8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):  May 20, 2008

CONSOLIDATION SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware (State of other jurisdiction of incorporation) 333-142105 (Commission File Number) 20-8317863 (IRS Employer Identification No.)

2756 N. Green Valley Parkway, Suite 225

Henderson, NV 89014

(Address of principal executive offices)

Registrant’s telephone number, including area code  (702) 614-5333

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

 

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FORWARD LOOKING STATEMENTS

This Current Report on Form 8-K and other reports filed by Registrant from time to time with the Securities and Exchange Commission (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, Registrant’s management, as well as estimates and assumptions made by Registrant’s management. When used in the filings the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions as they relate to Registrant or Registrant’s management identify forward-looking statements. Such statements reflect the current view of Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to Registrant’s industry, Registrant’s operations and results of operati ons and any businesses that may be acquired by Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Although Registrant believes that the expectations reflected in the forward-looking statements are reasonable, Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with Registrant’s pro forma financial statements and the related notes filed herein.

Unless otherwise indicated or the context otherwise requires, all references below in this Current Report on Form 8-K to “we,” “us,” “our,” “Registrant,” “CSI” and the “Company” refer to Consolidation Services, Inc., a Delaware corporation and/or its wholly-owned subsidiary Vector Energy Services, Inc.  All references below in this Current Report on Form 8-K to “Buckhorn”, “it”, or “its” refers to Buckhorn Resources, LLC.

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

The Acquisition of Buckhorn Resources LLC

On May 20, 2008, the Company completed (the “Closing”) the acquisition of a fifty (50%) percent equity ownership interest in Buckhorn Resources LLC (“Buckhorn”), a Kentucky limited liability company, pursuant to that certain Property Agreement, dated March 27, 2008, between the Company and Billy David Altizer, Pat E. Mitchell, Howard Prevette, William Dale Harris (collectively, the “Sellers”) and Buckhorn, which appears as an exhibit to the Company’s Current Report on Form 8-K, filed with the SEC on March 31, 2008.  Other than in respect to this transaction, the Company did not have any material relationship with the parties to the Property Agreement.  

As of June 1, 2008, the Company acquired all of the capital stock of Vector Energy Services, Inc. (“Vector”), a Delaware corporation without any significant assets, from its Chief Financial Officer, John Francis.  The Company intends to conduct its energy resource business through Vector as a wholly-owned subsidiary upon transfer of various assets and agreements from CSI to Vector.  References in this report to CSI do not take into account the transfer of assets to Vector.

 

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Buckhorn owns approximately 10,000 acres of land in Eastern Kentucky, including all rights to coal on the property, except for a $.30 per ton coal right retained by an unaffiliated third party who is the former owner of the property.  CSI can use the surface rights on the first 5,200 acres, for which a higher value use has not been identified, at no additional charge for its proposed grass fed grazing/organic farming operations.  As additional acres become available for organic use by CSI, CSI shall have the right of first refusal on any offer made for agricultural use of the surface acres, unless or until a higher value use is determined.  

The total consideration for this acquisition was $4,200,000, consisting of: (i) $2,100,000 in cash or installment payments, whereby $550,000 was paid by the Company in cash at the Closing and $1,550,000 remains payable by the Company in installments over the next twelve months (a total of $600,000 of the cash consideration component will be used to fund development activities on the property, such as obtaining coal-mining permits); and (ii) an aggregate of 1,093,750 shares of the Company’s restricted common stock, valued at $1.92 per share, or $2,100,000 in the aggregate.  The shares are subject to a lock-up/leak-out agreement permitting aggregate weekly sales of up to 21,034 shares commencing on April 1, 2009. CSI will guarantee payment of the $2,100,000 value of the shares as long as the shares are sold in accordance with the terms of the lock-up.  Any proceeds from the sale of such common stock in excess of $4.80 per share (the “Surplus” as defined in the Property Agreement) shall be paid to CSI.  The information is provided herein about the business and securities of the post-Closing combined company reflecting consummation of the acquisition of Buckhorn (the “Buckhorn Transaction”).

Business of Buckhorn Resources LLC

Buckhorn is a Kentucky limited liability company that was formed in the State of Kentucky on October 13, 2004.  Buckhorn’s main business strategy is to engage in the ownership of properties possessing natural and energy resources, as well as non-coal real estate development.  Buckhorn currently owns about 10,000 acres of land in Eastern Kentucky as set forth in the Deeds filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K (the “Buckhorn Property”).  Although Buckhorn anticipates that most of its revenue will come from coal, Buckhorn will work with CSI to develop other sources of income on the Buckhorn Property, including those with respect to timber and non-coal real estate development.  CSI will independently use the land for its proposed organic farming after reclamation.

Buckhorn’s primary assets are its coal bearing properties in Eastern Kentucky.  Buckhorn will not operate any mines.  Instead, Buckhorn plans to enter into long-term leases with experienced, third-party coal mine operators and coal producers for the right to mine coal reserves on its properties in exchange for royalty payments.  Buckhorn expects its lessees to pay royalties based on the higher of a percentage of the gross sales price or a fixed price per ton of coal sold, with pre-established minimum annual tonnage requirements.  Because Buckhorn will not mine the coal, it expects to have relatively small operating expenses and capital expenditure requirements, as compared to mining companies.  Therefore, Buckhorn’s coal royalty business is expected to have relatively high margins.  Buckhorn will also contractually limit its exposure to liabilities asserted with the operation of coa l mines, including site or environmental reclamation costs.

 

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Buckhorn’s revenues and profitability will be largely dependent on the production of coal from reserves on its properties by proposed lessees.  Buckhorn’s coal royalty revenues will vary depending on the coal prices realized by its lessees, subject to specified minimum fixed rates per ton.  Buckhorn estimates that its proposed lessees will sell more than 80% of the coal they produce to customers pursuant to contracts with negotiated prices and terms of one year or more.  They will sell the remaining portion of the coal they produce on the spot market.  Therefore, Buckhorn’s coal royalty revenues are expected to be affected by changes in coal prices and its lessees' long-term supply contracts and, to a lesser extent, by fluctuations in the spot market prices for coal. A number of factors affect the prevailing price for coal, including demand, the price and availability of alternative fuel s, overall economic conditions and governmental regulations.

Buckhorn does not have the rights to the oil, gas and minerals underlying the Buckhorn Property; however, pursuant to the Option Oil, Gas and Mineral Agreement (the “Option Agreement”) with Eastern Kentucky Land Corporation, a Kentucky corporation (“EK”), CSI has the ability to acquire all right, title and interest in the oil, gas and other minerals under the Buckhorn Property, except for the $.30 per ton coal rights retained by EK, as more fully described below and in the Company’s Current Report on Form 8-K, filed with the Commission on April 2, 2008.  

Following the proposed reclamation of lands after the utilization of its natural resources, Buckhorn plans to be included in CSI’s organic certification and farming operations on the Buckhorn Property.  

In addition, there are approximately 23 miles of riverfront property that Buckhorn may use for residential real estate development if such use proves to be more advantageous than organic foodservice-related uses. In addition to coal, timber is a valuable natural resource that is available on the Buckhorn Property, which has commercial uses such as hardwood lumber, sawdust and woodchips, among other things.  

Competitive Business Conditions

The coal industry is highly competitive. Buckhorn’s main competition is with other companies that manage and own coal bearing properties and lease acreage in such properties to coal mine operators and coal producers.  The most important factors on which Buckhorn competes are price, coal quality and characteristics, proximity to transportation, royalty rates, and the reliability of supply. Demand for coal and the prices that we will be able to obtain for our coal are closely linked to coal consumption patterns of the domestic electric generation industry and international consumers. These coal consumption patterns are influenced by factors beyond our control, including demand for electricity, which is significantly dependent upon economic activity and summer and winter temperatures in the United States, government regulation, technological developments and the location, availability, quality and price of competing sources of fuel such as natural gas, oil and nuclear, and alternative energy sources such as hydroelectric power.

 

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Steam coal prices remained relatively flat through most of the mid-to-late 1990s. When long-term contracts for many producers began to expire in 2000 and beyond, new contracts were entered into reflecting then-current market demand and operating conditions. Coal prices increased significantly between 2000 and 2006, especially in the eastern regions of the United States. During 2006, mild weather conditions across the United States led to reduced electricity demand and higher coal inventory levels, resulting in a decline in spot steam coal prices.  In 2007, the pricing environment for coal, eastern U.S. coal in particular, became extremely favorable as production remained low while demand increased. This momentum in the eastern U.S. coal markets has only increased in 2008.  The coal sector, both globally and in the United States, has recently benefited from favorable market fundamentals. Currently, the global supply and demand balance for coal, as well as the overall inc rease in prices for commodities, such as natural gas and crude oil, has created a strong price environment for coal. Coal prices in certain regions, such as Central and Northern Appalachia, are at the highest levels experienced in the past decade.  Specifically, coal mined from Central Appalachia has increased in price from approximately $55 per short ton (as opposed to metric ton) in December 2007 to $108.25 per short ton according to the Energy Information Administration’s Coal News and Markets Data for May 30, 2008, which was released on June 2, 2008 and is available at http://www.eia.doe.gov/cneaf/coal/page/coalnews/coalmar.html.

Buckhorn’s sole asset is the land and the natural resources available under the Buckhorn Property. Buckhorn, however, lacks the proper facilities, infrastructure and equipment to extract such natural resources, so third party developers and/or mining operators need to be utilized for such purposes.  Buckhorn, in conjunction with selected coal mining operators, shall prepare and submit or cause to be prepared and submitted the documents required by regulatory agencies responsible for coal mining and reclamation of the Buckhorn Property.  Such documents include, but are not necessarily limited, to the following: surface coal mining permit applications, including mining and reclamation operation plans; mine license applications; applicable Division of Water permit applications; applicable permit applications required by the U.S. Army Corps. of Engineers; and mining plans required by the U.S. Mine Safety and Health Administration.  The mining and reclamation plan will be structured to provide for and enhance long term organic farming, with particular attention directed to cattle farming. One of the primary concerns for mine and reclamation planning will be an economic balance between mining and organic farming.  A primary consideration for the coal mine recovery plan will be to maximize the area available for cattle farming at any given time during the mining operation, to the extent practical.

Buckhorn anticipates mining activities and receipt of royalties to commence in calendar year 2008.  Buckhorn management believes based on their knowledge of the industry, that royalty rates are typically ten percent or approximately $10 per ton based on current prices for this quality of coal.  Through its 50% ownership of Buckhorn, CSI will keep 50% of all royalties received by Buckhorn.

 

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Marketing/Distribution

Buckhorn intends to enter into leases with various coal mining operators who will mine coal from the Buckhorn Property and market and distribute such coal in raw form to smaller electric utilities, industrial companies, and/or coal resellers.  Buckhorn’s marketing and sales efforts will be performed by its managing member(s), consultants and  independent coal brokers.  Buckhorn’s sales efforts primarily  are  focused on contacting the maximum number of coal mining companies to enhance bidding to mine coal underlying its properties. Buckhorn’s properties are located near some of the major coal hauling railroads that serve Central Appalachia, which it anticipates its lessees utilizing as their main distribution channels.  Buckhorn believes that the geographic location of Buckhorn’s properties will give lessees a transportation cost advantage, particularly with respect to coal produced in the western states, which would improve their competitive position and Buckhorn’s corresponding coal royalty revenues.

Government Approvals and Regulation

The coal mine operators Buckhorn intends to enter into leases with on its properties are obligated to conduct mining operations in compliance with all applicable federal, state and local laws and regulations.  To the extent permissible under applicable law, Buckhorn’s lessees will bear all costs and responsibilities for the item/expenditure as such lessees routinely do in all their coal mining operations.  The proposed coal mining operations on Buckhorn’s properties may subject its lessees to extensive federal, state and local regulations with respect to matters such as: employee health and safety; permitting and licensing requirements; air quality standards; water quality standards; plant, wildlife and wetland protection; blasting operations; the management and disposal of hazardous and non-hazardous materials generated by mining operations; the storage of petroleum products and other hazardous substances; reclamation and restoration of properties after minin g operations are completed; discharge of materials into the environment, including air emissions and wastewater discharge; surface subsidence from underground mining; and the effects of mining operations on groundwater quality and availability.

Numerous governmental permits and approvals are required to commence coal mining operations. Regulatory authorities exercise considerable discretion in the timing and scope of permit issuance. Requirements imposed by these authorities may be costly and time consuming and may result in delays in the commencement or continuation of exploration or production operations. In addition, Buckhorn and/or its lessees may be required to prepare and present to federal, state and local authorities data pertaining to the effect or impact that proposed exploration for or production of coal might have on the environment. Further, the public may comment on and otherwise engage in the permitting process, including through intervention in the courts. Accordingly, the permits Buckhorn and/or its lessees need may not be issued, or, if issued, may not be issued in a timely fashion, or may involve requirements that restrict its or its lessees ability to conduct mining operations or to do so profitably.  Buckhorn will bear the cost of obtaining the permits, however, selected coal mining operators will reimburse Buckhorn for those expenses.  Under some circumstances, substantial fines and penalties, including revocation of mining permits, may be imposed under the laws described herein. Monetary sanctions and, in severe circumstances, criminal sanctions may be imposed for failure to comply with these laws. Regulations also provide that a mining permit can be refused or revoked if the permit applicant or permittee owns or controls, directly or indirectly through other entities, mining operations which have outstanding environmental violations.

 

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Buckhorn will seek to have each of its lessees be contractually obligated under its leases to post a reclamation bond and, except as discussed above with respect to costs relating to permits, Buckhorn does not anticipate accruing costs because it anticipates that its lessees shall be contractually liable for all costs relating to their mining operations, to the extent permissible by law. As such, Buckhorn does not currently expect that future compliance will have a material adverse effect on its operations.  However, because of extensive and comprehensive regulatory requirements, violations during mining operations are not unusual in the industry and, notwithstanding compliance efforts, we do not believe violations by our lessees can be eliminated completely.  While it is not possible to quantify the costs of compliance by Buckhorn’s lessees with all applicable federal and state laws, those costs are expected to be significant. Although Buckhorn’s lessees typically accrue adequate amounts to cover these costs, their future operating results would be adversely affected if they later determined these accruals to be insufficient. Compliance with government regulation and laws has substantially increased the cost of coal mining for le ssees, such as those Buckhorn intends to contract with, as well as other domestic coal producers.

The Surface Mining Control and Reclamation Act of 1977, or SMCRA, which is administered by the U.S. Office of Surface Mining Reclamation and Enforcement, or OSM, establishes mining, environmental protection and reclamation standards for all aspects of U.S. surface mining. The State of Kentucky has primacy over surface coal mining operations. That means that the state program has been patterned after the federal program and has been approved by OSM. Mine operators must obtain SMCRA permits and permit renewals for mining operations from the state regulatory agency.

SMCRA permit provisions include requirements for coal prospecting; mine plan development; topsoil removal, storage and replacement; selective handling of overburden materials; mine pit backfilling and grading; protection of the hydrologic balance; subsidence control for underground mines; surface drainage control; mine drainage and mine discharge control and treatment; and re-vegetation.

The coal mining permit application process is initiated by collecting baseline data to adequately characterize the pre-mine environmental condition of the permit area.   Once a permit application is prepared and submitted to the regulatory agency, it goes through a completeness and technical review. Public notice of the proposed permit is given for a comment period before a permit can be issued. Some SMCRA mine permits take over a year to prepare, depending on the size and complexity of the mine and often take six months to two years to be issued. Regulatory authorities have considerable discretion in the timing of the permit issuance and the public has the right to comment on and otherwise engage in the permitting process, including public hearings and through intervention in the courts.

Before a SMCRA permit is issued, a mine operator must submit a bond or other form of financial security to guarantee the performance of reclamation obligations.  This bonding/permitting process is expected to serve Buckhorn well, as this insures that the mine operator will reclaim the land as specified in the permit for CSI’s organic production activities.  

