*Table
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**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**





Mark
                One:x
            Annual
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the fiscal year ended**December
                31, 2007**oro
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of1934
                for the transition period from ____________ to
                _____________.Commission
                File Number 333-139312





**ROCK
      CITY ENERGY CORP.**


*(Exact
      name of registrant as specified in its charter)*





**NEVADA**
            **20-5503984**(State
                of Incorporation)
            (IRS
                Employer Identification No.)**3416
                Via Lido, Fourth Floor, Newport Beach, California
                92663**(Address
                of principal executive offices)**(877)
                587-2517**(Registrant’s
                telephone number, including area
                code)





Securities
      registered pursuant to Section 12(b) of the Act: N/A





Securities
      registered pursuant to Section 12(g) of the Act: N/A





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act during the past 12 months (or for such
      shorter period that the registrant was required to file such reports) and (2)
      has been subject to such filing requirements for the past 90 days.
      Yes x No
o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x





Indicate
      by checkmark whether the registrant is a shell company as defined in Rule 12b-2
      of the Exchange Act.


Yes x No
o





State
      issuer’s revenues for the most recent fiscal year:  $0





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a specific
      date within the past 60 days. (See definition of affiliate in Rule 12b-2 of
      the
      Exchange Act.) Not applicable. There is no market for the issuer’s common
      stock.





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date. As of March 24 ,
      2008,
      8,000,000 shares of common stock were outstanding.





Transitional
      Small Business Disclosure Format (Check one): Yes o No
x









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CONTENTS




*Page*Forward-Looking
                Statements
            iPart
                1Item
                1
            Business
            1Item
                2
            Properties
            5Item
                3
            Legal
                Proceedings
            7Item
                4
            Submission
                of Matters to a Vote of Security
                Holders
            7Part
                IIItem
                5
            Market
                for Common Equity and Related Shareholder Matters and
                Small Business
                Issuer Purchases of Equity Securities
            8Item
                6
            Management’s
                Discussion and Analysis or Plan of
                Operation
            9Item
                7
            Financial
                Statements
            25Item
                8
            Changes
                In and Disagreements With Accountants on Accounting
                and Financial
                Disclosure
            25Item
                8A
            Controls
                and Procedures
            25Item
                8B
            Other
                Information
            26Part
                IIIItem
                9
            Directors,
                Executive Officers, Promoters, Control Persons
                and Corporate
                Governance; Compliance with Section 16(a) of the Exchange
                Act
            26Item
                10
            Executive
                Compensation
            29Item
                11
            Security
                Ownership of Certain Beneficial Owners and
                Management and Related
                Stockholder Matters
            29Item
                12
            Certain
                Relationships and Related Transactions and Director
                Independence
            30Item
                13
            Exhibits
            32Item
                14
            Principal
                Accountant Fees and Services
            33Signatures
                and Certifications
            34Consolidated
                Financial Statements
            F-1





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**FORWARD-LOOKING
      STATEMENTS**





This
      Annual Report
      on
      Form 10-KSB filed by Rock City Energy Corp. contains forward-looking statements.
      These are statements regarding financial and operating performance and results
      and other statements that are not historical facts. The words “expect,”
“project,” “estimate,” “believe,” “anticipate,” “intend,” “plan,” “forecast,”
and similar expressions are intended to identify forward-looking statements.
      Certain important risks could cause results to differ materially from those
      anticipated by some of the forward-looking statements. Some, but not all, of
      these risks include, among other things:





·
            general
                economic conditions, because they may affect our ability to raise
                money,


·
            our
                reliance on Chesapeake Exploration Limited Partnership to successfully
                develop our oil and gas properties,


·
            our
                ability to raise enough money to continue our operations,


·
            changes
                in regulatory requirements that adversely affect our
                business,


·
            changes
                in the prices for oil and gas that adversely affect our business,
                and


·
            other
                uncertainties, all of which are difficult to predict and many of
                which are
                beyond our control.





We
      caution you not to place undue reliance on these forward-looking statements,
      which reflect our management’s view only as of the date of this report. We are
      not obligated to update these statements or publicly release the results of
      any
      revisions to them to reflect events or circumstances after the date of this
      report or to reflect the occurrence of unanticipated events. You should refer
      to
      and carefully review the information in future documents we file with the
      Securities and Exchange Commission.




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**PART
      I**





As
      used
      in this report, references to “Rock City”, “the company,” “management,” “we” and
“our” refer to Rock City Energy Corp. and, where appropriate, its
      subsidiaries.





**ITEM
              1.**
            **BUSINESS**





**Spin-Off**





We
      were
      incorporated on August 10, 2006 in the state of Nevada as a wholly owned
      subsidiary of Brek Energy Corporation. We were formed to acquire all of the
      shares of capital stock in Vallenar Energy Corp., an oil and gas company that
      Brek then owned. We acquired all of the shares of Vallenar, from Brek, on August
      24, 2006 when we issued 4,000,000 shares of common stock to Brek in exchange
      for
      5,312,500 shares of Vallenar common stock and 733,333 shares of Vallenar
      preferred stock. On March 7, 2007, we issued an additional 4,000,000 shares
      of
      common stock to Brek in exchange for $600,000. Brek was required, as a condition
      of its merger with Gasco Acquisition Inc., to dispose of its interest in
      Vallenar. On November 30, 2007 Brek spun off our business and operations by
      distributing to its shareholders holding 1,000 or more Brek shares on October
      29, 2007 the 8,000,000 shares of Rock City common stock it owned. The merger
      between Brek and Gasco Acquisition, Inc. was completed on December 14,
      2007.





**Agreement
      with Chesapeake Exploration Limited Partnership**





We
      are a
      holding company. We hold a 51.53% interest in Vallenar, which was formed in
      Nevada on January 27, 1999. Other than our interest in Vallenar, we have no
      operations. Vallenar operates through its subsidiary, Nathan Oil Partners LP,
      which was formed on October 31, 2001. In February 2002, Nathan Oil acquired
      nine **** leases
      covering approximately 9,191 gross and 8,865 net acres in the Rocksprings
      Prospect in the Val Verde Basin of Edwards County, Texas.





We
      acquired the leases with the intention of developing any heavy crude oil
      reserves on the properties covered by the leases, although no studies have
      been
      done to determine whether the properties contain heavy crude oil reserves.
      In
      2005, natural gas was discovered nearby. We believe that these properties may
      have significant deposits of natural gas and that finding and extracting the
      natural gas will be less costly than finding and extracting heavy
      oil.





Our
      goal
      is to develop our properties to fully exploit all of their resources, but to
      date we have not had the working capital to do this; therefore, on May 8, 2006,
      Nathan Oil entered into a letter agreement with Chesapeake Exploration
      Limited Partnership for Chesapeake to initiate drilling operations for the
      deep
      rights. In
      this
      discussion, when we refer to the “letter agreement”, we mean the letter
      agreement with Chesapeake; when we discuss the “deep rights”, we mean the rights
      to develop and extract hydrocarbons from depths below 1,500 feet, or the “deep
      zone”; and when we discuss the “shallow rights”, we mean the rights to develop
      and extract hydrocarbons from the surface to 1,500 feet, or the “shallow
      zone”.





In
      exchange for Chesapeake’s promise to bear the costs of drilling the first 10
      wells, to operate the wells and to market, transport and sell our share of
      the
      production from the wells, on June 9, 2006, Nathan Oil assigned the deep rights
      in eight of the leases. The assigned leases are designated, for purposes of
      this
      discussion, as follows:





·
            The
                “deep Allar lease” refers to one lease conveying the rights to develop and
                extract hydrocarbons from depths below 1,500 feet on approximately
                7,749.644 acres.


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          1 -
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·
            The
                “Baggett leases” refer to six leases conveying 50% of the rights to
                develop and extract hydrocarbons at any depth from approximately
                650.9
                acres.


·
            The
                “Driver lease” refers to one lease conveying the rights to develop and
                extract hydrocarbons at any depth from approximately 790.2
                acres.





The
      assigned leases all include provisions that allow their terms to be extended
      for
      so long as operations are conducted on the land with no cessation for more
      than
      180 consecutive days, in the case of the deep Allar lease, 90 consecutive days
      in the case of the Baggett leases and 60 consecutive days in the case of the
      Driver lease. “Operations” are defined as drilling, testing, completing,
      marketing, recompleting, deepening, plugging back or repairing a well in search
      for or in an endeavor to obtain production of oil, gas, sulphur or other
      minerals, or the production of oil, gas, sulphur or other minerals, whether
      or
      not in paying quantities.





In
      the
      letter agreement, Chesapeake agreed to initiate drilling operations on the
      land
      covered by the assigned leases before the end of their primary terms in February
      2007. If Chesapeake successfully completes a well capable of producing
      hydrocarbons in commercial quantities, the assignment of oil and gas leases
      will
      become permanent. There are no other specific provisions in the assignment
      governing expiration or termination. We cannot guarantee that Chesapeake will
      successfully develop the oil and gas reserves on the properties covered by
      the
      leases.





If
      Chesapeake successfully develops the property in accordance with the terms
      of
      the letter agreement, Chesapeake is entitled to recover all of the costs of
      drilling, completing, equipping and operating the first 10 wells, commonly
      called payout. After payout, we are entitled to a 25% working interest in
      Chesapeake’s interest in the wells. We also have the right to participate in any
      wells that Chesapeake drills after the first 10, with a 25% working interest
      if
      we elect to participate from the outset and pay our proportionate share of
      the
      costs, or we can back in to a 6.25% working interest after payout if we elect
      not to participate and pay our proportionate share.





The
      letter agreement also permits us to propose a well if Chesapeake fails to begin
      drilling a well on acreage covered by the assigned leases at least sixty days
      before the expiration of the terms of the assigned leases. Chesapeake may
      participate in any proposed well, so long as it does so within fifteen days
      of
      our proposal.





While
      we
      retained the shallow rights to all of the leases, and, pursuant to the terms
      of
      the letter agreement, we have the right to drill wells on the undeveloped
      portion of the leased properties, we do not have the funds to develop these
      rights. We did not conduct operations on the ninth lease conveying the rights
      to
      the shallow zone of the same acreage as the deep Allar lease, and it expired
      in
      2007.





Under
      the
      terms of the letter agreement, aside from initiating drilling operations,
      Chesapeake is required to:




·
            obtain
                a 3-D seismic survey over the area covered by the assigned leases
                at its
                own expense,


·
            provide
                interpretive data relating to the acreage covered by the assigned
                leases,
                and, in the initial well, provide an array of logs, including a magnetic
                imaging log and sidewall cores in the shallow zone of the assigned
                lease,


·
            assign
                to us our proportionate interest in wellbores according to the level
                of
                participation that we have elected,


·
            transport
                our gas for $0.50/mcf (1,000 cubic feet), which includes processing
                fees
                and costs, and market our gas for $0.03/mcf,
                and


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          2 -
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·
            once
                it has successfully completed a well capable of producing natural
                gas in
                commercial quantities, to immediately begin the process of building,
                or
                procuring, a pipeline to transport the gas to
                market.





Chesapeake
      drilled four wells on the assigned leases in 2007: two on the Baggett leases
      and
      two on the deep Allar leases. The wells on the Baggett leases were connected
      to
      a pipeline at the end of December, 2007. One well on the deep Allar lease was
      completed as a dry hole; the second was connected to a pipeline in January,
      2008. By drilling these four wells, Chesapeake extended the terms of the deep
      Allar lease and the Bagget leases.





Chesapeake
      did not initiate drilling operations on the land covered by the Driver lease
      before the Driver lease expired on February 4, 2007. Instead, Chesapeake
      obtained an agreement with the entity holding the top lease on the properties
      covered by the Driver lease. A top lease is a lease that becomes effective
      upon
      the termination of a prior lease. As a result of its agreement with the entity
      holding the top lease, upon the expiration of the Driver lease, Chesapeake
      obtained an interest of 68.75% in the top lease. The top lease is referred
      to in
      this discussion as the “new Driver lease”, which became effective on February 4,
      2007. Chesapeake has since increased its interest in the new Driver lease to
      80%, which increased our interest proportionately to 20% of the deep rights
      and
      80% of the shallow rights. This resulted in a reduction of the net acreage
      covered by the assigned leases from 8,865 acres to 8,233 acres. The new Driver
      lease will expire in February 2010.





As
      a
      result of Chesapeake’s actions, all of the acreage covered by the assigned
      leases has been secured beyond the original termination dates of the leases.
      However, as noted above, in order to continue the terms of the assigned leases
      beyond the original termination dates, continuous operations must be conducted for
      the
      periods of time specified in the lease s.
      Chesapeake has informed us that it intends to drill a third well on the deep
      Allar lease in April 2008. It is not required to drill again on the Baggett
      leases now that the two wells on that acreage are connected to a pipeline
      because the property is so small that it is only capable of having two
      wells.





Table
      1
      illustrates the number of net productive and dry exploratory and development
      wells that Chesapeake drilled during the last three fiscal years.





Table
      1


Net
                WellsYear
            Productive
            Dry
            Development2007
            2.5
            1
            0





As
      we
      noted above, once Chesapeake has recovered all of the costs of drilling,
      completing, equipping and operating the first 10 wells, Nathan Oil will be
      entitled to a 25% working interest in Chesapeake’s interest in the wells. Our
      working interests would include 25% in wells drilled on approximately 7,750
      acres covered by the deep Allar lease, 12.5% in wells drilled on approximately
      651 acres covered by the Baggett leases, and 20% in wells drilled on
      approximately 790 acres covered by the new Driver lease. Alternatively, Nathan
      Oil may, at any time before the first ten wells have paid out, elect to pay
      25%
      of the drilling, completing and operating costs, less any revenue earned from
      the wells, to the date of the election, to earn an immediate 25% working
      interest in the wells drilled as of the date of the election. In all
      subsequently drilled wells, Nathan Oil may participate by paying 25% of the
      costs of drilling, completing, equipping and operating the wells to earn a
      25%
      working interest in the wells, or it may elect to pay nothing toward these
      costs
      and earn a 6.25% working interest in these wells after payout. Chesapeake
      has made no representation that it will be successful in drilling, completing,
      equipping and operating any wells in accordance with the agreement.




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If
      Chesapeake does not commence drilling operations within 60 days from the
      expiration of a lease’s primary term, or from the expiration of the term
      provided for in the lease’s continuous development provision, then Nathan Oil
      has the right to drill a well under the terms of the letter
      agreement.





Upon
      the
      successful completion of a well capable of producing natural gas in commercial
      quantities, Chesapeake agreed to immediately begin building or procuring a
      pipeline to transport the natural gas to the market. We understand that
      Chesapeake has built the pipeline that is carrying our gas, but we have no
      formal confirmation from Chesapeake.





As
      is
      customary in the oil and gas industry, only a preliminary title review was
      conducted at the time Chesapeake entered into the agreement. Before it started
      its drilling operations, Chesapeake was responsible for examining the title
      of
      the drill site tract and curing any significant defects, if any, before
      proceeding with the operations.





The
      leasehold properties are subject to royalties, overriding royalties and other
      outstanding interests customary in the industry. The properties may also be
      subject to burdens such as liens incident to operating agreements and current
      taxes, development obligations under oil and gas leases and other encumbrances,
      easements and restrictions. We do not believe that any of these burdens will
      materially interfere with our use of these properties.





**Operations**





Getty
      Oil
      drilled eleven wellbores between 1975 and 1981 on the properties, for which
      we
      have no information, and we drilled one bore hole in 2002, the results of which
      were inconclusive. Chesapeake drilled four wells in 2007, three of which have
      recently been connected to a pipeline and one of which was completed as a dry
      hole. Chesapeake has just begun to produce oil and gas from the property and
      has
      not yet provided any production, revenue or payout reports. We expect the first
      reports early in April. We will not receive any oil and gas revenue until the
      first ten wells have paid out and we have earned our 25% of Chesapeake’s
      interest in the ten wells. The average cost of the four wells drilled to date
      is
      $3.2 million, so we don’t expect to reach payout soon. We have not retained the
      services of an engineer to determine if our property contains oil or gas
      reserves and we are unable to assure you that any such reserves
      exist.





We
      have
      no oil and gas reserves or production subject to long-term supply, delivery
      or
      similar agreements other than the letter agreement with Chesapeake. We have
      not
      filed estimates of our total proved oil and gas reserves with or included them
      in reports to any federal authority or agency but assume that Chesapeake has
      filed whatever they are required to file.





Once
      Chesapeake has completed a well capable of producing hydrocarbons in commercial
      quantities, it will have perpetuated its interest in the deep zone of the
      assigned leases and our interest in the properties will be limited to our right
      to a working interest in the wells and wellbores that Chesapeake completes.
      Our
      remaining leasehold interests will be confined to the shallow zone of the
      Baggett and new Driver leases. Table 2 illustrates Nathan Oil’s gross and net
      acres of developed and undeveloped gas and oil leases after Chesapeake has
      perpetuated its interest in the assigned leases.




