Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-Q**

 

**(MarkOne)**

 

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

 

**For the quarterly period ended March 31,2010**

 

**Or**

 

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

 

**For the transition period from          to          **

 

**Commission file number:  001-32471**

 

**BLACKRAVEN ENERGY, INC.**

 (Exact Name of Registrant asSpecified in its Charter)

 

| **Nevada**                                    | ** ** | **20-0563497**       |
|-----------------------------------------------|------------|----------------------|
| (State or Other  Jurisdiction                 |       | (I.R.S. Employer     |
| of Incorporation  or Organization)            |       | Identification  No.) |
|                                          |       |                 |
| **1125  Seventeenth Street, Suite 2300** |       |                 |
| **Denver,  CO**                               | ** ** | **80202**            |
| (Address of  Principal Executive Offices)     |       | (Zip Code)           |

 

Registrant’s Telephone Number, including areacode:**  (303) 308-1330**

 

Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes o   No x

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes o   No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer  o                |   | Accelerated filer  o          |
|------------------------------------------------|--------|------------------------------------|
|                                           |   |                               |
| Non-accelerated filer  o                  |   | Smaller reporting  company  x |
| (Do not check if a  smaller reporting company) |   |                               |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes o  No x

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court. Yes o  No x

 

The number of shares of the registrant’s common stockoutstanding as of March 31, 2010 was 16,658,109.

 

 

 

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**TABLE OF CONTENTS**

 
| PART I — Financial Information | 1                                                                                           |
|------------------------------------------|---------------------------------------------------------------------------------------------|
| Item 1.                                  | Financial Statements                                                                        | 1 |
| Item 2.                                  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| Item 3.                                  | Quantitative  and Qualitative Disclosures About Market Risk                                 | 16 |
| Item 4T.                                 | Controls and  Procedures                                                                    | 16 |
| PART II — Other  Information   | 16                                                                                          |
| Item 1.                                  | Legal Proceedings                                                                           | 16 |
| Item 1A.                                 | Risk Factors                                                                                | 16 |
| Item 5.                                  | Other Information                                                                           | 16 |
| Item 6.                                  | Exhibits                                                                                    | 17 |
|                                     | Signatures                                                                                  | 18 |

 

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**PART I — FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIAL STATEMENTS.**

 

**Black Raven Energy, Inc. (formerly known as PRBEnergy, Inc.)**

**Condensed Consolidated Balance Sheets**

**(Unaudited)**

***(In thousands)***

 
| ** **                                                                                | ** ** | **March 31, 2010** | ** ** | **December 31, 2009** | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| **Assets**                                                                                |       |                         |       |                            |       |
| Current  assets:                                                                          |       |                         |       |                            |       |
| Cash  and cash equivalents                                                                |       | $                            | 287        |                            | $          | 1,064 |   |
| Accounts  receivable, net                                                                 |       | 53                           |       | 62                              |       |
| Inventory                                                                                 |       | 62                           |       | 62                              |       |
| Prepaid  expenses                                                                         |       | 139                          |       | 108                             |       |
| Total  current assets                                                                     |       | 541                          |       | 1,296                           |       |
| Oil  and gas properties accounted for under the successful efforts method of  accounting: |       |                         |       |                            |       |
| Proved  properties                                                                        |       | 4,628                        |       | 4,626                           |       |
| Unproved  leaseholds                                                                      |       | 5,863                        |       | 5,842                           |       |
| Wells-in-progress                                                                         |       | 482                          |       | 483                             |       |
| Total  oil and gas properties                                                             |       | 10,973                       |       | 10,951                          |       |
| Less:  Accumulated depreciation, depletion and amortization                               |       | (1,219                       | )          | (1,212                          | )          |
| Net  oil and gas properties                                                               |       | 9,754                        |       | 9,739                           |       |
| Gathering  and other property and equipment                                               |       | 2,957                        |       | 2,964                           |       |
| Less:  Accumulated depreciation and amortization                                          |       | (941                         | )          | (925                            | )          |
| Net  gathering and other property and equipment                                           |       | 2,016                        |       | 2,039                           |       |
| Other  non-current assets:                                                                |       |                         |       |                            |       |
| Deferred  debt issuance costs, net                                                        |       | 229                          |       | 247                             |       |
| Other                                                                                     |       | 106                          |       | 96                              |       |
| Total  other non-current assets                                                           |       | 335                          |       | 343                             |       |
| TOTAL  ASSETS                                                                             |       | $                            | 12,646     |                            | $          | 13,417 |   |

 

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

 

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**Black Raven Energy, Inc. (formerly known as PRBEnergy, Inc.)**

**Condensed Consolidated Balance Sheets(Continued)**

**(Unaudited)**

***(In thousands)***

 
| ** **                                                                                                              | ** ** | **March 31, 2010** | ** ** | **December 31, 2009** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| **Liabilities and Stockholders’  Deficit**                                                                         |       |                    |       |                       |       |
| Current  liabilities:                                                                                                   |       |                    |       |                       |       |
| Accounts  payable                                                                                                       |       | $                       | 231        |                       | $          | 238 |   |
| Accrued  expenses and other current liabilities                                                                         |       | 323                     |       | 308                        |       |
| Total  current liabilities                                                                                              |       | 554                     |       | 546                        |       |
| Senior  secured debentures, net of discount                                                                             |       | 18,160                  |       | 17,828                     |       |
| Asset  retirement obligation                                                                                            |       | 224                     |       | 219                        |       |
| Investment  in insolvent subsidiary                                                                                     |       | —                  |       | 1,072                      |       |
| Total  liabilities                                                                                                      |       | 18,938                  |       | 19,665                     |       |
| Commitments  and Contingencies (Note 8)                                                                                 |       |                    |       |                       |       |
| Stockholders’  deficit                                                                                             |       |                    |       |                       |       |
| Common  stock, par value $.001; 150,000,000 authorized; 16,658,109 and 16,660,965  issued and outstanding, respectively |       | 17                      |       | 17                         |       |
| Additional  paid-in-capital                                                                                             |       | 29,496                  |       | 29,441                     |       |
| Accumulated  deficit                                                                                                    |       | (35,805                 | )          | (35,706                    | )          |
| Total  stockholders’ deficit                                                                                       |       | (6,292                  | )          | (6,248                     | )          |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                       |       | $                       | 12,646     |                       | $          | 13,417 |   |

 

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

 

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**Black Raven Energy, Inc. (formerly known as PRBEnergy, Inc.)**

