##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K







| ̈ | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------



|x | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------

For the transition period from April 1, 2010 to December 31, 2010

Commission file number 000-30234





LOGO

ENERJEX RESOURCES, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 88-0422242                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|1600 NE Loop 410 Suite 104 San Antonio, Texas                  |  | 78209                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(210) 451-5545

(Registrants telephone number, including area code)





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

Name of each exchange on which registered:

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value





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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act.     ̈  Yes    x  No

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

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

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants, 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.   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was 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: $1,283,657 based on a share value of $0.25.

Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date: 69,355,279 shares of common stock, $0.001 par value, outstanding on
April 18, 2011.





DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to
security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24, 1980).

NONE.









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##### Table of Contents

ENERJEX RESOURCES, INC.

FORM 10-K

TABLE OF CONTENTS



|               |  |                                                                                                              |  |      |    | 
|-------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|               |  |                                                                                                              |  | Page |   
|PART I         |  |                                                                                                              |  |      |    | 
|               |  |                                                                                                             
|ITEMS 1 AND 2. |  | BUSINESS AND PROPERTIES                                                                                      |  |      | 1  | 
|               |  |                                                                                                             
|ITEM 1A.       |  | RISK FACTORS                                                                                                 |  |      | 15 | 
|               |  |                                                                                                             
|ITEM 1B.       |  | UNRESOLVED STAFF COMMENTS                                                                                    |  |      | 29 | 
|               |  |                                                                                                             
|ITEM 3.        |  | LEGAL PROCEEDINGS                                                                                            |  |      | 29 | 
|               |  |                                                                                                             
|PART II        |  |                                                                                                              |  |      |    | 
|               |  |                                                                                                             
|ITEM 5.        |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  |      | 29 | 
|               |  |                                                                                                             
|ITEM 6.        |  | SELECTED FINANCIAL DATA                                                                                      |  |      | 31 | 
|               |  |                                                                                                             
|ITEM 7.        |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  |      | 31 | 
|               |  |                                                                                                             
|ITEM 7A.       |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  |      | 39 | 
|               |  |                                                                                                             
|ITEM 8.        |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  |      | 39 | 
|               |  |                                                                                                             
|ITEM 9.        |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  |      | 39 | 
|               |  |                                                                                                             
|ITEM 9A(T).    |  | CONTROLS AND PROCEDURES                                                                                      |  |      | 39 | 
|               |  |                                                                                                             
|ITEM 9B.       |  | OTHER INFORMATION                                                                                            |  |      | 40 | 
|               |  |                                                                                                             
|PART III       |  |                                                                                                              |  |      |    | 
|               |  |                                                                                                             
|ITEM 10.       |  | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                       |  |      | 41 | 
|               |  |                                                                                                             
|ITEM 11.       |  | EXECUTIVE COMPENSATION                                                                                       |  |      | 44 | 
|               |  |                                                                                                             
|ITEM 12.       |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               |  |      | 47 | 
|               |  |                                                                                                             
|ITEM 13.       |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                    |  |      | 48 | 
|               |  |                                                                                                             
|ITEM 14.       |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                       |  |      | 48 | 
|               |  |                                                                                                             
|PART IV        |  |                                                                                                              |  |      |    | 
|               |  |                                                                                                             
|ITEM 15.       |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                      |  |      | 49 | 



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FORWARD-LOOKING STATEMENTS

This Transition Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. The statements contained in
this document that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. Forward-looking statements are statements regarding future events, our future financial performance, and include statements regarding projected operating results. These forward-looking statements are based on current
expectations, beliefs, intentions, strategies, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. We have
attempted to identify forward-looking statements by terminology including anticipates, believes, can, continue, could, estimates, expects, intends,
may, plans, potential, predicts or should or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a
reasonable basis for doing so, we cannot guarantee their accuracy. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor
can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All forward-looking
statements included in this document are based on information available to us on the date of this Transition Report on Form 10-K, and we assume no obligation to update any such forward-looking statements, except as may otherwise be required by law.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the Risk Factors section in Part I, Item 1A of this Transition Report on Form 10-K and elsewhere in this document. The factors impacting these risks and uncertainties include, but are not
limited to:



| |  |  | inability to attract and obtain additional development capital;
| | - |  | ---------------------------------------------------------------



| |  |  | inability to achieve sufficient future sales levels or other operating results;
| | - |  | -------------------------------------------------------------------------------



| |  |  | inability to efficiently manage our operations;
| | - |  | -----------------------------------------------



| |  |  | effect of our hedging strategies on our results of operations;
| | - |  | --------------------------------------------------------------



| |  |  | potential default under our secured obligations or material debt agreements;
| | - |  | ----------------------------------------------------------------------------



| |  |  | estimated quantities and quality of oil reserves;
| | - |  | -------------------------------------------------



| |  |  | declining local, national and worldwide economic conditions;
| | - |  | ------------------------------------------------------------



| |  |  | fluctuations in the price of oil;
| | - |  | ---------------------------------



| |  |  | continued weather conditions that impact our abilities to efficiently manage our drilling and development activities;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | the inability of management to effectively implement our strategies and business plans;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | approval of certain parts of our operations by state regulators;
| | - |  | ----------------------------------------------------------------



| |  |  | inability to hire or retain sufficient qualified operating field personnel;
| | - |  | ---------------------------------------------------------------------------



| |  |  | increases in interest rates or our cost of borrowing;
| | - |  | -----------------------------------------------------



| |  |  | deterioration in general or regional (especially Eastern Kansas and South Texas) economic conditions;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing
operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the occurrence of natural disasters, unforeseen weather conditions, or other events or circumstances that could impact our operations or could impact
the operations of companies or contractors we depend upon in our operations;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | inability to acquire mineral leases at a favorable economic value that will allow us to expand our development efforts;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing
operations; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate.
| | - |  | -----------------------------------------------------------------------------------------------------------------

All references in this report to we, us, our, company and EnerJex refer to
EnerJex Resources, Inc. and our wholly-owned operating subsidiaries, EnerJex Kansas, Inc., DD Energy, Inc., Black Sable Energy, LLC and Working Interest, LLC, unless the context requires otherwise. We report our financial information on the basis of
a nine-month transition period from April 1, 2010 to December 31, 2010. We have provided definitions for the oil industry terms used in this report in the Glossary beginning on page 12 of this report.



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AVAILABLE INFORMATION

We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the
Internet at the SECs website at www.sec.gov or on our website at www.enerjexresources.com. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington,
DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to
security holders, including audited financial statements, at no charge upon receipt to of a written request to us at EnerJex Resources, Inc., 1600 NE Loop 410, Suite 104, San Antonio, Texas 78209.

INDUSTRY AND MARKET DATA

The market data and certain other statistical information used throughout this report are based on independent industry publications, government publications, reports by market research firms or other
published independent sources. In addition, some data are based on our good faith estimates.



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##### Table of Contents

PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES.

Change in Fiscal Year End

On January 21, 2011, our board of directors
approved the change in our fiscal year end from March 31 to December 31, effective December 31, 2010. As a result of this change, this Annual Report on Form 10-K is a transition report and includes financial information for the
nine-month transition period from April 1, 2010 to December 31, 2010, or Transition Period. References in this Transition Report on Form 10-K to fiscal year 2010 or fiscal 2010 refer to the period of April 1, 2009 through
March 31, 2010 and references to fiscal year 2009 or fiscal 2009 referred to the period of April 1, 2008 through March 31, 2009. Subsequent to this Transition Report on Form 10-K, our reports on Form 10-K will cover the calendar year
from January 1 to December 31, with historical periods remaining unchanged.

Company History

We were formerly known as Millennium Plastics Corporation and were incorporated in the State of Nevada on March 31, 1999. We
abandoned a prior business plan focusing on the development of biodegradable plastic materials. In August 2006, we acquired Midwest Energy, Inc., a Nevada corporation pursuant to a reverse merger. After the merger, Midwest Energy became a
wholly-owned subsidiary, and as a result of the merger the former Midwest Energy stockholders controlled approximately 98% of our outstanding shares of common stock. We changed our name to EnerJex Resources, Inc. in connection with the merger, and
in November 2007 we changed the name of Midwest Energy (now our wholly-owned subsidiary) to EnerJex Kansas, Inc. All of our current operations are conducted through EnerJex Kansas, and all leasehold interests are held in DD Energy, Inc., Black Sable
Energy, LLC and Working Interest, LLC, our wholly-owned subsidiaries.

Significant Developments in Transition Period 2010

The following is a brief description of our most significant corporate developments that occurred in the Transition Period 2010:



| |  |  | In April 2010, we terminated our consulting agreement with Mark Haas, President of Haas Petroleum, LLC and managing member of MorMeg, LLC. Effective
December 31, 2010, we entered into a Joint Operating Agreement and Joint Development Agreement with Haas Petroleum and MorMeg, discussed below in Relationship with Haas Petroleum and MorMeg.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 31, 2010, pursuant to a Securities Purchase and Asset Acquisition Agreement with West Coast Opportunity Fund, LLC (WCOF); Montecito
Venture Partners, LLC (MVP); RGW Energy, LLC; J&J Operating Company, LLC; and the Frey Living Trust, we issued to WCOF 10,550,415 shares of common stock in exchange for cancellation of the Senior Secured Debentures in the original amount of
$2,498,007 and the contribution of 617,317 shares of common stock in Oakridge Energy in the aggregate amount of $1,676,016, and 700,000 shares of common stock in Spindeltop Oil & Gas Co. in the aggregate amount of $1,295,000; to the Frey
Trust 223,056 shares of common stock in exchange for the cancellation of the Frey Senior Secured Debenture of $178,429; to RGW Energy, LLC 4,000,000 shares of common stock in exchange for its membership interest in Black Sable Energy, LLC; to MVP
15,595,540 shares of common stock and 4,779,460 shares of Series A Preferred Stock in exchange for the contribution of its membership interest in Black Sable Energy, LLC; and to Working Interest Holdings, LLC 18,750,000 shares of common stock and
$1,500,000 cash in exchange for 100% of the membership interest in Working Interest, LLC.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 31, 2010, we entered into a Securities Purchase Agreement with multiple investors in which we sold 12,500,000 shares of common stock
for an aggregate purchase price of $5,000,000, or $0.40 per share.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 31, 2010, we entered into a Separation and Settlement Agreement with C. Stephen Cochennet, where we believed it was in our best
interest to have Mr. Cochennet resign as an officer and employee of the Company and as a member of the board of directors.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effective December 31, 2010, all members of the board of directors resigned and appointed in their place the individuals who are the current
directors of the Company.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 31, 2010, the Credit Facility with Texas Capital Bank was amended to modify the borrowing base to $6,116,000 relative to the Proved
Reserves attributable to certain of our assets, identified as Borrowing Base Oil and Gas Properties in our agreement with the bank. The amendment also modified the EBITDA ratio on a quarterly basis, and for the quarter ending
March 31, 2011, the allowed ratio was changed to 4.25:1 00. The Credit Agreement was further amended in order to reflect the reorganization of the Company.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Our Business

Our principal strategy is to acquire, develop, explore and produce domestic onshore oil properties. Our business activities are currently focused in Eastern Kansas and South Texas. We have provided
definitions for the oil industry terms used in this report in the Glossary beginning on page 12.

From the
beginning of fiscal 2008 through the end of fiscal 2010, we deployed approximately $12 million in capital resources to acquire and develop five operating projects and drill 179 new wells (111 producing wells and 65 water injection wells and 3
dry holes). As a result, our estimated total net proved oil reserves at December 31, 2010 was approximately 2.32 million barrels of oil equivalent, or BOE. Of the 2.32 million BOE of total proved reserves, approximately 29% are
proved developed and approximately 71% are proved undeveloped. The proved developed reserves are 100% proved developed producing reserves.

The total PV10 (present value) of our proved reserves (PV10) as of December 31, 2010 was approximately $31.2 million. PV10 means the estimated future gross revenue to be generated
from the production of proved reserves, net of estimated production and future development and abandonment costs, using prices and costs in effect at the determination date, before income taxes, and without giving effect to non-property related
expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of the SEC. PV10 is a non-GAAP financial measure and generally differs from the standardized measure of discounted future net cash flows,
the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net revenues. See Managements Discussion and Analysis of Financial Condition and Results of Operations-Reserves
page 33, for a reconciliation to the comparable GAAP financial measure.

Except where noted:



| |  |  | the discussion regarding our business in this Transition Report on Form 10-K is as of December 31, 2010; and
| | - |  | ------------------------------------------------------------------------------------------------------------

| |  |  | references to our proved reserves
| | - |  | ---------------------------------

do not include Texas assets acquired in the series of transactions closing on December 31, 2010.

The Opportunity in Kansas

According to the Kansas Geological Survey, the
State of Kansas has historically been one of the top 10 domestic oil producing regions in the United States. For the years ended December 31, 2010 and 2009, 40.5 million barrels and 39.5 million barrels of oil were produced in
Kansas. Of the total barrels produced in Kansas in the calendar year ended December 31, 2010, 20 companies accounted for approximately 34% of the total production, with the remaining 66% produced by over 2,000 active producers.

In addition to significant historical oil production levels in the region, we believe that a confluence of the following factors in
Eastern Kansas and the surrounding region make it an attractive area for oil development activities:



| |  |  | Numerous Acquisition Opportunities in Fragmented Markets. The exploration and production business in Eastern Kansas is highly fragmented and
consists of many small operators that operate producing oil properties on relatively small budgets. Consequently, numerous acquisition opportunities with drilling and expansion potential exist in the area.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Opportunity to Enhance Operational Efficiency of Mature Leases. Many potential acquisition targets include significant opportunities for
enhanced operational efficiencies and increased ultimate recoveries of oil through the application of modern engineering technologies, professional approaches to reservoir engineering and operations management, and the potential application of a
number of enhanced oil recovery technologies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Opportunity to Reduce Operating Costs per Barrel Through Economies of Scale. A significant portion of expenses at the field level are fixed
(primarily labor and equipment). These costs are scalable, and lease operating expenses per barrel may be significantly reduced by increasing production in current areas of operation via the drilling of low risk development wells, acquisition of
producing properties in close proximity to existing operations, and the application of modern enhanced oil recovery technologies.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Large Oil Reserves in Place and Relatively Low Exploration Risk. A majority of the oil reserves in Eastern Kansas are present at relatively
shallow horizons (most at a depth less than 3,000 feet) and contain significant volumes of oil in place. These shallow reservoirs often lack a strong natural drive mechanism and ultimate recovery of oil in place can be significantly increased
through the application of secondary recovery technologies. Secondary recovery operations generally involve higher operating costs on a per barrel basis as compared to primary recovery; however, exploration risk in the area is relatively low, which
can more than offset higher operating costs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Our Kansas Properties

The table below summarizes our current Eastern Kansas acreage by project name as of December 31, 2010.



|                         |  |                   |       |  |                     |  |       |               |  |  |        |  |  |       |       |  |        |  |        |  |  |  |        | 
|------------------------ |  | ----------------- | ----- |  | ------------------- |  | ----- | ------------- |  |  | ------ |  |  | ----- | ----- |  | ------ |  | ------ |  |  |  | ------ | 
|Project Name             |  | Developed Acreage |       |  | Undeveloped Acreage |  |       | Total Acreage | 
|                         |  | Gross             |       |  | Net(1)              |  |       | Gross         |  |  | Net(1) |  |  | Gross |       |  | Net(1) | 
|Black Oaks Project       |  |                   | 550   |  |                     |  | 522   |               |  |  | 1,550  |  |  |       | 1,395 |  |        |  | 2,100  |  |  |  | 1,890  | 
|Tri-County Project       |  |                   | 610   |  |                     |  | 606   |               |  |  | 652    |  |  |       | 651   |  |        |  | 1,262  |  |  |  | 1,257  | 
|Thoren Project           |  |                   | 240   |  |                     |  | 240   |               |  |  | 165    |  |  |       | 165   |  |        |  | 405    |  |  |  | 405    | 
|DD Energy Project        |  |                   | 400   |  |                     |  | 400   |               |  |  | 480    |  |  |       | 480   |  |        |  | 880    |  |  |  | 880    | 
|Working Interest Project |  |                   | 335   |  |                     |  | 257   |               |  |  | 1,534  |  |  |       | 817   |  |        |  | 1,869  |  |  |  | 1,074  | 
|Gas City Project         |  |                   | 600   |  |                     |  | 600   |               |  |  | 4,713  |  |  |       | 4,713 |  |        |  | 5,313  |  |  |  | 5,313  | 
|                         |  |                   |       |  |                     |  |       |               |  |  |        |  |  |       |       |  |        |  |        |  |  |  |        | 
|Total                    |  |                   | 2,735 |  |                     |  | 2,625 |               |  |  | 9,094  |  |  |       | 8,221 |  |        |  | 11,829 |  |  |  | 10,819 | 
|                         |  |                   |       |  |                     |  |       |               |  |  |        |  |  |       |       |  |        |  |        |  |  |  |        | 



|(1) | Net acreage is
based on our net working interest as of December 31, 2010.
|--- | -------------------------------------------------------------------------

The table below summarizes proved reserves
on all Eastern Kansas properties as of December 31, 2010:



|                            |  |               |           |  |            |  |           |                     |  |   |            | 
|--------------------------- |  | ------------- | --------- |  | ---------- |  | --------- | ------------------- |  | - | ---------- | 
|                            |  | Gross 
STB(1) |           |  | Net STB(2) |  |           | PV10(3)(before
tax) | 
|Proved, Developed Producing |  |               | 900,690   |  |            |  | 666,220   |                     |  | $ | 12,107,970 | 
|Proved, Undeveloped         |  |               | 2,237,990 |  |            |  | 1,653,930 |                     |  | $ | 19,087,800 | 
|                            |  |               |           |  |            |  |           |                     |  |   |            | 
|Total Proved                |  |               | 3,138,680 |  |            |  | 2,320,150 |                     |  | $ | 31,195,770 | 
|                            |  |               |           |  |            |  |           |                     |  |   |            | 



|(1) | STB = one stock-tank barrel.
|--- | ----------------------------

|(2) | Net STB is based upon our net revenue interest, including any applicable reversionary interest.
|--- | -----------------------------------------------------------------------------------------------

|(3) | See Glossary on page 14 for our definition of PV10 and Managements Discussion and Analysis of Financial Condition and
Results of Operations-Reserves page 31, for a reconciliation to the comparable GAAP financial measure.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Black Oaks Project

Effective December 31, 2010, we entered
into a Joint Operating Agreement and a Joint Development Agreement with a shareholder, Haas Petroleum, LLC (Haas), and MorMeg, LLC, (MorMeg), which are controlled by Mark Haas, whereby we agreed to elect Haas to be the operator of the Black
Oaks Project in exchange for 100,000 shares of our common stock. In addition, we agreed to assign to MorMeg a 5% overriding royalty interest (ORRI) covering all leases on the Black Oaks Project, and a 10% working interest on all leases in the Black
Oaks Project. We also agreed to fund MorMegs 10% working interest for all future capital expenditure costs invested in the Black Oaks Project until the sooner of (i) 5 years or (ii) we fund an aggregate $500,000 on behalf of
MorMegs 10% working interest in the Black Oaks Project (capital expenditure costs apply to new producer and injector wellbores, and specifically excludes lease operating expenses). Our prior Joint Exploration Agreement dated April 9,
2007, as amended, with MorMeg has been terminated.

The Black Oaks Project encompasses approximately 2,100 gross acres in
Woodson and Greenwood Counties, Kansas, and all leases are held-by-production (see Glossary on page 13 for definition of held-by-production). At the time of acquisition the Black Oaks Project had approximately 35 oil wells producing
an average of approximately 32 barrels of oil per day, or BOPD. There are currently 67 producing wellbores and 13 injector wellbores on this project. The project is currently producing approximately 75 gross BOPD and we will focus a significant
portion of the 2011 capital expenditure budget on this project. We have identified 34 additional producer locations and 45 additional injector locations on currently producing leases in this project.

Tri-County Project

On September 14, 2007, we acquired a 100% working interest in the Tri-County Project for $800,000, which consisted of approximately 1,100 acres in Miami, Johnson and Franklin Counties, Kansas. At the
time of acquisition, this project was producing an average of approximately 25 BOPD.

We currently have 1,262 gross acres
leased in this project area and all leases are held-by-production. As of December 31, 2010, we had 207 oil wells producing an average of approximately 48 BOPD; along with 74 water injection wells and two water supply wells. We have identified a
significant number of development locations and several remediation projects within this project area and we intend to devote a significant portion of our 2011 capital expenditure budget to this project.

We have identified 122 additional producer locations and 135 additional injector locations on currently producing leases in this project.

Thoren Project

On April 27, 2007, we acquired a 100% working interest in the Thoren Project for $400,000 from MorMeg. This project, at the time of acquisition, contained 240 acres in Douglas County, Kansas, with 12
oil wells producing an average of approximately 10 BOPD, 4 water injection wells, and one water supply well. The original acquisition terms of this working interest include a revisionary right based on project payout. The project achieved there
payout hurdles in November 2010, at which the revisionary right was triggered and our working interest was reduced to 75%. We reacquired a 12.5% interest as part of the series of transactions that closed effective December 31, 2010. As a result we
have 87.5% working interest and there are no additional revisionary interests.

We currently have 405 gross acres leased in
this project area and all leases are held-by-production. As of December 31, 2010, we had 42 oil wells producing an average of approximately 24 BOPD; along with 17 water injection wells and one water supply well. We have identified 15 additional
producer locations and 17 additional injector locations on currently producing leases in this project.

DD Energy
Project

Effective September 1, 2007, we acquired a 100% working interest in the DD Energy Project for $2.7
million, which consisted of approximately 1,500 acres in Johnson, Anderson and Linn Counties, Kansas. At the time of acquisition, this project was producing an average of approximately 45 BOPD.



3



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##### Table of Contents

We currently have 880 gross acres leased in this project area and all leases are
held-by-production. As of December 31, 2010, we had 129 oil wells producing an average of approximately 48 BOPD; along with 71 water injection wells and two water supply wells. We have identified 32 additional producer locations and 20
additional injector locations on currently producing leases in this project.

Working Interest Project

As part of the series of transactions that closed effective December 31, 2010, we acquired Working Interest, LLC,
which holds an 80% working interest in certain producing and non-producing oil leases in Eastern Kansas, a substantial majority of which are in close proximity to our other oil leases. We currently have 1,869 gross acres leased in this project area
and all leases are held-by-production. As of December 31, 2010, we had 148 oil wells producing an average of approximately 55 BOPD; along with 70 water injection wells and one water supply well.

A majority of the producing leasehold in this project area consists of newly drilled leases with virgin production, resulting in a
significant amount of original oil in place remaining. We intend to add enhanced oil recovery operations to several of these leases during 2011 in order to increase production and accelerate oil recovery.

We have identified 51 additional producer locations and 49 additional injector locations on currently producing leases in this project.

Gas City Project

In August of 2007, we entered into a development agreement with Euramerica Energy, Inc., to further the development and expansion of the Gas City Project, which included 6,600 acres. Over time Euramerica
contributed $1,624,000 in capital toward the project, but failed to fund the full purchase and development funds required for the project. Therefore, Euramerica forfeited all of its interest in the property, including all interests in any wells,
improvements or assets, and all of Euramericas interest in the property reverted back to us. In addition, all operating agreements between us and Euramerica relating to the Gas City Project were deemed null and void.

We still maintain some leaseholds within the Gas City Project, and we currently are analyzing the acreage position for potential oil
prospects. Two of our leases in this project area are currently producing approximately 5 BOPD from 5 wells.

The Opportunity in South
Texas

Technological advances in the oil industry have made great strides over the last decade, especially in the area of
completion technologies, mainly through horizontal drilling and artificial fracture stimulation. Multiple sizeable oil deposits were discovered in South Texas during past decades, but operators lacked the technology to produce economically from
these reservoirs at the time of discovery. The availability of modern completion technologies coupled with the current commodity price environment provide an opportunity for operators to economically produce oil from reservoirs that were discovered
in the past, yet never fully developed due to technology and economic constraints.

Our Texas Properties

Our Texas properties were acquired through the acquisition of Black Sable Energy LLC, as part of a series of transactions that closed
effective December 31, 2010. Black Sable Energy is now a wholly-owned subsidiary based in San Antonio, Texas. The Companys Texas activities currently are focused on two project areas, the El Toro Project and the Lonesome Dove Project,
with approximately 9,000 gross acres under lease. A brief overview of each project is as follows:



4



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##### Table of Contents

El Toro Project



| |  |  | Approximately 7,000 gross acres leased targeting oil production from an undisclosed oil saturated formation at a depth of approximately 4,000 feet in
Atascosa and Frio Counties.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Potential for more than 1,000 wells and more than 20 million barrels of recoverable oil net to us in the project area covering approximately
25,000 prospective acres.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Proof of concept achieved with 9 wells drilled or re-entered in 2009-2010 spanning 8 miles across current acreage position.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Consistent petrophysical results but inconsistent production results, with at least 5 of the 9 wells appearing to be economic producers and 4 of the 9
wells demonstrating a high degree of water production and a low degree of oil production to date.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Further research and development is required to determine and understand production inconsistencies.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | 23 re-entry candidates in target area from abandoned Austin Chalk wells drilled in the 1990s.
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | 2 out of 2 successful re-entries completed to date (1 apparent economic producer and 1 well which has been perforated but not fracture stimulated and
is demonstrating a high degree of water production and a low degree of oil production to date).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mineral rights covering 440 contiguous acres net to us in the prospective oil window of the Eagleford Shale play.
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Adjacent well control with hydrocarbon shows and positive log indicators in the Eagle Ford Shale.
| | - |  | -------------------------------------------------------------------------------------------------

We continually evaluate and research our completion designs and procedures and intend to drill additional wells in 2011 to increase our
oil production and test new completion designs. The El Toro Project is currently producing approximately 50 gross BOPD and we own varying non-operated working interests of 40%-49%, a small portion of which is held-by-production.

Lonesome Dove Project



| |  |  | Approximately 2,000 acres leased targeting oil production from the Taylor Sand formation at a depth of approximately 4,000 feet and the Austin Chalk
formation at a depth of approximately 6,000 feet in Lee County.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Potential for more than 1 million barrels of recoverable oil net to us from 12 Austin Chalk wells and 50 Taylor Sand wells.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Multiple nearby Austin Chalk wells have achieved initial production rates of 200-500 barrels of oil per day.
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | We own and operate a 100% working interest in the prospective Taylor Sand formation and own a non-operated 10% working interest in the Austin Chalk
Formation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We will participate at no cost for a 15% interest in the first Austin Chalk well should its joint venture partner drill a well on its acreage.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mineral rights covering 200 acres net to the Company in the prospective oil window of the Eagle Ford Shale play.
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | High risk profile as compared to our other projects.
| | - |  | ----------------------------------------------------

We do not currently have producing wells in the Lonesome Dove Project and none of the acreage is held-by-production.

Our Business Strategy

Our principal strategy in Kansas is to focus on the
acquisition and development of oil mineral leases that have existing production and cash flow. Once acquired, subject to availability of capital, we strive to implement a development program utilizing capital resources, a regional operating focus,
an experienced management and technical team, and enhanced recovery technologies to attempt to increase production and increase returns for our stockholders. Our principal strategy in Texas is to identify, acquire and develop leases covering known
oil deposits that were never fully developed due to poor reservoir quality and low historical prices. Once acquired, subject to availability of capital, we strive to implement a development program utilizing capital resources, an experienced
management and technical team, and modern fracture stimulation to attempt to increase production and demonstrate the economic viability of a larger scale development program in an effort to increase returns for our stockholders. Our oil operations
are currently focused in Eastern Kansas and South Texas, with a near term focus on Eastern Kansas due to what we believe are temporary constraints of services and equipment in South Texas as a result of the rapidly developing Eagle Ford Shale
play. Depending on availability of capital, and other restraints, our goal is to increase stockholder value by finding and developing oil reserves at costs that provide an attractive rate of return on our investments. The principal elements of
our business strategy are:



| |  |  | Develop Our Existing Properties. We intend to create reserve and production growth from hundreds of drilling locations we have identified
on our existing properties.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maximize Operational Control. We seek to operate the majority of our properties and maintain a substantial working
| | - |  | ------------------------------------------------------------------------------------------------------------------



5



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##### Table of Contents

| | interest. We believe the ability to control our drilling inventory will provide us with the opportunity to more efficiently allocate capital, manage resources, control operating and development
costs, and utilize our experience and knowledge of oilfield technologies.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pursue Selective Acquisitions and Joint Ventures. Due to our local presence in Eastern Kansas and South Texas, we believe we are
well-positioned to pursue selected acquisitions and joint venture arrangements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reduce Unit Costs Through Economies of Scale and Efficient Operations. As we increase our oil production and develop our existing
properties, we expect that our unit cost structure will benefit from economies of scale. In particular, we anticipate reducing unit costs by greater utilization of our existing infrastructure over a larger number of wells.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are continually evaluating oil opportunities in Eastern Kansas and South Texas and plan to enter into
joint venture arrangements with partners who would contribute capital and or operational expertise to develop leases we currently own or would acquire as part of a joint venture arrangement. This economic strategy is anticipated to allow us to
utilize our own financial assets toward the growth of our leased acreage holdings, pursue the acquisition of strategic oil producing properties or companies and generally expand our existing operations while further diversifying risk. Subject to
availability of capital, we plan to continue to bring potential acquisition and joint venture opportunities to various financial partners for evaluation and funding options.

Our future financial results will continue to depend on: (i) our ability to source and screen potential projects; (ii) our ability to discover commercial quantities of oil; (iii) the market
price for oil; and (iv) our ability to fully implement our exploration, work-over and development program, which is in part dependent on the availability of capital resources. There can be no assurance that we will be successful in any of these
respects, that the prices of crude oil prevailing at the time of production will be at a level allowing for profitable production, or that we will be able to obtain additional funding at terms favorable to us to increase our capital
resources. For a detailed description of these and other factors that could materially impact actual results, please see Risk Factors in this document under ITEM 1A.

The board of directors has implemented a crude oil hedging strategy that will allow management to hedge up to 80% of our net production.

Relationship with Haas Petroleum and MorMeg

In April of 2007, we entered into a consulting agreement with Mark Haas, President of Haas Petroleum and managing member of MorMeg, which was terminated in April of 2010.

On December 31, 2010, we entered into a Joint Operating Agreement and a Joint Development Agreement with a shareholder, Haas
Petroleum, LLC (Haas), and MorMeg, LLC, (MorMeg), which are controlled by Mark Haas, whereby Haas agreed to be the operator of the Black Oaks Project in exchange for 100,000 shares of our common stock. In addition, we assigned to MorMeg a 5%
overriding royalty interest covering all leases on the Black Oaks Project, and a 10% working interest on all leases in the Black Oaks Project. We also agreed to fund MorMegs 10% working interest for all future capital expenditure costs
invested in Black Oaks Project until the sooner of (i) 5 years or (ii) we fund an aggregate $500,000 on behalf of MorMegs 10% working interest in the Black Oaks Project (capital expenditure costs apply to new producer and injector
wellbores, and specifically excludes lease operating expenses). The previous Joint Exploration Agreement dated April 9, 2007, between MorMeg and us, has been terminated. The Black Oaks Project encompasses approximately 2,100 gross acres in
Woodson and Greenwood Counties, Kansas.

