UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
 
 [X]
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
fiscal year ended December 31, 2008
 
 [  
      ]
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from __________ to ___________
 
 Commission
file number 000-28813
 
 NEW CENTURY ENERGY
CORP.
 (Exact
name of registrant as specified in its charter)
 
 COLORADO
                  
                  93-1192725(State
      or other jurisdiction of
                  
                  (IRS
      Employer Identification No.)incorporation
      or organization)
 
 1770 St. James Place, Suite
380, Houston, Texas 77056
 (Address
of principal executive offices)
 
 (713)
266-4344
 (Registrant's
telephone number)
 
 Securities
registered under Section 12(b) of the Exchange Act:
 
 NONE
 
 Securities
registered under Section 12(g) of the Exchange Act:
 
 COMMON
STOCK, $.001 PAR VALUE PER SHARE
 
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  o  No  þ
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes  o  No  þ
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ
 No
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.  o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 Large
      accelerated filer  o
              
              Accelerated
      filer  o
              
              Non-accelerated
      filer  o
              
              Smaller
      reporting company  þ(Do
      not check if a smaller reporting
company)
  Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes  o  No  þ
 
 The
aggregate market value of the issuer's voting and non-voting common equity held
by non-affiliates computed by reference to the average bid and ask price of such
common equity as of June 30, 2008, was approximately $10,160,189.
 
 APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
 PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
 
 Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
 Yes
[   ] No [   ].
  On July
28, 2008, the registrant filed voluntary petitions under Chapter 11 of the U.S.
Bankruptcy Code, in the United States Bankruptcy Court for the Southern District
of Texas. However, no receiver, fiscal agent or similar officer has been
appointed for the registrant to date, and accordingly, no plan has yet been
approved by a court.
 
 As of
March 15, 2009, the issuer had 56,010,612 shares of common stock, $0.001 par
value per share outstanding ("Common Stock"),
 
 Documents
Incorporated by Reference:
 
 NONE
 
 NEW
CENTURY ENERGY CORP.
 FORM
10-K
 YEAR
ENDED DECEMBER 31, 2008
 INDEX
 
 PART IItem
      1.
              Business
              4Item
      1A.
              Risk
      Factors
              8Item
      2.
              Properties
              15Item
      3.
              Legal
      Proceedings
              25Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              25PART IIItem
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              26Item
      6.
              Selected
      Financial Data
              26Item
      7.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              26Item
      8.
              Financial
      Statements and Supplementary Data
              F-1Item
      9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              38Item
      9A.
              Controls
      and Procedures
              38Item
      9B.
              Other
      Information
              40PART IIIItem
      10.
              Directors,
      Executive Officers, and Corporate Governance
              41Item
      11.
              Executive
      Compensation
              45Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              50Item
      13.
              Certain
      Relationships, Related Transactions, and Director
    Independence
              51Item
      14.
              Principal
      Accountant Fees and Services
              51PART
      IVItem
      15.
              Exhibits,
      Financial Statement Schedules
              52
 
 PART
I
 
 ITEM 1.
BUSINESS
 
 THE
FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS CONTAINS FORWARD
LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACT INCLUDED IN THIS SECTION REGARDING OUR FINANCIAL
POSITION AND LIQUIDITY, STRATEGIC ALTERNATIVES, FUTURE CAPITAL NEEDS, BUSINESS
STRATEGIES AND OTHER PLANS AND OBJECTIVES OF OUR MANAGEMENT FOR FUTURE
OPERATIONS AND ACTIVITIES, ARE FORWARD LOOKING STATEMENTS. THESE STATEMENTS ARE
BASED ON CERTAIN ASSUMPTIONS AND ANALYSES MADE BY OUR MANAGEMENT IN LIGHT OF ITS
EXPERIENCE AND ITS PERCEPTION OF HISTORICAL TRENDS, CURRENT CONDITIONS, EXPECTED
FUTURE DEVELOPMENTS AND OTHER FACTORS IT BELIEVES ARE APPROPRIATE UNDER THE
CIRCUMSTANCES. SUCH FORWARD LOOKING STATEMENTS ARE SUBJECT TO UNCERTAINTIES THAT
COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH STATEMENTS. SUCH
UNCERTAINTIES INCLUDE BUT ARE NOT LIMITED TO: THE VOLATILITY OF THE OIL AND GAS
INDUSTRY; CHANGES IN COMPETITIVE FACTORS AFFECTING OUR OPERATIONS; RISKS
ASSOCIATED WITH THE ACQUISITION OF MATURE OIL AND GAS PROPERTIES, INCLUDING
ESTIMATES OF RECOVERABLE RESERVES, FUTURE OIL AND GAS PRICES AND POTENTIAL
ENVIRONMENTAL AND PLUGGING AND ABANDONMENT LIABILITIES; OUR DEPENDENCE ON KEY
PERSONNEL AND CERTAIN CUSTOMERS; RISKS OF OUR GROWTH STRATEGY, INCLUDING THE
INHERENT RISK IN ACQUIRING MATURE OIL AND GAS PROPERTIES; OPERATING HAZARDS,
INCLUDING THE SIGNIFICANT POSSIBILITY OF ACCIDENTS RESULTING IN PERSONAL INJURY,
PROPERTY DAMAGE OR ENVIRONMENTAL DAMAGE; THE EFFECT ON OUR PERFORMANCE OF
REGULATORY PROGRAMS AND ENVIRONMENTAL MATTERS INCLUDING POLITICAL AND ECONOMIC
UNCERTAINTIES. ALTHOUGH WE BELIEVE THAT THE EXPECTATION REFLECTED IN SUCH
FORWARD LOOKING STATEMENTS ARE REASONABLE, WE CAN GIVE NO ASSURANCE THAT SUCH
EXPECTATIONS WILL PROVE TO BE CORRECT. YOU ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
HEREOF. WE UNDERTAKE NO OBLIGATION TO UPDATE ANY OF OUR FORWARD LOOKING
STATEMENTS FOR ANY REASON. REFERENCES TO "NEW CENTURY", "THE COMPANY", "WE",
"US" OR "OUR" AS USED THROUGHOUT THIS FORM 10-K REFER TO NEW CENTURY ENERGY
CORP. AND ITS WHOLLY OWNED SUBSIDIARIES, GULF COAST OIL CORPORATION AND CENTURY
RESOURCES, INC. UNLESS OTHERWISE STATED, OR THE CONTEXT APPEARS OTHERWISE.
REFERENCES IN THIS FORM 10-K, UNLESS ANOTHER DATE IS STATED, ARE TO DECEMBER 31,
2008.
 
 Information
regarding certain technical oil and gas exploration terms which are used
throughout this Form 10-K can be found in the "Glossary of Oil and Gas Terms,"
incorporated by reference into this Form 10-K as exhibit 99.1.
 
 Overview
 
 New
Century Energy Corp. (the "Company"), was incorporated in Colorado on April 18,
1997 as "Perfection Development Corporation." On September 29, 1998, the Company
entered into an agreement pursuant to which it would acquire all of the
outstanding capital stock of Vertica Software, Inc., a California corporation
("Vertica California"). On December 31, 1998, Vertica California merged with and
into the Company. The Company was the surviving corporation in the merger and
the separate corporate existence of Vertica California ceased.
  Concurrently
with the merger, the Company changed its name from Perfection Development
Corporation to Vertica Software, Inc. ("Vertica").  On February 1, 2002,
the Company's charter was automatically revoked by the Colorado Secretary of
State for failure to file a periodic report. Because of the Colorado statute at
that time, once a charter was revoked it could not be renewed and the Company
was forced to file new Articles of Incorporation with the Colorado Secretary of
State, which it did on December 22, 2003, as Vertica Software, Inc. The Company
filed a Statement of Merger with the Colorado Secretary of State to merge its
former Colorado filings as Perfection Development Corporation/Vertica Software,
Inc., with its current filings as New Century Energy Corp.
 
 On
September 30, 2004, the Company acquired 100% of the issued and outstanding
common stock of Century Resources, Inc., a Delaware Corporation ("Century"),
which was originally established for the acquisition, development, production,
exploration for, and the sale of oil and natural gas in Texas, in exchange for
37,500,000 newly issued shares of the Company's common stock, pursuant to an
Agreement and Plan of Reorganization whereby Century became a wholly-owned
subsidiary of the Company (the "Exchange"). On October 26, 2004, in connection
with its new business focus, the Company filed Articles of Amendment with the
Colorado Secretary of State, to change its name to "New Century Energy Corp."
which name change became effective on November 1, 2004.
  Bankruptcy
Filing
 
 On July
28, 2008, New Century Energy Corp. and its subsidiaries Gulf Coast Oil
Corporation and Century Resources, Inc. (the “Debtors”) filed voluntary
petitions under Chapter 11 of the U.S. Bankruptcy Code, in the United States
Bankruptcy Court for the Southern District of Texas, in order to facilitate
their financial restructuring in connection with the Company’s default on the
Secured Convertible Term Note with Laurus Master Fund, Ltd., as discussed in
more detail below.  As of the date of this report, no receiver, fiscal
agent or similar officer has been appointed for the
Company.  Accordingly, we urge that caution be exercised with respect
to existing and future investments in our equity securities.
 -4-
 For the
duration of our Chapter 11 proceedings, our operations, including our
ability to execute our business plan, are subject to the risks and uncertainties
associated with Bankruptcy as described below under “Risk
Factors.”  As such, and because the Company’s structure, including the
Company’s number of outstanding shares, shareholders, majority shareholders,
assets, liabilities, officers and/or Directors may be significantly different
following the outcome of our pending Bankruptcy proceedings as compared to our
entry into Chapter 11 Bankruptcy, the description of business operations,
planned operations and properties described below may not accurately reflect the
Company’s operations and business plans following the Company’s Bankruptcy
reorganization.
 
 The
Company filed a Motion in the United States Bankruptcy Court for the Southern
District of Texas Houston Division (the “Court” or “Bankruptcy Court”) for Joint
Administration of the New Century Energy Corp. case, the Gulf Coast Oil
Corporation case and the Century Resources, Inc. case and on August 13, 2008 the
Court approved the Order for Joint Administration whereby the cases would be
jointly administered under Case No. 08-50213 and that all further docketing
should be done in case number 08-50213.
 
 On
September 29, 2008, the Bankruptcy Court, approved the Stipulated Final Order
Authorizing Use of Cash Collateral (the “Cash Collateral Order”) for the period
of July 28, 2008, the date the Company commenced its Chapter 11 cases (the
“Petition Date”), to January 23, 2009 (the “Cash Collateral Use Period”), unless
this Cash Collateral Use Period is terminated earlier pursuant to the terms of
the Cash Collateral Order.  Under this Cash Collateral Order, the
Company is permitted to use cash collateral to pay the expenses set forth on the
agreed budget through the period ending November 28, 2008 to pay the “Adequate
Protection Payment” of $750,000 per month commencing September 15, 2008 and
continuing during the term of the Cash Collateral Use Period to Laurus Master
Fund Ltd. (“Laurus”) commencing on September 15, 2008 and continuing during the
term of the Cash Collateral Use Period. The Cash Collateral Order contained
certain deadlines regarding the Debtors' filing and confirmation of a plan of
reorganization. The Cash Collateral Order provided that the automatic stay as to
Laurus would be lifted without further order unless the deadlines were met.
Because those deadlines were not met, the automatic stay with respect to
Laurus's liens was lifted on January 18, 2009.
  On
October 27, 2008 the Bankruptcy Court issued an Order Under 11 U.S.C.§§105(A)
and 363(C) Authorizing Payment of Prepetition Claims of Critical Vendors (the
“Critical Vendor Order”).  Pursuant to this order, the Company is
authorized to pay prepetition fixed, liquidated and undisputed claims of certain
suppliers of materials, goods and services (the “Critical Vendors”) which whom
the Company continues to do business and whose goods and services are essential
to the continued operations of the Company.  The order also provided
that if a Critical Vendor accepts payments pursuant to the order, such Critical
Vendor is deemed to have agreed to continue to provide services to the Company
on as good as or better terms and conditions that existed ninety days prior to
the Petition Date of July 28, 2008.
 
 On November 3, 2008, a hearing was conducted in the Court to hear
the Debtor’s Expedited Motion to Determine the Amount of Laurus Master Fund
Ltd.’s (“Laurus”) Secured Claim, which sought an order of the Bankruptcy Court
determining Laurus’s entitlement to certain types of damages and penalties as
part of its secured claim.  Prior to filing the Motion the Debtors had
agreed, and a Court Order was entered confirming Laurus’s secured claim in the
amount of at least $66 million.  Thus the purpose of the Motion was to
determine if Laurus is entitled to a claim in excess of $66
million.  In light of the agreement with Laurus to limit the amount of
its credit bid on the Debtors’ Properties to $75 million, the Debtors have
withdrawn the Motion to Determine Amount of Laurus’s Secured
Claim.
 
 On
November 7, 2008, the Debtors filed their Joint Plan of Reorganization (the
“Original Plan”).  The Original Plan contemplated the restructuring of
the obligations under the Notes by the issuance of new notes that would pay in
full the obligations owed to Laurus.  Because of the continuing
decrease in oil and gas prices during the later half of 2008 and continuing into
2009, the Debtors determined that it could not confirm the Original
Plan.  Accordingly, the Debtors withdrew the Original
Plan.
 
 On
December 19, 2008, the Debtors filed their Motion Pursuant to Sections 105, 363,
and 365 of the Bankruptcy Code for an Order Authorizing the Sale Free and Clear
of All Liens, Claims and Encumbrances and for Assumption and Assignment of
Executory Contracts.  The Sale Motion was heard by the Bankruptcy
Court on January 26, 2009.  On January 28, 2009, the Bankruptcy Court
denied the Sale Motion (Docket No. 211), and the Bankruptcy Court issued its
findings of fact and conclusions of law on February 12, 2009 (Docket No.
237).
 
 On March
13, 2009, the Debtors filed a “First Amended Joint Plan of Reorganization Under
Chapter 11, Title 11 of the United States Code” (the “Plan”) with the United
States Bankruptcy Court for the Southern District of Texas, Houston Division
(the “Court”) in connection with the Company’s pending Chapter 11 Bankruptcy
proceedings (the “Bankruptcy” and/or the “Bankruptcy Proceeding”).
 
 The Plan
is proposed as a joint plan of reorganization for the Company and its affiliates
under its pending Bankruptcy Proceeding.  The purpose of the Plan is
to orderly liquidate the Company’s Property.  The Plan is subject to
the approval of the Court and the approval by the creditors of the Company (the
“Creditors”) as described in the Plan.
 
 The
following is a summary of certain of the material terms of the
Plan.
 -5-
 Pursuant
to the Plan:
 
 ·
              each
      Allowed Administrative Claim (as defined in the Plan) will receive, in
      full satisfaction, settlement, release, and discharge of and in exchange
      for such Allowed Administrative Claim (a) Cash equal to the unpaid portion
      of such Allowed Administrative Claim or (b) such other treatment as to
      which the Company and such holder have agreed upon in writing; provided,
      however, that Allowed Administrative Claims with respect to liabilities
      incurred by the Company in the ordinary course of business during the
      Chapter 11 Cases will be paid in the ordinary course of business in
      accordance with the terms and conditions of any agreements relating
      thereto;
 
 ·
              Laurus
      Master Fund, Ltd. and its assigns (“Laurus”), the Company’s largest
      creditor will receive in full satisfaction, settlement, release and
      discharge of and in exchange for all of its claims, substantially all of
      the proceeds from the sale of substantially all of the Company’s Assets
      (as described below); and
 
 ·
              each
      holder of certain general unsecured claims, as described in the Plan will
      receive cash equal to their ratable share of the Unsecured Creditors Fund
      (as defined in the Plan).
 
 The Plan
constitutes a motion under section 363 of the United States Bankruptcy Code to
sell all of the Company’s assets, personal and real, tangible and intangible,
including but not limited to its interests in realty, minerals, oil and gas
leases and properties (collectively the “Assets”) pursuant to the terms of an
Asset Purchase Agreement by and between the Company, NCEY Holdings Corp.
(“NCEY”, described in greater detail below) and Brazos Lateral Holdings Corp.
(the “Purchase Agreement”), and the Plan, at a hearing to be held as described
and approved in the Plan.
 
 The Plan
anticipates the formation of a new holding company, NCEY, which will be
transferred the Assets following the approval of the Plan and sale of the Assets
(assuming Laurus is the high bidder for such Assets) pursuant to the Purchase
Agreement.  It is currently contemplated that NCEY may employ certain
current members of the management and technical team of the Company, including
Edward R. DeStefano, the Company’s current Chief Executive Officer and sole
Director,  the Company’s Chief Financial Officer and  the Company’s
Controller, among other persons.  Management and technical employees may be
awarded ownership of certain of NCEY’s securities at the discretion of the CEO
and Laurus, which ownership and which employment has not been finalized to
date.  Aside from Laurus and certain members of the Company’s management
and technical team, it is not anticipated that there will be any other initial
shareholders of NCEY.
  For the
purposes of bidding at the sale, the Company and Laurus have agreed that Laurus
may credit bid for the Company’s Assets, and including any cash on hand, up to
$75 million.  If Laurus is the winning bidder at the sale, unless the
net sales price is greater than $75 million, then all cash on hand as well as
the Company’s Assets will be distributed to Laurus, NCEY Holdings Corp., and/or
Brazos Lateral Holdings Corp.  If the sale of the Company’s Assets
results in net proceeds in excess of $75 million, then $75 million will be
distributed to Laurus, and any remaining proceeds will be as provided in the
Plan. The Company does not anticipate that the sale of the Assets will exceed
$75 million.
 
 The cash
on hand that the Company has and the net proceeds of the sale of the Assets, if
any, will result in cash available for distribution to Creditors as provided
under the Plan, as described above, and as described in greater detail in the
Plan.
 
 The Plan
also provides that Broadpoint Capital, Inc. (“Broadpoint”), which was the
Company’s financial advisor from the date of the Company’s entry into
Bankruptcy, until February 10, 2009, shall receive the total sum of $326,000,
and shall be allowed to keep the moneys it has previously received from the
Company, in full and final satisfaction of its claims against the
Company.
 
 Additionally,
pursuant to the Plan, each equity owner of New Century Energy Corp., Century
Resources, Inc. and Gulf Coast Oil Corporation will have any and all rights
related to or arising from such owners’ common stock or other securities of any
of the above entities cancelled and extinguished on the date the Court approves
the Plan, assuming such Plan is approved by the Court (the “Effective Date”) and
the Company and its subsidiaries will be dissolved and will cease doing business
on the Effective Date.
 
 On March
13, 2009, the Debtors also filed the “First Amended Disclosure Statement with
Respect to Joint Plan of Reorganization under Chapter 11, Title 11 of the
Debtors” (the “Disclosure Statement”), pursuant to section 1125 of the
Bankruptcy Code, for use in the solicitation of votes on the
Plan.  This Disclosure Statement set forth certain information
regarding the Debtors’ prepetition operating and financial history, their need
to seek chapter 11 protection, significant events that have occurred during the
Chapter 11 Cases and the anticipated liquidation of the Debtors under the Plan.
This Disclosure Statement also describes terms and provisions of the Plan,
including certain alternatives to the Plan, certain effects of confirmation of
the Plan, and the manner in which distributions will be made under the
Plan.  In addition, this Disclosure Statement discusses the
confirmation process and the voting procedures that holders of Claims entitled
to vote under the Plan must follow for their votes to be counted.
 
 The
hearing to consider confirmation of the Plan (the “Confirmation Hearing”) is
scheduled for May 8, 2009 at 2:00PM before the Bankruptcy Court, conditioned
upon the approval of the Disclosure Statement at the hearing scheduled for April
27, 2009 (the “Disclosure Statement Hearing”).
 
 As a
result of the Chapter 11 filings, realization of assets and liquidation of
liabilities are subject to uncertainty. While operating as debtors-in-possession
under the protection of Chapter 11 of the Bankruptcy Code, the Debtors may
sell or otherwise dispose of assets and liquidate or settle liabilities for
amounts other than those reflected in the consolidated financial statements, in
the ordinary course of business, or, if outside the ordinary course of business,
subject to Bankruptcy Court approval.
 -6-
 Going
Concern
 
 The
Company is operating pursuant to Chapter 11 of the Bankruptcy Code and
continuation of the Company as a going concern is contingent upon, among other
things, the Company’s ability to (i) construct and obtain confirmation of a plan
of reorganization under the Bankruptcy Code; (ii) achieve profitability;
(iii) achieve sufficient cash flows from operations; and (iv) obtain
financing to meet the Company’s future obligations. These matters create
substantial doubt about the Company’s ability to continue as a going concern.
The accompanying consolidated financial statements do not reflect any
adjustments relating to the recoverability of assets and the classification of
liabilities that might result from the outcome of these uncertainties. In
addition, a plan of reorganization could materially change the amounts and
classifications reported in the consolidated financial statements which do not
give effect to any adjustments to the carrying values of assets or amounts of
liabilities that might be necessary as a consequence of confirmation of a plan
of reorganization.
 
 Research and
Development
 
 We
currently own licenses to 2-D seismic surveys and data over the South Sargent
Field, Prado Field, the San Miguel Creek Field, and Mustang Creek Field and we
plan to continue reprocessing and interpretation projects using this
data.
 
 Employees
 
 We have
eight (8) contract employees, five (5) of whom are employed in field operations.
We also have three (3) full-time employees who work for us, our Chief Executive
Officer, Edward R. DeStefano (who also serves as President, Treasurer, Secretary
and Director), our controller and a staff accountant.  We also have
one (1) part-time employee who works for us, our Chief Financial Officer, Ken
Cleveland.
 
 Competition
 
 We face
competition from numerous other oil and gas exploration and development
companies, which have greater resources than we do and may be better able to
find and extract commercial quantities of oil and gas and may be able to offer
their oil and gas products at prices lower than we can.
 
 Patents, Trademarks and
Licenses
 
 As an oil
and gas operator in Texas, we are required to have a Texas Railroad Commission
Operator number, which number is 141835. Additionally, we are required to, and
have certain bonds in connection with our oil and gas exploration activities. We
may also be required to obtain other permits from government agencies depending
on the location of future exploration plans. We do not currently hold any
patents or trademarks.
 
 Government
Regulation
 
 Various
federal, state and local laws regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment,
directly impact our oil and gas exploration, development and production
operations, and consequently may impact our operations and costs. These
regulations include, among others, (i) regulations by the Environmental
Protection Agency and various state agencies regarding approved methods of
disposal for certain hazardous and non-hazardous wastes; (ii) the Comprehensive
Environmental Response, Compensation, and Liability Act, Federal Resource
Conservation and Recovery Act and analogous state laws which regulate the
removal or remediation of previously disposed wastes (including wastes disposed
of or released by prior owners or operators), property contamination (including
groundwater contamination), and remedial plugging operations to prevent future
contamination; (iii) the Clean Air Act and comparable state and local
requirements which may result in the gradual imposition of certain pollution
control requirements with respect to air emissions from our operations; (iv) the
Oil Pollution Act of 1990 which contains numerous requirements relating to the
prevention of and response to oil spills into waters of the United States; (v)
the Resource Conservation and Recovery Act which is the principal federal
statute governing the treatment, storage and disposal of hazardous wastes; and
(vi) state regulations and statutes governing the handling, treatment, storage
and disposal of naturally occurring radioactive material.  Management
believes that we are in substantial compliance with applicable environmental
laws and regulations. To date, we have not expended any material amounts to
comply with such regulations, and management does not currently anticipate that
future compliance will have a materially adverse effect on our consolidated
financial position, results of operations or cash flows. However, if we are
deemed not to be in compliance with applicable environmental laws, we could be
forced to expend substantial amounts to be in compliance, which would have a
materially adverse effect on our available cash and liquidity.
 -7-
 ITEM 1A. RISK
FACTORS
 
 Our
business is subject to many risk factors, including the following (references to
"our," "us," "we," and words of similar meaning in these Risk Factors refer to
the Company, the Company's wholly owned subsidiary Century Resources, Inc.
("Century"), and the Company's wholly owned subsidiary Gulf Coast Oil
Corporation ("Gulf Coast"), unless the context suggests otherwise).
 
 RISK
FACTORS SPECIFICALLY RELATED TO OUR CURRENT REORGANIZATION
CASES
 UNDER
CHAPTER 11 OF THE U.S. BANKRUPTCY CODE
 
 WE
FILED FOR REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE ON JULY 28,
2008 AND ARE SUBJECT TO THE RISKS AND UNCERTAINTIES ASSOCIATED WITH
CHAPTER 11 PROCEEDINGS.
  For the
duration of our Chapter 11 proceedings, our operations, including our
ability to execute our business plan, are subject to the risks and uncertainties
associated with bankruptcy.  Risks and uncertainties associated with
our Chapter 11 proceedings include the following:
  ·
              our
      ability to prosecute, confirm and consummate a Plan of Reorganization (the
      “Plan”), which has not yet been proposed as of the date of this
      filing;
  ·
              the
      actions and decisions of our creditors and other third parties who have
      interests in our Chapter 11 proceedings that may be inconsistent with
      our plans;·
              our
      ability to obtain court approval with respect to motions in the
      Chapter 11 proceedings prosecuted from time to
  time;
  ·
              our
      ability to obtain and maintain normal terms with consultants, vendors and
      service providers;
  ·
              our
      ability to maintain contracts that are critical to our operations;
      and
  ·
              risks
      associated with third parties seeking and obtaining court approval to
      terminate or shorten the exclusivity period for us to confirm a proposed
      Plan, to appoint a Chapter 11 trustee or to convert such Bankruptcy to a
      Chapter 7 proceeding.
 
 These
risks and uncertainties could affect our business and operations in various
ways. For example, negative events or publicity associated with our
Chapter 11 proceedings could adversely affect our revenues and the
relationship with our customers, as well as with vendors and employees, which in
turn could adversely affect our operations and financial condition, particularly
if the Chapter 11 proceedings are unexpectedly protracted. Also,
transactions outside the ordinary course of business are subject to the prior
approval of the Bankruptcy Court, which may limit our ability to respond timely
to certain events or take advantage of certain opportunities.
 
 Because
of the risks and uncertainties associated with our Chapter 11 proceedings,
the ultimate impact that events that occur during these proceedings will have on
our business, financial condition and results of operations cannot be accurately
predicted or quantified.  Additionally, the result of any confirmed
Plan may result in substantial dilution of our existing shareholders, the sale
of substantially all of our assets, and/or the failure of the Company to
continue as a publicly reporting company, which could cause any investment in
the Company to become worthless.
  On
September 29, 2008, the United States bankruptcy Court for the Southern District
of Texas, Houston Division, approved the Stipulated Final Order Authorizing Use
of Cash Collateral from the period of July 28, 2008, the date the Company
commenced its Chapter 11 Bankruptcy (the “Petition Date”), to January 23, 2009,
unless the Cash Collateral Use Period is terminated earlier pursuant to the
terms of the Order.  Under this Order, the Debtors are permitted to
use cash collateral to pay the expenses set forth on an agreed budget through
the period ending November 28, 2008; to pay the “Adequate Protection Payment” to
Laurus of $750,000 per month commencing September 15, 2008 and continuing during
the term of the Cash Collateral Use Period. The Cash Collateral Order contained
certain deadlines regarding the Debtors' filing and confirmation of a plan of
reorganization. The Cash Collateral Order provided that the automatic stay as to
Laurus would be lifted without further order unless the deadlines were met.
Because those deadlines were not met, the automatic stay with respect to
Laurus's liens was lifted on January 18, 2009.
 
 A
LONG PERIOD OF OPERATIONS UNDER CHAPTER 11 BANKRUPTCY MAY HARM OUR
BUSINESS.
 
 A long
period of operations under Chapter 11 Bankruptcy could adversely affect our
business and operations. So long as our Chapter 11 reorganization (“Chapter
11”) continues, our senior management will be required to spend a significant amount of time and
effort dealing with the Bankruptcy reorganization instead of focusing
exclusively on our business operations. A prolonged period of operating under
Chapter 11 may also make it more difficult to attract and retain management
and other key personnel necessary to the success and growth of our business. In
addition, the longer the Chapter 11 reorganization proceedings continue,
the more likely it is that our contractors and suppliers will lose confidence in
our ability to successfully reorganize our businesses and seek to establish
alternative commercial relationships.
 -8-
 Furthermore,
so long as the Chapter 11 proceedings continue, we will be required to
incur substantial costs for professional fees and other expenses associated with
the administration of the cases. A prolonged continuation of the Chapter 11
cases may also require us to seek financing. If we require financing during the
Chapter 11 cases and we are unable to obtain the financing on favorable
terms or at all, our chances of successfully reorganizing our businesses may be
seriously jeopardized, and as a result, any securities in the Company could
become devalued or become worthless.
 
 WE
MAY NOT BE ABLE TO OBTAIN CONFIRMATION OF A CHAPTER 11 REORGANIZATION
PLAN.
 
 On March
13, 2009, the Debtors filed a "First Amended Joint Plan of Reorganization Under
Chapter 11, Title 11 of the United States Code" (the "Plan") with the United
States Bankruptcy Court for the Southern District of Texas, Houston Division in
connection with the Company's pending Chapter 11 Bankruptcy proceedings (the
"Bankruptcy" and/or the "Bankruptcy Proceeding"). The Plan is proposed as a
joint plan of reorganization for the Company and its affiliates under its
pending Bankruptcy Proceeding. The purpose of the Plan is to orderly liquidate
the Company's Property. The Plan is subject to the approval of the Court and the
approval by the creditors of the Company as described in the Plan. To
successfully emerge from Chapter 11 Bankruptcy protection as a viable
entity, we must meet certain statutory requirements with respect to adequacy of
disclosure with respect to the Plan, soliciting and obtaining the requisite
acceptances of the Plan, and fulfilling other statutory conditions for
confirmation, which have not occurred to date. We may not receive the requisite
acceptances to confirm our Plan or any other plan of reorganization that we may
submit to the Bankruptcy Court in the future. Even if the requisite acceptances
of the Plan are received, the Bankruptcy Court may not confirm the
Plan.  Furthermore, the Plan calls for the cancellation and
extinguishment of any and all rights related to or arising from such owners’
common stock or other securities of each equity owner of New Century Energy
Corp., Century Resources, Inc. and Gulf Coast Oil Corporation and that the
Company and its subsidiaries will be dissolved and will cease doing business on
the Effective Date.
 
 If any
future plan of reorganization is not confirmed by the Bankruptcy Court, it is
unclear whether we would be able to reorganize our businesses and what, if
anything, holders of claims against us would ultimately receive with respect to
their claims. If an alternative reorganization could not be agreed upon, it is
possible that we would have to liquidate our assets, in which case it is likely
that holders of claims would receive substantially less favorable treatment than
they would receive if we were to emerge as a viable, reorganized entity. If the
Plan is approved, all equity interests of the Company’s shareholders will be
cancelled and extinguished, and will therefore become worthless.
 
 A
PLAN OF REORGANIZATION MAY RESULT IN HOLDERS OF OUR COMMON STOCK RECEIVING NO
DISTRIBUTION ON ACCOUNT OF THEIR INTERESTS AND CANCELLATION OF THEIR COMMON
STOCK. THE CURRENT PLAN OF REORGANIZATION CONTEMPLATES THE CANCELLATION OF ALL
SHARES OF COMMON STOCK OF THE COMPANY.
 
 Under the
priority scheme established by the Bankruptcy Code, unless creditors agree
otherwise, post-petition liabilities and prepetition liabilities must be
satisfied in full before stockholders are entitled to receive any distribution
or retain any property under a plan of reorganization. The ultimate recovery to
creditors and/or stockholders, if any, will not be determined until confirmation
of a plan or plans of reorganization. No assurance can be given as to what
values, if any, will be ascribed in the Chapter 11 Bankruptcy proceeding to
each of these constituencies or what types or amounts of distributions, if any,
they would receive. A plan of reorganization could result in holders of our
common stock receiving no distribution on account of their interests and may
even result in the cancellation of their existing stock, as is currently
anticipated by the Plan. If certain requirements of the Bankruptcy Code are met,
a plan of reorganization, including the Plan, can be confirmed notwithstanding
its rejection by the class comprising the interests of our equity security
holders. Therefore, an investment in our common stock is highly speculative and
may become worthless in the future upon approval of the Plan, without any
required approval of consent of such shareholders.
  ANY
INTEREST THAT SHAREHOLDERS OWN IN THE COMPANY LIKELY WILL BE CANCELLED DUE TO
OUR FINAL CHAPTER 11 REORGANIZATION AND WE LIKELY WILL CEASE TO TRADE OUR COMMON
STOCK IN THE FUTURE.
 
 The
result of our petitions for Chapter 11 Bankruptcy protection likely will
be that all of our operations will cease and all of our securities will be
cancelled following the approval of the Plan. As a result, current and potential
investors should be aware that any interest they hold in the Company may
decrease in value and/or be substantially diluted, or become worthless through
the bankruptcy proceeding.
 
 OPERATING
UNDER THE U.S. BANKRUPTCY CODE MAY RESTRICT OUR ABILITY TO PURSUE OUR BUSINESS
STRATEGIES.
 
 Under the Bankruptcy Code, all debtors
must obtain Bankruptcy Court approval to, among other things:
 
 •
              sell
      assets outside the ordinary course of business;•
              consolidate,
      merge, sell or otherwise dispose of all or substantially all of our
      assets; and•
              obtain
      financing secured by the Company’s
assets.
 