**Condensed Consolidated Statements ofOperations**

**(Unaudited)**

***(In thousands, except share andper share amounts)***

 
| ** **                                                    | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                    | ** ** | **March 31,**     | ** ** |
| ** **                                                    | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Revenue:                                                      |       |                   |       |   |   |
| Natural  gas sales                                            |       | $                      | 143        |   | $ | 138 |   |
| Total  revenue                                                |       | 143                    |       | 138 |   |
| Operating  expenses:                                          |       |                   |       |   |   |
| Natural  gas production expense                               |       | 160                    |       | 169 |   |
| Exploration  expense                                          |       | —                 |       | 2 |   |
| Depreciation,  depletion, amortization and accretion          |       | 35                     |       | 75 |   |
| General  and administrative                                   |       | 643                    |       | 366 |   |
| Total  operating expenses                                     |       | 838                    |       | 612 |   |
| Operating  loss                                               |       | (695                   | )          | (474 | ) |
| Other  income (expense):                                      |       |                   |       |   |   |
| Interest  and other income                                    |       | 1                      |       | — |   |
| Loss  on disposal of assets                                   |       | (6                     | )          | — |   |
| Interest  expense                                             |       | (464                   | )          | (324 | ) |
| Total  other expense                                          |       | (469                   | )          | (324 | ) |
| Loss  before reorganization items and income taxes            |       | (1,164                 | )          | (798 | ) |
| Reorganization  items:                                        |       |                   |       |   |   |
| Gain  on reorganization                                       |       | 1,069                  |       | 24,568 |   |
| Professional  fees                                            |       | (4                     | )          | (106 | ) |
| Total  reorganization items                                   |       | 1,065                  |       | 24,462 |   |
| Net  income (loss) before income taxes                        |       | (99                    | )          | 23,664 |   |
| Income  tax provision/benefit                                 |       | —                 |       | — |   |
| **Net income (loss)**                                         |       | $                      | (99        | ) | $ | 23,664 |   |
| **Net income (loss) per common share—basic and diluted** |       | $                      | (0.01      | ) | $ | 1.86 |   |
| Basic  and diluted weighted average shares outstanding        |       | 16,659,315             |       | 12,694,453 |   |

 

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

 

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**Black Raven Energy, Inc. (formerly known as PRBEnergy, Inc.)**

**Condensed Consolidated Statements ofCash Flows**

**(Unaudited)**

***(In thousands)***

 
| ** **                                                                            | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                            | ** ** | **March 31,**     | ** ** |
| ** **                                                                            | ** ** | **2010**               | ** ** | **2009** | ** ** |
| **Cash  flows from operating activities**                                             |       |                   |       |   |   |
| Net income (loss)                                                                     |       | $                      | (99        | ) | $ | 23,664 |   |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities: |       |                   |       |   |   |
| Depreciation,  depletion, amortization and accretion                                  |       | 35                     |       | 75 |   |
| Amortization of debt  issuance costs                                                  |       | 18                     |       | — |   |
| Amortization of  discount on debentures                                               |       | 332                    |       | 213 |   |
| Share-based  compensation expense                                                     |       | 55                     |       | — |   |
| Gain on reorganization                                                                |       | (1,069                 | )          | (24,568 | ) |
| Loss on sale of assets                                                                |       | 6                      |       | — |   |
| Changes in assets and  liabilities:                                                   |       |                   |       |   |   |
| Accounts receivable                                                                   |       | 9                      |       | 44 |   |
| Prepaid expenses                                                                      |       | (31                    | )          | 226 |   |
| Other non-current  assets                                                             |       | (10                    | )          | 1 |   |
| Accounts payable                                                                      |       | (15                    | )          | (227 | ) |
| Accrued expenses and  other current liabilities                                       |       | 15                     |       | (290 | ) |
| Net cash used in  operating activities                                                |       | (754                   | )          | (862 | ) |
| **Cash  flows from investing activities**                                             |       |                   |       |   |   |
| Capital expenditures                                                                  |       | (23                    | )          | (374 | ) |
| Change in restricted  cash                                                            |       | —                 |       | — |   |
| Proceeds from sale of  assets                                                         |       | —                 |       | — |   |
| Net cash used in  investing activities                                                |       | (23                    | )          | (374 | ) |
| **Cash  flows from financing activities**                                             |       |                   |       |   |   |
| Proceeds from loans                                                                   |       | —                 |       | 1,450 |   |
| Repayment of loans                                                                    |       | —                 |       | (596 | ) |
| Net cash provided by  financing activities                                            |       | —                 |       | 854 |   |
| Net decrease in cash                                                                  |       | (777                   | )          | (382 | ) |
| Cash—beginning of year                                                           |       | 1,064                  |       | 472 |   |
| **Cash  and cash equivalents—end of year**                                       |       | $                      | 287        |   | $ | 90 |   |
| **Supplemental  disclosure of cash flow activity**                                    |       |                   |       |   |   |
| Cash paid for interest                                                                |       | $                      | 117        |   | $ | 74 |   |
| **Supplemental  schedule for non-cash activity**                                      |       |                   |       |   |   |
| Accrued capital  expenditures                                                         |       | 2                      |       | 69 |   |

 

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

 

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**BLACKRAVEN ENERGY, INC. (formerly known as PRB ENERGY, INC.)**

**Notesto Condensed Consolidated Financial Statements**

**March 31,2010**

**(Unaudited)**

 

**Note1—Description of Business, Basis of Presentation and Summary of SignificantAccounting Policies**

 

***Description of Business***

 

Black Raven Energy, Inc. (“Black Raven,” the“Company,” “us,” “our” or “we”), formerly known as PRB Energy, Inc. (“PRBEnergy”), operates as an independent energy company engaged in the acquisition,exploitation, development and production of natural gas and oil in the RockyMountain Region of the United States.

 

On March 5, 2008,PRB Energy and its subsidiaries filed voluntary petitions for relief for eachbusiness entity (the “Chapter 11 Bankruptcy”) under Chapter 11 of the UnitedStates Bankruptcy Code (the “Bankruptcy Code”) in the United States BankruptcyCourt for the District of Colorado (the “Bankruptcy Court”).  PRB Energy continued to operate its businessas a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court andin accordance with the applicable provisions of the Bankruptcy Code.

 

On January 16, 2009,the Bankruptcy Court entered an order confirming PRB Energy’s and PRB Oil andGas, Inc.’s (“PRB Oil”) Modified Second Amended Joint Plan ofReorganization (the “Plan”).  Theeffective date of the Plan was deemed to be February 2, 2009 (the“Effective Date”).  Pursuant to the Plan,all 8,721,994 shares of PRB Energy’s common stock were cancelled and PRB Energychanged its corporate name to Black Raven Energy, Inc.  The Plan provided that we continue as apublic company following our emergence from bankruptcy and for the issuance ofnew common stock of Black Raven (“New Common Stock”) to certain claimants, withsuch New Common Stock to be traded on the OTC Bulletin Board or a nationallyrecognized securities exchange, subject to compliance with applicableregulations.

 

We deconsolidated PRBGathering, Inc. (“PRB Gathering”), a wholly-owned subsidiary, during thefourth quarter of 2008. Effective November 1, 2008, control of the RecluseGathering System was turned over to a receiver appointed by the State Court ofWyoming.  The Company’sinvestment/obligation with regard to the PRB Gathering business is reflected asan Investment in Insolvent Subsidiary in the accompanying balance sheet as of December 31,2009.  PRB Gathering emerged from Chapter11 Bankruptcy on February 17, 2010 and a gain on reorganization wasrecognized for the amount of the Company’s obligation for PRB Gathering.

 

Theaccompanying financial statements have been prepared assuming the Company willcontinue as a going concern.  As shown in the accompanying financialstatements, the Company continues to experience net losses from its operations,reporting a net loss before reorganization items of approximately$1.2 million for the three months ended March 31, 2010.   Cash and cash equivalents on hand andinternally generated cash flows will not be sufficient to execute the Company’sbusiness plan.  Future bank financings,asset sales, or other equity or debt financings will be required to fund theCompany’s debt service, working capital requirements, planned drilling,potential acquisitions and other capital expenditures.  These conditions raise substantial doubtabout the Company’s ability to continue as a going concern.

 

TheCompany is currently exploring opportunities to raise capital, including aprivate placement of its common stock. There can be no assurances that the Company will be able to secure thisadditional financing and, accordingly, the Company’s liquidity and ability toexecute its business plan and to timely pay its obligations when due could beadversely affected.  If we fail to secureequity financing for future developments in a private placement of our commonstock, we will pursue other financing options through debt arrangements, jointventure partners, farm-out agreements or the sale of assets.

