U.S.
SECURITIES AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-Q/A





(Mark
One)



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



For
the quarterly period ended December 31, 2013



OR



[    ] 
TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934



Commission
File Number 000-28753





FREESTONE
RESOURCES, INC.



(Exact
name of small business issuer as specified in its charter)



|                                                   |  |                                      
|-------------------------------------------------- |  | -------------------------------------
|Nevada                                             |  | 90-0514308                           
|(State or other
    jurisdiction of incorporation) |  | (IRS Employer
    Identification No.)



Republic
Center, Suite 1350

325
N. St. Paul Street Dallas, TX 75201

(Address
of principal executive offices)



(214)
880-4870

(Issuer's
telephone number)





(Former
name, former address and former fiscal year, if changed since last report)





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



Indicate
by check mark whether the Registrant is a large accredited filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accredited filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act:



|Large Accredited Filer [  ] | Accelerated Filer [  ]        | 
|--------------------------- | ----------------------------- | 
|Non-Accredited Filer   [  ] | Smaller Reporting Company [X] | 



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



Indicate
by check mark whether the registrant has submitted electronically and posted on its website, if any, every Interactive File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS325.405 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 [ ]



As of October
30, 2015 there were 86,138,177 shares of Common Stock of the issuer outstanding.





1








EXPLANATORY
NOTE



We
are filing this amendment to this Quarterly Report to reflect the review of our financial statements for the periods indicated
by a PCAOB registered certified public accounting firm that was engaged by us as our certified public accounting firm on February
11, 2015.  Subsequent to the filing of the initially filed Quarterly Report for the periods indicated, we were advised that
our former certified public accounting firm was no longer a PCAOB registered public accounting firm.

















2








|Freestone
        Resources, Inc.
        Consolidated
        Balance Sheets
        (Unaudited)
        As
        of December 31, 2013 and June 30, 2013
|-----------------------------------------------------------------------------------------------------------------------------------------------------------



|Assets                                                              
|--------------------------------------------------------------------
|                                                                    
|                                                                    
|Current Assets:                                                     
|Cash                                                                
|Other receivables                                                   
|Total Current Assets                                                
|                                                                    
|Oil and gas properties used for research and development            
|Fixed assets, net of accumulated depreciation of $16,564 and $61,093
|Total fixed assets, net                                             
|                                                                    
|Investment in Aqueous Services                                      
|Other assets                                                        
|                                                                    
|Total Assets                                                        
|                                                                    
|                                                                    
|Liabilities and Stockholders’ Equity                                
|                                                                    
|                                                                    
|Current Liabilities:                                                
|Accounts payable                                                    
|Accrued expenses                                                    
|Derivative liability – warrants                                     
|Total Current Liabilities                                           
|                                                                    
|Long-term Liabilities:                                              
|Asset retirement obligations                                        
|Total Liabilities                                                   
|                                                                    
|Stockholders' Equity (Deficit):                                     
|Common stock, $.001 par value, 100,000,000 shares                   
|authorized, 68,943,177 and 68,318,177 shares issued                 
|and outstanding, respectively                                       
|Additional paid in capital                                          
|Accumulated deficit                                                 
|Stockholders' Equity                                                
|Total Liabilities and Stockholders’  Equity                         



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



3








|Freestone
                            Resources, Inc.
        Consolidated
        Statements of Operations
        (Unaudited)
        For
        the Three and Six Months Ended December 31, 2013 and 2012
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                        |  | Three Months Ended December 31, 2013 (Restated) |            | Three Months  Ended  December 31, 2012 |  | Six Months Ended December 31, 2013 (Restated) |            | Six Months Ended December 31, 2012
|------------------------------------------------------- |  | ----------------------------------------------- | ---------- | -------------------------------------- |  | --------------------------------------------- | ---------- | ----------------------------------
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|Revenue:                                                |  |                                                 |            |                                        |  |                                               |            |                                   
|Oil and gas revenues resulting from research activities |  | $                                               | —          |                                        |  | $                                             | 8,983      |                                   
|Other oil and gas related revenues                      |  |                                                 | 6,148      |                                        |  |                                               | —          |                                   
|Total revenue resulting from research activities        |  |                                                 | 6,148      |                                        |  |                                               | 8,983      |                                   
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|Operating expenses:                                     |  |                                                 |            |                                        |  |                                               |            |                                   
|Cost of revenue                                         |  |                                                 | 2,586      |                                        |  |                                               | —          |                                   
|Lease operating costs                                   |  |                                                 | 26,786     |                                        |  |                                               | 2,446      |                                   
|Depreciation                                            |  |                                                 | 7,181      |                                        |  |                                               | 5,253      |                                   
|Revision to ARO estimate                                |  |                                                 | —          |                                        |  |                                               | 36         |                                   
|Gain on sale of asset                                   |  |                                                 | (11,027    | )                                      |  |                                               | —          |                                   
|Loss on equity method investment                        |  |                                                 | 5,926      |                                        |  |                                               | —          |                                   
|Impairment of equity investment                         |  |                                                 | 95,480     |                                        |  |                                               | —          |                                   
|Impairment of oil & gas investment                      |  |                                                 | 12,575     |                                        |  |                                               | —          |                                   
|General and administrative                              |  |                                                 | 80,984     |                                        |  |                                               | 231,725    |                                   
|Total operating expenses                                |  |                                                 | 220,491    |                                        |  |                                               | 239,460    |                                   
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|Operating loss                                          |  |                                                 | (214,343   | )                                      |  |                                               | (230,477   | )                                 
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|Other income (expense):                                 |  |                                                 |            |                                        |  |                                               |            |                                   
|Interest Expense                                        |  |                                                 | —          |                                        |  |                                               | —          |                                   
|Warrant expense                                         |  |                                                 | —          |                                        |  |                                               | (278,273   | )                                 
|Total other income (expense)                            |  |                                                 | —          |                                        |  |                                               | (278,273   | )                                 
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|Net loss                                                |  | $                                               | (214,343   | )                                      |  | $                                             | (508,750   | )                                 
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|Basic and diluted loss per share                        |  | $                                               | (0.00      | )                                      |  | $                                             | (0.01      | )                                 
|                                                        |  |                                                 |            |                                        |  |                                               |            |                                   
|Weighted average shares outstanding:                    |  |                                                 |            |                                        |  |                                               |            |                                   
|Basic and diluted                                       |  |                                                 | 68,943,177 |                                        |  |                                               | 62,183,304 |                                   