Table 2


Shallow
                Zone AcreageDeveloped
                Acres
            
            Undeveloped
                AcresArea
            
            Gross
            
            Net
            
            Gross
            
            NetTexas
            
            0
            
            0
            
            1,441
            
            958




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**Competition**





We
      have
      no competitive presence in the oil and gas industry whatsoever. Most of our
      competitors have much greater experience than we have, are larger and have
      significantly greater financial resources, existing staff and labor forces,
      equipment, and other resources, including oil and gas producing properties,
      than
      we do. To date, we have earned no revenues from our operations and cannot assure
      that we ever will. We do not have the resources necessary to develop the limited
      properties we have.





Even
      if
      we had the resources necessary to develop our properties, the availability
      of a
      ready market for oil and gas depends on numerous factors beyond our control,
      including the extent of domestic production and imports of oil and gas,
      proximity and capacity of pipelines, and the effect of federal and state
      regulation of oil and gas sales, as well as environmental restrictions on
      exploration and usage of oil and gas.





**Government
      Regulation and Environmental Matters**





Oil
      and
      gas operations generally are subject to a number of federal, state and local
      regulations relating to the protection of the environment and to workplace
      health and safety. These types of operations are subject to extensive federal,
      state and local laws and regulations governing waste disposal, the release
      of
      emissions, the handling of hazardous substances, environmental protection and
      remediation and workplace exposure.





Because
      we have no operations, we believe that we are in substantial compliance with
      all
      such laws and do not anticipate that we will be required to spend any
      substantial amounts in the foreseeable future in order to meet environmental
      or
      workplace health and safety requirements.





Although
      no environmental claims have been made against us and we have not been named
      as
      a potentially responsible party by the EPA or any other entity, it is possible,
      as an owner of oil and gas leases, that we could be identified by the EPA,
      a
      state agency or one or more third parties as a potentially responsible party
      under CERCLA or under analogous state laws. If so, we could incur substantial
      litigation costs to prove that we were not responsible for the environmental
      damage or we could be required to pay costs to remediate the environmental
      damage if we are found to be responsible.





**Intellectual
      Property**





We
      do not
      own any patents, licenses, franchises, or concessions. Our leases call for
      the
      payment of royalties to the lessors, who are private landowners.





**Employees**





We
      have
      no employees. Our president, Richard Jeffs, who is also a director, our
      secretary, Shawne Malone, who is also a director, a company owned by our
      treasurer, John da Costa, and Susan Jeffs, the wife of our president, provide
      their administrative services to us. Messrs. Jeffs and Malone and Mrs. Jeffs
      provide their services without charge. Mr. da Costa’s company provides our
      accounting, reporting and administrative services on a contract at the rate
      of
      $7,500 per month plus disbursements.




**ITEM
              2.**
            **PROPERTIES**





Our
      office is located at 3416 Via Lido, Suite F, Newport Beach, California 92663.
      We
      pay $500 per month for our office on a month-to-month agreement.




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Nathan
      Oil’s registered office is located at 602 South Harbor Court, Granbury, Texas
      76048. We manage Nathan Oil’s operations from our Newport Beach
      office.





Through
      Nathan Oil, we have interests in eight leases covering approximately 9,191
      gross
      and approximately 8,233 net acres in the Rocksprings Prospect in the Val Verde
      Basin of Edwards County, Texas. Seven of the leases had a primary term of five
      years ending in February 2007; the eighth lease has a primary term ending in
      February 2010. All of the leases include provisions that allow the lease terms
      to be extended so long as operations are conducted on the properties covered
      by
      the leases. We believe that, through its drilling operations on the properties
      covered by the leases, Chesapeake has perpetuated the terms of Baggett leases
      until the wells cease to produce or the unit spacing is reduced from 640 acres
      and is conducting continuous operations on the deep Allar lease to perpetuate
      the terms of the lease. Chesapeake has an undivided 80% interest, rather than
      a
      100% interest, in the rights covered by the eighth lease (formerly the “Driver
      lease”, now the “new Driver lease”) through a top-lease that became effective
      when our lease expired on February 4, 2007. This new lease expires on February
      1, 2010. We had a ninth lease, the shallow Allar lease, which conveyed the
      rights to the shallow zone of the same acreage as the deep Allar lease. We
      did
      not have the resources to conduct operations on this lease and let it expire
      in
      2007, which reduced our interest in the shallow zone to 1,441 gross acres and
      958 net acres.





All
      of
      the leases with the exception of the deep Allar lease require the payment of
      a
      royalty of one-sixth of all oil produced or, at the option of the lessor, the
      payment of the average posted market price of such interest, less one-sixth
      of
      the cost to render the oil marketable, one-sixth of the amount realized for
      the
      sale of gas and casinghead gas, and one-tenth, either in kind or in value,
      of
      all other minerals that are mined and marketed (with the exception of sulphur
      that is mined and marketed, in which case the royalty is $1.00 per long ton).
      If, at any time after the expiry of the primary term, all the wells are shut-in
      for a period of 90 consecutive days and no operations are conducted on the
      leased property, then at or before the expiry of the 90-day period, we must
      pay
      the lessor a royalty of $1.00 for each acre of land covered by the leases.
      We
      are entitled to pool or unitize any land covered by six of the leases with
      any
      other land or leases to establish units of 80 surface acres, or 40 acres in
      the
      case of one lease.





The
      deep
      Allar lease requires the payment of a royalty of one-fifth of all oil and
      associated products, one-fifth of the value of all gas (delivered free of cost
      of production and delivery) and one-fifth of the value of all plant products
      (including residue gas). If residue gas is produced, the lessor must receive
      not
      less than one-fifth of the value of the gas at the current market price. The
      lessor may, at its option, take the gas royalty in kind. If at any time there
      is
      a gas well on the property, and the well is shut-in, we may pay an annual
      royalty of $5.00 for each acre of land covered by the deep Allar lease and,
      for
      a period of one year from the date that we make the payment, it will be
      considered that gas is being produced in paying quantities. We may continue
      paying this “shut-in royalty” on an annual basis for a period of no more than
      two years. The deep Allar lease will remain in force at the expiry of the
      primary term or the termination of continuous development so long as we are
      engaged in operations for drilling, mining or reworking any well on the property
      and drilling, mining or reworking do not cease for a period of more than 90
      days
      or as long as oil, gas or other minerals are produced. “Continuous development”
is defined in this lease as the commencement of drilling operations of a new
      well within 180 days of completion of the last well drilled on the property.
      We
      are entitled to unitize or pool the deep Allar lease and the property covered
      by
      it with other leases and properties in the same area or field. We have agreed
      to
      indemnify the lessor for any damages incurred to persons or property arising
      out
      of our operations.




Chesapeake ** has
      conducted a 3-D seismic survey over the lands covered by the leases and agreed
      to give us an array of logs, including a magnetic imaging log, and sidewall
      cores in the shallow oil zone covered by the leases and not transferred to
      Chesapeake. We sent the data to our petroleum consultants for review and
      concluded after discussing the data with them that drilling into the shallow
      zone would be unproductive.




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We
      have
      assigned an overriding royalty interest in all of the leases described above
      to
      Florida Energy I, Inc., Richard Jeffs, our president and a director, and Marc
      Bruner. The assignment to Florida Energy I, Inc. assigns an overriding royalty
      interest equal to 2% of all oil, gas and other minerals produced and saved
      for
      our benefit pursuant to all of the leases. The assignments to Mr. Jeffs and
      Mr.
      Bruner assign to each of them an overriding royalty interest equal to 3.166665%
      of all oil, gas and other minerals produced and saved for our benefit pursuant
      to all of the leases except the deep Allar lease and equal to 1.5% of all oil,
      gas and other minerals produced and saved for our benefit pursuant to the deep
      Allar lease. We agreed to assign the royalty interests to Florida Energy I,
      Inc., Mr. Jeffs and Mr. Bruner in 2001 in exchange for their efforts in
      identifying, negotiating and acquiring the leases and arranging the financing
      for the acquisitions. The assigned leases have just begun to generate royalties
      in 2008. The royalty interests in the leases that expired in 2007 expired at
      the
      same time. The surviving royalty interests cover oil, gas and other minerals
      produced and saved for our benefit from seven leases covering approximately
      8,401 gross acres (8,075 net acres).





**ITEM
              3.**
            **LEGAL
                PROCEEDINGS**





While
      we
      may, from time-to-time, be involved in legal proceedings relating to our
      business, we are not involved in any such proceedings as of the date of this
      filing.





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





Not
      applicable.





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**PART
      II**





**ITEM
              5.**
            **MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER****MATTERS
                AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY****SECURITIES**




**Market
      Information**





Our
      common stock has no public market. We planned to apply for quotation of our
      common stock on the OTC Bulletin Board upon the completion of the spin-off,
      however, we have not yet done so and we can provide no assurance that our shares
      will be quoted on the OTC Bulletin Board or, if quoted, that a public market
      will develop.





None
      of
      our common stock is subject to outstanding options or warrants to purchase,
      or
      securities convertible into, common stock. None of our common stock may be
      sold
      pursuant to Rule 144 under the Securities Act of 1933. All of our common stock
      became freely tradable on September 17, 2007, the date that the Securities
      and
      Exchange Commission declared effective the registration statement we filed
      in
      conjunction with the spin-off.





**Dividends**





We
      have
      not paid cash dividends since our inception and we do not contemplate paying
      dividends in the foreseeable future. We intend to retain any future earnings
      to
      finance the growth and development of our business. Any future determination
      to
      pay cash dividends will be at the discretion of our board of directors and
      will
      depend upon our financial condition, results of operation, capital requirements,
      contractual restrictions, general business conditions and other factors that
      our
      board of directors may deem relevant.





According
      to section 78.288 of the Nevada Revised Statutes, a corporation cannot
      distribute to its shareholders if, after the distribution, the corporation
      would
      not be able to pay its debts as they become due in the usual course of business
      or, except as otherwise specifically allowed by the articles of incorporation,
      the corporation’s total assets would be less than the sum of its total
      liabilities plus the amount that would be needed, if the corporation were to
      be
      dissolved at the time of distribution, to satisfy the preferential rights upon
      dissolution of shareholders whose preferential rights are superior to those
      receiving the distribution.





**Shareholders**





As
      of
      March 24, 2008, we had approximately 90 record holders of our common stock.
      This
      does not include an indeterminate number of shareholders whose shares are held
      by brokers in street name.





**Sales
      of Unregistered Securities**





Not
      applicable.





**Equity
      Compensation Plan Information**





Not
      applicable.




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**ITEM
              6.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION.**





**GENERAL**





We
      are
      involved in the oil and gas exploration business. Through our subsidiary we
      have
      an interest in several oil and gas leases in the state of Texas.





We
      are in
      the early exploration stage. In an exploration stage company, management devotes
      most of its time to conducting exploratory work and developing its business.
      Our
      continuation as a going concern and ability to emerge from the exploration
      stage
      with any planned principal business activity is dependent upon our continued
      financial support, ability to attain profitable operations and ability to raise
      equity financing.





“We”,
      “us” or “our” where used throughout this discussion means Rock City Energy Corp.
      and its subsidiaries.





**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**





The
      preparation of consolidated financial statements in conformity with generally
      accepted accounting principles of the United States (GAAP) requires estimates
      and assumptions that affect the reported amounts of assets and liabilities,
      revenues and expenses, and related disclosures of contingent assets and
      liabilities in the consolidated financial statements and accompanying notes.
      The
      SEC has defined a company’s critical accounting policies as the ones that are
      most important to the portrayal of the company’s financial condition and results
      of operations, and which require the company to make its most difficult and
      subjective estimates, often as a result of the need to make estimates of matters
      that are inherently uncertain. Based on this definition, we have identified
      the
      critical accounting policies and judgments addressed below. We also have other
      key accounting policies, which involve the use of estimates, judgments, and
      assumptions that are significant to understanding our results. Although we
      believe that our estimates, assumptions, and judgments are reasonable, they
      are
      based upon information presently available. Actual results may differ
      significantly from these estimates under different assumptions, judgments,
      or
      conditions.





**Unproved
      Oil and Gas Properties**





We
      follow
      the full cost method of accounting whereby all costs related to the acquisition
      and development of oil and gas leases and acquisition and development of oil
      and
      gas properties are capitalized into a single cost center (full cost pool).
      These
      costs include lease acquisition costs, geological and geophysical expenses,
      overhead directly related to exploration and development activities, and the
      costs of drilling both productive and non-productive wells. Proceeds from
      property sales are generally credited to the full cost pool without gain or
      loss
      recognition unless the sale would significantly alter the relationship between
      capitalized costs and the proved reserves attributable to these costs. A
      significant alteration would typically involve a sale of 25% or more of the
      proved reserves related to a single full cost pool. We did not incur any costs
      associated with production or general corporate activities nor did we capitalize
      any internal costs during the year ended December 31, 2007 or the period from
      August 10, 2006 (inception) to December 31, 2006.





When
      we
      have exploration and development costs we will capitalize them into a full
      cost
      pool. We will compute depletion on the full cost pool using the
      units-of-production method based upon estimated proven oil and gas reserves.
      We
      will withhold the costs of unproved properties from the depletion base until
      we
      determine whether proved reserves can be assigned to the properties. We review
      the properties quarterly for impairment. During the year ended December 31,
      2007
      and the period from August 10, 2006
      (inception) to December 31, 2006, we did not record any impairment charges
      against our unproven oil and gas properties.


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When
      we
      have well costs, we will transfer the total well costs to the depletable pool
      even when all targeted zones have not been fully evaluated. For depletion and
      depreciation purposes, we will convert relative volumes of oil and gas
      production and reserves at the energy equivalent rate of six thousand cubic
      feet
      of natural gas to one barrel of crude oil.





Under
      the
      full cost method of accounting, capitalized oil and gas property costs less
      accumulated depletion and net of deferred income taxes (full cost pool) may
      not
      exceed a ceiling amount equal to the present value, discounted at 10%, of
      estimated future net revenues from proved oil and gas reserves. Should the
      full
      cost pool exceed this ceiling, impairment is recognized. The present value
      of
      estimated future net revenues is computed by applying current oil and gas prices
      to estimated future production of proved oil and gas reserves as of period-end,
      less estimated future expenditures to be incurred in developing and producing
      the proved reserves assuming the continuation of existing economic conditions.
      However, subsequent commodity price increases may be used to calculate the
      ceiling value.





We
      will
      accrue the future cash outflows associated with asset retirement obligations
      in
      the balance sheet along with the cost, or estimated fair value, if lower, of
      unproved properties and the cost of any properties not being amortized. At
      December 31, 2007 and 2006, we did not have any material asset retirement
      obligations.





Estimated
      reserve quantities and future net cash flows have the most significant impact
      on
      the results of operations because we use these reserve estimates in providing
      a
      measure of the overall value of our oil and gas properties. Estimating
      accumulations of gas and oil is complex and is not exact because of the numerous
      uncertainties inherent in the process. The process relies on interpretations
      of
      available geological, geophysical, engineering and production data. The extent,
      quality and reliability of these technical data can vary. The process also
      requires certain economic assumptions, some of which are mandated by the
      Securities and Exchange Commission, such as gas and oil prices, drilling and
      operating expenses, capital expenditures, taxes and availability of funds.
      The
      accuracy of a reserve estimate is a function of the quality and quantity of
      available data, the interpretation of that data, the accuracy of various
      mandated economic assumptions, and the judgment of the persons preparing the
      estimate. We have not conducted a reserves estimate on our properties because
      our operator is developing the properties and we have not earned our 25%
      interest in the wells.





As
      the
      operator successfully develops the properties in accordance with the terms
      of
      our agreement, the operator is entitled to recover all of the costs of drilling,
      completing, equipping and operating the first 10 wells. Thereafter, we will
      be
      entitled to a 25% working interest in Chesapeake’s interest in the wells. Once
      we are entitled to our working interest, gas and oil prices, revenue, taxes,
      development expenditures, operating expenses and reserves of recoverable gas
      and
      oil most likely will vary from our estimates, and any significant variance
      could
      materially affect the quantity and present value of our reserves. We may adjust
      estimates of proved reserves to reflect production history, acquisitions,
      divestitures, ownership interest revisions, results of exploration and
      development and prevailing gas and oil prices. Our reserves may be susceptible
      to drainage by operators on adjacent properties.




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**Financial
      Instruments**





***Fair
      Value of Financial Instruments***




Our
      financial instruments include cash, accounts payable, accrued liabilities and
      accrued professional fees. The fair value of these financial instruments
      approximates their carrying values due to their short maturities.





***Concentration
      of Credit Risk***





The
      financial instrument that potentially subjects us to a significant concentration
      of credit risk consists principally of cash. At December 31, 2007 and 2006,
      we
      had approximately $472,000 and $100,000, respectively in cash that was not
      insured. This cash is on deposit with a major Canadian chartered bank. As part
      of our cash management process, we perform periodic evaluations of the relative
      credit standing of this financial institution. We have not experienced any
      losses in cash balances and do not believe that our cash is exposed to any
      significant credit risk.





