---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009.

or

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

For the transition period from _________________ to
_________________

Commission File Number: 000-52750

CROWN OIL AND GAS
INC.(Exact name of registrant as specified in its
charter)

|Nevada                                                               | 98-0495144                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|                                                                     |                                     
|400  225 West Magnolia Street, Bellingham, Washington               | 98225                               
|                                                                     | (Zip Code)                          
|(Address of principal executive offices)                             |                                     

360-392-2898(Registrants telephone number, including
area code)

N/A(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.
[X] Yes [ ] No

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 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, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|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).
[ ] Yes [X] No

---

5

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the Registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
[ ] Yes [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date:
36,422,800 shares of $0.001 par value common stock as of July 1,
2009.

---

6

Forward Looking Statements

This quarterly report contains forward-looking statements
within the meaning of Section 27A of the Securities Actof 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as may, should, expects, plans,
anticipates, believes, estimates, predicts, potential or continue or
the negative of these terms or other comparable terminology. These
forward-looking statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks set out in the
section hereof entitled Risk Factors and the risks set out below, any of which
may cause our or our industrys actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.

Forward looking statements are made based on managements
beliefs, estimates and opinions on the date the forward-looking statements are
made and we undertake no obligation to update forward-looking statements should
these beliefs, estimates and opinions or other circumstances change. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these forward-looking statements to actual results.

Our financial statements are stated in United States dollars
and are prepared in accordance with United States generally accepted accounting
principles.

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to
common stock refer to the shares of our common stock.

As used in this quarterly report, the terms we, us, our
and company mean Crown Oil and Gas Inc., unless the context clearly requires
otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

---

|7                                       
|----------------------------------------
|                                        
|                                        
|Crown Oil and Gas Inc.                  
|(formerly Onelife Health Products Inc.) 
|(An Exploration Stage Company)          
|Combined and Consolidated Balance Sheets

|                                                       |   | March 31,   |   |   | December 31, |  
|------------------------------------------------------ | - | ----------- | - | - | ------------ | -
|                                                       |   | 2009        |   |   | 2008         |  
|                                                       |   | (unaudited) |   |   |              |  
|                                                       |   |             |   |   |              |  
|Assets                                                 |   |             |   |   |              |  
|Current:                                               |   |             |   |   |              |  
|Cash                                                   | $ | 1,049,700   |   | $ | 990,252      |  
|Deposit                                                |   | 4,495       |   |   | 5,722        |  
|Total Current Assets                                   |   | 1,054,195   |   |   | 995,974      |  
|                                                       |   |             |   |   |              |  
|Non-current:                                           |   |             |   |   |              |  
|Equipment, net of amortization                         |   | 7,909       |   |   | 9,990        |  
|Supplies                                               |   | 5,261       |   |   | 350          |  
|Licenses                                               |   | 473,496     |   |   | 553,435      |  
|Loan receivable                                        |   | 13,428      |   |   | -            |  
|Oil and Gas Properties                                 |   | 17,129,427  |   |   | 16,593,525   |  
|Total Non-current Assets                               |   | 17,629,521  |   |   | 17,157,300   |  
|                                                       |   |             |   |   |              |  
|Total Assets                                           | $ | 18,683,716  |   | $ | 18,153,274   |  
|                                                       |   |             |   |   |              |  
|                                                       |   |             |   |   |              |  
|Liabilities                                            |   |             |   |   |              |  
|Current:                                               |   |             |   |   |              |  
|Accounts payable                                       | $ | 466,213     |   | $ | 94,965       |  
|Loans payable                                          |   | 2,800,000   |   |   | 2,500,000    |  
|Due to related party                                   |   | 14,272      |   |   | 14,273       |  
|Total Current Liabilities                              |   | 3,280,485   |   |   | 2,609,238    |  
|                                                       |   |             |   |   |              |  
|Total Liabilities                                      |   | 3,280,485   |   |   | 2,609,238    |  
|                                                       |   |             |   |   |              |  
|Stockholders Equity                                   |   |             |   |   |              |  
|Capital stock authorized                              |   |             |   |   |              |  
|900,000,000 with a par value of $0.001                 |   |             |   |   |              |  
|Capital stock issued and outstanding-                  |   |             |   |   |              |  
|36,422,800 and 118,705,000 issued and outstanding      |   | 36,425      |   |   | 35,705       |  
|Additional paid in capital                             |   | 16,241,375  |   |   | 15,524,295   |  
|Contributed
      surplus                              |   | 134,784     |   |   | 134,784      |  
|Deficit accumulated during the
      exploration stage |   | (1,009,353  | ) |   | (150,748     | )
|Total Stockholders Equity                             |   | 15,403,231  |   |   | 15,544,036   |  
|                                                       |   |             |   |   |              |  
|Total liabilities and stockholders equity             | $ | 18,683,716  |   | $ | 18,153,274   |  

The accompanying notes are an integral part of these
financial statements

---

|8                                                                            
|-----------------------------------------------------------------------------
|                                                                             
|                                                                             
|Crown Oil and Gas Inc.                                                       
|(formerly Onelife Health Products Inc.)                                      
|(An Exploration Stage Company)                                               
|Combined and Consolidated Statements of Operations                           
|For the three months ended March 31, 2009 and 2008 and
      for             
|the period from February 17, 2006 (Date of inception) to
      March 31, 2009

|                                    |   |              |   |   |              |   |   | Period since        |  
|----------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------------- | -
|                                    |   | Three Months |   |   | Three Months |   |   | Inception           |  
|                                    |   | Ended        |   |   | Ended        |   |   | (February 17, 2006) |  
|                                    |   | March 31,    |   |   | March 31,    |   |   | to                  |  
|                                    |   | 2009         |   |   | 2008         |   |   | March 31, 2009      |  
|                                    |   |              |   |   |              |   |   |                     |  
|Revenues                            | $ | -            |   | $ | -            |   | $ | -                   |  
|                                    |   |              |   |   |              |   |   |                     |  
|Operating expenses                  |   |              |   |   |              |   |   |                     |  
|General and administrative          |   | 530,338      |   |   | 33,100       |   |   | 933,607             |  
|Oil and gas
      exploration       |   | 328,267      |   |   | -            |   |   | 328,267             |  
|Total Operating Expenses            |   | 858,605      |   |   | 33,100       |   |   | 1,264,874           |  
|                                    |   |              |   |   |              |   |   |                     |  
|Loss from operations                |   | (858,605     | ) |   | (33,100      | ) |   | (1,264,874          | )
|                                    |   |              |   |   |              |   |   |                     |  
|Other Expenses                      |   |              |   |   |              |   |   |                     |  
|Write-down of
      inventory       |   | -            |   |   | -            |   |   | (5,493              | )
|Write-down of website               |   | -            |   |   | -            |   |   | (9,576              | )
|Interest income                     |   | -            |   |   | -            |   |   | 270,590             |  
|Total Other Expenses                |   | -            |   |   | -            |   |   | 255,521             |  
|                                    |   |              |   |   |              |   |   |                     |  
|Income (Loss) before income taxes   |   | (858,605     | ) |   | (33,100      | ) |   | (1,009,353          | )
|                                    |   |              |   |   |              |   |   |                     |  
|Income taxes                        |   | -            |   |   | -            |   |   | -                   |  
|                                    |   |              |   |   |              |   |   |                     |  
|Net (Loss) for the period           | $ | (858,605     | ) | $ | (33,100      | ) | $ | (1,009,353          | )
|                                    |   |              |   |   |              |   |   |                     |  
|Weighted average shares outstanding |   | 107,187,216  |   |   | 108,000,000  |   |   |                     |  
|                                    |   |              |   |   |              |   |   |                     |  
|Loss per share                      | $ | (0.01        | ) |   | (a)          |   |   |                     |  
|                                    |   |              |   |   |              |   |   |                     |  
|(a) Less than $0.01 per share       |   |              |   |   |              |   |   |                     |  

The accompanying notes are an integral part of these
financial statements

---

|9                                                                            
|-----------------------------------------------------------------------------
|                                                                             
|                                                                             
|Crown Oil and Gas Inc.                                                       
|(formerly Onelife Health Products Inc.)                                      
|(An Exploration Stage Company)                                               
|Combined and Consolidated Statements of Cash Flows                           
|For the three months ended March 31, 2009 and 2008 and
      for             
|the period from February 17, 2006 (Date of inception) to
      March 31, 2009

|                                       |   |              |   |   |              |   |   | Period since        |  
|-------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------------- | -
|                                       |   | Three Months |   |   | Three Months |   |   | Inception           |  
|                                       |   | Ended        |   |   | Ended        |   |   | (February 17, 2006) |  
|                                       |   | March 31,    |   |   | March 31,    |   |   | to                  |  
|                                       |   | 2009         |   |   | 2008         |   |   | March 31, 2009      |  
|                                       |   |              |   |   |              |   |   |                     |  
|Operating Activities                   |   |              |   |   |              |   |   |                     |  
|Net Loss                               | $ | (858,605     | ) | $ | (27,933      | ) | $ | (1,009,353          | )
|Stock based compensation               |   | -            |   |   | -            |   |   | 134,784             |  
|Increase (decrease) in deposit         |   | (4,145       | ) |   | -            |   |   | (4,495              | )
|Increase in accounts payable           |   | 438,750      |   |   | 1,400        |   |   | 466,213             |  
|Increase in due to related party       |   | 14,087       |   |   | 23,501       |   |   | 14,272              |  
|                                       |   |              |   |   |              |   |   |                     |  
|Cash provided by (used in) operating   |   |              |   |   |              |   |   |                     |  
|activities                             |   | (409,913     | ) |   | (3,032       | ) |   | (398,579            | )
|                                       |   |              |   |   |              |   |   |                     |  
|Financing Activities                   |   |              |   |   |              |   |   |                     |  
|Cash from sale of stock                |   | 5,717,800    |   |   | -            |   |   | 16,277,800          |  
|Increase (decrease) in loan receivable |   | 9,364,034    |   |   | -            |   |   | (13,428             | )
|Increase in loan payable               |   | 2,800,000    |   |   | -            |   |   | 2,800,000           |  
|                                       |   |              |   |   |              |   |   |                     |  
|Cash provided by (used in) operating   |   |              |   |   |              |   |   |                     |  
|activities                             |   | 17,881,834   |   |   | -            |   |   | 19,064,372          |  
|                                       |   |              |   |   |              |   |   |                     |  
|Investing Activities                   |   |              |   |   |              |   |   |                     |  
|Purchase of equipment                  |   | (7,909       | ) |   | -            |   |   | (7,909              | )
|Purchase of supplies                   |   | (5,261       | ) |   | -            |   |   | (5,261              | )
|Licenses                               |   | (473,496     | ) |   | -            |   |   | (473,496            | )
|Oil and gas properties                 |   | (17,129,427  | ) |   | -            |   |   | (17,129,427         | )
|                                       |   |              |   |   |              |   |   |                     |  
|Cash (used in) investing activities    |   | (17,616,093  | ) |   | -            |   |   | (17,616,093         | )
|                                       |   |              |   |   |              |   |   |                     |  
|Increase (Decrease) in cash            |   | (144,172     | ) |   | (3,032       | ) |   | 1,049,700           |  
|Cash, opening                          |   | 1,193,872    |   |   | 3,724        |   |   | -                   |  
|                                       |   |              |   |   |              |   |   |                     |  
|Cash, closing                          | $ | 1,049,700    |   | $ | 692          |   | $ | 1,049,700           |  

