UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2006

                                       Or

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ____________ to ________________

                        Commission file number 000-50229

                                    FALCON NATURAL GAS CORP.
               (Exact name of small business issuer as specified in its charter)

            Nevada                                        98-0403897
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

              Westchase Center, 2500 City West Boulevard, Suite 300
                              Houston, Texas 77042
                    (Address of principal executive offices)

                                 (713) 267-2240
              (Registrant's telephone number, including area code)

                  ---------------------------------------------
                  (Former address if changed since last report)

      Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, 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 shell company (as
defined in Rule 12b-2). Yes |_| No |X|

         As of November 3, 2006, there were 66,112,000 shares of the issuer's
common stock, par value $0.001, issued and outstanding.

        Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|

<PAGE>
                            FALCON NATURAL GAS CORP.
               SEPTEMBER 30, 2006 QUARTERLY REPORT ON FORM 10-QSB
                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
          Special Note Regarding Forward Looking Statements ...............    3

                         PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.............................................   .4
Item 2.   Plan of Operation................................................   25
Item 3.   Controls and Procedures..........................................   27

                           PART II - OTHER INFORMATION

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds......   27
Item 3.   Defaults Upon Senior Securities..................................   28
Item 5.   Other Information................................................   29
Item 6.   Exhibits.........................................................   30



                                       2

<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

To the extent that the information presented in this Quarterly Report on Form
10-QSB for the quarter ended September 30, 2006, discusses financial
expectations, information or expectations about our sales and marketing
activities, financing and operating strategies, or otherwise makes statements
about future events, such statements are forward-looking. We are making these
forward-looking statements in reliance on the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although we believe that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions, there are a number of risks and uncertainties that could
cause our actual results to differ materially from such forward-looking
statements. These risks and uncertainties are described, among other places in
this Quarterly Report, in "Plan of Operation".

In addition, we disclaim any obligations to update any forward-looking
statements to reflect events or circumstances after the date of this Quarterly
Report. When considering such forward-looking statements, you should keep in
mind the risks referenced above and the other cautionary statements in this
Quarterly Report.


                                       3

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS                                              PAGE
                                                                            ----

          Consolidated Balance Sheets as at September 30, 2006 (unaudited)
           and December 31, 2005                                               5

          Consolidated Statements of Operations for the three and nine
          months ended September 30, 2006 (unaudited) and September 30,
          2005 (unaudited) and for the period from inception (March 1,
          2004) to September 30, 2006 (unaudited)
                                                                               6

          Consolidated Statements of Cash Flows for the nine months
          ended September 30, 2006 (unaudited) and September 30, 2005
          (unaudited) and for the period from inception (March 1, 2004)
          to September 30, 2006 (unaudited)
                                                                               7

          Notes to Consolidated Financial Statements (unaudited)               8


                                       4
<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                          September 30,
                                                                             2006         December 31,
                                                                           (Unaudited)        2005
                                                                          -------------   ------------
<S>                                                                       <C>             <C>
ASSETS
  CURRENT ASSETS
    Cash and cash equivalents                                             $    564,359    $  3,832,998
    Accounts receivable                                                         86,690              --
    Unbilled oil & gas sales                                                    33,699              --
                                                                          ------------    ------------
      Total Current Assets                                                     684,748       3,832,998
                                                                          ------------    ------------

  PROPERTY & EQUIPMENT
    Proved oil & gas properties, successful efforts method                   3,208,334       1,755,370
    Unproved oil & gas properties, successful efforts method                   540,390         867,965
    Other                                                                       19,660          19,660
                                                                          ------------    ------------
      Total Property & Equipment                                             3,768,384       2,642,995
                                                                          ------------    ------------

    Less accumulated depletion, depreciation, & amortization                    20,263           7,102
                                                                          ------------    ------------
      Net Property & Equipment                                               3,748,121       2,635,893
                                                                          ------------    ------------

  OTHER ASSETS
    Prepaid expenses                                                           276,672              --
    Rent deposit                                                                 1,243           1,243
                                                                          ------------    ------------
      Total Other Assets                                                       277,915           1,243
                                                                          ------------    ------------

  TOTAL ASSETS                                                            $  4,710,784    $  6,470,134
                                                                          ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

  CURRENT LIABILITIES
    Accounts payable                                                      $    618,112    $  1,121,878
    Convertible debt, net of discount                                        7,044,943       5,709,221
    Derivative on convertible debt                                               1,859         116,667
    Note payable                                                               200,000              --
    Interest payable                                                           878,137         209,029
                                                                          ------------    ------------
      Total Current Liabilities                                              8,743,051       7,156,795
                                                                          ------------    ------------
  LONG-TERM LIABILITIES
    Convertible debt                                                                --         693,878
    Derivative on convertible debt                                                  --          16,667
                                                                          ------------    ------------
      Total Long-Term Liabilities                                                   --         710,545

  COMMITMENTS AND CONTINGENCIES                                                     --              --
                                                                          ------------    ------------
  STOCKHOLDERS' DEFICIT
    Common stock, $0.00001 par value; 200,000,000 shares authorized,
      66,062,000 and 63,262,000 shares issued and outstanding                      660             632
    Additional paid-in capital                                               8,262,858       7,167,419
    Common Stock warrants                                                    5,567,710          98,960
    Deficit accumulated during exploration stage                           (17,863,495)     (8,664,217)
                                                                          ------------    ------------
      Total Stockholders' Deficit                                           (4,032,267)     (1,397,206)
                                                                          ------------    ------------
    TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                           $  4,710,784    $  6,470,134
                                                                          ============    ============
</TABLE>

The accompanying condensed notes are an integral part of these interim
consolidated financial statements.

                                       5

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                                 Three months ending               Nine months ending
                                             -----------------------------   -----------------------------
                                             September 30,   September 30,   September 30,   September 30,
                                                  2006            2005           2006             2005
                                             -------------   -------------   -------------   -------------
                                              (Unaudited)     (Unaudited      (Unaudited)    (Unaudited
                                                             and Restated)                   and Restated)
<S>                                           <C>             <C>             <C>             <C>
REVENUES                                      $    35,459     $        --          35,459     $        --
OPERATING EXPENSES
  Lease Operating Expenses                         12,544              --          12,544              --
  Production Taxes                                  1,760              --           1,760              --
  Exploratory Dry Hole Costs                    1,653,615              --       1,653,615              --
  Lease exploration                              (178,145)             --              --          13,636
  Lease expense                                  (297,856)             --         421,045              --
  Depletion, depreciation and amortization         10,797           1,862          13,161           4,622

GENERAL AND ADMINISTRATIVE EXPENSES

  Investor relations                               15,521          36,451          41,819         140,560
  Advisory services                                    --          17,779          94,145         139,533
  Internet/webhosting                                 112             108           3,061             773
  Officers & directors fees                        61,500          55,500         184,500         180,936
  Office and general expenses                      11,250           6,674          22,732          57,034
  Professional fees                                36,594          62,962         111,853         210,391
  Travel and entertainment                          2,736          11,411          13,678          35,675
  Rent and related expenses                         8,180           7,919          22,830          24,612
                                              -----------     -----------     -----------     -----------
    Total Expenses                              1,338,608         200,666       2,596,742         807,772
                                              -----------     -----------     -----------     -----------
LOSS FROM OPERATIONS                           (1,303,149)       (200,666)     (2,561,283)       (807,772)
                                              -----------     -----------     -----------     -----------
OTHER INCOME (EXPENSES)
  Other expenses                                    4,450              --              --              --
  Other income                                         --              --              --              --
  Financing fees                                 (327,887)       (529,783)     (6,412,241)       (595,182)
  Interest expense                               (227,765)       (170,836)       (669,107)       (316,556)
  Interest income                                   1,892          23,790          33,451          24,066
  Gain (loss) on sale of property                 282,594              --         282,594              --
  Gain (loss) on derivatives                       68,255              --         127,308              --
  Forgiveness of debt                                  --              --              --           3,316
                                              -----------     -----------     -----------     -----------
    Total Other Income (Expenses)                (198,461)       (676,829)     (6,637,994)       (884,356)
                                              -----------     -----------     -----------     -----------
INCOME (LOSS) BEFORE INCOME TAXES              (1,501,610)       (877,495)     (9,199,277)     (1,692,128)
PROVISION FOR TAXES                                    --              --              --              --
                                              -----------     -----------     -----------     -----------
NET INCOME (LOSS)                             $(1,501,610)    $  (877,495)    $(9,199,277)    $(1,692,128)
                                              ===========     ===========     ===========     ===========
NET INCOME (LOSS) PER COMMON SHARE,
  BASIC AND DILUTED                           $     (0.02)    $     (0.01)    $     (0.14)    $     (0.03)
                                              ===========     ===========     ===========     ===========
WEIGHTED AVERAGE NUMBER
  OF COMMON SHARES OUTSTANDING,
  BASIC AND DILUTED                            66,012,000      62,262,000      65,323,111      62,244,222
                                              ===========     ===========     ===========     ===========
</TABLE>

