UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Amendment No. 1

x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2009

¨           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

                 For the Transition Period From ____to _____

Commission File Number: 333-137293

PHOENIX ENERGY RESOURCE CORPORATION

 (Exact name of registrant as specified in its charter)

Nevada	20-5408832
(State or other jurisdiction of	(I.R.S. Employer identification No.)
incorporation or organization)

1001 Bayhill Drive, 2nd Floor – Suite 200

San Bruno, California 94066

(Address of principal executive offices)

(650) 616-4123

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer ¨                                                                                                           Accelerated filer ¨

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.                                                                                                                         Yes [ ]      No [ ]

Number of shares of common stock outstanding as of January 8, 2010:  62,700,000

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

     The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer’s actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “we believe,” “the Company believes,” “management believes” and similar language, including those set forth in the discussions under “Notes to Consolidated Financial Statements” and “Management’s Discussion and Analysis or Plan of Operation” as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them.

PHOENIX ENERGY RESOURCE CORPORATION FORM 10-Q TABLE OF CONTENTS
	Page No.
PART I – FINANCIAL INFORMATION
Item 1.  Condensed Financial Statements                                                                                                                                                                                                                                        2
Item 2.  Management’s Discussion and Analysis of financial conditions and results of operations	7
Item 3.  Quantitative and Qualitative Disclosures on Market Risk	9
Item 4T. Controls and Procedures	9
PART II – OTHER INFORMATION
Item 1.  Legal Proceedings	10
Item 1A. Risk Factors	10
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3.  Defaults Upon Senior Securities	10
Item 4.  Submission of Matters to a Vote of Security Holders	10
Item 5.  Other Information	10
Item 6.  Exhibits	10

1

PART 1 – FINANCIAL INFORMATION

Item 1.                      Condensed Financial Statements

INDEX TOPHOENIX ENERGY RESOURCE CORPORATION CONDENSED FINANCIAL STATEMENTS

PHOENIX ENERGY RESOURCE CORPORATION                                                                                      PAGE

Condensed Balance Sheets                                                                                                                                       3

Condensed Statements of Operations                                                                                                                      4

Condensed Statements of Cash Flows                                                                                                                     5

Notes to Condensed Financial Statements                                                                                                              6

2

PHOENIX ENERGY RESOURCE CORPORATION

(an Exploration Stage Company)

CONDENSED BALANCE SHEETS

	September 30,			June 30,
	2009 (Unaudited)			2009
Assets
Current assets:
Cash	$	6,600		$	2,496
Prepaid expenses		-			-
Total current assets		6,600			2,496
Total assets	$	6,600		$	2,496
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	1,318		$	1,318
Accrued liabilities		10,659			5,000
Accrued interest		23,917			20,167
Accrued interest – related party		1,082			530
Accrued compensation – related party		12,000			3,000
Total current liabilities		48,976			30,015
Long term liabilities:
Note payable		150,000			150,000
Note payable – related party		60,000			50,000
Total long-term liabilities		210,000			200,000
Total Liabilities	$	258,976		$	230,015
Stockholders’ Equity (Deficit):
Preferred stock, $0.001 par value, 5,000,000
shares authorized, no shares issued and outstanding		-			-
Common stock, $0.001 par value, 100,000,000 shares authorized;
shares issued and outstanding – 62,700,000 at September  30, 2009 and June 30, 2009
		62,700			62,700
Additional paid in capital		97,300			97,300
(Deficit) accumulated during development stage		(412,376	)		(387,519	)
Total stockholders’ equity (deficit)		(252,376	)		(227,519	)
Total liabilities and stockholders’ equity (deficit)	$	6,600		$	2,496

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

3

PHOENIX ENERGY RESOURCE CORPORATION

(an Exploration Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 and 2008,

AND FOR THE PERIOD FROM INCEPTION (JUNE 3, 2005) THROUGH SEPTEMBER 30, 2009

(UNAUDITED)