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





4








|Freestone
                            Resources, Inc.
        Consolidated
        Statements of Cash Flows
        (Unaudited)
        Six
        Months Ended December 31, 2013 and 2012
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                            |  | Six Months Ended December 31, 2013 (Restated) |          | Six Months Ended December 31, 2012 | 
|--------------------------------------------------------------------------- |  | --------------------------------------------- | -------- | ---------------------------------- | 
|                                                                            |  |                                               |          |                                    | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |                                               |          |                                    | 
|Net income (loss)                                                           |  | $                                             | (300,618 | )                                  | 
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                               |          |                                    | 
|Depreciation and amortization                                               |  |                                               | 14,055   |                                    | 
|(Gain) loss on equity method investment                                     |  |                                               | 14,283   |                                    | 
|Impairment of equity method investment                                      |  |                                               | 95,480   |                                    | 
|Impairment of oil & gas investment                                          |  |                                               | 12,575   |                                    | 
|(Gain) loss on sale of investment asset                                     |  |                                               | (11,027  | )                                  | 
|Warrant Expense                                                             |  |                                               | (4,098   | )                                  | 
|Shares issued for services                                                  |  |                                               | —        |                                    | 
|Changes in operating assets and liabilities:                                |  |                                               |          |                                    | 
|Change in account receivable                                                |  |                                               | —        |                                    | 
|Change in other assets                                                      |  |                                               | 8,910    |                                    | 
|Change in accounts payable                                                  |  |                                               | (1,352   | )                                  | 
|Change in accrued expenses                                                  |  |                                               | 454      |                                    | 
|Net cash used in operating activities                                       |  |                                               | (171,338 | )                                  | 
|                                                                            |  |                                               |          |                                    | 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |                                               |          |                                    | 
|Sale of asset                                                               |  |                                               | —        |                                    | 
|Investment in Freestone Water Solutions                                     |  |                                               | —        |                                    | 
|Investment in Aqueous Services                                              |  |                                               | —        |                                    | 
|Purchases of fixed assets                                                   |  |                                               | (6,211   | )                                  | 
|Net cash used in investing activities                                       |  |                                               | (6,211   | )                                  | 
|                                                                            |  |                                               |          |                                    | 
|CASH FLOWS FROM FINANCING ACTIVITES:                                        |  |                                               |          |                                    | 
|Payments on note payables – related party                                   |  |                                               | —        |                                    | 
|Proceeds from sale of stock                                                 |  |                                               | 50,000   |                                    | 
|Stock to be issued                                                          |  |                                               | —        |                                    | 
|Net cash provided by financing activities                                   |  |                                               | 50,000   |                                    | 
|                                                                            |  |                                               |          |                                    | 
|NET CHANGE IN CASH                                                          |  |                                               | (127,549 | )                                  | 
|CASH AT BEGINNING OF PERIOD                                                 |  |                                               | 205,767  |                                    | 
|CASH AT END OF PERIOD                                                       |  | $                                             | 78,218   |                                    | 
|Supplemental cash flow information:                                         |  |                                               |          |                                    | 
|Cash paid for interest                                                      |  |                                               |          |                                    | 
|None cash investing activities:                                             |  |                                               |          |                                    | 
|Accounts
receivable from sale of as                                         |  | $                                             | 5,000    |                                    | 
|ARO liability
assumed by purchaser of oil & gas property                    |  | $                                             | 26,027   |                                    | 









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





5








Freestone
Resources, Inc.

Notes
to Consolidated Financial Statements

December
31, 2013

(Unaudited)





NOTE
1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES



Nature
of Activities, History and Organization:



Freestone
Resources, Inc. (the “Company” or “Freestone”) is an oil and gas technology development company that is
actively developing and marketing technologies and solvents designed to benefit various sectors in the oil and gas industry. The
Company has re-launched its Petrozene solvent after months of working with manufactures to develop a new and improved formula.
Petrozene is predominantly used for paraffin buildup. Petrozene can be used for pipelines, oil storage tanks, oil sludge build
up, de-emulsification, well treatment, as a corrosion inhibitor and as a catalyst in opening up formations thereby aiding in oil
production.