                                                                     From
                                                                    March 1,
                                                                     2004
                                                                  (Inception)
                                                                      to
                                                                 September 30,
                                                                     2006
                                                                 -------------
                                                                  (Unaudited)


REVENUES                                                         $     35,459
OPERATING EXPENSES
  Lease Operating Expenses                                             12,544
  Production Taxes                                                      1,760
  Exploratory Dry Hole Costs                                        1,653,615
  Lease exploration                                                 1,296,281
  Lease expense                                                       586,215
  Depletion, depreciation and amortization                             20,263

GENERAL AND ADMINISTRATIVE EXPENSES

  Investor relations                                                  361,695
  Advisory services                                                 4,141,433
  Internet/webhosting                                                  24,304
  Officers & directors fees                                         1,039,913
  Office and general expenses                                         103,190
  Professional fees                                                   513,583
  Travel and entertainment                                             83,941
  Rent and related expenses                                            78,958
                                                                 ------------
    Total Expenses                                                  9,917,695
                                                                 ------------
LOSS FROM OPERATIONS                                               (9,882,236)
                                                                 ------------
OTHER INCOME (EXPENSES)
  Other expenses                                                           --
  Other income                                                            500
  Financing fees                                                   (8,137,502)
  Interest expense                                                 (1,332,376)
  Interest income                                                      95,754
  Gain (loss) on sale of property                                     282,594
  Gain (loss) on derivatives                                        1,106,456
  Forgiveness of debt                                                   3,316
                                                                 ------------
    Total Other Income (Expenses)                                  (7,981,259)
                                                                 ------------
INCOME (LOSS) BEFORE INCOME TAXES                                 (17,863,495)
PROVISION FOR TAXES                                                        --
                                                                 ------------
NET INCOME (LOSS)                                                $(17,863,495)
                                                                 ============

The accompanying condensed notes are an integral part of these interim
consolidated financial statements.

                                        6

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                         Nine months ending                From
                                                                   ------------------------------      March 1, 2004
                                                                   September 30,    September 30,     (Inception) to
                                                                       2006             2005        September 30, 2006
                                                                   -------------    -------------   ------------------
                                                                                     (Unaudited
                                                                    (Unaudited)     and Restated)       (Unaudited)
<S>                                                                 <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                          $(9,199,277)     $(1,692,128)      $(17,863,494)
  Adjustments to reconcile net loss to net cash
    (used) by operating activities:
  Depreciation and amortization                                          13,161            4,622             20,263
  Amortization of debt discount                                       1,641,844               --          2,201,465
  Common stock issued for services                                       91,299           36,000          4,506,631
  Common stock and warrant issued for financing costs                 5,468,750           98,960          6,067,710
  Interest expense attributable to beneficial conversion feature             --          111,111                 --
  Loss (gain) on derivative                                            (127,308)              --         (1,106,455)
  Loss (gain) on sale of oil & gas properties                          (282,594)              --           (282,594)
  Forgiveness of debt                                                        --           (3,216)            (3,216)
  Changes in assets and liabilities:
    Decrease (increase) in prepaid expenses                            (276,672)           1,818           (276,672)
    Decrease (increase) in accounts receivable                         (120,389)             --            (120,389)
    Increase (decrease) in accounts payable                            (503,766)          57,938            611,210
    Increase (decrease) in accrued liabilities                               --           (6,959)                --
    Increase (decrease) in interest payable                             669,108          205,444            878,137
    Increase (decrease) in advance from shareholder                          --             (100)                --
                                                                    -----------      -----------       ------------
      Net cash used by operating activities                          (2,625,844)      (1,186,510)        (5,367,404)
                                                                    -----------      -----------       ------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
    Purchase of equipment                                                    --          (15,417)           (19,660)
    Oil and gas lease acquisition                                            --         (304,391)                --
    Development of oil and gas properties                            (1,909,567)             --          (4,307,902)
    Proceeds from sale of oil & gas properties                        1,066,772              --           1,066,772
    Decrease (increase) in rent deposit                                      --              --              (1,243)
    Cash received through recapitalization and acquisition                   --              --               2,681
                                                                    -----------      -----------       ------------
      Net cash used by investing activities                            (842,795)        (319,808)        (3,259,352)
                                                                    -----------      -----------       ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
      Proceeds from notes payable                                       200,000              --             340,000
      Payment on notes payable                                               --              --            (140,000)
      Proceeds from convertible debt                                         --        6,606,345          6,959,187
      Issuance of common stock for cash                                      --              --           2,031,928
                                                                    -----------      -----------       ------------
      Net cash provided by financing activities                         200,000        6,606,345          9,191,115
                                                                    -----------      -----------       ------------
  Net increase (decrease) in cash and cash equivalents               (3,268,639)       5,100,027            564,359
Cash and cash equivalents beginning of period                         3,832,998          162,227                 --
                                                                    -----------      -----------       ------------
Cash and cash equivalents end of period                             $   564,359      $ 5,262,255       $    564,359
                                                                    ===========      ===========       ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
  Income taxes paid                                                 $        --      $        --       $         --
                                                                    ===========      ===========       ============
  Interest paid                                                     $        --      $        --       $         --
                                                                    ===========      ===========       ============
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
  Common stock issued for services                                  $    91,299      $    36,000       $  4,506,631
  Common stock issued for financing costs and charges               $ 5,468,750      $    98,960       $  5,968,750
  Warrants issued for accounts payable                              $   688,750      $        --       $    688,750
  Common stock issued for convertible debt                          $   250,000      $        --       $    250,000
  Commom stock issued for forbearance agreement                     $ 4,780,000      $        --       $  4,780,000
  Interest expense attributable to beneficial conversion feature    $        --      $   111,111       $         --
</TABLE>

The accompanying condensed notes are an integral part of these interim
consolidated financial statements.

                                        7

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Falcon Natural Gas Corporation was incorporated on March 1, 2004. On April 16,
2004, Countryside Review, Inc. entered into a reverse merger transaction
agreement with Falcon Natural Gas Corporation, which transaction was completed
on May 6, 2004. In contemplation of this transaction and a change in business
focus, Countryside Review, Inc. changed its name to Falcon Natural Gas Corp.
("the Company") effective April 12, 2004. As a result of this transaction,
Falcon Natural Gas Corporation became a wholly-owned subsidiary. The Company's
operations are conducted through this wholly-owned subsidiary. The Company's
year-end is December 31.

The Company's principal office is located in Houston, Texas.

Basis of Presentation

The foregoing unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation S-B as
promulgated by the Securities and Exchange Commission ("SEC"). Accordingly,
these financial statements do not include all of the disclosures required by
generally accepted accounting principles in the United States of America for
complete financial statements. These unaudited interim financial statements
should be read in conjunction with the Company's audited financial statements
for the year ended December 31, 2005. In the opinion of management, the
unaudited interim financial statements furnished herein include all adjustments,
all of which are of a normal recurring nature, necessary for a fair statement of
the results for the interim period presented. Operating results for the period
ended September 30, 2006 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2006.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the U.S. and have been consistently applied in
the preparation of the financial statements.

Accounting Methods

The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.

Accounts Receivable

The Company carries its accounts receivable at net realizable value.


