BIOQUEST CORP. - FORM 10-Q

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EX-32 - BIOQUEST CORP.	fofu10q20110430ex32.htm
EX-31 - BIOQUEST CORP.	fofu10q20110430ex31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 April 30, 2011

Commission file number: 000-49993

FORCE FUELS, INC.

(Exact name of small business issuer as specified in its charter)

Nevada		56-2284320
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

1503 South Coast Dr. Ste. 206 Costa Mesa CA 92626

(Address of principal executive offices)

714 927 9118

(Issuer’s telephone number)

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o

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

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer o

Smaller Reporting Company x

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 10,441,875 shares of Common Stock, as of June 13, 2011.

Transitional Small Business Disclosure Format (check one): Yes o No x

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

	Item 1.	Financial Statements	F-1 to F-14

	Item 2.	Management's Discussion and Analysis of Financial Conditions and Results of Operations	1

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5

	Item 4.	Controls and Procedures	5

PART II - OTHER INFORMATION			5

	Item 1.	Legal Proceedings	5

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6

	Item 3.	Defaults Upon Senior Securities	7

	Item 4.	Submission of Matters to a Vote of Security Holders	7

	Item 5.	Other Information	7

	Item 6.	Exhibits	7

SIGNATURES			7

EXHIBIT INDEX			8

PART I - FINANCIAL INFORMATION

Item 1.

Unaudited Financial Statements

FORCE FUELS, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Contents	Page(s)

Consolidated Balance Sheets at April 30, 2011 (Unaudited) and July 31, 2010	F-2

Consolidated Statements of Operations for the Three and Nine Month Periods Ended April 30, 2011 and 2010, and from Inception on July 15, 2002 through April 30, 2011 (Unaudited)	F-3

Consolidated Statements of Stockholders’ Equity (Deficit) for the period from July 15, 2002 (inception) through April 30, 2011 (Unaudited)	F-4 - F-5

Consolidated Statements of Cash Flows for the Nine Month Periods Ended April 30, 2011 and 2010, and for the period from Inception on July 15, 2002 through April 30, 2011 (Unaudited)	F-6 - F-7

Notes to the Consolidated Financial Statements (Unaudited)	F-8 to F-15

F-1

FORCE FUELS, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

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

	April 30,			July 31,
	2011			2010
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	48,647		$	86,842
Accounts receivable, net					7,451
Inventory, net		-			81,980
Prepaid expenses		-			10,000
Notes receivable - related		2,500			-

Total Current Assets		51,147			186,273

LONG-TERM ASSETS:
Deposits		12,638			-
Oil and gas property, net		-			1,258,292
Property and equipment, net		-			133,361

Total Long-term Assets		12,638			1,391,653

Total Assets	$	63,785		$	1,577,926

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	230,550		$	224,258
Notes payable, net		340,366			139,747
Convertible notes payable - related		29,200			-
Notes payable for acquisition of oil and gas property, net		-			1,368,121
Accrued officer salaries		617,053			310,830

Total Current Liabilities		1,217,169			2,042,956

NON CURRENT LIABILITIES:
Asset retirement obligation		31,979			36,622

Total Liabilities		1,249,148			2,079,578

STOCKHOLDERS' DEFICIT:
Preferred stock at $0.001 par value: 1,000,000 shares authorized;
none issued or outstanding		-			-
Common stock at $0.001 par value: 100,000,000 shares authorized;
9,641,875 and 6,475,129 shares issued, respectively		9,642			6,475
Additional paid-in capital		3,333,533			2,543,518
Deficit accumulated during development stage		(4,528,538	)		(3,051,645	)

Total Stockholders' Deficit		(1,185,363	)		(501,652	)

Total Liabilities and Stockholders' Deficit	$	63,785		$	1,577,926

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

F-2

FORCE FUELS, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													For the Period
													from July 15,
	For the Three Months Ended						For the Nine Months Ended						2002 (inception)
	April 30,						April 30,						through January 31,
	2011			2010			2011			2010			2011

REVENUES:
Oil and gas	$	-		$	-		$	41,758		$	-		$	49,209

COST OF SALES		-			-			52,291			-			52,291

GROSS PROFIT (LOSS)		-			-			(10,533	)		-			(3,082	)

OPERATING EXPENSES:

Well operating costs		-			-			30,394			-			55,394
Depreciation on well operating equipment		4,939			-			14,817			-			9,878
Research and development		-			-			-			-			115,434
Salary and wages - officers		78,176			96,666			299,336			169,166			550,740
Impairment of intellectual property rights		-			-			-			-			344,000
Stock based compensation		-			(12,900	)		-			322,310			494,933
General and administrative expenses		174,897			119,225			764,082			294,587			1,963,533

