
                      4,504,066
                      
                      
                      
                      4,638,607TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                      
                      $
                      6,999,610
                      
                      
                      $
                      6,990,388
 
 
 The
accompanying notes are an integral part of these financial
statements.
   4
  
 CONSOLIDATION
      SERVICES, INC.(A
      Development Stage Company)Consolidated Statements of Operations(Unaudited)From
      InceptionFor
      the Three
                  
                  
                  For
      the Three
                  
                  
                  on
      January 26,Months
      Ended
                  
                  
                  Months
      Ended
                  
                  
                  2007
      ThroughMarch
      31,
                  
                  
                  March
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008
                  
                  
                  2009REVENUES
                  
                  $
                  4,266
                  
                  
                  $
                  -
                  
                  
                  $
                  17,419COST
      OF SALES
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -GROSS
      MARGIN
                  
                  
                  4,266
                  
                  
                  
                  -
                  
                  
                  
                  17,419OPERATING
      EXPENSESGeneral
      and administrative
                  
                  
                  128,179
                  
                  
                  
                  27,961
                  
                  
                  
                  808,462Total
      Expenses
                  
                  
                  128,179
                  
                  
                  
                  27,961
                  
                  
                  
                  808,462LOSS
      FROM OPERATIONS
                  
                  
                  (123,913
                  )
                  
                  
                  (27,961
                  )
                  
                  
                  (791,043
                  )OTHER
      INCOME (EXPENSE)Interest
      expense
                  
                  
                  (19,628
                  )
                  
                  
                  -
                  
                  
                  
                  (72,027
                  )Non
      controlling interest
                  
                  
                  1,041
                  
                  
                  
                  -
                  
                  
                  
                  2,422TOTAL
      OTHER INCOME (EXPENSE)
                  
                  
                  (18,587
                  )
                  
                  
                  -
                  
                  
                  
                  (69,605
                  )LOSS
      BEFORE INCOME TAXES
                  
                  
                  (142,500
                  )
                  
                  
                  (27,961
                  )
                  
                  
                  (860,648
                  )INCOME
      TAX EXPENSE
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -NET
      LOSS
                  
                  $
                  (142,500
                  )
                  
                  $
                  (27,961
                  )
                  
                  $
                  (860,648
                  )BASIC
      LOSS PER COMMON SHARE
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.00
                  )WEIGHTED
      AVERAGE NUMBEROF
      COMMON SHARES OUTSTANDING
                  
                  
                  14,883,824
                  
                  
                  
                  11,238,736
 
 
 
 The
accompanying notes are an integral part of these financial
statements.
   5
  
 CONSOLIDATION
      SERVICES, INC.(A
      Development Stage Company)Consolidated Statements of Stockholders'
      Equity(Unaudited)DeficitAccumulatedAdditional
                  
                  
                  Stock
                  
                  
                  Non
                  
                  
                  During
      the
                  
                  
                  TotalCommon
      Stock
                  
                  
                  Paid-In
                  
                  
                  Subscription
                  
                  
                  Controlling
                  
                  
                  Development
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Receivable
                  
                  
                  Interest
                  
                  
                  Stage
                  
                  
                  EquityBalance,
      January 26, 2007
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Shares
      issued for cashat
      $0.001 per share
                  
                  
                  9,000,000
                  
                  
                  
                  9,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,000Shares
      issued for cashat
      $0.05 per share
                  
                  
                  1,000,000
                  
                  
                  
                  1,000
                  
                  
                  
                  49,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,000Shares
      issued for servicesat
      $0.10 per share
                  
                  
                  815,000
                  
                  
                  
                  815
                  
                  
                  
                  80,685
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  81,500Fair
      value of common stockwarrants
      granted
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,000Common
      stock warrantsexercised
      at $1.00per
      share
                  
                  
                  160,600
                  
                  
                  
                  160
                  
                  
                  
                  160,440
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  160,600Common
      stock warrantsexercised
      for expenses paidat
      $1.00 per share
                  
                  
                  4,636
                  
                  
                  
                  5
                  
                  
                  