                                       8

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Recent Accounting Pronouncements

In March 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 156, "Accounting for Servicing of Financial
Assets--an amendment of FASB Statement No. 140." This statement requires an
entity to recognize a servicing asset or servicing liability each time it
undertakes an obligation to service a financial asset by entering into a
servicing contract in any of the following situations: a transfer of the
servicer's financial assets that meets the requirements for sale accounting; a
transfer of the servicer's financial assets to a qualifying special-purpose
entity in a guaranteed mortgage securitization in which the transferor retains
all of the resulting securities and classifies them as either available-for-sale
securities or trading securities; or an acquisition or assumption of an
obligation to service a financial asset that does not relate to financial assets
of the servicer or its consolidated affiliates. The statement also requires all
separately recognized servicing assets and servicing liabilities to be initially
measured at fair value, if practicable and permits an entity to choose either
the amortization or fair value method for subsequent measurement of each class
of servicing assets and liabilities. The statement further permits, at its
initial adoption, a one-time reclassification of available for sale securities
to trading securities by entities with recognized servicing rights, without
calling into question the treatment of other available for sale securities under
Statement 115, provided that the available for sale securities are identified in
some manner as offsetting the entity's exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to subsequently
measure at fair value and requires separate presentation of servicing assets and
servicing liabilities subsequently measured at fair value in the statement of
financial position and additional disclosures for all separately recognized
servicing assets and servicing liabilities. This statement is effective for
fiscal years beginning after September 15, 2006, with early adoption permitted
as of the beginning of an entity's fiscal year. Management believes the adoption
of this statement will have no impact on the Company's financial condition or
results of operations.

In May 2005, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 154, "Accounting Changes and Error
Corrections," (hereinafter "SFAS No. 154") which replaces Accounting Principles
Board Opinion No. 20, "Accounting Changes", and SFAS No. 3, "Reporting
Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion
No. 28". SFAS No. 154 provides guidance on accounting for and reporting changes
in accounting principle and error corrections. SFAS No. 154 requires that
changes in accounting principle be applied retrospectively to prior period
financial statements and is effective for fiscal years beginning after December
15, 2005. Management does not expect SFAS No. 154 to have a material impact on
the Company's financial position, results of operations, or cash flows.

In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 153. This statement addresses the measurement
of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29,
"Accounting for Nonmonetary Transactions," is based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. The guidance in that opinion, however, included certain
exceptions to that principle. This statement amends Opinion 29 to eliminate the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. This statement is effective for financial statements for fiscal
years beginning after June 15, 2005. Earlier application is permitted for
nonmonetary asset exchanges incurred during fiscal years beginning after the
date of this statement issued. The Company has not yet determined the impact to
its financial statements from the adoption of this statement.


                                       9

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly
liquid investments (or short-term debt) with original maturities of three months
or less to be cash equivalents.

Concentration of Credit Risk

The Company maintains its cash in two commercial accounts at a major financial
institution. Although the financial institution is considered creditworthy, at
September 30, 2006 the Company's cash balance exceeded Federal Deposit Insurance
Corporation (FDIC) limits by $461,324.

Derivative Instruments

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (hereinafter "SFAS No. 133"), as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", and SFAS No. 149,
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities."
These statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. They require that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.

The Company has determined that derivatives existed because of features of
convertible debt as of the balance sheet date of September 30, 2006 (See Note
5.)


                                       10

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Earnings Per Share

The Company has adopted Statement of Financial Accounting Standard No. 128,
which provides for calculation of "basic" and "diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing net
income (loss) available to common shareholders by the weighted average common
shares outstanding for the period. Diluted earnings per share reflect the
potential dilution of securities that could share in the earnings of an entity
similar to fully diluted earnings per share. Although there were common stock
equivalents outstanding September 30, 2006, they were not included in the
calculation of earnings per share because they would have been considered
anti-dilutive.

Estimates

The process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.

Exploration Costs

In accordance with accounting principles generally accepted in the United States
of America, the Company expenses lease exploration costs as incurred. As of
September 30, 2006, the exploration costs expensed during the Company's
exploration stage have been approximately $2,900,000.

Exploration Stage Activities

The Company has been in the exploration stage since its formation on March 1,
2004. It is primarily engaged in natural gas exploration.

Fair Value of Financial Instruments

The Company's financial instruments as defined by Statement of Financial
Accounting Standard No. 107, "Disclosures about Fair Value of Financial
Instruments," include cash, trade accounts receivable, accounts payable and
accrued expenses and short-term borrowings. All instruments other than the
derivative on the convertible debt are accounted for on a historical cost basis,
which, due to the short maturity of these financial instruments, approximates
fair value at September 30, 2006 and December 31, 2005.

Going Concern

The Company has generated no net income since inception, but production on three
wells has commenced and sales for August and September 2006 have been accrued.
From inception to September 30, 2006, the Company recorded losses of
approximately $17,863,495. The Company, being an exploration stage enterprise,
is currently implementing a revised business plan that will, if successful,
mitigate these factors that raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability of recorded assets, or the amounts
and classification of liabilities that might be necessary in the event the
Company cannot continue in existence.


                                       11

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Impaired Asset Policy

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, "Accounting for Impairment of Long-lived
Assets." In complying with this standard, the Company reviews its long-lived
assets quarterly to determine if any events or changes in circumstances have
transpired which indicate that the carrying value of its assets may not be
recoverable. The Company determines impairment by comparing the undiscounted
future cash flows estimated to be generated by its assets to their respective
carrying amounts.

The Company does not believe any adjustments are needed to the carrying value of
its assets at September 30, 2006.

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves, and
to drill and equip development wells are capitalized. Costs to drill exploratory
wells that do not find proved reserves, geological and geophysical costs, and
costs of carrying and retaining unproved properties are expensed.

Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of impairment by providing an impairment allowance. Other unproved
properties are amortized based on the Company's experience of successful
drilling and average holding period. Capitalized costs of producing oil and gas
properties, after considering estimated dismantlement and abandonment costs and
estimated salvage values, are depreciated and depleted by the unit-of-production
method. Support equipment and other property and equipment are depreciated over
their estimated useful lives.

On the sale or retirement of a complete unit of a proven property, the cost and
related accumulated depreciation, depletion, and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. On the
retirement or sale of a partial unit of proven property, the cost is charged to
accumulated depreciation, depletion, and amortization with a resulting gain or
loss recognized in income.

On the sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any unrecorded impairment if the property had been assessed
individually. If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.


                                       12

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets, which is three years.

Provision for Taxes

Income taxes are provided based upon the liability method of accounting pursuant
to Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (hereinafter "SFAS No. 109"). Under this approach, deferred income taxes
are recorded to reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial reporting
amounts at each year-end. A valuation allowance is recorded against deferred tax
assets if management does not believe the Company has met the "more likely than
not" standard imposed by SFAS No. 109 to allow recognition of such an asset.

Stock Split

In April, 2004, the Company entered into a 5 for 1 forward stock split. The
number of shares of the registrant company outstanding at the time of the
adoption of the 5 for 1 forward stock split was 9,000,000 shares which were
restated to 45,000,000 shares. All references in the accompanying financial
statements have been restated to reflect this stock split.

NOTE 3 - CONVERTIBLE DEBT

In November, 2004 and January, 2005, the Company entered into loan agreements
with Cornell Capital Partners, LP ("the Investor") in which the Company received
a $1,000,000 loan less related expenses of $300,190, which has been allocated as
discount on debt and will be amortized over a two year period. The convertible
securities are guaranteed by the assets of the Company. The convertible debt
instrument underlying this loan agreement will automatically convert into common
stock at either 120% of the closing bid price by the second anniversary date of
issuance or 80% of the average of the three lowest daily volume weighted average
price of the common stock for the 30 trading days immediately preceding the
conversion date. This feature was deemed a liability derivative with $233,695
being the initial value of the November, 2004 debenture under this agreement and
$295,454 as the initial value of the January, 2005 debenture. Under the
agreement, the Company is required to keep available common stock duly
authorized for issuance in satisfaction of the convertible. The conversion
amount will be the face amount of the convertible plus interest at the rate of
5% per annum from the closing dates of November, 2004 and January, 2005 to the
conversion date, which is the date on which the Company receives a notice of
conversion from the investor exercising the right to convert the convertible
into common shares of the Company. The convertible debt will automatically
convert into common stock on the second anniversary date of issuance. The terms
of the debt do not require regular monthly payments. Interest is accrued at 5%.