Total operating expenses		258,012			202,991			1,108,629			786,063			3,533,912

NET LOSS FROM OPERATIONS		(258,012	)		(202,991	)		(1,119,162	)		(786,063	)		(3,536,994	)

OTHER INCOME (EXPENSES) :
Gain on settlement of debt		(46,882	)		739,689			(271,882	)		739,689			(535,014	)
Loss on disposal of assets		-			-			-			-			(19,915	)
Interest expense		(7,406	)		(1,875	)		(85,849	)		(6,448	)		(124,315	)

Total other income (expenses)		(54,288	)		737,814			(357,731	)		733,241			(679,244	)

NET LOSS BEFORE TAXES		(312,300	)		534,823			(1,476,893	)		(52,822	)		(4,216,238	)

INCOME TAXES		-			-			-			-			-

NET LOSS	$	(312,300	)	$	534,823		$	(1,476,893	)	$	(52,822	)	$	(4,216,238	)

NET LOSS PER COMMON SHARE
- BASIC AND DILUTED:	$	(0.03	)	$	0.09		$	(0.19	)	$	(0.01	)

Weighted Average Common
Outstanding - basic and diluted		8,927,268			6,130,037			7,876,956			5,983,214

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

F-3

FORCE FUELS, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

													Deficit
													Accumulated			Total
	Common Stock						Additional						During the			Stockholders'
	Number of						Paid-in			Treasury			Development			Equity
	Shares			Par Value			Capital			Stock			Stage			(Deficit)

Balance at inception on July 15, 2002		-		$	-		$	-		$	-		$	-		$	-

Common shares issued in March, 2006 for
cash at an average price of $2.43 per share		175,000			175			425,825			-			-			426,000

Adjustment on reverse acquisition
in March, 2006		1,050,000			1,050			(10,550	)		(235,000	)		-			(244,500	)

Treasury stock purchased in June, 2006		-			-			-			(75,000	)		-			(75,000	)

Net loss for the period from inception on
July 15, 2002 through July 31, 2006		-			-			-			-			(30,873	)		(30,873	)

Balance, July 31, 2006		1,225,000			1,225			415,275			(310,000	)		(30,873	)		75,627

Net loss for the year ended July 31, 2007		-			-			-			-			(69,804	)		(69,804	)

Balance, July 31, 2007		1,225,000			1,225			415,275			(310,000	)		(100,677	)		5,823

Retirement of treasury stock in May, 2008		(1,100,000	)		(1,100	)		(308,900	)		310,000			-			-

Common shares issued in May, 2008 for
services rendered at $0.03 per share		3,700,000			3,700			107,300			-			-			111,000

Common shares issued in June, 2008 for
services rendered at $0.03 per share		2,797,763			2,798			81,135			-			-			83,933

Common shares issued in June, 2008 at
$0.03 per share in connection with assets
assignment agreement		1,000,000			1,000			29,000			-			-			30,000

Net loss for the year ended July 31, 2008		-			-			-			-			(269,356	)		(269,356	)

Balance, July 31, 2008		7,622,763			7,623			323,810			-			(370,033	)		(38,600	)

Common shares issued in February, 2010
for services rendered at $0.10 per share		60,000			60			5,940			-			-			6,000

Net loss for the year ended July 31, 2009		-			-			-			-			(399,723	)		(399,723	)

Balance, July 31, 2009		7,682,763		$	7,683		$	329,750		$	-		$	(769,756	)	$	(432,323	)

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

F-4

FORCE FUELS, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

											Deficit
											Accumulated			Total
	Common Stock						Additional				During the			Stockholders'
	Number of						Paid-in		Treasury		Development			Equity
	Shares			Par Value			Capital		Stock		Stage			(Deficit)

Balance, July 31, 2009		7,682,763		$	7,683		$	329,750	$	-	$	(769,756	)	$	(432,323	)

Common shares issued in October, 2009
for signing bonus at $0.30 per share		1,000,000			1,000			299,000		-		-			300,000

Common shares issued in January, 2010
for services rendered at $0.30 per share		1,122,366			1,122			335,588		-		-			336,710

Common shares issued in March, 2010
for services rendered at $0.30 per share		172,000			172			51,428		-		-			51,600

Common shares issued in April, 2010
upon conversion of debt at an average
price of $4.07 per share		138,000			138			561,476		-		-			561,613

