##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file no. 0-30502
 JOHN D. OIL AND GAS COMPANY
  MARYLAND
    
    94-6542723(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 8500 STATION STREET, SUITE 345, MENTOR, OHIO 44060
    Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 Yes o No þ




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##### 



PagePART IGlossary of Terms
    
    
    3Item 1. Business
    
    
    5Item 1A. Risk Factors
    
    
    7Item 2. Properties
    
    
    13Item 3. Legal Proceedings
    
    
    15PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities
    
    
    16Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 8. Consolidated Financial Statements and Supplementary Data
    
    
    25Item 9A. Controls and Procedures
    
    
    25Item 9B. Other Information
    
    
    26PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    27Item 11. Executive Compensation
    
    
    28Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    28Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    30Item 14. Principal Accountant Fees and Services
    
    
    33PART 1VItem 15. Exhibits and Financial Statement Schedules
    
    
    33EX-31.1EX-31.2EX-32.1EX-99.1
   2




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PART I
 
 Glossary of Terms
  Bbl
 Development well.
 Developed acres
 Dry hole or well
 Field
 Gross acres or gross wells
 Mcf
 Mcfe
 Net acres or net wells
 Oil
 Productive well.
 Proved developed reserves
 Proved reserves
 Proved undeveloped drilling location
  3




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Proved undeveloped reserves or PUDs
 Reservoir
 Standardized Measure.
 Successful well
 Undeveloped acreage
 Working interest
 Workover
  4




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##### Table of Contents



Item 1.
    
    Business
   Oil and Natural Gas Overview.
    Oil and Natural Gas Competition.
 Oil and Natural Gas Environmental and Other Regulations.
 
    
    require the acquisition of various permits before drilling commences;
 
    
    require the installation of expensive pollution control equipment;
 
    
    restrict the types, quantities and concentration of various substances that can be
released into the environment in connection with drilling and production activities;
 
    
    limit or prohibit drilling activities on lands lying within wilderness, wetland and
other protected areas;
 
    
    require remedial measures to prevent pollution from former operations, such as pit
closure and plugging of abandoned wells;
 
    
    impose substantial liabilities for pollution resulting from operations; and
 
    
    with respect to operations affecting federal lands or leases, require preparation of a
resource management plan, an environmental assessment, and/or an environmental impact
statement.
  5




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##### Table of Contents




    
    Clean Air Act, and its amendments, which governs air emissions;
 
    
    Clean Water Act, which governs discharges to waters of the United States;
 
    
    Comprehensive Environmental Response, Compensation and Liability Act, which imposes
liability where hazardous releases have occurred or are threatened to occur;
 
    
    Energy Independence and Security Act of 2007, which prescribes new fuel economy
standards and other energy saving measures;
 
    
    National Environmental Policy Act, which governs oil and gas production activities on
federal lands;
 
    
    Resource Conservation and Recovery Act, which governs the management of solid waste;
 
    
    Safe Drinking Water Act, which governs the underground injection and disposal of
wastewater; and
 
    
    U.S. Department of Interior regulations, which impose liability for pollution cleanup
and damages.
  Self-Storage Overview.
   Investment Policy.
  Activities of the Company.
 
    
    issue senior securities;
 
    
    borrow money;
 
    
    make loans;
  6




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##### Table of Contents




    
    underwrite securities of other issuers;
 
    
    engage in the purchase or sale of investments;
 
    
    offer securities in exchange for property;
 
    
    repurchase or otherwise reacquire its shares or other securities; and
 
    
    provide annual reports and other reports to stockholders which contain
annual audited financial statements.
  Principal Offices.
  Federal Income Tax.
  Employees.
  
 Item 1A.
    
    Risk Factors
 Risks Related to Our Oil and Natural Gas Business
 The report of our independent registered public accounting firm questions our ability to continue
as a going concern.
  In the event we are unable to refinance our line of credit which is currently due and being held by
a forbearance agreement until July of 2011 or obtain substitute financing, we may not be able to
continue as a going concern.
   7




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If we are unable to refinance our existing debt or obtain financing in the amounts and on terms
acceptable to us or we are unable to meet our future cash commitments, we may be unable to continue
our business and as a result may be required to scale back or cease operations of our business, the
result of which would be that you could lose some or all of your investment.
  
    
    drilling and completion costs for further wells increase beyond our expectations;
 
    
    market prices for our production decline beyond our expectations;
 
    
    production levels do not meet our expectations; or
 
    
    we encounter greater costs associated with general and administrative expenses.
     8




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We had a material weakness in our internal control over financial reporting and therefore, we may
not be able to accurately report our financial results or prevent fraud.
  
    
    our internal controls over financial reporting were not effective, and
 
    
    our disclosure controls and procedures are not effective to give reasonable assurance
that the information required to be disclosed in reports that we file under the Exchange
Act are recorded, processed and reported as and when required.
  Our Revenues will depend on natural gas prices.
   Natural gas markets are subject to many factors.
  
    
    the domestic and foreign supply of and demand for natural gas;
 
    
    the price and level of foreign imports;
 
    
    the level of consumer product demand;
 
    
    weather conditions;
 
    
    overall domestic and global economic conditions;
 
    
    political and economic conditions in natural gas and oil producing countries, including
those in the Middle East and South America;
  9




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
    
    the ability of members of the Organization of Petroleum Exporting Countries to agree to and
maintain oil price and production controls;
 
    
    the impact of the U.S. dollar exchange rates on natural gas and oil prices;
 
    
    technological advances affecting energy consumption;
 
    
    domestic and foreign governmental regulations and taxation;
 
    
    the impact of energy conservation efforts;
 
    
    the proximity and capacity of natural gas pipelines and other transportation facilities;
and
 
    
    the price and availability of alternative fuels.
  Locations that we decide to drill may not be productive.
  Actual quantities and present value of our proved reserves may prove to be lower than we have
estimated.
  Our development operations require substantial capital expenditures.
  We face significant competition.
   10




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We depend on a related third party to manage our business.
  Our business depends on gathering and transportation facilities owned by others.
  We depend on a key customer for sales of our natural gas and oil.
  Our business is hazardous.
  The oil and natural gas industry is highly regulated.
   11




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Risks Related to the Company
 We need to raise additional capital, which may not be available to us and may limit our operations
or growth.
  We have been unable to profitably operate the oil and natural gas assets we have acquired.
  Our management team owns a controlling interest in the Company.
  Our management team is subject to various conflicts of interest.
    12




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Item 2.
    