                                       13

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

On April 19, 2005, the Company and Cornell terminated the securities purchase
agreement entered into November 19, 2004, and the related convertible debt
agreements in the amount of $1,000,000, the security agreement, escrow
agreement, investor registration rights agreement and irrevocable transfer agent
instruction. On April 19, 2005, the Company entered into new securities purchase
agreement with Cornell. Pursuant to the new securities purchase agreement,
Cornell issued a convertible debenture to the Company in the principal amount of
$1,000,000. On June 20, 2005, the April 19, 2005 secured debenture was amended
and restated. The amended and restated $1,000,000 debenture is convertible at
Cornell's option any time up to maturity at a fixed conversion price of $0.60.
The debenture is secured by the assets of the Company. The debenture has a two
year term and accrues interest at 5% per year. After the earlier to occur of a)
the date a registration statement related to the shares issuable upon conversion
of the debentures is declared effective by the United States Securities and
Exchange commission or b) September 1, 2005, if the closing bid price of the
Company's common stock is less than $0.60 per share, Cornell, at its sole
option, can elect cash repayment of the debentures by requiring the Company to
make 5 payments of $200,000 each month from September 1, 2005 to January 1, 2006
plus accrued interest of each such installment. If there is an event of default
pursuant to any of the documents and/or agreements, including this debenture,
the conversion price shall be $0.10 per share. During the year ended December
31, 2005 and 2004, the Company recognized embedded derivatives in the
convertible debentures. (See Note 5.) Effective January 1, 2006, the Company was
in default under the $1,000,000 loan and entered into a forbearance agreement as
a negotiated settlement with Cornell Capital Partners, LP and Highgate House
Funds, LLP.

On April 19, 2005, the Company issued a 1,000,000 stock purchase warrant to
Cornell Capital Partners, LP as a financing fee. On June 20, 2005, the April,
2005 stock purchase warrant was amended and restated. Following EITF 00-19,
"Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settle in, a Company's Own Stock," and SFAS No. 133, the Company has recognized
an embedded equity derivative in the warrant. For accounting and fair value
purposes, the equity derivative will be accounted for as a stock option,
following SFAS No. 123(R) for valuation purposes.

On October 17, 2005, the Company entered into secured convertible debentures
with Cornell Capital Partners, LP and Highgate House Funds, LLP ("the
Investors") in which the Company received a $7,000,000 loan less related
expenses of $406,742 of which $185,424 was retained by the investors as interest
accrued on the $6,000,000 promissory note (See Note 4.) The expenses will be
allocated as discount on debt and will be amortized over the term of the note.
The debentures are due on October 17, 2006 and accrue interest at a rate of 12%
interest. The debentures shall be paid by monthly scheduled payments beginning
January 19, 2006 until maturity and paid in full. The debentures shall be
convertible into shares of common stock at the option of the investors, in whole
or in part at any time and from time to time. The number of common shares
issuable upon conversion equals the quotient obtained by dividing the
outstanding amount of these debentures to be converted by the conversion price
of $0.60 per share and may be adjusted in the event of default. During the year
ended December 31, 2005, the Company recognized embedded derivatives in the
convertible debentures. (See Note 5.) Effective January 19, 2006, the Company
was in default under the $1,000,000 loan and entered into a forbearance
agreement as a negotiated settlement with Cornell Capital Partners, LP and
Highgate House Funds, LLP.


                                       14

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Effective March 28, 2006, the Company entered into a forbearance agreement (the
"Forbearance Agreement") with Cornell Capital Partners, LP ("Cornell") in
connection with its defaults under the $1,000,000 April 19, 2005 and $7,000,000
October 17, 2005 debentures with Cornell ("Debentures"). As at March 28, 2006,
the Company owed Cornell interest of $88,767 and $151,509 under the April, 2005
and October, 2005 debentures, respectively. Under the Forbearance Agreement, the
maturity dates of the April, 2005 and October, 2005 debentures have been
extended until December 31, 2007. As of March 31, 2006, Cornell converted the
outstanding balance of $250,000 and reduced the principal balance of the
convertible debenture by $250,000 and the Company issued 2,500,000 shares to
Cornell. Additionally, the Company issued to Cornell 23,000,000 warrants valued
according to Black Scholes in the amount of $4,780,000. On April 1, 2007, and
the first business day of each month thereafter until the debentures are paid in
full, the Company is required to make payments of principal and interest. Each
monthly payment will be equal to the outstanding principal balance of the
debentures on the date such payment is due divided by 10, plus accrued and
unpaid interest. The Forbearance Agreement further provides that the Company is
required to re-file the Registration Statement for the resale of the shares of
common stock underlying (i) the Debentures and (ii) the warrants issued pursuant
to the Forbearance Agreement on or before May 15, 2006 and to have such
Registration Statement declared effective on or before July 31, 2006.

Standby Equity Distribution Agreement

In November, 2004, the Company entered into a standby equity distribution
agreement with Cornell Capital Partners, LP ("Cornell"). Pursuant to this
agreement, Cornell will purchase up to $10,000,000 of the Company's common stock
through a placement agent over a two-year period after the effective
registration of the shares. In addition, the Company issued 400,000 shares of
its common stock to Cornell and the placement agent upon the inception of the
standby equity distribution agreement. The $500,000 value of these shares was
based on the fair market value of the shares on the date of the contract and is
recognized as a period expense due to the fact that the 400,000 shares have been
deemed to be fully earned as of the date of the agreement.

On April 19, 2005, the Company entered into an agreement with Cornell Capital
Partners, LP to terminate the standby equity distribution agreement, dated
November 19, 2004, and the related registration rights agreement, placement
agent agreement and escrow agreement, of same date. On April 19, 2005, upon
execution of the termination agreement, the Company entered into a new standby
equity distribution agreement with Cornell Capital Partners, LP ("Cornell".)
Pursuant to the standby equity distribution agreement, the Company may, at its
discretion, periodically sell to Cornell shares of common shares for a total
purchase price of $20,000,000. For each share of common stock purchased under
the standby equity distribution agreement, Cornell will pay the Company 100% of
the lowest volume weighted average price of the Company's common stock as quoted
by Bloomberg, LP on the over-the-counter bulletin board or other principal
market on which the Company's common stock is traded for the 5 days immediately
following the notice date. Cornell will also retain 5% of each advance under the
standby equity distribution agreement. Cornell's obligation to purchase shares
of the Company's common stock under the standby equity distribution agreement is
subject to the Company's obtaining an effective registration statement for
shares of common stock sold under the standby equity distribution agreement and
is limited to $750,000 per weekly advance.


                                       15

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

NOTE 4 - LOAN AGREEMENT

The Company borrowed $200,000 from Blue Mint Exploration on August 4, 2006. The
loan is unsecured, matures on August 4, 2007 on which date the entire loan
becomes payable with interest. The loan bears interest at 11% per annum.

The Company borrowed $140,000 from Blue Mint Exploration on November 24, 2004.
The loan, which was unsecured, with interest at 12% per annum, was paid in full
as of December 31, 2005.

The Company borrowed $200,000 from Blue Mint Exploration on May 13, 2005. The
loan, which was unsecured, with interest at 12% per annum, was paid in full as
of December 31, 2005.

On July 15, 2005, the Company entered into a promissory note with Cornell
Capital Partners, LP and Highgate House Funds, LLP ("the Investors") in which
the Company received a $6,000,000 loan less related expenses of $1,382,727,
which will be allocated as discount on debt and will be amortized over the term
of the note. This note was originally due on February 10, 2006 and accrued
interest at a rate of 12%. The Company made no payments on the promissory note
and on October 17, 2005, the promissory note was superseded by a $7,000,000
secured debenture in which the Company entered into with Cornell Capital
Partners, LP and Highgate House Funds, LLP. (See Note 3.)

NOTE 5 - DERIVATIVES

Derivatives have been accounted for in accordance with SFAS 133, as amended, and
EITF No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock." The Company has identified that
the debentures described in Notes 4 and 5 have embedded derivatives. These
embedded derivatives have been bifurcated from their respective host debt
contracts and accounted for as derivative liabilities in accordance with EITF
00-19. When multiple derivatives exist within the loan agreements, they have
been bundled together as a single hybrid compound instrument in accordance with
SFAS No. 133, Derivatives Implementation Group Implementation Issue No. B-15,
"Embedded Derivatives: Separate Accounting for Multiple Derivative Features
Embedded in a Single Hybrid Instrument."


                                       16

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

The embedded derivatives within the loan agreements have been recorded at fair
value at the date of issuance and are marked-to-market each reporting period
with changes in fair value recorded on the Company's income statement as gain
(loss) on derivatives.

The fair value of the derivative liabilities are subject to the changes in the
trading value of the Company's common stock, as well as other factors. As a
result, the Company's financial statements may fluctuate from quarter-to-quarter
based on factors, such as the price of the Company's stock at the balance sheet
date and the amount of shares converted by note holders. Consequently, the
Company's financial position and results of operations may vary from
quarter-to-quarter based on conditions other than its operating revenues and
expenses.

