UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D. C. 20549



FORM
10-K



| | ☒ | ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



For
the Fiscal Year Ended June 30, 2018



| | ☐ | TRANSITION REPORT
    PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------



For
the Transition Period from ________ to ________



FREESTONE
RESOURCES, INC.

(Exact
name of registrant as specified in its charter)



|NEVADA                                             |  | 000-28753                    |  | 90-0514308                           
|-------------------------------------------------- |  | ---------------------------- |  | -------------------------------------
|(State or other jurisdiction
    of incorporation) |  | (Commission File
    Number) |  | (IRS Employer Identification
    No.)



|101
    W. Ave D.  Ennis, TX 75119           |  | 75201     
|-------------------------------------------- |  | ----------
|(Address of
    Principal Executive Offices) |  | (Zip Code)



Registrant’s
telephone number, including area code:  214-880-4870



Securities
registered pursuant to Section 12(b) of the Act: None



Securities
registered pursuant to Section 12(g) of the Act:  Common Stock, Par value $0.001



Indicate
by a check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.

Yes
☐ No☒



Indicate
by a check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Securities
Exchange Act. Yes ☐ No ☒



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



Indicate
by check mark whether the registrant has submitted electronically and posted on its website, if any, every Interactive File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§325.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files), Yes ☒
No ☐



Indicate
by check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (s229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K ☒





1









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



|Large Accelerated Filer   | ☐ | Accelerated Filer         | ☐
|------------------------- | - | ------------------------- | -
|                          |   |                           |  
|Non-Accelerated Filer     | ☐ | Smaller Reporting Company | ☒
|Emerging Growth Company ☐ |  



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



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐



Aggregate
market value of the voting stock held by non-affiliates of the registrant as of December 31, 2017: $2,959,487

Indicate
the number of Shares of outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 
As of September 30, 2018, the Registrant had 98,238,177 shares of common stock outstanding.



DOCUMENTS
INCORPORATED BY REFERENCE



None















2













TABLE
OF CONTENTS



|PART
    I   |                                                                                                                 
|------------ | ----------------------------------------------------------------------------------------------------------------
|             |                                                                                                                 
|Item 1.      | Description of Business                                                                                         
|Item 1A.     | Risk Factors                                                                                                    
|Item 1B.     | Unresolved Staff Comments                                                                                       
|Item 2.      | Description of Properties                                                                                       
|Item 3.      | Legal Proceedings                                                                                               
|Item 4.      | Mine Safety Disclosures                                                                                         
|             |                                                                                                                 
|PART
    II  |                                                                                                                 
|             |                                                                                                                 
|Item 5.      | Market for Registrant’s Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity Securities
|Item 6.      | Selected Financial Data                                                                                         
|Item 7.      | Management’s Discussion and Analysis of
    Financial Condition and Results of Operations                       
|Item 7A.     | Quantitative and Qualitative Disclosures about
    Market Risk                                                  
|Item 8.      | Financial Statements and Supplementary Data                                                                     
|Item 9.      | Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure                        
|Item 9A.     | Controls and Procedures                                                                                         
|Item 9B.     | Other Information                                                                                               
|             |                                                                                                                 
|PART
    III |                                                                                                                 
|             |                                                                                                                 
|Item 10.     | Directors, Executive Officers and Corporate
    Governance                                                      
|Item 11.     | Executive Compensation                                                                                          
|Item 12.     | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters              
|Item 13.     | Certain Relationship and Related Transactions
    and Director Independence                                     
|Item 14.     | Principal Accounting Fees and Services                                                                          
|             |                                                                                                                 
|PART
    IV  |                                                                                                                 
|             |                                                                                                                 
|Item 15.     | Exhibits and Financial Statement Schedules                                                                      











3











FORWARD-LOOKING
STATEMENTS



This
report includes forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995 or by
the U.S. Securities and Exchange Commission in its rules, regulations and releases, regarding, among other things, all statements
other than statements of historical facts contained in this report, including statements regarding our future financial position,
business strategy and plans and objectives of management for future operations. The words “believe,” “may,”
“estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,”
“could,” “target,” “potential,” “is likely,” “will,” “expect”
and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking
statements largely on our current expectations and projections about future events and financial trends that we believe may affect
our financial condition, results of operations, business strategy and financial needs.  In addition, our past results
of operations do not necessarily indicate our future results.



Other
sections of this report may include additional factors which could adversely affect our business and financial performance. New
risk factors emerge from time to time and it is not possible for us to anticipate all the relevant risks to our business, and
we cannot assess the impact of all such risks on our business or the extent to

which
any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements.
Those factors include, among others, those matters disclosed in this Annual Report on Form 10-K.



Except
as otherwise required by applicable laws and regulations, we undertake no obligation to publicly update or revise any forward-looking
statements or the risk factors described in this report, whether as a result of new information, future events, changed circumstances
or any other reason after the date of this report. Neither the Private Securities Litigation Reform Act of 1995 nor Section 27A
of the Securities Act of 1933 provides any protection to us for statements made in this report. You should not rely upon forward-looking
statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in
the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.





4







PART
I



ITEM
1.  DESCRIPTION OF BUSINESS



Company
Background



Freestone
Resources, Inc. (the “Company” or “Freestone”), a Nevada corporation, is an oil and gas technology development
company that is actively developing and marketing technologies and solvents designed to benefit various sectors in the oil and
gas industry. The Company has re-launched its PetrozeneTM solvent after developing a new and improved formula. PetrozeneTM
is primarily used to dissolve paraffin buildup, and it is primarily used for pipelines, oil storage tanks, oil sludge build up,
de-emulsification, well treatment, as a corrosion inhibitor and as a catalyst in opening up formations thereby aiding in oil production.



On
June 24, 2015 Freestone purchased 100% of the common stock of C.C. Crawford Retreading Company, Inc. (“CTR”), a Texas
corporation. CTR is an Off-The-Road (“OTR”) tire company located in Ennis, Texas, and a wholly owned subsidiary of
Freestone. CTR’s primary business is to repair, recycle, dispose of and sell OTR tires, which are used on large, industrial
equipment. Freestone made the decision to purchase CTR in order to utilize the CTR facility for the production of PetrozeneTM
..



On
June 24, 2015, the Company formed Freestone Dynamis Energy Products, LLC (“FDEP”) with Dynamis Energy, LLC (“Dynamis”).
FDEP was formed in order to operate and manage the specialized pyrolysis process that is used to create PetrozeneTM and other
byproducts of value. Freestone chose to work with Dynamis based on their extensive engineering and waste-to-energy expertise.
Freestone owns a 70% member interest in FDEP.



The
acquisition of CTR and the formation of FDEP have allowed Freestone to vertically integrate the PetrozeneTM product line.
CTR will remain an auxiliary company that will maintain existing operations that complement the efforts of FDEP and Freestone.



Available
Information



The
Freestone website is www.freestoneresources.com.  The Company’s references to the URLs for these websites
are intended to be inactive textual references only.  The Company’s Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities
Exchange Act of 1934, as amended, are filed with the U.S. Securities and Exchange Commission (the “SEC”).



The
public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street,
NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy, and information statements and other
information regarding issuers that file electronically with the SEC at http://www.sec.gov.



Products
and Services



OTR
Tire Services



CTR
has been involved in the OTR tire business since 1987. Since its formation, CTR has evolved into a unique company that can handle
most of the needs of its customers that require OTR tire services. These services include:



| | • | Specialized OTR
    tire repair services quickly and efficiently, and at competitive prices; and
| | - | ------------------------------------------------------------------------------------------------



| | • | Disposal services
    for OTR tires that can no longer be used or repaired; and
| | - | -------------------------------------------------------------------------------



| | • | A substantial inventory
    of used OTR tires for sale; and
| | - | -----------------------------------------------------------



| | • | Recycling OTR tires
    for alternative uses that prevent them from going to landfills.
| | - | ---------------------------------------------------------------------------------------









5











PetrozeneTM



Freestone
purchased CTR in order to use a specialized pyrolysis technology. Pyrolysis, by definition, is the decomposition of organic matter
in the absence of oxygen. The Company and FDEP will use this process to convert the OTR tires that have been disposed of into
byproducts of value. One of the byproducts from this process is used in the production of PetrozeneTM. The use of pyrolysis
allows Freestone and CTR to reduce the amount of tires that would have otherwise been disposed of in landfills.



Customers



CTR
provides services to many international OTR tire dealers. These OTR tire dealers make up a majority of its customer base.



Competition



OTR
Tire Services



Several
tire processing companies are permitted in the Dallas/Ft. Worth area, but most of them cannot handle OTR tires due to the size
of the OTR tires. CTR has its own trucks, forklifts and other equipment that are necessary for the management and processing of
OTR tires. CTR also has specialized, on-site shredding equipment to convert the OTR tires into one inch tire pieces that can be
sold as a tire derived fuel (“TDF”), or processed in the specialized pyrolysis technology.



CTR
is one of the few tire processing facilities that provide other services to its customers. These additional services include the
sale of used OTR tires and the repair of OTR tires. CTR’s operations focus on the states of Texas, Oklahoma, Louisiana,
New Mexico and Arkansas. Focusing on these specific states allow CTR to provide some of the fastest repair turnarounds in the
industry.



PetrozeneTM



Many
oil and gas service companies and petro-chemical companies provide a product that competes with PetrozeneTM. The Company’s
advantage is that PetrozeneTM is derived from a readily available waste product, and the pyrolysis process used to create
PetrozeneTM is extremely cost efficient. Most of the Company’s competitors use synthetically derived chemicals that
are extremely expensive to develop and manufacture.



