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Rancher Energy Corp.
0001287900
10-Q
2012-09-30
false
--03-31
No
No
Yes
Smaller Reporting Company
Q2
2013
119863049
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<p style="margin: 0pt"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; vertical-align: middle">
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin-top: 0; text-align: center; margin-bottom: 0">For the Six Months Ended</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin-top: 0; text-align: center; margin-bottom: 0">September 30,</p></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 17%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 31%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">2012</td>
<td style="width: 4%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="width: 26%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">2011</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Dilutive</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: middle"> 60,111,454</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: middle"> -</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td colspan="2" style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Anti-dilutive</td>
<td style="text-align: justify"> </td>
<td style="text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
<td style="text-align: justify"> </td>
<td style="text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">66,073,564</td></tr>
</table>
<p style="margin: 0pt"></p>
60111454
66073564
2284900
500641
<p style="margin: 0pt"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: bottom; width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 6%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 23%; border-bottom: black 1pt solid; font: 9pt Arial, Helvetica, Sans-Serif; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">September 30, 2012</td>
<td style="width: 4%"> </td>
<td style="vertical-align: bottom; width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; width: 23%; border-bottom: black 1pt solid; font: 9pt Arial, Helvetica, Sans-Serif; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">March 31, 2012</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="5" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Accounts payable, trade</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> $</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">           -    </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> $</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">       176,726</td></tr>
<tr style="background-color: White">
<td colspan="5" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Other payables and accrued liabilities</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">        131,734</td>
<td> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">          943,101</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="5" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Convertible notes payable</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">         140,000</td>
<td> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">          140,000</td></tr>
<tr style="background-color: White">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> $</td>
<td style="border-top: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">       271,734</td>
<td> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> $</td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">   1,259,827</td></tr>
</table>
<p style="margin: 0pt"></p>
176726
131734
943101
140000
140000
271734
1259827
25000
1776050
<p style="margin: 0pt"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Total sales price</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 20,000,000</td></tr>
<tr style="background-color: White">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Adjustments to sales price for assets retained</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> (945,367)</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Transaction expenses from sale of assets</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> (508,195)</td></tr>
<tr style="background-color: White">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Adjusted sales price</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 18,546,438</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="width: 26%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 26%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 7%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 18%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Summary of assets sold:</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"></td></tr>
<tr style="background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Fixed assets, net</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 126,712</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Oil and gas properties, net</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 13,630,945</td></tr>
<tr style="background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Other liabilities</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> (18,440)</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Total basis in assets sold</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-top: Black 1pt solid; border-bottom: Black 1pt solid"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 13,739,217</td></tr>
<tr style="background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-indent: 20pt"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"></td></tr>
<tr style="background-color: White">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 30pt">Gain on disposition of assets, net</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid">$</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 4,807,221</td></tr>
</table>
<p style="margin: 0pt"></p>
13630945
112620
112620
20000000
20000000
-945367
-508195
18546438
126712
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4807221
<p style="margin: 0pt"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">Outstanding and Vested Options</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"></td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 31%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 10%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 5%"> </td>
<td style="width: 5%"> </td>
<td style="width: 5%"> </td>
<td style="width: 38%"> </td>
<td style="width: 2%"> </td>
<td style="width: 2%"> </td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Number of shares</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 10,000,000</td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 1,375,000</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="5" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Weighted average remaining contractual life</td>
<td> </td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">2.6 years</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">2.5 years</td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Weighted average exercise price</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0.035</td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0.0875</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Aggregate intrinsic value</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0</td>
</tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr>
<td style="width: 9%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 8%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 2%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 1%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 30%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 12%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 2%; text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; width: 19%; border-bottom: black 1pt solid; padding-right: -5.75pt; padding-left: 5.7pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">Three months  September 30, 2011</td>
<td style="width: 2%"></td>
<td style="vertical-align: bottom; width: 1%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; width: 14%; border-bottom: black 1pt solid; padding-top: 5pt; padding-right: -5.75pt; padding-left: 5.7pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">Six months September 30, 2011</td></tr>
<tr>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="padding-right: 17.1pt; padding-left: 5.7pt; text-align: justify"></td>
<td></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; vertical-align: bottom"></td>
<td style="padding-right: 5.7pt; padding-left: 5.3pt; text-align: justify"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Revenue</td>
<td style="text-align: right; vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 1pt solid"> $</td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-top: 5pt; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td>
<td> </td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; border-top: Black 1pt solid; border-bottom: Black 1pt solid"> $</td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: 17.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Operating income</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> 4,392</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; border-bottom: Black 1pt solid"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">2,109</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: 17.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Operating loss from discontinued operations</td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">4,392</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">2,109</td></tr>
<tr style="background-color: White">
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Other income (expenses) from discontinued operations, net</td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">(4,040)</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; text-indent: 10pt"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: 17.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Net income (loss) from discontinued operations</td>
<td style="text-align: right; vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 1.5pt double">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> 4,392</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; border-top: Black 1pt solid; border-bottom: Black 1.5pt double">$</td>
<td style="vertical-align: bottom; border-bottom: Black 1.5pt double; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> (1,931)</td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td></tr></table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="width: 1%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 61%; border-bottom: white 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"></td>
<td style="width: 3%"> </td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid"></td>
<td style="width: 15%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">March 31, 2012</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"><u>Assets</u>:</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Current assets of discontinued operations -</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Accounts receivable</td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Deposits and other assets</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; border-top: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: bottom">$</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Other assets</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> </td>
</tr>
<tr style="background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Long-term assets of discontinued operations</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Total assets of discontinued operations</td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">$</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"><u>Liabilities</u>:</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Current liabilities of discontinued operations:</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Accounts payable and accrued liabilities</td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 112,620</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Total current liabilities of discontinued operations</td>
<td> </td>
<td style="border-top: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 0pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 112,620</td>
</tr>
</table>
<p style="margin: 0pt"></p>
9234
9234
37400000
500000
10000000
1375000
10000000
1375000
P2Y6M
P2Y5M
0
0
P2Y6M
P2Y5M
0.035
0.0875
0.035
0.0875
0
0
Two of the Company’s
employees filed proofs of claim and motions to allow administrative expenses for certain bonus payments.
A group of persons who purchased approximately
$1.8 million of securities (in the aggregate) in the Company’s private placement offering commenced in late 2006, alleged
that securities laws were violated in that offering.
A former officer
of the company filed a Proof of Claim for wages and benefits, to which the Company has objected with the Bankruptcy Court.
