UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

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

       For the fiscal year ended March 31, 2011

                                     Or

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

       For the transition period from _________ to _____________


                        Commission file number: 000-51425

                               RANCHER ENERGY CORP
                               -------------------
             (Exact name of registrant as specified in its charter)

             Nevada                                        98-0422451
----------------------------------                   ------------------------
 State or other jurisdiction of                          I.R.S. Employer
  incorporation or organization                        Identification No.

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

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

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

   Title of each class                               Name of each exchange
       registered                                     on which registered
---------------------------                        ------------------------
       Not Applicable                                   Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:
                                  Common Stock
                                ----------------
                                (Title of Class)




<PAGE>


Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes |_| No |X|

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. |_|

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.     Yes |X| No |_|

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Website, if any, every Interactive Data file required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (section  232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files) Yes |_| No |_|

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K (ss.  229.405 of this chapter) is not contained  herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|

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
definitions  of "large  accelerated  filer,"  "accelerated  filer" and  "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).

Large accelerated filer     [___]          Accelerated filer              [___]

Non-accelerated filer       [___]          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 |_| No |X|

              APPLICABLE ONLY TO REGISTRANTS 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  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
Yes |_| No |X|

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common  equity,  as of the
last  business day of the  registrant's  most recently  completed  second fiscal
quarter ended September 30, 2010 was $2,072,274.

The number of shares outstanding of the registrant's common stock as of July 11,
2011 was 119,316,723.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.

<PAGE>

                                TABLE OF CONTENTS

                                     PART I

ITEM 1.      Business
ITEM 1A.     Risk Factors
ITEM 1B.     Unresolved Staff Comments
ITEM 2.      Properties
ITEM 3.      Legal Proceedings
ITEM 4.      Removed and Reserved

                          PART II

ITEM 5.      Market for Registrant's Common Equity, Related Stockholder Matters
             and Issuer Purchases of Equity Securities
ITEM 6.      Selected Financial Data
ITEM 7.      Management's Discussion and Analysis of Financial Condition and
             Results of Operations
ITEM 7A.     Quantitative and Qualitative Disclosures About Market Risk
ITEM 8.      Financial Statements and Supplementary Data
ITEM 9.      Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure
ITEM 9A(T).  Controls and Procedures
ITEM 9B.     Other Information

                                       PART III

ITEM 10.     Directors, Executive Officers, and Corporate Governance
ITEM 11.     Executive Compensation
ITEM 12.     Security Ownership of Certain Beneficial Owners and Management and
             Related Stockholder Matters
ITEM 13.     Certain Relationships and Related Transactions, and Director
             Independence
ITEM 14.     Principal Accounting Fees and Services

                                       PART IV

ITEM 15.     Exhibits, Financial Statement Schedules
SIGNATURES



                                       1
<PAGE>

Note about Forward-Looking Statements

This From 10-K contains forward-looking  statements, such as statements relating
to our financial condition,  results of operations,  plans,  objectives,  future
performance and business  operations.  These  statements  relate to expectations
concerning  matters  that  are  not  historical  facts.  These   forward-looking
statements  reflect our current  views and  expectations  based largely upon the
information  currently  available  to us and are subject to  inherent  risks and
uncertainties.  Although we believe  our  expectations  are based on  reasonable
assumptions,  they are not  guarantees  of  future  performance  and there are a
number of important factors that could cause actual results to differ materially
from those expressed or implied by such  forward-looking  statements.  By making
these  forward-looking  statements,  we do not  undertake  to update them in any
manner  except as may be required by our  disclosure  obligations  in filings we
make with the Securities and Exchange  Commission  under the Federal  securities
laws.  Our  actual  results  may  differ  materially  from  our  forward-looking
statements.

                                     PART I

ITEM 1.  BUSINESS

General

The  following  is a  summary  of  some  of the  information  contained  in this
document. Unless the context requires otherwise,  references in this document to
"Rancher," "we," "our," "us" or the "Company" are to Rancher Energy Corp.

HISTORY OF RANCHER ENERGY CORP.

         We  are an  independent  energy  company  engaged  in the  development,
production, and marketing of oil and gas in North America. Our business strategy
is to use modern tertiary recovery techniques on older,  historically productive
fields with proven  in-place oil and gas. Higher oil and gas prices and advances
in technology such as 3-D seismic  acquisition and evaluation and carbon dioxide
(CO2)  injection  and  sequestration,   should  position  us  to  capitalize  on
attractive sources of potentially recoverable oil and gas.

         From January 2007 through  March 2011,  we operated  four fields in the
Powder River Basin,  Wyoming,  which is located in the Rocky Mountain  region of
the United States.  The fields,  acquired in December 2006 and January 2007, are
the South Glenrock B Field,  the Big Muddy Field, the Cole Creek South Field and
the South  Glenrock A Field.  All four  fields  currently  produce  some oil and
reservoir engineering studies indicate significant volumes of crude oil could be
recovered  through  the  use of  secondary  and  tertiary  recovery  techniques.
Effective  March 1, 2011, we sold all of our interest in the four fields to Linc
Energy Petroleum (Wyoming), Inc. as part of the Chapter 11 Bankruptcy proceeding
discussed below.

         Rancher's  main emphasis  going  forward will be to acquire,  either by
lease,  farmout, or purchase,  an interest in oil or gas prospects or properties
for exploration, when available, with third parties.

COMPANY OVERVIEW

         General
         -------

         Our headquarters office is located in Denver,  Colorado where we employ
three persons, including one executive officer.

                                       2
<PAGE>

          Incorporation, Organization and Management
          ------------------------------------------


         We were incorporated on February 4, 2004, as Metalex  Resources,  Inc.,
in the State of Nevada.  Prior to April 2006, we were engaged in the exploration
of a gold prospect in British  Columbia,  Canada.  Metalex found no commercially
exploitable  deposits or reserves of gold.  During April 2006, our  stockholders
voted to change our name to Rancher Energy Corp.

         Chapter 11 Reorganization
         -------------------------

         On October 15, 2009, a Note Payable (the "Note")  issued by the Company
to GasRock  Capital LLC  ("GasRock"  or the "Lender") in October 2007 became due
and  payable.  We were  unable  to pay the  amount  due of  approximately  $10.2
million,  and we were unsuccessful in reaching  agreement with GasRock to extend
the term or otherwise modify the terms of the Note. On October 16, 2009, GasRock
notified us of the  existence  of an event of default and of their  intention to
foreclose on the assets that secured the Note. On October 21, 2009, GasRock gave
instructions to our bank to transfer all funds held in our operating  account to
GasRock, leaving us without funds to conduct operations,  pay staff or generally
operate  our  business.  On October  28,  2009,  the  Company  filed a voluntary
petition (the "petition") for relief in the United States  Bankruptcy Court (the
"Court"),  District  of  Colorado  under  Chapter  11 of  Title  11 of the  U.S.
Bankruptcy Code (the "Bankruptcy Code").

         As a result of the  Chapter  11  filing  we  continue  to  operate  our
business as  "debtor-in-possession"  under the  jurisdiction of the Court and in
accordance  with the applicable  provisions of the Bankruptcy Code and the order
of the Court, as we devote renewed efforts to resolve our liquidity problems and
develop a  reorganization  plan. In November 2009, the Court approved an interim
order for our Use of Cash  Collateral.  The interim  order for  continued Use of
Cash Collateral has since been extended by the Court on several occasions. As of
the date of filing this annual report,  we continue to use cash collateral under
the  authority of the Court,  until such time as the Company is  dismissed  from
bankruptcy proceedings.

            On January  26,  2011,  the Court  granted the  Company's  Motion to
Approve  Debtor-In-Possession  Secured  Financing  from  Linc  Energy  Petroleum
(Wyoming),  Inc. ("Linc Energy.").  On January 28, 2011, the financing with Linc
Energy was closed and distributed to the Company.

            The Debtor-In-Possession Financing provided for the following:

     -    Authorizing the Company to borrow up to a maximum of $14,700,000  from
          Linc  Energy,  for the  limited  purposes  of: (a) paying the  GasRock
          Capital,  LLC debt ("GasRock  Debt") in the amount of $13,653,698,  in
          full;  (b) holding the  Carve-Out  Amount  ($100,000 to be used to pay
          actual  administrative  expenses) in the  Carve-Out  Account until the
          close of the Sale;  (c)  paying  pre-petition  ad  valorem  taxes with
          respect to Real  Property  located in Wyoming;  (d) funding the Escrow
          Amount into an interest bearing account to be maintained and disbursed
          pursuant to the terms and conditions of the Escrow Agreement;  and (e)
          other purposes with the prior written  consent of Lender,  in its sole
          and absolute discretion.

     -    In exchange for such funds,  the Company  granted to Linc Energy valid
          and perfected first priority security interests in and liens on all of
          Rancher's assets ("the Collateral"),  which Collateral includes but is
          not  limited  to (a)  Rancher's  interests  in oil and  gas  producing
          properties;  (b)  accounts  receivable;  (c)  equipment;  (d)  general
          intangibles;  (e) accounts;  (f) deposit  accounts;  and (g) all other
          real and  personal  property  of  Rancher,  except  for the  Carve-Out
          Amount.

            On February 24, 2011,  the Court  granted the  Company's  Motion For
Order Authorizing (I) Sale of Substantially All of the Debtor's Assets; and (II)


                                       3
<PAGE>

Assumption and Assignment of Certain  Executory  Contracts and Unexpired  Leases
pursuant to an Asset Purchase  Agreement with Linc Energy,  dated as of December
20, 2010.

         On March 15, 2011, effective as of March 1, 2011, the Company closed on
the sale of  substantially  all of its assets pursuant to the Asset and Purchase
Agreement  with Linc  Energy.  In exchange  for cash of $20  million  plus other
potential future consideration up to $825,000,  and subject to other adjustments
as specified in the Asset Purchase Agreement,  the Company sold all right, title
and interest in and to substantially  all operating assets,  properties,  rights
and business of every kind, character and description, to the extent owned, held
or primarily used in the conduct of the Company's business.  Funds from the sale
of assets were primarily used to pay outstanding  principal and accrued interest
on a Debtor-In-Possession Loan.

            Following the closing of the sale,  the Company began the process of
developing and confirming its proposed plan of reorganization  and pay creditors
pursuant thereto, and therefore the amount of cash immediately following closing
does not  represent  the  amount of cash  that the  Company  anticipates  having
following payment of its creditors, administrative expenses and other items.

Business Strategy

         Emergence From Bankruptcy
         -------------------------

         As discussed above, we are evaluating strategic operations alternatives
in an  effort  to  develop  a plan  of  reorganization  that  will  satisfy  the
requirements of the Court and enable us to meet our pre-petition obligations and
ultimately  to emerge from  Bankruptcy.  There is no  certainty  that we will be
successful in completing a plan of  reorganization  that it will be confirmed by
the Court.  If we are not  successful  in  presenting  a plan of  reorganization
within  the  prescribed  time  or if any  such  plan  of  reorganization  is not
confirmed by the Court, any party in interest may file a plan of  reorganization
for us or move to have the case converted to a case under Chapter 7.

         New Prospect Criteria
         ---------------------

         The Company  will  consider  the  following  criteria  when  evaluating
whether to acquire an oil and gas prospect:

     1)   proximity to existing production;
     2)   depth of existing production;
     3)   location in a known producing region;
     4)   whether there is well control data from nearby drill sites;
     5)   geologic evaluations by local geologists of production potential;
     6)   reasonable cost of acquisition;
     7)   term of lease and drilling commitment, if any; and
     8)   reasonable drilling cost estimates.

COMPETITION, MARKETS, REGULATION AND TAXATION

         Competition
         -----------

         There are a large number of companies  and  individuals  engaged in the
exploration for minerals and oil and gas; accordingly, there is a high degree of
competition  for  desirable   properties.   Almost  all  of  the  companies  and
individuals so engaged have substantially financial resources than Rancher does.

                                       4
<PAGE>

         Markets
         -------

         The availability of a ready market for oil and gas discovered,  if any,
will depend on numerous  factors  beyond the  Company's  control,  including the
proximity  and  capacity  of  refineries,  pipelines,  and the  effect  of state
regulation  of  production  and of  federal  regulations  of  products  sold  in
interstate  commerce,  and recent  intrastate sales. The market price of oil and
gas are volatile and beyond the Company's control. The market for natural gas is
also  unsettled,  and gas prices have  increased  dramatically  in the past four
years with substantial fluctuation, seasonally and annually.

         There generally are only a limited number of gas transmission companies
with  existing  pipelines in the  vicinity of a gas well or wells.  In the event
that producing gas properties are not subject to purchase  contracts or that any
such  contracts  terminate  and other  parties do not purchase the Company's gas
production,  there is no  assurance  that  Rancher  will be able to  enter  into
purchase  contracts  with any  transmission  companies  or other  purchasers  of
natural  gas and there  can be no  assurance  regarding  the  price  which  such
purchasers  would be  willing  to pay for such gas.  There  presently  exists an
oversupply  of gas in the  certain  areas  of the  marketplace  due to  pipeline
capacity,  the extent and duration of which is not known.  Such  oversupply  may
result in restrictions of purchases by principal gas pipeline purchasers.

         Effect of Changing Industry Conditions on Drilling Activity
         -----------------------------------------------------------

         Lower oil and gas prices have caused a decline in drilling  activity in
the U.S. from time to time. However,  such reduced activity has also resulted in
a decline in drilling costs, lease acquisition costs and equipment costs, and an
improvement in the terms under which drilling prospects are generally available.
Rancher  cannot  predict  what oil and gas prices will be in the future and what
effect those prices may have on drilling activity in general,  or on its ability
to generate  economic  drilling  prospects and to raise the necessary funds with
which to drill them.

Federal and State Regulations

         Governmental Regulation and Environmental Consideration
         -------------------------------------------------------

         Numerous Federal and state laws and regulations  govern the oil and gas
industry. These laws and regulations are often changed in response to changes in
the political or economic environment.  Compliance with this evolving regulatory
burden is often difficult and costly and  substantial  penalties may be incurred
for  noncompliance.  The  following  section  describes  some  specific laws and
regulations  that may affect us. We cannot predict the impact of these or future
legislative or regulatory initiatives Federal income and "windfall profit" taxes
have in the past affected the economic viability of such properties.

         The above  paragraphs only give a brief overview of potential state and
federal regulations.  Because the Company has only acquired specific properties,
and because of the wide range of activities in which Rancher may participate, it
is  impossible  to set forth in detail the  potential  impact  federal and state
regulations may have on the Company.

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

         Since  filing a  voluntary  petition  for relief in the  United  States
Bankruptcy Court on October 28, 2009, we have operated as a debtor-in-possession
under  the  jurisdiction  of the  Bankruptcy  Court and in  accordance  with the
applicable  provisions of the U.S.  Bankruptcy Code and orders of the Bankruptcy
Court.

         Environmental Laws and Regulations
         ----------------------------------

         Various  Federal,  state,  and local laws  regulating  the discharge of
materials into the environment,  or otherwise  relating to the protection of the
environment,   directly  impact  oil  and  gas  exploration,   development,  and
production  operations  and  consequently  may impact our  operations and costs.
These regulations  include,  among others (i) regulations by the EPA and various
state agencies  regarding approved methods of disposal for certain hazardous and

                                       5
<PAGE>

nonhazardous wastes; (ii) the Comprehensive Environmental Response, Compensation
and Liability Act, Federal Resource Conservation and Recovery Act, and analogous
state laws that  regulate  the removal or  remediation  of  previously  disposed
wastes  (including wastes disposed of or released by prior owners or operators),
property  contamination  (including  groundwater  contamination),  and  remedial
plugging operations to prevent future contamination; (iii) the Clean Air Act and
comparable  state  and local  requirements,  which  may  result  in the  gradual
imposition  of  certain  pollution  control  requirements  with  respect  to air
emissions  from our  operations;  (iv)  the Oil  Pollution  Act of  1990,  which
contains numerous requirements relating to the prevention of and response to oil
spills into  waters of the United  States;  (v) the  Resource  Conservation  and
Recovery Act, which is the principal  Federal  statute  governing the treatment,
storage,  and  disposal of  hazardous  wastes;  and (vi) state  regulations  and
statutes governing the handling,  treatment,  storage, and disposal of naturally
occurring radioactive material.

         Rancher's  operations are subject to local,  state and federal laws and
regulations  governing  environmental quality and pollution control. To date the
Company's  compliance  with these  regulations has had no material effect on its
operations,  capital,  earnings, or competitive  position,  and the cost of such
compliance has not been material.  The Company is unable to assess or predict at
this time what effect  additional  regulations or legislation  could have on its
activities.

         Oil and gas exploration and  development  are  specifically  subject to
existing federal and state laws and regulations governing  environmental quality
and pollution control. Such laws and regulations may substantially  increase the
costs of exploring for, developing,  or producing oil and gas and may prevent or
delay the commencement or continuation of a given operation.

         All  of  Rancher  operations  involving  the  exploration  for  or  the
production of any minerals are subject to existing laws and regulations relating
to exploration procedures,  safety precautions,  employee health and safety, air
quality  standards,  pollution of stream and fresh water sources,  odor,  noise,
dust, and other environmental  protection controls adopted by federal, state and
local  governmental  authorities  as well as the  right  of  adjoining  property
owners.  Rancher may be  required  to prepare  and present to federal,  state or
local  authorities  data  pertaining  to the effect or impact that any  proposed
exploration  for or  production of minerals may have upon the  environment.  All
requirements imposed by any such authorities may be costly, time consuming,  and
may delay commencement or continuation of exploration or production operations.

         It  may be  anticipated  that  future  legislation  will  significantly
emphasize the protection of the  environment,  and that, as a  consequence,  the
Company's  activities  may be more  closely  regulated  to further  the cause of
environmental protection.  Such legislation, as well as future interpretation of
existing  laws,  may require  substantial  increases in equipment  and operating
costs to the Company and delays, interruptions,  or a termination of operations,
the extent to which cannot now be predicted.

         Crude Oil and Natural Gas Liquids Price and Allocation Regulation
         -----------------------------------------------------------------

         Pursuant to Executive  Order  Number  12287,  issued  January 28, 1981,
President Reagan lifted all existing federal price and allocation  controls over
the sale and distribution of crude oil and natural gas liquids.  Executive Order
Number 12287 was made effective as of January 28, 1981, and consequently,  sales
of crude oil and  natural  gas  liquids  after  January  27,  1981 are free from
federal  regulation.  The  price  for  such  sales  and  the  supplier-purchaser
relationship  will be  determined  by private  contract  and  prevailing  market
conditions. As a result of this action, oil which may be sold by Rancher will be
sold at deregulated or free market prices. At various times, certain groups have
advocated the reestablishment of regulations and control on the sale of domestic
oil and gas.

                                       6
<PAGE>

         Proposed Legislation
         --------------------

         A number of legislative  proposals have been and probably will continue
to be introduced in Congress and in the  legislatures of various states,  which,
if enacted, would significantly affect the petroleum industries.  Such proposals
and executive  actions involve,  among other things,  the imposition of land use
controls such as prohibiting  drilling  activities on certain  federal and state
lands in roadless wilderness areas. At present, it is impossible to predict what
proposals,  if any,  will  actually be enacted by Congress or the various  state
legislatures  and what  effect,  if any,  such  proposals  will  have.  However,
President  Clinton's  establishment of numerous National  Monuments by executive
order has had the effect of precluding  drilling  across vast areas of the Rocky
Mountain West.

         Title to Properties
         -------------------

         As is  customary  in the oil  and gas  industry,  a  preliminary  title
examination  will be conducted at the time unproved  properties or interests are
acquired by us. Prior to commencement of drilling operations on such acreage and
prior to the  acquisition  of proved  properties,  Rancher  will conduct a title
examination and attempt  extremely  significant  defects before  proceeding with
operations or the acquisition of proved properties, as it may deem appropriate.

         Government Contracts
         --------------------

         The Company has no government contracts.

         Number of Persons Employed
         --------------------------

         As of March 31, 2011, Rancher had 3 employees.  Directors work on an as
needed basis.