	For the Three Months Ended						June 30, 2005
	September 30,						(Inception) to
	2009			2008			Sept. 30, 2009
Revenue	$	-		$	-		$	-
Expenses:
Consulting		-			13,060			90,060
Executive compensation		9,000			9,000			57,000
General and administrative		720			9,572			25,305
Professional fees		10,839			8,177			125,323
Impairment Expense		-			-			65,069
Other expense		-			-			646
Total operating expenses		20,559			39,809			363,403
Net operating (loss)		(20,559	)		(39,809	)		(363,403	)
Other income (expense):
Debt forgiveness		-			-			3,000
Interest expense		(4,302	)		(3,817	)		(25,000	)
Interest income		4			465			1,027
Total other income (expense)		(4,298	)		(3,352	)		(20,973	)
Net (loss)	$	(24,857	)	$	(43,161	)	$	(384,376	)
Weighted average number of common shares outstanding – basic and diluted		62,700,000			62,500,000
Net (loss) per share – basic and diluted	$	(0.01	)	$	(0.01	)

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

4

PHOENIX ENERGY RESOURCE CORPORATION

(an Exploration Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 and 2008,

AND FOR THE PERIOD FROM INCEPTION (JUNE 3, 2005) THROUGH SEPTEMBER 30, 2009 (UNAUDITED)

							June 30, 2005
	For the Three Months Ended						(inception) to
	2009			2008			Sept 30, 2009
Cash flows from operating activities
Net (loss)	$	(24,857	)	$	(43,161	)	$	(384,376	)
Adjustments to reconcile net (loss) to net cash used by operating activities:
Shares issued for services		-			-			82,000
Prepaid expenses		-			-			-
Accounts payable		-			134			1,318
Accrued liabilities		5,659			2,366			10,659
Accrued interest		4,302			3,816			24,999
Accrued salaries – related party		9,000			(9,000	)		12,000
Lease impairment		-			-			65,069
Net cash used by operating activities		(5,896	)		(45,845	)		(318,469	)
Cash flows from investing activities
Unevaluated oil and gas properties-purchases		-			(57,033	)		(65,069	)
Net cash used by investing activities		-			(57,033	)		(65,069	)
Cash flows from financing activities
Proceeds from notes payable		10,000			-			210,000
Subscription payable		-			-			27,500
Issuance of common stock		-			-			22,500
Net cash provided by financing activities		10,000			-			260,000
Net increase/(decrease) in cash		4,104			(102,878	)		6,600
Cash, beginning		2,496			140,576			-
Cash, ending	$	6,600		$	37,698		$	6,600
Supplemental disclosures:
Interest paid	$	-		$	-		$	-
Income taxes paid	$	-		$	-		$	-
Non cash transactions:
Impairment on Oil & Gas Properties	$	-		$	-		$	65,069
Shares issued for services	$	-		$	-		$	82,000

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

5

PHOENIX ENERGY RESOURCE CORPORATION

(an Exploration Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

(UNAUDITED)

Note 1 – Basis of presentation

The condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed interim financial statements be read in conjunction with the financial statements of the Company for the year ended June 30, 2009 and notes thereto. The Company follows the same accounting policies in the preparation of interim reports.

Results of operations for the interim periods are not indicative of annual results.

Note 2 – Going Concern

The accompanying financial statements have been prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. For the Company to continue as a going concern it must seek additional sources of capital, and it must attain future profitable operations. The Company is currently initiating its business plan and is in the process of raising additional capital. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Note 3 – Notes Payable

At September 30, 2009 we had a note payable to Seymore Investments totaling $150,000.  The note bears interest at a rate of 10% per annum, is unsecured and matures on May 20, 2011. Further, we have the option to repay the note in shares of our common stock at a 15% discount to the five day average trading price as quoted on the Over-the Counter Bulletin Board at the time of conversion. At September 30, 2009 we have accrued interest related to this note in the amount of $23,917.

On February 27, 2009 we entered into a note payable with Helvetic Capital Ventures AG, a related party shareholder in the amount of $35,000. The note bears interest at a rate of 4% per annum, is unsecured and matures on February 27, 2012. Further, we have the option to repay the note in shares of our common stock at a 15% discount to the five day average trading price as quoted on the Over-the Counter Bulletin Board at the time of conversion. At September 30, 2009 we have accrued interest related to this note in the amount of $832.

On June 1, 2009 we had established a second note payable with Helvetic Capital Ventures totaling $50,000, of which we had drawn $25,000 as of September 30, 2009. The note bears interest at an initial rate of 4% per annum, is unsecured and matures on May 31, 2012. Further, we have the option to repay the note in shares of our common stock at a 15% discount to the five day average trading price as quote on the Over-the Counter Bulletin Board at the time of conversion. At September 30, 2009 we have accrued interest related to this note in the amount of $252.