Research
and Development



Freestone
and its partners are continuously evaluating technologies and processes that can convert waste streams into valuable byproducts.
Freestone’s main focus has been the development of byproducts that can be used by the oil and gas industry to increase production
and efficiency. The Company’s research has resulted in the relaunch of PetrozeneTM, and expanding the ways in which
PetrozeneTM can be utilized. Freestone’s partners and customers have provided valuable feedback that has continued
to help create a superior product.



Growth
Strategy



Freestone
is actively pursuing a strategy of growth through the vertical integration of PetrozeneTM. The implementation of this strategy
allows the Company to reduce variables that could affect growth, performance and the quality of its products. In addition, Freestone
and FDEP are providing CTR with another recycling option. This means that more tires will be processed each year, and thus will
allow CTR to increase its disposal operations.



Government
Approval and Environmental Matters



CTR
is registered with the Texas Commission on Environmental Quality (“TCEQ”) as a transporter and scrap tire facility.





6









Freestone’s
and CTR’s operations and properties are subject to extensive and changing federal, state and local laws and regulations
relating to environmental protection, including the generation, storage, handling, emission, transportation and discharge of materials
into the environment, and relating to safety and health. The recent trend in environmental legislation and regulation generally
is toward stricter standards, and this trend will likely continue.



The
permits required for our operations may be subject to revocation, modification and renewal by issuing authorities. Governmental
authorities have the power to enforce their regulations, and violations are subject to fines or injunctions, or both.



On
September 6, 2016 CTR received a Notice of Enforcement for Compliance Evaluation Investigation from the TCEQ informing them of
potential violations related to its processing permit. On September 6, 2016 FDEP also received a Notice of Enforcement for Compliance
Evaluation Investigation informing them of potential violations relating to waste disposal and its permit for pyrolysis process.



CTR’s
potential violations related to tires stored in excess of the numbers permitted and noncompliance with fire regulations. CTR has
submitted a plan to reduce the number of tires and bring the facility into full compliance with all fire regulations.



FDEP’s
potential violations regarded failure to properly classify, track and dispose of hazards waste as well as operating a pyrolysis
machine without a separate permit from CTR. FDEP cured the potential hazards waste issue and submitted documentation of such to
the TCEQ. FDEP has applied for a separate permit for its pyrolysis operation and is awaiting approval from the TCEQ. As of June
30, 2018, the Company is awaiting approval of the permit



In
conjunction with the plan submitted to the TCEQ to bring the tire storage facility into compliance CTR accrued an environmental
and tire disposal liability of $400,000. (See financial statement Note 7). The Company also accrued $48,750 in proposed TCEQ fines
and penalties.



On
August 22, 2018 the TCEQ approved an Agree Order with CTR to settle the case. Under terms of the agreement the fine was reduced
to $3,600 providing CTR reduce it number of scrap tires on hand to 5,000 within 100 days.



Intellectual
Property



Freestone
is the owner of the PetrozeneTM trademark. Freestone does not own any patents at this time.





ITEM
1A.  RISK FACTORS



As
a smaller reporting company we are not required to provide the information required by this item.



ITEM
1B.  UNRESOLVED STAFF COMMENTS



None.



ITEM
2.  DESCRIPTION OF PROPERTY



CTR
is located at 101 W. Ave. D, Ennis TX 75119 and owns approximately 10.141 acres with three buildings consisting of 32,800 square
feet. During the current year Freestone relocated its corporate offices to the Ennis facilities as a cost saving measure.



ITEM 3.  LEGAL
PROCEEDINGS



Freestone
and CTR are not subject to any material pending legal proceedings, nor are the companies aware of any material threatened claims
against them.





7













ITEM
4.  MINE SAFETY DISCLOSURES



PART
II



ITEM
5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



The
Common Stock is currently quoted on the OTCQB under the symbol “FSNR.”



The
following tables set forth the quarterly high and low bid prices for the Common Stock for 2018 and 2017.  The prices
set forth below represent interdealer quotations, without retail markup, markdown or commission and may not be reflective of actual
transactions.



|Fiscal
    2018 |  | High |      |  | Low |  
|--------------- |  | ---- | ---- |  | --- | -
|First Quarter   |  | $    | 0.07 |  |     | $
|Second Quarter  |  | $    | 0.08 |  |     | $
|Third Quarter   |  | $    | 0.06 |  |     | $
|Fourth Quarter  |  | $    | 0.06 |  |     | $
|                |  |      |      |  |     |  
|Fiscal
    2017 |  | High |      |  | Low |  
|First Quarter   |  | $    | 0.13 |  |     | $
|Second Quarter  |  | $    | 0.08 |  |     | $
|Third Quarter   |  | $    | 0.09 |  |     | $
|Fourth Quarter  |  | $    | 0.08 |  |     | $



Shareholders



As
of June 30, 2018, there were approximately 260 record holders of the Common Stock. This number excludes any estimate by Freestone
of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.



Dividends



Freestone
has not paid cash dividends on any class of common equity since formation and Freestone does not anticipate paying any dividends
on its outstanding common stock in the foreseeable future.



Warrants



As
of June 30, 2018, the Company had no outstanding stock warrants.



ITEM
6.  SELECTED FINANCIAL DATA



As
a smaller reporting company we are not required to report selected financial data disclosures as required by item 301 of Regulation
S-K.



ITEM
7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



At
present, Freestone’s management is focused on the development and vertical integration of the PetrozeneTM product line.
Freestone continues to look for various solvents, chemicals, and technologies that might fit into Freestone’s petro-chemical
line, and continues to seek opportunities in the oil and gas water industry.





8











Critical
Accounting Policies



The
Company’s consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles.  As
such, management is required to make certain estimates, judgments and assumptions that they believe are reasonable based upon
the information available.  These estimates and assumptions affect the reported amounts of assets and liabilities at
the date of the consolidated financial statements and the reported amounts of income and expense during the periods presented.  The
significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating our
reported financial results include the following:



Revenue
Recognition



Freestone
and CTR recognize revenue from the sale of products in accordance with ASC 605.  Revenue will be recognized only when
all of the following criteria have been met:



| | •             Persuasive evidence of an arrangement exists; and                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | •        
    Ownership and all risks of loss have been transferred to buyer, which is generally upon delivery; and
| | •        
    The price is fixed and determinable; and                                                             
| | •        
    Collectability is reasonably assured.                                                                



The
three main sources of revenue are recognized as follows:



| | • | Revenues associated
    with tire disposals are recognized upon receipt of the tire by CTR; and
| | - | -----------------------------------------------------------------------------------------------



| | • | Revenues associated
    with tire repairs are invoiced and recognized upon completion of repair and receipt of the tire by the customer; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | • | Revenue associated
    with used tires and scrap sales are recognized upon delivery of the product to the customer.
| | - | -------------------------------------------------------------------------------------------------------------------



Stock
Based Compensation



Pursuant
to Accounting Standards Codification (“ASC”) 505-50, the guidelines for recording stock issued for services require
the fair value of the shares granted be based on the fair value of the services received or the publicly traded share price of
the Company’s registered shares on the date the shares were granted (irrespective of the fact that the shares granted were
unregistered), whichever is more readily determinable.  This position has been further clarified by the issuance of
ASC 820. ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date”. Accordingly, the Company elected the application
of these guidelines.  Freestone has determined that the fair value of all common stock issued for goods or services
is more readily determinable based on the publicly traded share price on the date of grant.



Results
of Operations for the Year ended June 30, 2018 Compared to the Year ended June 30, 2017



Revenue



Revenues
for the years ended June 30, 2018 and 2017 were $1,163,860 and $1,079,846, respectively. An increase of 7.8% due primarily to
the increase in tipping fees.



Cost
of Goods and Gross Profit



Cost
of Goods sold for the years ended June 30, 2018 was $904,807 compared to $839,007 in the prior year. The 7.8% increase was consistent
with the Company’s increase in sales. The Company’s gross margin remained steady at 22.3%.





9











Operating
Expense



Total
operating expenses for the years ended June 30, 2018 and 2017 were $1,267,235 and $1,557,977, respectively. A decrease of 18.7%
due to the Company’s implementation of cost savings measures. The primary area of decrease were selling of $64,600 and general
and administration of $207,923. The selling decreases were due to cuts in compensation at CTR while the general and administration
decrease was primarily a reduction of loan administration costs.



Other
Income and Expenses



Other
income and expense for the year ended June 30, 2018 and the year ended June 30, 2017 consisted of interest expense of $219,944
and $165,312 respectively. The increase is reflective of the Company increase in debt used to finance the Company losses.



Net
(Loss) Income



Net
loss for and the year ended June 30, 2018 was $1,138,132 compared to a net loss for the year ended June 30, 2017 of $1,386,947.
The decrease was primarily a result of the Company’s decrease in operating cost detailed above.



Liquidity
and Capital Resources



The
Company has little cash reserves and liquidity to the extent we receive it from operations and through the sale of common stock.



Cash
decreased from $4,109 at June 30, 2017 to $2,966 at June 30, 2018.



Net
cash used by operating activities was $786,056 for the year ended June 30, 2018. The difference between the Company’s net
loss and cash used is the none cash expenses of depreciation and stock compensation and an increase in accrued liabilities from
the deferral of officer’s payroll.



The
cash provided by financing activities totaled $780,613 funded by $270,058 of cash contributed by the non-controller member to
FDEP and $974,816 increase in borrowings from stockholders offset by $464,261 of payments on term loans.



Employees



As
of June 30, 2018, CTR had 16 full-time employees including 1 leased to FDEP. Freestone’s only employees are its three officers.