Issuance of shares in June, 2010 for
as a loan inducement fee
at $0.89 per share		150,000			150			133,350		-		-			133,500

Common shares issued in July, 2010
upon conversion of promissory
note at $0.94 per share		10,000			10			9,390		-		-			9,400

Cancellation of common shares		(3,800,000	)		(3,800	)		3,800		-		-			-

Forgiveness of debt by shareholder		-			-			739,689		-		-			739,689

Fair value of warrants granted		-			-			80,047		-		-			80,047

Net loss for the year ended July 31, 2010		-			-			-		-		(2,281,889	)		(2,281,889	)

Balance, July 31, 2010		6,475,129			6,475			2,543,518		-		(3,051,645	)		(501,652	)

Common shares issued in August, 2010
for prepaid consulting fees at
$0.65 per share (unaudited)		50,000			50			32,450		-		-			32,500

Common shares issued in August, 2010
for consulting services at $1.05 per share (unaudited)		31,746			32			33,300		-		-			33,332

Common shares issued in August, 2010
for consulting services at $0.65 per share (unaudited)		100,000			100			64,900		-		-			65,000

Common shares issued in September, 2010
upon default on promissory note at
$0.45 per share (unaudited)		500,000			500			224,500		-		-			225,000

Common shares issued in September, 2010
as loan inducement fee at $0.26 per share (unaudited)		60,000			60			15,540		-		-			15,600

Common shares issued in October, 2010
for prepaid consulting fees at
$0.45 per share (unaudited)		150,000			150			67,350		-		-			67,500

Common shares issued in October, 2010
for consulting services at $0.45 per share (unaudited)		25,000			25			11,225		-		-			11,250

Common shares issued in November, 2010
for consulting services at $0.35 per share (unaudited)		300,000			300			104,700		-		-			105,000

Common shares issued in December, 2010
for services at $0.20 per share (unaudited)		150,000			150			29,850		-		-			30,000

Common shares issued in January, 2011
for services at $0.10 per share (unaudited)		700,000			700			69,300		-		-			70,000
Common shares issued in February, 2011
for services at $0.15 per share (unaudited)		200,000			200			29,800		-		-			30,000
Common shares issued in March, 2011
for services at $0.12 per share (unaudited)		900,000			900			107,100		-		-			108,000

Net loss for the nine months ended
April 30, 2011 (unaudited)		-			-			-		-		(1,476,893	)		(1,476,893	)

Balance, April 30, 2011 (unaudited)		9,641,875		$	9,642		$	3,333,533	$	-	$	(4,528,538	)	$	(1,185,364	)

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

F-5

FORCE FUELS, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							For the Period
							from July 15,
	For the Nine Months Ended						2002 (inception)
	April 30,						through April 30,
	2011			2010			2011

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss		(1,476,893	)		(52,822	)		(4,216,238	)

Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation		14,817			1,734			24,091
Amortization of intangible assets		-			21,500			86,000
Impairment of intellectual property rights		-			-			344,000
Gain on settlement of debt		271,882			-			581,896
Loss on disposal of assets		-			-			19,915
Amortization of discount on debt		65,198			-			98,033
Stock based compensation		-			-			300,000
Common stock issued for services		568,182			290,209			1,290,925
Fair value of warrants		-			-			40,063
Changes in operating assets and liabilities:
Accounts receivable		7,451			-			-
Inventory		52,291			-			52,291
Deposits and prepaid expenses		(2,638	)		-			(2,638	)
Other current assets		-			-			-
Accounts payable and accrued expenses		6,292			47,901			221,051
Accrued salaries		306,223			-			617,053

NET CASH USED IN OPERATING ACTIVITIES		(187,195	)		308,522			(543,558	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable - related party		(2,500	)		-			(2,500	)
Purchase of test equipment		-			-			(24,250	)

NET CASH USED IN INVESTING ACTIVITIES		(2,500	)		-			(26,750	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		-			-			501,000
Payment of common stock to be issued		-			-			(75,000	)
Purchase of treasury stock		-			-			(310,000	)
Proceeds from notes payable		196,500			115,658			615,066
Repayment of notes payable		(45,000	)		-			(145,000	)
Due to related parties		-			131,750			345,189

NET CASH PROVIDED BY FINANCING ACTIVITIES		151,500			247,408			931,255

NET CHANGE IN CASH & CASH EQUIVALENTS		(38,195	)		555,930			360,947

Cash & Cash Equivalents at Beginning of Period		86,842			-			-

Cash & Cash Equivalents at End of Period		48,647			555,930			360,947

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

F-6

FORCE FUELS, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended April 30,				For the period from July 15, 2002 (inception) through April 30,
	2011		2010		2011