 

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The Abandoned Mine Land Fund, which is part of SMCRA, requires a fee on all coal produced in the U.S. The proceeds are used to rehabilitate lands mined and left unreclaimed prior to August 3, 1977, and to pay health care benefit costs of orphan beneficiaries of the “combined fund.”

SMCRA requires compliance with many other major environmental programs. These programs include the Clean Air Act; Clean Water Act; Resource Conservation and Recovery Act, or RCRA; and Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, commonly known as Superfund. Besides OSM, other Federal regulatory agencies are involved in monitoring or permitting specific aspects of mining operations. The U.S. Environmental Protection Agency, or EPA, is the lead agency for States or Tribes with no authorized programs under the Clean Water Act, RCRA and CERCLA. The U.S. Army Corps of Engineers regulates activities affecting navigable waters and the U.S. Bureau of Alcohol, Tobacco and Firearms regulates the use of explosive blasting.

In addition to regular property taxes, Kentucky's Revenue Cabinet assesses Buckhorn’s coal property each year.  Buckhorn’s lessees may be in disagreement as to the value they place on our reserves. If informal discussions do not settle the disagreement, the lessees must file a formal protest, which is a more formal process seeking a compromise. Failure to compromise results in an appeal to the Kentucky Board of Tax Appeals. The decision of the board can be appealed to the relevant Circuit Court and on through the appellate process. Complying with existing regulations for filing unmined coal returns is very expensive and time consuming. The coal owner is required to map and list all mineable coal on his tax return. If the owner believes a boundary of coal is not mineable, but the Revenue Cabinet believes it is, the Revenue Cabinet will take the position that the coal was "omitted", and assess a penalty along with interest. The Revenue Cabinet may also consider a boundary as "omitted" if the owner lists it but at nominal value.  Buckhorn may have ongoing negotiations and litigation with the Revenue Cabinet over its assessments and returns.  However, Buckhorn plans for its coal leases to require that the lessee reimburse Buckhorn for all unmined mineral taxes paid on coal they have leased.

At the present time, Buckhorn does not believe there are any matters that would materially hinder its ability to acquire mining permits.

Environmental Laws

The recent trend in environmental legislation and regulation generally is toward stricter standards, and this trend is expected to continue. These laws and regulations may require the acquisition of a permit or other authorization before construction, mining or drilling commences and for certain other activities; limit or prohibit construction, mining, drilling and other activities on certain lands lying within wilderness and other protected areas; and impose substantial liabilities for pollution resulting from our operations. The permits required for such mining and drilling operations are subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines, penalties or injunctions.  These obligations and responsibilities are those of the coal mining operators to whom Buckhorn will lease its properties.

 

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Buckhorn and its lessees will be subject to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), also known as the "Superfund" law, and similar state laws that impose liability on certain classes of persons that are considered to have contributed to the release of a "hazardous substance" into the environment without regard to fault or the legality of the original conduct. These persons include the owner or operator of the disposal site or sites where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources.  As the owner of the land upon which mining and other energy-related operations are anticipated to take place Buckhorn may be held strictly liable as a responsible party under CERCLA, along with any of its lessees.  Furthermore, neighboring landowners and other third parties may file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.

Buckhorn’s lessees will be subject to the Federal Clean Water Act and corresponding state laws which affect coal mining operations by imposing restrictions on discharges into regulated waters. Permits requiring regular monitoring and compliance with effluent limitations and reporting requirements govern the discharge of pollutants into regulated waters. New requirements under the Federal Clean Water Act and corresponding state laws could cause Buckhorn’s lessees mining operators to incur significant additional costs that adversely affect our future operating results.

Buckhorn’s lessees will be subject to the Federal black lung laws promulgated by the United States Department of Labor in connection with the lessees’ proposed coal mining operations as well as be affected by the Clean Air Act and similar state and local laws, which extensively regulate the amount of sulfur dioxide, particulate matter, nitrogen oxides, mercury and other compounds emitted into the air from electric power plants, which are the largest end-users of most coal producers.

Buckhorn’s lessees will be subject to Resource Conservation and Recovery Act (“RCRA”).  RCRA, which was enacted in 1976, affects U.S. coal mining operations by establishing “cradle to grave” requirements for the treatment, storage and disposal of hazardous wastes. Typically, the only hazardous materials found on a mine site are those contained in products used in vehicles and for machinery maintenance. Coal mine wastes, such as overburden and coal cleaning wastes, are not considered hazardous waste materials under RCRA, however, this may not be the case in connection with any oil and natural gas resources underlying the Buckhorn Property.  In May 2000, the EPA concluded that coal combustion materials do not warrant regulation as hazardous under RCRA. The EPA is retaining the hazardous waste exemption for these materials. The EPA is evaluating national non-hazardous waste guidelines for coal combustion materials placed at a mine. Nation al guidelines for mine-fills may affect the cost of ash placement at mines.

 

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Buckhorn’s lessees may be affected by a regional haze program originally developed in 1999 by the U.S. Environmental Protection Agency (the “EPA”) to improve visibility in national parks and wilderness areas. In June 2005, the EPA announced final amendments to its regional haze program. As part of the new rules, affected states must develop implementation plans within the 2003-2008 timeframe that, among other things, identify facilities that will have to reduce emissions and comply with stricter emission limitations. This program may restrict construction of new coal-fired power plants where emissions are projected to reduce visibility in protected areas. In addition, this program may require certain existing coal-fired power plants to install emissions control equipment to reduce haze-causing emissions such as sulfur dioxide, nitrogen oxide, and particulate matter. Demand for coal mined by our prospective lessees could be affected when these new standards are implemented by the applicable states.

The Kyoto Protocol to the United Nations Framework Convention on Climate Change calls for developed nations to reduce their emissions of greenhouse gases to five percent below 1990 levels by 2012. Carbon dioxide, which is a major byproduct of the combustion of coal and other fossil fuels, is subject to the Kyoto Protocol. The Kyoto Protocol went into effect on February 16, 2005 for those nations that ratified the treaty.  In 2001, the United States withdrew its support for the Kyoto Protocol. There has been increasing international pressure on the United States to adopt mandatory restrictions on carbon dioxide emissions and the U.S. Congress is actively considering legislation to reduce emissions of greenhouse gases. By comparison, many states and regional organizations have already taken legal measures to reduce emissions of greenhouse gases, primarily through the planned development of regional greenhouse gas cap and trade programs.

Buckhorn’s lessees may be affected by the Federal Endangered Species Act and counterpart state legislation that protects species threatened with possible extinction. Protection of endangered species may have the effect of prohibiting or delaying Buckhorn and/or its lessees from obtaining mining permits and may include restrictions on timber harvesting, road building and other mining or forestry activities in areas containing the affected species. A number of species indigenous to Central Appalachia are protected under the Endangered Species Act.  Buckhorn does not believe there are any species protected under the Endangered Species Act that would materially and adversely affect its lessees' ability to mine coal from our properties in accordance with current mining plans or our ability to sell timber growing on our properties for harvest. Additional species on Buckhorn’s properties may receive protected status under the Endangered Species Act and additional currently protected species may be discovered within its properties.  

Mine Health and Safety Laws. Stringent safety and health standards have been imposed by federal legislation since the adoption of the Mine Health and Safety Act of 1969. The Mine Health and Safety Act of 1969 resulted in increased operating costs and reduced productivity. The Mine Safety and Health Act of 1977, which significantly expanded the enforcement of health and safety standards of the Mine Health and Safety Act of 1969, imposes comprehensive safety and health standards on all mining operations. In addition, as part of the Mine Health and Safety Acts of 1969 and 1977, the Black Lung Acts require payments of benefits by all businesses conducting current mining operations to coal miners with black lung and to some survivors of a miner who dies from this disease.

 

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By Executive Order dated September 21, 2001, Kentucky's Governor Patton established a moratorium on permits for non-coal mining operations and the review of permits and laws regarding oil and gas wells in the Pine Mountain area.  The stated purpose of the order is to protect the environment and scenic landscape along the Pine Mountain Trail.  Viewscape or viewshed is now being recognized as a factor to be considered in Lands Unsuitable Petitions. However, legislation adopted in March 2002 establishing the Pine Mountain Trail as a park includes specific findings that the park boundaries are adequate to protect the trail and that use of lands outside the boundary of the park will not be restricted because those lands may be viewed from the park. If this legislation was challenged and a lands unsuitable for mining petition seeking denial of mining permits where mining would be within the view from the park were successful, it could have a material impact on our business, f inancial condition or results of operations, as the view from the top of Pine Mountain extends through the counties of Harlan, Leslie, Letcher and Perry.

The Kentuckians for the Commonwealth filed a lawsuit on August 21, 2001 in a federal district court in Charleston, West Virginia, Kentuckians for the Commonwealth v. Rivenburgh, related to valley fills in streams of Martin County, Kentucky. Plaintiffs alleged that the U.S. Corps of Engineers ("Corps") violated the Clean Water Act and the National Environmental Policy Act. Specifically, the lawsuit claims that the Corps of Engineers has no authority under the Clean Water Act to issue permits allowing valley fills in streams. In the alternative, plaintiffs claimed that:

•

the Corps violated the Clean Water Act by issuing Nationwide Clean Water Act Section 404 dredge and fill permits for valley fills rather than site specific permits;

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the Corps violated the National Environmental Policy Act by approving these permits without preparing an environmental impact statement;

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the Corps may not issue these permits without analyzing measures required by the Clean Water Act to avoid and minimize impact on streams; and

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the Corps cannot authorize disposal without waiting for the U.S. EPA to complete proceedings under the Clean Water Act to veto the proposed permit.

The plaintiffs sought an injunction prohibiting the Corps from issuing any new permits allowing valley fills in streams or, in the alternative, requiring revocation of the specific permits subject to this litigation. On May 8, 2002, the court granted the injunction requested by the plaintiffs.

On January 29, 2003 the Fourth Circuit reversed this injunction which prohibited the Army Corp of Engineers from issuing new Section 404 permits for the deposit of mountaintop debris in valley fills, indicating that issuance of permits did not violate the Clean Water Act.  

 

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The Corps are authorized to issue general "nationwide" permits for specific categories of activities that are similar in nature and that are determined to have minimal adverse environmental effects. Nationwide Permit 21 authorizes the disposal of dredged or fill material from surface coal mining activities into the waters of the United States. A July 2004 decision by the U.S. District Court for the Southern District of West Virginia in Ohio Valley Environmental Coalition v. Bulen enjoined the Huntington District of the Corps from issuing further permits pursuant to Nationwide Permit 21. While this decision was vacated by the U.S. Court of Appeals for the Fourth Circuit in November 2005, it has been remanded to the District Court for the Southern District of West Virginia for further proceedings consistent with the appellate court’s opinion.  Buckhorn and/or its lessees may utilize Nationwide Permit 21 authorizations in the future, and this and other court cases have created uncertainty regarding our ability to utilize this form of permit in the future for the disposal of dredged or fill material.

Plaintiff environmental groups have also recently challenged the Corps' decision to issue individual Clean Water Act or “CWA” Section 404 permits for certain surface coal mining activities. On March 23, 2007, in the case Ohio Valley Environmental Coalition v. U.S. Army Corps of Engineers, the U.S. District Court for the Southern District of West Virginia rescinded permits authorizing the construction of valley fills at a number of separate surface coal mining operations, finding that the Corps had issued the permits arbitrarily and capriciously in violation of the National Environmental Policy Act and the CWA. On June 19, 2007, the District Court issued a declaratory judgment indicating that the mining companies in the case were also required to obtain separate CWA Section 402 permit authorizations for discharges into the stream segments located between the toes of their valley fills and their respective sediment pond embankments against the construction of valley fills. In December 2007, plaintiff environmental groups brought a similar suit against the issuance of a different surface coal mine permit in the U.S. District Court for the Eastern District of Kentucky, alleging identical violations. The Corps has voluntarily suspended its permit in that case for agency re-evaluation. Although permits for our mining operations are not presently affected by either case, it is possible that we may be unable to obtain or may experience delays in securing, utilizing or renewing CWA Section 404 individual permits for surface mining operations due to agency or court decisions stemming from these cases.

Buckhorn’s lessees may use explosives in connection with their surface mining activities. The Federal Safe Explosives Act ("SEA"), applies to all users of explosives. Knowing or willful violations of the SEA may result in fines, imprisonment, or both. In addition, violations of SEA may result in revocation of user permits and seizure or forfeiture of explosive materials.  

Other Environmental Laws Affecting Lessees. Buckhorn’s lessees will be required to comply with numerous other federal, state and local environmental laws in addition to those previously discussed. These additional laws include, for example, the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the Toxic Substance Control Act, and the Emergency Planning and Community Right-to-Know Act.  

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Research and Development

Our business plan is focused on a strategy for maximizing the short-term mining and development of our coal, oil and natural gas resources underlying the Buckhorn Property.  For the fiscal years ended December 31, 2007 and 2006, Buckhorn incurred $44,094 and $51,198, respectively, in professional fees.  These expenses are comprised of legal fees and other fees and expenses incurred in maintaining Buckhorn’s land holdings.  Included in these amounts were $17,284 and $37,760 paid or accrued to A&L Surveying, LLC owned by David Altizer, the Managing Member and General Manager of Buckhorn, for surveying the Buckhorn Property.  To date, the execution of our business plan has largely focused on securing the rights to such coal resources and the evaluation of acquired data.  At this stage, based on the information we have gathered, we are moving forward with our coal mining development plan and in connection with the Buckhorn Transaction, CSI will fund Buckhorn directly with a capital contribution of $600,000 to facilitate the development of mining and coal development operations on the Buckhorn Property.  

Employees

Buckhorn does not have any employees and relies on the services of its managing member, in connection with operational and related matters, as well as third party service providers, with respect to the development of coal and other natural resources underlying our property.  Depending on the level in which our coal mining operations and natural resource development activities increase, we may need to hire employees to assist our managing member or engineers in connection with the initial permitting of the Buckhorn Property, as the needs arise.  We anticipate that any such employees would be hired on a part-time or contract basis or such services will be provided by coal mining companies as part of the lease process.

Properties

Our corporate headquarters is located at 380 Barbourville Road, London, Kentucky. The London, Kentucky office space consists of approximately 2,000 square feet.  We occupy this facility under a verbal agreement provided by our managing member on a rent-free basis.  We believe that our existing facilities are adequate for our current and reasonably anticipated future needs.

In addition, Buckhorn holds title to approximately 10,000 acres of land in Perry and Leslie counties.  As set forth under “Legal Proceedings” below Buckhorn was sued and has counterclaimed in a title dispute over approximately an additional 700 acres of land for which it claims ownership, As set forth in the Deeds filed herewith as Exhibits 10.1 and 10.2, respectively, the grantor of the Buckhorn Property reserved a $.30 per ton royalty for all coal mined by any party from the Buckhorn Property.

 

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The grantor also retained all rights to the oil, gas, and minerals underlying the Buckhorn Property.  However, on March 31, 2008, CSI entered into an Option Oil, Gas and Mineral Agreement (the “Option Agreement”) with Eastern Kentucky Land Corporation, a Kentucky corporation (“EK”), which provides that the Company shall have until October 1, 2008 (the “Option Period”) to close the Oil, Gas and Mineral Agreement, attached as Exhibit A to the Option Agreement (the “Rights Agreement”), as disclosed in CSI’s Current Report on Form 8-K, filed with the SEC on April 2, 2008. Under the Rights Agreement, CSI shall acquire all right, title and interest in the oil, gas and other minerals, except for the $0.30 per ton coal rights retained by the grantor as described in the above paragraph.   The Option Agreement extended the time to close on the Rights Agreement to allow for CSI’s performance of due diligence activities in conn ection with the purchase of the oil, gas and mineral rights on the Buckhorn Property, while allowing CSI to retain the agreed upon financial and other terms existing under the Rights Agreement.  However, CSI may exercise the option to close the Rights Agreement at any time during the six month Option Period.   

