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

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2012

                                       OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

      For the transition period from _____________ to ___________________.


                        Commission file number: 000-51425
                                    ---------

                              Rancher Energy Corp.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Nevada                                               98-0422451
          ------                                               ----------
(State or other jurisdiction                            (I.R.S. Employer Identi-
      or organization)                                       fication No.)


                           999 18th Street, Suite 2700
                                Denver, CO 80202
                    (Address of principal executive offices)

                                 (303) 629-1125
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (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 [x] No [ ]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this Chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files). Yes [x] No [ ]


Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]                     Accelerated filer          [  ]
Non-accelerated filer   [  ] (Do not check if a smaller reporting company)
Small reporting company    [x]

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

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 [x]

As of August 17, 2012,  119,316,723 shares of Rancher Energy Corp. common stock,
$.00001 par value, were outstanding.


<PAGE>

<TABLE>
<CAPTION>

                                        Table of Contents
                                 PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements
<S>                                                                                                  <C>

         Balance Sheets - June 30, 2012 (unaudited) and March 31, 2012...............................3

         Statements of Operations (Unaudited) for the Three Months Ended
           June 30, 2012 and 2011 ...................................................................4

         Statement of Changes in Stockholders' Equity for the Three Months Ended
           June 30, 2012 (unaudited).................................................................6

         Statements of Cash Flows (Unaudited) for the Three Months Ended June 30, 2012 and 2011 .....7

         Notes to Financial Statements (Unaudited)...................................................8

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations......15

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.................................23

Item 4.  Controls and Procedures....................................................................23


                                                     PART II - OTHER INFORMATION
Item 1.  Legal Proceedings..........................................................................24
Item 1A. Risk Factors...............................................................................25
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds................................25
Item 3.  Defaults Upon Senior Securities............................................................25
Item 4.  Mine and Safety Disclosures................................................................25
Item 5.  Other Information..........................................................................25

Item 6.  Exhibits...................................................................................25

SIGNATURES 27
</TABLE>





                                       2
<PAGE>

Item 1.   Financial Statements

<TABLE>
<CAPTION>

                              Rancher Energy Crop.
                             (Debtor-in-Possession)
                                 Balance Sheets


                                                                     June 30,         March 31,
                                                                       2012              2012
                                                                   (unaudited)        (audited)
                                                                  ---------------   ---------------
<S>                                                               <C>               <C>

                          ASSETS

Current Assets:
       Cash and cash equivalents                                     $ 3,263,133       $ 3,229,858
       Restricted cash                                                   500,641           500,641
       Accounts receivable                                                30,958            30,958
       Accounts receivable, settlement                                   525,000           525,000
       Prepaid expenses and other                                        277,645           303,104
       Current assets of discontinued operations                               -                 -
                                                                  ---------------   ---------------
           Total current assets                                        4,597,377         4,589,561
                                                                  ---------------   ---------------

Furniture and equipment, net of accumulated depreciation of $173,614
       and $164,998 respectively                                         164,068           172,684
Deposits and other assets                                                200,350           200,350
Long-term assets of discontinued operations                                    -                 -
                                                                  ---------------   ---------------
           Total other assets                                            364,418           373,034
                                                                  ---------------   ---------------

             Total assets                                            $ 4,961,795       $ 4,962,595
                                                                  ===============   ===============

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
       Accounts payable and accrued liabiliites - post petition        $ 527,641         $ 449,224
       Accounts payable, settlement                                      500,000           500,000
       Current liabilities of discontinued operations                    112,620           112,620
                                                                  ---------------   ---------------
          Total current liabilities, not subject to compromise         1,140,261         1,061,844

Liabilities subject to compromise                                      1,259,827         1,259,827
                                                                  ---------------   ---------------

             Total liabilities                                       $ 2,400,088       $ 2,321,671
                                                                  ---------------   ---------------

Stockholders'  Equity
       Common stock, $0.00001 par value; 275,000,000 shares
        authorized, 119,316,723 shares issued and outstanding
        at June 30, 2012 and March 31, 2012, respectively                  1,194             1,194
       Additional paid-in capital                                     93,193,008        93,193,008
       Accumulated deficit                                           (90,632,495)      (90,553,278)
                                                                  ---------------   ---------------
          Total stockholders' equity                                   2,561,707         2,640,924
                                                                  ---------------   ---------------

             Total liabilities and stockholders' equity             $ 4,961,795        $ 4,962,595
                                                                  ===============   ===============


See the notes to these unaudited financial statements.
</TABLE>


                                       3
<PAGE>

<TABLE>
<CAPTION>

                                      Rancher Energy Corp.
                                     (Debtor-in-Possession)
                                    Statements of Operations
                                           (Unaudited)

                                                                                       For the Three Months Ended
                                                                                                   June 30,
                                                                                     2012                     2011
                                                                             ----------------------   ----------------------
<S>                                                                          <C>                      <C>

Revenue:                                                                                       $ -                      $ -
                                                                             ----------------------   ----------------------

Operating expenses:
      General and administrative expenses                                                  104,887                  222,814
      Depreciaiton and amortization                                                         26,286                   11,488
                                                                             ----------------------   ----------------------
        Total operating expenses                                                           131,173                  234,302
                                                                             ----------------------   ----------------------

      Loss from operations                                                                (131,173)                (234,302)
                                                                             ----------------------   ----------------------
Other income (expense):
      Interest expense and financing costs                                                  (6,064)                  (5,934)
      Interest and other income                                                             88,396                  100,485
                                                                             ----------------------   ----------------------
        Total other income                                                                  82,332                   94,551
                                                                             ----------------------   ----------------------

        Loss before reorganization items and discontinued operations                       (48,841)                (139,751)

Reorganization items:
      Professional and legal fees                                                          (30,376)                 (97,596)
                                                                             ----------------------   ----------------------
        Total reorganization items                                                         (30,376)                 (97,596)
                                                                             ----------------------   ----------------------

        Loss from continuing operations                                                    (79,217)                (237,347)
                                                                             ----------------------   ----------------------
Discontinued operations:
      Loss from discontinued operations                                                          -                   (6,323)
      Gain on sale of discontinued operations                                                    -                        -
                                                                             ----------------------   ----------------------
        Total discontinued operations                                                            -                   (6,323)
                                                                             ----------------------   ----------------------

         Net loss                                                                        $ (79,217)              $ (243,670)
                                                                             ======================   ======================

Net loss per share from continuing operations                                               $ 0.00*                  $ 0.00*
                                                                             ======================   ======================
Net income (loss) per share from discontinued operations                                    $ 0.00*                  $ 0.00*
                                                                             ======================   ======================
Basic and diluted net loss per share                                                        $ 0.00*                  $ 0.00*
                                                                             ======================   ======================

Basic and diluted weighted average shares outstanding                                  119,316,723              119,316,723
                                                                             ======================   ======================

* Less lan $0.01 per share.

See the notes to these unaudited financial statements.
</TABLE>


                                       4
<PAGE>

<TABLE>
<CAPTION>

                                      Rancher Energy Corp.
                                     (Debtor-in-Possession)
                                    Statements of Cash Flows
                                           (Unaudited)



                                                                                   For The Three Months Ended
                                                                                           June 30,
                                                                                    2012                2011
                                                                               ----------------    ----------------
<S>                                                                            <C>                 <C>

Cash flows from (used in) operating activities:
         Net Loss                                                                    $ (79,217)         $ (243,670)
Adjustments to reconcile net loss from continuing operations to
         cash used from operating activities, before reorganization items
         Loss (income) from discontinued operations                                          -               6,323
         Reoganization items, net                                                       30,376              97,596
         Depreciation and amortization                                                  26,286              11,488
Changes in operating assets and liabilities:
         Accounts receivable and prepaid expenses                                       62,697              (3,610)
         Accounts payable and accrued liabiliites                                      (78,417)           (329,980)
                                                                               ----------------    ----------------

           Net cash used for operating activities, before reorganization items         (38,275)           (461,853)
                                                                               ----------------    ----------------

Payments for reorganization items -
         professional fees for services rendered in connection with
           the Chapter 11 proceeding                                                         -            (262,057)
                                                                               ----------------    ----------------

           Net cash used for operating activities                                      (38,275)           (723,910)
                                                                               ----------------    ----------------
Cash flows from (used in) investing activites

Cash flows from (used in) financing activities:

Discontinued operations:

         Cash flows from (used in) discontinued operating activities:                        -             159,913
         Cash flows from (used in) discontinued investing activities:                        -                   -
         Cash flows from (used in) discontinued financing activities:                        -                   -
                                                                               ----------------    ----------------

           Net cash provided by (used for) discontinued operations                           -             159,913
                                                                               ----------------    ----------------

Decrease in cash and cash equivalents                                                  (38,275)           (563,997)

Cash and cash equivalents, beginning of period                                       3,229,858           3,883,228
                                                                               ----------------    ----------------

Cash and cash equivalents, end of period                                           $ 3,263,133         $ 3,319,231
                                                                               ================    ================


See the notes to these unauditedfinancial statements.
</TABLE>


                                       5
<PAGE>

<TABLE>
<CAPTION>

                                              Rancher Energy Corp.
                                             (Debtor-in-Possession)
                                  Statement of Changes in Stockholders' Equity
                                                   (Unaudited)

                                                                         Additional
                                                                           paid-in          Accumulated
                                        Shares            Amount           Capital           Deficit           Total
                                   ------------------   ------------   ----------------   --------------   --------------
<S>                                <C>                  <C>            <C>                <C>              <C>

Balance March 31, 2012                   119,316,723        $ 1,194       $ 93,193,008     $(90,553,278)      $2,640,924

Net loss                                           -              -                  -          (79,217)         (79,217)
                                   ------------------   ------------   ----------------   --------------   --------------
Balance - June 30, 2012                  119,316,723        $ 1,194       $ 93,193,008     $(90,632,495)      $2,561,707
                                   ==================   ============   ================   ==============   ==============

See the Notes to these Financial Statements.
</TABLE>























                                       6
<PAGE>

                              Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

Note 1 - Business Organization

Organization
------------

         Rancher  Energy Corp.  ("Rancher  Energy" or the  "Company"),  formerly
known as Metalex  Resources,  Inc.  ("Metalex"),  was  incorporated in Nevada on
February 4, 2004. The Company acquires,  explores for, develops and produces oil
and natural gas,  concentrating  on applying  secondary  and  tertiary  recovery
technology to older, historically productive fields in North America.

