	At March 31,
	2012			2011
Proved leasehold costs	$	35,454,781		$	6,043,061
Costs of wells and development		29,858,429			17,504,183
Capitalized asset retirement costs		927,165			305,646
Oil & gas properties
not subject to amortization		-			797,950
Total oil & gas properties		66,240,375			24,650,840
Accumulated depreciation and depletion		(5,625,961	)		(3,709,719	)
Net Capitalized Costs	$	60,614,414		$	20,941,121

	2012			2011
Balance at beginning of year	$	24,650,840		$	24,699,722
Acquisitions using cash		2,094,161			8,311,739
Other capitalized costs		12,354,246			4,631,412
Sale proceeds		(4,183,745	)		(13,726,688	)
Issuance of note		22,000,000			90,841
Acquisitions using shares		8,703,354			503,205
Sale commission using shares		-			38,757
Other non-cash transactions		621,519			101,852
Balance at end of year	$	66,240,375		$	24,650,840

Fiscal Year 2012. During the year ended March 31, 2012, Lucas acquired various oil and gas properties and equipment at an aggregate net cost of $45,151,761 including $22,000,000 with a note payable, $14,448,407 cash, 2,000 and 2,824 shares of Lucas’ preferred stock series A and series B valued at $3,095,600 and $5,166,754, respectively, and 150,000 shares of Lucas' common stock valued at $441,000 ($2.94 per share based upon the closing price of the Company’s common stock on the date of agreement).

On October 13, 2011, Lucas entered into a purchase and sale agreement with Nordic Oil USA I, LLLP (Nordic 1), with an effective date of July 1, 2011, to purchase all of Nordic 1’s interests in certain oil, gas and mineral leases, rights and assets located in Gonzales, Karnes and Wilson Counties, Texas, which represent all of Nordic 1's interests in the existing two capital programs operated by Lucas (the Nordic 1 Transaction). Pursuant to the agreement, the closing of the Nordic 1 Transaction was deferred until Nordic 1's shareholders ratified the transaction effective November 18, 2011. Pursuant to the transaction, Lucas agreed to pay $22.0 million to Nordic 1 in the form of a senior secured promissory note. The entire $22.0 million was applied to oil and gas properties.

	Year Ended March 31
	2012			2011
	Unaudited

Net Operating Revenue	$	6,120,432		$	4,102,017
Operating Loss		(7,231,514	)		(4,169,053	)
Interest Expense		(1,623,182	)		(1,582,144	)
Net Loss		(8,837,227	)		(5,772,553	)

Net Loss per Share
Basic and Diluted	$	(0.47	)	$	(0.40	)

Average Number of Common Shares Outstanding
Basic and Diluted		18,676,186			14,378,705

The unaudited pro forma results reflect the revenues and direct operating expenses of the properties acquired and adjustments to recognize depreciation, depletion and amortization expense and accretion expense based on the purchase price and our closing date oil and gas reserve estimates as well as interest expense on the $22.0 million note at 6% interest beginning April 1, 2010 and an increase in the asset retirement obligation as of April 1, 2010. The unaudited pro forma results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had the acquisitions been completed on April 1, 2010. In addition, the unaudited pro forma results do not purport to project the future results of operations going forward due to both changes in the business and the omission of various operating expenses. Production and reserves, as well as costs and expenses, associated with the acquired properties may differ significantly from those characteristics when such properties became owned and operated by Lucas.

On October 13, 2011, Lucas also entered into a purchase agreement with a company, with an effective date of July 1, 2011, to purchase all of the Company’s interests in properties owned by Nordic 1, in consideration for 2,000 shares of designated Series A Convertible Preferred Stock of the Company, each of which shares are convertible into an aggregate of 1,000 shares of the Company’s common stock. The closing of the transaction with the holder was subject to the successful closing of the Nordic 1 Transaction. The discounted fair value of the transaction was $3.8 million, due to the six-month holding period during which the holder of the Series A Convertible Preferred Stock is not allowed to sell the shares of the Company’s common stock when converted, and other restrictions. The Series A Convertible Preferred Stock contains a provision that limits the amount of common shares that the holder can own at any time upon conversion to an aggregate of 4.99% of the Company’s then issued and outstanding shares of common stock.

On December 29, 2011, Lucas entered into a purchase and sale agreement with Hall Phoenix Energy, LLC (Hall Phoenix), with an effective date of December 1, 2011, to purchase all of Hall Phoenix’s interests in certain oil, gas and mineral leases, rights and assets located in Leon, Madison and Wilson Counties, Texas. Pursuant to the transaction, Lucas agreed to pay as consideration 2,824 shares of Series B Convertible Preferred Stock of the Company, each of which shares are convertible into an aggregate of 1,000 shares of the Company’s common stock. The discounted fair value of the transaction was $6.4 million, due to the six-month holding period during which the holder of the Series B Convertible Preferred Stock is not allowed to sell the shares of the Company’s common stock when converted, and other restrictions. The Series B Convertible Preferred Stock contains a provision that limits the amount of common shares that the holder can own at any time upon conversion to an aggregate of 9.99% of Company’s then issued and outstanding shares of common stock.

