UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  
 FORM
10-Q
 
 [
      X ]
              QUARTERLY
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
quarterly period ended March 31,
2009
 
 [  
      ]
              TRANSITION
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 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
                (State
      or other jurisdiction of
                incorporation
      or organization)
              20-5503984
                (I.R.S.
      Employer
                Identification
      No.)3416
      Via Lido, Suite F, Newport Beach, California,
      92663-3976
                (Address
      of principal executive offices)877-587-2517
                (Issuer’s
      telephone number)(Former
      name, former address and former fiscal year, if changed since last
      report)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  [  ] Yes  [X] No
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceeding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ 
 ]  No [   ]
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
 
 Large
      accelerated filer  [   ]
              Accelerated
      filer                    
       [   ]Non-accelerated
      filer    [   ]
                (Do
      not check if a smaller reporting company
              Smaller
      reporting company   
[X]
 
 Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  [X]
Yes  [   ] No
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.  As of May15,2009the registrant had 8,000,000 shares of common stock
outstanding.
  1
 
 PART
I - FINANCIAL INFORMATION
 
 Item 1. Financial
Statements.
 
 INSERT
FINANCIAL STATEMENTS
  ROCK
      CITY ENERGY CORP.(An
      Exploration Stage Company)CONSOLIDATED
      BALANCE SHEETSMarch
      31,
                  2009
                
                
                December
      31, 2008(Unaudited)ASSETSCurrent
      assetsCash
                
                $
                207,994
                
                
                $
                255,112Prepaid
      expenses
                
                
                19
                
                
                
                -Total
      current assets
                
                
                208,013
                
                
                
                255,112Unproved
      oil and gas properties
                
                
                100
                
                
                
                100Total
      assets
                
                $
                208,113
                
                
                $
                255,212LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
                
                $
                2,131
                
                
                $
                6,196Accrued
      liabilities
                
                
                1,026
                
                
                
                1,102Accrued
      professional fees
                
                
                17,270
                
                
                
                24,602Due
      to related parties
                
                
                375
                
                
                
                397Total
      current liabilities
                
                
                20,802
                
                
                
                32,297Commitments
      and contingencies
                
                
                -
                
                
                
                -Minority
      interest
                
                
                30,533
                
                
                
                30,743Stockholders'
      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
      shares issued and outstanding at March 31, 2009 and December 31,
      2008
                
                
                8,000
                
                
                
                8,000Additional
      paid-in capital
                
                
                633,430
                
                
                
                633,430Deficit
      accumulated in the exploration stage
                
                
                (484,652
                )
                
                
                (449,258
                )Total
      stockholders' equity
                
                
                156,778
                
                
                
                192,172Total
      liabilities and stockholders' equity
                
                $
                208,113
                
                
                $
                255,212The
      accompanying notes are an integral part of these consolidated financial
      statements
  2
  ROCK
      CITY ENERGY CORP.(An
      Exploration Stage Company)CONSOLIDATED
      STATEMENTS OF OPERATIONSUNAUDITEDAugust
      10, 2006Three
      Months Ended
                
                
                (Inception)
      toMarch
      31,
                
                
                March
      31,2009
                
                
                2008
                
                
                2009ExpensesAdministrative
      fees
                
                $
                22,500
                
                
                $
                22,500
                
                
                $
                127,950Bank
      charges
                
                
                330
                
                
                
                316
                
                
                
                3,140Office
                
                
                106
                
                
                
                160
                
                
                
                370Professional
                
                
                10,437
                
                
                
                17,353
                
                
                
                326,918Regulatory
                
                
                262
                
                
                
                623
                
                
                
                20,457Rent
                
                
                1,500
                
                
                
                500
                
                
                
                6,500Telephone
                
                
                469
                
                
                
                692
                
                
                
                4,129Travel
                
                
                -
                
                
                
                -
                
                
                
                8,226Total
      expenses
                
                
                35,604
                
                
                
                42,144
                
                
                
                497,690Other
      incomeInterest
                
                
                -
                
                
                
                -
                
                
                
                5,716Net
      loss before income tax and minority interest
                
                
                (35,604
                )
                
                
                (42,144
                )
                
                
                (491,974
                )Income
      tax
                
                
                -
                
                
                
                -
                
                
                
                (1,021
                )Net
      loss before minority interest
                
                
                (35,604
                )
                
                
                (42,144
                )
                
                
                (492,995
                )Minority
      interest
                
                
                210
                
                
                
                47
                
                
                
                8,343Net
      loss for the period
                
                $
                (35,394
                )
                
                $
                (42,097
                )
                
                $
                (484,652
                )Loss
      per share:Basic
      and diluted
                
                $
                0.00
                
                
                $
                (0.01
                )Weighted
      average shares outstanding:Basic
      and diluted
                
                
                8,000,000
                
                
                
                8,000,000The
      accompanying notes are an integral part of these consolidated financial
      statements
  3
  ROCK
      CITY ENERGY CORP.(An
      Exploration Stage Company)CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITYFOR
      THE PERIOD FROM AUGUST 10, 2006 (INCEPTION) THOUGH MARCH 31,
      2009DeficitAccumulatedCommon
      Stock Issued
                
                
                Additional
                
                
                in
      theNumber
      of
                
                
                
                
                
                Paid-In
                
                
                ExplorationShares
                
                
                Amount
                
                
                Capital
                
                
                Stage
                
                
                TotalBalance
      at August 10, 2006 (Inception)
                
                
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Issuance
      of common stock
                
                
                4,000,000
                
                
                
                4,000
                
                
                
                37,430
                
                
                
                -
                
                
                
                41,430Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (7,479
                )
                
                
                (7,479
                )Balance,
      December 31, 2006 (Audited)
                
                
                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 (Audited)
                
                
                8,000,000
                
                
                
                8,000
                
                
                
                633,430
                
                
                
                (263,197
                )
                
                
                378,233Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (42,097
                )
                
                
                (42,097
                )Balance,
      March 31, 2008 (Unaudited)
                
                
                8,000,000
                
                
                
                8,000
                
                
                
                633,430
                
                
                
                (305,294
                )
                
                
                336,136Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (143,964
                )
                
                
                (143,964
                )Balance,
      December 31, 2008 (Audited)
                
                
                8,000,000
                
                
                
                8,000
                
                
                
                633,430
                
                
                