         Metalex  was  formed  for  the  purpose  of  acquiring,  exploring  and
developing  mining  properties.  On April 18, 2006, the  stockholders of Metalex
voted to change its name to Rancher  Energy Corp.  and announced that it changed
its business plan and focus from mining to oil and gas.

Bankruptcy Filing

         On October 28,  2009,  the  Company  filed a  voluntary  petition  (the
"petition")  for relief in the  United  States  Bankruptcy  Court,  District  of
Colorado  (the  "Bankruptcy  Court")  under  Chapter  11 of Title 11 of the U.S.
Bankruptcy Code (the  "Bankruptcy  Code").  The Company will continue to operate
its business as "debtor-in-possession"  under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the Code and orders of
the Bankruptcy Court. See Note 2 "Proceedings Under Chapter 11 of the Bankruptcy
Code" for details regarding the bankruptcy filing and the Chapter 11 case.

     The  accompanying  financial  statements have been prepared on the basis of
accounting  principles  applicable to a going concern,  which  contemplates  the
realization of assets and  extinguishment of liabilities in the normal course of
business.  However,  the petition raises  substantial  doubt about the Company's
ability to remain a going concern. The Company's continuation as a going concern
may  be  contingent  upon,  among  other  things,  its  ability  (i)  to  reduce
administrative,  operating  and  interest  costs  and  liabilities  through  the
bankruptcy process; (ii) to generate sufficient cash flow from operations; (iii)
to obtain  confirmation of a plan of  reorganization  under the Bankruptcy Code;
and (iv) to obtain financing to facilitate an exit from bankruptcy.  The Company
is currently evaluating various courses of action to address the operational and
liquidity  issues  it is  facing.  There can be no  assurance  that any of these
efforts will be successful. The accompanying financial statements do not include
any  adjustments  that might  result  should we be unable to continue as a going
concern. In the event the Company's restructuring  activities are not successful
and it is required  to  liquidate,  additional  significant  adjustments  in the
carrying value of assets and liabilities, the revenues and expenses reported and
the balance sheet classifications used may be necessary.

         Financial   Accounting  Standards  Board  (FASB)  Accounting  Standards
Codification (ASC) 852 "Financial Reporting During Reorganization  Proceedings,"
which is  applicable to companies in Chapter 11,  generally  does not change the
manner in which financial statements are prepared. However, it does require that
the financial  statements  for periods  subsequent to the filing of a Chapter 11
case distinguish  transactions and events that are directly  associated with the
reorganization from the ongoing operations of the business.  Revenues, expenses,
realized  gains and  losses,  and  provisions  for losses  that can be  directly
associated with the  reorganization  and  restructuring  of the business must be
reported separately as reorganization items in the statements of operations. The
balance sheet must  distinguish  Prepetition  liabilities  subject to compromise
from both those  Prepetition  liabilities that are not subject to compromise and
from  post-petition  liabilities.  Liabilities that may be affected by a plan of
reorganization  must be reported at the amounts expected to be allowed,  even if
they  may  settled  for  lesser   amounts.   In  addition,   cash   provided  by
reorganization  items, if any, must be disclosed  separately in the statement of
cash flows.  The Company  adopted ASC 852-10  effective  on October 28, 2010 and
will  segregate  those  items  as  outlined  above  for  all  reporting  periods
subsequent to such date.

                                       7
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

Note 2 - Summary of Significant Accounting Policies


Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the reported amounts of oil and gas reserves, assets
and liabilities,  disclosure of contingent assets and liabilities at the date of
the  financial  statements,  and the  reported  amounts of revenues and expenses
during the reporting periods.  Actual results could differ from those estimates.
Estimates of oil and gas reserve  quantities  provide the basis for calculations
of depletion,  depreciation,  and  amortization  (DD&A) and impairment,  each of
which represents a significant component of the financial statements.

Cash and Cash Equivalents
-------------------------

The Company considers all liquid investments  purchased with an initial maturity
of three  months  or less to be cash  equivalents.  Cash  and  cash  equivalents
include   demand   deposits  and  money  market  funds  carried  at  cost  which
approximates fair value. The Company maintains its cash in institutions  insured
by the Federal Deposit  Insurance  Corporation  ("FDIC").  At June 30, 2012, the
Company had $3,013,133 in cash deposits in excess of FDIC insured limits.

Restricted cash
---------------

At June 30,  2012,  the  Company  had  $500,641  of  restricted  cash  which was
classified  as a current  asset.  As of the June 30, 2012 balance  sheet date, a
payable in this  amount was  recorded as it was deemed more likely than not that
this amount  would be paid out  subsequently  under an adversary  proceeding  in
process (see Note 7).

The  restricted  cash held in an escrow account was released on July 18, 2012 as
part of an agreed upon and bankruptcy court approved settlement  agreement.  See
further  details of the ultimate  disposition of monies and other released items
as set forth in Notes 8 and 14 to this report.

Accounts Receivable
-------------------

Accounts receivable as of June 30, 2012 is composed of a royalty fee arrangement
income  under a contract  expiring at the end of 2012 and $525,000 due from Linc
Energy related to a settlement agreement among Rancher Energy,  GasRock and Linc
Energy executed on June 15, 2012. The bankruptcy court subsequently approved the
settlement agreement and the $525,000 was received by the Company as of July 18,
2012.

Oil and Gas Producing Activities
--------------------------------

The Company uses the successful efforts method of accounting for its oil and gas
properties.  Under this method of accounting, all property acquisition costs and
costs of  exploratory  and  development  wells are  capitalized  when  incurred,
pending  determination  of whether  the well has found  proved  reserves.  If an
exploratory well does not find proved  reserves,  the costs of drilling the well
are charged to expense.  Exploratory  dry hole costs are  included in cash flows
from  investing   activities  as  part  of  capital   expenditures   within  the
consolidated  statements  of cash  flows.  The  costs of  development  wells are
capitalized  whether or not proved reserves are found. Costs of unproved leases,
which may become  productive,  are reclassified to proved properties when proved
reserves are  discovered  on the  property.  Unproved oil and gas  interests are
carried  at the lower of cost or  estimated  fair  value and are not  subject to
amortization.


                                       8
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

Geological  and  geophysical  costs  and the  costs of  carrying  and  retaining
unproved properties are expensed as incurred.  DD&A of capitalized costs related
to proved oil and gas properties is calculated on a  property-by-property  basis
using the units-of-production method based upon proved reserves. The computation
of DD&A takes into  consideration  restoration,  dismantlement,  and abandonment
costs and the anticipated proceeds from salvaging equipment.

The Company  complies with ASC 932,  "Extractive  Activities - Oil and Gas". The
Company currently does not have any existing capitalized exploratory well costs,
and has therefore  determined that there are no suspended well costs that should
be impaired.

The Company reviews its long-lived assets for impairments when events or changes
in circumstances indicate that impairment may have occurred. The impairment test
for proved properties  compares the expected  undiscounted future net cash flows
on  a  property-by-property  basis  with  the  related  net  capitalized  costs,
including costs associated with asset retirement obligations, at the end of each
reporting  period.  Expected  future  cash  flows are  calculated  on all proved
reserves  using a discount  rate and price  forecasts  selected by the Company's
management.   The  discount  rate  is  a  rate  that   management   believes  is
representative  of current  market  conditions.  The price  forecast is based on
NYMEX strip pricing, adjusted for basis and quality differentials, for the first
three to five years and is held constant  thereafter.  Operating  costs are also
adjusted as deemed  appropriate  for these  estimates.  When the net capitalized
costs exceed the  undiscounted  future net revenues of a field,  the cost of the
field is reduced to fair value,  which is determined using discounted future net
revenues.  An  impairment  allowance is provided on unproved  property  when the
Company  determines  the property will not be developed or the carrying value is
not realizable. The sale of substantially of the Company's assets in March, 2011
resulted in the  Company  having no oil and gas  properties  at June 30, 2012 or
2011.

Sales of Proved and Unproved Properties
---------------------------------------

The sale of a partial interest in a proved oil and gas property is accounted for
as  normal  retirement,  and no  gain  or  loss  is  recognized  as long as this
treatment does not  significantly  affect the  units-of-production  DD&A rate. A
gain or loss is recognized  for all other sales of producing  properties  and is
reflected  in  results  of  operations.  The sale of a  partial  interest  in an
unproved  property  is  accounted  for as a  recovery  of cost when  substantial
uncertainty  exists  as to  recovery  of the  cost  applicable  to the  interest
retained. A gain on the sale is recognized to the extent the sales price exceeds
the carrying amount of the unproved  property.  A gain or loss is recognized for
all other  sales of  nonproducing  properties  and is  reflected  in  results of
operations.  See the description of the sale of all oil and gas properties as of
March 1, 2011  contained in the Item 2 of Part I of this document as a result of
the current Bankruptcy filing.

Property and Equipment
----------------------

Property and equipment,  such as office  furniture and  equipment,  and computer
hardware and software,  are recorded at cost. Costs of renewals and improvements
that  substantially  extend  the useful  lives of the  assets  are  capitalized.
Maintenance  and  repair  costs are  expensed  when  incurred.  Depreciation  is
calculated using the straight-line method over the estimated useful lives of the
assets from three to seven years.  When other  property and equipment is sold or
retired, the capitalized costs and related accumulated  depreciation are removed
from their respective accounts.

Deferred Financing Costs
------------------------

Costs incurred in connection  with the Company's debt issuances are  capitalized
and  amortized  over the term of the  debt,  which  approximates  the  effective

                                       9
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

interest method.  As of June 30, 2012 and 2011 there were no deferred  financing
costs on the balance sheet and there was no  amortization  for the six and three
months ended June 30, 2012 and 2011.

Fair Value of Financial Instruments
-----------------------------------

The  Company's  financial  instruments,  including  cash and  cash  equivalents,
accounts   receivable,   and  accounts  payable,  are  carried  at  cost,  which
approximates fair value due to the short-term maturity of these instruments.