**Recent
      Accounting Pronouncements**





In
      February 2006, the Financial
      Accounting Standards Board ( FASB)
      issued Statement of Financial Accounting Standard No. 155 Accounting for Certain
      Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and
      140.
      This Statement amends FASB Statements No. 133, Accounting for Derivative
      Instruments and Hedging Activities, and No. 140, Accounting for Transfers and
      Servicing of Financial Assets and Extinguishments of Liabilities. This statement
      resolves issues addressed in Statement 133 Implementation Issue No. D1,
      Application of Statement 133 to Beneficial Interests in Securitized Financial
      Assets. This statement was effective for us on January 1, 2007. Adoption of
      SFAS
      155 did not have a material impact on our financial position or results of
      operations.





In
      March
      2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets
      - an amendment of FASB Statement No. 140. SFAS 156 amends SFAS No. 140,
      Accounting for Transfers and Servicing of Financial Assets and Extinguishment
      of
      Liabilities, with respect to accounting for separately recognized servicing
      assets and servicing liabilities. SFAS 156 was effective for us on January
      1,
      2007. We do not have any servicing assets or servicing liabilities and,
      accordingly, the adoption of SFAS 156 did not have a material impact on our
      financial position or results of operations.




In
      July 2006, the FASB issued FASB Interpretation No. 48 (or FIN 48),
      Accounting for Uncertainty in Income Taxes. Interpretation No. 48 clarifies
      the accounting for uncertainty in income taxes recognized in an enterprise's
      financial statements in accordance with SFAS No. 109, Accounting for Income
      Taxes. Interpretation No. 48 prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. Interpretation
      No. 48 also provides guidance on derecognition, classification, interest
      and penalties, accounting in interim periods, disclosure and transition.
      Interpretation No. 48 was effective beginning January 1,
      2007.




We
      adopted the provisions of FIN 48 on January 1, 2007. FIN 48 provides
      detailed guidance for the financial statement recognition, measurement and
      disclosure of uncertain tax positions recognized in the financial statements
      in
      accordance with SFAS 109. Tax positions must meet a “more-likely-than-not”
recognition threshold at the effective date to be recognized upon the adoption
      of FIN 48 and in subsequent periods. Our adoption of FIN 48 had an immaterial
      impact on our consolidated financial position and did not result in our
      recording unrecognized tax benefits. Accordingly, we have accrued no
      corresponding interest and penalties. We file income tax returns in the U.S.
      federal and state jurisdictions. No federal or applicable state income tax
      examinations are underway in these jurisdictions. We are no longer subject
      to
      U.S. federal income tax examinations by the Internal Revenue Service for the
      tax
      years before 2003 and for state and local tax authorities for the years before
      2002. Prior years’ net operating losses, however, remain open for
      examination.


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In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.
      SFAS 157 defines fair value, establishes a framework for measuring fair value
      and enhances disclosures about fair value measures required under other
      accounting pronouncements, but does not change existing guidance as to whether
      or not an instrument is carried at fair value. SFAS No. 157 will be
      effective for us on January 1, 2008. We do not expect our adoption of SFAS
      157
      to have a material impact on our consolidated financial statements.




In
      September 2006, the FASB issued SFAS 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
      No. 87, 88, 106, and 132(R). This statement requires an employer to
      recognize the over-funded or under-funded status of a defined benefit
      post-retirement plan as an asset or liability in its statement of financial
      position, and to recognize changes in that funded status in the year in which
      the changes occur through comprehensive income of a business entity. This
      statement also requires an employer to measure the funded status of a plan
      as of
      the date of its year-end statement of financial position, with limited
      exceptions. We will be required to initially recognize the funded status of
      a
      defined benefit postretirement plan and to provide the required disclosures
      as
      of the end of the fiscal year ending after December 15, 2006. The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008, or fiscal 2009 for us. We do
      not expect our adoption of SFAS 158 to have a material impact on our
      consolidated financial statements.




In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities—Including an amendment of FASB Statement
      No. 115. SFAS 159 permits entities to choose to measure many financial
      instruments and certain other items at fair value. Unrealized gains and losses
      on items for which the fair value option has been elected must be recognized
      in
      earnings at each subsequent reporting date. SFAS 159 will be effective for
      us on
      January 1, 2008. We do not expect our adoption of SFAS 159 to have a
      material impact on our consolidated financial statements.




In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations,
      which replaces SFAS 141, Business Combinations, which requires an acquirer
      to
      recognize the assets acquired, the liabilities assumed, and any non-controlling
      interest in the acquiree at the acquisition date, measured at their fair values
      as of that date, with limited exceptions. This statement also requires the
      acquirer in a business combination achieved in stages to recognize the
      identifiable assets and liabilities, as well as the non-controlling interest
      in
      the acquiree, at the full amounts of their fair values. SFAS 141(R) makes
      various other amendments to authoritative literature intended to provide
      additional guidance or to confirm the guidance in that literature to that
      provided in this statement. This statement applies prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008. SFAS
      141 (R) will be effective for us on January 1, 2009. We do not expect the
      adoption of SFAS 141(R) to have a significant impact on our consolidated
      financial statements.




In
      December 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
      consensus on Issue No. 07-1, Accounting for Collaborative Arrangements. The
      EITF concluded on the definition of a collaborative arrangement and that
      revenues and costs incurred with third parties in connection with collaborative
      arrangements would be presented gross or net based on the criteria in EITF
      99-19
      and other accounting literature. Companies are also required to disclose the
      nature and purpose of collaborative arrangements along with the accounting
      policies and the classification and amounts of significant financial-statement
      amounts related to the arrangements. Activities in the arrangement conducted
      in
      a separate legal entity should be accounted for under other accounting
      literature; however required disclosure under EITF 07-1 applies to the entire
      collaborative agreement. This issue is effective for financial statements issued
      for fiscal years beginning after December 15, 2008, and interim periods
      within those
      fiscal years, and is to be applied retrospectively to all periods presented
      for
      all collaborative arrangements existing as of the effective date. EITF 07-1
      will
      be effective for us on January 1, 2009. We do not expect the adoption of EITF
      07-1 to have a significant impact on our consolidated financial statements.




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In
      December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements, which amends Accounting Research Bulletin
      No. 51, Consolidated Financial Statements, to improve the relevance,
      comparability, and transparency of the financial information that a reporting
      entity provides in its consolidated financial statements. SFAS 160 establishes
      accounting and reporting standards that require the ownership interests in
      subsidiaries not held by the parent to be clearly identified, labeled and
      presented in the consolidated statement of financial position within equity,
      but
      separate from the parent’s equity. This statement also requires the amount of
      consolidated net income attributable to the parent and to the non-controlling
      interest to be clearly identified and presented on the face of the consolidated
      statement of income. Changes in a parent’s ownership interest while the parent
      retains its controlling financial interest must be accounted for consistently,
      and when a subsidiary is deconsolidated, any retained non-controlling equity
      investment in the former subsidiary must be initially measured at fair value.
      The gain or loss on the deconsolidation of the subsidiary is measured using
      the
      fair value of any non-controlling equity investment. The statement also requires
      entities to provide sufficient disclosures that clearly identify and distinguish
      between the interests of the parent and the interests of the non-controlling
      owners. This statement applies prospectively to all entities that prepare
      consolidated financial statements and applies prospectively for fiscal years,
      and interim periods within those fiscal years, beginning on or after
      December 15, 2008. SFAS 160 will be effective for us on January 1, 2009. We
      do not expect adoption of SFAS 160 to have a significant impact on our
      consolidated financial statements.




In
      June 2007, the EITF of the FASB reached a consensus on Issue No. 07-3,
      Accounting for Nonrefundable Advance Payments for Goods or Services Received
      for
      Use in Future Research and Development Activities. EITF 07-3 requires that
      non-refundable advance payments for goods or services that will be used or
      rendered for future research and development activities should be deferred
      and
      capitalized. As the related goods are delivered or the services are performed,
      or when the goods or services are no longer expected to be provided, the
      deferred amounts would be recognized as an expense. This issue is effective
      for
      financial statements issued for fiscal years beginning after December 15,
      2007 and earlier application is not permitted. This consensus is to be applied
      prospectively for new contracts entered into on or after the effective date.
      EITF 07-03 will be effective for us on January 1, 2008. The pronouncement is
      not
      expected to have a material effect on our consolidated financial statements.




**OUR
      OBJECTIVES AND AREAS OF FOCUS**





We
      were
      incorporated on August 10, 2006 as Vallenar Holdings, Inc. and changed our
      name
      to Rock City Energy Corp. on January 26, 2007. We did not have any operations
      between August 10 and August 24, 2006. Between August 10, 2006, and December
      31,
      2007, we had no revenue and accumulated a deficit of $263,197.




On
      August
      24, 2006, we acquired a 51.53% interest in Vallenar Energy Corp., a corporation
      organized in the State of Nevada on January 27, 1999. Vallenar owns all of
      Nathan Oil Operating Co. LLC, a limited liability company organized in the
      State
      of Texas on October 31, 2001. Nathan Oil Operating Co. LLC is the general
      partner of Nathan Oil Partners LP, a limited partnership formed in the State
      of
      Texas on October 31, 2001. Vallenar is the only limited partner. This structure
      is illustrated in the following diagram.




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We
      are a
      holding company based in Newport Beach, California. On September 20, 2006,
      our
      former parent, Brek Energy Corporation, disclosed that it had entered into
      an
      Agreement and Plan of Merger with Gasco Energy, Inc. and Gasco Acquisition,
      Inc.
      As a condition of the merger, Brek agreed to spin off all of its shares of
      our
      capital stock to its shareholders. Brek completed the spin-off on November
      30,
      2007.





Through
      Vallenar, we have interests in the deep zone in eight oil and gas leases and
      in
      the shallow zone in seven oil and gas leases covering 9,191 gross acres (8,233
      net deep acres and 958 net shallow acres) in the Rocksprings Prospect in the
      Val
      Verde Basin of Edwards County, Texas. In this discussion, when we discuss the
      deep rights, we mean the rights to develop and extract hydrocarbons from depths
      below 1,500 feet. When we discuss the shallow rights, we mean the rights to
      develop and extract hydrocarbons from the surface to 1,500 feet. The eight
      leases are designated, for purposes of this discussion, as follows:





·
            The
                deep Allar lease is one lease conveying the rights to develop and
                extract
                hydrocarbons from depths below 1,500 feet on approximately 7,749.644
                acres.


·
            The
                Baggett leases refer to six leases conveying the rights to develop
                and
                extract hydrocarbons at any depth from approximately 650.9 acres.


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·
            The
                new Driver lease refers to one lease conveying the rights to develop
                and
                extract hydrocarbons at any depth from approximately 158 deep acres
                and
                632 shallow acres. The original Driver Lease, comprising 790 gross
                and net
                acres, expired in February 2007. Our operator obtained a new lease
                covering the same acreage and has an undivided 80% (68.75% until
                November
                2007) interest in the mineral rights. Our proportionate interest
                in the
                new Driver lease is 25% of the operator’s interest (158 acres) in the deep
                rights, or a net interest of 20%, and 100% interest (632 acres) in
                the
                shallow rights, or a net interest of 80%. We have the right to a
                pro rata
                interest in any additional interest that the operator
                acquires.





The
      deep
      Allar lease, the Baggett leases and the new Driver lease all include provisions
      that allow their primary terms to be extended for so long as operations are
      conducted on the land with no cessation for more than 180 consecutive days
      in
      the case of the deep Allar lease, 90 consecutive days in the case of the Baggett
      leases, and 60 consecutive days in the case of the new Driver lease. Operations
      are defined as drilling, testing, completing, marketing, recompleting,
      deepening, plugging back or repairing of a well in search for, or in an endeavor
      to obtain production of, oil, gas, sulphur or other minerals, or the production
      of oil, gas, sulphur or other mineral, whether or not in paying quantities.





We
      had an
      interest in a ninth lease, the shallow Allar lease, covering the same acreage
      as
      the deep Allar lease, but did not conduct the work that would have extended
      the
      term of the lease, which expired in 2007.





Our
      goal
      is to develop our properties to fully exploit all of their resources, but we
      have not been able to do this to date because we lack working capital. Our
      plan
      is to earn revenue by assigning our rights to develop the properties covered
      by
      our leases, rather than by undertaking the expense and the risk of the
      exploration and development. Accordingly, on May 8, 2006, we entered into a
      letter agreement with Chesapeake Exploration Limited Partnership for the
      exploration and development of the deep rights associated with the deep Allar
      lease, the Baggett leases and the original Driver lease. In conjunction with
      the
      letter agreement, we executed an assignment of the deep Allar lease and the
      deep
      rights included in the Baggett leases and the original Driver lease
      (collectively, the assigned leases) to Chesapeake on June 9, 2006. The
      assignment is subject to all the applicable terms and provisions of the letter
      agreement.





In
      the
      letter agreement, Chesapeake agreed to initiate drilling operations on the
      land
      covered by the assigned leases before the end of their primary terms in February
      2007. If Chesapeake successfully completes a well capable of producing
      hydrocarbons in commercial quantities, Chesapeake will perpetuate the assignment
      of the assigned leases. No other specific provisions in the assignment govern
      expiration or termination. We cannot guarantee that Chesapeake will successfully
      develop the oil and gas reserves on the properties covered by the assigned
      leases.





If
      Chesapeake successfully develops the properties in accordance with the terms
      of
      the letter agreement, Chesapeake is entitled to recover all of the costs of
      drilling, completing, equipping and operating the first 10 wells, otherwise
      known as payout. Thereafter, we are entitled to a 25% working interest in
      Chesapeake’s interest in the wells. We have the right to participate in any
      wells that Chesapeake drills after the first 10, with a 25% working interest
      if
      we elect to participate from the outset and pay our proportionate share of
      the
      costs, or a 6.25% working interest after payout if we elect not to participate
      and pay our proportionate share.





The
      letter agreement permits us to propose a well if Chesapeake fails to begin
      drilling a well on acreage covered by the assigned leases at least sixty days
      before the expiration of the terms of the assigned leases. Chesapeake may
      participate in any proposed well, so long as it consents within fifteen days
      of
      our proposal.


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While
      we
      retained the shallow rights to all of the leases and have, under the terms
      of
      the letter agreement, the right to drill wells on the undeveloped portion of
      the
      leased properties, we do not have the funds to develop these
      rights.





Under
      the
      terms of the letter agreement, aside from initiating drilling operations,
      Chesapeake is required to:





●
                obtain a 3-D seismic survey over the area covered by the assigned
                leases
                at its own expense,●
                provide interpretive data relating to the acreage covered by the
                assigned
                leases, and, in the initial well, provide an array of logs, including
                a
                magnetic imaging log and sidewall cores in the shallow zone of the
                assigned leases,●
                assign to us our proportionate interest in wellbores according to
                the
                level of participation that we have elected,●
                transport our gas for $0.50/mcf (mcf means 1,000 cubic feet), which
                includes processing fees and costs, and market our gas for $0.03/mcf,
                and●
                immediately begin the process of building or procuring a pipeline
                to
                transport the gas to market once it has successfully completed a
                well
                capable of producing natural gas in commercial
                quantities.




Chesapeake
      has drilled four wells—two on the acreage covered by the Baggett leases, and two
      on the acreage covered by the deep Allar lease. In 2007, Chesapeake paid shut
      in
      royalties to perpetuate the terms of the Baggett leases and conducted continuous
      operations to perpetuate the terms of the deep Allar lease. One of the wells
      on
      the Allar acreage was completed as a dry hole and the second was connected
      to a
      pipeline on January 10, 2008. The two wells on the Baggett leases were connected
      to a pipeline on December 21, 2007, thus perpetuating the terms of the Baggett
      leases. We have not yet received any payout information from Chesapeake.
      Chesapeake has informed us that they intend to drill a third well on the Allar
      acreage in April, 2008, and to continue to maintain the 180-day continuous
      development provision of the lease.





Chesapeake
      did not initiate drilling on the property covered by the original Driver lease
      that we assigned to it. Instead, Chesapeake, through a partner, top-leased
      the
      acreage covered by the original Driver lease to February 2010 but obtained
      only
      an undivided 68.75% interest in the oil, gas and all other mineral rights.
      Our
      proportionate interest in the new Driver lease is 25% of Chesapeake’s interest
      in the deep rights and 100% of Chesapeake’s interest in the shallow rights. We
      are entitled to our proportionate share of any additional interest that
      Chesapeake acquires in the new Driver lease. Chesapeake informed us in November
      2007 that they acquired an additional 11.25% interest in the new Driver lease,
      for a total of 80%, which increases our interest in the deep rights to 20%
      and
      in the shallow rights to 80%. We have not seen the agreement under which
      Chesapeake takes its interest in the new Driver lease and are relying entirely
      on the terms of the letter agreement and Chesapeake’s representations that we
      have an interest in the new Driver lease.





**OPERATIONS
      REVIEW**




We
      had a
      net loss of $255,718 during the year ended December 31, 2007. At December 30,
      2007, we had a cash balance of $472,108. When our cash balance is offset against
      our current obligations of $17,663 in accounts payable, $1,903 in accrued
      liabilities, $28,117 in accrued professional fees and $8,007 due to a related
      party, we are left with working capital of $416,418 at December 31,
      2007.