    Properties
  Oil and Natural Gas Wells
   2010
    
    
    2009Net ProductionNatural Gas (mcf)
    
    
    383,503
    
    
    
    698,731Oil (bbl)
    
    
    8,876
    
    
    
    9,186Natural Gas Equivalent (mcfe)
    
    
    436,757
    
    
    
    753,847Net SalesNatural Gas
    
    $
    1,647,951
    
    
    $
    3,348,750Oil
    
    
    455,898
    
    
    
    362,918Total Sales
    
    $
    2,103,849
    
    
    $
    3,711,668Average Sale PriceNatural Gas (mcf)
    
    $
    4.30
    
    
    $
    4.79Oil (bbl)
    
    $
    51.36
    
    
    $
    39.51Natural Gas Equivalent (mcfe)
    
    $
    4.82
    
    
    $
    4.92Average Unit Costs per mcfeWell operating expenses
    
    $
    664,699
    
    
    $
    687,182Average Cost/mcfe
    
    $
    1.52
    
    
    $
    0.91
 Estimated Proved Reserves.
   13




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Form 10-K.
 2010
    
    
    2009Natural Gas
    
    
    Oil
    
    
    Natural Gas
    
    
    Oil(MCF)
    
    
    (BBLs)
    
    
    (MCF)
    
    
    (BBLs)Proved developed and undeveloped reserves:Beginning of year
    
    
    2,512,800
    
    
    
    28,800
    
    
    
    2,146,600
    
    
    
    17,500Revision of previous estimates,
extensions and other additions
    
    
    347,800
    
    
    
    13,400
    
    
    
    792,000
    
    
    
    17,600Net reserve additions
    
    
    
    
    
    
    
    
    
    
    272,900
    
    
    
    2,900Production
    
    
    (383,500
    )
    
    
    (8,900
    )
    
    
    (698,700
    )
    
    
    (9,200
    )End of year
    
    
    2,477,100
    
    
    
    33,300
    
    
    
    2,512,800
    
    
    
    28,800Proved developed reserves:Beginning of year
    
    
    2,512,800
    
    
    
    28,800
    
    
    
    2,146,600
    
    
    
    17,500End of year
    
    
    2,477,100
    
    
    
    33,300
    
    
    
    2,512,800
    
    
    
    28,800
 Productive Wells.
 Gross
    
    
    NetProductive Wells:Operated
    
    
    53
    
    
    
    51Non-Operated Properties
    
    
    5
    
    
    
    2Total
    
    
    58
    
    
    
    53
 Drilling Activity.
 2009Gross
    
    
    NetGross wells:Productive
    
    
    4
    
    
    
    4Dry
    
    
    1
    
    
    
    1Total
    
    
    5
    
    
    
    5
  14




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##### Table of Contents



Developed and Undeveloped Acreage.
 Developed Acreage
    
    
    Undeveloped AcreageGross
    
    
    Net
    
    
    Gross
    
    
    NetGeographic Area:Ohio
    
    
    2,558
    
    
    
    2,558
    
    
    
    2,745
    
    
    
    2,745
 Present Activities.
 Leases.
 Insurance.
 Depreciation.
 
 Item 3.
    
    Legal Proceedings.
    15




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
 Market Information.
  2010
    
    HIGH
    
    
    LOWFirst Quarter
    
    $
    0.15
    
    
    $
    0.04Second Quarter
    
    
    0.06
    
    
    
    0.03Third Quarter
    
    
    0.06
    
    
    
    0.03Fourth Quarter
    
    
    0.10
    
    
    
    0.03
 2009
    
    HIGH
    
    
    LOWFirst Quarter
    
    $
    0.40
    
    
    $
    0.15Second Quarter
    
    
    0.20
    
    
    
    0.10Third Quarter
    
    
    0.20
    
    
    
    0.05Fourth Quarter
    
    
    0.18
    
    
    
    0.07
 Holders.
 Dividends.
 Issuance of Common Stock
 Issuance of Preferred Stock.
 Purchases of Common Stock.
  16




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
       Critical Accounting Policies
   17




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Principles of Consolidation
  Accounts Receivable
   Property and Equipment
     Asset Impairment
   18




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Asset Retirement Obligation
  Revenue Recognition
  Income Taxes
     Liquidity and Capital Resources
    19




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
    
    Payment by the Loan Parties of a forbearance fee of $40,000 per month during the
forbearance period;
 
    
    No material adverse change in the condition of the Loan Parties;
 
    
    An assignment and grant of a security interest by the Company and Great Plains of
each of their ownership interests in the Alpha and Panzica wells;
 
    
    A pledge by the Loan Parties of their ownership interests in Kykuit Resources LLC
; and
 
    
    A pledge by Mr. Osborne of not less than 800,000 shares of common stock of Gas
Natural Inc. with such stock having a market value of not less than $9.6 million
pursuant to a pledge agreement.
     20




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Payments Due by PeriodLess than 1Contractual Obligations
    
    Year
    
    
    1-3 years
    
    
    4-5 years
    
    
    TotalLong-Term Debt
    
    $
    136,812
    
    
    $
    274,709
    
    
    $
    652,884
    
    
    $
    1,064,405Line of Credit
    
    
    9,480,187
    
    
    
    
    
    
    
    
    
    
    
    9,480,187Operating Lease*
    
    
    24,000
    
    
    
    6,000
    
    
    
    
    
    
    
    30,000Total Contractual
Cash Obligations
    
    $
    9,640,999
    
    
    $
    280,709
    
    
    $
    652,884
    
    
    $
    10,574,592
 *
    
    The operating lease for office space is leased from OsAir, Inc., a company owned by Mr. Osborne.
The lease was extended for a three year term on March 26, 2009 at $2,000 per month from $1,350 per
month, through April 1, 2012, which is reflected in the above table.   21




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Material Changes in Results of Operations
 Revenues from Operations
  Expenses from Operations
          22




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Net Loss
  Net Loss attributable to Non-Controlling Interest
  Net Loss attributable to John D. Oil and Gas Company
  Interest Rate Risk
   Off-Balance Sheet Arrangements
   23




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Forward-Looking Statements
  
    
    ability to continue as a going concern;
 
    
    liquidity and our ability to meet our debt obligations;
 
    
    business strategy;
 
    
    financial strategy;
 
    
    drilling locations;
 
    
    natural gas and oil reserves;
 
    
    realized natural gas and oil prices;
 
    
    production volumes;
 
    
    lease operating expenses, general and administrative expenses and finding and development
costs;
 
    
    future operating results; and
 
    
    plans, objectives, expectations and intentions.
   Income Taxes
     24




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Recently Issued Accounting Pronouncements
 Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses
   
 Item 8.
    
    Financial Statements and Supplementary Data
  
 Item 9A.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
     25




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Changes in Internal Control over Financial Reporting
  Attestation Report of Independent Registered Public Accounting Firm
  
 Item 9B.
    
    Other Information
   26




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PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
 Directors and Executive Officers.
 Richard M. Osborne
 Gregory J. Osborne,
 Thomas J. Smith,
 Carolyn Coatoam,
 Section 16(a) Beneficial Ownership Reporting Compliance.
 Code of Business Conduct and Ethics. www.johndoilandgas.com
 Audit Committee
  27




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Item 11.
    
