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EX-32.1 - CIRCLE STAR ENERGY CORP.ex32-1.htm
EX-31.1 - CIRCLE STAR ENERGY CORP.ex31-1.htm
EX-31.2 - CIRCLE STAR ENERGY CORP.ex31-2.htm
EX-32.2 - CIRCLE STAR ENERGY CORP.ex32-2.htm


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 July 31, 2012
 
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                             to                             
 
Commission file number: 000-53868

CIRCLE STAR ENERGY CORP.
 (Exact name of registrant as specified in its charter)
 
Nevada
 
30-0696883
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
7065 Confederate Park Road, Suite 102
   
Fort Worth, Texas
 
76108
(Address of principal executive offices)
 
(Zip Code)
 
(817) 744-8502
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   x  Yes  o 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).    x Yes  o  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (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 12b-2 of the Exchange Act)  o Yes  x  No

Number of common shares outstanding at September 14, 2012: 41,504,571
 
 
TABLE OF CONTENTS
 
   
Page
PART I.
FINANCIAL INFORMATION
 
Item 1.
  3
Item 2.
  16
Item 3.
  30
Item 4.
  30
     
PART II.
OTHER INFORMATION
 
Item 1.
  31
Item 1A.
  32
Item 2.
  32
Item 3.
  33
Item 4.
  33
Item 5.
  33
Item 6.
  34
     
  36
     
 
 
 
 
 
 
PART I.               FINANCIAL INFORMATION

Item 1.                 Financial Statements.
 
CIRCLE STAR ENERGY CORP.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 
   
July 31, 2012
   
April 30, 2012
 
  ASSETS
           
 CURRENT ASSETS:
           
 Cash
 
$
36,217
   
$
60,626
 
 Trade accounts receivable
   
89,575
     
153,872
 
 Warrant subscriptions receivable
   
-
     
1,200,000
 
 Prepaid expenses and other assets
   
22,092
     
13,972
 
  Total Current Assets
   
147,884
     
1,428,470
 
 Oil and gas properties at cost, using the successful efforts method, net
               
Unproved properties
   
1,893,789
     
 
Deposits on oil and gas properties subject to forfeiture
   
3,661,638
     
3,097,727
 
Proved properties
   
3,077,304
     
3,431,743
 
Less: accumulated depletion, depreciation and amortization
   
(601,831
)
   
(574,341
)
Net oil and gas properties
   
8,030,900
     
5,955,129
 
 OTHER ASSETS:
               
 Investment in partnership
   
177,131
     
167,215
 
 Furnitures and fixtures, net
   
6,184
     
6,596
 
  Total Other Assets
   
183,315
     
173,811
 
  Total Assets
 
$
8,362,099
   
$
7,557,410
 
                 
  LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
  CURRENT LIABILITIES:
               
  Accounts payable
 
$
412,859
   
$
256,840
 
 Accrued liabilities
   
15,624
     
6,447
 
 Bank overdrafts
   
-
     
409,544
 
  Due to related party
   
24,521
     
24,521
 
  Interest payable
   
163,992
     
86,472
 
  Seller note payable
   
-
     
1,500,000
 
 Convertible notes payable, net of unamortized discount
   
2,221,038
     
2,307,787
 
  Total Current Liabilities
   
2,838,034
     
4,591,611
 
 Convertible notes payable, net of unamortized discount
   
1,624,759
     
1,207,379
 
  Total Liabilities
   
4,462,793
     
5,798,990
 
  STOCKHOLDERS' EQUITY
               
  Common stock, 100,000,000, par value $0.001 shares authorized, 40,404,571 and 35,693,572 common shares
     issued and outstanding at July 31, 2012 and July 31, 2011, respectively.
   
40,405
     
35,694
 
  Additional paid in capital
   
17,038,088
     
12,971,209
 
  Accumulated deficit
   
(13,179,187
)
   
(11,248,483
)
  Total Stockholders' Equity
   
3,899,306
     
1,758,420
 
  Total Liabilities and Stockholders' Equity
 
$
8,362,099
   
$
7,557,410
 
 
 
 
CIRCLE STAR ENERGY CORP.
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
   
Three Months Ended
July 31, 2012
   
Three Months Ended
July 31, 2011
 
 Revenues:
           
 Oil sales
 
$
147,401
   
$
143,215
 
 Gas sales
   
3,203
     
73,078
 
 Total Revenues
   
150,604
     
216,293
 
                 
 Operating Expenses:
               
 Lease operating
   
17,774
     
8,944
 
 Production taxes
   
7,336
     
17,796
 
 Depreciation, depletion, and amortization
   
82,465
     
78,426
 
 Exploration costs
   
25,507
     
-
 
 Impairment of oil gas properties
   
-
     
3,397,693
 
 General and administrative
   
1,426,786
     
1,479,745
 
 Total Operating Expenses
   
1,559,868
     
4,982,604
 
 Operating Loss
   
(1,409,264
)
   
(4,766,311
)
 Other Income (Expense):
               
 Interest expense
   
(441,509
)
   
(330,000)
 
 Equity in earnings of unconsolidated affiliates
   
9,916
     
-
 
 Loss on sale of assets
   
(89,847
   
-
 
 Net Loss
 
$
(1,930,704
)
 
$
(5,096,311
)
                 
 Net Loss Per Share: Basic and Diluted
 
$
(0.05
)
 
$
(0.13)
 
                 
 Weighted Average Shares Outstanding: Basic and Diluted
   
36,601,529
     
39,714,674
 
 

CIRCLE STAR ENERGY CORP.
 
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
 
FOR THE QUARTER ENDED JULY 31, 2012
 
.                                
     
Common Stock
   
Additional Paid in
   
Accumulated
       
     
Shares
   
Amount
   
Capital
   
Deficit
   
Total
 
Balances, May 1, 2012
      35,693,571     $ 35,694       12,971,209       (11,248,483 )     1,758,420  
                                           
Net loss
      -       -       -       (1,930,704 )     (1,930,704 )
                                           
Share-based compensation expense
      -       -       959,890       -       959,890  
                                           
Common stock issued for cash
      500,000       500       749,500       -       750,000  
                                           
Common stock issued for acquisition of WEVCO leases
      600,000       600       533,400       -       534,000  
                                           
Common stock issued for acquisition of Blue Ridge leases
      2,611,000       2,611       1,825,089       -       1,827,700  
                                           
Shares issued to Jonathan Pina
      1,000,000       1,000       (1,000 )     -       -  
                                           
Balances, July 31, 2012
      40,404,571     $ 40,405     $ 17,038,088     $ (13,179,187 )   $ 3,899,306  
 
 
CIRCLE STAR ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
   
Three Months Ended
July 31, 2012
   
Three Months Ended
July 31, 2011
 
 Cash flows from operating activities
           
 Net loss
 
$
(1,930,704
)
 
$
(5,096,310
)
 Adjustments to reconcile net loss to net cash used in operating activities
         
 Depreciation expense
   
82,465
     
78,426
 
 Accretion of discount on notes payable
   
330,631
     
245,753
 
 Share-based compensation
   
959,890
     
1,182,397
 
 Impairment of oil and gas properties
   
-
     
3,397,693
 
 Equity in earnings of unconsolidated affiliates
   
(9,916
)
   
-
 
 Loss on sale of oil and gas properties
   
89,847
     
-
 
 Changes in operating assets and liabilities
               
 Trade accounts receivable
   
64,297
     
39,467
 
 Prepaid expenses and other assets
   
(8,120
)
   
(3,974
 Accounts payable
   
156,019
     
63,843
 
 Accrued liabilities
   
9,177
     
-
 
 Bank overdrafts
   
(409,544
   
-
 
 Salaries Payable
   
-
     
11,581
 
 Interest payable
   
77,520
     
53,425
 
 Net cash used in operating activities
   
(588,438
)
   
(27,699
)
 Cash flows from investing activities
               
 Additions of oil and gas properties, net
   
(135,971
)
   
(995,397
 Distributions from equity method investees
   
-
     
       3,270
 
 Capital expenditures
   
-
 
   
(8,860
 Net cash provided by (used in) investing activities
   
(135,971
   
(1,000,987
 Cash flows from financing activities
               
 Partner distributions
   
-
     
(72,435
 Proceeds from the issuance of common stock
   
1,950,000
     
1,200,000
 
 Payments on note issued to seller
   
(1,250,000
)
   
-
 
 Net cash provided by financing activities
   
700,000
     
1,127,565
 
 Net (decrease) increase in cash
   
(24,409
   
98,879
 
 Cash
               
 Beginning of period
   
60,626
     
6,696
 
 End of period
 
$
36,217
   
$
105,575
 
 Supplemental Cash Flow Information:
               
 Cash paid for interest
 
$
33,453
   
$
30,822
 
 Cash paid for income taxes
 
$
-
   
$
-
 
 Supplemental Non-Cash Investing and Financing Information:
         
 Settlement of seller note through conveyance of oil and gas properties
 
$
250,000
   
$
-
 
 Common stock issued for acquisition of WEVCO leases
 
$
534,000
   
$
-
 
 Common stock issued for acquisition of Blue Ridge leases
 
$
1,827,700
   
$
-
 
 Common stock issued for acquisition of JHE assets
 
$
-
   
$
400,000
 
 Promissory note assumed for acquisition of JHE assets
 
$
-
   
$
5,517,536
 
 
 
CIRCLE STAR ENERGY CORP.
NOTES TO FINANCIAL STATEMENTS
 
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations
 
Circle Star Energy Corp (a Nevada Corporation) (the “Company,” “we,” “us,” or “our”) is a Fort Worth based independent exploration and production company engaged in the acquisition and development of oil and natural gas properties and production of oil and natural gas in the United States.

Consolidation, Basis of Presentation and Significant Estimates

The interim consolidated financial statements of the Company are unaudited and contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full year due in part to the volatility in prices for oil and gas, future commodity prices for commodity derivative contracts, global economic and financial market conditions, interest rates, access to sources of liquidity, estimates of reserves, drilling risks, geological risks, transportation restrictions, the timing of acquisitions, product supply and demand, market competition and interruptions of production. You should read these consolidated interim financial statements in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended April 30, 2012, filed with the Securities and Exchange Commission on August 13, 2012.

The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly-owned subsidiary. Intercompany accounts and transactions are eliminated. In preparing the accompanying financial statements, we have made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. Significant assumptions are required in the valuation of proved oil and gas reserves, which affect the amount at which oil and gas properties are recorded. Significant assumptions are also required in estimating our share-based compensation. It is at least reasonably possible these estimates could be revised in the near term, and these revisions could be material.