On
November 16, 2012 the Company entered into a Company Agreement of Aqueous Services, LLC (“Aqueous”), a Texas limited
liability company, with International Aqueous Investments, LLC and Pajarito W&M, LP. Aqueous is a joint venture between the
Company and the two aforementioned parties, whereas the Company owns a 33.33% interest in Aqueous. Aqueous is a full water management
company with access to a fresh water well that has been permitted to up to one thousand five hundred acre-feet of water per annum.
A facility has been constructed that is owned and operated by Aqueous for the purpose of providing water for oil and gas activities
in the Eagle Ford. This site includes a designated location for the recycling frac water and produced water.



Unaudited
Interim Financial Statements:



The
accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting
principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These financial
statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals)
necessary to present fairly the balance sheet, statement of operations, statement of stockholders’ equity and statement
of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that
users of this interim financial information have read or have access to the audited financial statements and footnote disclosure
for the preceding fiscal year contained in the Company’s Annual Report on Form 10-K. The results of operations for the three
and six months ended December 31, 2013 are not necessarily indicative of the results of operations for the full year or any other
interim period.  The information included in this Form 10-Q should be read in conjunction with Management's Discussion
and Analysis and Financial Statements and notes thereto included in the Company’s June 30, 2013 Form 10-K.





6








Significant
Accounting Policies:



The
Company’s management selects accounting principles generally accepted in the United States of America and adopts methods
for their application.  The application of accounting principles requires the estimating, matching and timing of revenue
and expense.  It is also necessary for management to determine, measure and allocate resources and obligations within
the financial process according to those principles.  The accounting policies used conform to generally accepted accounting
principles which have been consistently applied in the preparation of these financial statements.



The
financial statements and notes are representations of the Company’s management which is responsible for their integrity
and objectivity.  Management further acknowledges that it is solely responsible for adopting sound accounting practices,
establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company's
system of internal  accounting control is designed to assure, among other items, that  1) recorded  transactions  are
valid;  2) valid  transactions  are recorded;  and  3) transactions  are  recorded
in the proper  period in a timely  manner to produce financial  statements which present fairly
the financial  condition,  results of operations  and cash  flows of the  Company  for
the  respective  periods  being presented.



Basis
of Presentation



The
Company prepares its financial statements on the accrual basis of accounting.  All intercompany balances and transactions
are eliminated.  Investments in subsidiaries, where the Company has a controlling interest, are reported using the equity
method. Management believes that all adjustments necessary for a fair presentation of the results of the three and six months
ended December 31, 2013 and 2012 have been made.



The
Company consolidates its subsidiaries in accordance with ASC 810, “Business Combinations”, (formally SFAS 141R)
and specifically ASC 810-10-15-8 which states, "The usual condition for a controlling financial interest is ownership of
a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over
50% of the outstanding voting shares of another entity is a condition pointing toward consolidation."



These
financial statements replace the financial statements originally issued for the quarter ended December 31, 2013 and included in
the Company’s quarterly 10Q report filed February 13, 2014. Subsequent to that filing our auditor of record, The Hall Group,
was determine not to have a valid PCAOB license and that filing was disallowed by the SEC. These financial statements have been
adjusted for subsequent events between February 13, 2014 and date of reissue requiring the impairment of certain assets.



Use of
Estimates:



The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from
those estimates.



Recently
Issued Accounting Pronouncements:



As
of December 31, 2013 the Company elected the early adoption of changes to ASC 915 Development Stage Enterpriseswhich eliminated
certain reporting requirements including identification of the Company as a development stage enterprises in financial statement
headings, discussion of development stage enterprises in Note 1 Summary of Accounting Policy and the presentation of cumulative
data in the statements of income and cash flows.

Cash
and Cash Equivalents:



Cash
and cash equivalents includes cash in banks with original maturities of three months or less and are stated at cost which approximates
market value, which in the opinion of management, are subject to an insignificant risk of loss in value.



7






Revenue
Recognition:



The
Company recognizes revenue from the sale of products in accordance with ASC 605-15 “Revenue Recognition”, (formerly
Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements"("SAB 104").  Revenue will be recognized only when all of the following criteria have been met:

1. Persuasive
evidence of an arrangement exists;

2. Ownership
and all risks of loss have been transferred to buyer, which is generally upon shipment;

3. The price
is fixed and determinable; and

4. Collectability
is reasonably assured.



Revenue
is recorded net any of sales taxes charged to customers.



Income
Taxes:



The
Company has adopted ASC 740-10 “Income Taxes” (formerly SFAS No. 109),  which requires the use of
the liability method in the computation of income tax expense and the current and deferred income taxes payable.

Earnings
per Share:



Basic
earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding
for the period.  Diluted earnings (loss) per share include the effects of any outstanding options, warrants and other
potentially dilutive securities.  For the periods presented, as there was a net loss from operations, any potentially
dilutive securities would be considered anti-dilutive and have been excluded from the fully diluted shares outstanding. Therefore,
primary earnings per share equals fully diluted.



Fair
Value Measurements:



ASC
Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements.  In
general, fair value of financial instruments are based upon quoted market prices, where available.  If such quoted market
prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market
based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These
adjustments may include amounts to reflect counterparty credit quality and the Corporation’s credit worthiness, among other
things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.