                (449,258
                )
                
                
                192,172Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (35,394
                )
                
                
                (35,394
                )Balance,
      March 31, 2009 (Unaudited)
                
                
                8,000,000
                
                
                $
                8,000
                
                
                $
                633,430
                
                
                $
                (484,652
                )
                
                $
                156,778The
      accompanying notes are an integral part of these consolidated financial
      statements
  4
  ROCK
      CITY ENERGY CORP.(An
      Exploration Stage Company)CONSOLIDATED
      STATEMENTS OF CASH FLOWSUNAUDITEDAugust
      10, 2006Three
      Months Ended
                
                
                (Inception)
      toMarch
      31,
                
                
                March
      31,2009
                
                
                2008
                
                
                2009Cash
      flows from operating activities:Net
      loss
                
                $
                (35,394
                )
                
                $
                (42,097
                )
                
                $
                (484,652
                )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Cash
      acquired on acquisition of subsidiary
                
                
                -
                
                
                
                -
                
                
                
                294Minority
      interest
                
                
                (210
                )
                
                
                (47
                )
                
                
                (8,343
                )Changes
      in operating assets and liabilities:Prepaid
      expenses
                
                
                (19
                )
                
                
                -
                
                
                
                (19
                )Accounts
      payable
                
                
                (4,065
                )
                
                
                (6,672
                )
                
                
                (69,291
                )Accrued
      liabilities
                
                
                (76
                )
                
                
                (424
                )
                
                
                1,223Accrued
      professional fees
                
                
                (7,332
                )
                
                
                (6,232
                )
                
                
                17,270Due
      to related parties
                
                
                (22
                )
                
                
                (8,007
                )
                
                
                (9,036
                )Net
      cash used in operating activities
                
                
                (47,118
                )
                
                
                (63,479
                )
                
                
                (552,554
                )Cash
      flows from investment activities:Proceeds
      of note receivable from related party
                
                
                -
                
                
                
                -
                
                
                
                160,548Net
      cash provided by investment activities
                
                
                -
                
                
                
                -
                
                
                
                160,548Cash
      flows from financing activities:Cash
      received on issuance of common stock
                
                
                -
                
                
                
                -
                
                
                
                600,000Net
      cash provided by financing activities
                
                
                -
                
                
                
                -
                
                
                
                600,000Net
      (decrease) increase in cash
                
                
                (47,118
                )
                
                
                (63,479
                )
                
                
                207,994Cash,
      beginning of period
                
                
                255,112
                
                
                
                472,108
                
                
                
                -Cash,
      end of period
                
                $
                207,994
                
                
                $
                408,629
                
                
                $
                207,994Supplemental
      cash flow information:Cash
      paid during the period for:Income
      taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                1,021Interest
                
                $
                -
                
                
                $
                -
                
                
                $
                -Non-cash
      items:Common
      shares issued on acquisition of subsidiary
                
                $
                -
                
                
                $
                -
                
                
                $
                41,430Net
      assets acquired on acquisition of subsidiaries (net of
    cash)
                
                $
                -
                
                
                $
                -
                
                
                $
                (80,012
                )Minority
      interest
                
                $
                -
                
                
                $
                -
                
                
                $
                38,876The
      accompanying notes are an integral part of these consolidated financial
      statements
  5
  ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 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. and changed its name to Rock City Energy Corp. on
January 26, 2007. 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.
 
 Basis
of Presentation
 
 The
unaudited consolidated financial statements included herein have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form
10-Q.  They do not include all information and notes required by
generally accepted accounting principles for complete financial
statements.  However, except as disclosed herein, there have been no
material changes in the information disclosed in the notes to the audited
consolidated financial statements included on Form 10-K of Rock City Energy
Corp. for the year ended December 31, 2008.  In the opinion of
management, all adjustments (including normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating
results for the three months ended March 31, 2009, are not necessarily
indicative of the results that may be expected for any other interim period or
the entire year.  For further information, these unaudited
consolidated financial statements and the related notes should be read in
conjunction with the Company’s audited consolidated financial statements for the
year ended December 31, 2008, included in the Company’s annual
report  on Form 10-K.
 
 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 SEC Industry Guide 7, and follows 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.
  6
 
 ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 
 A summary of the Company’s significant
accounting policies is included in the Company’s Form 10-K dated and filed on
March 31, 2009 for the fiscal year ended December 31,
2008.  Additional significant accounting policies that affect the
Company or have been developed since December 31, 2008 are summarized
below.
 
 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.
 
 Recent
Accounting Pronouncements
 
 In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141(R), Business
Combinations(SFAS 141(R)), which replaces SFAS 141, Business Combinations, and
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.  This statement was effective for us on
January 1, 2009.  The adoption of this pronouncement did not have a
material effect on our consolidated financial statements. We expect,
however,that SFAS 141(R) will have an impact on our accounting for future
business combinations, but the effect is dependent upon the acquisitions that
are made in the future.
 
 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.
Based on the nature of the arrangement, payments to or from collaborators would
be evaluated and its terms, the nature of the entity’s business, and whether
those payments are within the scope of other accounting literature would be
presented. 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 was
effective for the Company on January 1, 2009.  The adoption of EITF
07-1 did not have a significant impact on our consolidated financial
statements.
  7
  ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 2.
                SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES(Continued)
 
 Recent Accounting Pronouncements,(continued)
 
 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.
This statement was effective for us on January 1, 2009.   The
adoption of SFAS 160 did not have a significant impact on our consolidated
financial statements.
 