ITEM 1A.  RISK FACTORS

                           FORWARD LOOKING STATEMENTS

         This document includes forward-looking statements,  including,  without
limitation,  statements  relating  to  Rancher  plans,  strategies,  objectives,
expectations,  intentions  and  adequacy  of  resources.  These  forward-looking
statements  involve known and unknown  risks,  uncertainties,  and other factors
that may  cause  Rancher  actual  results,  performance  or  achievements  to be
materially  different  from any  future  results,  performance  or  achievements
expressed or implied by the forward-looking  statements.  These factors include,
among  others,  the  following:  ability of Rancher to  implement  its  business
strategy;  ability to obtain  additional  financing;  Rancher limited  operating
history;  unknown liabilities  associated with future  acquisitions;  ability to
manage growth;  significant competition;  ability to attract and retain talented
employees;  and future  government  regulations;  and other factors described in
this  registration  statement or in other of Rancher filings with the Securities
and Exchange Commission.  Rancher is under no obligation,  to publicly update or
revise any forward-looking  statements,  whether as a result of new information,
future events or otherwise.

                                  Risk Factors

Our pending bankruptcy raises questions as to our ability to continue as a going
concern and may limit our ability to borrow  additional  funds,  issue equity or
capitalize on acquisition or other business opportunities and preserve the value
of our equity.

         On October 28, 2009,  we filed for  protection  under Chapter 11 of the
U.S.  Bankruptcy  Code. Our bankruptcy  filing was made after  defaulting on the

                                       7
<PAGE>

terms of our  senior  secured  debt and being  notified  by the  lender of their
intention to foreclose on the assets held as collateral for the debt.

         As of March 31, 2011,  and as of the filing of this annual  report,  we
continued to operate as a debtor-in-possession in the Chapter 11 case. We are in
the  process of  developing  a plan of  reorganization  to resolve  pre-petition
obligations; however, there is no assurance that any such plan of reorganization
will  ultimately be confirmed and become  effective,  nor is there any assurance
that the ultimate terms of our exit from  bankruptcy will preserve the rights of
our existing equity holders in whole or at all. Accordingly,  our equity holders
continue to be subject to a risk that we will not be able to successfully emerge
from  bankruptcy  or that  rights  of the  equity  holders  will  be  diminished
substantially or eliminated entirely.

         Presently our only source of cash to pay for operating  activities  and
overhead is proceeds from the sale of Rancher's  assets,  interest earned on our
cash, and monthly proceeds from Merit Energy.  Under a litigation agreement with
Linc  Energy  entered  into as part of the sale to Linc  Energy,  the Company is
entitled to  reimbursement  for some legal fees  incurred in ongoing  litigation
with  GasRock  concerning  the  prepetition  conveyance  of certain  oil and gas
interests to GasRock. At the same time, GasRock has asserted a claim against the
Company for its litigation fees.

We are operating as a debtor-in  possession  under the  authorization  of the US
Bankruptcy Court and provisions of the U.S. Bankruptcy Code.

         Under the priority scheme  established by the Bankruptcy  Code,  unless
creditors  agree   otherwise,   post-petition   liabilities   and   pre-petition
liabilities  must be  satisfied in full before  shareholders  of the Company are
entitled  to receive any  distribution  or retain any  property  under a plan of
reorganization.  The ultimate  recovery,  if any, to shareholders of the Company
will  not be  determined  until  confirmation  and  consummation  of a  plan  of
reorganization.  No assurance  can be given as to what values,  if any,  will be
ascribed  in the  bankruptcy  case to  shareholders  or what types or amounts of
distributions,  if any, they would receive.  Accordingly, the Company urges that
extreme caution be exercised with respect to existing and future  investments in
any of the Company's liabilities and/or securities.

Our status as debtor-in-possession  may adversely affect our ability to find and
develop reserves.

         There  is no  assurance  that we will be able to  secure  financing  on
acceptable terms, or that we will be able to successfully  operate following the
Chapter 11 case,  any of which  could  result in a total loss to our Company and
our  shareholders.  While in  Chapter  11,  the  Company is unable to obtain any
financing,  without the Court's approval and potential  financers or acquisition
possibilities,  may be  unwilling to wait the amount time needed for the Company
to obtain that approval.

If a plan of  reorganization is not approved by the Court, we could be forced to
sell our remaining assets and liquidate the company.

          If we are not successful in presenting a plan of reorganization within
the prescribed  time or if any such plan of  reorganization  is not confirmed by
the court, any party in interest may file a plan of reorganization for us, which
could result in the forced sale of our remaining  assets and  liquidation of the
Company to satisfy our pre-petition obligations.

We have incurred  losses from  operations in the past and expect to do so in the
future.
         We have never been  profitable.  We incurred net losses of $674,059 and
$20,261,262 for the fiscal years ended March 31, 2011 and 2010, respectively. We
do not expect to be profitable during the fiscal year ending March 31, 2012. Our

                                       8
<PAGE>

acquisition  and  development of prospects will require  substantial  additional
capital  expenditures  in the future.  The  uncertainty  and  factors  described
throughout this section may impede our ability to economically acquire, develop,
and exploit oil reserves.  As a result, we may not be able to achieve or sustain
profitability or positive cash flows from operating activities in the future.

The Company will need additional financing for which Rancher has no commitments,
and this may jeopardize execution of the Company's business plan.

         Rancher has limited funds,  and such funds may not be adequate to carry
a business plan in the energy industry.  The Company's  ultimate success depends
upon its ability to raise additional  capital.  The Company has not investigated
the  availability,  source,  or terms  that  might  govern  the  acquisition  of
additional  capital  and will not do so until it  determines  the exact need for
additional  financing  and what amounts,  if any, may be needed.  If the Company
needs additional  capital, it has no assurance that funds will be available from
any source or, if  available,  that they can be obtained on terms  acceptable to
the Company and/or Bankruptcy Court. If not available,  Rancher  operations will
be limited to those that can be financed with its modest capital.

Rancher is not diversified and it will be dependent on only one business.

         Because of the limited financial  resources that the Company has, it is
unlikely  that the Company will be able to  diversify  its  operations.  Rancher
probable  inability to  diversify  its  activities  into more than one area will
subject the  Company to economic  fluctuations  within the energy  industry  and
therefore  increase the risks  associated  with the Company's  operations due to
lack of diversification.

Our failure to maintain effective internal control over financial  reporting may
not allow us to accurately report our financial  results,  which could cause our
financial  statements to become  materially  misleading and adversely affect the
trading price of our stock.

         In our annual reports on Form 10-K for the fiscal years ended March 31,
2011 and 2010, we reported the  determination  of our  management  that we had a
material  weakness  in  our  internal  control  over  financial  reporting.  The
determination was made by management that we did not adequately segregate duties
of  different  personnel in our  accounting  department  due to an  insufficient
complement  of staff and  inadequate  management  oversight.  While we have made
progress in  remediating  the weakness,  we have not  completely  remediated it,
primarily due to limited  resources to add  experienced  staff.  Until we obtain
sufficient financing we will not be able to correct the material weakness in our
internal control over financial reporting,  and our business could be harmed and
the stock price of our common stock could be adversely affected.

                 RISK FACTORS RELATING TO THE COMPANY'S BUSINESS

Rancher  business,  the oil and gas  business,  has  numerous  risks which could
render the Company unsuccessful.

         The  search  for  new  oil  and  gas  reserves  frequently  results  in
unprofitable efforts, not only from dry holes, but also from wells which, though
productive,  will not produce oil or gas in  sufficient  quantities  to return a
profit on the costs  incurred.  There is no  assurance  the Company will find or
produce oil or gas from any of the undeveloped  acreage farmed out to Rancher or
which may be  acquired  by the  Company,  nor are there any  assurances  that if
Rancher ever obtains any  production it will be  profitable.  (See "Business and
Properties")

                                       9
<PAGE>

Competition in the oil and gas industry is intense,  which may adversely  affect
our ability to succeed.

         The oil and gas industry is intensely  competitive  and we compete with
companies  that are  significantly  larger and have greater  resources.  Many of
these companies not only explore for and produce oil, but also carry on refining
operations and market petroleum and other products on a regional,  national,  or
worldwide basis.  These companies may be able to pay more for oil properties and
prospects  or  define,  evaluate,  bid for,  and  purchase  a greater  number of
properties  and prospects  than our  financial or human  resources  permit.  Our
larger  competitors  may be able to absorb  the  burden of  present  and  future
Federal,  state,  local, and other laws and regulations more easily than we can,
which would adversely  affect our competitive  position.  Our ability to acquire
additional  properties and to increase  reserves in the future will be dependent
upon our ability to evaluate and select  suitable  properties  and to consummate
transactions in a highly competitive environment.

Rancher will be subject to all of the market forces in the energy business, many
of which could pose a significant risk to the Company's operations.

         The  marketing  of  natural  gas and oil which may be  produced  by the
Company's prospects will be affected by a number of factors beyond the Company's
control.  These  factors  include  the extent of the supply of oil or gas in the
market, the availability of competitive fuels, crude oil imports, the world-wide
political situation,  price regulation,  and other factors. Current economic and
market  conditions  have  created  dramatic  fluctuations  in  oil  prices.  Any
significant decrease in the market prices of oil and gas could materially affect
the Company's profitability of oil and gas activities.

         There generally are only a limited number of gas transmission companies
with  existing  pipelines in the  vicinity of a gas well or wells.  In the event
that producing gas properties are not subject to purchase  contracts or that any
such  contracts  terminate  and other  parties do not purchase the Company's gas
production,  there is assurance that Rancher will be able to enter into purchase
contracts with any transmission companies or other purchasers of natural gas and
there can be no assurance  regarding  the price which such  purchasers  would be
willing to pay for such gas. There may, on occasion,  be an oversupply of gas in
the  marketplace  or in  pipelines,  the extent and duration  may affect  prices
adversely. Such oversupply may result in reductions of purchases and prices paid
to producers  by  principal  gas  pipeline  purchasers.  (See "Our  Business and
Competition, Markets, Regulation and Taxation.")

Rancher business is subject to significant weather interruptions.

         The Company's  activities may be subject to periodic  interruptions due
to weather conditions.  Weather-imposed restrictions during certain times of the
year on roads accessing properties could adversely affect its ability to benefit
from  production on such  properties or could increase the costs of drilling new
wells because of delays.

Rancher will require significant financing to fund any future activities.

         If Rancher  finds oil and gas  reserves  to exist on a prospect it will
need  substantial  additional  financing to fund the necessary  exploration  and
development  work.   Furthermore,   if  the  results  of  that  exploration  and
development work are successful,  the Company will need  substantial  additional
funds for continued development.  There is no assurance that the Company will be
successful in obtaining any financing.  These various financing alternatives may
dilute the interest of Rancher shareholders and/or reduce the Company's interest
in the properties.

The  Company is subject to Federal  Income Tax laws and  changes  therein  which
could adversely impact us.

         Federal income tax laws are of particular  significance  to the oil and
gas  industry in which the  Company  intends to engage.  Legislation  has eroded
various  benefits of oil and gas  producers  and  subsequent  legislation  could
continue this trend. Congress is continually  considering proposals with respect

                                       10
<PAGE>

to Federal income taxation which could have a material adverse effect on Rancher
future  operations  and on its ability to obtain risk  capital  which  Rancher's
industry has traditionally attracted from taxpayers in high tax brackets.

Rancher is subject to substantial  government  regulation in the energy industry
which could adversely impact the Company.

         The  production  and sale of oil and gas are subject to  regulation  by
state and federal authorities, the spacing of wells and the prevention of waste.
There are both federal and state laws regarding environmental controls which may
necessitate   significant   capital  outlays,   resulting  in  extended  delays,
materially  affect Rancher earnings  potential and cause material changes in the
in the Company's proposed business. Rancher cannot predict what legislation,  if
any,  may be passed by Congress  or state  legislatures  in the  future,  or the
effect of such legislation,  if any, on the Company. Such regulations may have a
significant effect on the Company's operating results.

         Government  Regulations:  The area of exploration of natural  resources
has become significantly  regulated by state and federal governmental  agencies,
and such  regulation  could have an adverse effect on the Company's  operations.
Compliance  with  statutes and  regulations  governing  the oil and gas industry
could significantly  increase the capital expenditures  necessary to develop the
Company's prospects.

         Nature of Rancher's  Business:  Rancher business is highly speculative,
involves  the  commitment  of  high-risk  capital,  and  exposes  the Company to
potentially  substantial  losses.  In  addition,  the Company  will be in direct
competition with other  organizations  which are  significantly  better financed
than Rancher.

         General Economic and Other  Conditions:  The Company's  business may be
adversely  affected  from time to time by such  matters  as  changes  in general
economic, industrial and international conditions; changes in taxes; oil and gas
prices and costs; excess supplies and other factors of a general nature.

Rancher  will  experience  substantial  competition  for  supplies in the energy
industry.

         The Company will be required to compete with a large number of entities
which are larger,  have greater resources and more extensive operating histories
than the Company  does.  Shortages of supplies may result from this  competition
and will lead to  increased  costs and  delays in  operations  which will have a
material adverse effect on the Company.

Rancher will be subject to many factors beyond the Company's control.

         The acquisition,  exploration,  development, production and sale of oil
and gas are subject to many  factors  which are outside the  Company's  control.
These factors include general economic conditions, proximities to pipelines, oil
import  quotas,   supply  and  price  of  other  fuels  and  the  regulation  of
transportation by federal and state governmental authorities.

The Company anticipates substantial competition in its effort to explore oil and
gas properties and may have difficulty in putting together drilling participants
and  getting  prospects  drilled and  explored.  Established  companies  have an
advantage over Rancher because of substantially  greater  resources to devote to
property  acquisition and to obtain drilling rigs,  equipment and personnel.  If
the Company is unable to compete for capital,  participation  and drilling rigs,
equipment and personnel, Rancher business will be adversely affected.

                                       11
<PAGE>

The  Company  has agreed to  indemnification  of officers  and  directors  as is
provided by Nevada Statute.

         Nevada  Statutes  provide  for  the  indemnification  of the  Company's
directors, officers, employees, and agents, under certain circumstances, against
attorney's  fees and other expenses  incurred by them in any litigation to which
they  become a party  arising  from  their  association  with or  activities  on
Rancher's behalf. The Company will also bear the expenses of such litigation for
any of its directors, officers, employees, or agents, upon such person's promise
to repay Rancher  therefore if it is ultimately  determined that any such person
shall not have been entitled to  indemnification.  This  indemnification  policy
could result in substantial expenditures by the Company that it may be unable to
recoup.

Rancher directors' liability to the Company and shareholders is limited

         Nevada Corporate  Statutes exclude personal  liability of the Company's
directors and its stockholders for monetary damages for breach of fiduciary duty
except in certain specified circumstances. Accordingly, Rancher will have a much
more limited right of action against its directors  than otherwise  might be the
case. This provision does not affect the liability of any director under federal
or applicable state securities laws.

Rancher may depend upon outside advisors

         To supplement  the business  experience  of the Company's  officers and
directors,  Rancher may be required to employ  accountants,  technical  experts,
appraisers,  attorneys,  or other consultants or advisors.  The Company's Board,
will  make  the  selection  of  any  such  advisors.  Furthermore,  the  Company
anticipates  that such persons will be engaged on an "as needed" basis without a
continuing fiduciary or other obligation to Rancher.

                        RISK FACTORS RELATED TO OUR STOCK

We are operating as a debtor-in  possession under the  authorization of the U.S.
Bankruptcy Court and provisions of the U.S. Bankruptcy Code.

         Under the priority scheme  established by the Bankruptcy  Code,  unless
creditors  agree   otherwise,   post-petition   liabilities   and   pre-petition
liabilities  must be  satisfied in full before  shareholders  of the Company are
entitled  to receive any  distribution  or retain any  property  under a plan of
reorganization.  The ultimate  recovery,  if any, to shareholders of the Company
will  not be  determined  until  confirmation  and  consummation  of a  plan  of
reorganization  and the final  resolution of the objections to claims and of the
adversary  proceeding  against  GasRock.  No  assurance  can be given as to what
values,  if any, will be ascribed in the bankruptcy case to shareholders or what
types or amounts of distributions,  if any, they would receive. Accordingly, the
Company  urges that extreme  caution be  exercised  with respect to existing and
future investments in any of the Company's liabilities and/or securities.

The regulation of "penny stocks" by SEC and FINRA may discourage the tradability
of the Company's securities.

         Rule 3a51-1 of the  Securities  Exchange  Act of 1934  establishes  the
definition  of a "penny  stock," as any equity  security  that has a minimum bid
price of less than $4.00 per share or with an exercise  price of less than $4.00
per  share,  subject  to a limited  number of  exceptions  which are  likely not
available to us. Based on the recent trading prices of our common stock,  we are
considered a penny stock and it is likely that our shares will be  considered to
be penny stocks for the  immediately  foreseeable  future.  This  classification
severely and adversely affects any market liquidity for our common stock.

         For any transaction  involving a penny stock,  unless exempt, the penny
stock rules require that a broker or dealer  approve an  investor's  account for
transactions  in penny stocks and the broker or dealer receive from the investor
a written  agreement to the transaction  setting forth the identity and quantity
of the penny stock to be purchased. In order to approve a customer's account for
transactions  in penny  stocks,  the  broker or  dealer  must  obtain  financial

                                       12
<PAGE>

information and investment  experience and objectives of the customer and make a
reasonable  determination that the transactions in penny stocks are suitable for
that  customer  and that  they  have  sufficient  knowledge  and  experience  in
financial matters to be capable of evaluating the risks of transactions in penny
stocks.

         The broker or dealer must also deliver,  prior to any  transaction in a
penny  stock,  a disclosure  schedule  prepared by the SEC relating to the penny
stock market, which, in highlight form, sets forth the basis on which the broker
or dealer  made the  suitability  determination,  and that the  broker or dealer
received a signed, written agreement from the investor prior to the transaction.

         Disclosure  also has to be made  about  (a) the risks of  investing  in
penny stock in both public offerings and in secondary  trading;  (b) commissions
payable to both the broker-dealer and the registered representative; (c) current
quotations for the securities;  and (d) the rights and remedies  available to an
investor  in  cases  of fraud in  penny  stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.

         Because of these regulations,  broker-dealers may not wish to engage in
the above-referenced  required paperwork and disclosures.  In addition, they may
encounter difficulties when attempting to sell shares of our common stock, which
may affect the ability of selling  shareholders  or other  holders to sell their
shares in any secondary market.  These additional sales practices and disclosure
requirements  may impede the sale of our  securities  and the  liquidity for our
securities  may  decrease,  with a  corresponding  decrease  in the price of our
securities.  Our shares, in all probability,  will be considered subject to such
penny stock rules for the foreseeable  future,  and our  shareholders  may, as a
result, find it difficult to sell their securities.

Rancher will pay no foreseeable dividends in the future.

         Rancher  has not  paid  dividends  on its  common  stock  and  does not
anticipate paying such dividends in the foreseeable future.

The  Company  may in the future  issue more  shares  which could cause a loss of
control by its present management and current stockholders.

         Rancher  may  issue  further  shares as  consideration  for the cash or
assets or services out of its authorized  but unissued  common stock that would,
upon  issuance,  represent  a  majority  of the  voting  power and equity of the
Company.  The result of such an  issuance  would be those new  stockholders  and
management  would  control the Company,  and persons  unknown  could replace the
Company's  management at this time. Such an occurrence would result in a greatly
reduced  percentage of ownership of Rancher by its current  shareholders,  which
could present significant risks to investors.

Rule 144 sales in the  future  may have a  depressive  effect on  Rancher  stock
price.