Note 4 – New Accounting Pronouncements

In March 2008, the FASB issued FASB ASC 815-10-15 (Prior authoritative literature, FASB Statement 161, Disclosures About Derivative Instruments and Hedging Activities).  FASB ASC 815-10-15 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows.  FASB ASC 815-10-15 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  The adoption of this statement on July 1, 2009 did not have a material effect on the Company’s consolidated financial statements.

In June 2009, the FASB issued FASB ASC 105-10-65 (Prior authoritative literature: FASB Statement 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles). Under FASB ASC 105-10-65 (Prior authoritative literature: FASB Statement 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles), the FASB Accounting Standards Codification ™ (the “Codification”) will become the exclusive source of authoritative U.S. generally accepted accounting principles (“U.S. GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification will supersede all then-existing non-SEC accounting and reporting standards, with the exception of certain non-SEC accounting literature which will become nonauthoritative. FASB ASC 105-10-65 (Prior authoritative literature: FASB Statement 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles) is effective for the Company’s 2009 first fiscal quarter. The adoption of FASB ASC 105-10-65 (Prior authoritative literature: FASB Statement 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles) will not have a material impact on the Company’s Financial Statements. All references to U.S. GAAP provided in the notes to the Financial Statements have been updated to conform to the Codification.

In May 2009, the FASB issued FASB ASC 855-10-25 (Prior authoritative literature: FASB Statement 165, Subsequent Events). FASB ASC 855-10-25 (Prior authoritative literature: FASB Statement 165, Subsequent Events) provides guidance on management’s assessment of subsequent events and incorporates this guidance into accounting literature. FASB ASC 855-10-25 (Prior authoritative literature: FASB Statement 165,Subsequent Events) is effective prospectively for interim and annual periods ending after June 15, 2009. The implementation of this standard did not have a material impact on the Company’s financial position and results of operations. The Company has evaluated subsequent events through November 16, 2009, the date of issuance of the Company’s financial position and results of operations.

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements.

6

Item 2.  Management’s Discussion and Analysis of financial condition and results of operations

Phoenix Energy Resource Corporation is hereby providing cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements made in this quarterly report on Form 10-Q. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “likely will result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intends,” “plans” and “projection”) are not historical facts and may be forward-looking statements and involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations: the absence of contracts with customers or suppliers; our ability to maintain and develop relationships with customers and suppliers; our ability to successfully integrate acquired businesses or new brands; the impact of competitive products and pricing; supply constraints or difficulties; the retention and availability of key personnel; and general economic and business conditions.

We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements and that the investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events or circumstances. Consequently, no forward-looking statement can be guaranteed.

New factors emerge from time to time, and it is not possible for us to predict all such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Introduction to Our Business

Phoenix Energy Resource Corporation (“Phoenix Energy”, “We”, “Us”, or “Our”), formerly known as Exotacar, Inc., is an energy acquisition, exploration and development company. On February 2, 2008 Helvetic Capital Ventures AG, Switzerland acquired 64% of the total outstanding shares of the company effectuating a change in control. Following the acquisition, the company changed the focus of its business plan from the development of online exotic car sales and entered into the oil and natural gas industry. In conjunction with the change, the company was renamed Phoenix Energy Resource Corporation.

Our principal strategy is to focus on the acquisition of oil and natural gas mineral leases that ideally have existing production and cash flow. Once acquired, we intend to implement an accelerated development program utilizing capital resources, a regional operating focus, recruit an experienced management and technical team, and hopefully deploy enhanced recovery technologies to attempt to increase production and increase returns for our stockholders. Our oil and natural gas acquisition and development activities are currently focused in Southern Kentucky.

The Opportunity in Kentucky

According to the Kentucky Geological Survey, the Southern region of Kentucky is historically one of the domestic oil producing regions in the United States. In addition to historical oil and natural gas production levels in the region, we believe that a confluence of the following factors in Southern Kentucky and the surrounding region make it an attractive area for oil and natural gas development activities:

·   Traditional Roll-Up Strategy.  We are seeking to employ a traditional roll-up strategy utilizing a combination of capital resources, operational and management expertise, technology, and strategic partnerships which have experience operating in the region.

·   Numerous Acquisition Opportunities.  There are many small producers and owners of mineral rights in the region, which afford us opportunities to pursue negotiated lease transactions verses having to competitively bid on fundamentally sound assets.

·   Fragmented Ownership Structure.  There are opportunities to acquire producing properties at attractive prices due to the current inefficient and fragmented ownership structure.