Buckhorn management anticipates mining activities and receipt of royalties to commence in calendar year 2009.  Management believes, based on its knowledge of the industry, that given current prices for this quality of coal, royalty rates are typically ten percent or approximately $10 per ton.  Based on CSI’s 50% ownership of Buckhorn, CSI will receive 50% of all royalties received by Buckhorn.  One managing member of Buckhorn has considerable experience in engineering, development and monitoring coal mining on a number of projects, including award winning reclamation projects. Other members of Buckhorn also have considerable experience in timber harvest and natural gas/oil drilling and all aspects of project planning and permitting required to assist CSI in developing a model production site, with profitable energy development.

The reclamation process, following mining of the coal on the Buckhorn Property, is expected to enhance and benefit the planned organic farming operations through the development of an estimated $1,000 per acre in infrastructure on the Buckhorn Property. The coal mining reclamation efforts will develop pastures of specific sizes, good roads to pastures and to approximately 400 natural gas/oil well drilling sites, ponds and watering sites throughout the property, reshape steep relatively inaccessible slopes to gentle slopes by lowering the peaks and filling the hollows, and seeding the pastures with Company selected species and varieties to maximize production.  The permits filed are specific and the reclamation performance will be bonded.

Harvest of timber resources on the Buckhorn Property is expected to provide additional revenues and materials to build fences and other facilities to benefit planned organic production operations. The reclamation program will include re-establishing trees in certain areas around pastures to provide shade and wind breaks for domestic animals and shelter for wildlife. The property is expected to have enhanced beauty, utility and productivity when fully developed and serve as a model organic production unit for CSI.  

 

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Legal Proceedings

Begley Properties, LLC v. Buckhorn Resources, LLC, Leslie Circuit Court Case No. 05-CI-00275.  Begley Properties, LLC (hereinafter, “Begley”) filed an action against Buckhorn Resources, LLC (hereinafter, “Buckhorn”) in the Leslie Circuit Court on September 29, 2005. The Complaint is an action to quiet title to certain parcels of property located in Leslie and Perry Counties in Kentucky.  Most recently, Begley Properties filed a motion for summary judgment in this case. Buckhorn has filed a response to Begley’s Motion for Summary Judgment, a Motion to Strike the Motion for Summary Judgment and a Statement of Disputed Facts. Begley’s motion is before the court for a ruling. It is unknown when the judge will make a ruling on the motion for summary judgment. Further, the likelihood of an unfavorable outcome in this matter is impossible to determine. The amount of loss Buckhorn would suffer in the event of an unfavorable outcome is unknown and c annot reasonably estimated at this time.

Market Price of and Dividends on Buckhorn’s Equity and Related Stockholder Matters

There is currently no public trading market for Buckhorn Resources, LLC membership units and we are not aware of any market activity in our membership units since inception on September 15, 2004.  Further, Buckhorn does not anticipate that a trading market will develop. The membership units are subject to transfer restrictions under Buckhorn's Amended and Restated Operating Agreement, dated as of May 20, 2008 and filed herewith as Exhibit 4.1 (the “Operating Agreement”) and are not freely transferable.  As of June 1, 2008, one hundred percent of the membership units were issued and outstanding to the five (5) membership unit holders of record listed in the “Security Ownership of Certain Beneficial Owners and Management of Buckhorn Resources LLC” table, below.  Although there is no indication that Buckhorn’s management and/or unitholders presently intend to sell, the aforementioned membership units are available for re-sale under Rule 144 pr omulgated under the Securities Act of 1933, as amended, provided the applicable conditions thereunder are satisfied and subject to the terms and restrictions on transfer in the Operating Agreement.

The Operating Agreement requires that Buckhorn allocate its net profits and losses (Including profits and losses attributable to the sale or other disposition of all or any portion of the Company’s property) among the Members based on their ownership percentages (as listed in Schedule A to the Operating Agreement) or in accordance with their capital accounts, which remain subject to change in accordance with the Operating Agreement.  The terms “net profits” and “net losses,” as used herein, shall mean the net amount of Buckhorn’s profits and losses, respectively, as determined for federal income tax purposes, and shall also include each Member’s share of income, expenditures, any expenditures which are not deducted or amortized, basis adjustments, and losses not deductible, in each case under the applicable sections of the Code as provided in the Operating Agreement.  Buckhorn’s profits and losses shall be allocated to the Members in accordance with the portion of the year during which the Members have held their respective interests.  All items of income and loss shall be considered to have been earned ratably over the fiscal year of the Company, except that gains and losses arising from the disposition of assets shall be taken into account as of the date thereof.  From time to time, but not less often than quarterly, each Member’s share of profits, losses and distributions shall be credited or charged, as the case may be, to such Member’s^. capital account.

Buckhorn has not paid any dividends or distributions since its inception, and presently anticipates that it will not declare dividends or distributions in the foreseeable future. Any future dividends or distribution will be subject to the discretion of Buckhorn’s managing members and will depend upon, among other things, its future earnings, operating and financial condition, capital requirements and general business conditions and other pertinent facts.

 

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Buckhorn does not currently have an equity compensation plan.

Recent Sales of Unregistered Securities of Buckhorn Resources, LLC

On or about September 15, 2004, Buckhorn issued membership units to its four (4) members representing one hundred percent (100%) of its issued and outstanding membership units as consideration for $1,000,000 in aggregate capital contributions.  Both of the offering and the sale of the membership units was conducted pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereunder. No placement agent or underwriter was used in connection with either the offering or the sale of the membership units and there is no commission, finder's fee or other compensation due or owing to any party as a result of the transactions described herein.  

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Results of Operations For the Years ended December 31, 2007 and 2006  

Revenues.  Buckhorn did not have any business operations or revenues during the years ended December 31, 2007 and 2006.  Buckhorn expects that its initial revenues will be derived from coal royalties or other energy revenues from our land acquisitions prior to such properties being reclaimed for organic farming beginning in 2009.

Operating expenses. Buckhorn has incurred general and administrative expenses of $15 for the year ended December 31, 2007, compared to $10,063 for the year ended December 31, 2006.  Buckhorn also incurred $44,094 of professional fees in 2007 compared to $51,198 in 2006.  These expenses are comprised primarily of legal fees and other fees and expenses incurred in maintaining Buckhorn’s land acquisitions and holdings.  Buckhorn expects its operating expenses in 2008 to increase as it prepares its real estate holdings for development.

Net loss. Net loss was $44,109 for the year ended December 31, 2007, compared to $61,261 for the year ended December 31, 2006.

Material Changes in Financial Condition, Liquidity and Capital Resources as of December 31, 2007

Buckhorn had cash of $329, no restricted cash and a working capital deficit of $55,406 at December 31, 2007.  The working capital deficit reflects the increase in accounts payable and accrued expenses.

Net cash provided by operating activities was $3,244 for the year ended December 31, 2007, compared to cash used of $52,879 for 2006.  This increase was fully attributable to the net loss of $44,109 for the year ended December 31, 2007, being smaller than the net loss of $61,261 for the year ended December 31, 2006, and was offset by an increase in accounts payable and accrued expenses of $47,353 during the year ended December 31, 2007.

Net cash was used in investing activities of $37,760 (compared to cash used of $17,284 for 2006), was primarily used in connection with land development and improvements.

 

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Net cash provided by financing activities was $34,588 (compared to cash provided of $26,310 for 2006), representing members’ equity contributions.

As a result of the foregoing, Buckhorn had a net increase in cash of $72 for the year ended December 31, 2007, as compared with a decrease in cash of $43,853 for the year ended December 31, 2006.

Buckhorn had an accumulated deficit of $155,825 as of December 31, 2007.  Buckhorn also has limited liquidity and has not established a stabilized source of revenues sufficient to cover operating costs over an extended period of time.  These factors raise substantial doubt about Buckhorn's ability to continue as a going concern.  Buckhorn’s independent registered public accounting firm has included an explanatory paragraph expressing doubt about its ability to continue as a going concern in their audit report for the year ended December 31, 2007.

Buckhorn’s future liquidity and cash requirements will depend on a wide range of factors, including the acquisition of operating businesses and/or revenues derived from the development of energy resources on land acquired for organic farming.  This was the reason for the sale of a 50% interest in Buckhorn to CSI on May 20, 2008.  In particular, Buckhorn expects to raise capital or seek additional financing. While there can be no assurance that such raising of capital or seeking of additional financing would be available in amounts and on terms acceptable to Buckhorn, management believes that such financing would likely be available on acceptable terms.

Results of Operations For the Three Month Period Ended March 31, 2008, As Compared to the Three Month Period Ended March 31, 2007

Revenues.  Buckhorn did not have any revenues during the three months ended March 31, 2008 nor in the three months ended March 31, 2007.  Buckhorn expects that its initial revenues will be derived from coal royalties or other energy revenues resulting from the sale of a 50% interest in Buckhorn to CSI on May 20, 2008.  Buckhorn expects that its land will subsequently be reclaimed for organic farming beginning in 2009.

Operating expenses. Total general and administrative expenses for the first quarter of 2008 were $15, compared to $15 for the comparable period of 2007.  Buckhorn also incurred $6,519 of professional fees in 2008 compared to $24,878 in the comparable period of 2007.  These expenses are comprised primarily of legal fees and other fees and expenses incurred in maintaining Buckhorn’s land acquisitions and holdings. Buckhorn expects its operating expenses in 2008 to increase as it prepares its real estate holdings for development.

Net loss. Net loss was $6,534 for the quarter ended March 31, 2008 compared to $24,893 for the quarter ended March 31, 2007.

Material Changes in Financial Condition, Liquidity and Capital Resources as of March 31, 2008

Buckhorn had cash of $314, no restricted cash and a working capital deficit of $61,940 at March 31, 2008.  The working capital deficit reflects the increase in accounts payable and accrued expenses.

 

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Net cash used in operating activities was $15 for the quarter ended March 31, 2008 (compared to cash used of $24,893 for 2007). The net loss of $6,534 for the quarter ended March 31, 2008, was reduced from $24,893 during the comparable period of 2007, and offset by an increase in accounts payable and accrued expenses of $6,519.

Net cash used in investing activities was zero in the quarters ended March 31, 2008 and 2007.  In 2006, net cash of $1,028,173, was used in connection with land development and improvements.

Net cash provided by financing activities was $-0- during the quarter ended March 31, 2008, as compared to cash provided of $28,085 for 2007, representing members’ equity contributions.

As a result of the foregoing, Buckhorn had a net decrease in cash of $15 for the quarter ended March 31, 2008.

Buckhorn had an accumulated deficit of $162,359 as of March 31, 2008.  Buckhorn also has limited liquidity and has not established a stabilized source of revenues sufficient to cover operating costs over an extended period of time.  These factors raise substantial doubt about Buckhorn's ability to continue as a going concern.

Buckhorn ’s future liquidity and cash requirements will depend on a wide range of factors, including the acquisition of operating businesses and/or revenues derived from the development of energy resources on land acquired for organic farming.  In particular, Buckhorn expects to raise capital or seek additional financing. While there can be no assurance that such raising of capital or seeking of additional financing would be available in amounts and on terms acceptable to Buckhorn, management believes that such financing would likely be available on acceptable terms.

Buckhorn has no off-balance sheet transactions.

Security Ownership of Certain Beneficial Owners and Management of Buckhorn Resources LLC

The following table sets forth information regarding the beneficial ownership of one hundred (100%) of all issued and outstanding Buckhorn membership units as of June 1, 2008.  Unless otherwise indicated, Buckhorn believes that all persons named in the table have sole voting and investment power with respect to all units beneficially owned by them.  There are currently no agreements that may result in a change of control, other than the recent acquisition by CSI of a 50% interest in Buckhorn.  Membership units were not certificated and are based on the respective Member’s capital contributions and ownership percentages as set forth on Schedule A to the Amended and Restated Operating Agreement of Buckhorn.

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Name and Address of Beneficial Owner (1)	Amount and Nature of Beneficial Ownership (2)
Pat E. Mitchell (3)	12.5%
Howard Prevette (3)	12.5%
William Dale Harris (3)	12.5%
Billy David Altizer (3)	12.5%
Consolidation Services, Inc.(4)	50%
Total	100%

(1)

Unless otherwise noted, the business address of each of the individuals is c/o Buckhorn Resources, LLC, 380 Barbourville Rd., London, Kentucky 40744.

(2)

Ownership percentages are based on the amount of capital contributions made to Buckhorn and represent one hundred percent of the issued and outstanding membership units of Buckhorn, following CSI’s acquisition of a fifty (50%) percent ownership interest in Buckhorn on May 20, 2008.

(3)

These were the four (4) initial members of Buckhorn Resources, LLC.  Prior to the recent CSI acquisition of a 50% interest, such members each had a 25% ownership interest in Buckhorn Resources, LLC.

(4)

The address of the membership unit holder is 2756 N. Green Valley Parkway, Suite 225, Henderson, NV 89014.

Management of Buckhorn Resources LLC

The following table provides information concerning the managing member(s) of Buckhorn. All managing members hold office until the resignation, death or judicial adjudication of incompetence in accordance with Buckhorn’s Bylaws.   

Names	Age	Position
Billy David Altizer	53	Managing Member
Johnny R. Thomas	66	Managing Member

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Billy David Altizer.  Billy David Altizer has been a managing member and the General Manager of Buckhorn Resources, LLC since inception on September 15, 2004.  He is currently one of two managing members following the appointment of Johnny R. Thomas as a managing member as of June 1, 2008.  For more than the past five years, Mr. Altizer has owned and managed an engineering consulting and surveying company and holds professional qualifications as Licensed/Registered Professional Engineer in Kentucky and Tennessee and as a Licensed Professional Surveyor in Kentucky.  In addition, Mr. Altizer serves as Managing Member and General Manager for two coal property development companies operating in Lee and Owsley Counties, Kentucky. Mr. Altizer received his Bachelor of Science Engineering of Mines and graduated cum laude from West Virginia University in 1979.  After graduating from West Virginia University, he worked as the manager of engineering fo r two coal companies.  Mr. Altizer was also in the United States Air Force Academy from 1973-1975.  Mr. Altizer serves on the board of directors for two non-profit organizations, Christ Church for the Blind and The Bennett Center.  Mr. Altizer has not been involved in any legal proceedings (including bankruptcies, criminal proceedings, prohibitions, regulatory actions, removal of licenses or other similar actions) within the past five years.

Johnny R. Thomas was appointed managing member of Buckhorn as of June 1, 2008, in connection with CSI’s purchase of its ownership interest in Buckhorn.  Mr. Thomas has served as Chairman of the Board, Chief Executive Officer and President of CSI since its inception on January 26, 2007. For more than the past five years, Dr. Thomas has been self employed as an investor in securities, real estate and limited custom home development. Since January 2000, Dr. Thomas has been a managing member of Falcon Financial Group, LLC, financial consultants. Prior thereto, he was a founder and served as Chairman of the Board and CEO of AgriBioTech, Inc. from September 1993 until February 1999. AgriBioTech and several of its subsidiaries filed a voluntary petition for bankruptcy in January 2000 (and was subsequently liquidated in Chapter 7), approximately eleven months following Dr. Thomas’s departure from the company.  Dr. Thomas recei ved his Ph.D. in genetics/plant breeding from Oregon State University in 1966.

Buckhorn utilizes the independent standards as are defined in Rule 4200(a)(15) of the listing standards for the Nasdaq Stock Market.  Mr. Altizer and Mr. Thomas, our two Managing Members, respectively, are not considered “independent” under such criteria.  Buckhorn does not utilize any other definition or criteria for determining the independence of a Managing Member or nominee, and no other transactions, relationships, or other arrangements exist to Buckhorn’s knowledge or were considered by Buckhorn, other than as may be discussed herein, in determining any such Managing Member’s or nominee’s independence.

Executive Compensation

The following table shows information concerning all compensation paid for services to Buckhorn in all capacities as of December 31, 2007:

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Summary Compensation Table

Name and Principal Position(s)	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Award(s) ($)	Non Equity Incentive Plan Compensation ($)	Non Qualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Billy David Altizer, Managing Member (1)	2007	$-0-	$ -0-	$ -0-	$0	$ -0-	$ -0-	$37,760(2)	$37,760

(1)

Served as a Managing Member and General Manager from September 15, 2004 (inception) through present.