Need
for Additional Financing



The
Company is uncertain of its ability to generate sufficient liquidity from its operations so the need for additional funding may
be necessary.  The Company may sell stock and/or issue additional debt to raise capital to accelerate our growth.



Going
Concern Uncertainties



The
accompanying consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. As of the date of this annual report, there is substantial
doubt regarding the Company’s ability to continue as a going concern as we have not generated sufficient cash flows to fund
our business operations and loan commitments.  Our future success and viability, therefore, are dependent upon our ability
to generate capital financing.  The failure to generate sufficient revenues or raise additional capital may have a material
and adverse effect upon the Company and our shareholders.







10









The
Company formed FDEP in order to vertically integrate its PetrozeneTM product line, and utilize a specialized pyrolysis process
in order to produce other byproducts of value that will generate revenue for FDEP. In turn, the ability of FDEP to process large
quantities of OTR tires will allow the Company to increase the amount of OTR tires it can dispose of and process, which will generate
additional revenue of the Company. Additionally, the Company intends to raise equity or debt financing that will allow the Company
to expand its current operations.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market
risk represents the risk of loss arising from adverse changes in market rates and foreign exchange rates. The amount of our outstanding
debt at any time may fluctuate and we may from time to time be subject to refinancing risk.  A hypothetical 100 basis
point increase in interest rates would have a material effect on our annual interest expense and on our results of operations
or financial condition as we rely on these notes to sustain our operations.  Since we do not have transactions in foreign
currencies, we do not consider it necessary to hedge against currency risk.



ITEM
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



The
consolidated financial statements of Freestone Resources, Inc. and Subsidiaries, together with the Report of Independent
Registered Public Accounting Firm Pinnacle Accountancy Group of Utah for the year ended June 30, 2018 and 2017, appear on
pages  20 through  38 of this report.



ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES



None.



ITEM
9A.  CONTROLS AND PROCEDURES



Evaluation
of Disclosure Controls and Procedures



We
carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) as of June 30, 2018.  This evaluation was accomplished under the
supervision and with the participation of our chief executive officer / principal executive officer, and chief financial officer
/ principal financial officer who concluded that our disclosure controls and procedures are not effective to ensure that all material
information required to be filed in the annual report on Form 10-K has been made known to them.



For
purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are
designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act
(15 U.S.C. 78a et seg.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s
rules and forms.  Disclosure, controls and procedures include, without limitation, controls and procedures designed
to ensure that information required to be disclosed by in our reports filed under the Securities Exchange Act of 1934, as amended
(the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.





11









Management’s
Annual Report on Internal Control Over Financial Reporting



Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes,
in accordance with generally accepted accounting principles in the United States of America.  Our internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance
with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial
statements.



Because
of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due
to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



Our
management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework (2013 framework) at June 30, 2018. Based on its evaluation, our management concluded that, as of June 30, 2018, our
internal control over financial reporting was not effective because of: a lack of sufficient accounting staff which results in
a lack of segregation of duties necessary for a good system of internal control. A material weakness is a deficiency, or a combination
of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.



This
annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal
control over financial reporting.  Management’s report was not subject to the attestation by the Company’s registered
public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this
annual report.













12











PART
III



ITEM
10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



The
following persons serve as directors and officers of Freestone Resources, Inc.:



Michael
McGhan, Chief Executive Officer and President

Paul
E. Babb, Chief Financial Officer

Don
Edwards, Chief Investment Officer



Michael
McGhan, age 63, has extensive experience with operations, sales and management that is extremely beneficial to Freestone, and
the development of the Company’s petrochemical product line. From 1991 to August 2002, Mr. McGhan was a co-founder, President
and Chief Executive Officer of Hanover Compressor Co. (now Exterran Holdings, Inc.). Hanover became the largest natural gas compression
company in the world with approximately 7,000 compression rental units in the field, and annual revenues over $1.1 billion. In
August 2004, Mr. McGhan along with his partners co-founded Valerus Compression Services LLP. Mr. McGhan served as co-CEO and ultimately
Vice-Chairman of the company until December 2009. Mr. McGhan and his partners built Valerus into one of the world's leading providers
of natural gas treatment and compression equipment and services to the global oil and gas industry.



Paul
E. Babb, age 61 is a CPA and served as the Company’s Controller and Director of Financial Reporting since July, 2015 until
his appointment as C.F.O. He received his B.S. and M.S. degrees in accounting from Oklahoma State University. He has over thirty
years of financial reporting experience in both industry and public accounting. Prior to his employment with Freestone Mr. Babb
worked as a consultant for the Thomas Edwards Group as an audit manager for The Hall Group CPAs. His previous experience included
ten years as controller for Mapsco, Inc.



Don
Edwards, age 67, is a graduate from Texas Christian University with a BBA degree concentrating in Finance and Economics. Mr. Edwards
started his business career with E. F. Hutton where he was a regional OTC Coordinator. He also ran a trading desk for OTC stocks.
He later served as President, CFO, CEO and Director for four securities firms as well as a Director for two savings and loans.
He has been responsible for managing many public and private companies. He has raised startup capital for dozens of both private
and public companies. Mr. Edwards has vast knowledge in the investment field including fine art. He has bought and sold art works
of such artists as Charles Russell and Monet. Don was a licensed Insurance agent for many years and assisted in managing the West
Texas region for Mass Mutual Life Ins. Co. Don also has a background in the Oil and Gas Industry. His family has run a successful
drilling company in West Texas for over half a century. Mr. Edwards will maintain his position as Chief Investment Officer of
the Company.  Mr. Edwards has served as the Chief Investment Officer for the Company for five years.  Prior
to his employment at the Company, Mr. Edwards was self-employed.



Ownership
Reporting Compliance



Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and
directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and
reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. We believe that as of the date of
this report they were all current in their 16(a) reports.



Board
of Directors



Our
board of directors currently consists of three members. Our directors serve one-year terms. Our board of directors has affirmatively
determined that there are currently no independent directors serving on our board.





13









Committees
of the Board of Directors



Audit
Committee



We
do not have a standing audit committee of the Board of Directors. Management has determined not to establish an audit committee
at present because of our limited resources and limited operating activities do not warrant the formation of an audit committee
or the expense of doing so. We do not have a financial expert serving on the Board of Directors or employed as an officer
based on management’s belief that the cost of obtaining the services of a person who meets the criteria for a financial
expert under Item 401(e) of Regulation S is beyond its limited financial resources and the financial skills of such an expert
are simply not required or necessary for us to maintain effective internal controls and procedures for financial reporting in
light of the limited scope and simplicity of accounting issues raised in its financial statements at this stage of its development.



Governance,
Compensation and Nominating Committee



We
do not have a standing governance, compensation and nominating committee of the Board of Directors. Management has determined
not to establish governance, compensation and nominating committees at present because of our limited resources and limited operations
do not warrant such a committee or the expense of doing so.



Code
of Ethics



The
Company has adopted the following code of ethics for officers, directors and employees:



| | • | Show respect towards
    others in the workplace
| | - | ------------------------------------------------



| | • | Conduct all business
    activities in a fair and ethical manner
| | - | ----------------------------------------------------------------



| | • | Work dutifully and
    responsibly for the Company’s shareholders and stakeholders
| | - | ----------------------------------------------------------------------------------



Limitation
of Liability of Directors



Pursuant
to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary
damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction
from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director
may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws.





14









ITEM
11.   EXECUTIVE COMPENSATION



Compensation
of Executive Officers



The
following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers
paid by us during the fiscal years ended June 30, 2018 and 2017 in all capacities for the accounts of our executives, including
the Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Investment Officer (CIO):



SUMMARY
COMPENSATION TABLE



|Name
    and Principal Position |  | Year |      | Salary($) |  | Bonus($) |         | Stock
    Awards($) |  | Option
    Awards($) |   | Non-Equity
                                         Incentive Plan Compensation
        ($) |  | Non-Qualified
                                         Deferred
        Compensation
        Earnings($) |        | All
    Other Compensation($) |  | Totals($)
|------------------------------- |  | ---- | ---- | --------- |  | -------- | ------- | ------------------- |  | -------------------- | - | ------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- | ------ | ----------------------------- |  | ---------
|                                |  |      |      |           |  |          |         |                     |  |                      |   |                                                                                             |  |                                                                                                          |        |                               |  |          
|Michael McGhan,                 |  |      | 2018 |           |  |          | 120,000 |                     |  |                      | 0 |                                                                                             |  |                                                                                                          | 0      |                               |  |          
|CEO                             |  |      | 2017 |           |  |          | 120,000 |                     |  |                      | 0 |                                                                                             |  |                                                                                                          | 0      |                               |  |          
|Don Edwards,                    |  |      | 2018 |           |  |          | 46,500  |                     |  |                      | 0 |                                                                                             |  |                                                                                                          | 0      |                               |  |          
|CIO                             |  |      | 2017 |           |  |          | 42,000  |                     |  |                      | 0 |                                                                                             |  |                                                                                                          | 0      |                               |  |          
|Paul Babb,                      |  |      | 2018 |           |  |          | 83,333  |                     |  |                      | 0 |                                                                                             |  |                                                                                                          | 18,750 |                               |  |          
|CFO                             |  |      | 2017 |           |  |          | 76,753  |                     |  |                      | 0 |                                                                                             |  |                                                                                                          | 30,000 |                               |  |          





Employment
Agreements



As
of June 30, 2018 the Company had no current employment agreements.



Payments
of officer’s compensation has been limited due to the Company cash flow. As of June 30, 2018, accrued liabilities include
$394,611 of officer’s salaries deferred under employment contracts and agreement by the officers.