Our Properties

The Company had no leases or undeveloped acreage as of September 30, 2009.

Our Business Strategy

Our goal is to increase stockholder value by finding and developing oil and natural gas reserves at costs that provide an attractive rate of return on our investments. The principal elements of our business strategy are:

·   Source and develop new properties. We intend to identify drilling locations on future properties by utilizing digital spectral satellite maps among other accepted technologies.  We have located a company in West Virginia providing such services.

·   Maximize Operational Control.  We seek to operate properties and maintain a substantial working interest. We believe the ability to control drilling inventory will provide us with the opportunity to more efficiently allocate capital, manage resources, control operating and development costs, and utilize our experience and knowledge of oilfield technologies.

·   Pursue Selective Acquisitions and Joint Ventures.  Due to our local presence in Southern Kentucky, we believe we are well-positioned to pursue selected acquisitions from the fragmented and capital-constrained owners of mineral rights throughout Southern Kentucky.

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

Significant Developments in Fiscal 2009 and Fiscal 2010 to Date

The following is a brief description of our most significant corporate developments that occurred in fiscal 2009 and fiscal 2010 to date:

·   In September of 2008, we acquired mineral leases representing a total of 434 net acres located in Allen County Kentucky.

·   In September of 2008, we entered into an Operating Agreement with JMACK Energy, LLC (“JMACK”), pursuant to which we granted to JMACK a 5% overriding royalty interest of all oil and/or gas produced from all mineral leases currently held by Phoenix Energy.

·   In February of 2009, we issued a promissory note to Helvetic Capital Ventures AG in the amount of $35,000. The note bears interest at a rate of 4% per annum and matures on February 27, 2012.

·   In June of 2009, we issued a promissory note to Helvetic Capital Ventures AG in the amount of $50,000, of which we had drawn $25,000 as of September 30, 2009. The note bears interest at a rate of 4% per annum and matures on May 31, 2012.

·   In June of 2009, leases representing 365 net acres purchased as part of the Allen County Kentucky acquisition expired.

·   In September of 2009, leases representing 69 net acres purchased as part of the Allen County Kentucky acquisition expired.

Title to Properties

Future properties are subject to customary royalty interests, liens under indebtedness, liens incident to operating agreements and liens for current taxes and other burdens, including mineral encumbrances and restrictions. Further, our debt is secured by first and second liens on substantially all of our assets. We do not believe that any of these burdens materially interferes with the use of our properties in the operation of our business.

As is customary in the natural gas and oil industry, minimal investigation of title is made at the time of acquisition of undeveloped properties. In most cases, we investigate title and obtain title opinions from counsel or have title reviewed by professional landsmen only when we acquire producing properties or before we begin drilling operations. However, any acquisition of producing properties without obtaining title opinions are subject to a greater risk of title defects.

Sale of Natural Gas and Oil

We do not intend to refine our natural gas or oil production. We expect to sell all or most of our production to a small number of purchasers in a manner consistent with industry practices at prevailing rates by means of long-term and short-term sales contracts, some of which may have fixed price components. As of September 30, 2009, we did not have any production; however, we believe that we will be able to find suitable purchasers when, and if, production is commenced.

Markets and Marketing

The natural gas and oil industry has experienced rising and volatile prices in recent years. As a commodity, global natural gas and oil prices respond to macro-economic factors affecting supply and demand. In particular, world oil prices have risen in response to political unrest and supply uncertainty in Iraq, Venezuela, Nigeria and Iran, and increasing demand for energy in rapidly growing economies, notably India and China. Due to rising world prices and the consequential impact on supply, North American prospects have become more attractive. Escalating conflicts in the Middle East and the ability of OPEC to control supply and pricing are some of the factors negatively impacting the availability of global supply. In contrast, increased costs of steel and other products used to construct drilling rigs and pipeline infrastructure, as well as higher drilling and well-servicing rig rates, negatively impact domestic supply.

Our market is affected by many factors beyond our control, such as the availability of other domestic production, commodity prices, the proximity and capacity of natural gas and oil pipelines, and general fluctuations of global and domestic supply and demand. Although we have entered into one sales contract with Shell at this time, we do not anticipate difficulty in finding additional sales opportunities, as and when needed.