 In
addition, if a trustee is appointed to operate the Company while in
Chapter 11 Bankruptcy, the trustee would assume control of our
assets.
 -9-
 WE
MAY BE UNABLE TO RAISE THE ADDITIONAL CAPITAL NEEDED TO FUND OUR BUSINESSES,
WHICH WOULD PREVENT US FROM CONTINUING OPERATIONS, EVEN IF SUBSTANTIALLY ALL OF
OUR DEBTS ARE DISCHARGED THROUGH THE BANKRUPTCY PROCEEDING.
 
 Even if
our debts are reduced or discharged through the Bankruptcy proceeding, and we
continue our business operations, we may need to raise additional funds through
public or private debt or equity financing or other various means to fund our
business after the completion of such bankruptcy proceedings. In such a case,
adequate funds may not be available when needed or may not be available on
favorable terms. If we need to raise additional funds in the future, by issuing
equity securities, dilution to existing stockholders will result, and such
securities may have rights, preferences and privileges senior to those of our
common stock. We may be unable to raise additional funds by issuing debt
securities due to our high leverage and due to restrictive covenants contained
in our senior debt, assuming such senior debt is not fully discharged by the
Bankruptcy Court, of which there can be no assurance, which may restrict our
ability to expend or raise capital in the future. If funding is insufficient at
any time in the future and we are unable to generate sufficient revenue from new
business arrangements, we will be unable to continue in our current form and
will be forced to restructure or seek creditor protection.
 
 RISKS
RELATING TO OUR OPERATIONS
 
 As
described above, the current Plan, contemplates that all of our operations will
cease and all of our securities will be cancelled following the approval of the
Plan.  The below risk factors describe the ongoing risks associated
with our operations and securities assuming that the Plan is not approved and
such operations continue following the date of this report, which, as described
above, is not currently contemplated or expected.
 
 OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS ISSUED AN UNQUALIFIED OPINION
WITH AN EXPLANATORY PARAGRAPH, TO THE EFFECT THAT THERE IS SUBSTANTIAL DOUBT
ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
 
 Our
independent registered public accounting firm has issued an unqualified opinion
with an explanatory paragraph, to the effect that there is substantial doubt
about our ability to continue as a going concern. This unqualified opinion with
an explanatory paragraph could have a material adverse effect on our business,
financial condition, results of operations and cash flows. See “Liquidity and
Capital Resources” in Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and Note 2 to
our consolidated financial statements included elsewhere in this Annual Report
on Form 10-K.
 
 We have
no committed sources of capital and do not know whether additional financing
will be available when needed on terms that are acceptable, if at all. The
addition of this going concern statement from our independent registered public
accounting firm may discourage some investors from purchasing our stock or
providing alternative capital financing. The failure to satisfy our capital
requirements will adversely affect our business, financial condition, results of
operations and prospects.
 
 Unless we
raise additional funds, either through the sale of equity securities or one or
more collaborative arrangements, we will not have sufficient funds to continue
operations. Even if we take these actions, they may be insufficient,
particularly if our costs are higher than projected or unforeseen expenses
arise.
 
 WE
WILL NEED ADDITIONAL FINANCING TO CONTINUE OUR BUSINESS PLAN AND DRILL,
RECOMPLETE AND STUDY ADDITIONAL WELLS, WHICH FINANCING, IF WE ARE UNABLE TO
RAISE MAY FORCE US TO SCALE BACK OR ABANDON OUR BUSINESS PLAN.
 
 We raised
$15,000,000 from the sale of a Secured Convertible Term Note to Laurus Master
Fund, Ltd. ("Laurus"); $3,675 from Laurus' exercise of a portion of the Option;
and $9,500,000 from the sale of a separate Secured Term Note to Laurus in 2005.
Additionally, our wholly owned subsidiary, Gulf Coast Oil Corporation ("Gulf
Coast") borrowed an aggregate of $45,000,000 from Laurus during the second
quarter of 2006. However, approximately $61,401,097 of the aggregate of
$85,713,675 which was borrowed from Laurus, was immediately used to purchase
interests in the Wishbone field and interests in McMullen, County, Texas; pay
closing costs and fees in connection with the various funding transactions; and
to repay amounts previously owed. Additionally, in December 2006, we sold Laurus
a Secured Term Note in the amount of $16,210,000, of which $10,000,000 was
immediately used to repay the balance of the $5,000,000 Gulf Coast note, and a
portion of the $40,000,000 Gulf Coast note (the "December 2006
Note").
 
 We also
raised $7,100,000 on November 20, 2007 when Gulf Coast entered into a Securities
Purchase Agreement with LV Administrative Services, Inc., as administrative and
collateral agent (the “Agent”) for Valens U.S. SPV I, LLC (“Valens
U.S.”) and Valens Offshore SPV II, Corp. (“Valens Offshore”), whereby Gulf
Coast sold Valens U.S. a Secured Term Note in the amount of $3,100,000 and
Valens Offshore a Secured Term Note in the amount of
$4,000,000.  Lastly, we raised an additional $5,300,000 on November
30, 2007 when New Century entered into a Securities Purchase Agreement with the
Agent for Valens U.S. and Valens Offshore, whereby we sold Valens U.S. a Secured
Term Note in the amount of $2,300,000 and Valens Offshore a Secured Term Note in
the amount of $3,000,000.
 -10-
 As
described above, we entered Bankruptcy proceedings in July 2008, and as a
result, as of December 31, 2008, we had $2,630,540 of cash, plus restricted cash
of $4,007 as of December 31, 2008. Based on our current plan of operations, we
do not have sufficient funds for the next 12 months. We believe that we will
require additional funds to continue our oil and gas exploration and production
program, assuming such program continues following our exit from Bankruptcy,
which is not currently anticipated. There can be no assurance that additional
financing will be available to us when needed or, if available, that it can be
obtained on commercially reasonable terms.  We can provide no
assurance that additional financing will be available on favorable terms, if at
all. If we are not able to raise the capital necessary to continue our business
operations, we may be forced to abandon or curtail our business plan and/or
suspend any exploration activities which continue following our Bankruptcy
proceedings.  As contemplated by the current Plan, all of our
operations will cease and all of our securities will be cancelled following the
approval of the Plan, as described in greater detail above.
  WE
RELY HEAVILY ON EDWARD R. DESTEFANO, OUR CHIEF EXECUTIVE OFFICER AND DIRECTOR,
AND IF HE WERE TO LEAVE, WE COULD FACE SUBSTANTIAL COSTS IN SECURING A SIMILARLY
QUALIFIED OFFICER AND DIRECTOR.
 
 Our
success depends upon the personal efforts and abilities of Edward R. DeStefano,
our sole Director and our President, Chief Executive Officer, Treasurer and
Secretary. Our ability to operate and implement our exploration activities is
heavily dependent on the continued service of Mr. DeStefano and our ability to
attract qualified contractors on an as-needed basis. We face continued
competition for such contractors. We do have an employment contract, as amended,
with Mr. DeStefano which is effective for three years ending on December 31,
2010; and we currently have key man insurance on Mr. DeStefano in the amount of
$1,000,000. Mr. DeStefano is our driving force and is responsible for
maintaining our relationships and operations. We cannot be certain that we will
be able to retain Mr. DeStefano and/or attract and retain such contractors in
the future and/or that he will not terminate his employment agreement with us.
The loss of Mr. DeStefano and/or our inability to attract and retain qualified
contractors on an as-needed basis could have a material adverse effect on our
business and operations.
 
 EDWARD
R. DESTEFANO OWNS APPROXIMATELY 67.1% OF OUR OUTSTANDING COMMON STOCK, AND HAS
SIGNIFICANT INFLUENCE OVER OUR CORPORATE DECISIONS, AND AS A RESULT, IF YOU
INVEST IN US, YOUR ABILITY TO AFFECT CORPORATE DECISIONS WILL BE
LIMITED.
 
 Edward R.
DeStefano, our sole Director and an executive officer, holds 37,610,700 shares
of our common stock, representing approximately 67.1% of the outstanding shares
of our common stock (and which will represent approximately 38% of our
outstanding common stock assuming the sale of all 43,060,789 of the shares
issuable upon conversion of Laurus' Note and the exercise of Laurus' Warrant,
Option and December Option, provided that Laurus may not convert the Note, or
exercise the Warrant or Options if such conversion or exercise would cause it to
own more than 9.99% of our outstanding common stock). This restriction, however,
does not prevent Laurus from converting and/or exercising some of its holdings,
selling those shares (assuming such shares are registered herein, are eligible
to be sold under Rule 144 or another exemption from registration under the
Securities Act), and then converting the rest of its holdings, while still
staying below the 9.99% limit. Accordingly, Mr. DeStefano will have significant
influence in determining the outcome of all corporate transactions or other
matters, including mergers, consolidations and the sale of all or substantially
all of our assets, and also the power to prevent or cause a change in control
even after such conversion and exercise by Laurus, as Mr. DeStefano will likely
continue to be our largest shareholder. The interests of Mr. DeStefano may
differ from the interests of the other stockholders and thus result in corporate
decisions that are adverse to other shareholders. Additionally, potential
investors should take into account the fact that any vote of shares purchased
will have limited effect on the outcome of corporate decisions.
  WE
DID NOT COMPLY WITH RULE 152 IN CONNECTION WITH OUR ENTRY INTO THE EIGHTH
AMENDMENT WITH LAURUS, WHICH HAS SINCE BEEN RESCINDED, AND WE MAY CONTINUE TO
HAVE LIABILITY IN CONNECTION WITH SUCH RESCISSION.
 
 We
previously entered into the Eighth Amendment Agreement with Laurus (the “Eighth
Amendment”), which modified the terms of the Warrant and Options while we were
in registration in connection with our Form SB-2 Registration Statement, in
violation of Rule 152 under the Securities Act of 1933, as amended ("Rule 152").
As a result, we rescinded the Eighth Amendment and all of the amendments and
modifications to the Warrant and Options affected in connection with the Eighth
Amendment pursuant to the Agreement to Rescind the Eighth Amendment (described
below). Although the previous amendments to the Warrant and Options have been
rescinded, we may face liability in connection with our violation of Rule 152
and/or in connection with the rescission of the terms of our Eighth Amendment.
Such liability could cost us substantial time and money, which could, in turn
cause the value of our securities to decrease in value.
 
 BECAUSE
OF THE SPECULATIVE NATURE OF OIL AND GAS EXPLORATION, THERE IS SUBSTANTIAL RISK
THAT NO ADDITIONAL COMMERCIALLY EXPLOITABLE OIL OR GAS WILL BE FOUND AND THAT
OUR BUSINESS WILL FAIL.
 
 The
search for commercial quantities of oil as a business is extremely risky. We
cannot provide investors with any assurance that our properties contain
commercially exploitable quantities of oil and/or gas. The exploration
expenditures to be made by us may not result in the discovery of commercial
quantities of oil and/or gas and problems such as unusual or unexpected
formations and other conditions involved in oil and gas exploration, and often
result in unsuccessful exploration efforts. If we are unable to find
commercially exploitable quantities of oil and gas, and/or we are unable to
commercially extract such quantities, we may be forced to abandon or curtail our
business plan, and as a result, any investment in us may become
worthless.
 -11-
 BECAUSE
OF THE INHERENT DANGERS INVOLVED IN OIL AND GAS EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS OPERATIONS,
WHICH COULD FORCE US TO EXPEND A SUBSTANTIAL AMOUNT OF MONEY IN CONNECTION WITH
LITIGATION AND/OR A SETTLEMENT.
 
 The oil
and natural gas business involves a variety of operating hazards and risks such
as well blowouts, caterings, pipe failures, casing collapse, explosions,
uncontrollable flows of oil, natural gas or well fluids, fires, formations with
abnormal pressures, pipeline ruptures or spills, pollution, releases of toxic
gas and other environmental hazards and risks. These hazards and risks could
result in substantial losses to us from, among other things, injury or loss of
life, severe damage to or destruction of property, natural resources and
equipment, pollution or other environmental damage, cleanup responsibilities,
regulatory investigation and penalties and suspension of operations. In
addition, we may be liable for environmental damages caused by previous owners
of property purchased and leased by us. As a result, substantial liabilities to
third parties or governmental entities may be incurred, the payment of which
could reduce or eliminate the funds available for exploration, development or
acquisitions or result in the loss of our properties and/or force us to expend
substantial monies in connection with litigation or settlements. In accordance
with customary industry practices, we maintain insurance against some, but not
all, of such risks and losses. As such, there can be no assurance that any
insurance obtained by us will be adequate to cover any losses or liabilities. We
cannot predict the availability of insurance or the availability of insurance at
premium levels that justify our purchase. The occurrence of a significant event
not fully insured or indemnified against, could materially and adversely affect
our financial condition and operations. We may elect to self-insure if
management believes that the cost of insurance, although available, is excessive
relative to the risks presented. In addition, pollution and environmental risks
generally are not fully insurable. The occurrence of an event not fully covered
by insurance could have a material adverse effect on our financial condition and
results of operations, which could lead to any investment in us becoming
worthless.
 
  WE
REQUIRE SUBSTANTIAL ADDITIONAL FINANCING TO CONTINUE OUR EXPLORATION AND
DRILLING ACTIVITIES, WHICH FINANCING IS OFTEN HEAVILY DEPENDENT ON THE CURRENT
MARKET PRICE FOR OIL AND GAS, WHICH WE ARE UNABLE TO PREDICT.
  Our
growth and continued operations could be impaired by limitations on our access
to capital markets. If the market for oil and/or gas were to weaken for an
extended period of time, our ability to raise capital would be substantially
reduced. There can be no assurance that capital from outside sources will be
available, or that if such financing is available, that it will not involve
issuing securities senior to the common stock or equity financings which will be
dilutive to holders of common stock. Such issuances, if made, would likely cause
a decrease in the value of our common stock.
 
 THE
MARKET FOR OIL AND GAS IS INTENSELY COMPETITIVE, AND AS SUCH, COMPETITIVE
PRESSURES COULD FORCE US TO ABANDON OR CURTAIL OUR BUSINESS PLAN.
 
 The
market for oil and gas exploration services is highly competitive, and we only
expect competition to intensify in the future. Numerous well-established
companies are focusing significant resources on exploration and are currently
competing with us for oil and gas opportunities. Additionally, there are
numerous companies focusing their resources on creating fuels and/or materials
which serve the same purpose as oil and gas, but are manufactured from renewable
resources. As a result, there can be no assurance that we will be able to
compete successfully or that competitive pressures will not adversely affect our
business, results of operations and financial condition. If we are not able to
successfully compete in the marketplace, we could be forced to curtail or even
abandon our current business plan, which could cause any investment in us to
become worthless.
 
 WE
MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH, WHICH COULD LEAD TO OUR
INABILITY TO IMPLEMENT OUR BUSINESS PLAN.
 
 Our
growth is expected to place a significant strain on our managerial, operational
and financial resources, especially considering that we currently only have one
executive officer and Director. Further, as we enter into additional contracts,
we will be required to manage multiple relationships with various consultants,
businesses and other third parties. These requirements will be exacerbated in
the event of our further growth or in the event that the number of our drilling
and/or extraction operations increases. There can be no assurance that our
systems, procedures and/or controls will be adequate to support our operations
or that our management will be able to achieve the rapid execution necessary to
successfully implement our business plan. If we are unable to manage our growth
effectively, our business, results of operations and financial condition will be
adversely affected, which could lead to us being forced to abandon or curtail
our business plan and operations.
 
 THE
PRICE OF OIL AND NATURAL GAS HAS HISTORICALLY BEEN VOLATILE AND IF IT WERE TO
DECREASE SUBSTANTIALLY, OUR PROJECTIONS, BUDGETS, AND REVENUES WOULD BE
ADVERSELY EFFECTED, AND WE WOULD LIKELY BE FORCED TO MAKE MAJOR CHANGES IN OUR
OPERATIONS.
  Our
future financial condition, results of operations and the carrying value of our
oil and natural gas properties depend primarily upon the prices we receive for
our oil and natural gas production. Oil and natural gas prices historically have
been volatile and likely will continue to be volatile in the future, especially
given current world geopolitical conditions. Our cash flows from operations are
highly dependent on the prices that we receive for oil and natural gas. This
price volatility also affects the amount of our cash flows available for capital
expenditures and our ability to borrow money or raise additional capital. In the
short term, our production on a barrel of oil equivalent (BOE) is weighted
towards oil and oil prices are likely to affect us more than gas prices because
as of December 31, 2008 (on a BOE using 6 MCF equals 1 barrel of oil) more than
approximately 84% of our Proved Developed Producing reserves for the Company and
its subsidiary Gulf Coast Oil Corporation were oil. Over the long term, our
production on a barrel of oil equivalent (BOE) is weighted towards oil and oil
prices are likely to affect us more than gas prices because as of December 31,
2008 (on a BOE using 6 MCF equals 1 barrel of oil) more than approximately 79%
of our total proved reserves (PDP, PDNP and PUD reserves) for the Company and
its subsidiary Gulf Coast Oil Corporation were oil. The prices for oil and
natural gas are subject to a variety of additional factors that are beyond our
control. These factors include:
 -12-
 o
              the
      level of consumer demand for oil and natural
  gas;
 
 o
              the
      domestic and foreign supply of oil and natural
  gas;
 
 o
              the
      ability of the members of the Organization of Petroleum Exporting
      Countries ("OPEC") to agree to and maintain oil price and production
      controls;
 
 o
              the
      price of foreign oil and natural
gas;
 
 o
              domestic
      governmental regulations and taxes;
 
 o
              the
      price and availability of alternative fuel
  sources;
 
 o
              weather
      conditions;
 
 o
              market
      uncertainty due to political conditions in oil and natural gas producing
      regions, including the Middle East;
and
 
 o
              worldwide
      economic conditions.
 
 These
factors as well as the volatility of the energy markets generally make it
extremely difficult to predict future oil and natural gas price movements with
any certainty. Declines in oil and natural gas prices would not only reduce our
revenue, but could reduce the amount of oil and natural gas that we can produce
economically and, as a result, could have a material adverse effect upon our
financial condition, results of operations, oil and natural gas reserves and the
carrying values of our oil and natural gas properties. If the oil and natural
gas industry experiences significant price declines, we may be unable to make
planned expenditures, among other things. If this were to happen, we may be
forced to abandon or curtail our business operations, which would cause the
value of an investment in us to decline in value, or become
worthless.
 
 OUR
OPERATIONS ARE HEAVILY DEPENDENT ON CURRENT ENVIRONMENTAL REGULATIONS, WHICH WE
ARE UNABLE TO PREDICT, AND WHICH MAY CHANGE IN THE FUTURE, CAUSING US TO EXPEND
SUBSTANTIAL ADDITIONAL CAPITAL.
 
 Public
interest in the protection of the environment has increased dramatically in
recent years. Our oil and natural gas production and saltwater disposal
operations and our processing, handling and disposal of hazardous materials,
such as hydrocarbons and naturally occurring radioactive materials are subject
to stringent regulation. We could incur significant costs, including cleanup
costs resulting from a release of hazardous material, third-party claims for
property damage and personal injuries fines and sanctions, as a result of any
violations or liabilities under environmental or other laws. Changes in or more
stringent enforcement of environmental laws could force us to expend additional
operating costs and capital expenditures to stay in compliance.
  Various
federal, state and local laws regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment,
directly impact oil and gas exploration, development and production operations,
and consequently may impact our operations and costs. These regulations include,
among others, (i) regulations by the Environmental Protection Agency and various
state agencies regarding approved methods of disposal for certain hazardous and
non-hazardous wastes; (ii) the Comprehensive Environmental Response,
Compensation, and Liability Act, Federal Resource Conservation and Recovery Act
and analogous state laws which regulate the removal or remediation of previously
disposed wastes (including wastes disposed of or released by prior owners or
operators), property contamination (including groundwater contamination), and
remedial plugging operations to prevent future contamination; (iii) the Clean
Air Act and comparable state and local requirements which may result in the
gradual imposition of certain pollution control requirements with respect to air
emissions from our operations; (iv) the Oil Pollution Act of 1990 which contains
numerous requirements relating to the prevention of and response to oil spills
into waters of the United States; (v) the Resource Conservation and Recovery Act
which is the principal federal statute governing the treatment, storage and
disposal of hazardous wastes; and (vi) state regulations and statutes governing
the handling, treatment, storage and disposal of naturally occurring radioactive
material.
 
 Management
believes that we are in substantial compliance with applicable environmental
laws and regulations. To date, we have not expended any material amounts to
comply with such regulations, and management does not currently anticipate that
future compliance will have a materially adverse effect on our consolidated
financial position, results of operations or cash flows. However, if we are
deemed to not be in compliance with applicable environmental laws, we could be
forced to expend substantial amounts to be in compliance, which would have a
materially adverse effect on our financial condition. If this were to happen,
any investment in us could be lost.
 -13-
 3D SEISMIC INTERPRETATION DOES NOT
GUARANTEE THAT HYDROCARBONS ARE PRESENT OR IF PRESENT WILL PRODUCE IN ECONOMIC
QUANTITIES.
 
 We rely
on 3D seismic studies to assist us with assessing prospective drilling
opportunities on our properties, as well as on properties that we may
acquire.  Such seismic studies are merely an interpretive tool and do
not necessarily guarantee that hydrocarbons are present or if present will
produce in economic quantities.  Our inability to properly use and
interpret the 3D seismic data may adversely affect our financial condition and
results of operations.
 
 OUR
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING OUR LIABILITIES AND STATEMENT OF
OPERATIONS ARE SUBJECT TO ANNUAL CHANGES IN OUR DERIVATIVE ACCOUNTING OF THE
LAURUS NOTE, WARRANT, OPTION, SINGLE COMPOUND EMBEDDED DERIVATIVE AND DECEMBER
OPTION.
 
 The value
of the liabilities relating to the Laurus Note, Warrant, Option, December Option
and single compound embedded derivative on our consolidated Balance Sheet, as
well as the net fair value of the Laurus Note, Warrant, Option, December Option
and single compound embedded derivatives in our consolidated Statements of
Operations, are subject to the changes in the trading value of our securities.
As a result, our consolidated financial statements and results of operations may
fluctuate annually, based on factors, such as the trading value of our common
stock on the OTCBB and the amount of shares converted by Laurus in connection
with the Note and exercised in connection with the Warrant, Option and December
Option. Consequently, our liabilities and consolidated statements of operations
may vary annually, based on factors other than the Company's revenues and
expenses.
  RISKS
RELATING TO THE COMPANY'S SECURITIES
 
 THE
CONVERTIBLE NOTE, WARRANT, OPTION AND DECEMBER OPTION CONTAIN PROVISIONS WHEREBY
LAURUS MASTER FUND, LTD. MAY HOLD MORE THAN 9.99% OF OUR COMMON STOCK, PROVIDED
THEY PROVIDE US SEVENTY-FIVE (75) DAYS NOTICE OR AN EVENT OF DEFAULT
OCCURS.
 
 Although
Laurus may not convert its Convertible Note and/or exercise its Warrant, Option
and/or December Option if such conversion or exercise would cause it to own more
than 9.99% of our outstanding common stock, the Convertible Note, Warrant,
Option and December Option also contain provisions which provide for the 9.99%
limit to be waived provided that Laurus provides us with 75 days notice of its
intent to hold more than 9.99% of our common stock or upon the occurrence of an
event of default, which has occurred to date. As a result,  Laurus may
fully exercise the Warrant, Option and December Option and fully convert the
Convertible Note, and become the beneficial owner of up to approximately 43.6%
of our then outstanding common stock, not including the conversion of interest
on the Convertible Note.
  If that
were to happen, Laurus would have significant control over us, including
exerting significant influence over our election of Directors and ability to
cause or prevent a change in control and/or our business operations. If Laurus
were to take control over approximately 47.2% of our outstanding common stock,
it could force us to change our business focus, sell all or substantially all of
our assets, or abandon our business plan. Any such event, if it were to occur,
would likely cause the value of our common stock to decline, and could lead to
our common stock becoming worthless.
  THE
ISSUANCE AND SALE OF COMMON STOCK IN CONNECTION WITH THE SECURED CONVERTIBLE
TERM NOTE, COMMON STOCK PURCHASE WARRANT, OPTION AND DECEMBER OPTION MAY DEPRESS
THE MARKET PRICE OF OUR COMMON STOCK.
 
 As of
April 15, 2009, we had 56,010,612 shares of common stock issued and outstanding.
If conversions and sales of the Option or Warrants take place, the price of our
common stock may decline to the detriment of our shareholders. The sale of the
shares issuable upon conversion of the Note, Warrant, Option and December
Option, may adversely affect the market price of our common stock.
 
 RISKS
RELATING TO OUR COMMON STOCK
 
 WE
HAVE NOT PAID ANY CASH DIVIDENDS IN THE PAST AND HAVE NO PLANS TO ISSUE CASH
DIVIDENDS IN THE FUTURE, WHICH COULD CAUSE THE VALUE OF OUR COMMON STOCK TO HAVE
A LOWER VALUE THAN OTHER SIMILAR COMPANIES WHICH DO PAY CASH
DIVIDENDS.
 
 We have
not paid any cash dividends on our common stock to date and do not anticipate
any cash dividends being paid to holders of our common stock in the foreseeable
future. While our dividend policy will be based on the operating results and
capital needs of the business, it is anticipated that any earnings will be
retained to finance our future expansion. As we have no plans to issue cash
dividends in the future, our common stock could be less desirable to other
investors and as a result, the value of our common stock may decline, or fail to
reach the valuations of other similarly situated companies who have historically
paid cash dividends in the past.
 -14-
 THE
MARKET FOR OUR COMMON STOCK MAY BE VOLATILE.
 
 The
market for our common stock has historically been volatile and we anticipate
that such market will continue to be subject to wide fluctuations in response to
several factors, including, but not limited to:
 
 (1)
actual or anticipated variations in our results of operations;
 
 (2) our
ability or inability to generate new revenues;
 
 (3)
increased competition; and
  (4)
conditions and trends in the oil and gas exploration industry and the market for
oil and gas.
 
 Our
common stock is traded on the over-the-counter Bulletin Board under the symbol
"NCEYQ." In recent years, the stock market in general has experienced extreme
price fluctuations that have oftentimes been unrelated to the operating
performance of the affected companies. Similarly, the market price of our common
stock may fluctuate significantly based upon factors unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price of our common stock.
 
 OUR
COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SECURITIES AND
EXCHANGE COMMISSION WHICH LIMITS THE TRADING MARKET IN OUR COMMON STOCK, MAKES
TRANSACTIONS IN OUR COMMON STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN
INVESTMENT IN OUR COMMON STOCK.
 
 Our
common stock is considered a "penny stock" as defined in Rule 3a51-1 promulgated
by Commission under the Securities Exchange Act of 1934. The Commission's Rule
15g-9 regarding penny stocks imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally persons with net worth in excess
of $1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with
their spouse). For transactions covered by the rules, the broker-dealer must
make a special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale. Thus, the
rules affect the ability of broker-dealers to sell our common stock should they
wish to do so because of the adverse effect that the rules have upon liquidity
of penny stocks. Unless the transaction is exempt under the rules, under the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990,
broker-dealers effecting customer transactions in penny stocks are required to
provide their customers with (i) a risk disclosure document; (ii) disclosure of
current bid and ask quotations if any; (iii) disclosure of the compensation of
the broker-dealer and its sales personnel in the transaction; (iv) monthly
account statements showing the market value of each penny stock held in the
customer's account and (v) the rules require that a broker wait two business
days after sending the risk disclosure document to an investor before effecting
a transaction in penny stocks for that investor. As a result of the penny stock
rules, the market liquidity for our common stock may be adversely affected by
limiting the ability of broker-dealers to sell our common stock and the ability
of purchasers to resell our common stock. Additionally, various state securities
laws impose restrictions on transferring "penny stocks" and as a result,
investors in the common stock may have their ability to sell their shares of the
common stock impaired.
 
  ITEM 2.
PROPERTIES
 
 OFFICE
SPACE
 
 In April
2008 we entered into a lease with 1770 St. James Limited Partnership for new
office space for our corporate office (the “St. James Lease”).  The
lease encompasses approximately 3,697 square feet of office
space.  The St. James Lease commences on June 1, 2008 and ends on May
31, 2013.  The rent under this lease is $5,545 per month for the first
full year of the lease and increases each year up to $6,008 per month for the
last two years of the lease.  On March 13, 2009, the Company filed its
First Amended Joint Plan of Reorganization Under Chapter 11, Title 11 of the
United States Code” (the “Plan”) with the United States Bankruptcy
Court.  Under this Plan, the Company’s successor (NCEY Holdings Corp),
shall assume the unexpired St. James Lease with 1770 St. James Limited
Partnership.
 
 We
entered into an amended lease with Essex Tanglewood Investors, L.P., a Texas
limited partnership, in connection with our office space lease at 5851 San
Felipe, Houston, Texas, on February 10, 2006 (the " Essex Tanglewood
Lease").  The Essex Tanglewood Lease encompasses approximately 1,378
square feet of office space.  The Essex Tanglewood Lease term is until
September 30, 2010. The monthly rent under this lease is $2,959 from the date of
the expansion of the lease in 2005 until June 30, 2007, and $3,042 per month
from July 1, 2007 until September 30, 2010.  Under the Plan filed on
March 13, 2009, the Company’s successor (NCEY Holdings Corp), shall not assume
the Essex Tanglewood Lease with Essex Tanglewood Investors,
L.P.
 -15-
 OIL
AND GAS PROPERTIES
 
 As
described above, the current Plan contemplates that all of our operations will
cease and all of our securities will be cancelled following the approval of the
Plan.  The below description of our Oil and Gas Properties describes
our properties and operations assuming that the Plan is not approved and such
operations continue following the date of this report, which, as described
above, is not currently contemplated or expected.
 
 1.)
OPERATED PROPERTIES:
 
 The
Company operates oil and gas properties in Texas under the name of Century
Resources, Inc., a wholly owned subsidiary of the Company. Century Resources,
Inc. is a bonded operator with the Railroad Commission of Texas and our Operator
number is 141835. Of the properties we operate, our working interest ownership
ranges from 80% in the Sargent South Field, to 100% in the San Miguel Creek,
Mustang Creek, Prado, Soleberg, and Tenna Fields.
 
 SARGENT
SOUTH FIELD - MATAGORDA COUNTY, TEXAS
 
 The
Company acquired 100% of the working interest in the 3,645 acre Sargent South
Field from Calpine Natural Gas (NYSE) and its partner ("Calpine") in January
2004. The Sargent South Field is located onshore in Matagorda County, Texas,
east of Matagorda Bay. In 2006 the Company acquired an additional 1,610 gross
acres (1,288 net acres) from the State of Texas covering adjacent lands in the
Gulf of Mexico. The total leasehold owned by the Company now totals
approximately 4,204 net acres. Currently, there are three (3) producing wells on
the Hamill Lease; Hamill #2, Hamill #14 and Hamill #17, with daily production in
excess of approximately 1,200 MCF of gas per day, (MCFGPD), however, the Company
can provide no assurance that the wells will continue to produce at this rate,
if at all. There are also four (4) shut-in wells, Hamill #10, Hamill #11, Hamill
#19, and Hamill #1-R.
 
 At the
time of the acquisition there were two producing wells, the Hamill #2 and Hamill
#19. The Hamill #19 is currently shut-in and non-producing. During 2009, the
Company may attempt to deepen the Hamill #19 outside of its existing
casing.
  A license
to a 10 square mile 3-D seismic survey ("3-D") was also acquired from Calpine
and this 3-D has been reprocessed, along with some recently purchased 2-D
seismic lines. New drilling locations have been identified on this lease for
drilling in 2009. The seismic and geological 3-D interpretation project process
will be an ongoing process. When the results from any new wells are drilled on
this lease, the data from the new wells will be integrated into and used to
update our ongoing interpretation project.
 
 The
Company has an ongoing workover and recompletion project underway in the Sargent
South Field that began in January 2005. The Hamill #2 well was cleaned out and
recompleted in November 2007 and is currently producing at the rate of
approximately 550 MCF per day on a 10/64 inch choke, with a flowing tubing
pressure of 480 pounds per square inch (“psi”).
 
 During
April 2008 an unsuccessful recompletion was attempted on the Hamill #10 well
after the well ceased producing gas. This well is currently shut-in and being
evaluated for possible recompletion.
 
 The
Hamill #11 well is currently shut in.
 
 Hamill
#14 was recompleted in April of 2008 in a new sand from perforations at 4,900
feet and is currently producing gas at the rate of approximately 277 MCF per day
on a 10/64 inch choke with flowing tubing pressure of 520 psi.
 
 The
Hamill #17 was worked over in November of 2007 and during September of 2008, the
#17 well was gravel packed to stop production of formation sand.  The
well was restored and currently produces gas from perforations in a stray sand
at 5,630 feet at the rate of 241 MCF per day on a 9/64 inch choke with a flowing
tubing pressure of 480 psi.
 
 During
August 2006, re-entry operations commenced on the Hamill #1-R well, that was
originally drilled by Gulf Oil Corporation (“Gulf”) to a depth of 16,200 feet in
1961 and subsequently plugged and abandoned by Gulf in June 1967. Recent
operations included milling out and removing numerous cement and bridge plugs
set in the well when it was originally abandoned by Gulf. The well has been
cleaned out to a depth of 11,000 feet inside the existing 9-5/8” casing. Cased
hole logs were run in the well in October of 2006 and the well is being
evaluated for possible gas sands for testing and possible production. The first
recompletion attempted in November of 2006, at a depth of 5,560 feet produced
gas, but in non-commercial quantities. The Hamill #1-R well is currently
temporarily abandoned and being evaluated for deepening outside of casing during
2009, pending a successful reorganization in connection with our Chapter 11
bankruptcy filing, of which there can be no assurance.
 