Compensation
of Directors



Directors
do not receive any compensation for their services as directors. The Board of Directors has the authority to fix the compensation
of directors. No amounts have been paid to, or accrued to, directors in such capacity















15











ITEM
12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS



As
of June 30, 2018, the following persons are known to Freestone to own 5% or more of Freestone's Common Stock, as well as the Company’s
officers and directors.



|Name and Address
    of Beneficial Owner, Officer or Director |  | Amount
    Beneficially Owned |            |  | Percent
    of Class | 
|------------------------------------------------------------- |  | ----------------------------- | ---------- |  | -------------------- | 
|                                                              |  |                               |            |  |                      | 
|Michael McGhan, President,
    CEO and Director               |  |                               | 5,500,000  |  |                      | 
|                                                              |  |                               |            |  |                      | 
|Paul E. Babb, Chief Financial Officer and Director            |  |                               | 1,482,275  |  |                      | 
|                                                              |  |                               |            |  |                      | 
|Don Edwards, Chief Investment Officer and Director            |  |                               | 6,500,000  |  |                      | 
|                                                              |  |                               |            |  |                      | 
|Clayton Carter, Beneficial Owner                              |  |                               | 7,605,000  |  |                      | 
|                                                              |  |                               |            |  |                      | 
|Gerald M. Johnston, Beneficial Owner                          |  |                               | 12,904,167 |  |                      | 
|                                                              |  |                               |            |  |                      | 







Directors
and Officers as a Group



101
W. ave d.

Ennis,
TX 7119



Gerald
M. Johnston



2821
Alliance Place

Suite
1

Springdale,
AR 72764



ITEM
13.     CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE



On
April 12, 2016 Paul Babb loaned the company $50,000 under a note due April 12, 2016 bearing interest at 6.5%. The note is convertible
into common stock at $.08 per share upon maturity. Mr. Babb became the Company’s CFO and a member of the board on May 31,
2016. The due date has subsequently extended to December 31, 2018 and the conversion price changed to $.05 per share.



During
the years ended June 30, 2018 and 2017 the Company borrowed a total of $1,509,919 from a shareholder of the Company in various
increments throughout the period. The note bears interest at 6.5% is convertible into common stock at $.05 per share. The due
date has subsequently been extended to December 31, 2018 Subsequent to yearend the note holder converted $125,000 of the balance
to common stock at $.05 a share for a total of 2,500,000 shares. (see note 15 to the financial statements)



On
December 15, 2016 the Company borrowed $20,000 from another shareholder. The bears interest at 6.5% and is convertible into common
stock at $.05 per share. The due date has subsequently been extended to December 15, 2018.





16









Due
to our limited resources, the Company does not have any independent directors serving on the board of directors.



ITEM
14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES



Audit
Fees



The
aggregate fees billed for professional services rendered by our auditors, for the audit of our annual financial statements and
review of the financial statements included in our Form 10-K and Forms 10-Q or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for the year ended June 30, 2018 and 2017 were $31,395 and
$26,679, respectively.



Audit
Related Fees



None.



Tax
Fees



None



All
Other Fees



None.



















17













ITEM
15.     EXHIBITS AND FINANICAL STATEMENT SCHEDULES



(a) 
The following documents are filed as part of this report:  Included in Part II, Item 7 of this report:



Report
of Independent Registered Public Accounting Firm for the years Ended June 30, 2018 and 2017



Consolidated
Balance Sheets



Consolidated
Statements of Operations



Statement
of Changes in Stockholders’ Equity/(Deficit)



Consolidated
Statements of Cash Flows



Notes
to the Consolidated Financial Statements



(b) 
Freestone filed the following Exhibits in the year ended June 30, 2018:



None









18













(c) 
Exhibits



|31   | Certification                                                                                                                           
|---- | ----------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                         
|32   | Certification Pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – CEO and CFO
|     |                                                                                                                                         
|XBRL |                                                                                                                                         





SIGNATURES



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





|                             | Freestone Resources, Inc. |                                                                                                 
|---------------------------- | ------------------------- | ------------------------------------------------------------------------------------------------
|                             |                           |                                                                                                 
|Dated:
     October 15, 2018 | By:                       | /s/ 
    Michael McGhan                                                                         
|                             |                           | Michael
                                         McGhan,
        Chief
        Executive Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned hereunto duly authorized.



|Name                       |  | Title                                           |  | Date            
|-------------------------- |  | ----------------------------------------------- |  | ----------------
|                           |  |                                                 |  |                 
|By:
    /s/ Michael McGhan |  | President, Chief Executive Officer and Director |  | October 15, 2018
|Michael McGhan             |  |                                                 |  |                 
|                           |  |                                                 |  |                 
|By:
    /s/ Paul E. Babb   |  | Chief Financial Officer, Director               |  | October 15, 2018
|Paul E. Babb               |  |                                                 |  |                 
|                           |  |                                                 |  |                 
|By:
    /s/ Don Edwards    |  | Chief Investment Officer, Director              |  | October 15, 2018
|Don Edwards                |  |                                                 |  |                 







19













To
The Board of Directors and Stockholders of

Freestone
Resources, Inc.



Opinion
on the Financial Statements

We
have audited the accompanying consolidated balance sheets of Freestone Resources, Inc. (the “Company”) as of June
30, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows
for each of the years in the two-year period ended June 30, 2018 (collectively referred to as the consolidated financial statements).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of June 30, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-yeear
period ended June 30, 2018 and 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis
for Opinion

These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.

Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed
in Note 15 to the consolidated financial statements, the Company has not generated sufficient cash flows from operations to fund
its business operations. This factor, among others, raises substantial doubt about the Company’s ability to continue as
a going concern. Management’s plans in regard to this matter are also described in Note 15. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.



/s/Pinnacle
Accountancy Group of Utah



We
have served as the Company’s auditor since 2016



Farmington,
Utah

October
15, 2018























20









|Freestone
                                         Resources Inc. and Subsidiaries
|----------------------------------------------------------------------------------
|Consolidated Balance Sheets                                                       
|                                                                                  
|                                                                                  
|                                                                                  
|ASSETS                                                                            
|                                                                                  
|Current Assets                                                                    
|Cash                                                                              
|Accounts receivable, net of allowance for doubtful
    accounts                   
|of $4,000 and $4,000                                                              
|Inventory                                                                         
|Prepaid and Other Assets                                                          
|Total Current Assets                                                              
|                                                                                  
|Property, plant and equipment, net of accumulated depreciation                    
|of $349,373 and $242,320                                                          
|                                                                                  
|TOTAL ASSETS                                                                      
|                                                                                  
|                                                                                  
|LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)                                    
|                                                                                  
|Current Liabilities                                                               
|Accounts payable                                                                  
|Accrued liabilities                                                               
|Environmental liability                                                           
|Convertible Notes Payable - Related Party                                         
|Current portion of capital lease obligation                                       
|Current portion of long-term
    debt                                             
|Total Current Liabilities                                                         
|                                                                                  
|Capital lease obligation, less current portion                                    
|Long-term debt, less current portion                                              
|                                                                                  
|TOTAL LIABILITIES                                                                 
|                                                                                  
|STOCKHOLDERS' EQUITY/(DEFICIT)                                                    
|Preferred stock, 5,000,000 shares authorized,
    0 shares issued                 
|and outstanding                                                                   
|Common stock, $.001 par value,  100,000,000 shares
    authorized,                
|91,988,177 and 91,613,177 shares issued and
    outstanding                       
|Additional paid in capital                                                        
|Accumulated deficit                                                               
|Total Freestone Resources, Inc. stockholders'
    deficit                         
|Non-Controlling Interest                                                          
|Total equity (deficit)                                                            
|                                                                                  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)                              
|                                                                                  



The
Accompanying Notes Are An Integral Part of These Consolidated Financial Statements







21











|Freestone Resources Inc. and Subsidiaries     
|----------------------------------------------
|Consolidated Statements of Operations         
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|REVENUE                                       
|Tipping Fee Revenue                           
|Tire Repair Revenue                           
|Used Tire Sales                               
|Scrap Material Sales                          
|Total Revenue                                 
|                                              
|COSTS OF REVENUE                              
|Tipping Fee Operations                        
|Tire Repair and Sales                         
|Used Tires                                    
|Tire Disposal                                 
|Scrap and Other Costs                         
|Total Cost of Revenue                         
|                                              
|GROSS PROFIT                                  
|                                              
|OPERATING EXPENSES                            
|Start Up Costs                                
|Selling                                       
|General and Administrative                    
|Depreciation and Amortization                 
|Loss on Sale of Assets                        
|Total Operating Expense                       
|                                              
|INCOME (LOSS) FROM OPERATIONS                 
|                                              
|OTHER INCOME (EXPENSES)                       
|Interest Expense, net                         
|                                              
|                                              
|INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST 
|                                              
|Loss Attributable to Non-Controlling Interest 
|                                              
|NET INCOME(LOSS) ATTRIBUTABLE
    TO FREESTONE
|                                              
|Basic and diluted income (loss) per share     
|Net income (loss) per share                   
|                                              
|Weighted average shares outstanding           
|Basic and diluted                             
|                                              









The
Accompanying Notes Are An Integral Part of These Consolidated Financial Statements