 

***Basis of Presentation***

 

The accompanyingunaudited interim Condensed Consolidated Financial Statements have beenprepared pursuant to the rules and regulations of the Securities andExchange Commission (“SEC”) and generally accepted accounting principles in theUnited States (“GAAP”). In the opinion of management, the CondensedConsolidated Financial Statements include the adjustments necessary for a fairstatement of the information required to be set forth therein. Certaininformation and note disclosures normally included in financial statementsprepared in accordance with GAAP have been condensed or omitted from thesestatements pursuant to such rules and regulations and, accordingly, thesefinancial statements should be read in conjunction with our auditedConsolidated Financial Statements for the year ended December 31, 2009,included in our Annual Report on Form 10-K for the year ended December 31,2009.  The results for interim periodsare not necessarily indicative of the results for the entire year.

 

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For the period from March 5,2008 through the Effective Date, we conducted our business in the ordinarycourse as debtors-in-possession under the protection of the Bankruptcy Court.We emerged from Chapter 11 Bankruptcy on February 2, 2009. OurCondensed Consolidated Financial Statements have been prepared in accordancewith Financial Accounting Standards Board (“FASB”) Accounting StandardsCodification (“ASC”) Topic 852, “Reorganizations” (“ASC Topic 852”), whichrequires that financial statements, for periods subsequent to ourChapter 11 Bankruptcy filings, distinguish transactions and events thatare directly associated with the reorganization from the ongoing operations ofthe business. Accordingly, certain income, expenses, realized gains and lossesand provisions for losses that were realized or incurred in our Chapter 11Bankruptcy cases are recorded in reorganization items on our CondensedConsolidated Statements of Operations. We determined that we did not meet therequirements to adopt fresh start accounting on the Effective Date of ouremergence from Chapter 11 Bankruptcy because the reorganization value ofour assets exceeded the total of post-petition liabilities and allowed claims.See Note 3 for further discussion of the Plan and the applicability offresh start accounting.

 

***Summary of Significant Accounting Policies***

 

Use of Estimates - The preparation of financialstatements in accordance with GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities,disclosures of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period.  Some specific examplesof such estimates include the allowance for accounts receivable, accruedexpenses, accrued revenue, asset retirement obligations, determining theremaining economic lives and carrying values of property and equipment and theestimates of gas reserves that affect the depletion calculations andimpairments for gas properties and other long-lived assets. In addition, we useassumptions to estimate the fair value of share-based compensation. We believeour estimates and assumptions are reasonable; however, actual results maydiffer from our estimates.

 

Cash and cash equivalents - We consider all highly liquidinstruments purchased with an original maturity of three months or less to becash equivalents.  We continually monitorour positions with, and the credit quality of, the financial institutions withwhich we invest.

 

Income Taxes - We recognize deferred tax liabilitiesand assets based on the differences between the tax basis of assets andliabilities and their reported amounts in the consolidated financial statementsthat will result in taxable or deductible amounts in future years.  In evaluating the ability to realize netdeferred tax assets, we will take into account a number of factors, primarilyrelating to our ability to generate taxable income. We have recognized, beforethe valuation allowance, a net deferred tax asset attributable to the netoperating losses for the three months and year ended March 31, 2010 and December 31,2009.  FASB ASC Topic 740, “Income Taxes”(“ASC Topic 740”), requires that a valuation allowance be recorded againstdeferred tax assets unless it is more likely than not that the deferred taxasset will be utilized.  As a result ofthis analysis, we have recorded a full valuation allowance against its netdeferred tax asset.

 

Revenue Recognition - Revenues are recognized whenproduction is sold to a purchaser at a fixed or determinable price, whendelivery has occurred and title has transferred, and if the collectability ofthe revenue is probable.  We derive revenue from the sale of producednatural gas.  We report revenue as the gross amount received before takinginto account production taxes and transportation costs, which are reported asseparate expenses.  Revenue is recorded in the month our production isdelivered to the purchaser, but payment is generally received between 30 and 90days after the date of production.  Revenues from the production of gasproperties in which we have an interest with other producers are recognized onthe basis of our net working interest.  At the end of each month, wecalculate a revenue accrual based on the estimates of production delivered toor transported for the purchaser.

 

Property and Equipment -Gas Gathering and Other — Gathering assets, including compressor sites and pipelines, arerecorded at cost and depreciated using the straight line method over 10years.  Other property and equipment,such as office furniture, computer and related software and equipment,automobiles and leasehold improvements are recorded at cost.  Depreciation is calculated using thestraight-line method over the estimated useful lives of the assets orunderlying leases, in respect to leasehold improvements, ranging from three toten years.

 

Oil and Gas ProducingProperties — Wehave elected to follow the successful efforts method of accounting for its oiland gas properties.  Under this method ofaccounting, all property acquisition costs and costs of exploratory anddevelopment wells are capitalized when incurred, pending determination ofwhether the well has found proved reserves. If an exploratory well does not find proved reserves, the costs ofdrilling the unsuccessful exploratory well are charged to expense.  Exploratory dry hole costs are included incash flows from investing activities as part of capital expenditures in theconsolidated statements of cash flows. The cost of development wells, whether productive or not, iscapitalized.

 

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Other exploration costs,including certain geological and geophysical expenses and delay rentals for oiland gas leases, are charged to expense as incurred. The sale of a partialinterest in a proved property is accounted for as a cost recovery and no gainor loss is recognized as long as this treatment does not significantly affectthe unit-of-production amortization rate. A gain or loss is recognized for allother sales of proved properties and is classified in other operating revenues.Maintenance and repairs are charged to expense, and renewals and bettermentsare capitalized to the appropriate property and equipment accounts.

 

Depreciation, depletionand amortization (“DD&A”) of capitalized costs of proved oil and gasproperties is determined on a field-by-field basis using theunits-of-production method based upon proved reserves.  The computation of DD&A takes intoconsideration restoration, dismantlement and abandonment costs and theanticipated proceeds from equipment salvage.

 

Impairment of Long-LivedAssets - Inaccordance with FASB ASC Topic 360, “Property, Plant and Equipment” (“ASC Topic360”),  we  group assets at the field level andperiodically reviews the carrying value of its property and equipment to testwhenever current events or circumstances indicate that such carrying value maynot be recoverable.  If the testsindicate that the carrying value of the asset is greater than the estimatedfuture undiscounted cash flows to be generated by such asset, an impairmentadjustment will be recognized.  Suchadjustment consists of the amount by which the carrying value of such assetexceeds its fair value.  We generallymeasure fair value by considering sale prices for similar assets or bydiscounting estimated future cash flows from such asset using an appropriatediscount rate.  Considerable managementjudgment is necessary to estimate the fair value of assets, and accordingly,actual results could vary significantly from such estimates.

 

Discount of Debt — On February 2, 2009, we issued anAmended and Restated Senior Secured Debenture, payable to West CoastOpportunity Fund, LLC (“WCOF”) in the amount of $18,450,000 (the “AmendedDebenture”).  We recorded a $1.4 milliondiscount on the Amended Debenture in first quarter of 2009.  The remaining discount on the AmendedDebenture at March 31, 2010 of $340,000 is being amortized using theretrospective interest method over the term of the debt, and is included in thebalance of the Amended Debenture at March 31, 2010.