 On or
about March 16, 2007, our working interest partner in the Sargent South Field,
Aquatic Cellulose International Corporation (“Aquatic”), executed a Partial
Assignment of Oil and Gas Lease and Bill of Sale whereby Aquatic conveyed to
Century Resources, Inc., all of Aquatic’s rights, title and interest in the
Hamill and Hamill leasehold for all depths below a depth of 7,000 feet below the
surface. In addition, Aquatics assigned all of its interests, regardless of
depth, in Hamill and Hamill well numbers 14, 19 and 1-R. In return, we repaid
Aquatics all deposits made toward the Hamill 1-R and Hamill #14 workovers and
released Aquatic of all prior commitments made regarding these
wells.
 -16-
 SAN MIGUEL CREEK FIELD - MCMULLEN COUNTY, TEXAS
 
 The San
Miguel Creek Field is located in north central McMullen County, Texas, near its
border with Atascosa County, approximately 75 miles due south of San Antonio,
Texas. The Company currently owns and operates the 200-acre Herrera Lease and
the 40-acre Wheeler #2 lease in this field (240 acres total). The Company now
controls 100% of the working interest on these leases and wells. To date two new
drilling locations have been identified.  The Herrera #9 well was
drilled in February 2007 and completed as an oil producer, and the Herrera #10
location has been staked as a possible future drilling location in 2009, pending
a successful reorganization in connection with our Chapter 11 bankruptcy filing,
of which there can be no assurance.
 
 MUSTANG
CREEK FIELD AREA WELLS - McMULLEN AND ATASCOSA COUNTIES, TEXAS.
 
 On April
28, 2006, the Company’s then newly formed wholly owned subsidiary, Gulf Coast
Oil Corporation (“Gulf Coast”), acquired the majority working interest and
operations over developed and undeveloped oil and gas mineral leases totaling
9,167 acres in the Mustang Creek Field area in McMullen and Atascosa Counties,
Texas. On June 30, 2006, Gulf Coast acquired the remainder of the working
interest ownership from another group of owners, in this same group of leases
and producing wells. As a result of the June 30, 2006 closing and recent
drilling activity, Gulf Coast now owns a 100% working interest in 27 oil wells
and one gas well and a 75% working interest in one additional oil well for a
total of 28 wells. The effective date for ownership for both acquisitions was
December 1, 2005. The following table summarizes Gulf Coast’s ownership in the
producing wells as of March 31, 2009:
 
 Schedule
of Acquired and Recently Drilled Wells and Mineral Interests in Mustang Creek
Area, as of March 31, 2009:
 
 WELL
      NAME
                WORKING
      INTEREST
                NET
      REVENUE INTEREST1.  HODDE
      #1
                100
      %
                0.7700
      %2.  DOUBLE
      K #2
                100
      %
                0.7700
      %3.  DOUBLE
      K #3
                  4.  DOUBLE
      K #4
                  5.  DOUBLE
      K #5
                100
      %
                  100
      %
                  100
      %
                0.7700
      %
                  0.7500
      %
                  0.7500
      %6.  DOUBLE
      K #6
                100
      %
                0.7500
      %7.  KASSNER
      #1
                100
      %
                0.7700
      %8.  KASSNER
      #2
                100
      %
                0.7700
      %9.  TYLER
      RANCH UNIT WELL #1
                100
      %
                0.77375
      %10.  PEACOCK
      #1
                100
      %
                0.7700
      %11.
      POWERS-SWAIM UNIT WELL #1
                100
      %
                0.7700
      %12.
      SWAIM 33-2
                100
      %
                0.7500
      %13.
      SWAIM 58-1
                100
      %
                0.7700
      %14.
      SWAIM 58-2
                100
      %
                0.7500
      %15.
      WHEELER #1
                75
      %
                0.4375
      %16.
      POWERS-SWAIM UNIT WELL #1-R
                100
      %
                0.7500
      %17.
      CAJUN CAPER UNIT #1
                100
      %
                0.75517152
      %18.
      RABKE#2
                100
      %
                0.76625
      %19.
      RABKE #3
                100
      %
                0.7575
      %20.
      RABKE #4
                100
      %
                0.7575
      %21.
      RABKE/MASPERO UNIT #1
                100
      %
                0.773750
      %22.
      RABKE/MASPERO UNIT #2
                100
      %
                0.773750
      %23.
      RABKE/MASPERO UNIT #4
                100
      %
                0.753750
      %24.
      RABKE/MASPERO UNIT #5
                100
      %
                0.753750
      %25.
      RABKE/MASPERO UNIT #6
                100
      %
                0.753750
      %26.
      RABKE-MASPERO OIL UNIT #1
                100
      %
                0.7860228
      %27.
      MAHONEY #2
                100
      %
                0.7500
      %28.
      DOWDY #1
                100
      %
                0.7500
      %
 
 Mustang
Creek Field area is located approximately 75 miles south of San Antonio, Texas.
Geologically, the Mustang Creek field area is located on the San Marcos Platform
back reef of the Cretaceous Stuart City and Sligo reef trends. The field
produces oil and gas from sands trapped against Wilcox faults from depths
between 3,000 feet and 6,200 feet, which wells commonly have multiple Wilcox pay
sands. In 2004, a new 65 square mile 3-D seismic survey was completed which
helped recognize and delineate numerous shallow Wilcox anomalies. Gulf Coast
acquired 9,167 acres of developed and undeveloped leases from Manti Operating
Company and its partners, along with the recently drilled producing wells noted
in the table above. In addition to the producing wells, in July of 2006, Gulf
Coast acquired a license to approximately 45 square miles of the new 3-D seismic
data and is finalizing an interpretation project to further delineate additional
Wilcox drilling opportunities and possibly drilling targets at deeper
depths.
 -17-
 As of the
beginning of the second quarter of 2009, we have identified approximately twenty
(20) un-drilled seismic anomalies and development locations based on our ongoing
3-D seismic interpretation project. Additional wells may be drilled in 2009,
funding permitting and assuming a successful reorganization under Chapter 11 of
the bankruptcy code, of which there can be no assurance.  From the
commencement of our initial drilling program in November 2006, through December
31, 2008, we have drilled a total of twenty-six (26) prospects and
locations.  Of the twenty-six (26) prospects drilled, fifteen (15) are
successful producing wells and nine (9) were plugged as dry
holes.  Additionally, in one (1) non-producing well the Swaim 60-1, we
set casing to a depth of 5,800 feet and anticipate permitting this well for use
as a salt water disposal well.  In one (1) other new well, the
Power-Swaim Unit 1-R, casing was set to 5,900 feet, based upon further
geological study we plan to re-drill the lower portion of Power Swaim Unit
1-R  well in an attempt to gain better structural position and
complete for production.  In July 2006, the Tyler Ranch Gas Unit #1,
the only gas well in our Mustang Creek field, ceased producing, and as of the
date of this filing it remains shut in and non-producing.
 
 Status of
Mustang Creek Field Prospects Drilled by Gulf Coast Oil Corporation as of March
31, 2009:
 
 Prospect/Well Name
                StatusDouble
      K North #4
                ProducerDouble
      K North #5
                ProducerDouble
      K Swaim Unit #1
                Dry
      holeHenry
      Kuykendall Unit #1
                Dry
      holeHodde
      #2
                Dry
      holeKassner
      #3
                Dry
      holeKassner
      #4
                Dry
      holeMahoney
      #2
                ProducerRabke
      Maspero Unit #2
                ProducerRabke
      Maspero Unit #4
                ProducerRabke
      Maspero Unit #5
                ProducerRabke
      Maspero Unit #6
                ProducerRabke-Maspero
      Oil Unit #1
                ProducerRabke
      #1
                Dry
      holeRabke
      #2
                ProducerRabke
      #3
                Shut-InRabke
      #4
                ProducerPower-Swaim
      Unit 1-R
                To
      be deepened outside casingSwaim
      33-2
                ProducerSwaim
      33-3
                Dry
      holeSwaim
      58-2
                ProducerSwaim
      58-3
                Dry
      holeSwaim
      60-1
                Permitted
      Salt Water Disposal Well (“SWD”)Dowdy
      #1
                ProducerGarza
      #1
                Dry
      hole
  Out of
the ten (10) wells listed as dry holes above, one (1) was plugged and abandoned
in 2006, five (5) were plugged and abandoned in 2007, and three (3) were plugged
and abandoned in 2008.  The remaining dry hole, Swaim 60-1, was
drilled in 2007 as a dry hole and is planned to be converted to a salt water
disposal well in the second quarter of 2009 subject to regulatory approval and
assuming a successful reorganization under Chapter 11 of the bankruptcy code, of
which there can be no assurance.
 
 Other
Production Activity in Mustang Creek Field in 2008 and 2009:
 
 During
2008, we sold 225,236 gross barrels or 170,817 net barrels from the Mustang
Creek Field oil wells.  As of April 15, 2009, current daily 8/8ths oil
production from the Mustang Creek Field wells was approximately 525 barrels of
oil per day (BOPD) from twenty-two (22) producing oil wells.
 
 As of
December 31, 2008, the Company’s total proved oil reserves in the Mustang Creek
Field were 854,000 barrels, compared to 1,233,000 barrels as of December 31,
2007.  The decrease in proved reserves year over year was 31%, or
379,000 barrels.  This decrease was due to (1) the production of
170,817 net barrels of oil during 2008 and (2) downward revisions to the
reserves based on actual well performance over time, and more significantly, due
to much lower oil prices projected for future years.  The oil price
used to project reserves on the December 31, 2007 reserve report was $91.50
compared to an oil price of $42.51 used on the December 31, 2008 reserve
report.  The lower oil pricing caused a significant reduction in oil
reserves, as the productive life of our wells curtailed due to lower projected
revenue causing the economic limit of certain wells to be reached
sooner.
 -18-
 TENNA
(HILLJE SAND) FIELD - WHARTON COUNTY, TEXAS
 
 The
Company acquired 100% of the working interest in three (3) wells in the Tenna
Field in July 2003. The field is located on county road 1300 in western Wharton
County, Texas, approximately 60 miles southwest of Houston, Texas. The Hillje
Sand was discovered in 1991 and has been a prolific oil and gas producer at a
shallow depth of 4,100 feet. We drilled a new well location, the Brothers Cattle
Company #5 well, in the first quarter of 2008, and completed this new well as an
oil producer, which currently produces 20 barrels of oil per day. Also, during
the first quarter of 2008 a pumping unit was installed on the Hillje Oil Unit #1
and is currently producing 4 barrels of oil per day. The Brothers Cattle Company
#3 continues to produce with an electrical submersible pump at the rate of
approximately 20 barrels of oil per day.
 
 SOLEBERG
WILCOX FIELD – GOLIAD COUNTY, TEXAS.
 
 On
December 5, 2006, but effective November 30, 2006, the Company executed an Oil,
Gas and Mineral Lease with James Allen Lewis and Mildred M. Lewis covering
83.516 acres in the S.C. White Survey, Abstract 290, in Goliad County, Texas.
The Company also acquired an additional 1,076 acres in this area from four
additional lessors and now owns a total of 1,158 gross acres of oil and gas
leases in Goliad County.
 
 On
December 6, 2006, but effective November 1, 2006, the Company executed an
Assignment and Bill of Sale with Unit Petroleum Company (“Unit”) whereby Unit
conveyed to the Company all of Unit’s right, title and interest in the Lewis “A”
No. 1 and the Lewis “A” No. 2 wells in Goliad County, Texas, including all
production equipment, surface facilities, improvements, to the extent
transferable all surface use agreements, easements, right of ways, permits and
similar rights and interests associated with the subject wells and oil and gas
properties, located on the Lewis lease. The Company now owns 100% of the working
interest in the subject inactive wells and leasehold.
 
 In April
2007, the Company commenced workover operations on the Lewis “A” No. 2 well and
attempted to establish production in the First Austin Sand at 10,500 feet. The
well flowed gas in non-commercial quantities and is presently shut in.
Additional flow testing occurred in late November 2007, and commercial
production was not established from the current completion. During the second
quarter of 2008, the Company commenced its second workover operation in the
Lewis “A” No. 2 well.  An apparent collapse in the 4 1⁄2” production
casing was encountered in the well at approximately 10,600 feet, preventing
the removal of a cast iron bridge plug set at 11,840 feet and preventing any
further completion attempt in the Second Austin sand at 11,868
feet.  A second attempt was made to establish production from a
shallower sand at 10,620 feet and this zone was stimulated with acid during the
second quarter of 2008.  This zone produced oil and gas in
non-commercial quantities, and the well is currently shut in for further
evaluation.  The Company cannot assure that the well will be restored
to production after any future workover or testing is completed. In August of
2007, the Company acquired a license for eight (8) square miles of 3-D seismic
data covering the leased acreage and adjoining areas in Goliad County, Texas.
The data was acquired to assist in the exploration and mapping process and to
help identify additional possible exploration well locations, for future
drilling and development. The interpretation project was completed in the first
quarter of 2008. The Company plans to farmout or drill these prospects on its
acreage in 2009, pending the outcome of its Chapter 11 Bankruptcy, of which
there can be no assurance.
  PRADO FIELD LEASES - JIM HOGG COUNTY, TEXAS.
 
 In June
2004, the Company acquired leases in the Prado Field comprising 1,280 acres in
Jim Hogg County, Texas. The former owner was JMI Energy Inc., of Houston, Texas
("JMI"). The Company now owns 100% of the working interest in the Prado Field
production, and we have finalized a seismic and geological interpretation of the
field. A workover program and well plugging program commenced in November 2007
and continued into June 2008 on certain existing wells. Since the workover
program commenced, we have plugged and abandoned ten (10) wells and recompleted
four (4) new wells. As of March 31, 2009, production is averaging approximately
18 BOPD from four (4) pumping wells (wells KMF # 20, #30, #36 and #701). The
Company has also identified three (3) new development drilling locations for
possible drilling in 2009, pending a successful reorganization out of its
Chapter 11 bankruptcy, of which there can be no assurance.
 
 2.)
NON-OPERATED PROPERTIES: WISHBONE FIELD - LINDHOLM HANSON GAS UNIT- McMULLEN
COUNTY, TEXAS:
 
 Since
January 3, 2006, the Company has owned a 15.20% non-operated working interest
with a 12.214% net revenue interest in the Wishbone Field in McMullen County,
Texas, which is operated by U.S. Enercorp, LTD, headquartered in San Antonio,
Texas.
 
 The field
was discovered in 2004 after the successful drilling of the Lindholm-Hanson Gas
Unit #1 Well, operated by U.S. Enercorp LTD of San Antonio Texas. The field
produces from Upper Wilcox sands at an average depth of approximately 12,800
feet. All of the producing wells in the Lindholm-Hanson Gas Unit have been
fracture stimulated using approximately 400,000 pounds of 20/40 propellant.
Initial producing rates after stimulation in a number of wells has exceeded
15,000 MCFGPD per well. As of February 2009, there are nine (9) producing wells
in the 640 acre unitized Lindholm-Hanson Gas Unit. Cumulative production in the
field has been approximately 24 billion cubic feet of gas (Bcf). Well log
analysis indicates probable and possible oil and gas production at shallow
depths in the Wishbone Field. Potential future production may be achieved in the
Slick sand, the 9,100 foot sand, the Hostetter sand and the Tom Lyne sands,
ranging in depth from 7,000 feet to 11,000 feet, of which there can be no
assurance.
 
 Since the
Company acquired its working interest in the Wishbone field, we have
participated in drilling an additional three (3) new wells within the unitized
Wishbone field. LH Gas Unit #10 was drilled in July of 2005. LH Gas Unit #11 was
drilled in September of 2005. LH Gas Unit #9 was drilled in December of 2005.
The Company also participated in drilling of the Lindholm Fee #1 in September of
2005, this well is not a part of the Lindholm-Hanson Gas unitized gas field and
our working interest is smaller in this well at 12.10%.
 -19-
 RECENT
DEVELOPMENTS IN WISHBONE FIELD
 
 As of
December 31, 2008, the Company’s proved gas reserves in the Wishbone Field
decreased by 43% to 849 MMCF from 1,478 MMCF on December 31, 2007, or a
difference of 629 MMCF.  Of the total 629 MMCF reduction in proved gas
reserves, 119 MMCF was due to actual net gas produced during 2008, and 510 MMCF
was from downward revisions to estimates of proved reserves.  The
majority of the 510 MMCF downward revision to proved reserves in 2008 can be
attributed to a steeper decline rate associated with the existing wells and the
failed recompletion attempts for proved behind pipe reserves in the LHGU #2 and
LHGU #10 wells.
 
 As of
December 31, 2007, the Company’s proved gas reserves in the Wishbone Field were
decreased by 57%.  The majority of this reduction, approximately
ninety percent (90%), was due to a significant reduction in future proved
undeveloped (PUD) locations projected to be drilled.  This reduction
was based on the operator’s indication that only one more PUD may be drilled due
to current high drilling costs and lower product prices.  In addition,
the decline rate associated with the existing proved developed producing (PDP)
gas reserves was steeper than previously projected, which contributed to
approximately ten percent (10%) of the decrease in the proved reserves in this
field.
  
 Current well status in the Lindholm-Hanson Gas Unit and Lindholm
Fee #1 at March 31, 2009:
 
 Well
                
                Status
                
                Daily
      8/8THS
                  Production
      (MCF)
                
                Net
      Revenue
                  Interest(MCF)LH-Gas
      Unit #1
                
                Producing
                
                925
                
                111LH-Gas
      Unit #2
                
                Shut-in
                
                0
                
                0LH-Gas
      Unit #3
                
                Producing
                
                425
                
                51LH-Gas
      Unit #4-C
                
                Shut-in
                
                353
                
                42LH-Gas
      Unit #4-T
                
                Producing
                
                321
                
                38LH-Gas
      Unit #5
                
                Producing
                
                680
                
                82LH-Gas
      Unit #7
                
                Shut-in
                
                0
                
                0LH-Gas
      Unit #8
                
                Producing
                
                0
                
                0LH-Gas
      Unit #9
                
                Producing
                
                101
                
                12LH-Gas
      Unit #10
                
                Producing
                
                0
                
                0LH-Gas
      Unit #11
                
                Producing
                
                297
                
                35Lindholm
      Fee #1
                
                Producing
                
                37
                
                4Daily
      totals in MCF of Gas
                
                
                
                3,139
                
                375
 
 OTHER
INDUSTRY AGREEMENTS
 
 The
Company has executed agreements with one oil and gas exploration company and one
other industry investor that were interested in participating in the Company's
exploration and production activities on its Hamill and Hamill lease in
Matagorda County, Texas. However, the Company retained operatorship and the
majority eighty percent (80%) working interest in this property. All of the
Company’s other producing properties are owned 100% and operated by the Company,
except for the Wishbone Field where the Company owns a 15.2% non-operated
working interest.
 -20-
 OIL
AND GAS ACREAGE, PRODUCTIVE WELLS,
 AND
DRILLING ACTIVITY DISCLOSURE OF OIL AND GAS OPERATIONS:
  COMPARISON
OF AVERAGE SALES PRICES OF OIL AND GAS SOLD BY THE COMPANY FOR THE LAST THREE
FISCAL YEARS OPERATED AND NON-OPERATED PROPERTIES:
 
 2008
                  
                  
                  2007
                  
                  
                  2006AVERAGE
      SALE PRICE OF OIL(Per
      bbl.)
                  
                  $
                  98.67
                  
                  
                  $
                  70.34
                  
                  
                  $
                  62.87AVERAGE
      SALE PRICE OF GAS(PER
      MCF)
                  
                  $
                  8.08
                  
                  
                  $
                  6.10
                  
                  
                  $
                  5.99
 
 NET OIL
PRODUCTION FROM COMPANY OPERATED PROPERTIES FOR THE LAST THREE FISCAL
YEARS:
 
 2008
                        
                        2007
                        
                        2006Barrels
                        
                        Barrels
                        
                        BarrelsMUSTANG
      CREEK FIELD
                        170,817
                        
                        127,738
                        
                        173,097PRADO
      FIELD
                        3,597
                        
                        2,083
                        
                        --SAN
      MIGUEL CREEK FIELD
                        15,163
                        
                        11,344
                        
                        9,938TENNA
      FIELD
                        12,478
                        
                        5,414
                        
                        7,811ANNUAL
      TOTALS
                        202,055
                        
                        146,579
                        
                        190,846
 
 NET GAS
PRODUCTION FROM COMPANY OPERATED PROPERTIES FOR THE LAST THREE FISCAL
YEARS:
 
 2008
                        
                        2007
                        
                        2006SARGENT
      SOUTH FIELD (MCF)
                        380,510
                        
                        180,220
                        
                        318,229TYLER
      RANCH GAS UNIT #1 (MCF)*
                        --
                        
                        --
                        
                        105,861TOTAL
                        380,510
                        
                        180,220
                        
                        424,090
 
 *In July
2006 the TYLER RANCH GAS UNIT #1 well stopped producing and is now shut-in
and non-operational.
 -21-
 NET GAS
PRODUCTION FROM NON-OPERATED PROPERTIES FOR THE LAST THREE FISCAL
YEARS:
 
 2008
                      
                      2007
                      
                      2006WISHBONE
      FIELD-LINDHOLM
      HANSONGAS
      UNIT(MCF)
                      
                      119,389
                      
                      272,301
                      
                      715,624
 
 This
table below sets forth the net quantities of oil and gas production (net of all
royalties, overriding royalties and production due to others) attributable to
New Century Energy Corp. for the fiscal years ended December 31, 2008 and 2007,
and the average sales prices, average production costs and direct lifting costs
per unit of production for the years ended December 31, 2008 and
2007.
 
 Years
      Ended December 31,2008
                  
                  
                  2007Net
      ProductionOil
      (Bbls)
                  
                  
                  202,055
                  
                  
                  
                  146,579Gas
      (Mcf)
                  
                  
                  499,899
                  
                  
                  
                  452,521Average
      Sales PricesOil
      (per Bbl)
                  
                  $
                  98.67
                  
                  
                  $
                  70.34Gas
      (per Mcf)
                  
                  $
                  8.08
                  
                  
                  $
                  6.10Average
      Production Cost 1per
      equivalent Bbl of oil
                  
                  $
                  55.69
                  
                  
                  $
                  52.75Average
      Lifting Costs 2per
      equivalent Bbl of oil
                  
                  $
                  18.78
                  
                  
                  $
                  16.09
 
 1
              Production
      costs include depreciation, depletion and amortization, lease operating
      expenses and all associated taxes.
 
 2
              Direct
      lifting costs include lease operating expenses and all associated taxes
      but do not include impairment expense, ceiling write-down, or
      depreciation, depletion and
amortization.
 -22-
 OIL AND
GAS ACREAGE
 
 In the
data below, "gross" represents the total acres or wells in which we own a
working interest and "net" represents the gross acres or wells multiplied by the
Company's working interest percentage. The following table sets forth New
Century's and its subsidiaries’ acreage position at December 31,
2008:
  
 DEVELOPED
                  
                  UNDEVELOPEDGROSS
                  
                  NET
                  
                  GROSS
                  
                  NETGoliad
      County, TX
                  84
                  
                  
                  84
                  
                  1,086
                  
                  
                  1,086Jim
      Hogg County, TX
                  1,280
                  
                  
                  1,280
                  
                  0
                  
                  
                  0Matagorda
      County, TX
                  3,645
                  
                  
                  2,916
                  
                  0
                  
                  
                  0(onshore)Matagorda
      County, TX
                  0
                  
                  
                  0
                  
                  1,610
                  
                  
                  1,288(offshore)McMullen
      County, TX
                  240
                  
                  
                  240
                  
                  0
                  
                  
                  0(San
      Miguel Creek Field)McMullen
      County, TX
                  720
                  
                  
                  109
                  
                  0
                  
                  
                  0(Wishbone
      Field)McMullen
      County, TX
                  7,765
                  
                  
                  7,765
                  
                  2,856
                  
                  
                  2,856(Mustang
      Creek Field)Wharton
      County, TX
                  100
                  
                  
                  100
                  
                  0
                  
                  
                  0Kern
      County, CA
                  0
                  
                  
                  0
                  
                  1,980
                  
                  
                  1,606Total
                  13,834
                  
                  
                  12,494
                  
                  7,532
                  
                  
                  6,836
 
 The
Company's net undeveloped acreage, subject to expiration are as
follows:
 
 Year
                    Acres2009
                    1,0142010
                    1,9432011
                    1,9252012
                    60
 
 PRODUCTIVE
WELLS
 
 The
following table sets forth our gross and net productive oil and natural gas
wells at December 31, 2008:
 
 PRODUCING
                        
                        OIL
      WELLS
                        
                        PRODUCING
                        
                        GAS
      WELLSGROSS
                        
                        NET
                        
                        GROSS
                        
                        NETGoliad
      County, TX
                        0
                        
                        0
                        
                        0
                        
                        0Jim
      Hogg County, TX
                        4
                        
                        4
                        
                        0
                        
                        0Matagorda
      County, TX
                        0
                        
                        0
                        
                        3
                        
                        2.6McMullen
      County, TX
                        30
                        
                        29.75
                        
                        8
                        
                        1.21Wharton
      County, TX
                        3
                        
                        3
                        
                        0
                        
                        0TOTAL
                        37
                        
                        36.75
                        
                        11
                        
                        3.81
 -23-
 DRILLING
ACTIVITY:
 
 The
following tables set forth the results of our drilling activities over the years
ending December 31, 2008, 2007, and 2006:
 
 OIL
      WELLS2008
                    
                    
                    2007
                    
                    
                    2006Oil
      Gross
                    
                    
                    Wells
      Net
                    
                    
                    Oil
      Gross
                    
                    
                    Wells
      Net
                    
                    
                    Oil
      Gross
                    
                    
                    Wells
      NetExploratory
      Wells – Productive (1) (2)
                    
                    
                    11
                    
                    
                    
                    11
                    
                    
                    
                    6
                    
                    
                    
                    6
                    
                    
                    
                    1
                    
                    
                    
                    1Exploratory
      Wells- Non-productive (1) (3)
                    
                    
                    4
                    
                    
                    
                    4
                    
                    
                    
                    7
                    
                    
                    
                    7
                    
                    
                    
                    1
                    
                    
                    
                    1Development
      Wells
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
 
 
 GAS
      WELLS2008
                  
                  
                  2007
                  
                  
                  2006Gas
      Gross
                  
                  
                  Wells
      Net
                  
                  
                  Gas
      Gross
                  
                  
                  Wells
      Net
                  
                  
                  Gas
      Gross
                  
                  
                  Wells
      NetExploratory
      Wells – Productive (1) (2)
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Exploratory
      Wells- Non-productive (1) (3)
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Development
      Wells
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
 
 (1) An
exploratory well is a well drilled either in search of a new, as yet
undiscovered oil or gas reservoir or to greatly extend the known limits of a
previously discovered reservoir. A development well is a well drilled with the
presently proved productive area of an oil or natural gas reservoir, as
indicated by reasonable interpretations of available data, with the objective of
completing in that reservoir.
 
 (2) A
productive well is an exploratory or development well found to be capable of
producing either oil or natural gas in sufficient quantities to justify
completion as an oil or natural gas well.
 
 (3) A
non-productive well is an exploratory or development well that is not a
producing well.
 
 SIGNIFICANT
OIL AND GAS PURCHASERS AND PRODUCT MARKETING
 
 Oil and
gas sales are made on a day-to-day basis under short-term contracts at the
current area market price. For the year ended December 31, 2008, we had four
purchasers that each accounted for 10% or more of our oil and natural gas
revenues on Company operated properties. Two purchasers accounted for 100% of
crude oil sales. Gulf Mark Energy, Inc. purchases all of the crude oil produced
from our Mustang Creek Field wells; and Flint Hill Resources, Inc., acquires the
crude oil produced from our San Miguel Creek, Tenna Field and Prado Field oil
wells. Two separate purchasers individually accounted for 100% of sales of
natural gas products.  Additionally, our non-operated properties had
yet another purchaser that individually accounted for 100% of sales of all
natural gas production from the Wishbone Field, for the year ended December 31,
2008.
 
 Our
ability to market oil and natural gas depends on many factors beyond our
control, including the extent of domestic production and imports of oil and gas,
the proximity of our gas production to pipelines, the available capacity in such
pipelines, the demand for oil and natural gas, the effects of weather, and the
effects of state and federal regulation. Our production is primarily from
developed fields close to major pipelines or refineries and established
infrastructure. As a result, we have not experienced any difficulty to date in
finding a market for all of our production as it becomes available or in
transporting our production to those markets; however, there is no assurance
that we will always be able to market all of our production or obtain favorable
prices.
 -24-
 OIL
MARKETING
 
 The
quality of our crude oil varies by area as well as the corresponding price
received. In our operated properties in the Mustang Creek and San Miguel Creek
Fields in McMullen County, Texas, and the Tenna Field, in Wharton County, Texas;
our oil production is primarily light sweet crude, which typically sells at or
near NYMEX West Texas Intermediate ("WTI") prices adjusted for transportation
costs by the purchaser.
 
 NATURAL
GAS MARKETING – OPERATED PROPERTIES
 
 Virtually
all of our natural gas production is close to existing pipelines. We sell all of
our natural gas produced from the Sargent South Field to Harvest Pipeline on a
month-to-month contract with prices fluctuating month-to-month based on a
discount to the published Houston Ship Channel Inside FERC, first of month index
price.
 
 NATURAL
GAS MARKETING -- NON-OPERATED PROPERTIES
 
 All of
the natural gas production sold from the non-operated gas wells in the Wishbone
Field is sold to Cross Tex CCNG Marketing LTD. ("Cross Tex"). The price payable
by Cross Tex is equal to the first of the month "Index" price published in
Inside F.E.R.C.'s Gas Market Report for the Houston Ship Channel as listed in
the table entitled Market center spot-gas prices, less sixteen cents per MMBtu
($0.16/MMBtu).
 
 ITEM 3. LEGAL
PROCEEDINGS
 
 Lara Energy, Inc. and
J&P Family Properties, Ltd.
 
 On or
about July 24, 2008, Gulf Coast Oil Corporation, the Company’s wholly owned
Delaware subsidiary (“Gulf Coast”) entered into a Settlement Agreement (the
“Settlement Agreement”) with Lara Energy, Inc. (“Lara”) and J&P Family
Properties, Ltd. (“J&P” and collectively with Lara, the “Claimants”). 
The Claimants had previously sent Gulf Coast demand letters contending that
pursuant to a June 30, 2006 letter agreement, Gulf Coast assumed certain of
Manti Resources, Inc.’s (“Manti’s”) obligations to assign overriding royalties
up to 3% on future acquisitions within Gulf Coast’s licensed areas in McMullen
County and Atascosa County (the “Interests”) in connection with Gulf Coast’s
June 2006 purchase of the Interests from Manti.
  In
connection with the ORRI’s that Gulf Coast agreed to grant to the Claimants,
Gulf Coast made a payment of $32,860 to Lara and $32,860 to J&P to satisfy
the full amount of the payments they would have been due in connection with such
ORRI’s which accrued from the date of first production by Gulf Coast through
April 2008.
  Finally,
pursuant to and in consideration for the parties agreeing to enter into the
Settlement Agreement, each Claimant and Gulf Coast agreed to release, acquit and
forever discharge each other and their related parties from and against any and
all claims or damages of any nature, known or unknown, which could have been
asserted by the Claimants in connection with the previous claims made by such
Claimants.
 
 Chapter 11
Proceedings
 
 Refer to
“Item 1. Business”, in this Annual Report for further information regarding
the Company’s pending Chapter 11 Bankruptcy proceedings.
  The
Company plans to continue operating its business as “debtors-in-possession”
under the jurisdiction of the Bankruptcy Court and in accordance with the
applicable provisions of the Bankruptcy Code and orders of the Bankruptcy
Court.
 
 Other
than the above, the Company is not a party to, and its properties are not the
subject of, any material pending legal proceeding nor to the knowledge of the
Company, are any such legal proceedings threatened.
  ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None.
 -25-
 PART
II
 
 ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Our
common stock was traded on the NASDAQ OTC-Bulletin Board until July 2008 under
the symbol “NCEY”, when our stock began trading under the symbol “NCEYQ” in
connection with our ongoing Chapter 11 Bankruptcy proceedings.  In
July 2008, our trading symbol changed from “NCEY” to “NCEYQ.”
 