    Executive Compensation
 Director and Executive Officer Compensation Decisions.
 Summary Compensation Table.
 All OtherName and
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Richard M. Osborne, 
Chairman and Chief Executive Officer*
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gregory J. Osborne, 
President and Chief Operating Officer
    
    
    2010
    
    
    
    110,000
    
    
    
    
    
    
    
    
    
    
    
    110,0002009
    
    
    
    110,000
    
    
    
    2,000
    
    
    
    
    
    
    
    112,000
 *
    
    Richard Osborne does not receive compensation for serving as our chairman and chief
executive officer. Executive Officer Outstanding Equity Awards at December 31, 2010.
 Executive Officer Employment Agreements.
 Director Compensation.
 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Beneficial Ownership(1)Name and Address(2)
    
    Shares
    
    
    Convertible Securities
    
    
    Total
    
    
    PercentRichard M. Osborne
    
    
    3,654,541
    (3)
    
    
    1,021,966
    (4)
    
    
    4,676,507
    (5)
    
    
    46.4
    %Richard A. Bonner
    
    
    500,000
    (6)
    
    
    250,000
    (7)
    
    
    750,000
    (6)(7)
    
    
    8.0
    %PO Box 1359
Middlefield, Ohio 44062S&A Investments
    
    
    
    
    
    
    500,000
    (8)
    
    
    500,000
    (8)
    
    
    5.2
    %10474 Broadview Road
Broadview Heights, Ohio 44147Gregory J. Osborne
    
    
    151,000
    
    
    
    
    
    
    
    151,000
    
    
    
    1.7
    %Thomas J. Smith
    
    
    62,000
    
    
    
    6,852
    (9)
    
    
    68,852
    (9)
    
    
    *All directors and officers as a group (4 individuals)
 *
    
    less than 1%  28




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(1)
    
    Unless otherwise indicated, we believe that all persons named in the table have sole investment
and voting power over the shares of common stock owned.(2)
    
    Unless otherwise indicated, the address of each of the beneficial owners identified is c/o John
D. Oil and Gas Company, 8500 Station Street, Suite 345, Mentor, Ohio 44060.(3)
    
    Includes (1) 3,503,541 shares owned by the Richard M. Osborne Trust, an Ohio trust of which
Richard Osborne is the sole trustee, and (2) 151,000 shares owned by Gregory Osborne which Richard
Osborne has the right to vote.(4)
    
    Includes (1) 5,188,528 limited partnership interests of LSS I Limited Partnership, a Delaware
limited partnership, owned by Richard Osborne that are presently convertible into 714,537 shares of
our common stock, (2) 1,869,292 limited partnership interests of LSS I owned by Retirement
Management Company, of which Richard Osborne is the sole stockholder, that are presently
convertible into 257,429 shares of our common stock and (3) 50,000 warrants to purchase 50,000
shares of common stock that are presently exercisable.(5)
    
    Includes (1) 3,503,541 shares owned by the Richard M. Osborne Trust, (2) 151,000 shares owned
by Gregory Osborne which Richard Osborne has the right to vote, (3) limited partnership interests
of LSS I owned by Richard Osborne that are presently convertible into 714,537 shares of our common
stock, (4) limited partnership interests of LSS I owned by Retirement Management Company that are
presently convertible into 257,429 shares of our common stock, and (5) warrants to purchase 50,000
shares of common stock that are presently exercisable.(6)
    
    Based solely on information in the Schedule 13D filed with the SEC on May 11, 2006.(7)
    
    Includes 250 shares of our Series A convertible preferred stock that are presently convertible
into 250,000 shares of our common stock.(8)
    
    Includes 500 shares of our Series A convertible preferred stock that are presently convertible
into 500,000 shares of our common stock. Based solely on information in the Schedule 13D filed
with the SEC on February 21, 2007.(9)
    
    Includes 49,753 limited partnership interests of LSS I owned by Mr. Smith that are presently
convertible into 6,852 shares of our common stock. Equity Compensation Plan Information
  Number ofNumber of
    
    
    
    
    
    
    securitiessecurities
    
    
    Weighted-
    
    
    remaining availableto be issued upon
    
    
    average
    
    
    for future issuanceexercise of
    
    
    exercise price of
    
    
    under equityoutstanding
    
    
    outstanding
    
    
    compensation plansoptions, warrants
    
    
    options, warrants
    
    
    (excluding securitiesPlan category
    
    and rights
    
    
    and rights
    
    
    reflected in column (a))Equity compensation plans approved by security holders
    
    
    35,000
    
    
    $
    0.65
    
    
    
    265,000Equity compensation plans not approved by security holders
    
    
    0
    
    
    
    
    
    
    
    0Total
    
    
    35,000
    
    
    $
    0.65
    
    
    
    265,000
  29




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Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
         30




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
    
    Payment by the Loan Parties of a forbearance fee of $40,000 per month during the
forbearance period;
 
    
    No material adverse change in the condition of the Loan Parties;
 
    
    An assignment and grant of a security interest by the Company and Great Plains
Exploration of each of their ownership interests in the Alpha and Panzica wells;
 
    
    A pledge by the Loan Parties of their ownership interests in Kykuit Resources
LLC; and
 
    
    A pledge by Mr. Osborne of not less than 800,000 shares of common stock of Gas
Natural Inc. with such stock having a market value of not less than $9.6 million
pursuant to a pledge agreement.
           31




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2010
    
    
    2009Accounts Receivable Oil and Gas Sales:Great Plains Exploration, LLC.
    
    $
    435,268
    
    
    $
    423,566Liberty Self Stor II
    
    
    3,806
    
    
    
    727Lucky Brothers
    
    
    
    
    
    
    38,983Various Related Companies
    
    
    4,628
    
    
    
    1,308$
    443,702
    
    
    $
    464,584Accounts Payable:Great Plains Exploration, LLC.
    
    $
    14,012
    
    
    $
    47,144Big Oats Oilfield Supply Company
    
    
    23,111
    
    
    
    Kykuit Resources LLC
    
    
    160,391Orwell Natural Gas
    
    
    1,296Osair, Inc.
    
    
    11,922
    
    
    
    OzGas Ltd.
    
    
    12,000
    
    
    
    $
    222,732
    
    
    $
    47,144
 2010
    
    
    2009Great Plains Exploration, LLC:Capitalized Costs for Well Property and Equipment
    
    $
    
    
    
    $
    140,410RevenuesRevenue From the Sale of Oil and Natural Gas
Production, net of pipeline transportation
costs
    
    $
    1,828,647
    
    
    $
    3,519,851Operating expensesWell Management, Water Hauling and Service Rig
    
    $
    395,892
    
    
    $
    506,337Big Oats Oilfield Supply Company:Purchases
    
    $
    22,193
    
    
    $
    Orwell Trumbull Pipeline, LLCOperating expenses
    
    $
    2,000
    
    
    $
    
  32




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
    
    on terms at least as favorable as those that we could obtain from
unrelated parties,
 
    
    for bona fide business purposes, and
 
    
    approved by a majority of disinterested and non-employee directors, if any.
 Director Independence
 
 Item 14.
    
    Principal Accountant Fees and Services
  Audit Committee Pre-Approval Policies and Procedure
 
 PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
 Exhibit No.
    
    Description2.1
    
    
    Agreement and Plan of Merger, dated as of December 28, 1999, by and among Meridian Point
Realty Trust 83, the Company and Liberty Self-Stor Limited Partnership (Exhibits A and B to
the Agreement and Plan of Merger are Exhibits 3.1 and 3.2, respectively) (Filed as Exhibit 2.1
to Registrants Form 8-K dated January 12, 2000 and incorporated herein by reference.)3.1
    
    
    Articles of Incorporation of the Company (Filed as Exhibit 3.1 to Registrants Form 8-K dated
January 12, 2000 and incorporated herein by reference.)3.2
    
    
    Articles of Amendment of Articles of Incorporation of the Company dated June 27, 2005(Filed
as Exhibit 3.1 to Registrants Form 8-K dated July 1, 2005 and incorporated herein by
reference.)3.3
    
    
    Articles Supplementary to John D. Oil and Gas Companys Articles of Incorporation, as
amended, restated and supplemented dated February 12, 2008 (Filed as Exhibit 3.1 to
Registrants Form 8-K dated February 12, 2008 and incorporated herein by reference.)3.4
    
    
    Bylaws of the Company (Filed as Exhibit 3.2 to Registrants Form 8-K dated January 12, 2000
and incorporated herein by reference.)
  33




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##### Table of Contents



Exhibit No.
    
