SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549






FORM
10-K







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






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







FREESTONE
RESOURCES, INC.


(Exact
name of registrant as specified in its charter)




Nevada
            
            000-28753
            
            33-0880427(State
      or other jurisdiction of incorporation)
            
            (Commission
      File Number)
            
            (IRS
      Employer Identification No.)444
      W Highway 84, Fairfield, Texas
            
            
            
            75840(Address
      of Principal Executive Offices)
            
            
            
            (Zip
      Code)




Registrant’s
telephone number, including area code:  903-389-6300


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


Securities
registered pursuant to Section 12(g) of the Act:  NONE





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
|X|




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
Act . Yes
|   | No |X|















Large Accelerated
      Filer [  ]
            
            Accelerated Filer
      [  ]Non-Accelerated
      Filer [  ]
            
            Smaller Reporting
      Company [X]








Aggregate
market value of the voting stock held by non-affiliates of the registrant as of
June 30, 2008:  $2,216,026





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 November 30,
2008,  the Registrant had 50,025,260 shares of common stock
outstanding.












PART I.





ITEM
1.                     
DESCRIPTION OF BUSINESS





Freestone
Resources, Inc. is distribution company that has purchased oil and gas
properties for experimental studies concerning our unique solvent
Petrozene.  The Freestone team is focused on the utilization and sale
of Petrozene.  Petrozene is a solvent that has been proven to inhibit corrosion, remove scale,
dissolve iron sulfides and decrease the viscosity of oil.





ITEM
2.                      DESCRIPTION
OF PROPERTY





Freestone's
corporate offices were located at 444 W. Hwy. 84 Fairfield, Texas
75840.  Freestone also has a warehouse used for the storage and
bottling of Petrozene.





ITEM  3.                      LEGAL
PROCEEDINGS





Freestone
is not involved in any legal proceedings.








ITEM
4.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS





Freestone
did not submit any matters to a vote to the security holders during the fiscal
year ended June 30, 2008.





2


PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS
      MATTERS





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





The
following table sets forth the quarterly high and low bid prices for the Common
Stock for 2008.  The prices set forth below represent interdealer
quotations, without retail markup, markdown or commission and may not be
reflective of actual transactions.





Fiscal
      2008
            
            High
            
            
            LowFirst
      Quarter
            
            $
            0.26
            
            
            $
            0.12Second
      Quarter
            
            $
            0.19
            
            
            $
            0.08Third
      Quarter
            
            $
            0.26
            
            
            $
            0.12Fourth
      Quarter
            
            $
            0.12
            
            
            $
            0.10





Shareholders





As of
June 30, 2008, there were approximately 190 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





Freestone
has no warrants outstanding.








ITEM
      6.
            MANAGEMENT
      DISCUSSIONS AND ANALYSIS OR PLAN OF
OPERATION





At
present, the Freestone team is focused on the utilization of our unique solvent
Petrozene.  Freestone’s investment in the aforementioned oil and gas
production was necessary to conduct in-house R&D for
Petrozene.   Minimal expenses have been incurred for the
operation of these oil and gas interests, as well as miscellaneous fees
associated with the corporation.





Petrozene





Freestone
Resources Inc. has been engaged in extensive laboratory and oil field testing of
Petrozene.  Most tests of Petrozene has involved treatment for
paraffin and asphaltine elimination within oil tank bottoms, oil flow lines, oil
production tubing, well bore and oil formation strata.  During the
testing and use of Petrozene we have found additional characteristics of
Petrozene that have marketable possibilities.  Petrozene inhibits
corrosion, removes scale, dissolves iron sulfide and decreases the viscosity of
oil.






3






Viscosity
is obviously a very important factor in oil production.  The simple
explanation is that it is more difficult to flow thick, high viscosity
oil.  Historically, heavy oil reserves, which abound in North America,
have been bypassed for lighter oils due to the viscosity problems associated
with production and refining.  Even if heavy crude oil was capable of
being produced from the well, the oil was often unable to travel by pipeline to
refineries due to the thickness, or could only be transported or produced during
the summer months when the viscosity was lowered by radiant heat. Methods used
in the past to decrease the viscosity of the oil in the pipelines have included
pipeline heaters or adding low viscosity condensate at high concentrations (up
to 25%) in order to thin the oil.  Some chemical treatments have also
been tried, but to our knowledge, none have been economically
proven.




Freestone
Resources’ current well assets and leases were purchased for the purpose of
testing Petrozene. These leases contain wells that have paraffin and asphaltine
problems, and our tests are allowing the company to perfect a treatment method
that can be marketed to potential customers.





Stock was
issued to consultants for consulting on the re-completion of the Carroll Unit
#1, as well as for consulting services relating to our solvent,
Petrozene.