Revenue Recognition
-------------------

The Company currently has no revenue from continuing or discontinued operations,
other than payments received for the resale of carbon dioxide under a supply and
sales agreement that is due to expire at the end of 2012.

Income Taxes
------------

The Company uses the liability method of accounting for income taxes under which
deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences of temporary  differences  between the accounting bases and the tax
bases of the  Company's  assets and  liabilities.  The  deferred  tax assets and
liabilities are computed using enacted tax rates in effect for the year in which
the temporary differences are expected to reverse.

The Company adopted the provisions of ASC 740,  "Income Taxes" on April 1, 2007.
FASB ASC 740 provides detailed guidance for the financial statement recognition,
measurement  and  disclosure  of  uncertain  tax  positions  recognized  in  the
financial   statements.   Tax  positions  must  meet  a   "more-likely-than-not"
recognition  threshold at the effective date to be recognized  upon the adoption
of FASB  ASC 740  and in  subsequent  periods.  The  adoption  of ASC 740 had an
immaterial  impact on the  Company's  financial  position  and did not result in
unrecognized  tax benefits being  recorded.  Subsequent to adoption,  there have
been  no  changes  to the  Company's  assessment  of  uncertain  tax  positions.
Accordingly,  no  corresponding  interest and penalties  have been accrued.  The
Company's  policy is to recognize  penalties  and interest,  if any,  related to
uncertain tax positions as general and administrative expense. The Company files
income tax returns in the U.S. Federal jurisdiction and various states.

Net Loss per Share
------------------

Basic net (loss) per common  share of stock is  calculated  by dividing net loss
available  to common  stockholders  by the  weighted-average  of  common  shares
outstanding during each period.

Diluted net income per common share is calculated by dividing  adjusted net loss
by the  weighted-average of common shares  outstanding,  including the effect of
other dilutive securities. The Company's potentially dilutive securities consist
of  in-the-money  outstanding  options and  warrants to purchase  the  Company's
common stock. Diluted net loss per common share does not give effect to dilutive
securities as their effect would be anti-dilutive.


                                       10
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)




The  treasury  stock  method is used to  measure  the  dilutive  impact of stock
options and warrants. The following table details the weighted-average  dilutive
and  anti-dilutive  securities  related to stock  options and  warrants  for the
periods presented:

                               For the Three Months Ended
                                            June 30,
                              -------------------------------------
                                    2012                2011
                              -----------------    ----------------

Dilutive                                   -                -

Anti-dilutive                     60,111,454       66,073,564

Stock  options and warrants  were not  considered  in the detailed  calculations
below as their effect would be anti-dilutive. The following table sets forth the
calculation of basic and diluted loss per share:

<TABLE>
<CAPTION>


                                                                       For the Three Months Ended
                                                                               June 30,
                                                             ---------------------------------------------
                                                                     2012                    2011
                                                             ---------------------   ---------------------
<S>                                                          <C>                     <C>

Net loss                                                               $ (79,217)             $ (243,670)
Basic weighted average common shares outstanding                      119,316,700             119,316,700
Basic and diluted net loss per common share                          $     (0.00)*           $     (0.00)*
                                                             ---------------------   ---------------------

* Less Lan $0.01 per share.
</TABLE>

Share-Based Payments
--------------------

The  Company  recognizes  compensation  cost  for  stock-based  awards  based on
estimated  fair value of the award and  records  compensation  expense  over the
requisite  service  period.  See Note 9 - Share-Based  Compensation  for further
discussion.

Commodity Derivatives
---------------------

The Company accounts for derivative  instruments or hedging activities under the
provisions  of ASC 815  "Derivatives  and  Hedging."  FASB ASC 815  requires the
Company to record derivative instruments at their fair value. The Company's risk
management  strategy  is to enter  into  commodity  derivatives  that set "price
floors" and "price  ceilings" for its crude oil production.  The objective is to
reduce the Company's  exposure to commodity  price risk associated with expected
crude oil production.

The Company has elected not to designate the commodity derivatives to which they
are a party as cash flow hedges, and accordingly, such contracts are recorded at
fair value on its balance  sheets and changes in such fair value are  recognized
in current earnings as income or expense as they occur.

The Company does not hold or issue  commodity  derivatives  for  speculative  or
trading  purposes.  The  Company  is  exposed  to credit  losses in the event of
nonperformance  by  the  counterparty  to  its  commodity  derivatives.   It  is
anticipated,  however,  that its counterparty  will be able to fully satisfy its
obligations  under the  commodity  derivatives  contracts.  The Company does not
obtain  collateral  or other  security  to  support  its  commodity  derivatives
contracts  subject to credit risk but does  monitor  the credit  standing of the
counterparty.  The price the Company receives for production in its three fields
is indexed to Wyoming Sweet crude oil posted  price.  The Company has not hedged
the basis  differential  between the NYMEX price and the  Wyoming  Sweet  price.

                                       11
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)


Under the terms of our Term Credit  Agreement issued in October 2007 the Company
was required hedge a portion of its expected future  production,  and it entered
into a costless collar  agreement for a portion of its anticipated  future crude
oil  production.  The  costless  collar  contains a fixed  floor price (put) and
ceiling price (call).  If the index price exceeds the call strike price or falls
below the put strike  price,  the Company  receives the fixed price and pays the
market price.  If the market price is between the call and the put strike price,
no payments are due from either party.  The table below  summarizes the terms of
the Company's costless collar:

The Company's sole derivative instrument expired during the year ended March 31,
2010, and the Company had no hedge positions after that date.

Comprehensive Income (Loss)
---------------------------

The Company does not have revenue,  expenses, gains or losses that are reflected
in equity rather than in results of  operations.  Consequently,  for all periods
presented, comprehensive loss is equal to net loss.

Major Customers
---------------

During the year ended March 31, 2012,  the  Company's  only source of income was
from a carbon dioxide  resale  contract that will expire at the end of 2012. The
Company had no oil and gas  operations  during the three  months  ended June 30,
2012 and 2011, and no customers or billings as a result.

Off-Balance Sheet Arrangements
------------------------------

As  part  of  its  ongoing  business,   the  Company  has  not  participated  in
transactions  that  generate  relationships  with  unconsolidated   entities  or
financial partnerships, such as entities often referred to as structured finance
or special purpose  entities  (SPEs),  which would have been established for the
purpose of facilitating  off-balance sheet  arrangements or other  contractually
narrow or limited  purposes.  From its incorporation in February 4, 2004 through
June 30,  2012,  the Company has not been  involved  in any  unconsolidated  SPE
transactions.

Reclassification
----------------

Certain  amounts in the 2012  financial  statements  have been  reclassified  to
conform to the 2013 financial statement presentation. Such reclassifications had
no effect on the Company's net loss.

Recent Accounting Pronouncements
--------------------------------

The Company has reviewed all recently issued, but not yet effective,  accounting
pronouncements   and  does  not  believe   the  future   adoption  of  any  such
pronouncements  may be  expected  to cause a  material  impact on its  financial
condition or the results of its operations.

Note 3 - Proceedings Under Chapter 11 of the United States Bankruptcy Code

On October  28,  2009 (the  "Petition  Date"),  the  Company  filed a  voluntary
petition for relief under Chapter 11 of the Bankruptcy  Code with the Bankruptcy
Court.  The  petition  was  filed in order  to  enable  the  Company  to  pursue
reorganization  efforts under  Chapter 11 of the  Bankruptcy  Code.  The Company
continues to operate its business as debtor-in-possession under the jurisdiction
of the Bankruptcy Court and in accordance with the applicable  provisions of the

                                       12
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)


Bankruptcy   Code  and  orders  of  the  Bankruptcy   Court.   In  general,   as
debtor-in-possession,  the Company is authorized under Chapter 11 to continue to
operate as an ongoing  business,  but may not engage in transactions  outside of
the ordinary  course of business  without the prior  approval of the  Bankruptcy
Court.

No assurance can be provided as to what values,  if any, will be ascribed in the
bankruptcy  proceedings to the Company's Prepetition  liabilities,  common stock
and other securities. Based upon the status of the Company's 2nd amended plan of
reorganization, we currently believe that it is uncertain whether holders of our
securities will receive any payment in respect of such securities.  Accordingly,
extreme  caution  should be  exercised  with  respect  to  existing  and  future
investments in any of these liabilities or securities.

Subject to certain  exceptions under the Bankruptcy Code, the Bankruptcy  Filing
automatically   enjoins,   or  stays,   the  continuation  of  any  judicial  or
administrative  proceedings or other actions against the Company or its property
to recover on,  collect or secure a claim  arising  prior to the Petition  Date.
Thus, for example,  creditor  actions to obtain  possession of property from the
Company,  or to create,  perfect or enforce any lien against the property of the
Company,  or to collect on or otherwise exercise rights or remedies with respect
to a Prepetition  claim are enjoined unless and until the Bankruptcy Court lifts
the automatic stay.

In order to  successfully  exit Chapter 11 bankruptcy,  the Company will need to
propose,  and obtain Bankruptcy Court  confirmation of, a plan of reorganization
that satisfies the requirements of the Bankruptcy Code. A plan of reorganization
would, among other things,  resolve the Debtors'  Prepetition  obligations,  set
forth the revised capital structure of the newly reorganized  entity and provide
for corporate governance subsequent to exit from bankruptcy.  In addition to the
need for Bankruptcy  Court  confirmation  and  satisfaction  of Bankruptcy  Code
requirements, a plan of reorganization must be accepted by classes of holders of
impaired claims and equity interests in order to become effective.

Under section 365 of the  Bankruptcy  Code,  the Company may assume,  assume and
assign,  or reject  executory  contracts and unexpired  leases,  including  real
property and equipment  leases,  subject to the approval of the Bankruptcy Court
and certain other conditions. Rejection constitutes a court-authorized breach of
the lease or contract in question and, subject to certain  exceptions,  relieves
the Company of its future obligations under such lease or contract but creates a
deemed Prepetition claim for damages caused by such breach or rejection. Parties
whose  contracts or leases are rejected may file claims  against the Company for
damages. The Company leased office space under a non-cancelable  operating lease
that was  scheduled to expire on July 31, 2012.  In October  2009, in connection
with the Company's bankruptcy petition the Company rejected the office lease and
relocated  its offices in April 2011.  The Company  reached  agreement  with the
building owner, to continue to occupy the office space on a month to month basis
at a  significantly  reduced rental rate and continued to accrue the full amount
of rent expense in accordance  with the original  lease.  In March 2011 an Order
was issued by the Bankruptcy  Court  specifying the claim amount to be $325,531.
The $122,927 gain, in 2011, on the difference between the amount of rent expense
accrued and the Court specified  amount is recognized as provision for executory
contracts rejected in the Statement of Operations.