Drilling Activity

The following table sets forth the results of our drilling activities during the 2008, 2009 and 2010 fiscal years. These results exclude drilling operations that occurred, at the projects owned by
Black Sable Energy, LLC and Working Interest, LLC; prior to the consummation of the transactions we closed on December 31, 2010.



|                    |  |             |  |  |              |  |     |     |  |  |       |  |  |           |     |  |     |  |  |  |  |  |     |  |  |  |     |  |  |  |     | 
|------------------- |  | ----------- |  |  | ------------ |  | --- | --- |  |  | ----- |  |  | --------- | --- |  | --- |  |  |  |  |  | --- |  |  |  | --- |  |  |  | --- | 
|Drilling Activity   | 
|                    |  | Gross Wells |  |  | Net Wells(1) | 
|Fiscal Year         |  | Total       |  |  | Producing    |  |     | Dry |  |  | Total |  |  | Producing |     |  | Dry | 
|2008 Exploratory    |  |             |  |  |              |  | 10  |     |  |  | 10    |  |  |           | -0- |  |     |  |  |  |  |  | 10  |  |  |  | 10  |  |  |  | -0- | 
|2009 Exploratory(2) |  |             |  |  |              |  | 12  |     |  |  | 12    |  |  |           | -0- |  |     |  |  |  |  |  | 12  |  |  |  | 12  |  |  |  | -0- | 
|2010 Exploratory    |  |             |  |  |              |  | -0- |     |  |  | -0-   |  |  |           | -0- |  |     |  |  |  |  |  | -0- |  |  |  | -0- |  |  |  | -0- | 
|                    |  |             |  |  |              |  |     |    
|2008 Development    |  |             |  |  |              |  | 59  |     |  |  | 57    |  |  |           | 2   |  |     |  |  |  |  |  | 58  |  |  |  | 56  |  |  |  | 2   | 
|2009 Development    |  |             |  |  |              |  | 96  |     |  |  | 95    |  |  |           | 1   |  |     |  |  |  |  |  | 96  |  |  |  | 95  |  |  |  | 1   | 
|2010 Development    |  |             |  |  |              |  | 2   |     |  |  | 2     |  |  |           | -0- |  |     |  |  |  |  |  | 2   |  |  |  | 2   |  |  |  | 1   | 



6



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##### Table of Contents

|(1) | Net wells are
based on our net working interest as of December 31, 2010.
|--- | ------------------------------------------------------------------------

|(2) | We incurred some
exploration costs related to exploratory wells drilled on behalf of Euramerica.
|--- | ------------------------------------------------------------------------------------------------

Net Production, Average Sales Price and
Average Production and Lifting Costs

The table below sets forth our net oil and natural gas production (net of all
royalties, overriding royalties and production due to others) for the nine-month transition period for December 31, 2010 and fiscal year ended March 31, 2010, and 2009, the average sales prices, average production costs and direct lifting
costs per unit of production.



|                           |  |                                                    |        |  |                                 |   |        |                                 |  |   |        | 
|-------------------------- |  | -------------------------------------------------- | ------ |  | ------------------------------- | - | ------ | ------------------------------- |  | - | ------ | 
|                           |  | Nine-MonthTransition 
PeriodEndedDecember 31, 2010 |        |  | Fiscal Year EndedMarch 31,
2010 |   |        | Fiscal YearEndedMarch 31, 
2009 | 
|Net Production             |  |                                                    |        |  |                                 |   |        |                                 |  |   |        | 
|Oil (Bbl)                  |  |                                                    | 40,345 |  |                                 |   | 64,948 |                                 |  |   | 74,289 | 
|Natural gas (Mcf)(1)       |  |                                                    | -0-    |  |                                 |   | -0-    |                                 |  |   | 12,275 | 
|                           |  |                                                    |       
|Average Sales Prices       |  |                                                    |        |  |                                 |   |        |                                 |  |   |        | 
|Oil (per Bbl)              |  | $                                                  | 72.60  |  |                                 | $ | 62.64  |                                 |  | $ | 85.67  | 
|Natural gas (per Mcf)      |  | $                                                  | -0-    |  |                                 | $ | -0-    |                                 |  | $ | 5.57   | 
|                           |  |                                                    |       
|Average Production Cost(2) |  |                                                    |        |  |                                 |   |        |                                 |  |   |        | 
|Per Bbl of oil             |  | $                                                  | 47.40  |  |                                 | $ | 40.38  |                                 |  | $ | 45.01  | 
|Per Mcf of natural gas     |  | $                                                  | -0-    |  |                                 | $ | -0-    |                                 |  | $ | 15.11  | 
|                           |  |                                                    |       
|Average Lifting Costs(3)   |  |                                                    |        |  |                                 |   |        |                                 |  |   |        | 
|Per Bbl of oil             |  | $                                                  | 38.12  |  |                                 | $ | 28.22  |                                 |  | $ | 33.01  | 
|Per Mcf of natural gas     |  | $                                                  | -0-    |  |                                 | $ | -0-    |                                 |  | $ | 15.11  | 



|(1) | Mcf = thousand
cubic feet of natural gas. We do not have any current natural gas operations, figures are historical only.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(2) | Production costs
include all operating expenses, depreciation, depletion and amortization, lease operating expenses and all associated taxes. Impairment of oil and natural gas properties is not included in production costs.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Direct lifting
costs do not include impairment expense or depreciation, depletion and amortization.
|--- | ---------------------------------------------------------------------------------------------------

Results of Oil Producing Activities

The following table shows the results of operations from our oil producing activities from the nine-month transition
period ended December 31, 2010, and fiscal years ended March 31, 2010 and 2009. Results of operations from these activities have been determined using historical revenues, production costs, depreciation, depletion and amortization of the
capitalized costs subject to amortization. General and administrative expenses and interest expense have been excluded from this determination.



|                                               |  |                                                    |            |   |                                       |   |            |                                       |  |   |            |  
|---------------------------------------------- |  | -------------------------------------------------- | ---------- | - | ------------------------------------- | - | ---------- | ------------------------------------- |  | - | ---------- | -
|                                               |  | Nine-MonthTransition 
PeriodEndedDecember 31, 2010 |            |   | For theFiscal YearEndedMarch 31, 2010 |   |            | For theFiscal YearEndedMarch 31, 2009 | 
|Production revenues                            |  | $                                                  | 2,929,103  |   |                                       | $ | 4,856,027  |                                       |  | $ | 6,436,805  |  
|Production costs                               |  |                                                    | (1,548,128 | ) |                                       |   | (1,833,108 | )                                     |  |   | (2,637,333 | )
|Depreciation, depletion and amortization       |  |                                                    | (359,855   | ) |                                       |   | (588,416   | )                                     |  |   | (872,230   | )
|                                               |  |                                                    |            |   |                                       |   |            |                                       |  |   |            |  
|Results of operations for producing activities |  | $                                                  | 1,021,120  |   |                                       | $ | 2,434,503  |                                       |  | $ | 2,972,242  |  
|                                               |  |                                                    |            |   |                                       |   |            |                                       |  |   |            |  



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##### Table of Contents

Producing Wells

The following table sets forth the number of productive oil wells in which we owned an interest as of December 31, 2010.



|                         |  |           |     |  |             |  |     | 
|------------------------ |  | --------- | --- |  | ----------- |  | --- | 
|                         |  | Producing |    
|Project                  |  | Gross Oil |     |  | Net 
Oil(1) | 
|Black Oaks Project       |  |           | 62  |  |             |  | 59  | 
|Tri-County Project       |  |           | 170 |  |             |  | 170 | 
|Thoren Project           |  |           | 33  |  |             |  | 33  | 
|DD Energy Project        |  |           | 114 |  |             |  | 114 | 
|Working Interest Project |  |           | 148 |  |             |  | 113 | 
|Black Sable Energy       |  |           | 9   |  |             |  | 4   | 
|Gas City Project         |  |           | 5   |  |             |  | 5   | 
|                         |  |           |     |  |             |  |     | 
|Total                    |  |           | 536 |  |             |  | 493 | 
|                         |  |           |     |  |             |  |     | 



|(1) | Net wells are
based on our net working interest as of December 31, 2010.
|--- | ------------------------------------------------------------------------

Eastern Kansas Reserves

Our estimated total proved PV10 (present value) before tax of reserves as of December 31, 2010 was $31.2 million, versus $29.9
million as of March 31, 2010. Of the 2.3 million net BOE at December 31, 2010 approximately 29% are proved developed and approximately 71% are proved undeveloped. See Glossary on page 14 for our definition of PV10.

Based on an estimated oil price of $72.43 as of December 31, 2010, and applying an annual discount rate of 10% of the
future net cash flow, the estimated PV10 of the 2.3 million BOE, before tax, is calculated as set forth in the following table:

Summary of Oil Reserves

as of December 31, 2010



|                            |  |             |           |  |           |  |           |                     |  |   |            | 
|--------------------------- |  | ----------- | --------- |  | --------- |  | --------- | ------------------- |  | - | ---------- | 
|Proved Reserves Category    |  | GrossSTB(1) |           |  | NetSTB(2) |  |           | PV10(3)(before
tax) | 
|Proved, Developed Producing |  |             | 900,690   |  |           |  | 666,220   |                     |  | $ | 12,107,970 | 
|Proved, Undeveloped         |  |             | 2,237,990 |  |           |  | 1,653,930 |                     |  |   | 19,087,800 | 
|                            |  |             |           |  |           |  |           |                     |  |   |            | 
|Total Proved                |  |             | 3,138,680 |  |           |  | 2,320,150 |                     |  | $ | 31,195,770 | 
|                            |  |             |           |  |           |  |           |                     |  |   |            | 



|(1) | STB = one stock-tank barrel.
|--- | ----------------------------

|(2) | Net STB is based upon our net revenue interest, including any applicable reversionary interest.
|--- | -----------------------------------------------------------------------------------------------

|(3) | See
Glossary on page 14 for our definition of PV10 and Managements Discussion and Analysis of Financial Condition and Results of Operations-Reserves page 33, for a reconciliation to the comparable GAAP
financial measure.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Oil Reserves Reported to Other Agencies

We did not file any estimates of total proved net oil reserves with, or include such information in reports to, any federal authority or
agency, other than the SEC, during the nine-month transition period ended December 31, 2010.

Title to Properties

Our properties are subject to customary royalty interests, liens under indebtedness, liens incident to operating agreements and liens for
current taxes and other burdens, including mineral encumbrances and restrictions. Further, our debt is secured by a lien substantially on all of our assets. These burdens have not materially interfered with the use of our properties in the
operation of our business to date, though there can be no assurance that such burdens will not materially impact our operations in the future.

We believe that we have satisfactory title to or rights in all of our producing properties. As is customary in the oil industry, minimal investigation of title is made at the time of acquisition of
undeveloped properties. In most cases, we investigate title and obtain title opinions from counsel or have title reviewed by professional landmen only when we acquire producing properties or before we begin drilling operations. However, any
acquisition of producing properties without obtaining title opinions creates a greater risk of title defects.



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##### Table of Contents

Sale of Oil

We do not intend to refine our oil production. We expect to sell all or most of our production to a small number of purchasers in a manner consistent with industry practices at prevailing rates by means
of long-term and short-term sales contracts, some of which may have fixed price components. We are currently selling oil to Coffeyville Resources and Pacer Energy Marketing, LLC on a month-to-month basis (i.e., without a long-term contract). We also
have an ISDA master agreement and a fixed price swap with BP through December 31, 2015 and a fixed price swap with Pacer through December 31, 2012. Under current conditions, we should be able to find other purchasers, if needed.
All of our produced oil is held in tank batteries and then each respective purchaser transports the oil by truck to the refinery. In addition, our board of directors has implemented a crude oil hedging strategy that will allow management to hedge up
to 80% of our net production in an effort to mitigate a majority of our exposure to changing oil prices in the intermediate term.

Secondary Recovery and Other Production Enhancement Strategies

When an oil field is first produced, the oil typically is recovered as a result of natural pressure within the producing formation, often assisted by pumps of various types. The only natural force present
to move the crude oil to the wellbore is the pressure differential between the higher pressure in the formation and the lower pressure in the wellbore. At the same time, there are many factors that act to impede the flow of crude oil, depending on
the nature of the formation and fluid properties, such as pressure, permeability, viscosity and water saturation. This stage of production is referred to as primary production, which in Eastern Kansas normally only recovers up to 5% to
15% of the crude oil originally in place in a producing formation.

Many, but not all, oil fields are amenable to assistance
from a waterflood, a form of secondary recovery, which is used to maintain or increase reservoir pressure and to help sweep oil to the wellbore. In a waterflood, certain wells are used to inject water into the reservoir while other wells
are used to recover the oil in place. We utilize waterflooding as a secondary recovery technique for the majority of our oil field projects in Eastern Kansas.

As the waterflood matures, the fluid produced contains increasing amounts of water and decreasing amounts of oil. Surface equipment is used to separate the oil from the water, with the oil going to
holding tanks for sale and the water being recycled to the injection facilities.

In addition, we may utilize 3-D seismic
analysis, horizontal drilling, and other technologies and production techniques to improve drilling results and ultimately enhance our production and returns. We also believe use of such technologies and production techniques in exploring for,
developing and exploiting oil properties will help us reduce drilling risks, lower finding costs and provide for more efficient production of oil from our properties.

Markets and Marketing

The oil industry has experienced dramatic price
volatility in recent years, and especially in recent months. Because oil is a commodity, global oil prices respond to macro-economic factors affecting supply and demand. In particular, world oil prices have risen and fallen in response to political
unrest and supply uncertainty in the Middle East, and changing demand for energy in rapidly growing economies, notably India and China. North American prospects have become more attractive as efforts to stimulate the US economy and reduce dependence
on foreign oil increase. Escalating conflicts in the Middle East and the ability of OPEC to control supply and pricing are some of the factors impacting the availability of global supply. The costs of steel and other products used to construct
drilling rigs and pipeline infrastructure, as well as drilling and well-servicing rig rates, are impacted by the commodity price volatility.

Our market is affected by many factors beyond our control, such as the availability of other domestic production, commodity prices, the proximity and capacity of oil pipelines, and general fluctuations of
global and domestic supply and demand. We have currently entered into two month-to-month sales contracts with Coffeeville Resources and Pacer Energy Marketing, and we do not anticipate difficulty in finding additional sales opportunities, as
and when needed.

Oil sales prices are negotiated based on factors such as the posted price for oil, price regulations,
regional price variations, hydrocarbon quality, distances from wells to pipelines, well pressure, and estimated reserves. Many of these factors are outside our control. Oil prices have historically experienced high volatility, related in part to
ever-changing perceptions within the industry of future supply and demand.

Competition

The oil industry is intensely competitive and we must compete against larger companies that may have greater financial and technical
resources than we do and substantially more experience in our industry. These competitive advantages may better enable our



9



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##### Table of Contents

competitors to sustain the impact of higher exploration and production costs, oil price volatility, productivity variances between properties, overall industry cycles and other factors related to
our industry. Their advantage may also negatively impact our ability to acquire prospective properties, develop reserves, attract and retain quality personnel and raise capital.

Research and Development Activities

We have not spent any material amount
of time in the last two fiscal years on research and development activities.

Governmental Regulations

Our oil exploration, production and related operations, when developed, are subject to extensive rules and regulations promulgated by
federal, state, tribal and local authorities and agencies. For example, some states in which we may operate, including Kansas and Texas, require permits for drilling operations, drilling bonds and reports concerning operations and impose other
requirements relating to the exploration and production of oil and natural gas. Such states may also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil properties, the
establishment of maximum rates of production from wells, and the regulation of spacing, plugging and abandonment of such wells. Failure to comply with any such rules and regulations can result in substantial penalties. Moreover, such states may
place burdens from previous operations on current lease owners, and the burdens could be significant. The regulatory burden on the oil and natural gas industry will most likely increase our cost of doing business and may affect our profitability.
Although we believe we are currently in substantial compliance with all applicable laws and regulations, because such rules and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with
such laws. Significant expenditures may be required to comply with governmental laws and regulations and may have a material adverse effect on our financial condition and results of operations.

The price we may receive from the sale of oil will be affected by the cost of transporting products to markets. Effective January 1,
1995, FERC implemented regulations establishing an indexing system for transportation rates for oil pipelines, which, generally, would index such rates to inflation, subject to certain conditions and limitations. We are not able to predict with
certainty the effect, if any, of these regulations on our intended operations. However, the regulations may increase transportation costs or reduce well head prices for oil.

Environmental Matters

Our operations and properties are subject to
extensive and changing federal, state and local laws and regulations relating to environmental protection, including the generation, storage, handling, emission, transportation and discharge of materials into the environment, and relating to safety
and health. The recent trend in environmental legislation and regulation generally is toward stricter standards, and this trend will likely continue.

These laws and regulations may:



| |  |  | require the acquisition of a permit or other authorization before construction or drilling commences and for certain other activities;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit or prohibit construction, drilling and other activities on certain lands lying within wilderness and other protected areas; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | impose substantial liabilities for pollution resulting from its operations, or due to previous operations conducted on any leased lands.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

The permits required for our operations may be subject to revocation, modification and renewal by issuing
authorities. Governmental authorities have the power to enforce their regulations, and violations are subject to fines or injunctions, or both. In the opinion of management, we are in substantial compliance with current applicable environmental laws
and regulations, and have no material commitments for capital expenditures to comply with existing environmental requirements. Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a
significant impact on us, as well as the oil and natural gas industry in general.

The Comprehensive Environmental,
Response, Compensation, and Liability Act, as amended (CERCLA), and comparable state statutes impose strict, joint and several liability on owners and operators of sites and on persons who disposed of or arranged for the disposal of
hazardous substances found at such sites. It is not uncommon for the neighboring land owners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the
environment. The Federal Resource Conservation and Recovery Act, as amended (RCRA), and comparable state statutes govern the disposal of solid waste and hazardous waste and authorize the imposition of
substantial fines and penalties for noncompliance. Although CERCLA currently excludes petroleum from its definition of hazardous substance, state laws affecting our operations may impose clean-up liability relating to petroleum and
petroleum related products. In addition, although RCRA classifies certain oil field wastes as non-hazardous, such exploration and production wastes could be reclassified as hazardous wastes thereby making such wastes subject to more
stringent handling and disposal requirements.



10



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The Federal Water Pollution Control Act of 1972, as amended (Clean Water Act),
and analogous state laws impose restrictions and controls on the discharge of pollutants into federal and state waters. These laws also regulate the discharge of storm water in process areas. Pursuant to these laws and regulations, we are required
to obtain and maintain approvals or permits for the discharge of wastewater and storm water and develop and implement spill prevention, control and countermeasure plans, also referred to as SPCC plans, in connection with on-site storage
of greater than threshold quantities of oil. The EPA issued revised SPCC rules in July 2002 whereby SPCC plans are subject to more rigorous review and certification procedures. We believe that our operations are in substantial compliance with
applicable Clean Water Act and analogous state requirements, including those relating to wastewater and storm water discharges and SPCC plans.

The Endangered Species Act, as amended (ESA), seeks to ensure that activities do not jeopardize endangered or threatened animal, fish and plant species, nor destroy or modify the critical
habitat of such species. Under ESA, exploration and production operations, as well as actions by federal agencies, may not significantly impair or jeopardize the species or its habitat. ESA provides for criminal penalties for willful violations of
the Act. Other statutes that provide protection to animal and plant species and that may apply to our operations include, but are not necessarily limited to, the Fish and Wildlife Coordination Act, the Fishery Conservation and Management Act, the
Migratory Bird Treaty Act and the National Historic Preservation Act. Although we believe that our operations will be in substantial compliance with such statutes, any change in these statutes or any reclassification of a species as endangered could
subject us to significant expenses to modify our operations or could force us to discontinue certain operations altogether.

Personnel

We currently have 18 full-time employees, including field personnel. As production and drilling activities increase or
decrease, we may have to continue to adjust our technical, operational and administrative personnel as appropriate. We are using and will continue to use independent consultants and contractors to perform various professional services, particularly
in the area of land services, reservoir engineering, geology drilling, water hauling, pipeline construction, well design, well-site monitoring and surveillance, permitting and environmental assessment. We believe that this use of third-party service
providers may enhance our ability to contain operating and general expenses, and capital costs.

Facilities

We currently lease our executive offices at 1600 N.E. Loop 410, Suite 104, San Antonio, Texas 78209, under a lease which expires in June
2011. We also have an office located at 27 Corporate Woods, Suite 350, 10975 Grandview Drive, Overland Park, Kansas 66210, the lease for which expires in September 30, 2013.



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GLOSSARY



|                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Term                     |  | Definition                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                         | 
|Barrel (bbl)             |  | The standard unit of measurement of liquids in the petroleum industry, it contains 42 U.S. standard gallons. Abbreviated to bbl.                                                                                                                                                                                                                                                                                                                                                 
|                         | 
|Basin                    |  | A depression in the crust of the Earth, caused by plate tectonic activity and subsidence, in which sediments accumulate. Sedimentary basins vary from bowl-shaped to elongated
troughs. Basins can be bounded by faults. Rift basins are commonly symmetrical; basins along continental margins tend to be asymmetrical. If rich hydrocarbon source rocks occur in combination with appropriate depth and duration of burial, then a
petroleum system can develop within the basin.
|                         | 
|BOPD                     |  | Abbreviation for barrels of oil per day, a common unit of measurement for volume of crude oil. The volume of a barrel is equivalent to 42 U.S. standard gallons.                                                                                                                                                                                                                                                                                                                   
|                         | 
|Carried Working Interest |  | The owner of this type of working interest in the drilling of a well incurs no capital contribution requirement for drilling or completion costs associated with a well and, if
specified in the particular contract, may not incur capital contribution requirements beyond the completion of the well.                                                                                                                                                                           
|                         | 
|Completion/Completing    |  | A well made ready to produce oil.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                         | 
|Development              |  | The phase in which a proven oil field is brought into production by drilling development wells.                                                                                                                                                                                                                                                                                                                                                                                    
|                         | 
|Development Drilling     |  | Wells drilled during the Development phase.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                         | 
|Division order           |  | A directive signed by the royalty owners verifying to the purchaser or operator of a well the decimal interest of production owned by the royalty owner. The Division Order
generally includes the decimal interest, a legal description of the property, the operators name, and several legal agreements associated with the process. Completion of this step generally precedes placing the royalty owner on pay status to
begin receiving revenue payments.                   
|                         | 
|Drilling                 |  | Act of boring a hole through which oil may be produced.                                                                                                                                                                                                                                                                                                                                                                                                                            
|                         | 
|Dry Wells                |  | A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and
taxes.                                                                                                                                                                                                                                                                                                          
|                         | 
|Exploration              |  | The phase of operations which covers the search for oil generally in unproven or semi-proven territory.                                                                                                                                                                                                                                                                                                                                                                            
|                         | 
|Exploratory Drilling     |  | Drilling of a relatively high percentage of properties which are unproven.                                                                                                                                                                                                                                                                                                                                                                                                         
|                         | 
|Farm out                 |  | An arrangement whereby the owner of a lease assigns all or some portion of the lease or licenses to another company for undertaking exploration or development
activity.                                                                                                                                                                                                                                                                                                           
|                         | 
|Field                    |  | An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The
field name refers to the surface area, although it may refer to both the surface and the underground productive formations.                                                                                                                                                                       
|                         | 
|Fixed price swap         |  | A derivative instrument that exchanges or swaps the floating or daily price of a specified volume of oil over a specified period, for a fixed price for
the specified volume over the same period (typically three months or longer).                                                                                                                                                                                                                                          
|                         | 
|Gathering line/system    |  | Pipelines and other facilities that transport oil from wells and bring it by separate and individual lines to a central delivery point for delivery into a transmission line or
mainline.                                                                                                                                                                                                                                                                                          



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|                                |  |                                                                                                                                                                                                                                                                            
|------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                | 
|Gross acre                      |  | The number of acres in which the Company owns any working interest.                                                                                                                                                                                                        
|                                | 
|Gross Producing Well            |  | A well in which a working interest is owned and is producing oil. The number of gross producing wells is the total number of wells producing oil in which a working interest is
owned.                                                                                     
|                                | 
|Gross well                      |  | A well in which a working interest is owned. The number of gross wells is the total number of wells in which a working interest is owned.                                                                                                                                  
|                                | 
|Held-By-Production (HBP)        |  | Refers to an oil property under lease, in which the lease continues to be in force, because of production from the property.                                                                                                                                               
|                                | 
|Horizontal drilling             |  | A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then turned and drilled horizontally. Horizontal drilling allows the
wellbore to follow the desired formation.                                                   
|                                | 
|In-fill wells                   |  | In-fill wells refers to wells drilled between established producing wells; a drilling program to reduce the spacing between wells in order to increase production and recovery of
in-place hydrocarbons.                                                                   
|                                | 
|Oil Lease                       |  | A legal instrument executed by a mineral owner granting the right to another to explore, drill, and produce subsurface oil. An oil lease embodies the legal rights, privileges and
duties pertaining to the lessor and lessee.                                             
|                                | 
|Lifting Costs                   |  | The expenses of producing oil from a well. Lifting costs are the operating costs of the wells including the gathering and separating equipment. Lifting costs do not include the
costs of drilling and completing the wells or transporting the oil.                       
|                                | 
|Mcf                             |  | Thousand cubic feet.                                                                                                                                                                                                                                                       
|                                | 
|Mmcf                            |  | Million cubic feet.                                                                                                                                                                                                                                                        
|                                | 
|Net acres                       |  | Determined by multiplying gross acres by the working interest that the Company owns in such acres.                                                                                                                                                                         
|                                | 
|Net Producing Wells             |  | The number of producing wells multiplied by the working interest in such wells.                                                                                                                                                                                            
|                                | 
|Net Revenue Interest            |  | A share of production revenues after all royalties, overriding royalties and other nonoperating interests have been taken out of production for a well(s).                                                                                                                 
|                                | 
|Operator                        |  | A person, acting for itself, or as an agent for others, designated to conduct the operations on its or the joint interest owners behalf.                                                                                                                                  
|                                | 
|Overriding Royalty              |  | Ownership in a percentage of production or production revenues, free of the cost of production, created by the lessee, company and/or working interest owner and paid by the
lessee, company and/or working interest owner out of revenue from the well.                   
|                                | 
|Pooled Unit                     |  | A term frequently used interchangeably with Unitization but more properly used to denominate the bringing together of small tracts sufficient for the granting of a
well permit under applicable spacing rules.                                                          
|                                | 
|Proved Developed Reserves       |  | Proved reserves that can be expected to be recovered from existing wells with existing equipment and operating methods. This definition of proved developed reserves has been
abbreviated from the applicable definitions contained in Rule 4-10(a)(2-4) of Regulation S-X.
|                                | 
|Proved Developed Non-
Producing |  | Proved developed reserves expected to be recovered from zones behind casings in existing wells.                                                                                                                                                                            



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|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Proved Undeveloped Reserves |  | Proved undeveloped reserves are the portion of proved reserves which can be expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a
relatively major expenditure is required for completion. This definition of proved undeveloped reserves has been abbreviated from the applicable definitions contained in Rule 4-10(a)(2-4) of Regulation S-X.                                                                                                                                                                                                                                                                                                           
|                            | 
|PV10                        |  | PV10 means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development and abandonment costs,
using prices and costs in effect at the determination date, before income taxes, and without giving effect to non-property related expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of
the SEC. PV10 is a non-GAAP financial measure. See Managements Discussion and Analysis of Financial Condition and Results of Operations-Reserves on page 33 for a reconciliation to the comparable GAAP financial
measure.                                       
|                            | 
|Re-completion               |  | Completion of an existing well for production from one formation or reservoir to another formation or reservoir that exists behind casing of the same well.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                            | 
|Reservoir                   |  | The underground rock formation where oil has accumulated. It consists of a porous rock to hold the oil, and a cap rock that prevents its escape.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                            | 
|Reservoir Pressure          |  | The pressure at the face of the producing formation when the well is shut-in. It equals the shut-in pressure at the wellhead plus the weight of the column of oil in the
well.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                            | 
|Roll-Up Strategy            |  | A roll-up strategy is a common business term used to describe a business plan whereby a company accumulates multiple small operators in a particular business sector
with a goal to generate synergies, stimulate growth and optimize the value of the individual pieces.                                                                                                                                                                                                                                                                                                                                                                                                                              
|                            | 
|Secondary Recovery          |  | The stage of hydrocarbon production during which an external fluid such as water or natural gas is injected into the reservoir through injection wells located in rock that has
fluid communication with production wells. The purpose of secondary recovery is to maintain reservoir pressure and to displace hydrocarbons toward the wellbore. The most common secondary recovery techniques are natural gas injection and
waterflooding. Normally, natural gas is injected into the natural gas cap and water is injected into the production zone to sweep oil from the reservoir. A pressure-maintenance program can begin during the primary recovery stage, but it is a form of
enhanced recovery.
|                            | 
|Shut-in well                |  | A well which is capable of producing but is not presently producing. Reasons for a well being shut-in may be lack of equipment, market or other.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                            | 
|Stock Tank Barrel or STB    |  | A stock tank barrel of oil is the equivalent of 42 U.S. Gallons at 60 degrees Fahrenheit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                            | 
|Undeveloped acreage         |  | Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas regardless of whether
such acreage contains proved reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                            | 
|Unitize, Unitization        |  | When owners of oil reservoir pool their individual interests in return for an interest in the overall unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                            | 
|Waterflood                  |  | The injection of water into an oil reservoir to push additional oil out of the reservoir rock and into the wellbores of producing wells. Typically a secondary
recovery process.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                            | 
|Water Injection Wells       |  | A well in which fluids are injected rather than produced, the primary objective typically being to maintain or increase reservoir pressure, often pursuant to a
waterflood.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                            | 
|Water Supply Wells          |  | A well in which fluids are being produced for use in a Water Injection Well.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                            | 
|Wellbore                    |  | A borehole; the hole drilled by the bit. A wellbore may have casing in it or it may be open (uncased); or part of it may be cased, and part of it may be open. Also called a
borehole or hole.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



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|                 |  |                                                                                                                                                                                                                                                                                  
|---------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Working Interest |  | An interest in an oil lease entitling the owner to receive a specified percentage of the proceeds of the sale of oil production or a percentage of the production, but requiring
the owner of the working interest to bear the cost to explore for, develop and produce such oil.

ITEM 1A. RISK FACTORS.

In the course of conducting our business operations, we are exposed to a variety of risks
that are inherent to the oil industry. The following discusses some of the key inherent risk factors that could affect our business and operations, as well as other risk factors which are particularly relevant to us in the current period of
significant economic and market disruption. Other factors besides those discussed below or elsewhere in this report also could adversely affect our business and operations, and these risk factors should not be considered a complete list of potential
risks that may affect us.

Declining economic conditions, and worsening geopolitical conditions, could negatively impact our business

Our operations are affected by local, national and worldwide economic conditions. Markets in the United States
and elsewhere have been experiencing extreme volatility and disruption for more than 2 years, due in part to the financial stresses affecting the liquidity of the banking system and the financial markets generally. In recent months, this
volatility and disruption has reached unprecedented levels. The consequences of a potential or prolonged recession may include a lower level of economic activity and uncertainty regarding energy prices and the capital and commodity markets.

In addition, actual and attempted terrorist attacks in the United States, Middle East, Southeast Asia and Europe, and war or
armed hostilities in the Middle East, Iran, North Korea or elsewhere, or the fear of such events, could further exacerbate the volatility and disruption to the financial markets and economy. The situation in Iraq and Afghanistan, tension over
Irans nuclear program, and more recently the events in Libya, Tunisia and Egypt that resulted in changes to long-standing regimes and other regimes in the Middle East and North Africa have lead to further instability in the
worldwide economy.

While the ultimate outcome and impact of the current economic conditions cannot be predicted, a lower
level of economic activity might result in a decline in energy consumption, which may materially adversely affect the price of oil, our revenues, liquidity and future growth. Instability in the financial markets, as a result of recession or
otherwise, also may affect the cost of capital and our ability to raise capital.

We have sustained losses, which raises doubt as to our
ability to successfully develop profitable business operations.

Our prospects must be considered in light of the
risks, expenses and difficulties frequently encountered in establishing and maintaining a business in the oil industry. There is nothing conclusive at this time on which to base an assumption that our business operations will prove to be successful
or that we will be able to operate profitably. Our future operating results will depend on many factors, including:



| |  |  | the future prices of oil;
| | - |  | -------------------------



| |  |  | our ability to raise adequate working capital;
| | - |  | ----------------------------------------------



| |  |  | success of our development and exploration efforts;
| | - |  | ---------------------------------------------------



| |  |  | effects of our hedging strategies;
| | - |  | ----------------------------------



| |  |  | demand for oil;
| | - |  | ---------------



| |  |  | the level of our competition;
| | - |  | -----------------------------



| |  |  | our ability to attract and maintain key management, employees and operators;
| | - |  | ----------------------------------------------------------------------------



| |  |  | transportation and processing fees on our facilities;
| | - |  | -----------------------------------------------------



| |  |  | fuel conservation measures;
| | - |  | ---------------------------



| |  |  | alternate fuel requirements or advancements;
| | - |  | --------------------------------------------



| |  |  | government regulation and taxation;
| | - |  | -----------------------------------



| |  |  | technical advances in fuel economy and energy generation devices; and
| | - |  | ---------------------------------------------------------------------



| |  |  | our ability to efficiently explore, develop and produce sufficient quantities of marketable oil in a highly competitive and speculative environment
while maintaining quality and controlling costs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

To achieve profitable operations, we must, alone or with
others, successfully execute on the factors stated above, along with continually developing ways to enhance our production efforts. Despite our best efforts, we may not be successful in our development efforts or obtain required regulatory
approvals. There is a possibility that some of our wells may never produce oil in sustainable or economic quantities.