78902
18750
140000
0.02
14000000
12240000
14700000
100000
2240000
10188000
14829250
10000000
2009-10-27
3503000
250000
14829250
1417750
814000
130000
395000
13739217
500641
30958
0
525000
76064
303104
2610964
4589561
155452
172684
200350
200350
355802
373034
2966766
4962595
500000
112620
11176
1061844
271734
1259827
282910
2321671
1194
1194
93193008
93193008
-90510346
-90553278
2966766
4962595
11176
449224
173614
164998
0.00001
0.00001
275000000
275000000
119316723
119316723
119316723
119316723
152838
289865
275395
512679
161454
298481
292627
532783
-161454
-298481
-292627
-532783
-53300
6064
-47236
11998
148754
88254
237150
188739
202054
82190
284386
176741
133509
231105
-81550
133509
-51173
231105
8616
8616
17232
20104
40600
-216291
-8241
-356042
81550
51173
122150
-349800
42932
-587147
4392
-1931
4392
-1931
122150
-345408
42932
-589078
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
119316723
119316723
119316723
119316723
179428177
119316723
179428177
119316723
257998
-149966
-694958
-872190
1931
-51173
231105
986947
330498
-694958
-816402
-395566
-694958
-1211968
339778
339778
10107
11998
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 1 –
Business Organization</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Organization</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Rancher Energy Corp.
(“Rancher Energy” or the “Company”) formerly known as Metalex Resources, Inc. (“Metalex”) was
incorporated in Nevada on February 4, 2004.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Metalex was formed
for the purpose of acquiring, exploring and developing mining properties. On April 18, 2006, the stockholders of Metalex voted
to change its name to Rancher Energy Corp. and announced that it changed its business plan and focus from mining to oil and gas.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Bankruptcy Filing</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On October 28, 2009,
the Company filed a voluntary petition (the “Petition”) for relief in the United States Bankruptcy Court, District
of Colorado (the “Bankruptcy Court”) under Chapter 11 of Title 11 of the U.S. Bankruptcy Code (the “Bankruptcy
Code”). The Company continued to operate its business as “debtor-in-possession” under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the Code and orders of the Bankruptcy Court until its plan
of reorganization (the “Plan”) was approved by the Bankruptcy Court and the Company was discharged from bankruptcy
on its effective date of September 28, 2012. See Note 3 – Proceedings Under Chapter 11 of the Bankruptcy Code.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The accompanying
financial statements have been prepared on the basis of accounting principles applicable to a going concern, which contemplates
the realization of assets and extinguishment of liabilities in the normal course of business. The Company’s continuation
as a going concern may be contingent upon, among other things, its ability (i) to reduce administrative, operating and interest
costs and liabilities as a result of the bankruptcy process; (ii) to generate sufficient cash flow from operations; and (iii) to
obtain financing and/or acquire producing assets as it emerges from bankruptcy. The Company is currently evaluating various courses
of action to address the operational and liquidity issues it is facing. There can be no assurance that any of these efforts will
be successful. The accompanying financial statements do not include any adjustments that might result should we be unable to continue
as a going concern. In the event the Company’s restructuring activities are not successful and it is required to liquidate,
additional significant adjustments in the carrying value of assets and liabilities, the revenues and expenses reported and the
balance sheet classifications used may be necessary.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) 852 "Financial Reporting During Reorganization Proceedings,"
which is applicable to companies in Chapter 11, generally does not change the manner in which financial statements are prepared.  However,
it does require that the financial statements for periods subsequent to the filing of a Chapter 11 case distinguish transactions
and events that are directly associated with the reorganization from the ongoing operations of the business.  Revenues,
expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring
of the business must be reported separately as reorganization items in the statements of operations. The balance sheet must distinguish
Prepetition liabilities subject to compromise from both those Prepetition liabilities that are not subject to compromise and from
post-petition liabilities.  Liabilities that may be affected by a plan of reorganization must be reported at the amounts
expected to be allowed, even if they may settled for lesser amounts.  In addition, cash provided by reorganization items,
if any, must be disclosed separately in the statement of cash flows.  The Company adopted ASC 852-10 effective on October
28, 2010 and will segregate those items as outlined above for all activity prior to September 28, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As the Company emerges
from bankruptcy, it has reviewed the use of “Fresh-start” accounting and determined that pursuant with ASC 852, the
Company does not qualify to use the provisions of “Fresh-start” accounting. The Company’s voting shareholders
immediately before the confirmation date do not own less than 50% of the voting shares of the emerging entity.</p>
525000
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 2 –
Summary of Significant Accounting Policies </b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Use of Estimates
in the Preparation of Financial Statements</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The preparation of
financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Cash and Cash
Equivalents</u></p>
<p style="font: 10pt/11pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company
considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Cash and cash
equivalents include demand deposits and money market funds carried at cost which approximates fair value. The Company maintains
its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At September 30, 2012, the
Company had $2,284,900 in cash deposits in excess of FDIC insured limits.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Restricted cash</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">The restricted cash that was held in an escrow
account in the amount of $500,641 was released on July 18, 2012 as part of an agreed upon and Bankruptcy Court approved settlement
agreement. See Note 7 – Commitments and Contingencies.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Accounts
Receivable</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As of July 18, 2012,
the Bankruptcy Court approved and the Company received $525,000 as part of a royalty fee arrangement relating to a settlement agreement
among Rancher Energy, GasRock and Linc Energy and at September 30, 2012 the balance owed to the Company is $0. See Note 7 –
Commitments and Contingencies.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Oil and Gas Producing
Activities</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company uses
the successful efforts method of accounting for its oil and gas properties. Under this method of accounting, all property acquisition
costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well has
found proved reserves. If an exploratory well does not find proved reserves, the costs of drilling the well are charged to expense.
Exploratory dry hole costs are included in cash flows from investing activities as part of capital expenditures within the consolidated
statements of cash flows. The costs of development wells are capitalized whether or not proved reserves are found. Costs of unproved
leases, which may become productive, are reclassified to proved properties when proved reserves are discovered on the property.
Unproved oil and gas interests are carried at the lower of cost or estimated fair value and are not subject to amortization<b>.</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Geological and geophysical
costs and the costs of carrying and retaining unproved properties are expensed as incurred. DD&A of capitalized costs related
to proved oil and gas properties is calculated on a property-by-property basis using the units-of-production method based upon
proved reserves. The computation of DD&A takes into consideration restoration, dismantlement, and abandonment costs and the
anticipated proceeds from salvaging equipment.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company complies
with ASC 932, “Extractive Activities – Oil and Gas”. The Company currently does not have any existing capitalized
exploratory well costs, and has therefore determined that there are no suspended well costs that should be impaired.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company reviews
its long-lived assets for impairments when events or changes in circumstances indicate that impairment may have occurred. The impairment
test for proved properties compares the expected undiscounted future net cash flows on a property-by-property basis with the related
net capitalized costs, including costs associated with asset retirement obligations, at the end of each reporting period. Expected
future cash flows are calculated on all proved reserves using a discount rate and price forecasts selected by the Company’s
management. The discount rate is a rate that management believes is representative of current market conditions. The price forecast
is based on NYMEX strip pricing, adjusted for basis and quality differentials, for the first three to five years and is held constant
thereafter. Operating costs are also adjusted as deemed appropriate for these estimates. When the net capitalized costs exceed
the undiscounted future net revenues of a field, the cost of the field is reduced to fair value, which is determined using discounted
future net revenues. An impairment allowance is provided on unproved property when the Company determines the property will not
be developed or the carrying value is not realizable. The sale of substantially of the Company’s assets in March 2011 resulted
in the Company having no oil and gas properties at September 30, 2012 or March 31, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Sales of Proved
and Unproved Properties</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The sale of a partial
interest in a proved oil and gas property is accounted for as normal retirement, and no gain or loss is recognized as long as this
treatment does not significantly affect the units-of-production DD&A rate. A gain or loss is recognized for all other sales
of producing properties and is reflected in results of operations. The sale of a partial interest in an unproved property is accounted
for as a recovery of cost when substantial uncertainty exists as to recovery of the cost applicable to the interest retained. A
gain on the sale is recognized to the extent the sales price exceeds the carrying amount of the unproved property. A gain or loss
is recognized for all other sales of nonproducing properties and is reflected in results of operations. See the description of
the sale of all oil and gas properties as of March 1, 2011 contained in the Item 2 of Part I of this report as a result of the
bankruptcy filing.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Property and Equipment</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Property and equipment,
such as office furniture and equipment, and computer hardware and software, are recorded at cost. Costs of renewals and improvements
that substantially extend the useful lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred.