Results
of Operations





Year
Ended June 30, 2008 Compared to Year Ended June 30, 2007





In the
year ended June 30, 2007 we had no operations. We had a loss of $508,392which
included general and administrative expenses of $662,086, interest of $11,694
(on prior debts forgiven in November 2006) and offset by the gain on debt
forgiveness of $165,388.





In
the year ended June 30, 2008





Revenue - Revenue for the year
was $  619,112. This was provided by sales of oil of
$45,386,  sales of gas of $143,757 and sales of Petrozene of $
405,122.





Expenses – Total expenses were
$601,448. These included Cost of sales which, for the year ended June 30, 2008
was made up of lease operating costs and royalties of $ 81004and cost of
Petrozene sold of $111,402.  This includes expenses for the year ended
June 30, 2008 of $368,638. This was made up of consulting and contract services
paid for by the issuance of common stock of $141,250, research and development
of $40,398, depreciation of $21,675, , with the balance general and
administrative expenses of $205,719.





Other
income and expense – the net expense of $1,039 was made up of other income of
$2,985 and interest expense of $4,024.





Net Loss -  Net
income for year was $7,715  12,438 due the sales of our oil and gas
and our Petrozene product. We had no sale or revenue producing assets in the
prior year.








4





LIQUIDITY
AND CAPITAL RESOURCES





We have
little cash reserves and liquidity to the extent we receive it from
operations.





During
the year ended June 30, 2008, our cash and cash equivalent increased by $13,548
from $0 at June 30, 2007.





Net cash
provided by operating activities was $ 157,734 for the year ended June 30, 2008
compared to $0 provided by operating activities for the same period ending June
30, 2007.





Employees





As of
June 30, 2008, our only employees are the officers of the company.





NEED
FOR ADDITIONAL FINANCING





The
Company believes it will generate sufficient liquidity from its operations so
the need for additional funding will be unnecessary, although we may sell stock
to raise capital to accelerate our growth..





Further,
there exist no agreements or understandings with regard to loan agreements by or
with the Officers, Directors, principals, affiliates or shareholders of the
Company.





ITEM
7.                         
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The financial statements of Freestone, together with the Report of
Independent Registered Public Accounting Firm thereon of Malone & Bailey, PC
appear on pages F-1 through F-7 of this report.





ITEM
      7.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANICAL
      DISCLOSURES





NONE





ITEM
8A.                      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, 2008.  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.






5






Based
upon an evaluation conducted for the period ended June 30, 2008, our Chief
Executive and Chief Financial Officer as of June 30, 2008 and as of the date of
this Report, has concluded that as of the end of the periods covered by this
report, we have identified the following material weakness of our internal
controls:




·
            Reliance
      upon independent financial reporting consultants for review of critical
      accounting areas and disclosures and material non-standard
      transaction.




·
            Lack
      of sufficient accounting staff which results in a lack of segregation of
      duties necessary for a good system of internal
  control.




In order
to remedy our existing internal control deficiencies, as our finances allow, we
will hire additional accounting staff.




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 at June 30, 2008.   Based on its
evaluation, our management concluded that, as of June 30, 2008, our internal
control over financial reporting was not effective because of: 1) Our reliance
upon independent financial reporting consultants for review of critical
accounting areas and disclosures and material non-standard transaction; and 2) 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 temporary rules of the
SEC that permit the Company to provide only management’s report in this annual
report.






Changes in Internal Controls
over Financial Reporting




We have
not yet made any changes in our internal controls over financial reporting that
occurred during the period covered by this report on Form 10-K that has
materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.







6





PART
III.





ITEM
9.                      DIRECTORS
AND EXECUTIVE OFFICERS OF REGISTRANT





The
following persons serve as directors and officers of Freestone.





Lloyd
      Lane, President and Chief Executive
Officer


James
      F. Carroll, Chief Financial Officer


Tom
      Bonner, Secretary


Kent
      Kendall, Treasurer


Jamie
      Long, Director





LLOYD
LANE, 37, has served as President and Chief Executive Officer of Freestone since
December of 2006.  Beginning in1998 with the acquisition of 3L used
oil disposal, Mr. Lane developed and expanded the company base, streamlining
logistics, client expansion, and refinement of the company’s existing product
marketing strategy. During this time, Mr. Lane realized market demand within the
oil & gas service industry, resulting in his founding of 3L service Inc. In
2000, providing key services to the many oil & gas companies located within
Freestone County, one of the most actively drilled areas in North America. As a
lifelong resident of Freestone County, Mr. Lane’s service and support to the
major oil & gas companies active within the region proved highly successful
and invaluable to numerous companies in the area. As a result of the alliances
formed, Mr. Lane was a Co-founder of VTI Pipeline Inc., which provided
mid-stream construction services. In 2004, realizing the need for commercial
salt water injection wells within the region, Mr. Lane identified a key area in
Freestone County to permit and drill for salt water disposal. This location
proved to be logistically favorable and expedited the disposal of waste fluids
created by oil & gas production. By January 2006, realizing the
opportunities within oil & gas lease acquisition, exploration, development,
and production Mr. Lane had sold the aforementioned companies in order to focus
his efforts in upstream oil & gas activities. With the formation of
Freestone resources, and its diverse group of directions, Mr. Lane seeks to
utilize the vast knowledge and networking capabilities within the
company.