We
      believe that our cash and cash equivalents as of the date of this filing are
      adequate to satisfy our working capital needs for the next twelve
      months.




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Our
      independent registered public accounting firm has added an explanatory paragraph
      to the audit opinion issued in connection with our consolidated financial
      statements for the year ended December 31, 2007 which states that our ability
      to
      achieve and maintain profitability and positive cash flow is dependent upon
      our
      ability to locate profitable oil and gas properties, generate revenue from
      oil
      and gas production and control our drilling, production and operating costs.
      We
      plan to mitigate our losses in the future through an agreement with Chesapeake
      whereby Chesapeake has agreed to initiate drilling operations on the oil and
      gas
      properties and pay the exploration, drilling, completing, equipping and
      operating costs associated with developing the oil and gas properties. Based
      upon our current plans, we expect to incur operating losses in the future and
      cannot assure that we will be able to obtain additional financing, locate
      profitable oil and gas properties, generate revenue from oil and gas production
      or control drilling, production or operating costs, or that Chesapeake will
      initiate drilling operations or pay for the exploration, drilling, completing,
      equipping or operating costs associated with developing the oil and gas
      properties. Our consolidated financial statements do not include any adjustments
      that might be necessary if we are unable to continue as a going
      concern.





**Related-party
      transactions**





At
      December 31, 2007, we owed $8,007 to a company controlled by one of our officers
      for administrative fees. During the year ended December 31, 2007, we accrued
      $7,950 in administrative fees to this company.





During
      the year ended December 31, 2007, we paid $200,000 in management fees to our
      former parent company.





***Overriding
      Royalty Interest***





Our
      president has overriding royalty interests in all oil, gas and other minerals
      produced of 3.17% in six of the oil and gas leases and 1.5% in one of the oil
      and gas leases as a result of an agreement made in 2001.





**Comparison
      of the year ended December 31, 2007 and the period from August 10, 2006
      (inception) to December 31, 2006**





***Overall
      results of operations***





During
      the year ended December 31, 2007, we had a net loss of $255,718, primarily
      due
      to professional, regulatory and administrative costs. During the period from
      August 10, 2006 (inception) to December 31, 2006 we had a net loss of $7,479,
      primarily due to professional costs.





***Expenses***





During
      the year ended December 31, 2007, we incurred $260,835 in expenses:
      approximately $9,000 for administrative services, primarily accounting services;
      approximately $16,000 and $36,000 for regulatory and professional fees in
      conjunction with the filing of a registration statement and our third quarter
      report on Form 10-QSB; and $200,000 for the professional, management and
      administration costs associated with our spin-off from Brek.





During
      the period from August 10, 2006 (inception) to December 31, 2006, we incurred
      $7,648 in expenses, of which approximately $7,000 was for professional
      fees.




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          17 -
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We
      expect
      our administrative and professional expenses to decrease during the next 12
      months by approximately $100,000 because we don’t have any more spin-off
      expenses, but our administrative and professional fees will increase to pay
      for
      our ongoing accounting and auditing costs, and to update our registration
      statement and continue filing reports required by the Securities Exchange Act
      of
      1934.





***Interest
      Income***




During
      the year ended December 31, 2007, we earned interest income of $3,448 on our
      bank deposits. We expect our interest income to decline as we use the funds
      on
      deposit to cover our expenses.





We
      earned
      interest income of $2,268 for the period from August 10, 2006 (inception) to
      December 31, 2006, on a note receivable from Brek.





**LIQUIDITY
      AND CAPITAL RESOURCES AND PLAN OF OPERATION**





**Liquidity
      and Capital Resources**





In
      the
      notes to our consolidated financial statements as of December 31, 2007, we
      caution that our ability to continue as a going concern is uncertain. We have
      not generated any revenue to cover our expenses and have accumulated a deficit
      of $263,197. As of December 31, 2007, we had $55,690 in current liabilities.
      When these liabilities are offset against our current assets of $472,108 cash,
      we are left with working capital of $416,418. On June 7, 2007, we issued
      4,000,000 shares of our common stock at $0.15 per share to Brek for $600,000
      cash. The funds we raised in this offering should be adequate to support our
      operations for the next 12 months. We are in the early stage of exploration
      and
      we have not produced any revenue from our oil and gas properties. Thus far,
      management has devoted most of its time to conducting exploratory work and
      developing our business. Our plans over the next twelve months include raising
      equity capital and exploring and developing our properties through our agreement
      with Chesapeake.





We
      are
      not certain that Chesapeake will be able to develop our properties, profitably
      or at all. Since May 8, 2006, the date of the letter agreement with Chesapeake,
      Chesapeake has begun drilling operations on the properties covered by seven
      leases, designing a pipeline, and negotiating with various landowners for
      permission to cross their lands to build the pipeline. If Chesapeake
      successfully obtains the appropriate easements and builds the pipeline, we
      expect that Chesapeake can sell the gas produced. If Chesapeake can develop
      the
      properties, the fluctuation of gas prices will impact the amount of revenue
      earned from the leases. If the resources required to develop the wells are
      in
      high demand, the development costs will increase, which will likely delay our
      earning any revenue. We are dependent on Chesapeake to both produce the gas
      and
      buy the gas produced. We cannot be certain that we will ever receive revenue
      from our agreement with Chesapeake.





Table
      3
      summarizes our sources and uses of cash for the following periods:




Table 3


Sources
              and Uses of CashYear
                Ended
            
            August
                10, 2006
              (Inception)
                toDecember
                31, 2007
            
            December
                31, 2006Net
                cash provided by investment activities
            
            $
            —
            
            $
            160,548Net
                cash provided by financing activities
            
            
            600,000
            
            
            —Net
                cash used in operating activities
            
            
            (228,183
            )
            
            (60,257
            )Net increase in cash
            
            $
            371,817
            
            $
            100,291





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          18 -
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***Net
      cash used in operating activities***





We
      used
      $228,183 of cash for operations during the year ended December 31, 2007,
      primarily to pay $200,000 in professional fees and $5,904 to a former related
      party, and to decrease our minority interest by $1,669. These expenditures
      were
      offset by increases in accounts payable of $13,588, accrued liabilities of
      $1,903, and accrued professional fees of $19,617.





***Net
      cash used in investment activities***





During
      the year ended December 31, 2007, we had no investment activities.





***Net
      cash provided by financing activities***





During
      the year ended December 31, 2007, we sold 4 million shares of our common stock
      at $0.15 per share and received cash of $600,000.





**Plan
      of Operation**





Chesapeake
      paid a shut in royalty to extend the terms of the Baggett leases and has
      conducted continuous operations on the deep Allar acreage. As a result of
      Chesapeake’s actions, all of the acreage covered by the assigned leases has been
      secured beyond the original termination dates of the leases. However, as noted
      under the discussion titled “Our Objectives and Areas of Focus” above, in order
      to continue the terms of the assigned leases beyond the original termination
      dates, operations cannot cease for the periods of time specified in the leases.
      Chesapeake intends to drill a third well to continue operations on the Allar
      acreage in April, 2008. The primary term of the new Driver lease expires in
      2010, so no operations are required on the Driver acreage until then. We sent
      the data from the wells drilled on the Allar acreage for a professional review
      to determine the potential in the shallow zone. The results were not
      encouraging. As we do not have the professional expertise or the financial
      resources to conduct our own operations, we elected not to drill into the
      shallow zone on the Allar acreage and let the shallow Allar lease expire in
      2007.





We
      plan
      to seek other oil and gas projects as our financial condition permits, and
      to
      find experienced operators to develop the properties in exchange for a working
      interest on terms similar to the agreement we have with Chesapeake.





We
      have
      no other operations. If our oil and gas leases are not successfully developed,
      we will earn no revenue.





In
      March
      2007, we sold 4,000,000 shares of our common stock to Brek at a price of $0.15
      per share for gross proceeds of $600,000. We estimate that our annual operating
      costs will be about $150,000, which does not include the costs of acquiring
      future oil and gas leases or properties. These costs are made up of our
      administrative, legal and regulatory costs. Nathan’s operating costs are paid by
      Vallenar. If Vallenar’s working capital is insufficient to meet its own and
      Nathan’s operating costs, then Vallenar will be required to raise the funds
      necessary to continue its and Nathan’s operations. If that were the case, we
      would likely provide additional capital to Vallenar, either in the form of
      a
      loan or through an investment in additional shares of Vallenar’s common stock.
      However, we cannot guarantee that we will have the cash available if Vallenar
      or
      Nathan need money, or that we would be able obtain funding from a third
      party.


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          19 -
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We
      cannot
      guarantee that Chesapeake will successfully develop the oil and gas reserves
      on
      the properties covered by the leases or that we will be able to rely on any
      other source for cash to cover our cash requirements if we were unable to do
      so
      with the cash we have on hand.





We
      do not
      expect to purchase a plant or any significant equipment or to have any
      significant changes in the number of employees over the next twelve
      months.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      have
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on our financial condition, revenue or expenses,
      results of operations, liquidity, capital expenditures or capital resources
      that
      is material to investors. We do not have any non-consolidated, special-purpose
      entities.





**INCOME
      TAXES**





Table
      4
      sets out our deferred tax assets as of December 31, 2007 and 2006. We have
      established a 100% valuation allowance as we believe it is more likely than
      not
      that the deterred tax assets will not be realized.




Table
      4


Deferred
                Tax Assets2007
            
            2006Federal
                loss carryforwards
            
            $
            218,511
            
            $
            131,000Less:
                Valuation allowance
            
            
            (218,511
            )
            
            (131,000
            )$
            —
            
            $
            —





We
      established a 100% valuation allowance based on our deferred tax assets and
      our
      current operating results. If our operating results improve significantly,
      we
      may have to record our deferred taxes in our consolidated financial statements,
      which could have a material impact on our financial results.





**CONTINGENCIES
      AND COMMITMENTS**





We
      had no
      contingencies or long-term commitments at December 31, 2007, and have none
      as of
      the date of this filing.





As
      is
      customary in the oil and gas industry, we may at times have agreements to
      preserve or earn acreage or wells. If we do not perform as required by the
      agreements, which might require that we pay money or engage in operations such
      as drilling wells, we could lose the acreage or wells.





**CONTRACTUAL
      OBLIGATIONS**





We
      did
      not have any contractual obligations at December 31, 2007, and do not have
      any
      as of the date of this filing.





**INTERNAL
      AND EXTERNAL SOURCES OF LIQUIDITY**





We
      have
      funded our operations solely through the issuance of shares of our common stock.
      We have no commitments for financing.


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          20 -
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**INFLATION**





We
      do not
      believe that inflation will have a material impact on our future
      operations.


Other
      than as we have described in this discussion, we know of no trends, events
      or
      uncertainties that could impact our revenues or liquidity.





**FACTORS
      AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL
      CONDITION**





***Vallenar
      Energy Corp., through its subsidiary, Nathan Oil Partners LP, holds interests
      in
      oil and gas leases but these leases may never be successfully developed.
      Therefore, your common stock may never have any
      value.***





Nathan
      Oil holds interests in oil and gas leases. It does not, however, have the funds
      to develop these leases. It has entered into an agreement with an operator,
      Chesapeake Exploration Limited Partnership, for drilling, completing, equipping
      and operating wells on its properties, but there is no guarantee that these
      activities will be successful. If these activities are unsuccessful, we will
      have no operations and earn no revenues, and your common stock may never have
      any value.





***Our
      auditor has expressed doubt about our ability to continue as a going concern.
      If
      we are unable to continue our business due to a lack of money, your common
      stock
      may never have any value.***





Our
      consolidated financial statements have been prepared on a going concern basis
      which contemplates the realization of assets and the liquidation of liabilities
      in the ordinary course of business. At December 31, 2007 we had an accumulated
      deficit of $263,197. We will require additional financing to locate and purchase
      the rights to profitable oil and gas properties and to support the development
      of those properties until we achieve positive cash flow from operations. These
      factors raise doubt about our ability to continue as a going concern. Our
      ability to emerge from the exploration stage conducting our principal business
      is dependent upon the continued financial support of our shareholders, our
      ability to obtain necessary debt or equity financing to continue our operations,
      and our having profitable operations. If we are unable to accomplish these
      objectives, your common stock may never have any value.





***In
      order to extend the terms of our leases beyond the primary term, we need to
      conduct operations on the properties. We lost a portion of the acreage covered
      by two of our leases. We could suffer such losses again in the future. A loss
      of
      acreage could have a material adverse affect on our business and results of
      operations.***





While
      our
      leases had varying terms, all of the primary terms were due to expire between
      January 31, 2007 and February 8, 2007. In order to extend the primary term
      of
      each lease, we were required to conduct operations on the properties covered
      by
      the leases. We assigned all of our leases to Chesapeake Exploration Limited
      Partnership in exchange for Chesapeake’s agreement to initiate drilling
      operations on the land covered by the leases before the end of the primary
      term.
      Chesapeake drilled four wells in 2007 in order to extend the terms of eight
      of
      the leases. Chesapeake did not initiate drilling on the ninth lease covering
      approximately 790 acres. Instead, Chesapeake, through a partner, top-leased
      the
      acreage covered by the ninth lease to February 2010 but obtained only an
      undivided 68.75% interest in the mineral rights, which it has since increased
      to
      80%. Our proportionate interest in the top lease is 25% of Chesapeake’s interest
      in the deep rights, or a net interest of 20%, and 100% of Chesapeake’s interest
      in the shallow rights, or a net interest of 80%. We lost a portion of the
      acreage by failing to drill a well that would extend the term. We also lost
      the
      shallow Allar lease in 2007 because we didn’t drill to extend the term. We may
      lose more or all of our rights in the leases if we do not have the resources
      to
      conduct operations
      as required by the leases. If we lose additional acreage our business and
      results of operations could be materially adversely affected.




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          21 -
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          of Contents*


***In
      some instances members of the board of directors may be liable for losses
      incurred by holders of our common stock. If a shareholder were to prevail in
      such an action in the U.S., it may be difficult for the shareholder to enforce
      the judgment against any of our three board members who are not U.S.
      residents.***




In
      certain instances, such as trading securities based on material non-public
      information, a director may incur liability to shareholders for losses sustained
      by the shareholders as a result of the director’s illegal or negligent activity.
      However, three of our directors, Richard Jeffs, Gregory Pek and Ian Robinson,
      reside and maintain a substantial portion of their assets outside the United
      States. As a result it may be difficult or impossible to effect service of
      process within the U.S. upon these directors or to enforce in the U.S. courts
      any judgment obtained here against them predicated upon any civil liability
      provisions of the U.S. federal securities laws.




Foreign
      courts may not entertain original actions predicated solely upon U.S. federal
      securities laws against these directors; and judgments predicated upon any
      civil
      liability provisions of the U.S. federal securities laws may not be directly
      enforceable in foreign countries.




As
      a
      result of the foregoing, it may be difficult or impossible for a shareholder
      to
      recover from any of these directors if, in fact, the shareholder is damaged
      as a
      result of the director’s negligent or illegal activity.





***Our
      president, chief financial officer and director, Richard Jeffs, is the subject
      of an order issued by the British Columbia Securities Commission preventing
      him
      from engaging in investor relations activities in British Columbia until April
      24, 2012. If we need to raise funds in British Columbia during the period prior
      to the expiration of the order, it may be difficult to do so since Mr. Jeffs
      may
      be unable to communicate with potential investors in British
      Columbia.***





Richard
      Jeffs, our president, chief financial officer and a director, is the subject
      of
      an order dated April 24, 2007 that was issued by the British Columbia Securities
      Commission. Mr. Jeffs is required by the order to fully comply with the British
      Columbia Securities Act, the rules and regulations promulgated under the act
      and
      any other applicable regulations. He is also prohibited, for a period of five
      years from the date of the order, from engaging in investor relations activities
      in British Columbia. The order stemmed from activities taken by Mr. Jeffs on
      behalf of Francis Jason Dean Biller, a former resident of British Columbia,
      who
      is prohibited from trading securities and engaging in investor relations in
      British Columbia until February 16, 2010. The British Columbia Securities
      Commission alleged that Mr. Jeffs assisted Mr. Biller in relocating from Costa
      Rica to British Columbia for the purpose of promoting the securities of public
      companies to retail investors on behalf of a company under the control of Mr.
      Jeffs’ brother. As a result of this order, Mr. Jeffs cannot directly communicate
      with the investment community in British Columbia or promote the company in
      any
      way to investors residing or located in British Columbia until April 24, 2012.
      If we need to raise funds in British Columbia for our operations during the
      period prior to the expiration of the order, we may find it difficult to do
      so
      since Mr. Jeffs is prohibited from communicating with potential investors
      residing or located in British Columbia.





***If
      we are unable to provide financial and administrative support for Vallenar’s
      day-to-day operations, our business could suffer.***





Until
      we
      became its parent on August 24, 2006, Vallenar was operated as a subsidiary
      of
      Brek. After the spin-off, we became an independent public company. Our ability
      to satisfy our obligations and achieve or maintain
      profitability is now solely dependent upon the future performance of our
      business, as we are no longer able to rely upon the financial and other
      resources of Brek. As of the date of this report, we have approximately $409,000
      in cash, which should be adequate to support our operations for the next twelve
      months.




