10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2013
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
	For the transition period from N/A to N/A

Commission File No. 0-54230

 CONSOLIDATION SERVICES, INC.

(Name of small business issuer as specified in its charter)

Delaware	20-8317863
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

2300 West Sahara Drive, Suite 800, Las Vegas, NV  89102

(Address of principal executive offices)

 (702) 949-9449

(Issuer’s telephone number)

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non–accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b–2 of the Exchange Act. (Check one):

Large accelerated filer	[  ]	Accelerated filer	[  ]
Non–Accelerated filer	[  ]	Small reporting company	[X]

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 14, 2013
Common stock, $0.001 par value	14,767,553

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CONSOLIDATION SERVICES, INC.

INDEX TO FORM 10-Q FILING

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated Financial Statements
	Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012	3
	Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012	5
	Notes to Consolidated Financial Statements	6-15
Item 2.	Management’s  Discussion and Analysis of Financial Condition and Results of Operations	16-21
Item 3	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	22
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	24
Item 5	Other information	24
Item 6.	Exhibits	24
	Signature Pages	27

CERTIFICATIONS

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

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PART I

FINANCIAL INFORMATION

CONSOLIDATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
		June 30,		December 31,
		2013		2012
ASSETS
CURRENT ASSETS:
Cash	$	18,595	$	12,597
Accounts receivable		5,015		10,831
Prepaid expenses		12,697		31,412
Total current assets		36,307		54,840
PROPERTY AND EQUIPMENT:
Oil and gas properties subject to amortization, net		288,665		290,807
Oil and gas properties not subject to amortization, net of $868,828 impairment		-		-
Support equipment, net		59,623		60,877
Net property and equipment		348,288		351,684
Licensing agreement		45,000		-
TOTAL ASSETS		429,595		406,524
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable		576,906		473,369
Accounts payable - related party		499,970		388,327
Accrued expenses		4,684		22,020
Common stock payable - related party		-		32,000
Accrued interest - shareholder		37,709		20,809
Notes payable - shareholder		650,198		463,198
Total current liabilities		1,769,467		1,399,723
Asset retirement obligations		5,735		4,384
TOTAL LIABILITIES		1,775,202		1,404,107
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' DEFICIT:
Preferred stock, $0.001 par value, 20,000,000 shares
authorized; none issued and outstanding		-		-
Common stock, $0.001 par value, 200,000,000 shares
authorized; 14,767,553 and 12,567,553 issued and
outstanding as of June 30, 2013 and December 31, 2012, respectively		14,768		12,568
Additional paid-in capital		9,565,008		9,391,208
Accumulated deficit		(10,925,383)		(10,401,359)
Total stockholders' deficit		(1,345,607)		(997,583)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	429,595	$	406,524

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

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CONSOLDATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended,		Six Months Ended,
	June 30,		June 30,
	2013	2012		2013	2012
OIL AND GAS REVENUES	$ 34,075	$22,494		$58,470	$75,261
COSTS AND OPERATING EXPENSES:
Lease operating expenses	32,888	38,995		63,857	89,958
Depreciation, depletion, amortization and accretion	1,360	2,257		4,747	8,691
General and administrative	199,229	174,692		496,353	317,822
Total costs and operating expenses	233,477	215,944		564,957	416,471
OPERATING LOSS	(199,402)	(193,450)		(506,487)	(341,210)
INTEREST EXPENSE	9,575	3,478		17,537	5,875
NET LOSS	$(208,977)	$(196,928)		$(524,024)	$(347,085)
Net loss per common share, basic and diluted	$(0.01)	$(0.02)		$(0.04)	$(0.03)
Weighted average number of common shares outstanding, basic and diluted	14,767,553	12,485,716		14,657,553	12,485,716

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

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CONSOLIDATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended June 30,
	2013		2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(524,024)	$	(347,085)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion, and amortization		3,396		4,218
Accretion of asset retirement obligations		1,351		4,473
Stock compensation		144,000		7,000
Changes in operating assets and liabilities:
Prepaid assets		18,715		-
Accounts receivable		5,816		7,062
Accounts payable and accrued expenses		86,201		95,615
Accounts payable and accrued expenses - related party		111,643		-
Accrued interest - shareholder		16,900		95,000
Net cash used in operating activities		(136,002)		(133,717)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for licensing agreement		(45,000)		-
Net cash used in investing activities		(45,000)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - shareholder		187,000		154,230
Net cash provided by financing activities		187,000		154,230
INCREASE IN CASH		5,998		20,513
CASH, BEGINNING OF PERIOD		12,597		668
CASH, END OF PERIOD	$	18,595	$	21,181
SUPPLEMENTAL CASH FLOW INFORMATION:
Income Taxes	$	-	$	-
Interest Paid	$	-	$	-
NON-CASH INVESTING AND FINANCING ACTIVITY:
Common stock issued for stock payable	$	-	$	5,000

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

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CONSOLIDATION SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Consolidation Services, Inc. (the “Company” or “CNSV”) was incorporated in the State of Delaware on January 26, 2007. The Company is engaged in the exploration and development of oil and gas reserves in Kentucky and Tennessee.

On February 21, 2013, the Company entered into a Bill of Sale and Assignment, Release and Assumption Agreement with Hydrocarbons Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“HH”), whereby substantially all of the Company’s oil and gas assets and liabilities were transferred to HH effective as of February 28, 2013.

Basis of Presentation of Interim Financial Statements

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2012, included within its Form 10-K, as filed with the Securities and Exchange Commission.

Principles of Consolidation

The consolidated financial statements include the accounts of Consolidation Services, Inc. and its subsidiaries, Vector Energy Services, Inc, CSI Energy, Inc, CSI Resource, Inc., all of which are presently not operating subsidiaries. On January 28, 2013, the Company formed Mongolia Equipment Rental Corporation, a wholly owned subsidiary which is presently not an operating subsidiary. On January 31, 2013, the Company formed Hydrocarbons Holdings, Inc., a wholly subsidiary, which became an operating subsidiary on February 28, 2013.

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Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

The Company’s consolidated financial statements are based on a number of significant estimates including the oil and gas reserve quantities which are the basis for the calculations of depreciation, depletion, and impairment. The Company’s reserve quantities are determined by an independent petroleum engineering firm. However, management emphasizes that estimated reserve quantities are inherently imprecise and that estimates of more recent discoveries are more imprecise than those for properties with long production histories.  Accordingly, the Company’s estimates are expected to change as future information becomes available.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At June 30, 2013, cash and cash equivalents include cash on hand and cash in depository institutions/commercial banks.  

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and gas operations.  Under this method of accounting, costs to acquire mineral interests in oil and gas properties, to drill and equip development wells, and to drill and equip exploratory wells that find proved reserves are capitalized.  Depletion of capitalized costs for producing oil and gas properties is calculated using the unit-of-production method based on estimates of proved oil and gas reserves on a field-by-field basis.  

The costs of unproved leaseholds and mineral interests are capitalized pending the results of exploration efforts.  In addition, unproved leasehold costs are assessed periodically, on a property-by-property basis, and a loss is recognized to the extent, if any, the property has been impaired.  This impairment will generally be based on geophysical or geologic data.  Due to the perpetual nature of the Company’s ownership of the mineral interests, the drilling of a well, whether successful or unsuccessful, may not represent a complete test of all depths of interest.  Therefore, at the time that a well is drilled, only a portion of the costs allocated to the acreage drilled may be expensed.  As unproved leaseholds are determined to be productive, the related costs are transferred to proved leaseholds.  The costs associated with unproved leaseholds and mineral interests that have been allowed to expire are charged to exploration expense.

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Long-lived assets that are held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  When it is determined that an asset’s estimated future net cash flows will not be sufficient to recover its carrying amount, an impairment charge must be recorded to reduce the carrying amount of the asset to its estimated fair value.  Fair value is determined by reference to the present value of estimated future cash flows of such properties.  

Exploration costs, including exploratory dry-holes, annual delay rental and geological and geophysical costs are charged to expense when incurred.

Support Equipment and Facilities

Support equipment and facilities including furniture, fixtures, automobiles, office equipment, leasehold improvements, and computer software, are stated at cost. Depreciation and amortization of support equipment and facilities is calculated using various accelerated or straight-line methods over the respective expected useful lives. The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures which increase the life of an asset or increase expected recoveries are capitalized and depleted or depreciated over the estimated remaining useful life of the asset. The cost of equipment sold, or otherwise disposed of, and the related accumulated depletion, depreciation or amortization is removed from the accounts and any gains or losses are reflected in current operations.

Revenue Recognition

The Company has royalty and working interests in various oil and gas properties which constitute its primary source of revenue.  The Company recognizes oil and gas revenue from its interest in producing wells as oil and gas is sold from those wells.   

The Company follows the “sales method” of accounting for oil and natural gas revenue, so it recognizes revenue on all natural gas or crude oil sold to purchasers, regardless of whether the sales are proportionate to its ownership in the property.  A receivable or liability is recognized only to the extent that the Company has an imbalance on a specific property greater than its share of the expected remaining proved reserves.

Accounts Receivable

Substantially all of the Company’s accounts receivable consists of accrued revenues from oil and gas production from third party companies in the oil and gas industry.  This concentration of customers may be a consideration of the Companies’ overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions affecting the oil and gas industry.  In determining whether or not to require collateral from a purchaser or joint interest owner, the Company may analyze the entity’s net worth, cash flows, earnings and credit ratings.  Historical credit losses incurred by the Company on receivables have not been significant.

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Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash. Interest-bearing accounts are insured up to $250,000.

The Company has two customers that purchase and distribute substantially all of our oil and gas production.

Earnings (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. Diluted loss per share is the same as basic loss per share because due to the Company having a net loss (attributable to its common shareholders). Accordingly, the effects of including any additional common stock equivalents would be anti-dilutive.  There were no potentially dilutive financial instruments outstanding at June 30, 2013 and 2012.