The accompanying notes are an integral part of these
financial statements

---

|10                                                               
|-----------------------------------------------------------------
|                                                                 
|                                                                 
|Crown Oil and Gas Inc.                                           
|(formerly Onelife Health Products Inc.)                          
|(An Exploration Stage Company)                                   
|Combined and Consolidated Statements of
      Stockholders`Equity

|                                          |  | Common Shares |   |   |         |   |   |            |   |   | Deficit     |  |   |             |  
|----------------------------------------- |  | ------------- | - | - | ------- | - | - | ---------- | - | - | ----------- |  | - | ----------- | -
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   | Accumulated |  
|                                          |  |               |   |   |         |   |   | Additional |   |   |             |  |   | in the      |  
|                                          |  |               |   |   |         |   |   | Paid in    |   |   | Contributed |  |   | Exploration |  
|                                          |  | Issued        |   |   | Amount  |   |   | Capital    |   |   | Surplus     |  |   | Stage       |  
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Balance, February 17, 2006 (inception)    |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Shares issued to founders on Feb 17,      |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|2006 @ 0.0001 per share                   |  | 90,000,000    |   | $ | 90,000  |   | $ | (85,000    | ) | $ | -           |  | $ | -           |  
|Private placement @ $0.003 per share      |  | 18,000,000    |   |   | 18,000  |   |   | 32,000     |   |   | -           |  |   | -           |  
|Net loss                                  |  | -             |   |   | -       |   |   | -          |   |   | -           |  |   | (11,369     | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Balance. November 30, 2006                |  | 108,000,000   |   |   | 108,000 |   |   | (53,000    | ) |   | -           |  |   | (11,369     | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Net loss                                  |  | -             |   |   | -       |   |   | -          |   |   | -           |  |   | (56,564     | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Balance, November 30, 2007                |  | 108,000,000   |   |   | 108,000 |   |   | (53,000    | ) |   | -           |  |   | (67,932     | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Net loss                                  |  | -             |   |   | -       |   |   | -          |   |   | -           |  |   | (209        | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Balance, December 31, 2007                |  | 108,000,000   |   |   | 108,000 |   |   | (53,000    | ) |   | -           |  |   | (68,141     | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Private placement on Mar 17/08 @ $1/share |  | 5,050,000     |   |   | 5,050   |   |   | 5,044,950  |   |   | -           |  |   | -           |  
|Private placement on Sep 24/08 @ $1/share |  | 5,655,000     |   |   | 5,655   |   |   | 5,449,345  |   |   | -           |  |   | -           |  
|Stock options granted                     |  | -             |   |   | -       |   |   | -          |   |   | 134,784     |  |   | -           |  
|Net loss                                  |  | -             |   |   | -       |   |   | -          |   |   | -           |  |   | (82,607     | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Balance, December 31, 2008                |  | 118,705,000   |   |   | 118,705 |   |   | 10,441,295 |   |   | 134,784     |  |   | (150,748    | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Shares cancelled                          |  | (88,000,000   | ) |   | (88,000 | ) |   | 88,000     |   |   | -           |  |   | -           |  
|Shares issued for services @ $1/share     |  | 717,800       |   |   | 720     |   |   | 717,080    |   |   | -           |  |   | -           |  
|Shares issued in acquisition of           |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Langford @ $1/share                       |  | 5,000,000     |   |   | 5,000   |   |   | 4,995,000  |   |   | -           |  |   | -           |  
|Net loss                                  |  | -             |   |   | -       |   |   | -          |   |   | -           |  |   | (858,605    | )
|                                          |  |               |   |   |         |   |   |            |   |   |             |  |   |             |  
|Balance, March 31, 2009 (unaudited)       |  | 36,422,800    |   | $ | 36,425  |   | $ | 16,241,375 |   | $ | 134,784     |  | $ | (1,009,353  | )

The accompanying notes are an integral part of these
financial statements

---

|11                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 1  Nature of Operations

Langford Worldwide Corp. (the Group) was incorporated in
Tortola, Road Town, British Virgin Islands in April 2007 as an international
business company with a purpose to develop investment opportunities in oil and
gas projects worldwide.

The Company is a 100% shareholder of two Cyprus companies,
Covenlina Holdings Ltd and Bandberg Holdings Ltd, which were acquired in October
and December 2007 respectively. Covenlina Holdings Ltd owns 51% of shares in
Russian companies Crown Oil & Gas LLC and RosEuroNeft LLC. Bandberg Holdings
Ltd owns 49% of shares in both Crown Oil & Gas LLC and RosEuroNeft LLC.

Crown Oil & Gas LLC and RosEuroNeft LLC were incorporated
in Moscow in May 2007 and September 2007 respectively. Crown Oil & Gas LLC
and RosEuroNeft LLC are under common control and management. Crown Oil & Gas
LLC has two subsidiaries Attik LLC and Artstroy-XXI LLC . RosEuroNeft LLC owns
100% interest in Attik-Neft LLC. The Group consists of independent oil
exploration and production companies. The primary operating entities of the
Group are incorporated in the Russian Federation.

During 2007 Crown Oil & Gas LLC purchased 100% share in
Attik LLC (the license holder for exploration and production of hydrocarbons at
Tereshkinsky area) and a 100% share in Artstroy-XXI LLC (the license holder for
exploration and production of hydrocarbons of the Kikinsko-Gusihinsky area).
Both fields are situated in the Saratov region of the Volga-Urals oil province,
Russia.

In March 2008, RosEuroNeft LLC acquired 100% interest in
Attik-Neft LLC (the license holder for exploration and production of
hydrocarbons at Krasnoarmeisky-2 area, in Saratov Region of the Volga-Urals oil
province, Russia).

Under Russian legislation, natural resources, including oil,
gas, precious metals and minerals and other commercial minerals situated within
the territory of the Russian Federation are the property of the Russian
Federation. The Law of the Russian Federation No. 2395-1, "On Subsurface
Resources", regulates relations arising in connection with the geological study,
use and protection of subsurface resources within the territory of the Russian
Federation. Pursuant to the Law, subsurface resources may be developed only on
the basis of a license. The license is issued by the regional governmental body
and contains information on the site to be developed, the period of activity,
financial and other conditions. The Group holds three licenses issued by
regional authorities in the Saratov region, and an option to acquire a third
license.

Exploration stage  going concern

The Company is an exploration stage enterprise. Exploration
licences have been acquired; however there is currently no source of revenue to
support operations which raises substantial doubt about its ability to continue
as a going concern. Exploration activities have primarily been financed through
short term debt. The Company expects to continue to be dependent on continued
availability of financial support, and on finding and developing oil and gas
reserves. There can be no certainty in this respect. These financial statements
have been prepared using the going concern assumption, adjustments to the
financial statements should this assumption become invalid, would be material.

---

|12                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 1  Nature of Operations

Basis of Presentation

In the opinion of management, the accompanying balance sheets
and related interim statements of income, cash flows, and stockholders' equity
include all adjustments, consisting only of normal recurring items, necessary
for their fair presentation in conformity with accounting principles generally
accepted in the United States of America ("U.S. GAAP"). Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, and expenses. Actual results
and outcomes may differ from management's estimates and assumptions.

Interim results are not necessarily indicative of results for a
full year. The information included in this Form lO-Q should be read in
conjunction with information included in the Form IO-K.

Note 2  Principles of Consolidation

The assets and liabilities of the entities acquired by the
Company in 2007 and 2008 were recorded in these financial statements at the
historical cost of their acquisition.

Where necessary, intra-group transactions, balances, related
income and expenses are eliminated in full on consolidation and combination. The
structure of the Company as of December 31, 2008 was as follows:

|Operating entities |  | Ownership | 
|------------------ |  | --------- | 
|                   |  | interest  | 
|                   |  |           | 
|Artstroy-XXI LLC   |  | 100%      | 
|Attik LLC          |  | 100%      | 
|Attik-Neft LLC     |  | 100%      | 

The accompanying combined and consolidated financial statements
include the combined accounts of Langford Worldwide Corp. and the accounts of
majority-owned subsidiaries where no minority shareholder or group of minority
shareholders exercise substantive participating rights. The purchase method of
accounting is used for acquired businesses. Companies acquired during the year
are included in the combined and consolidated financial statements from the date
of acquisition. Intercompany profits, transactions and balances have been
eliminated in consolidation.

Note 3  Summary of Significant Accounting Policies

Basis of presentation

The Group maintains accounting books and records in Russian
roubles in accordance with Russian statutory accounting regulations. The
accompanying combined and consolidated financial statements have been prepared
in order to present the combined and consolidated financial position and
combined and consolidated results of operations and cash flows of the Company in
accordance with accounting principles generally accepted in the United States of
America.

---

|13                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 3  Summary of Significant Accounting Policies
(continued)

Management estimates

The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities in the balance sheet as well as the
revenues and expenses during the reporting periods. Certain significant
estimates and assumptions for the Group include: recoverability and useful lives
of long-term assets and investments; allowances for doubtful accounts
receivable; asset retirement obligations; legal and tax contingencies;
depreciation, depletion and amortization; environmental remediation obligations;
oil reserves; recognition and disclosure of guarantees and other commitments.
While management uses its best estimates and judgements, actual results could
differ from those estimates and assumptions used.

Concentration of business risk

The Groups principal business activities are within the
Russian Federation. Laws and regulations affecting businesses operating in the
Russian Federation are subject to rapid changes, and the Groups assets and
operations could be at risk due to negative changes in the political and
business environment.

Translation methodology

The Company follows a translation policy in accordance with
SFAS No. 52, Foreign Currency Translation and has determined the rouble to be
its functional currency.

The Company determined the US dollar to be its reporting
currency and translates its functional currency financial statements into US
dollars. Assets and liabilities are translated at year-end exchange rates,
equity, other than retained earnings, at the rate effective on the date when the
transaction occurred, while income and expense items are translated at average
rates of exchange prevailing during the year. The resulting translation
adjustment is recorded as a separate component of other comprehensive income
(loss).

The translation of local currency denominated assets and
liabilities into US dollars for the purpose of these combined and consolidated
financial statements does not indicate that the Company could realize or settle,
in US dollars, the reported values of these assets and liabilities. Likewise, it
does not indicate that the Company could return or distribute the reported US
dollar value of capital to its shareholders.

Cash and cash equivalents

Cash and cash equivalents represent cash on hand and in bank
accounts and short-term investments having original maturities of less than
three months.

Advances receivable

Advances receivable are presented at net realizable value.
Allowances for impaired advances are provided for estimated uncollectible
amounts. Estimates of allowances require the exercise of judgment and the use of
assumptions. Changes in allowances are recorded in the combined and consolidated
statements of income.

Comprehensive income

The Companys comprehensive income is the cumulative foreign
currency translation adjustment.

---

|14                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 3  Summary of Significant Accounting Policies
(continued)

Supplies inventory

Materials and supplies are stated at the lower of weighted
average cost or market value. The Company uses the weighted-average-cost method.
Costs include both direct and indirect expenditures and charges incurred in
bringing an item or product to its existing condition and location.

Oil and gas properties

Mineral interests in properties (hereinafter referred to as
properties) includes the rights to extract oil or gas. Properties classified as
unproven include properties with no proven reserves. Costs incurred to purchase,
lease, or otherwise acquire a property (whether unproved or proved) are
capitalized when incurred. They include the costs of lease bonuses and options
to purchase or lease properties, the portion of costs applicable to minerals
when land including mineral rights is purchased in fee, brokers' fees, recording
fees, legal costs, and other costs incurred in acquiring properties.