 In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133(SFAS 133). This statement
is intended to improve financial reporting of derivative instruments and hedging
activities by requiring enhanced disclosures about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under SFAS 133 and its related interpretations and (c)
how derivative instruments and related hedged items affect an entity’s financial
position, financial performance and cash flows. The provisions of SFAS 161 are
effective for fiscal years beginning after
November 15, 2008.  This statement was effective for us on
January 1, 2009.  The adoption of this statement did not have a
material impact on our consolidated financial statements.
  In April
2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the Useful Life of
Intangible Assets (FSP 142-3). FSP 142-3 amends the factors to be
considered in developing renewal or extension assumptions used to determine the
useful life of intangible assets under SFAS No. 142, Goodwill and Other Intangible
Assets. Its intent is to improve the consistency between the useful life
of an intangible asset and the period of expected cash flows used to measure its
fair value. This FSP is effective prospectively for intangible assets acquired
or renewed after January 1, 2009. The adoption of  FSP 142-3 did
not have a material impact on our consolidated financial
statements.
  8
 ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 2.
                SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES
(Continued)
 
 Recent Accounting Pronouncements,(continued)
  On May 9,
2008, the FASB issued FSP APB 14-1 (FSP APB 14-1), Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement)
are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants.  Additionally, FSP
APB 14-1 specifies that issuers of such instruments should separately account
for the liability and equity components in a manner that will reflect the
entity’s nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. FSP APB 14-1 was effective for
the Company on January 1, 2009.  The adoption of FSP APB 14-1 did not
have a material impact on our consolidated results of operations or financial
position or our earnings per share calculations.
  On June
16, 2008, the FASB issued FSP EITF 03-6-1 (FSP No. EITF 03-6-1), Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
to address the question of whether instruments granted in share-based payment
transactions are participating securities prior to vesting. FSP EITF 03-6-1
indicates that unvested share-based payment awards that contain rights to
dividend payments should be included in earnings per share calculations. The
guidance will be effective for fiscal years beginning after December 15, 2008.
FSP EITF 03-6-1 was effective for the Company on January 1, 2009.  The
adoption of FSP EITF 03-6-1 did not have a material impact on our consolidated
results of operations or financial position.
 
 In June
2008, the FASB issued EITF Issue 07-5 (EITF 07-5), Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own
Stock.  EITF No. 07-5 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early application is not permitted. Paragraph 11(a)
of SFAS No. 133 Accounting for
Derivatives and Hedging Activities, specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Company’s own stock and (b) classified in stockholders’ equity in the statement
of financial position would not be considered a derivative financial instrument.
EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer’s own stock
and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope
exception.  EITF 07-5 was effective for us on January 1,
2009.  The adoption of EITF 07-5 did not have a material impact on our
consolidated financial statements.
  9
  ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 2.
                SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES
(Continued)
 
 Recent Accounting Pronouncements,(continued)
 
 In
December 2008, the FASB issued FSP No.132 (R)-1, Employers’ Disclosures about
Pensions and Other Postretirement Benefits (FSP 132R-1). FSP 132R-1
requires enhanced disclosures about the plan assets of a Company’s defined
benefit pension and other postretirement plans. The enhanced disclosures
required by this FSP are intended to provide users of financial statements with
a greater understanding of (1) how investment allocation decisions are
made, including the factors that are pertinent to an understanding of investment
policies and strategies, (2) the major categories of plan assets,
(3) the inputs and valuation techniques used to measure the fair value of
plan assets, (4) the effect of fair value measurements using significant
unobservable inputs (Level 3) on changes in plan assets for the period, and
(5) significant concentrations of risk within plan assets. The adoption of
this FSP did not have a material impact on our consolidated financial
statements.
  In
April 2009, the FASB issued FASB Staff Position Financial Accounting
Standard (FAS) 157-4 Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. Based on the
guidance, if an entity determines that the level of activity for an asset or
liability has significantly decreased and that a transaction is not orderly,
further analysis of transactions or quoted prices is needed, and a significant
adjustment to the transaction or quoted prices may be necessary to estimate fair
value in accordance with Statement of Financial Accounting Standards
No. 157 Fair Value
Measurements. This FSP is to be applied prospectively and is effective
for interim and annual periods ending after June 15, 2009 with early
adoption permitted for periods ending after March 15, 2009. We will adopt
this FSP for our quarter ending June 30, 2009. We do not expect any
impact on our consolidated financial statements.
  In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2 Recognition and Presentation of
Other-Than-Temporary Impairments. The guidance applies to investments in
debt securities for which other-than-temporary impairments may be recorded. If
an entity’s management asserts that it does not have the intent to sell a debt
security and it is more likely than not that it will not have to sell the
security before recovery of its cost basis, then an entity may separate
other-than-temporary impairments into two components: 1) the amount related to
credit losses (recorded in earnings), and 2) all other amounts (recorded in
other comprehensive income). This FSP is to be applied prospectively and is
effective for interim and annual periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. We will
adopt this FSP for our quarter ending June 30, 2009. We do not expect any
impact on our consolidated financial statements.
  In
April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board
(APB) 28-1 Interim Disclosures
about Fair Value of Financial Instruments. The FSP amends SFAS
No. 107 Disclosures about
Fair Value of Financial Instruments to require an entity to provide
disclosures about fair value of financial instruments in interim financial
information. This FSP is to be applied prospectively and is effective for
interim and annual periods ending after June 15, 2009 with early adoption
permitted for periods ending after March 15, 2009. We will include the
required disclosures in our quarter ending June 30, 2009.
 10
 ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 In
April 2009, the FASB issued FSP FAS 141(R)-1, Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies. This FSP requires that assets acquired and
liabilities assumed in a business combination that arise from contingencies be
recognized at fair value if fair value can be reasonably estimated. If fair
value cannot be reasonably estimated, the asset or liability would generally be
recognized in accordance with SFAS No. 5, Accounting
for Contingencies and FASB Interpretation No. 14, Reasonable
Estimation of the Amount of a Loss. Further, the FASB removed the
subsequent accounting guidance for assets and liabilities arising from
contingencies from SFAS No. 141(R). The requirements of this FSP carry
forward without significant revision the guidance on contingencies of SFAS
No. 141, Business
Combinations, which was superseded by SFAS No. 141(R). The FSP also
eliminates the requirement to disclose an estimate of the range of possible
outcomes of recognized contingencies at the acquisition date. For unrecognized
contingencies, the FASB requires that entities include only the disclosures
required by SFAS No. 5. We adopted this FSP effective January 1, 2009.
The adoption had no impact, but its effects on future periods will depend on the
nature and significance of business combinations subject to this
statement.
 
 3.
                GOING
      CONCERN
 
 The
Company has accumulated a deficit of $484,652 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.
Based upon its 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.  The Company plans to mitigate its losses in future
through its joint operating agreement with a Texas oil and gas company
(operator) pursuant to which the operator 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.  There is no assurance, however, that the operator will be
able to profitably develop the properties.  These consolidated
financial statements do not include any adjustments that might result from the
realization of these uncertainties.
  4.
                UNPROVED
      OIL AND GAS PROPERTIES
 
 The
Company has interests in eight oil and gas leases, covering 9,191 gross acres
(8,708 net deep acres and 958 net shallow acres) in Edwards County in
Texas.
 