(2)

Compensation received for surveying services provided by A&L Surveying, LLC, a Kentucky limited liability company which includes $5,889 credited as additional paid-in-capital on behalf of Mr. Altizer, $16,133 paid in 2007, and an additional $15,758 accrued as of December 31, 2007 and paid in 2008.

Certain Relationships and Related Transactions

In the fiscal years ended December 31, 2007 and 2006, as well as during fiscal year 2008, Buckhorn made payments to A & L Surveying, LLC (“A&L”), a Kentucky limited liability company owned by Billy David Altizer (a managing member of Buckhorn Resources, LLC, and a professional engineer and surveyor) in exchange for A&L’s performing surveying services for Buckhorn.

•

During the fiscal year ended December 31, 2006, A & L billed $4,309, which was credited as additional paid-in-capital for Mr. Altizer.  In addition, Buckhorn paid $12,975 in cash to A & L.  

•

During the fiscal year ended December 31, 2007, A & L billed $5,889 which was credited as additional paid-in-capital for Mr. Altizer. In addition, Buckhorn paid $16,113 in cash to A & L.  At the closing of the transaction between CSI and Buckhorn, A&L was paid an additional $15,758 in order to settle an outstanding account payable from the fiscal year 2007.

•

As a result of the condition to the Buckhorn transaction with CSI that all outstanding debt of Buckhorn be repaid at the time of closing, the Members from prior to such transaction contributed an additional aggregate amount of $128,592 in capital contributions to their capital accounts.

Mr. Altizer will supervise the initial permitting of the Buckhorn Property for coal mining and other energy related purposes, subject to the hiring of additional engineers as the needs may arise.

 

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Description of Securities

Since Buckhorn is not registering its membership units, this disclosure is not applicable with respect to its securities.   

Indemnification of Managing Members and Control Persons

Article VIII of Buckhorn’s Articles of Organization provides that:

Except as otherwise provided by Kentucky Law, no member, manager, agent or employee of the limited liability company shall be personally liable for the debts, obligations, or liabilities of the limited liability company, whether arising in contract, tort or otherwise, or for the acts or omissions of any other member, manager, agent or employee of the limited liability company.

Section 2.5 of Buckhorn’s Operating Agreement provides that:

In carrying out their duties hereunder, the Managers shall not be liable to the Company nor to any Members for their good faith actions or failure to act, nor for any errors of judgment, nor for any act or omission believed in good faith to be within the scope of authority conferred by this Agreement, but only for their own willful or fraudulent misconduct in the performance of their obligations under this Agreement, or for gross negligence or willful breach of their fiduciary duties under this Agreement. The receipt of advice of counsel that certain acts and omissions are within the scope of authority conferred by this Agreement shall be conclusive evidence of good faith; however, good faith may be determined without obtaining such legal advice.

The Company does hereby indemnify and hold harmless the Managers and their agents, officers and employees as to third parties against and from any personal loss, liability, or damages suffered as a result of any act or omission which the Managers believed, in good faith, to be within the scope of authority conferred by this Agreement, except for willful or fraudulent misconduct, gross negligence or willful breach of fiduciary duties, but not in excess of the capital contributions of all Members. Notwithstanding the foregoing, the Company’s indemnification of the Managers and their agents, officers’ and employees as to a third party is only with respect to such loss, liability or damages which is not otherwise compensated for by insurance carried for the benefit of the Company.  Insurance coverage for public liability, and all other insurance deemed necessary or appropriate by the Managers to the business of the Company, shall be carried in. such amounts and of such types as shall be determined by the Managers, subject to Article 2.4(A).

The Kentucky Revised Statutes Section 275.150, in pertinent part, provides the following:

275.150  Immunity from personal liability.

 

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(1)

Except as provided in subsection (2) of this section or as otherwise specifically set forth in other sections in this chapter, no member, manager, employee, or agent of a limited liability company, including a professional limited liability company, shall be personally liable by reason of being a member, manager, employee, or agent of the limited liability company, under a judgment, decree, or order of a court, agency, or tribunal of any type, or in any other manner, in this or any other state, or on any other basis, for a debt, obligation, or liability of the limited liability company, whether arising in contract, tort, or otherwise. The status of a person as a member, manager, employee, or agent of a limited liability company, including a professional limited liability company, shall not subject the person to personal liability for the acts or omissions, including any negligence, wrongful act, or actionable misconduct, of any other member, manager, agent, or employee of the lim ited liability company.

(2)

Notwithstanding the provisions of subsection (1) of this section, under a written operating agreement or under another written agreement, a member or manager may agree to be obligated personally for any of the debts, obligations, and liabilities of the limited liability company.

The Kentucky Revised Statutes Section 275.170, in pertinent part, provides the following:

275.170 Liability of management for certain conduct -- Member’s duties as member in managed limited liability company.

Unless otherwise provided in a written operating agreement:

(1)

A member or manager shall not be liable, responsible, or accountable in damages or otherwise to the limited liability company or the members of the limited liability company for any action taken or failure to act on behalf of the limited liability company unless the act or omission constitutes wanton or reckless misconduct.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

Buckhorn has not engaged or utilized the services of an independent public accounting firm.  CSI engaged its auditors to audit Buckhorn’s financial statements.

Financial Statements and Supplementary Data

Reference is made to the disclosure set forth under Item 9.01 of this current report on Form 8-K concerning the financial statements and supplementary data of Buckhorn and CSI, which is incorporated herein by reference.

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES

The disclosures made in Item 2.01 of this Current Report are incorporated herein by reference.

 

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On May 20, 2008, the Company issued 1,093,750 shares of its restricted common stock, par value $.001 per share (the “Shares”) to the three designees of the owners of Buckhorn.  The Shares were valued at $1.92 per share and were issued as payment of $2,100,000 in stock consideration pursuant to the terms of the above described Property Agreement.

Both of the offering and the sale of the Shares was conducted pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereunder. No placement agent or underwriter was used in connection with either the offering or the sale of the Shares and there is no commission, finder's fee or other compensation due or owing to any party as a result of the transactions described herein.

The securities issued in connection with the above described transaction have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.  This Current Report is not being used for the purpose of conditioning the market in the United States for any of the securities offered or sold.

ITEM 5.06 CHANGE IN SHELL COMPANY STATUS

The disclosures in Item 2.01 and 8.01 and are incorporated herein by reference.

As the time we filed our Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Commission on March 27, 2008, as recently amended by our Form 10-K/A, filed with the Commission on June 6, 2008, and despite our business strategy and our land acquisition of 250 acres in November of 2007, as previously reported in the Company’s quarterly report on Form 10-QSB filed with the Commission on November 19, 2007 and which is incorporated herein by reference, we were a “shell company” within the meaning of Rule 12b-2 under the Exchange Act because we had no or nominal operations; and either no or nominal assets, assets consisting solely of cash and cash equivalents or assets consisting of cash and nominal other assets. However, as a result of the Company’s acquisition (the “Buckhorn Transaction”) of a 50% equity interest in Buckhorn, which holds title to Buckhorn Property having a net value of over $1 million, based on the Buckhorn audit ed financial statements for the year ended December 31, 2007, in addition to natural resources, as more fully described in the Company’s Current Report on Form 8-K, filed with the Commission on May 27, 2008, such transaction has caused CSI to cease to be a shell company as given the value of the Buckhorn Property, in combination with the Company's land acquisition program, which thus far includes, among other things: (i) the Company’s land acquisition of approximately 250 acres in Eastern Kentucky; (ii) its option to purchase approximately 1,000 acres of land in Owsley County and have the same developed by third party coal mining operators; and (iii) our options to purchase oil and gas rights, and (iv) rights to receive royalties on coal mining leases and operations on various Eastern Kentucky properties, as is more fully described below, we now have significantly more than nominal assets and/or nominal operations.

 

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Eastern Kentucky was selected for the Company’s land acquisition program because, in addition to its ability to serve as an organic food production asset, the land in that region is believed to have commercially viable energy resources. Management is moving forward in its plan to develop some of its currently owned land assets as a long term profit center, in addition to exercising its ability to purchase other land assets, while the organic production capabilities are being developed.  In addition to the Buckhorn Transaction, and in furtherance of the Company’s strategy of growth by land acquisitions, the Company has entered into and/or completed the following transactions:

•

On November 8, 2007, the Company closed on the purchase of approximately 250 acres of land in Kentucky, as previously reported in the Company’s quarterly report on Form 10-QSB filed with the Commission on November 19, 2007 and which Deeds are incorporated by reference herewith as Exhibits 10.6 through 10.8.  The Company plans to harvest limited timber as it prepares the land for organic certification and farming. Total closing costs were $185,101, including $8,750 paid to Sitter Drilling LLC, an unaffiliated party, as a finders/negotiation fee.  The Company may also exploit natural gas and/or coal underlying its properties, however, we need to do core drilling so we can determine the quality of such natural resources prior to determining whether mining the land would be cost beneficial.  

•

On January 8, 2008, the Company entered into an Agreement to Assign Real Estate Purchase Option (the “Option Agreement”) to acquire approximately 1,000 acres of land in Eastern Kentucky for $1 million (the “Owsley Transaction”), as more fully described in the Company’s Current Report on Form 8-K, filed with the Commission on January 14, 2008 and which agreement is filed herewith as Exhibit 10.3.  The Option Purchase Agreement simultaneously provides for the Company to enter into the Project Development Plan, which is filed herewith as Exhibit 10.4, with an experienced energy and timber development group, AMS Development, LLC (the “Development Group"). The Company has paid an initial deposit of $100,000, which shall go towards obtaining permits and preparing reclamation plans, and will pay the Development Group an additional $400,000 plus fifty (50%) percent of the coal royalty revenues (net of the $.30 per ton coal rights retained by the grantor).  The Development Group shall provide the engineering, consulting and administrative services necessary to develop the property, contract for coal mining, conduct surface coal mining operations to recover the mineable and merchantable reserves, as well as oversee the reclamation process.  As of June 13, 2008, the full initial deposit in the amount of $100,000 has been released from escrow, including $13,000 towards obtaining a coal mining permit application and $10,000 in order to extend the Option Purchase Agreement. The Co mpany paid an additional $10,000 on June 13, 2008 to extend the Option Agreement through August 15, 2008, pursuant to the Option Extension Agreement, as described in Item 8.01 below.

 

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•

Effective March 31, 2008, pursuant to the Option Oil, Gas and Mineral Agreement (the “Option Agreement”) with Eastern Kentucky Land Corporation, a Kentucky corporation (“EK”), as more fully described in the Company’s Current Report on Form 8-K, filed with the Commission on April 2, 2008, and which agreement is incorporated by reference herewith as Exhibit 10.5, CSI has the ability to acquire all right, title and interest in the oil, gas and other minerals under the Buckhorn Property, except for the $.30 per ton coal rights retained by EK.  The total consideration consists of: (i) payment of $200,000 in cash at the closing; and (ii) $800,000 through the issuance of 415,584 shares of unregistered common stock of CSI at closing (the “Shares”), at a price of $1.925 per share, which is based on the average closing price of CSI common stock for the ten day tr ading period ending March 20, 2008, as reported on the OTCBB.

Management expects to continue acquiring land in 2008 and 2009, all of which is intended to ultimately be used in the production of organic and/or natural grass fed products.  Management intends to phase the land into organic production over a ten-year period, commencing in 2009, as coal is mined and infrastructure is built.  The cash flow from energy development in connection with such land acquisitions is projected to help finance the Company’s organic strategy on a long-term basis.  

The acquisition of a majority interest in Buckhorn in connection with the Buckhorn Transaction did not result in a change in control or management of the Company and we are not aware of any arrangements at the present time that may cause a change in control over the Company.

ITEM 8.01  OTHER EVENTS

The disclosures in Item 5.06 are incorporated herein by reference.

On June 13, 2008, the Company entered into an Extension of Real Estate Option to Purchase Agreement (the “Option Extension Agreement”), filed herewith as Exhibit 10.9, providing for the payment of $10,000 to extend through August 15, 2008 the Agreement to Assign Real Estate Purchase Option to acquire approximately 1,000 acres of land in Eastern Kentucky (the “Owsley Land”) for $1 million (the “Option Agreement”), as more fully described in the Company’s Current Report on Form 8-K, filed with the Commission on January 14, 2008.  In connection with the Option Extension Agreement, the parties also agreed upon a payment schedule regarding the purchase price of $1,000,000 as follows: $250,000 on the closing date, $150,000 on July 15, 2008, $100,000 on August 15, 2008, and $500,000 on October 15, 2008, with the proviso that if the closing does not occur until August 15, 2008, the amounts due up to and including such date will be aggregated and du e on such closing date.  The Company will purchase the Owsley Land in fee simple by a deed of general warranties at closing.  The Company will provide the seller with a promissory note and mortgage for the remaining balance of the purchase price, which shall be $750,000 if closed before July 15, 2008, and which shall decrease based on the corresponding cash component of the purchase price that is paid in accordance with the aforementioned payment schedule.  

 

26

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(A)  FINANCIAL  STATEMENTS  OF  BUSINESS  ACQUIRED

(i) The audited balance sheet of Buckhorn Resources LLC as of December 31, 2007 and December 31, 2006, and the related statements of operations, stockholders' equity and  cash  flows  for  the  years  ended December 31, 2007 and 2006.(1)

(ii) The unaudited balance sheet of Buckhorn Resources LLC as of March 31, 2008, and the related statements of operations, stockholders' equity and cash  flows for the three months  ended March 31, 2008 and March 31, 2007.(1)

(B)  PRO FORMA FINANCIAL INFORMATION

(i) The unaudited pro forma combined balance  sheet  as  of  December  31,  2007 and the unaudited pro forma combined statement of operations for the year ended December 31, 2007 for Consolidation Services, Inc.(1)

(ii) The unaudited pro forma combined balance  sheet  as  of  March 31, 2008 and the unaudited pro forma combined statement of operations for the three months ended March 31, 2008 for Consolidation Services, Inc.(1)

(D)  EXHIBITS

2.1	Property Agreement, dated March 27, 2008, between the Company and Billy David Altizer, Pat E. Mitchell, Howard Prevette, William Dale Harris and Buckhorn Resources LLC(2)
*3.1	Articles of Organization of Buckhorn Resources, LLC
*4.1	Amended and Restated Operating Agreement of Buckhorn Resources, LLC, dated May 20, 2008.
*10.1	Deed of Conveyance, between East Kentucky Land Corporation and Buckhorn Resources, LLC, dated January 6, 2005.
*10.2	Deed of Correction, between East Kentucky Land Corporation and Buckhorn Resources, LLC, dated October 19, 2005.
*10.3	Agreement to Assign Real Estate Purchase Option, dated January 8, 2008.
*10.4	Project Development Plan, Exhibit “E” to the Agreement to Assign Real Estate Purchase Option, dated January 8, 2008.
10.5	Option Oil, Gas and Mineral Agreement, dated March 31, 2008, by and among Consolidation Services, Inc. and Eastern Kentucky Land Corporation (the “Option Agreement”), with the Oil, Gas and Mineral Agreement, dated March 29, 2008, by and among Consolidation Services, Inc. and Eastern Kentucky Land Corporation (the “Rights Agreement”), attached as Exhibit A to the Option Agreement.(3)
10.6	Deed of Conveyance dated November 8, 2007, by and between the Company and Anna Jett for real property in Breathitt County, Kentucky.(4)

 

27

10.7	Deed of Conveyance dated November 8, 2007, by and between the Company and Anna Jett for mineral interests in Breathitt County, Kentucky.(4)
10.8	Deed of Conveyance dated November 8, 2007, by and between the Company and Sutter Drilling LLC for an undivided interest in oil and gas interests in Breathitt, County, Kentucky.(4)
*10.9	Extension of Real Estate Option to Purchase Agreement, dated June 13, 2008, between the Company and Larry Bruce Herald.
*21.1	Subsidiaries of the Registrant.
99.1	Press Release dated May 21, 2008.(1)

_________________

* Filed herewith.