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.

The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, accounts payable and advance from related party approximate fair value due to their short-term nature.

Recent Accounting Pronouncements  

No other accounting standards or interpretations issued recently are expected to a have a material consequence on the Company’s consolidated financial position, operations or cash flows.

Subsequent Events

The Company evaluated subsequent events through the date these financial statements were issued for disclosure consideration.

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NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has sustained recurring losses from operations including a net loss for the six months ended June 30, 2013 of $524,024.  Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from lenders, investors and the support of certain stockholders.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  

In this regard, the Company is planning to raise additional funds through loans and additional sales of its common stock. The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of oil and gas reserves. Although the Company is pursuing additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations.  The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 - OIL AND GAS PROPERTIES

During the six months ended June 30, 2013, the Company did not purchase or dispose of any oil and gas properties.

Activity of net oil and gas properties for the six months ended June 30, 2013 were:

Beginning balance January 1, 2013		290,807
Depletion, depreciation and change in asset retirement cost estimate		(2,142)
Ending balance June 30, 2013	$	288,665

Net oil and gas properties by classification were:

	As of June 30, 2013		As of December 31, 2012
Proved oil and gas properties	$	357,693	$	774,222
Unproved oil and gas properties		-		868,828
Asset retirement asset		3,432		3,432
Accumulated depreciation, depletion and impairment		(72,460)		(1,355,675)
Total oil and gas assets	$	288,665	$	290,807

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During the six months ended June 30, 2013 there was no impairment of its proved oil and gas properties.  As of June 30, 2013 and December 31, 2012, the Company had fully impaired its unproved oil and gas properties.   

Support facilities and equipment

The Company owns support facilities and equipment which serve its oil and gas production activities.  The equipment is depreciated over the useful life of the underlying oil and gas property.  The following table details the change in supporting facilities and equipment for the six months ended June 30, 2013:

Ending balance as of December 31, 2012		60,877
Depreciation		(1,254)
Ending balance as of June 30, 2013	$	59,623

NOTE 4 - LICENSING AGREEMENT

On March 21, 2013, the Company through its wholly owned subsidiary, Mongolia Equipment Rental Corporation, a Delaware corporation (the “Franchisee”) entered into an International Franchise Agreement (the “Franchise Agreement”) with Hertz Equipment Rental Corporation and Hertz Equipment Rental System (collectively “Franchisor”).

Under the Franchise Agreement the Franchisee will operate a business of renting, selling and maintaining equipment primarily for use in mining, construction, materials handling and commercial and industrial activities (“Equipment Rental Business”) under the unique plan or system of the Franchisor (the “System”) in the country of Mongolia.

The license granted to Franchisee under the Franchise Agreement shall commence on  July 1, 2013 and continue for a period of ten (10) years, unless renewed or sooner terminated.  The Franchisee shall have the option to renew the license for two (2) successive five (5) year terms, subject to the terms of the then current Hertz Equipment Rental System International Franchise Agreement, and provided such terms shall preserve Franchisee’s right to renew for an additional two successive five year periods and will not require the payment of an initial fee by Franchisee and the Franchisee is not in default of the Franchise Agreement.

The Franchise Agreement provides that so long as the Franchise Agreement remains in place and for one-year after the expiration or termination of the Franchise Agreement: (i) Franchisor will not establish or license another to establish an Equipment Rental Business in the country of Mongolia; and (ii) Franchisor will not establish or license another to establish a truck rental business under the System (“Truck Rental Business”) in the country of Mongolia without first having afforded Franchisee a non-transferrable right of first refusal to establish a Truck Rental Business in the country of Mongolia. Franchisee shall have a right of first opportunity (prior to Franchisor entering into any substantive discussions or negotiations with any other party) to acquire the franchise for any Equipment Rental Business in the country of Burma (a/k/a Myanmar).

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In consideration for the license provided under the Franchise Agreement, during the six months ended June 30, 2013, the Franchisee paid Franchisor an initial fee of $45,000 and also will (i) pay a continuing monthly license fee equal to 6% of Franchisee’s gross revenue, but not less than $135,000 per year; and (ii) an amount equal to 1% of all sums received by Franchisee related to (a) the sale, trade-in or other disposal of used equipment, and (b) the sale of any new equipment or product lines that have been previously approved by Franchisor. In addition, Franchisee shall be required to spend annually an amount equal to not less than 1% of the Franchisee’s gross revenue for local advertising and promotion of the Equipment Rental Business in Mongolia.

NOTE 5 - RELATED PARTY TRANSACTIONS

Notes Payable

During the six months ended June 30, 2013 and 2012, we entered into notes payable agreements with a shareholder totaling $187,000 and $154,230, respectively.  As of  June 30, 2013 and December 31, 2012, notes payable to related party were $650,198 and $463,198, respectively.  All of the notes payable are due on demand, have no periodic payment terms and bear interest at interest rates ranging from 6% - 7.5% per annum.

The Company recorded $17,537 and $5,875 of interest expense related to these notes payable during the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, the Company owed $37,709 and $20,809, respectively, of interest to the shareholder.

Accounts payable and accrued expenses – Related Parties

Accounts payable and accrued expenses to related parties represent expenses that are owed to the CEO of the Company. These payables are due upon demand and do not bear interest. At June 30, 2013 and December 31, 2012, amounts due to related parties were $497,086 and $388,327, respectively.

NOTE 6 - ASSET RETIREMENT OBLIGATIONS

The Company records the fair value of a liability for asset retirement obligations (“ARO”) in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset and is depreciated over the useful life of the asset. The Company accrues an abandonment liability associated with its oil and gas wells when those assets are placed in service. The ARO is recorded at its estimated fair value and accretion is recognized over time as the discounted liability is accreted to its expected settlement value. Fair value is determined by using the expected future cash outflows discounted at the Company’s credit-adjusted risk-free rate. No market risk premium has been included in the Company’s calculation of the ARO balance.

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		Six months ended June 30, 2013
Asset retirement obligation at beginning of the period	$	4,384
Additions		-
Accretion		1,351
Asset retirement obligation at end of the period	$	5,735

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Chief Executive Officer Employment Agreement

The Company has an employment agreement with its Chief Executive Officer (the “Executive’) (the “Employment Agreement”) that expires on July 1, 2016 and shall automatically renew on an annual basis unless terminated in accordance with the provisions of the Employment Agreement. The Employment Agreement provides for:

i.

A monthly salary of $25,000 per month subject to an annual increase of not less than the Consumer Price Index.

ii.

A cash bonus of 25% of his annual base salary each year in the event the Company reaches certain milestones as defined in the Employment Agreement.

iii.

The issuance of options (the Employment Agreement refers to them as warrants) on each anniversary date of the Employment Agreement, with a five-year exercise period, to purchase 1% of the then issued and outstanding shares of the Company exercisable at a price equal to the trailing six-month average share trading price prior to grant date.

iv.

An automobile and medical allowance of $3,060 per month in the aggregate.

v.

In the event the Executive's employment is terminated without cause he will receive 12 months of severance pay and all warrants for the following year will be immediately granted.  

The Executive has waived his right to receive previously unissued options since entering into the Employment Agreement, however, the Company is obligated to issue the Executive options on each future anniversary date in accordance with the Employment Agreement, beginning on July 1, 2013. On July 1, 2013, the Company issued a warrant to the Executive to purchase 147,676 shares of common stock at an exercise price per share of $0.30.

Consulting Agreements

On December 1, 2012, the Company entered into a one year consulting agreement (the “COO Consulting Agreement”) with Carl Casareto to serve as the Company’s Chief Operations Officer (“COO”).   In consideration of the services he provides, the Company has agreed to pay the COO $7,000 per month (“Base Compensation”).  In addition to the Base Compensation, the Company has agreed to pay the COO a bonus of 25% of the COO’s annual Base Compensation in the event the Company reaches certain milestones as defined in the COO Consulting Agreement.  On January 11, 2013, the Company granted the COO 200,000 shares of the Company’s common stock.  During the six months ended  June 30, 2013, the Company recorded stock compensation expense of $16,000 based on the trading price of the stock on the grant date of $0.08 per share.

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During January 2013, the Company entered into a one year consulting agreement with Richard S. Polep to serve as the Company’s Chief Financial Officer (“CFO”).  In consideration of the services the CFO provided by serving as CFO of the Company from August 8, 2011 until December 31, 2012, the Company granted the CFO 400,000 shares of the Company’s common stock.  In consideration for the services the CFO provides for 2013, the Company granted the CFO an additional 400,000 shares of the Company’s common stock.The Company recorded stock compensation expense of $64,000 based on the trading price of the stock on the grant date of $0.08 per share, of which $32,000 had been accrued and was expensed in 2012, and $32,000 was recorded as an expense during the six months ended June 30, 2013.

During January 2013, the Company entered into a one year consulting agreement with Brady Strahl to serve as the Company’s President.  In consideration for services, the Company granted the President 200,000 shares of the Company’s common stock.  During the six months ended June 30, 2013, the Company recorded stock compensation expense of $16,000 based on the trading price of the stock on the grant date of $0.08 per share.

During January 2013, the Company entered into a one year consulting agreement with Sean Kirwan to serve as the Company’s Vice President and In-house counsel.  In consideration for the services, the Company granted 200,000 shares of the Company’s common stock. During the six months ended June 30, 2013, the Company recorded stock compensation expense of $16,000 based on the trading price of the stock on the grant date of $0.08 per share.