22











|Freestone Resources
    Inc. and Subsidiaries              |  |             
|---------------------------------------------------------- |  | ------------
|Statement of
    Changes in Stockholders' Equity/(Deficit) |  |             
|                                                           |  |             
|                                                           |  |             
|                                                           |  | Common Stock
|                                                           |  | Shares      
|                                                           |  |             
|Balance, June 30, 2016                                     |  |             
|                                                           |  |             
|Common
    Stock Issued for Cash                           |  |             
|                                                           |  |             
|Common
    Stock Issued for Services                       |  |             
|                                                           |  |             
|Members
    Contributions to LLC                           |  |             
|                                                           |  |             
|Net Loss                                                   |  |             
|                                                           |  |             
|Loss
    Attributable to Non-Controlling Interest          |  |             
|                                                           |  |             
|Balance, June 30, 2017                                     |  |             
|                                                           |  |             
|Common
    Stock Issued for Services                       |  |             
|                                                           |  |             
|Members
    Contributions to LLC                           |  |             
|                                                           |  |             
|Net Loss                                                   |  |             
|                                                           |  |             
|Loss
    Attributable to Non-Controlling Interest          |  |             
|                                                           |  |             
|Balance, June 30, 2018                                     |  |             
|                                                           |  |             



The
Accompanying Notes Are An Integral Part of These Consolidated Financial Statements







23











|Freestone
                                         Resources Inc. and Subsidiaries
|----------------------------------------------------------------------------------
|Consolidated Statements of Cash
    Flow                                          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|CASH FLOW FROM OPERATING ACTIVITIES                                               
|Net Income (Loss)                                                                 
|Adjustments to reconcile net income (loss)
    to net cash provided               
|by operating activities:                                                          
|Depreciation                                                                      
|Loss on Disposal of Assets                                                        
|Bad Debt Write-off                                                                
|Stock Issued for Services                                                         
|Changes in operating assets and liabilities                                       
|Decrease in Accounts Receivable                                                   
|Decrease in Inventory                                                             
|Increase in Prepaid Expenses                                                      
|Increase in Accounts Payable                                                      
|Increase  in
    Accrued Liabilities                                              
|Net Cash (Used In) Operating Activities                                           
|                                                                                  
|CASH FLOW FROM INVESTING ACTIVITIES                                               
|Purchase of Fixed Assets                                                          
|Proceeds from Sale of
    Fixed Assets                                            
|Net Provided By (Cash Used) in Investing Activities                               
|                                                                                  
|CASH FLOW FROM FINANCING ACTIVITIES                                               
|Proceeds from sale of stock                                                       
|Proceeds from Long-Term Debt                                                      
|Proceeds from Convertible Notes Payable - Related
    Parties                     
|Repayment of Debt                                                                 
|Capital Lease Payments                                                            
|Cash Contributed to LLC
    by non-controlling member                             
|Net Provided By In Financing Activities                                           
|                                                                                  
|Net Decrease in Cash                                                              
|                                                                                  
|Cash at Beginning of the Period                                                   
|                                                                                  
|Cash at the End of the
    Period                                                 
|                                                                                  
|Cash Transactions                                                                 
|Total Amount of Interest
    Paid in Cash                                         
|                                                                                  
|Total Income Taxes Paid
    in Cash                                               
|                                                                                  
|Non Cash financing and Investing Activities                                       
|Accrued Interest and Penalties
    Added to Note Payable                          
|                                                                                  
|Services paid for directly
    by non-controlling interest                        
|                                                                                  



The
Accompanying Notes Are An Integral Part of These Consolidated Financial Statements







24







Freestone
Resources Inc. and Subsidiaries

Notes
to Financial Statements

June
30, 2018 and 2017



NOTE
1 – NATURE OF ACTIVITIES AND CONTINUANCE OF BUSINESS



Freestone
Resources, Inc. and subsidiaries (“Freestone” or collectively the “Company”) are an oil and gas technology
development company. The Company is located in Ennis, Texas and is incorporated under the laws of the State of Nevada. The Company’s
subsidiaries consist of C.C. Crawford Retreading Company, Inc., Freestone Technologies, LLC and Freestone Dynamis Energy Products,
LLC.



The
Company’s primary business is the development of new technologies that allow for the utilization of oil and gas resources
in an environmentally responsible and cost effective way.



C.C.
Crawford Retreading Company, Inc. (“CTR”) is an Off-The-Road (“OTR”) tire company located in Ennis, Texas
and incorporated under the laws of the State of Texas. CTR’s primary business is to repair, recycle, dispose of and sell
OTR tires, which are used on large, industrial equipment.



Freestone
Dynamis Energy Products, LLC (“FDEP”) is a joint venture between Dynamis Energy, LLC and the Company. FDEP was established
to pursue the production and marketing of PetrozeneTM. FDEP’s initial operations will utilize a specialized pyrolysis
technology in order to process CTR’s feedstock, and begin large scale production of PetrozeneTM. Freestone owns 70%
of FDEP.



Freestone
Technology, LLC. is an inactive subsidiary.



NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES



The
Company’s management selects accounting principles generally accepted in the United States of America and adopts methods
for their application.  The application of accounting principles requires the estimating, matching and timing of revenue
and expense.  It is also necessary for management to determine, measure and allocate resources and obligations within
the financial process according to those principles.  The accounting policies used conform to generally accepted accounting
principles which have been consistently applied in the preparation of these financial statements.



The
financial statements and notes are representations of the Company’s management which is responsible for their integrity
and objectivity.  Management further acknowledges that it is solely responsible for adopting sound accounting practices,
establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company's
system of internal  accounting control is designed to assure, among other items, that  1) recorded  transactions  are
valid;  2) valid  transactions  are recorded;  and  3) transactions  are  recorded
in the proper  period in a timely  manner to produce financial  statements which present fairly
the financial  condition,  results of operations  and cash  flows of the  Company  for
the  respective  periods  being presented.



Basis
of Presentation:



The
Company prepares its financial statements on the accrual basis of accounting.    The accompanying consolidated
financial statements include the accounts of the Company and its subsidiaries, all of which have a fiscal year end of June 30.
All significant intercompany accounts, balances and transactions have been eliminated in the consolidation.



The
Company consolidates its subsidiaries in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, "[t]he usual
condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership
by one reporting entity, directly or indirectly, or over 50% of the outstanding voting shares of another entity is a condition
pointing toward consolidation."





25









Use
of Estimates:



The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from
those estimates.



Recently
Issued Accounting Pronouncements:



Stock
compensation



In
March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-09 amending several aspects of share-based payment accounting. This guidance requires all excess tax benefits and tax deficiencies
to be recorded in the income statement when the awards vest or are settled, with prospective application required. The guidance
also changes the classification of such tax benefits or tax deficiencies on the statement of cash flows from a financing activity
to an operating activity, with retrospective or prospective application allowed. Additionally, the guidance requires the classification
of employee taxes paid when an employer withholds shares for tax-withholding purposes as a financing activity on the statement
of cash flows, with retrospective application required. This ASU is effective for annual periods, and interim periods within those
annual periods, beginning after December 15, 2016. As such, The Company adopted these provisions as of the fiscal year beginning
January 1, 2017. There was no material effect of the new provisions on our consolidated financial statements and related disclosures.



In
May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU
2017-09). ASU 2017-09 provides clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the
guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment
award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment
award require an entity to apply modification accounting in Topic 718. The amendments in this update are effective for all entities
for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted.
As such, The Company is required to adopt these provisions as of the fiscal year beginning on January 1, 2018. The amendments
in this update should be applied prospectively to an award modified on or after the adoption date. We are currently assessing
the potential impact of ASU 2017-09 on our consolidated financial statements and results of operations.



Leases



In
February 2016, FASB issued ASU 2016-02— Leases (Topic 842). The update is intended to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. Early application of the amendments in this update is permitted. As such, The Company
is required to adopt these provisions as of the fiscal year beginning on January 1, 2019. The Company is currently evaluating
the impact of FASB ASU 2016-02 and expects the adoption thereof will have a material effect on The Company’s presentation
of balance sheet assets and liabilities based on the present value of future lease payments,but does not expect a material effect
on the presentation of expenses and cash flows.



Revenue:



Revenue
from Contracts with Customers: In May 2014, ASC 606 was issued related to revenue from contracts with customers. Under this guidance,
revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration
that is expected to be received for those goods or services. The updated standard will replace most existing revenue recognition
guidance under GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition
method. Early adoption is not permitted. The standard will be effective for the Company's fiscal year beginning July 1, 2018,
including interim reporting periods within that year. The new guidance is not expected to have an impact on the Company's consolidated
financial statements. The Company has analyzed the standard and has implement any relevant provisions for the interim periods
beginning July 1, 2018.





26









Inventory



In
July 2015, FASB issued ASU 2015-11— Inventory (Topic 330): “Simplifying the Measurement of Inventory”. The update
is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. As such,
the Company adopted these provisions beginning on January 1, 2017. The amendments in this Update should be applied prospectively
with earlier application permitted as of the beginning of an interim or annual reporting period. The update is part of FASB’s
Simplification Initiative, the objective of which is to identify, evaluate, and improve areas of generally accepted accounting
principles (GAAP) for which cost and complexity can be reduced. Pursuant to the update, an entity should measure inventory at
the lower of cost and net realizable value. The amendments in the update more closely align the measurement of inventory in GAAP
with the measurement of inventory in International Financial Reporting Standards (IFRS). Adoption of the new guidance did not
have an impact on the Company's consolidated financial statements.

| |  | 
| |  | 



Income
Taxes:



The
Company has adopted ASC 740-10, which requires the use of the liability method in the computation of income tax expense and
the current and deferred income taxes payable. A valuation allowance is provided for the amount of deferred tax assets that, based
on available evidence, are not expected to be realized.