Exploratory well costs (including costs associated with
stratigraphic test wells) are temporarily capitalized pending determination of
whether such oil and gas reserves have been found to the proven reserves, which
justify commercial development. If such reserves are not found, the drilling
costs are charged to exploratory expenses. Intangible drilling costs applicable
to productive wells and to development dry holes, as well as tangible equipment
costs and costs of injection wells related to development of oil and gas
reserves are capitalized.

Oil and gas properties are accounted for using the successful
efforts method of accounting whereby property acquisitions, successful
exploratory wells, all development costs and support equipment and facilities
are capitalized.

Depreciation, depletion and amortization

Depletion and amortization of oil and gas properties are
provided on the unit-of-production method based on the ratio of current year
production to total estimated future production from proved developed reserves.
The Company has not begun production from its oil and gas properties as of
December 31, 2008 accordingly, no depletion and amortization has been
recorded.

Depreciation expense on office equipment is computed over the
estimated useful life of the equipment of 5 years using the straight-line
method

Income taxes

Russian legislation does not contain the concept of a "consolidated tax payer" and, accordingly,  the Company is not subject to taxation on a consolidated basis. Current income taxes are provided on taxable profit of each subsidiary as determined under the Russian Federation Tax Code at a rate of 20%, as of December 31, 2008, after adjustments for certain items which are not deductible for taxation purposes.

Deferred income tax assets and liabilities are recognized in
the accompanying combined and consolidated financial statements in the amounts
determined by the Group using the liability method in accordance with SFAS 109
"Accounting for Income Taxes". This method takes into account future tax
consequences attributable to temporary differences between the carrying amounts
of existing assets and liabilities for the purpose of the combined and
consolidated financial statements and their respective tax bases and in respect
of operating loss and tax credit carry forwards. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to reverse
and the assets be recovered and liabilities be settled. A valuation all owance
for deferred tax asset is recorded when management believes that it is more
likely than not that this tax asset will not be realized in the future.

---

|15                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 3  Summary of Significant Accounting Policies
(continued)

Contingencies

Certain conditions may exist as of the date these financial
statements are issued, which may result in a loss to the Group, but which will
only be resolved when one or more future events occur or fail to occur. The
Group's management and legal counsel assess such contingent liabilities. The
assessment of loss contingencies necessarily involves an exercise of judgment
and is a matter of opinion. In assessing loss contingencies related to legal
proceedings that are pending against the Group or unasserted claims that may
result in such proceedings, the Group's legal counsel evaluates the perceived
merits of any legal proceedings or unasserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is
probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Group's
financial statements. If the assessment indicates that a potentially material
loss contingency is not probable, but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together with
an estimate of the range of possible loss if determinable and material, would be
disclosed. If loss contingencies can not be reasonably estimated, management
recognizes the loss when information becomes available.

Loss contingencies considered remote are generally not
disclosed unless they involve guarantees, in which case the nature of the
guarantee would be disclosed. However, in some instances in which disclosure is
not otherwise required, the Group may disclose contingent liabilities of an
unusual nature which, in the judgment of management and its legal counsel, may
be of interest to shareholders or others.

Retirement and other benefit obligations

The Company does not have any substantial pension arrangements
separate from the State pension system of the Russian Federation, which requires
current contributions by the employer calculated as a percentage of current
gross salary payments; such contributions are charged to expense as incurred. In
addition, the Company has no post-retirement benefits or significant other
compensated benefits requiring accrual.

Recent accounting pronouncements

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions
Are Participating Securities, (FSP EITF 03-6-1). FSP EITF 03-6-1 addresses
whether instruments granted in share-based payment transactions are
participating securities prior to vesting, and therefore need to be included in
the computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, Earnings per Share.
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. We
are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF
03-6-1 would have material effect on our consolidated financial position and
results of operations if adopted.

In May 2008, the Financial Accounting Standards Board (FASB)
issued SFAS No. 163, Accounting for Financial Guarantee Insurance
Contracts-and interpretation of FASB Statement No. 60. SFAS No. 163
clarifies how Statement 60 applies to financial guarantee insurance contracts,
including the recognition and measurement of premium revenue and claims
liabilities. This statement also requires expanded disclosures about financial
guarantee insurance contracts. SFAS No. 163 is effective for fiscal years
beginning on or after December 15, 2008, and interim periods within those years.
SFAS No. 163 has no effect on the Companys financial position, statements of
operations, or cash flows at this time.

---

|16                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 3  Summary of Significant Accounting Policies
(continued)

Recent accounting standards (continued)

In May 2008, the Financial Accounting Standards Board (FASB)
issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles. SFAS No. 162 sets forth the level of authority to a given
accounting pronouncement or document by category. Where there might be
conflicting guidance between two categories, the more authoritative category
will prevail. SFAS No. 162 will become effective 60 days after the SEC approves
the PCAOBs amendments to AU Section 411 of the AICPA Professional Standards.
SFAS No. 162 has no effect on the Companys financial position, statements of
operations, or cash flows at this time.

In March 2008, the Financial Accounting Standards Board, or
FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133.This standard
requires companies to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 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.
This Statement is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but
does not expect it to have a material impact on its financial position, results
of operations or cash flows.

In December 2007, the SEC issued Staff Accounting Bulletin
(SAB) No. 110 regarding the use of a "simplified" method, as discussed in SAB
No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla"
share options in accordance with SFAS No. 123 (R), Share-Based Payment.
In particular, the staff indicated in SAB 107 that it will accept a company's
election to use the simplified method, regardless of whether the company has
sufficient information to make more refined estimates of expected term. At the
time SAB 107 was issued, the staff believed that more detailed external
information about employee exercise behavior (e.g., employee exercise patterns
by industry and/or other categories of companies) would, over time, become
readily available to companies. Therefore, the staff stated in SAB 107 that it
would not expect a company to use the simplified method for share option grants
after December 31, 2007. The staff understands that such detailed information
about employee exercise behavior may not be widely available by December 31,
2007. Accordingly, the staff will continue to accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007. The
Company currently uses the simplified method for plain vanilla share options
and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is
not believed that this will have an impact on the Companys financial position,
results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statementsan
amendment of ARB No. 51. This statement amends ARB 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest
in a subsidiary is an ownership interest in the consolidated entity that should
be reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised 2007). The Company will adopt this Statement beginning March 1,
2009. It is not believed that this will have an impact on the Companys
financial position, results of operations or cash flows.

---

|17                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 3  Summary of Significant Accounting Policies
(continued)

Recent accounting standards (continued)

Fair value of financial instruments

The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and short-term notes and loans receivable and
payable reported in the consolidated statement of financial position approximate
fair values due to the short maturity of those instruments.

Note 4  Cash and Cash Equivalents

Cash and cash equivalents as of March 31, 2009 and December 31,
2008, comprise the following:

|                                                                            |   | March 31, |  |   | December 31, | 
|--------------------------------------------------------------------------- | - | --------- |  | - | ------------ | 
|                                                                            |   | 2009      |  |   | 2008         | 
|                                                                            |   |           |  |   |              | 
|Cash in bank  Rubles (translated to US dollars at March
      31, 2009 and |   |           |  |   |              | 
|December 31, 2008)                                                          | $ | 11,926    |  | $ | -            | 
|Cash in bank  US dollars                                                   |   | 1,037,774 |  |   | 1,193,872    | 
|                                                                            |   |           |  |   |              | 
|Total cash and cash equivalents                                             | $ | 1,049,700 |  | $ | 1,193,872    | 

Note 5  Oil and Gas Properties and Licenses

Oil and gas properties and licenses, are as follows:

|                       |   | March 31,  |  |   | December 31, | 
|---------------------- | - | ---------- |  | - | ------------ | 
|                       |   | 2009       |  |   | 2008         | 
|                       |   |            |  |   |              | 
|Opening Balance        | $ | -          |  | $ | -            | 
|Licenses               |   | 473,496    |  |   | -            | 
|Oil and gas properties |   | 17,129,427 |  |   | -            | 
|                       |   |            |  |   |              | 
|Closing Balance        | $ | 17,602,923 |  | $ | -            | 

The Company's oil and gas fields and related hydrocarbons
belong to government authorities. The Company obtains licenses from such
government authorities and pays royalties to explore and produce from these
fields. The licenses expire in 2030 (two) and 2032 (one). During 2008, the
Company began 2D seismic and research works on its licensed areas.

The Company recently acquired the license and has been
incurring exploration costs. No determination has been made as to the success of
the exploration or the existence of resources, and therefore no depletion has
been recorded.

---

|18                                                           
|-------------------------------------------------------------
|                                                             
|                                                             
|Crown Oil and Gas Inc.                                       
|(formerly Onelife Health Products Inc.)                      
|(An Exploration Stage Company)                               
|Notes to Combined and Consolidated Financial
      Statements

Note 6  Loans Payable

As of March 31, 2009 the Company has short-term non-bank loans
outstanding as follows:

|                                                                            |   | March 31, |  |   | December 31, | 
|--------------------------------------------------------------------------- | - | --------- |  | - | ------------ | 
|                                                                            |   | 2009      |  |   | 2008         | 
|                                                                            |   |           |  |   |              | 
|                                                                            |   |           |  |   |              | 
|Short term credit facilities, due April 30, 2009, bearing
      interest at |   |           |  |   |              | 
|10% per annum and secured by shares of the Companys                        |   |           |  |   |              | 
|subsidiaries                                                                | $ | 2,500,000 |  | $ | -            | 
|Note payable on acquisition of Langford Worldwide Corp.                     |   | 300,000   |  |   | -            | 
|                                                                            |   |           |  |   |              | 
|Total                                                                       | $ | 2,800,000 |  | $ | -            | 

Fair values

The net carrying values of cash and cash equivalents,
short-term investments, short-term loans receivable, advances given and accounts
payable, taxes payable and accrued liabilities approximate their fair values
because of the short-term maturities of these instruments.

Credit risk

The Groups financial instruments that are potentially exposed
to concentrations of credit risk consist primarily of advances given, cash and
cash equivalents, as well as prepaid VAT, loans receivable and advances. A
significant portion of the Groups advances given is due to from domestic
trading companies. The Group does not generally require collateral to limit the
exposure to loss. However letters of credit and prepayments may be used.
Although collection of these receivables could be influenced by economic factors
affecting this entity, management believes there is no significant risk of loss
to the Group beyond provisions already recorded.

Prepaid VAT, representing amounts payable or paid to suppliers,
is recoverable form the tax authorities via offset against VAT payable to the
tax authorities on the Groups revenue or direct cash receipts from the tax
authorities. Management periodically reviews the recoverability of the balance
of prepaid VAT and believes it is fully recoverable within one year.

---

19

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION

You should read the following managements discussion and
analysis together with our financial statements and related notes appearing
elsewhere in this quarterly report. This managements discussion and analysis
contains forward-looking statements that involve risks, uncertainties, and
assumptions. The actual results may differ materially from those anticipated in
these forward-looking statements.

Corporate Organization and Structure

We were incorporated on February 17, 2006 in the State of
Nevada under the name OneLife Health Products Inc.. Our authorized capital
consisted of 900,000,000 shares of common stock with a par value of $0.001.

Our principal executive offices are located at 800  5th
Avenue, Suite 4100, Seattle, Washington, United States 98104. Our telephone
number is (206) 224-7975.