The ability of the Company to continue  as a going  concern is  dependent  upon,
among other things,  (i) the ability of the Company to maintain adequate cash on
hand;  (ii)  the  ability  of  the  Company  to  obtain  confirmation  of and to
consummate a plan of  reorganization  under the Bankruptcy Code; and,  (iii) the
cost, duration and outcome of the reorganization process.  Uncertainty as to the
outcome of these factors raises substantial doubt about the Company's ability to
continue as a going concern. The Company is currently evaluating various courses
of action to  address  the  operational  issues  it is  facing.  There can be no
assurance  that  any of  these  efforts  will be  successful.  The  accompanying
financial statements do not include any adjustments that might result should the
Company be unable to continue as a going concern.

As a result of the Bankruptcy  Filing,  realization of assets and liquidation of
liabilities    are   subject   to    uncertainty.    While    operating   as   a

                                       13
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)


debtor-in-possession  under  the  protection  of  Chapter  11,  and  subject  to
Bankruptcy  Court  approval or otherwise  as  permitted in the normal  course of
business,  the Company may sell or otherwise  dispose of assets and liquidate or
settle  liabilities  for amounts  other than those  reflected  in the  condensed
financial statements.  The Company has recognized a net gain from the settlement
and  adjustment of  liabilities of $18,042 and $85,750 for the years ended March
31, 2012 and 2011, respectively.

Further,  a plan of  reorganization  could  materially  change the  amounts  and
classifications  reported in our financial statements.  Our historical financial
statements do not give effect to any adjustments to the carrying value of assets
or  amounts  of  liabilities  that  might  be  necessary  as  a  consequence  of
confirmation of a plan of reorganization.

The adverse  publicity  associated with the Bankruptcy  Filing and the resulting
uncertainty  regarding the Company's  future  prospects may hinder the Company's
ongoing  business  activities  and its ability to operate,  fund and execute its
business plan by impairing relations with property owners and potential lessees,
vendors and service providers;  negatively  impacting the ability of the Company
to attract,  retain and  compensate  key  executives and employees and to retain
employees generally;  limiting the Company's ability to obtain trade credit; and
limiting the Company's  ability to maintain and exploit existing  properties and
acquire and develop new properties.

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 shareholders of the Company are entitled to receive any
distribution or retain any property under a plan of reorganization. The ultimate
recovery,  if any, to  creditors  and  shareholders  of the Company  will not be
determined until confirmation and consummation of a plan of  reorganization.  No
assurance  can be given  as to what  values,  if any,  will be  ascribed  in the
Bankruptcy  Cases to each of these  constituencies  or what  types or amounts of
distributions,  if any, they would receive.  Accordingly, the Company urges that
extreme caution be exercised with respect to existing and future  investments in
any of the Company's liabilities and/or securities.

On October 15, 2010, the Company filed with the Court its proposed Debtor's Plan
of Reorganization and a proposed Disclosure  Statement was filed  simultaneously
with the Plan. On December 13, 2010,  the Company filed with the Court its First
Amended Proposed Plan of Reorganization and Disclosure Statement. The Disclosure
Statement must be first approved by the  Bankruptcy  Court before  creditors and
shareholders  are presented with the  opportunity to vote on the Plan.  Prior to
confirmation and approval by the Court, the Proposed Plan of  Reorganization  is
subject to amendment.

On December 15, 2010,  the Company  filed a Motion to approve  financing  from a
party not  affiliated  with its  present  lender.  The purpose of the loan is to
repay the existing  lender in full and to pay certain past due ad valorem  taxes
owed to Converse County, Wyoming.  Converse County agreed that if it was paid by
February  1, 2011,  it would  waive  penalties  and  interest  of  approximately
$93,000.  This loan  closed  in  January  2011,  see Note 6 - Short  Term  Notes
Payable.

On December 20, 2010,  the Company  filed a Motion to allow the Company to enter
into an agreement  and approve the sale of  substantially  all its assets to the
same  party  providing  the new  financing  for the price of  approximately  $20
million.  The sale  closed  effective  March 1,  2011 see Note 3 -  Discontinued
Operations.

On April 30,  2012,  the Company  filed its 2nd Amended  Plan of  Reorganization
("the Plan") and  Disclosure  Statement  for 2nd Amended Plan of  Reorganization
with the  Court.  The Plan  provides  for the  Company  to pay the claims of its
creditors  as the  assets  of the  Company  allow,  and  permits,  but  does not

                                       14
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)


obligate,  the Company to continue in the oil and gas  industry  with a focus on
the purchase on non-operating interests in oil and gas producing properties,  as
discussed  below.  The Plan has not yet been  sent for  voting  and has not been
confirmed by the Bankruptcy Court A hearing has been scheduled for September 24,
2012 to review the Plan.

Reorganization Items
--------------------

Reorganization  items represent the direct and incremental  costs related to the
Company's Chapter 11 case, such as professional  fees incurred,  net of interest
income  earned  on  accumulated  cash  during  the  Chapter  11  process.  These
restructuring  activities may result in additional charges and other adjustments
for  expected  allowed  claims  (including  claims that have been allowed by the
Court) and other  reorganization  items that could be material to the  Company's
financial position or results of operations in any given period.

Liabilities Subject to Compromise
---------------------------------

Liabilities  subject  to  compromise  at June  30,  2012 and  2011  include  the
following Prepetition liabilities:

                                               2012                 2011
                                        -------------------   ------------------
Accounts payable, trade                   $      176,726        $      176,726

Other payables and accrued liabilities           943,101               820,312

Convertible notes payable                        140,000               140,000
                                                              ------------------
                                        -------------------
                                              $1,259,827        $    1,137,038
                                        -------------------   ------------------


Note 4 - Discontinued Operations

In March  2011,  we  completed  the sale of all our oil and gas  properties  and
substantially all fixed assets for approximately $20 million  consisting of cash
of  $3,503,000,  a  receivable  of $250,000,  secured note and accrued  interest
payoff in the amount of $14,829,250,  including  purchase price  adjustments and
allowances of $1,417,750.  Significant  purchase price adjustments and allowance
included the Company  retaining  performance  bonds for properties in Wyoming of
$814,000,  asset valuation  adjustments of $130,000 and production tax allowance
of $395,000.  For the fiscal year ended March 31, 2011 we recorded a gain on the
sale of discontinued operations of $4,807,221, which was determined as follows:

Total sales price                                         $      20,000,000
Adjustments to sales price for assets retained
                                                                   (945,367)
Transaction expenses from sale of assets
                                                                   (508,195)
                                                         ---------------------
      Adjusted sales price                                        18,546,438

Summary of assets sold:
  Fixed assets, net
                                                                     126,712
  Oil and gas properties, net                                     13,630,945
  Other liabilities
                                                                     (18,440)
                                                         ---------------------
     Total basis in assets sold                                   13,739,217
                                                         ---------------------

        Gain on disposition of assets, net                $        4,807,221
                                                         ---------------------

                                       15
<PAGE>


                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)


The financial  results of our business  related to oil and gas  operations  have
been classified as  discontinued  operations in our Statements of Operations for
all period presented.  The following summarizes components of income (loss) from
the Company's  discontinued  operations for the three months ended June 30, 2012
and 2011:

<TABLE>
<CAPTION>

                                                                        2012                   2011
                                                                -------------------    -------------------
<S>                                                             <C>                    <C>

Revenue                                                         $               -      $              -
                                                                -------------------    -------------------

Operating expenses                                                              -                 2,203
                                                                -------------------    -------------------

Operating loss from discontinued operations                                     -                (2,203)

Other income (expenses) from discontinued operations, net                       -                (4,040)
                                                                -------------------    -------------------

     Net operating loss from discontinued operations                $           -      $         (6,323)
                                                                ===================    ===================
</TABLE>


The assets and liabilities  relating to the Company's  discontinued  oil and gas
operations are reflected as assets and liabilities of discontinued operations in
the  accompanying  balance  sheets.  The following  summarizes the components of
these assets and liabilities at June 30, 2012 and 2011:

<TABLE>
<CAPTION>

                                                                              June 30,
                                                                -------------------------------------
                                                                     2012                  2011
                                                                ---------------    ------------------
<S>                                                             <C>                <C>

Assets:
------
Current assets of discontinued operations -
     Accounts receivable                                         $       -         $       3,265
     Deposits and other assets                                                           471,354
                                                                ---------------    ------------------
                                                                 $       -          $    474,619
                                                                ---------------    ------------------
Other assets
     Long-term assets of discontinued operations                                               -
                                                                         -
                                                                ---------------    ------------------

          Total assets of discontinued operations                $       -          $    474,619
                                                                ---------------    ------------------
Liabilities:
-----------

Current liabilities of discontinued operations:
     Accounts payable and accrued liabilities                    $     112,620      $     39,463
                                                                ---------------    ------------------
          Total current liabilities of discontinued
          operations                                             $     112,620      $     39,463
                                                                ---------------    ------------------
</TABLE>

Oil and gas properties
----------------------

As previously  noted  throughout this document,  all oil and gas properties were
sold  in a  transaction  as of  March  1,  2011.  There  have  been  no  further
acquisitions or dispositions of oil and gas properties since that date.

                                       16
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

Impairment of Unproved Properties
---------------------------------

As of the balance sheet dates of June 30, 2012 and March 31, 2012,  there are no
proved or unproved oil and gas properties.  Therefore, there is no impairment to
consider as of these dates or the date of this report.