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

Competition

The natural gas and oil industry is intensely competitive and, as an exploration-stage company, we must compete against larger companies that may have greater financial and technical resources than we do and substantially more experience in our industry. These competitive advantages may better enable our competitors to sustain the impact of higher exploration and production costs, natural gas and oil price volatility, productivity variances between properties, overall industry cycles and other factors related to our industry. Their advantage may also negatively impact our ability to acquire prospective properties, develop reserves, attract and retain quality personnel and raise capital.

7

Research and Development Activities

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

Governmental Regulations

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

Federal Regulation of Natural Gas.  The Federal Energy Regulatory Commission (“FERC”) regulates interstate natural gas transportation rates and service conditions, which may affect the marketing of natural gas produced by us, as well as the revenues that may be received by us for sales of such production. Since the mid-1980’s, FERC has issued a series of orders, culminating in Order Nos. 636, 636-A and 636-B (“Order 636”), that have significantly altered the marketing and transportation of natural gas. Order 636 mandated a fundamental restructuring of interstate pipeline sales and transportation service, including the unbundling by interstate pipelines of the sale, transportation, storage and other components of the city-gate sales services such pipelines previously performed. One of FERC’s purposes in issuing the order was to increase competition within all phases of the natural gas industry. The United States Court of Appeals for the District of Columbia Circuit largely upheld Order 636 and the Supreme Court has declined to hear the appeal from that decision. Generally, Order 636 has eliminated or substantially reduced the interstate pipelines’ traditional role as wholesalers of natural gas in favor of providing only storage and transportation service, and has substantially increased competition and volatility in natural gas markets.

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

Environmental Matters

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

These laws and regulations may:

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

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

·   Impose substantial liabilities for pollution resulting from its operations, or due to previous operations conducted on any leased lands.

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

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

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

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

Personnel

As of September 30, 2009, we had one full-time employee. As drilling production activities increase, we intend to hire additional technical, operational and administrative personnel as appropriate. We are using and will continue to use the services of independent consultants and contractors to perform various professional services, particularly in the area of land services, reservoir engineering, geology drilling, water hauling, pipeline construction, well design, well-site monitoring and surveillance, permitting and environmental assessment. We believe that this use of third-party service providers may enhance our ability to contain capital costs, general and administrative expenses.

Facilities

We currently maintain an office at 1001 Bayhill Drive, 2nd floor-Suite 200, San Bruno, California 94066 at a month to month fee of $190.

RESULTS OF OPERATIONS

Revenues (for the three months ended September 30, 2009 and 2008).

We have just begun our oil and gas exploration activities in Allen County, Kentucky and therefore have not generated any revenues to date.

Expenses (for the three months ended September 30, 2009 and 2008).

Operating expenses for the three months ended September 30, 2009 were $20,559, compared to $39,809 for the same period in 2008. The decrease in expenses during this period was primarily attributable to decreased consulting costs, professional fees, and administrative expenses. As we continue our efforts towards successful operations, we anticipate these amounts to increase over the next several quarters.

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Income/Losses (for the three months ended September 30, 2009 and 2008).

We had a net loss of $24,857 for the three months ended September 30, 2009. This compares to a net loss of $43,161 for the same period ended September 30, 2008. The decrease in net losses is attributable to the decreases in operating expenses mentioned above.

Liquidity and Capital Resources (for the three months ended September 30, 2009 and 2008).

Cash flows used in operations were $5,896 and $45,845 for the three months ended September 30, 2009 and 2008, respectively. The decreased cash flow used in operations was attributable to decreased prepaid expenses associated with our exploration activities. Pursuant to our agreement with JMACK energy, LLC, these funds were advanced and were to be utilized towards the development of our mineral leases located in Allen County Kentucky. As of September 30, 2009 all leases had expired and as a result the advanced funds were lost.

Cash flows used in investing activities were $0 and $57,033 for the three months ended September 30, 2009 and 2008, respectively. Our investing activities in 2008 were concentrated on the acquisition of mineral leases located in Allen County Kentucky. We acquired approximately 483 gross acres at $118 per acre in 2008. As of September 30, 2009 no acquisitions have been made.

Cash flows provided from financing activities were $10,000 and $0 for the three months ended September 30, 2009 and 2008, respectively.

Overall, we have funded our cash needs from inception through September 30, 2009 with a series of equity and debt transactions. We may need to continue to rely on financing from outside sources through debt or equity transactions. Failure to obtain such financing could have a material adverse effect on our operations and financial condition. This could include an inability to sufficiently implement our exploration plans. We could also find it more difficult to enter into strategic joint venture relationships with third parties. Finally, it would most likely delay the implementation of our business plan. An alternative plan of operation in the event of a failure to obtain financing would be to continue operations as currently configured, with the result being little, if any, projected growth. Another alternative would be to enter into a joint venture with another company that has working capital available, albeit on less favorable terms than had we obtained financing, for the development of our business plan.