    Description4.1
    
    
    Registration Rights Agreement between the Company and the Richard M. Osborne Trust dated
February 28, 2006 (Filed as Exhibit 4.1 to Registrants Form 8-K dated February 24, 2006 and
incorporated herein by reference.)9.1
    
    
    Voting Trust Agreement between the Company, Richard M. Osborne and Gregory J. Osborne dated
February 16, 2006 (Filed as Exhibit 7.1 to Registrants Form SC 13D/A dated April 11, 2006 and
incorporated herein by reference.)10.1
    
    
    Amended and Restated 1999 Stock Option and Award Plan of the Company (Filed as Annex A to
Registrants Definitive Proxy Statement filed on April 30, 2009 and incorporated herein by
reference.)10.2
    
    
    Lease between OsAir, Inc. and the Company (Filed as Exhibit 10.2 to Registrants Form 8-K
dated January 12, 2000 and incorporated herein by reference.)10.3
    
    
    Lease between OsAir, Inc and the Company dated March 26, 2009 (Filed as Exhibit 10.4 to
Registrants Form 10-K dated December 31, 2008 and incorporated herein by reference.)10.4
    
    
    Agreement of Limited Partnership of LSS I Limited Partnership, dated December 29, 1999.
(Filed as Exhibit 10.3 to Registrants Form 8-K dated January 12, 2000 and incorporated herein
by reference.)10.5
    
    
    Cost Sharing Agreement, by and between Liberty Self-Stor, Ltd. and Liberty Self-Stor II, Ltd.
dated December 28, 1999 (Filed as Exhibit 10.7 to Registrants Form 10-KSB, dated March 15,
2000 and incorporated herein by reference.)10.6
    
    
    Contract among Acquiport/Amsdell I Limited Partnership and/or its nominee, Liberty Self-Stor,
Ltd. and Liberty Self-Stor II, Ltd dated September 7, 2004 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated September 10, 2004 and incorporated herein by reference.)10.7
    
    
    Amended and Restated First Amendment to Agreement of Limited Partnership of LSS I Limited
Partnership dated March 29, 2006 (Filed as Exhibit 10.9 to Registrants form 10-KSB, dated
March 31, 2006 and incorporated herein by reference)10.8
    
    
    Stock Subscription Agreement between the Company and the Richard M. Osborne Trust dated
February 28, 2006 (Filed as Exhibit 10.1 to Registrants Form 8-K dated March 2, 2006 and
incorporated herein by reference.)10.9
    
    
    Stock Subscription Agreement between the Company and Terence P. Coyne dated February 28, 2006
(Filed as Exhibit 10.2 to Registrants Form 8-K dated March 2, 2006 and incorporated herein by
reference.)10.10
    
    
    Common Stock Purchase Warrant granted to Richard M. Osborne dated June 20, 2008 (Filed as
Exhibit 10.1 to Registrants Form 8-K dated June 20, 2008 and incorporated herein by
reference.)10.11
    
    
    Letter agreement between the Company and Great Plains Exploration, LLC relating to the
transfer of oil and natural gas wells dated as of January 1, 2006 (Filed as Exhibit 10.1 to
Registrants Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)10.12
    
    
    Oil and Gas Operations and Sale Agreement between the Company and Great Plains Exploration,
LLC dated as of January 1, 2006 (Filed as Exhibit 10.2 to Registrants Form 10-QSB dated March
31, 2006 and incorporated herein by reference.)10.13
    
    
    Amendment No 1 to Oil and Gas Operations and Sale Agreement between the Company and Great
Plains Exploration, LLC dated as of November 14, 2006 (Filed as Exhibit 10.4 to Registrants
Form 10-QSB dated September 30, 2006 and incorporated by reference.)
  34




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##### Table of Contents



Exhibit No.
    
    Description10.14
    
    
    Amendment No. 2 to Oil and Gas Operations and Sale Agreement dated as of January 12, 2009 by
and between the Company and Great Plains Exploration, LLC (Filed as Exhibit 10.1 to the
Registrants 8-K dated January 12, 2009 and incorporated herein by reference.)10.15
    
    
    Revolving Demand Note of the Company payable to the Richard M. Osborne Trust dated as of
January 1, 2006 (Filed as Exhibit 10.3 to Registrants Form 10-QSB dated March 31, 2006 and
incorporated herein by reference.)10.16
    
    
    Purchase and Sale Agreement between the Company and Buckeye Storage of Gahanna LLC dated as
of October 5, 2006 (Filed as Exhibit 10.1 to Registrants Form 8-K dated October 12, 2006 and
incorporated herein by reference.)10.17
    
    
    First Amended and Restated Loan and Security Agreement between RBS Citizens, N.A., d/b/a
Charter One, Richard M. Osborne and the Company, dated as of March 28, 2008 (Filed as Exhibit
10.1 to Registrants Form 8-K dated March 28, 2008 and incorporated herein by reference.)10.18
    
    
    Revolving Credit Note of the Company and Richard M. Osborne in favor of RBS Citizens, N.A.,
d/b/a Charter One, dated as of March 28, 2008 (Filed as Exhibit 10.2 to Registrants Form 8-K
dated March 28, 2008 and incorporated herein by reference.)10.19
    
    
    Loan Amendment Agreement between the Company, Great Plains Exploration, LLC and Richard M.
Osborne dated March 28, 2008 (Filed as Exhibit 10.1 to Registrants Form 10-Q dated March 28,
2008 and incorporated herein by reference.)10.20
    
    
    Assignment and Assumption of Lease Purchase and Sale Agreement and First Amendment of Lease
Purchase and Sale Agreement entered into as of August 3, 2007 between Great Plains
Exploration, LLC
and Kykuit Resources, LLC (Filed as Exhibit 10.1 to Registrants Form 8-K dated August
3, 2007 and incorporated herein by reference.)10.21
    
    
    Lease Purchase and Sale Agreement dated March 21, 2007 between Hemus, Ltd. and Great Plains
Exploration, LLC and First Amendment to Lease Purchase and Sale Agreement dated July 24, 2007
(Filed as Exhibit 10.2 to Registrants Form 8-K dated August 3, 2007 and incorporated herein
by reference.)10.22
    
    
    Joint Venture Development Agreement between Kykuit Resources, LLC and Hemus, Ltd, effective
August 3, 2007 (Filed as Exhibit 10.3 to Registrants Form 8-K dated August 3, 2007 and
incorporated herein by reference.)10.23
    
    
    Assignment of Oil, Gas and Mineral Leases dated May 1, 2008 between Hemus, Ltd. and Kykuit
Resources, LLC (Filed as Exhibit 10.1 to Registrants Form 8-K dated May 1, 2008 and
incorporated herein by reference.)10.24
    
    
    Transfer and Acceptance of Membership Interest dated May 29, 2008 between the Company and
Geis Coyne Oil and Gas, LLC (Filed as Exhibit 10.2 to Registrants Form 8-K dated May 1, 2008
and incorporated herein by reference.)10.25
    
    
    Second Amended and Restated Operating Agreement of Kykuit Resources, LLC dated May 29, 2008
(Filed as Exhibit 10.3 to Registrants Form 8-K dated May 1, 2008 and incorporated herein by
reference.)
  35




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##### Table of Contents



Exhibit No.
    