NOTE 8 - STOCKHOLDERS’ EQUITY

Common Stock

On November 29, 2012, the Board of Directors approved a 1-for-4 reverse split of the Company’s common stock. The reverse stock split was effective on December 28, 2012, before trading began on December 31, 2012. No fractional shares were issued. Stockholders who would otherwise hold a fractional share will receive a cash payment in lieu of such fractional share. All shares and per share amounts in the consolidated financial Statements and notes to the consolidated statements, have been retroactively adjusted for all periods presented to reflect the reverse stock split.

The Company is authorized to issue 200,000,000 shares of common stock, at $0.001 par value, of which 14,767,553 and 12,567,553 common shares were issued and outstanding as of June 30, 2013 and December 31, 2012, respectively.

On January 11, 2013, the Board of Directors granted 200,000 shares of the Company’s common stock to each member of the Board as compensation for serving as a member of the Board until the Company’s 2014 Annual Shareholder’s Meeting. A total of 800,000 shares of common stock were issued. As of the grant date, shares of the Company’s common stock were quoted at $0.08 per share.  The Company recorded $64,000 of stock compensation expense during the six months ended June 30, 2013 in connection with the issuance of these shares.

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During the six months ended June 30, 2013, the Company issued 1,400,000 shares of common stock for services to employees, of which 400,000 shares were earned in 2012 and recorded as a $32,000 common stock payable as of December 31, 2012 and the remaining 1,000,000 shares of common stock were granted during 2013.  The Company recorded stock compensation expense of $80,000 during the six months ended June 30, 2013 in connection with the grant of these 1,000,000 shares of common stock based on the fair value of the common stock on the grant dates.

During the six months ended June 30, 2012, the Company issued 250,000 common shares with an aggregate fair value of approximately $12,000 in exchange for services.

Preferred Stock

The Corporation is authorized to issue classes of preferred stock to be designated by the Board of Directors. The total number of preferred shares that the Company is authorized to issue is 20,000,000 shares with a par value of $0.001 per share. Except as otherwise required by statute, the designations and the powers, preferences and rights, and the qualifications or restrictions thereof, of any class or classes of stock or any series of any class of stock of the Company may be determined from time to time by resolution or resolutions of the Board of Directors.

NOTE 9 - SUBSEQUENT EVENTS

From the period of July 1, 2013 through August 1, 2013, the Company entered into additional notes payable with a shareholder totaling $25,000.  All of the notes are due on demand, have no periodic payment terms and bear interest at 6% per annum.

On July 1, 2013, the Company issued its Chief Executive Officer options to purchase 146,676 shares of common stock of the Company at a price of $0.30 per share in accordance with his Employment Agreement. The stock price on the grant date was $0.51 per share. The options were valued on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate 0.88%, (2) term of 5 years, and (3) expected stock volatility of 287.46%. As a result, the fair value of these options on the grant date was $75,241 and the intrinsic value was $30,802.

Effective August 1 2013, the Company entered into a one year consulting agreement with Michael Telford to serve as an Executive Vice President (the “EVP”) of the Company. The EVP has been retained to serve the Company for up to 20 hours per week.   In consideration for the services, the Company has agreed to grant 200,000 shares of the Company’s common stock to the EVP.  As of the grant date, shares of the Company’s common stock were quoted at $0.51 per share.  The Company will record $102,000 of stock compensation expense in connection with the issuance of these shares.

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statement Regarding Forward-Looking Disclosures

Certain statements contained in this report, including, without limitation, statements containing the words, "likely," "forecast," "project," "believe," "anticipate," "expect," and other words of similar meaning, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  Our plans and objectives are based, in part, on assumptions involving the continued expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

General

Consolidation Services, Inc. (the “Company” or “CNSV”) was incorporated in the State of Delaware on January 26, 2007.

Until January 1, 2010, the Company’s sole sources of revenues were from its coal mining and timber harvesting operations on approximately 12,000 contiguous acres in Tennessee. It also held the mineral rights for oil & gas on those properties. The Company discontinued its coal mining and timber harvesting operations on January 1, 2010 via a spin-off while maintaining its oil and gas rights in the Company (“Legacy Properties”). On April 1, 2010, the Company executed an acquisition of producing oil and gas properties in Kentucky and Tennessee. The Company’s current operations consist primarily of the maintenance and production of those oil and gas mineral reserves.  It has not begun exploration or production of its oil and gas rights on its Legacy Properties.

Hydrocarbons Holdings

On February 21, 2013, the Company entered into a Bill of Sale and Assignment, Release and Assumption Agreement with Hydrocarbons Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“HH”), whereby substantially all of the Company’s oil and gas assets and liabilities were transferred to HH effective as of February 28, 2013.

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Mongolia Equipment Rental Corporation

On March 21, 2013, Consolidation Services, Inc. (the “Company”) through its wholly owned subsidiary, Mongolia Equipment Rental Corporation, a Delaware corporation (the “Franchisee”) entered into an International Franchise Agreement (the “Franchise Agreement”) with Hertz Equipment Rental Corporation and Hertz Equipment Rental System (collectively “Franchisor”).

Under the Franchise Agreement the Franchisee will operate a business of renting, selling and maintaining equipment primarily for use in mining, construction, materials handling and commercial and industrial activities (“Equipment Rental Business”) under the unique plan or system of the Franchisor (the “System”) in the country of Mongolia.

The license granted to Franchisee under the Franchise Agreement shall commence on  July 1, 2013 and continue for a period of ten (10) years, unless renewed or sooner terminated.  The Franchisee shall have the option to renew the license for two (2) successive five (5) year terms, subject to the terms of the then current Hertz Equipment Rental System International Franchise Agreement, and provided such terms shall preserve Franchisee’s right to renew for an additional two successive five year periods and will not require the payment of an initial fee by Franchisee and the Franchisee is not in default of the Franchise Agreement.

The Franchise Agreement provides that so long as the Franchise Agreement remains in place and for one-year after the expiration or termination of the Franchise Agreement: (i) Franchisor will not establish or license another to establish an Equipment Rental Business in the country of Mongolia; and (ii) Franchisor will not establish or license another to establish a truck rental business under the System (“Truck Rental Business”) in the country of Mongolia without first having afforded Franchisee a non-transferrable right of first refusal to establish a Truck Rental Business in the country of Mongolia. Franchisee shall have a right of first opportunity (prior to Franchisor entering into any substantive discussions or negotiations with any other party) to acquire the franchise for any Equipment Rental Business in the country of Burma (a/k/a Myanmar).

In consideration for the license provided under the Franchise Agreement, Franchisee will pay Franchisor: (i) an initial fee of $45,000; (ii) a continuing monthly license fee equal to 6% of Franchisee’s gross revenue, but not less than $135,000 per annum; and (iii) an amount equal to 1% of all sums received by Franchisee related to (a) the sale, trade-in or other disposal of used equipment, and (b) the sale of any new equipment or product lines that have been previously approved by Franchisor. In addition Franchisee shall be required to spend annually an amount equal to not less than 1% of the Franchisee’s gross revenue for local advertising and promotion of the Equipment Rental Business in Mongolia.

Supplemental Oil and Gas Information - Comparisons of the three months ended June 30, 2013 and 2012

The following information is intended to supplement the unaudited consolidated financial statements included in this report with data that is not readily available from those statements.

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	Three months ended June 30,
	2013		2012
Production
Oil (Bbls)		353		246
Gas (Mcf)		-		-
Barrel of Oil Equivalent (“BOE”)		353		246
Average Prices
Oil ($/Bbl)	$	89.29	$	91.81
Gas ($/Mcf)	$	-	$	-
Average Lifting Cost
Per BOE	$	93.43	$	166.16

Results of Operations-For the Three Months ended June 30, 2013 and 2012

We use the successful efforts method of accounting for oil and gas operations.  Presently we are producing oil from our Kentucky properties.

Our revenues for the three months ended June 30, 2013 were $34,075 as compared to $22,494 for 2012.  Our revenues are from the sale of our oil and gas production.  During the three months ended June 30, 2013 we produced approximately 353 barrels and received an average price per barrel of $89.29 while during 2012 we produced 246 barrels and received an average price per barrel of $91.81.

Our operating expenses for production activities for the three months ended June 30, 2013 and 2012 were $34,248 (comprised of $32,888 of lease operating expenses and $1,360 of depreciation, depletion and amortization) and $41,252 (comprised of $38,995 of lease operating expenses and $2,257 of depreciation, depletion and amortization), respectively. Our primary operation is the production of our oil and gas properties. The wells in Kentucky are shallow wells (approximately 1,300 feet) and require minimal maintenance. The decrease in lease operating expenses is attributable to decreased work-over costs incurred during the three months ended June 30, 2013.  The decrease in depreciation, depletion and amortization is a result of an impairment of our capitalized oil and gas properties in the fourth quarter of 2012.

Our general and administrative expenses for the three months ended June 30, 2013 and 2012 were $ 199,229 and $174,692, respectively.  The increase of $25,000 is primarily attributable to the increase in executive compensation expense.

Supplemental Oil and Gas Information - Comparisons of the Six Months ended June 30, 2013 and 2012

The following information is intended to supplement the unaudited consolidated financial statements included in this report with data that is not readily available from those statements.

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	Six months ended June 30,
	2013		2012
Production
Oil (Bbls)		619		777
Gas (Mcf)		-		-
Barrel of Oil Equivalent (“BOE”)		619		777
Average Prices
Oil ($/Bbl)	$	85.88	$	96.86
Gas ($/Mcf)	$	-	$	-
Average Lifting Cost
Per BOE	$	103.16	$	121.20

Results of Operations-For the Six Months Ended June 30, 2013 and 2012

We use the successful efforts method of accounting for oil and gas operations.  Presently, we are producing oil from our Kentucky properties.  

Our revenues for the six months ended June 30, 2013 were $58,470 as compared to $75,261 for 2012.  Our revenues are from the sale of our oil and gas production.  During the six months ended June 30, 2013 we produced approximately 619 barrels and received an average price per barrel of $85.88 while during 2012 we produced 777 barrels and received an average price per barrel of $96.86.