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          22 -
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          of Contents*


While
      it
      owned Vallenar, Brek performed certain significant corporate functions for
      Vallenar, including legal and accounting services and day-to-day operational
      functions, such as administrative support. In connection with the spin-off,
      we
      were required to create our own, or to engage third parties to provide,
      corporate business functions to replace those provided by Brek. As an
      independent public company, we are required to bear the costs of obtaining
      these
      services. If we are unable to perform, or engage third parties to provide,
      these
      functions with the same level of expertise and on the same or as favorable
      terms
      as they had been provided by Brek, our business and operations could
      suffer.




***There
      is no trading market for our shares. You may not be able to sell your shares
      if
      you need money.***





There
      is
      no public market for our common stock. It is not likely that an active market
      for our common stock will develop or be sustained in the foreseeable future.
      You
      may not be able to sell the shares you own.





***If
      we are successful in having our stock quoted on the OTC Bulletin Board, we
      will
      be subject to the penny stock rules. The application of the “penny stock” rules
      to our common stock could limit the trading and liquidity of the common stock,
      adversely affect the market price of our common stock and increase your
      transaction costs to sell those shares.***




If
      we are
      successful in having our stock quoted on the OTC Bulletin Board, it will be
      a
“low-priced” security under rules promulgated under the Securities Exchange Act
      of 1934. In accordance with these rules, broker-dealers participating in
      transactions in low-priced securities must first deliver a risk disclosure
      document which describes the risks associated with such stocks, the
      broker-dealer’s duties in selling the stock, the customer’s rights and remedies
      and certain market and other information. Furthermore, the broker-dealer must
      make a suitability determination approving the customer for low-priced stock
      transactions based on the customer’s financial situation, investment experience
      and objectives. Broker-dealers must also disclose these restrictions in writing
      to the customer, obtain specific written consent from the customer, and provide
      monthly account statements to the customer. The effect of these restrictions
      will probably decrease the willingness of broker-dealers to make a market in
      our
      common stock, decreases liquidity of our common stock and increases transaction
      costs for sales and purchases of our common stock as compared to other
      securities.





***Substantial
      sales of our common stock could depress the market price of our common
      stock.***





All
      of
      the shares of our common stock issued in the spin-off are eligible for
      resale in the public market. If a market for our common stock develops, it
      is
      likely that some shareholders will sell the shares of our common stock that
      they
      received in the spin-off. Any sales of substantial amounts of our common stock
      in the public market, or the perception that such sales might occur, could
      depress the market price of our common stock. We are unable to predict whether
      shareholders will sell substantial numbers of our common stock in the public
      market, if one develops.





***We
      have not paid cash dividends and we are unlikely to pay cash dividends in the
      foreseeable future.***





We
      plan
      to use all of our earnings, if we have any, to fund our operations. We do not
      plan to pay any cash dividends in the foreseeable future. We cannot guarantee
      that we will, at any time, generate sufficient
      surplus cash that would be available for distribution as a dividend to the
      holders of our common stock. You should not expect to receive cash dividends
      on
      our common stock. Accordingly, shareholders must be prepared to rely on sales
      of
      their common stock after price appreciation, which might never occur, to earn
      an
      investment return.


-
          23 -
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          of Contents*


***We
      have the ability to issue additional shares of our common stock and to issue
      preferred stock without asking for shareholder approval, which could cause
      your
      investment to be diluted.***





Our
      articles of incorporation authorize the board of directors to issue up to
      200,000,000 shares of common stock and 25,000,000 shares of preferred stock.
      The
      power of the board of directors to issue shares of common or preferred stock
      is
      generally not subject to shareholder approval. Accordingly, any additional
      issuance of our common or preferred stock may have the effect of diluting the
      common stock held by our shareholders.





***Our
      articles of incorporation permit us to issue shares of preferred stock. By
      issuing preferred stock, we may be able to delay, defer or prevent a change
      of
      control.***





Our
      articles of incorporation permit us to issue 25,000,000 shares of preferred
      stock. Our articles of incorporation also permit our board of directors to
      determine the rights, preferences, privileges and restrictions granted to,
      or
      imposed upon, the preferred stock and to fix the number of shares constituting
      any series and the designation of such series without further action by our
      shareholders.





Depending
      on the rights, preferences and privileges granted when we issue the preferred
      stock, holders of our preferred stock may delay, defer or prevent a change
      in
      control, may discourage bids for our common stock at a premium over the market
      price of the common stock and may adversely affect the market price of and
      the
      voting and other rights of the holders of our common stock.





***If
      a market develops for our common stock, the price of our common stock may be
      volatile. Your shares of common stock may lose all or part of their
      value.***





If
      a
      market for our common stock develops, the price of our common stock may
      fluctuate widely, depending upon a number of factors, many of which are beyond
      our control. For instance, our future results of operations could be below
      the
      expectations of investors and, to the extent our company is followed by
      securities analysts, the expectations of these analysts. If this occurs, our
      stock price could decline. If a market for our common stock develops, other
      factors that could affect our stock price include the following:





·
            changes
                in analysts’ recommendations or projections, if
                any


·
            changes
                in market valuations of similar
                companies


·
            actions
                or announcements by our competitors


·
            actual
                or anticipated fluctuations in our operating
                results


·
            litigation
                developments


·
            changes
                in general economic or market conditions or other economic factors
                unrelated to our performance





The
      stock
      markets have experienced significant price and trading volume fluctuations,
      and
      the market prices of oil and gas producing companies generally have been
      extremely volatile and have recently experienced sharp changes in share prices
      and trading volumes. These broad market fluctuations may adversely affect the
      trading price of our common stock.


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          of Contents*


**ITEM
              7.**
            **FINANCIAL
                STATEMENTS**





The
      financial statements and supplementary data required to be included in this
      Item
      7 are set forth at page F-1 of this Annual Report.





**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON****ACCOUNTING
                AND FINANCIAL DISCLOSURE**





Not
      applicable.





**ITEM
              8A.**
            **CONTROLS
                AND PROCEDURES**





**Disclosure on
      controls and procedures**





We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our president and our chief financial officer, of
      the
      effectiveness of the design and operation of our “disclosure controls and
      procedures” as
      such
      term is defined under Exchange Act Rule 15(d)-15(e),as of the end of the
      period covered by this report. The evaluation was undertaken in consultation
      with our accounting personnel. Based on that evaluation, the president and
      the
      chief financial officer concluded that ,
      as of
      the evaluation date, our disclosure controls and procedures are effective to
      ensure that information required to be disclosed by us in the reports that
      we
      file or submit 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.





**Report
      on internal control over financial reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting to provide reasonable assurance regarding
      the
      reliability of our financial reporting and the preparation of financial
      statements for external purposes in accordance with generally accepted
      accounting principles. Internal control over financial reporting includes those
      policies and procedures that (i) pertain to the maintenance of records that
      in
      reasonable detail accurately and fairly reflect the transactions and
      dispositions of our assets, (ii) provide reasonable assurance that transactions
      are recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that our receipts
      and expenditures are being made only in accordance with authorizations of our
      management and directors, and (iii) provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use or disposition
      of our assets that could have a material effect on the financial
      statements.





Management
      assessed our internal control over financial reporting as of the end of our
      fiscal year. Management used the criteria set forth by the Committee of
      Sponsoring Organizations of the Treadway Commission. Management's assessment
      included the evaluation of such elements as the design and operating
      effectiveness of key financial reporting controls, process documentation,
      accounting policies, and our overall control environment.





Based
      on
      our assessment, management has concluded that our internal control over
      financial reporting was effective as of the end of the fiscal year to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external reporting purposes in
      accordance with generally accepted accounting principles.




This
        annual report does not include an attestation report of our independent
        registered public accounting firm regarding internal control over financial
        reporting. Management's report was not subject to attestation by our
        independent registered public accounting firm pursuant to temporary rules
        of the
        Securities and Exchange Commission that permit us to provide only
        management's report in this annual report.
  **Changes
        in internal control over financial reporting**




We
      have
      made no changes in our internal control over financial reporting during the
      fourth quarter of the 2007 fiscal year that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.


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**ITEM
              8B.**
            **OTHER
                INFORMATION**





Not
      applicable.




**PART
      III**





**ITEM
              9.**
            **DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS, CONTROL****PERSONS
                AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
                ACT**





Below
      is
      information about our directors, executive officers and significant employees.
      There are no family relationships among our executive officers and
      directors.





The
      number of directors required by our bylaws may not be less than one or more
      than
      eight. We have set the number of directors at six.





Table 5
      sets forth certain information regarding our directors and executive
      officers.





Table 5


Management


Name
            Age
            PositionRichard
                N. Jeffs
            62
            President,
                chief financial officer, directorGregory
                Pek
            53
            DirectorIan
                Robinson
            68
            DirectorMichael
                L. Nazmack
            58
            DirectorEugene
                Sweeney
            40
            DirectorShawne
                Malone
            39
            Secretary,
                directorJoao
                da Costa
            43
            Treasurer





Except
      as
      discussed below, during the past five years, none of our officers or directors
      has:





·
            been
                convicted in a criminal proceeding and is not subject to a pending
                criminal proceeding,


·
            been
                subject to any order, judgment, or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring, suspending or otherwise limiting
                his
                involvement in any type of business, securities, futures, commodities
                or
                banking activities,


·
            been
                found by a court of competent jurisdiction (in a civil action), the
                Securities and Exchange Commission or the Commodity Futures Trading
                Commission to have violated a federal or state securities or commodities
                law, and the judgment has not been reversed, suspended, or vacated,
                or


·
            had
                any bankruptcy petition filed by or against any business of which
                he was a
                general partner or executive officer, either at the time of the bankruptcy
                or within two years prior to that
                time.





On
      April
      24, 2007 the British Columbia Securities Commission issued an order prohibiting
      Mr. Jeffs from engaging in investor relations activities for a period of five
      years from the date of the order. Information relating to the circumstances
      surrounding the order is discussed at page 22 of this report.




-
          26 -
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          of Contents*




**Biographical
      Information**




**Richard
      N. Jeffs.** Mr.
      Jeffs
      has been our president, chief financial officer and a director since August
      2006. Mr. Jeffs was the president and chief executive officer of Brek Energy
      Corporation from February 2004 and a director and the chief financial officer
      from January 2005, until Brek Energy Corporation merged with Gasco Acquisition,
      Inc. on December 14, 2007. In the past five years, Mr. Jeffs has been a
      self-employed businessman (since 1990) and a director of a private venture
      capital company (since 1999).





**Gregory
      Pek** .
      Mr. Pek
      has been a director since August 2006. Mr. Pek was a co-founder of Brek Energy
      Corporation and held various positions with Brek Energy Corporation, including
      president, chief executive officer, chief financial officer and a director,
      from
      March 1999 to December 14, 2007. Since December 2002, Mr. Pek has been a
      director and officer of Global Financial Network Limited, a private Hong Kong
      company. From 1994 to 1999, Mr. Pek was an executive officer of both David
      Resources Company Limited, a petroleum and wine trading company, and Kong Tai
      International Holdings Company Limited, a real property investment company.
      From
      September 1998 to February 1999, Mr. Pek was a director of Singapore Hong Kong
      Properties Investment Limited, another real property investment company. Mr.
      Pek
      obtained a Bachelor of Commerce degree from the University of British Columbia
      in 1978 and his chartered accountant designation in 1981 after articling with
      Clarkson Gordon.





**Ian
      Robinson** .
      Mr.
      Robinson has been a director since August 2006. From April 2001 to December
      14,
      2007 Mr. Robinson was also a director of Brek Energy Corporation. Since 1995,
      Mr. Robinson has been the owner and managing director of Robinson Management
      Limited, a business consulting firm. In 1962, Mr. Robinson received his CA
      designation from the Institute of Chartered Accountants of
      Australia.





**Michael
        L. Nazmack** .
        Mr.
        Nazmack has been a director since August 2006. From March 2003 until December
        14, 2007, Mr. Nazmack was a director of Brek Energy Corporation. Mr. Nazmack,
        a
        graduate of Penn State University with degrees in mechanical and civil and
        structural engineering, was granted his Professional Engineer’s License from the
        states of California and Alaska in 1979. From 1977 until 1984 he worked for
        Santa Fe International Corporation as project engineer on a number of oil
        and
        gas related projects including pipeline development for several of the major
        oil
        fields on the North Slope of Alaska, on which he was responsible for the
        planning, engineering and construction of over one billion dollars worth
        of oil
        and gas pipelines. From 1986 to 1990, Mr. Nazmack was president of Nazmack
        Development Corporation which built 101 condominium units in York, Pennsylvania.
        From 1993 to 2003 Mr. Nazmack was the vice-president of York Condominium
        Constructors, Inc., a builder/developer of 191 retirement condominium units
        and
        from 1997 to 2003, Mr. Nazmack was also the president of Longstown Development
        Corporation which developed and built another 300 retirement condominium
        units,
        all located in York, Pennsylvania. For all three of these projects, Mr. Nazmack
        designed the units and the site layout, did the construction surveying and
        personally handled the permitting, sales, and the business, legal, and
        engineering matters on a daily basis. Mr. Nazmack was the chairman of the
        board
        of York Industries, Inc., an aerospace and defense contractor, from February
        1997 until he retired in May 2005.





**Eugene
      Sweeney** .
      Mr.
      Sweeney has been a director since August 2006. He was a director of Brek Energy
      Corporation from October 2004 to December 14, 2007. Mr. Sweeney has been an
      investment strategist for Griffin Asset Management LLC since September 2004.
      Mr.
      Sweeney was an equity and options trader from September 1999 to September
      2004.





**Shawne
      Malone.** Mr.
      Malone has been a director since August 2006. He was a director of Brek Energy
      Corporation from October 2004 to December 14, 2007. From March 1999 through
      June
      2004, Mr. Malone was an options specialist for TD Options LLC in New York,
      a
      subsidiary of TD Bank, a large multinational bank with headquarters in Toronto,
      Canada. Mr. Malone has experience trading options on a variety of assets from
      equities to commodities to convertible bonds.  Mr. Malone is
      a co-founder of, and since July 2004, has been the co-CEO of, Griffin Asset
      Management LLC, a money management firm headquartered in Chicago.  Mr.
      Malone graduated from Pennsylvania State University in 1997 with a BS in finance
      and international business.


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          27 -
 *Table
          of Contents*


**Joao
      da Costa.** Mr. da
      Costa has been Rock City’s treasurer since August 2006. He was the treasurer of
      Brek until it merged with Gasco on December 14, 2007. From 2003 to the present,
      Mr. DaCosta has been the owner and operator of Da Costa Management Corp.
      providing administrative and accounting services to a variety of companies
      operating in North America, South America and Europe.





**Election
      of Directors**





At
      a
      meeting of shareholders at which a quorum is present, directors are elected
      by a
      plurality of the votes cast by the shares entitled to vote in an
      election.





**Committees
      of the Board of Directors**





Our
      board
      of directors does not have an audit committee, a compensation committee or
      a
      nominating committee. Of our six directors, four are “independent”, as that term
      is defined in Section 121A of the Rules of the American Stock Exchange,
      therefore, in order for any action to be approved by our board, at least two
      of
      our four independent members must vote for it.





**Compensation
      of Directors**





We
      do not
      have a plan pursuant to which members of our board of directors are compensated
      and members of the board of directors do not receive cash compensation for
      their
      services as board members. Our directors may receive reimbursement for
      reasonable out-of-pocket expenses in attending meetings of the board of
      directors. From time to time we may engage certain members of the board of
      directors to perform services on our behalf. In such cases, we would compensate
      the members for their services at rates no more favorable than could be obtained
      from unaffiliated parties.





**Recommendations
      by Security Holders of Nominees to the Board of Directors**





We
      have
      no procedure by which shareholders may recommend nominees to our board of
      directors, and there has been no change in this policy.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) is not applicable. We do not have a class of equity security that is
      registered pursuant to section 12 of the Securities Exchange Act of
      1934.





**Code
      of Ethics**





We
      have
      adopted a code of ethics that applies to all of our employees, including our
      principal executive officer and principal financial officer. We will provide
      to
      any person, upon request and without charge, a copy of our code of ethics.
      Requests should be in writing and addressed to Richard N. Jeffs, c/o Rock City
      Energy Corp., 3416 Via Lido, Suite F, Newport Beach, California 92663, or by
      email to rick@rockcityenergy.com .




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**ITEM
              10.**
            **EXECUTIVE
                COMPENSATION**





**Officer
      and Director Compensation**





**Executive
      Compensation**




Since
      our
      inception on August 10, 2006, we have not paid any compensation to our executive
      officers. **** We
      have
      no employment agreements with any of our executive officers, nor have we issued
      any options or other equity-based awards to our executive officers.





**Option
      Grants and Exercises**





As
      disclosed above, we have granted no options to our officers or directors since
      our inception on August 10, 2006.