Note 5 - Fair Value Measurements

On April 1, 2008,  the Company  adopted ASC 820,  "Fair Value  Measurements  and
Disclosures,"  which defines fair value,  establishes a framework for using fair
value to measure  assets and  liabilities,  and expands  disclosures  about fair
value  measurements.  The  Statement  establishes a hierarchy for inputs used in
measuring fair value that  maximizes the use of observable  inputs and minimizes
the use of unobservable  inputs by requiring that the most observable  inputs be
used when available. Observable inputs are inputs that market participants would
use in pricing the asset or liability  developed  based on market data  obtained
from sources  independent  of the Company.  Unobservable  inputs are inputs that
reflect  the  Company's  assumptions  of what market  participants  would use in
pricing the asset or liability developed based on the best information available
in the  circumstances.  The  hierarchy is broken down into three levels based on
the reliability of the inputs as follows:

     o    Level 1: Quoted prices are  available in active  markets for identical
          assets or liabilities;

     o    Level 2:  Quoted  prices in active  markets  for  similar  assets  and
          liabilities that are observable for the asset or liability; or

     o    Level  3:   Unobservable   pricing  inputs  that  are  generally  less
          observable from objective sources, such as discounted cash flow models
          or valuations.

ASC 820 requires  financial assets and liabilities to be classified based on the
lowest level of input that is  significant  to the fair value  measurement.  The
Company's 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. As of June 30, 2012 and March 31, 2012, the Company had no derivative or
other financial assets or liabilities  required to be reported at fair value. In
accordance with Financial Staff Position 157-2,  the Company has not applied the
provisions of ASC 820 to its asset retirement obligations.

Note 6 - Short Term Notes Payable

On January 28, 2011 the Company  received  debtor-in-possession  financing ("DIP
Financing")  pursuant to a credit  agreement (the "DIP Credit  Agreement")  with
Linc Energy.  The DIP Credit Agreement provided loan advances up to an aggregate
of $14.7  million and was scheduled to mature on May 28, 2011 (total term of 120
days from the date of closing).  The Company  borrowed a total of  approximately
$14.0 million  under the DIP Credit  Agreement and the proceeds were used to pay
the allowed,  secured claims for certain ad valorem property taxes,  amounts due
to under Prepetition Note (defined below) and to fund $100,000 for the Company's
bankruptcy estate if no plan or reorganization is approved.

The DIP Credit Agreement specified interest at the rate of 10% per annum for the
60 days  following the date of closing and 12% per annum through loan  maturity.
Accumulated  interest  and  principal  was  due in  full  at  maturity.  The DIP
Financing lender obtained a valid and perfected first priority security interest
in and  liens on all the  collateral  including,  but not  limited  to:  (a) the
Company's  interests  in  oil  and  gas  producing   properties;   (b)  accounts
receivable;  (c) equipment;  (d) general intangibles;  (e) accounts; (f) deposit
accounts; and (g) all other real and personal property of the Company.

                                       17
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

On February 16, 2011, the Bankruptcy  Court  approved an order  authorizing  the
sale of  substantially  all of the  Company's  assets to Linc  Energy  for $20.0
million.  Effective March 1, 2011, the Company sold  substantially of its assets
to Linc Energy (see Note 4 -  Discontinued  Operations).  On March 14, 2011, all
outstanding  principal and accrued interest  totaling  $14,829,250 were paid and
the DIP Credit Agreement was cancelled.

Through  January 28,  2011,  the Company had a note  payable  (the  "Prepetition
Note")  outstanding under the terms of a Term Credit Agreement with GasRock (the
"Prepetition Lender"). The original principal balance of $12,240,000 outstanding
under the  Prepetition  Note was  initially due and payable on October 31, 2008,
with interest  accruing at a rate equal to the greater of (a) 12% per annum; and
(b) the one-month LIBOR rate plus 6% per annum. The Prepetition Note was amended
on October 22, 2008 (the "First  Amendment"),  to extend the maturity  date from
October 31, 2008 to April 30, 2009. In  consideration of the six month extension
and other  terms  included  in First  Amendment,  the  Company  made a principal
payment on the Prepetition Note in the amount of $2,240,000,  resulting in a new
loan balance of  $10,000,000.  The  maturity  date of the  Prepetition  Note was
amended  several  times  after April 30,  2009,  with a final  maturity  date of
October 15, 2009.  In connection  with these  amendments to the maturity date of
the  Prepetition  Note,  the  Company  granted the  GasRock  various  additional
considerations,   including   overriding   royalty  interests  and  net  profits
interests.  Payment of the principal balance of approximately $10,188,000,  plus
accrued interest,  was not made on October 15, 2009, and therefore,  an event of
default occurred under the Term Credit Agreement, as amended. In connection with
the DIP financing, the Prepetition Note was paid in full on January 28, 2011.

The  Company  has filed an  adversary  action in the  Bankruptcy  Court  against
GasRock  in an effort to avoid  certain  interests  previously  assigned  to the
Prepetition Lender (see Note 8 - Commitments and Contingencies).


Note 7 - Convertible Promissory Notes Payable

On October  27,  2009,  the Company  issued  Convertible  Promissory  Notes (the
"Promissory  Notes")  totaling  $140,000.  One hundred  thousand  dollars of the
Promissory  Notes were issued to officers and/or  directors  ($25,000 each). The
remainder  of the  Promissory  Notes were issued to existing  shareholders.  The
Promissory  Notes bear  interest  at an annual  rate equal to the greater of (i)
12%, or (ii) the prime rate (as  published in the Wall Street  Journal) plus 3%.
The Promissory Notes are convertible, at the holder's option, into shares of the
Company's  common  stock at a conversion  price of $0.02 per share,  at any time
during  the term of the  Promissory  Notes.  The  Promissory  Notes  matured  on
November 1, 2010,  and all  obligations  and payments  due under the  Promissory
Notes are subordinate to the Company's senior debt. As a result of the Company's
Chapter 11 bankruptcy  filing  described in Notes 1 and 3 above, the Company was
not able to pay principal and accumulated  interest on the Promissory Notes when
due.  Subject to certain  exceptions  under the  Bankruptcy  Code, the Company's
bankruptcy  filing  automatically  enjoins,  or stays,  the  continuation of any
judicial or  administrative  proceedings or other actions against the Company or
its  property  to recover  on,  collect or secure a claim  arising  prior to the
Petition Date. At June 30, 2012 and March 31, 2011, the principal outstanding on
the Notes was  $140,000.  As of June 30,  2012,  accrued  interest  on the Notes
totaled $54,016.

Note 8 - Commitments and Contingencies

Commitments
-----------

On February 12, 2010,  the Company filed an adversary  action in the  Bankruptcy
Court  against  GasRock,  the holder of the then  senior  secured  note  payable
seeking to avoid certain ownership  interests  assigned to GasRock in connection
with the Term  Credit  Agreement  and  amendments  thereto.  On March 18,  2010,

                                       18
<PAGE>


                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

GasRock filed a motion with the Court to dismiss the  complaint.  On October 21,
2010, the Court issued an order on the Motion to Dismiss dismissing three of the
nine claims made in the adversary action.  The Company,  GasRock and Linc Energy
have  executed a settlement  agreement as of June 15, 2012,  that would call for
the  Company to make a payment of  $500,000  to GasRock to dismiss all claims in
the  litigation  by GasRock and in return the Company  would  receive a $525,000
payment  form  Linc  Energy to  settle  other  matters  in the  litigation.  The
settlement  agreement was approved by the bankruptcy court in July 2012, and the
respective  payments to and from the Company  were made and other  issues in the
agreement were settled as noted in this report as of July 18, 2012.

Bankruptcy Proceedings
----------------------

On October 28, 2009, the Company filed a voluntary  petition for  reorganization
under  Chapter 11 in the United  States  Bankruptcy  Court for the  District  of
Colorado During the pendency of the Chapter 11 proceedings, the Company operates
the business as a  debtor-in-possession  in  accordance  with the  provisions of
Chapter 11, and will be subject to the jurisdiction of the Bankruptcy Court. All
pending  or  threatened   litigation  or  claims   involving  the  Company  were
automatically  stayed as a result of this Bankruptcy Filing, and all such claims
may be subject to  compromise or  modification  through the terms of any Plan of
Reorganization filed by the Company in the Chapter 11 proceedings.

Litigation
----------

In a letter  dated  February 18, 2009 sent to each of the  Company's  Directors,
attorneys  representing  a group of persons  who  purchased  approximately  $1.8
million of securities  (in the  aggregate) in the  Company's  private  placement
offering  commenced in late 2006,  alleged that securities laws were violated in
that offering.  In April 2009, the Company entered into tolling  agreements with
the  purchasers  to toll the statutes of  limitations  applicable  to any claims
related to the private placement.  The Company's Board of Directors directed the
Special  Committee to  investigate  these  allegations.  The Company  denies the
allegations and believes they are without merit.  The Company cannot predict the
likelihood of a lawsuit being filed, its possible  outcome,  or estimate a range
of possible losses, if any, that could result in the event of an adverse verdict
in any such  lawsuit.  Any suit  against the Company is stayed by the Chapter 11
case, and,  insofar as these claims are asserted  against the Company,  they are
subject to the claim  process  imposed by the  Bankruptcy  Code and the possible
subordination  under Section 510(b) of the Bankruptcy  Code. The purchasers have
filed a Proof of Claim with the  Bankruptcy  Court in the  amount of  $1,776,050
plus  ancillary  amounts  purported  to be damages  attributable  to the alleged
securities  violations.  In June 2011, the Bankruptcy  Court rendered a decision
that these claims are subordinated to unsecured claims.

If management  believes that a loss arising from this matter is probable and can
reasonably be estimated, the Company would record the amount of the loss, or the
minimum  estimated  liability when the loss is estimated  using a range,  and no
point within the range is more probable than another. As additional information,
becomes  available,  any  potential  liability  related to this  matter  will be
assessed and the treatment revised,  if necessary.  Based on currently available
information,  management is unable to make a determination as to the probability
of a gain or loss regarding this suit at this time.

A former  supplier  to the  Company  filed a Proof of Claim with the  Bankruptcy
Court for alleged  liquidated  damages  resulting from the Company's  filing for
bankruptcy.  In November  2010,  the Company  agreed to a settlement of $375,000
with the former  supplier,  which the Bankruptcy  Court approved as an unsecured
claim  in  December  2010.  This  amount  is  included  in loss on  discontinued
operations in the accompanying statements of operations.