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

Interest paid	$	-	$	6,545	$	-
Income tax paid	$	-	$	-	$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Issuance of shares and debt for purchase of intellectual property rights	$	-		-	$	430,000
Forgiveness of debt from related party	$	-		-	$	739,689
Issuance of promissory note for investment in oil lease rights and related assets	$	-		-	$	1,500,000

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

F-7

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Force Fuels, Inc. and Subsidiary is presented to assist in understanding the Company’s consolidated financial statements. Collectively, these entities are referred to hereafter as the Company.” The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their collective integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the Unites States of America, as well as standards of the Public Company Accounting Oversight Board (United States) and have been consistently applied in the preparation of the consolidated financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Operating results for the nine months ended April 30, 2011 are not necessarily indicative of the results that may be expected for the year ending July 31, 2011.

Organization and Business Activities

Force Fuels, Inc. (the Company”)(a development stage company) was incorporated under the laws of the State of Nevada in July 2002. The primary products of the Company are regulated and standardized energy-based products. These energy-based products include traditional hydrocarbon-based oil and gas as well as “green” or “alternative” energy, which includes solar and wind.

Principles of Consolidation

The consolidated financial statements include the accounts of Force Fuels Services, Inc., and Cheetah Motor Corporation. All inter-company balances and transactions have been eliminated.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

Development stage company

The Company is a development stage company as defined by ASC 915. The Company is still devoting substantially all of its efforts to establishing the businesses.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP”) 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

F-8

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and equipment, net

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of 7 years. The cost of assets sold or retired and the related amounts of accumulated depreciation are removed from the accounts in the year of disposal. Any resulting gain or loss is reflected in current operations. Expenditures for maintenance and repairs are charged to operations as incurred. The capitalized cost of the oil properties will be amortized based on the units-of-production method. Costs incurred for property acquisition and further development activity will be capitalized and amortized as previously noted.

Revenue recognition

The Company follows the guidance of ASC 605 for revenue recognition. The Company recognizes revenues when they are realized or realizable and earned, less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company will derive majority of its revenue from sales of oil purchased from third parties and/or produced by its wells.

The Company uses the sales method to account for sales of crude oil and natural gas. Under this method, revenues are recognized based on actual volumes of oil and gas sold to purchasers. The volumes sold may differ from the volumes to which the Company is entitled based on the interest in the properties. These differences create imbalances which are recognized as a liability only when the imbalance exceeds the estimate of remaining reserves. Costs associated with production are expensed in the period incurred.

Stock-based compensation

The Company accounted for its stock based compensation under the recognition and measurement principles of the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment” (SFAS No. 123R”)(ASC 718) using the modified prospective method for transactions in which the Company obtains employee services in share-based payment transactions and the Financial Accounting Standards Board Emerging Issues Task Force Issue No. 96-18 Accounting For Equity Instruments That Are Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling Goods Or Services” (EITF No. 96-18”) for share-based payment transactions with parties other than employees provided in SFAS No. 123R(ASC 718). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.

Income taxes

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 Accounting for Income Taxes” (SFAS No. 109”)(ASC 740). Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

F-9

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory

The Company’s inventory at April 30, 2011 consists of purchased barrels of oil. The inventory is accounted for on a First-In-First-Out (FIFO) basis, and is valued at the lower of cost or market. Inventory is evaluated periodically by management for potential impairment issues.

Oil and Gas Properties, Successful Efforts Method

The Company uses the successful efforts method of accounting for oil and gas producing activities. Under the successful efforts method, costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells that find proved reserves, and to drill and equip development wells are capitalized. Costs to drill exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining unproved properties are expensed as incurred. The Company evaluates its proved oil and gas properties for impairment on a field-by-field basis whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable. The Company follows ASC 360 for these evaluations. Unamortized capital costs are reduced to fair value if the undiscounted future net cash flows from our interest in the property’s estimated proved reserves are less than the asset’s net book value.

Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Other unproved properties are amortized based on the Company's experience of successful drilling and average holding period. Capitalized costs of producing oil and gas properties, after considering estimated dismantlement and abandonment costs and estimated salvage values, are depreciated and depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives.