**ITEM
              11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND****MANAGEMENT
                AND RELATED STOCKHOLDER
                MATTERS**





Table 6
      shows the beneficial ownership, on March 24, 2008, of shares of our common
      stock
      held by all five-percent shareholders, executive officers and
      directors.





Beneficial
      ownership is determined under the rules of the Securities and Exchange
      Commission and generally includes voting or investment power over securities.
      Except in cases where community property laws apply or as indicated in the
      footnotes to this table, we believe that each shareholder identified in the
      table possesses sole voting and investment power over all shares of common
      stock
      shown as beneficially owned by the shareholder.





Shares
      of
      common stock subject to options or warrants that are currently exercisable
      or
      exercisable within 60 days of March 24, 2008 are considered outstanding and
      beneficially owned by the person holding the options for the purpose of
      computing the percentage ownership of that person but are not treated as
      outstanding for the purpose of computing the percentage ownership of any other
      person.





-
          29 -
 *Table
          of Contents*


Table 6


Beneficial
                OwnershipBeneficial
                OwnershipName
                and Address of Beneficial Owner
            
            Number
            
            Nature
            
            Percent
                of Class1Richard
                N. Jeffs
              Flat
                1, 49 Pont Street
              London
                SW1X 0BD
            
            960,759
              124,640
            
            direct
              indirect
            
            13.57Ian
                Robinson
              29thFloor Caroline Centre
              28
                Yun Ping Road
              Causeway
                Bay, Hong Kong SAR
            
            82,858
              18,664
            
            direct
              indirect
            
            1.26Gregory
                M. Pek
              1-F,
                9 Broom Road
              Happy
                Valley, Hong Kong SAR
            
            160,616
            
            direct
            
            2.01Michael
                L. Nazmack
              4904
                Libhart Mill Road
              Hallam
                PA 17406
            
            100,752
              902
            
            direct
              indirect
            
            1.27Shawne
                P. Malone
              3416
                Via Lido, Suite F
              Newport
                Beach, CA  92663
            
            37,652
              18,699
            
            direct
              indirect
            
            0.70Eugene
                Sweeney
              3416
                Via Lido, Suite F
              Newport
                Beach, CA  92663
            
            68,519
            
            direct
              indirect2
            
            0.86Joao
                da Costa
              1100
                Melville Street, Suite 610
              Vancouver
                BC V6E 4A6
            
            6,001
            
            direct
            
            0.07Directors
                and executive officers as a group
            
            1,580,062
            
            
            
            19.74


1
              Based
                  on 8,000,000 shares of common stock issued and outstanding as of
                  March 24,
                  2008. 2
              Mr.
                  Sweeney has not provided his indirect
                  shareholdings.
  **ITEM
                12.**
              **CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS****AND
                  DIRECTOR
                  INDEPENDENCE**





With
      the
      exception of Richard Jeffs and Shawne Malone, the members of our board of
      directors are independent, as
      that
      term is defined in Section 121A of the Rules of the American Stock
      Exchange.





We
      have
      assigned overriding royalty interests in all of our oil and gas leases to
      Florida Energy I, Inc., Richard
      Jeffs, our president and a director, and Marc Bruner. The assignment to Florida
      Energy I, Inc. assigns an overriding royalty interest equal to 2% of all oil,
      gas and other minerals produced and saved for our benefit pursuant to all of
      the
      leases. The assignments to Mr. Jeffs and Mr. Bruner assign to each of the
      assignees an overriding royalty interest equal to 3.166665% of all oil, gas
      and
      other minerals produced and saved for our benefit pursuant to the Baggett leases
      and equal to 1.5% of all oil, gas and other minerals produced and saved for
      our
      benefit pursuant to the deep Allar lease. While the assignments are dated April
      21, 2006, they date back to 2001. At that time Mr. Jeffs was an affiliate of
      Vallenar because he held more than 5% of Vallenar’s issued and outstanding
      common stock. In 2001, Mr. Jeffs proposed to Vallenar that he and Mr. Bruner
      and
      Stephen Bruner,
      a
      principal of Florida Energy I, Inc., neither of whom was, at that time, an
      affiliate of Vallenar, negotiate Vallenar’s acquisition of leases in Edwards
      County Texas. Vallenar agreed that if favorable leases could be negotiated
      and
      Mr. Jeffs and the other two individuals could organize the financing required
      to
      acquire the leases and conduct a drilling program it would grant to these
      individuals, collectively, a royalty equal to the difference between the lease
      burdens existing on the properties and 25%, the standard burden in Texas. The
      leases were successfully negotiated and were signed in February 2002 and the
      financing was obtained. The delay in recording the royalty interests arose
      from
      a number of factors, most of which were personal to the individuals.
      Furthermore, because there was no production on which to calculate the
      royalties, there was no urgency to record the royalty assignments. When the
      development agreement with Chesapeake was negotiated, the parties determined
      that the royalty assignments needed to be recorded. Chesapeake was aware of
      the
      royalty assignments when it entered into the transaction with Nathan Oil. We
      believe that the assignment of the overriding royalty interests constituted
      terms that were at least as favorable to us as we could have obtained from
      unaffiliated third parties because of the risk of non-payment undertaken by
      Mr.
      Jeffs and his associates. These individuals were not paid cash compensation
      for
      their time and expertise and there was no assurance that oil or
      gas would be produced from the properties. No royalties have yet been paid
      to Mr. Jeffs, Mr. Bruner or Florida Energy I, Inc. The royalty interests in
      the
      two leases that expired in 2007 expired at the same time. The surviving royalty
      interests cover oil, gas and other minerals produced and saved for our benefit
      from seven leases covering approximately 8,400 gross acres (8,075 net
      acres).




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          30 -
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          of Contents*


While
      we
      were still a subsidiary of Brek, Brek provided office space and support staff
      to
      us at no charge. Brek also paid the costs of our executive officers. The value
      of the office space and services was approximately $12,000 annually. We did
      not
      have a contract with Brek that required Brek to provide these facilities and
      services and we never intended to repay Brek for the costs of these facilities
      and services. As our parent, Brek decided these terms, which were more favorable
      than terms we would have received from unaffiliated third parties. Since the
      spin-off, we have shared office space in Newport Beach with others. Our portion
      of the cost is $6,000 annually.





On
      June
      28, 2002 Brek borrowed a total of $370,000 from Vallenar. The loan was payable
      on demand and secured with a promissory note. Simple interest accrued on the
      promissory note at the rate of 6% per year. Brek used the proceeds of the loan,
      together with cash in the amount of $30,000, to purchase 800,000 shares of
      Vallenar common stock. The loan was paid in full on November 8, 2006. Brek
      paid
      a total of $55,519 in interest over the term of the loan.





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            of Contents*




**ITEM
              13.**
            **EXHIBITS**





Exhibit
                No.
            Title3.1
            Articles
                of Incorporation*3.2
            Bylaws*10.1
            Paid
                Up Oil and Gas Lease dated February 1, 2002 between The Allar Company,
                et
                al. and Nathan Oil Partners LP*10.2
            Paid
                Up Oil and Gas Lease dated February 1, 2002 between The Allar Company,
                et
                al. and Nathan Oil Partners LP*10.3
            Oil,
                Gas and Mineral Lease dated February 8, 2002 between Candace Baggett
                and
                Nathan Oil Partners LP*10.4
            Oil,
                Gas and Mineral Lease dated February 8, 2002 between Pam Rhoades
                Davis and
                Nathan Oil Partners LP*10.5
            Oil,
                Gas and Mineral Lease dated February 4, 2002 between Anita V. Driver,
                individual and administratrix, and Nathan Oil Partners
                LP*10.6
            Oil,
                Gas and Mineral Lease dated February 8, 2002 between Richard Nichols
                and
                Nathan Oil Partners LP*10.7
            Oil,
                Gas and Mineral Lease dated February 6, 2002 between Margie L. Rhoades,
                attorney in fact, and Nathan Oil Partners LP*10.8
            Oil,
                Gas and Mineral Lease dated February 6, 2002 between Dale Robert
                Rhoades,
                Jr. and Nathan Oil Partners LP*10.9
            Oil,
                Gas and Mineral Lease dated February 8, 2002 between Eddie Thomas
                and
                Nathan Oil Partners LP*10.10
            Assignment
                of Overriding Royalty Interests in favor of Richard N. Jeffs dated
                April
                21, 2006 (management contract)*10.11
            Assignment
                of Overriding Royalty Interests in favor of Marc Alan Bruner dated
                April
                21, 2006*10.12
            Assignment
                of Overriding Royalty Interests in favor of Florida Energy I, Inc.
                dated
                October 4, 2002*10.13
            Letter
                agreement dated April 3, 2006 between Chesapeake Exploration Limited
                Partnership and Nathan Oil Partners LP (including Model Form Operating
                Agreement)*10.14
            Assignment
                of Oil and Gas Leases in favor of Chesapeake Exploration Limited
                Partnership and dated June 9, 2006*10.15
            Promissory
                Note dated June 28, 2002 from Brek Energy Corporation in favor of
                Vallenar
                Energy Corp.*10.16
            Subscription
                Agreement dated March 7, 2007 between Brek Energy Corporation and
                Rock
                City Energy Corporation*10.17
            Corrected
                Assignment of Overriding Royalty Interests in favor of Richard N.
                Jeffs
                dated November 1, 2007 (management contract)**10.18
            Corrected
                Assignment of Overriding Royalty Interests in favor of Marc Alan
                Bruner
                dated November 1, 2007**21
            List
                of significant subsidiaries of Rock City Energy Corp.**31.1
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002**31.2
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002**32
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002**


*
              Incorporated
                  by reference from our registration statement on Form SB-2 filed
                  with the
                  Securities and Exchange Commission on December 13,
                  2006.
 **
              Filed
                  herewith.


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          of Contents*




**ITEM
              14.**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**





Table 7
      sets forth fees that Mendoza Berger & Company LLP has charged us during the
      fiscal years ended December 31, 2007 and December 31, 2006 for (i) services
      rendered for the audit of our annual financial statements and the review of
      our
      quarterly financial statements, (ii) services that were reasonably related
      to
      the performance of the audit or review of our financial statements and that
      are
      not reported as audit fees, (iii) services rendered in connection with tax
      compliance, tax advice and tax planning, and (iv) all other fees for services
      rendered.





Table
      7


Auditors’
                FeesDecember
                31Fees
            
            2007
            
            2006Audit
                fees
            
            $
            22,313
            
            $
            4,000Audit-related
                fees
            
            
            —
            
            
            —Tax-related
                fees
            
            
            3,880
            
            
            5,000All
                other fees
            
            
            —
            
            
            —Total
                fees
            
            $
            26,192
            
            $
            9,000




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          of Contents*




**SIGNATURES**





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





Date:
      March 31, 2008


ROCK
      CITY
      ENERGY CORP.






By: /s/
      Richard N. Jeffs


Richard
      N. Jeffs,


President
      and Chief Financial Officer





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities indicated below on this 31st day of March 2008.





SIGNATURE,
      TITLE




/s/
      Richard N. Jeffs





Richard
      N. Jeffs


President,
      Chief Financial Officer and


Director




/s/
      Ian
      Robinson





Ian
      Robinson


Director




/s/
      Gregory Pek





Gregory
      Pek


Director




/s/
      Michael L. Nazmack





Michael
      L. Nazmack


Director




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**ROCK
      CITY ENERGY CORP.**


**(An
      Exploration Stage Company)**


**CONSOLIDATED
      FINANCIAL STATEMENTS**





**AS
      OF DECEMBER 31, 2007 AND 2006,**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**


**AND
      FOR THE PERIOD FROM AUGUST 10, 2006 (INCEPTION)**


**THROUGH
      DECEMBER 31, 2007**














*Table
          of Contents*






**REPORT
                  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
                  FIRM**
              **F-1****CONSOLIDATED
                  BALANCE SHEETS**
              **F-2****CONSOLIDATED
                  STATEMENTS OF OPERATIONS**
              **F-3****CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS’
                  EQUITY**
              **F-4****CONSOLIDATED
                  STATEMENTS OF CASH
                  FLOWS**
              **F-5****NOTES
                  TO CONSOLIDATED FINANCIAL
                  STATEMENTS**
              **F-6**






*Table
          of Contents*
  **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
          the
          Board of Directors and Stockholders
 Rock
          City
          Energy Corp.
  We
          have
          audited the accompanying consolidated balance sheets of Rock City Energy
          Corp.
          (an exploration stage company), as of December 31, 2007 and 2006 and the
          related
          consolidated statements of operations, stockholders’ equity and cash flows for
          the years then ended and for the period from inception (August 10, 2006)
          through
          December 31, 2007. These consolidated financial statements are the
          responsibility of the Company’s management. Our responsibility is to express an
          opinion on these consolidated financial statements based on our
          audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          consolidated financial statements are free of material misstatement. The
          Company
          is not required to have, nor were we engaged to perform, an audit of its
          internal control over financial reporting. Our audit included consideration
          of
          internal control over financial reporting as a basis for designing audit
          procedures that are appropriate in the circumstances, but not for the purpose
          of
          expressing an opinion on the effectiveness of the Company’s internal control
          over financial reporting. Accordingly, we express no such opinion. An audit
          includes examining, on a test basis, evidence supporting the amounts and
          disclosures in the consolidated financial statements. An audit also includes
          assessing the accounting principles used and significant estimates made
          by
          management, as well as evaluating the overall financial statement presentation.
          We believe that our audit provides a reasonable basis for our
          opinion.
 
 In
          our
          opinion, the consolidated financial statements referred to above present
          fairly,
          in all material respects, the consolidated financial position of Rock City
          Energy Corp. (an exploration stage company) as of December 31, 2007 and
          2006,
          and the results of its consolidated operations and its cash flows for the
          years
          then ended and for the period from inception (August 10, 2006) through
          December
          31, 2007 in conformity with accounting principles generally accepted in
          the
          United States of America.
 
 The
          accompanying consolidated financial statements have been prepared assuming
          that
          the Company will continue as a going concern. As more fully described in
          Note 3,
          the Company has incurred recurring operating losses and has an accumulated
          deficit. These conditions raise substantial doubt about the Company’s ability to
          continue as a going concern. Management’s plans in regard to these matters are
          also described in Note 3. The consolidated financial statements do not
          include
          any adjustments to reflect the possible future effects on the recoverability
          and
          classification of assets or the amounts and classification of liabilities
          that
          may result from the outcome of this uncertainty.
 
 **Mendoza
          Berger & Company, LLP**
 
 /s/Mendoza
          Berger & Company, LLP
 
 Irvine,
          California
 March
          21,
          2008




F-1
 *Table
          of Contents*




**ROCK
                  CITY ENERGY CORP.****(An
                  Exploration Stage Company)****CONSOLIDATED
                  BALANCE SHEETS****DECEMBER
                  31, 2007 AND 2006**
  **2007**
              
              **2006****ASSETS**Current
                  assetsCash
              
              $
              472,108
              
              $
              100,291Total
                  current assets
              
              
              472,108
              
              
              100,291Unproved
                  oil and gas properties
              
              
              100
              
              
              100Total
                  assets
              
              $
              472,208
              
              $
              100,391**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilitiesAccounts
                  payable
              
              $
              17,663
              
              $
              4,075Accrued
                  liabilities
              
              
              1,903
              
              
              —Accrued
                  professional fees
              
              
              28,117
              
              
              8,500Due
                  to related party
              
              
              8,007
              
              
              13,911Total
                  current liabilities
              
              
              55,690
              
              
              26,486Commitments
                  and contingencies
              
              
              —
              
              
              —Minority
                  interest
              
              
              38,285
              
              
              39,954Stockholders'
                  equityPreferred
                  Stock, 25,000,000 shares authorized; $0.001 par value,0
                  shares issued and outstanding
              
              
              —
              
              
              —Common
                  Stock, 200,000,000 shares authorized; $0.001 par value,8,000,000
                  and 4,000,000 shares issued and outstandingat
                  December 31, 2007 and 2006
              
              
              8,000
              
              
              4,000Additional
                  paid-in capital
              
              
              633,430
              
              
              37,430Accumulated
                  deficit
              
              
              (263,197
              )
              
              (7,479
              )Total
                  stockholders' equity
              
              
              378,233
              
              
              33,951Total
                  liabilities and stockholders' equity
              
              $
              472,208
              
              $
              100,391The
                  accompanying notes are an integral part of these consolidated financial
                  statements




F-2
 *Table
          of Contents*




**ROCK
                  CITY ENERGY CORP.****(An
                  Exploration Stage Company)****CONSOLIDATED
                  STATEMENTS OF
                  OPERATIONS**
  **Year**
              
              **August
                  10, 2006**
              
              **August
                  10, 2006****Ended**
              
              **(Inception)
                  to**
              
              **(Inception)
                  to****December
                  31,**
              
              **December
                  31,**
              
              **December
                  31,****2007**
              
              **2006**
              
              **2007**ExpensesGeneral
                  and administration
              
              $
              8,718
              
              $
              421
              
              $
              9,139Professional
              
              
              236,078
              
              
              7,102
              
              
              243,180Regulatory
              
              
              16,039
              
              
              125
              
              
              16,164Total
                  expenses
              
              
              260,835
              
              
              7,648
              
              
              268,483Other
                  incomeInterest
              
              
              3,448
              
              
              2,268
              
              
              5,716Net
                  loss before franchise tax and minority interest
              
              
              (257,387
              )
              