Recently Issued Accounting Pronouncements
 
In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amended guidance changes several aspects of the fair value measurement guidance in ASC 820, Fair Value Measurement, further clarifying how to measure and disclose fair value. This guidance amends the application of the “highest and best use” concept to be used only in the measurement of fair value of nonfinancial assets, clarifies that the measurement of the fair value of equity-classified financial instruments should be performed from the perspective of a market participant who holds the instrument as an asset, clarifies that an entity that manages a group of financial assets and liabilities on the basis of its net risk exposure can measure those financial instruments on the basis of its net exposure to those risks, and clarifies when premiums and discounts should be taken into account when measuring fair value. The fair value disclosure requirements also were amended. The amendment is effective for the Company at the beginning of July 2012, with early adoption prohibited. The adoption of this amendment did not materially affect the Company’s financial statements.
 
In December 2011, the FASB issued an amendment to the accounting guidance for disclosure of arrangements that permit offsetting assets and liabilities. The amendment expands the disclosure requirements to require both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The amendment will be effective for us, beginning on January 1, 2013, and must be applied retrospectively. We do not expect the adoption of this accounting pronouncement to have a material impact on our financial statements when implemented.

NOTE 2—GOING CONCERN
 
At July 31, 2012, we had cash and cash equivalents of $36,217 and a working capital deficit of $2,690,150.  For the quarter ended July 31, 2012, we had net loss attributable to common shareholders of $1,930,704 and an operating loss of $1,409,264.
 
Given that we have not achieved profitable operations to date, our cash requirements are subject to numerous contingencies and risks beyond our control, including operational and development risks, competition from well-funded competitors, and our ability to manage growth. We can offer no assurance that the Company will generate cash flow sufficient to achieve profitable operations or that our expenses will not exceed our projections.  Accordingly, there is substantial doubt as to our ability to continue as a going concern for a reasonable period of time.
 
 
There can be no assurance that financing will be available to us when needed or, if available, or that it can be obtained on commercially reasonable terms. Unprecedented disruptions in the credit and financial markets in the past eighteen months have had a significant material adverse impact on access to capital and credit for many companies. Considering our financial condition, we may be forced to issue debt or equity at less favorable terms than would otherwise be available.  These disruptions could, among other things, make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations.  If we are unable to obtain additional or alternative financing on a timely basis and are unable to generate sufficient revenues and cash flows, we will be unable to meet our capital requirements and will be unable to continue as a going concern.
 
We anticipate generating losses in the near term, and therefore, may be unable to continue operations in the future. To secure additional capital, we will have to issue debt or equity or enter into a strategic arrangement with a third party.  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 funds through bank loans, lines of credit, or any other sources.
 
NOTE 3—LOSS PER COMMON SHARE
 
Basic net income or loss per common share is computed by dividing the net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income or loss per common share is calculated in the same manner, but also considers the impact to net income and common shares for the potential dilution from stock options, stock warrants and any other outstanding convertible securities.
 
We have issued potentially dilutive instruments as summarized in the table below.  We did not include any of these instruments in our calculation of diluted loss per share during the period because to include them would be anti-dilutive due to our net loss during the periods.
 
   
July 31,
   
July 31,
 
   
2012
   
2011
 
Common stock awards issuable pursuant to service contract
    400,000       -  
Common stock options
    450,000       450,000  
Common stock awards
    10,887,000       1,500,000  
Convertible notes payable
    3,166,667       -  
Stock warrants
    250,000       -  
 
NOTE 4—ACQUISITIONS AND DIVESTITURES
 
On June 16, 2011, Circle Star acquired all of the membership interests in JHE from HPO, effective as of June 1, 2011, for consideration including 1,000,000 shares of its common stock, a retained profit interest in existing properties valued at $404,101, and the assumption of a promissory note in the aggregate amount of $7,500,000, and 600,000 shares of the Company’s common stock.
 
As a result of the acquisition, JHE’s assets and liabilities were adjusted to their fair values at the acquisition date. No adjustments were made to JHE’s assets and liabilities other than oil and gas properties and the interest in JHE Energy Interests (JHE Units) units as their carrying value approximated fair value at the date of acquisition. As the consideration paid exceeded the fair value of JHE’s net assets, an impairment charge totaling $3,397,693 was recorded at the acquisition date. The calculation of the impairment charge follows:
 
 Fair value of oil and gas properties
 
$
3,192,372
 
 Investment in JHE Energy Interests
   
137,604
 
 Note payable, discounted at 28%
   
(5,517,536
)
 Cash payment at closing
   
(1,000,000
)
 Fair value of equity shares granted to sellers
   
(400,000
)
 Working capital acquired
   
189,867
 
 Impairment charge
 
$
(3,397,693
)
 
These assets were acquired in accordance with and in an effort to advance the Company’s business plan.  The Company incurred transaction costs of $255,000 during the closing of this acquisition which were recorded as expense in the statement of operations.
 
 
On December 6, 2011 the Company entered into a letter agreement (the “Apache Letter Agreement”) with Ingebritson Energy LLC, GTP Energy Partners, LLC, Wind Rush Energy, LLC, Gabriel Barerra and Charles T. Brackett (collectively, the “Apache Sellers”) with a stated execution date of December 1, 2011 (the “Apache Execution Date”). Pursuant to the Apache Letter Agreement, the Company purchased from the Apache Sellers certain interests in oil and gas properties within the Redfish 56 Prospect in Glasscock County, Texas (the “Redfish Properties”). In return, the Apache Sellers received 203,571 shares of common stock of the Company which, at the Execution Date, had a market value of $1.87 per share.  These shares were authorized on January 31, 2012 and issued on March 8, 2012.  The Company also assumed the responsibility for payment of certain operating expenses and capital expenditures which were valued at $193,717.  
 
The following unaudited summary, prepared on a pro forma basis, presents the results of operations for the quarter ended July 31, 2011, as if the acquisitions of JHE and the Redfish Properties along with transactions necessary to finance the acquisitions, as if they had occurred on May 1 of 2011. The pro forma information includes the effects of adjustments for interest expense, and depreciation and depletion expense. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of May 1, 2012, nor are they necessarily indicative of future consolidated results.
 
 Total operating revenue
 
$
340,405
 
 Total operating costs and expenses
   
136,412
 
 Operating loss
   
203,993
 
 Interest expense and other
   
(1,542,397
)
 Net loss attributed to common stockholders
 
$
(1,338,404
)
 Loss per common share, basic and fully diluted
 
$
(0.03
)
 
Greene Acquisition
 
On March 6, 2012, the Company entered into an agreement (the “Greene Agreement”) to purchase certain interests in 6,518 acres of land in Kansas for a total purchase price of $9,125,200.  Pursuant to the Greene Agreement, Circle Star delivered a non-refundable $50,000 deposit to the sellers. The deposit is to be applied to the purchase price upon closing. 
 
On June 19, 2012, the Company filed a petition with the District Court of Clark County, Kansas, Sixteenth Judicial District (Case No. 2012-CV-12) against Green Brothers Land Company, LLC, Greene Ranch Enterprises, Inc., David M. Greene, Jr., Marcia Greene, Thomas E. Greene, Janice C. Greene, Joseph B. Greene and Billie Greene (collectively the “Defendants”), requesting the return of a deposit pursuant to the termination of a certain Land Real Estate Sales Contract (the “Greene Agreement”) entered into between Circle Star and the Defendants on March 6, 2012, pursuant to which Circle Star would have acquired from the Defendants certain interests in 6,518 acres of land in Kansas. Pursuant to the Greene Agreement, Circle Star delivered a $50,000 deposit that was refundable due a default by the sellers. Circle Star terminated the Green Agreement as a result of defects in title which the Defendants did not cure within the time period set forth in the Greene Agreement. Prior to the litigation, Circle Star pursued an out of court settlement but was unsuccessful. Circle Star intends to vigorously pursue the recovery of the deposit in an efficient and expeditious manner.

Wevco Acquisition
 
The Company entered into a leasehold purchase agreement (the “Wevco Purchase Agreement”) with Wevco Production, Inc. (“Wevco”), whereby Wevco will sell to the Company all of Wevco’s rights, title, and working interest in and to certain oil and gas leases, containing up to 64,575 net acres, more or less, situated in Gove and Trego Counties, Kansas, described more fully in Exhibit A to the Wevco Purchase Agreement. Under the Wevco Purchase Agreement, the Company will pay to Wevco $5,000,000 (the “Wevco Purchase Price”) on or before closing and issue 1,000,000 shares of common stock of the Company to Wevco. Contemporaneously with the signing of the Wevco Purchase Agreement, the Company paid Wevco $100,000, and the Company paid Wevco an additional $200,000 during March  2012(collectively the “Wevco Signing Bonus”). The Wevco Signing Bonus is non-refundable and was considered an advance on the Wevco Purchase Price. The Company issued the Wevco Common Shares on March 15, 2012.
 
On April 24, 2012, the Company entered into an amendment to the Wevco Purchase Agreement extending the closing date from April 30, 2012 until May 31, 2012 (the “First Amendment Agreement”). The Company paid Wevco a non-refundable $100,000 extension fee (the “First Extension Price”) which is considered an advance on the Wevco Purchase Price.
 
On June 13, 2012, the Company entered into the Second Amendment to Leasehold Purchase Agreement (the “Second Wevco Amendment”) extending the closing date from May 31, 2012 until September 28, 2012 (the “Wevco Closing Date”). Pursuant to the Second Amendment, the Company paid Wevco a non-refundable $100,000 extension fee (the “June Extension Price”), and issued 600,000 shares of common stock of the Company (the “Wevco Extension Shares”) to Wevco.  The Company paid the $100,000 extension fee to Wevco on June 13, 2012.  If the Wevco Purchase Price is paid on or before the Wevco Closing Date then the June Extension Price, the Wevco Signing Bonus and the First Extension Price shall be credited towards the Wevco Purchase Price. As of July 31, 2012, $500,000 has been credited towards the Wevco Purchase Price.  The shares were issued on June 19, 2012 at a price of $0.89 per share.

As of July 31, 2012, we had $3,611,638 capitalized in oil and gas deposits subject to forfeiture on our consolidated balance sheet related to the Wevco acquisition.  If we are unsuccessful in completing the Wevco acquisition, we will charge these costs to exploration expense.
 