(1) Incorporated herein by reference to the Company’s Current Report on Form 8-K, filed with the Commission on May 27, 2008.

(2) Incorporated herein by reference to the Company’s Current Report on Form 8-K, filed with the Commission on March 31, 2008.

(3) Incorporated herein by reference to the Company’s Current Report on Form 8-K, filed with the Commission on April 2, 2008

(4) Incorporated herein by reference to the Company’s quarterly report on Form 10-QSB, filed with the Commission on November 19, 2007.

 

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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 hereunto duly authorized.

CONSOLIDATION SERVICES, INC.

Dated:  June 30, 2008	By:    /s/ Johnny R. Thomas
	Name:  Johnny R. Thomas
	Title:  Chief Executive Officer and President

 

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EX-3.1

Exhibit 3.1

ARTICLES OF ORGANIZATION

OF

BUCKHORN RESOURCES, LLC

The undersigned hereby forms and organizes a limited liability company pursuant to the Kentucky Limited Liability Company Act and adopts the following Articles of Organization for BUCKHORN RESOURCES, LLC.

ARTICLE I

The name of the limited liability company is BUCKHORN RESOURCES, LLC.

ARTICLE II

The limited liability company is organized to engage in any lawful business or activity for which limited liability Companies may be organized, under the Kentucky Limited Liability Company Act.

ARTICLE III

The name and street address of the registered agent is Gary W. Napier, 819 N. Main Street, Ste. B, London, Kentucky 40741.

ARTICLE IV

The mailing address of the principal place of business of the limited liability company is 380 Barbourville Road, London, Kentucky 40744.

ARTICLE V

The limited liability company has four (4) members.

ARTICLE VI

The management of the limited liability company is reserved to the members to be exercised in accordance with the operating agreement of the limited liability company.

ARTICLE VII

The duration of the limited liability company shall be perpetual, save and until its dissolution in accord with the Kentucky Limited Liability Company Act and the operating agreement of the limited liability company.

 

-1-

 

ARTICLE VIII

Except as otherwise provided by Kentucky Law, no member, manager, agent or employee of the limited liability company shall be personally liable for the debts, obligations, or liabilities of the limited liabilities of the limited liability company, whether arising in contract, tort or otherwise, or for the acts or omissions of any other member, manager, agent or employee of the limited liability company.

Date: October 5^th, 2004.

ORGANIZER:

/s/ BILLY DAVID ALTIZER

BILLY DAVID ALTIZER

COMMONWEALTH OF KENTUCKY    )

COUNTY OF LAUREL                          )

Personally appeared before me, a Notary Public in for said County and State, Billy David Altizer, Managing Member; with whom I am personally acquainted and, who, upon oath, acknowledged that he executed the within instrument for the purposes therein contained.

 

-2-

 

WITNESS my hand and official seal of office this the 5^th day of October, 2004.

/s/ NOTARY PUBLIC

My Commission Expires: 11-19-06

This instrument prepared by:

/s/ Gary W. Napier

Napier & Associates, P.S.C.

P.O. Drawer 5087

819 North Main Street, Suite B

London, KY 40745-5087

(606) ·864-2263

 

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EX-4.1

Exhibit 4.1

AMENDED AND RESTATED

OPERATING AGREEMENT

OF

BUCKHORN RESOURCES, LLC

A KENTUCKY LIMITED LIABILITY COMPANY

THIS AMENDED AND RESTATED OPERATING AGREEMENT is made effective by the undersigned as of this 20th day of May, 2008.

I.  FORMATION

1.1

The undersigned have formed a limited liability company under the laws of the Commonwealth of Kentucky filing on the 13th day of October, 2004, articles of organization with the Secretary of State of Kentucky.

1.2

The name of this Company is BUCKHORN RESOURCES, LLC,

1.3

The purpose for which this Company is formed is to engage in any lawful act, business or activity for which limited liability companies may be formed under the laws of the Commonwealth of Kentucky and to do any and all other things determined by the Managers to be necessary, desirable or incidental to the foregoing purpose.

1.4

The term of the Company shall become effective on the date the articles of organization are filed with the Secretary of State of Kentucky, and shall continue perpetually, unless the Company is dissolved earlier pursuant to the provisions of this Agreement or as provided under the Kentucky Revised Statutes.

1.5

The location of the principal place of business of the Company is 380 Barbourville Road, London, Kentucky 40744. The Managers may change the principal place of business and establish additional places of business as they deem necessary or desirable to conduct the business of the Company.

1.6

The Company’s agent for service of process shall be Gary W. Napier, who is located at the following address: 819 N. Main Street, Ste. B, London, Kentucky 40741, or such other agent as the Managers may designate from time to time.

II.  MANAGEMENT

2.1

The Managers are:

(A)

Billy David Altizer, Managing Member; and

(B)

Johnny R. Thomas, Managing Member

The Managing Members and all subsequent Managers shall be Members and shall be solely responsible for the management of the Company’s business. They shall possess all rights and powers generally conferred by law and all rights and powers that are necessary, advisable or consistent in connection therewith and with the provisions of this Agreement. A vote of at least seventy-five percent (75%) ownership of the Managing Managers shall bind all of the Managers.  The Managers shall also be vested with all specific rights and powers required for or appropriate to the management, conduct or operation of the business of the Company. Except for distributions made to Members as set forth in this Agreement and any fees for specific management and professional services, the Managers shall receive no compensation from the Company for its actions taken as Managers pursuant to this Agreement.

2.2

The Managers shall serve as such until resignation, death or a judicial adjudication of incompetence.

2.3

Rights and powers of the Managers, by way of a majority of at least seventy-five percent (75%) ownership and by way of illustration, but not by way of limitation, shall include the right and power to:

(A)

Authorize or approve all actions with respect to distribution of funds and assets in kind of the Company; acquire, secure or dispose of investments, including, without limitation, selling and otherwise disposing of assets of the Company, borrowing funds, executing contracts, bonds, guarantees, notes, security agreements, mortgages and all other instruments to effect the purposes of this Agreement; and execute any and all other instruments and perform any acts determined to be necessary or advisable to carry out the intentions and purposes of the Company.

Page 2 of 17

(B)

Subject to the limitations imposed by this Agreement, admit additional Members in substitution of Members disposing of their interest in the Company.

(C)

Perform any and all acts necessary to pay any and all organizational expenses incurred in the creation of the Company and in raising additional capital, including, without limitation, reasonable brokers’ and underwriters’ commissions, legal and accounting fees, license and franchise fees (it being understood that all expenses incurred in the creation of the Company and the commencement of the Company business shall be borne by the Company); and compromise, arbitrate or otherwise adjust claims in favor of or against the Company and to commence or defend against litigation with respect to the Company or any assets of the Company as deemed advisable, all or any of the above matters being at the expense of the Company; and to execute, acknowledge and deliver any and all instruments to effect any and all of the foregoing.

(D)

Purchase goods or services from any corporation or other form of business enterprise, whether or not such corporation or business enterprise is owned or controlled by, or affiliated with, the Managers or Members, including management or professional services at the usual and customary rates prevailing in the management or professional industry from time to time for similar services.

(E)

Establish Company offices at such or other places as may be appropriate; hire Company employees and consultants, engage counsel and, otherwise arrange for the facilities and personnel necessary to carryout the purposes and business of the Company, the cost and expense thereof and incidental thereto to be borne by the Company.

2.4

The Managers shall manage or cause to be managed the affairs of the Company in a prudent and businesslike manner and shall devote such time to the Company’s affairs as they shall, in their discretion exercise in good faith, determine is reasonably necessary for the conduct of such affairs; provided, however, that it is expressly understood and agreed that the Managers shall not be required to devote their entire time or attention to the business of the Company.  In carrying out their obligations, the Managers shall:

Page 3 of 17

(A)

Obtain and maintain such public liability, hazard and other insurance as may be deemed necessary or appropriate by the Managers, but in any event in any amount sufficient to replace the building(s), together with improvements, and personal property comprising part of the Company’s assets.

(B)

Deposit all funds of the Company in one or more separate bank accounts, using such banks or trust companies as the Managers may designate (withdrawals from such bank accounts to be made upon the signature of the General Manager).

(C)

Maintain complete and accurate records of all properties owned or leased by the Company and complete and accurate books of account (containing such information as shall be necessary to record allocations and distributions), and make such records and books of account available for inspection and audit by any Member or his duly authorized representative (at the expense of such Member) during the regular business hours and at the principal office of the Company.

(D)

Prepare and distribute to all Members tax reporting information.

(E)

Notify all Members of receipt of any notice of default from any lender, within ten (10) days after receipt of such notice.

(F)

Cause to be filled such certificates and do such other acts as may be required by law to qualify and maintain the Company as a limited liability company under all applicable state laws.

(G)

Maintain a list, in alphabetical order, of all current Members and past Members, together with the mailing address of each Member.

(H)

Maintain copies of the Articles of Organization, any amendments thereto and powers of attorney, if any, pursuant to which the execution of the Articles of Organization have occurred.

(I)

Maintain copies of present and past documents relating to the operation and business of the Company.

2.5

In carrying out their duties hereunder, the Managers shall not be liable to the Company nor to any Members for their good faith actions or failure to act, nor for any errors of judgment, nor for any act or omission believed in good faith to be within the scope of authority conferred by this Agreement, but only for their own willful or fraudulent

Page 4 of 17

misconduct in the performance of their obligations under this Agreement, or for gross negligence or willful breach of their fiduciary duties under this Agreement. The receipt of advice of counsel that certain acts and omissions are within the scope of authority conferred by this Agreement shall be conclusive evidence of good faith; however, good faith may be determined without obtaining such legal advice.

The Company does hereby indemnify and hold harmless the Managers and their agents, officers and employees as to third parties against and from any personal loss, liability, or damages suffered as a result of any act or omission which the Managers believed, in good faith, to be within the scope of authority conferred by this Agreement, except for willful or fraudulent misconduct, gross negligence or willful breach of fiduciary duties, but not in excess of the capital contributions of all Members. Notwithstanding the foregoing, the Company’s indemnification of the Managers and. their agents, officers and employees as to a third party is only with respect to such loss, liability or damages which is not otherwise compensated for by insurance carried for the benefit of the Company. Insurance coverage for public liability, and all other insurance deemed necessary or appropriate by the Managers to the business of the Company, shall be carried in such amounts and of such types as sh all be determined by the Managers, subject to Article 2.4(A).

2.6

No financial institution or any other person, firm or corporation dealing with the Managers shall be required to ascertain whether the Managers are acting in accordance with this Agreement, but such financial institution or such other person, firm or corporation shall be protected in relying upon the deed, transfer or assurance of, and the execution of such instrument or instruments by, the Managers.

2.7

The Members hereby acknowledge that the Managers may, from time to time, engage in business enterprises similar to the business of the Company and competitive with the business of the Company. The Managers may engage in such similar and competitive enterprises without restriction and have no obligation to account to the Company nor to the Members for such activities.

III.  MEMBERS

3.1

The Members are listed on Schedule A, which is. attached hereto and made a part hereof.  Schedule A shall reflect the capital contribution of each Member, indicating the amount of cash contributed, the value of property contributed and/or the value of services contributed, and each Member’s percentage ownership of the Company.  Capital contributions may be made over time as the requirements of the Company operations and the abilities of the Members dictate.

Page 5 of 17

3.2

Except as otherwise specifically provided in this Agreement to the contrary, no Member shall have the right:

(A)

To take part in the control of the Company business or to sign for or to bind the Company, such power being vested in the Managers.

(B)

To have his capital contribution repaid except to the extent provided in this Agreement.

(C)

 To require partition of the Company’s property or to compel any sale or appraisal of the Company’s assets.

(D)

To sell or assign his interest in the Company or to constitute the vendee or assignee thereunder, except as provided in this Agreement.

(E)

To voluntarily withdraw as a Member from the Company.

3.3

No Member shall be personally held accountable for any of the debts, losses, claims, judgments or any of the liabilities of the Company beyond the Members’ contributions to the capital of the Company, except as provided by law.

IV.  MEETINGS OF’ MEMBERS

4.1

Annual meeting. The annual meeting of the Members of the Company, for the consideration of reports to be laid before such meeting and for the transaction of such other business as may properly be brought before such meeting, shall be held at the principal office of the Company in the City of London, in Laurel County, Commonwealth of Kentucky, or at such other place, either within or without the Commonwealth of Kentucky, and date as may be designated by the Managers and specified in the notice of such meeting.

4.2

Special meetings. Special meetings of the Members of the Company may be held on any day, when called by the Members who hold at least seventy-five percent (75%) of the capital of the Company. Upon written request delivered either in person or by certified mail, return receipt requested, to the Managers by any Members entitled to call a meeting of Members, such Managers shall forthwith cause notice to be given to the Members entitled to such notice. The meeting must be held on a date not less than ten (10) nor more than sixty (60) days after the receipt of such request, as the Managers or Members may fix.  If such notice is not given within twenty (20) days after the delivery or mailing of such request, the person or persons calling thereof in the manner provided for by law or this Agreement, may cause such notice to be given by any designated representative. Each special meeting shall be held at the principal office of the Company in the City of London, in Laurel Coun ty, Commonwealth of Kentucky, or at such other place, either within or without the Commonwealth of Kentucky, as may be designated by the Managers and specified in the notice of such meeting.

Page 6 of 17

4.3

Notice of Meetings. Not less than ten (10) or more than sixty (60) days before the date fixed for a meeting (and, in the case of a special meeting, the purposes of such meeting) shall be given.

The notice shall be sent by personal delivery or by certified mail, return receipt requested, to each Member entitled to notice of the meeting who is a Member of record as of the day preceding the day on which notice is given, or, if a record date is duly fixed, as of that date. If mailed, the notice shall be addressed to the Members at their respective addresses as they appear in the records of the Company.

4.4

Quorum; adjournment.  Except as may otherwise be provided by law, the Articles of Organization or this Operating Agreement, at any meeting of the Members, the holders of a majority of the capital of the Company, either present in person or by proxy, shall constitute a. quorum for such meeting.

4.5

Proxies. Members entitled to vote may vote in person or by proxy. The person appointed as proxy need not be a Member. Unless the writing appointing a proxy otherwise provides, the presence at a meeting of the person who appointed a proxy shall not operate to revoke the appointment.  Notice to the Company, in writing or in open meeting, of the revocation of the appointment of a proxy shall not affect any vote or action regarding separate matters that have previously been taken.  

4.6

All votes of Members shall be in accordance with their then existing percentage of capital of the Company.

V.  PROFITS, LOSSES AND ACCOUNTING

5.1

Allocation of profits and losses:

(A)

Except as otherwise provided herein, net profits and losses of the Company (Including profits and losses attributable to the sale or other disposition of all or any portion of the Company’s property) shall be allocated among or borne by the Members in the percentages listed in Schedule A, which is attached hereto and made a part hereof, or, in accordance with their capital accounts, as those may change as provided herein.

Page 7 of 17

(B)

Notwithstanding any provision of this Agreement to the contrary, to the extent required by law, income, gain, loss and deduction attributable to property contributed to the Company by a Member shall be allocated among the Members so as to take into account any variation between the tax basis of the property and the fair market value thereof at the time of contribution, in accordance with. the. requirements of Section 704(c) of the Internal Revenue Code of 1986 (the “Code”), as amended, or its counterpart in any subsequently enacted Internal Review Code, and the applicable Treasury Regulations (the “Regulations”) thereunder.

(C)

Company profits and losses shall be allocated to the Members in accordance with the portion of the year during which the Members have held their respective interests. All items of income and loss shall be considered to have been earned ratably over the fiscal year of the Company, except that profits and losses arising from the disposition of assets shall be taken into account as of the date thereof.

(D)

Notwithstanding any provision of this Agreement to the contrary, in the event the Company is entitled to a deduction for imputed interest under any provision of the Code on any loan or advance from a Member, such deduction shall be allocated solely to such Member.

(E)

Notwithstanding any provision of this Agreement to the contrary, to the extent the payment of any expenditure by the Company is, treated as a distribution to a Member for federal income tax purposes, there shall be a gross income allocation to such Member in the amount of such distribution.