The initial fair value of the derivative embedded in the November, 2004 $500,000
convertible debenture was $233,695 and at December 31, 2004, the embedded
derivative was revalued to its fair value of $370,968. The initial fair value of
the derivative embedded in the January, 2005 $500,000 convertible debenture was
$295,454. Each of the $500,000 debentures were subsequently superseded by the
April, 2005 $1,000,000 debenture, and the initial fair value of the derivative
embedded in the $1,000,000 convertible debenture was $166,667 and the initial
fair value of the derivative embedded in the $7,000,000 convertible debenture
was $583,333. At September 30, 2006, the embedded derivatives were revalued to
their fair value of $1,859 for the $1,000,000 convertible debenture and $0 for
the $7,000,000 convertible debentures. Any change to the fair value of the
derivatives is recognized on the income statement and recorded as gain/(loss) on
derivatives. At September 30, 2006 the Company recognized a decrease in the fair
value of the derivatives of $127,308 and a corresponding gain on derivatives on
the consolidated statements of operation.

NOTE 6 - EQUIPMENT

Equipment is recorded at cost. Depreciation is calculated using the
straight-line method over five years. The following is a summary of equipment
and accumulated depreciation at September 30, 2006, and December 31, 2005:

                                 September   December
                                  30, 2006   31, 2005
                                 ---------   --------
Computer Equipment                $ 4,660     $ 4,660
Software                           15,000      15,000
                                  -------     -------
Total Assets                       19,660      19,660
Less: Accumulated Depreciation     10,648       7,102
                                  -------     -------
Total Property & Equipment        $ 9,012     $12,558
                                  =======     =======


                                       17

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Depreciation expense for the periods ending September 30, 2006 and December 31,
2005 were $3,547 and $6,484, respectively.

Depletion expense for the periods ending September 30, 2006 and December 31,
2005 were $9,614 and $0, respectively.

NOTE 7 - OIL AND GAS LEASES

During the year ended December 31, 2005, the Company entered signed nonbinding
letters of intent ("LOI") with Blue Ridge Group, Inc ("BRG") and Bayou City
Exploration ("BCE") to purchase working interest in one of BRG's and five of
BCE's oil and gas prospects. According to the LOI with BRG, Falcon was to
purchase 12.5% of the working interest of Prospect 107 located in Beauregard
Parish, Louisiana and pay 16.67% of all well costs to casing point on the
initial well drilled on the prospect. Additionally, Falcon agreed to pay 16.67%
of all G&G costs, third party prospect fees, land brokerage costs, lease bonus,
and all other similar costs associated with the prospect. Under the terms of the
LOI with BCE, Falcon was to purchase 12.5% of the working interest for the Live
Oak County Prospects, which include Jaboncillo Windmill Prospect, Leopard Branch
Prospect, and Frost National Bank Deep Prospect. Additionally, Falcon agreed to
pay 16.67% of all well costs to casing point on the initial well drilled on each
prospect and 16.67% of all G&G costs, third party prospect fees, land brokerage
costs, lease bonus and all similar costs associated with the project. As of the
period ending September 30, 2006, Falcon has elected not to participate in the
Jaboncillo Windmill Prospect or the Frost National Bank Deep Prospect. The
Company is participating in the Mary Lyne #1 well, located in the Leopard Branch
Prospect, which is producing at this time. Under the trade terms for BCE's Jeff
David Parish Prospects, including Gemini Prospect and Zodiac II Prospect, the
Company agreed to purchase 25% of the working interest from BCE. Also, the
Company agreed to pay 33.33% of all well costs to casing point on the initial
well drilled on each prospect and its proportionate share of all G&G costs,
third party prospect fees, land brokerage costs, lease bonus, and all other
similar costs associated with the prospect. As of the period ending September
30, 2006, the Company is participating in the Hilda Henry #1 well from the
Gemini Prospect, which is producing at this time, and has elected not to
participate in the Zodiac II Prospect.

The Company with Edwin S. Nichols Exploration, Inc. plans to develop the Hollins
Prospect located along the Eastern Shelf in northwestern Nolan County, Texas
that will target the Canyon Sand over 1,480 acres of leasehold position and
should ultimately result in the drilling of 20 to 25 wells. The total cost to
develop a 20-well field is estimated to be approximately $14 million. The
Company has purchased 75% of the working interest (55.80% of the net revenue
interest). The Company also has obligated itself to pay its proportionate share
of all G&G costs, third party prospect fees, land brokerage costs, lease bonus
and all other similar costs of the prospect as per the agreement with Edwin S.
Nichols Exploration, Inc. The Company also participates in the Pecan Station
North Prospect which drilled an initial test well. In the period ending
September 30, 2006, the well has been deemed uneconomical and all costs,
$482,169, associated with the drilling have been expensed.


                                       18

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

The Company entered into a participation agreement with Stanotex, LLC for the
drilling and completion of the Weido #2 well on the Brookshire Weido Prospect
located in Waller County, Texas. Participation involves a 66.66% working
interest and 50% net revenue interest. For the period ending September 30, 2006,
the total costs of the Weido #2 well for the Company were $302,275. The well has
been completed and began production in September, 2006. The company also agreed
to participate in the re-entry of the Weido #1. Participation involves a 50%
working interest and 25% net revenue interest on an authorization for
expenditure 1/3 for 1/4 basis. For the period ending September 30, 2006 the
costs incurred by the Company for the re-entry were $16,172. Production for the
Weido #1 is anticipated to begin within the next few months.

The Company entered into a participation agreement with Vincent Oil and Gas Corp
for a test well to be drilled by Vincent Oil and Gas Corp on the Norman prospect
located in Bee County, Texas. The Company has a 12% working interest and 77% net
revenue interest on an authorization for expenditure 1/3 for 1/4 basis whereby
the Company would pay 16% of all costs associated with drilling the well to the
casing point and 12.5% of all completion and operating costs, if applicable. The
Company's share of the costs is $575,404 for the period ending September 30,
2006. The test well was a dry hole and is being plugged and abandoned. The costs
associated with this prospect and well, which were $575,404, have been expensed
in the period ending September 30, 2006.

The Company entered into a participation agreement with WhitMar Exploration
Company in relation to the participation agreement in the drilling of a test
well on the South Wilburton Prospect located in Latimer County, Oklahoma.
Participation would involve a 12.5% working interest and 77.5% net revenue
interest on an authorization for expenditure 1/3 for 1/4 basis whereby the
Company would pay 16.67% of drilling costs to the casing point and 12.5% of all
costs after the casing point. The estimated drilling costs for the well are
$2,923,500 and the estimated completion cost is $1,092,000. The Company's share
of costs totals $735,088 for the period ending September 30, 2006.

On August 30, 2006 the Company executed a letter agreement (the "Agreement")
with Douglas C. McLeod acting on behalf of Petrogulf Corporation (the
"Participant"). Pursuant to the Agreement, which was given retroactive effect to
August 1, 2006, the Company assigned to the Participant working interests in the
Wyandotte Property located in St. Mary Parish, Louisiana for $554,021. Prior to
the assignments, the Company held a 100% working interest in the Wyandotte
Property. The assignments consisted of a 15% working interest in the leasehold
interests within the prospect area within the surface boundaries of the existing
DB-4 Unit, established by the Office of Conservation Order No-844-J effective
November 30, 1999, from the surface to the stratigraphic equivalent of the base
of the DB-4 Sand; a 50% working interest within the surface boundaries of the
existing DB-4 Unit below the stratigraphic equivalent of the base of the DB-4
Sand; and a 50% working interest in the balance of the leasehold lying within
the boundaries of the prospect area. Such assignment also conveyed a net revenue
interest of seventy percent (70%), proportionately reduced to the working
interest being acquired by Participant. Under the Agreement, the Company further
agrees to participate with the Participant in the drilling of a test well to a
depth sufficient to evaluate the DB-4 Sand which is anticipated to be
encountered at a depth of approximately 16,500 feet. In connection therewith,
Participant is required to pay 18% of the costs incurred in drilling the test
well to the casing point and 15% of the costs incurred after the casing point.
Subject to rig availability, drilling on the test well will commence no later
than January 31, 2007. Pursuant to the Agreement and a related Operating
Agreement, Petrogulf Corporation was named operator for the test well and any
subsequent wells drilled on the prospect.