 
BlueRidge Acquisition

On April 17, 2012 the Company agreed to purchase certain interests in oil and gas leases in Rawlins, Sheridan and Graham Counties, Kansas for $5,308,375 and 560,000 shares of common stock of the Company, with a closing date of July 1, 2012. Pursuant to the BlueRidge Purchase Agreement, the Company agreed to purchase interests in 17,168 acres in Rawlins County, 12,518 acres in Sheridan County (the “Sheridan Properties”) and 12,781 acres in Graham County.  The Company also paid $50,000 in irrevocable earnest money to be applied to the purchase price at closing.
 
The BlueRidge Purchase Agreement was amended (the “BlueRidge Amendment”) on July 2, 2012 by which the terms were modified by reducing the acreage of the leases in Graham County by 1,760 acres, and by granting the Company an option to purchase the properties in Rawlins and Graham Counties. The BlueRidge Amendment further modified the terms of the BlueRidge Purchase Agreement, whereby the $50,000 of earnest money previously paid was applied to the purchase price and the Company issued 2,611,000 Common Shares to the BlueRidge Sellers for the interests in Sheridan County.  The shares were issued on July 19, 2012 at a price of $0.70 per share.
 
Pursuant to the BlueRidge Amendment, the Company has the option (the “BlueRidge Option”) to purchase interests in 80,871 acres in Kansas (including the properties in the Rawlins and Graham Counties noted above), by making a cash payment of $10,108,875 and by delivering the number of Common Shares equal to $1,000,000, based on the market price of the Common Shares on the date before closing of the BlueRidge Option, on or before September 28, 2012.

Sale of Properties

On June 1, 2012, Circle Star conveyed certain interests in The Encana Properties to Orbis Energy LTD in accordance with the terms of the Note Payment Agreement for net consideration of $225,000 (See Note 7 for more information).  The Encana Properties had a carrying value of $320,837 resulting in a loss on the divestiture of $95,837.
 
NOTE 5—NOTES PAYABLE
 
A note payable in the amount of $7,500,000 was made by the Company for the purchase of JHE to the “Edsels”, the former owners of JHE, which was disclosed in the 8-K filed on June 21, 2011.  Upon closing of the transaction on June 16 and effective June 1, the note was reduced to $6,500,000 as a result of the payment of the initial installment of $1,000,000.  The note was further reduced to $5,000,000 after the payment of the September 1, 2011 installment of $1,500,000. The remaining installment payments due under the note payable are as follows: $2,000,000 on December 31, 2011; $1,500,000 on March 1, 2012; and 1,500,000 on June 1, 2012.  The note bears simple interest at 5.0%, which is payable quarterly.  The note was discounted, after payment of the initial installment of $1,000,000, using a rate of 28%, resulting in a fair value of $5,517,536. The Company received an extension from the note holder pursuant to the $1,500,000 payment due September 1, 2011 until September 15, 2011.  Full payment of the September 1 payment in the amount of $1,500,000 was made prior to September 15, 2011.
 
The Company was unable to timely make the December 2011 Edsel Payment to the Edsels, and in consideration of a payment in the amount of $100,000 by the Company to the Edsels and pursuant to a letter agreement dated December 29, 2011, the Edsels agreed to extend the payment date for the December 2011 Edsel Payment until January 31, 2012, on which date the December 2011 Payment was due and payable.  The Company was unable to timely make the December 2011 Edsel Payment to the Edsels on January 31, 2012 and as consideration for the Edsels agreeing to (i) further extend the due date for the December 2011 Payment until February 8, 2012 and (ii) extend the due date for March 2012 Edsel Payment until April 30, 2012 (collectively, the “Modified Payment Terms”), the Company offered to pay, among other items, the sum of $2,000,000 to the Edsels as a principal payment under the Edsel Promissory Note on or before February 8, 2012 pursuant to the terms of a letter agreement dated February 8, 2012.  On February 8, 2012, the Company made the December 2011 Payment due to the Edsels under the Note and, consequently, the Company remains current in its payments obligations under the Note.  Concurrently therewith, and as additional consideration for the Modified Payment Terms, the Company also agreed to execute the Amendments, which are described in more detail below.

On February 8, 2012, the Company entered into a First Amendment to Assignment and Novation Agreement and a First Amendment to Membership Interest Pledge and Security Agreement (collectively, the “Edsel Amendments”) pursuant to which the Company agreed to delete Section 6, and other similar provisions, from each of the Novation and the Amended Pledge Agreement which provided for, among other items, the vesting, and release from any transfer restrictions, of a corresponding portion of the Company Oil and Gas Properties, as defined in the Novation and Amended Pledge Agreement, once at least fifty percent (50%) of the original principal amount of the Edsel Promissory Note had been paid to the Edsels and thereafter as each further payment of principal was made by the Company to the Edsels under the Edsel Promissory Note.  Except as expressly set forth in the Edsel Amendments, all of the terms and provisions of the Novation and Amended Pledge Agreement are unchanged and remain in full force and effect.
 

The Promissory Note is secured by a pledge of all of the Company’s membership interests in JHE to the James H. Edsel, Nancy Edsel, and James H. Edsel, Jr. (collectively, the “Edsels”) pursuant to the Amended Pledge Agreement.  If the Company defaults on any of its obligations under the Promissory Note, the Edsels shall be entitled to exercise any and all remedies available at law to secure payment of the Promissory Note, including, but not limited to, selling the unvested portion of the membership interests.
 
Effective June 1, 2012, the Edsels and Circle Star entered into a Note Payment Agreement (the “Note Payment Agreement”, whereby, Circle Star paid the Edsels $1,250,000 and conveyed to Orbis Energy, Ltd. (“Orbis”) certain interests in properties held by JHE that were operated by Encana (“Encana Properties”).  The payment of $1,250,000 and the conveyance of the Encana Properties resulted in the Edsel Promissory Note being fully paid, and the Company was released from any further obligations to the Edsels under the Edsel Promissory Note, the Amended Pledge Agreement and the Novation.
 
On September 14, 2011, the Company issued 6% convertible notes (the “Notes”) in the total amount of $1,500,000 (the “Note Issuance”). The Notes are due and payable on September 14, 2014, with interest at the rate of 6% per annum accruing on the unpaid principal amount, compounded annually. The Notes are convertible at the option of the holder into shares of common stock of the Company at a conversion price of $1.50 per share.  The Notes are redeemable prior to maturity at the option of the Company and can be prepaid  in whole or in part at any time without a premium or penalty, upon 5 business days’ notice; prior to which the holder of the Note may convert the principal and interest into shares of common stock of the Company.  The proceeds of the Note Issuance went to pay the balance of the $1,500,000 installment due on September 1, 2011 for the Promissory Note discussed in the previous paragraph. The Notes were offered by the Company in a non-brokered private placement to non-U.S. persons outside of the United States in off-shore transactions. The Notes were not registered under the Securities Act, or the laws of any state, and are “restricted securities” (as defined in Rule 144(a)(3) of the Securities Act). The securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The Notes were placed pursuant to exclusions from registration requirements by Rule 903 of Regulation S of the Securities Act, such exclusions being available based on information obtained from the investors to the private placement.  The notes were discounted by $370,000 to reflect the beneficial conversion that existed on the date of issuance.  This discount will be accreted over the term of the convertible notes using the effective yield method.  As of July 31, 2012, the unamortized discount related to the Notes was $261,534.  Interest is payable with the principle on September 14, 2014.
 
On February 8, 2012, the Company issued 10% convertible notes (the “February 10% Notes”) in the aggregate principal amount of $2,750,000 (the “February 10% Note Issuance”), subject to the terms of the Inter-Creditor Agreement (as defined below).  The February 10% Notes accrue interest at the rate of 10% per annum on the unpaid principal balance and may be prepaid by the Company at any time without the prior written consent of the holders.  The February 10% Notes are due and payable on February 8, 2013 (the “10% Maturity Date”) or at the election of the applicable holder on the earlier of (i) the closing of a financing transaction by the Company for aggregate proceeds in excess of $5,000,000, which excess amount shall be applied to the principal balance of the applicable holder’s February 10% Note (based on the ratio of the principal amount of such holder’s February 10% Note relative to the aggregate principal amount of all the February 10% Notes); (ii) the sale or partial sale of JHE; (iii) the sale of all or substantially all of the assets of JHE; or (iv) an Event of Default (as defined in the February 10% Notes).  The 10% Notes are convertible at the option of the holders into shares of common stock of the Company at the 10% Maturity Date or upon the occurrence of one or more of the triggering events set forth in clauses (i), (ii), and (iii) above, at a conversion price of $1.50 per share. The proceeds of the 10% Note Issuance were used to make the December 2011 Edsel Payment, under the 10% Note and the balance of the proceeds of the 10% Note Issuance will be used for other general corporate purposes. The notes were discounted by $1,008,333 to reflect the beneficial conversion that existed on the date of issuance.  This discount will be accreted over the term of the convertible notes using the effective yield method.  As of July 31, 2012, the unamortized discount related to the February 10% Notes was $528,962.  Interest is payable monthly.
 
On March 14, 2012, the Company issued 10% convertible notes (the “March 10% Notes”) for cash in the aggregate principal amount of $500,000 (the “March 10% Note Issuance”), subject to the terms of the Addendum (as defined below).  The March 10% Notes accrue interest at the rate of 10% per annum on the unpaid principal balance and may be prepaid by the Company at any time without the prior written consent of the holders.  The March 10% Notes are due and payable on March 14, 2013 (the “March 10% Maturity Date”) or at the election of the holder on the earlier of (i) the closing of a financing transaction by the Company for aggregate proceeds in excess of $5,000,000, which excess amount shall be applied to the principal balance of the holder’s March 10% Note ; (ii) the sale or partial sale of JHE; (iii) the sale of all or substantially all of the assets of JHE; or (iv) an Event of Default (as defined in the March 10% Notes).  The March 10% Note is convertible at the option of the holder into shares of common stock of the Company at the March 10% Maturity Date or upon the occurrence of one or more of the triggering events set forth in clauses (i), (ii), and (iii) above, at a conversion price of $1.50 per share. The proceeds of the March 10% Note Issuance were used to pay the Wevco Signing Bonus.  The balance of the proceeds of the March 10% Note Issuance will be used for other general corporate purposes.  The notes were discounted by $183,333 to reflect the beneficial conversion price that existed on the date of issuance.  This discount will be accreted over the term of the convertible notes using the effective yield method.  As of July 31, 2012, the unamortized discount related to the March 10% Notes was $113,707.  Interest is payable monthly.
 