              (5,380
              )
              
              (262,767
              )Franchise
                  tax
              
              
              —
              
              
              (1,021
              )
              
              (1,021
              )Net
                  loss before minority interest
              
              
              (257,387
              )
              
              (6,401
              )
              
              (263,788
              )Minority
                  interest
              
              
              1,669
              
              
              (1,078
              )
              
              591Net
                  loss for the year
              
              $
              (255,718
              )
              $
              (7,479
              )
              $
              (263,197
              )Basic
                  and diluted loss per share
              
              $
              (0.04
              )
              $
              (0.00
              )Basic
                  and diluted weighted average shares outstanding
              
              
              6,279,452
              
              
              4,000,000The
                  accompanying notes are an integral part of these consolidated financial
                  statements




F-3
 *Table
          of Contents*




**ROCK
                  CITY ENERGY CORP.****(An
                  Exploration Stage Company)****CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS' EQUITY****FOR
                  THE YEAR ENDED DECEMBER 31, 2007 AND****FOR
                  THE PERIOD FROM INCEPTION (AUGUST 10, 2006) THOUGH DECEMBER 31,
                  2006**
  **Common
                  Stock Issued**
              
              **Additional****Number
                  of**
              
              
              
              **Paid-In**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Total**August
                  10, 2006
              
              
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Issuance
                  of common stock
              
              
              4,000,000
              
              
              4,000
              
              
              37,430
              
              
              —
              
              
              41,430Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (7,479
              )
              
              (7,479
              )Balance,
                  December 31, 2006
              
              
              4,000,000
              
              
              4,000
              
              
              37,430
              
              
              (7,479
              )
              
              33,951Issuance
                  of common stock
              
              
              4,000,000
              
              
              4,000
              
              
              596,000
              
              
              —
              
              
              600,000Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (255,718
              )
              
              (255,718
              )Balance,
                  December 31, 2007
              
              
              8,000,000
              
              $
              8,000
              
              $
              633,430
              
              $
              (263,197
              )
              $
              378,233The
                  accompanying notes are an integral part of these consolidated financial
                  statements




F-4
 *Table
          of Contents*




**ROCK
                  CITY ENERGY CORP.****(An
                  Exploration Stage Company)****CONSOLIDATED
                  STATEMENTS OF CASH
                  FLOWS**
  **Year**
              
              **August
                  10, 2006**
              
              **August
                  10, 2006****Ended**
              
              **(Inception)
                  to**
              
              **(Inception)
                  to****December
                  31,**
              
              **December
                  31,**
              
              **December
                  31,****2007**
              
              **2006**
              
              **2007**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (255,718
              )
              $
              (7,479
              )
              $
              (263,197
              )Adjustments
                  to reconcile net loss to net cash(used
                  in) operating activities:Cash
                  acquired on acquisition of subsidiary
              
              
              —
              
              
              294
              
              
              294Minority
                  interest
              
              
              (1,669
              )
              
              1,078
              
              
              (591
              )Changes
                  in operating assets and liabilities:Accounts
                  payable
              
              
              13,588
              
              
              (67,347
              )
              
              (53,759
              )Accrued
                  liabilities
              
              
              1,903
              
              
              —
              
              
              1,903Accrued
                  professional fees
              
              
              19,617
              
              
              8,500
              
              
              28,117Due
                  to related party
              
              
              (5,904
              )
              
              4,697
              
              
              (1,207
              )Net
                  cash used in operating activities
              
              
              (228,183
              )
              
              (60,257
              )
              
              (288,440
              )Cash
                  flows from investment activities:Proceeds
                  from note receivable from related party
              
              
              —
              
              
              160,548
              
              
              160,548Net
                  cash provided by investment activities
              
              
              —
              
              
              160,548
              
              
              160,548Cash
                  flows from financing activities:Cash
                  received on issuance of common stock
              
              
              600,000
              
              
              —
              
              
              600,000Net
                  cash provided by financing activities
              
              
              600,000
              
              
              —
              
              
              600,000Net
                  increase in cash
              
              
              371,817
              
              
              100,291
              
              
              472,108Cash,
                  beginning of period
              
              
              100,291
              
              
              —
              
              
              —Cash,
                  end of period
              
              $
              472,108
              
              $
              100,291
              
              $
              472,108Supplemental
                  cash flow information:Cash
                  paid during the period for:Franchise
                  taxes
              
              $
              —
              
              $
              1,021
              
              $
              1,021Interest
              
              $
              —
              
              $
              —
              
              $
              —Non-cash
                  items:Common
                  shares issued on acquisition of subsidiary
              
              $
              —
              
              $
              41,430
              
              $
              41,430Net
                  assets acquired on acquisition of subsidiaries (net of
                  cash)
              
              $
              —
              
              $
              (80,012
              )
              $
              (80,012
              )Minority
                  interest
              
              $
              —
              
              $
              38,876
              
              $
              38,876The
                  accompanying notes are an integral part of these consolidated financial
                  statements.






F-5
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**1.**
            **ORGANIZATION
                AND BASIS OF PRESENTATION**





**Organization**





Rock
      City
      Energy Corp. was incorporated in the State of Nevada on August 10, 2006 as
      Vallenar Holdings, Inc. On August 24, 2006, Rock City acquired a 51.53% interest
      in Vallenar Energy Corp., a company incorporated in the State of Nevada on
      January 27, 1999. Vallenar owns all of Nathan Oil Operating Co. LLC, a company
      organized in the State of Texas on October 31, 2001. Vallenar has a 99% interest
      in Nathan Oil Partners LP, a limited partnership formed in the State of Texas
      on
      October 31, 2001. Nathan Oil Operating Co. LLC has a 1% interest in Nathan
      Oil
      Partners LP.





Rock
      City
      is involved in the oil and gas exploration business. Through Vallenar’s
      subsidiary, Nathan Oil Partners LP, Rock City has an interest in several oil
      and
      gas leases in the state of Texas. In these notes, the terms “Company”, “we”,
“us” or “our” mean Rock City Energy Corp. and its subsidiary whose operations
      are included in these consolidated financial statements.





**Exploration
      Stage**





These
      consolidated financial statements and related notes are presented in accordance
      with accounting principles generally accepted in the United States of America,
      and are expressed in United States dollars. The Company has not produced any
      revenues from its principal business and is an exploration stage company as
      defined by Statement of Financial Accounting Standard (SFAS) No. 7.





The
      Company is in the early exploration stage. In an exploration stage company,
      management devotes most of its time to conducting exploratory work and
      developing its business. These consolidated financial statements have been
      prepared on a going concern basis, which implies the Company will continue
      to
      realize its assets and discharge its liabilities in the normal course of
      business. The Company has never paid any dividends and is unlikely to pay
      dividends or generate earnings in the immediate or foreseeable future. The
      Company’s continuation as a going concern and its ability to emerge from the
      exploration stage with any planned principal business activity is dependent
      upon
      the continued financial support of its shareholders and its ability to obtain
      the necessary equity financing and attain profitable operations.





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements include the financial statements of Rock
      City
      and Vallenar, its majority owned subsidiary, and Vallenar’s subsidiaries, Nathan
      Oil Partners LP and Nathan Oil Operating Co. LLC. All significant intercompany
      balances and transactions have been eliminated.





**Cash
      and Cash Equivalents**





For
      purposes of the balance sheet and statement of cash flows, the Company considers
      all amounts on deposit with financial institutions and highly liquid investments
      with maturities of 90 days or less to be cash equivalents. At December 31,
      2007,
      the Company did not have any cash equivalents.




F-6
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)





**Financial
      Instruments**





***Foreign
      Exchange Risk***





The
      Company is subject to foreign exchange risk for sales and purchases denominated
      in foreign currencies. Foreign currency risk arises from the fluctuation of
      foreign exchange rates and the degree of volatility of these rates relative
      to
      the United States dollar. The Company does not believe that it has any material
      risk to its foreign currency exchange.





***Fair
      Value of Financial Instruments***





The
      Company’s financial instruments include cash, accounts payable, accrued
      liabilities and accrued professional fees. The fair value of these financial
      instruments approximates their carrying values due to their short maturities.





***Concentration
      of Credit Risk***





Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist principally of cash.





At
      December 31, 2007 and 2006, the Company had approximately $472,000 and $100,000,
      respectively in cash that was not insured. This cash is on deposit with a major
      chartered Canadian bank. As part of its cash management process, the Company
      performs periodic evaluations of the relative credit standing of this financial
      institution. The Company has not experienced any losses in cash balances and
      does not believe it is exposed to any significant credit risk on its cash.





**Accounting
      Estimates**





The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from those
      estimates.





The
      Company’s consolidated financial statements are based on a number of significant
      estimates, including an estimate for accrued liabilities and accrued
      professional fees.





**Revenue
      Recognition**





Oil
      and
      gas revenue will be recognized as income when oil or gas is produced and sold.
      Interest revenue is recognized at the end of each month. Interest revenue
      consists of interest earned on money on deposit in our bank accounts and
      interest earned on the note receivable from a former related party (see Note
      5).




F-7
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)





**Long-lived
      Assets**





At
      December 31, 2007 and 2006, the Company’s only long-lived asset was its unproved
      oil and gas properties. Unproved properties whose costs are individually
      significant are assessed individually. Where it is not practicable to assess
      individually, such properties may be grouped for an assessment of impairment.
      Impairment of unproved properties is estimated based on primary lease terms,
      geologic data and average holding periods. The Company’s unproved properties are
      evaluated quarterly for the possibility of potential impairment. The Company
      has
      no other long-lived assets and has not recognized any impairment losses with
      respect to its unproved properties. See related disclosures under the caption
      “Unproved Oil and Gas Properties.”





**Income
      Taxes**





Income
      tax expense is based on pre-tax financial accounting income. Deferred tax assets
      and liabilities are recognized for the future tax consequences attributable
      to
      differences between the financial statement carrying amounts of existing
      assets and liabilities and their respective tax bases. Deferred tax assets,
      including tax loss and credit carryforwards, and liabilities are measured using
      enacted tax rates expected to apply to taxable income in the years in which
      those temporary differences are expected to be recovered or settled. The effect
      on deferred tax assets and liabilities of a change in tax rates is recognized
      in
      income in the period that includes the enactment date. Deferred income tax
      expense represents the change during the period in the deferred tax assets
      and
      deferred tax liabilities. The components of the deferred tax assets and
      liabilities are individually classified as current and non-current based on
      their characteristics. Deferred tax assets are reduced by a valuation allowance
      when, in the opinion of management, it is more likely than not that some portion
      or all of the deferred tax assets will not be realized.





**Stock-based
      Compensation**





In
      December 2004, the Financial
      Accounting Standards Board ( FASB)
      issued SFAS No. 123(R), *Share-Based
      Payment* (SFAS
      123(R)), which is a revision of SFAS No. 123, *Accounting
      for Stock-Based Compensation.* SFAS
      123(R) is effective for public companies for the first fiscal year beginning
      after June 15, 2005, supersedes Accounting Principles Board Opinion No. 25
      (APB
      25), *Accounting
      for Stock Issued to Employees* ,
      and
      amends SFAS 95, *Statement
      of Cash Flows.* SFAS
      123(R) eliminates the option to use APB 25’s intrinsic value method of
      accounting and requires that the expense for stock compensation be recorded
      based on a fair value method.





The
      Company follows the “modified prospective method”, which requires the Company to
      recognize compensation costs for all share-based payments, whether granted,
      modified or settled, in its consolidated financial statements.





**Comprehensive
      Income**





Comprehensive
      income reflects changes in equity that result from transactions and economic
      events from non-owner sources. The Company had no comprehensive income for
      the
      year ended December 31, 2007.




F-8
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)





**Unproved
      Oil and Gas Properties**





The
      Company follows the full cost method of accounting whereby all costs related
      to
      the acquisition and development of oil and gas leases and acquisition and
      development of oil and gas properties are capitalized into a single cost center
      (full cost pool). Such costs include lease acquisition costs, geological and
      geophysical expenses, overhead directly related to exploration and development
      activities, and the costs of drilling both productive and non-productive wells.
      Proceeds from property sales are generally credited to the full cost pool
      without gain or loss recognition unless such a sale would significantly alter
      the relationship between capitalized costs and the proved reserves attributable
      to these costs. A significant alteration would typically involve a sale of
      25%
      or more of the proved reserves related to a single full cost pool. We did not
      incur any costs associated with production or general corporate activities
      nor
      did we capitalize any internal costs during the year ended December 31, 2007
      or
      the period from August 10, 2006 (inception) to December 31, 2006.





Depletion
      of exploration and development costs is computed using the units-of-production
      method based upon estimated proven oil and gas reserves. The costs of unproved
      properties are withheld from the depletion base until it is determined whether
      proved reserves can be assigned to the properties. The properties are reviewed
      quarterly for impairment. During the year ended December 31, 2007 and the period
      from August 10, 2006 (inception) to December 31, 2006, we did not record any
      impairment charges against the unproven oil and gas properties.





Total
      well costs are transferred to the depletable pool even when all targeted zones
      have not been fully evaluated. For depletion and depreciation purposes, relative
      volumes of oil and gas production and reserves are converted at the energy
      equivalent rate of six thousand cubic feet of natural gas to one barrel of
      crude
      oil.





Under
      the
      full cost method of accounting, capitalized oil and gas property costs less
      accumulated depletion and net of deferred income taxes (full cost pool) may
      not
      exceed an amount equal to the present value, discounted at 10%, of estimated
      future net revenues from proved gas reserves plus the cost or estimated fair
      value, if lower, of unproven properties. In accordance with SFAS 143 and Staff
      Accounting Bulletin No. 106 (SAB 106), future cash outflows associated with
      settling asset retirement obligations that have been accrued on the balance
      sheet have been excluded from the present value of estimated future net cash
      flows used in the ceiling test calculation. Should capitalized costs exceed
      this
      ceiling, impairment is recognized. The present value of estimated future net
      revenues is computed by applying current prices of oil and gas to estimated
      future production of proved oil and gas reserves as of period-end, less
      estimated future expenditures to be incurred in developing and producing the
      proved reserves assuming the continuation of existing economic
      conditions.




F-9
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)





**Asset
      Retirement Obligation**





The
      Company follows SFAS No. 143, *Accounting
      for Asset Retirement Obligations* ,
      which
      requires that the fair value of a liability for an asset retirement obligation
      be recognized in the period in which it is incurred if a reasonable estimate
      of
      fair value can be made. The associated asset retirement costs are capitalized
      as
      part of the carrying amount of the long-lived asset. The increase in carrying
      value of a property associated with the capitalization of an asset retirement
      cost is included in proved oil and gas properties in the consolidated balance
      sheets. The Company did not have any proved oil and gas properties or asset
      retirement obligations at December 31, 2007 or 2006.





**Basic
      and Diluted Net Loss per Common Share**





Basic
      net
      loss per share is computed by dividing the net loss attributable to the common
      stockholders by the weighted average number of common shares outstanding during
      the reporting period. Diluted net income per common share includes the dilution
      that could occur upon the exercise of options and warrants to acquire common
      stock, computed using the treasury stock method which assumes that the increase
      in the number of shares is reduced by the number of shares that the Company
      could have repurchased with the proceeds from the exercise of options and
      warrants (which are assumed to have been made at the average market price of
      the
      common shares during the reporting period).





Potential
      common shares are excluded from the diluted loss per share computation in net
      loss periods as their inclusion would be anti-dilutive.





At
      December 31, 2007, the Company had 8,000,000 shares of common stock issued
      and
      outstanding and no outstanding options, warrants or convertible
      debt.





**Recent
      Accounting Pronouncements**





In
      February 2006, the FASB issued SFAS No. 155 (SFAS 155) *Accounting
      for Certain Hybrid Financial Instruments - an amendment of FASB Statements
      No.
      133 and 140* .
      This
      Statement amends FASB Statements No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      and No.
      140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* .
      This
      statement resolves issues addressed in Statement 133 Implementation Issue No.
      D1, *Application
      of Statement 133 to Beneficial Interests in Securitized Financial
      Assets* .
      This
      statement was effective for the Company on January 1, 2007. Adoption of SFAS
      155
      did not have a material impact on the Company’s financial position or results of
      operations.




F-10
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)





**Recent
      Accounting Pronouncements** (Continued)





In
      March
      2006, the FASB issued SFAS No. 156 (SFAS 156), *Accounting
      for Servicing of Financial Assets - an amendment of FASB Statement No.
      140* .
      SFAS
      156 amends SFAS No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishment of
      Liabilities* ,
      with
      respect to accounting for separately recognized servicing assets and servicing
      liabilities. SFAS 156 was effective for the Company on January 1, 2007. The
      Company does not have any servicing assets or servicing liabilities and,
      accordingly, the adoption of SFAS 156 did not have a material impact on its
      financial position or results of operations.