Accounts
Receivable:



Accounts
Receivable are carried at their face amount, less an allowance for doubtful accounts.  On a periodic basis, the Company
evaluates accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer
circumstances and credit conditions, based on a history of write offs and collections.  The Company’s policy is
generally not to charge interest on trade receivables after the invoice becomes past due.  A receivable is considered
past due if payments have not been received within agreed upon invoice terms.   Write offs are recorded at a time
when a customer receivable is deemed uncollectible.  The Company had no bad debt accruals at December 31, 2013 and June
30, 2013.





8








Oil
and Gas Properties:



Freestone
is actively purchasing marginal oil and gas properties and leasing properties that will be used in the further research and development
of its oil enhancement technologies.  This research focuses on the types of formations that will benefit the most from
the use of the solvent, as well as the various applications from production and storage to end cycle refinement.



Impairment
of Long Lived Assets



The
Company evaluates, on a periodic basis, long-lived assets to be held and used for impairment in accordance with the reporting
requirements of ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”. The evaluation
is based on certain impairment indicators, such as the nature of the assets, the future economic benefit of the assets, any historical
or future profitability measurements, as well as other external market conditions or factors that may be present. If these impairment
indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, then
an estimate of the discounted value of expected future operating cash flows is used to determine whether the asset is recoverable
and the amount of any impairment is measured as the difference between the carrying amount of the asset and its estimated fair
value. The fair value is estimated using valuation techniques such as market prices for similar assets or discounted future operating
cash flows.



Asset
Retirement Obligation:



The
Company records the fair value of a liability for asset retirement obligations (“ARO”) in the period in which an obligation
is incurred and records a corresponding increase in the carrying amount of the related long-lived asset. For Freestone Resources,
asset retirement obligations primarily relate to the abandonment of oil and gas properties. The present value of the estimated
asset retirement cost is capitalized as part of the carrying amount of oil and gas properties. The settlement date fair value
is discounted at Freestone Resource’s credit adjusted risk-free rate in determining the abandonment liability. The abandonment
liability is accreted with the passage of time to its expected settlement fair value. Revisions to such estimates are recorded
as adjustments to ARO and capitalized asset retirement costs and are charged to operations in the period in which they become
known. At the time the abandonment cost is incurred, Freestone Resources is required to recognize a gain or loss if the actual
costs do not equal the estimated costs included in ARO.



The
amounts recognized for ARO are based upon numerous estimates and assumptions, including future abandonment costs, future recoverable
quantities of oil and gas, future inflation rates, and the credit adjusted risk free interest rate.







9








NOTE
2 – FIXED ASSETS



Fixed
assets at December 31, 2013 and June 30, 2013 are as follows:

|                                                    |  | December 31, 2013 (Restated) |         | June 30, 2013
|--------------------------------------------------- |  | ---------------------------- | ------- | -------------
|Computers & office furniture                        |  | $                            | 8,967   |              
|Collectable art work (not depreciated)              |  |                              | 13,000  |              
|Oil and gas research and development equipment      |  |                              | 22,067  |              
|Total fixed assets                                  |  |                              | 44,034  |              
|Less: Accumulated depreciation                      |  |                              | (16,564 | )            
|Total fixed assets, net of accumulated depreciation |  | $                            | 27,470  |              



Depreciation
expense was $7,181 for the three months ended December 31, 2013 and $5,253 for the three months ended December 31, 2012. Depreciation
expense was $14,055 for the six months ended December 31, 2013 and $10,505 for the six months ended December 31, 2012.



The
Company disposed of the Carroll lease during the second fiscal quarter of 2014 for $5,000. The transaction resulted in a loss
of $15,000.



At
December 31, 2013 the Company recorded an impairment expense of $12,575 to reduce its net investment in the Rogers lease to $14,470.
See Note 11 for information regarding subsequent event regarding disposal of lease.





NOTE
3 – INCOME TAXES



The
Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation
of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset).   Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

During
the six months ended December 31, 2013 the Company had a net loss of $318,618 increasing the deferred tax asset approximately
$102,210 at the statutory tax rate of 34%. The net deferred tax asset generated by the loss carry-forward has been fully
reserved and will expire in the years 2019 through 2030. The realization of deferred tax benefits is contingent upon future earnings
and is fully reserved at December 31, 2013 and June 30, 2013.



NOTE
4 – ASSET RETIREMENT OBLIGATION



The
Company’s asset retirement obligation (“ARO”) primarily represents the estimated present value of the amount
Freestone Resources will incur to plug, abandon and remediate sits producing properties at the end of their productive lives,
in accordance with applicable state laws. Freestone Resources determines the ARO on its oil and gas properties by calculating
the present value of estimated cash flows related to the liability. At December 31, 2013, the liability for ARO was $14,470, all
of which is considered long term. The asset retirement obligations are recorded as current or non-current liabilities based on
the estimated timing of the anticipated cash flows. During 2014, the Company sold the Carroll lease resulting in a reduction in
the ARO obligation of $26,027.