 The table
below sets forth the high and low trading prices for the Company's common stock
for the periods indicated as reported by the NASDAQ OTC-Bulletin Board. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
 
 TRADING
      PRICESQUARTER ENDED
                  
                  HIGH
                  
                  
                  LOWDecember
      31, 2008
                  
                  $
                  0.04
                  
                  
                  $
                  0.01September
      30, 2008
                  
                  $
                  0.65
                  
                  
                  $
                  0.01June
      30, 2008
                  
                  $
                  0.69
                  
                  
                  $
                  0.03March
      31, 2008
                  
                  $
                  0.05
                  
                  
                  $
                  0.03December
      31, 2007
                  
                  $
                  0.07
                  
                  
                  $
                  0.02September
      30, 2007
                  
                  $
                  0.11
                  
                  
                  $
                  0.04June
      30, 2007
                  
                  $
                  0.12
                  
                  
                  $
                  0.06March
      31, 2007
                  
                  $
                  0.16
                  
                  
                  $
                  0.08
  There
were approximately 464 holders of record of the common stock as of March 31,
2009.    The Company has never paid a cash dividend on its common
stock and does not anticipate the payment of a cash dividend in the foreseeable
future. The Company intends to reinvest in its business operations any funds
that could be used to pay a cash dividend. The Company's common stock is
considered a "penny stock" as defined in the Commission's rules promulgated
under the Exchange Act. The Commission's rules regarding penny stocks impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally persons with net worth in excess of $1,000,000 or an annual income
exceeding $200,000 or $300,000 jointly with their spouse). For transactions
covered by the rules, the broker-dealer must make a special suitability
determination for the purchaser and receive the purchaser's written agreement to
the transaction prior to the sale. Thus the Rules affect the ability of
broker-dealers to sell the Company's shares should they wish to do so because of
the adverse effect that the Rules have upon liquidity of penny stocks. Unless
the transaction is exempt under the Rules, under the Securities Enforcement
Remedies and Penny Stock Reform Act of 1990, broker-dealers effecting customer
transactions in penny stocks are required to provide their customers with (i) a
risk disclosure document; (ii) disclosure of current bid and ask quotations if
any; (iii) disclosure of the compensation of the broker-dealer and its sales
personnel in the transaction; and (iv) monthly account statements showing the
market value of each penny stock held in the customer's account. As a result of
the penny stock rules, the market liquidity for the Company's securities may be
severely adversely affected by limiting the ability of broker-dealers to sell
the Company's securities and the ability of purchasers of the securities to
resell them.
 
 ITEM 6. SELECTED FINANCIAL
DATA.
 
 Not
required.
 
 ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
 
 This
report contains forward looking statements within the meaning of Section 27a of
the Securities Act of 1933 and Section 21e of the Securities Exchange Act of
1934. These forward looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including those set forth under "Risk
Factors" in this Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this report. The following discussion
and analysis should be read in conjunction with "Selected Financial Data" and
the Company's financial statements and notes thereto included elsewhere in this
report.
 
 PLAN OF
OPERATIONS OVERVIEW
 
 New
Century Energy Corp. is an independent oil and gas exploration and production
company, with daily net production to its working interest of approximately 600
barrels of oil per day (Bopd) and 1.35 million cubic feet of gas per day
(Mcfgpd). The Company’s proved reserves as of December 31, 2008 are 1,140,000
barrels of crude oil and 1.88 billion cubic feet (Bcf) of gas.  The
Company’s major areas of operations are located onshore United States, primarily
in Matagorda, McMullen, Goliad and Wharton Counties in Texas.
 -26-
 During 2008, the Company’s proved oil
reserves decreased by over 29% due primarily to the 31% decline in reserves in
our Mustang Creek Field.  This decrease was due to (1) the production
of 170,817 net barrels of oil during 2008 and (2) downward revisions to the
reserves based on actual well performance over time, and more significantly, due
to much lower oil prices projected for future years.  The oil price
used to project reserves on the December 31, 2007 reserve report was $91.50
compared to an oil price of $42.51 used on the December 31, 2008 reserve
report.  The lower oil pricing caused a significant reduction in oil
reserves, as the productive life of our wells curtailed due to lower projected
revenue causing the economic limit of certain wells to be reached sooner.
Proved developed oil reserves now
equal 0.96 million barrels, and comprise 84% of the Company’s 1.14 million
barrels of total proved oil reserves.
 
 As of
December 31, 2008, the Company’s proved gas reserves in the Wishbone Field
decreased by 43% to 849 MMCF from 1,478 MMCF on December 31, 2007, or a
difference of 629 MMCF.  Of the total 629 MMCF reduction in proved gas
reserves, 119 MMCF was due to actual net gas produced during 2008 and 510 MMCF
was from downward revisions to estimates of proved reserves.  The
majority of the 510 MMCF downward revision to proved reserves in 2008 can be
attributed to a steeper decline rate associated with the existing wells and the
failed recompletion attempts for proved behind pipe reserves in the LHGU #2 and
LHGU #10 wells.
  The
Company's estimates of proved reserves and proved undeveloped reserves at
December 31, 2008 and 2007, and changes in proved reserves during the last two
years are contained in the Supplemental Information on Oil and Gas Exploration
and Production Activities in the Company's 2008 Consolidated Financial
Statements of this Form 10-K. Proved reserve estimates were made by R.A. Lenser
and Associates, an independent petroleum evaluation and consulting firm, and
were prepared in accordance with generally accepted petroleum engineering and
evaluation principles in conformity with SEC definitions and
guidelines.
 
 The
Company earns revenues and income and generates operating cash flows primarily
from the sale of natural gas and crude oil at market prices of those products at
the time of sale. An important element in understanding the Company's future
operating performance is trends and uncertainties in natural gas and crude oil
prices that may have a material impact on future cash flows. Trends in energy
supply and demand are affected by many factors that are difficult to predict,
such as energy prices, U.S. economic growth, advances in technology, changes in
weather patterns, and future public policy decisions.
 
 The
Energy Information Administration “EIA” of the U.S. Government in its Short-Term
Energy Outlook release dated April 14, 2009 states, “The price of West Texas
Intermediate crude oil averaged $100 per barrel in 2008.  The global
economic slowdown is projected to reduce the average price to $53 per barrel in
2009. Assuming an economic recovery next year, WTI prices are expected to
average $63 in 2010.  Total consumption of natural gas is projected to
fall by nearly 2 percent in 2009, leading to lower natural gas
prices.  The Henry Hub natural gas price spot prices is projected to
decline from an average of $9.13 per MCF in 2008 to $4.24 per MCF in 2009, then
increase in 2010 to an average of more than $5.80 per MCF.”
 
 With the
uncertainties in product prices, and possible changes in sales volumes that may
increase or decrease as a result of future operations, these factors can impact
cash flow from operating activities in the short and long term. If there are
significant changes in crude oil or natural gas prices in 2009 and 2010 beyond
those projected by the EIA, this factor may have a material impact on future
revenues, income and operating cash flows for the Company.
 
 As
described above, the current Plan contemplates that all of our operations will
cease and all of our securities will be cancelled following the approval of the
Plan.  The discussion below describes our operations assuming that the
Plan is not approved and such operations continue following the date of this
report, which, as described above, is not currently contemplated or
expected.
 
 BUSINESS
STRATEGY FOR 2009 & 2010
 
 As part
of our corporate strategy, we expect to remain focused in the following
operational and project areas:
 
 1.
              remain
      focused in the Texas Gulf Coast onshore
region;
 
 2.
              acquire
      properties and proven reserves where we believe additional value can be
      created through a combination of exploitation, development, exploration
      drilling and expanding marketing
opportunities;
 
 3.
              acquire
      properties that give us a majority working interest and operational
      control or where we believe we can ultimately obtain
  it;
  4.
              maximize
      the value of our properties by increasing production and reserves while
      reducing operating costs;
 
 5.
              maintain
      a highly experienced team of operations and exploration consultants using
      state of the art 3D seismic technology to prepare detailed field
      geological studies;
 
 6.
              develop
      drilling prospects and acquire acreage positions over new drilling areas,
      for future drilling by the Company or farmout to qualified industry
      partners. In connection with this strategy, new projects are being
      evaluated in Texas;and
 
 7.
              Successfully
      reorganize the Company under Chapter 11 of the bankruptcy
      code.
 -27-
 OPERATED
PROPERTIES:
 
 As of
December 31, 2008, we estimated that our daily deliverability was approximately
1,350 MCF of gas per day, and 600 Bpd of crude oil per day on Company operated
properties. In the fourth quarter of 2007, we commenced our second drilling
program in McMullen County and this drilling program continued through the
second quarter of 2008. Additional prospective acreage has been identified for
oil and gas leasing in the Mustang Creek field area and new wells may be drilled
on this acreage in 2009 and beyond pending the outcome of our Chapter 11
bankruptcy. During 2008 our production declined in the South Sargent Field due
to natural depletion of reservoirs over time. We have identified five new
locations to be drilled in this field and its surrounding area in 2009 and
beyond pending the reorganization of the Company and availability of funds of
which there can be no assurance.
 
 NON-OPERATED
PROPERTIES:
 
 As of
March 31, 2009, we estimate that daily gas deliverability from Wishbone Field
was approximately 3.0 MMCF of gas per day to the 8/8ths interest, with net
production to the Company's net revenue interest (0.12214%) of approximately 375
MCF of gas per day.
 
 As of
January 1, 2009, our third party engineers attribute over 788 MCF of total
proved gas reserves in the Wishbone Field to our net interest, with
approximately $3.0 million of undiscounted future net income attributed to our
interests in the Wishbone Field.
 -28-
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues, expenses, contingent assets and liabilities and the related
disclosures in the accompanying financial statements. Changes in these estimates
and assumptions could materially affect our consolidated financial position,
results of operations or cash flows. Management considers an accounting estimate
to be critical if: (a) it requires assumptions to be made that were uncertain at
the time the estimate was made and (b) changes in the estimate or different
estimates that could have been selected may have a material impact on our
consolidated results of operations or financial condition. All other significant
accounting policies that we employ are presented in the notes to the
consolidated financial statements. The following discussion presents information
about the nature of our most critical accounting estimates, our assumptions or
approach used and the effects of hypothetical changes in the material
assumptions used to develop each estimate.
 
 Oil and
Gas Properties. -
 
 We follow
the successful efforts method of accounting for our investment in oil and
natural gas properties. Under the successful efforts method, the costs of
successful exploratory wells and leases containing productive reserves are
capitalized. Costs incurred to drill and equip developmental wells, including
unsuccessful development wells, are capitalized. Other costs such as geological
and geophysical costs and the drilling costs of unsuccessful exploratory wells
are expensed.
 
 All
capitalized costs are accumulated and recorded separately for each field and
allocated to leasehold costs and well costs. Leasehold costs are depleted on a
units-of-production basis based on the estimated remaining equivalent proved oil
and gas reserves of each field. Well costs are depleted on a units-of-production
basis based on the estimated remaining equivalent proved developed oil and gas
reserves of each field.
 
 Proved
Reserve Estimates. -
 
 Our
estimate of proved reserves is based on the quantities of oil and gas which
geological and engineering data demonstrate, with reasonable certainty, to be
recoverable in future years from known reservoirs under existing economic and
operating conditions. The accuracy of any reserve estimate is a function of the
quality of available data, engineering and geological interpretation, and
judgment. For example, we must estimate the amount and timing of future
operating costs, severance taxes, development costs, and work-over costs, all of
which may in fact vary considerably from actual results. In addition, as prices
and cost levels change from year to year, the economics of producing the
reserves may change and therefore the estimate of proved reserves also may
change. Any significant variance in these assumptions could materially affect
the estimated quantity and value of our reserves. Despite the inherent
imprecision in these engineering estimates, our reserves are used throughout our
consolidated financial statements. When converting proved gas reserves to barrel
of oil equivalent, we use a conversion factor of 6,000:1, or 6,000 cubic feet of
gas equaling 1 barrel of oil.
 
 Long-Lived
Assets -
 
 We review
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of any such asset may not be recoverable. We
record impairment losses on long-lived assets, including oil and gas properties,
used in operations when the estimated cash flows to be generated by those assets
are less than the carrying amount of those items. Our cash flow estimates are
based upon, among other things, historical results adjusted to reflect our best
estimate of future market rates, utilization levels, operating performance, and
with respect to our oil and gas properties, future oil and natural gas sales
prices, an estimate of the ultimate amount of recoverable oil and natural gas
reserves that will be produced from a field, the timing of this future
production, future costs to produce the oil and natural gas and other factors.
Our estimate of fair value represents our best estimate based on industry trends
and reference to market transactions and is subject to variability. The oil and
gas industry is cyclical and our estimates of the period over which future cash
flows will be generated, as well as the predictability of these cash flows, can
have significant impact on the carrying value of these assets and, in periods of
prolonged down cycles, may result in impairment charges.
 -29-
 Asset
Retirement Obligations -
  We have
certain obligations to remove tangible equipment and restore land at the end of
oil and gas production operations. Our removal and restoration obligations are
primarily associated with plugging and abandoning wells. We adopted Statement of
Financial Accounting Standards ("SFAS") No. 143, “Accounting for Asset
Retirement Obligations” effective January 1, 2003, as discussed in Note 2 to our
Consolidated Financial Statements. SFAS No. 143 significantly changed the method
of accruing for costs an entity is legally obligated to incur related to the
retirement of fixed assets ("asset retirement obligations" or "ARO"). Primarily,
SFAS No. 143 requires us to estimate asset retirement costs for all of our
assets, adjust those costs for inflation to the forecast abandonment date,
discount that amount using a credit-adjusted-risk-free rate back to the date we
acquired the asset or obligation to retire the asset and record an ARO liability
in that amount with a corresponding addition to our asset value. When new
obligations are incurred, i.e. new well drilled or acquired, we add a layer to
the ARO liability. We then accrete the liability layers quarterly using the
applicable period-end effective credit-adjusted-risk-free rates for each layer.
Should either the estimated life or the estimated abandonment costs of a
property change upon our quarterly review, a new calculation is performed using
the same methodology of taking the abandonment cost and inflating it forward to
its abandonment date and then discounting it back to the present using our
credit-adjusted-risk-free rate. The carrying value of the asset retirement
obligation is adjusted to the newly calculated value, with a corresponding
offsetting adjustment to the asset retirement cost; therefore, abandonment costs
will almost always approximate the estimate. When well obligations are relieved
by sale of the property or plugging and abandoning the well, the related
liability and asset costs are removed from our balance sheet.
 
 Derivatives
-
 
 We follow
the provisions of SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133") along with related interpretations EITF No.
00-19 "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock" ("EITF-19") and EITF No. 05-2
"The Meaning of 'Conventional Convertible Debt Instrument' in Issue No. 00-19"
("EITF 05-2"). SFAS No. 133 requires every derivative instrument (including
certain derivative instruments embedded in other contracts) to be recorded in
the Balance Sheet as either an asset or liability measured at its fair value,
with changes in the derivative's fair value recognized currently in earnings
unless specific hedge accounting criteria are met.
 
 We value
these derivative securities under the fair value method at the end of each
reporting period (quarter and annual), and their value is marked to market at
the end of each reporting period with the gain or loss recognition recorded
against earnings. We continue to revalue these instruments each quarter and year
to reflect their current value in light of the current market price of our
common stock. As a result, our consolidated financial statements may fluctuate
from quarter to quarter and year to year based on the change in fair value of
the derivatives and therefore our consolidated financial position and results of
operations may vary significantly from quarter to quarter and year to year,
based on factors other than the Company's revenues and expenses.
 
 We
utilize the Black-Scholes option-pricing model to determine the fair value of
our freestanding derivative instruments. Key assumptions of the Black-Scholes
option-pricing model include applicable volatility rates, risk-free interest
rates and the instruments expected remaining life. We also determined a fair
value for our various embedded derivatives within our $15 million Convertible
Note by using a layered, discounted, probability-weighted cash flow model. The
assumptions used in both modeling techniques required significant management
judgment and estimates of future fluctuation in stock price as well as changes
in future interest rates. The reader should reference Note 6 in the "Notes to
Consolidated Financial Statements" for further details in regards to our
derivative liabilities.
 -30-
 Recent
accounting pronouncements
 
 In September 2006, the FASB issued SFAS No. 157,
“Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a
frame work for measuring fair value in accordance with generally accepted
accounting principles and expands disclosures about fair value measurements.
This Statement applies under other accounting pronouncements that fair value is
the relevant measurement attribute. Accordingly, this Statement does not require
any new fair value measurements. SFAS 157 is effective for fiscal years
beginning after December 15, 2007. The Company adopted SFAS 157 in the first
quarter of fiscal 2008. We adopted SFAS 157 effective January 1, 2008, the
adoption of which has not affected our financial position or results of
operations but did result in additional required disclosures, which are provided
above.
 
 In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities (as amended)
(“SFAS 159”), which permits entities to choose to measure most financial
instruments and certain other items at fair value. SFAS 159 is effective
for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. We
adopted SFAS 159 on January 1, 2008.  The adoption of SFAS 159
did not have a material impact on our financial statements.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, which establishes accounting and reporting
standards to improve the relevance, comparability, and transparency of financial
information in its consolidated financial statements that include an outstanding
noncontrolling interest in one or more subsidiaries. SFAS 160 is effective for
fiscal years, and the interim periods within those fiscal years, beginning on or
after December 15, 2008. Management of the Company does not expect the adoption
of this pronouncement to have a material impact on its consolidated financial
statements.
  On December 31, 2008,
the SEC published the final rules and interpretations updating its oil and gas
reporting requirements. Many of the revisions are updates to definitions in the
existing oil and gas rules to make them consistent with the petroleum resource
management system, which is a widely accepted standard for the management of
petroleum resources that was developed by several industry organizations. Key
revisions include changes to the pricing used to estimate reserves utilizing a
12-month average price rather than a single day spot price which eliminates the
ability to utilize subsequent prices to the end of a reporting period when the
full cost ceiling was exceeded and subsequent pricing exceeds pricing at the end
of a reporting period, the ability to include nontraditional resources in
reserves, the use of new technology for determining reserves, and permitting
disclosure of probable and possible reserves. The SEC will require companies to
comply with the amended disclosure requirements for registration statements
filed after January 1, 2010, and for annual reports on Form 10-K for fiscal
years ending on or after December 15, 2009. Early adoption is not
permitted. The Company is currently assessing the impact that the adoption will
have on the Company’s disclosures, operating results, financial position and
cash flows.
  RESULTS
OF OPERATIONS:
 
 COMPARISON
OF THE RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
 
 Revenues
-
 
 Our
revenues are summarized as follows for the years ended December 31:
 
 2008
                      
                      
                      2007
                      
                      
                      %
      ChangeOil
      sales
                      
                      $
                      20,170,548
                      
                      
                      $
                      10,726,587
                      
                      
                      
                      88%Gas
      sales
                      
                      
                      4,159,724
                      
                      
                      
                      2,885,716
                      
                      
                      
                      44Oil
      and gas
                      
                      
                      24,330,272
                      
                      
                      
                      13,612,716
                      
                      
                      
                      79Gain
      on sale of oil and gas interest
                      
                      
                      -
                      
                      
                      
                      34,680
                      
                      
                      
                      (100
                      )Gas
      operations consulting
                      
                      
                      24,300
                      
                      
                      
                      36,930
                      
                      
                      
                      (34
                      )Total
      revenues
                      
                      $
                      24,354,572
                      
                      
                      $
                      13,683,913
                      
                      
                      
                      78%
 -31-
 Oil sales
rose $10.7 million for the year ended 2008 compared to the year ended 2007,
primarily due to the completion of eight new producing wells in the Mustang
Creek Field and one new oil well in the Tenna Field, and increased production
and sale of oil in connection with such wells during the year ended December 31,
2008. Revenue of $5,140,157 (53,219 barrels) was attributable to the new wells
from the Mustang Creek Field in 2008. Also contributing to the increase in 2008
oil revenue was the increase in the price of oil in 2008 compared to oil prices
in 2007. The average price of oil for our operated properties was $98.67 per
barrel in 2008 compared to $70.34 during 2007.
 
 The major
contributor of the $1.3 million increase in gas sales in 2008 was the increase
in the average price of natural gas from our operated and non operated
properties from $6.10 per MCF in 2007 to $8.08 per MCF in 2008.  In
addition, production increased slightly from a total of 452,521 MCF in 2007 to
499,899 MCF in 2008.
 
 Expenses-
 
 Our
expenses were comprised of the following for the year ended December
31:
  2008
                  
                  
                  2007
                  
                  
                  %
      ChangeExploration
                  
                  $
                  1,363,628
                  
                  
                  $
                  1,960,977
                  
                  
                  
                  (30
                  )%Lease
      Operating
                  
                  
                  4,352,258
                  
                  
                  
                  2,964,389
                  
                  
                  
                  47Production
      Taxes
                  
                  
                  1,006,372
                  
                  
                  
                  607,225
                  
                  
                  
                  66Depreciation,
      depletion and amortization
                  
                  
                  10,534,247
                  
                  
                  
                  8,138,310
                  
                  
                  
                  29Impairment
      of oil and gas properties
                  
                  
                  16,229,619
                  
                  
                  
                  10,211,390
                  
                  
                  
                  59General
      and administrative
                  
                  
                  1,469,080
                  
                  
                  
                  1,196,638
                  
                  
                  
                  23Total
      expenses
                  
                  $
                  34,955,204
                  
                  
                  $
                  25,078,929
                  
                  
                  
                  39
                  %
  Exploration
expenses decreased by $597,349 for the year ended 2008, compared with
exploration expenses for the year ended 2007, due primarily to the write-off of
five dry holes during the year ended December 31, 2007 (Rabke #1, Henry
Kuykendall #1, Double K Swaim #1, Swaim #58-3, and Hodde #2) compared to the
write-off of only three dry holes during the year ended December 31, 2008
(Gar-Henry #1, Kassner #34, and Swaim #33-3).
 
 The added
costs associated with operating eight additional wells in the Mustang Creek
Field in 2008 compared to 2007 gave rise to $334,352 of the $1,387,869 increase
in lease operating expenses for the year ended December 31, 2008, compared to
the year ended December 31, 2007. Also, contributing to the rise in the
operating expenses was the increase in the 2008 work over expenses due to a
greater number of wells in the Mustang Creek Field in 2008 compared to 2007. The
production taxes increased in 2008 due to the increase in production in 2008 as
compared to 2007.
 
 Depreciation,
depletion and amortization increased by $2.4 million for the year ended December
31, 2008 compared to the year ended December 31, 2007, primarily due to an
increase in our overall production in 2008 coupled with declining reserves in
most of our fields.
 
 We
recognized an impairment of proved properties at December 31, 2008 of
$16,057,342 as a result of a significant reduction in proved reserves in our
Wishbone and Mustang Creek Fields.  Our proved reserves decreased by
43% and 31% for the Wishbone and Mustang Creek Fields,
respectively.  The reduction in both fields was due to downward
revisions based on actual well performance over time combined with the
projection of significantly lower oil and gas prices for future years. We also
recognized an impairment of $172,277 on our unproved properties in the state of
California based on current market conditions and drilling feasibility in that
region.
 -32-
 Due to
the declining reserves in the Wishbone Field, there was a $10,211,390 impairment
expense for the year ended December 31, 2007.  During 2007, the
Company’s proved gas reserves in the Wishbone Field were decreased by
57%.  The majority of this reduction, approximately ninety percent
(90%), was due to a significant reduction in future proved undeveloped (PUD)
locations projected to be drilled.  This reduction was based on the
operator’s indication that only one more PUD may be drilled due to current high
drilling costs and lower product prices.  In addition, the decline
rate associated with the existing proved developed producing (PDP) gas reserves
was steeper than previously projected, which contributed to approximately ten
percent (10%) of the decrease in the proved reserves in this
field.
 
 General
and administrative expenses increased by $272,442 or 23%, for the year ended
December 31, 2008, compared to the year ended December 31, 2007. This increase
was primarily due to increases in payroll expenses and accounting/consulting
expense.  Payroll and related payroll expenses increased by
approximately $121,000 from 2007 to 2008 as a result of (1) the increase in our
CEO’s annual salary; (2) the implementation of our new 401K plan with a company
match; and (3) our part-time CFO moving from a consultant to an employee
commensurate with the bankruptcy filing.  Accounting and consulting
expenses increased by approximately $102,000 due to our part-time CFO consulting
fees and external costs associated with our Sarbanes-Oxley and internal controls
documentation.
 
 Other
Income (Expense)-
 
 Other
income (expense) consisted of the following for the year ended December
31:
 
 2008
                    
                    
                    2007Net
      (increase) decrease in fair value of derivative
liabilities
                    
                    $
                    (2,674,752
                    )
                    
                    $
                    1,255,507Interest
      and amortization of discount on debt expense
                    
                    
                    (6,099,243
                    )
                    
                    
                    (9,368,772
                    )All
      other, net
                    
                    
                    84,178
                    
                    
                    
                    320,943Other
      income (expense), net
                    
                    $
                    (8,689,817
                    )
                    
                    $
                    (7,792,322
                    )
 
 The
Convertible Note for the first acquisition of the Lindholm-Hanson Gas Unit (the
“L-H Gas Unit”) in June 2005, comprised freestanding derivatives of warrants and
options issued to the lender (the Warrant and Option, described in greater
detail above), and embedded derivatives relating to a conversion feature, a
contract rate adjustment and an optional redemption provision (the Convertible
Note, as described above) which were bundled together into a single compound
embedded derivative for financial accounting purposes.
 
 These
derivative liabilities are marked-to-market each quarter, with the change in
fair value recorded in our consolidated statements of operations. For each of
the years ended December 31, 2008 and 2007, the net decrease in fair value, or
increase in income, by derivative was as follows:
 
 2008
                  
                  
                  2007Laurus
      Warrant
                  
                  $
                  93,804
                  
                  
                  $
                  295,729Laurus
      Stock Option
                  
                  
                  163,620
                  
                  
                  
                  89,934Single
      compound embedded derivative within Convertible Note
                  
                  
                  126,477
                  
                  
                  
                  490,608Laurus
      December Option
                  
                  
                  (3,058,653
                  )
                  
                  
                  379,236(Increase)
      decrease in fair value of derivative liabilities
                  
                  $
                  (2,674,752
                  )
                  
                  $
                  1,255,507
 -33-
 The
Black-Scholes Method is utilized in determining fair value of the Laurus Stock
Option, Laurus Warrant and the Laurus December Option. A layered discounted
probability-weighted expected cash flow method is used for determining the fair
value of the single compound embedded derivative. The effect of the smaller
initial assigned fair market value to the single compound embedded derivative,
together with our stock price and volatility assumption representing only one
component of the methodology, resulted in the effect on income not being as
great as the effect on the freestanding derivatives. So long as the Convertible
Note remains outstanding, the quarterly mark-to-market adjustments of these
derivative liabilities could produce wide fluctuations in our consolidated
financial position and results of operations.
 
 Interest
and amortization of discounts on debt for each of the years ended December 31,
2008 and 2007 can be broken down as follows:
 
 2008
                  
                  
                  2007Interest
      expense on notional balance
                  
                  $
                  3,895,921
                  
                  
                  $
                  7,578,598Accretion
      of notes discounts and amortization of deferred loan costs
                  
                  
                  2,203,322
                  
                  
                  
                  1,790,174Total
      interest expense
                  
                  $
                  6,099,243
                  
                  
                  $
                  9,368,772
  
 The
interest on notional balances during the years ended December 31, 2008 and 2007
represents the stated interest on the Restated and Amended Convertible Note and
the four Secured Term Notes held by us and the three Secured Term Notes held by
Gulf Coast Oil Corporation, our wholly owned subsidiary.
 
 The
accretion of note discounts for the periods presented refers to the accretion of
the unamortized discounts on the Restated and Amended Convertible Note and the
six Secured Term Notes of the consolidated entity using the effective interest
method. Each discount is amortized over the original life of the
note.
  Amortization
of deferred loan costs comprises fees (i.e. escrow fees, legal fees, etc.) paid
to non-lenders in connection with the Convertible Note and seven of the Secured
Term Note financings. Such costs are capitalized as deferred loan costs and
amortized over the respective life of the note.
 -34-
 Also
included in other income (expense), are the following line
items:
 
 2008
                    
                    
                    2007Release
      of Vertica liabilities
                    
                    $
                    -
                    
                    
                    $
                    59,260Other
      income
                    
                    
                    84,178
                    
                    
                    
                    285,143Other
      expenses
                    
                    
                    -
                    
                    
                    
                    (23,460
                    )Total
      all other
                    
                    $
                    (1,168,381
                    )
                    
                    $
                    320,943
  
 Included
in other income is interest earned on funds received in the note financings
which have been temporarily invested pending the disbursement for which they
were borrowed.
  Income
taxes-
 
 No
federal income taxes have been paid since inception of the Company, due to our
net operating loss carry forwards. Due to the uncertainty surrounding the
realization of the benefits of our tax attributes, including net operating loss
carry forwards, no provision or benefit for federal income taxes has been
recorded in our consolidated statements of operations.
 Reorganization
Expense-
  Reorganization
expense of $1,252,559 for the year ended December 31, 2008 consists primarily of
the legal and financial advisory fees directly relating to assisting us with our
Chapter 11 bankruptcy filing and reorganization.
 Net Loss
–
 
 We had a
net loss of $20,543,008 for the year ended December 31, 2008, compared to a net
loss of $19,187,338 for the year ended December 31, 2007, the main reason for
the increase in net loss was the increased expenses for the year ended December
31, 2008, compared to the year ended December 31, 2007, as described
above.
 
 LIQUIDITY
AND CAPITAL RESOURCES
  Cash and cash equivalents
-
  We have
cash and cash equivalents of $2,630,540 plus restricted cash of $4,007 as of
December 31, 2008; however, based on our current plan of operations and the fact
we are currently in Chapter 11 bankruptcy, we do not believe that we have
sufficient funds to continue our operations for the next 12 months. We believe
that we will require additional funds to continue our oil and gas exploration
and production program. If we are unable to raise additional financing in the
next 12 months, and we fail to otherwise generate sufficient cash flows through
operations, we will be required to modify our operations plan accordingly or
even to cease operations altogether. These funds may be raised through equity
financing, debt financing or other sources, and may result in substantial
dilution of the equity ownership of our shares.  There can be no
assurance that additional financing will be available to us when needed or, if
available, that it can be obtained on commercially reasonable
terms.
  Due to
the substantial doubt of our ability to meet our current operating expenses and
the capital expenses noted above, in their report on the annual consolidated
financial statements for the year ended December 31, 2008, our independent
auditors included an explanatory paragraph regarding concerns about our ability
to continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure by our
independent auditors.
 -35-
 Total
Assets -
 
 We had
total assets of $25,590,149 as of December 31, 2008, which included $3,863,708
of current assets; $68,807 of office equipment, net of $135,458 of accumulated
depreciation; $21,625,709 of oil and gas properties net of accumulated depletion
of $57,482,655, which includes $26,268,732 of impairment expense; and deferred
loan costs and other assets of $31,925.
 
 Working
capital -
 
 At
December 31, 2008, we had a working capital deficit of $889,080. Additionally,
as of December 31, 2008, we had current liabilities of $4,752,788 and total
liabilities of $68,995,416. Our current assets of $3,863,708 at December 31,
2008, are substantially liquid as they comprise cash and cash equivalents of
$2,630,540, restricted cash of $4,007, accounts receivable of $823,897,
inventory of $316,200 and prepaid expenses and other $89,064.  The
conditions described above, in addition to the Company’s July 29, 2008 filing of
voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code, create
substantial doubt as to the Company’s ability to continue as a going
concern.  See Note 2 to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.
 
 Liabilities
-
 
 Total
liabilities as of December 31, 2008 were $68,995,416, and included current
liabilities of $4,752,788 and asset retirement obligation of $800,390 and
liabilities subject to compromise of $63,442,238.
 
 Off-balance
sheet financing -
 
 We have
not entered into any off-balance sheet financing arrangements.
 
 Change in
prices -
 
 Oil and
natural gas prices are subject to seasonal and other fluctuations that are
beyond our ability to control or predict.
 
 Inflation
-
 
 Although
certain of our costs and expenses are affected by the level of inflation,
inflation has not had a significant effect on our results of operations since
inception.
 
 Cash
flows-
 
 2008
                  
                  
                  2007Net
      cash provided by /(used in)Operating
      activities
                  
                  $
                  12,447,290
                  
                  
                  $
                  (859,377
                  )Investing
      activities
                  
                  
                  (8,759,840
                  )
                  
                  
                  (7,080,834
                  )Financing
      activities
                  
                  
                  (10,609,427
                  )
                  
                  
                  9,938,450Increase/(decrease)
      in cash andcash
      equivalents
                  
                  $
                  (6,891,977
                  )
                  
                  $
                  1,998,239Year
      ended December 31,
                  
                  2008
                  
                  
                  2007Cash
      and cash equivalents
                  
                  $
                  2,630,540
                  
                  
                  $
                  9,522,517
 -36-
 Operating
activities -
 
 Year
ended December 31, 2008
 
 Cash
flows provided by operating activities of $12,477,290 for the year ended
December 31, 2008, included the benefits of non-cash charges for depletion,
depreciation and amortization of $10,534,247; impairment of oil and gas
properties of $16,229,619; net change in fair value of derivative liabilities
and accretion of discount and loan cost on debt of $4,678,564;  $302,686
for the accretion related to the asset retirement obligation; and changes
in working capital components which totaled $1,074,682 for the year ended
December 31, 2008; offsetting these increases were a net loss for the year of
$20,543,008.
 
 Investing
Activities –
 
 Year
ended December 31, 2008
 
 Cash
flows used in investing activities of $8,759,840 for the year ended December 31,
2008, were primarily attributed to investments in oil and gas properties
totaling $2,978,583; investment in unproved properties of $252,974; and
investment in drilling exploratory wells at Mustang Creek of $5,546,486. Other
investing activities netted to a cash outflow of $17,434 during the year ended
December 31, 2008.
 
 Financing
activities -
 
 Year
ended December 31, 2008
 
 Cash
flows used in financing activities of $10,609,427 for the year ended December
31, 2008, were a result of $12,597,388 in payments to reduce long-term debt
offset by $1,987,961 of restricted cash released for drilling
operations.
 