Under ASC 932, drilling costs for exploratory wells are initially capitalized but generally must be charged to expense unless the wells are determined to be successful within one year after completion of drilling. Circumstances that permit continued capitalization of exploratory drilling costs are addressed by ASC 932. The one-year limitation may be exceeded for an exploratory well only if sufficient reserves have been found to justify its completion and sufficient progress has been made in assessing the reserves and the economic and operating viability of the project. If the exploratory well does not meet both criteria, its capitalized costs are expensed, net of any salvage value. Annual disclosures are required under ASC 932 to provide information about management’s evaluation of capitalized exploratory well costs, including disclosure of (i) net changes from period to period in the costs for wells that are pending the determination of proved reserves, (ii) the amount of any exploratory well costs that have been capitalized for more than one-year after the completion of drilling and (iii) an aging of suspended exploratory well costs and the number of wells affected.

On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income. On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained.

F-10

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently issued accounting pronouncements

In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160.

In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis.

In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167.

In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166.

In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1.

In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.

In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted.

In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). It is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued.

F-11

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently issued accounting pronouncements

In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. Share-lending arrangements that have been terminated as a result of counterparty default prior to December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that begins on or after June 15, 2009.

The Company has reviewed the above pronouncements and does not expect any of the provisions to have a material effect on the financial position, results of operations or cash flows of the Company.

NOTE 2 - DEVELOPMENT STAGE ACTIVITIES AND GOING CONCERN

The Company is currently in the development stage and has conducted minimal operations to date. While pursuing the development process of acquiring oil producing properties, on April 23, 2010 the Company entered into an agreement with Pemco, LLC, to acquire thirteen oil producing properties.

As reflected in the accompanying consolidated financial statements, the Company had a deficit accumulated during development stage of $4,528,538 at April 30, 2011 and had a net loss of $1,476,893 for the nine months ended April 30, 2011 with minimal revenues since inception. Although the Company has recorded minimal revenues through April 30, 2011, these revenues pertain to sales of purchased oil and gas inventory, as opposed to oil and gas removed from the ground by the Company.

While the Company is attempting to grow operations and generate a reliable flow of revenues, the Company’s cash position is not sufficient enough to support the Company’s operations. Management intends to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that these efforts will succeed and that the Company will continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise capital and to generate sufficient revenues. The consolidated financial statements do not include any adjustments that would be necessary if the Company is unable to continue as a going concern.

F-12

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 3 - PURCHASE OF OIL PROPERTIES

On April 23, 2010 the Company entered into an agreement with Pemco LLC to acquire thirteen oil producing properties. The cost of the properties aggregated $1,500,000 (including all of the associated equipment already in place amounting to $138,300 and approximately one thousand, two hundred seventy one (1,271) barrels of oil in storage amounting to $81,980 which has been considered as inventory. A deposit of $100,000 was paid at closing which reduced the amount due and owing to Pemco to $900,000, to be secured through a collateralized non-interest bearing promissory note to be paid, in equal monthly installments of $100,000, commencing one month after the initial closing and continuing for nine months. The Company has paid $45,000 on this balance through April 30, 2011. The remaining balance of $500,000 is to be paid to Energy Recovery Systems. The terms of the agreement with Energy Recovery Systems were not finalized as of the date of this report. Through April 30, 2011 The Company has imputed $55,315 of interest on the promissory notes at the rate of 10% per annum.

On March 31, 2011 the Company and Pemco LLC mutually agreed to terminate agreement dated April 23, 2010 above in exchange for one-half (50%) working interest in the Company’s oil producing revenue. As the result of the Joint Operating Agreement, Pemco, LLC and Energy Recovery Systems released all remaining debts owed by the Company.

	April 30, 2011		July 31, 2010
Note payable to ERS, unsecured, due November 30, 2010	$	-	$	500,000
Note payable to Pemco, unsecured, due February 23, 2011		-		900,000
Discount for imputed interest		-		(31,879)
Net	$	-	$	1,368,121

NOTE 4 - NOTES PAYABLE

Notes payable at April 30, 2011 and July 31, 2010 consisted of the following:

	April 30, 2011		July 31, 2011
Note payable on January 29, 2009, 10% interest, unsecured and due on demand.	$	35,960	$	35,960
Note payable on June 1, 2009, 10% interest, unsecured and due on demand.		13,738		13,738
Note payable on July 1, 2009, 10% interest, unsecured and due on demand.		12,710		12,710
Note payable on October 1, 2009, 10% interest, unsecured and due on demand.		10,658		10,658
Note payable on July 16, 2010, 10% interest, secured by the pledge of 500,000 shares of the Company’s common stock, due 90 days following the date on which the funds were delivered.		100,000		100,000
Note payable on September 23, 2010, 1.0% interest, unsecured, convertible into common stock at a price of $0.50 per share, due 90 days from issuance date		59,200		-
Note payable on November 18, 2010, zero percent interest, unsecured, convertible into Common stock at a 50% discount to market		50,000		-
Note payable on March 28, 2011, 5% interest, unsecured, convertible into common stock at a price of $0.20 per share at the time of conversion		27,300
Note payable on February 28, 2011, 8% interest, unsecured, convertible into common stock at a price of $0.25 per share at the time of conversion		5,000
Note payable on March 2, 2011, 5% interest, unsecured, convertible into common stock at a price of $0.25 per share at the time of conversion		5,000
Note payable on April 22, 2011, 1% interest, unsecured and due on demand		50,000
Discount for beneficial conversion feature		-		(33,319	)
Total	$	369,566	$	139,747