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets from three to seven years.
When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from
their respective accounts. Depreciation expense for the three and six months ended September 30, 2012 was $8,616 and $17,232 and
for the three and six months ended September 30, 2011 was $8,616 and $20,104, respectively.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Fair Value of
Financial Instruments</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company’s
financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, are carried at cost, which
approximates fair value due to the short-term maturity of these instruments.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Revenue Recognition</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company currently
has no revenue from continuing or discontinued operations, other than payments received for the resale of carbon dioxide under
a supply and sales agreement that is due to expire at the end of 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Income Taxes</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company uses
the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future
tax consequences of temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities.
The deferred tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences
are expected to reverse.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">The Company assessed the likelihood of utilization
of the deferred tax assets in light of recent and expected continuing losses. As a result of this review, the deferred tax asset
of $12,716,000 and $12,407,000 has been fully reserved at September 30, 2012 and March 31, 2012, respectively. At September 30,
2012, the Company had net operating loss carryforwards of approximately $37,400,000 that begin to expire in the year 2023.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company adopted
the provisions of ASC 740, “Income Taxes” on April 1, 2007. FASB ASC 740 provides detailed guidance for the financial
statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions
must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of
FASB ASC 740 and in subsequent periods. The adoption of ASC 740 had an immaterial impact on the Company’s financial position
and did not result in unrecognized tax benefits being recorded. Subsequent to adoption, there have been no changes to the Company’s
assessment of uncertain tax positions. Accordingly, no corresponding interest and penalties have been accrued. The Company’s
policy is to recognize penalties and interest, if any, related to uncertain tax positions as general and administrative expense.
The Company files income tax returns in the U.S. Federal jurisdiction and various states.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Net Income (Loss)
per Share</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Basic net income
(loss) per common share of stock is calculated by dividing net income (loss) available to common stockholders by the weighted-average
number of common shares outstanding during each period.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Diluted net income
(loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding,
including the effect of other dilutive securities. The Company’s potentially dilutive securities consist of in-the-money
outstanding options and warrants to purchase the Company’s common stock. Diluted net loss per common share does not give
effect to dilutive securities as their effect would be anti-dilutive.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The treasury stock
method is used to measure the dilutive impact of stock options and warrants. The following table details the weighted-average dilutive
and anti-dilutive securities related to stock options and warrants for the periods presented:</p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; vertical-align: middle">
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-indent: 0.5in">For the Six Months Ended</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">September 30,</p></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 17%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 31%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">2012</td>
<td style="width: 4%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="width: 26%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">2011</td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Dilutive</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: middle"> 60,111,454</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: middle"> -</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Anti-dilutive</td>
<td style="text-align: justify"> </td>
<td style="text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
<td style="text-align: justify"> </td>
<td style="text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">66,073,564</td></tr>
</table>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Stock options and
warrants were not considered in the detailed calculations as their effect would be anti-dilutive except for the three and six months
ended September 30, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Share-Based Payments</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company recognizes
compensation cost for stock-based awards based on estimated fair value of the award and records compensation expense over the requisite
service period. See Note 9 - Share-Based Compensation.  </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Comprehensive
Income (Loss)</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company does
not have revenue, expenses, gains or losses that are reflected in equity rather than in results of operations. Consequently, for
all periods presented, comprehensive income (loss) is equal to net income (loss).</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Major Customers</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company’s
only source of income was from a carbon dioxide resale contract that will expire at the end of 2012. The Company had no oil and
gas operations during the three and six months ended September 30, 2012 and 2011, and no customers or billings as a result.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Off-Balance Sheet
Arrangements</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As part of its ongoing
business, the Company has not participated in transactions that generate relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. From
its incorporation on February 4, 2004 through September 30, 2012, the Company has not been involved in any unconsolidated
SPE transactions.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Reclassification</u> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Certain amounts in
the prior period financial statements have been reclassified to conform to the current period financial statement presentation.
Such reclassifications had no effect on the Company’s net income (loss).</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Recent Accounting
Pronouncements</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected
to cause a material impact on its financial condition or the results of its operations.</p>
8616
8616
17232
20104
12716000
12407000
2023
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 3 –
Proceedings Under Chapter 11 of the United States Bankruptcy Code</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On October 28, 2009,
the Company filed a Petition for relief under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court. The Petition was filed
in order to enable the Company to pursue reorganization efforts under Chapter 11 of the Bankruptcy Code. The Company continued
to operate its business as “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance
with the applicable provisions of the Code and orders of the Bankruptcy Court until its Plan was approved by the Bankruptcy Court
and the Company was discharged from bankruptcy on its effective date of September 28, 2012. In general, as debtor-in-possession,
the Company was authorized under Chapter 11 to continue to operate as an ongoing business, but could not engage in transactions
outside of the ordinary course of business without the prior approval of the Bankruptcy Court.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As the Company emerges
from bankruptcy under its Plan with the availability of cash, the Company’s holders of its securities could receive a payment
in respect of such securities. However, caution should be exercised with respect to existing and future investments in any of its
securities.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Subject to certain
exceptions under the Bankruptcy Code, the bankruptcy filing automatically enjoined, or stayed, the continuation of any judicial
or administrative proceedings or other actions against the Company or its property to recover on, collect or secure a claim arising
prior to the Petition Date. Thus, for example, creditor actions to obtain possession of property from the Company, or to create,
perfect or enforce any lien against the property of the Company, or to collect on or otherwise exercise rights or remedies with
respect to a Prepetition claim were enjoined unless and until the Bankruptcy Court lifted the automatic stay.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">In order to successfully
exit Chapter 11 bankruptcy, the Company needed to propose, and obtain Bankruptcy Court confirmation of, a plan of reorganization
that satisfied the requirements of the Bankruptcy Code. The plan of reorganization would, among other things, resolve the Debtors'
Prepetition obligations, set forth the revised capital structure of the newly reorganized entity and provide for corporate governance
subsequent to exit from bankruptcy. In addition to the need for Bankruptcy Court confirmation and satisfaction of Bankruptcy Code
requirements, a plan of reorganization must be accepted by classes of holders of impaired claims and equity interests in order
to become effective. As such, the Company did satisfy these requirements with its Plan.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Under section 365
of the Bankruptcy Code, the Company could assume, assume and assign, or reject executory contracts and unexpired leases, including
real property and equipment leases, subject to the approval of the Bankruptcy Court and certain other conditions. Rejection constituted
a court-authorized breach of the lease or contract in question and, subject to certain exceptions, relieved the Company of its
future obligations under such lease or contract but created a deemed Prepetition claim for damages caused by such breach or rejection.