 

Net Loss Per Share - We account for earnings (loss) pershare (“EPS”) in accordance with FASB ASC Topic 260, “Earnings per Share” (“ASCTopic 260”).  Under ASC Topic 260, basicEPS is computed by dividing the net loss applicable to common stockholders bythe weighted average common shares outstanding without including anypotentially dilutive securities.  Potentially dilutive securities for the diluted earnings per sharecalculation consist of outstanding warrants and in-the-money outstanding stockoptions to purchase our common stock for the period ended March 31, 2010.Potentially dilutive securities for the diluted earnings per share calculationconsist of outstanding warrants and in-the-money outstanding stock options topurchase our common stock.  Diluted EPSis computed by dividing the net loss applicable to common stockholders for theperiod by the weighted average common shares outstanding plus, when theireffect is dilutive, common stock equivalents. For the periods ended March 31, 2010 and 2009, there were nopotentially dilutive securities outstanding whose effect would be dilutive toour earnings per share calculation.

 

Potentially dilutivesecurities, which have been excluded from the determination of diluted earningsper share because their effect would be anti-dilutive, are as follows:

 
| ** **                                  | ** ** | **For the three months ended** | ** ** |
|---------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                  | ** ** | **March 31,**                                 | ** ** |
| ** **                                  | ** ** | **2010**                                           | ** ** | **2009** | ** ** |
| Warrants                                    |       | 1,494,298                                          |       | 1,494,298 |   |
| Options                                     |       | 1,432,500                                          |       | — |   |
| Total potentially  dilutive shares excluded |       | 2,926,798                                          |       | 1,494,298 |   |

 

Subsequent to March 31,2010, we did not issue any dilutive securities which would have increased thenumber of potentially dilutive shares.

 

Comprehensive Income(Loss) - We account for comprehensive income (loss) inaccordance with FASB ASC Topic 220, “Comprehensive Income” (“ASC Topic 220”),which established standards for the reporting and presentation of comprehensiveincome in our consolidated financial statements.  For the three monthsended March 31, 2010 and 2009, comprehensive loss is equal to net loss asreported in our consolidated statement of operations.

 

Off-Balance SheetArrangements — Wehave not participated in transactions that generate relationships withunconsolidated entities or financial partnerships, such as entities oftenreferred to as structured finance or special purpose entities (“SPEs”), or SPEswhich would have been established for the purpose of facilitating off-balancesheet arrangements or other contractually narrow or limited purposes.  As of March 31, 2010, the Company is notinvolved in any off-balance sheet arrangements.

 

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Fair Value of Financial Instruments**- Our financial instruments, including cash and cashequivalents, accounts receivable, accounts payable and secured debentures, arecarried at cost.  At March 31, 2010, the fair value of the cash andcash equivalents, accounts receivable, and accounts payable approximatescarrying value due to the short term nature of these instruments.  The fair value of our debentures at March 31,2010 is approximately $18.1 million, based on a discounted cash flow modelusing expected future cash flows.

 

Concentrations of CreditRisk - Revenuesfrom customers which represented 10% or more of our gas sales for the threemonths ended March 31, 2010 and 2009 were as follows:

 
| ** **                           | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------|------------|------------------------------------------------------|------------|
| **Customer**                         | ** ** | **2010**                                             | ** ** | **2009** | ** ** |
| ** **                           | ** ** | **(% of total revenue)**              | ** ** |
| A –  Exploration and Production |       | 66                                                   | %          | 71 | % |
| B –  Exploration and Production |       | 34                                                   | %          | 29 | % |

 

Industry Segment and Geographic Information — In January 2009,the Company began operating in one industry segment,which is the exploration, development and production of natural gas and crudeoil, and all of the Company’s operations are conducted in the continentalUnited States. Consequently, the Company currently reports as a single industrysegment.

 

**Note2—Recent Accounting Pronouncements**

 

In January 2010, the FASB issued ASC Update2010-06, “Fair Value Measurements and Disclosures” (“ASC Update 2010-06”), thatrequires additional disclosures about the different classes of assets andliabilities measured at fair value, the valuation techniques and inputs used,the fair value measurements of the activity in Level 3 on a gross basis and thetransfers between Levels 1 and 2. This new authoritative guidance was effectivefor interim and annual reporting periods beginning after December 15,2009, except for the disclosures regarding gross activity in the Level 3rollforward, which will be effective for the Company as of January 1,2011. The adoption of ASC Update 2010-06 did not have a material impact on theCompany’s financial statements.

 

The Companyadopted FASB ASC Update 2010-09, “Amendments to Certain Recognition andDisclosure Requirements,*”* whichremoves the requirement for SEC filers to disclose the date through which anentity has evaluated subsequent events.  However, the date-disclosureexemption does not relieve management of an SEC filer from its responsibilityto evaluate subsequent events through the date on which financial statementsare issued.  This authoritative guidance was effective upon issuance on February 24, 2010. The adoption of this pronouncement did not have a material impact on theCompany’s consolidated financial statements.

 

**Note3—Emergence from Chapter 11 Bankruptcy**

 

On January 16, 2009, the Bankruptcy Court enteredan order confirming the Plan, with an effective date of February 2,2009.  Pursuant to the Plan, all 8,721,994issued shares of PRB Energy’s common stock were cancelled and PRB Energychanged its corporate name to Black Raven Energy, Inc. The Plan providedthat we continue as a public company following our emergence from bankruptcyand for the issuance of new common stock of Black Raven to certain claimants.

 

Pursuant to the terms of the Plan, the Company issued1,419,339 shares of common stock, along with one warrant for each share at anexercise price of $2.50 per share, on a pro-rata basis to the holders of ourpreviously outstanding convertible notes. The Company issued an additional74,959 shares of common stock, along with one warrant for each share at anexercise price of $2.50 per share, on a pro-rata basis to the other claimantsrelated to accounts payable and accrued expenses and other current liabilities.The Company also issued 13.5 million shares of common stock to WCOF, theprincipal pre-petition secured creditor.

 

On February 2, 2009, in connection with theconsummation of the Plan, we, along with our subsidiary PRB Oil, entered into aLimited Waiver, Consent, and Modification Agreement (the “ModificationAgreement”) with WCOF. Under the Modification Agreement, we issued the AmendedDebenture. The Amended Debenture superseded and amended the senior 

 

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secured debentures issued by PRB Oil to WCOF and DKRSoundshore Oasis Holding Fund Ltd. on December 28, 2006. Under the termsof the Amended Debenture, $3.75 million of the outstanding principle balanceand unpaid accrued interest were due on December 31, 2009, with theremainder of the outstanding balance and unpaid accrued interest due on December 31,2010. The Amended Debenture initially accrued interest at 10% per annum,  payable quarterly.

 

On April 13, 2009,Black Raven, WCOF and the Official Committee of Unsecured Creditors Appointedby the Bankruptcy Court entered into an Agreement Regarding New Equity Raise Underthe Modified Second Amended Joint Plan of Reorganization (the “New EquityAgreement”). The New Equity Agreement modified the obligations of the partiesunder the Plan and released WCOF from its obligation to raise or guarantee $7.5million of additional funding for us. The New Equity Agreement required WCOF topurchase 166,667 shares of the New Common Stock from us for $3.00 per sharewithin 10 business days of the New Equity Agreement and an additional $3million of New Common Stock, preferred stock or convertible debt securitiesfrom time to time prior to September 10, 2010, at a purchase price of$2.00 per share. The New Equity Agreement also modified the interest rate underthe Amended Debenture and extended the maturity date of the Amended Debentureto December 31, 2011.

 

On November 9, 2009,the amended and restated debenture for $18.45 million was amended to $18.5million in lieu of paying $50,000 in interest to WCOF.