(F)

Notwithstanding any provision of this Agreement to the contrary, if items of income or gain to be allocated include income or gain treated as ordinary income for federal income tax purposes because they are attributable to the recapture of depreciation under Section 1245 or 1250 of the Code, then such income or gain, to the extent treated as ordinary income, shall be allocated to, and reported by, the Members in proportion to their then respective cumulative allocations. of depreciation.

Page 8 of 17

5.2

Accounting:

(A)

The Company books shall be kept by the Managers or an accountant selected by the Managers on the accrual basis and in accordance with reasonable accounting principles consistently applied.

(B)

The fiscal year of the Company shall end on December 31.

(C)

The terms net profits and net losses, as used herein, shall mean the net amount of the Company’s profits and losses, as determined for federal income tax purposes, and shall also include each Member’s share of income described in Section 705(a)(1)(B) of the Code, any expenditures described in Section 705(a)(2)(B) of the Code, any expenditures described in Section 709(a) of the Code which are not deducted or amortized in accordance with Section 709(b) of the Code, basis adjustments required pursuant to former Section 48(g) of the Code, and losses not deductible pursuant to Section 267(a) or 707(b) of the Code.

5.3

Member’s capital accounts:

(A)

There shall be maintained a capital account for each Member in accordance with this Article 5.3. The amount of each Member’s contribution of cash, property and/or services to the capital of the Company shall be credited to such Member’s capital account. From time to time, but not less often than quarterly, each Member’s share of profits, losses and distributions shall be credited or charged, as the case may be, to such Member’s. capital account. The determination of a Member’ s capital account, and any adjustments thereto, shall be made in a manner consistent with tax accounting and other principles set forth in Section 704 of the Code and applicable Regulations thereunder.

(B)

If, at any time, the Company shall suffer a loss as a result of which the capital account of any Member shall be a negative amount, such loss shall be carried as a charge against the Member’s capital account, and that Member’s share of subsequent profits of the Company shall be applied to erase such capital account deficit.

Page 9 of 17

(C)

Immediately following the transfer of any interest in the Company, the capital account of the transferee Member shall be equal to the capital account of the transferor Member attributable to the transferred interest.

(D)

For purposes of computing the amount of any Items of income, gain, deduction or loss to be reflected in the Member’s capital account, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes, taking into account any adjustments required pursuant to Section 704 of the Code and the. applicable Regulations thereunder.

VI.  TRANSFER OF MEMBERS INTEREST

6.1

Should a Member desire to sell, assign or exchange all or any part of his interest in the Company to any person seeking to become a substituted Member (or, in the event of a transfer for no consideration, such as gift or bequest), such Member hereinafter assignor who desires to assign all or any part of his interest in the Company shall have the right to transfer to another the whole or any part of such interest except as set forth in this Agreement.

6.2

If the Member desires to sell or assign all or a portion of his interest in the Company, as set forth in Article 6.1, he shall first offer the same in writing to the Members, who shall have thirty (30) days after receipt of such offer to accept or reject the offer. If more than one Member accepts such offer, the interest being offered shall be allocated among the accepting Members in proportion to the size of their respective capital accounts.

If the offer is rejected, in whole or in part, the Member shall be free to sell or assign the rejected interest, on the same terms and conditions, to a third party, provided the Members have previously agreed by a fifty percent (50%) affirmative vote to approve such sale or assignment, and provided also that the sale is consummated within sixty (60) days following the expiration of the thirty (30) day period referred to in the preceding paragraph. If the same is not consummated within said sixty (60) days, the proposed sale or assignment shall again be subject to the provisions of this Article 6.2.

Page 10 of 17

6.3

No assignment of any Member’s interest in compliance with this Article VI, even if it results in the substitution of the assignee as a Member herein shall release the assignor from those liabilities to the Company which survive such assignment.

6.4

Any assignment by a Member of all or any part of his interest in the Company shall be subject of the following.

(A)

The assignment instrument shall be in form and substance satisfactory to the Managers. Among the reasons for which consent may be withheld by the Managers is that they have. determined, in their sole discretion, that such substitution may: (i) have an adverse effect on the legal status of the Company understate or federal law or both; or (ii) have an adverse effect on the Members who are not participating in the transfer under state or federal law or both. The request for consent to sale or assignment shall contain a copy of all instruments and documents or registered mail, return receipt requested, sent to the Managers at least sixty (60) days prior to the proposed date of transfer. Any additional information requested by the Managers, including any information relative to the assignee, shall be promptly furnished by the requesting assignor, and no decision need be reached by the Managers until such information is furnished.

(B)

The assignee shall have submitted his written acceptance and adoption of all the terms and provisions of this Agreement, including any and all amendments to this Agreement to be made subsequent to the assignment.

(C)

The assignor shall have paid, or obligated himself to pay, as the Company may determine, all reasonable expenses connected with such transfer, including, but not limited to, the cost of preparing and filing any amendment to this Agreement necessary to effectuate the transfer.

6.5

No Member’s interest in the Company has been registered under the. Securities Act of 1933, as amended (the “Act”). Notwithstanding any other provisions in this Agreement, no Member’s interest may be offered for sale, sold, transferred or otherwise disposed of unless:

Page 11 of 17

(A)

such interest is registered under the Act;

(B)

at the expense of the transferring Member, the Company receives an opinion of counsel letter, satisfactory to the Company, to the effect that such transfer is exempt from registration under the Act and is in compliance with all applicable federal securities laws and regulations; or

(C)

the Company receives a no action letter from the staff of the Securities and Exchange Commission (“SEC”), satisfactory to the Company, to the effect that the transfer is exempt from registration.

VII.  DISSOLUTION AND TERMINATION

7.1

Upon the occurrence of the following events, the Company shall be dissolved:

(A)

upon the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member; or any other occurrence which terminates a Member’s membership in the Company, except where the Members, other than the effected Member, vote unanimously to continue the business of the Company;

(B)

the Managers sell or transfer substantially all of the assets. of the Company;

(C)

the Company ceases its business operations; or

(D)

the Members unanimously vote to dissolve and terminate the Company.

7.2

Upon the death or incompetency of a Member, and in the event the Members continue the business under Article 7.1(A), the Member’s personal representative, executor or administrator shall have all of the rights of a Member for the purpose of managing or settling his estate, as well as such power as the decedent or incompetent possessed to designate an assignee of his interest in the Company and to join with such assignee in following the procedures contained in this Agreement so that the assignee may become a Member.

7.3

In the event of the dissolution of the Company, the business and affairs of the Company shall continue to be governed by this Agreement during the winding up of the Company’s business and affairs.

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VIII.  LIQUIDATION

8.1

Upon the dissolution and/or termination of the Company, the. Managers shall proceed with the liquidation of the Company and sale of its assets. The proceeds of such liquidation shall be applied and distributed in the following order or priority:

(A)

to the payment of the debts and liabilities of the Company (other than any loans or advances that may have been made by the Members to the Company) and expenses of liquidations;

(B)

to payment of any loans or advances made to or for the benefit of the Company by a Member, or for any compensation owed to any of the Managers, but if the amount available for repayment shall be insufficient, then the amount available shall be distributed among the applicable Members through the use of a fraction whose numerator is the amount owed to a single member and whose denominator is the total amount owed to all Members (thus, for example, if Member A were owed $2,000 and Member B were owed $1,000, and the amount available to compensate them was $600, Member A would receive $400 (2/3 of $600) and Member B would receive $200 (1/3 of $600);

(C)

to the setting up of any reserves which the Managers may deem reasonably necessary in order to meet any contingent or unforeseen liabilities or obligations of the Company arising out of, or in connection with, the business of the Company. Said reserves shall be paid over by the Managers to any financial institution, as escrow agent, with trust authority in the county in which the principal accounting records of the Company have been maintained in order to be held by it for the purpose of disbursing such reserves in payment of any of the aforementioned contingencies or liabilities; and at the expiration of such period as the Managers shall deem advisable, the financial institution shall distribute the balance remaining in the manner provided in this Article 8.1 and in the order named above; and

(D)

to the payment of the balance, if any, of the respective capital accounts of the Members, if any.

 

Page 13 of 17

8.2

When all of the acts provided in Article 8.1 have been accomplished, the Managers shall file such Articles of Dissolution and any other certificate required in the Commonwealth of Kentucky and in any other state that may be required by law.

IX.  AMENDMENT OF THE AGREEMENT

9.1

This Agreement may be amended by the Managers without the approval of the Members, provided that such amendment is:

(A)

solely for the purpose of clarification and does not change the substance hereof;

(B)

for the purpose of substituting a Member in accordance with provisions of this Agreement;

(C)

merely an implementation of the terms of this Agreement; or

(D)

in the opinion of counsel for the Company, necessary or appropriate to satisfy current requirements of the Internal Revenue Code of 1986, as amended, with respect to limited liability companies, or any federal or state securities laws or regulations.

(E)

any amendment made pursuant to (A) or (C) may be made effective as of the date of this Agreement. All Members shall, be notified as to the substance of any such amendment to this Agreement and, upon request, shall be furnished a copy thereof.

9.2

All other amendments to this Agreement shall require the approval of Members holding at least seventy-five percent (75%) of all units or shares outstanding and entitled to vote.

X.  MISCELLANEOUS

10.1

Any and all notices or other communications which may be sent to any Member shall be sent to the address noted in Schedule A, unless the Company is notified in writing with regard to a change of address. Notices or other communications shall be deemed to have been given only when deposited with the United States Postal Service by registered or certified mail, return receipt requested, addressed as set forth above.

10.2

This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Kentucky.

Page 14 of 17

10.3

This Agreement may be executed in multiple parts, each of which shall be deemed as an original and all of which together shall constitute one agreement, by each of the parties hereto on the dates indicated in the acknowledgment of said parties, notwithstanding that all of the parties are not signatories to the same part. or that signature pages from different parts are combined. The signature of any party to any part shall be deemed to be a signature to and may be appended to any other part.

10.4

Words of gender used in this Agreement shall be interpreted to include the other gender, and words in the singular number shall be interpreted to include the plural (and vice-verse), when the sense so requires. The captions to each Article are inserted only as a matter of convenience and for reference purposes and in no way define, limit or describe the scope or intent of this Agreement, nor in any way affect it.

10.5

This Agreement contains the entire understanding between the parties and supersedes, any prior understandings and agreements between them concerning the within subject matter. There are no representations, agreements, arrangements or understandings, oral or written, between the parties hereto relating to the subject matter of this Agreement which are not described herein.

10.6

This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations of the jurisdictions in which the Company does business. If any provisions of this Agreement or its application to any person or circumstance shall, for any reason and to any extent, be found to be invalid or unenforceable, provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law.

10.7

The word person, as used in this Agreement, shall include a corporation, firm, partnership or other form of association. Bankruptcy, as used in this Agreement, shall be deemed to occur when a Member files a petition in bankruptcy or voluntarily takes advantage of any bankruptcy or insolvency laws, or is adjudicated a bankrupt, or when a petition or answer is filed proposing the adjudication of a Member as a bankrupt and such Member either consents to the filing or such complaint or answer is not discharged or denied prior to the expiration of sixty (60) days following the date of filing.

10.8

This Agreement, and all the terms and provisions hereof, shall be binding upon and shall inure to the benefit of all Members and their respective legal representatives, heirs, permitted successors and permitted assigns.

Page 15 of 17

IN WITNESS WHEREOF, the Members have entered into this Amended and Restated Operating Agreement and have Hereunto set their hands to multiple copies hereof, as of the effective date first written above.

MEMBERS

/s/ BILLY DAVID ALTIZER

BILLY DAVID ALTIZER

/s/ HOWARD PREVETTE

HOWARD PREVETTE

/s/ WILLIAM DALE HARRIS

WILLIAM DALE HARRIS

/s/ PAT E. MITCHELL

PAT E. MITCHELL

CONSOLIDATION SERVICES, INC.

/s/ Johnny R. Thomas

By:     Johnny R. Thomas

Title:  President and CEO

Page 16 of 17

SCHEDULE A

BUCKHORN RESOURCES, LLC

A KENTUCKY LIMITED LIABILITY COMPANY

LIST OF MEMBERS	OWNERSHIP PERCENTAGE	CAPITAL CONTRIBUTION
PAT E. MITCHELL	12.5%	$            250,000
HOWARD PREVETTE	12.5%	$            250,000
WILLIAM DALE HARRIS	12.5%	$            250,000
BILLY DAVID ALTIZER	12.5%	$            250,000
CONSOLIDATION SERVICES INC.	50%	$            600,000

Page 17 of 17

EX-10.1

Exhibit 10.1

DEED OF CONVEYANCE

THIS DEBT OF CONVEYANCE, made and entered into this 6^th day of January, 2005, by and between East Kentucky Land Corporation, a Kentucky corporation with offices at 9501 State Route 5, Ashland, Kentucky 41102, Party of the First Part, herein after “Grantor” and Buckhorn Resources, LLC, of 380 Barbourville Road, London. Kentucky 40744, Party of the Second Part, hereinafter "Guarantee”.

WlTNESSETH:

THAT FOR AND IN CONSIDERATION OF the sum of Eight Hundred Twenty Five Thousand Dollars ($825,000,000) and other good and valuable consideration, the receipt of which is hereby acknowledged, Grantor has bargained and sold., and by these presents does hereby grant, bargain, sell and convey unto the Grantee, its successors and assigns, the following described property, to-wit:

ALL that certain tract, piece, or parcel of land situate and being in the County of Perry and County of Leslie, in the State of Kentucky; on Preston Campbell Branch of the North Fork of the Kentucky River; said tract of land being bounded and described as follows, to-wit:

Surveyed April 14, 1872 for William M. Smith. Beginning on two black pine trees on top of the ridge on the East Side of the gap of the ridge at the head of Preston Campbell's Branch; thence South thirty-eight degrees (38) West four hundred (400) poles to a stake; thence South eighty-five (85) degrees West nine hundred (900) poles to a stake: thence South five (5) East three hundred forty poles to a stake; South eighty-five degrees (85) West five hundred poles to a stake; thence N. 5 West 1360 poles to a stake; thence North eighty-five (85) East fourteen hundred (1400) poles to a stake; thence South 5 degrees (5) East five hundred sixty (560) poles to a stake; thence North eighty-five (85) degrees East three hundred (300) poles to a stake; thence South five degrees (5) East one hundred twenty (120) poles to the place of beginning. Containing ninety-eight hundred (9800) acres, more or less.

Grantor East Kentucky Land Corporation excepts, reserves unto itself and does not convey hereby, all of the oil and gas, and their constituents, underlying the above-described tract, together with all rights reasonably necessary to explore for, produce, gather, transport and market such oil and gas.

1

Grantor East Kentucky Land Corporation also reserve unto itself an overriding royalty of thirty cents ($0.30) per ton which shall be payable to Grantor for all coal mined by any party from the above-described tract.

Grantor East Kentucky Land Corporation and Grantee Buckhorn Resources, LLC, agree that Grantor and Grantee shall each receive one-half (1/2) of all proceeds, payments or settlements paid or payable in the future for or on account of the taking of coal or timber from the above-described tract prior to the date of this conveyance by parties not entitled thereto, or on account of any surface damages to said premises occurring prior to the date of this conveyance, for which either party hereto, their successors or assigns, receive remuneration. Any such payment or settlement must be approved in writing by both Grantor and Grantee prior to its effectuation. Grantor reserves unto itself all proceeds, payments or settlements paid or payable in the future for or on account of the taking of oil or gas from the above-described tract prior to the date of this conveyance by parties not entitled thereto.

The reservations and agreements contained in this Deed are agreed to by Grantor and Grantee and are an integral part of this conveyance.

AND BEING the same property conveyed to East Kentucky Land Corporation by Deed dated January 15, 1998, from Joseph E. Carter, et al, of record in Deed Book 279, page 287, Perry County, Kentucky, Clerk's office and of record in deed Book 146, page 510, Leslie County, Kentucky, Clerk's Office.