We
will need additional capital in the future to finance our planned growth, which we may not be able to raise or may only be available on terms unfavorable to us or our stockholders, which may result in our inability to fund our working capital
requirements and harm our operational results.



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We have and expect to continue to have substantial capital expenditure and working capital
needs. We will need to rely on cash flow from operations and borrowings under our Credit Facility or raise additional cash to fund our operations, pay outstanding long-term debt, fund our anticipated reserve replacement needs and implement our
growth strategy, or respond to competitive pressures and/or perceived opportunities, such as investment, acquisition, exploration, work-over and development activities.

If low oil prices, operating difficulties, constrained capital sources or other factors, many of which are beyond our control, cause our revenues or cash flows from operations to decrease, we may be
limited in our ability to spend the capital necessary to complete our development, production exploitation and exploration programs. If our resources or cash flows do not satisfy our operational needs, we will require additional financing, in
addition to anticipated cash generated from our operations, to fund our planned growth. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms,
our ability to fund our operations, take advantage of opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In such a capital restricted situation, we may curtail our
acquisition, drilling, development, and exploration activities or be forced to sell some of our assets on an untimely or unfavorable basis. Our current plans to address lower crude oil prices are primarily to reduce both capital and operating
expenditures to a level equal to or below cash flow from operations. However, our plans may not be successful in improving our results of operations and liquidity.

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have
rights, preferences or privileges senior to those of existing stockholders.

Oil prices are volatile. Future volatility may cause
negative change in cash flows which may result in our inability to cover our operating or capital expenditures.

Our
future revenues, profitability, future growth and the carrying value of our properties is anticipated to depend substantially on the prices we may realize for our oil production. Our realized prices may also affect the amount of cash flow available
for operating or capital expenditures and our ability to borrow and raise additional capital.

Oil prices are subject to wide
fluctuations in response to relatively minor changes in or perceptions regarding supply and demand. Historically, the markets for oil have been volatile, and they are likely to continue to be volatile in the future. Among the factors that can cause
this volatility are:



| |  |  | Commodities speculators;
| | - |  | ------------------------



| |  |  | local, national and worldwide economic conditions;
| | - |  | --------------------------------------------------



| |  |  | worldwide or regional demand for energy, which is affected by economic conditions;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the domestic and foreign supply of oil;
| | - |  | ---------------------------------------



| |  |  | weather conditions;
| | - |  | -------------------



| |  |  | natural disasters;
| | - |  | ------------------



| |  |  | acts of terrorism;
| | - |  | ------------------



| |  |  | domestic and foreign governmental regulations and taxation;
| | - |  | -----------------------------------------------------------



| |  |  | political and economic conditions in oil producing countries, including those in the Middle East and South America;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | impact of the U.S. dollar exchange rates on oil prices;
| | - |  | -------------------------------------------------------



| |  |  | the availability of refining capacity;
| | - |  | --------------------------------------



| |  |  | actions of the Organization of Petroleum Exporting Countries, or OPEC, and other state controlled oil companies relating to oil price and production
controls; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the price and availability of other fuels.
| | - |  | ------------------------------------------



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It is impossible to predict oil price movements with certainty. Lower oil prices may not
only decrease our future revenues on a per unit basis but also may reduce the amount of oil that we can produce economically. A substantial or extended decline in oil prices may materially and adversely affect our future business enough to force us
to cease our business operations. In addition, our reserves, financial condition, results of operations, liquidity and ability to finance and execute planned capital expenditures will also suffer in such a price decline. Further, oil prices do not
necessarily move together.

Approximately 71% of our total proved reserves as of December 31, 2010 consist of undeveloped and
developed non-producing reserves, and those reserves may not ultimately be developed or produced.

Our estimated total
proved PV10 (present value) before tax of reserves as of December 31, 2010 was $31.2 million, versus $29.9 million as of March 31, 2010. Of the 2.3 million net BOE at December 31, 2010, approximately 29% are proved developed
and approximately 71% are proved undeveloped. These figures include the assets acquired in the series of transactions that closed effective December 31, 2010. See Glossary on page 14 for our definition of PV10.

As of December 31, 2010, approximately 70% of our total proved reserves were undeveloped and approximately 6% were developed
non-producing. Assuming we can obtain adequate capital resources, we plan to develop and produce all of our proved reserves, but ultimately some of these reserves may not be developed or produced. Furthermore, not all of our undeveloped or developed
non-producing reserves may be ultimately produced in the time periods we have planned, at the costs we have budgeted, or at all.

Because we face uncertainties in estimating proven recoverable reserves, you should not place undue reliance on such reserve information.

Our reserve estimate and the future net cash flows attributable to those reserves at December 31, 2010 was
prepared by Miller and Lents, Ltd., an independent petroleum consultant. There are numerous uncertainties inherent in estimating quantities of proved reserves and cash flows from such reserves, including factors beyond our control and the
control of these independent consultants and engineers. Reserve engineering is a subjective process of estimating underground accumulations of oil that can be economically extracted, which cannot be measured in an exact manner. The accuracy of an
estimate of quantities of reserves, or of cash flows attributable to these reserves, is a function of the available data, assumptions regarding future oil prices, expenditures for future development and exploitation activities, and engineering and
geological interpretation and judgment. Reserves and future cash flows may also be subject to material downward or upward revisions based upon production history, development and exploitation activities and oil prices. Actual future production,
revenue, taxes, development expenditures, operating expenses, quantities of recoverable reserves and value of cash flows from those reserves may vary significantly from the assumptions and estimates in our reserve reports. Any significant variance
from these assumptions to actual figures could greatly affect our estimates of reserves, the economically recoverable quantities of oil attributable to any particular group of properties, the classification of reserves based on risk of recovery, and
estimates of the future net cash flows. In addition, reserve engineers may make different estimates of reserves and cash flows based on the same available data. The estimated quantities of proved reserves and the discounted present value of
future net cash flows attributable to those reserves included in this report were prepared by Miller and Lents, Ltd. in accordance with rules of the Securities and Exchange Commission, or SEC, and are not intended to represent the fair market
value of such reserves.

The present value of future net cash flows from our proved reserves is not necessarily the same as
the current market value of our estimated reserves. We base the estimated discounted future net cash flows from our proved reserves on prices and costs. However, actual future net cash flows from our oil properties also will be affected by factors
such as:



| |  |  | geological conditions;
| | - |  | ----------------------



| |  |  | assumptions governing future oil prices;
| | - |  | ----------------------------------------



| |  |  | amount and timing of actual production;
| | - |  | ---------------------------------------



| |  |  | availability of funds;
| | - |  | ----------------------



| |  |  | future operating and development costs;
| | - |  | ---------------------------------------



| |  |  | actual prices we receive for oil;
| | - |  | ---------------------------------



| |  |  | changes in government regulations and taxation; and
| | - |  | ---------------------------------------------------



| |  |  | capital costs of drilling new wells
| | - |  | -----------------------------------

The timing of both our production and our incurrence of expenses in connection with the development and production of our properties will affect the timing of actual future net cash flows from proved
reserves, and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net cash flows may not be the most appropriate discount factor based on interest rates in effect from time to time and
risks associated with our business or the oil industry in general.



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##### Table of Contents

The differential between the New York Mercantile Exchange, or NYMEX, or other benchmark price of oil
and the wellhead price we receive could have a material adverse effect on our results of operations, financial condition and cash flows.

The prices that we receive for our oil production typically trade at a discount to the relevant benchmark prices, such as NYMEX, that are used for calculating hedge positions. The difference between
the benchmark price and the price we receive is called a differential. While we have fixed this differential under the terms of our agreement with BP through December of 2015, the differential on physical sales after that date is still under
negotiation. We cannot accurately predict oil differentials. In recent years for example, production increases from competing Canadian and Rocky Mountain producers, in conjunction with limited refining and pipeline capacity from the Rocky
Mountain area, have gradually widened this differential. Recent economic conditions, including volatility in the price of oil, have resulted in both increases and decreases in the differential between the benchmark price for oil and the wellhead
price we receive. These fluctuations could have a material adverse effect on our results of operations, financial condition and cash flows by decreasing the proceeds we receive for our oil production in comparison to what we would receive if
not for the differential.

The oil business involves numerous uncertainties and operating risks that can prevent us from realizing
profits and can cause substantial losses.

Our development, exploitation and exploration activities may be
unsuccessful for many reasons, including weather, cost overruns, equipment shortages and mechanical difficulties. Moreover, the successful drilling of an oil well does not ensure a profit on investment. A variety of factors, both geological and
market-related, can cause a well to become uneconomical or only marginally economical. In addition to their cost, unsuccessful wells can hurt our efforts to replace reserves.

The oil business involves a variety of operating risks, including:



| |  |  | unexpected operational events and/or conditions;
| | - |  | ------------------------------------------------



| |  |  | reductions in oil prices;
| | - |  | -------------------------



| |  |  | limitations in the market for oil;
| | - |  | ----------------------------------



| |  |  | adverse weather conditions;
| | - |  | ---------------------------



| |  |  | facility or equipment malfunctions;
| | - |  | -----------------------------------



| |  |  | title problems;
| | - |  | ---------------



| |  |  | oil quality issues;
| | - |  | -------------------



| |  |  | pipe, casing, cement or pipeline failures;
| | - |  | ------------------------------------------



| |  |  | natural disasters;
| | - |  | ------------------



| |  |  | fires, explosions, blowouts, surface cratering, pollution and other risks or accidents;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | environmental hazards, such as oil spills, pipeline ruptures and discharges of toxic gases;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | compliance with environmental and other governmental requirements; and
| | - |  | ----------------------------------------------------------------------



| |  |  | uncontrollable flows of oil or well fluids.
| | - |  | -------------------------------------------

If we experience any of these problems, it could affect well bores, gathering systems and processing facilities, which could adversely affect our ability to conduct operations. We could also incur
substantial losses as a result of:



| |  |  | injury or loss of life;
| | - |  | -----------------------



| |  |  | severe damage to and destruction of property, natural resources and equipment;
| | - |  | ------------------------------------------------------------------------------



| |  |  | pollution and other environmental damage;
| | - |  | -----------------------------------------



| |  |  | clean-up responsibilities;
| | - |  | --------------------------



| |  |  | regulatory investigation and penalties;
| | - |  | ---------------------------------------



| |  |  | suspension of our operations; and
| | - |  | ---------------------------------



| |  |  | repairs to resume operations
| | - |  | ----------------------------



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Because we use third-party drilling contractors to drill our wells, we may not realize the
full benefit of worker compensation laws in dealing with their employees. Our insurance does not protect us against all operational risks. We do not carry business interruption insurance at levels that would provide enough funds for us to continue
operating without access to other funds. For some risks, we may not obtain insurance if we believe the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully
insurable. If a significant accident or other event occurs and is not fully covered by insurance, it could impact our operations enough to force us to cease our operations.

Drilling wells is speculative, and any material inaccuracies in our forecasted drilling costs, estimates or underlying assumptions will materially affect our business.

Developing and exploring for oil involves a high degree of operational and financial risk, which precludes definitive statements as to
the time required and costs involved in reaching certain objectives. The budgeted costs of drilling, completing and operating wells are often exceeded and can increase significantly when drilling costs rise due to a tightening in the supply of
various types of oilfield equipment and related services. Drilling may be unsuccessful for many reasons, including geological conditions, weather, cost overruns, equipment shortages and mechanical difficulties. Moreover, the successful drilling of
an oil well does not ensure a profit on investment. Exploratory wells bear a much greater risk of loss than development wells. Substantially all of our wells drilled through December 31, 2010 have been development wells. A variety of
factors, both geological and market-related, can cause a well to become uneconomical or only marginally economic. Our initial drilling and development sites, and any potential additional sites that may be developed, require significant additional
exploration and development, regulatory approval and commitments of resources prior to commercial development. If our actual drilling and development costs are significantly more than our estimated costs, we may not be able to continue our business
operations as proposed and would be forced to modify our plan of operation.

Development of our reserves, when
established, may not occur as scheduled and the actual results may not be as anticipated. Drilling activity and lack of access to economically acceptable capital may result in downward adjustments in reserves or higher than anticipated costs. Our
estimates will be based on various assumptions, including assumptions over which we have control and assumptions required by the SEC relating to oil prices, drilling and operating expenses, capital expenditures, taxes and availability of funds.
We have control over our operations that affect, among other things, acquisitions and dispositions of properties, availability of funds, use of applicable technologies, hydrocarbon recovery efficiency, drainage volume and production decline rates
that are part of these estimates and assumptions and any variance in our operations that affects these items within our control may have a material effect on reserves. The process of estimating our oil reserves is extremely complex, and requires
significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Our estimates may not be reliable enough to allow us to be successful in our intended business
operations. Our actual production, revenues, taxes, development expenditures and operating expenses will likely vary from those anticipated. These variances may be material.

Unless we replace our oil reserves, our reserves and production will decline, which would adversely affect our cash flows and income.

Unless we conduct successful development, exploitation and exploration activities or acquire properties containing proved reserves, our
proved reserves will decline as those reserves are produced. Producing oil reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future oil production, and,
therefore our cash flow and income, are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves. We may be unable to make such acquisitions
because we are:



| |  |  | unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | unable to obtain financing for these acquisitions on economically acceptable terms; or
| | - |  | --------------------------------------------------------------------------------------



| |  |  | outbid by competitors.
| | - |  | ----------------------

If we are unable to develop, exploit, find or acquire additional reserves to replace our current and future production, our cash flow and income will decline as production declines, until our existing
properties would be incapable of sustaining commercial production.

In order to exploit successfully our current oil lease and others
that we acquire in the future, we will need to generate significant amounts of capital.

The oil exploration,
development and production business is a capital-intensive undertaking. In order for us to be successful in acquiring, investigating, developing, and producing oil from our current mineral leases and other leases that we may acquire in the future,
we will need to generate an amount of capital in excess of that generated from our results of operations. In order to generate that additional capital, we may need to obtain an expanded debt facility and to issue additional shares of our equity
securities. There



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##### Table of Contents

can be no assurance that we will be successful in ether obtaining that expanded debt facility or issuing our equity securities, and our inability to generate the needed additional capital may
have a material adverse effect on our prospects and financial results of operations. If we are able to issue additional equity securities in order to generate such additional capital, then those issuances may occur at prices that represent discounts
to our trading price, and will dilute the percentage ownership interest of those persons holding our shares prior to such issuances. Unless we are able to generate additional enterprise value with the proceeds of the sale of our equity securities,
those issuances may adversely affect the value of our shares that are outstanding prior to those issuances.

A significant portion of
our potential future reserves and our business plan depend upon secondary recovery techniques to establish production. There are significant risks associated with such techniques.

We anticipate that a significant portion of our future reserves and our business plan will be associated with secondary recovery projects
that are either in the early stage of implementation or are scheduled for implementation subject to availability of capital. We anticipate that secondary recovery will affect our reserves and our business plan, and the exact project initiation dates
and, by the very nature of waterflood operations, the exact completion dates of such projects are uncertain. In addition, the reserves and our business plan associated with these secondary recovery projects, as with any reserves, are estimates only,
as the success of any development project, including these waterflood projects, cannot be ascertained in advance. If we are not successful in developing a significant portion of our reserves associated with secondary recovery methods, then the
project may be uneconomic or generate less cash flow and reserves than we had estimated prior to investing the capital. Risks associated with secondary recovery techniques include, but are not limited to, the following:



| |  |  | higher than projected operating costs;
| | - |  | --------------------------------------



| |  |  | lower-than-expected production;
| | - |  | -------------------------------



| |  |  | longer response times;
| | - |  | ----------------------



| |  |  | higher costs associated with obtaining capital;
| | - |  | -----------------------------------------------



| |  |  | unusual or unexpected geological formations;
| | - |  | --------------------------------------------



| |  |  | fluctuations in oil prices;
| | - |  | ---------------------------



| |  |  | regulatory changes;
| | - |  | -------------------



| |  |  | shortages of equipment; and
| | - |  | ---------------------------



| |  |  | lack of technical expertise.
| | - |  | ----------------------------

If any of these risks occur, it could adversely affect our financial condition or results of operations.

Any acquisitions we complete are subject to considerable risk.

Even when we make acquisitions that we believe are good for our business, any acquisition involves potential risks, including, among
other things:



| |  |  | the validity of our assumptions about reserves, future production, revenues and costs, including synergies;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | an inability to integrate successfully the businesses we acquire;
| | - |  | -----------------------------------------------------------------



| |  |  | a decrease in our liquidity by using our available cash or borrowing capacity to finance acquisitions;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | the diversion of managements attention from other business concerns;
| | - |  | ---------------------------------------------------------------------



| |  |  | an inability to hire, train or retain qualified personnel to manage the acquired properties or assets;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unforeseen difficulties encountered in operating in new geographic or geological areas; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | customer or key employee losses at the acquired businesses.
| | - |  | -----------------------------------------------------------

Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic and other
information, the results of which are often incomplete or inconclusive.



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Our reviews of acquired properties can be inherently incomplete because it is not always
feasible to perform an in-depth review of the individual properties involved in each acquisition. Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become
sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as ground water contamination, plugging or orphaned well liability
are not necessarily observable even when an inspection is undertaken.

We must obtain governmental permits and approvals for
drilling operations, which can result in delays in our operations, be a costly and time consuming process, and result in restrictions on our operations.

Regulatory authorities exercise considerable discretion in the timing and scope of permit issuances in the region in which we operate. Compliance with the requirements imposed by these authorities can be
costly and time consuming and may result in delays in the commencement or continuation of our exploration or production operations and/or fines. Regulatory or legal actions in the future may materially interfere with our operations or otherwise have
a material adverse effect on us. In addition, we are often required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that a proposed project may have on the environment, threatened and endangered
species, and cultural and archaeological artifacts. Accordingly, the permits we need may not be issued, or if issued, may not be issued in a timely fashion, or may involve requirements that restrict our ability to conduct our operations or to do so
profitably.

Due to our lack of geographic diversification, adverse developments in our operating areas would materially affect our
business.

We currently only lease and operate oil properties located in Eastern Kansas and South Texas. As a result
of this concentration, we may be disproportionately exposed to the impact of delays or interruptions of production from these properties caused by significant governmental regulation, transportation capacity constraints, curtailment of production,
natural disasters, adverse weather conditions or other events which impact this area.

We depend on a small number of customers for
all, or a substantial amount of our sales. If these customers reduce the volumes of oil they purchase from us, our revenue and cash available for distribution will decline to the extent we are not able to find new customers for our production.

We currently sell oil to two purchasers in Eastern Kansas: Coffeyville Resources and Pacer Energy Marketing. There
are approximately five potential purchasers of oil in Eastern Kansas, and it is not likely that there will be a large pool of available purchasers. If a key purchaser were to reduce the volume of oil it purchases from us, our revenue and cash
available for operations will decline to the extent we are not able to find new customers to purchase our production at equivalent prices.

We currently sell oil to Shell in South Texas. The number of purchasers in South Texas are numerous, but increased production volumes from extensive shale drilling activity in the area may result in
bottle necks with various purchasers.

We are not the operator of some of our properties and we have limited control over the activities
on those properties.

We are not the operator on our Black Oaks Project; the El Toro Project or the Lonesome Dove
Project. Our dependence on the operators of these projects limits our ability to influence or control the operation or future development of each project. Such limitations could materially adversely affect the realization of our targeted returns on
capital related to exploration, drilling or production activities and lead to unexpected future costs.

We may suffer losses or incur
liability for events for which we or the operator of a property have chosen not to obtain insurance.

Our operations
are subject to hazards and risks inherent in producing and transporting oil, such as fires, natural disasters, explosions, pipeline ruptures, spills, and acts of terrorism, all of which can result in the loss of hydrocarbons, environmental
pollution, personal injury claims and other damage to our and others properties. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. In addition, pollution and environmental
risks generally are not fully insurable. As a result of market conditions, existing insurance policies may not be renewed and other desirable insurance may not be available on commercially reasonable terms, if at all. The occurrence of an event that
is not covered, or not fully covered, by insurance could have a material adverse effect on our business, financial condition and results of operations.

Our hedging activities could result in financial losses or could reduce our available funds or income and therefore adversely affect our financial position.

To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of oil, we have entered into
derivative arrangements through December 31, 2015 for volumes up to 190 barrels of oil per day that could result in both realized



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and unrealized hedging losses. As of December 31, 2010, we had incurred realized and unrealized losses of approximately $1.9 million. The extent of our commodity price exposure is related
largely to the effectiveness and scope of our derivative activities. For example, the derivative instruments we may utilize may be based on posted market prices, which may differ significantly from the actual crude oil prices we realize in our
operations.

Our actual future production may be significantly higher or lower than we estimate at the time we enter into
derivative transactions for such period. If the actual amount is higher than we estimate, we will have greater commodity price exposure than we intended. If the actual amount is lower than the nominal amount that is subject to our derivative
financial instruments, we might be forced to satisfy all or a portion of our derivative transactions without the benefit of the cash flow from our sale or purchase of the underlying physical commodity, resulting in a substantial diminution of our
liquidity. As a result of these factors, our derivative activities may not be as effective as we intend in reducing the volatility of our cash flows, and in certain circumstances may actually increase the volatility of our cash flows. In addition,
while we believe our existing derivative activities are with creditworthy counterparties (Coffeyville Resources and BP), continued deterioration in the credit markets may cause a counterparty not to perform its obligation under the applicable
derivative instrument or impact their willingness to enter into future transactions with us.

Our business depends in part on gathering
and transportation facilities owned by others. Any limitation in the availability of those facilities could interfere with our ability to market our oil production and could harm our business.

The marketability of our oil production will depend in a very large part on the availability, proximity and capacity of pipelines and oil
processing facilities. The amount of oil that can be produced and sold is subject to curtailment in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage or lack of
available capacity on such systems. The curtailments arising from these and similar circumstances may last from a few days to several months. In many cases, we will be provided only with limited, if any, notice as to when these circumstances will
arise and their duration. Any significant curtailment in gathering system or pipeline capacity could significantly reduce our ability to market our oil production and could materially harm our business.

Cost and availability of drilling rigs, equipment, supplies, personnel and other services could adversely affect our ability to execute on a timely
basis our development, exploitation and exploration plans.

Shortages or an increase in cost of drilling rigs,
equipment, supplies or personnel could delay or interrupt our operations, which could impact our financial condition and results of operations. Drilling activity in the geographic areas in which we conduct drilling activities may increase, which
would lead to increases in associated costs, including those related to drilling rigs, equipment, supplies and personnel and the services and products of other vendors to the industry. Increased drilling activity in these areas may also decrease the
availability of rigs. Although Haas Petroleum has agreed to provide up to two drilling rigs to the Black Oaks Project when needed, subject to availability of capital, we do not have any contracts for drilling rigs and drilling rigs may not be
readily available when we need them. Drilling and other costs may increase further and necessary equipment and services may not be available to us at economical prices.

Our exposure to possible leasehold defects and potential title failure could materially adversely impact our ability to conduct drilling operations.

We obtain the right and access to properties for drilling by obtaining oil leases either directly from the hydrocarbon owner, or through
a third party that owns the lease. The leases may be taken or assigned to us without title insurance. There is a risk of title failure with respect to such leases, and such title failures could materially adversely impact our business by causing us
to be unable to access properties to conduct drilling operations.

Our reserves are subject to the risk of depletion because many of our
leases are in mature fields that have produced large quantities of oil to date.

Our operations are located in
established fields in Eastern Kansas and South Texas. As a result, many of our leases are in, or directly offset, areas that have produced large quantities of oil to date. As such, our reserves may be partially or completely depleted by
offsetting wells or previously drilled wells, which could significantly harm our business.

Our lease ownership may be diluted due to
financing strategies we may employ in the future due to our lack of capital.

To accelerate our development efforts we
plan to take on working interest partners who will contribute to the costs of drilling and completion and then share in revenues derived from production. In addition, we may in the future, due to a lack of capital or other strategic reasons,
establish joint venture partnerships or farm out all or part of our development efforts. These economic strategies may have a dilutive effect on our lease ownership and could significantly reduce our operating revenues.



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We may face lease expirations on leases that are not currently held-by-production.

We have several leases in Texas that are not currently held-by-production, some of which have near term lease expirations. We are
confident that we can maintain the lease position by drilling operations or by negotiating lease extensions, but we can make no guarantee that we can maintain these leases.

We are subject to complex laws and regulations, including environmental regulations, which can adversely affect the cost, manner or feasibility of doing business.

Development, production and sale of oil in the United States are subject to extensive laws and regulations, including environmental laws
and regulations. We may be required to make large expenditures to comply with environmental and other governmental regulations. Matters subject to regulation include, but are not limited to:



| |  |  | location and density of wells;
| | - |  | ------------------------------



| |  |  | the handling of drilling fluids and obtaining discharge permits for drilling operations;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | accounting for and payment of royalties on production from state, federal and Indian lands;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | bonds for ownership, development and production of oil properties;
| | - |  | ------------------------------------------------------------------



| |  |  | transportation of oil by pipelines;
| | - |  | -----------------------------------



| |  |  | operation of wells and reports concerning operations; and
| | - |  | ---------------------------------------------------------



| |  |  | taxation.
| | - |  | ---------

Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous
materials, remediation and clean-up costs and other environmental damages. Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal
penalties. Moreover, these laws and regulations could change in ways that substantially increase our costs. Accordingly, any of these liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our
financial condition and results of operations enough to possibly force us to cease our business operations.

Our operations may expose
us to significant costs and liabilities with respect to environmental, operational safety and other matters.

We may
incur significant costs and liabilities as a result of environmental and safety requirements applicable to our oil production activities. We may also be exposed to the risk of costs associated with Kansas Corporation Commission requirements to plug
orphaned and abandoned wells on our oil leases from wells previously drilled by third parties. In addition, we may indemnify sellers or lessors of oil properties for environmental liabilities they or their predecessors may have created. These costs
and liabilities could arise under a wide range of federal, state and local environmental and safety laws and regulations, including regulations and enforcement policies, which have tended to become increasingly strict over time. Failure to comply
with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of cleanup and site restoration costs, liens and to a lesser extent, issuance of injunctions to limit or cease operations. In
addition, claims for damages to persons or property may result from environmental and other impacts of our operations.

Strict, joint and several liability may be imposed under certain environmental laws, which could cause us to become liable for the
conduct of others or for consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. New laws, regulations or enforcement policies could be more stringent and impose unforeseen liabilities
or significantly increase compliance costs. If we are not able to recover the resulting costs through insurance or increased revenues, our ability to operate effectively could be adversely affected.

We operate in a highly competitive environment and our competitors may have greater resources than do we.

The oil industry is intensely competitive and we compete with other companies, many of which are larger and have greater financial,
technological, human and other resources. Many of these companies not only explore for and produce crude oil but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis. Such companies may
be able to pay more for productive oil properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, such companies may have a
greater ability to continue exploration activities during periods of low oil market prices. Our ability to acquire additional properties and to discover 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. If we are unable to compete, our operating results and financial position may be adversely affected.



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We may incur substantial write-downs of the carrying value of our oil properties, which would
adversely impact our earnings.

We review the carrying value of our oil properties under the full-cost accounting
rules of the SEC on a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of
the present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net
revenues, current prices and costs used are those as of the end of the appropriate quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those
contracts, including the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues.
Revisions to estimates of oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues. Any excess of the net book value, less deferred income taxes, is generally written off
as an expense. Under SEC regulations, the excess above the ceiling is not expensed (or is reduced) if, subsequent to the end of the period, but prior to the release of the financial statements, oil prices increase sufficiently such that an excess
above the ceiling would have been eliminated (or reduced) if the increased prices were used in the calculations.

In
December 2008, the Securities and Exchange Commission (SEC) issued new regulations for oil and gas reserve reporting which go into effect effective for fiscal years ending on or after December 31, 2009. One of the key elements
of the new regulations relate to the commodity prices which are used to calculate reserves and their present value. The new regulations provide for disclosure of oil and gas reserves evaluated using annual average prices based on the prices in
effect on the first day of each month rather than the current regulations which utilize commodity prices on the last day of the year.

There was no impairment for the nine-month transition period ended December 31, 2010 or year ended March 31, 2010.

Risks Associated with our Debt Financing

Significant and prolonged declines in
commodity prices may negatively impact our borrowing base and our ability to borrow overall.

Our borrowing base,
which is based on our oil reserves and is subject to review and adjustment on a semi-annual basis and other interim adjustments, has been and may be further reduced when it is reviewed. A reduction in our base results in a loan
excess which is required to be eliminated through payment of a portion of the loan and/or cash collateralization of Letters of Credit obligations; or adding properties to the borrowing base sufficient to offset the loan
excess. A reduction in our borrowing base or the ability to borrow under our Credit Facility, combined with a reduction in cash flow from operations resulting from a decline in oil prices, may require us to further reduce our capital
expenditures and our operating activities.

Until we repay the full amount of our outstanding Credit Facility, we may continue to have
substantial indebtedness, which is secured by substantially all of our assets.

On December 31, 2010,
approximately $6,116,000 of bank loans were outstanding. Under a default situation with respect to the secured debt, the lenders may enforce their rights as a secured party and we may lose all or a portion of our assets or be forced to materially
reduce our business activities.

Our substantial indebtedness could make it more difficult for us to fulfill our obligations under our
Credit Facility and, therefore, adversely affect our business.

On July 3, 2008, we entered into a three-year,
Senior Secured Credit Facility providing for aggregate borrowings of up to $50,000,000. As of December 31, 2010, we had total indebtedness of $6,116,000 under the Credit Facility, as well as other notes payable totaling approximately
$37,114. We had no outstanding letters of credit under the new facility on December 31, 2010. Our substantial indebtedness, and the related interest expense, could have important consequences to us, including:



| |  |  | our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our business strategy, or
other general corporate purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | being forced to use cash flow to reduce our outstanding balance as a result of an unfavorable borrowing base redetermination;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service our
indebtedness;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increasing our vulnerability to general adverse economic and industry conditions;
| | - |  | ---------------------------------------------------------------------------------



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| |  |  | placing us at a competitive disadvantage as compared to our competitors that have less leverage;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | our ability to capitalize on business opportunities and to react to competitive pressures and changes in government regulation;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to, or increasing the cost of, refinancing our indebtedness; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | our ability to enter into marketing, hedging, optimization and trading transactions by reducing the number of counterparties with whom we can enter
into such transactions as well as the volume of those transactions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The covenants in our Credit Facility impose
significant operating and financial restrictions on us.

The Credit Facility imposes significant operating and
financial restrictions on us. These restrictions limit our ability and the ability of our subsidiaries, among other things, to:



| |  |  | incur additional indebtedness and provide additional guarantees;
| | - |  | ----------------------------------------------------------------



| |  |  | pay dividends and make other restricted payments;
| | - |  | -------------------------------------------------



| |  |  | create or permit certain liens;
| | - |  | -------------------------------



| |  |  | use the proceeds from the sales of our oil properties;
| | - |  | ------------------------------------------------------



| |  |  | use the proceeds from the unwinding of certain financial hedges;
| | - |  | ----------------------------------------------------------------



| |  |  | engage in certain transactions with affiliates; and
| | - |  | ---------------------------------------------------



| |  |  | consolidate, merge, sell or transfer all or substantially all of our assets or the assets of our subsidiaries.
| | - |  | --------------------------------------------------------------------------------------------------------------

The Credit Facility also contain various affirmative covenants with which we are required to comply. We were not in compliance with three
covenants at December 31, 2010. We may be unable to comply with some or all of these covenants in the future as well. If we do not comply with these covenants and are unable to obtain waivers from our lenders, we would be unable to make
additional borrowings under these facilities, our indebtedness under these agreements would be in default and could be accelerated by our lenders. In addition, it could cause a cross-default under our other indebtedness, including our
debentures. If our indebtedness is accelerated, we may not be able to repay our indebtedness or borrow sufficient funds to refinance it. In addition, if we incur additional indebtedness in the future, we may be subject to additional covenants, which
may be more restrictive than those to which we are currently subject.

Risks Associated with our Common Stock

We do not expect to pay dividends to holders of our common stock because of the terms of our Credit Facility, the terms of our Series A preferred
stock, and our need to reinvest cash flow from operations in our business.