All of the above notes payable are due to unrelated parties. The related interest expense on these notes for the nine month period ended April 30, 2011 was $46,767.

F-13

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 5 - STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

On October 1, 2009, the Company issued 1,000,000 shares of its Common Stock to the Company’s chief executive officer as a signing bonus for entering into an Employment Agreement dated October 1, 2009. The shares were valued at $0.30 per share, or $300,000 in the aggregate.

On January 28, 2010, the Company issued 1,122,366 shares to various consultants for services provided to the Company. The shares were valued at $0.30 per share, or $336,710 in the aggregate.

On March 16, 2010 and March 30, 2010 the Company issued 172,000 shares, of its common stock to various consultants for services provided to the Company. The shares were valued at $0.30 per share, or $51,600 in the aggregate.

Between March 1 and April 30, 2010 the Company issued 138,000 shares of common stock upon conversion of convertible promissory notes at an average price of $4.07 per share, or $561,613 in the aggregate.

On June 25, 2010 the Company issued 150,000 shares of common stock as an inducement to an unrelated third-party lender. The shares were valued at $0.89 per share, or $133,500 in the aggregate.

On July 31, 2010 the Company issued 10,000 shares of common stock upon conversion of convertible promissory notes at a price of $0.94 per share, or $9,400 in the aggregate.

During the year ended July 31, 2010 the Company cancelled 3,800,000 previously issued shares of common stock.

In August, 2010 the Company issued 50,000 shares of common stock for prepaid consulting services valued at the market rate of $0.65 per share, or $32,500 in the aggregate.

In August, 2010 the Company issued 31,746 shares of common stock for consulting services rendered at $1.05 per share, pursuant to a consulting agreement. The shares were valued at $33,332 in the aggregate.

In August, 2010 the Company issued 100,000 shares of common stock for consulting services at the market rate of $0.65 per share, or $65,000 in the aggregate.

In September, 2010 the Company issued 500,000 shares of common stock upon the default of a note payable. The shares were valued at the market rate of $0.45 per share, or $225,000 in the aggregate.

In September, 2010 the Company issued 60,000 shares of common stock as a loan inducement fee. The shares were valued at the market rate of $0.26 per share, or $15,600 in the aggregate.

In October, 2010 the Company issued 150,000 shares of common stock as payment for prepaid consulting fees valued at the market rate of $0.45 per share, or $67,500 in the aggregate.

In October, 2010 the Company issued 25,000 shares of common stock for services rendered. The shares were valued at the market rate of $0.45 per share, or $11,250 in the aggregate.

In November, 2010 the Company issued 300,000 shares of common stock for services rendered. The shares were valued at the market rate of $0.35 per share, or $105,000 in the aggregate.

In December, 2010 the Company issued 150,000 shares of common stock for services rendered. The shares were valued at the market rate of $0.20 per share, or $30,000 in the aggregate.

In January, 2011 the Company issued 700,000 shares of common stock for services rendered. The shares were valued at the market rate of $0.10 per share, or $70,000 in the aggregate.

In February, 2011 the Company issued 200,000 shares of common stock for services rendered. The shares were valued at the market rate of $0.15 per share, or $30,000 in the aggregate.

In March, 2011 the Company issued 900,000 shares of common stock for services rendered. The shares were valued at the market rate of $0.12 per share, or $108,000 in the aggregate.

F-14

FORCE FUELS, INC.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 and July 31, 2010

NOTE 6 - FORMATION OF SUBSIDIARIES

On May 5, 2010 the Company formed Force Fuels Services, Inc., a Kansas entity (FFS”) as a wholly-owned subsidiary of the Company. On September 13, 2010 the Company formed Cheetah Motor Corp., a Nevada entity (Cheetah”), as a wholly-owned subsidiary. Both FFS and Cheetah were formed so as to allow the Company the opportunity to explore additional business opportunities in the green energy industries.