JAMES F.
CARROLL, 46, has served as the Chief Financial Officer and Treasurer of
Freestone since May 1, 1999. He has served as a director of Freestone since
November 12, 1999. From December 1973 to April 1999, Mr. Carroll was employed by
F. Schumacher & Co., a New York Fabric Company, as a manager of Production,
Purchasing and Inventory. Mr. Carroll received a B.B.A. degree in accounting
from Pace University of New York in 1985.





TOM
BONNER, 38, Dr. Bonner has served as the Secretary since December of 2006. Dr.
Bonner received his Doctorate in Veterinary Medicine from Texas A & M
University in 2000. After starting a successful practice, Dr. Bonner began
expanding his interests outside his occupation by selling and promoting
producing acreage and un-leased minerals in Freestone County. Dr. Bonner serves
the company as a public relations director and is instrumental in researching
and reporting on new technologies.





KENT
KENDALL, 43, has served as the Treasurer since December of 2006.  He
is currently a banker in Mexia Texas and has extensive experience in accounting
and banking.






7







JAMIE
LONG, 42, has served as a Director since December of 2006.  He has
worked within the oil and gas business for many years.  He currently
works for Long Industries, a company that develops infrastructure for various
oil and gas related projects.








ITEM
10.                      EXECUTIVE
COMPENSATION





No
executive compensation was paid in the year ended June 30, 2008.








ITEM
11.                      SECUIRTY
OWNERSHIP OF MANANGEMENT AND BENEFICIAL OWNERS





As of
June 30, 2008, the following persons are known to Freestone to own 5% or more of
Freestone's Voting Stock:










Name and
      Address
            
            Amount
      Beneficially Owned*
            
            Percent of
      ClassIRON
      ORE TRUST
              LLOYD
      LANE, TRUSTEE
              111
      CR 451
              BUFFALO,
      TX 75831
            
            6,000,000
            
            11.99%CGY
      TRUST
              TOM
      BONNER, TRUSTEE
              444
      W COMMERCE
              FAIRFIELD,
      TX 75840
            
            6,000,000
            
            11.99%CLAYTON
      CARTER
              PO
      BOX 625
              STREETMAN,
      TX 77859
            
            5,000,000
            
            10.00%MIKE
      DORAN
              444
      W COMMERCE
              FAIRFIELD,
      TX 75840
            
            5,000,000
            
            9.99%JIMMY
      CARTER
              PO
      BOX 625
              STREETMAN,
      TX 77859
            
            3,365,000
            
            6.73%CAPITAL
      FINANCIAL
              CONSULTANTS
      CORPORATION
              BOX
      325
              STREETMAN,
      TX 75859
            
            2,500,000
            
            5.00%ALL
      OFFICER, DIRECTORS AND
              5%
      SHAREHOLDERS AS A GROUP
            
            27,865,000
            
            55.70%




Unless
otherwise indicated such person is the sole beneficial owner of the shares set
forth opposite his name.








ITEM
      12.
            CERTAIN
      RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS





On
November 1, 2007, the Company assumed certain debt in conjunction with the
issuance of the 30,000,000 shares of common stock including a note for $50,000
to a relative of the President and $8,000 due to officers. These debts were
for funds paid for the recompletion/workover of the wells which was expended
prior to the November 1, 2007 transaction. These debts were paid in the quarter
ended March 31, 2008.






8





ITEM
      13.
            EXHIBITS,
      FINANICAL STATEMENTS AND REPORTS ON FORM
8-K





(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
Accountant





Consolidated Balance Sheets as of June
30, 2008 and June 30, 2007





Consolidated
Statements of Expenses – For the Years Ended June 30, 2008 and 2007





Consolidated
Statements of Cash Flows - For the Years Ended June 30, 2008 and
2007





Consolidated
Statements of Stockholders’ Deficit – For the Years Ended June 30, 2008 and
2007





Notes to
Consolidated Financial Statements








(b)
Freestone filed the following Form 8-K’s in the year ended June 30,
2008.





On June
4, 2008, we filed a Form 8-K to report the Change in Control of the
Company.