Parties whose contracts or leases were rejected could file claims against the Company for damages. Thus, the Company’s leased
office space under a non-cancelable operating lease expired during the quarter ended September 30, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The ability of the
Company to continue as a going concern is dependent upon, among other things, its ability (i) to reduce administrative, operating
and interest costs and liabilities as a result of the bankruptcy process; (ii) to generate sufficient cash flow from operations;
and (iii) to obtain financing and/or acquire producing assets as it emerges from bankruptcy. Uncertainty as to the outcome
of these factors raises substantial doubt about the Company's ability to continue as a going concern. The Company is currently
evaluating various courses of action to address the operational issues it is facing. There can be no assurance that any of these
efforts will be successful. The accompanying financial statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As a result of the
bankruptcy filing, realization of assets and liquidation of liabilities could be subject to uncertainty. While operating as a debtor-in-possession
under the protection of Chapter 11, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of
business, the Company could sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those
reflected in the condensed financial statements. As such, the Company recognized a net gain from the settlement and adjustment
of liabilities of $18,042 and $85,750 for the years ended March 31, 2012 and 2011, respectively.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Further, the Plan
could materially change the amounts and classifications reported in the Company’s financial statements and as further noted
in ASC 852 within the provisions of “Fresh-start” accounting. The Company’s historical financial statements do
not give effect to any adjustments to the carrying value of assets or amounts of liabilities as a consequence of confirmation of
the Plan and, more specifically, since the Company as it emerges from bankruptcy did not qualify to use “Fresh-start”
accounting.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The adverse publicity
associated with the bankruptcy filing and the resulting uncertainty regarding the Company's future prospects could hinder the Company's
ongoing business activities and its ability to operate, fund and execute its Plan by impairing relations with property owners and
potential lessees, vendors and service providers; negatively impacting the ability of the Company to attract, retain and compensate
key executives and employees and to retain employees generally; limiting the Company's ability to obtain trade credit; and limiting
the Company's ability to maintain and exploit existing properties and acquire and develop new properties.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On October 15, 2010,
the Company filed with the Bankruptcy Court its proposed Debtor's Plan of Reorganization and a proposed Disclosure Statement was
filed simultaneously with the Plan of Reorganization. On December 13, 2010, the Company filed with the Bankruptcy Court its First
Amended Proposed Plan of Reorganization and Disclosure Statement. The Disclosure Statement was first required to be approved by
the Bankruptcy Court before creditors and shareholders could be presented with the opportunity to vote on the Plan of Reorganization.
Prior to confirmation and approval by the Court, the Proposed Plan of Reorganization could be amended.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On December 15, 2010,
the Company filed a motion to approve financing from a party not affiliated with its present lender. The purpose of the loan was
to repay the existing lender in full and to pay certain past due ad valorem taxes owed to Converse County, Wyoming. Converse County
agreed that if it was paid by February 1, 2011, it would waive penalties and interest of approximately $93,000. This loan closed
in January 2011. See Note 5 – Short Term Notes Payable.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On December 20, 2010,
the Company filed a motion to allow the Company to enter into an agreement and approve the sale of substantially all its assets
to the same party and provide new financing for the price of approximately $20 million. The sale closed effective March 1, 2011.
See Note 4 – Discontinued Operations.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On April 30, 2012,
the Company filed its 2<sup>nd</sup> Amended Plan of Reorganization and Disclosure Statement with the Bankruptcy Court which eventually
became the Plan. The Plan provided for the Company to pay the claims of its creditors as the assets of the Company allowed and
permitted, but did not obligate the Company to continue in the oil and gas industry with a focus on the purchase on non-operating
interests in oil and gas producing properties. On September 10, 2012, the Bankruptcy Court approved the Plan and the Company was
discharged from bankruptcy on its effective date of September 28, 2012. As a result of this approval by the Bankruptcy Court,
the Company during September of 2012 paid $1,118,477 of creditor claims. </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Reorganization
Items</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Reorganization items
represent the direct and incremental costs related to the Company's Chapter 11 case, such as professional fees incurred, net
of interest income earned on accumulated cash during the Chapter 11 process. These restructuring activities could result in
additional charges and other adjustments for expected allowed claims (including claims that have been allowed by the Bankruptcy
Court) and other reorganization items that could be material  to the Company’s financial position or results of
operations in any given period.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Liabilities Subject
to Compromise</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Liabilities subject
to compromise at September 30, 2012 and March 31, 2012 include the following Prepetition liabilities:	</p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr>
<td style="vertical-align: bottom; width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 7%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; width: 4%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 23%; border-bottom: black 1pt solid; font: 9pt Arial, Helvetica, Sans-Serif; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">September 30, 2012</td>
<td style="vertical-align: bottom; width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="vertical-align: bottom; width: 19%; border-bottom: black 1pt solid; font: 9pt Arial, Helvetica, Sans-Serif; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">March 31, 2012</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Accounts payable, trade</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">  $         -    </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">  $      176,726</td></tr>
<tr style="background-color: White">
<td colspan="4" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Other payables and accrued liabilities</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">        131,734</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">          943,101</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="3" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Convertible notes payable</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">         140,000</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">          140,000</td></tr>
<tr style="background-color: White">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="border-top: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">     $  271,734</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">  $   1,259,827</td></tr>
</table>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b></b></p>
1118477
18042
85750
93000
20000000
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 4 –
Discontinued Operations</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">In March 2011, the
Company completed the sale of all of its oil and gas properties and substantially all fixed assets for approximately $20 million
consisting of cash of $3,503,000, a receivable of $250,000, secured note and accrued interest payoff in the amount of $14,829,250,
including purchase price adjustments and allowances of $1,417,750. Significant purchase price adjustments and allowances included
the Company retaining performance bonds for properties in Wyoming of $814,000, asset valuation adjustments of $130,000 and production
tax allowance of $395,000. For the year ended March 31, 2011, the Company recorded a gain on the sale of discontinued operations
of $4,807,221, which was determined as follows:</p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Total sales price</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 20,000,000</td></tr>
<tr style="background-color: White">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Adjustments to sales price for assets retained</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> (945,367)</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Transaction expenses from sale of assets</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> (508,195)</td></tr>