 On May 8,
2006, the Company 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.
The operator successfully completed a well capable of producing hydrocarbons in
commercial quantities and perpetuated its interest in the leases on December 21,
2007.
  11
  ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 4.
                UNPROVED OIL AND GAS
      PROPERTIES,(Continued)
 
 The Deep
Allar Lease is one lease covering the rights to develop and extract hydrocarbons
from depths below 1,500 feet from 7,742 acres.  The primary term of
the Deep Allar lease ended in January 2007. Included in the lease is a provision
that allows the primary term of the lease to be extended for so long as
operations are conducted on the land with no cessation for more than 180
consecutive days.  At March 31, 2009, sufficient operations had been
conducted on the property to extend the term of the lease to April 6, 2009 (see
Note 8).
 
 The
Baggett Leases are six leases covering the rights to develop and extract
hydrocarbons at any depth from approximately 651 acres.  The Baggett
Leases do not require continuous development because the two wells on the
property are producing.  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 minerals,
whether or not in paying quantities.
 
 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 Company’s original Driver Lease, covering 790 gross and net acres,
expired in February 2007. The Company’s operator obtained a new lease, which
expires February 1, 2010, covering the same acreage and has an undivided 80%
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%.
 
 The
following table sets out the shallow and deep zone developed and undeveloped
acreage at March 31, 2009:
 
 Developed
      and UndevelopedThe
      Company’s Acreage (Shallow Zone)
                
                
                The
      Operator’s Acreage (Deep Zone)Developed
      Acres
                
                
                Undeveloped
      Acres
                
                
                Developed
      Acres
                
                
                Undeveloped
      AcresLease
                
                Gross
                
                
                Net
                
                
                Gross
                
                
                Net
                
                
                Gross
                
                
                Net
                
                
                Gross
                
                
                NetAllar
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                640
                
                
                
                640
                
                
                
                7,110
                
                
                
                7,110Baggett
                
                
                0
                
                
                
                0
                
                
                
                651
                
                
                
                326
                
                
                
                651
                
                
                
                326
                
                
                
                0
                
                
                
                0Driver
                
                
                0
                
                
                
                0
                
                
                
                790
                
                
                
                632
                
                
                
                0
                
                
                
                0
                
                
                
                790
                
                
                
                6320
                
                
                
                0
                
                
                
                1,441
                
                
                
                958
                
                
                
                1,291
                
                
                
                966
                
                
                
                7,900
                
                
                
                7,742
  The
following table presents information regarding the Company’s unproved property
leasehold acquisition costs in the area indicated:
  March
      31,
                  2009
                
                
                December
      31,
                  2008Texas
                
                $
                100
                
                
                $
                100
 
 The
Company periodically evaluates its unproven properties for the possibility of
impairment.  During the three months ended March 31, 2009 and the year
ended December 31, 2008, no impairment charges were recorded against the
unproven oil and gas properties.
 
 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).
  12
 ROCK
CITY ENERGY CORP.
 (An
Exploration Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2009
 UNAUDITED
 5.
                RELATED
      PARTY TRANSACTIONS
 
 Due
to Related Party
 
 The
following amounts were due to related parties on the following
dates:
 
 March
      31,
                  2009
                
                
                December
      31, 2008Due
      to a company controlled by an officer (a)
                
                $
                175
                
                
                $
                197Due
      to the wife of a director
                
                
                200
                
                
                
                200Total
      due to related parties
                
                $
                375
                
                
                $
                397
 
 (a)
During the three months ended March 31, 2009 and 2008 the Company paid or
accrued $22,500, in administrative fees to a company controlled by an
officer.
 
 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).
 
 6.
                COMMON
      STOCK
 
 On August
24, 2006, the Company issued 4,000,000 common shares to Brek Energy Corporation,
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 March 31, 2009 or December 31,
2008.
 
 8.
                SUBSEQUENT
      EVENT
  Subsequent
to March 31, 2009, sufficient operations were not conducted on the deep Allar
lease to extend the term of the lease.  When the Allar lease expired
on April 6, 2009  the amount of leased acreage in which we have an
interest decreased by 7,110 undeveloped deep acres (see Note 4).
 13
  Item
2.  Management’s Discussion and Analysis or Plan of
Operation
  Forward-Looking
Statements
 
 Certain
information included in this Form 10-Q and other materials that we have filed or
will file with the Securities and Exchange Commission (as well as information
included in oral or written statements that we have made or others have made on
our behalf), may contain forward-looking statements about our current and
expected prospects, performance trends, growth plans, business goals and other
matters.  These statements may be contained in our filings with the
Securities and Exchange Commission, in our press releases, in other written
communications, and in oral statements made by or with the approval of one of
our authorized officers.  Words or phrases such as “believe,” “plan,”
“will likely result,” “expect,” “intend,” “will continue,” “is anticipated,”
“estimate,” “project,” “may,” “could,” “would,” “should,” and similar
expressions are intended to identify forward-looking
statements.  These statements, and any other statements that are not
historical facts, are forward-looking statements.
 
 We have
identified important factors, risks and uncertainties that could cause our
actual results to differ materially from those projected in the forward-looking
statements that we have made (see the section of our Form 10-K titled “Risk
Factors” filed with the Securities and Exchange Commission on March 31,
2009).  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.
 
 Because
of these factors, risks and uncertainties, we caution against placing undue
reliance on forward-looking statements.  Although we believe that the
assumptions underlying forward-looking statements are reasonable, any of the
assumptions could be incorrect, and there can be no assurance that
forward-looking statements will prove to be accurate.
 
 Forward-looking
statements speak only as of the date on which they are made.  We do
not undertake any obligation to modify or revise any forward-looking statement
to take into account or otherwise reflect subsequent events or circumstances
arising after the date that the forward-looking statement was made.
 
 You
should read this discussion and analysis in conjunction with our interim
unaudited consolidated financial statements and related notes included in this
Form 10-Q and the audited consolidated financial statements and related notes
included in our annual report on Form 10-K for the fiscal year ended December
31, 2008.  The inclusion of supplementary analytical and related
information in this report may require us to make estimates and assumptions to
enable us to fairly present, in all material respects, our analysis of trends
and expectations with respect to the results of our operations and financial
position taken as a whole.
 