         All of the  outstanding  shares of common  stock held by the  Company's
present  officers,   directors,   and  affiliate  stockholders  are  "restricted
securities"  within the meaning of Rule 144 under the Securities Act of 1933, as
amended.  As restricted  Shares,  these shares may be resold only pursuant to an
effective  registration statement or under the requirements of Rule 144 or other
applicable  exemptions  from  registration  under the Act and as required  under
applicable state securities laws. We have registered the outstanding shares held
by our officers,  directors and affiliates,  these  individuals  will be able to
sell their shares, if a public market for our stock develops.  Rule 144 provides
in essence  that a person who has held  restricted  securities  for six  months,
under  certain   conditions,   can  sell  every  three   months,   in  brokerage
transactions,  a number of shares  that does not exceed the greater of 1.0% of a
company's  outstanding  common stock or the average weekly trading volume during

                                       13
<PAGE>

the four  calendar  weeks prior to the sale.  There is no limit on the amount of
restricted  securities  that may be sold by a  nonaffiliate  after the owner has
held the restricted  securities for a period of two years. A sale under Rule 144
or under  any  other  exemption  from the Act,  if  available,  or  pursuant  to
subsequent  registration of shares of common stock of present stockholders,  may
have a  depressive  effect upon the price of the common stock in any market that
may develop.

Rancher  stock is thinly  traded and as a result you may be unable to sell at or
near ask prices or at all if you need to liquidate your shares.

         Our  common  stock  is  thinly-traded  on the OTC  Pink,  or the  OTC's
speculative  trading  marketplace.  The OTC Pink typically offers less liquidity
that other  trading  markets,  meaning that the number of persons  interested in
purchasing  the Company's  common shares at or near ask prices at any given time
may be relatively  small or  non-existent.  This situation is  attributable to a
number  of  factors,  including  the fact that we are a small  company  which is
relatively unknown to stock analysts, stock brokers, institutional investors and
others in the investment  community that generate or influence sales volume, and
that  even  if it  came  to the  attention  of  such  persons,  they  tend to be
risk-averse  and would be reluctant to follow an unproven,  early stage  company
such as Rancher or purchase or recommend the purchase of any of our common stock
until such time as we became more seasoned and viable.  As a consequence,  there
may be periods of several days or more when  trading  activity in the our common
stock is minimal or  non-existent,  as compared to a seasoned issuer which has a
large and  steady  volume  of  trading  activity  that  will  generally  support
continuous  sales without an adverse  effect on the stock price.  Rancher cannot
give you any assurance  that a broader or more active public  trading market for
the  Company's  common stock will develop or be  sustained,  or that any trading
levels  will be  sustained.  Due to  these  conditions,  the  Company  can  give
investors  no  assurance  that they will be able to sell their shares at or near
ask prices or at all if they need money or otherwise  desire to liquidate  their
shares in the Company.

There are risks associated with forward-looking statements made by us and actual
results may differ.

         Some of the information in this Annual Report contains  forward-looking
statements that involve  substantial risks and  uncertainties.  These statements
can be identified  by the use of  forward-looking  words such as "may",  "will",
"expect", "anticipate", "believe", "estimate", and "continue", or similar words.
Statements  that contain  these words should be read  carefully  because they:

     o    discuss our future expectations;
     o    contain  projections  of our future  results of  operations  or of our
          financial condition; and
     o    state other "forward-looking" information.

         We believe it is important to communicate  our  expectations.  However,
there may be events in the  future  that we are not able to  accurately  predict
and/or over which we have no control.  The risk factors  listed in this section,
other risk factors  about which we may not be aware,  as well as any  cautionary
language in this Annual Report,  provide examples of risks,  uncertainties,  and
events  that  may  cause  our  actual  results  to  differ  materially  from the
expectations we describe in our  forward-looking  statements.  The occurrence of
the events  described in these risk factors could have an adverse  affect on our
business, results of operations, and financial condition.

Our failure to maintain effective internal control over financial  reporting may
not allow us to accurately report our financial  results,  which could cause our
financial  statements to become  materially  misleading and adversely affect the
trading price of our stock.

                                       14
<PAGE>

         In our annual reports on Form 10-K for the fiscal years ended March 31,
2011 and 2010, we reported the  determination  of our  management  that we had a
material  weakness  in  our  internal  control  over  financial  reporting.  The
determination was made by management that we did not adequately segregate duties
of  different  personnel in our  accounting  department  due to an  insufficient
complement  of staff and  inadequate  management  oversight.  While we have made
progress in  remediating  the weakness,  we have not  completely  remediated it,
primarily due to limited  resources to add  experienced  staff.  Until we obtain
sufficient financing we will not be able to correct the material weakness in our
internal control over financial reporting,  and our business could be harmed and
the stock price of our common stock could be adversely affected.


ITEM 1B.  UNRESOLVED STAFF COMMENTS

         Not Applicable.


ITEM 2.  PROPERTIES

         Rancher Energy Corp. is located at 999 18th Street, Suite 2700, Denver,
Colorado  80202.  In March 2011, we entered into a lease for three offices for a
period of 1 year.

DESCRIPTION OF PROPERTIES/ASSETS/OIL AND GAS PROSPECTS

(a)         Real Estate.                                None.
(b)         Title to properties.                        None.
(c)         Oil and Gas Prospects.                      None.
(d)         Patents.                                    None.

         Rancher does not own any property, real or otherwise.


ITEM 3.  LEGAL PROCEEDINGS

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

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

         In addition,  the Company has  challenged the conveyance of the NPI and
the 1% ORRI, together with the original 2% ORRI conveyed to Lender when its loan
was first made, on the grounds that they should be  recharacterized  as security
interests and not outright  transfers of title. The Bankruptcy Court has granted
GasRock's motion to dismiss these claims.  The Company has also claimed that the
conveyances rendered the Loan usurious under Texas law. Further, the Company has
sought to have the NPI and 1% ORRI avoided as  preferences  under ss. 547 of the
Bankruptcy Code  and to  equitably subordinate  the Lender's claim. Although the

                                       15
<PAGE>

Company believes its claims are well-taken,  the Lender is vigorously  defending
against the  complaint,  and no assurance  can be given that the Company will be
successful in whole or in part.

In a  letter  dated  February  18,  2009,  sent to each of our  then  Directors,
attorneys representing a group of persons who purchased approximately $1,800,000
of securities (in the aggregate) in our private placement  offering commenced in
late 2006 alleged that securities laws were violated in that offering.  In April
2009,  we  entered  into  tolling  agreements  with the  purchasers  to toll the
statutes  of  limitations  applicable  to any  claims  related  to  the  private
placement.  In  February  2009,  our Board of  Directors  established  a Special
Committee of the Board (the "Special Committee") to investigate the allegations.
Following the completion of the investigation, the Special Committee recommended
no action be taken.  We deny the allegations and believe they are without merit.
The claimants have filed Proof of Claims with the Bankruptcy Court in the amount
of $1,776,050 plus ancillary amounts purported to be damages attributable to the
alleged securities violations.  The Company objected to the claims and asked the
Bankruptcy Court to subordinate the claims to the level of equity. In June 2011,
the Bankruptcy  Court rendered a decision that these claims are  subordinated to
unsecured  claims.  We  cannot  predict  the  possible  outcome  of any  further
objection to these claims,  or estimate a range of possible losses, if any, that
could result in the event of an adverse judgment.

ITEM 4.  REMOVED AND RESERVED.


                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED  STOCKHOLDER MATTERS AND
--------------------------------------------------------------------------------
ISSUER PURCHASES OF EQUITY SECURITIES
-------------------------------------

Market Information

         Our Common Stock is quoted on the OTC  Bulletin  Board and traded under
the symbol "RNCH" prior to our filing for protection  under the U.S.  Bankruptcy
Code,  our stock has been trading  under the symbol  "RNCHQ"  since  October 28,
2009. For the periods indicated, the following table sets forth the high and low
bid prices per share of our common stock as reported by the OTC Bulletin  Board.
These prices represent inter-dealer quotations without retail markup,  markdown,
or commission and may not necessarily represent actual transactions.

        Fiscal Year 2011             High Bid        Low Bid
-----------------------------------------------------------------
First Quarter                      $       0.035  $       0.028
Second Quarter                     $       0.027  $       0.011
Third Quarter                      $        0.02  $       0.009
Fourth Quarter                     $       0.065  $       0.009

        Fiscal Year 2010
First Quarter                      $       0.044  $       0.012
Second Quarter                     $       0.065  $       0.023
Third Quarter                      $        0.09  $        0.01
Fourth Quarter                     $        0.04  $       0.006

Holders

         There were  approximately 185 holders of record of Rancher common stock
as of March 31,  2011.  This does not  include  any  beneficial  owners for whom
shares may be held in "nominee" or "street name."

                                       16
<PAGE>

Dividend Policy

         Holders of Rancher  common stock are entitled to receive such dividends
as may be declared by Rancher board of  directors.  The Company has not declared
or paid any dividends on Rancher common shares and it does not plan on declaring
any  dividends  in the near  future.  The Company  currently  intends to use all
available funds to finance the operation and expansion of its business.

Recent Sales of Unregistered Securities

         During the year ended March 31, 2011, we did not issue any securities.

         During  the  year  ended  March  31,  2010,  we  issued  the  following
securities:

         On  October  27,  2009,  under  the  provisions   Management  Retention
         Agreements with each of our four directors, we granted each director an
         option to purchase  2,500,000  shares of our common stock at a price of
         $0.035 per share.  These  options vest 10% on the date of grant and 90%
         upon the earliest to occur of the following:

          1.   November 1, 2010;
          2.   the   confirmation   by  the  Bankruptcy   Court  of  a  plan  of
               reorganization;
          3.   the dismissal from Chapter 11 Bankruptcy with the approval of the
               Court;
          4.   an event of a  merger,  consolidation,  sale of  assets  or other
               transaction  which results in the holders of the Company's common
               stock immediately before such transaction owning less that 50% of
               the stock outstanding immediately after the transaction;
          5.   any other forms of change of control;
          6.   a voluntary termination for good reason.

         The  foregoing  transaction  was made  pursuant to Section  4(2) of the
         Securities Act.

         Pursuant  to our 2006 Stock  Incentive  Plan (the 2006 Stock  Incentive
         Plan),  we have  granted  options to purchase  shares of the  Company's
         common stock to directors,  officers,  employees and consultants. As of
         March 31, 2011, the following options were outstanding:

<TABLE>
<CAPTION>

                                             Number of      Exercise
          Date              Granted To        Options         Price                Vesting                  Term
          ----              ----------        -------         -----                -------                  ----
<S>                         <C>           <C>               <C>           <C>                             <C>

     April 10, 2007         Employees         31,000          $ 1.18      33.3% on 1st , 2nd and 3rd         "
                                                                           anniversaries of grant;
     April 10, 2007         Consultant        25,000          $ 1.64      50% at 8/31/07 and 50% at          "
                                                                                  2/29/08;
                                                                          10% at date of grant, 90%
                                                                            upon the earliest of
                                                                             November 1, 2010 or
    October 27, 2009        Employees         385,000        $ 0.035      change of control or             5 years
                                                                               emergence from
    October 27, 2009        Consultant       1,000,000       $ 0.035       bankruptcy, of change of
                                                                                   control.
                                          ---------------                 10% at date of grant, 90%
                                             1,441,000                      upon the earliest of
                                          ================                   November 1, 2010 or
                                                                               emergence from
                                                                           bankruptcy, or change of        5 years
                                                                                   control.

</TABLE>

                                       17
<PAGE>

         The options  granted to  officers  and  employees  are subject to early
         termination  of the  individual's  employment  with us.  The  foregoing
         transactions were made pursuant to Section 4(2) of the Securities Act.

         As of March 31, 2011, options for 8,559,000 shares remain available for
         issuance under the 2006 Stock Incentive Plan.

Issuer Purchases of Equity Securities

         Rancher did not  repurchase  any shares of its common  stock during the
year ended March 31, 2011.


ITEM 6.  SELECTED FINANCIAL DATA

         Not applicable.


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The  following  discussion  should  be read in  conjunction  with our  unaudited
financial  statements and notes thereto included herein. In connection with, and
because we desire to take  advantage  of, the "safe  harbor"  provisions  of the
Private  Securities  Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following  discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange  Commission.  Forward-looking
statements are statements not based on historical  information  and which relate
to future  operations,  strategies,  financial  results  or other  developments.
Forward looking  statements are necessarily based upon estimates and assumptions
that are inherently  subject to significant  business,  economic and competitive
uncertainties and  contingencies,  many of which are beyond our control and many
of which,  with  respect to future  business  decisions,  are subject to change.
These  uncertainties and contingencies can affect actual results and could cause
actual results to differ  materially from those expressed in any forward looking
statements  made by, or on our behalf.  We  disclaim  any  obligation  to update
forward-looking statements.

The  independent  registered  public  accounting  firm's report on the Company's
financial  statements as of December 31, 2011,  and for each of the years in the
two-year period then ended,  includes a "going concern"  explanatory  paragraph,
that describes  substantial  doubt about the Company's  ability to continue as a
going concern.

Organization

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

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

                                       18
<PAGE>

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

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

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

         We  acquired  our  oilfields  in late  2006  and  early  2007  with the
intention of significantly  increasing crude oil production  through an enhanced
oil recovery  (EOR)  project  utilizing  modern CO2  injection  techniques.  The
planned EOR project  required a  significant  amount of capital to carry out. In
October 2007, we borrowed $12.24 million from GasRock Capital LLC (GasRock),  an
investment  bank, to serve as a "bridge loan" to enable us to complete plans for
the EOR  project  while we sought a larger,  longer-term  source of  capital  to
conduct the project.  At least partially due to the severe disruptions in credit
and financial  markets,  coupled with extreme volatility in crude oil prices, we
were not successful in raising the capital to repay the bridge loan and commence
the project.  Following a series of amendments to the GasRock loan agreement and
extensions of the maturity date, we were unable to repay the loan on the amended
due date of October 15,  2009.  On October  16,  2009,  GasRock  notified us the
failure to repay the loan constituted an event of default and notified us of its
intention to foreclose on the assets pledged as collateral for the loan. GasRock
instructed  our bank to transfer all cash we had on deposit to GasRock,  leaving
us without funds to operate the oilfields or pay overhead.

         On  October  28,  2009  (the  "Petition  Date"),  we filed a  voluntary
petition for relief under  Chapter 11 of Title 11 of the United States Code (the
"Bankruptcy  Code") in the United  States  Bankruptcy  Court for the District of
Colorado  (the  "Court")  (Case  number  09-32943).  We  continue to operate our
business as  "debtor-in-possession"  under the  jurisdiction of the Court and in
accordance  with the applicable  provisions of the Bankruptcy Code and the order
of the Court, as we devote renewed efforts to resolve our liquidity problems and
develop a reorganization plan.

         In November  2009, the Court granted our motion for interim use of cash
collateral.  We immediately  took steps to reduce  operating costs and overhead,
including salary cuts of 10% - 20% for employees and the rejection of the office
lease for our corporate  headquarters.  In addition, we implemented a program of
repair  and  remediation  on a  number  wells  that  had  become  non-producing,
resulting  in a 25%  increase  in daily  crude oil  production  as  compared  to
pre-petition production levels.

         On October 15, 2010,  the Company  filed its proposed  Debtor's Plan of
Reorganization  ("Proposed Plan of  Reorganization")  with the Court. A proposed
Disclosure  Statement  was  filed  simultaneously  with  the  Proposed  Plan  of
Reorganization.

         On December 13, 2010, the Company filed its First Amended Proposed Plan
of Reorganization and Disclosure  Statement for the amended Plan with the Court.
The Disclosure  Statement must be first approved by the Court before
it may be sent to creditors, along with the Proposed Plan of Reorganization, for
approval.  Prior to confirmation and approval by the Court, the Proposed Plan of
Reorganization  is subject to further  amendment.  As of the filing date of this
report, the Court has not scheduled a hearing on the Proposed Plan of
Reorganization.

         On December 15, 2010,  the Company  filed a motion with the
Court to approve  financing from a party not affiliated with its present lender,
GasRock. This proposed financing was to repay GasRock in full and to pay certain
past due ad valorem taxes.  On January 26, 2011, the Court granted the Company's
motion  and  approved  the  new  debtor-in-possession  secured  financing  ("DIP

                                       19
<PAGE>

Financing").  Under the DIP Financing,  Linc Energy  Petroleum  (Wyoming),  Inc.
("Linc  Energy"),  would lend the  Company up to a maximum  of  $14,700,000  for
specified   purposes,   including  repayment  of  amounts  due  to  GasRock.  In
consideration  for the DIP Financing,  the Company would grant Linc Energy valid
and perfected  first  priority  security  interests in, and liens on, all of the
Company's assets (the "Collateral"),  which includes, but is not limited to, (a)
the  Company's  interests  in oil and gas  producing  properties;  (b)  accounts
receivable;  (c) equipment;  (d) general intangibles;  (e) accounts; (f) deposit
accounts;  and (g) all other real and personal  property of the Company,  except
for the Carve-Out Amount, as defined.

         On January 28, 2011,  the terms of the DIP  Financing  were executed as
part of a debtor-in-possession credit agreement (the "DIP Credit Agreement") and
the Company received loan proceeds of just over $14 million,  which were used as
follows:

     o    To pay the  allowed,  secured  claim for past due ad valorem  property
          taxes in the amount of $532,000;
     o    To pay the secured claim of the then current Lender,  GasRock Capital,
          in the amount of $13,653,698, which represented principal outstanding,
          unpaid  interest,  and all fees and expenses  allowed per the terms of
          the credit agreement with GasRock;
     o    To fund an escrow  account  established  per the  Order  issued by the
          Bankruptcy  Court granting the motion to approve  debtor-in-possession
          secured  financing.  The  escrow  account  was  established  with  the
          Company,  prior  lender,  and  current  lender  as  parties  until the
          Bankruptcy Court enters a final order regarding certain fees and costs
          claimed by the prior lender; and
     o    The  remaining  balance  was used to fund  certain  fees and  expenses
          associated with the DIP Financing, totaling $186,235.

         On December 20, 2010, the Company filed a motion to approve the sale of
substantially  all of its assets to Linc  Energy for the price of  approximately
$20.0  million.  On February  16,  2011,  the  Bankruptcy  Court issued an order
approving  the motion to sell  substantially  all of the Company's  assets.  The
closing of this sales  transaction  occurred  March 14, 2011,  with an effective
sale date of March 1, 2011. As a result of this sale,  the Company  recognized a
gain of over $4,807,000.

         Immediately  following  this sales  transaction,  we vacated our office
space and abandoned leasehold improvements with carrying costs of $102,000.

         On January 24,  2011,  we filed an omnibus  objection to the claims for
securities  violations  and  rescission  asserted by a  shareholder  group.  The
claimants filed a response, and the Bankruptcy Court set a hearing for March 18,
2011 on whether the claimants were subject to subordination.  A hearing occurred
on March 18, 2011 and the  Bankruptcy  Court  entered a schedule for the Company
and the claimants to brief the disputed legal issues,  which concluded April 15,
2011. In June 2011, the  Bankruptcy  Court rendered a decision that these claims
are subordinated to unsecured claims.

         In February 2011, we filed objections to three proof of claims that had
been filed with the  Bankruptcy  Court.  Hearings have been scheduled for two of
these claims (May 24,  2011and  September 29,  2011),  and as of the date of the
filing of this report no hearing has been scheduled for the third claim.

Results of Operations

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

     o    A discussion of the results of the Company's continuing operations for
          the year ended  March 31, 2011 as compared to the year ended March 31,
          2010; and

                                       20
<PAGE>

     o    A discussion of the results of the Company's  discontinued  operations
          for the year ended  March 31, 2011 as compared to the year ended March
          31, 2010.

         The Company's  results of operations  for the year ended March 31, 2011
as compared to the year ended March 31, 2010 should be read in conjunction  with
our Financial  Statements and the Notes to Financial Statements included in this
report.

         Results of Continuing  Operations  for the year ended March 31, 2011 as
         -----------------------------------------------------------------------
compared to the year ended March 31, 2010
-----------------------------------------

         Overview. With respect to our continuing operations, for the year ended
March 31, 2011, we reported a net loss of ($3,069,191), or ($0.03) per basic and
fully-diluted  share,  compared  to a net loss of  ($2,800,422),  or ($0.02) per
basic and  fully-diluted  share,  for year ended March 31, 2010.  Discussions of
individually significant year-over-year variances follow.

         Revenues.  The Company had  no  revenues from  continuing operations in
2011 or 2010.

         General  and  administrative   expenses.   General  and  administrative
expenses for 2011 were $1,508,635, compared to $2,350,348 for 2010. The decrease
of $841,713 was primarily  attributable to decreases in employee overhead costs,
legal and insurance expenses, and directors' fees.