(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





ITEM
14.                              
PRINCIPAL ACCOUNTANT FEES AND SERVICES









(1) AUDIT
FEES









The
aggregate fees billed for professional services rendered by our auditors, for
the audit of the registrant's annual financial statements and review of the
financial statements included in the registrant's Form 10-QSB or services that
are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for the year ended June 30, 2008 was $40,000
and $10,000 for the years ended June 30, 2008 and 2007,
respectively.







9




(2)
AUDIT-RELATED FEES









NONE









(3) TAX
FEES









NONE









(4) ALL
OTHER FEES









NONE









(5) AUDIT
COMMITTEE POLICIES AND PROCEDURES









Freestone
does not have an audit committee.









(6)




Not
applicable.

















10





SIGNATURES


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.








FREESTONE
RESOURCES, INC.





By:  /s/   Lloyd
Lane


Lloyd
Lane


Chief Executive Officer





Dated: December
16, 2008





11








REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











To the
Board of Directors


Freestone
Resources, Inc.


Fairfield,
Texas





We have
audited the accompanying consolidated balance sheets of Freestone Resources,
Inc. as of June 30, 2008 and 2007 and the related consolidated statements of
operations, stockholders’ deficit, and cash flows for the years ended June 30,
2008 and 2007.  These consolidated financial statements are the
responsibility of Freestone's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Freestone as of June 30,
2008 and 2007 and the results of operations and cash flows for the years ended
June 30, 2008 and 2007, in conformity with accounting principles generally
accepted in the United States of America.











/s/  Malone & Bailey,
PC Malone
& Bailey, PC


www.malone-bailey.com


Houston,
Texas





December 12,2008


12





FREESTONE
RESOURCES, INC.


CONSOLIDATED
BALANCE SHEETS











AS
      OF JUNE 30
            
            2008
            
            
            2007ASSETSCurrent
      assetsCash
            
            $
            13,548
            
            
            $
            -Accounts
      receivable
            
            
            42,260
            
            
            
            -Note
      receivable
            
            
            16,468
            
            
            
            16,468Total
      current assets
            
            
            72,276
            
            
            
            16,468Unproved
      oil and gas properties, full cost accounting, net of accumulated
      depletion, depreciation and amortization
            
            
            92,930
            
            
            
            -Equipment
      and other fixed assets, net of accumulated depreciation of $19,754 and $0
      respectively
            
            
            251,272
            
            
            
            -Other
      assets – Petrozene contract, net
            
            
            1,000
            
            
            
            -TOTAL
      ASSETS
            
            $
            417,478
            
            
            $
            16,468LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
      liabilitiesAccounts
      payable
            
            $
            23,625
            
            
            $
            19,013Accrued
      expenses – related party
            
            
            5,872
            
            
            
            5,872Note
      payable
            
            
            1,721
            
            
            
            -Current
      portion of long term debt
            
            
            12,267
            
            
            
            -Total current
      liabilities
            
            
            43,485
            
            
            
            24,885Long-term
      liabilitiesLong-term
      debt
            
            
            43,251
            
            
            
            -Other
      Long Term LiabilitiesAsset
      retirement obligations
            
            
            34,888
            
            
            
            -Total non-current
      liabilities
            
            
            78,139
            
            
            
            -TOTAL
      LIABILITIES
            
            
            121,624
            
            
            
            24,885STOCKHOLDERS’
      EQUITY(DEFICIT):Preferred
      stock, $.001 par value, 5,000,000 shares
              authorized,
      -0- shares issued and outstanding
            
            
            -
            
            
            
            -Common
      stock, $.001 par value, 100,000,000 shares
              authorized,
      50,025,260 and 19,260,260 shares issued and outstanding
            
            
            50,025
            
            
            
            19,260Additional
      paid in capital
            
            
            13,964,084
            
            
            
            13,707,203Accumulated
      deficit
            
            
            (13,718,255
            )
            
            
            (13,134,964
            )Accumulated
      deficit during development stage
            
            
            -
            
            
            
            (599,916
            )Total
      stockholders’ equity (deficit)
            
            
            295,854
            
            
            
            (8,417
            )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
            
            $
            417,478
            
            
            $
            16,468





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









13








FREESTONE
RESOURCES, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS











YEAR
      ENDED JUNE 30
            
            2008
            
            
            2007RevenuePetrozene
            
            $
            416,410
            
            
            $
            -Oil
      & Gas
            
            
            202,702
            
            
            
            -Total
      Revenue
            
            
            619,112
            
            
            
            -Operating
      Expense:Cost
      of Sales - Petrozene
            
            $
            111,402
            
            
            $
            -Lease
      Operating Costs
            
            
            81,004
            
            
            
            -Depreciation
      and Depletion
            
            
            19,754
            
            
            