It is unlikely that we will pay any
dividends to the holders of our common stock in the foreseeable future. The terms of our Credit Facility require that the lender approve any such distributions, and the lender is unlikely to provide that consent so long as we have significant unpaid
indebtedness outstanding. In addition, in the transactions that closed as of December 31, 2010, we issued to Montecito Venture Partners, LLC, 4,779,460 shares of Series A preferred stock. The terms of that Series A preferred stock require that
we pay to the holders of those shares cumulative distributions of $4,779,460 from one-third of our available cash from operations, which is our net cash flow from operations less principal being repaid to our lender. Because those priority
distributions to holders of our Series A preferred stock will absorb our available cash from operations, we are unlikely to pay dividends on our common stock until after we have paid the entire $4,779,460 of preferential dividends to holders of
our Series A preferred stock. We presently are unsure how many calendar quarters of operations we will need in order to complete the preferential payments due to the holders of our Series A preferred stock. Even after we complete those
distributions, we are likely to elect to retain and reinvest any available cash flow from operations, rather than funding dividend distributions to holders of our common stock.

There are a Limited Number of Stockholders who have Significant Control over our Common Stock, Allowing them to have Significant Influence over the Outcome of all Matters Submitted to Stockholders
for Approval, which may Conflict with our Interests and the Interests of other Stockholders.

Our directors, officers
and principal stockholders (stockholders owning 10% or more of our common stock) and their affiliates beneficially owned approximately 62,073,782, or 91.21%, of the outstanding shares of common stock, stock options, and derivatives that could have
been converted to common stock at December 31, 2010, immediately after giving effect to certain transactions that closed on that day, and such stockholders will have significant influence over the outcome of all matters submitted to our
stockholders for approval, including the election of directors and other corporate actions.



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Two of our directors, R. Atticus Lowe and Lance Helfert, serve on the investment committee
of West Coast Asset Management, Inc. West Coast Asset Management is the managing member of West Coast Opportunity Fund, LLC, a private investment vehicle formed for the purpose of investing in a wide variety of securities and financial instruments.
West Coast Asset Managements principals also manage Montecito Venture Partners, LLC.

In addition, we engage from time
to time in transactions with certain of these significant stockholders.

On December 31, 2010, we entered into a
Securities Purchase and Asset Acquisition Agreement with West Coast Opportunity Fund, Montecito Venture Partners, Working Interest Holdings, LLC, and certain other parties under which we acquired certain assets in exchange for an aggregate
61,618,991 shares of common stock, 4,779,460 shares of Series A preferred stock, and $1,500,000 cash, as further indicated in Note 3 of this Transition Report on Form 10-K. Under the Securities Purchase and Asset Acquisition Agreement,
Montecito Venture Partners acquired 15,595,540 shares of common stock and 4,779,460 shares of Series A Preferred Stock, and West Coast Opportunity Fund acquired 10,550,415 shares of common stock.

On December 31, 2010, we also entered into a Securities Purchase Agreement with Montecito Venture Partners pursuant to which we sold
to Montecito Venture Partners 5,025,000 shares of common stock for $2,010,000 in cash, upon the same terms and conditions as the remaining parties, as further indicated in Note 2 of this Transition Report on Form 10-K.

Our Large Stockholders may have Interests that Differ from other Stockholders.

As stated above, West Coast Opportunity Fund and Montecito Venture Partners, affiliates of our directors Mr. Lowe and
Mr. Helfert, beneficially own, as of December 31, 2010, 53.20% of our outstanding common stock and 100% of our outstanding Series A preferred stock.

The interests of West Coast Opportunity Fund and Montecito Venture Partners, and their affiliates, may differ from those of our other stockholders. West Coast Opportunity Fund and Montecito Venture
Partners, and their affiliates are in the business of making investments in companies and maximizing the return on those investments. They currently have, and may from time to time in the future acquire, interests in businesses that directly or
indirectly compete with certain aspects of our business or our suppliers or customers businesses.

In addition,
pursuant to the Securities Purchase and Asset Acquisition Agreement dated December 31, 2010, Working Interest Holding, LLC acquired 18,750,000 shares of our common stock, or 28.1% of our outstanding shares.

These stockholders significant ownership of our voting stock will enable it to influence or effectively control us.

The Holders of our Outstanding Shares of Series A Preferred Stock have dividend, conversion and other rights not shared with common stock holders.

As of April 18, 2011, we had 69,355,279 shares of our common stock issued and outstanding, as well as 4,779,460
shares of our Series A preferred stock issued and outstanding.

So long as any shares of Series A preferred stock are
outstanding, we are required to declare dividends each calendar quarter in an aggregate amount equal to one-third of our net cash from operating activities reduced by any principal amount of debt repayment in such calendar quarter to our
institutional lenders and other secured creditors. This right restricts our ability to use a portion of our net cash flow for other purposes such as developing our assets, strategic acquisitions, and dividends, and has other important consequences
to us, including the potential to adversely affect:



| |  |  | our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our business strategy, or
other general corporate purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to use a portion of our operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to
pay dividends;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | our ability to capitalize on business opportunities and to react to competitive pressures and changes in government regulation; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to, or increasing the cost of, refinancing our indebtedness.
| | - |  | ------------------------------------------------------------------------

In addition, we cannot declare any dividends with regard to our common stock unless we concurrently pay to holders of Series A preferred
stock a dividend in like amount, on an as-converted to common stock basis.

The Series A preferred stock is convertible into
4,779,460 shares of our common stock, and the Series A preferred stock, by its terms, shall convert into common stock on a one-to-one basis (subject to adjustment) once the cumulative dividends paid with regard to such stock equal the original
principal value, and upon conversion would represent approximately 6.54% of our outstanding common stock. This would dilute the holdings of our existing common stockholders. In addition, the preferred stockholders vote on a one-to-one basis
with our common stockholders on an as converted basis.

Furthermore, in the event of a liquidation, the holders of our Series
A preferred stock would receive priority liquidation payments before payments to common stockholders equal to the liquidation amount of the preferred stock before any distributions would be made to our common stockholders. The current total
liquidation amount of our Series A preferred stock is $4,779,460, or $1.00 per share, so the preferred stockholders would be entitled to receive that amount before any distributions could be made to common stockholders.

Lastly, the preferred stockholders have the right, by majority vote of the shares of preferred stock, to generally approve any issuances
by us of equity that is senior to or equal in rights to the preferred stock. Therefore, the preferred stockholders can effectively bar us from entering into a transaction which they feel is not in their best interests even if the transaction
would otherwise be in the best interests of EnerJex and its common stockholders.

We have derivative securities currently outstanding
and we may issue derivative securities in the future. Exercise of the derivatives will cause dilution to existing and new stockholders.

The exercise of our outstanding options and warrants, will cause additional shares of common stock to be issued, resulting in dilution to our existing and future common stockholders.

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

Our articles of incorporation authorizes the board of directors to issue
up to 100,000,000 shares of common stock and 10,000,000 shares of preferred stock. The power of the board of directors to issue shares of common stock, preferred stock or warrants or options to purchase shares of common stock or preferred stock
is generally not subject to stockholder approval. Accordingly, any additional issuance of our common stock, or preferred stock that may be convertible into common stock, or debt instruments that may be convertible into common or preferred stock, may
have the effect of diluting ones investment.

Our common stock is traded on an illiquid market, making it difficult for investors
to sell their shares.

Our common stock trades on the Over-the-Counter Bulletin Board (OTCBB) under the symbol
ENRJ, but trading has been minimal. Therefore, the market for our common stock is limited. The trading price of our common stock could be subject to wide fluctuations. Investors may not be able to purchase additional shares or sell their
shares within the time frame or at a price they desire.

The price of our common stock may be volatile and you may not be able to resell
your shares at a favorable price.

Regardless of whether an active trading market for our common stock develops, the
market price of our common stock may be volatile and you may not be able to resell your shares at or above the price you paid for such shares. The following factors could affect our stock price:



| |  |  | our operating and financial performance and prospects;
| | - |  | ------------------------------------------------------



| |  |  | quarterly variations in the rate of growth of our financial indicators, such as net income or loss per share, net income or loss and revenues;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in revenue or earnings estimates or publication of research reports by analysts about us or the exploration and production industry;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potentially limited liquidity;
| | - |  | ------------------------------



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| |  |  | actual or anticipated variations in our reserve estimates and quarterly operating results;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | changes in oil prices;
| | - |  | ----------------------



| |  |  | sales of our common stock by significant stockholders and future issuances of our common stock;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | increases in our cost of capital;
| | - |  | ---------------------------------



| |  |  | changes in applicable laws or regulations, court rulings and enforcement and legal actions;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | commencement of or involvement in litigation;
| | - |  | ---------------------------------------------



| |  |  | changes in market valuations of similar companies;
| | - |  | --------------------------------------------------



| |  |  | additions or departures of key management personnel;
| | - |  | ----------------------------------------------------



| |  |  | general market conditions, including fluctuations in and the occurrence of events or trends affecting the price of oil; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | domestic and international economic, legal and regulatory factors unrelated to our performance.
| | - |  | -----------------------------------------------------------------------------------------------

Our articles of incorporation, bylaws and Nevada Law contain provisions that could discourage an acquisition or change of control of us.

Our articles of incorporation authorize our board of directors to issue preferred stock and common stock without
stockholder approval. The election by our board of directors to issue Series A preferred stock, and any future election to issue more preferred stock, could make it more difficult for a third party to acquire control of us. In addition, provisions
of the articles of incorporation and bylaws could also make it more difficult for a third party to acquire control of us. In addition, Nevadas Combination with Interested Stockholders Statute and its Control Share
Acquisition Statute may have the effect in the future of delaying or making it more difficult to effect a change in control of us.

These statutory anti-takeover measures may have certain negative consequences, including an effect on the ability of our stockholders or other individuals to (i) change the composition of the
incumbent board of directors; (ii) benefit from certain transactions which are opposed by the incumbent board of directors; and (iii) make a tender offer or attempt to gain control of us, even if such attempt were beneficial to us and our
stockholders. Since such measures may also discourage the accumulations of large blocks of our common stock by purchasers whose objective is to seek control of us or have such common stock repurchased by us or other persons at a premium, these
measures could also depress the market price of our common stock. Accordingly, our stockholders may be deprived of certain opportunities to realize the control premium associated with take-over attempts.

We have no plans to pay dividends on our common stock. You may not receive funds without selling your stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future
earnings, if any, to finance the expansion of our business. Our future dividend policy with regard to our common stock is within the discretion of our board of directors and will depend upon various factors, including our business, financial
condition, results of operations, capital requirements, investment opportunities and restrictions imposed by our debentures and Credit Facility.

Because our common stock is deemed a low-priced Penny stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

Our common stock is currently deemed to be a penny stock, as defined in Rule 3a51-1 under the Securities Exchange
Act, which may make it more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock consistently trades above $5.00 per share, if ever, trading in the
common stock may be subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:



| |  |  | Deliver to the customer, and obtain a written receipt for, a disclosure document;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | Disclose certain price information about the stock;
| | - |  | ---------------------------------------------------



| |  |  | Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Send monthly statements to customers with market and price information about the penny stock; and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | In some circumstances, approve the purchasers account under certain standards and deliver written statements to the customer with information
specified in the rules.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Consequently, the penny stock rules may restrict the ability or willingness of
broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our
ability to raise additional capital in the future.

If we fail to remain current on our reporting requirements, we could be removed from
the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act
of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers
quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission. Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed
from the OTC Bulletin Board for failure to timely file twice in a two-year period then we will be ineligible for quotation on the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by
limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

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

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

Additional Risks and Uncertainties

We are an oil acquisition, exploration and development company. If any of the risks that we face actually occur, irrespective of whether
those risks are described in this section or elsewhere in this Transition Report, our business, financial condition and operating results could be materially adversely affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not
applicable.

ITEM 3. LEGAL PROCEEDINGS.

We may become involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this
transition report, there are no material pending legal proceedings to which we are a party or to which any of our property is subject.

PART II

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

Market Information for Common Stock

Our common stock currently trades on the OTC:BB under the symbol ENRJ. Our common stock has traded infrequently on the OTC:BB,
which limits our ability to locate accurate high and low bid prices for each quarter within the last two fiscal years. Therefore, the following table lists the quotations for the high and low sales prices of our common stock for the year ended
March 31, 2010 and through the end of business on December 31, 2010 of the transition period. The quotations reflect inter-dealer prices without retail mark-up, markdown, or commissions and may not represent actual transactions. The market
price of our common stock has been volatile. For an additional discussion, see Item 1A: Risk Factors of this Transition Report on Form 10-K.



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##### Table of Contents

|                                           |  |      |      |  |     |   |      | 
|------------------------------------------ |  | ---- | ---- |  | --- | - | ---- | 
|                                           |  | High |      |  | Low |  
|Transition Period Ended December 31, 2010  |  |      |      |  |     |   |      | 
|Three-month period ended July 2, 2010      |  | $    | 0.99 |  |     | $ | 0.14 | 
|Three-month period ended October 1, 2010   |  | $    | 0.58 |  |     | $ | 0.06 | 
|Three-month period ended December 31, 2010 |  | $    | 0.58 |  |     | $ | 0.06 | 
|                                           |  |     
|Fiscal Year Ended March 31, 2010           |  |      |      |  |     |   |      | 
|Quarter ended June 30, 2009                |  | $    | 1.34 |  |     | $ | 0.15 | 
|Quarter ended September 30, 2009           |  | $    | 1.85 |  |     | $ | 0.15 | 
|Quarter ended December 31, 2009            |  | $    | 1.00 |  |     | $ | 0.41 | 
|Quarter ended March 31, 2010               |  | $    | 1.09 |  |     | $ | 0.29 | 

As of April 18,
2011, there were 1,195 holders of record of our common stock.

Dividends

We have never paid or declared any cash dividends on our common stock. We are required by the terms of our Series A preferred stock to
declare dividends each calendar quarter in an aggregate amount equal to one-third of our net cash from operating activities reduced by any principal amount of debt repayment in such calendar quarter to institutional lenders and other secured
creditors. This right is senior to the rights of common stockholders to receive dividend payments. We currently intend to retain any future earnings in excess of debt repayments and Series A preferred stock dividends to finance the growth and
development of our business and we do not expect to pay any cash dividends on our common stock in the foreseeable future. In addition, we are contractually prohibited by the terms of our outstanding debt from paying cash dividends on our common
stock. Payment of future dividends on common stock, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current or future
financing instruments, including the consent of debt holders and holders of Series A preferred stock, if applicable at such time, and other factors our board of directors deems relevant.

Securities Authorized for Issuance under Equity Compensation Plans

2000/2001 Stock
Option Plan

The board of directors approved the 2000/2001 Stock Option Plan and our stockholders ratified the plan on
September 25, 2000. The total number of options that can be granted under the plan is 200,000 shares and all such shares were previously granted to the former Chief Executive Officer, Mr. Cochennet. On August 3, 2009, we
exchanged these outstanding options for 50,000 shares of our restricted common stock. Therefore, all 200,000 shares reserved for issuance under this plan are again available for issuance.

Stock Incentive Plan

The board of directors approved the EnerJex
Resources, Inc. Stock Option Plan on August 1, 2002 (the 2002-2003 Stock Option Plan). Originally, the total number of options that could be granted under the 2002-2003 Stock Option Plan was not to exceed 400,000 shares. In
September 2007 our stockholders approved a proposal to amend and restate the 2002-2003 Stock Option Plan to increase the number of shares issuable to 1,000,000. On October 14, 2008 our stockholders approved a proposal to amend and
restate the 2002-2003 Stock Option Plan to (i) rename it the EnerJex Resources, Inc. Stock Incentive Plan (the Stock Incentive Plan), (ii) increase the maximum number of shares of our common stock that may be issued under the
Stock Incentive Plan from 1,000,000 to 1,250,000, and (iii) add restricted stock as an eligible award that can be granted under the Stock Incentive Plan.

We had previously granted 438,500 options under this plan. On August 3, 2009, we exchanged all 438,500 outstanding options for 134,400 shares of our restricted common stock. In addition, we granted
151,750 shares of restricted common stock under the Stock Incentive Plan to employees for fiscal 2009 bonuses and 59,300 shares to our officers and directors for the prior rescission of stock options in fiscal 2008. There are currently 900,000
options outstanding under this plan.

General Terms of Plans

Officers (including officers who are members of the board of directors), directors, and other employees and consultants and our subsidiaries (if established) will be eligible to receive awards under the
2000/2001 Stock Option Plan and the Stock Incentive Plan. A committee of the board of directors will administer the plans and will determine those persons to whom awards will be granted, the number of and type of awards to be granted, the provisions
applicable to each grant and the time periods during which the awards may be exercised. No awards may be granted more than ten years after the date of the adoption of the plans.

Non-qualified stock options will be granted by the committee with an option price equal to the fair market value of the shares of common
stock to which the non-qualified stock option relates on the date of grant. The committee may, in its discretion, determine to price the non-qualified option at a different price. In no event may the option price with respect to an incentive stock
option granted



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under the plans be less than the fair market value of such common stock to which the incentive stock option relates on the date the incentive stock option is granted. However the price of an
incentive stock option will not be less than 110% of the fair market value per share on the date of the grant in the case of an individual then owning more than 10% of the total combined voting power of all classes of stock of the corporation.

Each option granted under the plans will be exercisable for a term of not more than ten years after the date of grant.
Certain other restrictions will apply in connection with the plans when some awards may be exercised.

Restricted stock will
have full dividend, voting and other ownership rights, unless otherwise indicated in the applicable award agreement pursuant to which it is granted. If any dividends or distributions are paid in shares of common stock during the restricted
period, the applicable award agreement may provide that such shares will be subject to the same restrictions as the restricted stock with respect to which they were paid.

These plans are intended to encourage directors, officers, employees and consultants to acquire ownership of common stock. The opportunity so provided is intended to foster in participants a strong
incentive to put forth maximum effort for our continued success and growth, to aid in retaining individuals who put forth such effort, and to assist in attracting the best available individuals in the future.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

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

This Managements Discussion and Analysis of Financial
Condition and Results of Operations section should read in conjunction with the other sections of this Transition Report on Form 10-K, including Item 1: Business and Item 8: Financial Statements and Supplementary Data. This
section includes forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements such as will, believe, are projected to
be and similar expressions are statements regarding future events or our future performance, and include statements regarding projected operating results. These forward-looking statements are based on current expectations, beliefs, intentions,
strategies, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks include, but are not limited to: our
ability to deploy capital in a manner that maximizes stockholder value; the ability to identify suitable acquisition candidates or business and investments opportunities; the ability to reduce our operating costs; general economic conditions and our
expected liquidity in future periods. These forward-looking statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in the Risk
Factors set forth in Part I, Item 1A of this Transition Report on Form 10-K. As a result, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

On
January 21, 2011, our board of directors approved the change in our fiscal year from March 31 to December 31. As a result of this change, this Transition Report on Form 10-K is a transition report and includes financial information
for the nine-month transition period from April 1, 2010 to December 31, 2010, or Transition Period. The comparative financial information provided for the nine-month period ended January 1, 2010 is unaudited, since it represented an
interim period of the fiscal year ended March 31, 2010 and includes all the normal recurring adjustments necessary for the fair statement of the results for that period. Subsequent to this Transition report on Form 10-K, our reports on Form
10-K will cover the calendar year from January 1 to December 31, with historical periods remaining unchanged.

Our
principal strategy is to develop, acquire, explore and produce domestic onshore oil properties. Our business activities are currently focused in Eastern Kansas and South Texas.



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Results of Operations for the nine-month transition period ended December 31, 2010, and for fiscal
years ended March 31, 2010 and 2009 compared.

Income:



|                            |  |                                                   |           |  |                            |      |           |  |                     |   |           |  |  |   |           | 
|--------------------------- |  | ------------------------------------------------- | --------- |  | -------------------------- | ---- | --------- |  | ------------------- | - | --------- |  |  | - | --------- | 
|                            |  | Nine-MonthTransition PeriodEnded December 31,2010 |           |  | Fiscal Year Ended March 31 |      |           |  |                    
|                            |  |                                                   | 2010      |  |                            | 2009 |           |  | Increase/(Decrease) |  
|Oil and nature gas revenues |  | $                                                 | 2,929,103 |  |                            | $    | 4,856,027 |  |                     | $ | 6,436,805 |  |  | $ | 1,926,924 | 

Revenues

Oil revenues for the nine-month transition period ended December 31, 2010 were $2,929,103, and fiscal year ended March 31, 2010
were $4,856,027 compared to revenues of $6,436,805 in the fiscal year ended March 31, 2009. The decrease in revenues is primarily the result of lower production. The average price per barrel we received for oil sold during the
nine-month transition period ended December 31, 2010 was $72.60 compared to the twelve months ended March 31, 2010 was $69.62 compared to $85.67 for the twelve months ended March 31, 2009

Expenses:



|                                         |  |                                                   |           |  |                            |      |           |  |                     |   |            |  |  |   |            |  
|---------------------------------------- |  | ------------------------------------------------- | --------- |  | -------------------------- | ---- | --------- |  | ------------------- | - | ---------- |  |  | - | ---------- | -
|                                         |  | Nine-MonthTransition
PeriodEnded December 31,2010 |           |  | Fiscal Year Ended March 31 |      |           |  |                    
|                                         |  |                                                   | 2010      |  |                            | 2009 |           |  | Increase/(Decrease) |  
|Expenses:                                |  |                                                   |           |  |                            |      |           |  |                     |   |            |  |  |   |            |  
|Direct operating costs                   |  | $                                                 | 1,548,128 |  |                            | $    | 1,833,108 |  |                     | $ | 2,637,333  |  |  | $ | (284,980   | )
|Depreciation, depletion and amortization |  |                                                   | 359,855   |  |                            |      | 588,416   |  |                     |   | 872,230    |  |  |   | (221,561   | )
|Total production expenses                |  |                                                   | 1,907,983 |  |                            |      | 2,421,524 |  |                     |   | 3,509,563  |  |  |   | (513,541   | )
|                                         |  |                                                   |           | 
|Professional fees                        |  |                                                   | 748,497   |  |                            |      | 561,625   |  |                     |   | 1,320,332  |  |  |   | (186,872   | )
|Salaries                                 |  |                                                   | 242,490   |  |                            |      | 835,576   |  |                     |   | 849,340    |  |  |   | (593,086   | )
|Depreciation on other fixed assets       |  |                                                   | 21,892    |  |                            |      | 47,081    |  |                     |   | 39,063     |  |  |   | (25,909    | )
|Administrative expenses                  |  |                                                   | 341,401   |  |                            |      | 1,016,484 |  |                     |   | 1,392,645  |  |  |   | (675,083   | )
|Impairment of oil & gas properties       |  |                                                   |          |  |                            |      |          |  |                     |   | 4,777,723  |  |  |   |           |  
|                                         |  |                                                   |           |  |                            |      |           |  |                     |   |            |  |  |   |            |  
|Total expenses                           |  | $                                                 | 3,262,262 |  |                            | $    | 4,882,290 |  |                     | $ | 11,888,666 |  |  | $ | (1,620,027 | )
|                                         |  |                                                   |           |  |                            |      |           |  |                     |   |            |  |  |   |            |  

Direct Operating Costs

Direct operating costs for the nine-month transition period ended December 31, 2010 were $1,548,128 compared to fiscal year ended March 31, 2010 $1,833,108 and $2,637,333 for the fiscal
year ended March 31, 2009. The decrease over the prior period results from the operating costs on a greater number of wells on our existing and acquired oil leases during the nine-month transition period ended December 31, 2010 and
for fiscal year ended March 31, 2010. Direct operating costs include pumping, gauging, pulling, repairs, certain contract labor costs, and other non-capitalized expenses.

Depreciation, Depletion and Amortization

Depreciation, depletion and
amortization for the nine-month transition period ended December 31, 2010 was $359,855, compared to $588,416 for fiscal year ended March 31, 2010 and $872,230 for the fiscal year ended March 31, 2009. The decrease was primarily a
result of lower production. The rate of depletion was $8.31 for the nine-month transition period ended December 31, 2010, compared to $9.06 per barrel for the fiscal year ended March 31, 2010 and $12.02 per barrel for the fiscal year
ended March 31, 2009.

Professional Fees

Professional fees for the nine-month transition period ended December 31, 2010 were $748,497 compared to $561,625 for the fiscal year ended March 31, 2010 and $1,320,332 for the fiscal year
ended March 31, 2009. Payments for services rendered in connection with acquisition and financing activities, our audit, legal, and consulting fees are recorded as professional fees and remained relatively constant over the two fiscal years.



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Salaries

Salaries for the nine-month transition period ended December 31, 2010 were $242,490, compared to $835,576 for fiscal year ended March 31, 2010 and $849,340 for the fiscal year ended
March 31, 2009. The number of full-time employees was flat compared to the respective years.

Depreciation on Other Fixed Assets

Depreciation on other fixed assets for the nine-month transition period ended December 31, 2010 was $21,892, compared
to $47,801 for fiscal year ended March 31, 2010 and $39,063 for the fiscal year ended March 31, 2009. The increase was primarily due to depreciation on fixed assets acquired during the period.

Administrative Expenses

Administrative expenses for the nine-month transition period ended December 31, 2010 were $341,401 compared to $1,016,484 for fiscal year ended March 31, 2010 and $1,392,645 in the fiscal
year ended March 31, 2009. The administrative expenses decreased resulting from less activity in development and exploration and cost cutting measures.

Impairment of Oil Properties

No impairment was recorded for the nine-month
transition period ended December 31, 2010. The impairment of oil properties in the year ended March 31, 2009 of $4,777,723 represented an impairment through applying the full-cost ceiling test method. This ceiling test was
applied to all of the cost of our oil properties accounted for under the full-cost method that were subject to amortization at March 31, 2009. We took this impairment based on the ceiling test results during the quarter ended
December 31, 2008, and was primarily due to depressed commodity prices at the time.

Reserves

Our estimated total proved PV10 (present value) of reserves as of the nine-month transition period ended December 31, 2010 were $31.2
million compared to the fiscal year ended March 31, 2010 which increased to $29.9 million from $10.63 million as of March 31, 2009. Total proved reserves at nine-month transition period ended December 31, 2010 were 2.3 million
barrels, compared to 2.5 million barrels for the fiscal year ended March 31, 2010. PV10 increased primarily as a result of increasing commodity prices. The estimated average price of oil at December 31, 2010 was $72.43 compared
to $62.64 as of March 31, 2010. Of the 2.3 million BOE at December 31, 2010 approximately 29% are proved developed and approximately 71% are proved undeveloped.

The following table presents summary information regarding our estimated net proved reserves as of December 31, 2010. All
calculations of estimated net proved reserves have been made in accordance with the rules and regulations of the SEC, and, except as otherwise indicated, give no effect to federal or state income taxes. The estimates of net proved reserves are based
on the reserve reports prepared by Miller and Lents, Ltd., our independent petroleum consultants. For additional information regarding our reserves, please see Note 13 to our audited financial statements as of and for the nine-month transition
period ended December 31, 2010.

Summary of Proved Oil Gas Reserves

as of December 31, 2010



|                            |  |       |           |  |     |  |           |                       |  |   |            | 
|--------------------------- |  | ----- | --------- |  | --- |  | --------- | --------------------- |  | - | ---------- | 
|Proved Reserves
Category(2) |  | Gross |           |  | Net |  |           | PV10 (before 
tax)(1) | 
|Proved, Developed Producing |  |       |           |  |     |  |           |                       |  |   |            | 
|Oil (stock-tank barrels)    |  |       | 900,960   |  |     |  | 666,220   |                       |  | $ | 12,107,970 | 
|Natural Gas(mcf)(2)         |  |       |          |  |     |  |          |                       |  |   |           | 
|Proved, Undeveloped         |  |       |           |  |     |  |           |                       |  |   |            | 
|Oil (stock-tank barrels)    |  |       | 2,237,990 |  |     |  | 1,653,930 |                       |  | $ | 19,087,800 | 
|Natural Gas (mcf)(2)        |  |       |          |  |     |  |          |                       |  |   |           | 
|Total Proved Reserves       |  |       |           |  |     |  |           |                       |  |   |            | 
|Oil (stock-tank barrels)    |  |       | 3,138,680 |  |     |  | 2,320,150 |                       |  |   | 31,195,770 | 
|Natural Gas (mcf(2)         |  |       |          |  |     |  |          |                       |  |   |           | 



|(1) | The following table shows our reconciliation of our PV10 to our standardized measure of discounted future net cash flows (the most direct comparable
measure calculated and presented in accordance with GAAP). PV10 is our estimate of the present value of future net revenues from estimated proved natural gas reserves after deducting estimated production and ad valorem taxes, future capital costs
and operating expenses, but before deducting any estimates of future income taxes. The estimated future net
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | revenues are discounted at an annual rate of 10% to determine their present value. We believe PV10 to be an important measure for evaluating the relative significance of our oil
properties and that the presentation of the non-GAAP financial measure of PV10 provides useful information to investors because it is widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. Because there
are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating our company. We believe that most other companies in the
oil and gas industry calculate PV10 on the same basis. PV10 should not be considered as an alternative to the standardized measure of discounted future net cash flows as computed under GAAP.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | There were no natural gas reserves as of December 31, 2010.
|--- | -----------------------------------------------------------



|                                                         |  |                         |            |  
|-------------------------------------------------------- |  | ----------------------- | ---------- | -
|                                                         |  | As of December 31, 2010 |           
|PV10(before tax)                                         |  | $                       | 31,195,770 |  
|Future income taxes, net of 10% discount                 |  |                         | (5,890,878 | )
|                                                         |  |                         |            |  
|Standardized measure of discounted future net cash flows |  | $                       | 25,304,892 |  
|                                                         |  |                         |            |  

Liquidity and Capital Resources

Liquidity is a measure of a companys ability to meet potential cash requirements. We have historically met our capital requirements through debt financing, revenues from operations and the issuance
of equity securities. We have classified $6,116,000 of the borrowings outstanding under our Credit Facility as a current liability. We have initiated discussions with Texas Capital Bank to provide a new credit facility with a three year term,
and we anticipate consummating a transaction during the second quarter 2011. We believe that additional reserves and PV10 added via the transactions completed December 31, 2010 coupled with the cash proceeds form the sale of equity securities,
provide us with adequate liquidity to fund its operations and capital program in 2011.

The following table summarizes total
current assets, total current liabilities and working capital at the nine-month transition period ended December 31, 2010, as compared to fiscal year ended March 31, 2010 and March 31, 2009.



|                          |  |                                                     |            |   |                    |   |             |               |  |   |                      |   |  |  |           | 
|------------------------- |  | --------------------------------------------------- | ---------- | - | ------------------ | - | ----------- | ------------- |  | - | -------------------- | - |  |  | --------- | 
|                          |  |                                                     |            |   | Fiscal Years Ended |   |             |               | 
|                          |  | Nine-Month TransitionPeriod 
Ended December31, 2010 |            |   | March 31,2010      |   |             | March 31,2009 |  |   | Increase/(Decrease)$ |  
|Current Assets            |  | $                                                   | 6,434,835  |   |                    | $ | 665,683     |               |  | $ | 898,941              |   |  |  | 5,769,152 | 
|Current Liabilities       |  | $                                                   | 8,332,379  |   |                    | $ | 11,686,510  |               |  | $ | 2,827,015            |   |  |  | 3,354,131 | 
|Working Capital (deficit) |  | $                                                   | (1,897,544 | ) |                    | $ | (11,020,827 | )             |  | $ | (1,928,074           | ) |  |  | 9,123,283 | 

Senior Secured Credit Facility

On July 3, 2008, EnerJex, EnerJex Kansas, and DD Energy entered into a three-year $50 million Senior Secured Credit
Facility (the Credit Facility) with Texas Capital Bank, N.A. Borrowings under the Credit Facility will be subject to a borrowing base limitation based on our current proved oil reserves and will be subject to semi-annual
redeterminations. A borrowing base redetermination was completed by Texas Capital Bank effective January 1, 2010. The borrowing base was determined to be $6,746,000 and called for $55,000 Monthly Borrowing Base Reductions
(MBBR) beginning February 1, 2010.

The Credit Facility is secured by a lien on substantially all of our
assets. The Credit Facility has a term of three years, and all principal amounts, together with all accrued and unpaid interest, will be due and payable in full on July 3, 2011. The Credit Facility also provides for the issuance of
letters-of-credit up to a $750,000 sub-limit under the borrowing base and up to an additional $2.25 million limit not subject to the borrowing base to support our hedging program. We have approximately $500,000 of availability under the current
borrowing base.