    Description10.26
    
    
    Purchase and Sale Agreement dated June 11, 2008 between Macum Energy, Inc., Harold and Eva
Holden Living Trust dated 1995, Harold and Eva Holden, Trustees, Winifred Gas Partnership,
Goodridge Resources, Inc., Vincent T. Larse, Dr. David T. Larsen, Pic Productions, Inc.,
Stanley and Beverly Stott Living Trust dated 4/30/96, Stanley and Beverly Stott, Trustees,
Faith Drilling Inc., and Kykuit Resources, LLC (Filed as Exhibit 10.4 to Registrants Form 8-K
dated May 1, 2008 and incorporated herein by reference.)10.27
    
    
    Cognovit Promissory Note of the Company dated August 3, 2007 (Filed as Exhibit 10.4 to
Registrants Form 8-K dated August 3, 2007 and incorporated herein by reference.)10.28
    
    
    Cognovit Promissory Note of the Company dated August 28, 2007 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated August 28, 2007 and incorporated herein by reference.)10.29
    
    
    Cognovit Promissory Note of the Company dated September 12, 2007 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated September 12, 2007 and incorporated herein by reference.)10.30
    
    
    Cognovit Promissory Note of the Company dated October 10, 2007 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated October 10, 2007 and incorporated herein by reference.)10.31
    
    
    Cognovit Promissory Note of the Company dated November 20, 2007 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated November 20, 2007 and incorporated herein by reference.)10.32
    
    
    Cognovit Promissory Note of the Company dated November 30, 2007 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated November 30, 2007 and incorporated herein by reference.)10.33
    
    
    Cognovit Promissory Note of the Company dated May 23, 2008 (Filed as Exhibit 10.5 to
Registrants Form 8-K dated May 1, 2008 and incorporated herein by reference.)10.34
    
    
    Cognovit Promissory Note of the Company dated May 27, 2008 (Filed as Exhibit 10.6 to
Registrants Form 8-K dated May 1, 2008 and incorporated herein by reference.)10.35
    
    
    Cognovit Promissory Note of the Company dated February 13, 2009 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated February 13, 2009 and incorporated herein by reference.)10.36
    
    
    Letter from Richard M. Osborne guaranteeing Charter One loan debt dated March 26, 2009
(Filed as Exhibit 10.37 to Registrants Form 10-K dated December 31, 2008 and incorporated
herein by reference.)10.37
    
    
    Cognovit Promissory Note of John D Oil and Gas Company dated April 7, 2009 (Filed as Exhibit
10.38 to Registrants Form 10-K dated December 31, 2008 and incorporated herein by reference.)10.38
    
    
    Cognovit Promissory Note of John D Oil and Gas Company (amended) dated May 22, 2009 (Filed
as Exhibit 10.1 to Registrants Form 8-K dated May 27, 2009 and incorporated herein by
reference.)10.39
    
    
    Forebearance Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the
Company, Great Plains Exploration, LLC, OzGas LTD., Richard M. Osborne and The Richard M.
Osborne Trust (Filed as Exhibit 10.1 to the Registrants Form 8-K dated June 25, 2010 and
incorporated herein by reference.)10.40
    
    
    Assignment & Security Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter
One, the Company and Great Plains Exploration, LLC (Filed as Exhibit 10.2 to the Registrants
Form 8-K dated June 25, 2010 and incorporated herein by reference.)
  36




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##### Table of Contents



Exhibit No.
    
    Description10.41
    
    
    Pledge Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the
Company and Richard M. Osborne (Filed as Exhibit 10.3 to the Registrants Form 8-K dated June
25, 2010 and incorporated herein by reference.)10.42
    
    
    Purchase and Sale Agreement effective as of January 30, 2008 between Liberty Self Stor, Ltd.
and Richard M. Osborne, Trustee (Filed as Exhibit 10.1 to Registrants Form 8-K dated December
28, 2007 and incorporated herein by reference.)10.43
    
    
    Operating Agreement of Lucky Brothers, LLC dated October 7, 2008 (Filed as Exhibit 10.1 to
Registrants Form 10-Q dated September 30, 2008 and incorporated herein by reference.)10.44
    
    
    Operating Contract between the Company, Lucky Brothers, LLC and Great Plains Exploration,
LLC dated October 7, 2008 (Filed as Exhibit 10.2 to Registrants Form 10-Q dated September 30,
2008 and incorporated herein by reference.)10.45
    
    
    Drilling Contract between the Company and Great Plains Exploration, LLC dated October 7,
2008 (Filed as Exhibit 10.3 to Registrants Form 10-Q dated September 30, 2008 and
incorporated herein by reference.)31.1
    *
    
    Section 302 Certification of Chairman of the Board and Chief Executive Officer (principal
executive officer) pursuant to the Sarbanes-Oxley Act of 200231.2
    *
    
    Section 302 Certification of Chief Financial Officer (principal financial officer) pursuant
to the Sarbanes-Oxley Act of 200232.1
    *
    
    Certification of Chairman of the Board and Chief Executive Officer (principal executive
officer) and Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    *
    
    Letter from Schlumberger Data & Consulting Services about Reserve Economics
 *
    
    Filed herewith
    
    Management agreement or compensatory plan or arrangement  37




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##### Table of Contents



Dated: March 31, 2011
    JOHN D. OIL AND GAS COMPANYBy:
    /s/  Richard M. OsborneRichard M. OsborneChairman and Chief Executive Officer
(Principal Executive Officer)  /s/  Richard M. Osborne

Richard M. Osborne 
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
    
    Dated: March 31, 2011/s/  Carolyn Coatoam

Carolyn Coatoam 

Chief Financial Officer
(Principal Financial and Accounting Officer)
    
    Dated: March 31, 2011/s/ Gregory J. Osborne

Gregory J. Osborne, President and Director
    
    Dated: March 31, 2011/s/ Thomas J. Smith

Thomas J. Smith, Director
    
    Dated: March 31, 2011
  38




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
  39




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##### Table of Contents



December 31, 2010
    
    
    December 31, 2009ASSETSCurrent Assets:Cash
    
    $
    20,016
    
    
    $
    22,072Accounts Receivable
    
    
    47,312
    
    
    
    57,748Accounts Receivable from Related Parties
    
    
    443,702
    
    
    
    464,584Other Current Assets
    
    
    4,610
    
    
    
    17,723Total Current Assets
    
    
    515,640
    
    
    
    562,127Property and Equipment, Net
    
    
    7,465,911
    
    
    
    8,985,937Investment in Unconsolidated Affiliate
    
    
    736,953
    
    
    
    705,965Other Assets
    
    
    
    
    
    
    5,495TOTAL ASSETS
    
    $
    8,718,504
    
    
    $
    10,259,524LIABILITIES AND EQUITYCurrent Liabilities:Line of Credit
    
    
    9,480,187
    
    
    
    9,497,024Current Maturities of Long Term Debt
    
    
    136,812
    
    
    
    1,145,174Accounts Payable
    
    
    276,452
    
    
    
    370,675Accounts Payable to Related Parties
    
    
    222,732
    
    
    
    47,144Accrued Expenses
    
    
    190,038
    
    
    
    201,959Total Current Liabilities
    
    
    10,306,221
    
    
    