NOTE 7 - SUBSEQUENT EVENTS

In May, 2011 the Company issued 400,000 shares of common stock to an unrelated third-party entity for services rendered. The shares were valued at market rate at $0.11, resulting in an aggregate expense of $44,000.

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and there are no subsequent events to report other than the event listed in the preceding paragraph.

F-15

Item 2.

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

Plan of Operations

The Company changed the focus of its business plan and on April 23, 2010 signed an agreement with Pemco, LLC to begin the process of engaging in the new direction. The primary products of the Company will be regulated and standardized energy-based products, which do not require a significant marketing or sales force. These energy-based products include traditional hydrocarbon-based oil and gas, as well as green” or alternative” energy, which includes solar and wind. On March 31, 2011 the Company and Pemco LLC mutually agreed to terminate agreement dated April 23, 2010 above in exchange for one-half (50%) working interest in the Company’s oil producing revenue. As the result of the Joint Operating Agreement, Pemco, LLC and Energy Recovery Systems released all remaining debts owed by the Company.

In the oil and gas field, the Company focuses on: 1) the purchase of marginally producing shallow oil wells, which are relatively inexpensive to operate and can be optimized with existing technologies; 2) the purchase of leases with potential for additional drilling in proven producing areas; and 3) the acquisition of in-house know-how to further optimize production through stimulation, refurbishing and site optimization.

The strategy of the Company is to invest principally in the acquisition or installation of energy-based assets that can contribute immediately and substantially to cash flow through sales to local energy companies, thus only requiring external or government financing for subsequent acquisitions and not for operating expenses.

In the short term, the Company will focus on maximizing revenue from its recent acquisition of over 2,600 acres of oil producing land leases with 49 oil strippers and 5 natural gas sites located in southern Kansas.

Subsequently, in the field of electrical energy production, the Company will focus solely on the exploitation of proven and established technologies that can generate a positive return on investment and tax benefits applicable to green energy and oil revenues. While naturally taking full advantage of current government assistance and incentives, placing a significant premium on the economic self-sustainability of all our projects and how new technologies and policies may affect us.

The Company intends to continue to leverage its Intellectual Property assets through further development, expansion and marketing of the technology licensed from ICE Conversions, Inc. This development will be implemented through the creation of a fully owned subsidiary.

This drive train technology consists of a proprietary, zero emission hydrogen fuel cell/electric battery hybrid drive system. and relies on hydrogen fuel cells to produce electricity and acts as a range extender for electric drive vehicles. The Company is currently in the process of selecting a manufacturer to build the first prototypes. The Company intends to combine components purchased from various suppliers and partner those items with its proprietary technology and integrate all of the parts into complete electric drive vehicles.

Resignation of Oscar Luppi

On March 22, 2011, the Board of Directors accepted Mr. Oscar Luppi’s voluntary resignation from his positions of Chairman, President, Chief Executive Officer, and Treasurer of the Registrant. There were no disagreements or misunderstandings relating to the Registrant’s operations, policies or practices between the Board and Mr. Luppi leading to his resignation.

Appointment of Thomas C. Hemingway

On March 22, 2010, Thomas C. Hemingway was appointed Chairman, President , Chief Executive Officer and Treasurer of the Registrant. No compensation arrangement has been entered into or is contemplated with respect to Mr. Hemingway’s employment as President, Chief Executive Officer, Treasurer and Interim Chief Financial Officer.

Going Concern

Our registered independent accounting firm expressed substantial doubt as to our ability to continue as a going concern in its report on the accompanying financial statements for the period ended April 30, 2011 based on the fact that we do not have adequate working capital to finance our day-to-day operations. Our continued existence depends upon the success of our efforts to raise additional capital necessary to meet our obligations as they come due and to obtain sufficient capital to execute our business plan. We intend to obtain capital primarily through issuances of debt or equity or entering into collaborative arrangements with corporate partners. There can be no assurance that we will be successful in completing additional financing or collaboration transactions or, if financing is available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we may be required to further scale down or perhaps even cease the operation of our business. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Liquidity and Capital Resources

At April 30, 2011, we had $48,647 in cash and cash equivalents and our current liabilities consisted of $230,550 in accounts payable and accrued expenses, $369,566 in notes payable and convertible notes, and $617,053 in accrued officer salaries.