                                       19
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

A law firm that was formerly  counsel to the company  filed a Proof of Claim for
Prepetition  fees, to which the Company has objected with the Bankruptcy  Court.
No hearing on the matter has yet been held.

A former  officer of the company  filed a Proof of Claim for wages and benefits,
to which the Company has objected with the Bankruptcy  Court. The Company agreed
to a  settlement  of  $18,750  with the  former  officer,  which  the  Court has
approved.

Two of the  Company's  employees  filed  proofs  of claim and  motions  to allow
administrative  expenses  for  certain  bonus  payments.  The  Company  and  the
employees reached a settlement,  which is still subject to Court approval.  This
liability is reflected in current  liabilities  as reported on the balance sheet
at March 31, 2012.

GasRock  filed a Proof of Claim for  attorney's  fees and costs  related  to the
Chapter 11 case generally, and to the litigation pending between GasRock and the
Company. The Company objected to these fees on various grounds. Subsequently, as
of June 15, 2012, a Settlement and release  Agreement  covering these claims and
other issues was executed by the Company, GasRock and Linc Energy. The agreement
was approved by the bankruptcy court in July 2012, and such claims were released
along with certain monetary payments among the parties noted here as of July 18,
2012.

Note 9 - Stockholders' Equity

The  Company's  capital stock as of June 30, 2012 and March 31, 2011 consists of
275,000,000  authorized shares of common stock, par value $0.00001 per share. As
of June 30, 2012 and March 31, 2012, a total of 119,623,723  common stock shares
were issued and outstanding.

Issuance of Common Stock
------------------------

During  the years  three  months  ended  June 30,  2012 and 2011, there  were no
issuances or cancellations of common stock.

Warrants
--------

During the year ended March 31, 2012, warrants exercisable for 54,632,565 shares
of the  Company's  common  stock  expired.  No warrants  for the purchase of the
Company's common shares were outstanding as of June 30, 2012.

Note 10 - Share-Based Compensation

During the three months ended June 30, 2012 and 2011,  the Company did not issue
any stock options and all outstanding stock options were fully-vested.

2006 Stock Incentive Plan
-------------------------

On March 30, 2007, the 2006 Stock Incentive Plan (the 2006 Stock Incentive Plan)
was approved by the  shareholders  and was effective  October 2, 2006.  The 2006
Stock  Incentive  Plan had  previously  been approved by the Company's  Board of
Directors. Under the 2006 Stock Incentive Plan, the Board of Directors may grant
awards of options to purchase  common  stock,  restricted  stock,  or restricted
stock units to officers,  employees,  and other persons who provide  services to
the Company or any related company. The participants to whom awards are granted,
the type of awards granted, the number of shares covered for each award, and the
purchase  price,  conditions and other terms of each award are determined by the
Board of  Directors,  except  that the term of the  options  shall not exceed 10
years.  A total of 10,million  shares of Rancher Energy common stock are subject
to the 2006 Stock Incentive Plan. The shares issued for the 2006 Stock Incentive
Plan may be either treasury or authorized and unissued shares.  During the three
months ended June 30, 2012, no options were granted,  expired or exercised under
the 2006 Stock Incentive Plan.

                                       20
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

The following table summarizes information related to the outstanding and vested
options as of June 30, 2012:

<TABLE>
<CAPTION>

                                                            Outstanding Options        Vested Options
                                                            -------------------     --------------------
<S>                                                         <C>                     <C>

         Number of shares
              Non-qualified                                        10,000,000              10,000,000
              2006 Plan
         Weighted average remaining contractual life
              Non-qualified                                 2.6 years               2.6 years
              2006 Plan                                     2.5 years               2.5 years
         Weighted average exercise price
              Non-qualified                                  $          0.035         $         0.035
              2006 Plan                                      $         0.0875         $        0.0875
         Aggregate intrinsic value
              Non-qualified                                  $              -         $             -
              2006 Plan                                      $              -         $             -
</TABLE>


At June 30, 2012,  all  outstanding  options were fully vested.  No options were
exercised  during the three  months  ended June 30,  2012.  The  Company did not
realize any tax  deductions  related to the  exercise  of stock  options for the
three months ended June 30, 2012 and 2011.

Note 11 - Income Taxes

The  effective  income tax rate for the three months ended June 30, 2012 and the
year ended March 31, 2012 differs  from the U.S.  Federal  statutory  income tax
rate due to the following:

<TABLE>
<CAPTION>

                                                For the Three            For the Year
                                                 Months Ended               Ended
                                                   June 30,                March 31,
                                                     2012                    2012
                                              --------------------   ---------------------
<S>                                           <C>                    <C>

Federal statutory income tax rate              $          11,883                309,000
State income taxes, net of Federal benefit                 3,961                 26,000
Permanent items                                                -               (132,000)
Other, change in rate                                          -                240,000
Change in valuation allowance                            (15,844)              (443,000)
                                              --------------------   ---------------------

                                              $                -     $                -
                                              --------------------   ---------------------
</TABLE>

The  components of the deferred tax assets and  liabilities  as of June 30, 2012
and March 31, 2012 are as follows:

                                       21
<PAGE>

                             Rancher Energy Corp.
                             (Debtor-in-Possession)
                        Notes to the Financial Statements
                For the Three Months Ended June 30, 2012 and 2011
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                      June 30,               March 31,
                                                        2012                   2012
                                                 -------------------    --------------------
<S>                                              <C>                    <C>

Long-term deferred tax assets:
  Federal net operating loss carry forwards        $    30,278,800        $     30,263,000
  Stock-based compensation                                 824,000                 824,000
  Accrued expenses                                         143,000
                                                                         143,000
Long-term deferred tax liabilities -
  property, plant and equipment                            (66,000)                (66,000)
Valuation allowance                                    (30,278,800)            (31,164,000)
                                                 -------------------    --------------------
Net long-term deferred tax assets                  $          -           $           -
                                                 -------------------    --------------------
</TABLE>

The Company has net operating loss carryovers of approximately $85,192,800 as of
June 30, 2012 and  $85,177,000 as of March 31, 2012. The Company's net operating
losses begin to expire in 2024.

         The Company has provided a full  valuation  allowance  for the deferred
tax assets as of June 30, 2012 and March 31, 2012,  based on the likelihood that
the deferred tax assets will not be utilized in the future.

Note 11 - Related Party Transactions

A director  of the  Company is a partner in the law firm that acts as counsel to
the Company. The Company incurred legal fees and expenses to the law firm in the
amount of $-0- and $ 27,000  during the three  months  ended  June 30,  2012 and
2011, respectively.  The amount owed to the law firm was approximately $9,234 as
of June 30, 2012 and March 31, 2012, respectively.

Note 12. Subsequent Events

Rancher  Energy  reached a Settlement  and Release  Agreement  (Agreement)  with
GasRock Capital (l/k/a Magma Assets,  LLC) and Linc Energy  Petroleum as of June
15, 2012 related to the  outstanding  litigation  regarding legal fees and other
costs (See further explanation setting forth details of the litigations as noted
in Part I,  Item 3 and in Note 7 to the  financial  statements).  As a result of
this Agreement,  and the subsequent  approval of the Agreement by the bankruptcy
court in July, 2012, on July 18, 2012, Rancher received a $525,000 Success Bonus
payment from Linc Energy,  and in turn made a $500,000 payment to GasRock out of
an existing  escrow  account in payment for settling  litigation  claims made by
GasRock. Based upon US GAAP guidelines covering the status of such transactions,
as of the June 30, 2012  financial  statement  date,  Rancher has  included  the
aforementioned amounts in its balance sheet for this 10-Q report as a receivable
and payable, respectively, as of June 30, 2012.

                                       22
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations

Forward-Looking Statements
--------------------------

         The statements contained in this Quarterly Report on Form 10-Q that are
not  historical  are  "forward-looking  statements,"  as that term is defined in
Section 21E of the  Securities  Exchange Act of 1934,  as amended (the  Exchange
Act), that involve a number of risks and  uncertainties.  These  forward-looking
statements include, among others, the following:

     o    Business strategy;
     o    Ability  to  develop  a  plan  of  reorganization  acceptable  to  the
          Bankruptcy Court and to emerge from bankruptcy;
     o    Ability  to  obtain  any  additional  financial  resources  needed  to
          continue operations, to repay secured debt, and to purchase additional
          oil and gas properties;
     o    Inventories, projects, and programs;
     o    Other anticipated capital expenditures and budgets;
     o    Future cash flows and borrowings;
     o    The availability and terms of financing;
     o    Oil reserves;
     o    Ability to obtain permits and governmental approvals;
     o    Technology;
     o    Financial strategy;
     o    Realized oil prices;
     o    Production;
     o    Lease  operating  expenses,  general  and  administrative  costs,  and
          finding and development costs;
     o    Availability and costs of drilling rigs and field services;
     o    Future operating results; and
     o    Plans, objectives, expectations, and intentions.

         These  statements  may be  found  under  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations,"  and other sections
of this Quarterly Report on Form 10-Q.  Forward-looking statements are typically
identified by use of terms such as "may," "could,"  "should,"  "expect," "plan,"
"project,"   "intend,"    "anticipate,"    "believe,"   "estimate,"   "predict,"
"potential,"  "pursue,"  "target" or  "continue,"  the negative of such terms or
other comparable  terminology,  although some forward-looking  statements may be
expressed differently.

         The forward-looking  statements  contained in this Quarterly Report are
largely based on our expectations,  which reflect estimates and assumptions made
by our management.  These  estimates and  assumptions  reflect our best judgment
based on  currently  known  market  conditions  and other  factors.  Although we
believe such estimates and  assumptions  to be  reasonable,  they are inherently
uncertain  and involve a number of risks and  uncertainties  that are beyond our
control. In addition,  management's assumptions about future events may prove to
be  inaccurate.   Management  cautions  all  readers  that  the  forward-looking
statements contained in this Quarterly Report on Form 10-Q are not guarantees of
future performance, and we cannot assure any reader that such statements will be
realized or the  forward-looking  events and  circumstances  will occur.  Actual
results  may  differ  materially  from  those  anticipated  or  implied  in  the
forward-looking  statements  due to the  factors  listed in the  "Risk  Factors"
section and elsewhere in our Annual Report on Form 10-K for the year ended March
31,  2012.  All  forward-looking  statements  speak  only as of the date of this
Quarterly Report on Form 10-Q. We do not intend to publicly update or revise any
forward-looking  statements  as a result of new  information,  future  events or
otherwise.  These cautionary  statements qualify all forward-looking  statements
attributable to us or persons acting on our behalf.