Our shares of common stock are traded on the over-the-counter
market and quoted on the over-the-counter bulletin board under the symbol
CWOI. On May 12, 2009, the closing price for our shares of common stock as
reported on the OTCBB was $2.00. There have been no trades in our shares of
common stock since May 12, 2009.

On January 3, 2007, Dan McFarland resigned from his offices as
President (Principal Executive Officer), Chief Executive Officer and director of
our company and Rakesh Chehil resigned from his offices as Chief Financial
Officer, Secretary, Treasurer (Principal Accounting Officer) and director of our
company. On January 3, 2007, John Hiner was appointed as President (Principal
Executive Officer), Secretary, Treasure and director of our company.

On January 31, 2008, we effected a stock split on an eighteen
to one basis to increase our authorized capital from 50,000,000 shares of common
stock with a par value of $0.001 to 900,000,000 shares of common stock with a
par value of $0.001.

On January 15, 2008, we completed a merger with our
wholly-owned subsidiary, Crown Oil and Gas Inc., a Nevada corporation. Pursuant
to the merger, we changed our name from OneLife Health Products Inc. to Crown
Oil and Gas Inc. to better reflect the anticipated future business of our
company. We do not have any subsidiaries.

Effective November 14, 2008, we changed our fiscal year end
from November 30 to December 31. As the transition period between the closing
date of our previous fiscal year and the opening date of our new fiscal year is
one month, no transition report is required. We filed a Form 10-K for our new
fiscal year ended December 31, 2008 on April 15, 2009, which contained separate
audited statements of income and cash flows for the stub period of November 30,
2008 to December 31, 2008.

On April 16, 2009, pursuant to a share purchase agreement dated
March 20, 2009 among our company, Langford Worldwide Corp. and Boshoff Holdings
Ltd. (the sole shareholder of Langford), we completed the acquisition of all of
the issued and outstanding shares of Langford, for the purchase price of $11.9
million, payable by the combination of debt forgiveness, issuance of our common
shares and the payment of cash. Langfords various indirect, wholly-owned
Russian subsidiaries hold oil and gas exploration and development licenses for
properties located in the Saratov region of the Volga-Ural oil-and-gas province
in Russia.

Langford is the sole shareholder of Covenlina Holdings Ltd. and
Bandberg Holdings Ltd., Cypriot companies which are the holders of 51% and 49%,
respectively, of the issued and outstanding shares in the capital of Crown Oil
and Gas LLC and RosEuroNeft LLC, companies organized under the laws of the
Russian Federation. Crown Oil and Gas LLC is the sole shareholder of Attik LLC
and Artstroy-XXI LLC, companies organized under the laws of the Russian
Federation. RosEuroNeft LLC is the sole shareholder of Attik-Neft LLC, a company
organized under the laws of the Russian Federation.

---

20

Crown Oil and Gas Inc. Organizational Chart



We have never declared bankruptcy, have never been in
receivership, and have never been involved in any legal actions or proceedings.

Business of Our Company

From our incorporation until the closing of the acquisition of
Langford Worldwide Corp., we were involved in the business of the production,
sale and distribution of quality herbal supplements to consumers via the
Internet. Our target market was health conscious adult individuals in the United
States with an interest in herbal supplements. We developed a human immune
system supplement product that we had branded "Daily Immune Enhancer with
Antioxidant Properties" designed for relief of symptoms of common cold and flu.
As our operations were not sufficiently profitable and our future prospects for
our business were poor, in 2007 we began seeking other business opportunities,
concentrating on those in the oil and gas industry. In connection with our
change of business, our management has closed our herbal supplement
operations.

With the acquisition of Langford, our business has changed to
oil and gas exploration and development. Through our indirect, wholly owned,
Russian subsidiaries, we hold exploration and development licenses for the
Tereshkinsky, Kikinsko-Gusikhinsky and Krasnoarmeisky-2 properties having a
combined area of approximately 500,000 acres that are located in the Saratov
region of Russia, one of the major oil and gas regions in the country with
advanced infrastructure and more than 60 years history of oil and gas
production. Saratov lies in the European part of Russia on the border with

---

21

Kazakhstan, the largest oil producing country in Central Asia.
Please refer to the information under the section entitled "Description of
Property" below for detailed descriptions of our licensed areas.

Competition

We are an exploration stage company engaged in the acquisition
of prospective oil and gas properties. We compete with other companies for both
the acquisition of prospective properties and the financing necessary to develop
such properties.

We conduct our business in an environment that is highly
competitive and unpredictable. In seeking out prospective properties, we have
encountered intense competition in all aspects of our business as we compete
directly with other exploration stage companies as well as established
international companies. Many of our competitors are national or international
companies with far greater resources, capital and access to information than us.
Accordingly, these competitors may be able to spend greater amounts on the
acquisition of prospective properties and on the exploration and development of
such properties. In addition, they may be able to afford greater geological
expertise in the exploration and exploitation of oil and gas properties. This
competition could result in our competitors having resource properties of
greater quality and attracting prospective investors to finance the development
of such properties on more favorable terms. As a result of this competition, we
may become involved in an acquisition with more risk or obtain financing on less
favorable terms.

Government Regulation

The exploration and development of oil and gas properties is
subject to various Russian federal, state and local governmental regulations.
Our company may from time to time, be required to obtain licenses and permits
from various governmental authorities in regards to the exploration of our
property interests.

Under Russian legislation, natural resources, including oil,
gas, precious metals and minerals and other commercial minerals situated within
the territory of the Russian Federation are the property of the Russian
Federation. Russian law No. 2395-1 (Subsurface Resources) regulates relations
arising in connection with the geological study, use and protection of
subsurface resources within the territory of the Russian Federation. Pursuant to
the Law, subsurface resources may be developed only on the basis of a license,
which is issued by the regional governmental body and contains information on
the site to be developed, the period of activity, financial and other
conditions.

If our company proceeds with the development of our current and
future properties, we anticipate that we will be subject to increased
governmental regulation. Matters subject to regulation include approvals for
drilling operations, drilling and abandonment bonds, reports concerning
operations, export duties and taxation. From time to time, regulatory agencies
have imposed price controls and limitations on production by restricting the
rate of flow of oil and gas wells below actual production capacity in order to
conserve supplies of oil and gas.

The production, handling, storage, transportation and disposal
of oil and gas, by-products thereof, and other substances and materials produced
or used in connection with oil and gas operations are also subject to regulation
under Russian federal, state, local laws and regulations relating primarily to
the protection of human health and the environment. The requirements imposed by
such laws and regulations may change and subject to interpretation, and we are
unable to predict the ultimate cost of compliance with these requirements or
their effect on our operations.

Employees

Until the close of the Langford acquisition, our company was
operated by our president, John Hiner. Following the close of the Langford
acquisition, Stanislav Bogomolov, the founder of Langford group of companies,
has been appointed as our chief operating officer and director. Mr. Bogomolov
has been instrumental in the advancement of Langfords Russian oil and gas
exploration projects over the past two years and will continue to play an
integral role as the company's projects move forward. Our Russian operating
subsidiaries employ 10 full-time employees. We intend to periodically hire
independent contractors to execute our exploration and development activities.
Our company may hire additional employees when circumstances warrant.

---

22

Plan of Operation

Tereshkinsky Licensed Area

The 2009 operational plan includes conducting 60 km of new 2D
seismic surveys over the prospective areas of the license that were identified
by previous seismic surveys in order to evaluate and prioritize such prospects
with the greatest chance of success for drilling. The primary seismic data will
then be processed and reinterpreted.

|                                  | 2009
      Schedule  Tereshkinsky Area
|--------------------------------- | ---------------------------------------
|Operations                        | **Jan**                                
|2D field seismic  60 km(1)       |                                        
|Data processing/interpretation(2) |                                        
|Appraisal report(3)               |                                        
|Independent re-interpretation(4)  |                                        
|Drilling targets selection(5)     |                                        
|Drilling project / approval(6)    |                                        
|Environmental monitoring          |                                        
|Drilling exploration well(7)      |                                        

Notes:

|1. | To be conducted by our Russian geophysical services
      contractor.                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | To be conducted after we finish seismic field
  work.                                                                                                                                                                                                                 
|3. | The Russian resource report based on the results of 2D
      seismic survey. Such report is submitted to regional government resource
      committee for high-grading resource base of the licensed area. It serves
      as the basis for granting drilling permits.
|4. | A secondary analysis of seismic data by independent
      company (research institute).                                                                                                                                                                               
|5. | To be identified by scientific committee of our company,
      including our senior geologist, chief operations officer and independent
      geophysicist/geologist.                                                                                                 
|6. | Will be developed by regional Oil & Gas Geology
      Scientific Institute, then it will have to be approved by local
      environmental agency and licensing committee.                                                                                             
|7. | A 2000 meter deep well is to be drilled (at a minimum
      speed of 800 meters per month) by a local drilling company subject to
      availability. We anticipate drilling cost of approximately $3,000,000 per
      well.                                         

|Operations                     | 2009 Expenditures - Tereshkinsky
      Area
|------------------------------ | -------------------------------------------
|Amount ($)                     | Required Financing ($)                     
|2D field seismic  60km        | 228,000                                    
|Data processing/interpretation | 18,000                                     
|Appraisal report               | --                                         
|Independent re-interpretation  | 27,000                                     
|Drilling targets               | --                                         
|Drilling project / approval    | 46,300                                     
|Environmental monitoring       | 45,000                                     
|Drilling exploration well(1)   | 3,000,000                                  
|TOTALS                         | 3,364,300                                  

Note:(1) Subject to availability of drilling
targets, drilling contractor, drilling project, approvals.

Kikinsko-Gusikhinsky Licensed Area

The 2009 operational plan includes conducting 401 km of new 2D
seismic surveys over the prospects identified by previous seismic surveys in
order to further define and prioritize the prospects for selection as those
prospects with the greatest chance of success for drilling. The primary seismic
data will then be processed and reinterpreted.

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23

|Operations                        | 2009 Schedule 
      Kikinsko-Gusikhinsky Area
|--------------------------------- | -----------------------------------------------
|**Jan**                           | Feb                                            
|2D field seismic - 401 km(1)      |                                                
|Data processing/interpretation(2) |                                                
|Appraisal report(3)               |                                                
|Independent re-interpretation(4)  |                                                
|Drilling targets(5)               |                                                
|Drilling project / approval(6)    |                                                
|Environmental monitoring          |                                                
|Drilling exploration well(7)      |                                                

Notes:

|1. | Our Russian geophysical services contractor conducted 80
      km of seismic surveys in February 2009 and plans to conduct an additional
      321 km of surveys between September and November 2009.                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | To be conducted in two steps: (a) 80 km ending in April
      2009; and (b) an additional 321 km between November and December 2009
      after the completion of the seismic field work in respect of
  same.                                                        
|3. | The Russian resource report based on the results of 2D
      seismic survey. Such report is submitted to regional government resource
      committee for high-grading resource base of the licensed area. It serves
      as the basis for granting drilling permits.
|4. | A secondary analysis of seismic data by independent
      company (research institute).                                                                                                                                                                               
|5. | To be identified by scientific committee of our company,
      including our senior geologist, chief operations officer and independent
      geophysicist/geologist.                                                                                                 
|6. | Will be developed by regional Oil & Gas Geology
      Scientific Institute, then it will have to be approved by local
      environmental agency and licensing committee.                                                                                             
|7. | A 1600 meter deep well is to be drilled (at a minimum
      speed of 800 meters per month) by a local drilling company subject to
      availability. We anticipate drilling cost of approximately $2,500,000 per
      well.                                         

|Operations                     | 2009 Expenditures -
      Kikinsko-Gusikhinsky Area
|------------------------------ | ---------------------------------------------------
|Amount ($)                     | Required Financing ($)                             
|2D field seismic  401km       | 1,213,350                                          
|Data processing/interpretation | 120,300                                            
|Appraisal report               | --                                                 
|Independent re-interpretation  | 113,000                                            
|Drilling targets               | --                                                 
|Drilling project / approval    | 46,300                                             
|Environmental monitoring       | 54,000                                             
|Drilling exploration well(1)   | 2,500,000                                          
|TOTALS                         | 4,046,950                                          

Note:(1) Subject to availability of drilling
targets, drilling contractor, drilling project, approvals.