 

**Note4—Asset Retirement Obligations**

 

The Company recognizes anestimated liability for future costs associated with the abandonment of its oiland gas properties.  A liability for the fair value of an assetretirement obligation and corresponding increase to the carrying value of therelated long-lived asset are recorded at the time a well is completed oracquired.  The increase in carrying value is included in proved oiland gas properties in the accompanying consolidated balancesheets.  The Company depletes the amount added to proved oil and gasproperty costs and recognizes expense in connection with the accretion of thediscounted liability over the remaining estimated economic lives of therespective oil and gas properties.  Cash paid to settle assetretirement obligations is included in the operating section of the Company’s accompanyingconsolidated statements of cash flows.

 

The Company’s estimatedasset retirement obligation liability is based on historical experience inabandoning wells, estimated economic lives, estimates as to the cost to abandonthe wells in the future, and federal and state regulatoryrequirements.  The liability is discounted using the credit-adjustedrisk-free rate estimated at the time the liability is incurred orrevised.  The credit-adjusted risk-free rate used to discount the Company’sabandonment liabilities is ten percent.  Revisions to the liabilitycould occur due to changes in estimated abandonment costs or well economiclives, or if federal or state regulators enact new requirements regarding theabandonment of wells.

 

A reconciliation of the Company’sasset retirement obligations is as follows:

 
| ** **                                         | ** ** | **For the**        | ** ** |
|----------------------------------------------------|------------|-------------------------|------------|
| ** **                                         | ** ** | **Three  Months Ended** | ** ** |
| ** **                                         | ** ** | **March 31,**      | ** ** |
| ** **                                         | ** ** | **2010**                | ** ** | **2009** | ** ** |
| ** **                                         | ** ** | **(in thousands)**      | ** ** |
| Asset retirement  obligations, beginning of period |       | $                       | 219        |   | $ | 345 |   |
| Sale  of assets                                    |       | —                  |       | — |   |
| Accretion  expense                                 |       | 5                       |       | 6 |   |
| Revision  to estimated cash flows                  |       | —                  |       | — |   |
| Asset retirement  obligations, end of period       |       | $                       | 224        |   | $ | 351 |   |

 

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**Note5—Borrowings**

 

As of March 31, 2010and December 31, 2009, our borrowings consisted of the following:

 

 
| ** **                                | ** ** | **March 31,**      | ** ** | **December 31,** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                | ** ** | **2010**                | ** ** | **2009**              | ** ** |
| ** **                                | ** ** | **(in thousands)** | ** ** | ** **            | ** ** |
| Amended  senior secured debentures        |       | $                       | 18,500     |                  | $          | 18,500 |   |
| Total  borrowings                         |       | 18,500                  |       | 18,500                |       |
| Less  current portion                     |       | —                  |       | —                |       |
| Total  borrowings, net of current portion |       | $                       | 18,500     |                  | $          | 18,500 |   |

 

***Amended and Restated Senior Secured Debentures***

 

On February 2, 2009,in connection with the consummation of the Plan, we, along with our subsidiaryPRB Oil, entered into a Modification Agreement with WCOF.  Under the Modification Agreement, we issuedthe Amended Debenture, payable to WCOF in the amount of $18,450,000.  The Amended Debenture superseded and amendedthe senior secured debentures issued by PRB Oil to WCOF and DKR SoundshoreOasis Holding Fund Ltd. on December 28, 2006.  Under the terms of the Amended Debenture,$3.75 million of the outstanding principle balance and unpaid accrued interestwere initially due on December 31, 2009, with the remainder of the outstandingbalance and unpaid accrued interest due on December 31, 2010.  The Amended Debenture accrues interest at 10%per annum payable quarterly.

 

Effective April 13,2009, Black Raven, WCOF and the Official Committee of Unsecured CreditorsAppointed by the Bankruptcy Court entered into the New Equity Agreement.  Among other things, the New Equity Agreementmodified the interest rate under the Amended Debenture to 2.5% per annum andextended the maturity date of the Amended Debenture to December 31, 2011for all unpaid principal.

 

As the stated rate atwhich the Company currently pays interest is not a prevailing rate at which theCompany could obtain third party financing, the Company has calculated andrecorded its obligation under the Amended Debenture at a discount in theaccompanying balance sheet.  Due to thevariable nature of the interest to be paid under the Amended Debenture, theCompany uses the retrospective method to amortize its discount and imputeinterest on the Amended Debenture.  Forthe three months ended March 31, 2010, the Company has recorded $332,000of interest expense related to the amortization of the discount on its AmendedDebenture.

 

On November 9, 2009,the Amended Debenture was amended to $18.5 million in lieu of paying $50,000 ininterest to WCOF.

 

On January 10, 2010WCOF agreed to extend the due date for all principal payments in connectionwith the Company’s Amended Debenture to June 30, 2013 subject to theCompany raising $25,000,000 in new equity by February 10, 2010.  As the Company did not raise the requiredcapital, the due date for all principal payments remains December 31,2011.

 

***PRB Funding Prepetition Loan***

 

Immediately prior to the filing of the Chapter 11petitions, the Company borrowed $300,000 from PRB Funding, LLC (“PRB Funding”)due on February 28, 2009.  PRBFunding was formed by three members of our Board of Directors:  Gus Blass, Reuben Sandler and JamesSchadt.  The PRB Funding Loan was securedby substantially all of the assets of PRB Energy and was repaid in 2009.

 

***Post-petition Debtor- in-Possession Financing***

 

In April 2008, the Company obtained courtapproval of post-petition Debtor-in-Possession Financing (“DIP Loan”) from PRBFunding in the amount of $275,000.  ThePRB Funding DIP Loan accruedinterest at 13% per annum, with all unpaid principal and accrued interest dueupon the earlier of March 1, 2009 or the confirmation of the Plan.

 

In May 2008, the Company obtained courtapproval of a $336,000 post-petition DIP Loan from PRB Acquisition, an entitythat was affiliated with Republic Financial. The PRB Acquisition DIP Loan accrued interest at 18% per annum, with all unpaid 

 

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principal and accruedinterest due upon the earliest of September 30, 2008, an event of default,or the confirmation of a plan of reorganization.  BothDIP Loans were repaid in 2009.

 

**Note6—Income Taxes**

 

Income tax expense duringinterim periods is based on applying an estimated annual effective income taxrate to year-to-date income, plus any significant, unusual or infrequentlyoccurring items which are recorded in the interim period.  The computation of the annual estimatedeffective tax rate at each interim period requires certain estimates andsignificant judgment including, but not limited to, the expected operatingincome or loss for the year, projections of the proportion of income earned andtaxed in various jurisdictions, permanent and temporary timing differences, andthe likelihood of recovering deferred tax assets generated in the current andprior years.  The accounting estimatesused to compute the provision for income taxes may change as new events occur,more experience is acquired, additional information is obtained or as the taxenvironment changes.

 

The provision for incometaxes for the three months ended March 31, 2010 and 2009 differs from theamount that would be provided by applying the statutory U.S. federal income taxrate of 35% to pre-tax income because of state income taxes and the Company’svaluation allowance.   The Company’seffective tax rate for the three months ended March 31, 2010 and 2009,before the valuation allowance, was 36.88 % and 36.06%, respectively.