<tr style="background-color: White">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Adjusted sales price</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 18,546,438</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="width: 26%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 26%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 7%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 20%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 18%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Summary of assets sold:</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"></td></tr>
<tr style="background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Fixed assets, net</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 126,712</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Oil and gas properties, net</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 13,630,945</td></tr>
<tr style="background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Other liabilities</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> (18,440)</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Total basis in assets sold</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-top: Black 1pt solid; border-bottom: Black 1pt solid"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 13,739,217</td></tr>
<tr style="background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; text-indent: 20pt"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"></td></tr>
<tr style="background-color: White">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 30pt">Gain on disposition of assets, net</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid">$</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 4,807,221</td></tr>
</table>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The financial results
of the Company’s business related to oil and gas operations have been classified as discontinued operations in its statements
of operations for all periods presented. The following summarizes components of income (loss) from the Company’s discontinued
operations for the three and six months ended September 30, 2011 only as there was no activity of discontinued operations for the
three and six months ended September 30, 2012:</p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr>
<td style="width: 9%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 8%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 2%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 1%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 30%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 12%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="width: 2%; text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; width: 19%; border-bottom: black 1pt solid; padding-right: -5.75pt; padding-left: 5.7pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">Three months  September 30, 2011</td>
<td style="width: 2%"></td>
<td style="vertical-align: bottom; width: 1%; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; width: 14%; border-bottom: black 1pt solid; padding-top: 5pt; padding-right: -5.75pt; padding-left: 5.7pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">Six months September 30, 2011</td></tr>
<tr>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="padding-right: 17.1pt; padding-left: 5.7pt; text-align: justify"></td>
<td></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; vertical-align: bottom"></td>
<td style="padding-right: 5.7pt; padding-left: 5.3pt; text-align: justify"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Revenue</td>
<td style="text-align: right; vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 1pt solid"> $</td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-top: 5pt; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td>
<td> </td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; border-top: Black 1pt solid; border-bottom: Black 1pt solid"> $</td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: 17.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Operating income</td>
<td style="text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> 4,392</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; border-bottom: Black 1pt solid"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">2,109</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: 17.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Operating loss from discontinued operations</td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">4,392</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">2,109</td></tr>
<tr style="background-color: White">
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Other income (expenses) from discontinued operations, net</td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif">(4,040)</td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; text-indent: 10pt"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: 17.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Net income (loss) from discontinued operations</td>
<td style="text-align: right; vertical-align: bottom; border-top: Black 1pt solid; border-bottom: Black 1.5pt double">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> 4,392</td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; border-top: Black 1pt solid; border-bottom: Black 1.5pt double">$</td>
<td style="vertical-align: bottom; border-bottom: Black 1.5pt double; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> (1,931)</td></tr>
<tr style="background-color: White">
<td colspan="6" style="padding-right: 5.7pt; padding-left: 5.7pt; text-align: justify"></td>
<td style="text-align: right; vertical-align: bottom"></td>
<td style="vertical-align: bottom; padding-right: -6.1pt; padding-left: 5.7pt; text-align: right"></td>
<td></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.7pt; text-align: right"></td>
<td style="vertical-align: bottom; padding-right: 5.7pt; padding-left: 5.3pt; text-align: right"></td></tr>
</table>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The assets and liabilities
relating to the Company’s discontinued oil and gas operations are reflected as assets and liabilities of discontinued operations
in the accompanying balance sheets. The following summarizes the components of these assets and liabilities at March 31, 2012 as
the Company had no assets and liabilities of discontinued operations at September 30, 2012:</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="width: 1%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="width: 61%; border-bottom: white 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"></td>
<td style="width: 3%"> </td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid"></td>
<td style="width: 15%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">March 31, 2012</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"><u>Assets</u>:</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Current assets of discontinued operations -</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Accounts receivable</td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Deposits and other assets</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; border-top: Black 1pt solid; border-bottom: Black 1pt solid; vertical-align: bottom">$</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Other assets</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> </td>
</tr>
<tr style="background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Long-term assets of discontinued operations</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; border-bottom: Black 1pt solid"></td>
<td style="vertical-align: bottom; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Total assets of discontinued operations</td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">$</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"><u>Liabilities</u>:</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Current liabilities of discontinued operations:</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
</tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Accounts payable and accrued liabilities</td>
<td> </td>
<td style="padding-right: 0pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 112,620</td>
</tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; text-indent: 20pt">Total current liabilities of discontinued operations</td>
<td> </td>
<td style="border-top: Black 1pt solid; border-bottom: Black 1pt solid; padding-right: 0pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 112,620</td>
</tr>
</table>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Oil and gas properties</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As previously noted
throughout this report, all oil and gas properties were sold in a transaction as of March 1, 2011. There have been no further acquisitions
or dispositions of oil and gas properties since that date.</p>
-4392
-2109
4392
2109
-4040
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 5 –
Short Term Notes Payable</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On January 28, 2011
the Company received debtor-in-possession financing (“DIP Financing”) pursuant to a credit agreement (the “DIP
Credit Agreement”) with Linc Energy. The DIP Credit Agreement provided loan advances up to an aggregate of $14.7 million
and was scheduled to mature on May 28, 2011 (total term of 120 days from the date of closing). The Company borrowed a total of
approximately $14.0 million under the DIP Credit Agreement and the proceeds were used to pay the allowed, secured claims for certain
ad valorem property taxes, amounts due to under Prepetition Note (defined below) and to fund $100,000 for the Company’s bankruptcy
estate.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The DIP Credit Agreement
specified interest at the rate of 10% per annum for the 60 days following the date of closing and 12% per annum through loan maturity.