 ---------------------------------------------------
 
 As
described in greater detail above, the current Plan contemplates that all of our
operations will cease and all of our securities will be cancelled following the
approval of the Plan.


-37-
 ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
 The
Financial Statements which follow are stated in U.S. dollars and are prepared in
accordance with U.S. Generally Accepted Accounting
Principles.





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS


OF
NEW CENTURY ENERGY CORP.





Report
      of Independent Registered Public Accounting Firm
            F-2,
      F-3Consolidated
      Balance Sheets at December 31, 2008 and December 31, 2007
            F-4,
      F-5Consolidated
      Statements of Operations for the years ended December 31, 2008 and
      December 31, 2007
            F-6Consolidated
      Statements of Shareholders’ Deficit for the years ended December 31,
      2008 and December 31, 2007
            F-7Consolidated
      Statements of Cash Flows for the years ended December 31, 2008 and
      December 31, 2007
            F-8Notes
      to Consolidated Financial Statements
            F-9


F-1


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and


Stockholders
of New Century Energy Corp.





We have
audited the accompanying consolidated balance sheet of New Century Energy Corp.
(the “Company”) as of December 31, 2008, and the related consolidated statements
of operations, stockholders’ deficit and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. the Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. 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 consolidated financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of New Century
Energy Corp. as of December 31, 2008, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company suffered recurring losses from
operations and on July 28, 2008, filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code, which raises
substantial doubt about its ability to continue as a going
concern.  Management’s plans regarding those matters are also
described in Note 2.  The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.





/s/
Malone & Bailey, P.C.


www.malone-bailey.com





April 24,
2009


Houston,
Texas


F-2


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and


Stockholders
of New Century Energy Corp.





We have
audited the accompanying consolidated balance sheet of New Century Energy Corp.
as of December 31, 2007, and the related consolidated statements of operations,
stockholders’ equity (deficit) and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company’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 audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. New Century
Energy Corp. is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of New Century
Energy Corp.’s internal control over financial reporting. Accordingly, we
express no such opinion. 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 consolidated 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 consolidated financial position of New Century
Energy Corp. as of December 31, 2007, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
New Century Energy Corp. will continue as a going concern. As more fully
described in Note 2, New Century Energy Corp. has recurring operating losses, an
accumulated deficit of $32.9 million and working capital deficit of $18.2
million at December 31, 2007. These factors, among others, as discussed in Note
2 to the consolidated financial statements, raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in regard
to these matters also are described in Note 2. The 2007 consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.





PMB HELIN
DONOVAN, LLP





/s/ PMB
Helin Donovan, LLP





March 28,
2008


Houston,
Texas


F-3


NEW
CENTURY ENERGY CORP.


(DEBTOR-IN-POSSESSION)


CONSOLIDATED
BALANCE SHEETS




December
      31,2008
              
              2007ASSETSCurrent
      AssetsCash
      and cash equivalents
              
              $
              2,630,540
              
              
              $
              9,522,517Restricted
      cash
              
              
              4,007
              
              
              
              1,964,446Certificate
      of deposit
              
              
              -
              
              
              
              35,075Accounts
      receivable
              
              
              823,897
              
              
              
              2,047,818Inventory
              
              
              316,200
              
              
              
              512,578Prepaid
      expenses and other
              
              
              89,064
              
              
              
              62,560Total
      Current Assets
              
              
              3,863,708
              
              
              
              14,144,994Office
      equipment, net of accumulated depreciation of $135,458 and $84,528,
      respectively
              
              
              68,807
              
              
              
              102,303Oil
      and gas properties, using successful efforts accountingProved
      properties
              
              
              68,120,263
              
              
              
              62,216,668Unproved
      properties
              
              
              1,084,222
              
              
              
              903,738Wells
      and related equipment and facilities
              
              
              9,903,879
              
              
              
              7,382,19279,108,364
              
              
              
              70,502,598Less
      accumulated depletion and impairment
              
              
              (57,482,655
              )
              
              
              (30,941,996
              )Net
      oil and gas properties
              
              
              21,625,709
              
              
              
              39,560,602Deferred
      loan costs and other assets, net
              
              
              31,925
              
              
              
              250,500TOTAL
      ASSETS
              
              $
              25,590,149
              
              
              $
              54,058,399LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      LiabilitiesAccounts
      payable
              
              $
              691,311
              
              
              $
              823,976Accrued
      liabilities
              
              
              64,763
              
              
              
              754,258Accrued
      reorganization expenses
              
              
              338,652
              
              
              
              -Royalty
      payable
              
              
              175,443
              
              
              
              233,377Current
      portion of notes payable
              
              
              -
              
              
              
              29,730,690Derivative
      liability for Laurus warrant
              
              
              17,949
              
              
              
              111,753Derivative
      liability for Laurus stock option
              
              
              66,454
              
              
              
              229,074Single
      compound embedded derivatives with convertible note
              
              
              3,347,621
              
              
              
              288,966Derivative
      liability for Laurus December stock option
              
              
              50,595
              
              
              
              177,074Total
      Current Liabilities
              
              
              4,752,788
              
              
              
              32,349,168Notes
      payable, less current portion (net of unamortized discount and loan
      costsof
      $0 and $2,002,812, respectively)
              
              
              -
              
              
              
              44,073,786Asset
      retirement obligation
              
              
              800,390
              
              
              
              497,704Liabilities
      subject to compromise (see Note 3)
              
              
              63,442,238
              
              
              
              -Total
      Liabilities
              
              
              68,995,416
              
              
              
              76,920,658Commitments
      and Contingencies (see Note 9)
              
              
              -
              
              
              
              -Stockholders'
      Deficit  F-4
 Preferred
      stock, $.001 par, 20,000,000 shares authorized,Series
      A convertible preferred shares, 5,000 sharesdesignated,
      none issued
              
              
              -
              
              
              
              -Series
      B convertible preferred shares, 2,000,000 sharesdesignated,
      none issued
              
              
              -
              
              
              
              -Common
      stock, $.001 par value, 200,000,000 sharesauthorized,
      56,010,612 shares issued and outstanding
              
              
              56,011
              
              
              
              56,011Additional
      paid in capital
              
              
              9,952,743
              
              
              
              9,952,743Retained
      deficit
              
              
              (53,414,021
              )
              
              
              (32,871,013
              )Total
      Stockholders' Deficit
              
              
              (43,405,267
              )
              
              
              (22,862,259
              )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
              
              $
              25,590,149
              
              
              $
              54,058,399







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


F-5


NEW CENTURY ENERGY CORP.


(DEBTOR-IN-POSSESSION)


CONSOLIDATED
STATEMENTS OF OPERATIONS





Year
      Ended December 31,2008
                  
                  
                  2007Revenues:Oil
      and gas sales
                  
                  $
                  24,330,272
                  
                  
                  $
                  13,612,303Gain
      on sale of oil and gas interest
                  
                  
                  -
                  
                  
                  
                  34,680Gas
      operations consulting
                  
                  
                  24,300
                  
                  
                  
                  36,930Total
      revenues
                  
                  
                  24,354,572
                  
                  
                  
                  13,683,913Operating
      expenses:Exploration
                  
                  
                  1,363,628
                  
                  
                  
                  1,960,977Lease
      operating
                  
                  
                  4,352,258
                  
                  
                  
                  2,964,389Production
      taxes
                  
                  
                  1,006,372
                  
                  
                  
                  607,225Depreciation,
      depletion and amortization
                  
                  
                  10,534,247
                  
                  
                  
                  8,138,310Impairment
      of oil and gas properties
                  
                  
                  16,229,619
                  
                  
                  
                  10,211,390General
      & administrative
                  
                  
                  1,469,080
                  
                  
                  
                  1,196,638Total
      expenses
                  
                  
                  34,955,204
                  
                  
                  
                  25,078,929Operating
      loss
                  
                  
                  (10,600,632
                  )
                  
                  
                  (11,395,016
                  )Other
      income (expense)Change
      in fair value of derivative liabilities
                  
                  
                  (2,674,752
                  )
                  
                  
                  1,255,507Interest
      and amortization of discount on debt (contractual interest expense for
      2008was $11.0
      million)
                  
                  
                  (6,099,243
                  )
                  
                  
                  (9,368,772
                  )Purchase
      and write down of Vertica liabilities
                  
                  
                  -
                  
                  
                  
                  59,260Loss
      on Natural Gas Put Option
                  
                  
                  -
                  
                  
                  
                  (23,460
                  )Interest
      and other income
                  
                  
                  84,178
                  
                  
                  
                  285,143Total
      other expense
                  
                  
                  (8,689,817
                  )
                  
                  
                  (7,792,322
                  )Loss
      before reorganization expense and income taxes
                  
                  
                  (19,290,449
                  )
                  
                  
                  (19,187,338
                  )Reorganization
      expense
                  
                  
                  (1,252,559
                  )
                  
                  
                  -Income
      taxes
                  
                  
                  -
                  
                  
                  
                  -NET
      LOSS
                  
                  $
                  (20,543,008
                  )
                  
                  $
                  (19,187,338
                  )Loss
      per share, basic and diluted
                  
                  $
                  (
      0.37
                  )
                  
                  $
                  (
      0.34
                  )Weighted
      average common shares used incomputing
      basic and diluted loss per share
                  
                  
                  56,010,612
                  
                  
                  
                  56,010,612







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


F-6


NEW
CENTURY ENERGY CORP.


(DEBTOR-IN-POSSESSION)


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT


Years
Ended December 31, 2008 and 2007





Common
      Stock
              
              
              Additional
                Paid
      In
              
              
              Retained
                EarningsShares
              
              
              Amount
              
              
              Capital
              
              
              (Deficit)
              
              
              TotalsDecember
      31, 2006
              
              
              56,010,612
              
              
              $
              56,011
              
              
              $
              9,952,743
              
              
              $
              (13,683,675
              )
              
              $
              (3,674,921
              )Net
      Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (19,187,338
              )
              
              
              (19,187,338
              )December
      31, 2007
              
              
              56,010,612
              
              
              
              56,011
              
              
              
              9,952,743
              
              
              
              (32,871,013
              )
              
              
              (22,862,259
              )Net
      Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (20,543,008
              )
              
              
              (20,543,008
              )December
      31, 2008
              
              
              56,010,612
              
              
              $
              56,011
              
              
              $
              9,952,743
              
              
              $
              (53,414,021
              )
              
              $
              (43,405,267
              )







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


F-7


NEW
CENTURY ENERGY CORP.
 (DEBTOR-IN-POSSESSION)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 Year
      Ended December 31,2008
                        
                        
                        2007Cash
      flows from operating activities:Net
      loss
                        
                        $
                        (20,543,008
                        )
                        
                        $
                        (19,187,338
                        )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation,
      depletion and amortization
                        
                        
                        10,534,247
                        
                        
                        
                        8,138,310Impairment
      of oil and gas properties
                        
                        
                        16,229,619
                        
                        
                        
                        10,211,390Write
      down of liabilities on Vertica reverse merger
                        
                        
                        -
                        
                        
                        
                        (59,260
                        )Gain
      on sale of oil and gas properties
                        
                        
                        -
                        
                        
                        
                        (34,680
                        )Loss
      on natural gas put option
                        
                        
                        -
                        
                        
                        
                        23,460Net
      change in fair value of derivatives
                        
                        
                        2,675,752
                        
                        
                        
                        (1,255,507
                        )Accretion
      of discount on notes to interest expense
                        
                        
                        2,002,812
                        
                        
                        
                        1,760,258Amortization
      of deferred loan costs
                        
                        
                        200,500
                        
                        
                        
                        29,916Accretion
      related to asset retirement obligation
                        
                        
                        302,686
                        
                        
                        
                        106,518Changes
      in working capital:Accounts
      receivable
                        
                        
                        1,223,921
                        
                        
                        
                        (115,583
                        )Inventory
                        
                        
                        196,378
                        
                        
                        
                        (186,486
                        )Prepaid
      expenses and other
                        
                        
                        (36,513
                        )
                        
                        
                        (155,980
                        )Accounts
      payable
                        
                        
                        (132,665
                        )
                        
                        
                        (7,115
                        )Accrued
      liabilities
                        
                        
                        (689,495
                        )
                        
                        
                        (216,115
                        )Royalty
      payments payable
                        
                        
                        (57,934
                        )
                        
                        
                        88,835Liabilities
      subject to compromise
                        
                        
                        232,338
                        
                        
                        
                        -Accrued
      reorganization costs
                        
                        
                        338,652
                        
                        
                        
                        -----Net
      cash provided by (used in) operating activities
                        
                        
                        12,477,290
                        
                        
                        
                        (859,377
                        )Cash
      flows from investing activities:Capital
      expenditures on oil and gas properties
                        
                        
                        (2,978,583
                        )
                        
                        
                        (2,059,483
                        )Decrease
      in drilling advances
                        
                        
                        -
                        
                        
                        
                        62,628Proceeds
      from sale of oil and gas property and equipment
                        
                        
                        -
                        
                        
                        
                        34,680Investment
      in unproved property
                        
                        
                        (252,974
                        )
                        
                        
                        (484,832
                        )Investment
      in drilling exploratory wells at Mustang Creek
                        
                        
                        (5,546,486
                        )
                        
                        
                        (4,655,289
                        )Investment
      in marketable securities
                        
                        
                        35,637
                        
                        
                        
                        19,462(Increase)
      decrease in other assets
                        
                        
                        (17,434
                        )
                        
                        
                        2,000
 Net
      cash used in investing activities
                                            
                                            
                                            (8,759,840
                                            )
                                            
                                            
                                            (7,080,834
                                            )Cash
      flows from financing activities:Net
      proceeds from $5.3M note financing
                                            
                                            
                                            -
                                            
                                            
                                            
                                            5,114,500Net
      proceeds from $7.1M note financing
                                            
                                            
                                            -
                                            
                                            
                                            
                                            6,851,500Payments
      to reduce long-term debt
                                            
                                            
                                            (12,597,388
                                            )
                                            
                                            
                                            (5,183,558
                                            )Restricted
      cash released for drilling operations
                                            
                                            
                                            1,987,961
                                            
                                            
                                            
                                            3,156,008Net
      cash provided by (used in) financing activities
                                            
                                            
                                            (10,609,427
                                            )
                                            
                                            
                                            9,938,450Net
      increase (decrease) in cash
                                            
                                            
                                            (6,891,977
                                            )
                                            
                                            
                                            1,998,239Cash
      at beginning of the year
                                            
                                            
                                            9,522,517
                                            
                                            
                                            
                                            7,524,278Cash
      at end of the year
                                            
                                            $
                                            2,630,540
                                            
                                            
                                            $
                                            9,522,517
 Supplemental
      disclosures of cash flow information:Interest
      paid
                        
                        $
                        (4,542,741
                        )
                        
                        $
                        (7,555,828
                        )Income
      taxes paid
                        
                        $
                        -
                        
                        
                        $
                        --Supplemental
      disclosures of noncash investing and financing activities(See
      Notes 9 and 10)
 The
accompanying notes are an integral part of these consolidated financial
statements.





F-8


NEW CENTURY ENERGY CORP.


(DEBTOR-IN-POSSESSION)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





New
Century Energy Corp. ("New Century" or the "Company"), along with its two
wholly-owned subsidiaries, Century Resources, Inc. (“Century”) and Gulf Coast
Oil Corporation (“Gulf Coast”), is an independent oil and gas exploration and
production company, with daily net production to its working interest of
approximately 600 barrels of oil per day (Bopd) and 1.35 million cubic feet of
gas per day (Mcfgpd). The Company’s proved reserves as of December 31, 2008 are
1,140,000 barrels of crude oil and 1.88 billion cubic feet (Bcf) of
gas.  The Company’s major areas of operations are located onshore
United States, primarily in Matagorda, McMullen, Goliad and Wharton Counties in
Texas.





Accounting
for Reorganization





On July
28, 2008, New Century Energy Corp. and its subsidiaries Gulf Coast Oil
Corporation and Century Resources, Inc. (collectively the “Debtors”), filed
voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. The
accompanying consolidated financial statements of New Century Energy Corp. have
been prepared in accordance with Statement of Position 90-7, “Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code,” and on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. However, as a
result of the bankruptcy filings, such realization of assets and satisfaction of
liabilities are subject to a significant number of uncertainties. New Century’s
consolidated financial statements do not reflect adjustments that might be
required if we (or each of the New Century Debtors) are unable to continue as a
going concern. SOP 90-7 requires the following for Debtor
entities:





•
            Reclassification
      of unsecured or under-secured pre-petition liabilities to a separate line
      item in the balance sheet which we have called Liabilities Subject to
      Compromise;





•
            Non-accrual
      of interest expense for financial reporting purposes, to the extent not
      paid during bankruptcy and not expected to be an allowable claim. However,
      unpaid contractual interest is calculated for disclosure
      purposes.





•
            Segregation
      of reorganization items (direct and incremental costs, such as
      professional fees, of being in bankruptcy) as a separate line item in the
      statement of operations outside of income from continuing
      operations;





•
            Evaluation
      of actual or potential bankruptcy claims, which are not already reflected
      as a liability on the balance sheet, under SFAS No. 5,
      “Accounting for Contingencies. If valid unrecorded claims meeting the
      SFAS No. 5 criteria are presented to us in future periods, we
      would accrue for these amounts, also at the expected amount of the allowed
      claim rather than at the expected settlement
  amount.





•
            Disclosure
      of condensed combined debtor entity financial information, if our
      consolidated financial statements include material subsidiaries that did
      not file for bankruptcy protection.





•
            Upon
      confirmation of our plan of reorganization, and our emergence from
      Chapter 11 reorganization, “fresh-start reporting” must be adopted if
      the reorganization value of our assets immediately before the date of
      confirmation is less than the total of all post-petition liabilities and
      allowed claims, and if holders of existing voting shares immediately
      before confirmation receive less than 50 percent of the voting shares
      of the emerging entity. Essentially, the reorganization value of the
      entity, as mutually agreed to by the debtor-in-possession and its
      creditors, would be allocated to the entity’s assets in conformity with
      the procedures specified by SFAS No. 141, “Business
      Combinations.”





Principles
of consolidation





The
accompanying consolidated financial statements include the accounts of New
Century Energy Corp., its wholly owned subsidiaries, Century Resources, Inc. and
Gulf Coast Oil Corporation, and its proportionate share of the assets,
liabilities, revenues and expenses. All significant intercompany accounts and
transactions have been eliminated in consolidation.





Use of
estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, as well as certain financial statement
disclosures. While management believes that the estimates and assumptions used
in the preparation of the consolidated financial statements are appropriate,
actual results could differ from these estimates.


F-9


Reclassifications





Certain
prior year amounts have been reclassified to conform to the current year
presentation.





Cash and
cash equivalents





For
purposes of the statements of cash flows, cash equivalents are considered to be
all highly liquid investments having an original maturity of three months or
less.





Concentration
of credit risk





We
maintain our cash primarily with major U.S. domestic banks. The amounts held in
these banks exceed the federal insured limit of $250,000 from time to time and
exceeded that balance at December 31, 2008 by approximately $2.4 million. The
terms of these deposits are on demand to minimize risk. The certificate of
deposit is maintained in an interest bearing account of a major U.S. domestic
bank.





Revenue
recognition and accounts receivable





Oil and
natural gas revenues are recorded using the sales method, whereby the Company
recognizes oil and natural gas revenue based on the amount of oil and gas sold
to purchasers, when title passes, the amount is determinable, and collection is
reasonably assured. There were no imbalances at December 31, 2008.





Currently
all of our working interest producing wells are located in Texas and all of our
revenue is generated in Texas.





The
Company periodically reviews its accounts receivable for collectability, and has
determined that no allowance for doubtful accounts is warranted at December 31,
2008.  The Company generally does not require collateral.





Inventory





The
Company carries small inventories of crude oil in its stock tanks located on
each oil producing property. Inventory costs include expenditures and other
charges (including depreciation) directly and indirectly incurred in bringing
the inventory to its existing condition and location. Selling expenses and
general and administrative expenses are reported as period costs and excluded
from inventory cost.  Inventories of materials and supplies are valued
at the lower of cost or market.





Oil and
gas properties





We follow
the successful efforts method of accounting for our oil and gas activities,
capitalizing costs of successful exploratory wells and expensing costs of
unsuccessful exploratory wells. Exploratory geological and geophysical costs are
expensed as incurred. All developmental costs are capitalized. As of December
31, 2008, we have no capitalized costs for exploratory wells pending
determination of proved reserves. We generally pursue acquisition and
development of proved reserves as opposed to exploration activities. A
significant portion of the property costs reflected in the accompanying
consolidated balance sheet are from acquisitions of proved properties from other
oil and gas companies.





Depreciation,
depletion and amortization of proved producing properties is computed on the
unit-of-production method based on estimated proved oil and gas reserves. Other
property and equipment is generally depreciated using either the
unit-of-production method for assets associated with specific reserves or the
straight-line method over estimated useful lives which range from 3 to 40 years.
Repairs and maintenance are expensed, while renewals and betterments are
generally capitalized.




If conditions indicate that long-term assets may be impaired, the
carrying value of the property is compared to management's undiscounted future
estimated pre-tax cash flow from properties generally aggregated on a
field-level basis. If impairment is necessary, the asset carrying value is
written down to fair value using future estimated discounted cash flows. Cash
flow estimates are based on existing proved reserve and production information
and pricing assumptions that management believes are reasonable. Impairment of
individually significant unproved properties is assessed on a
property-by-property basis, and impairment of other unproved properties is
assessed and amortized on an aggregate basis.





We
recognized an impairment of proved properties at December 31, 2008 of
$16,057,342 as a result of a significant reduction in proved reserves in our
Wishbone and Mustang Creek fields.  Our proved reserves decreased by
43% and 31% for the Wishbone and Mustang Creek fields,
respectively.  The reduction in both fields was due to downward
revisions based on actual well performance over time combined with the
projection of significantly lower oil and gas prices for future
years.





We also
recognized an impairment of $172,277 on our unproved properties in the state of
California based on current market conditions and drilling feasibility in that
region.


F-10


We
recognized an impairment of proved properties at December 31, 2007 of
$10,211,390 as a result of a significant reduction in proved reserves in our
Wishbone field.  During 2007, the Company’s proved gas reserves in the
Wishbone Field were decreased by 57%.  The majority of this reduction,
approximately ninety percent (90%), was due to a significant reduction in future
proved undeveloped (PUD) locations projected to be drilled.  This
reduction was based on the operator’s indication that only one more PUD may be
drilled due to current high drilling costs and lower product
prices.  In addition, the decline rate associated with the existing
proved developed producing (PDP) gas reserves was steeper than previously
projected, which contributed to approximately ten percent (10%) of the decrease
in the proved reserves in this field.





There can
be no assurance that future write-downs will not be required as a result of
factors that may negatively affect the present value of proved oil and natural
gas reserves and the carrying value of oil and natural gas properties, including
volatile oil and natural gas prices, downward revisions in estimated proved oil
and natural gas reserve quantities and unsuccessful drilling activities. The
Company has not capitalized any interest in 2008 or 2007 relating to
expenditures for significant exploration and development projects.





Long-lived
assets





Long
lived assets to be held and used or disposed of other than by sale are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. When required, impairment losses on
assets to be held and used or disposed of other than by sale are recognized
based on the fair value of the asset. Long-lived assets to be disposed of by
sale are reported at the lower of their carrying amount or fair value less cost
to sell.





Derivative
instruments





New
Century accounts for all derivative financial instruments in accordance with
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Derivative financial instruments are recorded as liabilities in the consolidated
balance sheet and are measured at fair value. When available, quoted market
prices are used in determining fair value. However, if quoted market prices are
not available, New Century estimates fair value using either quoted market
prices of financial instruments with similar characteristics or other valuation
techniques. These derivative liabilities are marked-to-market each quarter with
the change in fair value recorded in the income statement.





New
Century utilizes the Black-Scholes option-pricing model to determine the fair
value of its freestanding derivative instruments. Key assumptions of the
Black-Scholes option-pricing model include applicable volatility rates,
risk-free interest rates and the instruments expected remaining life. We also
determined a fair value for our various embedded derivatives within our $15
million convertible note by using a layered discounted probability-weighted cash
flow model. The assumptions used in both modeling techniques required
significant management judgment and estimates of future fluctuation in stock
price as well as changes in future interest rates. The reader should reference
Note 5 for further details in regards to our derivative
liabilities.





Interest
Expense




Interest
expense primarily consists of interest on outstanding loans, amortization of
deferred loan costs, and amortization of debt discount. Costs incurred to secure
debt financing is capitalized and amortized into interest expense over the terms
of the respective loans using the effective interest method. Debt discount is
amortized into interest expense over the term of the loan using the effective
interest method. At December 31, 2008 and 2007, we had $0 and $2,002,812 in
unamortized deffered loan costs and unamortized debt discount.




Asset
retirement obligation





For asset
retirement obligations, we follow SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 requires that an asset retirement
obligation associated with the retirement of a tangible long-lived asset be
recognized as a liability in the period in which it is incurred or becomes
determinable, with an associated increase in the carrying amount of the related
long-lived asset. The cost of the tangible long-lived asset, including the asset
retirement cost, is depreciated over the useful life of the asset.





Asset
retirement obligations primarily relate to the potential abandonment of oil and
gas producing facilities. The fair value of the asset retirement obligation is
recognized in the period in which the liability is incurred if a reasonable
estimate of fair value can be made. Asset retirement obligations include costs
to dismantle and relocate wells and related structures, and restoration costs of
land, including those leased. Depreciation of the capitalized asset retirement
cost and accretion of the asset retirement obligation are recorded over time.
The depreciation on the capitalized asset will generally be determined on a
unit-of-production basis, while the accretion of the liability will be
recognized over the life of the producing assets.





Contingencies





We
account for loss contingencies in accordance with SFAS No. 5, "Accounting for
Contingencies." Accordingly, when management determines that it is probable that
an asset has been impaired or a liability has been incurred, we accrue our best
estimate of the loss if it can be reasonably estimated. Our legal costs related
to litigation are expensed as incurred.




Income taxes





The
Company accounts for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes". This Statement prescribes the use of the liability method
whereby deferred tax asset and liability account balances are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. In assessing the
realization of deferred tax assets, management considers whether it is likely
that some portion or all of the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the Company
attaining future taxable income during periods in which those temporary
differences become deductible. The effect of changes in tax rates is recognized
in the period of enactment.


F-11


In July
2006, the FASB issued “Accounting for Uncertainty in Income Taxes,” an
interpretation of FAS 109 (“FIN 48”), effective for years beginning after
December 15, 2006. FIN 48 establishes a more-likely-than-not threshold for
recognizing the benefits of tax return positions in the financial statements.
Also, FIN 48 implements a process for measuring those tax positions which meet
the recognition threshold of being ultimately sustained upon examination by the
taxing authorities. There are no uncertain tax positions taken by the Company on
its tax returns and the adoption of FIN 48 had no material impact to the
Company’s consolidated financial statements. The Company files tax returns in
the U.S. and states in which it has operations and is subject to
taxation.





Loss per
share





Basic
earnings per share amounts are calculated based on the weighted average number
of shares of common stock outstanding during each period. Diluted earnings per
share is based on the weighted average number of shares of common stock
outstanding for the periods, including dilutive effects of stock options,
warrants granted and convertible preferred stock. Dilutive options and warrants
that are issued during a period or that expire or are canceled during a period
are reflected in the computations for the time they were outstanding during the
periods being reported. Since the Company has incurred losses for all periods,
the impact of the common stock equivalents would be anti-dilutive and therefore
are not included in the calculation.





Fair
Value Measurements





We
adopted SFAS No. 157 effective January 1, 2008.  SFAS 157 established
a framework for measuring fair value in GAAP and clarified the definition of
fair value within that framework. SFAS 157 does not require assets and
liabilities that were previously recorded at cost to be recorded at fair value
or for assets and liabilities that are already required to be disclosed at fair
value, SFAS 157 introduced, or reiterated, a number of key concepts which form
the foundation of the fair value measurement approach to be used for financial
reporting purposes. The fair value of the Company’s financial instruments
reflects the amounts that the Company estimates to receive in connection with
the sale of an asset or paid in connection with the transfer of a liability in
an orderly transaction between market participants at the measurement date (exit
price). SFAS 157 also established a fair value hierarchy that prioritizes the
use of inputs used in valuation techniques into the following three
levels:





Level
1—quoted prices in active markets for identical assets and
liabilities.





Level
2—observable inputs other than quoted prices in active markets for identical
assets and liabilities.





Level
3—unobservable inputs.





The
adoption of FAS 157 did not have an effect on the Company’s financial condition
or results of operations, but SFAS 157 introduced new disclosures about how we
value certain assets and liabilities. Much of the disclosure is focused on the
inputs used to measure fair value, particularly in instances where the
measurement uses significant unobservable (Level 3) inputs.





As
required by SFAS 157, financial assets and liabilities are classified based on
the lowest level of input that is significant to the fair value measurement. Our
assessment of the significance of a particular input to the fair value
measurement requires judgment and may affect the valuation of the fair value of
assets and liabilities and their placement within the fair value hierarchy
levels. Following are the major categories of assets and liabilities measured at
fair value on a recurring basis as of December 31, 2008, using quoted prices in
active markets for identical assets (Level 1); significant other observable
inputs (Level 2); and significant unobservable inputs (Level 3):





Fair
      Value Measurements at December 31, 2008 UsingLevel
      1
                
                
                Level
      2
                
                
                Level
      3
                
                
                TotalAssets
      (Liabilities):Derivative
      liabilities
                
                $
                -
                
                
                $
                (3,482,619
                )
                
                $
                -
                
                
                $
                (3,482,619
                )Total
                
                $
                -
                
                
                $
                (3,482,619
                )
                
                $
                -
                
                
                $
                (3,482,619
                )





Recent
accounting pronouncements




In September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”), which defines fair value, establishes a frame work
for measuring fair value in accordance with generally accepted accounting
principles and expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, this Statement does not require any new fair
value measurements. SFAS 157 is effective for fiscal years beginning after
December 15, 2007. The Company adopted SFAS 157 in the first quarter of fiscal
2008. We adopted SFAS 157 effective January 1, 2008, the adoption of which has
not affected our financial position or results of operations but did result in
additional required disclosures, which are provided above.


F-12


In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (as amended) (“SFAS 159”), which
permits entities to choose to measure most financial instruments and certain
other items at fair value. SFAS 159 is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. We adopted SFAS 159 on January 1,
2008.  The adoption of SFAS 159 did not have a material impact on our
financial statements.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, which establishes accounting and reporting
standards to improve the relevance, comparability, and transparency of financial
information in the consolidated financial statements that include an outstanding
noncontrolling interest in one or more subsidiaries. SFAS 160 is effective for
fiscal years, and the interim periods within those fiscal years, beginning on or
after December 15, 2008. Management of the Company does not expect the adoption
of this pronouncement to have a material impact on its consolidated financial
statements.





On
December 31, 2008, the SEC published the final rules and interpretations
updating its oil and gas reporting requirements. Many of the revisions are
updates to definitions in the existing oil and gas rules to make them consistent
with the petroleum resource management system, which is a widely accepted
standard for the management of petroleum resources that was developed by several
industry organizations. Key revisions include changes to the pricing used to
estimate reserves utilizing a 12-month average price rather than a single day
spot price which eliminates the ability to utilize subsequent prices to the end
of a reporting period when the full cost ceiling was exceeded and subsequent
pricing exceeds pricing at the end of a reporting period, the ability to include
nontraditional resources in reserves, the use of new technology for determining
reserves, and permitting disclosure of probable and possible reserves. The SEC
will require companies to comply with the amended disclosure requirements for
registration statements filed after January 1, 2010, and for annual reports
on Form 10-K for fiscal years ending on or after December 15, 2009. Early
adoption is not permitted. The Company is currently assessing the impact that
the adoption will have on the Company’s disclosures, operating results,
financial position and cash flows.





NOTE
2 – CHAPTER 11 BANKRUPTCY AND GOING CONCERN





Chapter
11 Bankruptcy





On July
28, 2008, New Century Energy Corp. and its subsidiaries Gulf Coast Oil
Corporation and Century Resources, Inc. (collectively the “Debtors”), filed
voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code, in the United
States Bankruptcy Court for the Southern District of Texas, in order to
facilitate their financial restructuring in connection with the Company’s
default on the Secured Convertible Term Note with Laurus Master Fund, Ltd., as
discussed in more detail below.  The Debtors’ Chapter 11 cases are
being jointly administered under Case No. 08-50213.  The Debtors will
continue to operate their businesses as “debtors-in-possession” under the
jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy
Court.





The
Company filed a Motion in the United States Bankruptcy Court for the Southern
District of Texas Houston Division (the “Court” or “Bankruptcy Court”) for Joint
Administration of the New Century Energy Corp. case, the Gulf Coast Oil
Corporation case and the Century Resources, Inc. case and on August 13, 2008,
the Court approved the Order for Joint Administration whereby the cases would be
jointly administered under Case No. 08-50213 and that all further docketing
should be done in case number 08-50213.