Advances under the Credit Facility will be in the form of either base rate loans or Eurodollar loans. The
interest rate on the base rate loans fluctuates based upon the higher of (1) the lenders prime rate and (2) the Federal Funds rate plus 0.50%, plus, in either case, a margin of between 0.0% and 0.5% depending on the
percent of the borrowing base utilized at the time of the credit extension, but in no event shall be less than five percent (5.0%). The interest rate on the Eurodollar loans fluctuates based upon the applicable LIBOR rate, plus a margin of 2.25% to
2.75% depending on the percent of the borrowing base utilized at the time of the credit extension, but in no event shall be less than five percent (5.0%). Eurodollar loans may be based upon one, two, three and six month LIBOR options, except that
beginning March 30, 2009 and continuing through the date of this report, Texas Capital Bank has suspended all LIBOR based funding with maturities less than 90 days due to the extreme volatility in the interest rate market and the unprecedented
spread between the 90 day LIBOR and the shorter term LIBOR options. A commitment fee of 0.375% on the unused portion of the borrowing base will accrue, and be payable quarterly in arrears. There was no commitment fee due at December 31,
2010.



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The Credit Facility includes usual and customary affirmative covenants for credit facilities
of this type and size, as well as customary negative covenants, including, among others, limitations on liens, mergers, asset sales or dispositions, payments of dividends, incurrence of additional indebtedness, and investments. The Credit Facility
also requires that we, at the end of each fiscal quarter beginning with the quarter ending September 30, 2008, maintain a minimum current assets to current liabilities ratio and a minimum ratio of EBITDA (earnings before interest, taxes,
depreciation and amortization) to interest expense and at the end of each fiscal quarter beginning with the quarter ended September 30, 2008 to maintain a minimum ratio of EBITDA to senior funded debt.

The Credit Facility was amended August 18, 2009 to implement a minimum interest rate of five percent (5.0%) and establish
minimum volumes to be hedged of not less than seventy-five percent (75%) of the proved developed producing reserves attributable to our interest in the borrowing base oil properties projected to be produced. The Credit Facility was further
amended January 13, 2010 to modify the senior funded debt to EBITDA ratio on a quarterly basis beginning with the quarter ended December 31, 2009 and to modify the annualization of the interest coverage ratio, also beginning with the
quarter ended December 31, 2009. The senior funded debt to EBITDA ratio allowed is 6.25:1.00 at December 31, 2009; 5.75:1.00 at March 31, 2010; 5.25:1.00 at June 30, 2010; and 4.75:1.00 at September 30, 2010; and
4.25:1.00 for all quarters ending after September 30, 2010. We were not in compliance the three technical covenants of the Credit Facility at December 31, 2010.

On September 29, 2010, the Credit Facility with Texas Capital Bank was amended to modify the borrowing base to $6,691,000 relative to the Proved Reserves attributable to the borrowing Base Oil and
Gas Properties. The amendment also modified various terms in the Credit Facility along with changing the commitment fees to 0.37% per annum times the average daily balance of the loan.

On December 31, 2010, the Credit Facility with Texas Capital Bank was amended to modify the borrowing base to $6,116,000 relative to
the Proved Reserves attributable to the borrowing Base Oil and Gas Properties. The amendment also modified the EBITDA ratio on a quarterly basis with the quarter ending March 31, 2011, permit the ratio allowed to 4.25:1 00. The Credit Agreement
was further amended in order to reflect our reorganization.

Debentures

On April 11, 2007, we previously entered into a Securities Purchase Agreement, Registration Rights Agreements, Senior Secured
Debentures, a Pledge and Security Agreement, a Secured Guaranty, and other related agreements (the Financing Agreements) with the Buyers of a new series of senior secured debentures (the Debentures). Under the
terms of the Financing Agreements, we agreed to sell Debentures for a total purchase price of $9.0 million. In connection with the purchase, we agreed to issue to the Buyers a total of 1,800,000 shares. The first closing occurred on April 12,
2007 with a total of $6.3 million in Debentures being sold and the remaining $2.7 million closing on June 21, 2007. Effective July 7, 2008, we redeemed an aggregate principal amount of $6.3 million of the Debentures. We also amended the
remaining $2.7 million of aggregate principal Debentures to, among other things, permit the indebtedness under our Credit Facility, subordinate the security interests of the debentures to the Credit Facility, provide for the redemption of the
remaining Debentures with the net proceeds from any next debt or equity offering and eliminate the covenant to maintain certain production thresholds.

Effective December 31, 2010, the holders of the Debentures contributed (i) the Debentures on which we were indebted, as of September 30, 2010, in the aggregate amount of $2,498,007,
(ii) shares of Oakridge Energy, Inc. with an agreed value of $1,676.016, and (iii) shares of Spindletop Oil & Gas, Inc., with an agreed value of $1,295,000, in exchange for 10,550,415 shares of common stock.

This resulted in cancelling approximately $2,675,000 of the Debentures in exchange for 3,345,546 shares of common stock.

Satisfaction of our cash obligations for the next 12 months.

A critical component of our operating plan is the ability to obtain additional capital through additional equity and/or debt financing and working interest participants. During fiscal 2010, we were in the
midst of a public equity offering when global economic conditions deteriorated and the commodity prices of oil experienced significant declines. Our cash revenues from



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operations have been significantly impacted as has our ability to meet our monthly operating expenses and service our debt obligations. In the event we cannot obtain additional capital through
other means to allow us to pursue our strategic plan, this would materially impact our ability to continue our desired growth. There is no assurance we would be able to obtain such financing on commercially reasonable terms, if at all.

We believe that the transactions that closed as of December 31, 2010, significantly improved our ability to generate the

additional debt and equity capital required to fund operations. In those transactions, we converted approximately $2,675,000 of debentures in to equity
securities, raised $3,500,000 of equity capital net of a $1,500,000 payment that we made in connection with those transactions, and reinstated our debt facility with Texas Capital Bank. As a result, we were able to significantly reduce the amount of
our outstanding indebtedness and resume periodic draws on our debt facility to fund operating costs.

Summary of product research and
development that we will perform for the term of our plan.

We do not anticipate performing any significant product
research and development under our plan of operation until such time as we can raise adequate working capital to sustain our operations.

Expected purchase or sale of any significant equipment.

We anticipate that we will purchase the necessary production and field service equipment required to produce oil during our normal course of operations over the next 12 months.

Significant changes in the number of employees.

We currently have 18 full-time employees including field personnel. As production and drilling activities increase or decrease, we will adjust our technical, operational and administrative personnel as
appropriate. We use and will continue to use independent consultants and contractors to perform various professional services, particularly in the area of land services, reservoir engineering, geology drilling, water hauling, pipeline construction,
well design, well-site monitoring and surveillance, permitting and environmental assessment. We believe that this use of third-party service providers may enhance our ability to contain operating and general expenses, and capital costs.

Off-Balance Sheet Arrangements.

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies
and Estimates.

Our critical accounting estimates include our oil properties, asset retirement obligations and the
value of share-based payments.

Oil Properties.

The accounting for our business is subject to special accounting rules that are unique to the oil industry. There are two allowable methods of accounting for oil business activities: the successful
efforts method and the full-cost method. We follow the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We also capitalize internal costs that can be
directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities.

Under the full-cost method, capitalized costs are amortized on a composite unit-of-production method based on proved oil reserves.
Depreciation, depletion and amortization expense is also based on the amount of estimated reserves. If we maintain the same level of production year over year, the depreciation, depletion and amortization expense may be significantly different if
our estimate of remaining reserves changes significantly. Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of
proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized. The costs of unproved properties are excluded from amortization until the properties are evaluated. We review all of our unevaluated
properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties, and otherwise if impairment has occurred. Unevaluated properties are assessed individually when individual costs are
significant.



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We review the carrying value of our oil properties under the full-cost accounting rules of
the SEC on a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the
present value of estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net
revenues, current prices and costs used are those as of the end of the appropriate quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those
contracts, including the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues.
Revisions to estimates of oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues. Any excess of the net book value, less deferred income taxes, is generally written off
as an expense. Under SEC regulations, the excess above the ceiling is not expensed (or is reduced) if, subsequent to the end of the period, but prior to the release of the financial statements, oil prices increase sufficiently such that an excess
above the ceiling would have been eliminated (or reduced) if the increased prices were used in the calculations.

The process
of estimating oil reserves is very complex, requiring significant decisions in the evaluation of available geological, geophysical, engineering and economic data. The data for a given property may also change substantially over time as a result of
numerous factors, including additional development activity, evolving production history and a continual reassessment of the viability of production under changing economic conditions. As a result, material revisions to existing reserve estimates
occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various properties increase
the likelihood of significant changes in these estimates.

As of December 31, 2010, approximately 100% of our proved
reserves were evaluated by an independent petroleum consultant. All reserve estimates are prepared based upon a review of production histories and other geologic, economic, ownership and engineering data. The December 31, 2010 reserve analysis
did not include our Texas assets acquired in the series of transactions that closed effective December 31, 2010.

Asset Retirement
Obligations.

The asset retirement obligation relates to the plug and abandonment costs when our wells are no longer
useful. We determine the value of the liability by obtaining quotes for this service and estimate the increase we will face in the future. We then discount the future value based on an intrinsic interest rate that is appropriate for us. If costs
rise more than what we have expected there could be additional charges in the future however we monitor the costs of the abandoned wells and we will adjust this liability if necessary.

Share-Based Payments.

The value we assign to the options and
warrants that we issue is based on the fair market value as calculated by the Black-Scholes pricing model. To perform a calculation of the value of our options and warrants, we determine an estimate of the volatility of our stock. We need to
estimate volatility because there has not been enough trading of our stock to determine an appropriate measure of volatility. We believe our estimate of volatility is reasonable, and we review the assumptions used to determine this whenever we issue
a new equity instruments. If we have a material error in our estimate of the volatility of our stock, our expenses could be understated or overstated.

Recent Issued Accounting Standards

Accounting Standards
Codification  On July 1, 2009, the Financial Accounting Standards Board (FASB) instituted a new referencing system, which codifies, but does not amend, previously existing nongovernmental GAAP. The FASBAccounting Standards Codification (ASC) is now the single authoritative source for GAAP. Although the implementation of ASC had no impact on our financial statements, certain references to authoritative GAAP
literature within our footnotes have been changed to cite the appropriate content within the ASC.

FASB Accounting Standards
Update (ASU) 2010-03 was issued on January 6, 2010, and aligns the current oil and natural gas reserve estimation and disclosure requirements of ASC 932 with those in theSEC Final Rule Modernization of Oil and Gas
Reporting issued December 31, 2008. The rules only apply prospectively as a change in estimate. The most significant amendments to the reserve and disclosure requirements include the following:



| |  |  | Commodity PricesEconomic producibility of reserves and discounted cash flows will be based on an unweighted arithmetic average of the first day
of the month commodity price during the 12-month period ending on the balance sheet date unless contractual arrangements designate the price to be used.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Disclosure of Unproved ReservesProbable and possible reserves may be disclosed separately on a voluntary basis.
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Proved Undeveloped Reserve GuidelinesReserves may be classified as proved undeveloped if there is a high degree of confidence that the quantities
will be recovered.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reserve Estimation Using New TechnologiesReserves may be estimated through the use of reliable technology in addition to flow tests and
production history.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reserve Personnel and Estimation ProcessAdditional disclosure is required regarding the qualifications of the chief technical person who oversees
our reserves estimation process. We will also be required to provide a general discussion of our internal controls used to assure the objectivity of the reserves estimate.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disclosure by Geographic AreaReserves in foreign countries or continents must be presented separately if they represent more than 15% of our
total oil and natural gas proved reserves.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non-Traditional ResourcesThe definition of oil and natural gas producing activities will expand and focus on the marketable product rather than
the method of extraction.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ASU 2010-03 is effective for entities with annual reporting periods ending on or
after December 31, 2009. We adopted both the FASB and the SEC rules.

Adoption of ASU 2009-05  In August
2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2009-05,Fair Value Measurement and Disclosures: Measuring Liabilities at Fair Value.ASU 2009-05
provides clarification on measuring liabilities at fair value when a quoted price in an active market is not available. We adopted ASU No. 2009-05 (FASB ASC 820-10). The adoption of this statement did not have an impact on our
financial position or results of operations.

Interim Disclosures about Fair Value of Financial Instrument  We
adopted FSP SFAS 107-1 and APB 28-1 Interim Disclosures about Fair Value of Financial Instruments, which is now incorporated into ASC Topic No. 825 (ASC 825). This statement increases the frequency of fair
value disclosures to a quarterly instead of annual basis. The guidance relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value. The adoption of this statement did
not have a material impact on our financial position or results of operations.

Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly  We adopted the FSP SFAS 157-4 Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly which is now incorporated into ASC Topic No. 820 (ASC 820). ASC 820 provides guidelines for a broad interpretation of
when to apply market-based fair value measures. It reaffirms managements need to use judgment to determine when a market that was once active has become inactive and in determining fair values in markets that are no longer active.

Disclosure about Derivative Instruments and Hedging Activities  We adopted FASB Statement No. 161,
Disclosure about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 which is now incorporated into ASC Topic No. 815 (ASC 815). ASC 815 amends and expands the
disclosure requirements for derivative instruments and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (i) how and why an entity uses derivative instruments; (ii) how
derivative instruments and related hedged items are accounted for; and (iii) how derivative instruments and related hedged items affect an entitys financial position, results of operations and cash flows. The adoption of this
statement did not have an impact on our financial position or results of operations.

Business Combinations  We
adopted SFAS No. 141 (Revised 2007) Business Combinations which is now incorporated into ASC Topic No. 805 ( ASC 805). The revision broadens the definition of a business combination to include all
transactions or other events in which control of one or more businesses is obtained. Further, this statement establishes principles and requirements for how an acquirer recognizes assets acquired, liabilities assumed and any non-controlling
interests acquired. The adoption of this statement has not had an impact on our financial position or results of operations, because we have not yet had any business combinations in the nine-month transition period ended December 31, 2010.

Effective Date of FASB Statement No. 157  We also adopted FSP SFAS 157-2, Effective Date of FASB
Statement No. 157, which is also now incorporated into ASC Topic No. 820. The effective date was deferred for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The adoption of this statement did not have a material impact on our
financial position or results of operations.



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Effects of Inflation and Pricing

The oil and natural gas industry is very cyclical and the demand for goods and services of oil field companies, suppliers and others
associated with the industry puts extreme pressure on the economic stability and pricing structure within the industry. Material changes in prices impact revenue stream, estimates of future reserves, borrowing base calculations of bank loans and
value of properties in purchase and sale transactions. Material changes in prices can impact the value of oil and natural gas companies and their ability to raise capital, borrow money and retain personnel. We anticipate business costs and the
demand for services related to production and exploration will fluctuate while the commodity prices for oil remain volatile.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Management Responsibility for Financial Information

We are responsible for the preparation, integrity and fair presentation of our financial statements and the other information that appears in this Transition Report on Form 10-K. The financial statements
have been prepared in accordance with accounting principles generally accepted in the United States and include estimates based on our best judgment.

We maintain a comprehensive system of internal controls and procedures designed to provide reasonable assurance, at an appropriate cost-benefit relationship, that our financial information is accurate and
reliable, our assets are safeguarded and our transactions are executed in accordance with established procedures.

Weaver & Martin, LLC, an independent registered public accounting firm, is retained to audit our consolidated financial
statements. Its accompanying report is based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Our consolidated financial statements and notes thereto, and other information required by this Item 8 are included in this report beginning on page F-1.

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

None.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Our chief executive officer and principal financial officer, Robert G. Watson, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this Transition Report. Based on the evaluation, Mr. Watson concluded that our disclosure controls and procedures are effective in timely altering him to material
information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings.

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as is defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented
fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of
human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute, assurance, with respect to reporting financial information.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and
criteria established in Internal Control  Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting
was effective as of December 31, 2010.



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

ITEM 9B. OTHER INFORMATION.

Technical Default under Credit Facility

On July 3, 2008, we entered into a three-year $50 million Senior Secured Credit Facility (the Credit Facility) with Texas Capital Bank, N.A. Borrowings under the Credit Facility are
subject to a borrowing base limitation based on our current proved oil reserves and are subject to semi-annual redeterminations.

The Credit Facility also requires that we, at the end of each fiscal quarter beginning with the quarter ending September 30, 2008,
maintain a minimum current assets to current liabilities ratio and a minimum ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense and at the end of each fiscal quarter and to maintain a minimum ratio
of EBITDA to senior funded debt. We obtained a waiver of default from Texas Capital Bank on two technical covenants at March 31, 2009 and one at June 30, 2009. We were not in compliance with the technical covenants of the Credit
Facility at March 31, 2010, however, we are current with principal and interest and as of December 31, 2010, we obtained a waiver of this technical default from Texas Capital Bank. The Credit Facility now is scheduled to mature on
July 3, 2011, and as a result, we have classified the entire outstanding balance due under the Credit Facility as a current liability.

We have received Monthly Commitment Reduction notices from Texas Capital Bank under the Credit Facility through monthly installments. We paid $500,000 to reduce the borrowing base during the
nine-month period ended December 31, 2010. Following receipt of the notices, we commenced discussions with Texas Capital Bank regarding a possible forbearance agreement or waiver, pursuant to which the bank would waive, postpone or delay the
requirement to repay some or all of the anticipated Monthly Commitment Reductions, in order to afford us additional time to raise equity capital, increase production or consummate alternative financing transactions.

With the proceeds of the transactions that closed on December 31, 2010, we were able to negotiate with Texas Capital Bank a Fourth
Amendment to Credit Agreement dated effective December 31, 2010, pursuant to which we made a payment of $500,000 to Texas Capital Bank and granted to the lender a lien in the additional assets that we acquired on December 31, 2010 which
provided a waiver of certain events of default that had arisen prior to that date, waived any events of default arising by reason of those December 31, 2010 transactions, waived our obligation to make certain other payments that had come due in
November 2010 and December 2010, and the loan from Texas Capital Bank was reinstated.

The terms of the Credit Facility
(including a full description of the rights and remedies of Texas Capital Bank upon an event of default), and copies of the Texas Capital Bank agreements related to the Credit Facility can be found in our prior filings with the SEC, including the
Current Reports on Forms 8-K filed with the SEC on July 10, 2008 and November 19, 2008, which are incorporated herein by reference and in the First Amendment to the Credit Agreement included in exhibit 10.12 and in the Second Amendment to
the Credit Agreement included in exhibit 10.16, and in the Third Amendment to the Credit Agreement included as Exhibit 10.33 to this Transition Report on Form 10-K and the Fourth Amendment to Credit Agreement included as Exhibit 10.34 to this
Transition Report on Form 10-K.

We have initiated discussions with Texas Capital Bank to provide a new credit facility with a
three year term, and we anticipate consummating a transaction during the second quarter of 2011.



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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets forth certain information regarding our current directors and executive officers. Our executive officers serve one-year terms.



|                        |  |     |  |                                                                                     |  |                                
|----------------------- |  | --- |  | ----------------------------------------------------------------------------------- |  | -------------------------------
|Name                    |  | Age |  | Position                                                                            |  | Board Committee(s)             
|Robert G. Watson, Jr.   |  | 34  |  | President, Chief Executive Officer, Principal Financial Officer and Directors       |  | None.                          
|                        |  |     | 
|Ryan A. Lowe            |  | 30  |  | Director, Senior Vice President of Corporate Development                            |  | Audit                          
|                        |  |     | 
|James G. Miller         |  | 62  |  | Director                                                                            |  | Audit; Compensation, Nominating
|                        |  |     | 
|Lance Helfert           |  | 37  |  | Director                                                                            |  | Compensation, Nominating       
|                        |  |     | 
|C. Stephen Cochennet(1) |  | 53  |  | Former President, Chief Executive Officer, Principal Financial Officer and Director |  | None                           
|                        |  |     | 
|Thomas Kmak(2)          |  | 50  |  | Former Chairman                                                                     |  | None                           
|                        |  |     | 
|Loren Moll(2)           |  | 54  |  | Former Director                                                                     |  | None                           
|                        |  |     | 
|Darrel G. Palmer(2)     |  | 51  |  | Director                                                                            |  | None                           
|                        |  |     | 
|Dierdre P. Jones(3)     |  | 45  |  | Former Chief Financial Officer                                                      |  | None                           



|(1) | Effective December 31, 2010, Mr. Cochennet resigned as an officer and a member of the board of directors of the Company.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(2) | Effective December 1, 2010, Messrs. Kmak, Palmer and Moll resigned as members of our board of directors.
|--- | --------------------------------------------------------------------------------------------------------

|(3) | Effective
June 10, 2010, Ms. Jones resigned as our chief financial officer to pursue other opportunities.
|--- | ---------------------------------------------------------------------------------------------------------

Robert Watson, Jr. Mr. Watson has served as President, Chief Executive Officer, Principal Financial Officer and
Secretary of the Company since December 31, 2010. Prior to joining the Company, Mr. Watson co-founded Black Sable Energy, LLC approximately three (3) years ago and served as its Chief Executive Officer. During his tenure at Black
Sable, Mr. Watson was responsible for the companys acquisition and development of two grassroots oil projects in South Texas, both of which have been partnered with larger oil and gas companies on a promoted basis. Prior to founding Black
Sable, he was a Senior Associate at American Capital, Ltd. (NASDAQ: ACAS), a publicly traded private equity firm and global asset manager with $18 billion in capital resources under management. Mr. Watson began his career in the Energy
Investment Banking Group at CIBC World Markets and subsequently founded and served as the Managing Partner of Centerra Energy Partners.

R. Atticus Lowe. Mr. Lowe is the Chief Investment Officer of West Coast Asset Management, Inc., a registered investment advisor that has invested more than $200 million in the oil and
gas industry on behalf of its principals and clients during the past 10 years. Mr. Lowe serves as a Director and Chairman of the Audit Committee for a privately held oil and gas company headquartered in Denver, CO with leases covering
approximately 180,000 net acres in the DJ Basin. He is a CFA charterholder and a co-author of The Entrepreneurial Investor, a book Published by John Wiley & Sons. Mr. Lowe has also been profiled in Oil and Gas Investor magazine
and Value Investor Insight, and he has been a featured speaker at the Value Investing Congress in New York and California.

James G. Miller.Mr. Miller retired in 2002 after serving as the Chief Executive Officer of Utilicorp United,
Inc.s business unit responsible for the companys electricity generation and electric and natural gas transmission and distribution businesses which served 1.3 million customers in seven mid-continent states. Utilicorp traded on the
New York Stock Exchange and the company was renamed Aquila in 2002. In 2007 its electricity assets in northwest Missouri were acquired by Great Plains Energy Incorporated (NYSE: GXP) for $1.7 billion and its natural gas properties and other assets
were acquired by Black Hills Corporation (NYSE: BKH) for $940 million. Mr. Miller joined Utilicorp in 1989 through its acquisition of Michigan Gas Utilities, for which he served as the president from 1983 to 1991. Mr. Miller also is a
member of the Board of Directors of Guardian 8 Holdings. Mr. Miller currently serves as Vice Chairman of The Nature Conservancy, Missouri Chapter, for which he has been a Board member for the past 10 years.

Lance Helfert. Mr. Helfert is the President and a co-founder of West Coast Asset Management, Inc. (WCAM), an equity



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and alternative asset manager located in Montecito, California. Mr. Helfert is the head of the investment committee, board of directors and steers WCAM investment strategies. Prior to
co-founding WCAM, he managed a portfolio of more than $1 billion at Wilshire Associates and was involved in a full range of financial strategies at M.L. Stern & Co. Mr. Helfert is a co-author of The Entrepreneurial Investor: The
Art, Science and Business Value Investingwhich has been acclaimed by authorities in finance and business for its insightful and approachable commentary on investing. Mr. Helfert has been featured in Kiplingers Personal Finance,
Forbes, Barrons, Fortune Magazine, and the Market Watch for his unique market prospective. Mr. Helfert is also a frequent guest commentator on CNBC and Fox Business networks, and has been a speaker at the Value Investing Congress in New
York and California. Mr. Helfert has also served on the board of directors for Junior Achievement of Southern California and the Tri-Counties Make-A-Wish Foundation.

Involvement in Certain Legal Proceedings

None of our executive officers or
directors has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring suspending or otherwise limiting him from acting as an investment
advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or
practice in connection with any such activity or in connection with the purchase or sale of any securities.

None of our
executive officers or directors has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding, which is currently pending.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), requires our executive officers and
directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial
owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we
believe that as of the date of this transition report they were all current in their 16(a) reports, except for Dariel Palmer, Thomas Kmak and Loren Moll, each of whom filed a Form 4 one day late.

Board of Directors; Independence

Our board of directors currently consists of four members. Our directors serve one-year terms.

A majority of the members of the board of a company listed on a national exchange must qualify as independent, as affirmatively determined by the board of directors. Since the Company is
not listed on a national exchange, it is not required to comply with these independence requirements. At present, our board of directors has affirmatively determined that Mr. Miller is an independent director, as defined by
Section 803 of the American Stock Exchange Company Guide.

Meetings of the Board

Our board met three (3) times during the transition period. Each director attended 75% or more of the meetings of the board and of
the committees on which he served, held during the period for which he was a director or committee member, respectively. Most matters decided by the board of directors were approved by unanimous written consent in lieu of a meeting.

All of theboard members attended last years annual meeting, either in person or telephonically. Effective
December 31, 2010, Messrs. Kmak, Palmer and Moll resigned as members of our board of directors. Effective December 31, 2010, Mr. Cochennet resigned as an officer and a member of the board of directors of the Company.

Committees of the Board of Directors

Our board of directors has two standing committees: an audit committee and a governance, compensation and nominating committee. Each of those committees has the composition and responsibilities set forth
below.

Audit Committee

Our Audit Committee consists of one independent director, James G. Miller, and one director who is not independent, Ryan A. Lowe, each of whom has been selected for membership on the Audit Committee by
the board of directors based on the boards determination that each is fully qualified, through a range of education, experiences in business and executive leadership and service on boards of directors, and an understanding of generally
accepted accounting principles, to oversee our internal audit function, assess and select independent auditors, and oversee our financial reporting processes and overall risk management. The Audit Committee has the authority to seek advice and
assistance from outside legal, accounting or other advisors and exercises such authority as it deems necessary. The full text of the charter of the Audit Committee can be found in the investor section of our website at
www.enerjexresources.com.



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Although the Company is traded on OTCBB, the board of directors reviews the American Stock
Exchange Company Guide listing standards on an annual basis. Mr. Miller qualifies as an independent director as defined by Section 803 of the American Stock Exchange Company Guide and Section 10A(m) of the Securities Exchange Act of
1934, and Rule 10A-3 thereunder. In light of Mr. Lowes relationship with West Coast Opportunity Fund, LLC, a significant stockholder of the Company, and his position as our Senior Vice President of Corporate Development, our board of
directors has determined that he is not independent (as independence is defined in Section 803 of the American Stock Exchange Company Guide).

The board has determined that James G. Miller is a financial expert as that term is used in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Exchange Act.

The Audit Committee did not hold any meetings during the transition period, when its members consisted of Messrs. Kmak and Moll.

The Audit Committee has the sole authority to appoint and, when deemed appropriate, replace our independent registered public
accounting firm, and has established a policy of pre-approving all audit and permissible non-audit services provided by our independent registered public accounting firm. The Audit Committee has, among other things, the responsibility to evaluate
the qualifications and independence of our independent registered public accounting firm; to review and approve the scope and results of the annual audit; to review and discuss with management and the independent registered public accounting firm
the content of our financial statements prior to the filing of our quarterly reports and annual reports; to review the content and clarity of our proposed communications with investors regarding our operating results and other financial matters; to
review significant changes in our accounting policies; to establish procedures for receiving, retaining, and investigating reports of illegal acts involving us or complaints or concerns regarding questionable accounting or auditing matters, and
supervise the investigation of any such reports, complaints or concerns; to establish procedures for the confidential, anonymous submission by our employees of concerns or complaints regarding questionable accounting or auditing matters; and to
provide sufficient opportunity for the independent auditors to meet with the committee without management present.

Report Of The Audit
Committee Of The Board

The Companys management is responsible for preparing our financial statements and ensuring
they are complete and accurate and prepared in accordance with generally accepted accounting principles. Weaver & Martin, LLC, our independent registered public accounting firm, is responsible for performing an independent audit of our
consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.

The Audit Committee has reviewed and discussed with our management the audited financial statements of the Company included in our Transition Report on Form 10-K for the nine-month transition period
ended December 31, 2010 (10-K).

The Audit Committee has also reviewed and discussed with Weaver &
Martin, LLC the audited financial statements in the 10-K. In addition, the Audit Committee discussed with Weaver & Martin, LLC those matters required to be discussed by the Statement on Auditing Standards No. 61, as amended.
Additionally, Weaver & Martin, LLC provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants
communications with the Audit Committee concerning independence. The Audit Committee also discussed with Weaver & Martin, LLC its independence from the Company.

Based upon the review and discussions described above, the Audit Committee recommended to the board of directors that the audited financial statements be included in the Companys Transition Report
on Form 10-K for filing with the United States Securities and Exchange Commission.

Submitted by the following members of the
Audit Committee:

James G. Miller (Chairman)

R. Atticus Lowe

Governance, Compensation and Nominating Committee

The governance, compensation and nominating committee is comprised of Messrs. Miller, and Helfert. Mr. Miller serves as the chairman
of the governance, compensation and nominating committee. The governance, compensation and nominating committee is responsible for, among other things: (i) identifying, reviewing, and evaluating individuals qualified to become members of
the board, (ii) setting the compensation of the chief executive officer, and (iii) performing other compensation oversight, reviewing and recommending the nomination of board members, and administering our equity compensation plans.



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A majority of the members of the governance, compensation and nominating committee are not
independent.

The governance, compensation and nominating committee did not meet during fiscal 2010, when its members
consisted of Messrs. Kmak, Moll and Palmer.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, as well as to directors, officers and employees of each subsidiary of the Company. Our
Code of Ethics was filed as Exhibit 99.6 to the Annual Report on Form 10-KSB for the year ended March 31, 2007 which was filed on June 13, 2007. A copy of our Code of Business Conduct and Ethics will be provided to any person, without
charge, upon request. It is available on our website: enerjexresources.com, or you may contact Robert G. Watson at 913-754-7754 to request a copy of the Code or send your request to EnerJex Resources, Inc., Attn: Robert G. Watson, 1600 NE Loop
410, Suite 104, San Antonio, Texas 78209. If any substantive amendments are made to the Code of Business Conduct and Ethics or if we grant any waiver, including any implicit waiver, from a provision of the Code to any of our officers and directors,
we will disclose the nature of such amendment or waiver in a report on Form 8-K.

Limitation of Liability of Directors

Pursuant to the Nevada General Corporation Law, our articles of incorporation exclude personal liability for our directors for monetary
damages based upon any violation of their fiduciary duties as directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any
transaction from which a director receives an improper personal benefit. This exclusion of liability does not limit any right which a director may have to be indemnified and does not affect any Directors liability under federal or applicable
state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a director if he acted in good faith and in a manner he believed to be in our best
interests.

Nevada Anti-Takeover Law and Charter and By-law Provisions

Depending on the number of residents in the state of Nevada who own our shares, we could be subject to the provisions of Sections
78.378et seq . of the Nevada Revised Statutes which, unless otherwise provided in a companys articles of incorporation or by-laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our
voting shares. Our articles of incorporation and by-laws do not contain any provision which would currently keep the change of control restrictions of Section 78.378 from applying to us.

We are subject to the provisions of Sections 78.411et seq. of the Nevada Revised Statutes. In general, this statute prohibits a
publicly held Nevada corporation from engaging in a combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the
combination or the transaction by which the person became an interested stockholder is approved by the corporations board of directors before the person becomes an interested stockholder. After the expiration of the three-year period, the
corporation may engage in a combination with an interested stockholder under certain circumstances, including if the combination is approved by the board of directors and/or stockholders in a prescribed manner, or if specified requirements are met
regarding consideration. The term combination includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an interested stockholder is a
person who, together with affiliates and associates, owns, or within three years did own, 10% or more of the corporations voting stock. A Nevada corporation may opt out from the application of Section 78.411et seq.
through a provision in its Articles of Incorporation or By-laws. We have not opted out from the application of this section.