Accumulated interest and principal was due in full at maturity. The DIP Financing lender obtained a valid and perfected first priority
security interest in and liens on all the collateral including, but not limited to: (a) the Company’s interests in oil and
gas producing properties; (b) accounts receivable; (c) equipment; (d) general intangibles; (e) accounts; (f) deposit accounts;
and (g) all other real and personal property of the Company.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On February 16, 2011,
the Bankruptcy Court approved an order authorizing the sale of substantially all of the Company’s assets to Linc Energy for
$20.0 million. Effective March 1, 2011, the Company sold substantially of its assets to Linc Energy. On March 14, 2011, all outstanding
principal and accrued interest totaling $14,829,250 were paid and the DIP Credit Agreement was cancelled. See Note 4 – Discontinued
Operations.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Through January 28,
2011, the Company had a note payable (the “Prepetition Note”) outstanding under the terms of a Term Credit Agreement
with GasRock (the “Prepetition Lender”). The original principal balance of $12,240,000 outstanding under the Prepetition
Note was initially due and payable on October 31, 2008, with interest accruing at a rate equal to the greater of (a) 12% per
annum, or (b) the one-month LIBOR rate plus 6% per annum. The Prepetition Note was amended on October 22, 2008 (the “First
Amendment”), to extend the maturity date from October 31, 2008 to April 30, 2009. In consideration of the six month extension
and other terms included in First Amendment, the Company made a principal payment on the Prepetition Note in the amount of $2,240,000,
resulting in a new loan balance of $10,000,000. The maturity date of the Prepetition Note was amended several times after April
30, 2009, with a final maturity date of October 15, 2009. In connection with these amendments to the maturity date of the Prepetition
Note, the Company granted the GasRock various additional considerations, including overriding royalty interests and net profits
interests. Payment of the principal balance of approximately $10,188,000, plus accrued interest, was not made on October 15, 2009,
and therefore, an event of default occurred under the Term Credit Agreement, as amended. In connection with the DIP financing,
the Prepetition Note was paid in full on January 28, 2011.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company filed
an adversary action in the Bankruptcy Court against GasRock in an effort to avoid certain interests previously assigned to the
Prepetition Lender. See Note 7 - Commitments and Contingencies.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 6 –
Convertible Promissory Notes Payable</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On October 27, 2009,
the Company issued convertible promissory notes (the “Promissory Notes”) totaling $140,000 of which $100,000 of the
Promissory Notes were issued to officers and/or directors or $25,000 each. The additional Promissory Notes were issued to existing
shareholders. The Promissory Notes carry interest at an annual rate equal to the greater of (i) 12%, or (ii) the prime rate (as
published in the Wall Street Journal) plus 3%. The Promissory Notes are convertible, at the holder’s option, into shares
of the Company’s common stock at a conversion price of $0.02 per share and at any time during the term of the Promissory
Notes. The Promissory Notes matured on November 1, 2010, and all obligations and payments due under the Promissory Notes were subordinate
to the Company’s senior debt. As a result of the Company’s bankruptcy filing described in Notes 1 and 3 above, the
Company was not able to pay principal and accumulated interest on the Promissory Notes when due. Subject to certain exceptions
under the Bankruptcy Code, the Company’s bankruptcy filing automatically enjoined, or stayed, the continuation of any judicial
or administrative proceedings or other actions against the Company or its property to recover on, collect or secure a claim arising
prior to the Petition Date. At September 30, 2012 and March 31, 2012, the principal outstanding on the Promissory Notes is $140,000.
The $100,000 of Promissory Notes due to the officers and/or directors were paid on October 9, 2012 and the remaining $40,000 of
Promissory Notes due to shareholders were paid on October 17, 2012. At September 30, 2012, accrued interest related to these Promissory
Notes is $715 and $54,015, respectively. The reduction in the accrued interest of $53,300 from March 31, 2012 to September 30,
2012 was the result of a Bankruptcy Court decision that the amount of the interest related to the Promissory Notes shall be $715.
This reduction of $53,300 was reported in the statement of operations for the three and six months ended September 30, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 8 –
Stockholders’ Equity</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company’s
capital stock at September 30, 2012 and March 31, 2012 consists of 275,000,000 authorized shares of common stock, par value $0.00001
per share. At September 30, 2012 and March 31, 2012, a total of 119,326,723 common stock shares were issued and outstanding.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Issuance of Common
Stock </u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">During the six months
ended September 30, 2012 there were no issuances or cancellations of common stock.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Warrants</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">As part of the Plan approved by the Bankruptcy
Court, warrant holders holding warrants exercisable for 54,632,565 shares of the Company's common stock are to be cancelled and
the holders of these warrants will receive one share of the Company's common stock for every 100 shares of common stock the warrant
holder would have been entitled to if the warrants were exercised. Therefore, the Company will be issuing approximately 546,326
shares of common stock to the warrant holders during October 2012. See Note 11 – Subsequent Events.</p>
54623565
546326
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 9 –
Share-Based Compensation</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">During the six months
ended September 30, 2012 and 2011, the Company did not issue any stock options and all outstanding stock options were fully-vested.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>2006 Stock Incentive
Plan</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On March 30,
2007, the 2006 Stock Incentive Plan (the 2006 Stock Incentive Plan) was approved by the shareholders and was effective October 2,
2006. The 2006 Stock Incentive Plan had previously been approved by the Company’s Board of Directors. Under the 2006 Stock
Incentive Plan, the Board of Directors may grant awards of options to purchase common stock, restricted stock, or restricted stock
units to officers, employees, and other persons who provide services to the Company or any related company. The participants to
whom awards are granted, the type of awards granted, the number of shares covered for each award, and the purchase price, conditions
and other terms of each award are determined by the Board of Directors, except that the term of the options shall not exceed 10
years. A total of 10 million shares of the Company’s common stock are subject to the 2006 Stock Incentive Plan. The shares
issued for the 2006 Stock Incentive Plan may be either treasury or authorized and unissued shares. During the six months ended
September 30, 2012, no options were granted, expired or exercised under the 2006 Stock Incentive Plan.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The following table
summarizes information related to the outstanding and vested options at September 30, 2012:</p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">Outstanding and Vested Options</td>
<td style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"></td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 31%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 10%"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; width: 5%"> </td>
<td style="width: 5%"> </td>
<td style="width: 5%"> </td>
<td style="width: 38%"> </td>
<td style="width: 2%"> </td>
<td style="width: 2%"> </td>
<td style="width: 2%"> </td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Number of shares</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 10,000,000</td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 1,375,000</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="5" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Weighted average remaining contractual life</td>
<td> </td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">2.6 years</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">2.5 years</td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="4" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Weighted average exercise price</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0.035</td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0.0875</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Aggregate intrinsic value</td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom"> </td>
</tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> Non-qualified</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0</td>
</tr>
<tr style="vertical-align: top; background-color: White">
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> 2006 Plan</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; vertical-align: bottom">$</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> 0</td>
</tr>
</table>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The aggregate intrinsic
value of outstanding securities is the amount by which the fair value of underlying (common) shares exceeds the exercise price
of the options issued and outstanding.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">At September 30,
2012, all outstanding options were fully vested. No options were exercised during the six months ended September 30, 2012. The
Company did not realize any income tax expense related to the exercise of stock options for the six months ended September 30,
2012 and 2011.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 10 –
Related Party Transactions</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 2.05pt">A director of
the Company is a partner in the law firm that acts as counsel to the Company. The Company incurred legal fees and expenses to the
law firm in the amount of $6,325 and $54,474 during the six months ended September 30, 2012 and 2011, respectively that are included
in the statement of operations. The amount owed to the law firm was approximately $9,234 at September 30, 2012 and March 31, 2012,
respectively.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 11 –
Subsequent Events</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company issued
546,326 shares of its common stock during the month of October 2012 in exchange for warrants held by warrants holders as part of
the Plan approved by the Bankruptcy Court.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">We have evaluated
subsequent events through November 6, 2012. Other than those set forth above, there have been no subsequent events after September
30, 2012 for which disclosure is required.</p>
6325
54474
2012-10-09
2012-10-17
100000
40000
715
54015
-53300
-53300
17232
20104
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><b>Note 7 –
Commitments and Contingencies</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Commitments</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On February 12, 2010,
the Company filed an adversary action in the Bankruptcy Court against GasRock, the holder of the then senior secured note payable
seeking to avoid certain ownership interests assigned to GasRock in connection with the Term Credit Agreement and amendments thereto.