For the nine months ended April 30, 2011, net cash used in operating activities was $187,195, inclusive of a $1,476,893 net loss for the nine months ended April 30, 2011. Additional significant factors effecting cash flows from operations were depreciation charges of $14,817, common stock issuances for services totaling $568,182, a loss on settlement of debt in the amount of $271,882, amortization of debt discount totaling $65,198, a change in inventory of $52,291, an increase in accrued officer salaries in the amount of $306,223, and a change in accounts payable and accrued expenses amounting to $6,292.

Cash used in investing activities during the nine months ended April 30, 2011 totaled $2,500, all of which related to the Company’s note receivable from a related party.

Net cash provided by financing activities was $151,500 for the nine months ended April 30, 2011, resulting primarily from proceeds from notes payable in the aggregate amount of $196,500, partially offset by payments on notes payable in the aggregate amount of $45,000.

In January 2009, the Company commenced a capital formation activity to submit a Registration Statement on Form S-1 to the Securities and Exchange Commission (the SEC”) to register and sell in a self-directed offering 210,000 shares of newly issued common stock at an offering price of $4.00 per share for proceeds of up to $840,000. The Registration also registered 1,039,740 of the Company’s outstanding shares of common stock for resale on behalf of selling stockholders, for which the Company would not receive any of the proceeds from sales of these shares. The Registration Statement on Form S-1 was filed with the SEC on January 30, 2008. The Company amended the Registration Statement in January 2010 to terminate the public offering and deregistered all shares to be sold by the Company, and reducing the shares being registered for sale by selling shareholders to 938,333 shares . The Company will not offer or sell any additional shares of common stock pursuant to this registration statement. The 938,333 shares of common stock that were registered for resale by existing shareholders continue to be registered for resale; however, the Company will not receive any of the proceeds of such sales. The Registration Statement was declared effective on February 26, 2010.

We do not have sufficient cash on hand to fund our administrative and other operating expenses or our proposed new business operations to acquire and operate oil and gas interests and properties for the next twelve months. In order to meet our obligations as they come due and to fund the development of our or business, we will require significant new funding to pay for these expenses. We might do so through loans from current stockholders, public or private equity or debt offerings, grants or strategic arrangements with third parties. There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain additional funds through bank loans, lines of credit or any other sources.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Information set forth herein contains "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "may,” should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. No assurance can be given that the future results covered by the forward-looking statements will be achieved. The Company cautions readers that important factors may affect the Company’s actual results and could cause such results to differ materially from forward-looking statements made by or on behalf of the Company. These include the Company’s lack of historically profitable operations, dependence on key personnel, the success of the Company’s business, ability to manage anticipated growth and other factors identified in the Company's filings with the Securities and Exchange Commission, press releases and other public communications.

Recently issued accounting pronouncements

Critical Accounting Policies

The preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.

Please refer to Note 1 - Summary of significant accounting policies for our critical accounting policies.

Oil and Gas Properties, Successful Efforts Method

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.

Item 4.

Controls and Procedures

Our Chief Executive Officer, who is also our Chief Financial Officer (the Certifying Officer”), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of October 31, 2010. Based on this evaluation, our Certifying Officer has concluded that our disclosure controls and procedures were ineffective to ensure that information required to be disclosed in our periodic reports is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules for each report and that such information is presented to our management as appropriate to allow timely decisions regarding required disclosure. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.

PART II -OTHER INFORMATION

Item 1.

Legal Proceedings

The Company has one outstanding complaint in the amount of approximately $25,000 which it anticipates resolving within the next quarter.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

During the year ended July 31, 2010, the Company sold convertible promissory notes in the principal amount of $261,000 in unregistered sales to accredited investors. Such sales were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and Regulation D. The proceeds of the convertible notes were used for working capital and developing the Company's new business plan. These notes were converted to 148,000 shares.

On January 28, 2010, the Company issued 1,122,366 shares to various consultants for services provided to the Company. The shares were valued at $0.30 per share, or $336,710 in the aggregate.

On June 25, 2010 the Company issued 150,000 shares of common stock as an inducement to an unrelated third-party lender. The shares were valued at $0.89 per share, or $133,500 in the aggregate.

On July 31, 2010 the Company issued 10,000 shares of common stock upon conversion of convertible promissory notes at a price of $0.94 per share, or $9,400 in the aggregate.

During the year ended July 31, 2010 the Company cancelled 3,800,000 previously issued shares of common stock.

In August, 2010 the Company issued 50,000 shares of common stock for prepaid consulting services valued at the market rate of $0.65 per share, or $32,500 in the aggregate.

In August 2010 the Company issued 31,746 shares of common stock for consulting services rendered at $1.05 per share, pursuant to a consulting agreement. The shares were valued at $33,332 in the aggregate.