On
September 29, 2008, the Bankruptcy Court, approved the Stipulated Final Order
Authorizing Use of Cash Collateral (the “Cash Collateral Order”) for the period
of July 28, 2008, the date the Company commenced its Chapter 11 cases (the
“Petition Date”), to January 23, 2009 (the “Cash Collateral Use Period”), unless
this Cash Collateral Use Period is terminated earlier pursuant to the terms of
the Cash Collateral Order.  Under this Cash Collateral Order, the
Company was permitted to use cash collateral to pay the expenses set forth
on the agreed budget through the period ending November 28, 2008 to pay the
“Adequate Protection Payment” of $750,000 per month commencing September 15,
2008, and continuing during the term of the Cash Collateral Use Period to Laurus
Master Fund, Ltd. (“Laurus”). The Cash Collateral Order contained certain
deadlines regarding the Debtors' filing and confirmation of a plan of
reorganization. The Cash Collateral Order provided that the automatic stay as to
Laurus would be lifted without further order unless the deadlines were met.
Because those deadlines were not met, the automatic stay with respect to
Laurus's liens was lifted on January 18, 2009.





On
October 27, 2008, the Bankruptcy Court issued an Order Under 11 U.S.C.§§105(A)
and 363(C) Authorizing Payment of Prepetition Claims of Critical Vendors (the
“Critical Vendor Order”).  Pursuant to this order, the Company is
authorized to pay prepetition fixed, liquidated and undisputed claims of certain
suppliers of materials, goods and services (the “Critical Vendors”) which whom
the Company continues to do business and whose goods and services are essential
to the continued operations of the Company.  The order also provided
that if a Critical Vendor accepts payments pursuant to the order, such Critical
Vendor is deemed to have agreed to continue to provide services to the Company
on as good as or better terms and conditions that existed ninety days prior to
the Petition Date of July 28, 2008.





On
November 3, 2008, a hearing was conducted in the Court to hear the Debtor’s
Expedited Motion to Determine the Amount of Laurus Master Fund Ltd.’s (“Laurus”)
Secured Claim, which sought an order of the Bankruptcy Court determining
Laurus’s entitlement to certain types of damages and penalties as part of its
secured claim.  Prior to filing the Motion the Debtors had agreed, and
a Court Order was entered confirming Laurus’s secured claim in the amount of at
least $66 million.  Thus the purpose of the Motion was to determine if
Laurus is entitled to a claim in excess of $66 million.  In light of
the agreement with Laurus to limit the amount of its credit bid on the Debtors’
Properties to $75 million, the Debtors have withdrawn the Motion to Determine
Amount of Laurus’s Secured Claim.


F-13


On
November 7, 2008, the Debtors filed their Joint Plan of Reorganization (the
“Original Plan”).  The Original Plan contemplated the restructuring of
the obligations under the Notes by the issuance of new notes that would pay in
full the obligations owed to Laurus.  Because of the continuing
decrease in oil and gas prices during the later half of 2008 and continuing into
2009, the Debtors determined that it could not confirm the Original
Plan.  Accordingly, the Debtors withdrew the Original
Plan.





On
December 19, 2008, the Debtors filed their Motion Pursuant to Sections 105, 363,
and 365 of the Bankruptcy Code for an Order Authorizing the Sale Free and Clear
of All Liens, Claims and Encumbrances and for Assumption and Assignment of
Executory Contracts.  The Sale Motion was heard by the Bankruptcy
Court on January 26, 2009.  On January 28, 2009, the Bankruptcy Court
denied the Sale Motion (Docket No. 211), and the Bankruptcy Court issued its
findings of fact and conclusions of law on February 12, 2009 (Docket No.
237).





On March
13, 2009, the Debtors filed a “First Amended Joint Plan of Reorganization Under
Chapter 11, Title 11 of the United States Code” (the “Plan”) with the United
States Bankruptcy Court for the Southern District of Texas, Houston Division
(the “Court”) in connection with the Company’s pending Chapter 11 Bankruptcy
proceedings (the “Bankruptcy” and/or the “Bankruptcy Proceeding”).





The Plan
is proposed as a joint plan of reorganization for the Company and its affiliates
under its pending Bankruptcy Proceeding.  The purpose of the Plan is
to orderly liquidate the Company’s Property.  The Plan is subject to
the approval of the Court and the approval by the creditors of the Company (the
“Creditors”) as described in the Plan.





The
following is a summary of certain of the material terms of the
Plan.





Pursuant
to the Plan:





·
            each
      Allowed Administrative Claim (as defined in the Plan) will receive, in
      full satisfaction, settlement, release, and discharge of and in exchange
      for such Allowed Administrative Claim (a) Cash equal to the unpaid portion
      of such Allowed Administrative Claim or (b) such other treatment as to
      which the Company and such holder have agreed upon in writing; provided,
      however, that Allowed Administrative Claims with respect to liabilities
      incurred by the Company in the ordinary course of business during the
      Chapter 11 Cases will be paid in the ordinary course of business in
      accordance with the terms and conditions of any agreements relating
      thereto;





·
            Laurus
      Master Fund, Ltd. and its assigns (“Laurus”), the Company’s largest
      creditor will receive in full satisfaction, settlement, release and
      discharge of and in exchange for all of its claims, substantially all of
      the proceeds from the sale of substantially all of the Company’s Assets
      (as described below); and





·
            each
      holder of certain general unsecured claims, as described in the Plan will
      receive cash equal to their ratable share of the Unsecured Creditors Fund
      (as defined in the Plan).





The Plan
constitutes a motion under section 363 of the United States Bankruptcy Code to
sell all of the Company’s assets, personal and real, tangible and intangible,
including but not limited to its interests in realty, minerals, oil and gas
leases and properties (collectively the “Assets”) pursuant to the terms of an
Asset Purchase Agreement by and between the Company, NCEY Holdings Corp.
(“NCEY”, described in greater detail below) and Brazos Lateral Holdings Corp.
(the “Purchase Agreement”), and the Plan, at a hearing to be held as described
and approved in the Plan.





The Plan
anticipates the formation of a new holding company, NCEY, which will be
transferred the Assets following the approval of the Plan and sale of the Assets
(assuming Laurus is the high bidder for such Assets) pursuant to the Purchase
Agreement.  It is currently contemplated that NCEY may employ certain
current members of the management and technical team of the Company, including
Edward R. DeStefano, the Company’s current Chief Executive Officer and sole
Director,  the Company’s Chief Financial Officer and  the Company’s
Controller, among other persons.  Management and technical employees may be
awarded ownership of certain of NCEY’s securities at the discretion of the CEO
and Laurus, which ownership and which employment has not been finalized to
date.  Aside from Laurus and certain members of the Company’s management
and technical team, it is not anticipated that there will be any other initial
shareholders of NCEY.




For the
purposes of bidding at the sale, the Company and Laurus have agreed that Laurus
may credit bid for the Company’s Assets, and including any cash on hand, up to
$75 million.  If Laurus is the winning bidder at the sale, unless the
net sales price is greater than $75 million, then all cash on hand as well as
the Company’s Assets will be distributed to Laurus, NCEY Holdings Corp., and/or
Brazos Lateral Holdings Corp.  If the sale of the Company’s Assets
results in net proceeds in excess of $75 million, then $75 million will be
distributed to Laurus, and any remaining proceeds will be as provided in the
Plan. The Company does not anticipate that the sale of the Assets will exceed
$75 million.





The cash
on hand that the Company has and the net proceeds of the sale of the Assets, if
any, will result in cash available for distribution to Creditors as provided
under the Plan, as described above, and as described in greater detail in the
Plan.


F-14


The Plan
also provides that Broadpoint Capital, Inc. (“Broadpoint”), which was the
Company’s financial advisor from the date of the Company’s entry into
Bankruptcy, until February 10, 2009 shall receive the total sum of $326,000, and
shall be allowed to keep the moneys it has previously received from the Company,
in full and final satisfaction of its claims against the Company.





Additionally,
pursuant to the Plan, each equity owner of New Century Energy Corp., Century
Resources, Inc. and Gulf Coast Oil Corporation will have any and all rights
related to or arising from such owners’ common stock or other securities of any
of the above entities cancelled and extinguished on the date the Court approves
the Plan, assuming such Plan is approved by the Court (the “Effective Date”) and
the Company and its subsidiaries will be dissolved and will cease doing business
on the Effective Date.





On March
13, 2009, the Debtors also filed the “First Amended Disclosure Statement with
Respect to Joint Plan of Reorganization under Chapter 11, Title 11 of the
Debtors” (the “Disclosure Statement”), pursuant to section 1125 of the
Bankruptcy Code, for use in the solicitation of votes on the
Plan.  This Disclosure Statement set forth certain information
regarding the Debtors’ prepetition operating and financial history, their need
to seek chapter 11 protection, significant events that have occurred during the
Chapter 11 Cases and the anticipated liquidation of the Debtors under the Plan.
This Disclosure Statement also describes terms and provisions of the Plan,
including certain alternatives to the Plan, certain effects of confirmation of
the Plan, and the manner in which distributions will be made under the
Plan.  In addition, this Disclosure Statement discusses the
confirmation process and the voting procedures that holders of Claims entitled
to vote under the Plan must follow for their votes to be counted.





The
hearing to consider confirmation of the Plan (the “Confirmation Hearing”) is
scheduled for May 8, 2009 at 2:00PM before the Bankruptcy Court, conditioned
upon the approval of the Disclosure Statement at the hearing scheduled for April
27, 2009 (the “Disclosure Statement Hearing”).





As a
result of the Chapter 11 filings, realization of assets and liquidation of
liabilities are subject to uncertainty. While operating as debtors-in-possession
under the protection of Chapter 11 of the Bankruptcy Code, the Debtors may
sell or otherwise dispose of assets and liquidate or settle liabilities for
amounts other than those reflected in the consolidated financial statements, in
the ordinary course of business, or, if outside the ordinary course of business,
subject to Bankruptcy Court approval.





Going
Concern





The
Company is operating pursuant to Chapter 11 of the Bankruptcy Code and
continuation of the Company as a going concern is contingent upon, among other
things, the Company’s ability to (i) construct and obtain confirmation of a plan
of reorganization under the Bankruptcy Code; (ii) achieve profitability;
(iii) achieve sufficient cash flows from operations; and (iv) obtain
financing to meet the Company’s future obligations. These matters create
substantial doubt about the Company’s ability to continue as a going concern.
The accompanying consolidated financial statements do not reflect any
adjustments relating to the recoverability of assets and the classification of
liabilities that might result from the outcome of these uncertainties. In
addition, a plan of reorganization could materially change the amounts and
classifications reported in the consolidated financial statements which do not
give effect to any adjustments to the carrying values of assets or amounts of
liabilities that might be necessary as a consequence of confirmation of a plan
of reorganization.





The
conditions described above create substantial doubt as to New Century’s ability
to continue as a going concern.  The 2008 consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classifications of liabilities that may result from the outcome of this
uncertainty.





NOTE
3 – LIABILITIES SUBJECT TO COMPROMISE





As a
result of the Chapter 11 Filings, the payment of prepetition indebtedness
may be subject to compromise or other treatment under the Debtors’ plan of
reorganization. Generally, actions to enforce or otherwise effect payment of
prepetition liabilities are stayed. Refer to Note 2, Chapter 11 Bankruptcy
and Going Concern. Although prepetition claims are generally stayed, at hearings
held in October 2008, the Court granted approval for the Company to pay
prepetition fixed, liquidated and undisputed claims of certain suppliers of
materials, goods and services which whom the Company continues to do business
and whose goods and services are essential to the continued operations of the
Company.


The
Debtors have been paying and intend to continue to pay undisputed postpetition
claims in the ordinary course of business. In addition, the Debtors may reject
prepetition executory contracts and unexpired leases with respect to the
Debtors’ operations, with the approval of the Court. Damages resulting from
rejection of executory contracts and unexpired leases are treated as general
unsecured claims and will be classified as liabilities subject to
compromise.


SOP 
90-7 requires prepetition liabilities that are subject to compromise to be
reported at the amounts expected to be allowed, even if they may be settled for
lesser amounts. The amounts currently classified as liabilities subject to
compromise may be subject to future adjustments depending on Court actions,
further developments with respect to disputed claims, determinations of the
secured status of certain claims, the values of any collateral securing such
claims, or other events.


F-15


Liabilities
subject to compromise consist of the following:





December 31,2008Current
      portion of notes payable
                
                $
                63,209,900Accounts
      payable (lease operating expenses)
                
                
                222,750Accounts
      payable (general and administrative expenses)
                
                
                9,588Total
      Liabilities Subject to Compromise
                
                $
                63,442,238








NOTE
4 - DEBT




A recap
of the Company’s Notes Payable is as follows:





December
      31, 2008
                                          
                                          December
      31, 2007Current
      portion:Second
      Amended and Restated Secured Convertible Term (interest rate equal to the
      Wall Street Journal prime rate plus two points but not less than 7%,
      maturity date of June 30, 2008)
                                          $
                                          11,158,736
                                          
                                          $
                                          12,300,000Third
      Amended And Restated Secured Term (interest rate of 20%, maturity date of
      July 1, 2008)
                                          
                                          6,006,259
                                          
                                          
                                          6,351,391December
      2006 Secured Term (interest rate equal to the Wall Street Journal prime
      rate plus two points but not less than 8%, maturity date of January 4,
      2010)
                                          
                                          13,298,245
                                          
                                          
                                          2,400,000New
      Century November 2007 Secured Term (interest rate equal to the Wall Street
      Journal prime rate plus two points but not less than 8%,
                                          
                                          4,110,407
                                          
                                          
                                          143,950maturity date of November 20, 2010)Gulf
      Coast (interest rate equal to the Wall Street Journal prime rate plus two
      points but not less than 8%, maturity date of October 28,
      2009)
                                          
                                          22,860,689
                                          
                                          
                                          8,414,496Gulf
      Coast November 2007 Secured Term (interest rate equal to the Wall Street
      Journal prime rate plus two points but not less than 8%, maturity date of
      November 20, 2010)
                                          
                                          5,775,564
                                          
                                          
                                          120,853Total
      current portion of notes payable
                                          $
                                          63,209,900
                                          
                                          $
                                          29,730,690Noncurrent
      portion:December
      2006 Secured Term
                                          $
                                          -
                                          
                                          
                                          12,611,328New
      Century November 2007 Secured Term
                                          
                                          -
                                          
                                          
                                          5,156,050Gulf
      Coast
                                          
                                          -
                                          
                                          
                                          21,330,072Gulf
      Coast November 2007 Secured Term
                                          
                                          -
                                          
                                          
                                          6,979,148Total
      noncurrent portion of notes payable
                                          
                                          -
                                          
                                          $
                                          46,076,598Less:
      Unamortized discount
                                          
                                          -
                                          
                                          
                                          (2,002,812
                                          )Net
      payable (net of unamortized discount)
                                          $
                                          63,209,900
                                          
                                          $
                                          73,804,476




The
Company’s notes payable are collateralized by a security interest in all cash
and cash equivalents, inventory, equipment, goods, fixtures, documents,
instruments, contract rights, commercial tort claims, general intangibles, oil
and gas leases, now owned or acquired in the future; all rights, title,
interests and estates in any and all properties or leases, now owned or acquired
in the future; and any and all agreements or future agreements entered into in
the future by New Century, Gulf Coast or Century.


F-16


Interest
and amortization of discount on debt expense for the years ended December 31,
2008 and 2007 can be broken down as follows:





Year Ended
      December 312008
                
                
                2007Interest
      expense on notional balance
                
                $
                3,895,921
                
                
                $
                7,578,598Accretion
      of notes discounts and amortization of deferred loan costs and
      discounts
                
                
                2,203,322
                
                
                
                1,790,174$
                6,099,243
                
                
                $
                9,368,772





DEFAULT
ON LAURUS NOTES





On June
30, 2008, certain obligations of the Company owed to Laurus, including the
Second Amended and Restated Secured Convertible Term Note entered into on June
30, 2005, in the original principal amount of $15,000,000, which had an
outstanding balance (not including any accrued and unpaid interest) of
approximately $11.7 million as of September 30, 2008 (as amended and restated
from time to time, the “Convertible Note”) and the Third Amended and Restated
Secured Term Note entered into on September 19, 2005, in the original principal
amount of $9,500,000, which had a balance of approximately $6.3 million as of
September 30, 2008 (as amended and restated from time to time, the “Term Note”)
became due.  The Company failed to repay the outstanding amounts of
the Convertible Note and the Term Note (the “Notes”) on June 30,
2008.





Pursuant
to the terms of the Notes, the Company had three (3) days to cure any default in
repayment of the Notes, which cure period expired July 3, 2008, and which Notes
remain unpaid as of the date of this report.  As such, the Company is
currently in default of the Notes, which default may trigger an event of default
and default payments equal to an additional 30% of any amounts due (the “Default
Payments”) under the other outstanding promissory notes, warrants, options and
other related agreements which the Company has previously entered into with
Laurus and parties affiliated with Laurus (the “Laurus
Agreements”).





On or
around July 7, 2008, Laurus communicated notice of the Company’s event of
default under the Notes, alleged an event of default under the other Laurus
Agreements, and the fact that the Laurus Agreements began to accrue interest at
the default rate (as provided in each Laurus Agreement) beginning on July 3,
2008, to the Company.





Laurus
also agreed to forbear from exercising its rights and remedies (other than the
implementation of the increased rates of interest and the requirement that the
Company pay Default Payments) under the Laurus Agreements until 5:00 PM (New
York time) on July 18, 2008 (the “Forbearance Period”), or such later time as
Laurus may agree in its sole discretion.  Laurus did not agree to
forbear from administering the credit facility and/or from collecting, receiving
and/or applying proceeds from the Company’s accounts receivable to the amounts
owed to Laurus.  The notice also stated that in the event the Company
was able to repay the amounts owing to Laurus and under the Laurus Agreements
prior to the end of the Forbearance Period, Laurus would waive any default
interest and the requirement that the Company pay the Default
Payments.  The above terms were not binding on Laurus in the event
that an event of default has occurred under the notice, including if an event of
default other than those described above occurred under any Laurus Agreement, if
any representation made by the Company under any Laurus Agreement was false in
any material respect when made, the Company’s failure to comply with any
covenant in any Laurus Agreement, and/or in the event that any person or entity
other than Laurus exercised any rights to remedies against any of our assets or
properties.  Although the Company sought out alternative financing to
repay Laurus or an alternative structure with Laurus to combine all of its
obligations; it was not able to raise any additional funding or reach an
agreement with Laurus to restructure its obligations and the Forbearance Period
expired after July 18, 2008.





On July
21, 2008, LV Administrative Services, Inc., the administrative and collateral
agent for Laurus (also referred to herein as “Laurus”) provided the Company
notice of its acceleration (the “Acceleration Notice”) of the amounts due to
Laurus under the Convertible Note and the Term Note.  The Acceleration
Notice also notified us of Laurus’s acceleration of and request for immediate
payment of the entire amount of funds we owe to Laurus, including any and all
accrued and unpaid interest, default interest and default payments due on such
amount.





As
discussed in Note 2 above, on July 28, 2008, the Company filed voluntary
petitions under Chapter 11 of the U.S. Bankruptcy Code, in the United States
Bankruptcy Court for the Southern District of Texas. In total, the Laurus
Agreements, evidenced by five (5) separate notes totaling approximately $63
million, which amount does not include any default interest and/or default
payments due in connection with such Laurus Agreements, which default payments
may total an additional 30% of the amount owed to Laurus.





For the
period from July 28, 2008 through December 31, 2008, the Company made four debt
payments to Laurus in the amount of $750,000 each.  We recorded these
payments as reductions in the principal amount owed on the various Laurus loans
as it appears that the debt owed to Laurus is most likely under-collateralized
due to current market conditions.  We were unable to confirm our
outstanding debt amount with Laurus as they have applied most of our $750,000
payments against accrued interest.


F-17


NOTE
5 - DERIVATIVE LIABILITIES





The
Second Amended and Restated Secured Convertible Term Note (the “Secured
Convertible Note”) with Laurus was deemed to have both freestanding and embedded
derivative instruments under SFAS No. 133.  The Laurus Warrant, Laurus
Option and Laurus December Option included within the Secured Convertible Note
have been accounted for as freestanding derivative liabilities and are fair
valued under the Black-Scholes Method.  The interest rate adjustment,
option redemption, form of payment and conversion features of the Secured
Convertible Note have been bundled together as a Single Compound Embedded
Derivative Liability, and is fair valued under a layered discounted
probability-weighted expected cash flow methodology.





The
following assumptions were used in the valuation of the derivative liabilities
at December 31, 2008:





Probability-Weighted
      Expected Cash Flow Methodology -Assumptions:Single
      Compound Embedded Derivative within Convertible NoteRisk
      - free interest rate
              0.27%Prime
      rate (increasing .25% each quarter of first year)
              3.25%Timely
      registration
              100.00%Default
      status
              100.00%Alternative
      financing available and exercised
              0.00%Trading
      volume, gross monthly dollars (monthly increase)
              1.00%Annual
      growth rate of stock price
              21.151%Future
      projected volatility
              140.00%





The following assumptions were used in the preparation of the
valuations at December 31, 2008:





Black-Scholes
Methodology:




LaurusLaurus
            
            December
            
            LaurusAssumptions
            
            Option
            
            Option
            
            WarrantDividend
      yield
            
            0.00%
            
            0.00%
            
            0.00%Risk-free
      interest rate
            
            3.05%
            
            3.05%
            
            1.00%Volatility
            
            140.00%
            
            140.00%
            
            140.00%Expected
      term
            
            20
      years
            
            20
      years
            
            3.50
      years




FAIR
VALUE OF DERIVATIVES





The fair
value of the Company's derivative liabilities comprised the following as of
December 31, 2008:





Laurus
      Warrant
                
                $
                17,949Laurus
      Stock Option
                
                
                66,454Single
      compound embedded derivative within Convertible Note
                
                
                3,347,621Laurus
      December Option
                
                
                50,595Total
                
                $
                3,482,619





The net
(increase) / decrease in fair value of the Company's derivative liabilities for
each of the years ended December 31, 2008 and 2007 was as follows:




2008
                
                
                2007Laurus
      Warrant
                
                $
                93,804
                
                
                $
                295,729Laurus
      Stock Option
                
                
                163,620
                
                
                
                490,608Single
      compound embedded derivativewithin
      Convertible Note
                
                
                126,477
                
                
                
                89,934Laurus
      December Option
                
                
                (3,058,653
                )
                
                
                379,236(Increase)
      / Decrease - fair value of derivative liabilities
                
                $
                (2,674,752
                )
                
                $
                1,255,507


F-18


The
increase in the fair value of the derivative liabilities (mark-to-market) during
2008 is due primarily to the Company’s bankruptcy filing which caused the
default status percentage to increase from 5% at December 31, 2007 to 100% at
December 31, 2008.  The decrease in the fair value of the derivative
liabilities (mark-to-market) during 2007 was due to the increasing volatility
and the wide, but mostly downward sliding, fluctuations in the price of our
common stock during the year. Prices ranged from $0.160 per share on February
16, 2007 to $0.026 per share on December 28, 2007. The closing price of our
stock and volatility assumption was $0.035 per share and 125% at December 31,
2007, versus $0.110 and 100% at December 31, 2006. The changes in the fair value
of the derivative liabilities have been recorded under Other Income (Expense) in
the accompanying consolidated statements of operations.





The
values of the derivative liabilities relating to the Convertible Note, as
reflected in our consolidated financial statements, are subject to changes in
the trading value of the Company's common stock. As a result, our financial
statements may fluctuate quarter-to-quarter based on this factor, and the amount
of shares converted by Laurus in connection with the Convertible Note and
exercised in connection with the Laurus Warrants and Laurus Stock Options.
Consequently, our consolidated financial position and results of operations may
vary significantly from quarter-to-quarter, based on factors other than the
Company's revenues and expenses.





NOTE
6 - OTHER INCOME (EXPENSE)





For each
of the periods ended December 31, 2008 and December 31, 2007, $0 and $59,260 has
been released into Other Income, in connection with the reverse merger with
Vertica in 2004. The release is comprised of settlements with creditors, the
expiration of the statutory four-year aging period, and the settlement agreement
with prior Vertica employees regarding disputed back wages. As of December 31,
2008 and 2007, liabilities related to the purchase of the Vertica shell were
zero.





In
February 2007, the Company invested in a natural gas put option for 20,000
thousand British Thermal Units (“Mmbtu’s”) of gas.  The option was
purchased for a "Strike Price" of $7.30 (less $0.70 commission) with
determination periods each month from February 2007 through October 2007. 
The "Floating Price" is calculated approximately three days prior to the
beginning of the determination period.  If the "Strike Price" is greater
than the "Floating Price" for a period, then the Company will receive an amount
equal to the excess of the "Strike Price" over the "Floating Price" for each
Mmbtu purchased.  This natural gas put option did not qualify for hedge
accounting for financial reporting purposes, and the Company has recognized a
loss on marketable securities of $23,460 for the twelve months ended December
31, 2007.




NOTE 7 - INCOME
TAXES





The
Company accounts for income taxes pursuant to Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes,
which requires recognition of deferred income tax liabilities and assets for the
expected future tax consequences of events that have been recognized in its
financial statements or tax returns. The Company provides for deferred taxes on
temporary differences between the financial statements and tax basis of assets
using the enacted tax rates that are expected to apply to taxable income when
the temporary differences are expected to reverse.





On
January 1, 2007, the Company adopted the provisions of FIN 48, Accounting for Uncertainty in Income
Taxes, and (“FIN 48”). FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Under FIN 48, we
recognize tax benefits only for tax positions that are more likely than not to
be sustained upon examination by tax authorities.  The amount recognized is
measured as the largest amount of benefit that is greater than 50 percent likely
to be realized upon settlement.  A liability for “unrecognized tax
benefits” is recorded for any tax benefits claimed in our tax returns that do
not meet these recognition and measurement standards.  As of December 31,
2008 and 2007, the Company has determined that no liability is required to be
recognized due to adoption of FIN 48.





In May
2007, the FASB issued FSP No. FIN 48-1, Definition of Settlement in FASB
Interpretation No. 48, (FIN 48-1) which amends FIN 48 and provides
guidance concerning how an entity should determine whether a tax position is
“effectively,” rather than the previously required “ultimately,” settled for the
purpose of recognizing previously unrecognized tax benefits. In addition, FIN
48-1 provides guidance on determining whether a tax position has been
effectively settled. The guidance in FIN 48-1 is effective upon the initial
January 1, 2007 adoption of FIN 48. Companies that have not applied this
guidance must retroactively apply the provisions of this FSP to the date of the
initial adoption of FIN 48. The Company has adopted FIN 48-1 and no retroactive
adjustments were necessary.





The
Company has a net operating loss for financial accounting purposes of
approximately $20,543,000 for the year ended December 31, 2008. The Company has
a potential deferred tax asset of approximately $9,361,000 as a result of the
tax net operating loss and percentage depletion carry forward for December 31,
2008. Due to the uncertainty surrounding the realization of the benefits of its
tax attributes, including net operating loss carry forwards, in future tax
returns, the Company has provided a 100% valuation allowance on its deferred tax
assets. The valuation allowance increased by approximately $4,913,000 for the
year ended December 31, 2008.


F-19


The
following table sets forth a reconciliation of the statutory federal income tax
for the year ended December 31, 2008 and 2007.





2008
                
                
                2007Loss
      before income taxes
                
                $
                (20,543,007
                )
                
                $
                (19,187,338
                )Income
      tax benefit computed at statutory rates
                
                $
                (6,984,622
                )
                
                $
                (6,523,695
                )Net
      increase (decrease) in fair value of derivative
liabilities
                
                
                1,391,916
                
                
                
                (427,902
                )Loss
      on early extinguishment of debt
                
                
                281,029
                
                
                
                -Permanent
      differences
                
                
                405,887
                
                
                
                (17,804
                )Increase
      in valuation allowance
                
                
                4,912,593
                
                
                
                6,754,263Other
                
                
                (6,803
                )
                
                
                215,138Provision
      for income taxes
                
                $
                0
                
                
                $
                0





No
federal income taxes have been paid since the inception of the Company. The
Company has a net operating loss and percentage depletion carry forward for
financial reporting purposes of approximately $27,532,000 at December 31, 2008,
which will expire in 2024 through 2028 if not utilized. Section 382 of the
Internal Revenue Code limits net operating loss and tax credit carry forwards
when an ownership change of more than fifty percent of the value of the stock in
a loss corporation occurs within a three-year period.





The tax
effects of the temporary differences between income for financial and income tax
reporting purposes are recognized as deferred tax assets and liabilities.
Significant components of deferred tax assets and liabilities as of December 31,
2008 and 2007 are set out below:




2008
                
                
                2007Deferred
      tax assets:Net
      operating loss and percentage depletion carry forwards
                
                $
                9,693,003
                
                
                $
                8,993,166Asset
      retirement obligation
                
                
                272,133
                
                
                
                169,219Valuation
      allowance
                
                
                (15,405,029
                )
                
                
                (10,492,436
                )Tax/book
      difference in amortization of loan costs
                
                
                281,872
                
                
                
                (119,725
                )Revision
      to net operating loss carry forward
                
                
                (332,222
                )
                
                
                230,451Deferred
      tax liabilities:Book
      over tax depreciation, depletionand
      capitalization methods on oil and gas properties
                
                
                5,490,243
                
                
                
                1,219,325Net
      deferred tax asset
                
                $
                -
                
                
                $
                -







NOTE 8 - ASSET RETIREMENT
OBLIGATION





A summary
of the changes in the asset retirement obligation during 2008 and 2007 is as
follows:




2008
                
                
                2007Carrying
      amount of obligation at beginning of year
                
                $
                497,704
                
                
                $
                391,186Obligations
      incurred
                
                
                90,741
                
                
                
                50,728Accretion
      expense
                
                
                93,105
                
                
                
                46,015Revision
      in estimated liabilities
                
                
                118,840
                
                
                
                9,775Carrying
      amount of obligation at end of year
                
                $
                800,390
                
                
                $
                497,704







NOTE
9 - COMMITMENTS AND CONTINGENCIES





Leases





Future
minimum lease commitments on our office space lease in Houston, Texas are as
follows as of December 31, 2008:





Years
      ending December 312009
                
                $
                67,6242010
                
                
                69,4732011
                
                
                71,3212012
                
                
                72,0922013
                
                
                36,046Total
                
                $
                316,556


F-20


Rent
expense for 2008 and 2007 was $76,021 and $38,494, respectively.





Litigation





In February 2008, a demand was made by
letter from counsel for J & P Family Properties, Ltd. and Lara Energy, Inc.
(the “Claimants”).  The letter relates only to Gulf Coast’s McMullen
County and Atascosa County properties and possible acquisitions, all as found in
an area outlined on a plat attached to a Geophysical Exploration Agreement dated
January 8, 2004 between Manti Resources, Inc. and the Claimants, describing an
Area of Mutual Interest.  Claimants contend that pursuant to a June 1,
2006 letter agreement, Gulf Coast assumed Manti’s obligations to assign
overriding royalties up to 3% on future acquisitions within the referenced
area.  The
demand seeks assignments of overriding royalty interest believed in no event to
exceed 3%, and in some cases less, on newly acquired (since June 1, 2006)
acreage together with various forms of information regarding operation, in the
referenced area. On or
about July 24, 2008, Gulf Coast entered into a Settlement Agreement (the
“Settlement Agreement”) with the Claimants. In connection with the overriding
royalty interests that Gulf Coast agreed to grant to the Claimants, Gulf Coast
made a payment of $32,860 to Lara and $32,860 to J&P to satisfy the full
amount of the payments they would have been due in connection with such
overriding royalty interests which accrued from the date of first production by
Gulf Coast through April 2008. Finally, pursuant to and in
consideration for the parties agreeing to enter into the Settlement Agreement,
each Claimant and Gulf Coast agreed to release, acquit and forever discharge
each other and their related parties from and against any and all claims or
damages of any nature, known or unknown, which could have been asserted by the
Claimants in connection with the previous claims made by such
Claimants.





Other
than the above, the Company is not a party to, and its properties are not the
subject of, any material pending legal proceeding nor to the knowledge of the
Company, are any such legal proceedings threatened.





Amended Viking Agreement




On or
about May 30, 2006, we entered into an Agreement Modifying Prior Geophysical
Interpretation and Exploitation Agreement, with Viking International Petroleum,
L.L.C. ("Viking"), and two individuals (the "Amended Viking Agreement"). The
Amended Viking Agreement amended the terms of the Geophysical Interpretation and
Exploration Agreement dated July 13, 2005, entered into between the parties. The
Amended Viking Agreement provided that approximately $17,919 previously paid to
Viking represented the full amount of consideration owed to Viking under the
original agreement.





Pursuant
to the Amended Viking Agreement, we agreed that Viking has the right but not the
obligation to participate for between 10% and up to 50% of the working interest
on a wellbore only basis of any new production well drilled on the acreage
covered by the Amended Viking Agreement, subject to the terms and conditions of
the original agreement. Additionally, we agreed that if a well is completed in
the area covered by the agreement and a subsequent well is proposed within 1200
feet of the original well that (a) drains the same reservoir or (b) develops a
behind-pipe reservoir identified in the original well and in the same fault
block as the original well, then Viking has the right to participate in that
well under the same terms as well. Additionally, the Amended Viking Agreement
provided that such royalty interests to be assigned on any new well bores will
be subject to certain overriding royalty interests as provided in the Amended
Viking Agreement.





Additionally,
pursuant to the Amended Viking Agreement, we agreed to issue an aggregate of
200,000 restricted shares of common stock, 100,000 shares each to two
individuals. With such issuance, the individuals agreed, pursuant to a Lock-Up
Agreement not to sell their restricted shares of common stock until July 1,
2008, to comply with Laurus' Convertible Note restrictions on our ability to
issue shares of common stock without affecting the Fixed Conversion Price of the
Convertible Note.