                  4,631
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,636Net
      loss from inceptionthrough
      December 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (176,517
                  )
                  
                  
                  (176,517
                  )Balance,
      December 31, 2007
                  
                  
                  10,980,236
                  
                  
                  
                  10,980
                  
                  
                  
                  297,756
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (176,517
                  )
                  
                  
                  132,219Common
      stock warrantsexercised
      at $1.00per
      share
                  
                  
                  2,179,400
                  
                  
                  
                  2,180
                  
                  
                  
                  2,177,220
                  
                  
                  
                  (880,000
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,299,400Common
      stock issued for propertiesat
      $1.94 per share
                  
                  
                  1,934,334
                  
                  
                  
                  1,934
                  
                  
                  
                  3,183,770
                  
                  
                  
                  -
                  
                  
                  
                  564,296
                  
                  
                  
                  -
                  
                  
                  
                  3,750,000Net
      loss for the yearended
      December 31, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,381
                  )
                  
                  
                  (541,631
                  )
                  
                  
                  (543,012
                  )Balance,
      December 31, 2008
                  
                  
                  15,093,970
                  
                  
                  
                  15,094
                  
                  
                  
                  5,658,746
                  
                  
                  
                  (880,000
                  )
                  
                  
                  562,915
                  
                  
                  
                  (718,148
                  )
                  
                  
                  4,638,607Receipt
      of stock subscription
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,000Net
      loss for the three monthsended
      March 31, 2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,041
                  )
                  
                  
                  (142,500
                  )
                  
                  
                  (143,541
                  )Balance,
      March 31, 2009
                  
                  
                  15,093,970
                  
                  
                  $
                  15,094
                  
                  
                  $
                  5,658,746
                  
                  
                  $
                  (871,000
                  )
                  
                  $
                  561,874
                  
                  
                  $
                  (860,648
                  )
                  
                  $
                  4,504,066
 
 
 The
accompanying notes are an integral part of these financial
statements.
   6
  
 CONSOLIDATION
      SERVICES, INC.(A
      Development Stage Company)Consolidated Statements of Cash Flows(Unaudited)From
      InceptionFor
      the Three
                  
                  
                  For
      the Three
                  
                  
                  on
      January 26,Months
      Ended
                  
                  
                  Months
      Ended
                  
                  
                  2007
      ThroughMarch,
      31
                  
                  
                  March,
      31
                  
                  
                  March
      31,2009
                  
                  
                  2008
                  
                  
                  2009OPERATING
      ACTIVITIESNet
      loss
                  
                  $
                  (142,500
                  )
                  
                  $
                  (27,961
                  )
                  
                  $
                  (860,648
                  )Adjustments
      to reconcile net loss to net cashused
      by operating activities:Common
      stock and warrants issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  104,500Common
      stock issued for expenses paid
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,636Non
      controlling interest in subsidiary loss
                  
                  
                  (1,041
                  )
                  
                  
                  -
                  
                  
                  
                  (2,422
                  )Changes
      in operating assets and liabilities:Change
      in prepaid expenses
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Change
      in deposits on property purchases
                  
                  
                  -
                  
                  
                  
                  (100,000
                  )
                  
                  
                  -Change
      in accounts payable and accrued expenses
                  
                  
                  88,028
                  
                  
                  
                  (6,878
                  )
                  
                  
                  441,339Net
      Cash Used inOperating
      Activities
                  
                  
                  (55,513
                  )
                  
                  
                  (134,839
                  )
                  
                  
                  (312,595
                  )INVESTING
      ACTIVITIESPurchase
      of property and equipment
                  
                  
                  (75,752
                  )
                  
                  
                  -
                  
                  
                  
                  (2,383,041
                  )Net
      Cash Used inInvesting
      Activities
                  
                  
                  (75,752
                  )
                  
                  
                  -
                  
                  
                  
                  (2,383,041
                  )FINANCING
      ACTIVITIESRepayment
      of loans payable
                  
                  
                  (244,265
                  )
                  
                  
                  (33,000
                  )
                  