         Interest expense.  Interest expense from continuing operations reflects
interest  incurred  on  unsecured,  convertible  promissory  notes that were not
associated  with the  Company's  assets sold.  Interest  expense was $16,312 and
$7,513 for 2011 and 2010, respectively.  These notes originated in October 2009,
therefore  2011  reflects  interest  expense  for the  entire  year,  while 2010
includes  interest  expense  for only a portion of the year.  Additionally,  the
interest  rate on these  loans  for 2011 is  higher  than  2010 due to  interest
accruing at the default interest rate since November, 2010.

         Abandonment of leasehold improvements. On March 31, 2011, following the
sale of substantially all of our assets, we reduced our administrative  overhead
by  downsizing  our  corporate  office.  With our move to a smaller  office,  we
abandoned  leasehold  improvements  in  our  previous  office,  which  had a net
carrying cost of $102,000. No such expense was incurred in 2010.

         Interest  and other  income.  Interest  and other  income  increased to
$92,214 in 2011,  from $3,487 in 2010.  The increase of $88,727 is primarily due
to income  generated  from the resale of carbon dioxide under a supply and sales
agreement that the Company entered into in January 2011.

         Reorganization expenses. Reorganization items for 2011 were $1,434,334,
compared to $310,591 for 2010.  The increase of  $1,123,743  primarily  resulted
from the following factors:

     o    We  incurred  reorganization  expenses  during our entire  2011 fiscal
          year,  while we only  incurred  reorganization  expenses for just over
          five months of our 2010 fiscal year;
     o    Under the terms of the credit  agreement with our prepetition  secured
          lender,  we were responsible for reimbursing them for certain fees and
          expenses  related to the  repayment  of  amounts  due under the credit
          facility.  Expenses totaled  $1,044,500 were incurred in 2011, with no
          such expenses incurred in 2010.
     o    Fees  incurred  for  the  eventual  sale of  substantially  all of our
          assets.

                                       21
<PAGE>

     Results of  Discontinued  Operations  for the year ended  March 31, 2011 as
     ---------------------------------------------------------------------------
compared to the year ended March 31, 2010
-----------------------------------------

         We sold all of our oil and gas related operating assets effective March
1, 2011. The following comparisons are for the 11 months ended February 28, 2011
compared to the year ended March 31, 2010.

         Overview.  With  respect  to  activities  related  to our  discontinued
operations,  for the year  ended  March 31,  2011,  we  reported  net  income of
$2,395,132,  or $0.02 per basic and fully-diluted share,  compared to a net loss
of ($17,460,840),  or ($0.15) per basic and fully-diluted  share, for year ended
March 31, 2010. Discussions of individually significant year-over-year variances
follow.

         Revenues. Revenues from oil sales for the eleven months ended March 31,
2011 were $4,385,829,  compared to $3,585,738 for the year ended March 31, 2010.
The increase of $800,091 is the result of a production increase of approximately
$260,000 and a favorable price variance of approximately  $540,000. In 2010, the
Company  incurred net losses on  derivative  activities of  ($357,582),  with no
related activities in 2011.

         Operating  expenses.  Operating  expenses for year ended March 31, 2011
were $4,558,108,  compared to $17,193,360 for the year ended March 31, 2010. The
decrease  of  $12,635,252  was the result of an  impairment  recorded in 2010 of
$13,525,642  for the remaining  carrying  value of our  undeveloped  properties,
offset in part by  increases  in lease  operating  expenses and payments for the
settlement of certain claims.  Lease operating expenses increased as a result of
our  operational  plan to enhance  recovery  from existing  wells.  Based on the
incremental revenue, the expected payback period from this investment would have
been  less  than  two  years.  Additionally,  during  2011  we  settled  certain
contractual claims that arose from our filing for bankruptcy for $375,000.

         Gain on sale of discontinued operations. The Company recorded a gain of
$4,807,221 in connection  with the sale of  substantially  all of our assets for
approximately $20 million, effective March 1, 2011.

Liquidity and Capital Resources

         The report of our independent  registered public accounting firm on the
financial  statements  for the years ended  March 31, 2011 and 2010  includes an
explanatory  paragraph relating to the uncertainty of our ability to continue as
a going  concern.  We have incurred a cumulative net loss of  approximately  $90
million for the period from inception (February 4, 2004) to March 31, 2011.

         In March 2011, we sold all of our oil and gas income  producing  assets
which  enabled us to pay off all secured debt and left us with net cash proceeds
of  approximately  $3,500,000 and a receivable from the transaction of $250,000.
We do not have any  sources  of revenue  and our  projected  interest  and other
income is not  sufficient  to sustain  our ongoing  general and  administrative,
legal and reorganization costs. We do expect to receive proceeds from the return
of funds we have on deposit for oil and gas  environmental and performance bonds
with the State of Wyoming.  These amounts total  approximately  $814,000 and are
expected to be returned  in the first half of our 2012  fiscal  year.  We expect
that our monthly  operating  expenses will exceed  monthly  operating  income by
approximately $70,000 until we are able to pursue other business activities.

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

                                       22
<PAGE>

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

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

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

Critical Accounting Policies

         Estimates.   We  are   engaged   in  the   exploration,   exploitation,
development,  acquisition,  and  production  of natural  gas and crude oil.  Our
discussion  of financial  condition  and results of operations is based upon the
information  reported in our  financial  statements.  The  preparation  of these
financial  statements  requires us to make assumptions and estimates that affect
the reported amounts of assets,  liabilities,  revenues, and expenses as well as
the  disclosure  of  contingent  assets  and  liabilities  as of the date of our
financial statements. We base our decisions,  which affect the estimates we use,
on  historical  experience  and various  other  sources  that are believed to be
reasonable under the circumstances. Actual results may differ from the estimates
we calculate due to changing  business  conditions or unexpected  circumstances.
Policies we believe are critical to  understanding  our business  operations and
results of operations  are detailed  below.  For  additional  information on our
significant  accounting  policies  see  Note 1 -  Organization  and  Summary  of
Significant  Accounting  Policies  and Note 12 -  Disclosures  About Oil and Gas
Producing  Activities  in the  Notes  to  Financial  Statements  of our  audited
financial statements included in this Annual Report.

         Successful efforts method of accounting.  Generally accepted accounting
principles  provide for two alternative  methods for the oil and gas industry to
use in accounting  for oil and gas producing  activities.  These two methods are
generally  known in our  industry  as the full cost  method  and the  successful
efforts method.  Both methods are widely used. The methods are different  enough
that in many  circumstances  the  same  set of  facts  will  provide  materially
different  financial  statement  results within a given year. We have chosen the
successful efforts method of accounting for our oil and gas producing activities
and a detailed  description is included in Note 1 - Organization  and Summary of
Significant  Accounting  Policies in the Notes to  Financial  Statements  of our
audited financial statements included in this Annual Report.

         Income taxes.  We provide for deferred  income taxes on the  difference
between the tax basis of an asset or liability  and its  carrying  amount in our
financial  statements  in  accordance  with FASB ASC 740  "Income  Taxes".  This
difference  will result in taxable income or deductions in future years when the
reported amount of the asset or liability is recovered or settled, respectively.
Considerable judgment is required in determining when these events may occur and
whether recovery of an asset is more likely than not. Additionally,  our Federal
and state  income tax  returns  are  generally  not filed  before the  financial
statements  are prepared,  therefore we estimate the tax basis of our assets and
liabilities  at the  end of each  period  as well  as the  effects  of tax  rate
changes,  tax credits,  and net  operating  and capital loss  carryforwards  and
carrybacks. Adjustments related to differences between the estimates we used and
actual  amounts  we  reported  are  recorded  in the period in which we file our
income tax  returns.  These  adjustments  and changes in our  estimates of asset
recovery could have an impact on our results of operations.  Deferred tax assets
are reduced by a valuation  allowance when, in the opinion of management,  it is
more likely than not that some  portion or all of the  deferred  tax assets will
not be realized.  To date, we have not recorded any deferred tax assets  because
of the historical losses that we have incurred.

                                       23
<PAGE>

         Stock-based  compensation.   As  of  April  1,  2006,  we  adopted  the
provisions of FASB ASC. This statement  requires us to record expense associated
with the fair value of stock-based compensation.

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

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

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Rancher  operations do not employ financial  instruments or derivatives
which are market  sensitive.  Short term funds are held in non-interest  bearing
accounts  and funds  held for longer  periods  are  placed in  interest  bearing
accounts.  Large  amounts of funds,  if  available,  will be  distributed  among
multiple  financial  institutions  to reduce risk of loss.  The  Company's  cash
holdings do not generate interest income.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The audited financial  statements of Rancher for  the years ended March
31, 2011 and 2010,  appear as pages F-1 through F-25, at the end of the document
and are incorporated herein by reference.


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.

ITEM 9A(T).  CONTROLS AND PROCEDURES

Controls and Procedures

         We  conducted  an  evaluation   under  the  supervision  and  with  the
participation  of our  management,  including  our Chief  Executive  Officer and
Acting  Chief  Accounting  Officer,  of  the  effectiveness  of the  design  and
operation  of our  disclosure  controls  and  procedures.  The term  "disclosure
controls and  procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities  Exchange Act of 1934, as amended  (Exchange Act), means controls and
other  procedures  of a company  that are  designed to ensure  that  information

                                       24
<PAGE>

required to be disclosed by the company in the reports it files or submits under
the Exchange Act is recorded,  processed,  summarized  and reported,  within the
time periods  specified in the  Securities and Exchange  Commission's  rules and
forms.  Disclosure  controls and procedures  also include,  without  limitation,
controls  and  procedures  designed  to ensure that  information  required to be
disclosed  by a  company  in the  reports  that it files or  submits  under  the
Exchange  Act is  accumulated  and  communicated  to the  company's  management,
including its principal executive and principal  financial officers,  or persons
performing similar functions, as appropriate to allow timely decisions regarding
required  disclosure.  We identified a material weakness in our internal control
over  financial  reporting  and,  as a  result  of this  material  weakness,  we
concluded as of March 31, 2011, that our disclosure controls and procedures were
not effective.

Management's Annual Report on Internal Control Over Financial Reporting

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

     a)   pertain to the  maintenance  of records that,  in  reasonable  detail,
          accurately and fairly reflect the transactions and dispositions of the
          assets of the company;
     b)   provide  reasonable   assurance  that  transactions  are  recorded  as
          necessary to permit preparation of financial  statements in accordance
          with generally accepted accounting  principles,  and that receipts and
          expenditures  of the  Company are being made only in  accordance  with
          authorizations of management and directors of the Company; and
     c)   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.  Also,  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.

         Management assessed the effectiveness of the Company's internal control
over  financial  reporting  as of March 31,  2011.  In making  this  assessment,
management   used  the  criteria  set  forth  by  the  Committee  of  Sponsoring
Organizations of the Treadway Commission (COSO).

Internal Control-Integrated Framework

         A material weakness is a control deficiency,  or combination of control
deficiencies,  that  result in more  than a remote  likelihood  that a  material
misstatement of annual or interim financial  statements will not be prevented or
detected.  As of March 31, 2011, the Company  identified the following  material
weakness:

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

         We have  limited  accounting  personnel  with  sufficient  expertise in
generally  accepted  accounting  principles to enable  effective  segregation of
duties with respect to recording  journal  entries and to allow for  appropriate
monitoring of financial  reporting  matters and internal  control over financial
reporting.  Specifically, the Acting Chief Accounting Officer has involvement in

                                       25
<PAGE>

the creation and review of journal entries and note disclosures without adequate
independent  review and  authorization.  This control deficiency is pervasive in
nature and  impacts all  significant  accounts.  This  control  deficiency  also
affects  the  financial   reporting   process  including   financial   statement
preparation and the related note disclosures.

         As  a  result  of  the  aforementioned  material  weakness,  management
concluded that the Company's  internal  control over  financial  reporting as of
March 31, 2011 was not effective.

Management's Planned Corrective Actions

         In relation to the material  weakness  identified above, and subject to
emerging from bankruptcy and securing  permanent  financing,  our management and
the  board of  directors  intend  to work to  remediate  the risk of a  material
misstatement in financial  reporting.  Subject to obtaining permanent financing,
we intend to  implement  the  following  plan to address  the risk of a material
misstatement in the financial statements:

     o    Engage qualified  accounting staff to prepare journal entries and note
          disclosures   thereby  enabling  our  Chief  Accounting   Officer  the
          opportunity  to  independently  review and authorize  such entries and
          disclosures  prior to entering the  information  into the accounts and
          financial satements diclosures;
     o    Engage qualified third-party  accountants and consultants to assist us
          in the preparation and review of our financial information,
     o    Ensure  employees,  third-party  accountants  and  consultants who are
          performing  controls  understand  responsibilities  and how to perform
          said responsibilities, and
     o    Consult with qualified third-party  accountants and consultants on the
          appropriate  application of generally accepted  accounting  principles
          for complex and non-routine transactions.

Auditors Attestation

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

Changes in Internal Control over Financial Reporting

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


ITEM 9B.  OTHER INFORMATION

Not applicable.


                                       26
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     Our current directors and executive  officers,  their respective  positions
and ages, and the year in which each director was first  elected,  are set forth
in the following table.

<TABLE>
<CAPTION>
                                                                                          Beginning of Term of
                Name                     Age                Positions Held                       Service
-------------------------------------- -------- --------------------------------------- --------------------------
<S>                                    <C>      <C>                                     <C>

Jon C. Nicolaysen                        64     Director, President, Chief Executive    President and CEO Oct 2,
                                                Officer                                  2009; Director Oct 27,
                                                                                                  2009;
-------------------------------------- -------- --------------------------------------- --------------------------
A.L. Sid Overton                         70     Director, Chairman of the Board               Sep 30, 2009
-------------------------------------- -------- --------------------------------------- --------------------------
Mathijs van Houweninge                   45     Director                                      Sep 30, 2009
-------------------------------------- -------- --------------------------------------- --------------------------
Jeffrey B. Bennett                       56     Director                                      Sep 30, 2009
-------------------------------------- -------- --------------------------------------- --------------------------
</TABLE>

     Rancher's directors hold office until their successors are duly elected and
qualified under Rancher's bylaws. The directors named above will serve until the
next annual  meeting of Rancher's  stockholders.  Thereafter,  directors will be
elected for one-year terms at the annual  stockholders'  meeting.  Officers will
hold  their  positions  at the  pleasure  of the board of  directors  absent any
employment agreement.

Jon C. Nicolaysen, President, CEO and Director

     In 1985,  Mr.  Nicolaysen  completed  the Atlantic  Businessman's  Exchange
Program. In 1986, he completed the W.K. Kellogg  Foundations  Fellowship Wyoming
Agriculture  Leadership  Program.  In  1970,  he  received  an  MS  in  Business
Administration from the University of Wyoming,  and in 1968, he earned his BS in
Business Administration from Colorado College.

     From  1970 to the  present,  Mr.  Nicolaysen  has been Vice  President  and
President of Cole Creek Sheep  Company,  Inc.,  a cattle and sheep  ranching and
farming  operation.  From 1989 to June of 2009,  he was  president  of Parkerton
Ranch, Inc., a cattle and sheep ranching and farming operation. From 1988 to the
present, he's been president of JK Minerals, Inc., an oil production and mineral
leasing  company.  From 1995 to June 2009,  he was the  President  of Cole Creek
Outfitters,  Inc., a guiding and hunting operation.  From 1998 to the present he
has been  President,  and was a founding  member of, Seven Cross  Ranches,  LLC;
Wcamp,  FLLC;  Sagebrush  Land  Management,  FLLC,  all of which are real estate
development companies.

     From 2001 to 2008, Mr. Nicolaysen was a unit operator for JK Minerals, Inc.
From 2004 - 2007 Mr.  Nicolaysen  was an operator of Big Muddy Field for Wyoming
Mineral  Exploration,  LLC, of which he was a founding member. From 2007 - 2008,
he was a founding member of Muddy Mineral Exploration, LLC in Wyoming. From 2008
to May 1, 2009, he was a board member of Ameriwest Energy Corp.

     Mr. Nicolaysen,  and A.L. Sid Overton,  Director and Chairman of the Board,
are brothers-in-law.

A.L. Sid Overton, Director and Chairmen of the Board of Directors

     In 1964, Mr. Overton received his B.A. from the University of North Dakota.
In 1966, he earned his L.L.B. from the University of North Dakota School of Law,
and in 1969,  he earned his J.D.  from the  University of North Dakota School of
Law.  Since 1998,  Mr.  Overton has worked as a lawyer for Overton & Associates,
LLC. Mr Overton is the brother-in-law of Mr. Nicolaysen.

Mathijs Van Houweninge, Director

     Mr.  van  Houweninge  studied  Cognitive  Artificial  Intelligence  at  the
University of Utrecht, The Netherlands.  In 1998, he attended the Young Managers
Programme at Insead Business School in Paris. In addition to being self-employed
since 1992, Mr. van  Houweninge was the founder and CEO of  "Effective," a Dutch

                                       27
<PAGE>

software and  consultancy  firm,  from 1992 - 2002. From September 2007 to April
2008,  Mr. van  Houweninge was an associate at Advisor Falcon Capital in London.
From May 2008 to December 2008, he was a Partner at Falcon Capital in London.

         He  currently  serves as a  Director  of the  following  companies  and
organizations:  Nieuwe  Regentesseschool,   a  Dutch  primary  school  (Utrecht,
November 2004, non-profit);  Blackwater Midstream Corp., a midstream gas storage
facility  (New  Orleans,  May 2008,  listed);  Cybercity  3D, a 3D modeling  and
marketing company (El Segundo,  February 2008, non-listed);  SkyPostal Networks,
Inc., an air courier services company (Miami,  April 2008, listed);  IonIP bv, a
network  and  business  intelligence  technology  firm  (Amsterdam,  June  2008,
non-listed);  and Skillcity, an ICT support organization (Utrecht,  August 2008,
non-profit).

Jeffrey B. Bennett, Director

         Mr.  Bennett  obtained a Bachelor's of Arts from  Western State College
of  Colorado  in  1979,   majoring   in   Biology.   Mr.   Bennett  has  been  a
co-owner/partner   in  TCF   Services,   Inc.   from  2005  to  present   and  a
co-owner/partner  in Flame Energy,  Inc.  from May 2005 to present.  He was Vice
President of Operations of NQL Energy Services in Alberta, Canada from June 2003
through  2005. He was employed by Black Max Downhole  Tools,  Inc. from May 2001
through 2003, as a Region Manager. From 2000 to 2001, Mr. Bennett was operations
manager for the western United States for Sharewell.

Conflicts of Interest - General

         The  Company's  directors  and  officers  are, or may become,  in their
individual  capacities,  officers,  directors,  controlling  shareholder  and/or
partners of other entities engaged in a variety of businesses. Thus, there exist
potential conflicts of interest including, among other things, time, efforts and
corporation  opportunity,  involved in  participation  with such other  business
entities.

Conflicts of Interest - Corporate Opportunities

         Presently  no  requirement  contained  in  the  Company's  Articles  of
Incorporation,  Bylaws,  or minutes which requires officers and directors of the
Company's business to disclose to Rancher business  opportunities  which come to
their  attention.  The  Company's  officers and directors  do,  however,  have a
fiduciary   duty  of  loyalty  to  Rancher  to  disclose  to  it  any   business
opportunities  which come to their  attention,  in their  capacity as an officer
and/or  director or otherwise.  Excluded  from this duty would be  opportunities
which the person learns about through his involvement as an officer and director
of another company. The Company has no intention of merging with or acquiring an
affiliate,  associate  person or business  opportunity from any affiliate or any
client of any such person.

Code of Business Conduct and Ethics

         We  have  adopted  a Code  of  Business  Conduct  and  Ethics  for  our
directors,  officers, and employees. The Board expects all directors, as well as
officers  and  employees,  to act  ethically  at all  times and to adhere to the
policies outlined in our Code of Business Conduct and Ethics. Copies of our Code
of Business  Conduct and Ethics are available by  contacting  the Company at the
address or phone number contained in this annual report.