 Overview
 
 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 assigned our leases to Chesapeake Exploration Limited
Partnership.  Chesapeake is the operator for the development of our
oil and gas properties.
 
 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 our
ability to emerge from the exploration stage with our planned principal business
activity is dependent upon our ability to obtain 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.
  14
 
 Our
Business
 
 We were
incorporated on August 10, 2006 in the state of Nevada as Vallenar Holdings,
Inc. and changed our name to Rock City Energy Corp. on January 26,
2007.  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.  We are
involved in the oil and gas exploration business and, through Vallenar’s
subsidiary, Nathan Oil Partners LP, we have an interest in several oil and gas
leases in the state of Texas.  We assigned our leases to Chesapeake
who acts as the operator for the development of our oil and gas
properties.  A description of our agreement with Chesapeake is
included below in the section titled “Unproved Oil and Gas
Properties”.
 
 Analysis
of Consolidated Statements of Operations
 
 Our
operating results for the three months ended March 31, 2009 and 2008 and the
changes between those three month periods are summarized in Table
1.
  Table
      1: Changes in OperationsThree
      Months Ended
                  March
      31,
                
                
                Increase
      (Decrease)
                  Between
      the
                  ThreeMonthsEnded
                  March
      31,2009
                
                
                2008
                
                
                2009
      and 2008ExpensesAdministrative
      fees
                
                $
                22,500
                
                
                $
                22,500
                
                
                $
                -Bank
      charges
                
                
                330
                
                
                
                316
                
                
                
                14Office
                
                
                106
                
                
                
                160
                
                
                
                (54)Professional
                
                
                10,437
                
                
                
                17,353
                
                
                
                (6,916)Regulatory
                
                
                262
                
                
                
                623
                
                
                
                (361)Rent
                
                
                1,500
                
                
                
                500
                
                
                
                1,000Telephone
                
                
                469
                
                
                
                692
                
                
                
                (223)Travel
                
                
                -
                
                
                
                -
                
                
                
                -Total
      expenses and net loss before minority interest
                
                
                35,604
                
                
                
                42,144
                
                
                
                (6,540)Minority
      interest
                
                
                210
                
                
                
                47
                
                
                
                163Net
      loss
                
                $
                35,394
                
                
                $
                42,097
                
                
                $
                (6,703)
 
 Revenues
 
 We did
not have any operating revenues from our inception on August 10, 2006 to the
date of this filing.  To date we have financed our activities with the
proceeds that we received from the sale of our securities and from the repayment
of a note receivable from a former related party.  Due to the nature
of our business we do not expect to have operating revenues within the next
year.
 
 Expenses
 
 Our
expenses decreased by $6,540 or 16% from $42,144 for the three months ended
March 31, 2008 to $35,604, for the three months ended  March 31,
2009.  This decrease in our expenses was primarily due to a decrease
in professional fees offset by an increase in rent.
 
 Professional
fees were lower during the three months ended March 31, 2009 as compared to the
three months ended March 31, 2008 due to controls we implemented to reduce
our legal, accounting and auditing costs during the first three months of
2009.  Our rent was higher during the three months ended March 31,
2009 as compared to the three months ended March 31, 2008 because on March 1,
2008 we began paying rent of $500 per month.
  15
  Liquidity
and Capital Resources
 
 Going
Concern
 
 We have
accumulated a deficit of $484,652 since inception and will require additional
financing to fund and support our operations until we achieve positive cash
flows from operations.  These factors raise substantial doubt about
our ability to continue as a going concern.  Our ability to achieve
and maintain profitability and positive cash flows depends upon our ability to
locate profitable oil and gas properties, generate revenues from oil and gas
production and control our drilling, production and operating
costs.  We have a joint operating agreement with Chesapeake in which
Chesapeake agreed to initiate drilling operations on our properties and pay the
exploration, drilling, completing, equipping and operating costs associated with
developing the properties.  Irrespective of this arrangement, we
expect to incur operating losses in future periods.  While our plan is
to develop our existing oil and gas producing properties and to find and acquire
other oil and gas producing properties, there is no assurance that we will be
able to obtain the financing necessary to implement this plan, locate profitable
oil and gas properties to acquire, generate revenues from oil and gas production
or control our drilling, production or operating costs.  We cannot
assure you that Chesapeake will successfully complete profitable drilling
operations or that it will undertake any extensive development of our oil and
gas properties.  Our consolidated financial statements do not include
any adjustments that might result from the realization of these
uncertainties.
 
 Since May
8, 2006, the date of our agreement with Chesapeake, Chesapeake has conducted
drilling operations on two of our three properties, has built a pipeline and is
selling the gas produced, but to date it has recovered only 12.4% of the costs
associated with the wells.  Until Chesapeake drills at least 10 wells
and recovers from the revenue produced by those wells (net of taxes and
royalties) all of its costs in drilling, completing, equipping and operating the
wells, we will not have any interest in the production from the
wells.  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. On
December 24, 2008, Chesapeake informed us that they have no current plans to
conduct operations on the deep Allar lease. As we do not have the resources to
conduct operations ourselves, the lease expired on April 6, 2009 and we lost
7,110 undeveloped acres.
 
 At March
31, 2009, we had a cash balance of $207,994 and negative cash flow from
operations of $47,118.  To date we have funded our operations with
cash that we received from the sale of our common stock and from the repayment
of a note receivable from a related party.
  Sources
and Uses of Cash
 
 Table 2
summarizes our sources and uses of cash for the three months ended March 31,
2009 and 2008.
  Table
      2: Sources and Uses of CashMarch
      31,2009
                
                
                2008Net
      cash provided by financing activities
                
                $
                -
                
                
                $
                -Net
      cash provided by investment activities
                
                
                -
                
                
                
                -Net
      cash used in operating activities
                
                
                (47,118)
                
                
                
                (63,479)Net
      (decrease) increase in cash
                
                $
                (47,118)
                
                
                $
                (63,479)
 
 Net
cash used in operating activities
 
 We used net cash during
the three months of $47,118 in operating activities during the three
month ended March 31, 2009.  We used cash of $35,394 to cover our
loss, net of a minority interest adjustment of $210.  We also used
cash when our prepaid expenses increased by $19 due to an overpayment to a
supplier; we had net reductions in accounts payable, accrued liabilities and
accrued professional fees of $4,065, $76 and $7,332 respectively; and a
reduction of $22 in the amount due to related parties which was due to foreign
exchange translation adjustments.
  16
 
 We used net cash during
the three months of $63,479 in operatingactivities during the three
month ended March 31, 2008.  We used cash of $42,097 to cover our
loss, net of a minority interest adjustment of $47; we had net reductions in
accounts payable, accrued liabilities and accrued professional fees of $6,672,
$424 and $6,232 respectively; and a reduction of $8,007 in the amount due to
related parties.
 