TO HAVE AND TO HOLD THE SAME, together with all privileges, appurtenances, rights and improvements thereunto belonging, unto the Grantee, its successors and assigns, forever, with Covenants of Special Warranty.

PURSUANT to KRS 382.135, the parties hereto state that the full consideration paid for the property hereby transferred is Eight Hundred Twenty Five Thousand Dollars ($825,000.00).

IN TESTIMONY WHEREOF, Grantor and Grantee have executed this Deed of Conveyance the day and: date first above written.

GRANTEE:	GRANTOR:
BUCKHORN RESOURCES, LLC	EAST KENTUCKY LAND CORPORATION
By: /s/ Billy David Altizer	By: /s/ James H. Large
Its: Managing Member	Its: President

2

COMMON WEALTH OF KENTUCKY

COUNTY OF State at Large

Subscribed and sworn to before me by Billy David Altizer, Buckhorn Resources, LLC, this 6^th day of January, 2005.

/s/ NOTARY PUBLIC

My Commission Expires: 03/04/07

COMMON WEALTH OF KENTUCKY

COUNTY OF State at Large

Subscribed and sworn to before me by James H. Large, East Kentucky Land Corporation, this 6^th day of January, 2005.

/s/ NOTARY PUBLIC

My Commission Expires: 03/04/07

PREPARED BY:

/s/ MORRIS KENNEDY

Attorney at Law

2332 Old Hickory Lane

Lexington KY 40515

3

STATE OF KENTUCKY

COUNTY OF PERRY

I, HAVEN KING, Clerk of the State and County aforesaid do certify that the foregoing instrument was lodged for record in my office and it the foregoing and this my certificate have been duly recorded in my office in Deed Book No. 313 Page 241.

Witness my hand this 7^th  day of January 2005.

Haven King, Clerk

Perry County

By: /s/ Barbara Sue Franks D.C.

STATE OF KENTUCKY

COUNTY OF LESLIE

I, JAMES LEWIS, CLERK OF THE COUNTY AND STATE AFORESAID, DO HEREBY CERTIFY THAT THE FOREGOING DEED WAS ON THE 7^TH DAY OF JANUARY, 2005, LODGED IN MY OFFICE FOR RECORD, AND THAT, IF, THE FOREGOING AND THIS CERTIFICATION HAVE BEEN DULY RECORDED IN MY SAID OFFICE IN, LODGED IN MY OFFICE FOR RECORD, AND THAT, IF, THE FOREGOING AND THIS CERTIFICATION HAVE BEEN DULY RECORDED IN MY SAID OFFICE IN DEED BOOK NO. 165, PAGE 555.

WITNESS MY HAND THIS 07 DAY OF JANUARY 2005.

JAMES LEWIS CLERK

/S/

EX-10.2

Exhibit 10.2

DEED OF CORRECTION

THIS DEED OF CORRECTION, made and entered into this 19th day of October, 2005, by and between East Kentucky Land Corporation, a Kentucky corporation with offices at 9501 State Route 5, Ashland, Kentucky 41102, Party of the First Part, hereinafter "Grantor" and Buckhorn Resources, LLC, of 380 Barbourville ,Road, London, Kentucky 40744, Party of the Second Part, hereinafter "Grantee".

WITNESSETH:

WHEREAS, the Deed of Conveyance (the "Deed") dated January 6, 2005, does not accurately reflect the parties' agreement regarding the. transfer of the property , described in Dead Book 313, at Page 241 of the Perry County Clerk's Office and in Deed Book 165 at Page 555, of the Leslie County Clerk's Office; and

WHEREAS, the Grantor and Grantee desire to correct the Deed to accurately reflect the parties' agreement regarding the transfer of the property.

NOW THEREFORE, FOR AND IN CONSIDERATION of the amount noted in the deeds of conveyance noted above and to correctly reflect the agreement of the Grantor and Grantee, and for no monetary consideration, the receipt of which is hereby acknowledged, the Grantor has bargained and sold, and by these presents does hereby grant, bargain, sell and convey unto the Grantee, its successors and assigns, the following described' property, to-wit:

All that certain tract, piece, or parcel of land, situate and being in the County of Perry and the County of Leslie, in the State of Kentucky, on Preston Campbell Branch of the North Fork of the Kentucky River, said tract of land being bounded and described as follows, to-wit:

 

1

Surveyed April 14, 1872 for William M. Smith. Beginning on two black pine trees on top of the ridge on the East Side of the gap of the ridge at the head of, Preston Campbell's Branch; thence South thirty eight degrees (38) West four hundred (400) poles to a stake; thence, South eight five (85) degrees West nine hundred (900) poles to a stake; thence South five (5) East three hundred forty poles to a stake; South eighty-five degrees (85) West five hundred poles to a stake; thence N. 5 West 1360 poles to a stake; thence North eighty-five (85) East fourteen hundred (1400) poles , to a stake; thence South 5 degrees (5) East five hundred sixty (560) poles to a stake; thence North eighty five (85) degrees East three hundred (300) poles to a stake thence South five degrees (5,) East one hundred twenty.(120) poles to the place of beginning. Containing ninety-eight hundred (9800) acres, more or less.

Grantor East Kentucky Land Corporation excepts, reserves unto itself and does not convey hereby, all of the oil and gas, and their constituents, underlying the above-described tract, together with- all rights reasonably necessary to explore for, produce, gather, transport and market such oil and gas.

Grantor reserves unto itself the right to prosecute and collect all claims for damages which it may lawfully assert for the unlawful taking of any coal or timber from the above-described tract, or for damage to the surface of the above-described tract, which taking or damages occurred prior to the date of the Deed, to-wit: January 6, 2005.

The reservations and agreement contained in this Deed are agreed to by Grantor and Grantee and are an integral part of this conveyance.

BEING the same property conveyed to East Kentucky Land Corporation by Deed dated January 15, 1998, from Joseph E. Carter, at al, of record in Deed Book 279, at Page 287, of the Perry County Clerk's Office and of record in Deed Book 146, at Page 510, of the Leslie County Clerk s Office.

 

2

TO HAVE AND TO HOLD THE SAME, together with all privileges, appurtenances rights and improvements thereunto belonging, unto the Grantee, its successors and assigns, forever, with Covenants of "Special Warranty."

IN WITNESS WHEREOF, the Grantor and Grantee have executed this instrument the day and year first above written.

GRANTOR:

EAST KENTUCKY LAND CORPORATION

By: /s/ JAMES H. LARGE

JAMES H. LARGE, PRESIDENT

The Grantor, EAST KENTUCKY LAND CORPORATION, and the Grantee, BUCKHORN RESOURCES, LLC, do hereby certify, pursuant to KRS Chapter 382, that the above-stated consideration is the true, correct, and full consideration paid for the property herein conveyed and that the fair market value of the property is .as stated in the original Deed of Conveyance. We further certify our understanding that falsification of the stated consideration of the sale price of the property is a Class D felony, subject to one to five years imprisonment and fines up to TEN THOUSAND DOLLARS ($10.,000.00).

 

3

GRANTOR:

EAST KENTUCKY LAND CORPORATION

By: /s/ JAMES H. LARGE

JAMES H. LARGE, PRESIDENT

GRANTEE:

BUCKHORN RESOURCES, LLC

By: /s/ BILLY DAVID ALTIZER

BILLY DAVID ALTIZER, MANAGING MEMBER

COMMON WEALTH OF KENTUCKY

COUNTY OF State at Large

Personally appeared before me, a Notary Public in and for said County, JAMES H. LARGE, with whom I am personally acquainted, and who acknowledged himself to be PRESIDENT of EAST KENTUCKY LAND CORPORATION and that he executed the within instrument for the purposes therein contained and that the consideration stated herein is true and correct.

WITNESS my hand and seal this the 20^th day of October, 2005.

/s/ NOTARY PUBLIC

My Commission Expires: 03/04/07

COMMON WEALTH OF KENTUCKY

COUNTY OF LAUREL

Personally appeared before me, a Notary Public in and for said County, BILLY DAVID ALTIZER, with whom I am personally acquainted, and who acknowledged himself to be MANAGING MEMBER of BUCKHORN RESOURCES, LLC, and that he executed the within instrument for the purposes therein contained and that the consideration stated herein is true and correct.

 

4

WITNESS my hand and seal this the 21^ST day of October, 2005.

/s/ NOTARY PUBLIC

My Commission Expires: 03/06/06

THIS INSTRUMENT PREPARED BY:

/s/ GARY W. NAPIER

NAPIER & ASSOCIATES, P.S.C.

819 NORTH MAIN STREET, SUITE B

P.O. DRAWER 5087

LONDON, KY 40745-5087

(606 864-2263)

 

5

EX-10.3

Exhibit 10.3

AGREEMENT TO ASSIGN REAL ESTATE PURCHASE OPTION

This “Agreement to Assign Real Estate Purchase Option” herein “AGREEMENT TO ASSIGN” is between AMS Development, LLC,  a Kentucky entity herein “Assignor” with mailing address of 380 Barbourville Road, London, KY 40744 and;

Consolidation Services, Inc, a Delaware corporation herein “Assignee/Optionee” with a mailing address of 2756 N. Green Valley Parkway, Suite 225, Henderson, NV 69014 and;

Whereas Assignor is the owner of a certain “Real Estate Purchase Option” herein “PURCHASE OPTION” to purchase a property known as the Larry Bruce Herald tract in Owsley County, KY fully described in the attached “Legal Description Exhibit A”, and;

Whereas Assignee/Optionee among other things is in the business of real estate investment and development and desires to purchase Assignor's PURCHASE OPTION and;  

Therefore for the valid consideration set forth in this agreement both parties agree as follows:

1.

Assignor agrees to assign and transfer it’s rights under said Real Estate PURCHASE OPTION to Assignee in return for payment of $100,000.00 and for re-assignment to AMS Development, LLC of 50% of all coal interests in said property, transfer to be made simultaneously and contemporaneously to AMS Development, LLC or it’s assigns by mineral deed on Assignee’s exercising said PURCHASE OPTION. Mineral Deed in favor of AMS Development, LLC or it's assign's to be recorded in the appropriate court house immediately thereafter;

2.

Assignee shall exercise the PURCHASE OPTION by purchasing the property for $1,000,000.00 under the terms of the PURCHASE OPTION and this AGREEMENT TO ASSIGN. Assignee shall pay Assignor $400,000.00 at the time Assignee purchases the property for the services referenced in exhibit E (Project Development Plan).

3.

Assignee/Optionee agrees to deposit $10,000.00 (herein “Initial Deposit”) and $90,000.00 (herein “Second Deposit”) in the escrow account of Attorney Darrell Herald, herein “Escrow Agent”  located at  1140 Main Street, Jackson, KY 41339-0744 who shall act as Escrow Agent for the execution of this AGREEMENT TO ASSIGN Real Estate Purchase Option and the Real Estate Purchase Agreement.

4.

The $10,000.00 Initial Deposit shall be wired to Escrow Agent no later than January 9, 2008 and said Initial Deposit shall be released by Escrow Agent to Larry Bruce Herald when Larry Bruce Herald signs the appropriate paper work for the renewal of the Purchase Option (Exhibit B).

5.

The Second Deposit shall be released by Escrow Agent when the following terms and conditions are fulfilled as confirmed in writing to Escrow Agent by Assignor and Assignee/Optionee.

a.

Review and acceptance of the form of the following documents; which shall become a part of this Agreement To Assign:

Exhibit A: Legal Description

Exhibit B: Escrow Instructions to Darrell Herald*

Exhibit C: Purchase Option (between AMS and L. Herald)

Exhibit D: Real Estate Purchase Agreement*

Exhibit E: Property Development Plan

*Exhibits B and D shall be approved by Darrell Herald and Larry Bruce Herald respectively.

b.

Receipt and acceptance of proof of marketable title in the form of insurable Opinion of Title by legal counsel.

6.

This AGREEMENT TO ASSIGN shall expire 90 days from the signature date entered below unless extended by a payment by Assignee to Assignor of an additional non-refundable $25,000.00, prior to the 90 day expiration period. Said $25,000.00 shall automatically renew and extend this AGREEMENT TO ASSIGN for an additional 30 day period.

7.

Should Assignee fail to satisfy the terms of this agreement by purchasing said property and assigning the coal interests, this AGREEMENT TO ASSIGN shall expire and the Assignor shall be free to enter into a new AGREEMENT TO ASSIGN with other parties.

8.

By accepting the assignment, Assignee/Optionee agrees to undertake and perform any obligation imposed on Assignee/Optionee as Optionee under the aforementioned agreement. Assignee/Optionee accepts this assignment subject to all terms and conditions contained in this “AGREEMENT TO ASSIGN Real Estate Purchase Option” and as imposed by law. A copy of said “Real Estate PURCHASE OPTION Exhibit C” is attached hereto and incorporated herein as if fully set forth herein.
 

Assignee/Optionee shall upon signing this agreement and returning by FAX to 561-948-4977, transfer the Second Deposit no later than January 16, 2008 into the escrow account of said Escrow Agent pursuant to the terms of this AGREEMENT TO ASSIGN.  All provisions of this agreement shall extend to, bind and inure to the benefit of heirs, executors, personal representatives, successors and assigns of Assignor and Assignee.

In WITNESS WHEREOF, Assignor and Assignee/Optionee have set their hands the date aforementioned:

/s/ Johnny R. Thomas Johnny R. Thomas, CEO Consolidation Services, Inc 2756 N Green Valley Pkwy 225 Henderson, NV 69014	/s/ Billy David Altizer Billy David Altizer, Managing Member AMS Development, LLC 380 Barbourville Road London, KY 40744
/s/                              Notary	/s/                             Notary

EX-10.4

Exhibit 10.4

EXHIBIT "E"

Project Development Plan

The Optionor, AMS Development, LLC, shall provide the engineering, consulting and administration services necessary to develop the subject property in the following manner:

•

Surface coal mining operations will be conducted to recover the mineable and merchantable reserves.

•

Where practicable, auger and/or highwall mining operations will be conducted to enhance recovery.

•

The mining and reclamation plan will be structured to provide for and enhance long term organic farming, with particular attention directed to cattle farming. Examples of enhancement techniques include seeding mixtures, permanent pond construction, access road construction and regrading slopes to leave a gentle contour to the extent practical.

•

Economic balance will be one of the primary concerns for mine and reclamation planning.

•

A primary consideration for the coal mine recovery plan for the subject property will be to maximize the area available for cattle farming at any given time during the mining operation, to the extent practical.

The Optionor shall prepare and submit or cause to be prepared and submitted the documents required by regulatory agencies responsible for coal mining and reclamation with jurisdiction for the subject property. Such documents include, but are not necessarily limited to the following:

•

Surface coal mining permits applications, including mining and reclamation operation plans.

•

Mine license applications.

•

Applicable Division of Water permit applications.

•

Applicable permit applications required by the U.S. Army Corps of Engineers.

•

Mining plans required by the Mine Safety and Health Administration (federal).

The project development plan includes the goal of commencing mining within six months of the signing of the Agreement to Assign.

EX-10.9

Exhibit 10.9

EXTENSION OF

REAL ESTATE OPTION TO PURCHASE AGREEMENT

WHEREAS, Larry Bruce Herald gave a Real Estate Option to Purchase (hereafter the “Option”) concerning nine (9) certain tracts or parcels of land lying and being in Owsley County, Kentucky (hereafter the “Premises”), to Pat E. Mitchell and David Altizer, dated the 8th day of January, 2008; and

WHEREAS, Pat E. Mitchell and Billy David Altizer assigned the Option to AMS Development, LLC, by instrument dated the 8th day of January, 2008; and

WHEREAS, AMS Development, LLC assigned the Option to Consolidation Services, Inc., by instrument dated the 8th day of January, 2008; and

WHEREAS, on March 10, 2008, the Option was extended for a period of sixty (60) days, or, until fourteen (14) days after the date the Lis Pendens recorded in Lis Pendens Book 10, page 629, in the Office of the Owsley County Clerk was released, whichever date was later; and

WHEREAS, the said Lis Pendens was released on May 27, 2008; and

WHEREAS, the parties hereto desire to extend the Option to purchase the premises until August 15, 2008, to allow sufficient time for Consolidation Services, Inc. to prepare for the closing;

NOW, THEREFORE, this agreement is made and entered into on this ____day of June, 2008, by and between LARRY BRUCE HERALD, of Route 1, Box 138, Booneville, Kentucky 41314, (hereafter referred to as “First Party”), and CONSOLIDATION SERVICES, INC., of 2756 North Green Valley Parkway, Suite 225, Henderson, Nevada 69014 (hereafter referred to as "Second Party").