At September 30, 2009, we had notes payable totaling $210,000.  Further, we have the option to repay the notes in shares of our common stock at a 15% discount to the five day average trading price as quoted on the Over-the Counter Bulletin Board at the time of conversion. At September 30, 2009 we have accrued interest related to this note in the amount of $24,999.

We had cash on hand of $6,600 and working capital of ($42,376) as of September 30, 2009. Our current amount of cash in the bank is insufficient to fund our operations for the next twelve months. We will rely on funding from outside sources; however, we have no current or projected capital reserves that will sustain our business for the next 12 months. We will need to obtain additional capital through equity or debt financing to sustain operations for an additional year. An inability to generate revenues during the remainder of fiscal 2009 will significantly affect the implementation of our business plan and make it necessary to raise additional funds through equity or debt financing. Our current level of operations and planned development would require capital of approximately $750,000 to sustain exploration and operations through fiscal 2009 and approximately $500,000 per year thereafter. Modifications to our business plans or additional property acquisitions may require additional capital for us to operate. There can be no assurance that additional capital will be available to us when needed or available on terms favorable to us.

On a long-term basis, liquidity depends on continuation and expansion of operations, receipt of revenues, and additional infusions of capital and debt financing. Our current capital and revenues are insufficient to fund such marketing. If we choose to launch such a campaign, we will require substantially more capital. If necessary, we will raise this capital through an additional stock offering. However, there can be no assurance that we will be able to obtain additional equity or debt financing in the future, if at all. If we are unable to raise additional capital, our growth potential will be adversely affected and we will have to significantly modify our plans. For example, if we are unable to raise sufficient capital to develop our business plan, we may need to:

-   Seek projects of lesser value or that may be less profitable  

-   Seek smaller projects, which are less capital intensive, in lieu of larger projects; or

-   Seek projects that are outside our current geographical area to generate revenue.

Going concern

As shown in the accompanying condensed financial statements, we have suffered recurring losses from operation to date and had an accumulated deficit of $412,376 as of September 30, 2009. These factors raise substantial doubt about our ability to continue as a going concern.

Management’s plans in regard to this matter are to raise equity capital and seek strategic relationships and alliances in order to generate revenues in an effort to generate positive cash flow. Additionally, we must continue to rely upon equity infusions from investors in order to improve liquidity and sustain operations. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Item 3.   Quantitative And Qualitative Disclosures About Market Risk

The information to be reported under this item is not required of smaller reporting companies.

Item 4T. Controls And Procedures.

DISCLOSURE CONTROLS AND PROCEDURES

Our management, including our Principal Executive Officer and Principal Financial Officer, has evaluated the design, operation, and effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon the evaluation performed by our management, including its Principal Executive Officer and Principal Financial Officer, it was determined that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including its Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosures.

Changes in Internal Control Over Financial Reporting

Our Principal Executive Officer and Principal Financial Officer have determined that, during the period covered by this quarterly report, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. They have also concluded that there were no significant changes in our internal controls after the date of the evaluation.

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PART II - OTHER INFORMATION

Item 1.Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

Item 1A.Risk Factors

The information to be reported under this item is not required of smaller public companies.

Item 2.      Unregistered Sales Of Equity Securities And Use Of Proceeds

We did not issue or sell any of our equity securities during the quarter ended September 30, 2009.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the quarter ended September 30, 2009.

Item 3. Defaults Upon Senior Securities

None.

Item 4.      Submission Of Matters To A Vote Of Security Holders

We did not submit any matters to a vote of our security holders during the quarter ended September 30, 2009.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description
3.1	Articles of Incorporation
3.2	Bylaws
31.1	CEO Certification Pursuant to Section 302
31.2	CFO Certification Pursuant to Section 302 (included in Exhibit 31.1)
32.1	CEO Certification Pursuant to Section 906
32.2	CFO Certification Pursuant to Section 906 (included in Exhibit 32.1)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PHOENIX ENERGY RESOURCE CORPORATION (Registrant)
Date: January 8, 2010	By:  /s/	Rene Soullier
		Rene Soullier, Chief Executive Officer