NOTE
10 - OTHER STOCKHOLDERS' EQUITY TRANSACTIONS





Options and
Warrants





Activity
      in 2008
                
                Options
                
                
                WarrantsOutstanding,
      1/1/2008
                
                
                11,609,176
                
                
                
                7,258,065Granted
                
                
                -
                
                
                
                -Exercised
                
                
                -
                
                
                
                -Expired
      or cancelled
                
                
                -
                
                
                
                -Outstanding,
      end of year
                
                
                11,609,176
                
                
                
                7,258,065Exercisable,
      end of year
                
                
                11,609,176
                
                
                
                7,258,065Available
      for grant, end of year
                
                
                11,609,176
                
                
                
                7,258,065


F-21


The
weighted average option and warrant exercise price information for 2008 is as
follows:





Activity
      in 2008
                
                Options
                
                
                WarrantsOutstanding,
      beginning of year
                
                $
                0.001
                
                
                $
                0.80Granted
      during the year
                
                $
                -
                
                
                $
                -Exercised
      during the year
                
                $
                -
                
                
                $
                -Expired
      or cancelled during the year
                
                $
                -
                
                
                $
                -Outstanding
      at end of year
                
                $
                0.001
                
                
                $
                0.80Exercisable
      at end of year
                
                $
                0.001
                
                
                $
                0.80





Significant
option and warrant groups outstanding at December 31, 2008, and related weighted
average exercise price and remaining life information is as follows:





Grant
      date
                
                Options
                
                Warrants
                
                Exercisable
                
                Weighted
                
                ExerciseRemaining
      Life (Years)
                
                Outstanding
                
                Outstanding
                
                Options
                
                Warrants
                
                PriceJune
      30, 2005 (indefinite)
                
                
                6,547,784
                
                
                
                
                6,547,784
                
                
                
                $
                0.001June
      30, 2005 (3.50)
                
                
                
                
                7,258,065
                
                
                -
                
                7,258,065
                
                $
                0.800December
      30, 2005 (indefinite)
                
                
                5,061,392
                
                
                
                
                5,061,392
                
                
                
                $
                0.001As
      of December 31, 2008
                
                
                11,609,176
                
                7,258,065
                
                
                11,609,176
                
                7,258,065





At
December 31, 2008, approximately 44.0 million shares of common stock were
reserved for issuance under the Convertible Note, the Laurus Stock Option, the
Laurus Warrant, and the Laurus December Option. Additionally, 10 million shares
of common stock were reserved for issuance under the 2007 Stock Incentive Plan
(see Note 11).




NOTE 11 - EMPLOYEE BENEFIT
PLANS





401(k)
Plan





Our
Company has an employee benefit plan available to all full-time employees under
Section 401(k) of the Internal Revenue Code ("401(k) plan"). Employees may make
contributions up to a specified percentage of their compensation. Effective July
1, 2008, the Company is obligated to make safe harbor matching contributions
equal to 100% of a participant’s elective deferrals; however, the Company will
not match elective deferrals that exceed 6% of a participant’s eligible
earnings.  The Company may also make non-elective contributions to the
plan, although the Company is not required to do so.  No such
non-elective contributions were made in 2008 or 2007.





The
Company made $12,143 and $3,312 in matching employer contribution to the 401(k)
Plan in 2008 and 2007, respectively.





2000 Stock Incentive Plan, 2002 Stock Incentive
Plan and 2004 Stock Incentive Plan





On
October 9, 2007, at an annual meeting of stockholders of the Company, the
Company’s majority shareholder, Edward R. DeStefano, also the Company’s sole
officer and Director, ratified the Company’s 2007 Stock Incentive Plan and
approved the cancellation of the Company’s previously adopted 2000 Stock
Incentive Plan, 2002 Stock Incentive Plan and 2004 Stock Incentive Plan, without
affecting any of the securities issued or granted pursuant to such
plans.  As of December 31, 2008 and 2007, there were no options or
warrants granted or outstanding under the 2000 Stock Incentive Plan, 2002 Stock
Incentive Plan and 2004 Stock Incentive Plan.





2007
Stock Incentive Plan





The
Company’s 2007 Stock Incentive Plan, which includes a total of up to ten million
(10,000,000) shares or options provides an opportunity for any employee,
officer, Director or consultant of the Company, except for instances where
services are in connection with the offer or sale of securities in a
capital-raising transaction, or they directly or indirectly promote or maintain
a market for the Company's securities, subject to any other limitations provided
by federal or state securities laws, to receive (i) incentive stock options (to
eligible employees only); (ii) nonqualified stock options; (iii) restricted
stock; (iv) stock awards; (v) shares in performance of services; or (vi) any
combination of the foregoing. In making such determinations, the Board of
Directors may take into account the nature of the services rendered by such
person, his or her present and potential contribution to the Company's success,
and such other factors as the Board of Directors in its discretion shall deem
relevant.  As of December 31, 2008 and 2007, there were no options or
warrants granted or outstanding under the 2007 Stock Incentive
Plan.




NOTE 12 -
CONCENTRATIONS





Major
Purchaser


F-22


During
2008 and 2007, New Century’s operated properties had two purchasers who
accounted for 100% of crude oil sales and two different purchasers who accounted
for 100% of sales of natural gas products. New Century’s non-operated properties
had yet another purchaser who individually accounted for 100% of sales of all
natural gas production for the same periods of 2008 and 2007.





Predominance
of Sales





In 2008
and 2007, crude oil sales accounted for 83% and 79%, respectively, and sales of
natural gas products accounted for 17% and 21%, respectively, of total revenue
from oil and gas operations.





Primary
lenders





All of
our existing notes payable in the amount of approximately $63.2 million are due
to Laurus Master Fund, LTD and/or one of its affiliate companies (Valens Onshore
US SPV I, LLC; Valens Offshore Fund SPV I, Ltd; Valens Offshore US SPV II, LLC;
and P-Source Structured Debt).  We are currently in default on all of
our notes payable with Laurus and its affiliate companies (see Note
4).





NOTE
13 - SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)





Capitalized
Costs





Capitalized
costs incurred in property acquisition, exploration, and development
activities:




December
      31, 2008Proved
      properties
                
                $
                68,120,263Unproved
      properties
                
                
                1,084,222Wells
      and related equipment and facilities
                
                
                9,903,879$
                79,108,364Less
      accumulated depreciation, depletion,amortization
      and impairment
                
                
                (57,482,655
                )Net
      capitalized costs
                
                $
                21,625,709




Costs incurred for property acquisition, exploration, and
development activities.




Year
      ended December 31,2008
                
                
                2007Acquisition
      of properties-Proved
                
                $
                -
                
                
                $
                --Unproved
                
                
                252,974
                
                
                
                484,832Exploration
      costs
                
                
                1,363,628
                
                
                
                1,960,977Development
      costs
                
                
                8,342,793
                
                
                
                6,514,772Total
      costs incurred for propertyacquisition,
      exploration, anddevelopment
      activities
                
                $
                9,959,395
                
                
                $
                8,960,581




Results
of Operations for oil and gas producing activities:




Year
      ended December 31,2008
                
                
                2007Oil
      and gas sales
                
                $
                24,330,272
                
                
                $
                13,612,303Gain
      on sale of oil and gas interest
                
                
                -
                
                
                
                34,680Gas
      operations consulting
                
                
                24,300
                
                
                
                36,930Production
      costs
                
                
                (5,358,630
                )
                
                
                (3,571,614
                )Exploration
      expenses
                
                
                (1,363,628
                )
                
                
                (1,960,977
                )Depreciation,
      depletion and amortization
                
                
                (10,534,247
                )
                
                
                (8,138,310
                )Impairment
      of oil and gas properties (a)
                
                
                (16,229,619
                )
                
                
                (10,211,390
                )(9,131,552
                )
                
                
                (10,198,378
                )Income
      tax expense, 34% rate
                
                
                -
                
                
                
                -Results
      of operations for oil andgas
      producing activities (excludingcorporate
      overhead and financing costs)
                
                $
                (9,131,552
                )
                
                $
                (10,198,378
                )


F-23


(a)
  We recognized an impairment of proved properties at December 31, 2008 of
$16,057,342 as a result of a significant reduction in proved reserves in our
Wishbone and Mustang Creek fields.  Our proved reserves decreased by
43% and 31% for the Wishbone and Mustang Creek fields,
respectively.  The reduction in both fields was due to downward
revisions based on actual well performance over time combined with the
projection of significantly lower oil and gas prices for future years. We also
recognized an impairment of $172,277 on our unproved properties in the state of
California based on current market conditions and drilling feasibility in that
region. We recognized an impairment of proved properties at December 31, 2007 of
$10,211,390 as a result of a significant reduction in proved reserves in our
Wishbone Field.  During 2007, the Company’s proved gas reserves in the
Wishbone Field were decreased by 57%.  The majority of this reduction,
approximately ninety percent (90%), was due to a significant reduction in future
proved undeveloped (PUD) locations projected to be drilled.  This
reduction was based on the operator’s indication that only one more PUD may be
drilled due to current high drilling costs and lower product
prices.  In addition, the decline rate associated with the existing
proved developed producing (PDP) gas reserves was steeper than previously
projected, which contributed to approximately ten percent (10%) of the decrease
in the proved reserves in this field.




Reserve Information





The
following estimates of proved developed reserve quantities and related
standardized measure of discounted net cash flow are estimates only, and do not
purport to reflect realizable values or fair market values of New Century's
reserves. New Century emphasizes that reserve estimates are inherently
imprecise. Accordingly, these estimates are expected to change as future
information becomes available. All of New Century's reserves are located in
Texas and Louisiana, which are considered a single geographic area.





Proved
reserves are estimated reserves of crude oil (including condensate and natural
gas liquids) and natural gas that geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved developed
reserves are those expected to be recovered through existing wells, equipment,
and operating methods.





The
standardized measure of discounted future net cash flows is computed by applying
year-end prices of oil and gas (with consideration of price changes only to the
extent provided by contractual arrangements) to the estimated future production
of proved oil and gas reserves, less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing the proved reserves,
less estimated future income tax expenses (based on year-end statutory tax
rates) to be incurred on pretax net cash flows less tax basis of the properties
and available credits, and assuming continuation of existing economic
conditions. The estimated future net cash flows are then discounted using a rate
of 10 percent a year to reflect the estimated timing of the future cash
flows.





2008
            
            2007Oil
            
            Gas
            
            Oil
            
            Gas(Bbls)
            
            (MMcf)
            
            (Bbls)
            
            (MMcf)Proved
      developed and undeveloped reservesBeginning
      of year
            
            
            1,613,224
            
            3,041
            
            858,423
            
            7,187Revisions
      of previous estimates
            
            
            (340,586
            )d
            (664
            )f
            667,606
            a
            (3,693
            )cPurchases
      of minerals in place
            
            
            -
            
            -
            
            -
            
            -Production
            
            
            (202,055
            )
            (500
            )
            (146,579
            )
            (453
            )Extensions
      and discoveries
            
            
            69,849
            e
            -
            
            233,774
            b
            -End
      of the year
            
            
            1,140,432
            
            1,877
            
            1,613,224
            
            3,041Proved
      developed reservesBeginning
      of year
            
            
            1,398,912
            
            2,214
            
            790,800
            
            2,131End
      of year
            
            
            962,610
            
            1,049
            
            1,398,912
            
            2,214





a
            The
      upward revision of previous estimates by 667,606 net barrels is primarily
      a result of changes in three wells.  First, the Herrera #4 well
      and the Hodde #3 wells have new proved behind pipe and proved undeveloped
      reserves of 144,493 and 154,358 net barrels of oil, respectively, per the
      December 31, 2007 reserve report prepared by R.A. Lenser (the “Lenser
      Report”).  Secondly, the Hodde #1 well’s proved producing
      reserves increased from 76,525 net barrels per the December 31, 2006
      Lenser Report to 341,977 net barrels per the December 31, 2007 Lenser
      Report.b
            In
      2007, we drilled six new wells in the Mustang Creek Field which resulted
      in additions to our proved reserves at December 31, 2007.  Their
      total proved reserves per the December 31, 2007 Lenser Report were as
      follows (note that the Double K#4 and Double K#5 are combined on the
      Lenser Report):


F-24


ProvedWell
                
                ReservesRabke
      #2
                
                
                30,491Swaim
      58-2
                
                
                46,351Swaim
      33-2
                
                
                67,580Double
      K#4
                
                
                74,297Mahoney
      #2
                
                
                15,055Total
                
                
                233,774







c
              The
      downward revision of previous estimates by 3,693 net MMCf of gas is
      primarily the result of changes in the gas reserves in the Wishbone
      Field.  During 2007, the Company’s proved gas reserves in the
      Wishbone Field were decreased by 57%.  The majority of this
      reduction, approximately ninety percent (90%), was due to a significant
      reduction in future proved undeveloped (PUD) locations projected to be
      drilled.  This reduction was based on the operator’s indication
      that only one more PUD may be drilled due to current high drilling costs
      and lower product prices.  In addition, the decline rate
      associated with the existing proved developed producing (PDP) gas reserves
      was steeper than previously projected, which contributed to approximately
      ten percent (10%) of the decrease in the proved reserves in this
      field.




d
            The
      downward revision of previous estimates by 340,586 net barrels is
      primarily a result of changes in the Mustang Creek
      Field.  Total proved reserves per the December 31, 2007 reserve
      report prepared by R.A. Lenser (the “Lenser Report”) were 1,233,060 net
      barrels versus 853,932 net barrels per the December 31, 2008 Lenser
      Report. This decrease was due to (1) the production of 170,817 net barrels
      of oil during 2008, and (2) downward revisions to the reserves based on
      actual well performance over time, and more significantly, due to much
      lower oil prices projected for future years.  The oil price used
      to project reserves on the December 31, 2007 Lenser Report was $91.50
      compared to an oil price of $42.51 used on the December 31, 2008 Lenser
      Report.  The lower oil pricing caused a significant reduction in
      oil reserves, as the productive life of our wells curtailed due to lower
      projected revenue causing the economic limit of certain wells to be
      reached sooner.e
            In
      2008, we drilled eight new wells in the Mustang Creek Field and one new
      well in the Tenna Field which resulted in additions to our proved reserves
      at December 31, 2008.  Their total proved reserves per the
      December 31, 2008 Lenser Report were as
follows:





ProvedWell
                
                ReservesRabke
      Maspero Oil Unit
                
                
                -Rabke
      #3
                
                
                -Rabke
      #4
                
                
                20,509Dowdy
      #1
                
                
                198Double
      K Noerth #6
                
                
                16,188Rabke
      Maspero Unit #4
                
                
                25,952Rabke
      Maspero Unit #5
                
                
                1,258Rabke
      Maspero Unit #6
                
                
                295Brothers
      Cattle #5
                
                
                5,449Total
                
                
                69,849





f
            The
      downward revision of previous estimates by 664 net MMCF of gas is
      primarily the result of changes in the gas reserves in the Wishbone
      Field.  As of December 31, 2008, the Company’s proved gas
      reserves in the Wishbone Field were decreased by 43% to 849 MMCF from
      1,478 MMCF on December 31, 2007, or a difference of 629
      MMCF.  Of the total 629 MMCF reduction in proved gas reserves,
      119 MMCF was due to actual net gas produced during 2008 and 510 MMCF from
      downward revisions to estimates of proved reserves.  The
      majority of the 510 MMCF downward revision to proved reserves in 2008 can
      be attributed to a steeper decline rate associated with the existing wells
      and the failed recompletion attempts for proved behind pipe reserves in
      the LHGU #2 and LHGU #10 wells.


F-25


Standardized
      Measure of Discounted FutureNet
      Cash Flows at December 31, 2008 and 2007 (in $000's)2008
                
                
                2007Future
      cash inflows
                
                $
                58,073
                
                
                $
                166,693Future
      production costs
                
                
                (18,882
                )
                
                
                (34,036
                )Future
      development costs
                
                
                (3,225
                )
                
                
                (2,250
                )Future
      income tax expenses, at 34%
                
                
                -
                
                
                
                (16,071
                )Future
      gross cash flows
                
                
                35,966
                
                
                
                114,336Less:
      10% annual discount forestimated
      timing of cash flows
                
                
                (14,333
                )
                
                
                (34,304
                )Standardized
      measures of discounted future net cash flowsrelating
      to proved oil and gas reserves
                
                $
                21,633
                
                
                $
                80,032




The following reconciles the change in the standardized measure
of discounted future net cash flow during 2008 and 2007.




2008
                
                
                2007Beginning
      of year
                
                $
                80,032
                
                
                $
                51,566Sales
      of oil and gas produced, net of production costs
                
                
                (19,693
                )
                
                
                (11,035
                )Net
      changes in sales price, net of production costs
                
                
                (37,791
                )
                
                
                33,416Development
      cost incurred during the periods that reduced future development
      costs
                
                
                541
                
                
                
                698Extensions
      and discoveries, net of development costs
                
                
                1,765
                
                
                
                13,815Purchase
      of reserves in place
                
                
                -
                
                
                
                -Accretion
      of discount
                
                
                4,942
                
                
                
                2,018Net
      changes in estimated future development costs
                
                
                912
                
                
                
                (1,271
                )Revisions
      of previous quantity estimates
                
                
                (7,557
                )
                
                
                2,436Changes
      in future income tax expense
                
                
                951
                
                
                
                (951
                )Changes
      in production rates and other
                
                
                (2,469
                )
                
                
                (10,660
                )End
      of year
                
                $
                21,633
                
                
                $
                80,032


F-26


ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  Our
consolidated financial statements for the year ended December 31, 2007 were
audited by PMB Helin Donovan, LLP (“PMB”). Effective July 16, 2008, the client
auditor relationship between us and PMB ceased as the former accountant was
dismissed. Effective July 16, 2008, we engaged Malone & Bailey, PC,
Certified Public Accountants (“Malone”) as our principal independent public
accountant for the fiscal year ended December 31, 2008. The decision to change
accountants from PMB to Malone was recommended and approved by the Company’s
Board of Directors on July 16, 2008. PMB had been engaged by the Company on
April 11, 2005.
 
 During
the period beginning April 11, 2005 (the date that the Company engaged PMB) up
to and including the date the relationship with PMB ceased, there were no
disagreements with PMB on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of PMB would have caused
PMB to make reference to the subject matter of the disagreement(s) in connection
with its report on the Company’s financial statements. There have been no
reportable events as defined in Item 304(a)(1)(iv) of Regulation S-K during the
interim period up to and including the date the relationship with PMB
ceased.
  PMB
audited the balance sheet of the Company as of December 31, 2007, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the fiscal years ended December 31, 2007 and 2006. PMB’s report on the
Company's financial statements for the fiscal years ended December 31, 2007 and
2006 did not contain any adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting
principles.
 
 The
Company authorized PMB to respond fully to any inquiries of any new auditors
hired by the Company relating to their engagement as the Company's principal
independent accountant. The Company has requested that PMB review the disclosure
and PMB has been given an opportunity to furnish the Company with a letter
addressed to the Commission containing any new information, clarification of the
Company's expression of its views, or the respect in which it does not agree
with the statements made by the Company herein. Such letter is filed as an
exhibit to this report.
 
 The
Company did not previously consult with Malone regarding either (i) the
application of accounting principles to a specified transaction, either
completed or proposed; or (ii) the type of audit opinion that might be rendered
on the Company's financial statements; or (iii) any matter that was either the
subject matter of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation
S-K) between the Company and PMB, the Company's previous principal independent
accountants, as there were no such disagreements, or an other reportable event
(as defined in Item 304(a)(1)(iv) of Regulation S-K) during the interim period
up to an including the date the relationship with PMB ceased. Neither has the
Company received any written or oral advice concluding there was an important
factor to be considered by the Company in reaching a decision as to an
accounting, auditing, or financial reporting issue.
 
 ITEM 9A. CONTROLS AND
PROCEDURES
 
 (a)        Disclosure
Controls and Procedures.
  As of
December 31, 2008 we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and our Principal Financial Officer, of the design and operation of our
disclosure controls and procedures to ensure that information  required to
be disclosed in the reports we file under the Exchange Act were recorded,
processed, summarized and reported, within the time periods specified in the
Commission’s rules and forms and to ensure that information required to be
disclosed was accumulated and communicated to our management as appropriate to
allow timely decisions regarding required disclosure. As a result of this
evaluation, we concluded that our disclosure controls and procedures were
effective to ensure that information required to be disclosed in the reports we
file under the Exchange Act were recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms and
that such disclosure controls and procedures were effective to ensure that
information required to be disclosed was accumulated and communicated to our
management as appropriate to allow timely decisions regarding required
disclosure.
  (b)        Management’s
      Annual Report on Internal Control over Financial
  Reporting
  Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act
as a process designed by, or under the supervision of, a company’s principal
executive and principal financial officers and effected by a company’s board of
directors, management and other personnel 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. Our internal control over financial reporting includes
those policies and procedures that: (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of consolidated financial
statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on the
consolidated financial statements.
 -38-
 Our management conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation under the framework in Internal
Control — Integrated Framework, our management concluded that our internal
control over financial reporting was effective as of December 31,
2008
  This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual
report.
  (c)        
      Changes in Internal Control over Financial
  Reporting
  There were no changes in our internal control over financial reporting that
occurred during our most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
 -39-
 ITEM 9B. OTHER
INFORMATION.
 
 Cautionary Note to
Investors:
 
 We
previously became aware of a potential stock scam regarding the proposed
purchase of shares of our common stock from offshore investors. At least one
investor has been contacted by a third party offering to purchase the shares of
our common stock which that investor holds for well over the current market
price of our common stock. However, the third party also requests certain legend
removal fees and transaction fees which must be paid up front before moving
forward with the sale of the common stock. We believe these offers to buy shares
of our common stock are fraudulent and that such third parties will not honor
their sales once they receive their substantial up front costs. We urge any
investor in the Company to only make sales of common stock through licensed
broker/dealers and/or to consult with a licensed broker before signing any
unsolicited purchase agreements they may receive.
 -40-
 PART
III
 
 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
 
 The
following table sets forth the name, age and position of our director and
executive officers. There are no other persons who can be classified as a
promoter or controlling person of us. Our officers and director are as
follows:
 
  Name
                          Age
                          PositionEdward
      R. DeStefano
                          56
                          Chief
      Executive Officer, President,
      Secretary,
                            Treasurer
      and DirectorKen
      Cleveland
                          42
                          Chief
      Financial
Officer
 
  EDWARD
R. DESTEFANO
 Chief
Executive Officer, President, Secretary, Treasurer and Director
 
 Edward R.
DeStefano has served as our Chief Executive Officer, President, Secretary,
Treasurer and Director since November 2, 2004. From November 2, 2004 to January
31, 2008, Mr. DeStefano also served as Chief Financial Officer of the
Company.  Mr. DeStefano has served as the Chief Executive Officer of
Century Resources, Inc. since June 1985, which company became our wholly owned
subsidiary in connection with the Exchange, discussed above under "Description
of Business". From June 1981 to June 1985, Mr. DeStefano served as the Director
of Operations of Aracca Petroleum Corporation. From January 1976 to June 1981,
Mr. DeStefano was employed as an exploration associate with Gulf Oil
Corporation. Mr. DeStefano obtained a Bachelors of Science degree from Ithaca
College in 1975. He completed additional course work in Energy Economics at the
University of Houston in 1980. Mr. DeStefano is a member of the Houston
Geological Society, North Texas Oil and Gas Association, Society of Petroleum
Engineers, and the American Association of Petroleum Geologists.
  KEN
CLEVELAND
 Chief
Financial Officer
 
 Ken
Cleveland has served as our Chief Financial Officer since January 31, 2008. Mr.
Cleveland is also currently a financial consultant for Agility Business
Partners, LLC, a provider of financial and regulatory consulting to microcap and
smaller public companies.  Mr. Cleveland has been employed by Agility
since January, 2008. Prior to joining Agility, Mr. Cleveland served as a
financial consultant with Sirius Solutions, LLP. from February 2004 until
January 2008.  From May 2002 to January 2004, Mr. Cleveland
served as Vice President of Finance and as Chief Financial Officer of RhinoPak,
L.P.  From November 1999 to May 2002, Mr. Cleveland served as
Controller of NeworkOil, Inc.  From April 1994 to November 1999, Mr.
Cleveland held various financial management positions for several private and
publicly traded companies. Prior to that, he was with the big four accounting
firm Ernst & Young for five years, from September 1989 to April 1994. Mr.
Cleveland holds a BBA degree from the Baylor University, which he received in
1989, and is a Certified Public Accountant.
 
 Our
Director will hold office until the next annual meeting of the shareholders,
and/or until his successor has been elected and qualified. Our officers were
elected by the Board of Directors and hold office at the pleasure of the
Board.
 -41-
 SECOND
AMENDED EXECUTIVE EMPLOYMENT AGREEMENT WITH EDWARD R. DESTEFANO
 
 On or
about December 3, 2007, the Company and Edward R. DeStefano, the Company’s Chief
Executive Officer and President, entered into a Second Amended Executive
Employment Agreement (the “Employment Agreement”).  Pursuant to the
terms of the Employment Agreement, as amended, Mr. DeStefano will receiver a
yearly salary of $425,000 for the twelve month period beginning January 1, 2008
and ending December 31, 2008, and a yearly salary of $475,000 for each of the
twelve month periods beginning January 1, 2009 and January 1, 2010, and ending
December 31, 2009 and December 31, 2010, respectively.  Furthermore,
Mr. DeStefano was entitled to a one-time payment in the amount of $20,000, in
connection with Gulf Coast Oil Corporation’s November 2007 closing of the
$7,100,000 in financing for the drilling of up to fourteen wells on its
properties and the New Century closing of the $5,300,000 in financing described
above.  Mr. DeStefano will also receive twenty days of paid time off
per year, and he may be granted, at the sole discretion of the Company’s Board
of Directors, an overriding royalty interest of up to one half of one percent
(0.005%) in connection with any new wells drilled by the Company subsequent to
the date of the Employment Agreement.
 
 Under the
Employment Agreement, we agreed to indemnify and hold harmless Mr. DeStefano,
his nominees and/or assigns against any and all losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses and
disbursements (incurred in any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, suit, proceeding or investigation that is in any way
related to his employment with us (whether or not in connection with any action
in which he is a party). Such indemnification does not apply to acts performed
by Mr. DeStefano, which are criminal in nature or a violation of law. We also
agreed that he shall not have any liability (whether direct or indirect, in
contract or tort, or otherwise) to us, for, or in connection with, the
engagement of Mr. DeStefano under the Employment Agreement, except to the extent
that any such liability resulted primarily and directly from his gross
negligence and willful misconduct.
 
 The
Employment Agreement shall terminate:
  (a) in
the event Mr. DeStefano suffers an injury, illness, or incapacity of such
character as to prevent him from performing his duties without reasonable
accommodation for a period of more than thirty (30) consecutive days upon us
giving at least thirty (30) days written notice of termination to
him;
 
 (b) upon
Mr. DeStefano's death;
 
 (c) at
any time because of, (i) the conviction of Mr. DeStefano of an act or acts
constituting a felony or other crime involving moral turpitude, dishonesty or
theft or fraud; or (ii) his gross negligence in the performance of his duties
hereunder;
 
 (d) Mr.
DeStefano may terminate his employment for "good reason" by giving us ten (10)
days written notice if: (i) he is assigned, without his express written consent,
any duties materially inconsistent with his positions, duties, responsibilities,
or status with us, or a change in his reporting responsibilities or titles as in
effect as of the date hereof; (ii) his compensation is reduced; or (iii) we do
not pay any material amount of compensation due hereunder and then fail either
to pay such amount within the ten (10) day notice period required for
termination hereunder or to contest in good faith such notice; or
 
 (e) at
any time without cause.
 
 In the
event of the termination of Mr. DeStefano's employment pursuant to (a), above,
he will be entitled to a one time lump sum payment equal to 50% of the full
Yearly Salary then in effect in addition to all payments of salary earned
through the date of termination, which shall be immediately due and payable
(plus life insurance or disability benefits).
 -42-
 In the
event of the termination of Mr. DeStefano's employment pursuant to (b) or (c)
above, he will be entitled only to the compensation earned by him as of the date
of such termination (plus life insurance or disability benefits).
 
 In the
event of Mr. DeStefano's termination pursuant to (d) or (e) above, he will be
entitled to receive as severance pay, a one time lump sum payment equal to 150%
of the full Yearly Salary then in effect, in addition to all payments of salary
earned through the date of such termination, which shall be immediately due and
payable; provided however, that any severance payment is contingent upon the
execution by Mr. DeStefano of a Settlement Agreement and Mutual Release
releasing us from any and all obligations under the Employment
Agreement.
 
 AMENDED
EMPLOYMENT AGREEMENT WITH KEN CLEVELAND
 
 The
Company named Ken Cleveland as Acting Chief Financial Officer effective January
31, 2008.  Mr. Cleveland provided his services to the Company as a
consultant with Agility Financial Partners, LLC until August 1, 2008 when he
became an employee of the Company pursuant to the Ken Cleveland Employment
Agreement (the “Original Agreement”).  On or about February 1, 2009,
the Company and Mr. Cleveland entered into the Amended Ken Cleveland Employment
Agreement (the “Amended Employment Agreement”). Pursuant to this Amended
Employment Agreement, Mr. Cleveland will receive a base salary of $85 per hour
for all hours worked for the Company.  The term of this amended
agreement is a month to month basis and may be extended for successive one month
terms, subject to being earlier terminated pursuant to Article 5 of the Original
Agreement.
 
 Under the
Amended Employment Agreement, we agreed to indemnify and hold harmless Mr.
Cleveland, his nominees and/or assigns against any and all losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs, expenses
and disbursements (incurred in any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, suit, proceeding or investigation that is in any way
related to his employment with us (whether or not in connection with any action
in which he is a party). Such indemnification does not apply to acts performed
by Mr. Cleveland, which are criminal in nature or a violation of law. We also
agreed that he shall not have any liability (whether direct or indirect, in
contract or tort, or otherwise) to us, for, or in connection with, the
engagement of Mr. Cleveland under the Amended Employment Agreement, except to
the extent that any such liability resulted primarily and directly from his
gross negligence and willful misconduct.
 
 The
Company may terminate Mr. Cleveland’s employment at any time and for any reason,
with or without cause and without any liability whatsoever.  Employee
may voluntarily terminate his employment with the Company at any time, for any
reason, without any liability whatsoever.  In the event the Company or
Mr. Cleveland terminates employment, the terminating party shall provide the
other party with thirty (30) days written notice.  Should Mr.
Cleveland engage in any dishonest, unethical, fraudulent or felonious act
related to his duties to the Company, then the Company is not required to
provide any termination notice.
 
 In the
event of the termination of this Amended Employment Agreement, Mr. Cleveland
shall be entitled to his base salary earned prior to the date of termination as
provided for in this agreement pro-rata up to and including the date of
termination.
 -43-
 SECTION
16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
 Section
16(a) of the securities Exchange Act of 1934, as amended, requires our
directors, executive officers and persons who own more than 10% of a class of
our equity securities which are registered under the Exchange Act to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes of ownership of such registered securities. Such executive officers,
directors and greater than 10% beneficial owners are required by Commission
regulation to furnish us with copies of all Section 16(a) forms filed by such
reporting persons.
 
 To our
knowledge, based solely on a review of the copies of such reports furnished to
us and on representations that no other reports were required, we are of the
opinion that Edward R. DeStefano, Ken Cleveland, and Laurus Master Fund,
Ltd.(through an entity which it owns and controls), are currently subject to
Section 16(a) filing requirements.
 -44-
 ITEM 11. EXECUTIVE
COMPENSATION
 
  SUMMARY COMPENSATION
  TABLEName
      and principal position
                            (a)
                          Year
                            (b)
                          Salary
      ($)
                            (c)
                          Bonus
      ($)
                            (d)
                          Stock
      Awards ($)
                            (e)
                          Option
      Awards ($)
                            (f)
                          Non-Equity
      Incentive Plan Compensation ($)
                            (g)
                          Nonqualified
      Deferred Compensation Earnings ($)
                            (h)
                          All
      Other Compensation ($)
                            (i)
                          Total
      ($)
                            (j)Edward
      R. DeStefano
                            CEO,
      President Former CFO, and Secretary (5)
                          2008(5)
                          425,000
                          -
                          -
                          -
                          -
                          -
                          13,100
      (1) (2)
                          438,1002007(5)
                          350,000(3)
                          20,000(3)
                          -
                          -
                          -
                          -
                          9,000
      (1)
                          379,0002006(5)
                          283,333(4)
                          26,667(4)
                          -
                          -
                          -
                          -
                          9,750
      (1)
                          319,750Ken
      Cleveland
                            CFO
                          2008
                          43,771
                          -
                          -
                          -
                          -
                          -
                          -(6)
                          43,7712007
                          -(7)
                          -(7)
                          -
                          -
                          -
                          -
                          -
                          -
 
 * Does
not include perquisites and other personal benefits in amounts less than 10% of
the total annual salary and other compensation. Other than the individuals
listed above, we have no other executive employees who have received more than
$100,000 in compensation, including bonuses and options, during each of the last
three (3) fiscal years.
 
 (1) Since
September 1, 2005, in connection with Mr. DeStefano's Employment Agreement,
beginning September 2005, he has been receiving a car allowance.  For
the years ended December 31, 2008 and 2007, such car allowance totaled
approximately $750 per month, which amount represents $9,000 of other
compensation in 2008 and 2007.  The $9,750 of other annual
compensation in 2006 was also solely due to a car allowance provided to Mr.
DeStefano.
 