Our operating expenses for production activities for the six months ended June 30, 2013 and 2012 were $68,604 (comprised of $63,857 of lease operating expenses and $4,747 of depreciation, depletion and amortization) and $98,649 (comprised of $89,958 of lease operating expenses and $8,691 of depreciation, depletion and amortization), respectively. Our primary operation is the production of our oil and gas properties. The wells in Kentucky are shallow wells (approximately 1,300 feet) and require minimal maintenance. The decrease in lease operating expenses is attributable to decrease hauling and work-over costs incurred during 2013 from the decrease in oil production.  The decrease in depreciation, depletion and amortization is a result of an impairment of our capitalized oil and gas properties in the fourth quarter of 2012.

Our general and administrative expenses for the six months ended June 30, 2013 and 2012 were $496,353 and $317,822, respectively.  The increase is primarily attributable to the increase in executive compensation expense of our CEO and COO of approximately $192,000 and a decrease of legal fees of approximately $16,000.

Liquidity and Capital Resources

Our cash used in operating activities for the six months ended June 30, 2013 was $136,002 as compared to $133,717 for the six months ended June 30, 2012.   The increase in cash flows used in operations was primarily attributable to the unfavorable changes in operating assets and liabilities, primarily related to increases in accounts payable, in 2013 as compared to 2012.

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Our cash used in investing activities for the six months ended June 30, 2013 was $45,000 as compared to $0 for 2012.  The increase in investing activities was due to the purchase of the Hertz licensing agreement during the six months ended June 30, 2013.

Our cash provided by financing activities for the six months ended June 30, 2013 was $187,000 as compared to $154,230 for 2012.  The increase in financing activities was due to the proceeds from notes payable with a shareholder.

During the six months ended June 30, 2013, we entered into notes payable with a shareholder:  The total of all notes payable due to the shareholder is $650,198 at June 30, 2013.  All of the notes payable are due on demand, have no periodic payment terms and bear interest at interest rates ranging from 6% - 7.5% per annum.

From the period of July 1, 2013 through August 1, 2013, the Company entered into additional notes payable with a shareholder totaling $25,000.  All of the notes are due on demand, have no periodic payment terms and bear interest at 6% per annum.

Our future development plan for our oil and gas assets is uncertain and is dependent on our ability to effectively drill for oil and gas and obtain contract and leasing opportunities on oil and gas properties and/or acquisitions. There are no assurances of the ability of our Company to drill economically producible wells. The process/practice of drilling for oil and gas is cost intensive. Accordingly, it is critical for us to raise sufficient capital to implement our business plan.  We incurred net losses of $524,024 and $347,085 for the six months ended June 30, 2013 and 2012, respectively.

We believe we will have to rely on public and private equity and debt financings to fund our liquidity requirements over the next twelve months.  We may be unable to obtain any additional financings on terms favorable to us, or obtain additional funding at all. If adequate funds are not available on acceptable terms, and if cash and cash equivalents, together with any income generated from operations, fall short of our liquidity requirements, we may be unable to sustain operations. Continued negative cash flows could create substantial doubt regarding our ability to fully implement our business plan and could render us unable to expand our operations, respond to competitive pressures, or take advantage of acquisition opportunities, any of which may have a material adverse effect on our business. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock. If we raise additional funds by issuing debt, we may be subject to limitations on our operations, including limitations on the payment of dividends.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. However, the Company had a loss from operations for the six months ended June 30, 2013.   Further, the Company had inadequate working capital to maintain or develop its assets, and is dependent upon funds from lenders, investors and the support of certain stockholders.  

These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The consolidated financial statements herein do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, Company management is pursuing additional funds through loans and additional sales of its common stock.

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The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of oil and gas reserves. Although the Company is pursuing additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.  We have limited cash and cash equivalents and rely on investment from shareholders and other financing.  We have relied upon advances from a shareholder to fund operating expenses.  We need approximately $75,000 per month to fund operating expenses and professional fees of the Company.  

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

WHERE YOU CAN FIND MORE INFORMATION

You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, Current Reports on Form 8-K and proxy statements that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov. Company information is also available at: www.cnsv.info.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business is currently conducted principally in the United States. As a result, our financial results are not affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates, although if the geographical scope of our business broadens, we may do so in the future.

Our exposure to risk for changes in interest rates relates primarily to our investments in short-term financial instruments. Investments in both fixed rate and floating rate interest earning instruments carry some interest rate risk. The fair value of fixed rate securities may fall due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Partly as a result of this, our future interest income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that have fallen in estimated fair value due to changes in interest rates. However, as substantially all of our cash equivalents consist of bank deposits and short-term money market instruments, we do not expect any material change with respect to our net income as a result of an interest rate change.

We do not hold any derivative instruments and do not engage in any hedging activities.  

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ITEM 4. CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures

Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, June 30, 2013. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2013.

Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).  Management is required to base its assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations (COSO). The COSO framework, published in Internal Control-Integrated Framework, is known as the COSO Report. Our principal executive officer and our principal financial officer have chosen the COSO framework on which to base its assessment. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2012.

Our internal controls over financial reporting were not effective due to:

·

The inability of the Company to prepare and file its financial statements timely due to its limited financial and personnel resources caused the Company to be unable to file the required 2012 financial statements by the extended reporting deadline of April 15, 2013.

·

Also, the Company improperly accounted for the valuation of certain of its oil and gas properties with respect to the December 31, 2012 financials, which resulted in material audit adjustments.

There were no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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This quarterly report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Our report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting the Company, our common stock, any of our subsidiaries or of the Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 1A - RISK FACTORS

There were no material changes during our six months ended June 30, 2013 from the risk factors previously disclosed in Part II, Item 1A, “Risk Factors” in our  Annual Report on Form 10-K for the year ended December 31, 2012.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company granted officers and directors 2,200,000 restricted shares of Common Stock of the Company.  The fair value of the shares on the grant date was $176,000.The offer and sale of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act. A legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the three months ended June 30, 2013.

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ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5.  OTHER INFORMATION

There is no information with respect to which information is not otherwise called for by this form.

ITEM 6.  EXHIBITS

3.1	Articles of Incorporation of Consolidation Services, Inc.(1)
3.2	Articles of Amendment to Articles of Incorporation (1)
3.3	Bylaws of Consolidation Services, Inc. (1)
4.1	Form of Class A Common Stock Purchase Warrant(1)
4.2	Form of Class B Common Stock Purchase Warrant(2)
4.3	Form of Class C Common Stock Purchase Warrant(2)
4.4	Form of Subscription Agreement, dated February 9, 2007(2)
10.1	Real Estate Sale and Purchase Agreement, dated January 8, 2008, between Larry Bruce Herald and Consolidation Services, Inc.(5)
10.2	Agreement to Assign Real Estate Purchase Option, dated January 8, 2008.(5)
10.3	Property Agreement, by and among Consolidation Services, Inc. and Billy David Altizer, Pat E. Mitchell, Howard Prevette, William Dale Harris and Buckhorn Resources LLC effective March 20, 2008 and entered  into on March 27, 2008(3)
10.4	Option Oil, Gas and Mineral Agreement, dated as of March 31, 2008, by and among Consolidation Services, Inc. and Eastern Kentucky Land Corporation (the “EK Option Agreement”), with the Oil, Gas and Mineral Agreement, dated as of 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.(4)
10.5	Extension of Real Estate Option to Purchase Agreement, dated June 13, 2008, between the Company and Larry Bruce Herald.(5)
10.6	Stock Purchase Agreement (“Agreement”) is entered into as of July 1, 2008, by and among Vector Energy Services, Inc., John C. Francis, and Consolidation Services, Inc.(6)
10.7	Development Agreement, dated August 26, 2008, between Consolidation Services, Inc. and AMS Development, LLC.(7)
10.8	Form of Promissory Note, dated August 25, 2008, made by Consolidation Services, Inc. to Larry Bruce Herald.(7)
10.9	Form of Mortgage, dated August 25, 2008, between Consolidation Services, Inc. and Larry Bruce Herald.(7)
10.10	LeeCo Agreement, entered into as of September 11, 2008, by and among Consolidation Services, Inc., Altizer, Mitchell, and LeeCo Development, LLC.(8)
10.11	Agreement between the Company and Larry Bruce Herald, dated on or about May 27, 2009.(9)
10.12	Amendment to August 26, 2008 Agreement between the Company and AMS Development LLC, dated June 25, 2009.(9)
10.13	Amendment to March 20, 2008 Agreement between the Company and Buckhorn Resources LLC, dated June 25, 2009.(9)
10.14	Amendment to June 19, 2008 Agreement between the Company and LeeCo. Development LLC, dated June 25, 2009.(9)
10.15	Separation and Distribution Agreement by and between Consolidation Services, Inc. and Colt Resources, Inc.(10)