 Net
cash used in investment activities
 
 We had no
investment activities during the three months ended March 31, 2009 and
2008.
 
 Net
cash provided by financing activities
 
 We had no
financing activities during the three months ended March 31, 2009 and
2008.
 
 Unproved
Oil and Gas Properties
 
 Through
Vallenar, we have interests in the deep zone in eight oil and gas leases
covering 2,081 gross acres (1,598 net acres) and in the shallow zone in seven
oil and gas leases covering 1,441 gross acres (958 net 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 and 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” refers to one lease conveying the rights to develop and
      extract hydrocarbons from depths below 1,500 feet on approximately 640
      acres.
 ·
                The
      “Baggett leases” refer to six leases conveying 50% of the rights to
      develop and extract hydrocarbons at any depth from approximately 651gross
      acres (326 net acres).
 ·
                The
      “new Driver lease” refers to one lease conveying the rights to develop and
      extract hydrocarbons at any depth from approximately 790 acres (632 net
      acres).  The original Driver Lease, covering 790 gross and net
      acres, expired in February 2007.  Chesapeake obtained a new
      lease covering the same acreage and has an undivided 80% interest in the
      mineral rights.  Our proportionate interest in the new Driver
      lease is 25% of Chesapeake’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 Chesapeake
    acquires.
  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 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 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. The Baggett leases and the
deep Allar lease no longer require continuous development because the three
wells on the properties are producing. The primary term of the new Driver lease
expires on February 1, 2010.
 
 While our
goal is to develop our properties to fully exploit all of their resources, 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 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. This plan has generated no revenue to date
and won’t until the wells drilled under the Chesapeake letter agreement have
paid out and we have acquired our 25% working interest in the wellbores. We have
no assurance that we will ever acquire a working interest in the wellbores
because they may never pay out.
  17
 
 As
required by the letter agreement, Chesapeake initiated drilling operations on
the land covered by the assigned leases before the end of their primary terms in
February 2007. Chesapeake successfully completed a well capable of
producing hydrocarbons in commercial quantities in December 2007 and perpetuated
the assignment of the assigned leases.  The assignment contained no
other specific provisions governing expiration or
termination.  Although Chesapeake has successfully completed three
wells—two on the Baggett leases and one on the deep Allar lease—we cannot
guarantee that Chesapeake will successfully develop all of the oil and gas
reserves on the properties covered by the assigned leases.
 
 Chesapeake
is entitled to recover from revenue 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. On December 24, 2008, Chesapeake informed us that they have no
current plans to develop the deep Allar lease on which they have drilled three
wells, two of which are dry holes. As we do not have the resources to develop
the lease we lost 7,110 undeveloped deep zone acres when the lease expired on
April 6, 2009.
 
 We
retained the shallow rights to the Bagget and Driver 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, however, have the funds to develop
these rights.
  The terms
of the letter agreement also required that Chesapeake:
  ·
                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 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.
  Chesapeakeobtained the 3-D seismic
survey, provided interpretive data, has not assigned any wellbore interests to
us as none of the wells has paid out, has built a pipeline and transports the
gas produced from the leases.
  Chesapeake
has drilled five wells—two on the acreage covered by the Baggett leases, and
three on the acreage covered by the deep Allar lease. The wells on the Baggett
leases were connected to the pipeline on December 21, 2007, thus perpetuating
the terms of the Baggett leases and the assignment of the leases to
Chesapeake.  Two of the wells on the Allar acreage were completed as
dry holes and one was connected to a pipeline on January 10, 2008.
 
 According
to the payout information we received from Chesapeake, at February 28, 2009
Chesapeake had recovered from the revenue generated by the three producing wells
approximately 12.4% of the drilling, production and operating costs of all five
wells.  To date, the average cost of drilling and operating the wells
exceeds $4.3 million.  Chesapeake has informed us that, after careful
review by management, they have no current plans to develop the remaining
acreage of the lease.  As we do not have the resources to continue the
drilling program on our own, the lease covering the undeveloped deep Allar
acreage expired on April 6, 2009.  With the expiry of the deep Allar
lease, our deep interests were reduced to our proportionate working interest in
the three producing wells and wellbores after payout and any wells and wellbores
that Chesapeake develops on the new Driver lease.
  18
  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 80% 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.   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.
 
 Table 3
summarizes the development status of our shallow and deep zone
acreage.
 
 Table
      3:  Developed and Undeveloped AcreageShallow
      Zone (Nathan Oil)
                
                Deep
      Zone (Chesapeake)Developed
      Acres
                
                Undeveloped
      Acres
                
                Developed
      Acres
                
                Undeveloped
      AcresArea
                
                Gross
                
                Net
                
                Gross
                
                Net
                
                Gross
                
                Net
                
                Gross
                
                NetTexas
                
                0
                
                0
                
                1,441
                
                958
                
                1,291
                
                966
                
                790
                
                632
 
 Challenges
and Risks
 
 As a
result of the operations that Chesapeake has conducted, all of the acreage
covered by the assigned Baggett leases has been secured beyond the original
termination dates of the leases.  However, as noted under the
discussion titled “Unproved Oil and Gas Properties” above, since Chesapeake let
the Allar lease expire on April 6, 2009 and we did not conduct the operations
necessary to extend the term, our working interest in the Allar acreage is now
limited to a 25% working interest after payout in the one producing well located
on the Allar lease. The primary term of the new Driver lease expires in 2010. We
do not know what plans Chesapeake has for drilling on the new Driver
lease.
 