    11,261,976Long Term Debt, Net of Current Maturities
    
    
    927,593
    
    
    
    Asset Retirement Obligation
    
    
    654,493
    
    
    
    680,056Commitments and Contingencies
    
    
    
    
    
    
    Equity:Serial Preferred Stock  $.001 par value: 2,000,000
shares authorized, 1,350 shares issued and
outstanding
    
    
    1
    
    
    
    1Common Stock  $.001 par value: 50,000,000 shares
authorized; 9,067,090 shares issued and
outstanding
    
    
    9,067
    
    
    
    9,067Paid-in Capital
    
    
    30,277,787
    
    
    
    30,273,239Accumulated Deficit
    
    
    (32,746,986
    )
    
    
    (31,151,171
    )Total John D. Oil and
Gas Company Equity
    
    
    (2,460,131
    )
    
    
    (868,864
    )Non-Controlling Interest
    
    
    (709,672
    )
    
    
    (813,644
    )Total Equity
    
    
    (3,169,803
    )
    
    
    (1,682,508
    )TOTAL LIABILITIES AND EQUITY
    
    $
    8,718,504
    
    
    $
    10,259,524
   40




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##### Table of Contents



2010
    
    
    2009RevenuesOil and Natural Gas Sales
    
    $
    2,103,849
    
    
    $
    3,711,668Self-Storage Operation Revenues
    
    
    339,345
    
    
    
    333,569Interest and Other
    
    
    193,588
    
    
    
    8Total Revenues
    
    
    2,636,782
    
    
    
    4,045,245Operating ExpensesInterest
    
    
    473,302
    
    
    
    448,558Accretion
    
    
    24,580
    
    
    
    45,905Oil and Natural Gas Production Costs
    
    
    664,699
    
    
    
    687,182Self-Storage Property Operating Expense
    
    
    138,524
    
    
    
    114,539Legal and Professional Fees
    
    
    356,658
    
    
    
    367,854Property Taxes and Insurance
    
    
    76,230
    
    
    
    137,492General and Administrative
    
    
    605,023
    
    
    
    762,982Loss from Unconsolidated Affiliate
    
    
    175,512
    
    
    
    650,420Impairment
    
    
    
    
    
    
    145,444Depreciation, Depletion and Amortization
    
    
    1,506,097
    
    
    
    3,381,114Total Operating Expenses
    
    
    4,020,625
    
    
    
    6,741,490Net Loss
    
    
    (1,383,843
    )
    
    
    (2,696,245
    )Net Income (Loss) attributable to Non-controlling Interest
    
    
    103,972
    
    
    
    (81,544
    )Net Loss attributable to John D. Oil and Gas Company
    
    $
    (1,487,815
    )
    
    $
    (2,614,701
    )Other Comprehensive Income All attributable to John D.
Oil and Gas Company:Change in Fair Value of Cash Flow Hedge
    
    
    
    
    
    
    133,880Comprehensive Loss
    
    $
    (1,487,815
    )
    
    $
    (2,480,821
    )Weighted Average Shares Outstanding- Basic and Diluted
    
    
    9,067,090
    
    
    
    9,067,090Loss per Common Share  Basic and Diluted
    
    $
    (0.16
    )
    
    $
    (0.31
    )
   41




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##### Table of Contents



AccumulatedOther
    
    
    Non-Preferred
    
    
    Common
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ControllingStock
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Interest
    
    
    TotalBalance at December 31, 2008
    
    $
    1
    
    
    $
    9,067
    
    
    $
    30,268,691
    
    
    $
    (28,428,470
    )
    
    $
    (133,880
    )
    
    $
    (732,100
    )
    
    $
    983,309Restricted Common Stock Award
    
    
    
    
    
    
    
    
    
    
    4,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,548Dividends Declared and Paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,000
    )
    
    
    
    
    
    
    
    
    
    
    (108,000
    )Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,614,701
    )
    
    
    
    
    
    
    (81,544
    )
    
    
    (2,696,245
    )Change in Fair Value of Cash
Flow Hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133,880
    
    
    
    
    
    
    
    133,880Balance at December 31, 2009
    
    $
    1
    
    
    $
    9,067
    
    
    $
    30,273,239
    
    
    $
    (31,151,171
    )
    
    $
    
    
    
    $
    (813,644
    )
    
    $
    (1,682,508
    )Restricted Common Stock Award
    
    
    
    
    
    
    
    
    
    
    4,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,548Dividends Declared and Paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,000
    )
    
    
    
    
    
    
    
    
    
    
    (108,000
    )Net Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,487,815
    )
    
    
    
    
    
    
    103,972
    
    
    
    (1,383,843
    )Balance at December 31, 2010
    
    $
    1
    
    
    $
    9,067
    
    
    $
    30,277,787
    
    
    $
    (32,746,986
    )
    
    $
    
    
    
    $
    (709,672
    )
    
    $
    (3,169,803
    )
   42




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##### Table of Contents



For The Years Ended December 31,2010
    
    
    2009Cash Flows from Operating Activities:Net Loss
    
    $
    (1,383,843
    )
    
    $
    (2,696,245
    )Adjustments to Reconcile Net Loss to Net Cash
Provided By Operating ActivitiesAccretion
    
    
    24,580
    
    
    
    45,905Loss from Unconsolidated Affiliate
    
    
    175,512
    
    
    
    650,420Loss from Uncompleted wells
    
    
    93,506
    
    
    
    Impairment
    
    
    
    
    
    
    145,444Depreciation, Depletion and Amortization
    
    
    1,506,097
    
    
    
    3,381,114Restricted Common Stock Award
    
    
    4,548
    
    
    
    4,548Changes in Operating Assets and Liabilities:Accounts Receivable
    
    
    31,318
    
    
    
    940,895Other Current Assets
    
    
    13,113
    
    
    
    38,479Other Assets
    
    
    5,495
    
    
    
    55,129Accounts Payable
    
    
    (31,695
    )
    
    
    (1,612,062
    )Accrued Expenses
    
    
    (11,921
    )
    
    
    (87,731
    )Net Cash Provided By Operating Activities
    
    
    426,710
    
    
    
    865,896Cash Flows from Investing Activities:Purchases of Property and Equipment
    
    
    (119,642
    )
    
    
    Expenditures for Unconsolidated Affiliate
    
    
    (93,440
    )
    
    
    (367,127
    )Expenditures for Oil and Natural Gas Wells
    
    
    (10,078
    )
    
    
    (329,125
    )Net Cash Used In Investing Activities
    
    
    (223,160
    )
    
    
    (696,252
    )Cash Flows from Financing Activities:Dividends Paid to Preferred Stockholders
    
    
    (108,000
    )
    
    
    (108,000
    )Proceeds from Related Party Note Payable
    
    
    
    
    
    
    600,000Proceeds from Long Term Debt
    
    
    63,956
    
    
    
    Payments on Line of Credit
    
    
    (16,837
    )
    
    
    Principal Payments on Related Party Debt
    
    
    
    
    
    
    (600,000
    )Principal Payments on Long Term Debt
    
    
    (144,725
    )
    
    
    (117,873
    )Net Cash Used In Financing Activities
    
    
    (205,606
    )
    
    
    (225,873
    )Net Decrease in Cash
    
    
    (2,056
    )
    
    
    (56,229
    )Cash, Beginning of Period
    
    
    22,072
    
    
    