Apart from Nevada law, however, our articles of incorporation and by-laws do not contain any provisions which are sometimes associated with inhibiting a change of control from occurring (i.e., we do not
provide for a staggered board, or for super-majority votes on major corporate issues). However, we do have 10,000,000 shares of authorized blank check preferred stock, which could be used to inhibit a change in control.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth summary compensation information for the nine-month transition period ended December 31, 2010 and for
the fiscal years ended March 31, 2010 and 2009 for our chief executive officer and principal financial officer. We did not have any other executive officers as of the end of fiscal 2010 whose total compensation exceeded $100,000. We refer to
these persons as our named executive officers elsewhere in this report.



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Summary Compensation Table



|                                                                   |  |            |      |  |           |   |         |           |  |   |                 |     |  |                          |   |  |          |   |           |     |  |   |            | 
|------------------------------------------------------------------ |  | ---------- | ---- |  | --------- | - | ------- | --------- |  | - | --------------- | --- |  | ------------------------ | - |  | -------- | - | --------- | --- |  | - | ---------- | 
|Name and Principal Position                                        |  | FiscalYear |      |  | Salary($) |   |         | Bonus ($) |  |   | OptionAwards($) |     |  | All OtherCompensation($) |   |  | Total($) |  
|Robert G. Watson                                                   |  |            | 2010 |  |           | $ |        |           |  |   |                |     |  |                          |  |  |          |   |          |     |  | $ |           | 
|President, Chief Executive Officer and
Principal Financial Officer |  |            |      |  |           |   |         |           |  |   |                 |     |  |                          |   |  |          |   |           |     |  |   |            | 
|                                                                   |  |            |      |  |           |  
|C. Stephen Cochennet(1)                                            |  |            | 2010 |  |           | $ | 150,000 |           |  | $ |                |     |  |                          |  |  |          | $ | 33,333.34 | (3) |  | $ | 183,333.34 | 
|Former President, Chief Executive Officer                          |  |            | 2009 |  |           | $ | 186,525 |           |  | $ | 50,000          |     |  |                          |  |  |          |   |          |     |  | $ | 236,525    | 
|                                                                   |  |            |      |  |           |  
|Dierdre P. Jones(2)                                                |  |            | 2010 |  |           | $ | 140,000 |           |  | $ | 20,000          | (4) |  |                          |  |  |          |   |          |     |  | $ | 160,000    | 
|Former Chief Financial Officer                                     |  |            | 2009 |  |           | $ | 128,808 |           |  | $ | 10,000          |     |  |                          |  |  |          |   |          |     |  | $ | 138,808    | 
|                                                                   |  |            |      |  |           |   |         |           |  |   |                 |     |  |                          |   |  |          |   |           |     |  |   |            | 



|(1) | Mr. Cochennet resigned as our chief executive officer, principal financial officer and secretary on December 31, 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(2) | Ms. Jones
resigned as our chief financial officer in June of 2010.
|--- | ------------------------------------------------------------------

|(3) | Amount represents the estimated total fair market value of shares of common stock issued to Mr. Cochennet in lieu of salary under SFAS 123(R).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Amount represents
the estimated total fair market value of shares of common stock issued to Ms. Jones as a bonus under SFAS 123(R).
|--- | -----------------------------------------------------------------------------------------------------------------------------------

Outstanding Equity Awards at 2010 Fiscal Year-End

The following table lists the outstanding equity incentive awards held by our named executive officers as of the nine-month transition period ended December 31, 2010.



|                        |  |               |      |  |                                                               |  |   |                                                                 |  |  |                                                            |  |  |                        |         |  |                      |   |      |  |  |  |  | 
|----------------------- |  | ------------- | ---- |  | ------------------------------------------------------------- |  | - | --------------------------------------------------------------- |  |  | ---------------------------------------------------------- |  |  | ---------------------- | ------- |  | -------------------- | - | ---- |  |  |  |  | 
|                        |  | Option Awards |     
|                        |  | FiscalYear    |      |  | Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable(#) |  |   | Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable(#) |  |  | Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#) |  |  | OptionExercisePrice($) |         |  | OptionExpirationDate |  
|Robert G. Watson        |  |               | 2010 |  |                                                               |  |   |                                                                 |  |  |                                                            |  |  |                        | 900,000 |  |                      | $ | 0.40 |  |  |  |  | 
|C. Stephen Cochennet(1) |  |               | 2010 |  |                                                               |  |  |                                                                 |  |  |                                                           |  |  |                        |        |  |                      |   |     |  |  |  |  | 
|Dierdre P. Jones(2)     |  |               | 2010 |  |                                                               |  |  |                                                                 |  |  |                                                           |  |  |                        |        |  |                      |   |     |  |  |  |  | 



|(1) | Mr. Cochennet resigned as the chief executive officer, principal financial officer and secretary on December 31, 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(2) | Ms. Jones resigned as the chief financial officer in June 2010.
|--- | ---------------------------------------------------------------

Option Exercises for fiscal 2010

There were no options exercised by our
named executive officers in fiscal 2010. See Securities Authorized for Issuance under Equity Compensation Plans for a description of our outstanding equity compensation plans.

Employment Agreements

Robert G. Watson, Jr.  Chief Executive Officer

On December 31, 2010, the Company and Robert G. Watson, entered into an Employment Agreement pursuant to which
(i) we will employ Mr. Watson as its chief executive officer for a term ending on December 31, 2012, (ii) we will pay to Mr. Watson base compensation of $150,000 plus such discretionary cash bonus as our board of directors
determines to be appropriate, (iii) we have granted to Mr. Watson an option for the purchase of 900,000 shares of common stock at $0.40 per share, (A) in which option he will vest in equal monthly increments over a period of 48
months, and in full upon a change of control of the company or the sale of all or substantially all of its assets, and (B) which option will have a term of five (5) years, and (iv) if we terminate Mr. Watsons employment
without Cause (as defined in the Employment Agreement), then we will pay to Mr. Watson as severance pay (A) the Base Compensation that would have accrued during the remainder of the term of that Employment Agreement, and
(B) if that termination occurs after 16 months of employment, we also will pay to Mr. Watson additional severance pay in the amount of $100,000.



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C. Stephen Cochennet  Former Chief Executive Officer

On December 20, 2010, in accordance with the terms of the Separation Agreement, C. Stephen Cochennet, chairman, chief executive
officer, principal financial officer, president, secretary and treasurer, resigned from his employment and all positions that he holds with us effective December 31, 2010. Mr. Cochennet was a named executive officer of the Company for the
nine-month period ended December 31, 2010 and for fiscal year ended March 31, 2010. Pursuant to the Separation Agreement, we agreed (i) to terminate the employment agreement with Mr. Cochennet dated August 1, 2008 effective
as of December 31, 2010 and eliminate the Non-Compete provisions of the employment agreement, (ii) that Mr. Cochennet would resign as a director, employee and officer of the Company, effective as of December 31, 2010,
(iii) to pay Mr. Cochennet his accrued salary in the amount of $16,666.67 on or before December 31, 2010, (iv) to pay Mr. Cochennet $50,000 as severance and in consideration for the termination of his employment with us,
(v) issue Mr. Cochennets fiscal 2009 restricted stock bonus of 75,000 shares, (vi) transfer title, and pay all taxes, fees and expenses related thereto, to the automobile and certain other assets Mr. Cochennet was utilizing
in connection with the Companys business, and (vii) to mutually release each other party from any and all claims related to the subject matter of the Separation Agreement.

Potential Payments Upon Termination or Change in Control

We entered into
employment agreements with our chief executive officer and our chief financial officer, which could result in payments to such officers because of their resignation, incapacity or disability, or other termination of employment with us or our
subsidiaries, or a change in control, or a change in their responsibilities following a change in control.

In December
2010, we experienced a change in control, as defined in our executive employment agreements, when three of the members of our board of directors (Messrs. Moll, Palmer and Kmak) resigned and were replaced by three new members (Messrs. Helfert, Lowe
and Miller). As of the date of this report, we have not received any claims or paid any payments as a result of this change in control.

Director Compensation

The following table sets forth summary compensation information for the nine-month transition period ended December 31, 2010 for each
of our non-employee directors.



|                    |  |                           |        |  |              |   |        |                   |  |   |                        |  |  |        |        |     |  |   |        | 
|------------------- |  | ------------------------- | ------ |  | ------------ | - | ------ | ----------------- |  | - | ---------------------- |  |  | ------ | ------ | --- |  | - | ------ | 
|Name                |  | FeesEarnedor Paid inCash$ |        |  | StockAwards$ |   |        | OptionAwards (2)$ |  |   | All OtherCompensation$ |  |  | Total$ |       
|Thomas Kmak(1)      |  | $                         |        |  |              | $ |        | (2)               |  | $ | -0-                    |  |  | $      |        | (3) |  | $ |        | 
|Darrel G. Palmer(1) |  | $                         | 45,000 |  |              | $ | 15,000 | (2)               |  | $ | -0-                    |  |  | $      | 70,000 | (3) |  | $ | 46,500 | 
|Loren Moll(1)       |  | $                         |        |  |              | $ |        |                   |  | $ | -0-                    |  |  | $      |        |     |  | $ |        | 



|(1) | Effective December 31, 2010, Messrs. Kmak, Palmer and Moll resigned as members of our board of directors.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | Amount represents the estimated fair market value of shares of common stock issued for board retainer fees for nine-month transition period ended
December 31, 2010 under SFAS 123(R).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the amount of accrued but unpaid director and committee member fees for nine-month transition period ended December 31, 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



46



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##### Table of Contents

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

The following table presents information, to the best of our knowledge, about the
ownership of our common stock on December 31, 2010 relating to those persons known to beneficially own more than 5% of our capital stock and by our directors and executive officers. The percentage of beneficial ownership for the following table
is based on 69,355,279 shares of common stock outstanding.

Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting
or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60 days after December 31, 2010 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the
outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares
of EnerJexs common stock.



|                                                                                     |  |                 |            |     |                                                 |  |       |  
|------------------------------------------------------------------------------------ |  | --------------- | ---------- | --- | ----------------------------------------------- |  | ----- | -
|Name and Address of Beneficial Owner
(1)                                             |  | Numberof Shares |            |     | Percent of OutstandingShares of CommonStock (2) | 
|Robert G. Watson, Jr., CEO/President and Director                                    |  |                 | 4,037,500  | (3) |                                                 |  | 5.93  | %
|R. Atticus Lowe, Director(4)(7)                                                      |  |                 | 1,389,872  |     |                                                 |  | 2.04  | %
|Lance Helfert, Director(4)(8)                                                        |  |                 | 7,936,608  |     |                                                 |  | 11.67 | %
|James G. Miller, Director(6)                                                         |  |                 | 2,073,781  |     |                                                 |  | 3.05  | %
|West Coast Opportunity Fund LLC(4)1205 Coast Village RoadMontecito, CA 93108         |  |                 | 11,812,103 |     |                                                 |  | 17.7  | %
|Montecito Venture Partners, LLC(5)1205 Coast Village RoadMontecito, California 93108 |  |                 | 25,400,000 |     |                                                 |  | 35.5  | %
|Working Interest Holding, LLC10380 W 179th St.Bucyrus, KS 66013                      |  |                 | 18,750,000 |     |                                                 |  | 28.1  | %
|Directors, Officers and Beneficial Owners as a Group                                 |  |                 | 62,073,782 |     |                                                 |  | 91.21 | %



|(1) | As used in this table, beneficial ownership means the sole or shared power to vote, or to direct the voting of, security, or the sole or shared investment
power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). The address of each person is care of the Registrant, 1600 NE Loop 410, Suite 104, San Antonio, Texas 78209.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Figures are rounded to the nearest tenth of a percent.
|--- | ------------------------------------------------------

|(3) | Includes 37,500 shares under an option granted to Mr. Watson to purchase 900,000 shares of common stock at $0.40 per share. Mr. Watson vests in that option in
equal monthly increments over 48 months commencing January 1, 2011.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | West Coast Asset Management, Inc. (the Investment Manager) is the Investment Manager to separately managed accounts, some of which are affiliated with the
Reporting Persons (the Accounts). The Accounts directly own all of the shares reported herein. R. Atticus Lowe, Paul Orfalea and Lance Helfert serve on the investment committee of the Investment Manager. Each Reporting Person disclaims
beneficial ownership of all securities reported herein, except to the extent of their pecuniary interest therein, if any, and this report shall not be deemed an admission that such Reporting Person is the beneficial owner of the shares for purposes
of Section 16 of the Securities and Exchange Act of 1934 or for any other purposes.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Montecito Venture Partners, LLC is a controlled affiliate of West Coast Asset Management, Inc. Includes 4,779,460 shares of Series A Preferred Stock that is convertible
into 4,779,460 shares of the Registrants common stock.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes (i) 22,929 shares that Mr. Miller owns directly, and (ii) beneficial ownership of 2,050,942 shares that are held by Working Interest Holding,
LLC.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes 11,872 of the shares beneficially owned by Mr. Lowe by reason of his ownership interest in West Coast Opportunity Fund, LLC, and 1,378,000 of the shares
beneficially owned by Mr. Lowe by reason of his ownership interest in Montecito Venture Partners, LLC.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes 69,358 of the shares beneficially owned by Mr. Helfert by reason of his ownership interest in West Coast Opportunity Fund, LLC, and 7,867,250 of the
shares beneficially owned by Mr. Helfert by reason of his ownership interest in Montecito Venture Partners, LLC.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47



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##### Table of Contents

Equity Compensation Plan Information

The following table sets forth information as of nine-month transition period ended December 31, 2010 regarding outstanding options
granted under our stock option plans and options reserved for future grant under the plans.



|                                                       |  |                                                                                         |         |  |                                                                              |   |      |                                                                                                                                   |  |  |         | 
|------------------------------------------------------ |  | --------------------------------------------------------------------------------------- | ------- |  | ---------------------------------------------------------------------------- | - | ---- | --------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Plan Category                                          |  | Numberof shares to be 
issuedupon exercise ofoutstanding options,warrants and rights(a) |         |  | Weighted-averageexercise price ofoutstanding options,warrants and 
rights(b) |   |      | Number of sharesremaining available forfuture issuance 
underequity compensationplans (excluding sharesreflected in column (a)(c) | 
|Equity compensation plans approved by stockholders     |  |                                                                                         | 900,000 |  |                                                                              | $ | 0.40 |                                                                                                                                   |  |  | 204,550 | 
|Equity compensation plans not approved by stockholders |  |                                                                                         |        |  |                                                                              |   |     |                                                                                                                                   |  |  |        | 
|                                                       |  |                                                                                         |         |  |                                                                              |   |      |                                                                                                                                   |  |  |         | 
|Total                                                  |  |                                                                                         | 900,000 |  |                                                                              | $ | 0.40 |                                                                                                                                   |  |  | 204,550 | 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

We describe below transactions and series of similar transactions that have occurred during this nine-month Transition Period to which we
were a party or will be a party in which:



| |  |  | The amounts involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal
years ($72,446); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect
material interest.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On December 31, 2010, pursuant to a Securities Purchase and Asset Acquisition
Agreement with West Coast Opportunity Fund, LLC (WCOF); Montecito Venture Partners, LLC (MVP); RGW Energy, LLC; J&J Operating Company, LLC; and the Frey Living Trust, we issued to WCOF 10,550,415 shares of common stock in exchange for
cancellation of the Senior Secured Debentures in the original amount of $2,498,007 and the contribution of 617,317 shares of common stock in Oakridge Energy in the aggregate amount of $1,676,016, and 700,000 shares of common stock in Spindeltop
Oil & Gas Co. in the aggregate amount of $1,295,000; to the Frey Trust 223,056 shares of common stock in exchange for the cancellation of the Frey Senior Secured Debenture of $178,429; to RGW Energy, LLC 4,000,000 shares of common stock in
exchange for its membership interest in Black Sable Energy, LLC; to MVP 15,595,540 shares of common stock and 4,779,460 shares of Series A Preferred Stock in exchange for the contribution of its membership interest in Black Sable Energy, LLC; and to
Working Interest Holdings, LLC 18,750,000 shares of common stock and $1,500,000 cash in exchange for 100% of the membership interest in Working Interest, LLC.

On December 31, 2010, we entered into a Securities Purchase Agreement with multiple investors, including MVP, in which we sold 12,500,000 shares of our common stock.

As indicated above, WCOF, MVP, and Working Interest Holdings beneficially own more than 5% of our outstanding shares of common stock, and
our directors Mr. Lowe and Mr. Helfert are related persons with regard to those entities.

Director Independence

Our board of directors has affirmatively determined that Mr. Miller is an independent director, as defined by Section 803 of the
American Stock Exchange Company Guide.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Weaver & Martin, LLC served as our principal independent public accountants for the nine-month transition period ended
December 31, 2010 and for fiscal year ended March 31, 2010 and 2009. Aggregate fees billed to us for the nine-month Transition Period ended December 31, 2010 and for fiscal years ended March 31, 2010 and 2009 by
Weaver & Martin, LLC were as follows:



48



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##### Table of Contents

|                                       |  |                                                           |        |  |                                     |      |        |  |  |   |        | 
|-------------------------------------- |  | --------------------------------------------------------- | ------ |  | ----------------------------------- | ---- | ------ |  |  | - | ------ | 
|                                       |  | For the Nine-MonthTransition Periodended December 31,2010 |        |  | For the Fiscal Years EndedMarch 31, |     
|                                       |  |                                                           | 2010   |  |                                     | 2009 |       
|Audit Fees(1)                          |  | $                                                         | 67,720 |  |                                     | $    | 63,000 |  |  | $ | 56,000 | 
|Audit-Related Fees(2)                  |  | $                                                         | -0-    |  |                                     | $    | - 0-   |  |  | $ | -0-    | 
|Tax fees(3)                            |  | $                                                         | 12,288 |  |                                     | $    | 10,000 |  |  | $ | 10,000 | 
|All Other Fees(4)                      |  | $                                                         | -0-    |  |                                     | $    | -0-    |  |  | $ | 19,718 | 
|                                       |  |                                                           |        |  |                                     |      |        |  |  |   |        | 
|Total fees of our principal accountant |  | $                                                         | 76,008 |  |                                     | $    | 73,000 |  |  | $ | 85,718 | 
|                                       |  |                                                           |        |  |                                     |      |        |  |  |   |        | 

|(1) | Audit Fees include fees billed and expected to be billed for services performed to comply with Generally Accepted Auditing Standards (GAAS), including
the recurring audit of the Companys consolidated financial statements for such period included in this Transition Report on Form 10-K and for the reviews of the consolidated quarterly financial statements included in the Quarterly Reports
on Form 10-QSB filed with the Securities and Exchange Commission. This category also includes fees for audits provided in connection with statutory filings or procedures related to audit of income tax provisions and related reserves, consents
and assistance with and review of documents filed with the SEC.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Audit-Related Fees include fees for services associated with assurance and reasonably related to the performance of the audit or review of the
Companys financial statements. This category includes fees related to assistance in financial due diligence related to mergers and acquisitions, consultations regarding Generally Accepted Accounting Principles, reviews and evaluations of the
impact of new regulatory pronouncements, general assistance with implementation of Sarbanes-Oxley Act of 2002 requirements and audit services not required by statute or regulation.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Tax fees consist of fees related to the preparation and review of the Companys federal and state income tax returns.
|--- | ---------------------------------------------------------------------------------------------------------------------

|(4) | Other fees include fees related to the preparation and review of the Form S-1 Registration Statement.
|--- | -----------------------------------------------------------------------------------------------------

Audit Committee Policies and Procedures

Our Audit Committee pre-approves all services to be provided to us by our independent auditor. This process involves obtaining (i) a written description of the proposed services, (ii) the
confirmation of our Principal Accounting Officer that the services are compatible with maintaining specific principles relating to independence, and (iii) confirmation from our securities counsel that the services are not among those that our
independent auditors have been prohibited from performing under SEC rules, as outlined in the Audit Committee charter. The members of the Audit Committee then make a determination to approve or disapprove the engagement of Weaver & Martin
for the proposed services. In fiscal 2010, all fees paid to Weaver & Martin were unanimously pre-approved in accordance with this policy.

Less than 50 percent of hours expended on the principal accountants engagement to audit the registrants financial statements for the most recent fiscal year were attributed to work performed by persons
other than the principal accountants full-time, permanent employees.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following information required under this item is filed as part of this report:

1. Financial Statements



|                                                                 |  |      |     | 
|---------------------------------------------------------------- |  | ---- | --- | 
|                                                                 |  | Page |    
|                                                                 | 
|Management Responsibility for Financial Information              |  |      | 39  | 
|                                                                 | 
|Managements Report on Internal Control Over Financial Reporting |  |      | 39  | 
|                                                                 | 
|Index to Financial Statements                                    |  |      | F-1 | 
|                                                                 | 
|Report of Independent Registered Public Accounting Firm          |  |      | F-2 | 
|                                                                 | 
|Consolidated Balance Sheets                                      |  |      | F-3 | 
|                                                                 | 
|Consolidated Statements of Operations                            |  |      | F-4 | 
|                                                                 | 
|Consolidated Statements of Stockholders Equity                   |  |      | F-5 | 
|                                                                 | 
|Consolidated Statements of Cash Flows                            |  |      | F-6 | 



49



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##### Table of Contents

2. Financial Statement Schedules

None.

3. Exhibit Index



|            |  |                                                                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                           
|2.1         |  | Agreement and Plan of Merger between Millennium Plastics Corporation and Midwest Energy, Inc. effective August 15, 2006 (incorporated by reference to Exhibit 2.3 to the Form 8-K
filed on August 16, 2006)                                           
|            | 
|3.1         |  | Amended and Restated Articles of Incorporation, as currently in effect (incorporated by reference to Exhibit 3.1 to the Form 10-Q filed on August 14, 2008)                                                                                           
|            | 
|3.2         |  | Amended and Restated Bylaws, as currently in effect (incorporated by reference to Exhibit 3.3 to the Form SB-2 filed on February 23, 2001)                                                                                                            
|            | 
|4.1         |  | Article VI of Amended and Restated Articles of Incorporation of Millennium Plastics Corporation (incorporated by reference to Exhibit 1.3 to the Form 8-K filed on December 6,
1999)                                                                  
|            | 
|4.2         |  | Article II and Article VIII, Sections 3 & 6 of Amended and Restated Bylaws of Millennium Plastics Corporation (incorporated by reference to Exhibit 4.1 to the Form SB-2 filed on
February 23, 2001)                                                  
|            | 
|4.3         |  | Specimen common stock certificate (incorporated by reference to Exhibit 4.3 to the Form S-1/A filed on May 27, 2008)                                                                                                                                  
|            | 
|4.4         |  | Certificate of Designation (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on January 6, 2011).                                                                                                                                       
|            | 
|10.1        |  | Credit Agreement with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by reference to Exhibit 10.33 to the Form 10-K filed on July 10, 2008)                                                                                                
|            | 
|10.2        |  | Promissory Note to Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by reference to Exhibit 10.34 to the Form 10-K filed on July 10, 2008)                                                                                                   
|            | 
|10.3        |  | Amended and Restated Mortgage, Security Agreement, Financing Statement and Assignment of Production and Revenues with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by
reference to Exhibit 10.35 to the Form 10-K filed on July 10, 2008)
|            | 
|10.4        |  | Security Agreement with Texas Capital Bank, N.A. dated July 3, 2008 (incorporated by reference to Exhibit 10.36 to the Form 10-K filed on July 10, 2008)                                                                                              
|            | 
|10.5        |  | Letter Agreement with Debenture Holders dated July 3, 2008 (incorporated by reference to Exhibit 10.37 to the Form 10-K filed on July 10, 2008)                                                                                                       
|            | 
|10.6       |  | C. Stephen Cochennet Employment Agreement dated August 1, 2008 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August 1, 2008)                                                                                                    
|            | 
|10.7       |  | Dierdre P. Jones Employment Agreement dated August 1, 2008 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August 1, 2008)                                                                                                        
|            | 
|10.8       |  | Amended and Restated EnerJex Resources, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October 16, 2008)                                                                                               
|10.9        |  | Form of Officer and Director Indemnification Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on October 16, 2008)                                                                                                          
|            | 
|10.10       |  | Euramerica Letter Agreement Amendment dated September 15, 2008 (incorporated by reference to Exhibit 10.10 to the Form 8-K filed on September 18, 2008)                                                                                               
|            | 
|10.11       |  | Euramerica Letter Agreement Amendment dated October 15, 2008 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on October 21, 2008)                                                                                                   
|            | 
|10.12(a)   |  | C. Stephen Cochennet Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(a) to the Form 10-Q filed on February 23,
2009)                                                                         
|            | 
|10.12(b)   |  | Dierdre P. Jones Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(b) to the Form 10-Q filed on February 23,
2009)                                                                             
|            | 
|10.12       |  | Daran G. Dammeyer Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(c) to the Form 10-Q filed on February 23,
2009)                                                                            
|            | 
|10.12(d)    |  | Darrel G. Palmer Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(d) to the Form 10-Q filed on February 23,
2009)                                                                             



50



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##### Table of Contents

|         |  |                                                                                                                                                                                                                                                                                                                          
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | 
|10.12(e) |  | Dr. James W. Rector Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(e) to the Form 10-Q filed on February 23,
2009)                                                                                                                                             
|         | 
|10.12(f) |  | Robert G. Wonish Rescission of Option Grant Agreement dated November 17, 2008 (incorporated by reference to Exhibit 10.38(f) to the Form 10-Q filed on February 23,
2009)                                                                                                                                                
|         | 
|10.13    |  | Letter Agreement with Debenture Holders dated June 11, 2009 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on June 16, 2009)                                                                                                                                                                           
|         | 
|10.14    |  | Joint Operating Agreement with Pharyn Resources to explore and develop the Brownrigg Lease Press Release dated June 1, 2009 (incorporated by reference to Exhibit 99.1 to the
Form 8-K filed on June 5, 2009)                                                                                                            
|         | 
|10.15    |  | Amendment 4 to Joint Exploration Agreement effective as of November 6, 2008 between MorMeg, LLC and EnerJex Resources, Inc. (incorporated by reference to Exhibit 10.15 to
the Form 10-K filed July 14, 2009)                                                                                                            
|         | 
|10.16    |  | Waiver from Texas Capital Bank, N.A. dated July 14, 2009 (incorporated by reference to Exhibit 10.16 to Form 10-K filed July 14, 2009)                                                                                                                                                                                   
|         | 
|10.17    |  | First Amendment to Credit Agreement dated August 18, 2009 (incorporated by reference to the Exhibit 10.12 to the Form 10-Q filed August 18, 2009)                                                                                                                                                                        
|         | 
|10.18    |  | Debenture Holder Amendment Letter dated November 16, 2009 (incorporated by reference to the Exhibit 10.13 to the Form 10-Q filed November 20, 2009)                                                                                                                                                                      
|         | 
|10.19    |  | Standby Equity Distribution Agreement with Paladin Capital Management, S.A. dated December 3, 2009 (incorporated by reference to Exhibit 10.52 to the Form S-1 filed on December 9,
2009)                                                                                                                                
|         | 
|10.20    |  | Amendment 5 to Joint Exploration Agreement effective as of December 31, 2009 between MorMeg LLC and EnerJex Resources, Inc. (incorporated by reference to Exhibit 10.15 to the Form
10-Q filed on February 16, 2010)                                                                                                     
|         | 
|10.21    |  | Second Amendment to Credit Agreement dated January 13, 2010 (incorporated by reference to Exhibit 10.16 to the Form 10-Q filed on February 16, 2010)                                                                                                                                                                     
|         | 
|10.22    |  | Debenture Holder Amendment Letter dated January 27, 2010 (incorporated by reference to Exhibit 10.17 to the Form 10-Q filed on February 16, 2010)                                                                                                                                                                        
|         | 
|10.23    |  | Waiver from Texas Capital Bank, N.A. dated February 10, 2009 (incorporated by reference to Exhibit 10.18 to the Form 10-Q filed on February 16, 2010)                                                                                                                                                                    
|         | 
|10.24    |  | Amendment 6 to Joint Exploration Agreement effective as of March 31, 2010 between MorMeg LLC and EnerJex Resources, Inc. (incorporated by reference to Exhibit 10.24 to the Form 10-K
filed on July 15, 2010)                                                                                                            
|         | 
|10.25    |  | Debenture Holder Amendment Letter dated April 1, 2010 (incorporated by reference to Exhibit 10.25 to the Form 10-K filed on July 15, 2010)                                                                                                                                                                               
|         | 
|10.26    |  | Separation and Settlement Agreement with C. Stephen Cochennet dated December 31, 2010 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 28,
2010).                                                                                                                                            
|         | 
|10.27    |  | Securities Purchase and Asset Acquisition Agreement between Enerjex Resources, Inc. and West Coast Opportunity Fund, LLC; Montecito Venture Partners, LLC; J&J Operating Company,
LLC and Frey Living Trust dated December 31, 2010 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 6, 2011).
|         | 
|10.28    |  | Stock Repurchase Agreement between Enerjex Resources, Inc. and Working Interest Holdings, LLC dated December 31, 2010 (incorporated by reference to Exhibit 10.2 to the Form 8-K
filed on January 6, 2011).                                                                                                              
|         | 
|10.29    |  | Securities Purchase Agreement between Enerjex Resources, Inc. and various Investors dated December 31, 2010 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on
January 6, 2011).                                                                                                                        
|         | 
|10.30    |  | Employment Agreement between Enerjex Resources, Inc. and Robert G. Watson dated December 31, 2010 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on January 6,
2011).                                                                                                                                  
|         | 
|10.31    |  | Joint Development Agreement between Enerjex Resources, Inc. and Haas Petroleum, LLC dated December 31, 2010 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on
January 27, 2011).                                                                                                                       
|         | 
|10.32    |  | Joint Operating Agreement between Enerjex Resources, Inc. and Haas Petroleum, LLC and MorMeg, LLC dated December 31, 2010 (incorporated by reference to Exhibit 10.2 to the Form 8-K
filed on January 27, 2011).                                                                                                         
|         | 
|10.33    |  | Third Amendment to Credit Agreement dated September 29, 2010.                                                                                                                                                                                                                                                            
|         | 
|10.34    |  | Fourth Amendment to Credit Agreement dated December 31, 2010.                                                                                                                                                                                                                                                            



51



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##### Table of Contents

|     |  |                                                                                                                           
|---- |  | --------------------------------------------------------------------------------------------------------------------------
|     | 
|21.1 |  | List of Subsidiaries                                                                                                      
|     | 
|23.1 |  | Miller & Lents, Ltd. Consent Of Independent Petroleum Engineers and Geologists Letter                                     
|     | 
|23.2 |  | Consent of Weaver & Martin, LLC                                                                                           
|     | 
|31.1 |  | Certification of Chief Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|     | 
|32.1 |  | Certification of Chief Executive and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



| | Indicates management contract or compensatory plan or arrangement.
|- | ------------------------------------------------------------------



52



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##### Table of Contents

SIGNATURES

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



|                        |  |                                          
|----------------------- |  | -----------------------------------------
|ENERJEX RESOURCES, INC.
|                        | 
|By:                     |  | /s/ Robert G. Watson                     
|                        |  | Robert G. Watson, Chief Executive Officer

Date:
April 21, 2011

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.



|                                      |  |                                                                                           |  |               
|------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | --------------
|Name                                  |  | Title                                                                                     |  | Date          
|                                      |  |                                                                                          
|/s/ Robert G. Watson Robert G. Watson |  | President, Chief Executive Officer, (Principal Financial Officer), Secretary and Director |  | April 21, 2011
|                                      |  |                                                                                          
|/s/ Ryan A. Lowe Ryan A. Lowe         |  | Director and Senior Vice President of Corporate Development                               |  | April 21, 2011
|                                      |  |                                                                                          
|/s/ Lance Helfert Lance Helfert       |  | Director                                                                                  |  | April 21, 2011
|                                      |  |                                                                                          
|/s/ James G. Miller James G. Miller   |  | Director                                                                                  |  | April 21, 2011



53



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Index to Financial Statements



|                                                                                                                                                               |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                               |  | Page
|Index to Financial Statements                                                                                                                                  |  | F-1 
|Report of Independent Registered Public Accounting Firm                                                                                                        |  | F-2 
|Consolidated Balance Sheets at December 31, 2010, and March 31, 2010                                                                                           |  | F-3 
|Consolidated Statements of Operations for the Nine-Month Transition Period Ended December 31, 2010 and for Fiscal Year Ended March 31,
2010                    |  | F-4 
|Consolidated Statement of Stockholders Equity(Deficit) for the Nine-Month Transition Period Ended December 
31, 2010 and for Fiscal Year Ended March 31, 2010 |  | F-5 
|Consolidated Statement of Cash Flows for the Nine-Month Transition Period Ended December 31, 2010 and for Fiscal Year Ended March 31,
2010                     |  | F-6 
|Notes to Consolidated Financial Statements                                                                                                                     |  | F-7 