10








NOTE
5 – COMMITMENTS AND CONTINGENCIES



The
Company leases office space under a non-cancelable operating lease which was extended in April, 2014 and now expires in July 2017.  The
lease requires payment of electricity costs.  . Future minimum lease payments are as follows:



| | Year Ending June 30, |  |   | Amount | 
| | -------------------- |  | - | ------ | 
| | 2015                 |  | $ | 22,605 | 
| | 2016                 |  |   | 22,605 | 
| | 2017                 |  |   | 22,605 | 
| | Total                |  | $ | 67,815 | 





Rent
expense, included in general and administrative expenses, totaled approximately $14,971 and $14,241 for the six months ended December
31, 2013 and 2012 respectively.



NOTE
6 – EQUITY TRANSACTIONS



The
Company is authorized to issue 100,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights.  At
December 31, 2013 and June 30, 2013, there were 68,943,177 and 68,318,177 respectively, common shares outstanding. During the
six months ended December 31, 2013 the Company sold 625,000 shares for cash of $50,000.



NOTE
7 – FREESTONE TECHNOLOGIES, LLC



On
October 24, 2008.  Freestone established Freestone Technologies, LLC (the “Subsidiary”) in the state of
Texas.  The Subsidiary is wholly owned by Freestone and has certain assets and liabilities relating to the purchase
of oil wells.  These wells were purchased as additional test wells for Petrozene and research and development for subsequent
technologies.  The assets and liabilities of the Subsidiary are included in the consolidated financial statements of
Freestone.





NOTE
8 – INVESTMENT IN AQUESOUS SERVICES, LLC.



On
November 16, 2012 the Company formed Aqueous Services, LLC (“Aqueous”), a Texas limited liability company, with International
Aqueous Investments, LLC and Pajarito W&M, LP. The Company made an initial capital contribution of $100,000 in exchange for
a 33.33% interest in the joint venture. Aqueous is a full water management company with access to a fresh water well that has
been permitted to extract up to one thousand five hundred acre-feet (approximately 500 million gallons) of water per annum. Aqueous
constructed and operates a facility to provide fresh water for oil and gas activities in the Eagle Ford. This site also includes
a designated location for the recycling frac and production water.



The
joint venture is accounted for under the equity method as follows:



|                         |  | December 31, 2013 (Restated) |         | June 30, 2013
|------------------------ |  | ---------------------------- | ------- | -------------
|                         |  |                              |         |              
|Beginning Balance        |  | $                            | 109,763 |              
|Capital Contributions    |  |                              | —       |              
|Equity in Loss of JV     |  |                              | (14,283 | )            
|Impairment of Investment |  |                              | (95,480 | )            
|Period End Balance       |  | $                            | —       |              









11








NOTE
9 – GOING CONCERN



As
reflected in the accompanying consolidated financial statements, Freestone incurred operating losses, and negative cash flow from
operations as of December 31, 2013.  The above factors raise substantial doubt about Freestone's ability to continue
as a going concern.  Freestone's continued existence is dependent on its ability to obtain additional equity and/or
debt financing to fund its operations.  Freestone plans to raise additional financing and to increase sales volume.  There
is no assurance that Freestone will obtain additional financing or achieve profitable operations or cash inflows.  The
consolidated financial statements do not include any adjustments relating to the recoverability or classification of recorded
asset amounts or the amount and classification of liabilities that might be necessary as a result of this uncertainty.



NOTE
10 – SUBSEQUENT EVENTS



On April
16, 2014 the Company sold 2,000,000 shares of for cash of $120,000.



On
February 18, 2014 the Company issued 2,600,000 shares of the Company’s common stock to certain directors, officers and consultants
for services rendered to the Company. The stock was valued at $.073 a share for a total expense of $189,800.



Clayton
Carter, the Company’s Director and Chief Executive Officer, received 1,000,000 shares of the Company’s common stock,
G. Don Edwards, the Company’s Director and Chief Investment Officer, received 1,000,000 shares of the Company’s common
stock, and James Carroll, the Company’s Director and Chief Financial Officer received 100,000 shares of the Company’s
common stock. The Company also issued 500,000 shares of the Company’s common stock to consultants as consideration for services
rendered to the Company.



On
September 4, 2014 the Company sold 220,000 shares for cash of $22,000.



In
November, 2014 the Company sold 2,225,000 shares for cash of $220,000.



On
April 14, 2015 Freestone entered into a royalty and commission agreements with certain consultants related to the sale of PetrozeneTM
for their work in the re-launch of the PetrozeneTM product line.  These royalty and commission agreements range from
2.5% to 7.5% of the net income the Company receives from PetrozeneTM sales, and the agreements also have special royalty
provisions for certain customers that expire on April 14, 2016. One of the consultants is related party and the brother of the
Chief Executive Officer of the Company



On
April 17, 2014 the Company sold an 8.25% revenue interest in its Rogers Oil and Gas Lease for $20,000 cash. On September 14, 2015
the Company repurchased the same 8.25% revenue interest in the Company’s Rogers Oil and Gas Lease for $20,000. The Company
issued 200,000 shares of common stock at $.10 to satisfy the debt.



On
June 24, 2015 the Company sold 5,000,000 shares of common stock to Dynamis Energy LLC. (Dynamis) for $500,000 which was used as
the partial payment for the purchase of C.C. Crawford Retreading Inc. Freestone also issued to Dynamis Energy LLC warrants to
purchase 5M shares of common stock with par value of $0.001. The warrant is exercisable from the issuance date for 12 months,
therefore expiring on 6/24/2016. The exercise price of the warrant will be 80% of the average of the closing price on the 10 days
prior to the date of issuance.