Krasnoarmeisky-2 Licensed Area

The 2009 operational plan includes conducting 100 km of new 2D
seismic surveys over the prospects identified by previous seismic surveys in
order to high-grade such prospects and be able to select the prospects with the
greatest chance of success for drilling. The primary seismic data will then to
be processed and interpreted.



|Operations                        | **2009 Schedule 
      Krasnoarmeisky-2 Area**
|--------------------------------- | -----------------------------------------------
|**Jan**                           | Feb                                            
|2D field seismic  100km(1)       |                                                
|Data processing/interpretation(2) |                                                
|Appraisal report(3)               |                                                
|Independent re-interpretation(4)  |                                                
|Drilling targets(5)               |                                                
|Drilling project / approval(6)    |                                                
|Environmental monitoring          |                                                
|Drilling exploration well(7)      |                                                

---



24

Notes:

|8.  | To be conducted by our Russian geophysical services
      contractor.                  
|--- | ---------------------------------------------------------------------------------------
|9.  | To be conducted after we finish seismic field
  work.                                  
|10. | To be issued only in 2010.                                                             
|11. | A secondary analysis of seismic data by independent
      company (research institute).
|12. | To be identified by scientific committee of the company
      in fourth quarter 2009.  
|13. | Anticipated to start working at the end of
2009.                                       
|14. | We plan to drill a 4000 meter deep well in
  2010.                                     

|Operations                     | 2009 Expenditures -
      Krasnoarmeisky-2 Area
|------------------------------ | -----------------------------------------------
|Amount ($)                     | Required Financing ($)                         
|2D field seismic  100km       | 995,000                                        
|Data processing/interpretation | 75,000                                         
|Appraisal report               | --                                             
|Independent re-interpretation  | 25,000                                         
|Drilling targets               | --                                             
|Drilling project / approval    | 46,300                                         
|Environmental monitoring       | 48,000                                         
|Drilling exploration well(1)   | --                                             
|TOTALS                         | 1,189,300                                      

Note:(1) Subject to availability of drilling
targets, drilling contractor, drilling project, approvals.

Cash Requirements

Over the next 12 months we plan to conduct geological
exploration of the areas covered by our three mineral licenses, including the
acquisition of new 2D seismic survey data (total of 561 linear kilometers) and
drilling of three exploration wells. This will be part of a two year exploration
and appraisal program on our three licensed areas in Saratov.

Our starting point will be to collect and analyse the existing
information available to us from the many geophysical surveys, well drilling and
testing activities that have already taken place in or around the licensed areas
since serious exploration and appraisal commenced in the region.

Our primary aim is a detailed analysis and re-interpretation of
the most recent 2D seismic data, which was acquired in 2008 and to model the
geological structure at licensed areas.

In addition to this, it is likely to prove advantageous to
reprocess the available seismic data. Seismic data can be altered in many ways
beyond recognition during the processing phase and techniques have improved over
the course of the last decade. Since most of the data in this area is relatively
old, a simple and cost-effective way of enhancing our understanding of the area
is to reprocess the seismic data.

We are also considering shooting additional 2D seismic lines.
The idea is to use 2D seismic surveying over prospects identified by previous
seismic surveys in order to prioritize such prospects and be able to select
potential drill targets with the greatest chance of success.

In 2008, Langford paid approximately $4,767,900 of the
estimated $7,783,000 cost of new 2D seismic surveys at all three Russian
licensed areas. Langford completed the acquisition of 1,299 km of seismic data
on the areas of interest in the licenses and these data are being processed.
Pending final analysis of all relevant data, we expect to be able to define
drilling locations in the second quarter of 2009, and commence drilling in the
second half of 2009  beginning of 2010. We may have to spend approximately
$5,500,000 for drilling two exploration wells under the licenses working
obligations. We have to spend approximately $147,000 on environmental monitoring
at our three Russian licensed areas in 2009.

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25

We estimate our operating expenses and working capital
requirements for the next 12 month period to be as follows:

|Estimated Expenses For the Next Twelve Month
      Period
|---------------------------------------------------------
|Operating Expenses ($)                                   
|Exploration costs  2D seismic surveys                   
|Exploration costs  data re-interpretation               
|Exploration costs  drilling cost (2 wells)              
|Environmental monitoring                                 
|Employee compensation, including social taxes            
|Professional fees                                        
|General and administrative expenses                      
|TOTAL                                                    

Exploration Costs

We estimate that our seismic surveying cost on our three
Russian licensed areas will be approximately $2,350,000 during the next 12
months, which will include shooting 100 km of 2D seismic lines at the
Krasnoarmeisky-2 area, 401 km at the Kikinsko-Gusikhinsky licensed area and 60
km at the Tereshkinsky licensed area. We plan to spend an additional $200,000 on
data re-processing/re-interpretation in the state oil and gas geology scientific
institute. Depending on the results of the seismic survey, we may then drill our
various prospects at a cost to us of an estimated $3,000,000 per 2000 meter
exploration well, with at least one well at the Tereshkinsky and
Kikinsko-Gusikhinsky licensed areas.

Results of Operations

|Summary of Period Results        | Period Ended March
      31
|-------------------------------- | ---------------------------
|                                 | 2009                       
|Expenses                         | $
      858,605            
|Income                           | $ NIL                      
|Net Income (Loss) for the Period | $(858,605)                 

Revenue

We have had revenue from inception of $Nil.

|Expenses                         | Period Ended March
|-------------------------------- | ------------------
|                                 | 2009              
|Amortization                     | $ NIL             
|Management fees                  | $ NIL             
|Professional fees                | $ NIL             
|General and
      administrative | $
      858,605   
|Net Income (Loss) for the Period | $(858,605)        

Total expenses during the period ended March 31, 2009 increased
as compared to the comparative period in 2008 due to an increase in professional
fees and a granting of stock options which have been charged to management
fees.

Liquidity and Financial Condition

|Working Capital     | As at March 31, | As at December 31,
|------------------- | --------------- | ------------------
|                    | 2009            | 2008              
|Current assets      | $ 1,054,195     | $ 995,974         
|Current liabilities | $ 3,280,485     | $ 2,609,238       
|Working capital     | $(2,226,290)    | $(1,613,264)      

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26

|Cash Flows                                      | Period
      Ended March 31
|----------------------------------------------- | ---------------------------
|                                                | **2009**                   
|Cash Flows (used in)
      Operating Activities | $ (409,913)                
|Cash Flows from Financing
      Activities      | $ 17,881,834               
|Cash Flows (used in)
      Investing Activities | $(17,616,093)              
|Net Increase (Decrease) in Cash Flows           | $ (144,172)                

Future Financing

At March 31, 2009 we had $1,049,700 in cash. Over the next
twelve months ending March 31, 2010, we will have to raise additional monies
through private placements of our equity securities and/or debt financing in
order that we may fund the identification and evaluation of a suitable business
opportunity. We believe we have sufficient cash to satisfy our cash requirements
for 3 months.

On March 17, 2008, we closed a private placement of 5,050,000
units at a price of $1 per unit, raising gross proceeds of $5,050,000. Each unit
consists of one share of our common stock and one common share purchase warrant
exercisable at $1.50 during the first year after the closing of the offering and
at $2 during the second year after the closing of the offering.

On September 24, 2008, we closed a private placement of
5,655,000 units at a price of $1 per unit, raising gross proceeds of $5,655,000.
Each unit consists of one share of our common stock and one common share
purchase warrant exercisable at $1.50 during the first year after the closing of
the offering and at $2 during the second year after the closing of the
offering.

Management believes that our cash and cash equivalents, together with cash provided by operating activities, if any, will not be sufficient to meet our total estimated operating expenses for the next twelve months ending March 31, 2010. We plan to raise additional capital required to satisfy cash shortfall, if any, through the private placement of our equity securities. There are no assurances that we will be able to obtain funds required for our continued operation. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business.

Going Concern

The unaudited financial statements accompanying this quarterly
report have been prepared on a going concern basis, which implies that our
company will continue to realize our assets and discharge our liabilities and
commitments in the normal course of business.

Our company has not generated revenues since inception and we
do not anticipate that we will derive any revenues from operations unless and
until we acquire a new business opportunity. There is no assurance that we will
acquire a new business opportunity and that, even if we are successful in doing
so, there is no assurance that we will be able to operate profitably. In
addition, we have never paid any dividends and we are unlikely to pay any
dividends in the immediate or foreseeable future.

As at March 31, 2009, our company had accumulated losses of
$1,009,353 while our cash on hand was approximately $1,049,700. We may need to
obtain additional financing in the future to satisfy cash shortfall, if any, for
the next twelve months ending March 31, 2009.

Due to the uncertainty of our ability to meet our current
operating expenses and other anticipated expenses noted above, our independent
auditors included an explanatory paragraph regarding concerns about our ability
to continue as a going concern in their report on the audited financial
statements for the fiscal year ended December 31, 2008. Our audited financial
statements contain additional note disclosures describing the circumstances that
lead to such disclosure by our independent auditors.

The continuation of our company as a going concern is dependent
upon the continued financial support from our stockholders, the ability of our
company to obtain necessary equity financing to achieve our operating objectives
and the

---

27

attainment of profitable operations. The issuance of additional
equity securities by us could result in a significant dilution in the equity
interests of our current stockholders. Obtaining commercial loans, assuming such
loans are available, will increase our liabilities and future cash
commitments.

There is no assurances that we will be able to either (a)
achieve a level of revenues adequate to generate sufficient cash flow from
operations, or (b) obtain additional financing through private placements,
public offerings and/or bank financings necessary to support our working capital
requirements. As noted herein, we are pursuing various financing alternatives to
meet our immediate and long-term financial requirements. There is no assurance
that additional financing will be available to us when needed or, if available,
that it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will be unable to conduct
our operations as planned, and we will not be able to meet our other obligations
as they become due. In such event, we will be forced to scale down or perhaps
even cease our operations.

As of the date of this quarterly report, we have entered into
negotiations with prospective business entities but have not entered into any
formal written agreements for a business opportunity.

Purchase of Significant Plant and Equipment

Unless we acquire a new business, we do not intend to purchase
any significant equipment over the twelve months ending March 31, 2010.

Employee and Consultant Compensation

Given the current stage of our exploration properties, we
intend to continue to fulfill our professional and personnel requirements by
hiring some additional full-time employees critical to the success of our
operations, while retaining consultants on an as needed basis. We estimate that
our consultant and related professional compensation expenses for the next
12-month period will be approximately $375,000, including social insurance and
taxes. We estimate that our net employee compensation expenses for the next
12-month period will be approximately $270,000.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.