On March 18, 2010, GasRock filed a motion with the Bankruptcy Court to dismiss the complaint. On October 21, 2010, the Bankruptcy
Court issued an order on the Motion to Dismiss that dismissed three of the nine claims made in the adversary action. The Company,
GasRock and Linc Energy executed a settlement agreement as of June 15, 2012, that called for the Company to make a payment of $500,000
to GasRock to dismiss all claims in the litigation by GasRock and in return the Company would receive a $525,000 payment form Linc
Energy to settle other matters in the litigation. The settlement agreement was approved by the Bankruptcy Court in July 2012 and
the respective payments among the parties were made and other issues in the agreement were settled as noted in this report as of
July 18, 2012. As a result of the settlement agreement, the Company incurred a loss of $25,000 that was written off and reported
in the statement of operations for the three and six months ended September 30, 2012.	</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Bankruptcy Proceedings</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">On October 28, 2009,
the Company filed a Petition for reorganization under Chapter 11 in the United States Bankruptcy Court for the District of Colorado.
The Company continued to operate its business as “debtor-in-possession” under the jurisdiction of the Bankruptcy Court
and in accordance with the applicable provisions of the Code and orders of the Bankruptcy Court until its Plan was approved by
the Bankruptcy Court and became effective September 28, 2012. All pending or threatened litigation or claims involving the Company
were automatically stayed as a result of the bankruptcy filing, and all such claims subject to compromise or modification through
the terms of any plan of reorganization filed by the Company in the bankruptcy proceedings. On September 10, 2012, the Bankruptcy
Court approved the Plan and the Company was discharged from bankruptcy on its effective date of September 28, 2012. See Note 3
- Proceedings Under Chapter 11 of the United States Bankruptcy Code.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Litigation</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">In a letter dated
February 18, 2009 sent to each of the Company’s directors, attorneys representing a group of persons who purchased approximately
$1.8 million of securities (in the aggregate) in the Company’s private placement offering commenced in late 2006, alleged
that securities laws were violated in that offering. In April 2009, the Company entered into tolling agreements with the purchasers
to toll the statutes of limitations applicable to any claims related to the private placement. The Company’s Board of Directors
directed the Special Committee to investigate these allegations. The Company denies the allegations and believes they are without
merit. The Company cannot predict the likelihood of a lawsuit being filed, its possible outcome, or estimate a range of possible
losses, if any, that could result in the event of an adverse verdict in any such lawsuit. Any suit against the Company is stayed
by the bankruptcy filing, and, insofar as these claims are asserted against the Company, they are subject to the claim process
imposed by the Bankruptcy Code and the possible subordination under Section 510(b) of the Bankruptcy Code. The purchasers have
filed a Proof of Claim with the Bankruptcy Court in the amount of $1,776,050 plus ancillary amounts purported to be damages
attributable to the alleged securities violations. These claims are covered under the Company’s D & O insurance policy.
In June 2011, the Bankruptcy Court rendered a decision that these claims are subordinated to unsecured claims. If  management 
believes  that a loss arising from this matter is probable and can reasonably be estimated,  the Company would record
the amount of the loss, or the minimum  estimated  liability when the loss is estimated  using a range,  and
no point within the range is more probable than another. As additional information becomes available, any potential liability
related to this matter will be assessed and the treatment revised, if necessary.  Based on current available
information, management is unable to make a determination as to the probability of a gain or loss regarding this suit at this time. </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">A law firm that was
formerly counsel to the Company filed a Proof of Claim for Prepetition fees, to which the Company objected with the Bankruptcy
Court. The Company agreed to a settlement which the Bankruptcy Court approved in September 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">A former officer
of the Company filed a proof of claim for wages and benefits to which the Company objected with the Bankruptcy Court. The Company
agreed to a settlement of $18,750 with the former officer, which the Bankruptcy Court approved.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Two of the Company’s
employees filed proofs of claim and motions to allow administrative expenses for certain bonus payments. The Company and the employees
reached a Bankruptcy Court settlement in the amount of $78,902 which was paid in September 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">GasRock filed a proof
of claim for attorney’s fees and costs related to the bankruptcy filing generally and to the litigation pending between GasRock
and the Company. The Company objected to these fees on various grounds. Subsequently, as of June 15, 2012, a Settlement and Release
Agreement covering these claims and other issues was executed by the Company, GasRock and Linc Energy. This agreement was approved
by the Bankruptcy Court in July 2012, and such claims were released and certain payments were made among the parties as of July
18, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Use of Estimates
in the Preparation of Financial Statements</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The preparation of
financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Cash and Cash
Equivalents</u></p>
<p style="font: 10pt/11pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company
considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Cash and cash
equivalents include demand deposits and money market funds carried at cost which approximates fair value. The Company maintains
its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At September 30, 2012, the
Company had $2,284,900 in cash deposits in excess of FDIC insured limits.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Restricted cash</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">The restricted cash that was held in an escrow
account in the amount of $500,641 was released on July 18, 2012 as part of an agreed upon and Bankruptcy Court approved settlement
agreement. See Note 7 – Commitments and Contingencies.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Accounts Receivable</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As of July 18, 2012,
the Bankruptcy Court approved and the Company received $525,000 as part of a royalty fee arrangement relating to a settlement agreement
among Rancher Energy, GasRock and Linc Energy and at September 30, 2012 the balance owed to the Company is $0. See Note 7 –
Commitments and Contingencies.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Oil and Gas Producing
Activities</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company uses
the successful efforts method of accounting for its oil and gas properties. Under this method of accounting, all property acquisition
costs and costs of exploratory and development wells are capitalized when incurred, pending determination of whether the well has
found proved reserves. If an exploratory well does not find proved reserves, the costs of drilling the well are charged to expense.
Exploratory dry hole costs are included in cash flows from investing activities as part of capital expenditures within the consolidated
statements of cash flows. The costs of development wells are capitalized whether or not proved reserves are found. Costs of unproved
leases, which may become productive, are reclassified to proved properties when proved reserves are discovered on the property.