ITEM 11.  EXECUTIVE COMPENSATION

         The following  table sets forth the  compensation  paid to officers and
board members  during the fiscal years ended March 31, 2011 and 2010.  The table
sets forth this information for Rancher,  including  salary,  bonus, and certain


                                       28
<PAGE>

other  compensation  to the Board members and named  executive  officers for the
past two fiscal years and includes all Officers as of March 31, 2011.

<TABLE>
<CAPTION>

                              SUMMARY EXECUTIVES COMPENSATION TABLE

-------------------- -------- --------- -------- -------- ------- ------------- -------------- ------------- ---------
                                                                   Non-equity   Non-qualified
                                                          Option   incentive      deferred
                                                 Stock    awards      plan      compensation    All other
Name & Position                Salary    Bonus   awards   ($)     compensation    earnings     compensation   Total
                     Year       ($)       ($)      ($)    (1)         ($)            ($)           ($)         ($)
-------------------- -------- --------- -------- -------- ------- ------------- -------------- ------------- ---------
<S>                  <C>      <C>       <C>      <C>      <C>     <C>           <C>            <C>           <C>

Jon C. Nicolaysen,
Chief Executive      2011     120,000      0        0       0          0              0           6,000      126,000
Officer (2)          2010      60,423      0        0     63,363       0              0           3,000      126,786
-------------------- -------- --------- -------- -------- ------- ------------- -------------- ------------- ---------
Richard E.           2011      46,667      0        0       0          0              0           7,415       54,082
Kurtenbach, Former   2010     170,569      0        0      8,909       0              0           4,780      184,258
Chief Accounting
Officer (3)
-------------------- -------- --------- -------- -------- ------- ------------- -------------- ------------- ---------
John  H. Works (4)   2011        0         0        0       0          0              0             0           0
                     2010     116,827      0        0       0          0              0          29,939       146,766
-------------------- -------- --------- -------- -------- ------- ------------- -------------- ------------- ---------
</TABLE>

     (1)  The amount in this column reflects the total grant date fair value for
          financial  statement  reporting  purposes  for  awards  granted in the
          fiscal  year ended March 31,  2010,  in  accordance  with FASB ASC 718
          "Share  Based  Payments".  Please  refer  to Note 10 of the  Notes  to
          Financial  Statements  of our  audited  financial  statements  for the
          fiscal year ended March 31, 2010, for a discussion of the  assumptions
          made in the valuation of the stock option awards.
     (2)  For Mr. Nicolaysen, Other Compensation represents auto allowances. Mr.
          Nicolaysen was appointed as Chief  Executive  Officer and President on
          October 2, 2009, and as a Director on October 27, 2009. He serves as a
          Director for no additional compensation.
     (3)  For Mr.  Kurtenbach,  Other  Compensation  represents auto allowances,
          contributions  to his 401(k)  accounts,  and  payment  for accrued but
          unused vacation as of his resignation.  Mr. Kurtenbach resigned and as
          the Company's Chief Accounting Officer on July 31, 2010.
     (4)  For  Mr.  Works  Other   Compensation   represents  auto   allowances,
          contributions  to his 401(k)  accounts,  and  payment  for accrued but
          unused  vacation  as of his  termination.  Mr.  Works also served as a
          member of our Board of Directors for no additional  compensation.  Mr.
          Works' employment with the Company was terminated on October 2, 2009.

Employment Agreements; Potential Payments Upon Termination or Change-in-Control

Employment Agreements

            On  October  27,  2009,  we  entered  into an  Executive  Employment
Agreement  with Jon C.  Nicolaysen to become our  President and Chief  Executive
Officer. Pursuant to the agreement, Mr. Nicolaysen will receive a base salary of
$120,000 per year. The base salary shall thereafter be increased annually at the
greater of five  percent or such other  increase as may be approved by the Board
of  Directors.  In  addition,  Mr.  Nicolaysen:  i) shall be eligible to receive
incentive compensation or a bonus, payable solely in the discretion of the Board
of Directors;  ii) he shall be entitled to participate  in all benefit  programs
established by the Company, and; iii) he shall be entitled to a Company-provided
vehicle or a monthly  allowance of $500.  The  Agreement  may be  terminated  by
either  party upon  fifteen  days  written  notice.  Also on October 27, 2009 we
entered into a Management  Retention Agreement with Mr. Nicolaysen,  under which
Mr. Nicolaysen was granted options to purchase 2,500,000 shares of the Company's
common  stock at $0.035 per share.  The  Management  Retention  Agreement  shall
terminate the earlier of (i) one year;  (ii) thirty days after the  consummation

                                       29
<PAGE>

of a Change in  Control;  (iii)  thirty days  following  the  confirmation  of a
Reorganization  Plan, or: (iv) the date that all obligations of the parties have
been satisfied.  See the table below for a description of the vesting provisions
and term of the stock options.

               Outstanding Equity Awards at Fiscal Year-end Table

         The following  table sets forth  certain  information  regarding  stock
options held by the named executive officers as of March 31, 2011.

<TABLE>
<CAPTION>

             Name                                               Option Awards
                                     Number of          Number of
                                    Securities         Securities
                                    Underlying         Underlying
                                    Unexercised        Unexercised
                                    Options (#)        Options (#)
-------------------------------- ------------------ ------------------
                                                           Non            Exercisable         Option
                                    Exercisable        exercisable          Price         Expiration Date
                                 ------------------ ------------------ ----------------- --------------------
<S>                              <C>                <C>                <C>               <C>

Jon C. Nicolaysen (A)                2,500,000             -0-              $0.035            10/27/19
</TABLE>


(A) Mr. Nicolaysen's  options vested 10% on the date of grant,  October 27, 2009
and 90% on the earlier to occur of:

     i)   November 1, 2010;
     ii)  The confirmation by the Bankruptcy Court of a Plan of Reorganization;
     iii) The  dismissal  from  Chapter 11  Bankruptcy  with the approval of the
          Court
     iv)  An  event  of  a  merger,  consolidation,  sale  of  assets  or  other
          transaction which results in the holders of the Company's common stock
          immediately before such transaction owning less than 50% of the common
          stock outstanding immediately after the transaction;
     v)   Any other form of change of control, or;
     vi)  Voluntary termination for good reason.

                              Director Compensation

         During the year ended March 31, 2011, we compensated  our  non-employee
Directors under the following compensation scheme.

Cash Compensation and Equity Compensation

         In September  2009 the new Board of Directors  implemented a new scheme
under which each  non-employee  director  would receive a cash payment of $5,000
per  fiscal  quarter.  In  addition,  under  the terms of  Management  Retention
Agreements  entered into with each  non-employee  Director and the President and
CEO, each member of the Board of Directors  would be granted options to purchase
2,500,000 shares of the Company's common stock at $0.035 per share.


                                       30
<PAGE>

         The  following   table  sets  forth  certain   information   concerning
compensation  paid to the  Company's  directors  during the year ended March 31,
2011:

<TABLE>
<CAPTION>

                      Fees                             Non-equity    Non-qualified
                    earned or                          incentive        deferred
                     paid in    Stock                     plan        compensation     All other
                      cash      awards   Option       compensation      earnings      compensation     Total
      Name             ($)        ($)    awards ($)       ($)             ($)             ($)           ($)
------------------ ------------ -------- ----------- --------------- --------------- --------------- -----------
<S>                <C>          <C>      <C>         <C>             <C>             <C>             <C>

Jon C.                $ -0-      $ -0-     $ -0-         $ -0-           $ -0-          $126,000      $126,000
Nicolaysen (1)
------------------ ------------ -------- ----------- --------------- --------------- --------------- -----------
A.L. Sid Overton    $ 20,000     $ -0-     $ -0-         $ -0-           $ -0-           $ -0-        $20,000
------------------ ------------ -------- ----------- --------------- --------------- --------------- -----------
Mathijs Van          $20,000     $ -0-      $-0-         $ -0-            $-0-           $ -0-        $20,000
Houweninge
------------------ ------------ -------- ----------- --------------- --------------- --------------- -----------
Jeffrey B.           $20,000     $ -0-      $-0-         $ -0-            $-0-           $ -0-        $20,000
Bennett
------------------ ------------ -------- ----------- --------------- --------------- --------------- -----------
</TABLE>

     (1)  Mr.  Nicolaysen is employed as the Company's Chief Executive  Officer.
          During  the year  ended  March  31,  2011,  he  received  $126,000  in
          compensation  for his services in that  capacity,  as discussed in the
          Executive Compensation Table.

         All of the  Company's  officers  and/or  directors  will continue to be
active in other companies. All officers and directors have retained the right to
conduct their own independent business interests.

Indemnification of Directors and Officers

         Rancher  officers  and  directors  are  indemnified  as provided by the
Nevada Revised Statutes and the bylaws.

         Under the Nevada Revised Statutes,  director immunity from liability to
a company or its shareholders  for monetary  liabilities  applies  automatically
unless it is specifically limited by a company's Articles of Incorporation.  The
Company's  Articles of Incorporation  do not  specifically  limit the directors'
immunity.  Excepted from that immunity are: (a) a willful failure to deal fairly
with  Rancher  or its  shareholders  in  connection  with a matter  in which the
director has a material  conflict of interest;  (b) a violation of criminal law,
unless the director had reasonable  cause to believe that his or her conduct was
lawful or no  reasonable  cause to believe that his or her conduct was unlawful;
(c) a transaction from which the director  derived an improper  personal profit;
and (d) willful misconduct.

         The Company's  bylaws  provide that it will  indemnify the directors to
the fullest extent not prohibited by Nevada law; provided,  however, that it may
modify the  extent of such  indemnification  by  individual  contracts  with the
directors and officers;  and, provided,  further,  that the Company shall not be
required to indemnify any director or officer in connection with any proceeding,
or part thereof,  initiated by such person unless such  indemnification:  (a) is
expressly  required to be made by law, (b) the  proceeding was authorized by the
board of directors, (c) is provided by the Company, in sole discretion, pursuant
to the powers  vested under Nevada law or (d) is required to be made pursuant to
the bylaws.

         The Company's bylaws provide that it will advance to any person who was
or is a party or is threatened to be made a party to any threatened,  pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative,  by reason of the fact that he is or was a director or officer of
the  Company,  or is or was  serving at the  request of Rancher as a director or

                                       31
<PAGE>

executive officer of another company, partnership, joint venture, trust or other
enterprise, prior to the final disposition of the proceeding, promptly following
request  therefore,  all  expenses  incurred  by  any  director  or  officer  in
connection  with such  proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined  ultimately that
such person is not entitled to be indemnified under the bylaws or otherwise.

         The Company's  bylaws  provide that no advance shall be made by Rancher
to an  officer  except by reason  of the fact  that such  officer  is or was the
Company's director in which event this paragraph shall not apply, in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, if
a  determination  is reasonably and promptly made: (a) by the board of directors
by a majority  vote of a quorum  consisting of directors who were not parties to
the proceeding, or (b) if such quorum is not obtainable, or, even if obtainable,
a quorum of disinterested  directors so directs, by independent legal counsel in
a written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner  that such  person did not believe to be in or
not opposed to the Company's best interests.

                      EQUITY COMPENSATION PLAN INFORMATION

         The following  table sets forth  information as of March 31, 2011, with
respect to compensation plans (including individual  compensation  arrangements)
under which equity  securities of the Company that are  authorized for issuance,
aggregated as follows:

<TABLE>
<CAPTION>

                                  Number of securities to be Weighted-average
                                   issued upon exercise of      exercise          Number of securities
                                    outstanding options,        price of         remaining available for
                                     warrants and rights       outstanding        future issuance under
                                             (a)                options,        equity compensation plans
                                                              warrants and        (excluding securities
                                                                 rights         reflected in column (a))
          Plan Category                                            (b)                     (c)
<S>                                <C>                         <C>              <C>

 Equity compensation plans
 approved by security holders                      1,441,000          $0.0875                      8,559,000
 Equity compensation plans not
 approved by security holders                     10,000,000          $ 0.035                              -
                                   ---------------------------                  -----------------------------
 Total                                            11,441,000          $0.0416                      8,559,000
                                   ===========================                  =============================
</TABLE>

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
--------------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS.
---------------------------

         The  following  table  sets  forth  information  with  respect  to  the
beneficial ownership of Rancher outstanding common stock by:

     o    each person who is known by Rancher to be the beneficial owner of five
          percent (5%) or more of Rancher common stock;

     o    Rancher chief executive  officer,  its other executive  officers,  and
          each  director  as  identified   in  the   "Management   --  Executive
          Compensation" section; and

     o    all of the Company's directors and executive officers as a group.

         Beneficial  ownership is determined in accordance with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to securities.  Shares of common stock and options,  warrants
and convertible  securities that are currently exercisable or convertible within
60 days of the date of this document  into shares of the Company's  common stock
are deemed to be outstanding and to be beneficially  owned by the person holding
the options, warrants or convertible securities for the purpose of computing the
percentage  ownership of the person,  but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.

         The information below is based on  the  number of shares  of our common
stock that Rancher believes was  beneficially  owned by each person or entity as
of March 31, 2011.


                                       32
<PAGE>

<TABLE>
<CAPTION>

    Title of Class       Name and Address of Beneficial    Amount and Nature of     Percent of Class (1)
                                      Owner                 Beneficial Owner*
------------------------ -------------------------------- ----------------------- -------------------------
<S>                      <C>                              <C>                     <C>

Common shares            Jon C. Nicolaysen, Director,
                         President, Chief Executive
                         Officer (2)
                         999-18th Street, Suite 3400            4,450,000                  3.73%
                         Denver, Colorado 80202

Common shares            A.L. Sid Overton (3)                   3,750,000                  3.14%
                         999-18 Street, Suite 3400
                         Denver, Colorado 80202

Common shares            Mathijs van Houweninge (4)             3,750,000                  3.14%
                         999-18 Street, Suite 3400
                         Denver, Colorado 80202


Common shares            Jeffrey B. Bennett (5)                 3,753,000                  3.15%
                         999-18 Street, Suite 3400
                         Denver, Colorado 80202

------------------------ -------------------------------- ----------------------- -------------------------
Common shares            All Directors and Executive
                         Officers as a Group
                          (4 persons)                          15,703,000                 13.16%
------------------------ -------------------------------- ----------------------- -------------------------

All 5% or Greater Shareholders

Common shares            Sergei Stetsenko
                         Paradeplatz 4
                         Zurich 8001 Switzerland                8,896,000                  7.45%

Common shares            Andrew P. Vander Ploeg                 7,000,000                   5.9%
                         19 Foxtail Circle
                         Cherry Hills Village, CO
                         80113
</TABLE>

     (1)  At March 31, 2011,  the Company had  119,316,723  shares of its common
          stock issued and outstanding.
     (2)  Mr.  Nicolaysen  holds 700,000 shares of common stock. In addition Mr.
          Nicolaysen holds a $25,000  convertible  promissory note,  convertible
          into  1,250,000  shares  of  common  stock at $0.02  per  share and is
          convertible in whole or in part. Mr.  Nicolaysen  also holds an option
          exercisable into 2,500,000 shares of common stock at $0.035 per share.
     (3)  Mr. Overton holds a $25,000 convertible  promissory note,  convertible
          into  1,250,000  shares  of  common  stock at $0.02  per  share and is
          convertible  in whole or in part.  Mr.  Overton  also  holds an option
          exercisable into 2,500,000 shares of common stock at $0.035 per share.
     (4)  Mr.  van  Houweninge  holds a  $25,000  convertible  promissory  note,
          convertible  into 1,250,000  shares of common stock at $0.02 per share
          and is convertible in whole or in part. Mr. van Houweninge  also holds
          an option  exercisable into 2,500,000 shares of common stock at $0.035
          per share.
     (5)  Mr.  Bennett  holds 3,000  shares of common  stock.  In  addition  Mr.
          Bennett holds a $25,000 convertible  promissory note, convertible into
          1,250,000 shares of common stock at $0.02 per share and is convertible
          in whole or in part. Mr. Bennett also holds an option exercisable into
          2,500,000 shares of common stock at $0.035 per share.

                                       33
<PAGE>

     Rule  13d-3  under  the  Securities   Exchange  Act  of  1934  governs  the
determination of beneficial  ownership of securities.  That rule provides that a
beneficial  owner of a security  includes any person who directly or  indirectly
has or  shares  voting  power  and/or  investment  power  with  respect  to such
security.  Rule  13d-3  also  provides  that a  beneficial  owner of a  security
includes  any person who has the right to acquire  beneficial  ownership of such
security  within  sixty  days,  including  through  the  exercise of any option,
warrant or conversion of a security.  Any securities not  outstanding  which are
subject to such  options,  warrants or  conversion  privileges  are deemed to be
outstanding   for  the  purpose  of  computing  the  percentage  of  outstanding
securities of the class owned by such person. Those securities are not deemed to
be outstanding for the purpose of computing the percentage of the class owned by
any other person.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Related Transactions
----------------------------

         On October 27, 2009, each of the four members of our Board of Directors
loaned  $25,000  for a total of  $100,000  to the  Company,  under  the terms of
Convertible Promissory Notes (the "Notes"). The Notes as fully described in Note
7 - Convertible  Promissory Notes Payable, of the Notes to Financial  Statements
of our audited  financial  statements  for the fiscal year ended March 31, 2010,
interest at the greater of 12% or prime plus 4%,  mature on November 1,  2010and
are  convertible,  at the holder's  option,  into shares of the Company's common
stock at a conversion price of $0.02 per share.

         During the years ended March 31,  2011 and 2010,  the Company  incurred
legal fees  totaling  $113,313  and  $72,768,  respectively,  with  Overton  and
Associates,  LLC, a law firm in which Mr. Overton, a director of the Company, is
a principal.  The  employment of Overton and  Associates as special  counsel has
been approved by the Bankruptcy Court.

         During the years ended March 31,  2011 and 2010,  the Company  incurred
engineering and oilfield operating consulting fees totaling $108,969 and 68,907,
respectively,  with TCF Services,  Inc., an engineering consulting firm in which
Mr. Bennett,  a director of the Company,  is a principal.  The employment of TCF
Services, Inc. has been approved by the Bankruptcy Court.

         The Company has not implemented a formal written policy  concerning the
review  of  related  party   transactions,   but  compiles   information   about
transactions between the Company and its directors and officers, their immediate
family  members,  and their  affiliated  entities,  including the nature of each
transaction and the amount involved.  The Board of Directors has  responsibility
for reviewing these transactions.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Auditor's Fees

         The following  table  describes  fees for  professional  audit services
rendered by Hein & Associates LLP ("Hein"),  our principal  accountant,  for the
audit of our annual financial  statements for the years ended March 31, 2011 and
March 31,  2010 and fees billed for other  services  rendered by Hein during the
2011 and 2010 fiscal years.

                                                      Fiscal       Fiscal 2010
                             Type of Fee               2011
       ------------------------------------------------------------------------

       Audit Fees (1)                             $   103,434      $    74,093
       Audit-Related Fees                         $         -      $         -
       Tax Fees (2)                               $     8,536      $    10,464
       All Other Fees                             $         -      $         -
                                                -------------------------------
       Total                                      $   111,970      $    84,557
                                                ===============================

                                       34
<PAGE>

     1.   Audit Fees include the aggregate fees incurred by us for  professional
          services  rendered  by Hein  for the  audit  of our  annual  financial
          statements  and review of financial  statements  included in our Forms
          10-Q for the 2011 and 2010 fiscal years.
     2.   Tax Fees include the aggregate  fees  incurred by us for  professional
          services  rendered by Hein for tax compliance and tax planning for the
          2011 and 2010 fiscal years.

Pre-approval Policies and Procedures
------------------------------------

         The Board of Directors on an annual basis  reviews  audit and non-audit
services performed by the independent  auditor. All audit and non-audit services
are preapproved by the Board of Directors,  which considers, among other things,
the  possible  effect  of the  performance  of such  services  on the  auditors'
independence.  The  Board  of  Directors  has  considered  the  role  of Hein in
providing services to us for the fiscal years ended March 31, 2011 and March 31,
2010 and has concluded that such services are compatible with their independence
as our auditors.  In 2011 and 2010, 100% of the Audit Related Fees, Tax Fees and
All Other Fees were pre-approved by the Board of Directors.