 
Effective March 14, 2012, the Company entered into an Addendum to March 2012 Convertible Note Subscription Agreement (the “Addendum”) with the holder of the March 10% Notes. The Addendum provides for, among other items the Company to use its best efforts to (i) the grant to the holder of the March 10% Note of a subordinated security interest in JHE, upon termination of the currently existing pledge and security interest JHE and any creditor with a senior security interest or right to a security interest in JHE existing as of the date of the Addendum, (ii) grant a security interest in the Company’s interest in certain oil and gas properties within the Redfish 56 Prospect in Glasscock County, Texas, and (iii) upon issuance of the Pina Bonus Shares, under the terms of the Pina Employment Agreement, as may be amended from time to time, Pina will pledge the Pina Shares to secure payment of the March 10% Notes.

NOTE 6—SHARE BASED COMPENSATION
 
We recognized share-based compensation expense of $959,890 and $1,182,397 for the quarters ended July 31, 2012 and 2011, respectively.
 
On July 6, 2011, David Brow (“Brow”) the then sole officer of the Company, was granted 100,000 stock options under the Company’s 2011 Stock Option Plan at an exercise price of $0.50 and vesting immediately.
 
On July 11, 2011, Jonathan Pina, CFO was granted stock options under the Plan, consisting of options to purchase up to an aggregate of 350,000 shares of the Company’s common stock with 116,666 stock options vesting on July 11, 2012, 116,667 stock options vesting July 11, 2013 and 116,667 stock options vesting July 11, 2014. The options will expire, July 11, 2022, July 11, 2023 and July 11, 2024 respectively.

A summary of the Company’s common-stock options as of July 31, 2012 is presented below:
 
   
Shares
   
Weighted Average Exercise Price
 
 Balance at beginning of period
   
450,000
   
0.50
 
 Granted
   
0
     
0
 
 Balance at end of period
   
450,000
   
$
0.50
 
 Exercisable at July 31, 2012
   
216,666
   
$
0.50
 
 
Total unrecognized compensation cost related to the non-vested common stock options was $186,815 as of July 31, 2012, which is expected to be recognized over a weighted-average period of 2.0 years.  At July 31, 2012 the aggregate intrinsic value for common stock options was $688,500 and the weighted average remaining contract life was 10 years.

On October 11, 2011, the Company entered into an executive employment agreement (the “Johnson Employment Agreement”) with Jeff Johnson, a director and Chairman of the board of directors (the “Board”) of the Company. Pursuant to the Johnson Employment Agreement, Johnson was appointed to the position of CEO of the Company. The term of the Johnson Employment Agreement is for a two-year period beginning on October 1, 2011 (the “Effective Date”) and ending on the second anniversary of the Effective Date. Under the terms of the Johnson Employment Agreement, Johnson shall be paid a salary of not less than $200,000, annually. Johnson and the Company agreed to an incentive stock compensation arrangement that is anticipated to be linked to the success of the Company’s business and increases shareholder value. Under the terms of the equity compensation, Johnson will be issued shares of common stock of the Company (each, a “Restricted Share”), upon satisfaction of the following performance based conditions:
 
 
(a)
Restricted Share Issuance 1: 1,514,500 Restricted Shares are payable and issued on the following schedule so long as Mr. Johnson is employed or the Johnson Employment Agreement is still effective: 1/3 on March 1, 2012, 1/3 on June 1, 2012, 1/3 on September 1, 2012;
 
 
(b)
Restricted Share Issuance 2: 1,514,500 Restricted Shares are payable and issued after satisfaction of the following conditions:
 
 
(1)
Daily trading volume of the Company’s common stock exceeds 300,000 for 20 of the last 30 days prior to issuance; and
 
 
(2)
EBITDA (as defined in the Johnson Employment Agreement ) of the Company exceeds $4,000,000 during any four consecutive quarter periods during the term of the Johnson Employment Agreement ;
 

 
(c)
Restricted Share Issuance 3: 3,029,000 Restricted Shares are payable and issued after satisfaction of the following conditions:
 
 
(1)
Daily trading volume of the Company’s common stock exceeds 450,000  for 20 of the last 30 days prior to issuance; and
 
 
(2)
EBITDA of the Company exceeds $6,000,000 during any four consecutive quarter periods during the term of the Johnson Employment Agreement ;
 
 
(d)
Restricted Share Issuance 4: 3,029,000 Restricted Shares are payable and issued after the Company enters into a single Transaction (as defined in the Johnson Employment Agreement) which has a Transaction Value (as defined in the Johnson Employment Agreement) equal to or in excess of $100,000,000.
 
On December 21, 2011, The Company entered into an amending agreement (the “Pina Amending Agreement”) with Pina to amend the executive employment agreement (the “Pina Employment Agreement”) entered into by the Company and Pina on July 11, 2011 (the “ Pina Effective Date”). Pursuant to the Pina Employment Agreement, Pina would receive 500,000 shares of common stock of the Company (the “Pina Bonus Shares”) on the Effective Date, 500,000 Pina Bonus Shares on the 12 month anniversary of the Pina Effective Date, and 500,000 Pina Bonus Shares on the 24 month anniversary of the Pina Effective Date.  The Pina Amending Agreement modifies the vesting of the Pina Bonus Shares, whereby Pina will receive 1,000,000 Pina Bonus Shares on the 12 month anniversary of the Pina Effective Date and 500,000 Pina Bonus Shares on the 24 month anniversary of the Pina Effective Date.  Pina and the Company have rescinded and cancelled the original issuance of the 500,000 Pina Bonus Shares issued on the Pina Effective Date.  On December 21, 2011, the market price of the Company’s stock was $2.05 per common share resulting in additional compensation expense to be recognized on a prospective basis of $80,000 through the vesting date of July 31, 2012.  As of July 31, 2012, all of this amount had been recognized.
 
On February 29, 2012, the Company and Johnson entered into an amendment to the Johnson Employment Agreement whereby the issue and payable dates for Restricted Shares Issuance 1 (1,514,500 restricted shares) were amended to 1/3 on March 1, 2013, 1/3 on June 1, 2013, 1/3 on September 1, 2013.

On March 8, 2012, Thomas Richards, a director, received a grant of 150,000 shares of common stock of the Company that vests on March 13, 2013.

On March 8, 2012, Morris Smith, a director, received a grant of 150,000 shares of common stock of the Company that vests on March 13, 2013.

On April 19, 2012, Renee Traghella, an employee, received a grant of 100,000 shares that vest according to the following schedule; 33,333 shares on May 1, 2013, 33,333 shares on May 1, 2014, and 33,334 shares on May 1, 2015.

On July 16, 2012, Elmer Reed, a director, received a grant of 150,000 shares of common stock of the Company that vests on July 16, 2013.
 
On July 16, 2012, Jayme Wollison, an employee, received a grant of 750,000 shares that vest according to the following schedule; 250,000 shares on April 12, 2013, 250,000 shares on April 12, 2014, and 250,000 shares on April 12, 2015.

A summary of the Company’s non-vested stock awards as of July 31, 2012 is presented below:
 
  
 
Shares
   
Grant Date Fair Value
 
 Non-vested at beginning of period
   
10,987,000
   
$1.90
 
 Granted
   
900,000
     
1.68
 
 Vested
   
1,000,000
     
1.97
 
 Forfeited
   
-
     
-
 
 Non-vested at end of period
   
10,887,000
   
$
1.68
 
 
Total unrecognized compensation cost related to the above non-vested, restricted shares amounted to $2,991,258 as of July 31, 2012, which is expected to be recognized over a weighted-average period of 2.5 years. Related shares are not issued until vested.
 
  
NOTE 7—INCOME TAXES

The effective income tax rates for the three months ended July 31, 2012 and 2011, was nil. Total income tax expense for the three months ended July 31, 2012 and 2011, differed from amounts computed by applying the U.S. federal statutory tax rates to pre-tax income due primarily to changes in the valuation allowance recorded against deferred tax assets.
 
NOTE 8—SHAREHOLDERS’ EQUITY
 
On May 15, 2012, the Company closed a private placement of units to an Accredited Investor. Under the terms of the private placement, the Company issued 500,000 units at a price of $1.50 per unit, for aggregate cash proceeds of $750,000. Each unit consists of one share of common stock of the Company and one half common share purchase warrant, each full warrant exercisable to purchase one share of common stock of the Company at $2.75 for a period of three years. The proceeds were partially used to pay the final payment of the Edsel Promissory Note, the June Extension Price and general corporate purposes.
 
A summary of the Company’s outstanding warrants as of July 31, 2012 is presented below:
 
   
Shares
   
Weighted Average Exercise Price
 
 Balance at beginning of period
   
0
   
-
 
 Granted
   
250,000
     
2.75
 
 Balance at end of period
   
250,000
   
$
2.75
 
 Exercisable at July 31, 2012
   
250,000
   
$
2.75
 

On July 31, 2012, the Company issued 1,000,000 shares of common stock to Jonathan Pina in accordance with the terms of the Pina Amending Agreement dated December 21, 2011.  The shares vested on July 11, 2012.
  
NOTE 9—RELATED PARTY TRANSACTIONS
 
As of July 31, 2012, there is a balance due to a stockholder of the Company in the amount of $24,521.  This amount is unsecured, non-interest bearing, and has no specific terms of repayment
 
During the quarter ended July 31, 2011, Pimuro Capital Partners, LLC (“Pimuro”), a consultant who advised HPO with regards to its acquisition of JHE and the Purchase Agreement, charged fees and expenses in the amount of $240,000 relating to such consulting arrangement between HPO and Pimuro. Pimuro was controlled by G. Jonathan Pina (“Pina”), who was appointed as our Chief Financial Officer on July 11, 2011.
 
On June 16, 2011, the Company closed an acquisition under the terms of a Membership Interest Purchase Agreement, effective as of June 1, 2011 (the “Purchase Agreement”), among HPO, and JHE, pursuant to which the Company acquired all of the membership interests in JHE from HPO (the “Acquisition”). HPO is an entity controlled by S. Jeffrey Johnson (“Johnson”), who was appointed as a director of the Company on June 16, 2011 and Chairman of the Board on July 6, 2011.

On June 12, 2012, the Company paid HPO $25,000 for its 10% share of the sale of the Encana Properties.

NOTE 10—LITIGATION

Landers

On June 16, 2011, Circle Star acquired all of the outstanding equity interest in JHE. JHE was party to a litigation related to a mineral interest in the well known as Landers #1 (“Landers #1”) that was initiated in November 2008 in the District Court 82nd Judicial District, Robertson County, Texas. The litigation involved a multi-party trespass to try title suit to determine the ownership of Landers #1. Ross L. Martella III originally sought a temporary restraining order, but the lawsuit evolved into a trespass to try title action under Chapter 22 of the Texas Property Code. A Final Judgment was rendered in the suit in November, 2010 and it became final and non-appealable in December, 2010. Subsequently, two additional litigation matters involving Landers #1 were initiated. As of June 10, 2011, one of the suits was dismissed and Orbis has agreed to indemnify JHE in connection with the remaining litigation related to Landers #1.
 