Cash:



Cash
and cash equivalents include cash in banks and short-term investments with original maturities of three months or less. The Company
maintains deposits in a financial institution which provides Federal Deposit Insurance Corporation coverage for interest
bearing and non-interest bearing transaction accounts of up to $250,000.  At June 30, 2018 and 2017, none of the
Company’s cash was in excess of federally insured limits.



Revenue
Recognition:



CTR
recognizes revenue from the sale of products in accordance with ASC 605.  Revenue will be recognized only when all of
the following criteria have been met:



| | •        
    Persuasive evidence of an arrangement exists; and                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | •       
    Ownership and all risks of loss have been transferred to buyer, which is generally upon delivery; and
| | •        
    The price is fixed and determinable; and                                                            
| | •        
    Collectability is reasonably assured.                                                               



The
three main sources of revenue are recognized as follows:



| | • | Revenues associated
    with tire disposals are recognized upon receipt of the tire by CTR; and
| | - | -----------------------------------------------------------------------------------------------



| | • | Revenues associated
    with tire repairs are invoiced and recognized upon completion of repair and receipt of the tire by the customer; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | • | Revenue associated
    with used tires and scrap sales are recognized upon delivery of the product to the customer.
| | - | -------------------------------------------------------------------------------------------------------------------



| | • | Revenue associated
    with sales of Petrozene is recognize upon delivery to the customer.
| | - | ------------------------------------------------------------------------------------------







27











Accounts
Receivable:



Accounts
Receivable consists of OTR tire repair, disposal, recycling and used tire sales receivables due from customers and are unsecured.
The receivables are generally unsecured and such amounts are generally due within 30 to 45 days after the date of the invoice.  Accounts
receivable are carried at their face amount, less an allowance for doubtful accounts.   CTR’s policy is generally
not to charge interest on receivables after the invoice becomes past due.  A receivable is considered past due if payments
have not been received within agreed upon invoice terms. Write offs are recorded at a time when a customer receivable is deemed
uncollectible. CTR’s allowance for doubtful accounts was $4,000 and $4,000 as of June 30, 2018 and 2017, respectively. During
the year ended June 30, 2018 the Company’s joint venture wrote off a $45,158 receivable for certain cost associated with
the installation and operation of the venture’s leased pyrolysis machine from the lessor of the machine. The Company’s
feel the costs are a valid receivable however since the original lease has expired and the machine is not currently producing
revenue recovery can not be assured.



Shipping
and Handling Costs



The
Company includes shipping and handling cost as part of cost of goods sold.



Inventory:



Inventory
of the Company is carried at lower of cost or market. The Company’s inventory consists of processed rubber from disposed
tires carried at cost of processing, used tires for sale carried at the cost of repairs and tire oil produced from the Company’s
pyrolysis operations. As of June 30, 2018 and 2017 inventory consisted of:



|                               |  | 2018 |        | 2017
|------------------------------ |  | ---- | ------ | ----
|Crum
    Rubber for Processing |  | $    | ---    |     
|Used
    Tire for Resale       |  |      | 11,648 |     
|Petrozene
    and Tire Oil     |  |      | 18,743 |     
|                               |  | $    | 30,391 |     





Property,
Plant and Equipment:



Property,
Plant and Equipment are carried at the cost of acquisition or construction, and are depreciated over the estimated useful lives
of the assets. Assets acquired in a business combination are stated at estimated fair value. Costs associated with repair and
maintenance are expensed as they are incurred. Costs associated with improvements which extend the life, increase the capacity
or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related
asset. Gains and losses on dispositions of equipment are in operating income. Depreciation and amortization are provided using
the straight-line and accelerated methods over the estimated useful lives of the assets as follows:



| | Buildings and Improvements   |  | 10 - 39 Years
| | ---------------------------- |  | -------------
| | Machinery and Equipment      |  | 7 Years      
| | Automotive Equipment         |  | 5-7 Years    
| | Office Furniture & Equipment |  | 5 Years      



Impairment
of Long-Lived Assets:



The
Company evaluates, on a periodic basis, long-lived assets to be held and used for impairment in accordance with the reporting
requirements of ASC 360-10. The evaluation is based on certain impairment indicators, such as the nature of the assets, the future
economic benefit of the assets, any historical or future profitability measurements, as ell as other external market conditions
or factors that may be present. If these impairment indicators are present or other factors exist that indicate that the carrying
amount of the asset may not be recoverable, then an estimate of the undiscounted value of expected future operating cash flows
is used to determine whether the asset is recoverable and the amount of any impairment is measured as the difference between the
carrying amount of the asset and its estimated fair value. The fair value is estimated using valuation techniques such as market
prices for similar assets or discounted future operating cash flows.





28









Stock-Based
Compensation:



The
Company accounts for stock-based compensation using a fair value based method whereby compensation cost is measured at the grant
date based on the value of the services received and is recognized over the service period.   The Company uses
the Black-Scholes pricing model to calculate the fair value of options and warrants issued.   In calculating this fair
value, there are certain assumptions used such as the expected life of the option, risk-free interest rate, dividend yield, volatility
and forfeiture rate.  The use of a different estimate for any one of these components could have a material impact on the
amount of calculated compensation expense.



The
Company does not have any employee benefit or stock option plans.



Fair
Value Measurements:



ASC
Topic 820, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and
requires certain disclosures about fair value measurements.  In general, fair value of financial instruments are based
upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon
internally developed models that primarily use, as inputs, observable market based parameters.  Valuation adjustments
may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts
to reflect counterparty credit quality and the Company’s credit worthiness, among other things, as well as unobservable
parameters.

Cash,
accounts receivable, accounts payable and other accrued expenses and other current assets and liabilities are carried at amounts
which reasonably approximate their fair values because of the relatively short maturity of those instruments.



Emerging
Growth Company Critical Accounting Policy Disclosure:

The
Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that
an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards.   As an emerging grown company, the Company can delay the
adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company may
elect to take advantage of the benefits of this extended transition period in the future.



Net
Loss Per Share:



Basic
net loss per share is computed using the weighted-average number of common shares outstanding during the period except that it
does not include unvested common shares subject to repurchase or cancellation. Diluted net income per share is computed using
the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential
common shares consist of the incremental common shares issuable upon conversion of notes payable to related parties and stock
compensation to officers under employment contracts. The dilutive effect of potential common shares is not reflected in diluted
earnings per share because we incurred net losses for the years ended June 30, 2018 and 2017, and the effect of including these
potential common shares in the net loss per share calculations would be anti-dilutive. The total potential common shares include
8,011,823 for convertible debt. The convertible debt is specifically limited to authorized shares available per the note agreements.





29









Reclassifications



Certain
accounts in the prior year financial statements have been reclassified to conform with current year presentation.



NOTE
3 - FORMATION OF FREESTONE DYNAMIS ENERGY PRODUCTS, LLC.



On
June 24, 2015 the Company entered into an agreement with Dynamis in order to form the joint venture FDEP, a Delaware limited liability
company. Freestone determined to enter into a joint venture with Dynamis based on their track record and experience in the waste-to-energy
industry, and their ability to provide the necessary funding to fully integrate the production, marketing and sale of PetrozeneTM
to current and future customers. The terms of the joint venture between the Company and Dynamis are as follows:

| | • | Freestone owns a
    70% member interest in FDEP for licensing the rights to use PetrozeneTM to FDEP; and
| | - | --------------------------------------------------------------------------------------------------------



| | • | Dynamis owns a 30%
    member interest in FDEP in exchange for providing funding up to $5,000,000 to operate the joint venture, and purchase a continuous-feed
    pyrolysis machine capable of producing a product that can be used to produce PetrozeneTM; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | FDEP will be leasing
    employees from CTR, and said employees will operate the machine. FDEP will reimburse CTR for the leased employees; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | • | FDEP has the right,
    but not the obligation to purchase CTR from Freestone through cash compensation to Freestone, the issuance of additional units
    in FDEP to Freestone or a combination of both cash and units in FDEP as mutually agreed upon by FDEP and Freestone; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | FDEP will lease
    a building from CTR in order to operate the specialized pyrolysis technology for payment of either the ad valorem taxes associated
    with the rented property or $1,000 per month depending on which amount is the greater of the two; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Dynamis
    will receive 80% of the distributions from FDEP until they have reached a 25% initial rate of return on funds invested into
    the joint venture. Once the 25% initial rate of return threshold is met all distributions from FDEP will be split according
    to the 70 / 30 member interest of FDEP owned by the Company and Dynamis.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On
June 24, 2015 FDEP simultaneously entered into a lease agreement with a company that has developed a continuous-feed pyrolysis
technology that will be operated by FDEP at the Company’s facility in Ennis, Texas. FDEP and the company that developed
the pyrolysis technology will split the revenues generated from the machine. FDEP will receive 70% of the revenues generated from
the machine, and the company providing the continuous-feed pyrolysis technology will receive 30% of the revenues. This revenue
split will remain in place so long as the machine is operating at the Company’s facility in Ennis, Texas. The agreement
between the two companies allows FDEP the opportunity to ensure that the technology continues to operate properly under the strict
conditions that are necessary to produce PetrozeneTM. If the leased pyrolysis machine operates within certain, predefined
parameters then FDEP has the right to purchase additional machines.

During
the year ended June 30, 2018 and 2017, Dynamis paid $12,641 and $14,143, respectively for certain engineering and general administrative
costs on behalf of FDEP, which are shown on the Statement of Cash Flows as a non-cash financing activity. These payments
were treated as capital contributions to the entity by Dynamis. Dynamis also made cash contributions totaling $270,058 and $298,737
to the entity during the year ended June 30, 2018 and 2017, respectively.