                                       19

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

NOTE 9 - COMMITMENTS AND CONTINGENCIES

On August 9, 2004, the Company entered into an agreement for financial advisory
services. The terms of the agreement include compensation of 10% cash and 10%
warrants on all monies raised by the financial advisory company and payment of a
retainer in the amount of $5,000. The agreement states a termination date of
January 1, 2005 but includes automatic extension until notice is provided by
either party. As of December 31, 2004, the financial advisory company was
instrumental in the raising of funds related to Cornell Capital Partners LP and
new terms related to the agreement dated August 9, 2004 were renegotiated. Under
the new terms of the agreement, the Company paid a retainer in the amount of
$5,000 in addition to a fixed one time payment of $35,000 and accrued an
additional $10,000 for fees. The Company valued the warrants at $22,609 and this
amount was estimated using Black Scholes calculation and the following
assumptions were made to value the warrants for the period ending December 31,
2004: estimated risk free interest rate of 4%; estimated volatility of 48%; a
term of two years; no payment of dividends. As of December 31, 2005, the Company
paid an additional $75,000 in fees and accrued an additional $675,000 for fees.
The Company valued the warrants at $341,041 and this amount was estimated using
Black Scholes calculation and the following assumptions were made to value the
warrants for the period ending December 31, 2005: estimated risk free interest
rate of 4%; estimated volatility of 48%; a term of two years; no payment of
dividends. All accrued fees and warrants have been recorded as accounts payable,
and as of March 31, 2006 none of the warrants earned in the year 2004 or 2005
have been issued. During the period ended March 31, 2006, the Company entered
into a settlement agreement with the parties to the financial advisory service
and agreed to issue 2,000,000, 5 year, common stock purchase warrants with an
exercise price, subject to adjustment, of $0.60 per share. These warrants have
been determined by management to have a value of $688,750. Additionally, the
Company is to pay $400,000 in cash, of which $40,000 has been previously paid.
The remaining balance of $360,000 will be paid pursuant to the agreed payment
plan.

On November 24, 2004, the Company entered into a loan agreement with Blue Mint
Exploration in the amount of $140,000 for a term of six months terminating May
25, 2005 and an interest rate of 12% per annum to be paid at the maturity of the
loan agreement. (See Note 4.) This note was paid in full.


                                       20

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

Standby Equity Distribution Agreement

On November 19, 2004, the Company entered into a standby equity distribution
agreement with Cornell Capital Partners, LP ("Cornell"). Pursuant to this
agreement, Cornell was to purchase up to $10,000,000 of the Company's common
stock through a placement agent over a two-year period after the effective
registration of the shares. On April 19, 2005, the Company entered into an
agreement with Cornell Capital Partners, LP to terminate the standby equity
distribution agreement, dated November 19, 2004, and the related registration
rights agreement, placement agent agreement and escrow agreement, of same date.
On April 19, 2005, upon execution of the termination agreement, the Company
entered into a new standby equity distribution agreement with Cornell Capital
Partners, LP ("Cornell".) Pursuant to the standby equity distribution agreement,
the Company may, at its discretion, periodically sell to Cornell shares of
common shares for a total purchase price of $20,000,000. (See Note 3.)

NOTE 10 - RELATED PARTY TRANSACTIONS

A shareholder advanced the Company $100 to open the Company's bank account. The
funds advanced are unsecured, non-interest bearing, and due on demand. As of
December 31, 2005, the shareholder has elected to forgive the debt.

NOTE 11 - COMMON STOCK

The Company is authorized to issue 200,000,000 shares of common stock. All
shares have equal voting rights, are non-assessable and have one vote per share.
Voting rights are not cumulative and, therefore, the holders of more than 50% of
the common stock could, if they choose to do so, elect all of the directors of
the Company.

On September 7, 2006, the Company issued 50,000 shares valued at $0.21 per share
to Source Capital Group Inc. for financial advising services.

On August 2, 2006, the Company issued 50,000 shares valued at $0.23 per share to
Source Capital Group Inc. for financial advising services.

On July 5, 2006, the Company issued 50,000 shares valued at $0.32 per share to
Source Capital Group Inc. for financial advising services.

On June 5, 2006, the Company issued 50,000 shares valued at $0.33 per share to
Source Capital Group Inc. for financial advising services.


                                       21

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

On May 2, 2006, the Company issued 50,000 shares valued at $0.33 per share to
Source Capital Group Inc. for financial advising services.

On April 5, 2006, the Company issued 50,000 shares valued at $0.40 per share to
Source Capital Group Inc. for financial advising services.

During the period ended March 31, 2006, the Company issued 2,500,000 common
shares for the conversion of debt in the amount of $250,000 on the convertible
debenture dated April 19, 2005 at a default conversion price of $0.10 per share.

During the year ended December 31, 2005, the Company deposited 24,000,000 shares
of the Company's common stock with an escrow agent as security for its
performance under the Cornell

Capital Partners, LP and Highgate House Funds, Ltd convertible debentures. The
escrow shares are considered issued but not outstanding and are not included in
the issued and outstanding balance of common shares for the period ended.

On October 28, 2005, the Company issued 1,000,000 shares valued at $0.48 per
share to the president of the Company pursuant to an executive employment
agreement, in which the executive shall receive 1,000,000 shares at the end of
each 12 month period in which he is employed by the Company, with an overall
limitation of 5,000,000 shares.

On March 2, 2005, the Company issued 80,000 shares valued at $0.45 per share to
two consultants for geological services.

During the period ended December 31, 2004, the Company issued 20,000,000 shares
valued at $0.001 per share for services received at the founding of the Company.

During the period ended December 31, 2004, the Company issued 900,000 shares of
common stock in partial payment of an oil and gas lease. The shares were valued
at $0.25 per share, or $225,000.

During the period ended December 31, 2004, the Company issued for cash 632,000
shares of common stock at $1.00 per share, less expenses of $60, for a net of
$631,940.

On October 8, 2004, the Company entered into a subscription agreement to issue
1,500,000 shares at the purchase price of approximately $0.93 per share. The
Company received $1,400,000 less expenses of $12, for a net of $1,399,988.

In October, 2004, an officer of the Company resigned from his position as CEO
and rescinded 9,000,000 shares that he held. The rescinded shares were valued at
par because they were part of the recapitalization of the Company's shares.


                                       22

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

In October, 2004, the Company issued 392,000 shares to Cornell Capital and 8,000
to the placement agent related to the standby equity distribution agreement
valued at fair market value of $1.25 per share. (See Note 3.)

On September 7, 2004, the Company issued 100,000 shares valued at $1.34 per
share to an independent consultant for advisory services.

On August 27, 2004, the Company issued 100,000 shares valued at $1.32 per share
to an independent consultant for advisory services.

On August 2, 2004, the Company issued 2,500,000 shares valued at $1.42 per share
for services as part of the Argyle Energy, Inc. lease contract.

On June 14, 2004, the Company issued 50,000 restricted shares valued at $1.25
per share as part of an investor relations contract. (See Note 10.)

In April, 2004, the Company entered into a 5 for 1 forward stock split. The
number of shares of the registrant company outstanding at the time of the
adoption of the 5 for 1 forward stock split was 9,000,000 shares which were
restated to 45,000,000 shares.

Warrants

On April 19, 2004, the Company issued 1,000,000 warrants to Cornell Capital
Partners, LP enabling the holder to purchase 1,000,000 shares of common stock at
an exercise price of $0.60 for a term of 2 years. These warrants are recorded on
the balance sheet at $98,960. During the years ended December 31, 2005 and 2004,
the Company issued 1,396,483 warrants to Source Capital Group, Inc. enabling the
holder to purchase 1,396,483 shares of common stock at an exercise price equal
to the price of the common stock subject to adjustment for a term of 5 years.
For the years ending December 31, 2005 and 2004, these warrants were classified
as accounts payable on the balance sheet in the amount of $363,750 and $22,609,
respectively. The amounts were estimated using Black Scholes calculation and the
following assumptions were made to value the warrants for the period ending
December 31, 2005 and 2004: estimated risk free interest rate of 4%; estimated
volatility of 48%; a term of two years; no payment of dividends.