F-1



---

##### Table of Contents

Report of Independent Registered
Public Accounting Firm

Stockholders and Directors

EnerJex Resources, Inc. and Subsidiaries

We have audited the accompanying consolidated balance
sheet of EnerJex Resources, Inc. as of December 31, 2010 and March 31, 2010 and the related consolidated statements of operations, stockholders equity, and cash flows for the nine month transition period ended December 31, 2010
and the year ended March 31, 2010. 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 misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of EnerJex Resources, Inc. as of December 31, 2010 and March 31, 2010 and the consolidated results of its operations, stockholders equity and cash flows for the nine months transition period ended December 31, 2010 and the year
ended March 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

/S/ Weaver &
Martin

Weaver & Martin, LLC

Kansas City, Missouri

April 21, 2011



F-2



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##### Table of Contents

EnerJex Resources, Inc. and
Subsidiaries

Consolidated Balance Sheets



|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ------------- | - | ----------- | -
|                                                                                                                                                                                                                                                                           |  | December 31,2010 |             |   | March 31,2010 |  
|Assets                                                                                                                                                                                                                                                                     |  |                  |             |   |               |   |             |  
|Current Assets:                                                                                                                                                                                                                                                            |  |                  |             |   |               |   |             |  
|Cash                                                                                                                                                                                                                                                                       |  | $                | 2,961,819   |   |               | $ | 169,163     |  
|Accounts receivable                                                                                                                                                                                                                                                        |  |                  | 357,387     |   |               |   | 330,102     |  
|Marketable securities                                                                                                                                                                                                                                                      |  |                  | 2,971,162   |   |               |   |            |  
|Prepaid debt issue costs                                                                                                                                                                                                                                                   |  |                  |            |   |               |   |            |  
|Deposits and prepaid expenses                                                                                                                                                                                                                                              |  |                  | 144,468     |   |               |   | 166,418     |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total current assets                                                                                                                                                                                                                                                       |  |                  | 6,434,836   |   |               |   | 665,683     |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|                                                                                                                                                                                                                                                                           |  |                 
|Fixed assets                                                                                                                                                                                                                                                               |  |                  | 253,847     |   |               |   | 371,885     |  
|Less: Accumulated depreciation                                                                                                                                                                                                                                             |  |                  | 122,775     |   |               |   | 120,545     |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total fixed assets                                                                                                                                                                                                                                                         |  |                  | 131,072     |   |               |   | 251,340     |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|                                                                                                                                                                                                                                                                           |  |                 
|Other assets:                                                                                                                                                                                                                                                              |  |                  |             |   |               |   |             |  
|Oil and gas properties using full-cost accounting:                                                                                                                                                                                                                         |  |                  |             |   |               |   |             |  
|Properties not subject to amortization                                                                                                                                                                                                                                     |  |                  | 18,679,255  |   |               |   |            |  
|Properties subject to amortization                                                                                                                                                                                                                                         |  |                  | 5,637,473   |   |               |   | 6,093,033   |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total other assets                                                                                                                                                                                                                                                         |  |                  | 24,616,728  |   |               |   | 6,093,033   |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total assets                                                                                                                                                                                                                                                               |  | $                | 30,882,636  |   |               | $ | 7,010,056   |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Liabilities and Stockholders Equity (Deficit)                                                                                                                                                                                                                             |  |                  |             |   |               |   |             |  
|Current liabilities:                                                                                                                                                                                                                                                       |  |                  |             |   |               |   |             |  
|Accounts payable                                                                                                                                                                                                                                                           |  | $                | 1,109,848   |   |               | $ | 877,511     |  
|Accrued liabilities                                                                                                                                                                                                                                                        |  |                  | 161,811     |   |               |   | 417,142     |  
|Derivative liability                                                                                                                                                                                                                                                       |  |                  | 929,720     |   |               |   | 1,184,178   |  
|Convertible note payable                                                                                                                                                                                                                                                   |  |                  |            |   |               |   | 25,000      |  
|Long-term debt, current                                                                                                                                                                                                                                                    |  |                  | 6,131,000   |   |               |   | 9,182,679   |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total current liabilities                                                                                                                                                                                                                                                  |  |                  | 8,332,379   |   |               |   | 11,686,510  |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|                                                                                                                                                                                                                                                                           |  |                 
|Asset retirement obligation                                                                                                                                                                                                                                                |  |                  | 883,066     |   |               |   | 883,589     |  
|Derivative liability                                                                                                                                                                                                                                                       |  |                  | 2,267,109   |   |               |   | 2,364,068   |  
|Long-term debt, net of discount at December 31, 2010                                                                                                                                                                                                                       |  |                  | 22,114      |   |               |   | 43,440      |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total liabilities                                                                                                                                                                                                                                                          |  |                  | 11,504,668  |   |               |   | 14,977,607  |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|                                                                                                                                                                                                                                                                           |  |                 
|Consignments and commitments                                                                                                                                                                                                                                               |  |                  |             |   |               |   |             |  
|Stockholders Equity (Deficit):                                                                                                                                                                                                                                            |  |                  |             |   |               |   |             |  
|Preferred stock, $0.001 par value, 10,000,000 shares authorized, 4,779,460 shares issued and outstanding                                                                                                                                                                   |  |                  | 4,780       |   |               |   |            |  
|Common stock, $0.001 par value, 100,000,000 shares authorized; shares issued and outstanding 5,809,628 at December 31,
2010 and 5,053,189 at March 31, 2010 and 61,650,241 and 4,836 of owned but not issued stock at December 31, 2010 and March 31, 2010, respectively. |  |                  | 67,460      |   |               |   | 5,058       |  
|Paid in capital                                                                                                                                                                                                                                                            |  |                  | 37,661,719  |   |               |   | 9,505,417   |  
|Retained (deficit)                                                                                                                                                                                                                                                         |  |                  | (18,355,991 | ) |               |   | (17,478,026 | )
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total stockholders equity (deficit)                                                                                                                                                                                                                                       |  |                  | 19,377,968  |   |               |   | (7,967,551  | )
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  
|Total liabilities and stockholders equity (deficit)                                                                                                                                                                                                                       |  | $                | 30,882,636  |   |               | $ | 7,010,056   |  
|                                                                                                                                                                                                                                                                           |  |                  |             |   |               |   |             |  

See Notes to Consolidated Financial Statements.



F-3



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##### Table of Contents

EnerJex Resources, Inc. and
Subsidiaries

Consolidated Statements of Operations



|                                            |  |                                                    |           |   |               |   |            |  
|------------------------------------------- |  | -------------------------------------------------- | --------- | - | ------------- | - | ---------- | -
|                                            |  | Nine-MonthTransition 
PeriodEnded December 31,2010 |           |   | March 31,2010 |  
|Oil and natural gas revenues                |  | $                                                  | 2,929,103 |   |               | $ | 4,856,027  |  
|                                            |  |                                                   
|Expenses:                                   |  |                                                    |           |   |               |   |            |  
|Direct operating costs                      |  |                                                    | 1,548,128 |   |               |   | 1,833,108  |  
|Depreciation, depletion and amortization    |  |                                                    | 381,747   |   |               |   | 635,497    |  
|Impairment of oil and gas properties        |  |                                                    |          |   |               |   |           |  
|Professional fees                           |  |                                                    | 748,497   |   |               |   | 561,625    |  
|Salaries                                    |  |                                                    | 242,490   |   |               |   | 835,576    |  
|Administrative expense                      |  |                                                    | 341,401   |   |               |   | 1,016,484  |  
|                                            |  |                                                    |           |   |               |   |            |  
|Total expenses                              |  |                                                    | 3,262,263 |   |               |   | 4,882,290  |  
|                                            |  |                                                    |           |   |               |   |            |  
|Loss from operations                        |  |                                                    | (333,160  | ) |               |   | (26,263    | )
|                                            |  |                                                    |           |   |               |   |            |  
|                                            |  |                                                   
|Other income (expense):                     |  |                                                    |           |   |               |   |            |  
|Interest expense                            |  |                                                    | (519,748  | ) |               |   | (751,470   | )
|Loan interest accretion                     |  |                                                    |          |   |               |   | (596,108   | )
|Gain on liquidation of hedging instrument   |  |                                                    |          |   |               |   |           |  
|Gain on repurchase of debentures            |  |                                                    |          |   |               |   | 436,500    |  
|Loss on derivatives                         |  |                                                    | (64,362   | ) |               |   | (3,911,063 | )
|Other Gain (Loss)                           |  |                                                    | 39,306    |   |               |   | 101,352    |  
|                                            |  |                                                    |           |   |               |   |            |  
|Total other income (expense)                |  |                                                    | (544,804  | ) |               |   | (4,720,789 | )
|                                            |  |                                                    |           |   |               |   |            |  
|Net income  (loss)                         |  | $                                                  | (877,964  | ) |               | $ | (4,747,052 | )
|                                            |  |                                                    |           |   |               |   |            |  
|Weighted average shares outstanding  basic |  |                                                    | 5,360,920 |   |               |   | 4,743,774  |  
|                                            |  |                                                    |           |   |               |   |            |  
|Net income (loss) per share  basic         |  | $                                                  | (0.16     | ) |               | $ | (1.00      | )
|                                            |  |                                                    |           |   |               |   |            |  

See Notes to Consolidated Financial Statements.



F-4



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##### Table of Contents

EnerJex Resources, Inc. and
Subsidiaries

Consolidated Statements of Stockholders Equity (Deficit)



|                                        |  |                 |           |  |              |   |       |                |  |  |                 |   |  |                                   |        |   |  |   |            |   |  |   |             |   |  |   |            |  
|--------------------------------------- |  | --------------- | --------- |  | ------------ | - | ----- | -------------- |  |  | --------------- | - |  | --------------------------------- | ------ | - |  | - | ---------- | - |  | - | ----------- | - |  | - | ---------- | -
|                                        |  | Preferred Stock |           |  | Common Stock |   |       | Paid inCapital |  |  | RetainedDeficit |   |  | TotalStockholdersEquity(Deficit) |       
|                                        |  | Shares          |           |  | ParValue     |   |       | Shares         |  |  | ParValue        |   |  |                                   |       
|Balance, April 1, 2009                  |  |                 |          |  |              | $ |      |                |  |  | 4,443,512       |   |  | $                                 | 4,444  |   |  | $ | 8,932,906  |   |  | $ | (12,730,974 | ) |  | $ | (3,793,624 | )
|Stock issued for services and interest  |  |                 |          |  |              |   |      |                |  |  | 365,416         |   |  |                                   | 370    |   |  |   | 328,422    |   |  |   |            |   |  |   | 328,792    |  
|Stock issued to employees and directors |  |                 |          |  |              |   |      |                |  |  | 314,261         |   |  |                                   | 314    |   |  |   | 274,019    |   |  |   |            |   |  |   | 274,333    |  
|Stock redeemed and cancelled            |  |                 |          |  |              |   |      |                |  |  | (70,000         | ) |  |                                   | (70    | ) |  |   | (29,930    | ) |  |   |            |   |  |   | (30,000    | )
|Net (loss) for the year                 |  |                 |          |  |              |   |      |                |  |  |                |   |  |                                   |       |   |  |   |           |   |  |   | (4,747,052  | ) |  |   | (4,747,052 | )
|                                        |  |                 |           |  |              |   |       |                |  |  |                 |   |  |                                   |        |   |  |   |            |   |  |   |             |   |  |   |            |  
|                                        |  |                 |           |  |              |   |      
|Balance, March 31, 2010                 |  |                 |          |  |              |   |      |                |  |  | 5,053,189       |   |  |                                   | 5,058  |   |  |   | 9,505,417  |   |  |   | (17,478,026 | ) |  |   | (7,967,551 | )
|Stock issued for interest and services  |  |                 |          |  |              |   |      |                |  |  | 756,439         |   |  |                                   | 752    |   |  |   | 300,136    |   |  |   |            |   |  |   | 300,888    |  
|Stock sold                              |  |                 |          |  |              |   |      |                |  |  | 12.500,000      |   |  |                                   | 12,500 |   |  |   | 4,987,500  |   |  |   |            |   |  |   | 5,000,000  |  
|Stock issued for oil and gas assets     |  |                 | 4,779,460 |  |              |   | 4,780 |                |  |  | 38,345,540      |   |  |                                   | 38,346 |   |  |   | 17,206,875 |   |  |   |            |   |  |   | 17,250,000 |  
|Stock issued for marketable securities  |  |                 |          |  |              |   |      |                |  |  | 7,427,905       |   |  |                                   | 7,428  |   |  |   | 2,963,734  |   |  |   |            |   |  |   | 2,971,162  |  
|Stock issued for debt                   |  |                 |          |  |              |   |      |                |  |  | 3,376,796       |   |  |                                   | 3,376  |   |  |   | 2,698,057  |   |  |   |            |   |  |   | 2,701,433  |  
|Net loss for the year                   |  |                 |          |  |              |   |      |                |  |  |                |   |  |                                   |       |   |  |   |           |   |  |   | (877,964    | ) |  |   | (877,964   | )
|                                        |  |                 |           |  |              |   |       |                |  |  |                 |   |  |                                   |        |   |  |   |            |   |  |   |             |   |  |   |            |  
|                                        |  |                 |           |  |              |   |      
|Balance, December 31, 2010              |  |                 | 4,779,460 |  |              | $ | 4,780 |                |  |  | 67,459,869      |   |  | $                                 | 67,460 |   |  | $ | 37,661,719 |   |  | $ | (18,355,991 | ) |  | $ | 19,377,968 |  
|                                        |  |                 |           |  |              |   |       |                |  |  |                 |   |  |                                   |        |   |  |   |            |   |  |   |             |   |  |   |            |  

See Notes to Consolidated Financial Statements.



F-5



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##### Table of Contents

EnerJex Resources, Inc. and
Subsidiaries

Consolidated Statements of Cash Flows



|                                                                             |  |                                                    |            |   |               |   |            |  
|---------------------------------------------------------------------------- |  | -------------------------------------------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                             |  | Nine-MonthTransition 
PeriodEnded December 31,2010 |            |   | March 31,2010 |  
|Cash flows from operating activities                                         |  |                                                    |            |   |               |   |            |  
|Net (loss)                                                                   |  | $                                                  | (877,964   | ) |               | $ | (4,747,052 | )
|Depreciation and depletion                                                   |  |                                                    | 381,748    |   |               |   | 668,212    |  
|Debt issue cost amortization                                                 |  |                                                    |           |   |               |   | 45,929     |  
|Stock and options issued for services and interest                           |  |                                                    | 223,864    |   |               |   | 328,792    |  
|Accretion of interest on long-term debt discount                             |  |                                                    |           |   |               |   | 596,108    |  
|Accretion of asset retirement obligation                                     |  |                                                    | 58,323     |   |               |   | 75,687     |  
|Loss on derivatives                                                          |  |                                                    | (351,417   | ) |               |   | 3,548,245  |  
|Gain on purchase of debentures                                               |  |                                                    |           |   |               |   | (436,500   | )
|Stock issued to employees and directors                                      |  |                                                    |           |   |               |   | 274,333    |  
|Loss on sale of fixed assets                                                 |  |                                                    | 47,255     |   |               |   | 25,999     |  
|Principal issued on debentures for interest                                  |  |                                                    | 208,391    |   |               |   | 368,045    |  
|Impairment of oil & gas properties                                           |  |                                                    |           |   |               |   |           |  
|Adjustments to reconcile net (loss) to cash provided byoperating activities: |  |                                                    |            |   |               |   |            |  
|Accounts receivable                                                          |  |                                                    | (20,985    | ) |               |   | 131,942    |  
|Deposits and prepaid expenses                                                |  |                                                    | 84,100     |   |               |   | 96,965     |  
|Accounts payable                                                             |  |                                                    | 232,335    |   |               |   | (138,659   | )
|Accrued liabilities                                                          |  |                                                    | (178,311   | ) |               |   | 329,330    |  
|Deferred payment from Euramerica for development                             |  |                                                    |           |   |               |   |           |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Cash provided by operating activities                                        |  |                                                    | (192,691   | ) |               |   | 1,167,376  |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|                                                                             |  |                                                   
|Cash flows from investing activities                                         |  |                                                    |            |   |               |   |            |  
|Purchase of fixed assets                                                     |  |                                                    |           |   |               |   | (72,603    | )
|Additions to oil & gas properties                                            |  |                                                    | (1,500,000 | ) |               |   | (228,962   | )
|Sale of oil & gas properties                                                 |  |                                                    | 60,000     |   |               |   | 32,000     |  
|Proceeds from sale of vehicle                                                |  |                                                    | 28,010     |   |               |   | 16,500     |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Cash used in investing activities                                            |  |                                                    | (1,411,990 | ) |               |   | (253,065   | )
|                                                                             |  |                                                    |            |   |               |   |            |  
|                                                                             |  |                                                   
|Cash flows from financing activities                                         |  |                                                    |            |   |               |   |            |  
|Proceeds from (repayment of) note payable, net                               |  |                                                    | 5,000,000  |   |               |   | (193,500   | )
|Cash from oil & gas properties acquired                                      |  |                                                    | 2,296      |   |               |   |           |  
|Borrowings on long-term debt                                                 |  |                                                    |           |   |               |   | 38,480     |  
|Payments on long-term debt                                                   |  |                                                    | (604,959   | ) |               |   | (717,713   | )
|                                                                             |  |                                                    |            |   |               |   |            |  
|Cash provided from financing activities                                      |  |                                                    | 4,397,337  |   |               |   | (872,733   | )
|                                                                             |  |                                                    |            |   |               |   |            |  
|                                                                             |  |                                                   
|Increase (decrease) in cash and cash equivalents                             |  |                                                    | 2,792,656  |   |               |   | 41,578     |  
|Cash and cash equivalents, beginning                                         |  |                                                    | 169,163    |   |               |   | 127,585    |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Cash and cash equivalents, end                                               |  | $                                                  | 2,961,819  |   |               | $ | 169,163    |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|                                                                             |  |                                                   
|Supplemental disclosures:                                                    |  |                                                    |            |   |               |   |            |  
|Interest paid                                                                |  | $                                                  |           |   |               | $ | 325,625    |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Income taxes paid                                                            |  | $                                                  |           |   |               | $ |           |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Non-cash transactions:                                                       |  |                                                    |            |   |               |   |            |  
|Share-based payments issued for services                                     |  | $                                                  | 225,888    |   |               |   | 603,125    |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Principal issued on debentures for interest                                  |  | $                                                  | 208,391    |   |               |   | 368,045    |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Stock issued for debt                                                        |  | $                                                  | 2,701,437  |   |               |   |           |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Stock issued for investment in securities                                    |  | $                                                  | 2,971,162  |   |               |   |           |  
|                                                                             |  |                                                    |            |   |               |   |            |  
|Stock issued for oil properties and supporting assets                        |  | $                                                  | 17,179,256 |   |               |   |           |  
|                                                                             |  |                                                    |            |   |               |   |            |  

See Notes to Consolidated Financial Statements.



F-6



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##### Table of Contents

EnerJex Resources, Inc.

Notes to Consolidated Financial Statements

Note 1  Summary of Accounting Policies

Basis of Presentation

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
Our operations are considered to fall within a single industry segment, which is the acquisition, development, exploitation and production of natural gas and crude oil properties in the United States. All significant intercompany balances and
transactions have been eliminated upon consolidation. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

Nature of Business

We are an independent energy company engaged in the
business of producing and selling crude oil and natural gas. This crude oil and natural gas is obtained primarily by the acquisition and subsequent exploration and development of mineral leases. Development and exploration may include drilling new
exploratory or development wells on these leases. These operations are conducted primarily in Eastern Kansas and South Texas.

Use of
Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates included in the consolidated financial statements are: (1) oil revenues and reserves; (2) depreciation,
depletion and amortization; (3) valuation allowances associated with income taxes (4) accrued assets and liabilities; (5) stock-based compensation; (6) asset retirement obligations and (7) valuation of derivative
instruments. Although management believes these estimates are reasonable, changes in facts and circumstances or discovery of new information may result in revised estimates. Actual results could differ from those estimates.

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear any interest. We regularly review receivables to insure
that the amounts will be collected and establish or adjust an allowance for uncollectible amounts as necessary using the specific identification method. Account balances are charged off against the allowance after all means of collection have
been exhausted and the potential for recovery is considered remote. There were no reserves for uncollectible amounts in the periods presented.

Share-Based Payments

The value we assign to the options and warrants that we issue is based on the fair market value as calculated by the Black-Scholes pricing model. To perform a calculation of the value of our options and
warrants, we determine an estimate of the volatility of our stock. We need to estimate volatility because there has not been enough trading of our stock to determine an appropriate measure of volatility. We believe our estimate of volatility is
reasonable, and we review the assumptions used to determine this whenever we issue a new equity instruments.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of
income and expense are recognized in the financial statements in different periods

than when recognized in the applicable tax return. Deferred
tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax
credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the
financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the date when the change in the tax rate was enacted.

We routinely assess the realizability of our deferred tax assets. If we conclude that it is more likely than not that some portion or all of the deferred tax assets will not be realized under
accounting standards, the tax asset is reduced by a valuation allowance. In addition we routinely assess uncertain tax positions, and accrue for tax positions that are not more-likely-than-not to be sustained upon examination by taxing
authorities.



F-7



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##### Table of Contents

Fair Value Measurements

Accounting guidance establishes a single authoritative definition of fair value based upon the assumptions market participants would use when pricing an asset or liability and creates a fair value
hierarchy that prioritizes the information used to develop those assumptions. Additional disclosures are required, including disclosures of fair value measurements by level within the fair value hierarchy. We incorporate a credit risk
assumption into the measurement of certain assets and liabilities

Cash and Cash Equivalents

We consider all highly liquid investment instruments purchased with original maturities of three months or less to be cash equivalents for
purposes of the consolidated statements of cash flows and other statements. We maintain cash on deposit, which, at times, exceed federally insured limits. We have not experienced any losses on such accounts and believe we are not exposed to any
significant credit risk on cash and equivalents.

Revenue Recognition and Imbalances

Oil and gas revenues are recognized net of royalties when production is sold to a purchaser at a fixed or determinable price, when
delivery has occurred and title has transferred, and if collection of the revenue is probable. Cash received relating to future revenues is deferred and recognized when all revenue recognition criteria are met.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is on a straight-line method using the estimated lives of the assets (3-15
years). Expenditures for maintenance and repairs are charged to expense.

Debt issue costs

Debt issuance costs incurred are capitalized and subsequently amortized over the term of the related debt on the straight-line method of
amortization over the estimated life of the debt.

Oil Properties

We follow the full-cost method of accounting under which all costs associated with property acquisition, exploration and development
activities are capitalized. We also capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar
activities.

Under the full-cost method, capitalized costs are amortized on a composite unit-of-production method based on
proved gas and oil reserves. Depreciation, depletion and amortization expense is also based on the amount of estimated reserves. If we maintain the same level of production year over year, the depreciation, depletion and amortization expense may be
significantly different if our estimate of remaining reserves changes significantly. Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between
costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized. The costs of unproved properties are excluded from amortization until the properties are evaluated. We review all of
our unevaluated properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties, and otherwise if impairment has occurred. Unevaluated properties are assessed individually when individual
costs are significant.

We review the carrying value of our oil properties under the full-cost accounting rules of the SEC on
a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of
estimated future net revenues (adjusted for cash flow hedges) less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. In calculating future net revenues, current SEC
regulations require us to utilize prices at the end of the appropriate quarterly period. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts, including
the effects of derivatives qualifying as cash flow hedges. Two primary factors impacting this test are reserve levels and current prices, and their associated impact on the present value of estimated future net revenues. Revisions to estimates of
oil reserves and/or an increase or decrease in prices can have a material impact on the present value of estimated future net revenues. Any excess of the net book value, less deferred income taxes, is generally written off as an expense. Under SEC
regulations, the excess above the ceiling is not expensed (or is reduced) if, subsequent to the end of the period, but prior to the release of the financial statements, oil prices increase sufficiently such that an excess above the ceiling would
have been eliminated (or reduced) if the increased prices were used in the calculations.

The estimates of proved natural gas,
crude oil and natural gas liquids reserves utilized in the preparation of the financial statements are estimated in accordance with guidelines established by the Securities and Exchange Commission ( SEC ) and the Financial
Accounting Standards Board ( FASB ), which require that reserve estimates be prepared under existing economic and



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operating conditions using a 12-month average price with no provision for price and cost escalations in future years except by contractual arrangements.

Long-Lived Assets

Impairment of long-lived assets is recorded when indicators of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets carrying value. The carrying value of the assets is then reduced to their estimated fair value that is usually measured based on an estimate of future discounted cash flows.

Asset Retirement Obligations

The asset retirement obligation relates to the plug and abandonment costs when our wells are no longer useful. We determine the value of the liability by obtaining quotes for this service and estimate the
increase we will face in the future. We then discount the future value based on an intrinsic interest rate that is appropriate for us. If costs rise more than what we have expected there could be additional charges in the future, however, we monitor
the costs of the abandoned wells and we will adjust this liability if necessary.

Major Purchasers

For the nine-month transition period ended December 31, 2010 and the year ended March 31, 2010 we sold all of our oil production
to one purchaser.

Available-for-sale securities

The Company classifies its marketable equity securities as available-for-sale and they are carried at fair market value, with the unrealized gains and losses included in the determination of comprehensive
income and reported in stockholders equity.

Recent Issued Accounting Standards

Accounting Standards Codification  On July 1, 2009, the Financial Accounting Standards Board (FASB) instituted a new referencing system, which codifies, but does not amend, previously existing nongovernmental GAAP. The FASBAccounting Standards Codification (ASC) is now the single authoritative
source for GAAP. Although the implementation of ASC had no impact on our financial statements, certain references to authoritative GAAP literature within our footnotes have been changed to cite the appropriate content within the ASC.

FASB Accounting Standards Update (ASU) 2010-03 was issued on January 6, 2010, and aligns the current
oil and natural gas reserve estimation and disclosure requirements of ASC 932 with those in theSEC Final Rule Modernization of Oil and Gas Reporting issued December 31, 2008. The rules only apply prospectively as a change in estimate.
The most significant amendments to the reserve and disclosure requirements include the following:



| |  |  | Commodity PricesEconomic producibility of reserves and discounted cash flows will be based on an unweighted arithmetic average of the first day
of the month commodity price during the 12-month period ending on the balance sheet date unless contractual arrangements designate the price to be used.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disclosure of Unproved ReservesProbable and possible reserves may be disclosed separately on a voluntary basis.
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Proved Undeveloped Reserve GuidelinesReserves may be classified as proved undeveloped if there is a high degree of confidence that the quantities
will be recovered.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reserve Estimation Using New TechnologiesReserves may be estimated through the use of reliable technology in addition to flow tests and
production history.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reserve Personnel and Estimation ProcessAdditional disclosure is required regarding the qualifications of the chief technical person who oversees
our reserves estimation process. We will also be required to provide a general discussion of our internal controls used to assure the objectivity of the reserves estimate.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disclosure by Geographic AreaReserves in foreign countries or continents must be presented separately if they represent more than 15% of our
total oil and natural gas proved reserves.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non-Traditional ResourcesThe definition of oil and natural gas producing activities will expand and focus on the marketable product rather than
the method of extraction.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ASU 2010-03 is effective for entities with annual reporting periods ending on or after
December 31, 2009. We adopted both the FASB and the SEC rules.

Adoption of ASU 2009-05  In August 2009, the
Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU ) No. 2009-05, Fair Value Measurement and Disclosures: Measuring Liabilities at Fair Value.ASU 2009-05 provides clarification on
measuring liabilities at fair value when a quoted price in an active market is not available. We adopted ASU No. 2009-05 (FASB ASC 820-10). The adoption of this statement did not have an impact on our financial position or results of
operations.

Interim Disclosures about Fair Value of Financial Instrument  We adopted FSP SFAS 107-1 and APB 28-1
Interim Disclosures about Fair Value of Financial Instruments, which is now incorporated into ASC Topic No. 825 (ASC 825). This statement increases the frequency of fair value disclosures to a quarterly
instead of annual basis. The guidance relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value. The adoption of this statement did not have a material impact on our
financial position or results of operations.

Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly  We adopted the FSP SFAS 157-4 Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly which is now incorporated into ASC Topic No. 820 (ASC 820). ASC 820 provides guidelines for a broad interpretation of when to apply market-based
fair value measures. It reaffirms managements need to use judgment to determine when a market that was once active has become inactive and in determining fair values in markets that are no longer active.

Disclosure about Derivative Instruments and Hedging Activities  We adopted FASB Statement No. 161, Disclosure
about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 which is now incorporated into ASC Topic No. 815 (ASC 815). ASC 815 amends and expands the disclosure requirements
for derivative instruments and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (i) how and why an entity uses derivative instruments; (ii) how derivative instruments and
related hedged items are accounted for; and (iii) how derivative instruments and related hedged items affect an entitys financial position, results of operations and cash flows. The adoption of this statement did not have an impact
on our financial position or results of operations.

Business Combinations  We adopted SFAS No. 141 (Revised
2007) Business Combinations which is now incorporated into ASC Topic No. 805 ( ASC 805). The revision broadens the definition of a business combination to include all transactions or other events in which
control of one or more businesses is obtained. Further, this statement establishes principles and requirements for how an acquirer recognizes assets acquired, liabilities assumed and any non-controlling interests acquired. The adoption of
this statement has not had an impact on our financial position or results of operations, because we have not yet had any business combinations in the year ended March 31, 2010.

Effective Date of FASB Statement No. 157We also adopted FSP SFAS 157-2, Effective Date of FASB Statement
No. 157, which is also now incorporated into ASC Topic No. 820. The effective date was deferred for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The adoption of this statement did not have a material impact on our
financial position or results of operations.

Note 2  Stock Transactions

The Series A preferred stock is convertible into 4,779,460 shares of our common stock, and the Series A preferred stock, by its terms,
shall convert into common stock on a one-to-one basis (subject to adjustment) once the cumulative dividends paid with regard to such stock equal to original principal value of $1.00 per share. In the event of a liquidation, the holders of our Series
A preferred stock would receive priority liquidation payments before payments to common stockholders equal to the amount of the stated value of the preferred stock before any distributions would be made to our common stockholders. The preferred
stockholders have the right, by majority vote of the shares of preferred stock, to generally approve any issuances by us of equity that is senior to or equal in rights to the preferred stock.

We are required by the terms of our Series A preferred stock to declare dividends each calendar quarter in an aggregate



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amount equal to one-third of our net cash from operating activities reduced by any principal amount of debt repayment in such calendar quarter to institutional lenders and other secured
creditors.

Stock transaction in nine month transition period ended December 31, 2010

We issued 600,000 shares for services to board members. The stock was valued at the closing price on the day the shares were
authorized to be issued and that totaled $144,000. The amount was expensed.

We issued 151,750 shares to officers and
employees for a liability that was accrued in the previous fiscal year. Other issuances netted to 4,689 shares.

On
December 24, 2010 we agreed to issue 31,250 shares in exchange for a $25,000 convertible note. The shares were not issued at December 31, 2010.

On December 31, 2010 we agreed in two transactions to issued 4,779,460 shares of Series A preferred stock and 38,345,540 shares of common stock for oil properties. The Series A preferred stock and
common stock was valued at $0.40 per share. These shares were not issued at December 31, 2010.

On December 31, 2010
we agreed to issue 7,427,905 shares for marketable securities. The price per share was $0.40 per share and it approximated the market value of the marketable securities. These shares were not issued at December 31, 2010.

On December 31, 2010 we agreed to issue 3,122,510 shares in exchange for $2,498,007 of senior secured debentures and accrued and
unpaid interest of at a rate of $0.80 per share. There was a gain on the conversion of this debt, however, the parties were considered to be related parties with the Company so the gain of $1,249,004 was recorded as additional paid in capital. The
shares were not issued at December 31, 2010.

On December 31, 2010 we agreed to issue 223,036 shares in exchange for
$178,429 of senior secured debentures and accrued and unpaid interest at a rate of $0.40 per share. The shares were not issued at December 31, 2010.