            -Accretion
            
            
            1,921
            
            
            
            -Research
      and Development
            
            
            40,398
            
            
            
            -General
      and Administrative
            
            
            346,969
            
            
            
            662,086Total
      Operating Expenses
            
            
            601,448
            
            
            
            662,086Net
      Operating Income/(loss)
            
            
            17,664
            
            
            
            (662,086
            )Other
      income (expense)Gain
      on debt forgiveness
            
            
            -
            
            
            
            165,388Other
      Income
            
            
            2,985
            
            
            
            -Interest
      expense
            
            
            (4,024
            )
            
            
            (11,694
            )Total
      other income (expense)
            
            
            (1,039
            )
            
            
            153,694Net
      Income/ (Loss)
            
            $
            16,625
            
            
            $
            (508,392
            )Basic
      and diluted income (loss) per share:Net
      income (loss) per share
            
            $
            -
            
            
            $
            (0.03
            )Weighted
      average shares outstanding:Basic
      and diluted
            
            
            39,790,082
            
            
            
            17,640,989





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


14


FREESTONE
RESOURCES, INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS


Years
Ended June 30, 2008 and 2007














YEAR
      ENDED JUNE 30
            
            2008
            
            
            2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
            
            $
            16,625
            
            
            $
            (508,392
            )Adjustments
      to reconcile net loss from continuing operations to net cash used in
      operating activities:Depreciation
      and amortization
            
            
            19,754
            
            
            
            -Adjustment
      for interest reasonableness
            
            
            (3.181
            )
            
            
            -Accretion
      Expense
            
            
            1,921Shares
      issued for services
            
            
            141,250
            
            
            
            642,820Gain
      on debt forgiveness
            
            
            -
            
            
            
            (165,388
            )Change
      in note receivable
            
            
            -
            
            
            
            253Change
      in accounts payable
            
            
            23,625
            
            
            
            30,707Change
      in account receivable
            
            
            (42,260
            )
            
            
            -Net
      cash provided by operating activities
            
            
            157,734
            
            
            
            -CASH
      FLOWS USED IN FINANCING ACTIVITIESPayments
      on loans
            
            
            (144,186
            )
            
            
            -Net
      cash used for financing activities
            
            
            (144,186
            )
            
            
            -NET
      CHANGE IN CASH
            
            
            13,548
            
            
            
            -CASH
      AT BEGINNING OF PERIOD
            
            
            -
            
            
            
            -CASH
      AT END OF PERIOD
            
            $
            13,548
            
            
            $
            -Supplemental
      cash flow information:Cash
      paid for interest
            
            $
            4,025
            
            
            $
            -Cash
      paid for income taxes
            
            
            -
            
            
            
            -








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


15


FREESTONE
RESOURCES, INC.


CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIT


For
the Years Ended June 30, 2008 and 2007











Common
      stock
            
            
            
            Additional
                paid
      in capital
            
            Accumulated
                Deficit
            
            
            TotalShares
            
            
            AmountBalance,  June
      30, 2006
            
            
            15,336,260
            
            
            
            15,336
            
            
            
            13,068,307
            
            
            
            (13,226,488
            )
            
            
            (142,845
            )Common
      stock issued for services
            
            
            3,924,000
            
            
            
            3,924
            
            
            
            638,896
            
            
            
            -
            
            
            
            642,820Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (508,392
            )
            
            
            (508,392
            )Balance,  June
      30, 2007
            
            
            19,260,260
            
            
            $
            19,260
            
            
            $
            13,707,203
            
            
            $
            (13,734,880
            )
            
            $
            (8,417
            )Common
      stock issued for services
            
            
            765,000
            
            
            
            765
            
            
            
            140,485
            
            
            
            -
            
            
            
            141,250Common
      stock issued for assets
            
            
            30,000,000
            
            
            
            30,000
            
            
            
            119,577
            
            
            
            -
            
            
            
            149,577Adjustment
      for  interest reasonableness
            
            
            
            
            
            
            
            
            
            
            (3,181
            )
            
            
            -
            
            
            
            (3,181
            )Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            16,625
            
            
            
            16,625Balance,  June
      30, 2008
            
            
            50,025,260
            
            
            $
            50,025
            
            
            $
            13,964,084
            
            
            $
            (13,718,255
            )
            
            $
            295,854








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


16


FREESTONE
RESOURCES, INC.


(formerly
iChargeit, Inc.)