During the year ended December 31, 2005, the Company issued 1,396,483 warrants
to Source Capital Group, Inc. enabling the holder to purchase 1,396,483 shares
of common stock at an exercise price equal to the price of the common stock at
an exercise price equal to the price of the common stock subject to adjustment
for a term of 5 years. The warrants were valued at $341,141 and were recorded in
accounts payable. The amounts were estimated using Black Scholes calculation and
the following assumptions were made to value the warrants for the period ending
December 31, 2005 and 2004: estimated risk free interest rate of 4%; estimated
volatility of 48%; a term of two years; no payment of dividends. On February 3,
2006, the Company entered into a settlement agreement with Source Capital Group
that modified the terms of the original August, 2004 agreement. The new
agreement states that the Company agrees to issue 2,000,000, 5 year, common
stock purchase warrants with an exercise price of $0.60 per share. The 2,000,000
purchase warrants were valued by management at $688,750.


                                       23

<PAGE>

FALCON NATURAL GAS CORP.
(Formerly Countryside Review Inc.)
(An Exploration Stage Company)
Condensed Notes to Consolidated Financial Statements
September 30, 2006

In consideration of the Forbearance Agreement (See Note 3), the Company has also
issued an aggregate of 23,000,000 common stock purchase warrants dated March 29,
2006 to Cornell, each exercisable for a period of five years commencing March
29, 2006 for the purchase of one share of common stock. The warrants provide
that the holder cannot exercise the warrants to the extent such exercise would
cause the holder and its affiliates to own more than 4.99% of our outstanding
common shares, except within 60 days of the warrant expiration date. The
restriction may be waived by the holder upon not less than 65 days prior notice
to us. The warrants have exercise prices, subject to adjustment, ranging from
$0.30 to $0.80 per share and contain cashless exercise provisions.

                    Number of   Weighted-Average
                    Warrants     Remaining Life    Exercise Price
                   ----------   ----------------   --------------
Outstanding
and Exercisable-
Cornell Capital    24,000,000         4.50         $0.30 to $0.80

Outstanding
and Exercisable-
Source Capital      2,000,000         4.80                  $0.60

NOTE 12 - SUBSEQUENT EVENTS

In October, 2006, the Company issued 50,000 shares of common stock as payment in
lieu of cash on the outstanding payable due Source Capital Group. (See Note 9)
The balance in accounts payable has been reduced by approximately $9,400 as of
October, 2006, for the value of the common shares issued.


                                       24

<PAGE>

ITEM 2. PLAN OF OPERATION

The following Plan of Operation of ours should be read in conjunction with our
consolidated financial statements and notes thereto included herein.

We are in the exploration stage as a natural gas and oil exploration company.
During the quarter ended September 30, 2006 we realized our first oil and gas
operation revenues. We are engaged in natural gas and oil exploration activities
in St. Mary Parish, Louisiana; Starr County, Texas; Beauregard Parish,
Louisiana; Jeff Davis Parish, Louisiana; and Live Oak County, Texas. See Note 7
to Notes to Consolidated Financial Statements.

We estimate that we can satisfy our cash requirements for the next 12 months
which does not take into account our present debt services requirements which
have been restructured, the costs for drilling wells or further exploration work
on our leased properties. We currently use approximately $60,000 of cash per
month for general and administrative expenses such as investor relations,
advisory services, Internet/web-hosting, officer's salaries and director's fees,
office and general expenses, professional fees, travel and entertainment and
rent and related expenses. We estimate that such uses of cash will continue
throughout 2006.

We obtained the services of independent contractors to complete two-dimensional
geophysical studies of our Starr County property and three-dimensional
geophysical seismic studies on our Wyandotte property. The well scheduled to be
drilled on our Wyandotte Property is intended to be a replacement of the
Inglewood 2 well, previously drilled in 1980. We are currently working on the
Drill site location for our replacement well in to our Wyandotte project and
expect to begin drilling during November 2006. We originally anticipated being
able to commence drilling operations on the Wyandotte Property in July 2006 but
due to limited rig availability, we now expect to be able to commence drilling
operations during November 2006.

On September 13, 2006 we executed an agreement with Petrogulf Corporation in
which Petrogulf purchased a 15% working interest in the DB-4 unit to a depth of
16,500 ft and a 50% working interest in all additional acreage located in our
Wyandotte Prospect. On October 1, 2005 we executed oil and gas well
participation agreements with each of Bayou City Exploration, Inc. and Blue
Ridge Group, Inc. under which three wells have been drilled and three additional
wells are scheduled to be drilled in the first quarter of 2007. On August 8,
2006 the Hilda Henry No.1 began production at a rate of 310 MCF/D and on August
24, 2006 the Weido #2 well started production and has since stabilized at 33
barrels of oil per day average production. The Mary Lyne#1 well started
production on September 16, 2006 but has not stabilized yet. On November 11,
2005 we also executed oil and gas well participation agreements with Southern
Resource Company for up to 11 wells which are scheduled to be started in
late-2006. We have received an offer to sell part of our position in this
project and it is currently under consideration. In order to establish positive
cash flow and expand our asset base we have also agreed to participation
agreements on low risk wells with Whitmar Exploration Company, Stanotex, LLC,
Vincent Oil and Gas Inc., and Edwin S. Nichols Exploration, Inc. Work on these
wells started during May 2006 and is expected to be completed in late 2006.


                                       25

<PAGE>

In connection with the Wyandotte Property, an engineering study has concluded
that the reentry of the old well would be too risky. A new well will therefore
be drilled. We plan to drill the replacement well to develop the Discorbis Bol
Sands.

Drilling and completion of this or any other well is no guarantee that we will
be able to produce commercial quantities of natural gas or oil. If we do not
discover and produce commercial quantities of natural gas or oil, we will not
have any products or services to offer and our business could fail. Estimates of
reserves are made under conditions of uncertainty. Notwithstanding the
foregoing, we requested and received a reserves report from an independent
petroleum engineering firm with respect to the Wyandotte Property. The report
indicated estimated proved undeveloped reserves of approximately 26 billion
cubic feet of gas (70% of which or 18.2 BCF are owned directly by the Company
and 30% of which is owned by local mineral owners) in the reservoirs comprising
the Discorbis Bol Sands. Proved reserves are those quantities of petroleum and
gas which, by analysis of geological and engineering data, can be estimated with
reasonable certainty to be commercially recoverable, from a given date forward,
from known reservoirs and under current economic conditions, operating methods,
and government regulations. Proved reserves are categorized as developed or
undeveloped.

In general, reserves are considered proved if the commercial producibility of
the reservoir is supported by actual production or formation tests. In this
context, the term proved refers to the actual quantities of petroleum reserves
and not just the productivity of the well or reservoir. In certain cases, proved
reserves may be assigned on the basis of well logs or core analysis that
indicate the subject reservoir is hydrocarbon bearing and is analogous to
reservoirs in the same area that are producing or have demonstrated the ability
to produce on formation tests.

The area of the reservoir considered as proved includes (i) the area delineated
by drilling and defined by fluid contacts, if any, and (ii) the undrilled
portions of the reservoir that can reasonably be judged as commercially
productive on the basis of available geological and engineering data. In the
absence of data on fluid contacts, the lowest known occurrence of hydrocarbons
controls the proved limit unless otherwise indicated by definitive geological,
engineering or performance data.

Reserves may be classified as proved if facilities to process and transport
those reserves to market are operational at the time of the estimate or there is
a reasonable expectation that such facilities will be installed. Reserves in
undeveloped locations may be classified as proved undeveloped provided (i) the
locations are direct offsets to wells that have indicated commercial production
in the objective formation, (ii) it is reasonably certain such locations are
within the known proved productive limits of the objective formation, (iii) the
locations conform to existing well spacing regulations where applicable, and
(iv) it is reasonably certain the locations will be developed. Reserves from
other locations are categorized as proved undeveloped only where interpretations
of geological and engineering data from wells indicate with reasonable certainty
that the objective formation is laterally continuous and contains commercially
recoverable petroleum at locations beyond direct offsets.


                                       26

<PAGE>

We plan to drill the replacement well a few yards away from an existing well. We
believe that we will have to drill the replacement well to a measured depth of
at least 17,000 feet. We are currently estimating a dry hole cost of $6,200,000
and a completed cost of $7,000,000.

If we can produce commercial quantities of natural gas and/or oil that we can
sell, we intend to use the proceeds to fund a second well on the Wyandotte
property to accelerate the recovery time of the natural gas and/or oil reserves.
Based on our letter agreement with Argyle Energy Inc. for transferring all of
our purchased leases into our name and the leases, we are entitled to receive a
70% net revenue interest. In addition, we plan to use any proceeds from
production to fund additional exploration and drilling on our leased properties.
We estimate that we will need between $2 million and $7 million of additional
financing for each additional well that we desire to drill.