 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 Energy Corporation,
our former parent, at $0.15 per share for gross proceeds of
$600,000.  We estimate that our annual operating costs will be about
$160,000, which does not include the costs of acquiring future oil and gas
leases or properties.  These costs include our administrative,
professional, rent, office and regulatory costs.  We believe that we
can continue our operations for at least 12 months with our cash on
hand.  However, we do not have enough cash to acquire additional
properties and we may not have the funds to pay our proportionate share of the
costs to develop the leases we assigned to Chesapeake.
  We cannot
guarantee that Chesapeake will successfully develop the oil and gas reserves on
our properties 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 our employees over the next twelve
months.
  Other
Trends, Events or Uncertainties that may Impact Results of Operations or
Liquidity Trends, Events, and Uncertainties
  The
economic crisis in the United States and the resulting economic uncertainty and
market instability may make it harder for us to raise capital as and when we
need it and have made it difficult for us to assess the impact of the crisis on
our operations or liquidity and on Chesapeake’s ability or willingness to
continue to conduct operations.  If Chesapeake does not continue
operations on our properties and we are unable to raise cash, we may be required
to cease our operations.
  19
 
 Historically,
the markets for oil and natural gas have been volatile, and such markets are
likely to continue to be volatile in the future.  Prices are subject
to wide fluctuation in response to relatively minor changes in the supply of and
demand for oil and natural gas, market uncertainty and a variety of additional
factors that are beyond our control.  These factors include the level
of consumer product demand, weather conditions, domestic and foreign
governmental regulations, the price and availability of alternative fuels,
political conditions, the foreign supply of oil and natural gas, the price of
foreign imports and overall economic conditions. We have no ability to mitigate
price volatility under our agreement with Chesapeake.  Any substantial
or extended decline in the prices of or demand for oil or natural gas could
significantly lengthen the time until payout and have a material adverse effect
on our future results of operations.
 
 Other
than as discussed in this report, we know of no other trends, events or
uncertainties that have or are reasonably likely to have a material impact on
our short-term or long-term liquidity.
 
 Off-Balance
Sheet Arrangements
 
 We have
no off-balance sheet arrangements and no non-consolidated, special-purpose
entities.
 
 Contingencies
and Commitments
 
 We had no
contingencies or long-term commitments at March 31, 2009, and have none as of
the date of this filing.
 
 As noted
above, our leases require us to continuously conduct operations on our leased
properties.  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 minerals,
whether or not in paying quantities.  If we fail to operate the
properties (or to pay royalties instead, if so permitted), we would lose our
rights to extend the lease terms.  On April 6, 2009, we lost our
interest in 7,110 undeveloped acres when a lease expired.
 
 As is
customary in the oil and gas industry, we may at times have commitments to
preserve or earn certain acreage positions or wells. If we do not pay these
commitments, we could lose the acreage positions or wells.
 
 Contractual
Obligations
 
 We did
not have any contractual obligations at March 31, 2009, 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.
  Recently
Adopted and Recently Issued Accounting Standards
 
 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.
  20
  Refer to
Note 2 of our Notes to Consolidated Financial Statements included in our Form
10-K for the fiscal year ended December 31, 2008 for a discussion of recent
accounting standards and pronouncements.  Accounting pronouncements
that have been issued or adopted since December 31, 2008 are described
below:
 
 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.
 
 Concentration
of Credit Risk
 
 Financial
instruments that potentially subject us to significant concentrations of credit
risk consist principally of cash.
 
 At March
31, 2009 and December 31, 2008, we had approximately $200,000 and $250,000,
respectively, in cash that was not insured. This cash is on deposit with a major
chartered Canadian bank. As part of our cash management process, we perform
periodic evaluations of the relative credit standing of this financial
institution. We have not lost any cash and do not believe that our cash is
exposed to any significant credit risk.
  Recent
Accounting Standards and Pronouncements
 
 In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141(R), Business
Combinations, which replaces SFAS 141, Business Combinations, and
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.  This statement was effective for us on
January 1, 2009.  The adoption of this pronouncement did not have a
material effect on our consolidated financial statements. We expect,
however,that SFAS 141(R) will have an impact on our accounting for future
business combinations, but the effect is dependent upon the acquisitions that
are made in the future.
 
 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.
Based on the nature of the arrangement, payments to or from collaborators would
be evaluated and its terms, the nature of the entity’s business, and whether
those payments are within the scope of other accounting literature would be
presented. 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 was
effective for us on January 1, 2009.  The adoption of EITF 07-1 did
not have a significant impact on our consolidated financial
statements.
  21
 
 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.
This statement was effective for us on January 1, 2009.   The
adoption of SFAS 160 did not have a significant impact on our consolidated
financial statements.
 
 In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No.
133. This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  This statement was effective for
us on January 1, 2009. The adoption of this statement did not have a
material impact on our consolidated financial statements.
  In April
2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the Useful Life of
Intangible Assets. FSP 142-3 amends the factors to be considered in
developing renewal or extension assumptions used to determine the useful life of
intangible assets under SFAS No. 142, Goodwill and Other Intangible
Assets. Its intent is to improve the consistency between the useful life
of an intangible asset and the period of expected cash flows used to measure its
fair value. This FSP is effective prospectively for intangible assets acquired
or renewed after January 1, 2009. The adoption of FSP 142-3 did not have a
material impact on our consolidated financial statements.
  On May 9,
2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement)
are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants.  Additionally, FSP
APB 14-1 specifies that issuers of such instruments should separately account
for the liability and equity components in a manner that will reflect the
entity’s nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. FSP APB 14-1 was effective for us on January 1,
2009.  The adoption of FSP APB 14-1 did not have a material impact on
our consolidated results of operations or financial position.
 
 On June
16, 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
to address the question of whether instruments granted in share-based payment
transactions are participating securities prior to vesting. FSP EITF 03-6-1
indicates that unvested share-based payment awards that contain rights to
dividend payments should be included in earnings per share calculations. The
guidance will be effective for fiscal years beginning after December 15, 2008.
FSP EITF 03-6-1 was effective for us on January 1, 2009.  The adoption
of FSP EITF 03-6-1 did not have a material impact on our consolidated results of
operations or financial position.
 