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10.16	Form of Asset Purchase Agreement dated April 1, 2010 entered into by the Company and each of 12 oil and gas partnerships each of which agreement has substantially the same forms for each of the other 11 oil gas partnerships. (11)
10.17	American Energy Advisors, Inc. Summary Reserve Report. (12)
10.18	B & J Oil LLC Equipment Summary Appraisal Report. (12)
10.19	Schedules and Exhibits to Asset Purchase Agreement dated April 1, 2010 by and between the Company and Energy Production Revenue Fund, LLP which are substantially the same forms for each of the other 11 oil gas partnerships. (11)
10.20	Attached hereto are the audited financial statements of Leland Kentucky Holdings, Inc. Managed Partnerships Combined Financial Statements of the oil and gas properties purchased from 12 partnerships noted in Item 2.1 for the year ended December 31, 2009 and for the three months ended April 1, 2010, together with the Report of Independent Registered Public Accounting Firm of S. E. Clark & Company, PC concerning the audited statements and related notes. (13)
10.21	Unaudited Pro Forma Combined Financial Information as of March 31, 2010. (12)
10.22	Unaudited Pro Forma Combined Financial Information as of December, 2009. (12)
10.23	Employment Agreement dated as of April 7, 2010 by and between Consolidation Services, Inc. and Gary D. Kucher. (14)
10.24	Agreement for Financial and Accounting Consultation Services dated as of April 2, 2010 by and between Consolidation Services, Inc. and Pamela J. Thompson, CPA, PC (14)
10.25	Consulting Agreement dated as of December 1, 2012 by and between the Company and Carl Casareto. (15)
10.26	Consulting Agreement dated as of January 1, 2013 by and between the Company and Richard Polep. (16)
10.27	Consulting Agreement dated as of January 28, 2013 by and between the Company and Brady Stahl. (17)
10.28	Consulting Agreement dated as of January 28, 2013 by and between the Company and Sean Kirwin. (17)
10.29	Fifth Amendment to (Amended) Employment Agreement dated as of January 11, 2013, by and between the and Gary Kucher. (18)
10.30	Bill of Sale and Assignment, Release and Assumption agreement dated as of February 21, 2013. (19)
10.31	International Franchise Agreement of Hertz Equipment Rental System dated March 21, 2013 by and between Hertz equipment Rental Corporation and Mongolia Equipment Rental Corporation. (20)
14.1	Code of Ethics
16.1	Letter from Moore and Associates, Chartered, dated August 11, 2009 to the Commission regarding statements included in Form 8-K for August 7, 2009.
*21.1	Subsidiaries of Registrant
*31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)  Incorporated by reference from the Company's Form SB-2 filed with the Commission on April 13, 2007.

(2)  Incorporated by reference from the Company's Amendment No. 1 to Form SB-2 filed with the Commission on June 12, 2007.

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

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(4)  Incorporated by reference to the Company's Current Report on Form 8-K filed with the Commission on April 2, 2008.

(5)  Incorporated by reference to the Company's Current Report on Form 8-K/Amendment No. 1 filed with the Commission on June 30, 2008.

(6)  Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008, filed with the Securities and Exchange Commission on August 1, 2008.

(7) Incorporated by reference to the Company's Current Report on Form 8-K filed with the Commission on August 28, 2008.

(8) Incorporated by reference to the Company's Current Report on Form 8-K filed with the Commission on September 17, 2008.

(9)  Incorporated by reference to the Company's Report on Form 10-Q for the period ended June 30, 2009.

(10) Incorporated by reference to the Company's Current Report on Form 8-K for February 9, 2010 filed with the Commission on February 12, 2010.

(11) Incorporated by reference to the Company’s Current Report on Form 8-K for April 1, 2010, filed with the Commission on April 7, 2010.

(12) Incorporated by reference to the Company’s Amended Current Report on Form 8-K for April 1, 2010, filed with the Commission on July 20, 2010.

(13) Incorporated by reference to the Company’s Amended Current Report on form 8-K for April 1, 2010, filed with the Commission on June 20, 2010.

(14) Incorporated by reference to the Company’s Current Report on Form 8-K for April 2, 2010, filed with the commission on May 25, 2012.

(15) Incorporated by reference to the Company’s Current Report on Form 8-K for December 1, 2012, filed with the Commission on December 1, 2012.

(16) Incorporated by reference to the Company’s Current Report on Form 8-k for January 1, 2012, filed with the Commission on January 18, 2012.

(17) Incorporated by reference to the Company’s Current Report on Form 8-k for January 24, 2013, filed with the Commission on January 29, 2013

(18) Incorporated by reference to the Company’s Current Report on Form 8-K for January 11, 2013, filed with the Commission on February 4, 2013.

(19) Incorporated by reference to the Company’s Current Report on Form 8-K for February 1, 2013, filed with the Commission on February 27, 2013

(20) Incorporated by reference to the Company’s Current Report of Form 8-K for March 18, 2013 filed with the Commission on March 25, 2013.

* Filed herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant Date: August 14, 2013	Consolidation Services, Inc. By: /s/ Gary D. Kucher
	Gary D. Kucher
	Chief Executive Officer (Principal Executive Officer)
Registrant Date: August 14, 2013	Consolidation Services, Inc. By: /s/  Richard S. Polep
	Richard S. Polep
	Chief Financial Officer (Principal Financial Officer)

- 27 -

EX-31.1

Exhibit 31.1

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934

I, Gary D. Kucher, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of Consolidation Services, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

EX-31.2

Exhibit 31.2

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934

I, Richard S. Polep, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of Consolidation Services, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant‘s internal control over financial reporting.

Registrant Dated: August 14, 2013		Consolidation Services, Inc. /s/ Richard S. Polep
	By:	Richard S. Polep
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Consolidation Services, Inc.  (the “Company”) on Form 10-Q for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Gary Kucher, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Registrant Dated:  August 14, 2013	Consolidation Services, Inc. /s/ Gary D. Kucher
	Gary D. Kucher
	Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Consolidation Services, Inc.  (the “Company”) on Form 10-Q for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Richard S. Polep, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Registrant Dated:  August 14, 2013	Consolidation Services, Inc. /s/ Richard S. Polep
	By:  Richard S. Polep
	Its:  Chief Financial Officer (Principal Financial Officer)

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Description of Business and Summary of Significant Accounting Policies: Use of Estimates and Assumptions (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Use of Estimates and Assumptions

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

The Company’s consolidated financial statements are based on a number of significant estimates including the oil and gas reserve quantities which are the basis for the calculations of depreciation, depletion, and impairment. The Company’s reserve quantities are determined by an independent petroleum engineering firm. However, management emphasizes that estimated reserve quantities are inherently imprecise and that estimates of more recent discoveries are more imprecise than those for properties with long production histories.  Accordingly, the Company’s estimates are expected to change as future information becomes available.

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Statement
OIL AND GAS REVENUES	$ 34,075	$ 22,494	$ 58,470	$ 75,261
COSTS AND OPERATING EXPENSES:
Lease operating expenses	32,888	38,995	63,857	89,958
Depreciation, depletion, amortization and accretion	1,360	2,257	4,747	8,691
General and administrative	199,229	174,692	496,353	317,822
Total costs and operating expenses	233,477	215,944	564,957	416,471
OPERATING LOSS	(199,402)	(193,450)	(506,487)	(341,210)
INTEREST EXPENSE	9,575	3,478	17,537	5,875
NET LOSS	$ (208,977)	$ (196,928)	$ (524,024)	$ (347,085)
Net loss per share, basic and diluted	$ (0.01)	$ (0.02)	$ (0.04)	$ (0.03)
Weighted average of common shares outstanding, basic and diluted	14,767,553	12,485,716	14,657,553	12,485,716

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RELATED PARTY TRANSACTIONS

3 Months Ended

Jun. 30, 2013

Notes

RELATED PARTY TRANSACTIONS

NOTE 5 - RELATED PARTY TRANSACTIONS

Notes Payable

During the six months ended June 30, 2013 and 2012, we entered into notes payable agreements with a shareholder, totaling $187,000 and $154,230, respectively. As of June 30, 2013 and December 31, 2012, amounts due related party were $650,198 and $463,198, respectively. All of the notes payable are due on demand, have no periodic payment terms and bear interest at interest rates of 6% - 7.5% per annum.

The Company recorded $17,537 and $5,875 of interest expense related to these notes payable during the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and December 31, 2012, the Company owed $37,709 and $20,809, respectively, of interest to the shareholder.

Accounts payable - Related parties

Accounts payable from related parties represent expenses that have been separately stated from trade accounts payable that are owed to our executives and shareholders of the Company.  These payables are due upon demand and do not bear interest. At June 30, 2013 and December 31, 2012, amounts due to related parties were $497,086 and $388,327, respectively.

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Description of Business and Summary of Significant Accounting Policies: Earnings (loss) Per Share (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Earnings (loss) Per Share

Earnings (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. Diluted loss per share is the same as basic loss per share because due to the Company having a net loss (attributable to its common shareholders). Accordingly, the effects of including any additional common stock equivalents would be anti-dilutive.  There were no potentially dilutive financial instruments outstanding at June 30, 2013 and 2012.

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Description of Business and Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At June 30, 2013, cash and cash equivalents include cash on hand and cash in depository institutions/commercial banks. 

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ASSET RETIREMENT OBLIGATIONS: Description of the changes to asset retirement obligations (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Details
Asset retirement obligation, beginning of period	$ 4,384
Accretion expense	1,351
Asset retirement obligation, ending of period	$ 5,735

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Description of Business and Summary of Significant Accounting Policies: Subsequent Events (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Subsequent Events

Subsequent Events

The Company evaluated subsequent events through the date these financial statements were issued for disclosure consideration.

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Description of Business and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Recent Accounting Pronouncements

Recent Accounting Pronouncements 

No other accounting standards or interpretations issued recently are expected to a have a material consequence on the Company’s consolidated financial position, operations or cash flows.

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OIL AND GAS PROPERTIES AND ACQUISITIONS: Net oil and gas properties by classification (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Details
Proved oil and gas properties	$ 357,693	$ 774,222
Unproved oil and gas properties		868,828
Asset retirement obligation capitalized	3,432	3,432
Accumulated depreciation, depletion and impairment	(72,460)	(1,355,675)
Total oil and gas assets	$ 288,665	$ 290,807

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STOCKHOLDERS' EQUITY (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Reverse split of common stock		1-for-4
Stock granted, total	800,000
Stock compensation expense, total	$ 64,000
Shares of common stock issued for services	250,000
Stock compensation expense	64,000
Fair value of shares issued for services	12,000
Stock issued to employees
Stock compensation expense, total	80,000
Shares of common stock issued for services	1,400,000
Stock compensation expense	$ 80,000

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ASSET RETIREMENT OBLIGATIONS: Description of the changes to asset retirement obligations (Tables)

3 Months Ended

Jun. 30, 2013

Tables/Schedules

Description of the changes to asset retirement obligations

		Six Months Ended June 30, 2013
Asset retirement obligation at beginning of the period	$	4,384
Additions		--
Accretion expense		1,351
Asset retirement obligation at end of the period	$	5,735

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Description of Business and Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.