    78,301Cash, End of Period
    
    $
    20,016
    
    
    $
    22,072Supplemental Disclosure of Cash flow Information:Interest Paid on Borrowings
    
    $
    473,576
    
    
    $
    443,549
   43




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##### Table of Contents



1. Summary of Significant Accounting Policies
 General
    Principles of Consolidation
  Use of Estimates
    44




---



##### Table of Contents



Accounts Receivable
   Property and Equipment
     Asset Impairment
   45




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##### Table of Contents



Asset Retirement Obligation
   2010
    
    
    2009Asset retirement obligations, beginning of the year
    
    $
    680,056
    
    
    $
    674,517Liabilities incurred during the year
    
    
    4,551
    
    
    
    Revisions in estimated cash flows
    
    
    (54,694
    )
    
    
    (14,366
    )Liabilities settled during the year
    
    
    
    
    
    
    (26,000
    )Accretion expense
    
    
    24,580
    
    
    
    45,905Asset retirement obligations, end of the year
    
    $
    654,493
    
    
    $
    680,056
  Revenue Recognition
     2011
    
    $
    219,2102012
    
    
    207,6762013
    
    
    201,6842014
    
    
    183,2882015
    
    
    137,916Thereafter
    
    
    162,110$
    1,111,884
  46




---



##### Table of Contents



Stock-Based Compensation
    Income Taxes
     Fair Value of Financial Instruments
   47




---



##### Table of Contents



Recently Issued Accounting Pronouncements
     2. Going Concern
  3. Property and Equipment
  2010
    
    
    2009Oil and Natural Gas Properties:Proved Properties
    
    $
    16,473,401
    
    
    $
    16,516,743Unproved Properties
    
    
    79,308
    
    
    
    169,536Well Material Inventory
    
    
    50,349
    
    
    
    50,349Accumulated Depletion
    
    
    (10,613,130
    )
    
    
    (9,250,963
    )Total Oil and
Natural Gas Properties
    
    
    5,989,928
    
    
    
    7,485,665Other Property and Equipment:Land
    
    
    307,780
    
    
    
    307,780Building and Improvements
    
    
    2,402,983
    
    
    
    2,357,822Furniture and Equipment
    
    
    248,120
    
    
    
    173,640Accumulated Depreciation
    
    
    (1,482,900
    )
    
    
    (1,338,970
    )Total Other Property
and Equipment
    
    
    1,475,983
    
    
    
    1,500,272Property
and Equipment, Net
    
    $
    7,465,911
    
    
    $
    8,985,937
  48




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4. Investment in Unconsolidated Affiliates
   Kykuit Resources LLC
Balance Sheet
 December 31, 2010
    
    
    December 31, 2009Current Assets
    
    $
    429,656
    
    
    $
    115,893Unproved Leaseholds and Development Costs
    
    
    3,647,721
    
    
    
    6,957,065Furniture and Fixtures, Net of Depreciation
    
    
    20,373
    
    
    
    31,747Other Assets
    
    
    15,726
    
    
    
    24,087$
    4,113,476
    
    
    $
    7,128,792Current Liabilities
    
    $
    677,331
    
    
    $
    832,728Paid in Capital
    
    
    7,436,674
    
    
    
    6,786,675Accumulated Deficit
    
    
    (4,000,529
    )
    
    
    (490,611
    )$
    4,113,476
    
    
    $
    7,128,792
 Kykuit Resources LLC.
Statement of Operations
For The Years Ended December 31, 2010 and 2009
 2010
    
    
    2009Total Revenues
    
    $
    
    
    
    $
    Total Expenses
    
    
    3,509,918
    
    
    
    304,543Net Loss
    
    $
    (3,509,918
    )
    
    $
    (304,543
    )
 5. Line of Credit and Long-Term Debt
   49




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##### Table of Contents




    
    Payment by the Loan Parties of a forbearance fee of $40,000 per month during the
forbearance period;
 
    
    No material adverse change in the condition of the Loan Parties;
 
    
    An assignment and grant of a security interest by the Company and GPE of each of
their ownership interests in the Alpha and Panzica wells;
 
    
    A pledge by the Loan Parties of their ownership interests in Kykuit Resources
LLC; and
    
    A pledge by Mr. Osborne of not less than 800,000 shares of common stock of Gas
Natural Inc. with such stock having a market value of not less than $9.6 million
pursuant to a pledge agreement.
  50




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##### Table of Contents



2011
    
    $
    124,4402012
    
    
    124,4402013
    
    
    124,4402014
    
    
    637,0441,010,364Less current portion
    
    
    (124,440
    )$
    885,924
  51




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##### Table of Contents



2011
    
    $
    12,3722012
    
    
    12,7302013
    
    
    13,0992014
    
    
    13,4792015
    
    
    2,36154,041Less current portion
    
    
    (12,372
    )$
    41,669
  6. Notes Payable to Related Party
    7. Stockholders Equity
    52




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##### Table of Contents



8. Earnings/Loss Per Share
    9. Income Taxes
  2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %Provision (benefit) based on the federal statutory rate
    
    $
    (506,000
    )
    
    
    (34.0
    )
    
    $
    (889,000
    )
    
    
    (34.0
    )Increase in valuation allowance
    
    
    506,000
    
    
    
    34.0
    
    
    
    889,000
    
    
    
    34.0$
    
    
    
    
    
    
    
    $
    
    
    
    
    
  2010
    
    
    2009Deferred tax assetsNet operating loss carry forwards
    
    $
    5,645,000
    
    
    $
    5,420,000AMT credit
    
    
    41,100
    
    
    
    41,100Total Deferred assets
    
    
    5,686,100
    
    
    
    5,461,100Deferred tax liabilitiesOil and natural gas properties, principally due to differences in depreciation,
depletion and amortization
    
    
    (1,425,000
    )
    
    
    (1,750,000
    )Net Deferred tax assets
    
    
    4,261,100
    
    
    
    3,711,100Valuation allowance
    
    
    (4,261,100
    )
    
    
    (3,711,100
    )Net Deferred tax assets
    
    $
    
    
    
    $
    
  53




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10. Other Related Party Transactions
          54




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##### Table of Contents



2010
    
    
    2009Accounts Receivable Oil and Gas Sales:Great Plains Exploration, LLC.
    
    $
    435,268
    
    
    $
    423,566Liberty Self Stor II
    
    
    3,806
    
    
    
    727Lucky Brothers
    
    
    
    
    
    
    38,983Various Related Companies
    
    
    4,628
    
    
    
    1,308$
    443,702
    
    
    $
    464,584Accounts Payable:Great Plains Exploration, LLC.
    
    $
    14,012
    
    
    $
    47,144Big Oats Oilfield Supply Company
    
    
    23,111
    
    
    
    Kykuit Resources LLC
    
    
    160,391Orwell Natural Gas
    
    
    1,296Osair, Inc.
    
    
    11,922
    
    
    
    OzGas Ltd.
    