30











NOTE
4 – CONCENTRATION OF CREDIT RISK



At
June 30, 2018 and 2017 two customers made up 67% and two customers made up 64% of the Company’s outstanding trade accounts
receivable balance, respectively. For the years ending June 30, 2018 and 2017 two customers and three customers accounted for
59% and 68% of the Company’s net revenue, respectively.





NOTE
5 – PROPERTY, PLANT AND EQUIPMENT

|                                                                            |  |   |           | 
|--------------------------------------------------------------------------- |  | - | --------- | 
|At June 30, 2018 and 2017 Property,
    Plant and Equipment was as follows: |  |  
|                                                                            |  |   |           | 
|                                                                            |  |   | 2018      | 
|Land                                                                        |  | $ | 360,000   | 
|Buildings and Improvements                                                  |  |   | 706,700   | 
|Automotive Equipment                                                        |  |   | 78,100    | 
|Machinery and Equipment                                                     |  |   | 507,807   | 
|Capital
    Lease Assets                                                    |  |   | 56,738    | 
|                                                                            |  |   | 1,709,345 | 
|Less
    Accumulated Depreciation                                           |  |   | 349,373   | 
|                                                                            |  | $ | 1,359,972 | 
|                                                                            |  |   |           | 



For
the year ended June 30, 2018 and 2017 depreciation expense was $124,755 and $125,851, respectively.



NOTE
6 – ENVIRONMENTAL LIABILITY



The
Company’s tire recycling permit requires the Company to ultimately dispose of all tires accepted for recycling.  Tire
disposal occurs in the normal course of business however the Company always has tires stored at its facility that have not yet
been disposed of. The environmental liability was calculated by estimating the costs associated with the various disposal costs
that would be necessary to remove the tires from the CTR permitted facility. CTR plans to convert the majority of the tires into
crum rubber and sell it to FDEP as a feedstock for its specialized pyrolysis operations. Although CTR still plans to convert the
majority of the tires in crum rubber for use by FDEP the liability was recorded as part of the plan submitted to the TCEQ to cure
potential violations regarding it processing permit. Since the plan requires CTR to significantly reduce the numbers of tires
on hand within the next year and to date FDEP has not been able to demonstrate the capacity to use the number of tires on hand.
The liability is considered short-term and the balance at June 30, 2018 and 2017 was $400,000.















31













NOTE
7 – CAPITAL LEASE OBLIGATIONS



Capital
lease assets of $56,738 and $56,738 and accumulated amortization of $31,557 and $20,209 are included in property, plant and equipment
on the balance sheet at June 30, 2018 and 2017, respectively. For the year ended June 30, 2018 and 2017 amortization expense was
$11,348 and $11,348, respectively.



|At June 30, 2018 and 2017 capital lease obligations
    were as follows:                                                                                                                                                                       |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ------- | -
|                                                                                                                                                                                                                                               |      |   | 2018    |  
|Lease
    payable bearing interest at 4.95% with monthly payments of $315 maturing August 2019.  The lease is secured by equipment.                                                                                                            |      | $ | 4,281   |  
|Lease
        payable bearing interest at 3.95% with monthly payments of $309 maturing December, 2020.  The lease is secured
        by equipment.                                                                                             |      |   | 8,725   |  
|                                                                                                                                                                                                                                               |      |   |         |  
|Lease
                                    payable bearing interest at 4.78% with monthly payments of $489 maturing
                                    September,
                                    2020. The lease is secured by equipment. |      |   | 12,602  |  
|                                                                                                                                                                                                                                               |      |   | 25,608  |  
|                                                                                                                                                                                                                                               |      |   |         |  
|Less current maturities                                                                                                                                                                                                                        |      |   | (12,484 | )
|                                                                                                                                                                                                                                               |      |   |         |  
|Capital
    Lease Obligations, Less Current Maturities                                                                                                                                                                                         |      | $ | 13,124  |  
|                                                                                                                                                                                                                                               |      |   |         |  
|At June 30, 2018
    future maturities of capital lease obligations were as follows:                                                                                                                                                           |      |   |         |  
|                                                                                                                                                                                                                                               |      |   |         |  
|Year Ending June
    30:                                                                                                                                                                                                                       |      |   |         |  
|                                                                                                                                                                                                                                               | 2019 | $ | 12,484  |  
|                                                                                                                                                                                                                                               | 2020 | $ | 9,839   |  
|                                                                                                                                                                                                                                               | 2021 | $ | 3,285   |  
|                                                                                                                                                                                                                                               |      | $ | 25,608  |  















32













NOTE
8 – NOTES PAYABLE





|At June 30, 2018 and 2017 notes payable were
    as follows:                                                                                                                                                                                                                                                                                                      |  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- | -
|                                                                                                                                                                                                                                                                                                                                                                  |  |   | 2018      |  
|Note
    payable to bank bearing interest at 4.5% with monthly payment of $390 maturing September, 2017.  The note is secured
    by an automobile                                                                                                                                                                                                                |  | $ | --        |  
|                                                                                                                                                                                                                                                                                                                                                                  |  |   |           |  
|Note
    payable to bank bearing interest at 6.5% with monthly payment of $4,892 maturing November, 2017.  The note is secured
    by machinery and equipment                                                                                                                                                                                                     |  |   | --        |  
|Note
        payable to bank bearing interest at 6.5% with monthly payment of $809 maturing April, 2020.  The note is secured
        by a truck.                                                                                                                                                                                                                 |  |   | --        |  
|Note
        payable to bank bearing interest at 7.0% with monthly payment of $3,718 maturing June, 2020.  The note is secured
        by accounts receivable.                                                                                                                                                                                                    |  |   | 79,826    |  
|Line
        of Credit with Bank maximum $75,000 bearing interest at 6.5% due March, 2018. Line is secured by accounts receivable.                                                                                                                                                                                                                                |  |   | --        |  
|Note
        payable to seller in connection with purchase of CTR bearing interest at 12% maturing October, 2020. Note amended to add
        $360,065 of accrued interest and penalties to principal in February, 2017. Interest only payable until November, 2018.
        Monthly payment of $45,904 thereafter. Secured by the common stock and assets of CTR |  |   | 975,163   |  
|                                                                                                                                                                                                                                                                                                                                                                  |  |   | 1,054,989 |  
|                                                                                                                                                                                                                                                                                                                                                                  |  |   |           |  
|Less current maturities                                                                                                                                                                                                                                                                                                                                           |  |   | (339,858  | )
|                                                                                                                                                                                                                                                                                                                                                                  |  |   |           |  
|Long Term
    Debt, Less Current Maturities                                                                                                                                                                                                                                                                                                                       |  | $ | 715,131   |  
|                                                                                                                                                                                                                                                                                                                                                                  |  |   |           |  
|At June 30, 2018
    future maturities of long term debt were as follows:                                                                                                                                                                                                                                                                                         |  |   |           |  
|                                                                                                                                                                                                                                                                                                                                                                  |  |   |           |  
|Year Ending June
    30:                                                                                                                                                                                                                                                                                                                                          |  |   |           |  
|2019                                                                                                                                                                                                                                                                                                                                                              |  | $ | 339,858   |  
|2020                                                                                                                                                                                                                                                                                                                                                              |  | $ | 536,014   |  
|2021                                                                                                                                                                                                                                                                                                                                                              |  | $ | 179,117   |  
|                                                                                                                                                                                                                                                                                                                                                                  |  | $ | 1,054,989 |  











33













NOTE
9 –  NOTES PAYABLE – RELATED PARTIES





|At June 30, 2018 and  2017 notes payable
    to officers and shareholders were as follows:                                                                                                                                                  |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ---------- | -
|                                                                                                                                                                                                                                            |      |   | 2018       |  
|Note
        payable to officer bearing interest at 6.5% due December, 2018. The note was amended on June 30, 2018 to change the
        conversion         terms from $0.055 a         share to $0.05 a share. The note is unsecured.      |      |   | 50,000     |  
|Note
        payable to stockholder bearing interest at 6.5% due December, 2018. The note is convertible into common stock at $.05
        a share. The note is unsecured.                                                                  |      |   | 20,000     |  
|Note
        payable to stockholder bearing interest at 6.5% due December, 2018. The note  was amended on June 30, 2018 to change
        the conversion terms from $0.055 a share to $0.05 a share. The         note is         unsecured. |      |   | 1,509,919  |  
|                                                                                                                                                                                                                                            |      |   | 1,579,919  |  
|                                                                                                                                                                                                                                            |      |   |            |  
|Less
    current maturities                                                                                                                                                                                                                 |      |   | (1,579,919 | )
|                                                                                                                                                                                                                                            |      |   |            |  
|                                                                                                                                                                                                                                            |      | $ | –          |  
|                                                                                                                                                                                                                                            |      |   |            |  
|At
    June 30, 2018 future maturities of Notes Payable – Related Parties  were as follows:                                                                                                                                                 |      |   |            |  
|                                                                                                                                                                                                                                            |      |   |            |  
|Year Ending June 30:                                                                                                                                                                                                                        |      |   |            |  
|                                                                                                                                                                                                                                            | 2019 | $ | 1,579,919  |  
|                                                                                                                                                                                                                                            |      | $ | 1,579,919  |  
|                                                                                                                                                                                                                                            |      |   |            |  

















34











NOTE
10 – EQUITY



The
Company is authorized to issue 100,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights.  At
June 30, 2018 and 2017 there were 91,988,177 and 90,613,177 common shares outstanding, respectively.



In
July, 2016 the Company sold 500,000 shares of common stock for $25,000 cash.