The parties consider the lawsuits to be a nuisance and Circle Star does not believe the Landers #1 litigation to be material due to Orbis’ agreement to indemnify, hold harmless and defend at its sole cost and expenses, Circle Star and its respective successors and assigns from any and all claims and/or costs associated with these lawsuits or any other claim which might be made against the interests that are subject to such litigation.

The property that is subject to the litigation was assigned to Orbis on June 12, 2012 pursuant to the Note Payment Agreement.

Cottonwood

On or about June 18, 2012, the Company’s registered agent was served with a complaint (Civil Action No. 12-CV-327-CVE-PJC) filed in the United States District Court for the Northern District of Oklahoma by Cottonwood Natural Resources, Ltd. (“Cottonwood”). Cottonwood alleges breach of contract and fraud in connection with a Purchase and Sale Agreement dated April 19, 2012 between the company and Cottonwood (the “Cottonwood Purchase Agreement”) related to the purchase of certain oil and gas interests in approximately 14,640 acres in Finney County, Kansas (the “Finney Property”). Cottonwood filed the complaint after the Company terminated the Cottonwood Purchase Agreement after the Company determined that Cottonwood had options to title to less than 12,908.46 net acres and Cottonwood failed to disclose all material facts related to the Finney Property. Cottonwood is seeking damages of at least $4,324,180. Management believes that the allegations by Cottonwood are without merit and the Company intends to vigorously defend against the claims. The Company is evaluating potential counterclaims against Cottonwood.
 
Greene Litigation
 
On June 19, 2012, the Company’s filed a petition with the District Court of Clark County, Kansas, Sixteenth Judicial District (Case No. 2012-CV-12) against Green Brothers Land Company, LLC, Greene Ranch Enterprises, Inc., David M. Greene, Jr., Marcia Greene, Thomas E. Greene, Janice C. Greene, Joseph B. Greene and Billie Greene (collectively the “Defendants”), requesting the return of a deposit pursuant to the termination of a certain Land Real Estate Sales Contract (the “Greene Agreement”) entered into between Circle Star and the Defendants on March 6, 2012, pursuant to which Circle Star would have acquired from the Defendants certain interests in 6,518 acres of land in Kansas. Pursuant to the Greene Agreement, Circle Star delivered a $50,000 deposit that was refundable due a default by the sellers. Circle Star terminated the Green Agreement as a result of defects in title which the Defendants did not cure within the time period set forth in the Greene Agreement. Prior to the litigation, Circle Star pursued an out of court settlement but was unsuccessful. Circle Star intends to vigorously pursue the recovery of the deposit in an efficient and expeditious manner.

NOTE 11—SUBSEQUENT EVENTS

Subsequent to the period covered by these financial statements, the Company entered into a Debt Conversion Agreement (the “Debt Conversion Agreement”) with holder of the March 10% Note and G. Jonathan Pina. The March 10% Note was convertible at $1.50 per share of common stock of the Company. The Company agreed to reduce the conversion price to $0.4677 per share as an incentive to convert the full principal and accrued interest under the March 10% Note into shares of common stock of the Company. The Company agreed to issue to the holder of the March 10% Note, 1,100,000 shares of common stock of the Company which shall constitute full, fair and adequate consideration for the relinquishment of the March 10% Note, the unpaid interest under the March 10% Note of $14,516.13, and the Addendum.  The Company recognized an expense of $391,000 as a result of the inducement of the holder to relinquishment the debt early.  The Company also recognized, as interest expense, the write-off of $101,685 of unamortized discount.  

 
Item 2.                Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As used in this quarterly report on Form 10-Q, and unless otherwise indicated, the terms “we,” “us,” “our,” “Circle Star” and the “Company” refer to Circle Star Energy Corp. All dollar amounts in this quarterly report on Form 10-Q are expressed in U.S. dollars unless otherwise indicated.
 
Forward-Looking Statements
 
Certain statements in this quarterly report on Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern our anticipated results and developments in our operations in future periods, planned exploration and development of our properties, plans related to our business and matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. We use words like “expects,” “believes,” “intends,” “anticipates,” “plans,” “targets,” “projects” or “estimates” in this quarterly report on Form 10-Q. When used, these words and other, similar words and phrases or statements that an event, action or result “will,” “may,” “could,” or “should” result, occur, be taken or be achieved, identify “forward-looking” statements. Such forward-looking statements are subject to certain risks and uncertainties, both known and unknown, and assumptions, including, without limitation, risks related to:
 
● risks related to continuation or disposal of our on-line customer support business;
● risks related to the competition from large number of established and well-financed entities that are actively involved in the oil and gas development business;
● risks related to drilling, completion and facilities costs;
● risks related to abandonment and reclamation costs;
● risks related to the performance and characteristics of our oil and gas properties;
● risks related to expected royalty rates, operating and general administrative costs, costs of services and other costs and expenses;
● risks related to our oil and gas production levels;
● risks related to fluctuations in the price of oil and gas, interest and exchange rates;
● risks related to the oil and gas industry, such as risks in developing and producing crude oil and natural gas and market demand;
● risks related to actions taken by governmental authorities, including increases in taxes and changes in government regulations and incentive programs;
● risks related to geological, technical, drilling and processing problems;
● risks and uncertainties involving geology of oil and gas deposits;
● risks related to our ability to locate satisfactory properties for acquisition or participation;
● risks related to shut-ins of connected wells resulting from extreme weather conditions;
● risks related to hazards such as fire, explosion, blowouts, cratering and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury;
● risks related to encountering unexpected formations or pressures, premature decline of reservoirs and the invasion of water into producing formations;
● risks related to the possibility that government policies or laws, including laws and regulations related to the environment, may change or governmental approvals may be delayed or withheld;
● risks related to competition for and/or inability to retain drilling rigs and other services;
● risks related to competition for, among other things, capital, acquisition of reserves, undeveloped land and skilled personnel;
● risks related to our history of operating losses, our limited financial resources and our needs for additional financing;
● risks related to the integration of our new management and implementation of our expanded business strategy in the oil and gas development business;
● other risks related to the thinly traded market for our securities; and
● risks related to holding non-operated interests in properties operated by third-party operators, including our lack of control on the schedule of development, budgeting and production decisions and our reliance on third-party operators.
 
The preceding outlines some of the risks and uncertainties that may affect our forward-looking statements. For a full description of such risks and uncertainties, see the heading “Risk Factors” in our annual report on Form 10-K for our fiscal year ended April 30, 2012, filed with the SEC on August 13, 2012.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected.
 
 
Our management has included projections and estimates in this quarterly report on Form 10-Q, which are based primarily on management's experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law.
 
We qualify all the forward-looking statements contained in this quarterly report on Form 10-Q by the foregoing cautionary statements.

Business Overview

We are an early stage company that was incorporated on May 21, 2007. Up until June 2011, we had been a limited operations entity, primarily focused on organizational matters and developing an online help desk customer support system to assist service companies to improve their customer relationship management. In fiscal 2011, we began to explore opportunities to diversify our business.

In June 2011, the Company changed its focus and undertook an acquisition of interests in oil and gas producing properties.  As a result of the acquisition, the Company was no longer in the development stage.  On June 2, 2011, David Brow (“Brow”) replaced Felipe Pati, as the sole officer of the Company and was appointed as the President, Treasurer and Secretary. On June 6, 2011, Brow was elected as the sole director of the Company at the annual and special meeting of the shareholders. At the annual and special meeting, the shareholders voted in favor of changing the name of the Company to Circle Star Energy Corp. and amending and restating the bylaws of the Company.
 
On June 16, 2011 the Company filed a Certificate of Amendment to its articles of incorporation with the Secretary of State of Nevada changing the name of the Company from Digital Valleys Corp. to Circle Star Energy Corp., effective July 1, 2011. Effective July 1, the Company’s ticker symbol on the OTCBB was changed from “DTLV” to “CRCL.”

JHE Acquisition

On June 16, 2011, the Company closed an acquisition under the terms of a Membership Interest Purchase Agreement, effective as of June 1, 2011 (the “JHE Purchase Agreement”), among High Plains Oil, LLC, Nevada limited liability company (“High Plains”), and JHE Holdings, LLC (“JHE”), pursuant to which the Company acquired all of the membership interests in JHE, a Texas limited liability company from High Plains (the “JHE Acquisition”). High Plains is an entity controlled by S. Jeffrey Johnson (“Johnson”), who was appointed as a director of the Company on June 16, 2011 and Chairman of the Board on July 6, 2011. Johnson was at arms' length to the Company prior to his appointment as a director.
 
 In consideration for the acquisition of JHE, the Company agreed to:
 
 
(a)
issue 1,000,000 shares of its common stock to High Plains (the “High Plains Consideration Shares”);
     
 
(b)
pay the $1,000,000 installment payment due June 1, 2011, under a promissory note in the aggregate amount of $7,500,000 (the “Edsel Promissory Note”) issued by High Plains to James H. Edsel, Nancy Edsel, and James H. Edsel, Jr. (collectively, the “Edsels”) in connection with the acquisition of JHE by High Plains from the Edsels that closed on March 30, 2011 and was effective as of January 2011 (the “High Plans Acquisition”);
     
 
(c)
execute and deliver a Novation and Assignment Agreement (the “Novation”) pursuant to which the Company will, effective June 1, 2011 (the “JHE Effective Date”): (i) assume all of the obligations and liabilities of High Plains under the Edsel Promissory Note, and (ii) in consideration for, among other things, consenting to the Acquisition and the forbearance by the Edsels of the first installment payment of $1,000,000 due under the Edsel Promissory Note on June 1, 2011 until June 10, 2011 or the closing date, issue an aggregate of 600,000 share of its common stock to the Edsels (the “Edsel Shares”);
     
 
(d)
undertake to cause JHE to amend its limited liability company agreement to, among other items, provide for the retention by High Plains of a 10% contractual profits interest in JHE (the “Retained Profits Interest”) in the form of a right to 10% of the net revenues, payments, royalties and other distributions received by JHE from the JHE Oil and Gas Properties, as defined below;
 
 
 
(e)
execute and deliver an Amended and Restated Pledge and Security Agreement (the “Amended Pledge Agreement”) with the Edsels pursuant to which the Company will, effective as of the JHE Effective Date: (i) assume all of High Plains’ obligations and liabilities under the initial Pledge and Security Agreement entered into by and between High Plains and the Edsels in connection with the issuance of the Edsel Promissory Note as partial consideration in respect to the High Plains Acquisition and (ii) undertake to cause JHE to assign and transfer a 10% interest in the JHE Oil and Gas Properties to High Plains in exchange for the Retained Profits Interest upon full and complete payment and satisfaction of all obligations due under the Edsel Promissory Note and Amended Pledge Agreement;
     
 
(f)
undertake to cause JHE to make a distribution to High Plains, within five (5) business days of June 30, 2011, of cash remitted to JHE through and including June 30, 2011; and
     
 
(g)
pay Pimuro, a consultant who advised High Plains with regards to its acquisition of JHE and the Purchase Agreement, the accrued fees and expenses in the amount of $240,000 relating to such consulting arrangement between High Plains and Pimuro under the terms of an Installment Agreement (the “Installment Agreement”), payable of $100,000 on the closing date and thereafter in monthly installments of $50,000, $50,000 and $40,000 commencing when JHE receives $75,000 in monthly aggregate distribution from JHE Oil and Gas Properties (defined below). Pimuro is controlled by G. Jonathan Pina (“Pina”), who was appointed as our Chief Financial Officer on July 11, 2011. Pina was at arms'-length to the Company prior to his appointment.