Notes To
Consolidated Financial Statements


June 30,
2008





NOTE 1 – NATURE OF
ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES





Nature of Activities,
History and Organization:





Freestone
is involved in the sale and marketing of a solvent known as Petrozene which
breaks down paraffin, disperses oil tank sludge, and has other unique
industrial-use qualities. Freestone was involved in the operation of an internet
computer supply business until its operations were discontinued in
2001.  It has had no business since that time.  Freestone
was incorporated as Para-Link, Inc. in Texas on January 22, 1997 and on March
10, 1999, Para-Link acquired 100% of the outstanding capital stock of iChargeit
Inc., which was incorporated on January 6, 1999 in Nevada.  On March
17, 1999, Para-Link, Inc. changed its name to iChargeit, Inc. On November 5,
1999, iChargeit was reincorporated in Delaware.  On August 22, 2007,
iChargeit was reincorporated in Nevada and changed its name to Freestone
Resources, Inc.





Income
Taxes:





Income
taxes are computed using the asset and liability method.  Under the asset
and liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
 A valuation allowance is provided for the amount of deferred tax assets
that, based on available evidence, are not expected to be realized.





Earnings per
Share:





Basic net
loss per share is calculated by dividing the net loss by the weighted average
number of common shares outstanding for the period covered.  Freestone
has no potentially dilutive securities, therefore fully diluted loss per share
is identical to basic loss per share.





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.





Cash and
Cash Equivalents




Cash and
cash equivalents include cash in hand and cash in time
deposits, certificates of deposit and all highly liquid debt instruments
with original maturities of three months or less.






17





Revenue
Recognition:





The
Company recognizes revenue from the sale of Petrozene in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue
Recognition in Financial Statements." Revenue will be recognized only when all
of the following criteria have been met:





*
      Persuasive evidence of an arrangement exists;*
      Ownership and all risks of loss have been transferred to buyer, which is
      generally upon shipment;*
      The price is fixed and determinable; and*
      Collectibility is reasonably
assured.





Revenues
associated with sales of crude oil, natural gas, natural gas liquids, petroleum
and chemical products, and other items are recognized when title passes to the
customer, which is when the risk of ownership passes to the purchaser and
physical delivery of goods occurs, either immediately or within a fixed delivery
schedule that is reasonable and customary in the industry.





Revenues
from the production of natural gas and crude oil properties, in which we have an
interest with other producers, are recognized based on the actual volumes we
sold during the period. Any differences between volumes sold and entitlement
volumes, based on our net working interest, which are deemed to be
non-recoverable through remaining production, are recognized as accounts
receivable or accounts payable, as appropriate. Cumulative differences between
volumes sold and entitlement volumes are generally not significant.





Property and
equipment





Property
and equipment are carried at the cost of acquisition or construction and
depreciated over the estimated useful lives of the assets. Costs associated with
repair and maintenance are expensed as 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 reflected in operations. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, which are 3
to 30 years.  Oil and gas properties were purchased primarily for
product testing and are depreciated over their estimated useful lives of 10
years.





Asset
retirement obligation




In
accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations,”
Freestone Resource records the fair value of a liability for asset retirement
obligations (“ARO”) in the period in which an obligation is incurred and records
a corresponding increase in the carrying amount of the related long-lived asset.
For Freestone Resources, asset retirement obligations primarily relate to the
abandonment of oil and gas properties. The present value of the estimated asset
retirement cost is capitalized as part of the carrying amount of oil and gas
properties and is depleted over the useful life of the asset. The settlement
date fair value is discounted at Freestone Resource’s credit adjusted risk-free
rate in determining the abandonment liability. The abandonment liability is
accreted with the passage of time to its expected settlement fair value.
Revisions to such estimates are recorded as adjustments to ARO and capitalized
asset retirement costs and are charged to operations in the period in which they
become known. At the time the abandonment cost is incurred, Freestone Resources
is required to recognize a gain or loss if the actual costs do not equal the
estimated costs included in ARO.






18






The
amounts recognized for ARO are based upon numerous estimates and assumptions,
including future abandonment costs, future recoverable quantities of oil and
gas, future inflation rates, and the credit adjusted risk free interest
rate.





Research
and Development Costs




Research
and development expenses consist of costs associated with product. These
expenses include related salaries and benefits, trial and
related testing costs, contract and other outside service fees.
Research and development costs are expensed as incurred.





Impairment of Property,
Plant and Equipment





Property,
plant and equipment used in operations are assessed for impairment whenever
changes in facts and circumstances indicate a possible significant deterioration
in the future cash flows expected to be generated by an asset group. If, upon
review, the sum of the undiscounted pretax cash flows is less than the carrying
value of the asset group, the carrying value is written down to estimated fair
value through additional amortization or depreciation provisions and reported as
impairments in the periods in which the determination of the impairment is made.
Individual assets are grouped for impairment purposes at the lowest level for
which there are identifiable cash flows that are largely independent of the cash
flows of other groups of assets—generally on a field-by-field basis for
exploration and production assets. The fair value of impaired assets is
determined based on quoted market prices in active markets, if available, or
upon the present values of expected future cash flows using discount rates
commensurate with the risks involved in the asset group. Long-lived assets
committed by management for disposal within one year are accounted for at the
lower of amortized cost or fair value, less cost to sell.