                                     PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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


(a)     Audited financial statements for years ended March 31, 2011 and 2010


(b)    Exhibit No.                                   Description
       -----------                                   -----------
      31.1           Certification of Chief Executive Officer pursuant to
                     Section 302 of the Sarbanes-Oxley Act*


      31.2           Certification of Chief Financial Officer pursuant to
                     Section 302 of the Sarbanes-Oxley Act*

      32.1           Certification of Principal Executive Officer pursuant to
                     Section 906 of the Sarbanes-Oxley Act*

      32.2           Certification of Principal Financial Officer pursuant to
                     Section 906 of the Sarbanes-Oxley Act*



                     *Filed herewith.


                                       35
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS



Audited Financial Statements - Rancher Energy Corp.

Report of Independent Registered Public Accounting Firm

Balance Sheets as of March 31, 2011 and 2010

Statements of Operations for the Years Ended March 31, 2011 and 2010

Statements of Changes in Stockholders' Equity (Deficit) for the Years Ended
March 31, 2011 and 2010

Statements of Cash Flows for the Years Ended March 31, 2011 and 2010

Notes to Financial Statements






















                                      F-1

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders
Rancher Energy Corp.


We have audited the  accompanying  balance sheets of Rancher  Energy Corp.  (the
"Company")  as of March  31,  2011  and  2010,  and the  related  statements  of
operations, stockholders' equity, and cash flows for the years then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we  engaged to perform  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Rancher  Energy Corp. as of
March 31, 2011 and 2010,  and the results of its  operations  and its cash flows
for the years then ended in conformity with U.S. generally  accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  on October  28,  2009,  the  Company  filed a  voluntary
petition under Chapter 11 of the U.S. Bankruptcy Code. Uncertainties inherent in
the  bankruptcy  process,  as well as  recurring  losses from  operations  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note 1. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.




HEIN & ASSOCIATES LLP

Denver, Colorado
July 12, 2011


                                      F-2

<PAGE>

<TABLE>
<CAPTION>

                                      Rancher Energy Corp.
                                     (Debtor-in-possession)
                                         Balance Sheets



                                                                                                 March 31,
                                                                                    -------------------------------------
                                                                                          2011               2010
                                                                                    ------------------ ------------------
                                  ASSETS
<S>                                                                                 <C>                <C>

Current assets:
   Cash and cash equivalents                                                          $     3,883,228    $       372,286
   Restricted cash                                                                            500,066                -
   Accounts receivable and prepaid expenses                                                   420,875             75,793
   Current assets of discontinued operations                                                   45,229            539,809
                                                                                    ------------------ ------------------
       Total current assets                                                                 4,849,398            987,888
                                                                                    ------------------ ------------------

Furniture and equipment, net of accumulated depreciation of $127,662
   and $124,820 respectively                                                                  210,020            308,972
Other assets                                                                                      350             40,777
Long-term assets of discontinued operations                                                   814,354         17,247,579
                                                                                    ------------------ ------------------
       Total other assets                                                                   1,024,724         17,597,328
                                                                                    ------------------ ------------------

           Total assets                                                               $     5,874,122    $    18,585,216
                                                                                    ================== ==================

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued liabilities - post petition                           $     1,115,151    $       142,967
   Current liabilities of discontinued operations                                              58,191         11,690,065
                                                                                    ------------------ ------------------
       Total current liabilities                                                            1,213,342         11,833,032

Long-term liabilities of discontinued operations                                                  -            1,255,497
                                                                                    ------------------ ------------------

       Total liabilities not subject to compromise                                          1,213,342         13,088,529
                                                                                    ------------------ ------------------

Liabilities subject to compromise                                                           1,136,928          1,465,908
                                                                                    ------------------ -------------------

           Total liabilities                                                                2,350,270         14,554,437
                                                                                    ------------------ ------------------

Commitments and contingencies (Notes 2, 5, 6 and 7)

Stockholders' equity:
   Common stock, $0.00001 par value,  275,000,000 shares authorized at March 31,
   2011 and 2010;  119,316,723 shares issued and outstanding at March 31, 2011
   and
     2010                                                                                       1,194              1,194
   Additional paid-in capital                                                              93,193,008         93,025,876
   Accumulated deficit                                                                    (89,670,350)       (88,996,291)
                                                                                    ------------------ ------------------
         Total stockholders' equity                                                         3,523,852          4,030,779
                                                                                    ------------------ ------------------

           Total liabilities and stockholders' equity                                 $     5,874,122    $    18,585,216
                                                                                    ================== ==================

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

                                              F-3
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

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



                                                                                            For the Year Ended March 31,
                                                                                      -----------------------------------------
                                                                                             2011                   2010
                                                                                      -------------------     -----------------
<S>                                                                                   <C>                     <C>

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

Operating expenses:
     General and administrative expenses                                                      1,508,635               2,350,348
     Depreciation and amortization                                                              100,124                 135,457
                                                                                      -------------------     -----------------
         Total operating expenses                                                             1,608,759               2,485,805
                                                                                      -------------------     -----------------

       Loss from operations                                                                  (1,608,759)             (2,485,805)
                                                                                      -------------------     -----------------

Other income (expense):
     Interest expense and financing costs                                                       (16,312)                 (7,513)
     Abandonment of leasehold improvements                                                     (102,000)                   -
     Interest and other income                                                                   92,214                   3,487
                                                                                      -------------------     -----------------
         Total other income (expense)                                                           (26,098)                 (4,026)
                                                                                      -------------------     -----------------

           Loss before reorganization items and discontinued operations                      (1,634,857)             (2,489,831)
                                                                                      -------------------     -----------------

Reorganization items:
     Professional and legal fees                                                              1,643,011                 310,591
     Provision for settlement and adjustment of liabilities                                     (85,750)                   -
     Provision for executory contracts rejected                                                (122,927)                   -
                                                                                      -------------------     -----------------
         Total reorganization items                                                           1,434,334                 310,591
                                                                                      -------------------     -----------------

           Loss from continuing operations                                                   (3,069,191)             (2,800,422)

Discontinued operations:
     Loss from discontinued operations                                                       (2,412,089)            (17,460,840)
     Gain on sale of discontinued operations                                                  4,807,221                    -
                                                                                      -------------------     -----------------
       Total discontinued operations                                                          2,395,132             (17,460,840)
                                                                                      -------------------     -----------------

             Net loss                                                                  $       (674,059)      $     (20,261,262)
                                                                                      ===================     =================

     Net loss per share from continuing operations                                     $          (0.03)      $           (0.02)
                                                                                      ===================     =================
     Net income (loss) per share from discontinued operations                          $           0.02        $          (0.15)
                                                                                      ===================     =================
     Basic and diluted net loss per share                                              $          (0.01)      $           (0.17)
                                                                                      ===================     =================

     Basic and diluted weighted average shares outstanding                                  119,316,723             119,347,248
                                                                                      ===================     =================


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

                                              F-4
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                      Rancher Energy Corp.
                                     (Debtor-in-possession)
                          Statements of Changes in Stockholders' Equity



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

Balance March 31, 2009                        119,016,723        $ 1,191     $92,582,001        $(68,735,029)       $23,848,163

Common stock issued on exercise of
stock options                                     500,000              5               -                   -                  5

Common stock issued to directors
for services rendered                               -             -                51,700                  -             51,700

Cancelation of non-vested restricted
stock                                            (200,000)            (2)               2                  -                  -

Discount on convertible notes due to
beneficial conversion feature                       -             -               105,000                  -            105,000

Stock-based compensation                            -             -               287,173                       -       287,173

Net loss                                            -             -                   -            (20,261,262)     (20,261,262)
                                           ---------------    -----------    ---------------    ----------------    ----------------

Balance March 31, 2010                        119,316,723     $   1,194         $93,025,876        $(88,996,291)   $  4,030,779

Stock-based compensation                            -             -                 167,132              -              167,132

Net loss                                            -             -                   -               (674,059)        (674,059)
                                           ---------------    -----------    ---------------    ----------------    ----------------

Balance March 31, 2011                        119,316,723     $   1,194         $93,193,008        $(89,670,350)   $  3,523,852
                                           ===============    ===========    ===============    ================    ================


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

                                              F-5
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

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



                                                                                                   For the Year Ended March 31,
                                                                                              --------------------------------------
                                                                                                    2011                 2010
                                                                                              ------------------   -----------------
<S>                                                                                           <C>                  <C>

Cash flows from operating activities:
      Net loss                                                                                  $    (674,059)      $ (20,261,262)

Adjustments to reconcile  net loss from  continuing  operations to cash used for
      operating activities, before reorganization items:
      Income (loss) from discontinued operations                                                   (2,395,132)         17,460,840
      Reorganization items, net                                                                     1,434,334             310,591
      Loss on abandonment of leasehold improvements                                                   102,000                   -
      Depreciation and amortization                                                                   100,124             135,457
      Gain on settlement of liabilities                                                              (208,677)
      Stock-based compensation expense                                                                167,132             287,173
      Common stock issued for services, directors                                                           -              51,700
      Interest expense - convertible notes beneficial conversion feature                                    -             105,000
Changes in operating assets and liabilities:
      Restricted cash                                                                                (500,066)                  -
      Accounts receivable and prepaid expenses                                                        (62,234)            171,358
      Accounts payable and accrued liabilities                                                        (10,429)          1,877,377
                                                                                              ------------------   -----------------
        Net cash provided by (used for) operating activities, before reorganization items          (2,227,416)            138,234

Operating cash flows from reorganization items -
      professional fees for services rendered in connection with the Chapter 11 proceeding         (1,137,046)           (110,154)
                                                                                              ------------------   -----------------

        Net cash provided by (used for) operating activities                                       (3,414,462)             28,080
                                                                                              ------------------   -----------------

Cash flows from investing activities:
      Purchases of furniture, fixtures and equipment                                                   (5,890)                  -
      Proceeds from sales of assets                                                                         -               8,014
                                                                                              ------------------   -----------------
        Net cash provided by (used for) investing activities                                           (5,890)              8,014
                                                                                              ------------------   -----------------

Cash flows from financing activities:
      Proceeds from issuance of convertible notes payable                                                   -             140,000

      Proceeds from issuance of common stock upon exercise of stock options
                                                                                                            -                   5
                                                                                              ------------------   -----------------
        Net cash provided by financing activities                                                                         140,005
                                                                                                            -
                                                                                              ------------------   -----------------

Discontinued operations:
      Operating cash flows                                                                             (494,320)         (590,088)
      Investing cash flows                                                                            2,815,601           (32,760)
      Financing cash flows                                                                            4,610,013           (98,125)
                                                                                              ------------------   -----------------
        Net cash provided by (used for) discontinued operations                                       6,931,294          (720,973)
                                                                                              ------------------   -----------------

Increase (decrease) in cash and cash equivalents                                                      3,510,942          (544,874)
Cash and cash equivalents, beginning of period                                                          372,286           917,160
                                                                                              ------------------   -----------------
Cash and cash equivalents, end of period                                                        $     3,883,228    $      372,286
                                                                                              ==================   =================

Supplemental Statement of Cash Flow Information:
      Cash paid for interest                                                                    $     2,566,088    $      613,479
                                                                                              ==================   =================
Non-cash investing and financing activities:
      Closing costs from repayment of debt and asset dispositions                               $       593,438    $            -
                                                                                              ==================   =================
      Repayment of debt from asset sale proceeds                                                $    14,700,000    $            -
                                                                                              ==================   =================
      Asset retirement asset and obligation                                                     $             -    $      (18,747)
                                                                                              ==================   =================
      Discount on note payable, conveyance of overriding royalty interest and net profits       $             -    $    1,500,000
      interest
                                                                                              ==================   =================

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

                                              F-6
</TABLE>


<PAGE>

                              Rancher Energy Corp.
                             (Debtor-in-possession)
                         Notes to Financial Statements

Note 1 - Organization and Summary of Significant Accounting Policies

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

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

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

Bankruptcy Filing
-----------------

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

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

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

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

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

                                      F-7

<PAGE>

from those estimates.  Estimates of oil and gas reserve  quantities  provide the
basis for calculations of depletion,  depreciation,  and amortization (DD&A) and
impairment,  each of which  represents a significant  component of the financial
statements.

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

         The Company  currently has no revenue from continuing  operations.  The
Company's  discontinued  operations  derived revenue  primarily from the sale of
produced crude oil. Revenue (and net revenue interests) included in discontinued
operations  represent  amounts  received  before taking into account  production
taxes and transportation costs, which are reported as separate expenses. Revenue
included in  discontinued  operations  was  recorded in the month the  Company's
production was delivered to the purchaser and was not recognized unless title to
the product transferred to the purchaser.

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

         The Company considers all liquid investments  purchased with an initial
maturity  of  three  months  or less  to be  cash  equivalents.  Cash  and  cash
equivalents include demand deposits and money market funds carried at cost which
approximates fair value. The Company maintains its cash in institutions  insured
by the Federal Deposit Insurance  Corporation  ("FDIC").  At March 31, 2011, the
Company had $3,633,228 in cash deposits in excess of FDIC insured limits.

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

         At March 31, 2011 the Company had $500,066 of  restricted  cash,  which
was  classified as a current  asset.  The  restricted  cash is held in an escrow
account until a determination is made by the Court of the responsible  party for
legal fees incurred by GasRock Capital LLC in an adversary proceeding in process
(See Note 7).

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

         Accounts  receivable  consists  primarily of amounts due in  connection
with substantially all of the Company's assets. Such amounts were held back from
the sales proceeds and are due  contingent  upon the Company  providing  certain
information post-closing, which has been performed as of March 31, 2011.

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

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

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

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

         The Company reviews its long-lived  assets for impairments  when events
or changes in  circumstances  indicate that  impairment may have  occurred.  The
impairment test for proved properties compares the expected  undiscounted future
net cash flows on a property-by-property  basis with the related net capitalized
costs, including costs associated with asset retirement obligations,  at the end
of each  reporting  period.  Expected  future cash flows are  calculated  on all
proved  reserves  using a  discount  rate and price  forecasts  selected  by the
Company's  management.  The discount rate is a rate that management  believes is
representative  of current  market  conditions.  The price  forecast is based on
NYMEX strip pricing, adjusted for basis and quality differentials, for the first
three to five years and is held constant  thereafter.  Operating  costs are also
adjusted as deemed  appropriate  for these  estimates.  When the net capitalized
costs exceed the  undiscounted  future net revenues of a field,  the cost of the
field is reduced to fair value,  which is determined using discounted future net

                                      F-8

<PAGE>

revenues.  An  impairment  allowance is provided on unproved  property  when the
Company  determines  the property will not be developed or the carrying value is
not realizable. The sale of substantially of the Company's assets in March, 2011
resulted  in the Company  having no oil and gas  properties  at March 31,  2011.
During the year ended March 31, 2010,  the Company  recognized  an impairment of
$13,525,000,  representing  the excess of the carrying  value over the estimated
realizable value of such properties.  Following the recognition of impairment in
the year ended  March 31,  2010,  the net book value of the  Company's  unproved
properties was $0.

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

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

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

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

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

         Costs  incurred in  connection  with the Company's  debt  issuances are
capitalized  and amortized  over the term of the debt,  which  approximates  the
effective   interest  method.   Amortization  of  deferred  financing  costs  of
$1,500,000  was  recognized  for the year  ended  March 31,  2010,  and has been
charged to operations as an expense in the Statement of Operations.

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

         The  Company's   financial   instruments,   including   cash  and  cash
equivalents,  accounts  receivable,  and accounts payable,  are carried at cost,
which  approximates  fair  value  due  to  the  short-term   maturity  of  these
instruments.  Because considerable  judgment is required to develop estimates of
fair value, the estimates provided are not necessarily indicative of the amounts
the Company could realize upon the sale or refinancing of such instruments.

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

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

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

                                      F-9

<PAGE>

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

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

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

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

                                        For the Year Ended March 31,
                                        --------------------------------------
                                              2011                 2010
                                        -----------------    -----------------

                 Dilutive                            -                   -
                 Anti-dilutive              60,111,454          69,091,225

         Stock  options  and  warrants  were  not  considered  in  the  detailed
calculations below as their effect would be anti-dilutive.

         The  following  table sets forth the  calculation  of basic and diluted
loss per share:

<TABLE>
<CAPTION>

                                                                     For the Year Ended March 31,
                                                             ---------------------------------------------
                                                                     2011                    2010
                                                             --------------------    ---------------------
<S>                                                          <C>                     <C>

Net loss                                                      $       (674,059)       $    (20,261,262)
Basic weighted average common shares outstanding                   119,316,700             119,347,248
                                                              $                       $
Basic and diluted net loss per common share                              (0.01)                  (0.17)
                                                             ====================    =====================
</TABLE>

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

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

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

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

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

         The  Company  does  not  hold  or  issue   commodity   derivatives  for
speculative or trading purposes.  The Company is exposed to credit losses in the
event of nonperformance by the counterparty to its commodity derivatives.  It is
anticipated,  however,  that its counterparty  will be able to fully satisfy its
obligations  under the  commodity  derivatives  contracts.  The Company does not
obtain  collateral  or other  security  to  support  its  commodity  derivatives
contracts  subject to credit risk but does  monitor  the credit  standing of the

                                      F-10

<PAGE>

counterparty.  The price the Company receives for production in its three fields
is indexed to Wyoming Sweet crude oil posted  price.  The Company has not hedged
the basis  differential  between the NYMEX price and the  Wyoming  Sweet  price.
Under the terms of our Term Credit  Agreement issued in October 2007 the Company
was required hedge a portion of its expected future  production,  and it entered
into a costless collar  agreement for a portion of its anticipated  future crude
oil  production.  The  costless  collar  contains a fixed  floor price (put) and
ceiling price (call).  If the index price exceeds the call strike price or falls
below the put strike  price,  the Company  receives the fixed price and pays the
market price.  If the market price is between the call and the put strike price,
no payments are due from either party.  The table below  summarizes the terms of
the Company's costless collar:

          The table below summarizes the realized and unrealized  losses related
to the Company's  derivative  instruments for the years ended March 31, 2011 and
2010.

<TABLE>
<CAPTION>

                                                                      For the Year Ended March 31,
                                                              --------------------------------------------
                                                                     2011                    2010
                                                              ------------------    ----------------------
<S>                                                           <C>                   <C>

Realized gains on derivative instruments                      $              -        $        98,378
Unrealized losses on derivative instruments                   $              -               (455,960)
                                                              ------------------    --------------------
Net realized and unrealized losses on derivative instruments  $              -        $      (357,582)
                                                              ==================    ====================
</TABLE>

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

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

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

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

         For the years ended March 31, 2011 and 2010, one customer accounted for
100% of the Company's oil and gas sales from discontinued operations.

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

         As part of its ongoing  business,  the Company has not  participated in
transactions  that  generate  relationships  with  unconsolidated   entities  or
financial partnerships, such as entities often referred to as structured finance
or special purpose  entities  (SPEs),  which would have been established for the
purpose of facilitating  off-balance sheet  arrangements or other  contractually
narrow or limited purposes.  From February 4, 2004 (inception) through March 31,
2011, the Company has not been involved in any unconsolidated SPE transactions.

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

         Certain amounts in the 2010 financial statements have been reclassified
to conform to the 2011 financial statement presentation.  Such reclassifications
had no effect on the Company's net loss.