In
      July 2006, the FASB issued FASB Interpretation No. 48 (Interpretation
      No. 48 or FIN 48), *Accounting
      for Uncertainty*  *in
      Income Taxes* .
      Interpretation No. 48 clarifies the accounting for uncertainty in income
      taxes recognized in an enterprise's financial statements in accordance with
      SFAS
      No. 109, *Accounting
      for Income Taxes.* Interpretation No. 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. Interpretation
      No. 48 also provides guidance on derecognition, classification, interest
      and penalties, accounting in interim periods, disclosure and transition.
      Interpretation No. 48 was effective beginning January 1, 2007.






The
      Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48
      provides detailed guidance for the financial statement recognition, measurement
      and disclosure of uncertain tax positions recognized in the financial statements
      in accordance with SFAS 109. Tax positions must meet a “more-likely-than-not”
recognition threshold at the effective date to be recognized upon the adoption
      of FIN 48 and in subsequent periods. The adoption of FIN 48 had an immaterial
      impact on the Company’s consolidated financial position and did not result in
      unrecognized tax benefits being recorded. Accordingly, no corresponding interest
      and penalties have been accrued. The Company files income tax returns in the
      U.S. federal and state jurisdictions. No federal or state income tax
      examinations are underway in these jurisdictions. The Company is no longer
      subject to U.S. federal income tax examinations by the Internal Revenue service
      for tax years before 2003 and for state and local tax authorities for years
      before 2002. The Company does, however, have prior years’ net operating losses
      which remain open for examination.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (SFAS
      No. 157). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value and enhances disclosures about fair value measures required
      under other accounting pronouncements, but does not change existing guidance
      as
      to whether or not an instrument is carried at fair value. SFAS No. 157 will
      be effective for the Company on January 1, 2008. The adoption of SFAS 157 is
      not
      expected to have a significant impact on our consolidated financial statements.


F-11
 *Table
            of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)







**Recent
      Accounting Pronouncements** (Continued)




In
      September 2006, the FASB issued SFAS 158 (SFAS 158), *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106, and 132(R).* This
      statement requires an employer to recognize the over funded or under funded
      status of a defined benefit postretirement plan as an asset or liability in
      its
      statement of financial position and to recognize changes in that funded status
      in the year in which the changes occur through comprehensive income of a
      business entity. This statement also requires an employer to measure the funded
      status of a plan as of the date of its year end statement of financial position,
      with limited exceptions. The Company is required to initially recognize the
      funded status of a defined benefit post retirement plan and to provide the
      required disclosures as of the end of the fiscal year ending after
      December 15, 2006. The requirement to measure plan assets and benefit
      obligations as of the date of the employer’s fiscal year end statement of
      financial position is effective for fiscal years ending after December 15,
      2008, or fiscal 2009 for the Company. Adoption of SFAS 158 is not expected
      to
      have a material impact on the Company’s consolidated financial
      statements.




In
      February 2007, the FASB issued SFAS No. 159 (SFAS 159), *The
      Fair Value Option for Financial Assets and Financial Liabilities—Including an
      amendment of FASB Statement No. 115.* SFAS
      159
      permits entities to choose to measure many financial instruments and certain
      other items at fair value. Unrealized gains and losses on items for which the
      fair value option has been elected will be recognized in earnings at each
      subsequent reporting date. SFAS 159 will be effective for the Company on
      January 1, 2008. Adoption of SFAS 159 is not expected to have a material
      impact on the Company’s consolidated financial statements.




In
      December 2007, the FASB issued SFAS No. 141(R), *Business
      Combinations* (SFAS
      141(R)), which replaces SFAS 141, *Business
      Combinations* .
      SFAS
      141(R) requires an acquirer to recognize the assets acquired, the liabilities
      assumed, and any non-controlling interest in the acquiree at the acquisition
      date, measured at their fair values as of that date, with limited exceptions.
      This statement also requires the acquirer in a business combination achieved
      in
      stages to recognize the identifiable assets and liabilities, as well as the
      non-controlling interest in the acquiree, at the full amounts of their fair
      values. SFAS 141(R) makes various other amendments to authoritative literature
      intended to provide additional guidance or to confirm the guidance in that
      literature to that provided in this statement. This statement applies
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. SFAS 141(R) will be effective for the Company on January
      1, 2009. We do not expect the adoption of SFAS 141(R) to have a significant
      impact on our consolidated financial statements.




F-12
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)





**Recent
      Accounting Pronouncements** (Continued)




In
      December 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
      consensus on Issue No. 07-1, *Accounting
      for Collaborative Arrangements* (EITF
      07-1). The EITF concluded on the definition of a collaborative arrangement
      and
      that revenues and costs incurred with third parties in connection with
      collaborative arrangements would be presented gross or net based on the criteria
      in EITF 99-19 and other accounting literature. Companies are also required
      to
      disclose the nature and purpose of collaborative arrangements along with the
      accounting policies and the classification and amounts of significant
      financial-statement amounts related to the arrangements. Activities in the
      arrangement conducted in a separate legal entity should be accounted for under
      other accounting literature; however, required disclosure under EITF 07-1
      applies to the entire collaborative agreement. This issue is effective for
      financial statements issued for fiscal years beginning after December 15,
      2008, and interim periods within those fiscal years, and is to be applied
      retrospectively to all periods presented for all collaborative arrangements
      existing as of the effective date. EITF 07-1 will be effective for the Company
      on January 1, 2009. We do not expect the adoption of EITF 07-1 to have a
      significant impact on our consolidated financial statements.





In
      December 2007, FASB issued SFAS No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements* (SFAS
      160), which amends Accounting Research Bulletin No. 51, *Consolidated
      Financial Statements* ,
      to
      improve the relevance, comparability, and transparency of the financial
      information that a reporting entity provides in its consolidated financial
      statements. SFAS 160 establishes accounting and reporting standards that require
      the ownership interests in subsidiaries not held by the parent to be clearly
      identified, labeled and presented in the consolidated statement of financial
      position within equity, but separate from the parent’s equity. This statement
      also requires the amount of consolidated net income attributable to the parent
      and to the non-controlling interest to be clearly identified and presented
      on
      the face of the consolidated statement of income. Changes in a parent’s
      ownership interest while the parent retains its controlling financial interest
      must be accounted for consistently, and when a subsidiary is deconsolidated,
      any
      retained non-controlling equity investment in the former subsidiary must be
      initially measured at fair value. The gain or loss on the deconsolidation of
      the
      subsidiary is measured using the fair value of any non-controlling equity
      investment. The statement also requires entities to provide sufficient
      disclosures that clearly identify and distinguish between the interests of
      the
      parent and the interests of the non-controlling owners. This statement applies
      prospectively to all entities that prepare consolidated financial statements
      and
      applies prospectively for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008. SFAS 160 will be effective
      for the Company on January 1, 2009. We do not expect the adoption of SFAS 160
      to
      have a significant impact on our consolidated financial statements.




F-13
 *Table
          of Contents*




**ROCK
        CITY ENERGY CORP.**
 **(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES**(Continued)





**Recent
      Accounting Pronouncements** (Continued)





In
      June 2007, the EITF of the FASB reached a consensus on Issue No. 07-3, *Accounting
      for Nonrefundable Advance Payments for Goods or Services Received for Use in
      Future Research and Development Activities* (EITF
      07-3). EITF 07-3 requires that non-refundable advance payments for goods or
      services that will be used or rendered for future research and development
      activities must be deferred and capitalized. As the related goods are delivered
      or the services are performed, or when the goods or services are no longer
      expected to be provided, the deferred amounts must be recognized as an expense.
      This issue is effective for financial statements issued for fiscal years
      beginning after December 15, 2007 and earlier application is not permitted.
      This consensus is to be applied prospectively for new contracts entered into
      on
      or after the effective date. EITF 07-03 will be effective for the Company on
      January 1, 2008. The pronouncement is not expected to have a material effect
      on
      our consolidated financial statements.





**Reclassifications**





Certain
      prior period amounts in the accompanying consolidated financial statements
      have
      been reclassified to conform to the current period’s presentation. These
      reclassifications had no effect on the consolidated results of operations or
      financial position for any period presented.





**3.**
            **GOING
                CONCERN**





The
      Company has accumulated a deficit of $263,197 since inception and will require
      additional financing to fund and support its operations until it achieves
      positive cash flows from operations. These factors raise substantial doubt
      about
      the Company’s ability to continue as a going concern. The Company’s ability to
      achieve and maintain profitability and positive cash flows is dependent upon
      its
      ability to locate profitable oil and gas properties, generate revenues from
      oil
      and gas production and control its drilling, production and operating costs.
      The
      Company plans to mitigate its losses in future through its joint operating
      agreement with a Texas oil and gas company (operator) whereby the operator
      has
      agreed to initiate drilling operations on the oil and gas properties and pay
      the
      exploration, drilling, completing, equipping and operating costs associated
      with
      developing the oil and gas properties. Based upon current plans, the Company
      expects to incur operating losses in future periods and there is no assurance
      that the Company will be able to obtain additional financing, locate profitable
      oil and gas properties, generate revenues from oil and gas production and
      control its drilling, production or operating costs, or that the operator will
      initiate drilling operations or pay for the exploration, drilling, completing,
      equipping or operating costs associated with developing the oil and gas
      properties. These consolidated financial statements do not include any
      adjustments that might result from the realization of these
      uncertainties.




F-14
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**4.**
            **UNPROVED
                OIL AND GAS PROPERTIES**





The
      Company has interests in eight oil and gas leases, comprising 9,191 gross acres
      (8,233 net deep acres and 958 net shallow acres) in Edwards County in Texas.





The
      following table presents information regarding the Company’s net property
      acquisition costs incurred during the year ended December 31, 2007 and during
      the period from August 10, 2006 (inception) to December 31, 2006 on its unproved
      properties:




December
                31,
              2007
            
            December
                31,
              2006Unproved
                oil and gas properties
            
            $
            —
            
            $
            —





The
      following table presents information regarding the Company’s unproved property
      leasehold acquisition costs in the area indicated:




December
                31,
              2007
            
            December
                31,
              2006Texas
            
            $
            100
            
            $
            100





The
      following table summarizes oil and gas property costs not being amortized by
      the
      year in which the costs were incurred:




December
                31,
              2007
            
            December
                31,
              2006Acquisition
                costs
            
            $
            —
            
            $
            100





The
      Company’s unproven properties are evaluated periodically for the possibility of
      impairment. During the year ended December 31, 2007 and the period from August
      10, 2006 (inception) to December 31, 2006, no impairment charges were recorded
      against the unproven oil and gas properties.





The
      Company has an interest in eight leases located in Edwards County in
      Texas:





The
      Deep
      Allar Lease is one lease covering the rights to develop and extract hydrocarbons
      from depths below 1,500 feet from approximately 7,750 acres.





The
      Baggett Leases are six leases covering the rights to develop and extract
      hydrocarbons at any depth from approximately 651 acres.





The
      Driver Lease is one lease covering the rights to develop and extract
      hydrocarbons at any depth from approximately 158 deep acres and 632 shallow
      acres. The original Driver Lease, comprising 790 gross and net acres, expired
      in
      February 2007. The Company’s operator obtained a new lease covering the same
      acreage and has an undivided 80% (68.75% until November 2007) interest in the
      mineral rights. The Company’s proportionate interest in this eighth lease is 25%
      of the operator’s interest (158 acres) in the deep rights, or a net interest of
      20%, and 100% interest (632 acres) in the shallow rights, or a net interest
      of
      80%.




F-15
 *Table
          of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**4.**
            **UNPROVED
                OIL AND GAS PROPERTIES**(Continued)





All
      of
      the leases include provisions that allow their primary terms to be extended
      for
      so long as operations are conducted on the land with no cessation for more
      than
      180 consecutive days in the case of the Deep Allar Lease, 90 days in the case
      of
      the Baggett Leases, and 60 consecutive days in the case of the Driver Lease.
      Operations are defined as drilling, testing, completing, marketing,
      recompleting, deepening, plugging back or repairing of a well in search for
      or
      in an endeavor to obtain production of oil, gas, sulphur or other minerals,
      or
      the production of oil, gas, sulphur or other mineral, whether or not in paying
      quantities.





On
      May 8,
      2006, Vallenar entered into a letter agreement dated April 3, 2006, with a
      Texas
      oil and gas company (operator) for the development of the Company’s oil and gas
      properties in Texas. Under the agreement, the operator can earn a 100% leasehold
      interest in the leases to depths below 1,500 feet in exchange for drilling
      until
      it has completed a well capable of producing hydrocarbons in commercial
      quantities. When the operator has completed the first 10 wells and recovered
      100% of the costs to drill the wells (payout), the Company can back in for
      a 25%
      working interest in the wells. On future wells, the Company can either
      participate from the outset to earn a 25% working interest, or back in after
      payout to earn a 6.25% working interest.





Pursuant
      to an assignment of oil and gas leases dated June 9, 2006, the Company assigned
      all of its oil and gas leases, so far as they cover depths below 1,500 feet,
      to
      the operator in exchange for the operator’s initiating drilling operations on
      the land covered by the leases before the primary terms of the leases expire.
      If
      the operator successfully completes a well capable of producing hydrocarbons
      in
      commercial quantities, this assignment of oil and gas leases will become
      permanent.





Overriding
      royalty interests in the oil and gas leases totaling between 5% and 8.33% of
      all
      oil, gas and other minerals produced, were assigned to three parties, one a
      related party, between October 4, 2002 and April 21, 2006 (see Note 5).





**5.**
            **RELATED
                PARTY TRANSACTIONS**





**Due
      from Related Party**





At
      December 31, 2007, the Company owed $8,007 to a company controlled by an
      officer. During the year ended December 31, 2007, the Company accrued $7,950
      in
      administrative fees to this company.





During
      the period from August 10, 2006 (inception) to December 31, 2006, Brek, the
      Company’s former parent, paid in full the note receivable of $200,000 plus
      accrued interest of $48,519. At December 31, 2007 and 2006, the Company owed
      Brek $1,730 and $13,911. At December 31, 2007, the $1,730 due to Brek was
      recorded in accounts payable. During the year ended December 31, 2007 the
      Company paid $200,000 in management fees to Brek.





**Overriding
      Royalty Interest**





The
      president of the Company has overriding royalty interests in all oil, gas and
      other minerals produced of 3.17%, in six of the oil and gas leases and 1.5%,
      in
      one of the oil and gas leases (see Note 4).





F-16
 *Table
            of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**6.**
            **COMMON
                STOCK**





On
      August
      24, 2006, the Company issued 4,000,000 common shares to Brek, its former parent,
      in exchange for 5,312,500 shares of common stock and 733,333 shares of preferred
      stock in Vallenar Energy Corp.





On
      June
      7, 2007 the Company issued 4,000,000 common shares at $0.15 per share to Brek,
      its former parent, for cash of $600,000.





**7.**
            **COMMITMENTS**





**Oil
      and Gas Commitments**





As
      is
      customary in the oil and gas industry, the Company may at times have commitments
      to preserve or earn certain acreage positions or wells. If the Company does
      not
      pay such commitments, it may lose the acreage positions or wells.





**Lease
      Commitments**





The
      Company had no lease commitments at December 31, 2007 or 2006.





**8.**
            **INCOME
                TAXES**





Income
      tax expense has not been recognized for the year ended December 31, 2007 and
      during the period from August 10, 2006 (inception) to December 31, 2006 and
      no
      taxes were payable at December 31, 2007 or 2006 because the Company has incurred
      losses since its inception.





The
      following table sets out the Company’s net tax losses at December
      31:




December
                31,
              2007
            
            December
                31,
              2006Net
                tax losses
            
            $
            257,387
            
            $
            80,706





At
      December 31, 2007 and 2006, the Company had the following deferred tax assets
      that primarily relate to net operating losses. The Company established a 100%
      valuation allowance, as management believes it is more likely than not that
      the
      deferred tax assets will not be realized:




December
                31,
              2007
            
            December
                31,
              2006Net
                loss carryforwards
            
            $
            218,511
            
            $
            131,000Less
                valuation allowance
            
            
            218,511
            
            
            131,000$
            —
            
            $
            —





The
      Company’s valuation allowance increased during 2007 and 2006 by $87,511 and
      $27,440 respectively.


F-17
 *Table
            of Contents*




**ROCK
      CITY ENERGY CORP.**


**(An
        Exploration Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**8.**
            **INCOME
                TAXES**,
                (Continued)





At
      December 31, 2007 and 2006, the Company had the following net operating loss
      carryforwards (NOLs):





December
                31,
              2007
            
            December
                31,
              2006Net
                operating loss carryforwards
            
            $
            707,949
            
            $
            450,562





The
      federal NOLs expire at various dates up to December 31, 2027.





NOLs
      incurred before August 24, 2006 are subject to an annual limitation due to
      the
      ownership change (as defined under Section 382 of the Internal Revenue Code
      of
      1986) which resulted in a change in business direction. Unused annual
      limitations may be carried over to future years until the net operating losses
      expire. Alternative minimum tax rules could limit the use of net operating
      losses in any one year.






F-18