The
expected future cash flows used for impairment reviews and related fair value
calculations are based on estimated future production volumes, prices and costs,
considering all available evidence at the date of review. Freestone has no price
hedges.  The impairment review includes cash flows from proved
developed and undeveloped reserves, including any development expenditures
necessary to achieve that production. Additionally, when probable reserves
exist, an appropriate risk-adjusted amount of these reserves may be included in
the impairment calculation. The price and cost outlook assumptions used in
impairment reviews differ from the assumptions used in the Standardized Measure
of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserve
Quantities. In that disclosure, SFAS No. 69, “Disclosures about Oil and Gas
Producing Activities,” requires inclusion of only proved reserves and the use of
prices and costs at the balance sheet date, with no projection for future
changes in assumptions.





Recently Issued Accounting
Pronouncements:





The
Company  does not
expect  the  adoption  of  recently  issued  accounting
pronouncements  to have a significant  impact on the
Company’s  results of  operations, financial position or
cash flow.





Concentrations of Credit
Risk





The
Company’s financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents. The Company places its cash
and cash equivalents with highly-rated financial institutions, limits the amount
of credit exposure with any one financial institution and conducts ongoing
evaluation of the credit worthiness of the financial institutions with which it
does business.






19





NOTE 2 – DEBT
FORGIVENESS





In
November of 2006, the statue of limitations expired for a long term note payable
issued by Freestone in 2002.  Freestone wrote off the entire balance
including interest of $165,388 during the year ended June 30,
2007.  The income from this write off is reported as a gain on debt
forgiveness in the accompanying financial statements.





NOTE 3 – INCOME
TAXES





Freestone
has adopted Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, which requires the use of the liability method in the computation
of income tax expense and the current and deferred income taxes payable.
Freestone has calculated its tax liability in accordance with Section 382 of the
Internal Revenue Code which generally limits the amount of its income that can
be offset by historical losses (NOL carryforwards) once a corporation has
undergone an ownership change. An ownership changed in Freestone on November 1,
2007. The cumulative net operating loss carry-forward that can offset current
and/or future income includes amounts from both continuing and discontinued
operations and is approximately $1,801,000.  The use of this loss
carryforwards is limited under Internal Revenue Code section 382 due to an
ownership change in the current year.  The annual limitation is
$97,000.  All NOLs will expire between 2019 and 2027.





Freestone’s
net deferred tax amounts are as follows:





June
      30, 2008
            
            
            June
      30, 2007Deferred
      tax asset attributable to:Net
      operating loss carryover
            
            $
            (576,368
            )
            
            $
            (631,624
            )Less:
      valuation allowance
            
            
            576,368
            
            
            
            631,624Net
      deferred tax asset
            
            
            0
            
            
            
            0








NOTE 4 – ACCOUNTS PAYABLE -
RELATED PARTY





Represents
expenses paid on behalf of the Company by an officer of
Freestone.   The Company expects to pay this in the coming fiscal
year.





NOTE 5 –
EQUITY





The
Company is authorized to issue 5,000,000 preferred shares at a par value of
$0.001 per share. These shares have full voting rights. At June 30, 2008 there
were no shares were outstanding.








20





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,
2008, there were 50,025,260 common shares outstanding.




The
Company has not paid a dividend to its shareholders.





Common
Stock and Cash for Services


Under
SFAS No. 123R the guidelines for recording stock issued for goods or
services require the fair value of the shares granted be based on the fair value
of the goods or services received or the publicly traded share price of
Freestone Resources 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 SFAS No. 157. Accordingly, Freestone Resources elected an early
application of these guidelines. Freestone Resources 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.





Common
Stock Issued for Oil and Gas Property


During
the fiscal year ended June 30, 2008, Freestone Resources purchased oil and gas
properties and fixed and intangible assets valued at $363,956 by issuing
30,000,000 shares of its common shares. (See Note 7).





In August
2006, Freestone issued 100,000 shares of common stock valued at $14,000 to two
consultants for services.


In
October of 2006, Freestone issued 2,450,000 shares of common stock valued at
$379,500 to two consultants for services.


In
February 2007, Freestone issued 1,274,000 shares of common stock valued at
$229,320 to a consultant for services.


In March
2007, Freestone issued 100,000 shares of common stock valued at $20,000 to a
consultant for services.


In August
2007, Freestone issued 540,000 shares of common stock valued at $108,000 to
consultants for services.


In
November 2007, Freestone issued 30,000,000 shares of common stock for assets as
more fully described in NOTE 7.