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

         In January 2010, the FASB issued FASB Accounting Standards Update (ASU)
No. 2010-03 "Oil and Gas Estimations and Disclosures" (ASU 2010-03). This update
aligns the  current  oil and  natural  gas  reserve  estimation  and  disclosure
requirements  of the  Extractive  Industries  Oil  and  Gas  topic  of the  FASB
Accounting  Standards  Codification (ASC Topic 932) with the changes required by
the SEC final rule ASC 2010-3,  as  discussed  above,  ASU  2010-03  expands the
disclosures  required for equity method  investments,  revises the definition of
oil- and natural gas-producing activities to include nontraditional resources in
reserves  unless not intended to be upgraded into  synthetic oil or natural gas,
amends the definition of proved oil and natural gas reserves to require 12-month
average  pricing in  estimating  reserves,  amends and adds  definitions  in the
Master Glossary that is used in estimating proved oil and natural gas quantities
and  provides  guidance  on  geographic  area  with  respect  to  disclosure  of
information   about   significant   reserves.   ASU  2010-03   must  be  applied

                                      F-11

<PAGE>

prospectively  as a change in accounting  principle that is  inseparable  from a
change  in  accounting  estimate  and is  effective  for  entities  with  annual
reporting  periods ending on or after December 31, 2009. The Company adopted ASU
2010-03  effective  December  31,  2009.  The  Company  does  not  believe  that
provisions of the new guidance,  other than pricing,  significantly impacted the
reserve  estimates or consolidated  financial  statements.  The Company does not
believe that it is  practicable to estimate the effect of applying the new rules
on net loss or the amount recorded for depreciation,  depletion and amortization
for the years ended March 31, 2011 and 2010.

         In January 2010,  the FASB issued ASU 2010-06,  "Improving  Disclosures
About  Fair  Value  Measurements",  which  provides  amendments  to  fair  value
disclosures.  ASU 2010-06 requires additional  disclosures and clarifications of
existing disclosures for recurring and nonrecurring fair value measurements. The
revised  guidance for transfers  into and out of Level 1 and Level 2 categories,
as well as increased  disclosures around inputs to fair value  measurement,  was
adopted  January 1, 2010,  with the amendments to Level 3 disclosures  effective
beginning after January 1, 2011. ASU 2010-06 concerns  disclosure only.  Neither
the  current  requirements  nor the  amendments  effective  in 2011  will have a
material impact on the Company's financial position or results of operations.

Note 2 - Proceedings Under Chapter 11 of the United States Bankruptcy Code

         On  October  28,  2009  (the  "Petition  Date"),  the  Company  filed a
voluntary  petition for relief under Chapter 11 of the Bankruptcy  Code with the
Bankruptcy  Court.  The  petition  was filed in order to enable  the  Company to
pursue  reorganization  efforts under  Chapter 11 of the  Bankruptcy  Code.  The
Company  continues  to operate its  business as  debtor-in-possession  under the
jurisdiction  of the  Bankruptcy  Court and in  accordance  with the  applicable
provisions  of the  Bankruptcy  Code and  orders  of the  Bankruptcy  Court.  In
general, as debtor-in-possession,  the Company is authorized under Chapter 11 to
continue to operate as an ongoing  business,  but may not engage in transactions
outside of the  ordinary  course of business  without the prior  approval of the
Bankruptcy Court.

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

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

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

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

                                      F-12

<PAGE>

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

         As a  result  of the  Bankruptcy  Filing,  realization  of  assets  and
liquidation  of liabilities  are subject to  uncertainty.  While  operating as a
debtor-in-possession  under  the  protection  of  Chapter  11,  and  subject  to
Bankruptcy  Court  approval or otherwise  as  permitted in the normal  course of
business,  the Company may sell or otherwise  dispose of assets and liquidate or
settle  liabilities  for amounts  other than those  reflected  in the  condensed
financial statements.  The Company has recognized a net gain from the settlement
and  adjustment of  liabilities  of $85,750 and $0 for the years ended March 31,
2011 and 2010, respectively.

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

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

         Under the priority scheme  established by the Bankruptcy  Code,  unless
creditors agree otherwise, post-petition liabilities and Prepetition liabilities
must be  satisfied  in full before  shareholders  of the Company are entitled to
receive any distribution or retain any property under a plan of  reorganization.
The ultimate recovery, if any, to creditors and shareholders of the Company will
not  be  determined   until   confirmation   and   consummation  of  a  plan  of
reorganization.  No assurance  can be given as to what values,  if any,  will be
ascribed in the Bankruptcy Cases to each of these  constituencies  or what types
or amounts  of  distributions,  if any,  they would  receive.  Accordingly,  the
Company  urges that extreme  caution be  exercised  with respect to existing and
future investments in any of the Company's liabilities and/or securities.

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

         On December 15, 2010,  the Company filed a Motion to approve  financing
from a party not affiliated with its present lender.  The purpose of the loan is
to repay the  existing  lender in full and to pay  certain  past due ad  valorem
taxes owed to Converse  County,  Wyoming.  Converse County agreed that if it was
paid by February 1, 2011, it would waive penalties and interest of approximately
$93,000.  This loan  closed  in  January  2011,  see Note 5 - Short  Term  Notes
Payable.

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

Reorganization Items

         Reorganization items represent the direct and incremental costs related
to the Company's  Chapter 11 case,  such as professional  fees incurred,  net of
interest income earned on accumulated cash during the Chapter 11 process.  These
restructuring  activities may result in additional charges and other adjustments

                                      F-13

<PAGE>

for  expected  allowed  claims  (including  claims that have been allowed by the
Court) and other  reorganization  items that could be material to the  Company's
financial position or results of operations in any given period.

Liabilities Subject to Compromise

         Liabilities  subject to  compromise  at March 31, 2011 and 2010 include
the following Prepetition liabilities:

                                                 2011               2010
                                             --------------     --------------
Accounts payable, trade                        $  176,616         $   164,390
Other payables and accrued liabilities            820,312             395,291
Property and ad valorem taxes payable                -                766,227
Convertible notes payable                         140,000             140,000
                                             --------------     --------------
                                               $1,136,928         $ 1,465,908
                                             ==============     ==============

Note 3 - Discontinued Operations

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


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

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

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

         The financial results of our business related to oil and gas operations
have been classified as discontinued  operations in our Statements of Operations
for all period presented.  The following summarizes  components of income (loss)
from the Company's  discontinued  operations  for the years ended March 31, 2011
and 2010:

<TABLE>
<CAPTION>

                                                               2011                  2010
                                                       -------------------    ------------------
<S>                                                    <C>                    <C>

Revenue                                                  $    4,385,829        $     3,228,156
                                                       -------------------    ------------------

Operating expenses                                            4,558,108             17,193,360
                                                       -------------------    ------------------

Operating loss from discontinued operations                    (172,279)           (13,965,204)

Other expenses from discontinued operations, net             (2,239,810)            (3,495,636)
                                                       -------------------    ------------------

    Net operating loss from discontinued operations          (2,412,089)           (17,460,840)

    Net gain on sale of discontinued operations               4,807,221                    -
                                                       -------------------    ------------------

      Net income (loss) from discontinued operations     $    2,395,132        $   (17,460,840)
                                                       ===================    ==================
</TABLE>

                                      F-14

<PAGE>


         The assets and liabilities  relating to the Company's  discontinued oil
and gas  operations  are  reflected as assets and  liabilities  of  discontinued
operations in the  accompanying  balance  sheets.  The following  summarizes the
components of these assets and liabilities at March 31, 2011 and 2010:

<TABLE>
<CAPTION>

                                                                                March 31,
                                                                   ------------------------------------
                                                                        2011                2010
                                                                   ----------------    ----------------
<S>                                                                <C>                 <C>

Assets:
------
Current assets of discontinued operations -
     accounts receivable                                                 $  45,229      $      539,809
                                                                   ----------------    ----------------


Furniture and equipment, net                                                     -             265,965
Oil and gas properties, net                                                      -          16,108,293

Other assets                                                               814,354             873,321
                                                                   ----------------    ----------------
     Long-term assets of discontinued operations                           814,354          17,247,579
                                                                   ----------------    ----------------

         Total assets of discontinued operations                         $ 859,583      $   17,787,388
                                                                   ================    ================

Liabilities:
-----------
Current liabilities of discontinued operations:
     Accounts payable and accrued liabilities                            $  58,191      $      532,131
     Asset retirement obligation                                                               174,332
     Accrued interest                                                                          893,615

     Note payable                                                                -          10,089,987
                                                                   ----------------    ----------------
         Total current liabilities of discontinued operations               58,191          11,690,065

Long-term liabilities of discontinued operations -

     asset retirement obligation                                                 -           1,255,497
                                                                   ----------------    ----------------

                                                                         $  58,191      $   12,945,562
                                                                   ================    ================
</TABLE>

Oil and gas properties

         The following  summarizes  the oil and gas  properties of  discontinued
operations as of March 31, 2011 and 2010:


                                                  2011              2010
                                               ------------     --------------
Proved properties                              $      -          $  19,432,703
                                               ------------     --------------

Unimproved properties excluded from DD&A              -             52,716,480
Equipment and other                                   -                314,334
                                               ------------     --------------
Unevaluated properties                                -
                                               ------------     --------------

Total oil and gas properties                          -             72,463,517
Less: Accumulated depletion, depreciation,            -           (56,355,224)
  amortization and impairment
                                               ------------     --------------
                                                $     -          $  16,108,293
                                               ============     ==============

                                      F-15

<PAGE>

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

         In conjunction  with the regular  periodic  assessment of impairment of
unproved  properties,  the Company  assessed the carrying  value of its unproved
properties  giving  consideration  to  volatility  of  commodity  prices and the
difficulties  encountered  in raising  capital to develop the  properties.  As a
result of this  assessment,  the  Company  recorded  an  impairment  on unproved
properties of $13,525,000  during the year ended March 31, 2010.  This amount is
included in operating expenses from discontinued operations.

Asset Retirement Obligations
----------------------------

         The  Company  recognizes  an  estimated   liability  for  future  costs
associated with the  abandonment of its oil and gas properties.  A liability for
the fair value of an asset retirement obligation and a corresponding increase to
the carrying  value of the related  long-lived  asset are recorded at the time a
well is  completed or  acquired.  The increase in carrying  value is included in
proved oil and gas properties in the balance  sheets.  The Company  depletes the
amount  added to proved  oil and gas  property  costs and  recognizes  accretion
expense in connection with the discounted liability over the remaining estimated
economic  lives of the respective  oil and gas  properties.  Cash paid to settle
asset  retirement  obligations  is  included  in the  operating  section  of the
Company's statement of cash flows.

         The Company's estimated asset retirement  obligation liability is based
on our historical  experience in abandoning  wells,  estimated  economic  lives,
estimated costs abandoning wells in the future, and Federal and state regulatory
requirements. The liability is discounted using a credit-adjusted risk-free rate
estimated at the time the liability is incurred or revised.  The credit-adjusted
risk-free rate used to discount the Company's abandonment liabilities was 13.1%.
Revisions to the liability are due to changes in estimated abandonment costs and
changes in well  economic  lives,  or if Federal or state  regulators  enact new
requirements regarding the abandonment of wells.

         A reconciliation of the Company's asset retirement obligation liability
during the years ended March 31, 2011 and 2010 is as follows:

                                           2011                   2010
                                       -----------------   --------------------
Beginning asset retirement obligation   $   1,429,829       $      1,280,680
Liabilities incurred
                                                    -                      -
Liabilities settled                         (1,589,138)                    -
Changes in estimates                                -                (18,747)
Accretion expense                              159,309               167,896
                                       -----------------   --------------------

Ending asset retirement obligation     $             -      $      1,429,829
                                       =================   ====================


Current                                $             -      $         174,332
Long-term                                            -              1,255,497
                                       -----------------   --------------------

                                       $             -      $       1,429,829
                                       =================   ====================

Note 4 - Fair Value Measurements

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

     o    Level 1: Quoted prices are  available in active  markets for identical
          assets or liabilities;
     o    Level 2:  Quoted  prices in active  markets  for  similar  assets  and
          liabilities that are observable for the asset or liability; or

                                      F-16

<PAGE>

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

         FASB ASC 820 requires financial assets and liabilities to be classified
based on the  lowest  level  of  input  that is  significant  to the fair  value
measurement.  The Company's assessment of the significance of a particular input
to the fair value measurement requires judgment, and may affect the valuation of
the fair value of assets and  liabilities  and their  placement  within the fair
value  hierarchy  levels.  As of March 31, 2011 the Company had no derivative or
other financial assets or liabilities  required to be reported at fair value. In
accordance with FSP 157-2, the Company has not applied the provisions of ASC 820
to its asset retirement obligations.

Note 5 - Short Term Notes Payable

         On January 28, 2011 the Company received debtor-in-possession financing
("DIP  Financing")  pursuant to a credit agreement (the "DIP Credit  Agreement")
with a new lender.  The DIP Credit  Agreement  provided  loan  advances up to an
aggregate of $14,700,000,  and matures May 28, 2011 (total term of 120 days from
the date of  closing).  The  Company  borrowed  a total of  approximately  $14.0
million  under the DIP Credit  Agreement  and the proceeds  were used to pay the
allowed,  secured claims for certain ad valorem  property taxes,  amounts due to
under  Prepetition  Note (defined  below) and to fund $100,000 for the Company's
bankruptcy estate if no plan or reorganization is approved.

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

         On  February  16,  2011,  the   Bankruptcy   Court  approved  an  order
authorizing  the sale of  substantially  all of the Company's  assets to the DIP
Financing  lender for $20.0 million.  Effective  March 1, 2011, the Company sold
substantially  of  its  assets  to  the  DIP  Financing  Lender  (see  Note  3 -
Discontinued  Operations).  On March 14, 2011,  all  outstanding  principal  and
accrued interest totaling $14,829,250 were paid and the DIP Credit Agreement was
cancelled.

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

         The  Company  has filed an  adversary  action in the  Bankruptcy  Court
against the  Prepetition  Lender in an effort to avoid  certain of the interests
previously  assigned to the  Prepetition  Lender (see Note 7 -  Commitments  and
Contingencies).

Note 6 - Convertible Promissory Notes Payable

         On October 27, 2009, the Company issued  Convertible  Promissory  Notes
(the "Promissory Notes") totaling $140,000.  One hundred thousand dollars of the
Promissory  Notes were issued to officers and/or  directors  ($25,000 each). The
remainder  of the  Promissory  Notes was issued to  existing  shareholders.  The
Promissory  Notes bear  interest  at an annual  rate equal to the greater of (i)
12%, or (ii) the prime rate (as  published in the Wall Street  Journal) plus 3%.
The Promissory Notes are convertible, at the holder's option, into shares of the
Company's  common  stock at a conversion  price of $0.02 per share,  at any time
during  the term of the  Promissory  Notes.  The  Promissory  Notes  matured  on

                                      F-17

<PAGE>


November 1, 2010,  and all  obligations  and payments  due under the  Promissory
Notes are subordinate to the Company's senior debt. As a result of the Company's
Chapter 11 bankruptcy  filing  described in Notes 1 and 2 above, the Company was
not able to pay principal and accumulated  interest on the Promissory Notes when
due.  Subject to certain  exceptions  under the  Bankruptcy  Code, the Company's
bankruptcy  filing  automatically  enjoins,  or stays,  the  continuation of any
judicial or  administrative  proceedings or other actions against the Company or
its  property  to recover  on,  collect or secure a claim  arising  prior to the
Petition Date.

Note 7 - Commitments and Contingencies

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

         On February 12,  2010,  the Company  filed an  adversary  action in the
Bankruptcy Court against the holder of the then senior secured note payable (see
NOTE 6 - Short Term Note Payable) seeking to avoid certain  ownership  interests
assigned  to the  Lender  in  connection  with the  Term  Credit  Agreement  and
amendments  thereto. On March 18, 2010, the Lender filed a motion with the Court
to dismiss the complaint.  On October 21, 2010, the Court issued an order on the
Motion to Dismiss  dismissing  three of the nine  claims  made in the  adversary
action.  The Company is actively pursuing the remaining  claims.  The Company is
unable to predict a likely  outcome or estimate the possible  benefit should the
Company prevail in the litigation.

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

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

Litigation
----------

     In a  letter  dated  February  18,  2009  sent  to  each  of the  Company's
Directors, attorneys representing a group of persons who purchased approximately
$1,800,000 of securities (in the aggregate) in the Company's  private  placement
offering  commenced in late 2006,  alleged that securities laws were violated in
that offering.  In April 2009, the Company entered into tolling  agreements with
the  purchasers  to toll the statutes of  limitations  applicable  to any claims
related to the private placement.  The Company's Board of Directors directed the
Special  Committee to  investigate  these  allegations.  The Company  denies the
allegations and believes they are without merit.  The Company cannot predict the
likelihood of a lawsuit being filed, its possible  outcome,  or estimate a range
of possible losses, if any, that could result in the event of an adverse verdict
in any such  lawsuit.  Any suit  against the Company is stayed by the Chapter 11
case, and,  insofar as these claims are asserted  against the Company,  they are
subject to the claim  process  imposed by the  Bankruptcy  Code and the possible
subordination  under Section 510(b) of the Bankruptcy  Code. The purchasers have
filed a Proof of Claim with the  Bankruptcy  Court in the  amount of  $1,776,050
plus  ancillary  amounts  purported  to be damages  attributable  to the alleged
securities  violations.  In June 2011, the Bankruptcy  Court rendered a decision
that these claims are subordinated to unsecured claims.

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

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

         A former officer of the Company  filed a  Proof of Claim for  wages and
benefits,  to which the Company  has  objected  with the  Bankruptcy  Court.  No
hearing on the matter has yet been held.

         GasRock filed a Proof of Claim for attorney's fees and costs related to
the Chapter 11 case generally, and to the litigation pending between GasRock and
the Company.  The Company has objected to these fees on various grounds,  and no
hearings on these objections have been held.

Note 8 - Stockholders' Equity

         The  Company's  capital stock as of March 31, 2011 and 2010 consists of
275,000,000 authorized shares of common stock, par value $0.00001 per share.

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

         During the year  ended  March 31,  2011,  there  were no  issuances  or
cancellations of common stock.

         During the year ended March 31, 2010,  activity in the Company's common
stock  consisted of the following:

                                      F-18

<PAGE>

     -    issued  500,000 shares to an officer of the upon the exercise of stock
          options;
     -    cancelled 200,000 of non-vested shares previously issued to directors

Warrants
--------

         In  connection  with sale of common stock and other  securities  in the
fiscal year ended March 31, 2007, the Company issued warrants to purchase shares
of common stock. The following is a summary of warrants  outstanding as of March
31, 2011:

<TABLE>
<CAPTION>

                                                          Warrants           Exercise Price          Expiration Date
                                                     -------------------    ------------------    -----------------------
<S>                                                  <C>                    <C>                   <C>

Warrants issued in connection with the following:

Private placement of common stock                    45,940,510             $1.50                          March 30, 2012
Private placement of convertible notes payable       6,996,322              $1.50                          March 30, 2012
Private placement agent commissions                  1,445,733              $1.50                          March 30, 2012
Acquisition of oil and gas properties                250,000                $1.50                       December 22, 2011
                                                     -------------------
  Total warrants outstanding at March 31, 2011       54,632,565
                                                     ===================
</TABLE>

Note 9 - Share-Based Compensation

         Share-based  awards to employees  and directors are accounted for under
FASB ASC 718 "share-Based  Payment FASB SAC 718 requires  companies to recognize
share-based  payments to employees as  compensation  expense  using a fair value
method. Under the fair value recognition provisions of FASB ASC 718, stock-based
compensation  cost is  measured at the grant date based on the fair value of the
award and is recognized as an expense over the service period on a straight-line
basis,  which  generally  represents  the  vesting  period.  The Company did not
recognize a tax benefit from the stock  compensation  expense because it is more
likely than not that the related deferred tax assets, which have been reduced by
a full valuation allowance, will not be realized.

         The Black-Scholes  option-pricing model was used to estimate the option
fair values. The option-pricing model requires a number of assumptions, of which
the most  significant  are the stock price at the valuation  date,  the expected
stock price  volatility,  and the expected  option term (the amount of time from
the grant date until the options are exercised or expire).

         Prior to the  adoption  of FASB  ASC 718,  the  Company  reflected  tax
benefits  from  deductions  resulting  from the  exercise  of stock  options  as
operating  activities in the statements of cash flows. FASB ASC 718 requires tax
benefits  resulting  from tax  deductions  in  excess of the  compensation  cost
recognized for those options (excess tax benefits) be classified and reported as
both an operating cash outflow and a financing cash inflow upon adoption of FASB
ASC 718.  As a result of the  Company's  net  operating  losses,  the excess tax
benefits,  which would  otherwise be available to reduce  income taxes  payable,
have the effect of increasing the Company's net operating  loss carry  forwards.
Accordingly,  because  the  Company  is not able to  realize  these  excess  tax
benefits, such benefits have not been recognized in the statements of cash flows
for the years ended March 31, 2011 and 2010.