For and in consideration of the sum of Ten Thousand ($10,000.00) dollars, First Party does hereby extend the Option to purchase the premises until August 15, 2008.

It is the intention of Second Party to close on the Premises prior to August 15, 2008, if reasonably possible. Because Second party has a good faith intention to close on the Premises as soon as reasonably possible, First Party has agreed to the following payment schedule for the purchase price of One Million ($1,000.000.00) dollars:

a.) For a closing held prior to July 15, 2008, the purchase price shall be paid in the following installments: $250,000.00 on the day of closing; $150,000.00 on July 15, 2008; $100,000.00 on August 15, 2008; and, $500,000.00 on October 1,2008.

b.) For a closing held on July 15, 2008, and thereafter, but prior to August 15, 2008, the purchase price shall be paid in the following increments: $400,000.00 on the day of closing; $100,000.00 on August 15, 2008; and, 5500,000.00 on October 15, 2008.

c.) For a closing held Oft August 15, 2008, the purchase price shall be paid in the following increments: $500,000.00 on August 15, 2008; and, $500,000.00 on October 15, 2008.

The parties agree that all of the remaining terms and conditions of the Option shall remain in full force and effect.

FIRST PARTY:	/s/ Larry B. Herald
	LARRY BRUCE HERALD

SECOND PARTY:	CONSOLIDATION SERVICES, INC.
	/s/ Johnny R. Thomas
	JOHNNY R. THOMAS, President

STATE OF KENTUCKY

COUNTY OF BREATHITT

I, Darrell A. Herald, a notary public for the State of Kentucky at large, certify that the foregoing Extension of Real Estate Option to Purchase Agreement was produced before me in said County and State, and signed, acknowledged and delivered by LARRY BRUCE HERALD, on this 13th day of June, 2008.

/s/ Darrell A. Herald

NOTARY PUBLIC

My commission expires: 04/02/2010

STATE OF NEVADA

COUNTY OF CLARK

I, Cathi Johnson, a notary public for the State of Nevada at large, certify that the foregoing Extension of Real Estate Option to Purchase Agreement was produced before me in said County and State, and signed, acknowledged and delivered by JOHNNY R. THOMAS, for and on behalf of CONSOLIDATION SERVICES, INC., as President, on this 14th day of June, 2008.

/s/ Cathi Johnson

NOTARY PUBLIC

My commission expires: 08/07/2011

This Instrument Prepared By:

DARRELL A. HERALD

Attorney at Law

Jackson, Kentucky 41339

/s/ Darrell A. Herald

REAL ESTATE SALE AND PURCHASE AGREEMENT

THIS REAL ESTATE SALE AND PURCHASE AGREEMENT (the “Agreement”) is made and entered into by and between LARRY BRUCE HERALD, of Route 1 Box 138, Kentucky 41314 (the "Seller"), and CONSOLIDATION SERVICES, INC., of 2756 N. Green Valley Parkway, Suite 225, Henderson, Nevada 89014 (the “Buyer”), this ____ day of _________, 2008.

WITNESSETH:

WHEREAS, Seller is the fee simple owner of certain real property located on Cow Creek, in Owsley County, Kentucky, (the “property”) which is more fully described in Exhibit “A” attached hereto and incorporated herein by reference; and

WHEREAS, Seller desires to sell and Buyer desires to purchase the property, subject to the terms and conditions more particularly set forth herein;

NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, Seller and Buyer do hereby agree as follows:

1. Upon the terms and conditions set forth herein, Seller agrees to sell and Buyer agrees to purchase for the sum of One Million ($1,000,000.00) dollars the property described in Exhibit “A”.

2. An unencumbered, good, and marketable fee simple title to the property shall be conveyed to Buyer, or its successor or assign, at the option of Buyer, by deed of GENERAL WARRANTY at closing.

3. All real estate taxes and other assessments to the property due and payable in calendar year 2008 shall be prorated between Buyer and Seller from January 1, 2008 to date of deed.

4. Buyer or its successor or assign, shall accept the deed to the property when tendered by Seller at closing and make settlement as herein set forth. Possession of the property shall be given to Buyer on the date of the deed.

5. Buyer agrees to pay all closing costs including the of document preparation and transfer taxes.

6. The Buyer and Seller have read the entire contents of this agreement and acknowledge receipt of an executed copy hereof. It is agreed that all terms and conditions pertinent hereto are included in this writing, and no verbal agreements or understandings of any kind shall be binding upon Buyer and Seller. Buyer and Seller further agree that any modifications of this agreement shall be in writing and shall be executed by the Seller and Buyer.

IN TESTIMONY WHEREOF, witness the signatures of the Buyer and Seller as of the date first set forth herein.

FIRST PARTY:	/s/ Larry B. Herald
	LARRY BRUCE HERALD

SECOND PARTY:	CONSOLIDATION SERVICES, INC.
	/s/ Johnny R. Thomas
	JOHNNY R. THOMAS, President

STATE OF KENTUCKY

COUNTY OF ______________

I, ________________, a notary public for the State of Kentucky at large, certify that the foregoing Real Estate Option to Purchase Agreement was produced before me in said County and State, and signed, acknowledged and delivered by LARRY BRUCE HERALD, on this _____ day of ____________, 2008.

___________________

NOTARY PUBLIC

My commission expires: __________

STATE OF NEVADA

COUNTY OF _____________

I, ___________________, a notary public for the State of Nevada at large, certify that the foregoing Real Estate Option to Purchase Agreement was produced before me in said County and State, and signed, acknowledged and delivered by JOHNNY R. THOMAS, for and on behalf of CONSOLIDATION SERVICES, INC., as President, on this _____ day of ____________, 2008.

_____________________

NOTARY PUBLIC

My commission expires: _____________

This Instrument Prepared By:

Darrell A. Herald

Attorney at Law

Jackson, Kentucky 41339

_______________________

EXHIBIT "A"

Tract No. 1:

A certain tract or parcel of land lying and being in Owsley County, Kentucky, on Slate Lick Fork of Cow Creek, and more particularly described as follows:

Beginning at the standing rock on the East bank of said creek or fork; thence N 53 degrees W 80 poles crossing said fork to the top of the fork ridge between said fork and wolf pen fork; thence with the dividing ridge between said forks to a black gum and two chestnuts; thence down the point S 20 degrees E 20 poles to two chestnuts; thence S 39 degrees E 21 poles to two black oaks; thence down the hill S 15 E 62 poles to a beech on the South bank of Mud Lick Branch; thence same course continued to the top of the fork point between the Mud Lick and Curly Maple Forks; thence up said point as it meanders to the dividing ridge between Cow Creek and Indian Creeks; thence with top of said ridge u it meanders to the deep gap, between Curly Maple Fork: of Cow Creek and Steel Trap Fork of Buffalo; thence with the top of said ridge to a knoll between Curly Maple and Cane Brake Fork of Cow Creek and the Steel Trap Folk of Buffalo; thence down the dividing ridge between the Curly Maple Fork: and Cane Brake Fork to the top of the ridge between the Brawner Hollor and Cane Break to a high rocky knob on the fork point between the can Brake and the Slate Lick Forks to a black oak and chestnut; thence down the hill No. 66 degrees W 74 poles to the beginning. Containing 200 acres, more or less.

It is understood and agreed that grantors herein do grant and convey to second party the right of way across the Bill Eversole track, which joins the tract herein conveyed. It is understood that this right of way shall follow the old road to the line of Virgil Herald land then cross to and remain on the left hand side of the Jennings Fork.

Being the same property conveyed unto Larry Bruce Herald from Lucy Rose DeBord and Jack DeBord, husband, by deed dated the 26th day of May 1992 and recorded in Deed Book 61, page 500.

MORTGAGE

THIS MORTGAGE, dated on this ____ day of June, 2008, by and between CONSOLIDATION SERVICES, INC., a Delaware corporation, of 2756 North Green Valley Parkway, Suite 225, Henderson, Nevada 89104, hereinafter referred to as "Mortgagor", and LARRY BRUCE HERALD, of Route 1, Box 138, Booneville, Kentucky 41314, hereinafter referred to as "Mortgagee";

WHEREAS, CONSOLIDATION SERVICES, INC., is justly indebted to LARRY BRUCE HERALD, Mortgagee, in the sum of Seven Hundred Fifty Thousand ($750,000.00) dollars, which indebtedness is evidenced by the Mortgagors’ negotiable promissory note of even date, and for the purpose of securing the payment of said sum, hereby grant, mortgage and convey unto the said Mortgagee those Nine (9) certain tracts or parcels of land more fully described in Exhibit "A" which is attached hereto and incorporated herein by reference.

The Mortgagor shall promptly pay the principal of the indebtedness evidenced by the promissory note at the times and in the manner therein provided. In the event the Mortgagor shall fail to make any payment set forth in the promissory note, or shall fail to fulfill covenants and agreements herein contained, or shall file of a petition in bankruptcy or shall have an involuntary petition in bankruptcy filed against it, or shall make an assignment for the benefit of creditors, then the Mortgagee may immediately declare the entire unpaid balance of the promissory note secured hereby immediately due and payable and proceed to enforce the collection of same without further notice or demand, to .the extent allowed by applicable law, and may foreclose this Mortgage by judicial proceeding.

Mortgagor agrees to assume the risk of loss and hold Mortgagee harmless from any and all liability in connection with said property.

In the event any proceeding shall be instituted to condemn the mortgaged property, or any part thereof, and take the same for public use under the power of eminent domain or to enforce any lien upon or interest in the mortgaged property. Mortgagee may, without notice, at his option, declare the entire unpaid balance of the promissory note immediately due and payable and proceed to enforce the collection of the same. Mortgagor hereby waives all rights of valuation and appraisement laws.

The Mortgagor shall keep the mortgaged property in good order and condition, reasonable wear and tear excepted, and will not commit or permit any waste of the mortgaged property. The Mortgagor agrees that during the term of this mortgage that it will not remove any trees, timber or minerals, disturb the property in any way, or otherwise perform any act which would diminish the fair market value of the property. However, the foregoing notwithstanding, the Mortgagor, and/or its agents, servants and employees, shall be allowed to core drill to determine any coal reserves located upon or within said property. The Mortgagor agrees that it will not explore for oil and/or gas reserves upon or within the said property during the term of this mortgage.

This mortgage shall be binding upon and inure to the benefit of the respective heirs, successors, and assigns of the parties hereto.

TO HAVE AND TO HOLD the said property unto the said Larry Bruce Herald, his heirs and assigns forever; PROVIDED, HOWEVER, that if the aforesaid Consolidation Services, Inc., pays to Larry Bruce Herald, the total sum of Seven Hundred Fifty Thousand ($750,000.00) dollars on or before the 15th day of October, 2008, then this mortgage and such other writings as may exist as evidence of said indebtedness shall be null and void and -the Mortgagee shall immediately release the said mortgage.

IN TESTIMONY WHEREOF, witness its signature, this day and date first herein appearing.

CONSOLIDATION SERVICES, INC.

/s/ Johnny R. Thomas

JOHNNY R. THOMAS, President

ATTEST:

/s/ Helen H. Thomas

SECRETARY

This Instrument Prepared By:

DARRELL A. HERALD

Attorney at Law

Jackson, Kentucky 41339

_____________________________

STATE OF NEVADA

COUNTY OF CLARK

On this 9^th day of June, 2008, personally appeared before me, a Notary Public, JOHNNY R. THOMAS, President of CONSOLIDATION SERVICES, INC., a Delaware corporation, who acknowledged that he executed the above mortgage to LARRY BRUCE HERALD, and said mortgage was attested by HELEN H. THOMAS, Secretary of said corporation.

Given under my hand this 9th day of June, 2008.

/s/____________________

NOTARY PUBLIC

My commission expires: 08/07/2011

STATE OF KENTUCKY

COUNTY OF OWSLEY

I, Sid Gabbard, Clerk of the aforesaid  County Court, certify that the foregoing Mortgage was, on the ____ day of _____________, 2008, lodged for record; whereupon the same, with the forgoing and this certificate have been duly recorded in my said office in Mortgage Book No. ______, at page no. _________.

Witness my hand this _____ day of __________, 2008.

SID GABBARD, CLERK

BY: ____________________ D.C.

PROMISSORY NOTE

$750,000.00 June _____, 2008

FOR VALUE RECEIVED, CONSOLIDATION SERVICES, INC., of 2756 N. Green Valley Parkway, Suite 225, Henderson, Nevada 69014, hereby promises and agrees to pay to LARRY BRUCE HERALD, of Route 1, Box 138, Booneville, Kentucky 41314, the principal sum of Seven Hundred Fifty Thousand ($750,000.00) dollars.

This principal sum shall be paid as follows: the amount of One Hundred Fifty Thousand ($150,000.00) dollars on or before July 15, 2008; the amount of One Hundred Thousand ($100,000.00) dollars on or before August 15, 2008; and the amount of Five Hundred Thousand ($500,000.00) on or before October 15, 2008.

This note is secured as of the date of its making by certain real property owned by Consolidation Services. Inc., pursuant to the terms of a mortgage dated the _____ day of June, 2008.

At any time prior to the due date of any payment, the amounts set forth under the terms of this note may be repaid in whole or in part without penalty or premium; provided, however, that in such event Larry Bruce Herald shall have no obligation to advance, and Consolidations Services, Inc. shall have no right to reborrow, any amounts repaid.

The failure by Consolidation Services, Inc., to make either of the installment payments to Larry Bruce Herald when due, or the failure of Consolidation Services, Inc. to fulfill covenants and agreements herein contained, or the filing of a petition in bankruptcy by Consolidation Services, Inc., or an involuntary petition in bankruptcy being filed against it, or the making of an assignment for the benefit of creditors, shall constitute a default under the terms of this note. In the event of a default, the entire principal balance shall, at the option of Larry Bruce Herald, become immediately due and payable, without presentment, notice, protest, or demand of any kind (all of which are hereby expressly waived by Consolidation Services, Inc.). Furthermore, Larry Bruce Herald shall have the right to proceed immediately to repossess the above-described real property and to take legal action against Consolidation Services, Inc.

Failure of Larry Bruce Herald to exercise any rights and remedies shall not constitute a waiver of the right to exercise the same at that or any other time. All rights and remedies of Larry Bruce Herald for default under this note shall be cumulative to the greatest extent permitted bylaw. Time shall be of the essence in the payment of all installments on this note and the performance of the other obligations under this note.

Consolidation Services, Inc. hereby waives presentment, demand, notice of dishonor, protest, notice of protest and nonpayment, and further waives all exemptions to which they may now or hereafter be entitled to under the laws of the Commonwealth of Kentucky or the United States.

IN TESTIMONY THEREOF, witness the signatures of the undersigned, on this ___day of June, 2008.

CONSOLIDATION SERVICES, INC.

/s/ Johnny R. Thomas

JOHNNY R. THOMAS, President

ATTEST:

/s/ Helen H. Thomas

SECRETARY

STATE OF NEVADA

COUNTY OF CLARK

Subscribed and sworn to before me by JOHNNY R. THOMAS, President of CONSOLIDATION SERVICES, INC., a Delaware corporation, for and on behalf of said corporation by him as its President, and attested by HELEN H. THOMAS, Secretary, on this 9th day of June, 2008.

/s/____________________

NOTARY PUBLIC

My commission expires: 08/07/2011

EX-21.1

 

Exhibit 21.1

Subsidiaries of the Registrant

Buckhorn Resources, LLC

 

Vector Energy Services, Inc.