                  
                  (718,450
                  )Proceeds
      from loans payable
                  
                  
                  300,000
                  
                  
                  
                  23,000
                  
                  
                  
                  1,922,655Proceeds
      from common stock issued
                  
                  
                  9,000
                  
                  
                  
                  517,000
                  
                  
                  
                  1,508,000Net
      Cash Provided byFinancing
      Activities
                  
                  
                  64,735
                  
                  
                  
                  507,000
                  
                  
                  
                  2,712,205NET
      INCREASE IN CASH
                  
                  
                  (66,530
                  )
                  
                  
                  372,161
                  
                  
                  
                  16,569CASH
      AT BEGINNING OF PERIOD
                  
                  
                  83,099
                  
                  
                  
                  78,482
                  
                  
                  
                  -CASH
      AT END OF PERIOD
                  
                  $
                  16,569
                  
                  
                  $
                  450,643
                  
                  
                  $
                  16,569SUPPLEMENTAL
      DISCLOSURES OFCASH
      FLOW INFORMATIONCASH
      PAID FOR:Interest
                  
                  $
                  7,000
                  
                  
                  $
                  -
                  
                  
                  $
                  10,393Income
      Taxes
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -NON
      CASH FINANCING ACTIVITIES:Properties
      purchased for common stock
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  3,750,000
 
 
 The
accompanying notes are an integral part of these financial
statements.
   7
  CONSOLIDATION
SERVICES, INC.
 (A
Development Stage Company)
 Notes to the Consolidated Financial Statements
 For the
periods ended March 31, 2009 and 2008
 
 
 NOTE 1 -
CONDENSED FINANCIAL STATEMENTS
  The
accompanying financial statements have been prepared by the Company without
audit.  In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at March 31, 2009 and for all
periods presented have been made.
 
 Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 2008 audited
financial statements.  The results of operations for the periods ended
March 31, 2009 and 2008 are not necessarily indicative of the operating results
for the full year.
 NOTE 2 -
GOING CONCERN
 The
Company’s financial statements are prepared using generally accepted accounting
principles applicable to a going concern which contemplates the realization of
assets and liquidation of liabilities in the normal course of
business.  The Company has had minimal revenues and has generated
losses from operations.
 
 In order
to continue as a going concern and achieve a profitable level of operations, the
Company will need, among other things, additional capital resources and to
develop a consistent source of revenues.  Management’s plans include
investing in and developing potential energy resources that may exist on or
under the Company’s properties in eastern Kentucky.
 
 The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plan described in the preceding paragraph
and eventually attain profitable operations.  The accompanying
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
 
 NOTE 3 –
EQUITY TRANSACTIONS
 
 During
the three months ended March 31, 2009, the Company issued no additional shares
of its common stock.
   
  8
  CONSOLIDATION
SERVICES, INC.
 (A
Development Stage Company)
 Notes to
the Consolidated Financial Statements
 For the
periods ended March 31, 2009 and 2008
 
 
 NOTE 4 –
SIGNIFICANT ACCOUNTING POLICIES
 
 Use of
Estimates
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
 
 Recent Accounting
Pronouncements
 
 In
June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
(“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under
the two-class method as described in FASB Statement of Financial Accounting
Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning on or after
December 15, 2008 and earlier adoption is prohibited. We are not required
to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have
material effect on our consolidated financial positionand results of
operations if adopted.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial
Guarantee Insurance Contracts-and interpretation of FASB Statement No.
60”.SFAS
No. 163 clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement of premium revenue and
claims liabilities. This statement also requires expanded disclosures about
financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal
years beginning on or after December 15, 2008, and interim periods within those
years. SFAS No. 163 has no effect on the Company’s financial position,
statements of operations, or cash flows at this time.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles”.SFAS No. 162 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. SFAS No. 162 will become effective 60
days after the SEC approves the PCAOB’s amendments to AU Section 411 of the
AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time.
     9
  CONSOLIDATION
SERVICES, INC.
 (A
Development Stage Company)
 Notes to
the Consolidated Financial Statements
 For the
periods ended March 31, 2009 and 2008
 
 
 In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its financial position, results of operations or cash flows.
 