 (2) For
the year ended December 31, 2008, the Company also contributed $4,100 to his
401(k) plan as a Company match via the Company’s new 401(k) plan implemented
during 2008.
 
 (3) Mr.
DeStefano earned $350,000 for the fiscal year ended December 31, 2007.
Additionally, Mr. DeStefano received $20,000 in bonuses for his performance in
regards to Gulf Coast’s November 2007 closing of $7,100,000 in financing for the
drilling of up to fourteen wells on its properties and the New Century closing
of the $5,300,000 in financing described above.
 -45-
 (4) Mr.
DeStefano earned $283,333 for the fiscal year ended December 31, 2006 which
included $93,750 earned from January 1, 2006 to May 31, 2006, which was paid
under the terms of his Executive Employment Agreement; and $189,583 which he was
paid during the remainder of 2006 (June 1, 2006 through December 31, 2006)
pursuant to his Amended Executive Employment Agreement (see footnote 4 below).
Additionally, Mr. DeStefano received $26,667 in bonuses for his performance in
regards to completing the 2006 acquisitions described above under "Description
of Business."
 
 (5) Mr.
DeStefano is employed under a three year Amended Executive Employment Agreement
with us which expires on December 31, 2010, and is described in greater detail
under "Directors, Executive Officers, Promoters and Control Persons,"
above.
 
 (6) Prior
to August 1, 2008, Mr. Cleveland performed services for the Company as a
consultant through Agility Business Partners, LLC (“Agility”).  The
Company paid Agility $59,250 for these services during 2008.
 
 (7) Mr.
Cleveland was appointed Chief Financial Officer on January 31, 2008, when Mr.
DeStefano resigned as Chief Financial Officer of the Company and was not an
executive of the Company during the fiscal year ended December 31,
2007.
 -46-
 COMPENSATION DISCUSSION AND
ANALYSIS
 
 Director
Compensation
 
 Edward R.
DeStefano, our CEO, President and Director, does not receive any separate
consideration from the Company other than the compensation he is paid as the
Company’s Chief Executive Officer, for his service on the Board of Directors.
However; the Board of Directors reserves the right in the future to award the
members of the Board of Directors cash or stock based consideration for services
to the Company, which awards, if granted shall be in the sole determination of
the Board of Directors.
 
 Executive
Compensation Philosophy
 
 Our Board
of Directors, consisting solely of Edward R. DeStefano, determines the
compensation provided to our executive officers, Mr. DeStefano and Mr.
Cleveland, and/or any other executive officers we may hire in the future in
their sole determination. Our executive compensation program is designed to
attract and retain talented executives (such as Mr. DeStefano and Mr.
Cleveland), to meet our short-term and long-term business objectives. In doing
so, we attempt to align our executive’s interests with the interests of our
shareholders by providing an adequate compensation package to such executive.
This compensation package includes a base salary, which we believe is
competitive with other companies of our relative size. Additionally, our Board
of Directors reserves the right to award incentive bonuses which are linked to
our performance, as well as to individual executive officer’s performance in the
future. This package may also include long-term, stock based compensation to our
current executive officers and/or any additional executives we may hire in the
future, which are intended to align the performance of our executives with our
long-term business strategies.
 
 Base
Salary
 
 The base
salary of Mr. DeStefano, our Chief Executive Officer, President, Secretary and
Treasurer, was established by our entry into a Second Amended Employment
Agreement with Mr. DeStefano, effective December 3, 2007, described in
greater detail above. Mr. DeStefano’s salary was established by evaluating the
range of responsibilities of his positions, as well as the anticipated impact
that Mr. DeStefano could have in meeting our strategic objectives.
 
 Pursuant
to Mr. Cleveland’s Amended Employment Agreement, he is currently paid a base
salary of $85 per hour.
 
 The
established base salary of Mr. DeStefano and Mr. Cleveland and/or the base
salaries of any additional executive officers we may hire in the future will be
adjusted to reflect the varying levels of position responsibilities and
individual executive performance.
 
 Incentive
Bonus
 
 Along
with Mr. DeStefano’s base salary, the Board of Directors reserves the right to
give incentive bonuses to Mr. DeStefano, which bonuses the Board of Directors
may grant in its sole discretion, if the Board of Directors believes such
bonuses are in the Company’s best interest, after analyzing our current business
objectives and growth, if any, and the amount of revenue we are able to generate
each month, which revenue is a direct result of the actions and ability of Mr.
DeStefano in the sole discretion of the Board of Directors.
 -47-
 Long-term,
Stock Based Compensation
 
 In order
to attract, retain and motivate executive talent necessary to support the
Company’s long-term business strategy we may award executives with long-term,
stock based compensation in the future, in the sole discretion of our Board of
Directors, which we do not currently have any immediate plans to
award.
 
 Criteria
for Compensation Levels
 
 The
Company has always sought to attract and retain qualified executives and
employees able to positively contribute to the success of the Company for the
benefit of its various stakeholders, the most important of which is its
shareholders, but also including its customers, its employees, and the
communities in which the Company operates.
 
 The Board
of Directors (in establishing compensation levels for Mr. DeStefano and Mr.
Cleveland) and the Company (in establishing compensation levels for all
employees of the Company) consider many factors, which may include, but are not
limited to, the individual’s abilities and executed performance that results in:
the advancement of corporate goals of the Company, execution of the Company’s
business strategies, contributions to positive financial results, contributions
to the Company’s overall image and reputation in the Company’s industry, and
contributions to the development of the management team and other employees. An
employee must demonstrate his or her ability to deliver results in his or her
areas of responsibility, which can include, among other things: business
development, efficient management of operations and systems, implementation of
appropriate changes and improvements to operations and systems, personnel
management, financial management, and strategic decision making. In determining
compensation levels, the Board of Directors may also consider: competitiveness
of compensation packages relative to other comparable companies, both inside and
outside of the oil and gas exploration industries, and the experience level of
each particular individual.
 
 Compensation
levels for executives and employees are generally reviewed upon the expiration
of such executive’s employment and/or consulting agreements (if any), and/or
annually, but may be reviewed more often as deemed appropriate.
 
 Compensation
Philosophy and Strategy
 
 In
addition to the “Criteria for Compensation Levels” set forth above, the Company
has a “Compensation Philosophy” for all employees of the Company (set forth
below), and a “Compensation Strategy for Key Management Personnel” (set forth
below), a substantial portion of which also applies to all employees of the
Company.
 
 Compensation
Philosophy
 
 The
Company’s compensation philosophy is as follows:
  ·
              The
      Company believes that compensation is an integral component of its overall
      business and human resource strategies. The Company’s compensation plans
      will strive to promote the hiring and retention of personnel necessary to
      execute the Company’s business strategies and achieve its business
      objectives.
 
 ·
              The
      Company’s compensation plans will be strategy-focused, competitive, and
      recognize and reward individual and group contributions and results. The
      Company’s compensation plans will strive to promote an alignment of the
      interests of employees with the interests of the shareholders by having a
      portion of compensation based on financial results and actions that will
      generate future shareholder value.
 -48-
 ·
              In
      order to reward financial performance over time, the Company’s
      compensation programs generally will consist of: base compensation, and
      may also consist of short-term variable incentives and long-term variable
      incentives, as appropriate.
 
 ·
              The
      Company’s compensation plans will be administered consistently and fairly
      to promote equal opportunities for the Company’s
  employees.
 
 Compensation
Strategy for Key Management Personnel
 
 The
Company’s compensation strategy for its key management personnel is as
follows:
 
 ·
              Total
      compensation may include base salary and short-term and long-term variable
      incentives based on annual and long term performance, and long-term
      variable incentives, in each case, where
      appropriate.
 
 ·
              Compensation
      will be comparable to general and industry-specific compensation
      practices.
 
 ·
              Generally,
      base compensation, and targeted short and long-term variable compensation,
      if any, will be established within the range of compensation of similarly
      situated companies in the Company’s industry. The Company’s organization
      size and complexity will be taken into account, and therefore similarly
      situated companies include companies of similar size and complexity
      whether or not such companies are in the Company’s industry or
      not.
 
 ·
              When
      determining compensation for officers, managers and consultants, the
      Company takes into account the employee’s (and/or consultant’s) knowledge,
      experience, past employment history and connections in the industry,
      including industry specific knowledge and experience, to the extent such
      knowledge and experience contributes to the Company’s ability to achieve
      its business objectives.
 
 ·
              The
      Company reserves the right to adjust annual base salaries of employees
      and/or to award performance based bonuses if individual performance is at
      or above pre-established performance
  expectations.
 -49-
 ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 
 The
following table provides the names and addresses of each person known to own
directly or beneficially more than 5% of our outstanding common stock (as
determined in accordance with Rule 13d-3 under the Exchange Act) as of March 31,
2009, and by the officers and directors, individually and as a group. Except as
otherwise indicated, all shares are owned directly.
 
 Name
      and Address ofBeneficial
      Owner
                    
                    Shares
                    
                    Percent(1)Edward
      R. DeStefano*
                    
                    37,610,700
                    
                    67.1%Chief
      Executive Officer, President, Secretary, Treasurer and
      Director1770
      St. James Place, Suite 380Houston,
      Texas 77056Ken
      Cleveland
                    
                    0
                    
                    0%Chief
      Financial Officer1770
      St. James Place, Suite 380
                      Houston,
      Texas 77056Laurus
      Master Fund, Ltd.(2)(4)
                    
                    3,675,000
                    (3)
                    6.6%P.O.
      Box 309GT
      Ugland HouseGeorge
      TownSouth
      Church StreetGrand
      Cayman,Cayman
      IslandsAll
      of the officers and
                    
                    37,610,700
                    
                    67.1%directors
      as a group (2 persons)
  * Mr.
DeStefano received 37,500,000 shares of our restricted common stock in December
2004, pursuant to a share exchange, whereby he exchanged 100% of the outstanding
shares of Century, for 37,500,000 shares of our common stock. He purchased 4,800
shares of common stock during the fourth quarter of 2006 and 105,900 shares
during fiscal 2007, in market transactions at the then value of our common
stock.
 
 (1) Using
56,010,612 shares of common stock issued and outstanding as of April 15,
2009.
 
 (2) The
beneficial owner of Laurus Master Fund, Ltd. is Laurus Capital Management, LLC,
a Delaware limited liability company, who manages Laurus Master Fund, Ltd.
Eugene Grin and David Grin are the sole members of Laurus Capital Management,
LLC.
 
 (3)
Laurus currently holds 3,675,000 shares of our common stock and has
contractually agreed not to hold more than 9.99% of our issued and outstanding
common stock, unless an event of default occurs or upon providing 75 days prior
notice to us. If an event of default occurs or upon 75 days prior notice to us,
subject to Laurus' pledge under the December Option, not to exercise any part of
the December Option, until (a) the payment in full of all obligations of the
Company to Laurus under the Convertible Note and (b) the exercise of the
Warrant, unless an event of default occurs and is continuing, Laurus is able to
hold an aggregate of 46,735,789 shares of our common stock assuming full
conversion of the Note, and exercise of the Warrant, Option and December Option.
The shares of common stock issuable in connection with the conversion of the
Note (of which Laurus has transferred the rights to certain entities controlled
by Laurus), the exercise of the Warrant and exercise of the Option and the
December Option represent an aggregate of 43,060,789 shares, including
24,193,548 shares representing the full conversion of the Note, 7,258,065 shares
representing full exercise of the Warrant, 6,547,784 shares representing the
remaining amount of the Option, and 5,061,392 shares representing full exercise
of the December Option (which is subject to the limitation above), defined and
described in greater detail above under "Description of Business", and not
including any shares of our common stock for conversion of interest on the Note,
or any changes in the Fixed Conversion Price, plus the 3,675,000 shares of
common stock which Laurus already holds. Assuming full conversion of the Note
and exercise of the Warrant, Option and December Option upon an event of default
or upon 75 days prior notice to us (subject to the limitation of exercise of the
December Option, described above), Laurus could hold 46,735,789 shares of our
common stock, which would represent approximately 45.5% of our then outstanding
common stock (assuming the issuance of no additional shares of common stock
other than in connection with the conversion of the Note, Warrant and
Option).
 
 (4) In
June 2006, Laurus provided us notice of their transfer of their rights
underlying the Warrant, Option, December Option and Gulf Coast Warrant to an
entity controlled by Laurus, Promethean Industries, Inc. ("Promethean"). For the
purposes of the table above, all references to Laurus include the ownership of
Promethean.
 -50-
 ITEM 13. CERTAIN
RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
 
 On August
1, 2007, with an effective date of January 1, 2007, Century Assets Corporation
(“Century Assets”), which is owned by Edward R. DeStefano, our Chief Executive
Officer and Director, entered into a Surface Lease with Century Resources, Inc.
(“Century” and the “Surface Lease”).  Pursuant to the Surface Lease,
Century Assets leased us the use of five acres of land, next to our Sargent
South Gas Field in Matagorda County, Texas for storage of equipment, pipe and
materials used in the operation of the gas field. The term of the Lease is for
one year, and shall automatically renew thereafter unless terminated by either
party with thirty (30) days prior written notice.  We agreed to pay
Century Assets $1,000 per month for use of the Lease acreage.  In
addition to the use of the leased acreage for storage, Century, our wholly owned
subsidiary agreed to operate a pipeline on the acreage, and to pay all costs
associated with such operations, and to indemnify Century Assets for all
liability in connection with the operation of such pipeline.
 
 In
November 2007, Mr. DeStefano received a one-time bonus payment in the amount of
$20,000, in connection with Gulf Coast Oil Corporation’s November 2007 closing
of the $7,100,000 in financing for the drilling of up to fourteen wells on its
properties and the New Century closing of the $5,300,000 in financing described
above.
 
 On or about December 3, 2007, we
entered into a Second Amended Executive Employment Agreement with our Chief
Executive Officer and President, Edward R. DeStefano, which amended the terms of
the Amended Executive Employment Agreement entered into with Mr. DeStefano which
was originally effective
June 1, 2006. The Second Amended Executive Employment Agreement is described in
greater detail above under "Directors, Executive Officers, Promoters and Control
Persons".
 
 The
Company named Ken Cleveland as Acting Chief Financial Officer effective January
31, 2008.  Mr. Cleveland provided his services to the Company as a
consultant with Agility Financial Partners, LLC until August 1, 2008 when he
became an employee of the Company pursuant to the Ken Cleveland Employment
Agreement (the “Original Agreement”).  On or about February 1, 2009,
the Company and Mr. Cleveland entered into the Amended Ken Cleveland Employment
Agreement (the “Amended Employment Agreement”). Pursuant to this Amended
Employment Agreement, Mr. Cleveland will receive a base salary of $85 per hour
for all hours worked for the Company.  The Amended Employment
Agreement is described in greater detail above under “Amended Employment
Agreement with Ken Cleveland.”
 
 ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
 
 AUDIT
FEES
 
 The
aggregate fees billed by Malone & Bailey, P.C. (“Malone”) for professional
services rendered for the audit of our annual consolidated financial statements
during the fiscal year ended December 31, 2008, and for the reviews of the
consolidated financial statements included in our quarterly reports on Form 10-Q
for that fiscal year were $80,311. The aggregate fees billed by PMB Helin
Donovan, LLP (“PMB”) for the reviews of the consolidated financial statements
included in our quarterly reports on Form 10-Q for the fiscal year ended
December 31, 2008 were $18,720. The aggregate fees billed by PMB for
professional services rendered for the audit of our annual consolidated
financial statements during the fiscal year ended December 31, 2007, and
for the reviews of the consolidated financial statements included in our
quarterly reports on Form 10-QSB for that fiscal year were
$103,300.
 
 AUDIT
RELATED FEES
 
 Malone
and PMB did not bill us for any professional services that were reasonably
related to the performance of the audit or review of financial statements for
either the fiscal year ended December 31, 2008 or 2007 that are not
included under Audit Fees above.
  TAX
FEES
 
 The
aggregate fees billed in each of the last two fiscal years ended December 31,
2008 and December 31, 2007, by the principal accountant for tax compliance was
$0 and $10,330, respectively.
 
 ALL OTHER
FEES
 
 Malone
and PMB did not perform any services for us or charge any fees other than the
services described above for either of the fiscal years ended December 31,
2008 or December 31, 2007.
 -51-
 ITEM 15. EXHIBITS, FINANCIAL
STATEMENT SCHEDULES
 
 (a)
EXHIBITS
  
 Exhibit
      No.
              Description
      of Exhibit10.1(1)
              Securities
      Purchase Agreement2.1(1)
              Agreement
      and Plan of Reorganization (without exhibits)3.1(2)
              Articles
      of Incorporation3.2(2)
              Articles
      of Amendment to Articles of Incorporation3.3(3)
              Articles
      of Amendment to Articles of Incorporation3.4(3)
              Articles
      of Amendment to Articles of Incorporation3.5(3)
              Certificate
      of Correction filed with the Colorado Secretary of
State3.5(25)
              Articles
      of Amendment to Articles of Incorporation filed with the Colorado
      Secretary of State3.6(2)
              Bylaws10.1(4)
              Purchase
      and Sale & Exploration Agreement with Aquatic10.2(4)
              First
      Amendment of Purchase and Sale & Exploration Agreement with
      Aquatic
 
 10.3(5)
                  Development
      Agreement with Strong (with all confidential information
      removed)10.4(6)
                  Settlement
      Agreement and Mutual Release with Core Concepts, LLC10.5(7)
                  Securities
      Purchase Agreement between Laurus Master Fund, Ltd. and New Century Energy
      Corp.10.6(7)
                  Secured
      Convertible Term Note10.7(8)
                  Amended
      and Restated Secured Convertible Note10.8(7)
                  Common
      Stock Purchase Warrant10.9(7)
                  Master
      Security Agreement10.10(7)
                  Registration
      Rights Agreement
 -52-
 10.11(7)
              Option
      Agreement10.12(7)
              Purchase
      and Sale Agreement (June 2005)10.13(9)
              Finder's
      Warrant10.14(10)
              Purchase
      and Sale Agreement (September 2005)10.15(11)
              September
      2005 Securities Purchase Agreement10.16(12)
              Amended
      and Restated Secured Term Note10.17(11)
              September
      2005 Reaffirmation and Ratification Agreement10.18(11)
              Mortgage,
      Deed of Trust, Security Agreement, Financing Statement and Assignment of
      Production in Wharton County, Texas10.19(11)
              Mortgage,
      Deed of Trust, Security Agreement, Financing Statement and Assignment of
      Production in McMullen County, Texas10.20(11)
              Mortgage,
      Deed of Trust, Security Agreement Financing Statement and Assignment of
      Production in Matagorda County, Texas10.21(13)
              Purchase
      and Sale Agreement dated November 1, 2005 and exhibits10.22(13)
              Amendment
      to Purchase and Sale Agreement dated November 2, 200510.23(13)
              Amendment
      Agreement to June 2005 Securities Purchase
  Agreement
 
 10.24(14)
                  Edward
      R. DeStefano Employment Agreement10.25(31)
                  Edward
      R. DeStefano Amended Employment Agreement10.26(15)
                  Second
      Amendment Agreement with Laurus10.27(16)
                  Third
      Amendment Agreement10.28(16)
                  December
      Option10.29(16)
                  Settlement
      Agreement with William F. Mason10.30(17)
                  Asset
      Purchase Agreement10.31(17)
                  Securities
      Purchase Agreement (Gulf Coast and Laurus)10.32(17)
                  Secured
      Term Note (Gulf Coast)10.33(17)
                  Common
      Stock Purchase Warrant (Gulf
Coast)
 -53-
 10.34(17)
              Guaranty
      (New Century and Century)10.35(17)
              Guaranty
      (Gulf Coast)10.36(17)
              Stock
      Pledge Agreement (Gulf Coast)10.37(17)
              Mortgage,
      Deed of Trust, Security Agreement, Financing Statement and Assignment of
      Production, filed in Atascosa County and McMullen County,
      Texas10.38(17)
              Amended
      and Restated Mortgage, Deed of Trust, Security Agreement, Financing
      Statement and Assignment of Production, filed in Matagorda County,
      McMullen County and Wharton County, Texas10.39(17)
              Master
      Security Agreement10.40(17)
              Collateral
      Assignment10.41(17)
              Letter
      Agreement regarding Shareholder Agreement10.42(17)
              Reaffirmation,
      Ratification and Amendment Agreement10.43(17)
              Fourth
      Amendment Agreement with Laurus10.44(26)
              Fifth
      Amendment Agreement with Laurus
  10.45(27)
                June
      2006 Asset Purchase Agreement10.46(27)
                June
      2006 Securities Purchase Agreement (Gulf Coast and
  Laurus)10.47(27)
                June
      2006 Secured Term Note (Gulf Coast)10.48(27)
                June
      2006 Amended and Restated Term Note (Gulf Coast)10.49(27)
                June
      2006 Amended and Restated Mortgage, Deed of Trust, Security Agreement,
      Financing Statement and Assignment of Production, filed in Matagorda
      County, McMullen County and Wharton County, Texas10.50(27)
                Collateral
      Assignment10.51(27)
                Reaffirmation
      and Ratification Agreement (Gulf Coast)10.52(27)
                Reaffirmation
      and Ratification Agreement (New Century and Century)10.53(29)
                Sixth
      Amendment Agreement10.54(30)
                Seventh
      Amendment Agreement10.55(32)
                Eighth
      Amendment Agreement
 -54-
 10.55(33)
              Escrow
      Agreement in connection with the June 30, 2005 closing with
      Laurus10.56(33)
              Funds
      Disbursement Letter in connection with the June 30, 2005 closing with
      Laurus10.57(34)
              Securities
      Purchase Agreement - December 200610.58(34)
              Second
      Amended and Restated Secured Term Note10.59(34)
              Second
      Amended and Restated Secured Term Convertible Note10.60(34)
              Secured
      Term Note - December 2006 10.61(34) Reaffirmation, Ratification and
      Amendment Agreement - December 200610.62(34)
              Amended
      Guaranty (Gulf Coast Oil Corporation) - December 200610.63(34)
              Master
      Security Agreement - December 200610.64(34)
              Funds
      Disbursement Letter - December 2006
  10.65(34)
              Escrow
      Agreement - December 200610.66(35)
              Agreement
      to Rescind the Eighth Amendment10.67(37)
              1
      st
      Amendment to Energy Capital Solutions Warrant10.68(38)
              Third
      Amended and Restated Term Note10.69(39)
              Agreement
      with Century Asset Corporation10.70(40))
              November
      2007 Securities Purchase Agreement10.71(40)
              November
      2007 Secured Term Note (Gulf Coast and Valens U.S.)  (With
      Confidential Information Removed)10.72(40)
              November
      2007 Secured Term Note (Gulf Coast and Valens Offshore) (With Confidential
      Information Removed)10.73(40)
              Guaranty
      (in favor of Purchasers)10.74(40)
              Master
      Security Agreement (With Confidential Information
  Removed)10.75(40)
              Amended
      and Restated Common Stock Purchase Warrant10.76(40)
              Net
      Interest Agreement (With Confidential Information
  Removed)10.77(40)
              Conveyance
      of Net Profits Overriding Royalty Interest (With Confidential Information
      Removed)
 -55-
 10.78(41)
                November
      2007 Securities Purchase Agreement10.79(41)
                November
      2007 Secured Term Note (New Century and Valens U.S.)10.80(41)
                November
      2007 Secured Term Note (New Century and Valens
Offshore)10.81(41)
                Consent
      Letter Agreement10.82(41)
                Master
      Security Agreement10.83(41)
                Net
      Interest Agreement10.84(41)
                Conveyance
      of Net Profits Overriding Royalty Interest10.85(41)
                Amended
      and Restated Mortgage10.86(41)
                Second
      Amended Executive Employment Agreement with Edward R.
      DeStefano10.87(42)
                Letter
      Agreement with Laurus Amending the Third Amended and Restated Term
      Note10.88(44)
                Draft
      of Asset Purchase Agreement10.89*
                Employment
      Agreement with Ken Cleveland10.90*
                Amended
      Employment Agreement with Ken Cleveland16.1(18)
                Letter
      from Randolph Scott and Company, Certified Public
    Accountants16.2(19)
                Letter
      from Malone and Bailey, PC, Certified Public
Accountants16.3(36)
                Letter
      from Helin, Donovan, Trubee & Wilkinson, LLP21.1*
                Subsidiaries31.1*
                Certificate
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2*
                Certificate
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1*
                Certificate
      of the Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2*
                Certificate
      of the Chief Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
 
 99.1(20)
              Glossary
      of Oil and Gas Terms
 
 99.2(9)
              R.A.
      Lenser and Associates, Inc. Summary Letter of Reserves and Future
      Production of New Century Energy Corp.'s Oil and Gas Properties as of
      January 1, 2005
 -56-
 99.3(31)
              R.A.
      Lenser and Associates, Inc. Summary Letter of Reserves and Future
      Production of New Century Energy Corp.'s Oil and Gas Properties as of
      January 1, 200699.4(21)
              Financial
      Statements of the Company's first acquisition in the Lindholm-Hanson Gas
      Unit99.5(21)
              Pro
      Forma Financial Information of the Company's first acquisition in the
      Lindholm-Hanson Gas Unit99.6(22)
              Financial
      Statements of the Company's second acquisition in the Lindholm-Hanson Gas
      Unit99.7(22)
              Pro
      Forma Financial Information of the Company's second acquisition in the
      Lindholm-Hanson Gas Unit
  99.8(23)
              Financial
      Statements of the Company's third acquisition in the Lindholm-Hanson Gas
      Unit99.9(23)
              Pro
      Forma Financial Information of the Company's third acquisition in the
      Lindholm-Hanson Gas Unit99.10(24)
              Financial
      Statements of Gulf Coast's 1st acquisition in the Mustang Creek
      Property99.11(24)
              Pro
      Forma Financial Information of Gulf Coast's 1st acquisition in the Mustang
      Creek Property99.10(28)
              Financial
      Statements of Gulf Coast's 2nd acquisition in the Mustang Creek
      Property99.11(28)
              Pro
      Forma Financial Information of Gulf Coast's 2nd acquisition in the Mustang
      Creek Property
  99.12(43)
              New
      Century Energy Corp. 2007 Stock Incentive Plan99.13(44)
              First
      Amended Joint Plan Of Reorganization Under Chapter 11, Title 11 of The
      United States Code
  * Filed
herewith.
 
 (1) Filed
as exhibit 99 to the Form 8-K filed October 20, 2004, and incorporated by
reference herein.
 
 (2) Filed
as exhibits 2.1, 2.2, and 2.3 to our Form 10-SB, filed January 7, 2000, and
incorporated herein by reference.
 
 (3) Filed
as exhibits 3.1, 3.2, and 3.3 to our quarterly report for the period ended
September 30, 2004, and incorporated herein by reference.
 
 (4) Filed
as exhibits to our 10-KSB filed on March 31, 2005, and incorporated herein by
reference.
 
 (5) Filed
as exhibit 10.4 to our Form 10-QSB filed on May 23, 2005, and incorporated
herein by reference.
 
 (6) Filed
as exhibit 10.1 to our Report on Form 8-K, filed on June 16, 2005, and
incorporated herein by reference.
 -57-
 (7) Filed
as exhibits to our Report on Form 8-K, filed on July 8, 2005, and incorporated
herein by reference.
 
 (8) Filed
as exhibits to the Company's Report on Form 8-K filed with the Commission on
January 4, 2006, and incorporated herein by reference.
 
 (9) Filed
as exhibits to our Form SB-2 Registration Statement filed on August 5, 2005, and
incorporated herein by reference.
 
 (10)
Filed as exhibit 10.1 to our Report on Form 8-K filed on September 6, 2005, and
incorporated herein by reference.
 
 (11)
Filed as exhibits to our Report on Form 8-K filed on September 22, 2005 and
incorporated herein by reference.
 
 (12)
Filed as an exhibit to our Form 8-K filed on April 4, 2006, and incorporated
herein by reference.
 
 (13)
Filed as exhibits to our Report on Form 8-K filed on November 7, 2005 and
incorporated herein by reference.
 
 (14)
Filed as exhibits to the Company's Report on Form 10-QSB filed with the
Commission on December 20, 2005, and incorporated herein by
reference.
 
 (15)
Filed as exhibit 10.1 to the Company's Report on Form 8-K filed with the
Commission on December 19, 2005, and incorporated herein by
reference.
 
 (16)
Filed as exhibits to the Company's Report on Form 8-K filed with the Commission
on January 4, 2006, and incorporated herein by reference.
 
 (17)
Filed as exhibits to the Company's Report on Form 8-K filed with the Commission
on May 3, 2006, and incorporated herein by reference.
 
 (18)
Filed as exhibit 16.1 to our Form 8-K filed December 1, 2004, and incorporated
herein by reference.
 
 (19)
Filed as exhibit 16.2 to our Form 8-K filed on April 14, 2005, and incorporated
herein by reference.
 
 (20)
Filed as an exhibit to the Company's Form 10-KSB filed with the Commission on
March 31, 2005, and incorporated herein by reference.
 
 (21)
Filed as exhibits to the Company's amended Report on Form 8-K/A, filed with the
Commission on May 8, 2006, and incorporated herein by reference.
 
 (22)
Filed as exhibits to the Company's amended Report on Form 8-K/A, filed with the
Commission on May 8, 2006, and incorporated herein by reference.
 
 (23)
Filed as exhibits to the Company's amended Report on Form 8-K/A, filed with the
Commission on May 8, 2006, and incorporated herein by reference.
 
 (24)
Filed as exhibits to the Company's amended Report on Form 8-K/A, filed with the
Commission on July 13, 2006, and incorporated herein by reference.
  (25)
Filed as an exhibit to our Report on Form 8-K, filed with the Commission on June
14, 2006, and incorporated herein by reference.
 
 (26)
Filed as exhibit 10.1 to our Report on Form 8-K, filed with the Commission on
June 23, 2006, and incorporated herein by reference.
 
 (27)
Filed as exhibits to our Report on Form 8-K, filed with the Commission on July
7, 2006, and incorporated herein by reference.
 
 (28)
Filed as exhibits to the Company's amended Report on Form 8-K/A, filed with the
Commission on September 13, 2006, and incorporated herein by
reference.
 
 (29)
Filed as an exhibit to the Company's Form 8-K, filed with the Commission on
September 13, 2006, and incorporated herein by reference.
 
 (30)
Filed as an exhibit to the Company's Form 8-K, filed with the Commission on
October 26, 2006, and incorporated herein by reference.
 -58-
 (31)
Filed as an exhibit to the Company's Form SB-2, filed with the Commission on
July 18, 2006, and incorporated herein by reference.
 
 (32)
Filed as an exhibit to the Company's Form 8-K, filed with the Commission on
December 8, 2006, and incorporated herein by reference.
 
 (33)
Filed as exhibits to the Company's Report on Form 10-QSB, filed with the
Commission on November 16, 2006, and incorporated herein by
reference.
 
 (34)
Filed as exhibits to the Company's Report on Form 8-K, filed with the Commission
on January 10, 2007, and incorporated herein by reference.
 
 (35)
Filed as an exhibit to the Company's Report on Form 8-K, filed with the
Commission on January 10, 2007, and incorporated herein by
reference.
 
 (36)
Filed as an exhibit to the Company’s Report on Form 8-K, filed with the
Commission on January 25, 2007, and incorporated herein by
reference.
 
 (37)
Filed as an exhibit to the Company’s Report on Form 10-KSB, filed with the
Commission on April 12, 2007, and incorporated herein by reference.
 
 (38)
Filed as an exhibit to the Company’s Report on Form 8-K, filed with the
Commission on July 12, 2007, and incorporated herein by reference.
 
 (39)
Filed as exhibits to the Company's Report on Form 10-QSB, filed with the
Commission on November 16, 2007, and incorporated herein by
reference.
  (40)
Filed as an exhibit to the Company’s Report on Form 8-K, filed with the
Commission on November 27, 2007, and incorporated herein by
reference.
 
 (41)
Filed as an exhibit to the Company’s Report on Form 8-K, filed with the
Commission on December 4, 2007, and incorporated herein by
reference.
 
 (42)
Filed as an exhibit to the Company’s Report on Form 8-K, filed with the
Commission on January 23, 2008, and incorporated herein by
reference.
 
 (43)
Filed as Appendix A to the Company’s Definitive Schedule 14c filing, filed with
the Commission on September 11, 2007, and incorporated herein by
reference.
 
 (44)
Filed as an exhibit to the Company’s Report on Form 8-K, filed with the
Commission on March 20, 2009, and incorporated herein by reference.
 
 * Filed
herein
 -59-
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
  NEW
      CENTURY ENERGY CORP.Dated: 
      April   27, 2009
                By:
                /s/  Edward R.
    DeStefanoEdward
      R. DeStefano
                  Chief
      Executive Officer
                  (Principal
      Executive Officer)
 
 
 In
accordance with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
 
 
 NAME
                    
                    TITLE
                    
                    DATE/s/
      Edward R. DeStefano
                      Edward
      R. DeStefano
                    
                    Chief
      Executive Officer
                      (Principal
      Executive Officer)
                    
                    April   27,
      2009Secretary,
      Treasurer and Director/s/ Ken ClevelandKen
      Cleveland
                    
                    Chief
      Financial Officer
                      (Principal
      Accounting Officer)
                    
                    April   27,
      2009
 -60-