12






On
June 24, 2015 the Company acquired 100% of the outstanding common stock of C.C. Crawford Retreading Co., Inc., a privately held
company (“CTR”), for an aggregate price of $1,520,000. Terms of the purchase were $500,000 cash at closing and a note
payable to the seller for $1,020,000.



On
June 24, 2015 the Company entered into an agreement with Dynamis in order to form the joint venture FDEP, a Delaware limited liability
company. Freestone determined to enter into a joint venture with Dynamis based on their track record and experience in the waste-to-energy
industry, and their ability to provide the necessary funding to fully integrate the production, marketing and sale of PetrozeneTM
to current and future customers. The terms of the joint venture between the Company and Dynamis are as follows:



| | • | Freestone
                                         owns a 70% member interest in FDEP for licensing the rights to use PetrozeneTM to
                                         FDEP; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | Dynamis
                                         owns a 30% member interest FDEP in exchange providing funding up to $5,000,000 to operate
                                         the joint venture, and purchase a continuous-feed pyrolysis machine capable of producing
                                         a product that can be used to produce PetrozeneTM; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | FDEP
                                         will be leasing employees from CTR, and said employees will operate the machine. FDEP
                                         will reimburse CTR for the leased employees; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | FDEP
                                         has the right, but not the obligation to purchase CTR from Freestone through cash compensation
                                         to Freestone, the issuance of additional units in FDEP to Freestone or a combination
                                         of both cash and units in FDEP as mutually agreed upon by FDEP and Freestone; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | FDEP
                                         will lease a building from CTR in order to operate the specialized pyrolysis technology
                                         for payment of either the ad valorem taxes associated with the rented property or $1,000
                                         per month depending on which amount is the greater of the two; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | Dynamis
                                         will receive 80% of the distributions from FDEP until they have reached a 25% initial
                                         rate of return on funds invested into the joint venture. Once the 25% initial rate of
                                         return threshold is meet all distributions from FDEP will be split according to the 70
                                         / 30 member interest of FDEP owned by the Company and Dynamis.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On
June 24, 2015 FDEP simultaneously entered into a lease agreement with a company that has developed a continuous-feed pyrolysis
technology that will be operated by FDEP at the Company’s facility in Ennis, Texas. FDEP and the company that developed
the pyrolysis technology will split the revenues generated from the machine. FDEP will receive 70% of the revenues generated from
the machine, and the company providing the continuous-feed pyrolysis technology will receive 30% of the revenues. This revenue
split will remain in place so long as the machine is operating at the Company’s facility in Ennis, Texas. The agreement
between the two companies allows FDEP the opportunity to ensure that the technology continues to operate properly under the strict
conditions that are necessary to produce PetrozeneTM. If the leased pyrolysis machine operates within certain, predefined
parameters then FDEP has the right to purchase additional machines.





On
June 29, 2015 the Company also issued 100,000 shares valued at $.0661 per share based on the closing price on the date of issue
to consultants as consideration for services rendered to the Company.



On
July 25, 2015 Company sold 3,500,000 shares at $0.10 per share to provide funding of subsequent costs associated with the acquisition
of CTR, as well as general working capital for the Company. This transaction made Gerald M. Johnson a controlling shareholder
of the Company. Mr. Johnson also joined the Company’s advisory board. Mr. Johnson is the former CFO of Tyson Foods, Inc.





13








On
July 30, 2015 Pajarito W&M, LP and International Aqueous Investment, LLC signed an agreement with the Company to cancel all
of the warrants related to the Aqueous transaction.



On
August 21, 2015 FDEP entered into a one year lease with a purchase option for a 10,000 square foot office warehouse adjacent to
the Company’s facilities in Ennis, TX.



|Future
    Minimum lease payments are as follow | 
|----------------------------------------------- | 
|                                                | 
|                                                | 
|                                                | 
|                                                | 
|                                                | 







On
September 23, 2015 the Company issued shares of the Company’s common stock to certain directors, officers and consultants
for services rendered to the Company. Clayton Carter, the Company’s Director and Chief Executive Officer, received 600,000
shares of the Company’s common stock, G. Don Edwards, the Company’s Director and Chief Investment Officer, received
600,000 shares of the Company’s common stock, and James Carroll, the Company’s Director and Chief Financial Officer
received 50,000 shares of the Company’s common stock. The Company also issued 100,000 shares to consultants as consideration
for services rendered to the Company. The stock was valued at $.19 per share based on the closing price on the date of issue.



On
September 14, 2015 the Company repurchased an 8.25% revenue interest in the Company’s Rogers Oil and Gas Lease for $20,000
in exchange for 200,000 shares of common stock at $.10 to satisfy the debt.



On
September 14, 2015 the Company disposed of its remaining oil and gas properties used for research by transferring 100% of its
working interest in the Rogers Oil and Gas Lease to a third party in exchange for assumption of all asset retirement obligations
and other liabilities associated with the property.