The acquisition of JHE by the Company closed on June 16, 2011 and was subject to customary closing conditions, including, but not limited to, the receipt of all necessary consents and approvals, the Company and High Plains having complied with all covenants under the JHE Purchase Agreement, and there being no pending litigation, judgment, order or decree that would prohibit the acquisition of JHE by the Company.
 
The Company owns royalty, non-operated working interests and mineral interests in certain oil and gas properties in Texas. The Oil and Gas Properties include producing wells in the TXL Extension, Crane County, TX (1.00% working interest and 0.75% revenue interest in two wells); Bullard Prospect, Scurry County, TX (1.25% – 2.50% working interest and 0.94% – 2.08% revenue interest in nine wells); Nursery Prospect, Victoria County, TX (2.75% working interest and 2.00% – 2.10% revenue interest in two wells); Pearsall Prospect, Dimmit and Zavala Counties, TX (0.24% - 5.00% working interest and 0.17% – 3.75% revenue interest in 25 wells); Madison Woodbine, Grimes and Madison Counties, TX (0.00% - 2.90% working interest and 0.0190% – 2.90% revenue interest in seven wells); Giddings Field, Fayette and Lee Counties, TX (0.00% - 3.00% working interest and 0.76% – 2.28% revenue interest in six wells); and the Glass Prospect in Glasscock County, TX (3.17% working interest in four wells).
 
In addition, the JHE Oil and Gas Properties include mineral interest and non-operated working interest rights in various oil and gas properties. See “Oil and Gas Properties” below.
 
County and Well Information
 
Texas County
 
Producing Wells*
   
Net Well Count
 
Crane
   
2.00
     
0.02
 
Dimmit
   
11.00
     
0.08
 
Fayette
   
6.00
     
0.15
 
Glasscock
   
 4.00
     
 0.13
 
Grimes
   
3.00
     
0.02
 
Madison
   
4.00
     
0.11
 
Scurry
   
9.00
     
0.19
 
Victoria
   
3.00
     
0.07
 
Zavala
   
14.00
     
0.05
 
Total*
   
56.00
     
0.82
 
                 
*Does not include interests in saltwater disposal wells.
 
 
Redfish Properties Acquisition

On December 6, 2011 the Company entered into a letter agreement (the “Apache Letter Agreement”) with Ingebritson Energy LLC, GTP Energy Partners, LLC, Wind Rush Energy, LLC, Gabriel Barerra and Charles T. Brackett (collectively, the “Apache Sellers”) with a stated execution date of December 1, 2011 (the “Apache Execution Date”). The Letter Agreement is effective November 1, 2011. Pursuant to the Apache Letter Agreement, the Company purchased from the Apache Sellers certain interests in oil and gas properties within the Redfish 56 Prospect in Glasscock County, Texas. In return, the Apache Sellers received 203,571 shares of common stock of the Company and the Company assumed the responsibility for payment of certain operating expenses and capital expenditures.
 

The foregoing description of the Apache Letter Agreement is qualified in its entirety by reference to the copy of the Apache Letter Agreement which appears as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on December 7, 2011.
 
Colonial Divestiture
 
The Company entered into a Membership Interest Purchase Agreement with Colonial Royalties, LLC (“Colonial”) on December 30, 2011 (the “Colonial Purchase Agreement”), whereby Colonial would purchase 100% of the Company’s interests in JHE and the Retained Profits Interest, held by High Plains (the “Colonial Transaction”), in consideration for $9,350,000. The first payment, $100,000, was received on December 30, 2011.

On February 6, 2012, the Company sent a Notice of Default and Termination (the “Colonial Notice”) to Colonial stating that Colonial was in breach of its payment obligations under the Colonial Purchase Agreement and that the Company was exercising its right to terminate the Colonial Purchase Agreement.  Under the terms of the Colonial Purchase Agreement, the delivery of the Colonial Notice by the Company to Colonial was not deemed to be an election of remedies and the Company retains the right to pursue all legal or equitable remedies against Colonial for breach of the Colonial Purchase Agreement.
 
Wevco Acquisition
 
The Company entered into a leasehold purchase agreement (the “Wevco Purchase Agreement”) with Wevco Production, Inc. (“Wevco”), whereby Wevco will sell to the Company all of Wevco’s rights, title, and working interest in and to certain oil and gas leases, containing up to 64,575 net acres, more or less, situated in Gove and Trego Counties, Kansas, described more fully in Exhibit A to the Wevco Purchase Agreement. Under the Wevco Purchase Agreement, the Company will pay to Wevco $5,000,000 (the “Wevco Purchase Price”) on or before closing and issue 1,000,000 shares of common stock of the Company to Wevco. Contemporaneously with the signing of the Wevco Purchase Agreement, the Company paid Wevco, $100,000 and the Company paid Wevco an additional $200,000 on or before March 13, 2012 (as amended to March 15, 2012)(collectively the “Wevco Signing Bonus”). The Wevco Signing Bonus is non-refundable and was considered an advance on the Wevco Purchase Price. The Company issued the Wevco Common Shares on March 15, 2012.
 
The foregoing description of the Wevco Purchase Agreement is qualified in its entirety by reference to the copy of the Wevco Purchase Agreement which appears as Exhibit 10.19 to the Company quarterly report on Form 10-Q filed with the SEC on March 13, 2012.
 
On April 24, 2012, the Company entered into an amendment to the Wevco Purchase Agreement extending the closing date from April 30, 2012 until May 31, 2012 (the “First Amendment Agreement”). The Company paid Wevco a non-refundable $100,000 extension fee (the “First Extension Price”) which is considered an advance on the Wevco Purchase Price.

The foregoing description of the First Amendment Agreement is qualified in its entirety by reference to the copy of the Amendment Agreement attached as Exhibit 10.1 to the Company’s Current Report.

On June 13, 2012, the Company entered into the Second Amendment to Leasehold Purchase Agreement (the “Second Wevco Amendment”) extending the closing date from May 31, 2012 until September 28, 2012 (the “Wevco Closing Date”). Pursuant to the Second Amendment, the Company paid Wevco a non-refundable $100,000 extension fee (the “June Extension Price”), and issued 600,000 shares of common stock of the Company (the “Wevco Extension Shares”) to Wevco. The Company paid the $100,000 extension fee to Wevco on June 13, 2012.  If the Wevco Purchase Price is paid on or before the Wevco Closing Date then the June Extension Price, the Wevco Signing Bonus and the First Extension Price shall be credited towards the Wevco Purchase Price. To date, $500,000 has been credited towards the Wevco Purchase Price.
 
The foregoing description of the Second Amendment is qualified in its entirety by reference to the copy of the Second WEVCO Amendment attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 19, 2012 with the SEC.
 
As part of our commitment to finalize the WevCo Purchase Agreement, we are evaluating various alternatives for securing the necessary capital, which may take the form of a convertible debenture or unit (common stock with warrants) offering or the sale of assets.  Based upon the Second WevCo Amendment, we must pay $4,500,000 no later than September 28, 2012.  We are pursuing all available alternatives to ensure a final close of the transaction but cannot be sure our efforts will result in securing the necessary capital.

As of July 31, 2012, we had $3,611,638 capitalized in oil and gas deposits subject to forfeiture on our consolidated balance sheet related to the Wevco acquisition.  If we are unsuccessful in completing the Wevco acquisition, we will charge these costs to exploration expense.
 
  
BlueRidge Acquisition

On July 9, 2012, the Company entered into the Amendment to the Purchase and Sale Agreement (the “BlueRidge Amendment”) with BlueRidge Petroleum Corporation, Walter F. Brown, Kirk T. and/or Rebecca L. Rundle as JTRS, First Equity Resources, LLC, G. Jeff Mowry and Marsha S. Mowry Trust Dated July 9, 2007, Harold C. Porter Family Trust, Bobbie D. Porter Living Trust dated December 13, 2004, Porter Oil Properties, LLC, OA Operating, Inc., and Swann Resources, Inc. (collectively the “BlueRidge Sellers”). The Amendment amends the Purchase and Sale Agreement entered into by the same parties on April 17, 2012 (the “BlueRidge Purchase Agreement”).

Pursuant to the BlueRidge Purchase Agreement, the Company agreed to purchase certain interests in oil and gas leases in Rawlins, Sheridan and Graham Counties, Kansas, as more fully described in Exhibit A to the BlueRidge Purchase Agreement in return for $5,308,375 and 560,000 shares of common stock of the Company, with a closing date of July 1, 2012. Pursuant to the BlueRidge Purchase Agreement, the Company agreed to purchase interests in 17,168 acres in Rawlins County, 12,518 acres in Sheridan County (the “Sheridan Properties”) and 12,781 acres in Graham County.

The BlueRidge Purchase Agreement was amended (the “BlueRidge Amendment”) on July 2, 2012 by which the terms were modified by reducing the acreage of the leases in Graham County by 1,760 acres, and by granting the Company an option to purchase the properties in Rawlins and Graham Counties. The BlueRidge Amendment further modified the terms of the BlueRidge Purchase Agreement, whereby the $50,000 of earnest money previously paid was applied to the purchase price and the Company issued 2,611,000 Common Shares to the BlueRidge Sellers for the interests in Sheridan County.  The shares were issued on July 19, 2012 at a price of $0.70 per share.
 