 

In assessing the need fora valuation allowance on the Company’s deferred tax assets, all availableevidence, both negative and positive, was considered in determining whether itis more likely than not that some portion or all of the deferred tax assets willbe realized.  Based on this assessment,the Company has recorded a full valuation allowance against its net deferredtax asset as of March 31, 2010.  TheCompany’s evaluation of the amount of the deferred tax asset considered morelikely than not to be realizable will likely change in future periods asestimates of future income change due to changes in expected future oil and gasprices and other factors, and these changes could be material.

 

The Company accounts forits uncertain tax positions in accordance with the provisions of the ACS Topic740, *Income Taxes*.  During the three months ended March 31,2010, there was no change to the Company’s liability for uncertain taxpositions.

 

**Note7—Equity Compensation Plan**

 

On June 3, 2009, theBoard adopted the Black Raven Energy, Inc. Equity Compensation Plan (the“Equity Compensation Plan”) under which we may grant nonqualified stockoptions, stock appreciation rights, stock awards or other equity-based awardsto certain of our employees, consultants, advisors and non-employeedirectors.  The Board initially reserved3,791,666 shares of common stock for issuance under the Equity CompensationPlan.

 

On July 1, 2009, theCompany issued 1,060,000 stock options to employees of the Company under theEquity Compensation Plan.  The optionshave an exercise price of $2.00 per share for a total fair value of $1.1million and vest ratably over three years. The Company issued the same employees an additional 172,500 stockoptions on September 16, 2009, which vested immediately.  The options have an exercise price of $2.00per share, and a total fair value of $178,000. On December 8, 2009, the Company issued 100,000 options to twodirectors.  The options have an exerciseprice of $2.00 per share, and a total fair value of $64,000.

 

On February 7, 2010,the Company issued 100,000 options to an officer of the Company.  The options have an exercise price of $2.00per share, a total fair value of $59,000, and vest over three years.  The Company recorded equity compensation expenseduring the first quarter of 2010 totaling $55,000 related to vesting of 2009grants.

 

**Note 8—Commitments and Contingencies**

 

***Commitments***

 

In the normal course of business operations, theCompany has entered into operating leases for office space, office equipmentand vehicles. Rental payments under these operating leases totaled $17,000 forthe period ended March 31, 2010.

 

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**ITEM 2*.    *MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS.**

 

**Forward-LookingStatements**

 

Allstatements, other than statements of historical facts, included in thisQuarterly Report that address activities, events, or developments with respectto our financial condition, results of operations, or economic performance thatwe expect, believe, or anticipate will or may occur in the future, or thataddress plans and objectives of management for future operations, areforward-looking statements.  The words “anticipate,” “assume,”“believe,” “budget,” “estimate,” “expect,” “forecast,” “intend,” “plan,”“project,” “will,” and similar expressions are intended to identifyforward-looking statements.

 

Ourforward-looking statements are based on assumptions and analyses made by us inlight of our experience and our perception of historical trends, currentconditions, expected future developments, and other factors that we believe areappropriate under the circumstances.  These statements are subject toa number of known and unknown risks and uncertainties which may cause ouractual results and performance to be materially different from any futureresults or performance expressed or implied by the forward-lookingstatements.  These risks are described in the “Risk Factors” sectionof our Annual Report on Form 10-K for the year ended December 31,2009.

 

**GeneralOverview and Significant Transactions**

 

Theaccompanying condensed consolidated financial statements have been preparedassuming the Company will continue as a going concern.  As shown in theaccompanying financial statements, the Company continues to experience netlosses from its operations, reporting a net loss before reorganization items ofapproximately $1.2 million for the three months ended March 31,2010.   Cash and cash equivalents on handand internally generated cash flows will not be sufficient to execute theCompany’s business plan.  Future bankfinancings, asset sales, or other equity or debt financings will be required tofund the Company’s debt service, working capital requirements, planneddrilling, potential acquisitions and other capital expenditures.  These conditions raise substantial doubtabout the Company’s ability to continue as a going concern.

 

TheCompany is currently exploring opportunities to raise capital.  There can be no assurances that the Companywill be able to secure this additional financing and, accordingly, theCompany’s liquidity and ability to execute its business plan and to timely payits obligations when due could be adversely affected.  If we fail to secure equity financing forfuture developments in a private placement of our common stock, we will pursueother financing options through debt arrangements, joint venture partners,farm-out agreements or the sale of assets.

 

Youshould read the following discussion in conjunction with the consolidatedfinancial statements and related notes in Item 1 and our Annual Report on Form 10-Kfor the year ended December 31, 2009.

 

TheCompany, formerly known as PRB Energy, Inc. (“PRB Energy”), currentlyoperates as an independent energy company engaged in the acquisition,exploitation, development and production of natural gas and oil in the RockyMountain Region of the United States.  OnFebruary 2, 2009, in connection with our emergence from bankruptcy, PRBEnergy changed its corporate name to Black Raven Energy, Inc.

 

***Emergencefrom Bankruptcy***

 

On January 16, 2009, the Bankruptcy Court enteredan order confirming the Plan, with an effective date of February 2,2009.  Pursuant to the Plan, all8,721,994 issued shares of PRB Energy’s common stock were cancelled and PRBEnergy changed its corporate name to Black Raven Energy, Inc. The Planprovided that we continue as a public company following our emergence frombankruptcy and for the issuance of new common stock of Black Raven to certainclaimants, with such New Common Stock to be traded on the OTC Bulletin Board ora nationally recognized securities exchange, subject to compliance withapplicable regulations.

 

Pursuant to the terms of the Plan, the Company issued1,419,339 shares of common stock, along with one warrant for each share at anexercise price of $2.50 per share, on a pro-rata basis to the holders of ourpreviously outstanding convertible notes. The Company issued an additional74,959 shares of common stock, along with one warrant for each share at anexercise price of $2.50 per share, on a pro-rata basis to the other claimantsrelated to accounts payable and accrued expenses and other 

 

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current liabilities. The Company also issued 13.5million shares of common stock to West Coast Opportunity Fund, LLC (“WCOF”),the principal pre-petition secured creditor.

 

On February 2, 2009, in connection with theconsummation of the Plan, we, along with our subsidiary PRB Oil, Inc.(“PRB Oil”), entered into a Limited Waiver, Consent, and Modification Agreement(the “Modification Agreement”) with WCOF. Under the Modification Agreement, weissued an Amended and Restated Senior Secured Debenture (the “AmendedDebenture”), payable to WCOF in the amount of $18,450,000. The AmendedDebenture superseded and amended the senior secured debentures issued by PRBOil to WCOF and DKR Soundshore Oasis Holding Fund Ltd. on December 28,2006. Under the terms of the Amended Debenture, $3.75 million of theoutstanding principle balance and unpaid accrued interest were due on December 31,2009, with the remainder of the outstanding balance and unpaid accrued interestdue on December 31, 2010. See below for discussion of the second amendment.The Amended Debenture initially accrued interest at 10% per annum, payablequarterly.

 

On April 13, 2009, Black Raven, WCOF and theOfficial Committee of Unsecured Creditors Appointed by the Bankruptcy Courtentered into an Agreement Regarding New Equity Raise Under the Modified SecondAmended Joint Plan of Reorganization (the “New Equity Agreement”). The NewEquity Agreement modified the obligations of the parties under the Plan andreleased WCOF from its obligation to raise or guarantee $7.5 million of additionalfunding for us. The New Equity Agreement required WCOF to purchase 166,667shares of the New Common Stock from us for $3.00 per share within 10 businessdays of the New Equity Agreement and an additional $3 million of New CommonStock, preferred stock or convertible debt securities from time to time priorto September 10, 2010, at a purchase price of $2.00 per share. The NewEquity Agreement also modified the interest rate under the Amended Debentureand extended the maturity date of the Amended Debenture to December 31,2011.