14












|NOTE 11 - RESTATMENT |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-------------------- | --------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | - | --- | - | ------------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Certain previously reported numbers have been adjusted and are reflected in this table: |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Balance Sheet as of December 31, 2013                                                   |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   | As Reported |   |   | Adjustment |   |     |   | As Adjustment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Fixed Assets                                                                            | $ | 40,045      |   | $ | (12,575    | ) | <A> | $ | 27,470        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Investment in Aqueous Service                                                           | $ | 95,480      |   | $ | (95,480    | ) | <B> | $ | -             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Other Assets                                                                            | $ | 4,455       |   | $ | (4,455     | ) | <A> | $ | -             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Total Assets                                                                            | $ | 223,198     |   | $ | (112,510   | ) |     | $ | 110,688       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Derivative Liability - Warrants                                                         | $ | 279,625     |   | $ | (279,625   | ) | <C> | $ | -             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Total Liabilities                                                                       | $ | 304,433     |   | $ | (279,625   | ) |     | $ | 24,808        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Accumulated Deficit                                                                     | $ | (18,316,664 | ) |   | (108,412   | ) | <C> |   | (18,425,076)  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Additional Paid In Capital                                                              | $ | 18,166,486  |   |   | 275,527    |   | <C> |   | 18,442,013    |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Stockholders' Equity                                                                    | $ | (81,235     | ) | $ | 167,115    |   |     | $ | 85,880        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Total Liabilities & Stockholders' Equity                                                | $ | 223,198     |   | $ | (112,510   | ) |     | $ | 110,688       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Statement of Operations for the Quarter Ended December 31, 2013:                        |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   | As Reported |   |   | Adjustment |   |     |   | As Adjustment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Total Revenue                                                                           | $ | 6,148       |   | $ | -          |   |     | $ | 6,148         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Lease Operating Costs                                                                   | $ | 22,331      |   | $ | 4,455      |   | <A> | $ | 26,786        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Impairment of Equity Investment                                                         | $ | -           |   | $ | 95,480     |   | <B> | $ | 95,480        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Impairment of Oil & Gas Investment                                                      | $ | -           |   | $ | 12,575     |   | <A> | $ | 12,575        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | General and Administrative Expenses                                                     | $ | 85,077      |   | $ | (4,093     | ) | <C> | $ | 80,984        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Total Expenses                                                                          | $ | 112,079     |   | $ | 108,412    |   |     | $ | 220,491       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     | Net Income (Loss)                                                                       | $ | (105,931    | ) | $ | (108,412   | ) |     | $ | (214,343)     |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                     |                                                                                         |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 





15










|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | - | --- | - | ------------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | Statement of Operations for the Six Months Ended December 31, 2013:                                                                                                                                                                                                                                                                                                                                                  |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   | As Reported |   |   | Adjustment |   |     |   | As Adjustment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | Total Revenue                                                                                                                                                                                                                                                                                                                                                                                                        | $ | 12,608      |   | $ | -          |   |     | $ | 12,608        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | Lease Operating Costs                                                                                                                                                                                                                                                                                                                                                                                                | $ | 22,387      |   | $ | 4,455      |   | <A> | $ | 26,842        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | Impairment of Equity Investment                                                                                                                                                                                                                                                                                                                                                                                      | $ | -           |   | $ | 95,480     |   | <B> | $ | 95,480        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | Impairment of Oil & Gas Investment                                                                                                                                                                                                                                                                                                                                                                                   | $ | -           |   | $ | 12,575     |   | <A> | $ | 12,575        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | General and Administrative Expenses                                                                                                                                                                                                                                                                                                                                                                                  | $ | 159,605     |   | $ | (4,098     | ) | <C> | $ | 155,507       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | Total Expenses                                                                                                                                                                                                                                                                                                                                                                                                       | $ | 204,814     |   | $ | 108,412    |   |     | $ | 313,226       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    | Net Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                    | $ | (192,206    | ) | $ | (108,412   | ) |     | $ | (300,618)     |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|<A> | The Company prior auditors, The Hall Group, did not have a valid PCAOB
    registration when the reviewed the financial statements for this period.  Certain subsequent events to the original
    issuance of the financial statements provided additional evidence about the condition of the oil and gas assets.  Consequently, these assets were impaired and reported at their net realizable value             |   |             |   |   |           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|<B> | The Company prior auditors, The Hall Group, did not have a valid PCAOB
    registration when the reviewed the financial statements for this period.  Certain subsequent events to the original
    issuance of the financial statements provided additional evidence about the condition of the investment in Aqueous Services.  Consequently, these assets were impaired and reported at their net realizable value |   |             |   |   |           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |   |            |   |     |   |               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|<C> | During the preparation of our quarterly report, we identified an error related the accounting for the issuance of stock warrants.  The warrants were incorrectly identified as a derivative.  This resulted in an overstatement of a derivative liability of $279,625 at December 31, 2013.                                                                                                                          |   |             |  
|    | Management evaluated these errors both quantitatively and qualitatively, and determined that the errors were immaterial to the prior year. Pursuant to the SEC SAB Topic 108, the error has been correct in the current period                                                                                                                                                                                      







16










ITEM
2.   MANAGEMENT’S DISCUSSION AND ANALYSIS





This
report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. The Company’s actual results could differ materially from those
set forth on the forward looking statements as a result of the risks set forth in the Company’s filings with the Securities
and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.