    
    12,000
    
    
    
    $
    222,732
    
    
    $
    47,144
 Great Plains Exploration, LLC:
    
    2010
    
    
    2009Capitalized Costs for Well Property and Equipment
    
    $
    
    
    
    $
    140,410RevenuesRevenue From the Sale of
Oil and Natural Gas
Production, net of
pipeline transportation
costs
    
    $
    1,828,647
    
    
    $
    3,519,851Operating expensesWell Management, Water Hauling and Service Rig
    
    $
    395,892
    
    
    $
    506,337Big Oats Oilfield Supply Company:Purchases
    
    $
    22,193
    
    
    $
    Orwell Trumbull Pipeline, LLC
Operating expenses
    
    $
    2,000
    
    
    $
    
    55




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11. Financial Information Relating to Industry Segments
   Oil and Gas
    
    
    Self-StorageTwelve Months ended December 31, 2010
    
    Production
    
    
    Facilities
    
    
    TotalRevenues from external customers
    
    $
    2,103,849
    
    
    $
    339,345
    
    
    $
    2,443,194Interest and other revenue
    
    
    15,670
    
    
    
    177,918
    
    
    
    193,588Total Revenue
    
    
    2,119,519
    
    
    
    517,263
    
    
    
    2,636,782Interest Expense
    
    
    437,497
    
    
    
    35,805
    
    
    
    473,302Accretion Expense
    
    
    24,580
    
    
    
    
    
    
    
    24,580Property Operating Costs
    
    
    664,699
    
    
    
    138,524
    
    
    
    803,223Other Operating expenses
    
    
    933,909
    
    
    
    104,002
    
    
    
    1,037,911Loss from Unconsolidated Affiliate
    
    
    175,512
    
    
    
    
    
    
    
    175,512Impairments
    
    
    
    
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    1,384,450
    
    
    
    121,647
    
    
    
    1,506,097Total Operating Expenses
    
    
    3,620,647
    
    
    
    399,978
    
    
    
    4,020,625Net Income (Loss)
    
    $
    (1,501,128
    )
    
    $
    117,285
    
    
    $
    (1,383,843
    )Property and Equipment additions
    
    $
    83,173
    
    
    $
    46,547
    
    
    $
    129,720Total Assets
    
    $
    7,346,068
    
    
    $
    1,372,436
    
    
    $
    8,718,504
 Oil and Gas
    
    
    Self-StorageTwelve Months ended December 31, 2009
    
    Production
    
    
    Facilities
    
    
    TotalRevenues from external customers
    
    $
    3,711,668
    
    
    $
    333,569
    
    
    $
    4,045,237Interest and other revenue
    
    
    8
    
    
    
    
    
    
    
    8Total Revenue
    
    
    3,711,676
    
    
    
    333,569
    
    
    
    4,045,245Interest Expense
    
    
    412,637
    
    
    
    35,921
    
    
    
    448,558Accretion Expense
    
    
    45,905
    
    
    
    
    
    
    
    45,905Property Operating Costs
    
    
    687,182
    
    
    
    114,539
    
    
    
    801,721Other Operating expenses
    
    
    1,089,434
    
    
    
    178,894
    
    
    
    1,268,328Loss from Unconsolidated Affiliate
    
    
    650,420
    
    
    
    
    
    
    
    650,420Impairments
    
    
    145,444
    
    
    
    
    
    
    
    145,444Depreciation, depletion and amortization
    
    
    3,260,576
    
    
    
    120,538
    
    
    
    3,381,114Total Operating Expenses
    
    
    6,291,598
    
    
    
    449,892
    
    
    
    6,741,490Net Loss
    
    $
    (2,579,922
    )
    
    $
    (116,323
    )
    
    $
    (2,696,245
    )Property and Equipment additions
    
    $
    329,125
    
    
    $
    
    
    
    $
    329,125Total Assets
    
    $
    8,790,619
    
    
    $
    1,468,905
    
    
    $
    10,259,524
  56




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##### Table of Contents



12. Commitments and Contingencies
 Environmental Matters
  Oil and Gas Contracts
  13. Supplemental Disclosures About Oil and Natural Gas Producing Activities

 Unaudited
 Estimated Proved Reserves
     57




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2010
    
    
    2009Natural Gas
    
    
    Oil
    
    
    Natural Gas
    
    
    Oil(MCF)
    
    
    (BBLs)
    
    
    (MCF)
    
    
    (BBLs)Proved developed and undeveloped
reserves:Beginning of year
    
    
    2,512,800
    
    
    
    28,800
    
    
    
    2,146,600
    
    
    
    17,500Revision of previous estimates,
extensions and other additions
    
    
    347,800
    
    
    
    13,400
    
    
    
    792,000
    
    
    
    17,600Net reserve additions
    
    
    
    
    
    
    
    
    
    
    272,900
    
    
    
    2,900Production
    
    
    (383,500
    )
    
    
    (8,900
    )
    
    
    (698,700
    )
    
    
    (9,200
    )End of year
    
    
    2,477,100
    
    
    
    33,300
    
    
    
    2,512,800
    
    
    
    28,800Proved developed reserves:Beginning of year
    
    
    2,512,800
    
    
    
    28,800
    
    
    
    2,146,600
    
    
    
    17,500End of year
    
    
    2,477,100
    
    
    
    33,300
    
    
    
    2,512,800
    
    
    
    28,800
 Capitalized Costs Relating to Oil and Natural Gas Producing Activities for the years ended December
31.
 2010
    
    
    2009Proved oil and natural gas properties
    
    $
    16,473,401
    
    
    $
    16,516,743Unproved oil and natural gas properties
    
    
    79,308
    
    
    
    169,536Well Material inventory
    
    
    50,349
    
    
    
    50,349Total
    
    
    16,603,058
    
    
    
    16,736,628Accumulated depreciation, depletion and amortization
    
    
    (10,613,130
    )
    
    
    (9,250,963
    )Net capitalized costs
    
    $
    5,989,928
    
    
    $
    7,485,665
 Costs Incurred in Oil and Natural Gas Producing Activities for the years ended December 31.
 2010
    
    
    2009Property acquisition costs
    
    $
    317
    
    
    $
    3,047Development costs
    
    $
    10,626
    
    
    $
    340,443
  58




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Standardized Measure of Discounted Future Net Cash Flows at December 31, (in thousands of dollars).
 2010
    
    
    2009Future cash inflows from sales of oil and gas
    
    $
    15,439
    
    
    $
    13,794Future production and development costs
    
    
    (8,661
    )
    
    
    (8,207
    )Future asset retirement obligations
    
    
    (1,635
    )
    
    
    (1,449
    )Future income tax expense
    
    
    (1,749
    )
    
    
    (1,407
    )Future net cash flows
    
    
    3,349
    
    
    
    2,731Future net cash flows 10% annual discount for estimated
timing of cash flows
    
    
    (1,390
    )
    
    
    (1,186
    )Standardized measure of discounted future net cash flows
    
    $
    2,004
    
    
    $
    1,545
   Changes in the Standardized Measure of Discounted Future Net Cash Flow at December 31, (in
thousands of dollars).
 2010
    
    
    2009Balance, beginning of year
    
    $
    1,545
    
    
    $
    3,522Extensions, discoveries and other additions
    
    
    
    
    
    
    412Revision of quantity estimates
    
    
    974
    
    
    
    985Sales of oil and gas, net of production costs
    
    
    (445
    )
    
    
    (1,936
    )Net change in prices and production costs
    
    
    471
    
    
    
    (1,668
    )Net change in income taxes
    
    
    (342
    )
    
    
    1,004Accretion of discount
    
    
    155
    
    
    
    352Other
    
    
    (354
    )
    
    
    (1,126
    )Balance, end of year
    
    $
    2,004
    
    
    $
    1,545
   59