In
December 2007, Freestone issued 200,000 shares of common stock valued at $28,000
to consultants for services.


In March
2008, Freestone issued 25,000 shares of common stock valued at $5,250 to
consultants for services.





NOTE 6 – NOTE
PAYABLE





On
November 1, 2007, the Company assumed certain debt in conjunction with the
issuance of the 30,000,000 shares of common stock including a mortgage note for
approximately $54,000 secured by the building the Company received as part of
the same transaction. The building had a cost basis of $62,500. The note is
payable in monthly installments of $754, interest rate of 7.75%, due May
2011.









21






NOTE 7 – PURCHASE PRICE
TRANSACTION





On
November 1, 2007, Freestone purchased all of its oil & gas properties and
equipment by issuing 30,000,000 common shares valued at the carryover basis
value of $149,577 and assumption of certain liabilities, including debt
associated with the properties and equipment totaling $173,593. The assets were
valued at their carryover basis because the new shareholders became control
persons of Freestone. In conjunction with the issuance of the 30,000,000 shares
of common stock, Freestone received oil and gas properties, their Petrozene
contract (See Note 11), other fixed assets and assumed certain liabilities,
including a note for $50,000 to a relative of the President and
approximately $8,000 due to officers. These debts were for funds paid for the
recompletion/workover of the wells which was expended prior to the November 1,
2007 transaction. These debts were paid in the quarter ended March 31, 2008. The
fixed assets were valued at $330,989 net of the estimated Asset Retirement
Obligation (see Note 10) and the Petrozene contract at $1,000, their carryover
bases.





NOTE 8 – NOTE
RECEIVABLE





In May of
2007, Freestone sold a note receivable that originated from the discontinued
operations of its subsidiary in 2001 for $20,000 to Capital Financial
Consultants, Inc. Because the note had been previously written off to
discontinue operations in 2001, the amount of the note was recorded as income
from discontinued operations.  Freestone, Inc. did not receive cash in
the transaction.  Instead they received a commitment by Capital
Financial Consultants, Inc. to pay for expenses on behalf of Freestone, Inc. As
of June 30, 2008, Capital Financial Consultants has paid $3,532 expenses on
behalf of Freestone, Inc.  These payments reduced the amount of the
note receivable to $16,468.





NOTE 9 – EQUIPMENT AND OTHER
FIXED ASSETS





Fixed
Assets at June 30, 2008 and 2007 are as follows:





2008
            
            
            2007Building
            
            $
            62,500
            
            
            $
            0Computers
            
            
            2,992
            
            
            
            0Oil
      & gas equipment
            
            
            205,534
            
            
            
            0Less:
      accumulated depreciation
            
            
            ( 19,754
            )
            
            
            0Total
      fixed assets
            
            $
            251,272
            
            
            
            0





Depreciation
expense was $19,754 and $0 for the years ended June 30, 2008 and
2007.





NOTE 10 –
ASSET RETIREMENT OBLIGATION





Asset
Retirement Obligation


Freestone
Resources financial statements reflect the provisions of Statement of Financial
Accounting Standards No. 143, “Accounting for Asset Retirement
Obligations”. Our asset retirement obligation (“ARO”) primarily represents the
estimated present value of the amount Freestone Resources will incur to plug,
abandon and remediate its producing properties at the end of their productive
lives, in accordance with applicable state laws. Freestone Resources determines
the ARO on its oil and gas properties by calculating the present value of
estimated cash flows related to the liability. At June 30, 2008, the liability
for ARO was $34,888, all of which is considered long term. The asset retirement
obligations are recorded as current or non-current liabilities based on the
estimated timing of the anticipated cash flows. For the year ended June 30, 2008
and June 30, 2007, Freestone Resources has recognized accretion expense of
$1,921 and $0, respectively.








22






The
following table describes the changes in the asset retirement obligations for
the year ended June 30, 2008.


Asset retirement obligations, beginning of period
            
            $
            0Accretion expense
            
            
            1,921Asset retirement addition
            
            
            32,967Asset retirement obligations, end of period
            
            $
            34,888











NOTE 11 –
PETROZENE CONTRACT





The
Petrozene Contract is an intangible asset. The initial term of this agreement is
36 months with the right to renew for an additional 36 months.  The
purchase price per gallon of NR206 is $6.00.  Freestone
Resources will also pay on or before the 30th day of
each month, 50% of the difference between $12.00 per gallon and the actual sales
price per gallon on each gallon of NR206 sold during the previous
month.





NOTE 12 –
MAJOR CUSTOMERS





In fiscal
year ended June 30, 2008, 91.2% revenue was from two major customers. Freestone
Resources did not have any revenue in the prior year.





23