Unproved oil and gas interests are carried at the lower of cost or estimated fair value and are not subject to amortization<b>.</b></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Geological and geophysical
costs and the costs of carrying and retaining unproved properties are expensed as incurred. DD&A of capitalized costs related
to proved oil and gas properties is calculated on a property-by-property basis using the units-of-production method based upon
proved reserves. The computation of DD&A takes into consideration restoration, dismantlement, and abandonment costs and the
anticipated proceeds from salvaging equipment.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company complies
with ASC 932, “Extractive Activities – Oil and Gas”. The Company currently does not have any existing capitalized
exploratory well costs, and has therefore determined that there are no suspended well costs that should be impaired.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company reviews
its long-lived assets for impairments when events or changes in circumstances indicate that impairment may have occurred. The impairment
test for proved properties compares the expected undiscounted future net cash flows on a property-by-property basis with the related
net capitalized costs, including costs associated with asset retirement obligations, at the end of each reporting period. Expected
future cash flows are calculated on all proved reserves using a discount rate and price forecasts selected by the Company’s
management. The discount rate is a rate that management believes is representative of current market conditions. The price forecast
is based on NYMEX strip pricing, adjusted for basis and quality differentials, for the first three to five years and is held constant
thereafter. Operating costs are also adjusted as deemed appropriate for these estimates. When the net capitalized costs exceed
the undiscounted future net revenues of a field, the cost of the field is reduced to fair value, which is determined using discounted
future net revenues. An impairment allowance is provided on unproved property when the Company determines the property will not
be developed or the carrying value is not realizable. The sale of substantially of the Company’s assets in March 2011 resulted
in the Company having no oil and gas properties at September 30, 2012 or March 31, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Sales of Proved
and Unproved Properties</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The sale of a partial
interest in a proved oil and gas property is accounted for as normal retirement, and no gain or loss is recognized as long as this
treatment does not significantly affect the units-of-production DD&A rate. A gain or loss is recognized for all other sales
of producing properties and is reflected in results of operations. The sale of a partial interest in an unproved property is accounted
for as a recovery of cost when substantial uncertainty exists as to recovery of the cost applicable to the interest retained. A
gain on the sale is recognized to the extent the sales price exceeds the carrying amount of the unproved property. A gain or loss
is recognized for all other sales of nonproducing properties and is reflected in results of operations. See the description of
the sale of all oil and gas properties as of March 1, 2011 contained in the Item 2 of Part I of this report as a result of the
bankruptcy filing.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Property and Equipment</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Property and equipment,
such as office furniture and equipment, and computer hardware and software, are recorded at cost. Costs of renewals and improvements
that substantially extend the useful lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred.
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets from three to seven years.
When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from
their respective accounts. Depreciation expense for the three and six months ended September 30, 2012 was $8,616 and $17,232 and
for the three and six months ended September 30, 2011 was $8,616 and $20,104, respectively.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Fair Value of
Financial Instruments</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company’s
financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, are carried at cost, which
approximates fair value due to the short-term maturity of these instruments.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Revenue Recognition</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company currently
has no revenue from continuing or discontinued operations, other than payments received for the resale of carbon dioxide under
a supply and sales agreement that is due to expire at the end of 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Income Taxes</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company uses
the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future
tax consequences of temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities.
The deferred tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences
are expected to reverse.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">The Company assessed the likelihood of utilization
of the deferred tax assets in light of recent and expected continuing losses. As a result of this review, the deferred tax asset
of $12,716,000 and $12,407,000 has been fully reserved at September 30, 2012 and March 31, 2012, respectively. At September 30,
2012, the Company had net operating loss carryforwards of approximately $37,400,000 that begin to expire in the year 2023.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company adopted
the provisions of ASC 740, “Income Taxes” on April 1, 2007. FASB ASC 740 provides detailed guidance for the financial
statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions
must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of
FASB ASC 740 and in subsequent periods. The adoption of ASC 740 had an immaterial impact on the Company’s financial position
and did not result in unrecognized tax benefits being recorded. Subsequent to adoption, there have been no changes to the Company’s
assessment of uncertain tax positions. Accordingly, no corresponding interest and penalties have been accrued. The Company’s
policy is to recognize penalties and interest, if any, related to uncertain tax positions as general and administrative expense.
The Company files income tax returns in the U.S. Federal jurisdiction and various states.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Net Income (Loss)
per Share</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Basic net income
(loss) per common share of stock is calculated by dividing net income (loss) available to common stockholders by the weighted-average
number of common shares outstanding during each period.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Diluted net income
(loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding,
including the effect of other dilutive securities. The Company’s potentially dilutive securities consist of in-the-money
outstanding options and warrants to purchase the Company’s common stock. Diluted net loss per common share does not give
effect to dilutive securities as their effect would be anti-dilutive.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The treasury stock
method is used to measure the dilutive impact of stock options and warrants. The following table details the weighted-average dilutive
and anti-dilutive securities related to stock options and warrants for the periods presented:</p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; vertical-align: middle">
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-indent: 0.5in">For the Six Months Ended</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0">September 30,</p></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 17%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="width: 31%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">2012</td>
<td style="width: 4%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="width: 26%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif">2011</td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Dilutive</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: middle"> 60,111,454</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: justify"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: middle"> -</td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif">Anti-dilutive</td>
<td style="text-align: justify"> </td>
<td style="text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom"> -</td>
<td style="text-align: justify"> </td>
<td style="text-align: center; font-family: Arial, Helvetica, Sans-Serif; vertical-align: bottom">66,073,564</td></tr>
</table>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Stock options and
warrants were not considered in the detailed calculations as their effect would be anti-dilutive except for the three and six months
ended September 30, 2012.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Share-Based Payments</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company recognizes
compensation cost for stock-based awards based on estimated fair value of the award and records compensation expense over the requisite
service period. See Note 9 - Share-Based Compensation.  </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Comprehensive
Income (Loss)</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company does
not have revenue, expenses, gains or losses that are reflected in equity rather than in results of operations. Consequently, for
all periods presented, comprehensive income (loss) is equal to net income (loss).</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Major Customers</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">The Company’s
only source of income was from a carbon dioxide resale contract that will expire at the end of 2012. The Company had no oil and
gas operations during the three and six months ended September 30, 2012 and 2011, and no customers or billings as a result.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Off-Balance Sheet
Arrangements</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">As part of its ongoing
business, the Company has not participated in transactions that generate relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. From
its incorporation on February 4, 2004 through September 30, 2012, the Company has not been involved in any unconsolidated
SPE transactions.</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Reclassification</u> </p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0">Certain amounts in
the prior period financial statements have been reclassified to conform to the current period financial statement presentation.
Such reclassifications had no effect on the Company’s net income (loss).</p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; text-align: justify; margin-right: 5.05pt; margin-left: 0"><u>Recent Accounting
Pronouncements</u></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected
to cause a material impact on its financial condition or the results of its operations.</p>
The Promissory Notes bear interest at an annual rate equal to the greater of (i) 12%, or (ii) the prime rate (as published in the Wall Street Journal) plus 3%.
One hundred thousand dollars of the Promissory Notes were issued to officers and/or directors ($25,000 each). The remainder of the Promissory Notes were issued to existing shareholders.
10% per annum for the 60 days following the date of closing
Interest accruing at a rate equal to the greater of (a)12% per annum, or (b)the one-month LIBOR rate plus 6% per annum