                                       23
<PAGE>

Organization
------------

         We are an  independent  energy  company that  explores for and develops
produces,  and  markets oil and gas in North  America.  Through  March 2011,  we
operated four oil fields in the Powder River Basin,  Wyoming.  Since October 28,
2009,  we have been  operating as  debtor-in-possession  under Chapter 11 of the
United States Bankruptcy Code.

         Effective  March 1,  2011,  we sold all of our oil and gas  properties,
which has allowed us to  eliminate  the  majority  of our debt and also  provide
financial resources during our continuing reorganization.

         The following  summarizes  our goals and objectives for the next twelve
months:

     o    Minimize  our  operating  and  administrative  expenses  while  we are
          reorganizing;
     o    Successfully  emerge  from  bankruptcy  under  the  provisions  of  an
          approved plan of reorganization; and
     o    Pursue and analyze oil and gas related opportunities for us, should we
          successfully emerge from bankruptcy.

Proceedings under Chapter 11
----------------------------

         On October 28, 2009, we filed a voluntary petition (the "petition") for
relief in the United States Bankruptcy Court (the "Court"), District of Colorado
under  Chapter  11 of Title  11 of the U.S.  Bankruptcy  Code  (the  "Bankruptcy
Code"). As a result of the Chapter 11 filing we continue to operate our business
as "debtor-in-possession"  under the jurisdiction of the Court and in accordance
with the  applicable  provisions  of the  Bankruptcy  Code and the  order of the
Court,  as we devoted  renewed  efforts to resolve our  liquidity  problems  and
develop a  reorganization  plan. In November 2009, the Court approved an interim
order for our use of cash  collateral.  The interim  order for  continued Use of
Cash Collateral has since been extended by the Court on several occasions. As of
the date of  filing  this  annual  report,  no  creditor  has a lien on our cash
collateral,  and therefore no further authority of the Court is necessary to our
use of cash collateral.

         From January 2007 through  March 2011,  we operated  four fields in the
Powder River Basin,  Wyoming,  which is located in the Rocky Mountain  region of
the United States.  The fields,  acquired in December 2006 and January 2007, are
the South Glenrock B Field,  the Big Muddy Field, the Cole Creek South Field and
the South Glenrock A Field. Effective March 1, 2011, we sold all of our interest
in the four  fields to Linc  Energy  Petroleum  (Wyoming),  Inc.  as part of the
Chapter 11 Bankruptcy proceeding.  The sale of such properties has allowed us to
eliminate the majority of our debt and also provides financial  resources during
our continuing reorganization.

         On  April  30,  2012,  the  Company  filed  its  2nd  Amended  Plan  of
Reorganization  ("the Plan") and  Disclosure  Statement  for 2nd Amended Plan of
Reorganization  with the Court.  The Plan  provides  for the  Company to pay the
claims of its creditors as the assets of the Company allow, and permits but does
not obligate the Company to continue in the oil and gas industry with a focus on
the purchase on non-operating interests in oil and gas producing properties,  as
discussed  below.  The Plan has not yet been  sent for  voting  and has not been
confirmed  by the  Bankruptcy  Court.  A hearing has been set in the  bankruptcy
court to review the 2nd Amended Plan on September 4, 2012.

         There is no certainty  that we will be  successful in completing a plan
of  reorganization  or that it will be  confirmed  by the Court.  If the plan of
reorganization  is not confirmed by the Court,  any party in interest may file a
plan of reorganization for us or move to have the case converted to a case under
Chapter 7, which would result in the liquidation of the Company.

         The following  summarizes  our goals and objectives for the next twelve
months:

     o    Minimize  our  operating  and  administrative  expenses  while  we are
          reorganizing;
     o    Successfully  emerge  from  bankruptcy  under  the  provisions  of  an
          approved plan of reorganization; and
     o    Pursue and analyze oil and gas related opportunities for us, should we
          successfully emerge from bankruptcy.

                                       24
<PAGE>

Results of Operations

         With the sale of  substantially  all of the  Company's  assets in March
2011, the Company's results of operations are presented as follows:

     Continuing operations
     o    Results of the Company's  continuing  operations  for the three months
          ended June 30,  2012 as compared  to the three  months  ended June 30,
          2011; and

     Discontinued operations
     o    Results of the Company's discontinued  operations for the three months
          ended June 30,  2012 as compared  to the three  months  ended June 30,
          2011; and

Continuing Operations

         Three months ended June 30, 2012 compared to three months June 30, 2011
- continuing operations.

         The following is a comparative  summary of our results from  continuing
operations:

<TABLE>
<CAPTION>

                                                               Three Months Ended
                                                                    June 30,
                                                     ---------------------------------------
                                                           2012                  2011
                                                     ------------------   -------------------
<S>                                                  <C>                  <C>

    Revenues                                          $             -       $          -
                                                     ==================   ===================

    Operating expenses:
      General and administrative                              104,887               222,814
      Depreciation and amortization                            26,286                11,488
                                                     ------------------   -------------------
        Total operating expenses                              131,173               243,302
                                                     ------------------   -------------------

    Other income (expense):
      Interest expense and financing costs                     (6,064)               (5,934)
      Interest and other income                                88,396               100,485
                                                     ------------------   -------------------
        Total other income                                     82,332                94,551
                                                     ------------------   -------------------

    Loss before reorganization items                          (48,841)             (139,751)

    Reorganization items                                      (30,376)              (97,596)
                                                     ------------------   -------------------

    Net loss from continuing operations               $       (79,217)      $      (237,347)
                                                     ==================   ===================
</TABLE>


         Overview.  For the three months ended June 30, 2012,  we reported a net
loss from continuing operations of $79,217, or $0.00 per basic and fully-diluted
share,  compared to a net loss of $237,437 or $0.00 per basic and  fully-diluted
share, for the corresponding  three months of 2011.  Discussions of individually
significant period to period variances follow.

                                       25
<PAGE>

         General and administrative expense. For the three months ended June 30,
2012, we incurred general and administrative expenses of $104,887 as compared to
$222,814 for the corresponding three months ended June 30, 2011. The decrease in
our general and administrative resulted primarily from decreases in compensation
and office expenses.  Office expenses  decreased  primarily as a result of lower
rent  expense  associated  with  the  April  2011  relocation  of the  Company's
headquarters.

         Reorganization  items.  Reorganization  items, totaling $30,376 for the
three months ended June 30, 2012,  include  those items of expense  specifically
related to our  reorganization  following the filing of a voluntary petition for
relief under  Chapter 11 of the  Bankruptcy  Code with the  Bankruptcy  Court on
October 28, 2009.  These costs consist  entirely of  professional  fees to legal
counsel for assistance with our reorganization plan and other bankruptcy related
matters. While these costs have decreased as compared to the corresponding three
months in 2011  (total  expense  of  $97,596),  we expect  these  expenses  will
continue to be a  significant  component of expenses as we progress  through the
bankruptcy process.

         Interest  and other  income.  The Company  entered into an agreement to
assign  interests in a CO2 supply  agreement to Merit Energy Company  ("Merit"),
beginning in December 2010. In return for this assignment,  the Company receives
a fee of $.03 per Mcf  purchased  by Merit  under this supply  agreement,  which
expires at the end of 2012.  During the three months  ended June 30,  2012,  the
Company recognized income of approximately $86,818 for purchases made under this
supply agreement.

Discontinued Operations

         Three months ended June 30, 2012 compared to three months June 30, 2011
- discontinued operations.

         For the three  months  ended  June 30,  2012,  we did not  report a net
income  or loss  from our  discontinued  operations,  compared  to a net loss of
$6.323, for the corresponding  three months of 2011. With the sale of all of the
Company's oil and gas  properties  in March 2011,  the Company had no revenue or
notable  expenses  relating to discontinued  operations  during the three months
ended June 30, 2012.

Liquidity and Capital Resources
-------------------------------

         The report of our independent  registered public accounting firm on the
financial  statements  for the years ended  March 31, 2012 and 2011  includes an
explanatory  paragraph relating to the uncertainty of our ability to continue as
a going concern. We are in bankruptcy and have incurred a cumulative net loss of
approximately  $93 million for the period from  inception  (February 4, 2004) to
June 30, 2012.

         In March 2011, we sold all of our oil and gas income  producing  assets
which  enabled us to pay off all secured debt and left us with net cash proceeds
of  approximately  $3,500,000 and a receivable from the transaction of $250,000.
We do not have any  sources  of revenue  and our  projected  interest  and other
income is not  sufficient  to sustain  our ongoing  general and  administrative,
legal and reorganization costs. We received proceeds from the return of funds we
have on deposit for oil and gas  environmental  and  performance  bonds with the
State of Wyoming.  These amounts total approximately  $279,000 and were returned
to the Company in October  2011. We expect that our monthly  operating  expenses
(excluding  reorganization  items)  will  exceed  monthly  operating  income  by
approximately $70,000 until we are able to pursue other business activities.

         We continue to operate our business as "debtor-in-possession" under the
jurisdiction  of the Court and in accordance  with the applicable  provisions of
the Bankruptcy Code and orders the Court. As debtors-in-possession,  the Company
is  authorized  to continue to operate as an ongoing  business,  and may pay all
debts and honor all  obligations  arising in the ordinary course of our business
after the  Petition  Date.  However,  we may not pay  creditors  on  account  of
obligations  arising before the Petition Date or engage in transactions  outside
the ordinary course of business without approval of the Court,  after notice and
an opportunity for a hearing.

                                       26
<PAGE>

         We have prepared and filed all required financial and operating reports
and other  documents  with the Court.  There is no assurance the Company will be
able to emerge from bankruptcy as an operating business, and if so, that we will
be able to raise the capital or funds  necessary to analyze and pursue other oil
and gas related opportunities.

         Cash flows used for continuing operations decreased in the three months
ended  June 30,  2012 as  compared  to the three  months  ended  June 30,  2011,
primarily  due to a  decrease  in the  Company's  operational  activities  and a
decrease in the fees associated with its administrative activities.