The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, accounts payable and advance from related party approximate fair value due to their short-term nature.

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Description of Business and Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2013

Notes

Description of Business and Summary of Significant Accounting Policies

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Consolidation Services, Inc. (the “Company” or “CNSVE”) was incorporated in the State of Delaware on January 26, 2007. The Company is engaged in the exploration and development of oil and gas reserves in Kentucky and Tennessee.

On February 21, 2013, the Company entered into a Bill of Sale and Assignment, Release and Assumption Agreement with Hydrocarbons Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“HH”), whereby substantially all of the Company’s oil and gas assets and liabilities were transferred to HH effective as of February 28, 2013.

Basis of Presentation of Interim Financial Statements

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2012, included within its Form 10-K, as filed with the Securities and Exchange Commission.

Principles of Consolidation

The consolidated financial statements include the accounts of Consolidation Services, Inc. and its subsidiaries, Vector Energy Services, Inc, CSI Energy, Inc, CSI Resource, Inc., all of which are presently not operating subsidiaries. On January 28, 2013, the Company formed Mongolia Equipment Rental Corporation, a wholly owned subsidiary which is presently not an operating subsidiary. On January 31, 2013, the Company formed Hydrocarbons Holdings, Inc., a wholly subsidiary, which became an operating subsidiary on February 28, 2013.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

The Company’s consolidated financial statements are based on a number of significant estimates including the oil and gas reserve quantities which are the basis for the calculations of depreciation, depletion, and impairment. The Company’s reserve quantities are determined by an independent petroleum engineering firm. However, management emphasizes that estimated reserve quantities are inherently imprecise and that estimates of more recent discoveries are more imprecise than those for properties with long production histories.  Accordingly, the Company’s estimates are expected to change as future information becomes available.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At June 30, 2013, cash and cash equivalents include cash on hand and cash in depository institutions/commercial banks. 

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and gas operations.  Under this method of accounting, costs to acquire mineral interests in oil and gas properties, to drill and equip development wells, and to drill and equip exploratory wells that find proved reserves are capitalized.  Depletion of capitalized costs for producing oil and gas properties is calculated using the unit-of-production method based on estimates of proved oil and gas reserves on a field-by-field basis. 

The costs of unproved leaseholds and mineral interests are capitalized pending the results of exploration efforts.  In addition, unproved leasehold costs are assessed periodically, on a property-by-property basis, and a loss is recognized to the extent, if any, the property has been impaired.  This impairment will generally be based on geophysical or geologic data.  Due to the perpetual nature of the Company’s ownership of the mineral interests, the drilling of a well, whether successful or unsuccessful, may not represent a complete test of all depths of interest.  Therefore, at the time that a well is drilled, only a portion of the costs allocated to the acreage drilled may be expensed.  As unproved leaseholds are determined to be productive, the related costs are transferred to proven leaseholds.  The costs associated with unproved leaseholds and mineral interests that have been allowed to expire are charged to exploration expense.

Long-lived assets that are held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  When it is determined that an asset’s estimated future net cash flows will not be sufficient to recover its carrying amount, an impairment charge must be recorded to reduce the carrying amount of the asset to its estimated fair value.  Fair value is determined by reference to the present value of estimated future cash flows of such properties. 

Exploration costs, including exploratory dry-holes, annual delay rental and geological and geophysical costs are charged to expense when incurred.

Support Equipment and Facilities

Support equipment and facilities including furniture, fixtures, automobiles, office equipment, leasehold improvements, and computer software, are stated at cost. Depreciation and amortization of support equipment and facilities is calculated using various accelerated or straight-line methods over the respective expected useful lives. The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures which increase the life of an asset or increase expected recoveries are capitalized and depleted or depreciated over the estimated remaining useful life of the asset. The cost of equipment sold, or otherwise disposed of, and the related accumulated depletion, depreciation or amortization is removed from the accounts and any gains or losses are reflected in current operations.

Revenue Recognition

The Company has royalty and working interests in various oil and gas properties which constitute its primary source of revenue.  The Company recognizes oil and gas revenue from its interest in producing wells as oil and gas is sold from those wells.  

The Company follows the “sales method” of accounting for oil and natural gas revenue, so it recognizes revenue on all natural gas or crude oil sold to purchasers, regardless of whether the sales are proportionate to its ownership in the property.  A receivable or liability is recognized only to the extent that the Company has an imbalance on a specific property greater than its share of the expected remaining proved reserves.

Accounts Receivable

Substantially all of the Company’s accounts receivable consists of accrued revenues from oil and gas production from third party companies in the oil and gas industry.  This concentration of customers may be a consideration of the Companies’ overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions affecting the oil and gas industry.  In determining whether or not to require collateral from a purchaser or joint interest owner, the Company may analyze the entity’s net worth, cash flows, earnings and credit ratings.  Historical credit losses incurred by the Company on receivables have not been significant.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash. Interest-bearing accounts are insured up to $250,000.

The Company has two customers that purchase and distribute substantially all of our oil and gas production.

Earnings (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. Diluted loss per share is the same as basic loss per share because due to the Company having a net loss (attributable to its common shareholders). Accordingly, the effects of including any additional common stock equivalents would be anti-dilutive.  There were no potentially dilutive financial instruments outstanding at June 30, 2013 and 2012.

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.

The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, accounts payable and advance from related party approximate fair value due to their short-term nature.

Recent Accounting Pronouncements 

No other accounting standards or interpretations issued recently are expected to a have a material consequence on the Company’s consolidated financial position, operations or cash flows.

Subsequent Events

The Company evaluated subsequent events through the date these financial statements were issued for disclosure consideration.

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OIL AND GAS PROPERTIES AND ACQUISITIONS

3 Months Ended

Jun. 30, 2013

Notes

OIL AND GAS PROPERTIES AND ACQUISITIONS

NOTE 3 - OIL AND GAS PROPERTIES AND ACQUISITIONS

During the six months ended June 30, 2013, the Company did not purchase or dispose of any oil and gas properties.

Activity of net oil and gas properties during the six months ended June 30, 2013 were:

	June 30, 2013
Beginning balance January 1, 2013	$	290,807
Depletion, depreciation and change in asset retirement cost estimate		(2,142)
Ending balance March 31, 2013	$	288,665

Net oil and gas properties by classification were:

	As of June 30, 2013		As of December 31, 2012
Proved oil and gas properties	$	357,693	$	774,222
Unproved oil and gas properties		--		868,828
Asset retirement obligations capitalized		3,432		3,432
Accumulated depreciation, depletion and impairment		(72,460)		(1,355,675)
Total oil and gas assets	$	288,665	$	290,807

During the six months ended June 30, 2013 there was no impairment of its proved oil and gas properties.  As of June 30, 2013 and December 31, 2012, the Company had fully impaired its unproved oil and gas properties.

Support facilities and equipment

The Company owns support facilities and equipment, which serve its oil and gas production activities. The equipment is depreciated over the useful life of the underlying oil and gas property. The following table details the change in supporting facilities and equipment for the six months ended June 30, 2013:

Ending balance as of December 31, 2012	$	60,877
Depreciation		(1,254)
Ending balance as of June 30, 2013	$	59,623

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ASSET RETIREMENT OBLIGATIONS

3 Months Ended

Jun. 30, 2013

Notes

ASSET RETIREMENT OBLIGATIONS

NOTE 6 - ASSET RETIREMENT OBLIGATIONS

The Company records the fair value of a liability for asset retirement obligations (“ARO”) in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset and is depreciated over the useful life of the asset. The Company accrues an abandonment liability associated with its oil and gas wells when those assets are placed in service. The ARO is recorded at its estimated fair value and accretion is recognized over time as the discounted liability is accreted to its expected settlement value. Fair value is determined by using the expected future cash outflows discounted at the Company’s credit-adjusted risk-free rate. No market risk premium has been included in the Company’s calculation of the ARO balance.

		Six Months Ended June 30, 2013
Asset retirement obligation at beginning of the period	$	4,384
Additions		--
Accretion expense		1,351
Asset retirement obligation at end of the period	$	5,735

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Licensing Agreement

3 Months Ended

Jun. 30, 2013

Notes

Licensing Agreement

NOTE 4 - LICENSING AGREEMENT

On March 21, 2013, the Company through its wholly owned subsidiary, Mongolia Equipment Rental Corporation, a Delaware corporation (the “Franchisee”) entered into an International Franchise Agreement (the “Franchise Agreement”) with Hertz Equipment Rental Corporation and Hertz Equipment Rental System (collectively “Franchisor”).

Under the Franchise Agreement the Franchisee will operate a business of renting, selling and maintaining equipment primarily for use in mining, construction, materials handling and commercial and industrial activities (“Equipment Rental Business”) under the unique plan or system of the Franchisor (the “System”) in the country of Mongolia.

The license granted to Franchisee under the Franchise Agreement shall commence on July 1, 2013 and continue for a period of ten (10) years, unless renewed or sooner terminated.  The Franchisee shall have the option to renew the license for two (2) successive five (5) year terms, subject to the terms of the then current Hertz Equipment Rental System International Franchise Agreement, and provided such terms shall preserve Franchisee’s right to renew for an additional two successive five year periods and will not require the payment of an initial fee by Franchisee and the Franchisee is not in default of the Franchise Agreement.