 In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based
Payment.  In particular, the staff indicated in SAB 107 that it
will accept a company's election to use the simplified method, regardless of
whether the company has sufficient information to make more refined estimates of
expected term. At the time SAB 107 was issued, the staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the staff stated in SAB
107 that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such detailed
information about employee exercise behavior may not be widely available by
December 31, 2007. Accordingly, the staff will continue to accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007. The
Company currently uses the simplified method for “plain vanilla” share options
and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is
not believed that this will have an impact on the Company’s financial position,
results of operations or cash flows.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No.
51.  This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised 2007). The Company will adopt this Statement beginning March 1,
2009. It is not believed that this will have an impact on the Company’s
financial position, results of operations or cash flows.
      10
  CONSOLIDATION
SERVICES, INC.
 (A
Development Stage Company)
 Notes to
the Consolidated Financial Statements
 For the
periods ended March 31, 2009 and 2008
 
 
 In
December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This
Statement replaces FASB Statement No. 141, Business Combinations, but
retains the fundamental requirements in Statement 141.  This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s financial position, results of operations or cash
flows.
 
 In
February 2007, the FASB, issued SFAS No. 159,The Fair Value Option for Financial
Assets and Liabilities—Including an Amendment of FASB Statement No.
115.  This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments
in Debt and Equity Securities applies to all entities with available for
sale or trading securities. Some requirements apply differently to entities that
do not report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of the previous fiscal year provided that the
entity makes that choice in the first 120 days of that fiscal year and also
elects to apply the provisions of SFAS No. 157 Fair Value
Measurements.  The Company adopted SFAS No. 159 beginning March
1, 2008. The adoption of this pronouncement did not have an impact on the
Company’s financial position, results of operations or cash flows.
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements  This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company adopted this statement March 1, 2008. The adoption of this
pronouncement did not have an impact on the Company’s financial position,
results of operations or cash flows.
     
  11
  Item 2.    Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
  Forward-Looking
Statements
  Statements
contained in this Item 2. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and elsewhere in this document that are not
historical or current facts may constitute “forward-looking statements” within
the meaning of such term in Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”).  Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that could
cause the actual financial or operating results of the Company to be materially
different from the historical results or from any future results expressed or
implied by such forward-looking statements.  Factors that could cause
actual results to differ materially from those predicated in any such
forward-looking statements include: our ability to raise funds; our business
strategies and future plans of operations; our ability to attract and retain
qualified personnel; our ability to identify and successfully consummate and
manage future acquisitions; our ability to compete against much larger
companies; the current economic recession in the United States, as well as the
economic conditions affecting the industry in which we operate; our current
operating losses; and the competitive environment within the industry in which
we compete.  Such forward-looking statements are based on our best
estimates of future results, performance or achievements, based on current
conditions and the most recent results of the Company.  In addition to
statements that explicitly describe such risks and uncertainties, readers are
urged to consider statements labeled with the terms “may,” “will,” “potential,”
“opportunity,” “believes,” “expects,” “intends,” “estimates,” “anticipates” or
“plans” to be uncertain and forward-looking.  The forward-looking
statements contained herein are also subject generally to other risks and
uncertainties that are described from time to time in the Company’s reports and
registration statements filed with the SEC.
  General
  The
Company was formed on January 26, 2007, to engage in the acquisition and
consolidation of companies engaged in the foodservice industry (including with
respect to organic and natural food products).  As discussed in our annual
report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the
“SEC”) on March 25, 2009, in view of the current economic climate and our
obligation to maximize value for our stockholders, our primary business focus
has shifted away from our proposed organic and natural food business to the
development of our energy-related assets, primarily the ability to generate
revenues from our coal related operations, through the harvesting of our
inventory of timber, as well as from our proposed natural gas operations, for
which there are no assurances such coal or natural gas resources exist in
economically feasible quantities, if at all.
 