On December 31, 2010 we agreed to issue 5,000,000 shares that were sold at a price of $0.40 per share. The shares were not issued at December 31, 2010.

Stock transaction in fiscal year ended March 31, 2010

We issued 355,000 shares of our stock for services during the year ended March 31, 2010. The value of the stock was $1.00 per share which approximated the market value at the time the
obligations were settled.

We issued 10,416 shares of stock and had unissued but owed 4,836 shares (subsequently these shares
were issued) of stock for payment in kind interest on our debentures. The value assigned to the transaction varied from $.46 to $1.28 and was based on the approximate market value at the time the obligations were settled.

We issued 109,700 shares of stock in order to cancel the 438.500 outstanding options. The value assigned to the transaction was
$1.00 per share and was based on the approximate market value at the time the exchange was made.

We issued 204,561 to
employees and directors for services. The value of the stock ranged from $.45 to $1.00 per share and was based on the approximate market value at the time the obligations were settled.

We purchased debentures from the holders and in connection with the purchase we received 75,000 of our shares. We cancelled 70,000
shares by March 31, 2010 and will cancel an additional 5,000 shares. The value assigned to this acquisition was based on the market value of the shares and debentures at the time of purchase. We recorded a $30,000 reduction in equity
for this transaction.

Option and Warrant transactions

Officers (including officers who are members of the board of directors), directors, employees and consultants are eligible to receive options under our stock option plans. We administer the stock
option plans and we determine those persons to whom options will be granted, the number of options to be granted, the provisions applicable to each grant and the time periods during which the options may be exercised. No options may be granted
more than ten years after the date of the adoption of the stock option plans.

Each option granted under the stock option
plans will be exercisable for a term of not more than ten years after the date of grant. Certain other restrictions will apply in connection with the plans when some awards may be exercised. In the event of a change



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of control (as defined in the stock option plans), the vesting date on which all options outstanding under the stock option plans may first be exercised will be accelerated. Generally, all
options terminate 90 days after a change of control.

2000-2001 Stock Option Plan

The board of directors approved a stock option plan and our stockholders ratified the plan on September 25, 2000. The total
number of options that can be granted under the plan is 200,000 shares. At December 31, 2010, there were no outstanding options.

Stock Option Plan

On
December 31, 2010 we granted 900,000 options that vest ratably over a 48 month period and are excersiable at $0.40 per share.

On May 4, 2007, we amended and restated the EnerJex Resources, Inc. Stock Option Plan to rename the plan and to increase the number of shares issuable under the plan to 1,000,000. Our
stockholders approved this plan in September of 2007. On October 14, 2008 our stockholders approved a proposal to amend and restate the 2002-2003 Stock Option Plan to (i) rename it the EnerJex Resources, Inc. Stock Incentive Plan
(the Stock Incentive Plan), (ii) increase the maximum number of shares of our common stock that may be issued under the Stock Incentive Plan from 1,000,000 to 1,250,000, and (iii) add restricted stock as an eligible award that
can be granted under the Stock Incentive Plan. At December 31, 2010 there were 900,000 options outstanding. A summary of stock options and warrants is as follows:



|                              |  |         |          |   |                              |   |       |          |  |  |                              |   |  |   |       |  
|----------------------------- |  | ------- | -------- | - | ---------------------------- | - | ----- | -------- |  |  | ---------------------------- | - |  | - | ----- | -
|                              |  | Options |          |   | Weighted Ave. Exercise Price |   |       | Warrants |  |  | Weighted Ave. Exercise
Price |  
|Outstanding April 1, 2009     |  |         | 438, 500 |   |                              | $ | 6.30  |          |  |  | 75,000                       |   |  | $ | 3.00  |  
|Granted                       |  |         |         |   |                              |   |      |          |  |  |                             |   |  |   |      |  
|Cancelled                     |  |         | (438,500 | ) |                              |   | (6.25 | )        |  |  |                             |   |  |   |      |  
|Exercised                     |  |         |         |   |                              |   |      |          |  |  |                             |   |  |   |      |  
|Outstanding March 31, 2010    |  |         | 438,500  |   |                              | $ | 6.30  |          |  |  | 75,000                       |   |  | $ | 3.00  |  
|Granted                       |  |         | 900,000  |   |                              | $ | 0.40  |          |  |  |                             |   |  |   |      |  
|Cancelled                     |  |         |         |   |                              |   |      |          |  |  | (75,000                      | ) |  |   | (3.00 | )
|Exercised                     |  |         |         |   |                              |   |      |          |  |  |                             |   |  |   |      |  
|Outstanding December 31, 2010 |  |         | 900,000  |   |                              | $ | 0.40  |          |  |  |                             |   |  |   |      |  
|                              |  |         |          |   |                              |   |       |          |  |  |                              |   |  |   |       |  

Note 3  Asset Retirement Obligation

Our asset retirement obligations relate to the abandonment of oil. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit
adjusted risk-free interest rates. The following shows the changes in asset retirement obligations:



|                                             |  |   |         |  
|-------------------------------------------- |  | - | ------- | -
|Asset retirement obligation at April 1, 2009 |  | $ | 803,624 |  
|Liabilities incurred during the period       |  |   | 4,281   |  
|Liabilities settled during the period        |  |   |        |  
|Accretion                                    |  |   | 75,684  |  
|Asset retirement obligations, March 31, 2009 |  |   | 883,589 |  
|Liabilities incurred during the period       |  |   |        |  
|Liabilities settled during the period        |  |   | (58,846 | )
|Accretion                                    |  |   | 58,323  |  
|Asset retirement obligations, March 31, 2010 |  | $ | 883,066 |  
|                                             |  |   |         |  

Note 4  Long-Term Debt

Senior Secured Credit Facility

On July 3, 2008, EnerJex, EnerJex
Kansas, and DD Energy entered into a three-year $50 million Senior Secured Credit Facility (the Credit Facility) with Texas Capital Bank, N.A. Borrowings under the Credit Facility will be subject to a borrowing base limitation based
on our current proved oil and gas reserves and will be subject to semi-annual redeterminations. A borrowing base redetermination was completed by Texas Capital Bank effective January 1, 2010. The borrowing base was determined to be
$6,746,000 and called for $55,000 Monthly Borrowing Base Reductions (MBBR) beginning February 1, 2010.



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The Credit Facility is secured by a lien on substantially all of our assets. The Credit
Facility has a term of three years, and all principal amounts, together with all accrued and unpaid interest, will be due and payable in full on July 3, 2011. The Credit Facility also provides for the issuance of letters-of-credit up to a
$750,000 sub-limit under the borrowing base and up to an additional $2.25 million limit not subject to the borrowing base to support our hedging program. We have borrowed all of our available borrowing base as of March 31, 2010.

Advances under the Credit Facility will be in the form of either base rate loans or Eurodollar loans. The interest rate on
the base rate loans fluctuates based upon the higher of (1) the lenders prime rate and (2) the Federal Funds rate plus 0.50%, plus, in either case, a margin of between 0.0% and 0.5% depending on the percent of the
borrowing base utilized at the time of the credit extension, but in no event shall be less than five percent (5.0%). The interest rate on the Eurodollar loans fluctuates based upon the applicable LIBOR rate, plus a margin of 2.25% to 2.75% depending
on the percent of the borrowing base utilized at the time of the credit extension, but in no event shall be less than five percent (5.0%). Eurodollar loans may be based upon one, two, three and six month LIBOR options, except that beginning
March 30, 2009 and continuing through the date of this report, Texas Capital Bank has suspended all LIBOR based funding with maturities less than 90 days due to the extreme volatility in the interest rate market and the unprecedented spread
between the 90 day LIBOR and the shorter term LIBOR options. A commitment fee of 0.375% on the unused portion of the borrowing base will accrue, and be payable quarterly in arrears. There was no commitment fee due at March 31, 2010.

The Credit Facility includes usual and customary affirmative covenants for credit facilities of this type and size, as well
as customary negative covenants, including, among others, limitations on liens, mergers, asset sales or dispositions, payments of dividends, incurrence of additional indebtedness, and investments. The Credit Facility also requires that we, at the
end of each fiscal quarter beginning with the quarter ending September 30, 2008, maintain a minimum current assets to current liabilities ratio and a minimum ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to
interest expense and at the end of each fiscal quarter beginning with the quarter ended September 30, 2008 to maintain a minimum ratio of EBITDA to senior funded debt.

The Credit Facility was amended August 18, 2009 to implement a minimum interest rate of five percent (5.0%) and establish minimum volumes to be hedged of not less than seventy-five percent
(75%) of the proved developed producing reserves attributable to our interest in the borrowing base oil and gas properties projected to be produced. The Credit Facility was further amended January 13, 2010 to modify the senior funded
debt to EBITDA ratio on a quarterly basis beginning with the quarter ended December 31, 2009 and to modify the annualization of the interest coverage ratio, also beginning with the quarter ended December 31, 2009. The senior funded debt to
EBITDA ratio allowed is 6.25:1.00 at December 31, 2009; 5.75:1.00 at March 31, 2010; 5.25:1.00 at June 30, 2010; and 4.75:1.00 at September 30, 2010; and 4.25:1.00 for all quarters ending after September 30, 2010.

On September 29, 2010, the Credit Facility with Texas Capital Bank was amended to modify the borrowing base to $6,691,000 relative
to the Proved Reserves attributable to the borrowing Base Oil and Gas Properties. The amendment also modified various terms in the Credit Facility along with changing the commitment fees to 0.37% per annum times the average daily balance of the
loan.

On December 31, 2010, the Credit Facility with Texas Capital Bank was amended to modify the borrowing base to
$6,116,000 relative to the Proved Reserves attributable to the borrowing Base Oil and Gas Properties. The amendment also modified the EBITDA ratio on a quarterly basis with the quarter ending March 31, 2011, permit the ratio allowed to 4.25:1
00. The Credit Agreement was further amended in order to reflect the reorganization of the Company.

Debentures

On April 11, 2007, we entered into a Securities Purchase Agreement, Registration Rights Agreements, Senior Secured Debentures, a
Pledge and Security Agreement, a Secured Guaranty, and other related agreements (the Financing Agreements) with the Buyers of a new series of senior secured debentures (the Debentures). Under the terms of the
Financing Agreements, we agreed to sell Debentures for a total purchase price of $9.0 million. In connection with the purchase, we agreed to issue to the Buyers a total of 1,800,000 shares. The first closing occurred on April 12, 2007 with a
total of $6.3 million in Debentures being sold and the remaining $2.7 million closing on June 21, 2007. Effective July 7, 2008, we redeemed an aggregate principal amount of $6.3 million of the Debentures. We also amended the remaining $2.7
million of aggregate principal Debentures to, among other things, permit the indebtedness under our Credit Facility, subordinate the security interests of the debentures to the Credit Facility, provide for the redemption of the remaining Debentures
with the net proceeds from any next debt or equity offering and eliminate the covenant to maintain certain production thresholds.

Effective December 31, 2010, the holders of the Debentures contributed (i) Debentures on which we were indebted, as of September 30, 2010, in the aggregate amount of $2,398,007.11,
(ii) shares of Oakridge Energy, Inc. with an agreed value of



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$1,676.016, and (iii) shares of Spindletop Oil & Gas, Inc., with an agreed value of $1,295,000, in exchange for 10,550,415 shares of common stock.

This resulted in cancelling approximately $2,675,000 of the Debentures in exchange for 3,345,546 shares of common stock.

Convertible and Other Long-Term Debt

We had a $25,000 convertible note that has an interest rate of 6% and matured August 2, 2010. We acquired the note on December 31, 2010 (see Note 2).

We financed the purchase of vehicles through a bank. The notes are for four years and the weighted average interest is 7.2% per
annum. Vehicles collateralize these notes.

Long-term debt consists of the following at March 31, 2010:



|                      |  |   |            |  
|--------------------- |  | - | ---------- | -
|Credit Facility       |  | $ | 6,116,000  |  
|                      | 
|Vehicle notes payable |  |   | 37,114     |  
|Total long-term debt  |  |   | 6,153,114  |  
|Less current portion  |  |   | (6,131,000 | )
|Long-term debt        |  | $ | 22,114     |  
|                      |  |   |            |  

Principal amounts are due on long-term and convertible debt as follows: Year ended December 31, 2012
-$6,116,000, December 31, 2013 -$16,217, March 31, 2014 -$5,897.

Note 5  Oil Properties

During the nine month transition period ended December 31, 2010, we sold some of our properties for $60,000.

On December 31, 2010 we acquired oil properties totaling $18,750,000 for $1,500,000 in cash and 4,779,460 of Series A preferred
stock and 38,345,540 shares of common stock (See Note 2).

Note 6  Related party transactions

In the normal course of business we utilize the services of stockholder who perform work for us at normal business rates.

Note 7  Commitments and Contingencies

We have a lease agreement that expires in September 30, 2013. Rent expense for the transition nine month period ended December 31, 2010 and the year ended March 31, 2010 $54,000 and
$71,000 respectively. Future non-cancellable minimum payments are approximately $74,000 for 2012, $76,000 for 2013 and $58,000 for 2014.

We, as a lessee and operator of oil properties, are subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws
and regulations may, among other things, impose liability on the lessee under an oil lease for the cost of pollution clean-up resulting from operations and subject to the lessee to liability for pollution damages. In some instances, the Company may
be directed to suspend or cease operations in the affected area. As of December 31, 2010, we have no reserve for environmental remediation and are not aware of any environmental claims.

Note 8  Income Taxes

There was no current or deferred income tax expense (benefit) for the nine month transition period ended December 31, 2010 and fiscal year ended March 31, 2010 because there was a net loss and a
valuation allowance that offsets the deferred tax amounts.



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The following table sets forth a reconciliation of the provision for income taxes to the
statutory federal rate:



|                                      |  |                                                      |         |  |                                  |  |         | 
|------------------------------------- |  | ---------------------------------------------------- | ------- |  | -------------------------------- |  | ------- | 
|                                      |  | Nine-Month Transition Period
Ended December 31, 2010 |         |  | Fiscal Year Ended
March 31,
2010 | 
|Statutory tax rate                    |  |                                                      | 34.0%   |  |                                  |  | 34.0%   | 
|Derivative instruments                |  |                                                      | 13.6%   |  |                                  |  | (24.4)% | 
|Oil & gas costs and long-lived assets |  |                                                      | (3.6)%  |  |                                  |  | (0.80)% | 
|Change in valuation allowance         |  |                                                      | (44.0)% |  |                                  |  | (10.4)% | 
|Effective tax rate                    |  |                                                      | %      |  |                                  |  | %      | 
|                                      |  |                                                      |         |  |                                  |  |         | 

Significant components of the deferred tax assets and liabilities are as follows:



|                                               |  |                                                      |            |   |                                  |   |            |  
|---------------------------------------------- |  | ---------------------------------------------------- | ---------- | - | -------------------------------- | - | ---------- | -
|                                               |  | Nine-Month Transition Period
Ended December 31, 2010 |            |   | Fiscal Year Ended
March 31,
2010 |  
|Non-current deferred tax asset:                |  |                                                      |            |   |                                  |   |            |  
|Impaired oil & gas costs and long-lived assets |  | $                                                    | 1,817,562  |   |                                  | $ | 1,825,000  |  
|Derivative instruments                         |  |                                                      | 1,086,961  |   |                                  |   | 1,206,400  |  
|Net operating loss carry-forward               |  |                                                      | 3,473,295  |   |                                  |   | 3,263,000  |  
|Valuation allowance                            |  |                                                      | (6,377,818 | ) |                                  |   | (6,294,400 | )
|Total deferred tax net                         |  | $                                                    |           |   |                                  | $ |           |  
|                                               |  |                                                      |            |   |                                  |   |            |  

At December 31, 2010 we have a net operating loss carry forward of approximately $10,215,000 expiring
in 2021-2025 and are subject to certain limitations on an annual basis. A valuation allowance has been established against state net operating losses where it is more likely than not that such losses will expire before they are utilized.

The Company incurred changes of control as defined by the Internal Revenue Service. Accordingly, the rules will limit the utilization of
the Companys net operating losses. The limitation is determined by multiplying the value of the stock immediately before the ownership change by the applicable long-term exempt rate. It is estimated that $10,215,000 of net operating losses
will be subject to an annual limitation. Any unused annual limitation may be carried over to later years. The amount of the limitation may under certain circumstances be increased by the built-in gains in assets held by the Company at the time of
the change that are recognized in the five-year period after the change.

ASC 740, Income Taxes(ASC 740)
prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. For those benefits to be recognized, an income
tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Our policy is to recognize interest and penalties related to uncertain tax positions as income tax benefit (expense) in our Consolidated
Statements of Operations. For the transition period ended December 31, 2010 and the year ended March 31, 2010, respectively, we recorded no interest expense and penalties related to unrecognized tax benefits associated with uncertain
tax positions recognized in our provision for income taxes.

Note 9  Fair Value Measurements

We hold certain financial assets which are required to be measured at fair value on a recurring basis in accordance with the Statement of
Financial Accounting Standard No. 157, Fair Value Measurements (ASC Topic 820-10). ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10
defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the
asset or transfer the liability occurs in the principal market for the asset or liability. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:

Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to
access. We believe our debt approximates fair value at December 31, 2010.

Level 2. Valuations based on quoted
prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets
or liabilities. We consider the derivative liability to be Level 2. We determine the fair value of the derivative liability utilizing various inputs, including NYMEX price quotations and contract terms.



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Level 3. Valuations based on inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.

Our derivative instruments consist of variable to fixed
price commodity swaps.



|                    |  |                        |   |  |         |   |           |         |  |   |   | 
|------------------- |  | ---------------------- | - |  | ------- | - | --------- | ------- |  | - | - | 
|                    |  | Fair Value Measurement |  
|                    |  | Level 1                |   |  | Level 2 |   |           | Level 3 | 
|Crude oil contracts |  | $                      |  |  |         | $ | 3,196,829 |         |  | $ |  | 
|                    |  |                        |   |  |         |   |           |         |  |   |   | 

Note 10  Derivative Instruments

We have entered into certain derivative or physical arrangements with respect to portions of our crude oil production to reduce our sensitivity to volatile commodity prices and/or to meet hedging
requirements under our Credit Facility. We believe that these derivative arrangements, although not free of risk, allow us to achieve a more predictable cash flow and to reduce exposure to commodity price fluctuations. However,
derivative arrangements limit the benefit of increases in the prices of crude oil. Moreover, our derivative arrangements apply only to a portion of our production.

We have an Intercreditor Agreement in place between us; our counterparty, BP Corporation North America, Inc. (BP); and our agent, Texas Capital Bank, N.A., which allows Texas Capital Bank to
also act as agent for BP for the purpose of holding and enforcing any liens or security interests resulting from our derivative arrangements. Therefore, we generally are not required to post additional collateral, including cash.

The following derivative contracts were in place at December 31, 2010:



|               |  |      |            |  |                 |  |            |               |  |   |            |  |  |   |            |  
|-------------- |  | ---- | ---------- |  | --------------- |  | ---------- | ------------- |  | - | ---------- |  |  | - | ---------- | -
|               |  | Term |            |  | Monthly Volumes |  |            | Price per Bbl |  |   | Fair Value | 
|Crude oil swap |  |      | 1/11-12/13 |  |                 |  | 2,083 Bbls |               |  | $ | 57.30      |  |  | $ | (2,393,975 | )
|Crude oil swap |  |      | 1/13-12/14 |  |                 |  | 1,150 Bbls |               |  | $ | 77.05      |  |  | $ | (802,854   | )
|               |  |      |            |  |                 |  |            |               |  |   |            |  |  | $ | (3,196,829 | )

Monthly volume is the
weighted average throughout the period.

The total fair value is shown as a derivative instrument in both the current and
non-current liabilities on the balance sheet. We recorded a loss on the derivative contracts of $64,362 in the transition period ended December 31, 2010 and a loss in the year ended March 31, 2010 of $3,911,063.

Note 11  Income (Loss) Per Common Share

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10, Earnings per Share. Basic earnings (loss) per share is computed by dividing income (loss) available to
common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of
warrants and debt to purchase common shares would have an anti-dilutive effect. There were no potential common shares as of December 31, 2010 that have been excluded from the computation of diluted net loss per share. Potential common
shares as of March 31, 2010 that have been excluded from the computation of diluted net loss per share include 75,000 warrants and $25,000 of debt convertible into 25,000 shares of the Companys common stock.

Note 12  Change in Year End

On January 21, 2011, the board of directors approved a change in the Companys fiscal year end from March 31 to December 31. The nine month results now being reported by the Company
relate to the transitional period ended December 31, 2010. Comparative information for the nine months ended December 31, 2009 is included in the previously filed unaudited Quarterly Report on Form 10-Q for the quarter December 31,
2009.

The following table presents certain comparative transition period financial information for the nine months ended
December 31, 2010 and 2009 respectively:



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##### Table of Contents

|                                                                               |  |                                           |           |   |                 |   |            |  
|------------------------------------------------------------------------------ |  | ----------------------------------------- | --------- | - | --------------- | - | ---------- | -
|                                                                               |  | For the Nine-Month TransitionPeriod Ended |          
|                                                                               |  | December 31,                              |          
|                                                                               |  | 2010                                      |           |   | 2009(unaudited) |  
|Revenues                                                                       |  | $                                         | 2,929,103 |   |                 | $ | 3,703,724  |  
|                                                                               |  |                                          
|Gross profit (loss)                                                            |  | $                                         | (333,160  | ) |                 | $ | (162,630   | )
|                                                                               |  |                                          
|Net loss before income taxes                                                   |  | $                                         | (877,964  | ) |                 | $ | (3,139,100 | )
|                                                                               |  |                                          
|Net loss                                                                       |  | $                                         | (877,964  | ) |                 | $ | (3,139,100 | )
|                                                                               |  |                                          
|Net loss per sharebasic and fully diluted                                     |  | $                                         | (0.16     | ) |                 | $ | (0.68      | )
|                                                                               |  |                                          
|Weighted average shares used in computing basic and
diluted net loss per share |  |                                           | 5,361,011 |   |                 |   | 4,647,879  |  

Note 13  Accounts Payable

The Companys current liabilities include accounts payable in the amount of $1,109,848. This figure includes $492,134
payable to former attorneys of the Company that are in dispute.

Note 14  Subsequent Events

In January of 2011 we sold marketable securities for $1,400,000.

On February 14, 2011, we entered into additional forward sale contracts with British Petroleum. These transactions increased our hedged volumes and extended the hedge position through FY 2015. We
also assumed additional hedge positions from Working Interest Holdings as part of the December 31, 2010 transactions. The $57.50 hedge position was terminated as a part of these transactions, and the Companys current weighted average
hedge price is $80.00 per barrel.

On March 31, 2011, we entered into a Securities Purchase Agreement with several investors in
which the company sold 5,676,644 shares of common stock for an aggregate purchase price of $3,405,987, or $0.60 per share. Concurrent with this transaction the company repurchased 3,750,000 shares of common stock for an aggregate purchase price of
$1,500,000, or $0.40 per share.

As part of the transaction, the Company issued to investors common stock purchase warrants
for the purchase, in the aggregate, of 2,838,322 shares of common stock. The warrants have a cash strike price of $0.90 and expire at the end of 2011.

On April 20, we acquired approximately 280 acres of additional leasehold in Kansas for $245,000. The acreage has 10 existing wellbores that were recently drilled and evaluated, but have not been
completed. The acreage includes multiple infill locations.

Note 15  Supplemental Oil and Natural Gas Reserve Information
(Unaudited)

Results of operations from oil producing activities

The following table shows the results of operations from the Companys oil producing activities. Results of operations from
these activities are determined using historical revenues, production costs and depreciation and depletion. The results of operations from the Companys oil producing activities below exclude non-oil revenues, general and administrative
expenses, interest income and interest expense. Income tax expense was determined by applying the statutory rates to pretax operating results.



|                                               |  |                                                      |            |   |                                  |   |            |  
|---------------------------------------------- |  | ---------------------------------------------------- | ---------- | - | -------------------------------- | - | ---------- | -
|                                               |  | Nine Month Transition Period
Ended December 31, 2010 |            |   | Fiscal Year Ended
March 31, 2010 |  
|Production revenues                            |  | $                                                    | 2,929,103  |   |                                  | $ | 4,856,027  |  
|Production costs                               |  |                                                      | (1,548,128 | ) |                                  |   | (1.833,108 | )
|Depletion and depreciation                     |  |                                                      | (359,855   | ) |                                  |   | (588,416   | )
|Income tax                                     |  |                                                      | (347,180   | ) |                                  |   | (824,331   | )
|Results of operations for producing activities |  | $                                                    | 673,940    |   |                                  | $ | 1,610,172  |  
|                                               |  |                                                      |            |   |                                  |   |            |  



Capitalized costs

The following table summarizes the Companys capitalized costs of oil and gas properties.



|                                                   |  |                                                      |            |   |                                  |   |            |  
|-------------------------------------------------- |  | ---------------------------------------------------- | ---------- | - | -------------------------------- | - | ---------- | -
|                                                   |  | Nine Month Transition Period
Ended December 31, 2010 |            |   | Fiscal Year Ended
March 31, 2010 |  
|Unevaluated properties not subject to amortization |  | $                                                    | 18,301,377 |   |                                  | $ |           |  
|Properties subject to amortization                 |  |                                                      | 8,380,559  |   |                                  |   | 8.499,406  |  
|Capitalized costs                                  |  |                                                      | 26,681,936 |   |                                  |   | 8,499,406  |  
|Accumulated depletion                              |  |                                                      | (2,743,086 | ) |                                  |   | (2,406,373 | )
|Net capitalized costs                              |  | $                                                    | 23,938,850 |   |                                  | $ | 6,093,033  |  
|                                                   |  |                                                      |            |   |                                  |   |            |  



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Cost incurred in property acquisition, exploration and development activities



|                          |  |                                                      |            |  |                                  |   |         | 
|------------------------- |  | ---------------------------------------------------- | ---------- |  | -------------------------------- | - | ------- | 
|                          |  | Nine Month Transition 
PeriodEnded December 31, 2010 |            |  | Fiscal Year EndedMarch 
31, 2010 |  
|Acquisition of properties |  | $                                                    | 18,301,377 |  |                                  | $ |        | 
|Exploration costs         |  |                                                      |           |  |                                  |   |        | 
|Development costs         |  |                                                      |           |  |                                  |   | 228,962 | 
|                          |  |                                                     
|Net capitalized costs     |  | $                                                    | 18,301,377 |  |                                  | $ | 228,962 | 
|                          |  |                                                      |            |  |                                  |   |         | 

Estimated quantities of proved reserves

Our ownership interests in estimated quantities of proved oil reserves and changes in net proved reserves all of which are located in the United States are summarized below. Proved reserves are
estimated quantities of oil that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those that
are expected to be recovered through existing wells with existing equipment and operating methods. Reserves are stated in thousand cubic feet (mcf) of natural gas and barrels (stb) of oil. Geological and engineering estimates by Miller and Lents,
LTD of proved oil reserves at one point in time are highly interpretive, inherently imprecise and subject to ongoing revisions that may be substantial in amount. Although every reasonable effort is made to ensure that the reserve estimates are
accurate, by their nature reserve estimates are generally less precise than other estimates presented in connection with financial statement disclosures.



|                                |  |                                                      |   |  |                                 |  |           |         |  |  |         |  |  |  |           |  
|------------------------------- |  | ---------------------------------------------------- | - |  | ------------------------------- |  | --------- | ------- |  |  | ------- |  |  |  | --------- | -
|                                |  | Nine Month Transition 
PeriodEnded December 31, 2010 |   |  | Fiscal Year
EndedMarch 31, 2010 | 
|                                |  | Gas-mcf                                              |   |  | Oil-stb                         |  |           | Gas-mcf |  |  | Oil-stb | 
|Proved reserves:                |  |                                                      |   |  |                                 |  |           |         |  |  |         |  |  |  |           |  
|Beginning                       |  |                                                      |  |  |                                 |  | 2,475,000 |         |  |  |        |  |  |  | 1,336,630 |  
|Revisions of previous estimates |  |                                                      |   |  |                                 |  | (265,006  | )       |  |  |        |  |  |  | 1,203,318 |  
|Purchase of minerals in place   |  |                                                      |  |  |                                 |  | 150,450   |         |  |  |        |  |  |  |          |  
|Extensions and discoveries      |  |                                                      |  |  |                                 |  |           |         |  |  |        |  |  |  |          |  
|Production                      |  |                                                      |   |  |                                 |  | (40,344   | )       |  |  |        |  |  |  | (64,948   | )
|                                |  |                                                      |   |  |                                 |  |           |         |  |  |         |  |  |  |           |  
|Total                           |  |                                                      |  |  |                                 |  | 2,320,100 |         |  |  |        |  |  |  | 2,475,000 |  
|                                |  |                                                      |   |  |                                 |  |           |         |  |  |         |  |  |  |           |  

Proved developed reserves for December 31, 2010 and March 31, 2010 were all oil reserves and
totaled 666.2 and 732.0 MBbls, respectively. Proved undeveloped reserves at December 31, 2010 and March 31, 2010 were 1,653.9 and 1,743.0 MBbls, respectively.

Standardized measure of discounted future net cash flows

The standardized
measure of discounted future net cash flows from our proved reserves for the periods presented in the financial statements is summarized below.



|                                                        |  |                                                     |             |   |                                  |   |             |  
|------------------------------------------------------- |  | --------------------------------------------------- | ----------- | - | -------------------------------- | - | ----------- | -
|                                                        |  | Nine Month 
TransitionPeriodEnded December 31, 2010 |             |   | Fiscal Year EndedMarch 
31, 2010 |  
|Future production revenue                               |  | $                                                   | 168,048,830 |   |                                  | $ | 155,034,940 |  
|Future production costs                                 |  |                                                     | (67,618,260 | ) |                                  |   | (58,706,390 | )
|Future development costs                                |  |                                                     | (13,470,180 | ) |                                  |   | (16,330,000 | )
|Future cash flows before income taxes                   |  |                                                     | 86,960,390  |   |                                  |   | 79,998,550  |  
|Future income taxes                                     |  |                                                     | (14,013,908 | ) |                                  |   | (18,999,000 | )
|Future net cash flows                                   |  |                                                     | 72,946,482  |   |                                  |   | 60,999,550  |  
|10% annual discount for estimating of future cash flows |  |                                                     | (47,641,590 | ) |                                  |   | (37,921,028 | )
|Standardized measure of discounted net cash flows       |  | $                                                   | 25,304,892  |   |                                  | $ | 23,078,522  |  
|                                                        |  |                                                     |             |   |                                  |   |             |  

Changes in Standardized Measure of Discounted Future Net Cash Flows

The following is a summary of a Standardized Measure of discounted net future cash flows related to the Companys proved oil and gas
reserves. The information presented is based on a calculation of estimated proved reserves using discounted cash flows based



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on the 12-month average price for oil calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month prior period. The additions to
estimated proved reserves from new discoveries and extensions could vary significantly from year to year. Additionally, the impact of changes to reflect current prices and costs of reserves proved in prior years could also be significant.



|                                                 |  |                                                     |            |   |                                  |   |            |  
|------------------------------------------------ |  | --------------------------------------------------- | ---------- | - | -------------------------------- | - | ---------- | -
|                                                 |  | Nine Month 
TransitionPeriodEnded December 31, 2010 |            |   | Fiscal Year EndedMarch 
31, 2010 |  
|Balance beginning of year                        |  | $                                                   | 23,078,522 |   |                                  | $ | 10,629,340 |  
|Sales, net of production costs                   |  |                                                     | (1,380,975 | ) |                                  |   | (3,039,640 | )
|Net change in pricing and production costs       |  |                                                     | 4,965,735  |   |                                  |   | 9,558,455  |  
|Net change in future estimated development costs |  |                                                     | (2,873,397 | ) |                                  |   | (3,894,180 | )
|Purchase of minerals in place                    |  |                                                     | 3,205,370  |   |                                  |   |           |  
|Extensions and discoveries                       |  |                                                     |           |   |                                  |   |           |  
|Revisions                                        |  |                                                     | (5,197,401 | ) |                                  |   | 16,288,287 |  
|Accretion of discount                            |  |                                                     | 2,562,394  |   |                                  |   | 310,890    |  
|Change in income tax                             |  |                                                     | 944,644    |   |                                  |   | (6,774,630 | )
|Balance end of year                              |  | $                                                   | 25,304,892 |   |                                  | $ | 23,078,522 |  
|                                                 |  |                                                     |            |   |                                  |   |            |  





F-19