Based upon the BlueRidge Amendment, the Company possesses an option to purchase the remaining acreage owned by BlueRidge on or before September 28, 2012.  The company will exercise its option only upon receiving sufficient funding.  We are pursuing all available funding alternatives including but not limited to a convertible debenture or unit (common stock with warrants) offering or a sale of assets; however, we cannot be sure our efforts will be successful in raising the necessary capital.

Pursuant to the BlueRidge Amendment, the Company has the option (the “BlueRidge Option”) to purchase interests in 80,871 acres in Kansas (including the properties in the Rawlins and Graham Counties noted above), by making a cash payment of $10,108,875 and by delivering the number of Common Shares equal to $1,000,000, based on the market price of the Common Shares on the date before closing of the BlueRidge Option, on or before September 28, 2012.
 
The foregoing description of the BlueRidge Purchase Agreement is qualified in its entirety by reference to the copy of the Blue Purchase Agreement attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 13, 2012 with the SEC.

The foregoing description of the BlueRidge Amendment is qualified in its entirety by reference to the copy of the BlueRidge Amendment attached as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 13, 2012 with the SEC.

Edsel Promissory Note

Pursuant to the Amended Pledge Agreement, the Company, effective as of the JHE Effective Date, pledged 100% of the membership interests in JHE to the Edsels, including all rights and assets relating to such membership interests, as security for the payment and satisfaction of the Company’s obligations under the Edsel Promissory Note.
 
Effective June 1, 2012, the Edsels and the Company entered into a Note Payment Agreement (the “Note Payment Agreement”, whereby, the Company paid the Edsels $1,250,000 and conveyed to Orbis Energy, Ltd. (“Orbis”) certain interests in properties held by JHE that were operated by Encana (the “Encana Properties”).  The payment of $1,250,000 and the conveyance of the Encana Properties resulted in the Edsel Promissory Note being fully paid, and the Company was released from any further obligations to the Edsels under the Edsel Promissory Note, the Amended Pledge Agreement and the Novation. See Note 7 to the unaudited financial statements for the fiscal quarter ended July 31, 2012 for further details.

Financings

On June 15, 2011, the Company closed a private placement of units. Under the terms of the private placement, the Company issued 4,800,000 units at a price of $0.25 per unit. Each unit consists of one share of common stock of the Company and one common share purchase warrant, which may be exercised to acquire one share of common stock of the Company at an exercise price of $0.50 through June 15, 2013.
 
On August 17, 2011, the Company closed a private placement of shares. Under the terms of the private placement, the Company issued 1,440,000 shares of common stock of the Company at a price of $0.25 per share to "Accredited Investors" (as defined in Rule 501(a) of the United States Securities Act of 1933, as amended (the “Securities Act”).
 

On September 14, 2011, the Company issued 6% convertible notes (the “6% Notes”) in the total amount of $1,500,000 (the “6% Note Issuance”). The 6% Notes are due and payable on September 14, 2014, with interest at the rate of 6% per annum accruing on the unpaid principal amount, compounded annually. The 6% Notes are convertible at the option of the holder into shares of common stock of the Company at a conversion price of $1.50 per share.  The 6% Notes are redeemable prior to maturity at the option of the Company and can be prepaid  in whole or in part at any time without a premium or penalty, upon 5 business days’ notice; prior to which the holder of the 6% Note may convert the principal and interest into shares of common stock of the Company.  The proceeds of the 6% Note Issuance went to pay the balance of the $1,500,000 installment due on September 1, 2011 for the Edsel Promissory Note (see Edsel Promissory Note above for more additional information).
 
On February 8, 2012, the Company issued 10% convertible notes (the “February 10% Notes”) in the aggregate principal amount of $2,750,000 (the “February 10% Note Issuance”), subject to the terms of the Inter-Creditor Agreement (as defined below).  The February 10% Notes accrue interest at the rate of 10% per annum on the unpaid principal balance and may be prepaid by the Company at any time without the prior written consent of the holders.  The February 10% Notes are due and payable on February 8, 2013 (the “10% Maturity Date”) or at the election of the applicable holder on the earlier of (i) the closing of a financing transaction by the Company for aggregate proceeds in excess of $5,000,000, which excess amount shall be applied to the principal balance of the applicable holder’s February 10% Note (based on the ratio of the principal amount of such holder’s February 10% Note relative to the aggregate principal amount of all the February 10% Notes); (ii) the sale or partial sale of JHE; (iii) the sale of all or substantially all of the assets of JHE; or (iv) an Event of Default (as defined in the February 10% Notes).  The 10% Notes are convertible at the option of the holders into shares of common stock of the Company at the 10% Maturity Date or upon the occurrence of one or more of the triggering events set forth in clauses (i), (ii), and (iii) above, at a conversion price of $1.50 per share. The proceeds of the 10% Note Issuance were used to make the December 2011 Edsel Payment, under the 10% Note and the balance of the proceeds of the 10% Note Issuance were used for other general corporate purposes. (See Edsel Promissory Note above for additional information)
 
On March 14, 2012, the Company issued 10% convertible notes (the “March 10% Note”) for cash in the aggregate principal amount of $500,000 (the “March 10% Note Issuance”), subject to the terms of the Addendum (as defined below).  The March 10% Notes accrue interest at the rate of 10% per annum on the unpaid principal balance and may be prepaid by the Company at any time without the prior written consent of the holders.  The March 10% Notes are due and payable on March 14, 2013 (the “March 10% Maturity Date”) or at the election of the holder on the earlier of (i) the closing of a financing transaction by the Company for aggregate proceeds in excess of $5,000,000, which excess amount shall be applied to the principal balance of the holder’s March 10% Note ; (ii) the sale or partial sale of JHE; (iii) the sale of all or substantially all of the assets of JHE; or (iv) an Event of Default (as defined in the March 10% Notes).  The March 10% Note is convertible at the option of the holder into shares of common stock of the Company at the March 10% Maturity Date or upon the occurrence of one or more of the triggering events set forth in clauses (i), (ii), and (iii) above, at a conversion price of $1.50 per share. The proceeds of the March 10% Note Issuance were used to pay the Wevco Signing Bonus.  The balance of the proceeds of the March 10% Note Issuance were used for other general corporate purposes.

Effective March 14, 2012, the Company entered into an Addendum to March 2012 Convertible Note Subscription Agreement (the “Addendum”) with the holder of the March 10% Notes. The Addendum provides for, among other items the Company to use its best efforts to (i) the grant to the holder of the March 10% Note of a subordinated security interest in JHE, upon termination of the currently existing pledge and security interest JHE and any creditor with a senior security interest or right to a security interest in JHE existing as of the date of the Addendum, (ii) grant a security interest in the Company’s interest in certain oil and gas properties within the Redfish 56 Prospect in Glasscock County, Texas, and (iii) upon issuance of the Pina Bonus Shares (as defined below), under the terms of the Pina Employment Agreement (as defined below), as may be amended from time to time, Pina will pledge the Pina Shares (as defined below) to secure payment of the March 10% Note.
 
The foregoing description of the Addendum is qualified in its entirety by reference to the copy of the Addendum which appears as Exhibit 10.21 to this quarterly report on Form 10-Q.

As of April 30, 2012, the Company issued 4,800,000 shares of common stock in connection with the exercise of 4,800,000 share purchase warrants at $0.50 per share. The Company received $2,400,000 in proceeds of which $1,200,000 was received in April 2012 and $1,200,000 in May 2012.  The Company recorded a receivable of $1,200,000 for those warrants exercised in April 2012 but for which funds had not been received as of the balance sheet date.  The warrants were issued on June 15, 2011 in a private placement by the Company of 4,800,000 units at a price of $0.25 per unit, each unit consisted of one share of common stock and one common stock purchase warrant, exercisable to acquire one share of common stock of the Company at an exercise price of $0.50 through June 15, 2013. The terms of the offering are described in more detail above and on the Company’s Current Report on Form 8-K filed with the SEC on June 21, 2011. 
 

On May 15, 2012, the Company closed a private placement of units to an "Accredited Investor" (as defined in Rule 501(a) of the Securities Act). Under the terms of the private placement, the Company issued 500,000 units at a price of $1.50 per unit. Each unit consists of one share of common stock of the Company and one half common share purchase warrant, each full warrant exercisable to purchase one share of common stock of the Company at $2.75 for a period of three years. $750,000 was raised by the Company in the private placement. The proceeds were partially used to pay the final payment of the Edsel Promissory Note, the June Extension Price and general corporate purposes.

Subsequent Events

Subsequent to the period covered by this report, the Company entered into a Debt Conversion Agreement (the “Debt Conversion Agreement”) with holder of the March 10% Note and G. Jonathan Pina. The March 10% Note was convertible at $1.50 per share of common stock of the Company. The Company agreed to reduce the conversion price to $0.4677 per share as an incentive to convert the full principal and accrued interest under the March 10% Note into shares of common stock of the Company. The Company agreed to issue to the holder of the March 10% Note, 1,100,000 shares of common stock of the Company which shall constitute full, fair and adequate consideration for the relinquishment of the March 10% Note, the unpaid interest under the March 10% Note of $14,516.13, and the Addendum.  

The foregoing description of the Debt Conversion Agreement is qualified in its entirety by reference to the copy of the Debt Conversion Agreement which appears as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on August 30, 2012.

Officer/Director Compensation and Appointments
 
During the fiscal quarter ended July 31, 2012, the Company had the following changes to its board of directors:

On July 16, 2012, pursuant to Article 3, Section 9 of the Bylaws of Company, the board of directors of the Company, appointed Elmer Reed, as a director of the Company to fill a vacancy.  Mr. Reed received a grant of 150,000 shares of common stock of the Company that vests on July 16, 2013.
 
Business Strategy
 
On-line Customer Support Business
 
The Company is currently evaluating its on-line customer support business in order to determine how best to move forward with its implementation or abandonment. We are in the process of determining whether to continue to develop our on-line customer support business, to sell the business (assuming a purchaser can be found) or to abandon the business. Given the competitive nature of the business and our change in overall business strategy, we may be forced to abandon the business.
  
Oil and Gas Development Business
 
In June 2011, we acquired JHE, which holds interests on properties operated by others, including royalty, non-operated working interests and mineral interests.
 
The Company’s business strategy is to continue to expand its reserve base and increase production and cash flow through the continued development of our assets and the acquisition of producing oil and natural gas properties.

 
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this quarterly report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.  See the heading “Forward-Looking Statements” above.
 
The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that the Company believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but the Company does not believe such differences will materially affect our financial position or results of operations. Critical accounting policies, the policies the Company believes are most important to the presentation of its financial statements and require the most difficult, subjective and complex judgments, are outlined below in “Critical Accounting Policies,” and have not changed significantly.