 

On November 9, 2009,the Amended Debenture was amended to $18.5 million in lieu of paying $50,000 ininterest to WCOF.

 

***EquityCompensation Plan***

 

On June 3, 2009, theBoard adopted the Black Raven Energy, Inc. Equity Compensation Plan (the“Equity Compensation Plan”) under which we may grant nonqualified stockoptions, stock appreciation rights, stock awards or other equity-based awardsto certain of our employees, consultants, advisors and non-employee directors.  The Board initially reserved 3,791,666 sharesof common stock for issuance under the Equity Compensation Plan.

 

On July 1, 2009 theCompany issued 1,060,000 stock options to employees of the Company under theEquity Compensation Plan.  The optionshave an exercise price of $2.00 per share for a total fair value of $1.1million and vest ratably over three years. The Company issued the same employees an additional 172,500 stockoptions on September 16, 2009, which vested immediately.  The options have an exercise price of $2.00per share, and a total fair value of $178,000. On December 8, 2009, the Company issued 100,000 options to twodirectors.  The options have an exerciseprice of $2.00 per share, and a total fair value of $64,000.

 

On February 7, 2010,the Company issued 100,000 options to an officer of the Company.  The options have an exercise price of $2.00per share, and a total fair value of $59,000. The Company recorded equity compensation expense during the firstquarter of 2010 totaling $55,000.

 

**Resultsof Operations**

 

**ThreeMonths Ended March 31, 2010 (unaudited) Compared to the Three Months EndedMarch 31, 2009 (unaudited)**

 

Thefinancial information with respect to the three months ended March 31,2010 and 2009, respectively, which is discussed below, is unaudited. In theopinion of management, such information contains all adjustments, consistingonly of normal recurring accruals, necessary for a fair presentation of theresults for such periods. The results of operations for interim periods are notnecessarily indicative of the results of operations for the full fiscal year.

 

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| ** **                        | ** ** | **Three months  Ended March 31, (In thousands)** | ** ** | **Increase/  Decrease** | ** ** | **Percentage  Change**     | ** ** |
|-----------------------------------|------------|----------------------------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                        | ** ** | **2010**                                                             | ** ** | **2009**                | ** ** | **2010 vs 2009** | ** ** | **2010 vs 2009** | ** ** |
| **Revenue**                       |       |                                                                 |       |                    |       |                       |       |   |   |
| Natural  gas sales                |       | $                                                                    | 143        |                    | $          | 138                        |       | $ | 5 |   | 3.6 | % |
| **Total revenue**                 |       | 143                                                                  |       | 138                     |       | 5                          |       | 3.6 | % |
| **Operating expenses**            |       |                                                                 |       |                    |       |                       |       |   |   |
| Natural  gas production expense   |       | 160                                                                  |       | 169                     |       | (9                         | )          | -5.3 | % |
| Exploration  expense              |       | —                                                               |       | 2                       |       | (2                         | )          | -100.0 | % |
| DD&A                          |       | 35                                                                   |       | 75                      |       | (40                        | )          | -53.3 | % |
| G&A                           |       | 643                                                                  |       | 366                     |       | 277                        |       | 75.7 | % |
| **Total expenses**                |       | 838                                                                  |       | 612                     |       | 226                        |       | 36.9 | % |
| **Operating loss**                |       | (695                                                                 | )          | (474                    | )          | (221                       | )          | -46.6 | % |
| Interest  and other income (loss) |       | (5                                                                   | )          | —                  |       | (5                         | )          | 100.0 | % |
| Interest  expense                 |       | (464                                                                 | )          | (324                    | )          | 140                        |       | 43.2 | % |
| Reorganization  items             |       | (4                                                                   | )          | (106                    | )          | (102                       | )          | -96.2 | % |
| Gain  on reorganization           |       | 1,069                                                                |       | 24,568                  |       | (23,499                    | )          | -95.6 | % |
| **Net income (loss)**             |       | $                                                                    | (99        | )                       | $          | 23,664                     |       | $ | (23,763 | ) | -100.4 | % |

 

***Revenues***

 

Naturalgas sales for the first quarter of 2010 increased $5,000, or 3.6%, incomparison to 2009 as a result of an increase in natural gas prices, partiallyoffset by a decrease in the volume of natural gas sold.   The average sales price during the firstquarter of 2010 was $1.70 per Mcf higher than the average sales price for thefirst quarter of 2009 ($4.86 for 2010 compared to $3.16 for 2009) resulting ina revenue increase of $75,000. Sales volumes decreased in the first quarter of2010 by 14,539 Mcf, from 43,845 Mcf for 2009 to 29,317 Mcf for 2010, causing arevenue decline of $70,000 for the first quarter of 2010 compared to the firstquarter of 2009.

 

***Natural Gas Lease Operating Expenses***

 

Naturalgas lease operating expenses in the first quarter of 2010 decreased $9,000, or5.3%, to $160,000 from $169,000 in the first quarter of 2009 as a result of thereduced production volumes, as discussed above.

 

***Depreciation, Depletion, Amortization and Impairments(“DD&A”)***

 

DD&Aexpense for the first quarter of 2010 decreased $40,000, or 53.3%, from $75,000in the first quarter of 2009 to $35,000 in the first quarter of 2010 as aresult of the decrease in oil & gas production in 2010.

 

***General and Administrative Expenses***

 

Generaland administrative (“G&A”) expenses for the first quarter of 2010 increasedby $277,000, or 75.7%, to $643,000 from $366,000 for the first quarter of 2009.This increase was primarily due to an increase in accounting, auditing andlegal fees associated with the Company’s efforts to become current with its SECand tax filing requirements, as well as the Company’s efforts to raisecapital.  In addition, the Companyrecorded equity compensation expense during the first quarter of 2010 of$55,000, while there was no equity compensation expense recorded in the firstquarter of 2009.

 

***Gain on Reorganization***

 

The Company’s obligationwith regard to the PRB Gathering business was reflected as an Investment inInsolvent Subsidiary in the accompanying balance sheet as of December 31,2009.  PRB Gathering emerged from Chapter11 Bankruptcy on February 17, 2010 and a gain on reorganization ofapproximately $1.1 million was recognized.

 

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***Interest Expense***

 

Interestexpense for the first quarter of 2010 increased $140,000 or 43.2% to $464,000from $324,000 for the first quarter of 2009. This increase is directly attributable to the amortization of thediscount on the Amended Debenture.

 

**Liquidity and Capital Resources**

 

At March 31,2010, cash and cash equivalents totaled approximately $0.3 million. At March 31,2010, the Company had a working capital deficit of $13,000, compared to workingcapital of $1.8 million at December 31, 2009. The decline is attributableto continued operating losses.

 

Asnoted in our risk factors (See Item 1A of our 2009 Annual Report on Form 10-K),cash and cash equivalents on hand and internally generated cash flows willrequire augmentation from future bank financings, asset sales, or other equityor debt financing to fund our debt service, working capital requirements,planned drilling, potential acquisitions and other capital expenditures. Theamount and allocation of future capital and exploitation expenditures willdepend upon a number of factors including the number and size of acquisitionsand drilling opportunities, our cash flows from operating and financingactivities and our ability to assimilate acquisitions. Also, the impact of oiland gas market prices on investment opportunities, the availability of capitaland borrowing facilities and the success of our exploitation and developmentactivities, particularly in Colorado, could lead to changes in fundingrequirements for future development. If we fail to secure financing for thefuture development, we may pursue other financial arrangements through jointventure partners, farm-out agreements or the sale of assets.  We intend to seek equity and debt financingin the future.  We may not be able toobtain financing on acceptable terms or at all. The maturity date of the Amended Debenture is December 31, 2011,and additional financing will be necessary in order to meet this obligation.