The Franchise Agreement provides that so long as the Franchise Agreement remains in place and for one-year after the expiration or termination of the Franchise Agreement: (i) Franchisor will not establish or license another to establish an Equipment Rental Business in the country of Mongolia; and (ii) Franchisor will not establish or license another to establish a truck rental business under the System (“Truck Rental Business”) in the country of Mongolia without first having afforded Franchisee a non-transferrable right of first refusal to establish a Truck Rental Business in the country of Mongolia. Franchisee shall have a right of first opportunity (prior to Franchisor entering into any substantive discussions or negotiations with any other party) to acquire the franchise for any Equipment Rental Business in the country of Burma (a/k/a Myanmar).

In consideration for the license provided under the Franchise Agreement, during the six months ended June 30, 2013, the Franchisee paid Franchisor an initial fee of $45,000 and also will (i) pay a continuing monthly license fee equal to 6% of Franchisee’s gross revenue, but not less than $135,000 per year; and (ii) an amount equal to 1% of all sums received by Franchisee related to (a) the sale, trade-in or other disposal of used equipment, and (b) the sale of any new equipment or product lines that have been previously approved by Franchisor. In addition Franchisee shall be required to spend annually an amount equal to not less than 1% of the Franchisee’s gross revenue for local advertising and promotion of the Equipment Rental Business in Mongolia.

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SUBSEQUENT EVENTS (Details) (USD $)	6 Months Ended		1 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Aug. 01, 2013 Michael Telford Consulting Agreement	Aug. 01, 2013 Subsequent Event
Note payable agreements entered into during period	$ 187,000	$ 154,230		$ 25,000
Shares of common stock granted	800,000		200,000
Stock compensation expense	$ 64,000		$ 102,000

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OIL AND GAS PROPERTIES AND ACQUISITIONS: NetOilAndGasPropertiesTbl (Tables)

3 Months Ended

Jun. 30, 2013

Tables/Schedules

NetOilAndGasPropertiesTbl

	June 30, 2013
Beginning balance January 1, 2013	$	290,807
Depletion, depreciation and change in asset retirement cost estimate		(2,142)
Ending balance March 31, 2013	$	288,665

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GOING CONCERN (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Details
Net loss for the year ended	$ 524,024

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RELATED PARTY TRANSACTIONS (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Details
Note payable agreements entered into during period	$ 187,000	$ 154,230
Notes payable due, related parties	650,198		463,198
Interest expense, related part debt	17,537	5,875
Interest owed	37,709		20,809
Accounts payable due, related parties	$ 497,086		$ 388,327

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Balance Sheet
Oil and gas properties - impairment	$ 868,828	$ 868,828
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	14,767,553	12,567,553
Common stock, shares outstanding	14,767,553	12,567,553

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SUBSEQUENT EVENTS

3 Months Ended

Jun. 30, 2013

Notes

SUBSEQUENT EVENTS

NOTE 9 - SUBSEQUENT EVENTS

From the period of July 1, 2013 through August 1, 2013, the Company entered into additional notes payable with a shareholder totaling $25,000.  All of the notes are due on demand, have no periodic payment terms and bear interest at 6% per annum.

On July 1, 2013, the Company issued its Chief Executive Officer options to purchase 146,676 shares of common stock of the Company at a price of $0.30 per share in accordance with his Employment Agreement. The stock price on the grant date was $0.51 per share. The options were valued on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate 0.88%, (2) term of 5 years, and (3) expected stock volatility of 287.46%. As a result, the fair value of these options on the grant date was $75,241 and the intrinsic value was $30,802.

Effective August 1 2013, the Company entered into a one year consulting agreement with Michael Telford to serve as an Executive Vice President (the “EVP”) of the Company. The EVP has been retained to serve the Company for up to 20 hours per week.   In consideration for the services, the Company has agreed to grant 200,000 shares of the Company’s common stock to the EVP.  As of the grant date, shares of the Company’s common stock were quoted at $0.51 per share.  The Company will record $102,000 of stock compensation expense in connection with the issuance of these shares.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (524,024)	$ (347,085)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion, and amortization	3,396	4,218
Accretion of asset retirement obligations	1,351	4,473
Stock compensation	144,000	7,000
Changes in operating assets and liabilities:
Prepaid assets	18,715
Accounts receivable	5,816	7,062
Accounts payable and accrued expenses	86,201	95,615
Accounts payable and accrued expenses - related parties	111,643
Accrued interest - shareholder	16,900	95,000
Net cash used in operating activities	(136,002)	(133,717)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment of licensing agreement	45,000
Net cash used in investing activities	(45,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - shareholder	187,000	154,230
Net cash provided by financing activities	187,000	154,230
INCREASE (DECREASE) IN CASH	5,998	20,513
CASH, BEGINNING OF PERIOD	12,597	668
CASH, END OF PERIOD	18,595	21,181
SUPPLEMENTAL CASH FLOW INFORMATION:
Income Taxes
Interest Paid
NON-CASH INVESTING AND FINANCING ACTIVITY:
Common stock issued for stock payable		$ 5,000

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Jun. 30, 2013	Dec. 31, 2012
CURRENT ASSETS
Cash	$ 18,595	$ 12,597
Accounts receivable	5,015	10,831
Prepaid expenses	12,697	31,412
Total current assets	36,307	54,840
PROPERTY AND EQUIPMENT
Oil and gas properties subject to amortization, net	288,665	290,807
Oil and gas properties not subject to amortization, net of impairmanet
Support equipment, net	59,623	60,877
Net property and equipment	348,288	351,684
Licensing agreement	45,000
TOTAL ASSETS	429,595	406,524
CURRENT LIABILITIES:
Accounts payable	576,906	473,369
Accounts payable - related parties	499,970	388,327
Accrued expenses	4,684	22,020
Common stock payable		32,000
Accrued interest - shareholder	37,709	20,809
Notes payable - shareholder	650,198	463,198
Total current liabilities	1,769,467	1,399,723
Asset retirement obligations	5,735	4,384
TOTAL LIABILITIES	1,775,202	1,404,107
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock value
Common stock value	14,768	12,568
Additional paid-in capital	9,565,008	9,391,208
Accumulated deficit	(10,925,383)	(10,401,359)
Total stockholders' equity	(1,345,607)	(997,583)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 429,595	$ 406,524

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OIL AND GAS PROPERTIES AND ACQUISITIONS: Net oil and gas properties by classification (Tables)

3 Months Ended

Jun. 30, 2013

Tables/Schedules

Net oil and gas properties by classification

	As of June 30, 2013		As of December 31, 2012
Proved oil and gas properties	$	357,693	$	774,222
Unproved oil and gas properties		--		868,828
Asset retirement obligations capitalized		3,432		3,432
Accumulated depreciation, depletion and impairment		(72,460)		(1,355,675)
Total oil and gas assets	$	288,665	$	290,807

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Description of Business and Summary of Significant Accounting Policies: Concentrations of Credit Risk (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash. Interest-bearing accounts are insured up to $250,000.

The Company has two customers that purchase and distribute substantially all of our oil and gas production.

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	6 Months Ended			6 Months Ended		12 Months Ended	17 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 Chief Executive Officer Employment Agreement	Jul. 01, 2013 Chief Executive Officer Employment Agreement	Jun. 30, 2013 COO Consulting Agreement	Jun. 30, 2013 CFO Consulting Agreement	Dec. 31, 2012 CFO Consulting Agreement	Dec. 31, 2012 CFO Consulting Agreement	Jun. 30, 2013 Brady Strahl Consulting Agreement	Jun. 30, 2013 Sean Kirwan Consulting Agreement
Monthly salary		$ 25,000		$ 7,000
Available cash bonus		0.2500		0.2500
Automobile and medical allowance per month		3,060
Warrants issued			147,676
Shares of common stock granted	800,000			200,000	400,000		400,000	200,000	200,000
Stock compensation expense	$ 64,000			$ 16,000	$ 32,000	$ 32,000		$ 16,000	$ 16,000

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OIL AND GAS PROPERTIES AND ACQUISITIONS: Change in supporting facilities and equipment (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Details
Support facilities and equipment	$ 59,623	$ 60,877

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Licensing Agreement (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Details
Initial franchise fee	$ 45,000
Monthly license fee	6% of Franchisee’s gross revenue, but not less than $135,000 per year

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STOCKHOLDERS' EQUITY

3 Months Ended

Jun. 30, 2013

Notes

STOCKHOLDERS' EQUITY

NOTE 8 - STOCKHOLDERS’ EQUITY

Common Stock

On November 29, 2012, the Board of Directors approved a 1-for-4 reverse split of the Company’s common stock, following approval by the stockholders. The reverse stock split was effective on December 28, 2012, before trading began on December 31, 2012. No fractional shares were issued. Stockholders who would otherwise hold a fractional share will receive a cash payment in lieu of such fractional share. All shares and per share amounts have been retroactively adjusted for the years presented to reflect the reverse stock split.

The Company is authorized to issue 200,000,000 shares of common stock, at $0.001 par value, of which 14,767,553 and 12,567,553 common shares were issued and outstanding as of June 30, 2013 and December 31, 2012, respectively.

On January 11, 2013, the Board of Directors granted 200,000 shares of the Company’s common stock to each member of the Board as compensation for serving as a member of the Board until the Company’s 2014 Annual Shareholder’s Meeting. A total of 800,000 shares of common stock were issued. As of the grant date, shares of the Company’s common stock were quoted at $0.08 per share.  The Company recorded $64,000 of stock compensation expense during the six months ended June 30, 2013 in connection with the issuance of these shares.

During the six months ended June 30, 2013, the Company issued 1,400,000 shares of common stock for services to employees, of which 400,000 shares were earned in 2012 and recorded as a $32,000 common stock payable as of December 31, 2012 and the remaining 1,000,000 shares of common stock were granted during 2013.  The Company recorded stock compensation of $80,000 during the six months ended June 30, 2013 in connection with the grant of these 1,000,000 shares of common stock based on the fair value of the common stock on the grant dates.