General



On
August 22, 2007, the Company changed its name to Freestone Resources, Inc. in anticipation of going into the oil and gas technology
development business.  Since that time Freestone has been actively engaged in the development of technologies that can
enhance oil and gas production in an environmentally responsible way. The Company currently markets and sells Petrozene, which
is a solvent derived from recycled hydrocarbons. Petrozene can cost effectively decrease paraffin buildup in oil and gas wells,
and can be utilized to clean oil storage facilities. Furthermore, Petrozene has been shown to reduce bottom sediment and water
in oil storage tanks and act as a de-emulsification agent.



Results
of Operations



Three
and six months Ended December 31, 2013 compared to three and six months Ended December 31, 2012



Revenue- Our revenue for the three months ended December 31, 2013 was $6,148, compared to $8,983 for the same period in 2012, and
for the six months ended December 31, 2013 was $12,608 and $8,983 for the same period in 2012. Revenue decreased in the fiscal
second quarter as there were no development sales in fiscal 2014. Revenue increased in the six months ended December 31, 2013,
due to the sale of Petrozene.



Cost
of Revenues – Cost of sales (Petrozene) for the three months ended December 31, 2013 and 2012 were $2,586 and $0, respectively.
Cost of sales for the six months ended December 31, 2013 and 2012 were $5,511 and $0, respectively. The cost is related to purchasing
and transporting the product.



Lease
Operating Expense- Lease operating expense for the three months ended December 31, 2013 was $26,786 compared to $2,446 for
the same period in 2012 and $26,842 for the six months ended December 31, 2012 compared to $8,959 for the same period in 2012. 
The increase was primarily due to work done on the Carroll Unit in preparation for sale.



Operating
Expense- Total other operating expenses for the three months ended December 31, 2013 were 191,119 compared to $237,014 for
the same period in 2012.  The decrease in costs of $45,895 in the three months ended December 31, 2011 was a net of
consulting expense of $167,400 recognized for the issuance of stock for services related to the formation of Aqueous Services,
LLC in the three months ended December 31, 2012 offset by impairment expense of $108,055 in the current quarter.





17








Total
other operating expenses for the six months ended December 31, 2013 were $280,873 compared to $316,219 the same period in 2012.
The decrease in costs of $35,346 in the six months ended December 31, 2012 were related to the factors detailed above for the
quarter ended December 31, 2013.



Net
Income (Loss)- Net loss for the three months ended December 31, 2013 was $214,343 compared to net loss of $508,750 for the
same period in 2012.  Net loss for the six months ended December 31, 2013 was $300,618 compared to $594,490 for the
same period in 2012. The change in loss in the three and six month periods ended December 31, 2012 is mainly related to the consulting
expense mention above and warrant expense of $278,273 related to the same investment included in other income and expense in the
period ended December 31, 2012.



Liquidity
and Capital Resources



We have
little cash reserves and liquidity to the extent we receive it from operations and from the sale of stock.



Net
cash used from operating activities of the Company was $176,338 for the six months ended December 31, 2013 compared to cash used
of $147,583 for the same period in 2012.   We continue to explore working capital options and raise funds through
the sale of stock . During the six months ended December 31, 2013, our cash and cash equivalents decreased to $78,218 from $205,767
at June 30, 2013 mainly due to the net loss incurred by the Company.



Employees



As of December
31, 2013, Freestone had two employees.



Need
for Additional Financing



No
commitments to provide additional funds have been made by management or other stockholders.  Our independent auditors
included a going concern explanatory paragraph in their report included in our annual report on Form 10-K for the year
ended June 30, 2013, which raises substantial doubt about our ability to continue as a going concern.





ITEM
3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not applicable.





ITEM
4T: CONTROLS AND PROCEDURES



Evaluation
of Disclosure Controls and Procedures



We
carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2013.  This evaluation was accomplished under the
supervision and with the participation of our chief executive officer /principal executive officer, and chief financial officer/principal
financial officer who concluded that our disclosure controls and procedures are not effective.





18








Based
upon an evaluation conducted for the period ended December 31, 2013, our Chief Executive and Chief Financial Officer as of December
31, 2013 and as of the date of this Report, has concluded that as of the end of the periods covered by this report, we have identified
the following material weakness of our internal controls:



| | • | Lack of sufficient accounting staff which results in a lack of
    segregation of duties necessary for a good system of internal control and financial statement presentation.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Changes
in Internal Controls over Financial Reporting



We
have not yet made any changes in our internal controls over financial reporting that occurred during the period covered by this
report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.





PART
II



Items No.
1, 3, 4, 5 - Not Applicable.



Item
6 - Exhibits and Reports on Form 8-K



(a)  During
the six months ended December 31, 2013 the Company filed no Form 8-Ks.



(b)   Exhibits



Exhibit
Number



|31.1 | Certification of Chief Executive Officer,
    pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.                            
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                       
|31.2 | Certification of Chief Financial Officer, pursuant to Rule 13a-14(a)
    of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.                            
|     |                                                                                                                                                                                       
|32.1 | Certification of Chief Executive Officer and Chief Financial Officer,
    pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
|     |                                                                                                                                                                                       





SIGNATURES



In accordance
with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.



FREESTONE
RESOURCES, INC.



By /s/
Clayton Carter



Clayton
Carter, CEO



Date: October
30, 2015





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