We do not expect to purchase or sell any plant or significant equipment during
the next twelve months.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Under the supervision and
with the participation of our chief executive officer and chief financial
officer, we conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended,
as of the end of the period covered by this report (the "Evaluation Date").
Based on this evaluation, our chief executive officer and chief financial
officer conclude as of the Evaluation Date that our disclosure controls and
procedures were effective such that the information relating to us, including
our consolidated subsidiaries, required to be disclosed in our Securities and
Exchange Commission ("SEC") reports (i) is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms, and (ii) is
accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate to allow timely decisions
regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting. There were no changes
in our internal control over financial reporting that occurred during the period
covered by this report that have materially affected or are reasonably likely to
materially affect our internal control over financial reporting.

                           PART II--OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Effective April 1, 2006 we issued 50,000 shares of our restricted common stock
to Source Capital Group, Inc. ("SCGI") and its designees pursuant to our March
15, 2006 Supplemental Settlement Agreement with SCGI. The shares were issued by
us pursuant to Section 4(2) of the Act since the foregoing issuance did not
involve a public offering, the recipient had access to information that would be
included in a registration statement, took the shares for investment and not for
resale and we took appropriate measures to restrict resale.


                                       27

<PAGE>

Effective August 1, 2006 we issued 50,000 shares of our restricted common stock
to designees of Source Capital Group, Inc. ("SCGI") pursuant to our March 15,
2006 Supplemental Settlement Agreement with SCGI. The shares were issued by us
pursuant to Section 4(2) of the Act since the foregoing issuance did not involve
a public offering, the recipient had access to information that would be
included in a registration statement, took the shares for investment and not for
resale and we took appropriate measures to restrict resale.

Effective September 1, 2006 we issued 50,000 shares of our restricted common
stock to designees of Source Capital Group, Inc. ("SCGI") pursuant to our March
15, 2006 Supplemental Settlement Agreement with SCGI. The shares were issued by
us pursuant to Section 4(2) of the Act since the foregoing issuance did not
involve a public offering, the recipient had access to information that would be
included in a registration statement, took the shares for investment and not for
resale and we took appropriate measures to restrict resale.

Effective October 1, 2006 we issued 50,000 shares of our restricted common stock
to designees of Source Capital Group, Inc. ("SCGI") pursuant to our March 15,
2006 Supplemental Settlement Agreement with SCGI. The shares were issued by us
pursuant to Section 4(2) of the Act since the foregoing issuance did not involve
a public offering, the recipient had access to information that would be
included in a registration statement, took the shares for investment and not for
resale and we took appropriate measures to restrict resale.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Effective March 28, 2006 we entered into a Forbearance Agreement (the
"Forbearance Agreement") with Cornell Capital Partners, LP ("Cornell") in
connection with our defaults under our $1,000,000 April 19, 2005 and $7,000,000
October 17, 2005 debentures with Cornell (singly and collectively the
"Debentures"). As at March 28, 2006 we owed Cornell interest of $88,767 and
$151,509 under the April 2005 and October 2005 Debentures, respectively. The
Forbearance Agreement also took into account our failure to timely register the
common stock underlying the Debentures. Under the Forbearance Agreement, the
maturity dates of the April 2005 and October 2005 Debentures were extended until
December 31, 2007. Further, we have no interest or principal payment obligations
under the Debentures until April 1, 2007, at which time, and the first business
day of each month thereafter until the Debentures are paid in full, we are
required to make payments of principal and interest. Each monthly payment will
be equal to the outstanding principal balance of the Debentures on the date such
payment is due divided by 10, plus accrued and unpaid interest.


                                       28

<PAGE>

Pursuant to the Debenture defaults, Cornell was entitled, among other things, to
convert the April 19, 2005 Debenture into shares of our common stock at the
default rate of $0.10 per share. In connection therewith and the Forbearance
Agreement, Cornell converted $250,000 of the principal amount of the April 2005
Debenture into 2,500,000 shares of our common stock. In consideration of the
Forbearance Agreement, we also issued an aggregate of 23,000,000 common stock
purchase warrants dated March 29, 2006 to Cornell, each exercisable for a period
of five years commencing March 29, 2006 for the purchase of one share of our
common stock. The warrants provide that the holder cannot exercise the warrants
to the extent such exercise would cause the holder and its affiliates to own
more than 4.99% of our outstanding common shares, except within 60 days of the
warrant expiration date. The restriction may be waived by the holder upon not
less than 65 days prior notice to us. The warrants have exercise prices, subject
to adjustment, ranging from $0.30 to $0.80 per share and contain cashless
exercise provisions. The number of warrants and applicable exercise prices
thereon are as follows:

      o     3,000,000 warrants - $0.30

      o     3,000,000 warrants - $0.35

      o     3,000,000 warrants - $0.40

      o     3,000,000 warrants - $0.50

      o     3,000,000 warrants - $0.60

      o     3,000,000 warrants - $0.70

      o     5,000,000 warrants - $0.80

The Forbearance Agreement required us to re-file the Registration Statement for
the resale of the shares of common stock underlying (i) the Debentures and (ii)
the warrants issued pursuant to the Forbearance Agreement (as described above),
on or before May 15, 2006 and to have such Registration Statement declared
effective on or before July 31, 2006. We did not re-file the Registration
Statement until July 25, 2006 and the Registration Statement has yet to be
declared effective. Accordingly, we are in default under the Forbearance
Agreement. As a consequence thereof, the Debentures are presently convertible at
their respective default conversion prices of $0.10 per share (April 19, 2005
Debenture) and $0.0948 per share (October 2005 Debenture). Further, Cornell has
the right to seize upon the collateral securing the Debentures, including our
assets. At this time, Cornell has not elected to pursue any remedies available
to it by reason of this default, but no assurance can be given that they will
not choose to do so in the future.

ITEM 5. OTHER INFORMATION

On August 30, 2006 we executed a letter agreement (the "Agreement") with Douglas
C. McLeod acting on behalf of Petrogulf Corporation (the "Participant").
Pursuant to the Agreement, which was given retroactive effect to August 1, 2006,
we assigned to the Participant working interests in our Wyandotte Property
located in St. Mary Parish, Louisiana for $554,021. Prior to the assignments, we
held a 100% working interest in the Wyandotte Property. The assignments
consisted of a 15% working interest in the leasehold interests within the
prospect area within the surface boundaries of the existing DB-4 Unit,
established by the Office of Conservation Order No-844-J effective November 30,
1999, from the surface to the stratigraphic equivalent of the base of the DB-4
Sand; a 50% working interest within the surface boundaries of the existing DB-4
Unit below the stratigraphic equivalent of the base of the DB-4 Sand; and a 50%
working interest in the balance of the leasehold lying within the boundaries of
the prospect area. Such assignment also conveyed a net revenue interest of
seventy percent (70%), proportionately reduced to the working interest being
acquired by Participant. Under the Agreement, we further agreed to participate
with the Participant in the drilling of a test well to a depth sufficient to
evaluate the DB-4 Sand which is anticipated to be encountered at a depth of
approximately 16,500 feet. In connection therewith, Participant is required to
pay 18% of the costs incurred in drilling the test well to the casing point and
15% of the costs incurred after the casing point. Subject to rig availability,
drilling on the test well will commence no later than January 31, 2007. Pursuant
to the Agreement and a related Operating Agreement, Petrogulf Corporation was
named operator for the test well and any subsequent wells drilled on the
prospect. Petrogulf Corporation is an independent, exploration and production
company based in Houston, Texas and Denver Colorado. It presently operates in
eight states and owns interests in more than 2,000 wells.


                                       29

<PAGE>

On August 4, 2006 we received a $200,000 loan from an unrelated party. The loan
is unsecured and matures on August 4, 2007. The loan bears annual interest at
the rate of 11%.

ITEM 6. EXHIBITS

Exhibits

The following exhibits are filed as a part of this report on Form 10-QSB:

Exhibit No.   Description
-----------   -----------
31.1          Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal
              Executive Officer

31.2          Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal
              Financial Officer

32.1          Rule 1350 Certification of Principal Executive Officer

32.2          Rule 1350 Certification of Principal Financial Officer


                                       30

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-QSB to be
signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 17, 2006                Falcon Natural Gas Corp.


                                        By: /s/ Fred Zaziski
                                            ------------------------------------
                                        Name: Fred Zaziski
                                        Title: President


                                       31