Recently Issued Accounting Standards

In February 2007, the Financial Accounting Standards Board (the
FASB) issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS No. 159). SFAS No. 159
permits companies to choose to measure many financial instruments and certain
other items at fair value. The standard requires that unrealized gains and
losses on items for which the fair value option has been elected be reported in
earnings. SFAS No. 159 is effective for a company beginning in the first quarter
of fiscal year ending in 2008, although earlier adoption is permitted. We are
currently evaluating the impact that SFAS No. 159 will have on our financial
statements.

In September 2006, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements (SAB No. 108). SAB No. 108 addresses how the effects of
prior year uncorrected misstatements should be considered when quantifying
misstatements in current year financial statements. SAB No. 108 requires
companies to quantify misstatements using a balance sheet and income statement
approach and to evaluate whether either approach results in quantifying an error
that is material in light of relevant quantitative and qualitative factors. SAB
No. 108 is effective for periods ending after November 15, 2006. The adoption of
this statement did not have a material effect on our reported financial position
or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements (SFAS No. 157). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements.
SFAS No. 157 applies under other accounting pronouncements that

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28

require or permit fair value measurements and does not require
any new fair value measurements. The provisions of SFAS No. 157 are effective
for fair value measurements made in fiscal years beginning after November 15,
2007. The adoption of this statement is not expected to have a material effect
on our future reported financial position or results of operations.

In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statements No. 109 (FIN. 48). FIN. 48 clarifies the accounting for
uncertainty in income taxes by prescribing a two-step method of first evaluating
whether a tax position has met a more likely than not recognition threshold, and
second, measuring that tax position to determine the amount of benefit to be
recognized in the financial statements. FIN. 48 provides guidance on the
presentation of such positions within a classified statement of financial
position as well as on derecognition, interest and penalties, accounting in
interim periods, disclosure and transition. FIN. 48 is effective for fiscal
years beginning after December 15, 2006. The adoption of this statement is not
expected to have a material effect on our future reported financial position or
results of operations.

Application of Critical Accounting Estimates

Our financial statements have been prepared in accordance with
the United States generally accepted accounting principles. Because a precise
determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the
use of estimates which have been made using careful judgment.

Our financial statements have, in managements opinion, been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies as disclosed in the notes to
our audited financial statements for the three months ended March 31, 2009 and
the fiscal year ended December 31, 2008.

Risk Factors

An investment in our shares of common stock involves a number
of very significant risks. You should carefully consider the following risks and
uncertainties in addition to other information herein when evaluating our
business. Our business, operating results and financial condition could be
seriously harmed and you could lose all or part of your investment in our shares
of common stock due to any of the following risks.

Risks Associated with our Business

Risks Relating to our Business and the Oil and Gas
Industry

We have had a history of losses and no revenue to date,
which trend may continue and may negatively impact our ability to achieve our
business objectives.

We have experienced net losses since inception, and expect to
continue to incur substantial losses for the foreseeable future. Our accumulated
deficit was $1,009,353 as at March 31, 2009 and as of June 23, 2009, we have a
working capital deficiency of approximately $500,000. To date, we have not
generated any revenues from our operations.

We will not be able to generate significant revenues in the
future and our management expects operating expenses to increase substantially
over the next 12 months as we undertake oil and gas exploration activities. As a
result, our management expects the business to continue to experience negative
cash flow for the foreseeable future and cannot predict when, if ever, our
business might become profitable. We will need to raise additional funds, and
such funds may not be available on commercially acceptable terms, if at all. If
we are unable to raise funds on acceptable terms, we may not be able to execute
our business plan, take advantage of future opportunities, or respond to
competitive pressures or unanticipated requirements. This may seriously harm our
business, financial condition and results of operations.

We have no known oil and natural gas reserves and if we
cannot find any, we may have to cease exploration.

We have no known oil and natural gas reserves. If we do not
find any commercially exploitable oil and natural gas reserves or if we cannot
complete the exploration of any oil and natural gas reserves, either because we
do not have the money to do so or because it is not economically feasible to do
so, we may have to cease operations and our investors may lose their
investments.

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29

No reserves have yet been established in respect of the three
properties. There are numerous uncertainties inherent in estimating reserves,
including many factors beyond our control and no assurance can be given that any
level of reserves or recovery thereof will be realized. In general, estimates of
reserves are based upon a number of assumptions made as of the date on which the
estimates were determined, many of which are subject to change and are beyond
our control.

We are an exploration stage company with a limited
operating history, which may hinder our ability to successfully meet our
objectives.

We are an exploration stage company with only a limited
operating history upon which to base an evaluation of our current business and
future prospects. We have only been actively engaged in the oil and gas
exploration and development business since purchase of the shares of Langford
Worldwide Corp. on April 16, 2009 and we do not have an established history of
locating and developing properties that have oil and gas reserves. As a result,
the revenue and income potential of our business is unproven. In addition,
because of our limited operating history, we have limited insight into trends
that may emerge and affect our business. Errors may be made in predicting and
reacting to relevant business trends and we will be subject to the risks,
uncertainties and difficulties frequently encountered by early-stage companies
in evolving markets. We may not be able to successfully address any or all of
these risks and uncertainties. Failure to adequately do so could cause our
business, results of operations and financial condition to suffer.

Our proposed operations will require significant capital
expenditures for which we may not have sufficient funding and if we do obtain
additional financing, our existing shareholders may suffer substantial
dilution.

We intend to make capital expenditures in excess of our
existing capital resources to explore the oil and gas properties for which we
have obtained exploration and production licenses. Furthermore, we intend to
rely on external sources of financing to meet our capital requirements to
continue acquiring, exploring and developing oil and gas properties and to
otherwise implement our business plan. We plan to obtain such funding through
the debt and equity markets, but we cannot assure that we will be able to obtain
additional funding when it is required or that it will be available to us on
commercially acceptable terms, if at all. In addition, any additional equity
financing may involve substantial dilution to our then existing
shareholders.

The successful implementation of our business plan is
subject to risks inherent in the oil and gas business, which if not adequately
managed, could result in additional losses.

Our oil and gas operations are subject to the economic risks
typically associated with exploration and development activities, including the
necessity of making significant expenditures to locate and acquire properties
and to drill exploratory wells. In addition, the availability of drilling rigs
and the cost and timing of drilling, completing and, if warranted, operating
wells is often uncertain. In conducting exploration and development activities,
the presence of unanticipated pressure or irregularities in formations,
miscalculations or accidents may cause our exploration, development and, if
warranted, production activities to be unsuccessful. This could result in a
total loss of our investment in a particular well. If exploration efforts are
unsuccessful in establishing proved reserves and exploration activities cease,
the amounts accumulated as unproved costs will be charged against earnings as
impairments.

In addition, in the event that we commence production, market
conditions or the unavailability of satisfactory oil and gas transportation
arrangements may hinder our access to oil and gas markets and delay our
production. The availability of a ready market for our prospective oil and gas
production depends on a number of factors, including the demand for and supply
of oil and gas and the proximity of reserves to pipelines and other facilities.
Our ability to market such production depends in substantial part on the
availability and capacity of gathering systems, pipelines and processing
facilities, in most cases owned and operated by third parties. Our failure to
obtain such services on acceptable terms could materially harm our business. We
may be required to shut in wells for lack of a market or because of inadequacy
or unavailability of pipelines or gathering system capacity. If that occurs, we
would be unable to realize revenue from those wells until arrangements are made
to deliver such production to market.

Our future performance is dependent upon our ability to
identify, acquire and develop oil and gas properties, the failure of which could
result in under use of capital and losses.

Our future performance depends upon our ability to identify,
acquire and develop oil and gas reserves that are economically recoverable. Our
success will depend upon our ability to acquire working and revenue interests in
properties

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30

upon which oil and gas reserves are ultimately discovered in
commercial quantities, and our ability to develop prospects that contain proven
oil and gas reserves to the point of production. Without successful acquisition
and exploration activities, we will not be able to develop oil and gas reserves
or generate revenues. We cannot provide you with any assurance that we will be
able to identify and acquire oil and gas reserves on acceptable terms, or that
oil and gas deposits will be discovered in sufficient quantities to enable us to
recover our exploration and development costs or sustain our business.

The successful acquisition and development of oil and gas
properties requires an assessment of recoverable reserves, future oil and gas
prices and operating costs, potential environmental and other liabilities, and
other factors. Such assessments are necessarily inexact and their accuracy
inherently uncertain. In addition, no assurance can be given that our
exploitation and development activities will result in the discovery of any
reserves. Our operations may be curtailed, delayed or canceled as a result of
lack of adequate capital and other factors, such as lack of availability of rigs
and other equipment, title problems, weather, compliance with governmental
regulations or price controls, mechanical difficulties, or unusual or unexpected
formations, pressures and or work interruptions. In addition, the costs of
exploitation and development may materially exceed our initial estimates.

Market conditions or operation impediments may hinder our
access to oil and natural gas markets or delay our production.

The marketability of production from the properties for which
we have licenses to explore depends in part upon the availability, proximity and
capacity of pipelines, natural gas gathering systems and processing facilities.
This dependence is heightened where this infrastructure is less developed.
Therefore, if drilling results are positive in certain areas of our oil and gas
properties, a new gathering system would need to be built to handle the
potential volume of gas produced. We might be required to shut in wells, at
least temporarily, for lack of a market or because of the inadequacy or
unavailability of transportation facilities. If that were to occur, we would be
unable to realize revenue from those wells until arrangements were made to
deliver production to market.

Our ability to produce and market oil and natural gas is
affected and also may be harmed by:

- the lack of pipeline transmission facilities or carrying capacity;
- government regulation of natural gas and oil production;
- government transportation, tax and energy policies;
- changes in supply and demand; and
- general economic conditions.

We might incur debt in order to fund our exploration and
development activities, which would continue to reduce our financial flexibility
and could have a material adverse effect on our business, financial condition or
results of operations.

If we incur indebtedness, our ability to meet our debt
obligations and reduce our level of indebtedness depends on future performance.
General economic conditions, oil and gas prices and financial, business and
other factors affect our operations and future performance. Many of these
factors are beyond our control. We cannot assure investors that we will be able
to generate sufficient cash flow to pay the interest on our current or future
debt or that future working capital, borrowings or equity financing will be
available to pay or refinance such debt. Factors that will affect our ability to
raise cash through an offering of our capital stock or a refinancing of our debt
include financial market conditions, the value of our assets and performance at
the time we need capital. We cannot assure investors that we will have
sufficient funds to make such payments. If we do not have sufficient funds and
are otherwise unable to negotiate renewals of our borrowings or arrange new
financing, we might have to sell significant assets. Any such sale could have a
material adverse effect on our business and financial results.

We will have substantial capital requirements that, if
not met, may hinder our growth and operations.

---

31

Our future growth depends on our ability to make large capital
expenditures for the exploration and development of our natural gas and oil
properties. Future cash flows and the availability of financing will be subject
to a number of variables, such as:

- the success of our Russian projects;
- success in locating and producing reserves; and
- prices of oil and natural gas.

Additional financing sources will be required in the future to
fund developmental and exploratory drilling. Issuing equity securities to
satisfy our financing requirements could cause substantial dilution to our
existing shareholders. Additional debt financing could lead to:

- a substantial portion of operating cash flow being dedicated to the payment
  of principal and interest;
- being more vulnerable to competitive pressures and economic downturns; and
- restrictions on our operations.