Fiscal Year 2011. During the year ended March 31, 2011, Lucas purchased various oil and gas properties and equipment at an aggregate net cost of $13,631,073 for $12,943,151 in cash, 284,788 in shares of Lucas' common stock valued at $503,205 ($1.77 per share based upon the closing price of the Company’s common stock on the date of agreement) and assumptions of a net working capital deficit of $184,717. In connection with the purchase and sale of oil and gas properties, Lucas acquired a note receivable and assumed a note payable the balances of which at March 31, 2011 were approximately $27,800 and $90,800, respectively.

In December 2010, Lucas entered into an agreement for the right to purchase, over time as financing becomes available, up to an aggregate 77.5% interest in certain oil and gas properties and leases located in McKinley County, New Mexico for an aggregate price of $20.5 million, which included a deposit of $0.5 million towards the possible purchase of the interests. The deposit is reflected in the Balance Sheet at March 31, 2011. In January 2011 as part of the agreement, Lucas purchased an undivided 7.56% interest in the New Mexico properties for $2.0 million and paid the deposit of $0.5 million. Lucas did not purchase any additional interests and allowed the right to purchase additional interests to expire in April 2011 without exercising it. Lucas sold their undivided 7.56% interest in these properties in fiscal year 2012. See Sales of Oil and Gas Properties below.

In connection with Lucas’ development strategy, Lucas completed farm-out arrangements with Hilcorp Energy I, LP, an affiliate of Hilcorp Energy Company; Marathon Oil (East Texas) LP, a subsidiary of Marathon Oil Corporation, to develop leases held by Lucas in the Eagle Ford shale formation; Seidler Oil LP to develop leases held by Lucas in the Austin Chalk formation; and completed the sale of certain underperformed wells. Those transactions, which are described below, resulted in sales proceeds to Lucas while maintaining a working interest percentage in such leases.

Fiscal Year 2012. During the year ended March 31, 2012, Lucas sold various oil and gas properties and equipment for aggregate gross proceeds of approximately $4,183,745, of which $3,683,745 was paid in cash. Lucas issued a $500,000 note receivable for the sale of certain properties. All oil and gas property sale proceeds were treated as a reduction in the full cost pool with no gain or loss recorded on the sales. Such sales included the transactions discussed below.

In September 2011, Lucas entered into several joint venture agreements to drill new Austin Chalk horizontal wells. Under the agreements, the counterparty purchased a working interest in the well operated by Lucas. Proceeds from the sale of the partial working interest were approximately $100,100 and were recorded as a reduction in the full cost pool.

In October 2011, Lucas entered into a purchase and sale agreement with Nordic Oil USA 2, LLLP (Nordic 2), with an effective date of February 1, 2011, to sell to Nordic 2 all of Lucas’ interests in certain oil, gas and mineral leases located in McKinley County, New Mexico for $4 million in cash. Net proceeds to the Company from the sale were approximately $3.6 million after deducting commissions. As a portion of the transaction, Nordic 2 returned a cash deposit for property acquisition of $0.5 million. The proceeds from this sale were recorded as a $3.1 million reduction in the full cost pool with no gain or loss recorded from the sale, and a $0.5 million reduction in Other Assets. The Company acquired the properties in January 2011 in a purchase transaction for $2.5 million, which included a deposit of $0.5 million. Nordic 2 acquired, among other things, the rights to the $0.5 million deposit. No revenues or expenses were derived from Lucas relating to these properties since the properties were acquired in January 2011.

On December 1, 2011, Lucas entered into an asset sale agreement with a company to sell certain underperforming wells. Lucas received as consideration $100,000 in cash and a $500,000 secured promissory note, of which $60,157 was current as of March 31, 2012. On March 31, 2012, the long term portion of the note receivable was $426,750. The proceeds from sale were recorded as a reduction in the full cost pool with no gain or loss recorded on the sale. The note bears interest at 6% per annum with monthly installments of $7,300, including accrued interest, through 2018.

Fiscal Year 2011. During the year ended March 31, 2011, Lucas sold various oil and gas properties and equipment for an aggregate gross proceeds of $13,773,411, paid sales commissions with 39,502 shares of Lucas’ common stock with a fair value of $38,800 and released a receivable amount of $7,966 for net proceeds of $13,726,688, all of which was treated as a reduction in the full cost pool with no gain or loss recorded on the sales. Such sales included the transactions discussed below.

On April 1, 2010, Lucas entered into a purchase and sale agreement with HilCorp Energy I, L.P. (HilCorp) for the development of Lucas’ Eagle Ford Shale properties located in Gonzales County, Texas. The agreement provided for HilCorp to acquire an undivided eighty-five percent (85%) working interest in all the formations below the Austin Chalk formation held by Lucas in Gonzales County, Texas. During the nine months ended December 31, 2010, Lucas received gross proceeds of approximately $10.1 million and net proceeds of approximately $8.9 million, after distribution to Lucas’ working interest participants of their proportionate share of proceeds totaling approximately $1.2 million. The final closing occurred in March 2011.

On November 21, 2011, Lucas entered into a purchase agreement for a building in Gonzales County for $450,000 to be used as office space. Pursuant to the agreement, the Company agreed to pay $325,000 in the form of a promissory note to be repaid in monthly installments. The final payment was paid on May 1, 2012. The note bears an interest rate of 8% per annum and is collateralized by the property. As of March 31, 2012, the balance of the note was $45,000 and is included in the current portion of long term debt.