During the six months ended June 30, 2012, the Company issued 250,000 common shares with an aggregate fair value of approximately $12,000 in exchange for service.

Preferred Stock

The Corporation is authorized to issue classes of preferred stock to be designated by the Board of Directors. The total number of preferred shares that the Company is authorized to issue is 20,000,000 shares with a par value of $0.001 per share. Except as otherwise required by statute, the designations and the powers, preferences and rights, and the qualifications or restrictions thereof, of any class or classes of stock or any series of any class of stock of the Company may be determined from time to time by resolution or resolutions of the Board of Directors.

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OIL AND GAS PROPERTIES AND ACQUISITIONS: Change in supporting facilities and equipment (Tables)

3 Months Ended

Jun. 30, 2013

Tables/Schedules

Change in supporting facilities and equipment

Ending balance as of December 31, 2012	$	60,877
Depreciation		(1,254)
Ending balance as of June 30, 2013	$	59,623

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Description of Business and Summary of Significant Accounting Policies: Principles of Consolidation (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Consolidation Services, Inc. and its subsidiaries, Vector Energy Services, Inc, CSI Energy, Inc, CSI Resource, Inc., all of which are presently not operating subsidiaries. On January 28, 2013, the Company formed Mongolia Equipment Rental Corporation, a wholly owned subsidiary which is presently not an operating subsidiary. On January 31, 2013, the Company formed Hydrocarbons Holdings, Inc., a wholly subsidiary, which became an operating subsidiary on February 28, 2013.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Jun. 30, 2013

Notes

COMMITMENTS AND CONTINGENCIES

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Chief Executive Officer Employment Agreement

The Company has an employment agreement with its Chief Executive Officer (the “Executive’) (the “Employment Agreement”) that expires on July 1, 2016 and shall automatically renew on an annual basis unless terminated in accordance with the provisions of the Employment Agreement. The Employment Agreement provides for:

i.  A monthly salary of $25,000 per month subject to an annual increase of not less than the Consumer Price Index.

ii.  A cash bonus of 25% of his annual base salary each year in the event the Company reaches certain milestones as defined in the Employment Agreement.

iii.  The issuance of options (the Employment Agreement refers to them as warrants) on each anniversary date of the Employment Agreement, with a five-year exercise period, to purchase 1% of the then issued and outstanding shares of the Company exercisable at a price equal to the trailing six-month average share trading price prior to grant date.

iv.  An automobile and medical allowance of $3,060 per month in the aggregate.

v.  In the event the Executive's employment is terminated without cause he will receive 12 months of severance pay and all warrants for the following year will be immediately granted. 

The Executive has waived his right to receive previously unissued options since entering into the Employment Agreement, however, the Company is obligated to issue the Executive options on each future anniversary date in accordance with the Employment Agreement, beginning on July 1, 2013. On July 1, 2013, the Company issued a warrant to the Executive to purchase 147,676 shares of common stock at an exercise price per share of $0.30.

Consulting Agreements

On December 1, 2012, the Company entered into a one year consulting agreement (the “COO Consulting Agreement”) with Carl Casareto to serve as the Company’s Chief Operations Officer (“COO”).   In consideration of the services he provides, the Company has agreed to pay the COO $7,000 per month (“Base Compensation”).  In addition to the Base Compensation, the Company has agreed to pay the COO a bonus of 25% of the COO’s annual Base Compensation in the event the Company reaches certain milestones as defined in the COO Consulting Agreement.  On January 11, 2013, the Company granted the COO 200,000 shares of the Company’s common stock.  During the six months ended June 30, 2013, the Company recorded stock compensation expense of $16,000 based on the trading price of the stock on the grant date of $0.08 per share.

During, January 2013, the Company entered into a one year consulting agreement with Richard S. Polep to serve as the Company’s Chief Financial Officer (“CFO”).  In consideration of the services the CFO provided by serving as CFO of the Company from August 8, 2011 until December 31, 2012, the Company granted the CFO 400,000 shares of the Company’s common stock.  In consideration for the services the CFO provides for 2013, the Company granted the CFO an additional 400,000 shares of the Company’s common stock. The Company recorded stock compensation expense of $64,000 based on the trading price of the stock on the grant date of $0.08 per share, of which $32,000 had been accrued and was expensed in 2012, and $32,000 was recorded as expense during the six months ended June 30, 2013.

During January 2013, the Company entered into a one year consulting agreement with Brady Strahl to serve as the Company’s President. In consideration for services, the Company granted the President 200,000 shares of the Company’s common stock.  During the six months ended June 30, 2013, the Company recorded stock compensation expense of $16,000 based on the trading price of the stock on the grant date of $0.08 per share.

During January 2013, the Company entered into a one year consulting agreement with Sean Kirwan to serve as the Company’s Vice President and In-house counsel. In consideration for the services, the Company granted 200,000 shares of the Company’s common stock. During the six months ended June 30, 2013, the Company recorded stock compensation expense of $16,000 based on the trading price of the stock on the grant date of $0.08 per share.

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GOING CONCERN

3 Months Ended

Jun. 30, 2013

Notes

GOING CONCERN

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has sustained recurring losses from operations including a net loss for the six months ended June 30, 2013 of $524,024. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from lenders, investors and the support of certain stockholders. These factors raise substantial doubt about the ability of the Company to continue as a going concern. 

In this regard, the Company is planning to raise additional funds through loans and additional sales of its common stock. The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of oil and gas reserves. Although the Company is pursuing additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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OIL AND GAS PROPERTIES AND ACQUISITIONS: NetOilAndGasPropertiesTbl (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Details
Oil and gas properties, gross	$ 290,807
Depletion and depreciation and change in asset retirement cost estimate	(2,142)
Oil and gas properties, net

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Description of Business and Summary of Significant Accounting Policies: Oil and Gas Properties (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Oil and Gas Properties

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and gas operations.  Under this method of accounting, costs to acquire mineral interests in oil and gas properties, to drill and equip development wells, and to drill and equip exploratory wells that find proved reserves are capitalized.  Depletion of capitalized costs for producing oil and gas properties is calculated using the unit-of-production method based on estimates of proved oil and gas reserves on a field-by-field basis. 

The costs of unproved leaseholds and mineral interests are capitalized pending the results of exploration efforts.  In addition, unproved leasehold costs are assessed periodically, on a property-by-property basis, and a loss is recognized to the extent, if any, the property has been impaired.  This impairment will generally be based on geophysical or geologic data.  Due to the perpetual nature of the Company’s ownership of the mineral interests, the drilling of a well, whether successful or unsuccessful, may not represent a complete test of all depths of interest.  Therefore, at the time that a well is drilled, only a portion of the costs allocated to the acreage drilled may be expensed.  As unproved leaseholds are determined to be productive, the related costs are transferred to proven leaseholds.  The costs associated with unproved leaseholds and mineral interests that have been allowed to expire are charged to exploration expense.

Long-lived assets that are held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  When it is determined that an asset’s estimated future net cash flows will not be sufficient to recover its carrying amount, an impairment charge must be recorded to reduce the carrying amount of the asset to its estimated fair value.  Fair value is determined by reference to the present value of estimated future cash flows of such properties. 

Exploration costs, including exploratory dry-holes, annual delay rental and geological and geophysical costs are charged to expense when incurred.

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Description of Business and Summary of Significant Accounting Policies: Basis of Presentation of Interim Financial Statements (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Basis of Presentation of Interim Financial Statements

Basis of Presentation of Interim Financial Statements

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2012, included within its Form 10-K, as filed with the Securities and Exchange Commission.

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Description of Business and Summary of Significant Accounting Policies: Accounts Receivable (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Accounts Receivable

Accounts Receivable

Substantially all of the Company’s accounts receivable consists of accrued revenues from oil and gas production from third party companies in the oil and gas industry.  This concentration of customers may be a consideration of the Companies’ overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions affecting the oil and gas industry.  In determining whether or not to require collateral from a purchaser or joint interest owner, the Company may analyze the entity’s net worth, cash flows, earnings and credit ratings.  Historical credit losses incurred by the Company on receivables have not been significant.

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Description of Business and Summary of Significant Accounting Policies: Support Equipment and Facilities (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Support Equipment and Facilities

Support Equipment and Facilities

Support equipment and facilities including furniture, fixtures, automobiles, office equipment, leasehold improvements, and computer software, are stated at cost. Depreciation and amortization of support equipment and facilities is calculated using various accelerated or straight-line methods over the respective expected useful lives. The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures which increase the life of an asset or increase expected recoveries are capitalized and depleted or depreciated over the estimated remaining useful life of the asset. The cost of equipment sold, or otherwise disposed of, and the related accumulated depletion, depreciation or amortization is removed from the accounts and any gains or losses are reflected in current operations.

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Document and Entity Information	3 Months Ended
	Jun. 30, 2013
Document and Entity Information
Entity Registrant Name	Consolidation Services, Inc.
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Entity Central Index Key	0001392960
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	14,767,553
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Description of Business and Summary of Significant Accounting Policies: Revenue Recognition (Policies)

3 Months Ended

Jun. 30, 2013

Policies

Revenue Recognition

Revenue Recognition

The Company has royalty and working interests in various oil and gas properties which constitute its primary source of revenue.  The Company recognizes oil and gas revenue from its interest in producing wells as oil and gas is sold from those wells.  

The Company follows the “sales method” of accounting for oil and natural gas revenue, so it recognizes revenue on all natural gas or crude oil sold to purchasers, regardless of whether the sales are proportionate to its ownership in the property.  A receivable or liability is recognized only to the extent that the Company has an imbalance on a specific property greater than its share of the expected remaining proved reserves.