 In the
near term, we intend to lease our coal reserves in the eastern Kentucky region
of the United States to experienced mine operators under long-term leases that
grant the operators the right to mine and sell coal from our reserves in
exchange for royalty payments.  However, as of the date of this
report, the Company has not commenced mining activities or entered into leases
with any coal mine operators and there can be no assurance that we will be able
to enter into leases with coal operators.  The Company is currently in
the final stages of discussions with one or more potential coal lessees
regarding its properties located in eastern Kentuckyand anticipates that it
will be able to enter into a lease with one or more such coal
operators in the near future.
    12
  
 Material
Changes in Results of Operations For the Three Month Period Ended March 31, 2009
As Compared to the Three Month Period Ended March 31, 2008.
  Revenues.
The Company received revenues during the three months ended March 31, 2009,
consisting of $4,266 from partial timber removal on our Owsley
property.  The Company did not receive any revenues during the three
month period ended March 31, 2008.
 
 Operating expenses. We
incurred general and administrative expenses of $128,179, for the three months
ended March 31, 2009, which expenses are comprised primarily of reporting
expenses, professional fees and expenses incurred in mining permit applications,
title research and negotiating leases with potential coal lessees during this
period.  The only other expense incurred for the three months ended
March 31, 2009 was interest expense of $19,628.  For the three month
period ended March 31, 2008, the Company’s only expenses were general and
administrative expenses of $27,961, which were comprised primarily of SEC and
state "Blue Sky" filing fees, professional fees and expenses.
 
 Net loss. Net loss was
$142,500 or ($.01) per share for the three months ended March 31, 2009,
reflecting the impact of general and administrative costs and interest expenses
incurred.  Net loss was $27,961 or ($.00) per share for the three month
period ended March 31, 2008, reflecting the impact of organizational, reporting,
and compliance costs incurred.
 
 Material
Changes in Financial Condition; Liquidity and Capital Resources as of March 31,
2009 As Compared to December 31, 2008.
  The
Company had cash of$16,569 and a working
capital deficit of $2,478,975 at March 31, 2009.  We also had an
accumulated deficit of $860,648on our balance sheet as
of March 31, 2009.  In comparison, at December 31, 2008 the Company’s
cash position was $83,099 which was mainly due to proceeds from the issuance of
Company securities.  In terms of capital resources, management
anticipates that it will continue harvesting timber from the Company’s
properties over the next twelve months, in addition to the anticipated
commencement of royalty revenues from our coal bearing properties around the end
of June or July 2009, should we be successful in finalizing our current
discussions with a potential coal lessee and entering into a lease, for which
there is no assurance will occur or that we will receive coal royalties in
economically feasible amounts or at all.
 
 Of the
$2,179,400 due to the Company in connection with the exercise of 2,179,400 Class
A Warrants at $1.00 per share in connection with the Second Warrant Reduction
between February 6, 2008 and April 30, 2008, only $871,000 remained due under
promissory notes payable to the Company by four non-affiliated parties as of
March 31, 2009, reflecting $9,000 in cash payments made during the first quarter
which reduced the principal balance from $880,000as of the year ended
December 31, 2008.  The aforementioned promissory notes were due and
payable on or before August 15, 2008, however, were extended to March 31, 2009,
and then further extended until June 30, 2009 by resolution of the Company’s
board of directors.
 
 Net cash
used in operating activities was $55,513 for the three month period ended March
31, 2009, which was attributable to our net loss of $142,500, as offset in part,
by a significant increase in accounts payable of $88,028.  Net cash
used in operating activities was $134,839 for the three-month period ended March
31, 2008, which was attributing primarily to a net loss of $27,961 plus $100,000
paid in deposits on purchase of properties.
    13
  