Off-Balance Sheet Arrangements
------------------------------

         We have no material  off-balance sheet  arrangements nor do we have any
unconsolidated subsidiaries.

Critical Accounting Policies and Estimates
------------------------------------------

         Critical  accounting  policies  and  estimates  are provided in Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  and Item 8. Financial  Statements and  Supplementary  Data, both of
which are  included in Part II of our Annual  Report on Form 10-K for the fiscal
year ended March 31, 2012. Additional footnote disclosures are provided in Notes
to  Financial  Statements  (unaudited),  which are include in Item 1.  Financial
Statements to this Quarterly Report on Form 10-Q for the quarter ended March 31,
2012.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Commodity Price Risk
--------------------

         Because we are not currently  operating on any oil and gas  properties,
we are not exposed to market risk relating to the pricing  applicable to the oil
and gas commodity markets.  However,  our ability to raise additional capital at
attractive  rates,  any future  revenues  from oil and gas  operations,  and our
profitability  will  depend  substantially  upon the  market  prices  of oil and
natural  gas,  which  fluctuate  widely.  To the  extent we are able to  acquire
additional oil and gas producing  properties,  exposure to this risk will become
significant. We expect commodity price volatility to continue.

Financial Market Risk
---------------------

         The debt and equity markets have exhibited adverse conditions in recent
years. The unprecedented volatility and upheaval in the capital markets impacted
our ability to refinance or extend our existing  short term debt when it matured
on  October  15,  2009.  Going  forward,   market   conditions  may  affect  the
availability of capital for prospective lenders or purchasers of or equity.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures
----------------------------------

         We  conducted  an  evaluation   under  the  supervision  and  with  the
participation of our management,  including our Chief Executive Officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures.  The term "disclosure  controls and procedures," as defined in Rules
13a-15(e) and 15d-15(e)  under the  Securities  Exchange Act of 1934, as amended
(Exchange  Act),  means  controls  and other  procedures  of a company  that are
designed to ensure that  information  required to be disclosed by the company in
the reports it files or submits  under the Exchange Act is recorded,  processed,
summarized and reported, within the time periods specified in the Securities and
Exchange  Commission's rules and forms.  Disclosure controls and procedures also
include,  without  limitation,  controls and procedures  designed to ensure that

                                       27
<PAGE>

information  required to be  disclosed by a company in the reports that it files
or  submits  under the  Exchange  Act is  accumulated  and  communicated  to the
company's  management,  including its principal  executive  officer,  or persons
performing similar functions, as appropriate to allow timely decisions regarding
required  disclosure.  The  conclusion  by our  Chief  Executive  Office  is the
identification  of the following  material weakness in our internal control over
financial reporting and, as a result of this material weakness,  we concluded as
of March 31,  2012 and as of the end of the  period  covered  by this  Quarterly
Report that our disclosure controls and procedures were not effective.

         We did not  adequately  segregate  the  duties of  different  personnel
within our Accounting Department due to an insufficient  complement of staff and
inadequate management oversight.

         We have  limited  accounting  personnel  with  sufficient  expertise in
generally  accepted  accounting  principles to enable  effective  segregation of
duties with respect to recording  journal  entries and to allow for  appropriate
monitoring of financial  reporting  matters and internal  control over financial
reporting.  Specifically, the Acting Chief Accounting Officer has involvement in
the creation and review of journal entries and note disclosures without adequate
independent  review and  authorization.  This control deficiency is pervasive in
nature and  impacts all  significant  accounts.  This  control  deficiency  also
affects  the  financial   reporting   process  including   financial   statement
preparation and the related note disclosures.

Changes in Internal Control over Financial Reporting
----------------------------------------------------

         There have been no  changes  in our  internal  control  over  financial
reporting during the most recently completed fiscal quarter that have materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.


                           PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

         On October 28,  2009,  the  Company  filed a  voluntary  petition  (the
"petition")  for relief in the United  States  Bankruptcy  Court (the  "Court"),
District of Colorado under Chapter 11 of Title 11 of the U.S.  Bankruptcy  Code.
(the  "Bankruptcy  Code").  The Bankruptcy  proceedings are discussed in further
detail in Item 1 of this filing.

         On February 12, 2010, the Company filed an adversary  proceeding in the
Bankruptcy  Court  against  GasRock  Capital  LLC,  Case No.  10-01173-MER.  The
complaint  seeks to recover the 10% NPI  conveyed to GasRock  ("the  Lender") in
connection  with the  Eighth  Amendment  to the Term  Credit  Agreement  and the
additional 1% ORRI conveyed to the Lender in October 2008 in connection  with an
extension of the short term note. The primary basis of the complaint is that the
Lender gave less than fair  equivalent  value for the conveyances at a time when
the  Company  was  insolvent,  or when the  conveyances  left the  Company  with
insufficient  capital. In other words, the Company has claimed that the value of
the conveyances was in excess of a reasonable fee for the extensions,  and, as a
result, the conveyances were  "constructively  fraudulent" under both applicable
Bankruptcy law and the Uniform Fraudulent Transfers Act.

         In addition,  the Company has  challenged the conveyance of the NPI and
the 1% ORRI, together with the original 2% ORRI conveyed to Lender when its loan
was first made,  on the grounds  that they should be  characterized  as security
interests and not outright  transfers of title. The Bankruptcy Court has granted
GasRock's motion to dismiss these claims.  The Company has also claimed that the
conveyances rendered the Loan usurious under Texas law. Further, the Company has
sought to have the NPI and 1% ORRI avoided as  preferences  under ss. 547 of the
Bankruptcy Code and to equitably  subordinate  the Lender's claim.  Although the
Company believes its claims are well-taken,  the Lender is vigorously  defending
against the  complaint,  and no assurance  can be given that the Company will be
successful in whole or in has part.

         On June 15, 2012, the Company entered into a settlement  agreement with
GasRock and Linc Energy to resolve the adversary  proceeding against GasRock. In
July,  the bankruptcy  court  approved the settlement  agreement and on July 18,
2012 the Company:

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<PAGE>

     a.   received the disputed NPI, which the Company conveyed to Linc Energy;
     b.   released all claims to the funds held in escrow  pursuant to the terms
          of the sale of substantially all of its assets to Linc Energy;
     c.   received from Linc Energy $525,000 plus an amount of $35,523 for final
          settlement  of  Rancher's  litigation  costs due under the  Litigation
          Agreement with Linc Energy;
     d.   Dismissed the adversary proceeding against GasRock with prejudice; and
     e.   Paid to GasRock  $500,000  from an existing  escrow  account,  and was
          released  from  GasRock's  claim for  attorneys'  fees and costs  that
          GasRock  asserted it was owed for  defending  itself in the  adversary
          proceeding.

         In a  letter  dated  February  18,  2009,  sent  to  each  of our  then
Directors, attorneys representing a group of persons who purchased approximately
$1,800,000 of securities  (in the aggregate) in our private  placement  offering
commenced  in late 2006  alleged  that  securities  laws were  violated  in that
offering.  In April 2009, we entered into tolling agreements with the purchasers
to toll the  statutes of  limitations  applicable  to any claims  related to the
private  placement.  In February  2009,  our Board of  Directors  established  a
Special  Committee of the Board (the "Special  Committee")  to  investigate  the
allegations.   Following  the  completion  of  the  investigation,  the  Special
Committee  recommended no action be taken.  We deny the  allegations and believe
they are  without  merit.  The  claimants  have filed  Proof of Claims  with the
Bankruptcy Court in the amount of $1,776,050 plus ancillary amounts purported to
be damages  attributable  to the  alleged  securities  violations.  The  Company
objected to the claims and asked the Bankruptcy  Court to subordinate the claims
to the level of equity.  In June 2011, the Bankruptcy  Court rendered a decision
that these claims are subordinated to unsecured claims.

         If management believes that a loss arising from this matter is probable
and can  reasonably  be  estimated,  the Company  would record the amount of the
loss,  or the minimum  estimated  liability  when the loss is estimated  using a
range,  and no  point  within  the  range  is more  probable  than  another.  As
additional  information,  becomes available,  any potential liability related to
this matter will be assessed and the treatment revised,  if necessary.  Based on
currently available information, management is unable to make a determination as
to the  probability of a gain or loss regarding this suit at this time.

ITEM 1A. Risk Factors

Not applicable to smaller reporting companies.

ITEM 2.  CHANGES IN SECURITIES

NONE.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

NONE.

ITEM 4.  MINE AND SAFETY DISCLOSURE

NOT APPLICABLE.

ITEM 5.  OTHER INFORMATION

NONE.

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<PAGE>

ITEM 6.  EXHIBITS

The  following is a complete  list of exhibits  filed as part of this Form 10-Q.
Exhibit  numbers  correspond  to the numbers in the Exhibit Table of Item 601 of
Regulation S-K.

     Exhibit 31.1     Certification of Chief Executive Officer and Acting Chief
                      Financial Officer pursuant to Section 302 of the Sarbanes-
                      Oxley Act

     Exhibit 32.1     Certification of Principal Executive Officer and Acting
                      Chief Financial Officer pursuant to Section 906 of the
                      Sarbanes-Oxley Act

101.INS XBRL Instance Document (1)

101.SCH XBRL Taxonomy  Extension Schema Document (1)

101.CAL XBRL Taxonomy Extension  Calculation Linkbase Document (1)

101.DEF  XBRL  Taxonomy  Extension  Definition  Linkbase  Document  (1)

101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)

(1)  Pursuant to Rule 406T of  Regulation  S-T,  this  interactive  data file is
deemed not filed or part of a registration  statement or prospectus for purposes
of  Sections  11 or 12 of the  Securities  Act of 1933,  is deemed not filed for
purposes of Section 18 of the Securities  Exchange Act of 1934, and otherwise is
not subject to liability under these sections.

*Filed herewith.









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<PAGE>


                                   SIGNATURES
         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                              RANCHER ENERGY CORP.

Dated:  August 20, 2012                       By: /s/ Jon C. Nicolaysen
                                                  ------------------------------
                                                  Jon C. Nicolaysen, President,
                                                  Chief Executive Officer, and
                                                  Acting Chief Accounting
                                                  Officer





















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