 

*CashFlow Used in Operating Activities*

 

Duringthe three months ended March 31, 2010, our net loss of $0.1 millionincluded non-cash DD&A expense of $35,000, non-cash amortization of ourdiscount on the Amended Debentures of $332,000 and a non-cash gain onreorganization of approximately $1.1 million. Cash used in operating activitiesof $754,000 during the three months ended March 31, 2010 compared to$862,000 for the same period of 2009.

 

*CashFlow Used in Investing Activities*

 

Cashused in investing activities was $23,000 during the three months ended March 31,2010, representing a $351,000 decrease compared to cash used in investingactivities of $374,000 for the three months ended March 31, 2009. This decrease was due to the limited available cash, which has delayed drillingoperations.

 

*CashFlow from Financing Activities*

 

Therewas no cash provided by financing activities during the three months ended March 31,2010, compared to approximately $0.9 million for the three months ended March 31,2009.  During the first quarter of 2009, we raised $1.5 million from theissuance of additional debentures as required by the Plan. We also repaidapproximately $0.6 million for the PRB Funding DIP Loan and part of the PRBAcquisition DIP Loan during the three months ended March 31, 2009.

 

*OffBalance-Sheet Arrangements*

 

We donot have any off-balance sheet financing arrangements as of March 31,2010.

 

**CriticalAccounting Policies and Estimates**

 

Werefer you to the corresponding section in Part II, Item 7 of our AnnualReport on Form 10-K for the year ended December 31, 2009 and to thefootnote disclosures included in Part I, Item 1 of this Quarterly Report.

 

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**ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK.**

 

Notapplicable to smaller reporting companies.

 

**ITEM 4T.***   ***CONTROLS ANDPROCEDURES.**

 

We maintain a system ofdisclosure controls and procedures that is designed to ensure that informationrequired to be disclosed in our SEC reports is recorded, processed, summarized,and reported within the time periods specified in the SEC’s rules andforms, and to ensure that such information is accumulated and communicated toour management, including the Chief Executive Officer and the Acting ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosure.

 

As of March 31,2010, we carried out an evaluation, under the supervision and with theparticipation of our management, including the Chief Executive Officer and theActing Chief Financial Officer, of the effectiveness of the design andoperation of our disclosure controls and procedures.  Based upon thatevaluation, the Chief Executive Officer and the Acting Chief Financial Officerconcluded that our disclosure controls and procedures are effective for thepurposes discussed above as of the end of the period covered by this QuarterlyReport on Form 10-Q.

 

There was no change inour internal control over financial reporting that occurred during the three monthsended March 31, 2010 that has materially affected, or is reasonably likelyto materially affect, the effectiveness of our internal control over financialreporting.

 

**PART II - OTHER INFORMATION**

 

**ITEM 1.    LEGAL PROCEEDINGS.**

 

On March 5, 2008,PRB Energy and its subsidiaries filed voluntary petitions for relief for eachbusiness entity under Chapter 11 of the Bankruptcy Code in the BankruptcyCourt.  On January 16, 2009, theBankruptcy Court entered an order confirming PRB Energy’s and PRB Oil’s ModifiedSecond Amended Joint Plan of Reorganization. On February 2, 2009, PRB Energy and PRB Oil emerged from bankruptcyand PRB Energy changed its name to Black Raven Energy, Inc.  PRB Gathering emerged from Chapter 11Bankruptcy on February 17, 2010.

 

As of the date of filingof this Quarterly Report, we are not currently party to any material pendinglitigation.

 

**ITEM 1A.  RISK FACTORS.**

 

Therehave been no material changes to the risk factors contained in our AnnualReport on Form 10K for the year ended December 31, 2009.

 

**ITEM 5.  OTHER INFORMATION.**

 

Patrick A. Quinnwas appointed as contract Chief Financial Officer for the Company on an interimbasis as of January 10, 2010.   Hewill serve as the Principal and Accounting Officer of the Company.  Mr. Quinn is paid hourly for hisservices and will be included in the Company’s Equity Compensation Plan.

 

Mr. Quinnbrings more than 30 years of accounting experience to Black Raven, including 12years as the President of Quinn & Associates, P.C., which provides accounting,audit, tax and merger and acquisition consulting services to businesses in thereal estate, mining and oil and gas industries. He has served as the Controller of Hamilton Oil Corporation from 1981 to1986, the contract CFO of Teton Energy Corporation from 2004 to 2006 , and thecontract CFO of Intrepid Mining, LLC (predecessor to Intrepid Potash, Inc.(NYSE: IPI) from 2000 to 2008.  Mr. Quinnholds a Bachelor of Science degree in Accounting from Colorado StateUniversity.

 

Quinn &Associates, P.C. provides outsource accounting, financial and other advisoryservices to the Company.

 

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**ITEM 6.    EXHIBITS.**

 
| **Exhibit********Number** | ** ** | **Description**                                                                                                                                                                                                                                                                          |
|---------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                       |       | Modified Second Amended  Joint Plan of Reorganization Filed by PRB Energy, Inc. and PRB  Oil & Gas, Inc., dated December 3, 2008 (incorporated  herein by reference to Exhibit 99.1 to our Current Report on  Form 8-K filed on January 21, 2009) |
|                      |       |                                                                                                                                                                                                                                                                                     |
| 3.1                       |       | Amended and Restated  Articles of Incorporation of Black Raven Energy, Inc. (incorporated  herein by reference to Exhibit 3.1 to our Current Report on  Form 8-K filed on February 6, 2009)                                                                          |
|                      |       |                                                                                                                                                                                                                                                                                     |
| 3.2                       |       | Amended and Restated  Bylaws of Black Raven Energy, Inc. (incorporated herein by reference to  Exhibit 3.2 to our Current Report on Form 8-K filed on  February 6, 2009)                                                                                             |
|                      |       |                                                                                                                                                                                                                                                                                     |
| 4.1                       |       | Amended and Restated  Senior Secured Debenture (incorporated herein by reference to  Exhibit 4.1 to our Current Report on Form 8-K filed on  February 6, 2009)                                                                                                            |
|                      |       |                                                                                                                                                                                                                                                                                     |
| 31.1Ç                |       | Certification of the  Chief Executive Officer pursuant to Rule 13a-14(a) or  Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act                                                                |
|                      |       |                                                                                                                                                                                                                                                                                     |
| 31.2Ç                |       | Certification of the  Acting Chief Financial Officer pursuant to Rule 13a-14(a) or  Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act.                                                        |
|                      |       |                                                                                                                                                                                                                                                                                     |
| 32.1Ç                |       | Certification of the  Chief Executive Officer and Acting Chief Financial Officer pursuant to 18  U.S.C. Section 1350 as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act.                                                                                            |

 

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ÇFiled herewith.

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
| ** **              | **Black  Raven Energy, Inc.** |
|-------------------------|------------------------------------|
| ** **              | ** **                         |
| Date: May 21, 2010 | /s/ Thomas E.  Riley          |
|                    | Thomas E. Riley                    |
|                    | *Chief  Executive Officer*         |
|                    |                               |
| Date: May 21, 2010 | /s/ Patrick A.  Quinn         |
|                    | Patrick A. Quinn                   |
|                    | *Acting  Chief Financial Officer*  |

 

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