Chief Executive Officer (CEO) and Non-Executive Director Option Grants
----------------------------------------------------------------------

         On May 15,  2006,  in  connection  with an  employment  agreement,  the
Company granted its President and CEO options to purchase up to 4,000,000 shares
of Company common stock at an exercise price of $0.00001 per share.  The options
vest  as  follows:  (i)  1,000,000  shares  upon  execution  of  the  employment
agreement,  (ii) 1,000,000  shares from June 1, 2006 to May 31, 2007 at the rate
of 250,000 shares per completed quarter of service,  (iii) 1,000,000 shares from
June 1, 2007 to May 31, 2008 at the rate of 250,000 shares per completed quarter
of service,  and (iv) 1,000,000  shares from June 1, 2008 to May 31, 2010 at the
rate of  250,000  shares per  completed  quarter  of  service.  In the event the
employment  agreement  is  terminated,  the CEO will be allowed to exercise  all
options that are vested.  All unvested  options shall be forfeited.  The options
have no expiration date.

         The Company  determined the fair value of the options to be $0.4235 per
underlying  common share.  The value was  determined by using the  Black-Scholes
valuation model using  assumptions  which resulted in the value of one Unit (one
common share and one warrant to purchase a common  share)  equaling  $0.50,  the
price  of the  most  recently  issued  securities  at the  date of  grant of the

                                      F-19

<PAGE>

options.  The combined value was allocated between the value of the common stock
and the value of the warrant.  The value of one common share from this  analysis
($0.4235)  was used to calculate the  resulting  compensation  expense under the
provisions  of SFAS 123(R).  The  assumptions  used in the  valuation of the CEO
options were as follows:

 Volatility                                                87.00%
 Expected option term                                    One year
 Risk-free interest rate                                    5.22%
 Expected dividend yield                                    0.00%

         The expected term of options  granted was based on the expected term of
the warrants included in the Units described above. The expected  volatility was
based on historical  volatility of the  Company's  common stock price.  The risk
free rate was based on the one-year U.S Treasury bond rate for the month of July
2006.

         The  Company  recognized  the  remaining  stock  compensation   expense
attributable  to these options of $105,875  during the ended March 31, 2010. All
compensation  expense relating to these options had been recognized prior to the
termination of the CEO on October 2, 2009.

         On October 27, 2009,  in  conjunction  with the execution of Management
Retention Agreements (the "Retention Agreement"), the Company's new CEO and each
of the Company's three  non-executive  directors was granted options to purchase
2,500,000  shares of the Company's  common stock at an exercise  price of $0.035
per share.  The options  expire on  December  31,  2019 and are  exercisable  as
follows:  1) 10% on the date of grant;  and 2) 90% on or after the  earliest  to
occur  of:  i)  November  1,  2010;  ii)  the  confirmation  by the  court  of a
reorganization  plan for the Company filed with the Bankruptcy  Court;  iii) the
dismissal  of the  Company  from  Chapter 11  bankruptcy  with  approval  of the
Bankruptcy Court; iv) an event of merger, consolidation, sale of assets or other
transaction  which  results  in  the  holders  of  the  Company's  common  stock
immediately after such transaction  owning less the 50% of the stock outstanding
immediately before any such  transaction(s);  v) any other Change of Control, as
defined in the  Retention  Agreement;  or vi) a Voluntary  Termination  for Good
Reason, as defined in the Retention Agreement.

         The Company  determined the fair value of the options to be $0.0255 per
underlying  common  share.  The value  was  determined  using the  Black-Scholes
valuation model using the following assumptions:


Volatility                                                   125.14%
Expected option term                                        3 years
Risk-free interest rate                                        5.22%
Expected dividend yield                                        0.00%

         The Company recognized stock based compensation expense relating to the
new CEO's and non-executive  Director's options of $134,000 and $121,000 for the
fiscal years ended March 31, 2011 and 2010, respectively.  As of March 31, 2011,
all outstanding options were vested.

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

         On March 30,  2007,  the 2006  Stock  Incentive  Plan  (the 2006  Stock
Incentive Plan) was approved by the  shareholders  and was effective  October 2,
2006.  The  2006  Stock  Incentive  Plan had  previously  been  approved  by the
Company's Board of Directors.  Under the 2006 Stock Incentive Plan, the Board of
Directors  may grant  awards of options to  purchase  common  stock,  restricted
stock, or restricted stock units to officers,  employees,  and other persons who
provide services to the Company or any related company. The participants to whom
awards are granted, the type of awards granted, the number of shares covered for
each award, and the purchase price, conditions and other terms of each award are
determined by the Board of Directors,  except that the term of the options shall
not exceed 10 years. A total of 10,000,000 shares of Rancher Energy common stock
are subject to the 2006 Stock  Incentive  Plan.  The shares  issued for the 2006
Stock Incentive Plan may be either  treasury or authorized and unissued  shares.
During the year ended  March 31,  2011 no options  were  granted  under the 2006
Stock Incentive Plan. During the year ended March 31, 2010,  options to purchase
1,700,000  of the  Company's  stock  were  granted  to  two  employees  and  one
non-employee under the 2006 Stock Incentive Plan.

                                      F-20

<PAGE>

         The fair value of the options  granted  under the 2006 Stock  Incentive
Plan  during  fiscal  2010  was  estimated  as  of  the  grant  date  using  the
Black-Scholes option pricing model with the following assumptions:

Volatility                                                        125.14%
Expected option term                                             3 years
Risk-free interest rate                                             5.22%
Expected dividend yield                                             0.00%

         The  expected  volatility  was based the  volatility  of the  Company's
common stock for a period of time  equivalent to the expected term. The expected
term of options granted was estimated in accordance  with the simplified  method
prescribed in SEC Staff Accounting  Bulletin ("SAB") No. 107 and SAB No 110. The
risk free rate was based on the three-year U.S Treasury note rate.

         The following table summarizes stock option activity for the year ended
March 31, 2011 and 2010:

<TABLE>
<CAPTION>

                                                              2011                                         2010
                                            -----------------------------------------    -----------------------------------------
                                                                   Weighted Average                             Weighted Average
                                            Number of Options       Exercise Price       Number of Options       Exercise Price
                                            -------------------    ------------------    ------------------    -------------------
<S>                                         <C>                    <C>                   <C>                   <C>

Outstanding at beginning of year
                                           $
    Non-qualified                                  10,000,000       $0.00001                      500,000      $0.00001
    2006 Plan                                       2,206,000       $  0.154                      576,000      $0.612
Granted

    Non-qualified                                           -       $             -            10,000,000      $0.035
    2006 Plan                                               -       $             -             1,700,000      $0.035
Exercised
    Non-qualified                                           -       $             -              (500,000)     $0.00001
    2006 Plan                                               -       $             -
Cancelled
    Non-qualified                                           -       $             -                     -      -
    2006 Plan                                        (765,000)      $ 0.279                       (70,000)     $0.984
                                            -------------------                          ------------------
Outstanding at March 31,
    Non-qualified                                  10,000,000       $  0.035                   10,000,000      $0.035
                                            ===================    ==================    ==================    ===================
    2006 Plan                                       1,441,000       $ 0.0875                    2,206,000      $0.154
                                            ===================    ==================    ==================    ===================
Exercisable at March 31,
    Non-qualified                                  10,000,000       $ 0.035                     1,000,000      $0.035
                                            ===================    ==================    ==================    ===================
    2006 Plan                                       1,441,000       $ 0.0875                      516,667      $0.40
                                            ===================    ==================    ==================    ===================
</TABLE>


                  The  following  table  summarizes  information  related to the
outstanding and vested options as of March 31, 2011:

<TABLE>
<CAPTION>

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

  Number of shares
       Non-qualified                                                                     10,000,000
                                                                10,000,000
       2006 Plan
  Weighted average remaining contractual life
       Non-qualified                                             3.6 years                3.6 years
       2006 Plan                                                 3.5 years                3.5 years
                    Weighted average exercise price
       Non-qualified                                            $ 0.035                  $ 0.035
       2006 Plan                                                $ 0.0875                 $ 0.0875
  Aggregate intrinsic value
       Non-qualified                                            $(50,000)                $(50,000)
                                                                $(82,825)                $(82,825)
</TABLE>

                                      F-21

<PAGE>

         The following table summarizes  changes in the unvested options for the
years ended March 31, 2011 and 2010:

                                                                Weighted
                                                                 Average
                                       Number of               Grant Date
                                        Options               Fair Value
                                   -------------------     --------------------

  Non-vested, April 1, 2009
                Non-qualified                250,000         $          0.42
                2006 Plan                    366,000         $          0.27
                                   -------------------
                Total                        616,000         $          0.33
                                   -------------------
  Granted-
                Non-qualified             10,000,000         $       0.02545
                2006 Plan                  1,700,000         $       0.02545
                                   -------------------
                Total                     11,700,000         $       0.02545
                                   -------------------
  Vested-
                Non-qualified             (1,250,000)        $       0.10506
                2006 Plan                   (338,334)        $       0.13791
                                   -------------------
                Total                     (1,588,334)        $       0.01121
                                   -------------------
  Cancelled-
                2006 Plan                    (37,333)        $        0.4996
                                   -------------------

  Non-vested, March 31, 2010
                Non-qualified              9,000,000         $       0.02545
                2006 Plan                  1,690,333         $       0.04514
                                   -------------------
                Total                     10,690,333         $       0.02856
                                   ===================     ====================
  Granted-
                Non-qualified                      -         $           -
                2006 Plan                          -         $           -
                                   -------------------
                Total                              -         $           -
                                   -------------------
  Vested-
                Non-qualified             (9,000,000)        $       0.02545
                2006 Plan                 (1,225,333)        $       0.04359
                                   -------------------
                Total                    (10,225,333)        $       0.02774
                                   -------------------
  Cancelled-
                 2006 Plan                  (465,000)        $        0.1343
                                   -------------------

  Non-vested, March 31, 2011
                Non-qualified                      -         $           -
                2006 Plan                          -         $           -
                                   -------------------
                Total                              -         $           -
                                   ===================     ====================

         The total  intrinsic  value,  calculated as the difference  between the
exercise  price and the  market  price on the date of  exercise  of all  options
exercised  during the years  ended March 31,  2011 and 2010,  was  approximately
$132,825 and $9,700,  respectively.  No options were  exercised  during the year
ended March 31, 2011. The Company received $5 for stock options exercised during
the year ended March 31,  2010.  The Company did not realize any tax  deductions
related to the exercise of stock options for either year.

Note 10 - Income Taxes

         The  effective  income tax rate for the years  ended March 31, 2011 and
2010  differs  from  the  U.S.  Federal  statutory  income  tax  rate due to the
following:

                                      F-22

<PAGE>

<TABLE>
<CAPTION>

                                                     2011                   2010
                                             --------------------   ---------------------
<S>                                          <C>                    <C>

Federal statutory income tax rate                    $   236,000            $  7,092,000
State income taxes, net of Federal benefit                 1,000                  21,000
Permanent items                                        (254,000)               (168,000)
Other                                                     57,000                  68,000
Change in valuation allowance                           (40,000)             (7,013,000)
                                             --------------------   ---------------------

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

         The  components of the deferred tax assets and  liabilities as of March
31, 2011 and 2010 are as follows:

<TABLE>
<CAPTION>

                                                      2011                   2010
                                               -------------------    --------------------
<S>                                            <C>                    <C>

Long-term deferred tax assets:
  Federal net operating loss carryforwards       $    29,903,000        $     11,663,000
  Asset retirement obligation                               -                    502,000
  Stock-based compensation                               761,000                 714,000
  Accrued expenses                                       132,000                   6,000
  Property, plant and equipment                             -                 17,797,000
Long-term deferred tax liabilities:
  Property, plant and equipment                          (75,000)                   -
Valuation allowance                                  (30,721,000)            (30,682,000)
                                               -------------------    --------------------
Net long-term deferred tax assets                $          -           $           -
                                               ===================    ====================
</TABLE>

         The  Company  has  net  operating  loss  carryovers  of   approximately
$85,200,000  as of March 31, 2011.  The Company's net operating  losses begin to
expire in 2024.

         The Company has provided a full  valuation  allowance  for the deferred
tax  assets  as of March  31,  2011 an 2010,  based on the  likelihood  that the
deferred tax assets will not be utilized in the future.

Note 11 - Related Party Transactions

         A  director  of the  Company  is a partner in the law firm that acts as
 counsel to the Company. The Company incurred legal fees and expenses to the law
 firm in the amount of  $113,313  and  $72,768  during the years ended March 31,
 2011 and 2010, respectively.  The amount owed to the law firm was approximately
 $54,000 and $6,700 as of March 31, 2011 and 2010, respectively.

         A director  of the Company is a partner in a firm that  provides  field
 supervision and consulting  services to the Company.  The Company incurred fees
 and expenses to the firm in the amount of $108,969 and $68,907 during the years
 ended  March 31, 2011 and 2010,  respectively.  The amount owed to the firm was
 $7,000 and $23,000 as of March 31, 2011 and 2010, respectively.

Note 12 -  Disclosures  About  Oil and Gas  Producing  Activities  (Discontinued
Operations)

Costs Incurred in Oil and Gas Producing Activities:

         Costs  incurred in oil and gas property  acquisition,  exploration  and
development  activities,  whether  capitalized  or expensed,  are  summarized as
follows:

                                          For the Year Ended March 31,
                                            2011                 2010
                                      ------------------    ----------------
Exploration                            $        31,953      $        19,181
Development                                    166,600               82,963
Acquisitions:
Unproved                                              -                   -
Proved                                                -                   -
                                      ------------------    ----------------
Total                                  $        198,553        $    102,144

Costs associated with asset
        retirement obligations         $              -     $       (18,747)
                                      ==================    ================

                                      F-23

<PAGE>

Oil and Gas Reserve Quantities (Unaudited):

         The Company had no  reserves as of March 31,  2011.  For the year ended
March 31, 2010, Ryder Scott Company,  L.P. prepared the reserve  information for
the  Company's  Cole Creek South,  South  Glenrock B, South  Glenrock A, and Big
Muddy Fields in the Powder River Basin.

         Proved  oil and gas  reserves,  as  defined in  Regulation  S-X.,  Rule
4-10(a)(22),  are  those  quantities  of oil and  gas,  which,  by  analysis  of
geoscience and engineering  data, can be estimated with reasonable  certainty to
be economically  producible from a given date forward.  Proved developed oil and
gas reserves  are those  expected to be recovered  through  existing  wells with
existing equipment and operating  methods.  All of the Company's proved reserves
were located in the continental United States.

         Presented below is a summary of the changes in the Company's  estimated
oil  reserves  (in  barrels)  for the years  ended  March 31, 2011 and 2010 (the
Company did not have any natural gas reserves).

<TABLE>
<CAPTION>

                                                           2011                  2010
                                                     ------------------    ------------------
<S>                                                  <C>                   <C>

Total proved:
Beginning of year                                             851,179             1,166,702
Purchases, sales and assignments of minerals
        in-place                                             (790,212)              (51,235)
Production                                                    (60,967)              (56,818)
Revisions of previous estimates                                     -              (207,470)
                                                     ------------------    ------------------
End of year                                                         -               851,179
                                                     ==================    ==================

Proved developed reserves:                                          -               815,138
                                                     ==================    ==================
</TABLE>


Standardized Measure of Discounted Future Net Cash Flows (Unaudited):

         FASB  ASC  932, "Disclosures about Oil  and Gas  Producing  Activities"
prescribes  guidelines for computing a  standardized  measure of future net cash
flows and changes therein relating to estimated proved reserves. The Company has
followed these guidelines, which are briefly discussed below.

         Future cash inflows were  determined  by applying  average first day of
month prices received for the previous year, including transportation,  quality,
and basis differentials  ("net prices",  and production and development costs in
effect at year-end to the  year-end  estimated  quantities  of oil and gas to be
produced in the future. Each property the Company operated was also charged with
field-level  overhead in the estimated  reserve  calculation.  Estimated  future
income taxes were computed using current  statutory income tax rates,  including
consideration for estimated future statutory depletion. The resulting future net
cash  flows  were  reduced to  present  value  amounts by  applying a 10% annual
discount factor.

         Future   operating  costs  were   determined   based  on  estimates  of
expenditures  to be incurred in developing  and producing the proved oil and gas
reserves in place at the end of the period,  using  year-end  costs and assuming
continuation of existing economic conditions,  plus Company overhead incurred by
the central administrative office attributable to operating activities.

         The  assumptions  used to compute  the  standardized  measure are those
prescribed by the FASB and the SEC. These assumptions do not necessarily reflect
the Company's expectations of actual revenues to be derived from those reserves,
nor their  present  value.  The  limitations  inherent in the  reserve  quantity
estimation  process,  as discussed  previously,  are equally  applicable  to the
standardized  measure  computations  since these estimates are the basis for the
valuation  process.  With the sale of all of the  Company's  properties in March
2011, the  standardized  measure of discounted  future net cash flows is $0. The
price, as adjusted for transportation, quality, and basis differentials, used in
the  calculation of the  standardized  measure for the year ended March 31, 2010
was $61.66 per barrel of oil. The Company  properties did not produce marketable
quantities of natural gas.

         The following  summary sets forth the  Company's  future net cash flows
relating  to  proved  oil and gas  reserves  based on the  standardized  measure
prescribed in ASC 932:

                                      F-24

<PAGE>

<TABLE>
<CAPTION>

                                                                      As of March 31,         As of March 31,
                                                                           2011                    2010
<S>                                                                 <C>                     <C>

Future cash inflows                                                  $            -           $      54,752,000
Future production costs                                                           -                 (34,313,000)
Future development costs                                                          -                    (600,000)
Future income taxes                                                               -                          -
                                                                    --------------------    --------------------
Future net cash flows                                                             -                  19,839,000
10% annual discount                                                               -                 (10,089,000)
                                                                    --------------------    --------------------
Standardized measure of discounted future net cash flows             $            -           $       9,750,000
                                                                    ====================    ====================
</TABLE>

         The  principal  sources  of  change  in  the  standardized  measure  of
discounted future net cash flows are:

<TABLE>
<CAPTION>

                                                            For the year           For the year
                                                           ended March 31,        ended March 31,
                                                                2011                   2010
                                                           ----------------      -----------------
<S>                                                        <C>                   <C>

Standardized measure of discounted future net cash         $      9,750,000      $       8,724,000
  flows, beginning of year
Sales of oil and gas produced, net of production costs           (1,835,000)            (1,522,000)
Net changes in prices and production costs                             -                 3,114,000
Purchase, sales and assignments of minerals in-place             (8,890,000)              (661,000)
Revisions of previous quantity estimates                               -                (2,675,000)
Changes in future development costs                                    -                   828,000
Accretion of discount                                               975,000                872,000
Changes in timing and other                                            -                 1,070,000
                                                           -----------------       ----------------
Standardized measure of discounted future                  $           -            $    9,750,000
  net cash flows, end of year
                                                           =================       ================
</TABLE>


                                      F-25

<PAGE>

                                   SIGNATURES


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


                                        RANCHER ENERGY CORP.

Dated: July 12, 2011
                                        By: /s/ Jon C. Nicolaysen
                                            ------------------------------------
                                            Jon C. Nicolaysen, Chief Executive
                                            Officer & Principal Accounting
                                            Officer



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

Dated: July 14, 2011
                                        RANCHER ENERGY CORP.


                                        /s/ Jon C. Nicolaysen
                                        ----------------------------------------
                                        Jon C. Nicolaysen, Chief Executive
                                        Officer & Director


                                        /s/ A.L. Sid Overton
                                        ----------------------------------------
                                        A.L. Sid Overton, Director


                                        /s/ Mathijs van Houweninge
                                        ----------------------------------------
                                        Mathijs van Houweninge, Director


                                        /s/ Jeffrey B. Bennett
                                        ----------------------------------------
                                        Jeffrey B. Bennett, Director



                                      36