 Net
cash used in investing activities was $75,752, which was used
primarily in connection with the filing of mining permit applications regarding
the Company’s properties.  During the three-month period ended March
31, 2008, there were no investing activities.
  Net cash
provided by financing activities was $64,735, which was attributable to the
repayment of $244,265 in loans payable and the receipt of (i) $300,000, in the
aggregate, under four promissory notes from the Company to Johnny Thomas or his
designees with interest at 6% per annum, payable upon demand, and (ii) $9,000 in
cash payments due under the promissory notes issued in connection with the
Second Warrant Reduction.  During the three-month period ended March
31, 2008, net cash provided by financing activities was $507,000 resulting
primarily from the receipt of $517,000 from the exercise of warrants and $23,000
proceeds received from loans, as offset by $33,000 paid in repayment of
loans.  The Company continues to seek related party or asset based
financing in order to meet outstanding obligations and for working capital
purposes, of which there are no assurances such financing will be available.
However, in the event that the Company is able to generate significant royalty
revenues from its prospective coal operations, management anticipates that it
will not need to rely as heavily, if at all, on such asset based or related
party financing arrangements.
  As a
result of the foregoing, the Company had a net decreasein cash of $66,530 for
the three month period ended March 31, 2009, compared with a net increase
in cash of $372,161 during the same period last year.
  We
anticipate that the Company will need additional capital within the next twelve
months of up to approximately $3,000,000 to cover ongoing operating
expenses, current liabilities, and other expenses.  The Company's
accumulated deficit, lack of operations and sources of revenues raise
substantial doubt about the Company's ability to continue as a going concern.
Our independent registered public accounting firm has included an explanatory
paragraph expressing doubt about our ability to continue as a going concern in
their audit report for the year ended December 31, 2008 and our financial
statements for the three months ended March 31, 2009 address this in Note
2.
 
 The
Company's future liquidity and cash requirements will depend on a wide range of
factors, including the ability to generate revenues from the development of
energy resources on land as well as the Company’s ability to utilize financing
sources (including debt or equity financing) and borrow funds.  As a
result of concerns about the stability of financial markets generally and the
solvency of counterparties specifically, the cost of obtaining money from the
credit markets has increased as many lenders and institutional investors have
increased interest rates, enacted tighter lending standards, and refused to
refinance existing debt or equity at all or on similar terms.  If
funding is not available when needed, or is available only on unfavorable terms
and we are unable to generate significant revenues from operations, we may be
unable to fund our working capital requirements, debt or guarantee obligations,
complete acquisitions or otherwise take advantage of business opportunities or
respond to competitive pressures, any of which could have a material adverse
effect on our revenues and results of operations.
 
 Off-Balance
Sheet Arrangements
  We do not
have any 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 investors.
    14
  
 Going
Concern
  The
financial statements included in this filing have been prepared in conformity
with generally accepted accounting principles that contemplate the continuance
of us as a going concern. The Company has had nominal revenues and has generated
losses from operations.  In order to continue as a going concern and
achieve a profitable level of operations, the Company will need, among other
things, additional capital resources and to develop a consistent source of
revenues.  Management intends to use advances from related parties, asset
backed lending, borrowing, or financings from the issuance or exercise of its
securities to mitigate the effects of its cash position, however no assurance
can be given that such sources of financing, if and when required, will be
available. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets and classification of
liabilities that might be necessary should we be unable to continue in
existence.
  Critical
Accounting Policies
  We have
identified the policies outlined below as critical to our business operations
and an understanding of our results of operations.  The list is not
intended to be a comprehensive list of all of our accounting policies.  In
many cases, the accounting treatment of a particular transaction is specifically
dictated by accounting principles generally accepted in the United States, with
no need for Management's judgment in its application.  The impact and any
associated risks related to these policies on our business operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our reported and expected
financial results.  Note that our preparation of the financial statements
requires us to make estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of our financial statements, and the reported amounts of revenue and
expenses during the reporting period.  There can be no assurance that
actual results will not differ from those estimates.
 