 In June
2008, the FASB issued EITF Issue 07-5, Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own
Stock.  EITF No. 07-5 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Early application was not permitted. Paragraph 11(a)
of SFAS No. 133 Accounting for
Derivatives and Hedging Activities, specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to a
company’s own stock and (b) classified in stockholders’ equity in the statement
of financial position would not be considered a derivative financial instrument.
EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer’s own stock
and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope
exception.  EITF 07-5 was effective for us on January 1,
2009.  The adoption of EITF 07-5 did not have a material impact on our
consolidated financial statements.
  22
  In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities.
FSP 03-6-1 clarifies that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and are to be included in the computation
of earnings per share under the two-class method described in SFAS No. 128,
Earnings Per
Share.  This FSP was effective for us on January 1, 2009
and requires that all prior-period earnings-per-share data that are presented be
adjusted retrospectively.  The adoption of FSP 03-6-1 did not have a
material impact on our earnings-per-share calculations.
 
 In
December 2008, the FASB issued FSP No.132 (R)-1, Employers’ Disclosures about
Pensions and Other Postretirement Benefits. FSP 132R-1 requires enhanced
disclosures about the plan assets of a company’s defined benefit pension and
other post-retirement plans. The enhanced disclosures required by this FSP are
intended to provide users of financial statements with a greater understanding
of (1) how investment allocation decisions are made, including the factors
that are pertinent to an understanding of investment policies and strategies,
(2) the major categories of plan assets, (3) the inputs and valuation
techniques used to measure the fair value of plan assets, (4) the effect of
fair value measurements using significant unobservable inputs (Level 3) on
changes in plan assets for the period, and (5) significant concentrations
of risk within plan assets. The adoption of this FSP did not have a material
impact on our consolidated financial statements.
  In
April 2009, the FASB issued FASB Staff Position Financial Accounting
Standard (FAS) 157-4 Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly. Based on the guidance, if an entity determines that the level of
activity for an asset or liability has significantly decreased and that a
transaction is not orderly, further analysis of transactions or quoted prices is
needed, and a significant adjustment to the transaction or quoted prices may be
necessary to estimate fair value in accordance with Statement of Financial
Accounting Standards No. 157 Fair
Value Measurements. This FSP is to be applied prospectively and is
effective for interim and annual periods ending after June 15, 2009 with
early adoption permitted for periods ending after March 15, 2009. We will
adopt this FSP for our quarter ending June 30, 2009. We do not expect
any impact on our consolidated financial statements.
  In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2 Recognition
and Presentation of Other-Than-Temporary Impairments. The guidance
applies to investments in debt securities for which other-than-temporary
impairments may be recorded. If an entity’s management asserts that it does not
have the intent to sell a debt security and it is more likely than not that it
will not have to sell the security before recovery of its cost basis, then an
entity may separate other-than-temporary impairments into two components: 1) the
amount related to credit losses (recorded in earnings), and 2) all other amounts
(recorded in other comprehensive income). This FSP is to be applied
prospectively and is effective for interim and annual periods ending after
June 15, 2009 with early adoption permitted for periods ending after
March 15, 2009. We will adopt this FSP for our quarter ending June 30,
2009. We do not expect any impact on our consolidated financial
statements.
  In
April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board
(APB) 28-1 Interim
Disclosures about Fair Value of Financial Instruments. The FSP amends
SFAS No. 107 Disclosures
about Fair Value of Financial Instruments to require an entity to provide
disclosures about fair value of financial instruments in interim financial
information. This FSP is to be applied prospectively and is effective for
interim and annual periods ending after June 15, 2009 with early adoption
permitted for periods ending after March 15, 2009. We will include the
required disclosures in our quarter ending June 30, 2009.
  In
April 2009, the FASB issued FSP FAS 141(R)-1, Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies. This FSP requires that assets acquired and
liabilities assumed in a business combination that arise from contingencies be
recognized at fair value if fair value can be reasonably estimated. If fair
value cannot be reasonably estimated, the asset or liability would generally be
recognized in accordance with SFAS No. 5, Accounting
for Contingencies and FASB Interpretation No. 14, Reasonable
Estimation of the Amount of a Loss. Further, the FASB removed the
subsequent accounting guidance for assets and liabilities arising from
contingencies from SFAS No. 141(R). The requirements of this FSP carry
forward without significant revision the guidance on contingencies of SFAS
No. 141, Business
Combinations, which was superseded by SFAS No. 141(R). The FSP also
eliminates the requirement to disclose an estimate of the range of possible
outcomes of recognized contingencies at the acquisition date. For unrecognized
contingencies, the FASB requires that entities include only the disclosures
required by SFAS No. 5. We adopted this FSP effective January 1, 2009.
The adoption had no impact, but its effects on future periods will depend on the
nature and significance of business combinations subject to this
statement.
  23
 Item
3.  Quantitative and Qualitative Disclosures about Market
Risk
 
 As a
smaller reporting company, we are not required to include this
information.
 
 Item
4.  Controls and Procedures
 
 Disclosure
Controls and Procedures
 
 Richard
N. Jeffs, our chief executive officer and chief financial officer, has evaluated
the effectiveness of our disclosure controls and procedures (as the term is
defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934) as
of the end of the period covered by this quarterly report (the “evaluation
date”).  Based on his evaluation, Mr. Jeffs has 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.
 
 Item
4 (T).  Controls and Procedures
 
 Changes
in Internal Controls
 
 During
the quarter of the fiscal year covered by this report, there were no changes to
our internal control over financial reporting that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
   PART
II - OTHER INFORMATION
 
 Item
1.  Legal Proceedings.
 
 Not
applicable
 
 Item
1A.  Risk Factors.
 
 Not
applicable
 
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.
 
 Not
applicable
 
 Item
3.  Defaults Upon Senior Securities.
 
 Not
applicable
 
 Item
4.  Submission of Matters to a Vote of Security Holders.
 
 Not
applicable
 
 Item 5. Other Information
 
 Not
applicable
  24
 
 Item
6. Exhibits
 
 Exhibit
      No.
              Title3.1
              Articles
      of Incorporation(1)3.2
              Bylaws(1)31.1
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(2)31.2
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(2)32.1
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002(2)32.2
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002(2)
 (1)
Incorporated by reference from the registrant’s registration statement on Form
SB-2, SEC File No. 333-139312, filed with the Securities and Exchange Commission
on December 13, 2006.
 (2) Filed
herewith.
 
 25
  SIGNATURES
 
 In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
  ROCK
      CITY ENERGY CORP.Date:
      May 15, 2009
              By:
              /s/ Richard
      N. JeffsRichard
      N. JeffsDirector,
      President and Chief Financial Officer
                (Principal
      Executive Officer and
                Principal
      Financial Officer)
 
  25