In
the years ended June 30, 2018 and 2017 the Company issued 375,000 and 500,000 shares valued at $18,750 and $30,000, which was
the fair market value of the stock, to the CFO as compensation for services under his employment contract.



In
each case, the certificates representing the shares carry a legend that the shares may not be transferred without compliance with
the registration requirements of the Securities Act of 1933 or in reliance upon an exemption therefrom.   For each
of these transactions, the Company relied upon Section 4(2) of the Securities Act of 1933 as an exemption from the registration
requirements of the Act.



The
Company has not paid any dividends to its shareholders





NOTE
11 – MERGER AGREEMENT



On
November 2, 2017 the Company formed Freestone Dynamis Acquisition, LLC an Idaho limited liability Company.



On
November 2, 2017, Freestone entered into an Agreement and Plan of Merger (the “Plan”) with Freestone Dynamis Acquisition,
LLC, an Idaho limited liability company and wholly owned subsidiary of the Company (“Merger Sub”), and Dynamis Energy,
LLC, an Idaho limited liability company (“Dynamis”). Pursuant to the terms of the Plan, at the Effective Time (as
defined in the Plan) thereof: (i) Merger Sub will be merged with and into Dynamis, with the separate existence of Merger Sub to
cease and with Dynamis to continue as the surviving entity and as a wholly owned subsidiary of the Company; and (ii) all Units
of Dynamis will be exchanged for shares of the Company’s common stock to be paid in accordance with Article II of the Plan
(the “Merger”). At the closing of the Merger, it is expected that the members and warrant holders of Dynamis will
collectively own or have the right to purchase (through exercising a warrant to purchase Dynamis Units, which the Company will
have the right to exchange shares of its common stock in exchange for such Dynamis Units) shares of the Company’s common
stock, representing approximately seventy five percent (75%) of the Company’s issued and outstanding shares. The Merger
contemplated by the Plan, together with the Rights Offering (as defined below), is intended to qualify as a nontaxable exchange
pursuant to Section 351 of the Internal Revenue Code of 1986, as amended.



The
closing of the Merger is subject to numerous conditions including, but not limited to, the following:



- At
or one week prior to the Effective Time, the Company shall have commenced a rights offering to its stockholders on the terms set
forth in the Plan (the “Rights Offering”), which Rights Offering shall remain open for a period of 90 days;



- The
approval by the Company’s stockholders and the filing with the Nevada Secretary of State of an amendment to the Company’s
Articles of Incorporation to increase the number of the Company’s authorized shares of common stock in an amount sufficient
to consummate the Merger, the Rights Offering, the Company’s new equity incentive plan and the other transactions contemplated
by the Plan;



35













- The
effectiveness of the Company’s to-be-filed: (i) Registration Statement on Form S-3 relating to the registration under the
Securities Act, of the shares of Company common stock to be issued in its Rights Offering; and (ii) Registration Statement on
Form S-4 relating to the authorization and the registration under the Securities Act of the shares of Company common stock to
be issued in the Merger;



- Dynamis
members, together with Company stockholders participating in the Rights Offering, shall collectively hold at least 80 percent
of the total issued and outstanding shares of the Company’s stock (other than stock subject to vesting restrictions); and



- The
Company’s stockholders shall have approved the Company’s new equity incentive plan that is contemplated by the Plan.



In
addition, either party may terminate the Plan at any time prior to closing on certain terms and conditions



As
of June 30, 2018, the two Companies continue to work toward completing the merger. Dynamis Energy has encountered delays in completing
the required audited financial statements to comply with SEC requirements. Freestone remains committed to completing the merger
once these issues are resolved. However, the Company is reviewing all options and seeking additional capital investment.









36









NOTE
12 - INCOME TAXES



The
Company files a consolidated Federal Income Tax Return. As of June 30, 2018, the Company has a NOL carryforward of approximately
$6,072,000. Under IRC Code Sec 382 use of NOL carryforwards may be limited due to CTR acquisition by Freestone.



The
Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net
income, regardless of when reported for tax purposes.  Deferred taxes are provided in the financial statements under ASC
Topic 740, Income Taxes, to give effect to the resulting temporary differences which may arise from differences in the
bases of fixed assets, depreciation methods, allowances, non-deductible stock for services and environmental reserves based on
the income taxes expected to be payable in future years. Deferred tax benefits related to the NOL carryforwards of approximately
$1,275,000 are fully reserved by a valuation allowance due to the uncertainly of their realization.



On
December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Act”) was signed into law. Among other provisions, the Act reduced
the highest corporate tax rate from 35% to 21%. With the passage of the Act, the Company’s deferred tax assets and liabilities
were restated as of the effective date of the law to reflect the new applicable rate. The reduction to the net deferred tax asset
was charged to tax expense in the period of the change and offset by a valuation allowance stemming from historical net operating
loss carryforwards.



FDEP
has a calendar tax year and files a separate Form 1065 partnership return with income and loss being allocated based on distributions
and contributions under the partnership agreement. Freestone’s share of the year ended December 31, 2017 loss is included in the
consolidated June 30, 2018 return.



The
Company has no tax positions at June 30, 2018 and 2017 for which the ultimate deductibility is highly certain but for which there
is uncertainty about the timing of such deductibility.

Freestone’s
tax returns for the years ended June 30, 2017, 2016, and 2015 and CTR’s tax returns for the periods ended June
30, 2015 are open for examination under Federal Statute of Limitations.

The
Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
 The Company had no accruals for interest and penalties since inception.

A
reconciliation of the provision for income tax expense with the expected income tax computed by applying the federal statutory
income tax to income before provision for income taxes is as follows:

|                                                                               |  |   |                                  |   |  |   |                              |  
|------------------------------------------------------------------------------ |  | - | -------------------------------- | - |  | - | ---------------------------- | -
|                                                                               |  |   | Year
        Ended June 30, 2018 |   |  |   | Year
    Ended June 30, 2017 |  
|                                                                               |  |   |                                  |   |  |   |                              |  
|Income Tax (benefit) computed
    at Federal statutory tax rate of 21% and 34% |  | $ | (239,000                         | ) |  | $ | (498,000                     | )
|                                                                               |  |   |                                  |   |  |   |                              |  
|Loss allocated to non-controlling interest                                     |  |   | 63,000                           |   |  |   | 108,000                      |  
|                                                                               |  |   |                                  |   |  |   |                              |  
|Non-Deductible Stock Compensation Expense                                      |  |   | 4,000                            |   |  |   | 10,000                       |  
|                                                                               |  |   |                                  |   |  |   |                              |  
|Change in valuation allowance                                                  |  |   | (556,175                         | ) |  |   | 380,000                      |  
|                                                                               |  |   |                                  |   |  |   |                              |  
|Impact of rate changes
    on valuation allowance                              |  |   | 728,175                          |   |  |   | —                            |  
|                                                                               |  |   |                                  |   |  |   |                              |  
|Provision For
    Income Taxes                                                 |  | $ | —                                |   |  | $ | —                            |  





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NOTE
13 – EMPLOYEE BENEFITS AND AGREEMENTS



Retirement
Plan Contribution:



During
the year ended June 30, 2018 and 2017 the Company contributed $8,597 and $6,815 in matching contributions to the Company’s
IRA plan.



NOTE
14 – COMMITMENTS AND CONTINGENCIES



Freestone
has royalty and commission agreements with certain consultants related to the sale of PetrozeneTM for their work in the re-launch
of the PetrozeneTM product line.  These royalty and commission agreements range from 2.5% to 7.5% of the net income
the Company receives from PetrozeneTM sales, and the agreements also have special royalty provisions for certain customers
that expire on April 14, 2030. One of the contracts is with the brother of the former CEO of the Company. In case of change of
control of the Company the agreement is voided.



NOTE
15 – GOING CONCERN



As
of the date of this annual report, there is substantial doubt regarding the Company’s ability to continue as a going concern
as we have not generated sufficient cash flows to fund our business operations and loan commitments.  Our future success
and viability, therefore, are dependent upon our ability to generate capital financing.  The failure to generate sufficient
revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders.



The
Company formed FDEP in order to vertically integrate its PetrozeneTM product line, and utilize a specialized pyrolysis process
in order to produce other byproducts of value that will generate revenue for FDEP. In turn, the ability of FDEP to process large
quantities of OTR tires will allow the Company to increase the amount of OTR tires it can dispose of and process, which will generate
additional revenue of the Company. Additionally, the Company intends to raise equity or debt financing that will allow the Company
to expand its current operations.



NOTE
16 – SUBSEQUENT EVENTS



On
August 15, 2018 the Company issued at total of 2,500,000 shares of stock to a note holder for conversion of $150,000 of debt a
$0.05 a share in accordance with the note agreement.



On
August 21, 2018 the Company issued 3,750,000 shares of common stock valued at $.04 a share to its Officers as compensation.



On
October 9, 2018 the Company filed a Pre 14C Form with the SEC notifying stockholders regarding a resolution to file with the Nevada
Secretary of State a Certificate of Change: (i) increasing our authorized shares of common stock from one hundred million (100,000,000)
shares having a par value of one mill ($0.001) per share to six hundred million (600,000,000) shares and retaining the par value
of $0.001 per share (the “Common Stock Resolution”); and (ii) increasing our authorized shares of preferred stock
from five million (5,000,000) shares having a par value of one mill ($0.001) per share to ten million (10,000,000) shares and
retaining the par value of $0.001 per share (the “Preferred Stock Resolution”).  Under Nevada law the increase
can be implemented by a joint resolution passed by the board of directors approved by a simple majority of the outstanding shares
The joint resolution included in the Form 14C filing included the approval of ten shareholders representing 51.36% of the outstanding
common shares.





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