Financing might not be available in the future, or we might not
be able to obtain necessary financing on acceptable terms, if at all. If
sufficient capital resources are not available, we might be forced to curtail
our drilling and other activities or be forced to sell some assets on an
untimely or unfavorable basis, which would have an adverse affect on our
business, financial condition and results of operations.

If we or our operators fail to maintain adequate
insurance, our business could be materially and adversely affected.

Our operations are subject to risks inherent in the oil and gas
industry, such as blowouts, cratering, explosions, uncontrollable flows of oil,
gas or well fluids, fires, pollution, earthquakes and other environmental risks.
These risks could result in substantial losses due to injury and loss of life,
severe damage to and destruction of property and equipment, pollution and other
environmental damage, and suspension of operations. We could be liable for
environmental damages caused by previous property owners. As a result,
substantial liabilities to third parties or governmental entities may be
incurred, the payment of which could have a material adverse effect on our
financial condition and results of operations.

Any prospective drilling contractor or operator which we hire
will be required to maintain insurance of various types to cover our operations
with policy limits and retention liability customary in the industry. Therefore,
we do not plan to acquire our own insurance coverage for such prospects. The
occurrence of a significant adverse event on such prospects that is not fully
covered by insurance could result in the loss of all or part of our investment
in a particular prospect which could have a material adverse effect on our
financial condition and results of operations.

The oil and gas industry is highly competitive, and we
may not have sufficient resources to compete effectively.

The oil and gas industry is highly competitive. We compete with
oil and natural gas companies and other individual producers and operators, many
of which have longer operating histories and substantially greater financial and
other resources than we do, as well as companies in other industries supplying
energy, fuel and other needs to consumers. Our larger competitors, by reason of
their size and relative financial strength, can more easily access capital
markets than we can and may enjoy a competitive advantage in the recruitment of
qualified personnel. They may be able to absorb the burden of any changes in
laws and regulation in the jurisdictions in which we do business and handle
longer periods of reduced prices for oil and gas more easily than we can. Our
competitors may be able to pay more for oil and gas leases and properties and
may be able to define, evaluate, bid for and purchase a greater number of leases
and properties than we can. Further, these companies may enjoy technological
advantages and may be able to implement new technologies more rapidly than we
can. Our ability to acquire additional properties in the future will depend upon
our ability to conduct efficient operations, evaluate and select suitable
properties, implement advanced technologies and consummate transactions in a
highly competitive environment.

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32

Complying with environmental and other government
regulations could be costly and could negatively impact our
production.

Our business is governed by numerous laws and regulations at
various levels of government. These laws and regulations govern the operation
and maintenance of our facilities, the discharge of materials into the
environment and other environmental protection issues. Such laws and regulations
may, among other potential consequences, require that we acquire permits before
commencing drilling and restrict the substances that can be released into the
environment with drilling and production activities.

Under these laws and regulations, we could be liable for
personal injury, clean-up costs and other environmental and property damages, as
well as administrative, civil and criminal penalties. Prior to commencement of
drilling operations, we may secure limited insurance coverage for sudden and
accidental environmental damages as well as environmental damage that occurs
over time. However, we do not believe that insurance coverage for the full
potential liability of environmental damages is available at a reasonable cost.
Accordingly, we could be liable, or could be required to cease production on
properties, if environmental damage occurs.

The costs of complying with environmental laws and regulations
in the future may harm our business. Furthermore, future changes in
environmental laws and regulations could occur that result in stricter standards
and enforcement, larger fines and liability, and increased capital expenditures
and operating costs, any of which could have a material adverse effect on our
financial condition or results of operations.

Our ability to produce oil and gas from our properties
may be adversely affected by a number of factors outside of our control which
may result in a material adverse effect on our business, financial condition or
results of operations.

The business of exploring for and producing oil and gas
involves a substantial risk of investment loss. Drilling oil and gas wells
involves the risk that the wells may be unproductive or that, although
productive, the wells may not produce oil or gas in economic quantities. Other
hazards, such as unusual or unexpected geological formations, pressures, fires,
blowouts, loss of circulation of drilling fluids or other conditions may
substantially delay or prevent completion of any well. Adverse weather
conditions can also hinder drilling operations. A productive well may become
uneconomic if water or other deleterious substances are encountered that impair
or prevent the production of oil or gas from the well. In addition, production
from any well may be unmarketable if it is impregnated with water or other
deleterious substances. There can be no assurance that oil and gas will be
produced from the properties in which we have interests. In addition, the
marketability of oil and gas that may be acquired or discovered may be
influenced by numerous factors beyond our control. These factors include the
proximity and capacity of oil and gas, gathering systems, pipelines and
processing equipment, market fluctuations in oil and gas prices, taxes,
royalties, land tenure, allowable production and environmental protection. We
cannot predict how these factors may affect our business.

We are dependent upon the efforts of various third
parties that we do not control and, as a result, we may not be able to control
the timing of development efforts, associated costs, or the rate of production
of reserves (if any).

The success of our business is dependent upon the efforts of
various third parties that we do not control. At least at the present, we do not
plan to serve as the operator for our projects. As a result, we may have limited
ability to exercise influence over the operations of the properties or their
associated costs. Our dependence on the operator and, where applicable, other
working interest owners for these projects and our limited ability to influence
operations and associated costs could prevent the realization of our targeted
returns on capital in drilling or acquisition activities. The success and timing
of development and exploitation activities on properties operated by others
depend upon a number of factors that will be largely outside of our control,
including:

- the timing and amount of capital expenditures;
- the operators expertise and financial resources;
- approval of other participants in drilling wells;
- selection of technology;

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33

- the rate of production of the reserves; and
- the availability of suitable drilling rigs, drilling equipment, production
  and transportation infrastructure, and qualified operating personnel.

We will rely upon various companies to provide us with
technical assistance and services. We will also rely upon the services of
geologists, geophysicists, chemists, engineers and other scientists to explore
and analyze oil and gas prospects to determine a method in which the oil and gas
prospects may be developed in a cost-effective manner. Although our management
has relationships with a number of third-party service providers, we cannot
assure you that we will be able to continue to rely on such persons. If any of
these relationships with third-party service providers are terminated or are
unavailable on commercially acceptable terms, we may not be able to execute our
business plan.

The unavailability or high cost of drilling rigs,
equipment, supplies, personnel and oil field services could adversely affect our
ability to execute our exploration and development plans on a timely basis and
within our budget.

Shortages or the high cost of drilling rigs, equipment,
supplies or personnel could delay or adversely affect our exploitation and
exploration operations, which could have a material adverse effect on our
business, financial condition and results of operations. Since our operations
and properties are concentrated in Russia, we could be materially and adversely
affected if drilling rigs are unavailable or cost of rigs, equipment supplies or
personnel increase significantly over current costs.

We may be unable to retain our exploration and
development licenses, which would result in significant financial losses to our
company.

We have no interest in any properties other than licenses to
explore for and produce hydrocarbons on certain properties. If we fail to meet
the specific requirements of each license, such license may terminate or expire.
We cannot assure you that any of the obligations required to maintain each
license will be met. The termination or expiration of our licenses may harm our
business. In addition, we will need significant funds to meet capital
requirements for the exploration activities that we intend to conduct pursuant
to the terms of the licenses.

Oil prices are subject tofluctuations in response to a variety
of factors beyond our control. Our operating results and financial condition
will depend substantially upon prevailing oil prices.

Oil prices are subject to fluctuations in response to a variety
of factors beyond our control. Our operating results and

financial condition will depend substantially upon prevailing
oil prices. Historically, prices for oil have fluctuated widely for many
reasons, including:

- global and regional supply and demand, and expectations regarding future
  supply and demand, for crude oil and petroleum products;
- geopolitical uncertainty;
- weather conditions and natural disasters;
- access to pipelines, railways and other means of transporting crude oil;
- prices and availability of alternative fuels;
- prices and availability of new technologies;
- the ability of the members of OPEC, and other crude oil producing nations,
  to set and maintain specified levels of production and prices;
- political, economic and military developments in oil producing regions,
  particularly the Middle East;
- Russian and foreign governmental regulations and actions, including export
  restrictions and taxes; and

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34

- global and regional economic conditions.

Lower oil prices may adversely impact on the economic
exploitation of our assets, reducing revenues or net income, impairing our
ability to achieve its business objectives and may materially and adversely
affect our financial results.

Our production operations involve risks common to the oil
and gas industry.

Our production operations involve risks common to the oil and
gas industry, including oil spills, explosions, fires, equipment damage or
failure, natural disasters, geological uncertainties, unusual or unexpected rock
formations and abnormal geological pressures. In the event that any of these
occur, environmental damage, injury to persons and loss of life, failure to
produce oil in commercial quantities or an inability to fully produce discovered
reserves could result. They can also put at risk some or all of our licenses
enabling it to explore and/or produce, and incur fines or penalties as well as
criminal sanctions against our company and/or its officers. Consequent
production delays and declines from normal field operating conditions may result
in revenue and cash flow levels being adversely affected.

We contract services and equipment from third-party
providers and suppliers. Such equipment and services can be in short supply and
may not be readily available at the times and places required.

We contract services and equipment from third-party providers
and suppliers. Such equipment and services can be in short supply and may not be
readily available at the times and places required. In particular, we utilize
the services of local drilling contractors, and there are a limited number of
them relative to demand in the Saratov region. In addition, the costs of
third-party services and equipment have increased significantly over recent
years and may continue to rise. This may therefore have an adverse effect on our
business. In addition, the failure of a third party provider or supplier could
have a material adverse impact on our business and the results of
operations.

Our costs are largely ruble-based, and in the event that
we find and begin producing oil, the majority of all revenues, from the domestic
market or from exports, will be either ruble denominated or must eventually be
converted to rubles.

Our costs are largely ruble-based, and in the event that we
find and begin producing oil, the majority of all revenues, from the domestic
market or from exports, will be either ruble denominated or must eventually be
converted to rubles. The official exchange rate for the ruble thus has a direct
and indirect effect on the value of the our assets, but it is difficult to
quantify this effect generally, since it will vary over time, depending upon
whether we have a net positive cash flow, the proportion of hard currency sales
in relation to ruble sales and whether the acquisition value of assets is
dependent on the ruble exchange rate. As long our net investments in rubles
exceed its revenues in rubles, a weak ruble in relation to other currencies
(primarily the U.S. dollar) is a positive factor. If the replacement value of
our assets does not fall as a result of the weak ruble, a depreciation of the
ruble also produces a neutral effect on existing assets. In the event of a
substantial appreciation of the ruble, in principle, the opposite applies. Costs
would rise in relation to other currencies, and export sales, in rubles, would
have a relatively lower value.

We depend on key management for the operation of our
day-to-day activities and implementation of its growth strategy.

We depend on key management for the operation of our day-to-day
activities and implementation of our growth strategy. In addition, personal
connections and relationships of our key management are important to the conduct
of our business. If we were to lose a member of our key management, our business
and results of operations might be adversely affected.

Risks Related to Conducting Business in Russia

Our operations are exposed to the Russian political,
economic, legal, regulatory and social environment.