 Revenue
Recognition
  The
Company recognizes revenues when the product or service is delivered and
accepted by the customer.  During the three months ended March 31,
2009, the Company realized revenues from the sale of timber grown on its
property.
  Stock
Based Compensation Expense
  The
Company adopted SFAS No. 123R, "Share-Based Payments" in the first quarter
of fiscal 2007. Under the requirements of SFAS No. 123R, share-based
compensation cost is estimated at the grant date based on the fair value of the
award and is recognized as an expense over the requisite service period of the
award. The Company recognizes stock option expense using the straight-line
attribution method under SFAS No. 123R. The Company uses the Black-Scholes
option-pricing model to estimate the fair value of stock options. Option
valuation models require the input of assumptions, including the expected life
of stock options, the expected stock price volatility, the risk-free interest
rate, and the expected dividend yield. The expected volatility and expected life
are based on our limited operating experience. The risk-free interest rate is
based on U.S. Treasury interest rates whose term is consistent with the expected
life of the stock options. Expected dividend yield was not considered in the
option pricing formula as we do not pay dividends and have no current plans to
do so in the future. We will update these assumptions if changes are
warranted.
    15
  
 Item 3.  Quantitative and Qualitative Disclosure About Market
Risk.
  The
Company, as a smaller reporting company, is not required to provide the
information required by this item pursuant to Item 305 of Regulation
S-K.
  Item 4T.  Controls and Procedures.
  EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
  Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the design and operation of our disclosure controls and
procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e)
promulgated under the Exchange Act, as of March 31, 2009.  Based on
this evaluation, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in the reports we file or
submit under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the SEC’s rules and forms and that our
disclosure and controls are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.  In designing and evaluating our disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply
its judgment in evaluating and implementing possible controls and
procedures.
 
 CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  There
were no changes (including corrective actions with regard to significant
deficiencies or material weaknesses) in our internal controls over financial
reporting that occurred during the three month period ended March 31, 2009 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
  PART II.  OTHER INFORMATION
  Item 1.  Legal Proceedings
  In the
ordinary course of business, the Company may be involved in legal proceedings
from time to time.  As of the date of this quarterly report on Form 10-Q,
there have been no material changes to any legal proceedings previously reported
by us in our Annual Report on Form 10-K for December 31, 2008.
  Item 1A.  Risk Factors
  Not
required for smaller reporting companies.
    16
  
 Item 2.  Unregistered Sales of Equity Securities and Use of
Proceeds.
  None.
  Item 3.  Defaults Upon Senior Securities.
  None.
  Item 4.  Submission of Matters to a Vote of Security
Holders.
  None.
  Item 5.  Other Information.
  None.
  
 
 
 
 
 
 
 
 
 
   17
  Item 6.  Exhibits.
  Exhibits.
  Set forth
below is a list of the exhibits to this quarterly report on Form
10-Q.
  Exhibit
                Number
              Description*31.1
              Certification
      of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule
      15d-14(a) of the Securities and Exchange Act of 1934, as amended, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.*31.2
              Certification
      of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule
      15d-14(a) of the Securities and Exchange Act of 1934, as amended, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.*32.1
              Certification
      of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule
      15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.*32.2
              Certification
      of the Chief Financial Officer pursuant to Rule 13a-14(b) or Rule
      15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.
  * Filed
herewith.
 
   
 
 
 
 
   18
  SIGNATURES
  In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  Dated:
       May 12, 2009
                      Consolidation
      Services, Inc.By:
                      /s/
      Johhny R. ThomasJohnny
      R. Thomas, President and
                        Chief
      Executive Officer (Principal Executive Officer)By:
                      /s/ John C. FrancisJohn
      C. Francis, Vice President and
                        Chief
      Financial Officer (Principal Financial and Accounting
    Officer)
  
 
 
 
 
 
 
 
 
 
  
 19
  Consolidation
Services, Inc.
 Quarterly
Report on Form 10-Q
 Quarter
Ended March 31, 2009
  EXHIBIT INDEX
  Exhibit
                
                Number
              Description31.1
              Certification
      of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule
      15d-14(a) of the Securities and Exchange Act of 1934, as amended, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
              Certification
      of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule
      15d-14(a) of the Securities and Exchange Act of 1934, as amended, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
              Certification
      of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule
      15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.32.2
              Certification
      of the Chief Financial Officer pursuant to Rule 13a-14(b) or Rule
      15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.
           20