Our operations are exposed to the political, economic, legal,
regulatory and social environment of the countries in which it operates,
primarily Russia, or intends to operate. These risks include corruption, civil
strife or labor unrest, armed conflict, terrorism, limitations or price controls
on oil exports and limitations or the imposition of tariffs or duties on imports
of certain goods. There may be additional risks arising from us being perceived
as a foreign company. Such risks could evidence themselves in expropriation or
nationalization of property whether on a direct or indirect basis. As with many
countries, possible future changes in the government, possible major policy
shifts or increased security arrangements could have to varying degrees an
adverse effect on the value of investments in Russia. These factors could
materially adversely

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35

affect our business, prospects or financial results. If the
existing body of Russian laws and regulations are interpreted or applied, or
relevant discretions exercised, in an inconsistent manner by the courts or
applicable regulatory bodies, this could result in ambiguities, inconsistencies
and anomalies in the enforcement of such laws and regulations, which could
hinder our long term planning efforts and may create uncertainties in its
operating environment.

The Russian government exercises significant influence
over the oil and gas industry.

The Russian government has exercised and continues to exercise
significant influence over many aspects of the Russian economy, including the
oil industry. Any government action concerning the economy, including the oil
industry (such as a change in taxation rules or practice), could have a material
adverse effect on us.

Tax risks in Russia may be more significant than those
generally found in countries with more developed tax systems.

The tax risks in Russia are more significant than those
generally found in countries with more developed tax systems, imposing
additional burdens and costs on our operations, including management resources.
We may be subject to a broad range of taxes imposed at the federal, regional and
local levels, including but not limited to export duties, income tax, natural
resources production tax, property tax and social taxes. Laws related to these
taxes have been in force for a comparatively short period relative to tax laws
in more developed market economies, and the implementation of these tax laws has
at times been unclear or inconsistent. Our assets, targets, projections,
cash-flows and profitability could be adversely affected by any adverse change
in the taxation laws, taxation levels, introduction of new tariffs or duties,
withdrawal of any reliefs, or the applicability or enforceability in the regions
in which we operate.

Investment in emerging markets may only be suitable for
sophisticated investors who fully appreciate the significance of the risks
involved in, and are familiar with, investing in emerging markets.

Generally, investment in emerging markets may only be suitable
for sophisticated investors who fully appreciate the significance of the risks
involved in, and are familiar with, investing in emerging markets. Investors
should also note that emerging markets, such as Russia, are subject to rapid
change and that information may become outdated relatively quickly. Moreover,
financial turmoil in any emerging market country may adversely affect prices in
equity markets of all emerging market countries as investors move their money to
more stable, developed markets. As has happened in the past,

financial problems or an increase in the perceived risks
associated with investing in emerging economies could dampen foreign investment
in Russia and adversely affect the Russian economy. Thus, even if the Russian
economy remains relatively stable, financial turmoil in other emerging market
countries could adversely affect our business.

Risks Associated with our Shares of Common
Stock

A decline in the price of our common stock could affect
our ability to raise further working capital and adversely impact our ability to
continue operations.

A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a corresponding
reduction in our ability to raise capital. Because a significant portion of our
operations have been and will be financed through the sale of equity securities,
a decline in the price of our common stock could be especially detrimental to
our liquidity and our operations. Such a reduction could force us to reallocate
funds from other planned uses and may have a significant negative effect on our
business plan and operations, including our ability to develop new products and
continue our current operations. If our stock price declines, we can offer no
assurance that we will be able to raise additional capital or generate funds
from operations sufficient to meet our obligations. If we are unable to raise
sufficient capital in the future, we may not be able to have the resources to
continue our normal operations.

The market price for our common stock may also be affected by
our ability to meet or exceed expectations of analysts or investors. Any failure
to meet these expectations, even if minor, may have a material adverse effect on
the market price of our common stock.

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36

Because we do not intend to pay any dividends on our
shares of common stock, investors seeking dividend income or liquidity should
not purchase our shares of common stock.

We have not declared or paid any dividends on our shares of
common stock since inception, and we do not anticipate paying any such dividends
for the foreseeable future. Investors seeking dividend income or liquidity
should not invest in our shares of common stock.

Because we can issue additional shares of our common
stock, purchasers of our shares of common stock may incur immediate dilution and
may experience further dilution.

We are authorized to issue up to 900,000,000 shares of common
stock, of which 36,422,800 shares of common stock are issued and outstanding.
Our board of directors has the authority to issue additional shares of our
common stock and to determine the rights, preferences and privilege of such
shares of our common stock, without consent of any of our shareholders.
Consequently, the shareholders may experience more dilution in their ownership
of our shares of common stock in the future.

Trading of our shares of common stock may be restricted
by the Securities and Exchange Commissions penny stock regulations, which may
limit a stockholders ability to buy and sell our common shares.

The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that has a market
price (as defined therein) less than $5.00 per share or an exercise price of
less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000, or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC, which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customers confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our shares of common stock.

FINRA sales practice requirements may also limit a
stockholders ability to buy and sell our stock.

In addition to the "penny stock" rules described above, the
Financial Industry Regulatory Authority, formerly the National Association of
Securities Dealers, has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customers financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our shares of
common stock, which may limit your ability to buy and sell our Common Shares and
have an adverse effect on the market for our shares of common stock.

Our common stock is illiquid and the price of our common
stock may be negatively impacted by factors which are unrelated to our
operations.

Our common stock currently trades on a limited basis on the OTC
Bulletin Board. Trading of our stock through the OTC Bulletin Board is
frequently thin and highly volatile. There is no assurance that a sufficient
market will develop in our

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37

stock, in which case it could be difficult for shareholders to
sell their stock. The market price of our common stock could fluctuate
substantially due to a variety of factors, including market perception of our
ability to achieve our planned growth, quarterly operating results of our
competitors, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our
competitors or us. In addition, the stock market is subject to extreme price and
volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their
operating performance and could have the same effect on our common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.

As a smaller reporting company (as defined by §229.10(f)(1)),
we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Managements Report On Internal Control Over Financial
Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over
financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under
the Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the companys principal executive and principal financial
officers and effected by the companys board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures that:

- Pertain to the maintenance of records that in reasonable detail accurately
  and fairly reflect the transactions and dispositions of the assets of the
  company;
- Provide reasonable assurance that transactions are recorded as necessary to
  permit preparation of financial statements in accordance with accounting
  principles generally accepted in the United States of America and that
  receipts and expenditures of the company are being made only in accordance
  with authorizations of management and directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use or disposition of the companys assets that
  could have a material effect on the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate. All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of the inherent limitations of internal
control, there is a risk that material misstatements may not be prevented or
detected on a timely basis by internal control over financial reporting.
However, these inherent limitations are known features of the financial
reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk.

As of March 31, 2009 management assessed the effectiveness of
our internal control over financial reporting based on the criteria for
effective internal control over financial reporting established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting
such assessments. Based on that evaluation, they concluded that, during the
period covered by this report, such internal controls and procedures were not
effective to detect the inappropriate application of US GAAP rules as more fully
described below. This was due to deficiencies that existed in the design or
operation of our internal controls over financial reporting that adversely
affected our internal controls and that may be considered to be material
weaknesses.

The matters involving internal controls and procedures that our
management considered to be material weaknesses under the standards of the
Public Company Accounting Oversight Board were: (1) lack of a functioning audit
committee due to a

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38

lack of a majority of independent members and a lack of a
majority of outside directors on our board of directors, resulting in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures; (2) inadequate segregation of duties consistent with
control objectives; and (3) ineffective controls over period end financial
disclosure and reporting processes. The aforementioned material weaknesses were
identified by our Chief Executive Officer in connection with the review of our
financial statements as of March 31, 2009.

Management believes that the material weaknesses set forth in
items (2) and (3) above did not have an effect on our financial results.
However, management believes that the lack of a functioning audit committee and
the lack of a majority of outside directors on our board of directors results in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures, which could result in a material misstatement in our
financial statements in future periods.

This annual report does not include an attestation report of
the Corporation's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by
the Corporation's registered public accounting firm pursuant to temporary rules
of the SEC that permit the Corporation to provide only the management's report
in this annual report.

Managements Remediation Initiatives

In an effort to remediate the identified material weaknesses
and other deficiencies and enhance our internal controls, we have initiated, or
plan to initiate, the following series of measures:

We will create a position to segregate duties consistent with
control objectives and will increase our personnel resources and technical
accounting expertise within the accounting function when funds are available to
us. And, we plan to appoint one or more outside directors to our board of
directors who shall be appointed to an audit committee resulting in a fully
functioning audit committee who will undertake the oversight in the
establishment and monitoring of required internal controls and procedures such
as reviewing and approving estimates and assumptions made by management when
funds are available to us.

Management believes that the appointment of one or more outside
directors, who shall be appointed to a fully functioning audit committee, will
remedy the lack of a functioning audit committee and a lack of a majority of
outside directors on our Board.

We anticipate that these initiatives will be at least
partially, if not fully, implemented by December 31, 2009. Additionally, we plan
to test our updated controls and remediate our deficiencies by December 31,
2009.

Changes in internal controls over financial
reporting

There was no change in our internal controls over financial
reporting that occurred during the period covered by this report, which has
materially affected, or is reasonably likely to materially affect, our internal
controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, active or pending legal proceedings
against our company nor of any proceedings that a governmental authority is
contemplating against us.

We know of no material proceedings to which any of our
directors, officers, affiliates, owner of record or beneficially of more than 5%
of our voting securities or security holder is an adverse party or has a
material interest adverse to our interest.

ITEM 1A. RISK FACTORS

As a smaller reporting company (as defined by §229.10(f)(1)),
we are not required to provide the information required by this Item.

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39

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

|Exhibit |                                                                                                                                                                                                                                                                              
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                                                                                                                  
|(3)     | Articles of Incorporation and Bylaws                                                                                                                                                                                                                                         
|3.1     | Articles of Incorporation (incorporated
        by reference to the Companys SB-2 Registration Statement filed February
        5, 2007).                                                                                                                                   
|3.2     | Bylaws (incorporated by reference
        to the Companys SB-2 Registration Statement filed February 5, 2007).                                                                                                                                                              
|3.3     | Certificate of Merger filed with
        the Nevada Secretary of State and effective on January 15, 2008 (incorporated
        by reference to our Current Report on Form 8-K filed on January 16, 2008).                                                                    
|3.4     | Certificate of Change filed with
        the Nevada Secretary of State, effective on January 31, 2008 (incorporated
        by reference to our Current Report on Form 8-K filed on February 1, 2008).                                                                       
|(10)    | Material Contracts                                                                                                                                                                                                                                                           
|10.1    | Form of Subscription Agreement
        used between our company and the 35 non affiliated stockholders who purchased
        1,000,000 common shares at $0.05 per Common Share (incorporated by reference
        to our SB-2 Registration Statement filed February 5, 2007).
|10.2    | Form of Subscription Agreement
        used between our company and the ten investors who purchased 5,050,000
        units at $1 per unit (incorporated by reference to our Current Report
        on Form 8-K filed on March 20, 2008).                                    
|(31)    | Section 302 Certifications                                                                                                                                                                                                                                                   
|31.1*   | Section
        302 Certification of John Hiner.                                                                                                                                                                                                                             
|(32)    | Section 906 Certification                                                                                                                                                                                                                                                    
|32.1*   | Section
        906 Certification of John Hiner.                                                                                                                                                                                                                             

* Filed herewith

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40

SIGNATURES

In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

CROWN OIL AND GAS INC.

|By: | /s/ John Hiner                                 
|--- | -----------------------------------------------
|    | Name: John Hiner                               
|    | Title: President (Principal Executive Officer),
|    | Secretary, Treasurer (Principal Accounting     
|    | Officer and Director                           

DATED: July 1, 2009

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