Plan of Operation

Oil and Gas Properties
 
Permian Basin:
 
The Permian Basin is an oil field located in West Texas and the adjoining area of southeastern New Mexico. The Permian Basin Oil Field covers an area approximately 250 miles wide and 300 miles long. Various zones and terms such as the Avalon Shale, Leonard Shale, Spraberry Formation, Yeso Oil Play, Bone Spring Formation & Wolfcamp Shale are all part of the Permian Basin.  
 
Bullard Prospect (Scurry County, TX) is a producing oil/gas field located in Scurry County, Texas which is located in the Permian Basin in West Texas. The Company owns a 1.25% - 2.50% working interest (0.9375% - 2.0833% net revenue interest) in nine oil/gas wells producing out of the Clear Fork and Glorietta formations at an approximate depth of 3,800 to 3,900 feet. Further, the operator may drill in 5-6 more locations in the Bullard Prospect in the next 12 months. As of January 3, 2011, the operator had identified approximately 6-10 undeveloped locations in the Bullard Prospect. The Company has interests in wells located in the Bullard Prospect operated by Unitex Oil & Gas. The Company holds interests in 2,962.7 gross acres, 762.7 of which is undeveloped, and 73.1 net acres, 69.1 of which is undeveloped.
 
TXL Extension (Crane County, TX) is a producing oil/gas field located in Crane County, Texas, which is located in the Permian Basin in West Texas. The Company has interests in wells located in the TXL Extension operated by CML Exploration, LLC. The Company owns a 1.00% working interest (0.75% net revenue interest) in two wells producing out of the Wolfcamp formation at an approximate depth of 8,000 to 9,000 feet. The Company holds interests in 80.00 gross acres and 0.80 net acres in the TXL Extension.
 
Eagle Ford Shale
 
The Eagle Ford Shale is located in South Texas.  The formation produces from various depths between 4,000 and 12,000 feet. The Eagle Ford Shale takes its name from the town of Eagle Ford Texas where the shale outcrops at the surface in clay form.
 
The Eagle Ford Shale is a geological formation directly beneath the Austin Chalk limestone and it is considered to be the “source rock”, or the original source of hydrocarbons that are contained in the Austin Chalk.
  
The Company has interests in wells in the Pearsall Prospect which is a producing oil field located around and between Crystal City and Carrizo Springs, Texas, located in south Texas  The wells in which the Company has an interest are located in Dimmit and Zavala counties.
 
Dimmit County, TX
 
Dimmit County is situated in South Texas where companies are targeting oil, condensate, and gas. Dimmit County produces from both the condensate rich and oil prone areas of the Eagle Ford.
 
 
Zavala County, TX
 
Zavala County is in South Texas and forms part of the Eagle Ford Shale Oil Play. The county lies within the Maverick Basin where oil & gas companies are targeting the Eagle Ford Shale and the Pearsall Shale Gas Play.  Drilling in the Eagle Ford targets depths of 4,000 ft to 6,000 feet in the central and southern portions of the county.

Pearsall Prospect
 
The Pearsall field was originally discovered in the 1930’s and is part of a major oil-producing trend that stretches from near the Texas/Mexico border to the Texas/Louisiana border. The Company’s Eagle Ford interests in the Pearsall Prospect are operated by Chesapeake Energy Corporation (“Chesapeake”). The Company owns interests in various non-producing overriding royalty interest in the Eagle Ford Shale, which is a deeper, productive formation located in the same geographic area below the Austin Chalk formation and is generally considered to be the “source rock” for much of the regional production. Chesapeake has permitted 13 Eagle Ford wells on the acreage in which the Company owns an average overriding royalty interest of 0.16% across 25,000 acres, and 7 wells have been, or are currently being drilled on the aforementioned asset. In addition, the Company owns a 1.00% overriding royalty interest in 3,200 acres operated by Chesapeake.  Chesapeake has permitted 13 Eagle Ford wells on the acreage in which the Company owns an average overriding royalty interest of 0.16% across 25,000 acres, and 7 wells have been, or are currently being drilled on the aforementioned asset.  In addition, the Company owns a 1.0% overriding royalty interest in 3,200 acres operated by Chesapeake.
 
Approximately 50% of the horizontal drill wells in the world have been drilled in the Austin Chalk.  The Austin Chalk is a prolific reservoir that has been developed with vertical and horizontal drilling techniques.   The Company’s Austin Chalk wells in the Pearsall Prospect are operated by CML Exploration, LLC. The Company owns a 0.24% - 5.00% working interest (0.17% - 3.75% net revenue interest) in 18 oil wells producing out of the Austin Chalk and Buda formations at an approximate depth of 6,000 to 7,100 feet. The Company holds interests in gross acres of 36,687.53 and net acres of 90.2365 in the Pearsall Prospect. Oil and natural gas production from this area is 40 degrees-gravity oil and 1,200 - 1,600 BTU natural gas. The Company also owns interests in various non-producing overriding royalty interests in the Eagle Ford Shale, which is a deeper, productive formation located in the same geographic area (see Eagle Ford Pearsall Prospect).
  
Nursery Prospect
 
Nursery Prospect (Victoria County, TX) is a producing gas field located in Victoria County, Texas. The Nursery Prospect is situated in an area that has exhibited excellent gas and very good associated condensate production. The Company owns a 2.75% working interest (2.00% - 2.10% net revenue interest) in two gas wells producing out of the Frio and Miocene formations at an approximate depth of 4,400 to 6,000 feet. The Company’s wells located in the Nursery Prospect are operated by CML Exploration, LLC. The Company holds interests in 8,000 gross acres and 220 net acres in the Nursery Prospect.
 
Madisonville Woodbine Prospect
 
Madisonville Woodbine Prospect (Grimes and Madison Counties, TX) is a producing oil field located south of Madisonville, Texas. The Company owns a 0.00% - 2.90% working interest (0.019% - 2.90% net revenue interest) in seven oil wells producing out of the Woodbine formation at an approximate depth of 7,800 to 9,000 feet. The Company acquired these interests via an acquisition which enjoins mineral and working interests in the Madisonville Woodbine Prospect through perpetual mineral deeds. The Company's wells located in the Madisonville Woodbine Prospect are currently operated by CML Exploration and Woodbine Acquisition Corp.  The Company holds interests in 3,466.23 gross acres and 43.97 net acres in the Madisonville Woodbine Prospect. The Company owns approximately a 5.00% net revenue interest in the Oltmann Unit #1. Oil and natural gas production from this area is 40 degrees - gravity oil and 1,200 - 1,400 BTU natural gas. The Company also owns an interest in WAC's Camp #1 well which is undergoing completion and in several undeveloped horizontal Woodbine locations.

Giddings Field
 
Giddings Field (Fayette and Lee Counties, TX) is a producing oil field across several counties in South Central Texas. The Giddings field was rapidly exploited in the 1970’s and eventually expanded to include a long, narrow trend which extends from the Texas-Mexico border up through northeast Texas into Louisiana. The primary producing reservoir is the Austin Chalk which produced over 1 Billion BOE through vertical development and then underwent massive horizontal development beginning in the early 1990’s, with secondary production from the Taylor and deeper Buda and Georgetown formations. The Company owns a 0.00% - 3.00% working interest (0.76% - 2.28% net revenue interest) in six oil wells producing out of the Austin Chalk formation at an approximate depth of 7,800 to 9,000 feet. The Company’s wells in Giddings field are operated by Leexus Oil LLC. The Company holds interests in 1,766.13 gross acres and 54.25 net acres in Giddings field.
 
 
Glass Prospect

Glass Prospect (Glasscock County, TX) is project area encompasses 1,280 gross acres and 640 net mineral acres located in the oil-rich Permian basin region and is operated by Apache Corporation (“Apache”). The operator has already drilled 4 Spraberry wells and is evaluating the potential for additional development. Covering 2,500 square miles and six Texas counties, the Spraberry Formation is one of the largest in the nation for total proved reserves. The formation produces oil from a single enormous sedimentary unit located between the depths of 5,100 and 8,300 feet. In 2007, the U.S. Department of Energy ranked the Spraberry Trend third in the United States by total proved reserves and seventh in total production. Estimated reserves for the entire Spraberry-Dean unit exceed 10 billion barrels. To-date the formation has produced an estimated one billion barrels of oil. While development on the Glass Prospect leases has focused on the Spraberry formation to-date, the project is prospective for both Fusselmen and Cline Shale opportunities.  Apache is actively drilling horizontal Cline shale wells in the same field as the Glass prospect, and a recent Cline well drilled by Apache produced 8,800 Bbl of oil equivalent in the first 30 days on-line.

Commodity Price Environment
 
Generally, the demand and the price of natural gas increases during the colder winter months and decreases during the warmer summer months.  Pipelines, utilities, local distribution companies and industrial users utilize natural gas storage facilities and purchase some of their anticipated winter requirements during the summer, which can lessen seasonal demand fluctuations. Crude oil and the demand for heating oil are also impacted by seasonal factors, with generally higher prices in the winter. Seasonal anomalies, such as mild winters, sometimes lessen these fluctuations.
 
Our results of operations and financial condition are significantly affected by oil and natural gas commodity prices, which can fluctuate dramatically. Commodity prices are beyond our control and are difficult to predict. We do not currently hedge any of our production.
 
The prices received for domestic production of oil and natural gas have been volatile and have resulted in increased demand for the equipment and services that we need to drill, complete and operate wells. Shortages have developed, and we have seen an escalation in drilling rig rates, field service costs, material prices and all costs associated with drilling, completing and operating wells. If oil and natural gas prices remain high relative to historical levels, we anticipate that the recent trends toward increasing costs and equipment shortages will continue.

Results of Operations
 
Three Months Ended July 31, 2012, Compared to Three Months Ended July 31, 2011

The following table sets forth summary information regarding oil gas production, average sales prices and average production costs for the quarters ended July 31,2012 and 2011. We determined the Boe using the ratio of six Mcf of natural gas to one Boe. The ratios of six Mcf of natural gas to one Boe does not assume price equivalency and, given price differentials, the price for a Boe for natural gas may differ significantly from the price for a barrel of oil.
 
   
Quarter Ended July 31, 2012
   
Quarter Ended July 31, 2011
 
 Revenues
           
 Oil
  $ 147,401     $ 143,215  
 Gas
    3,203       73,078  
 Total oil and gas sales
  $ 150,604     $ 216,293  
 Production
               
 Oil (Bbls)
    1,578       1,533  
 Gas (Mcf)
    1,475       18,251  
 Total (Boe)
    1,824       4,575  
 Total (Boe/d)
    20       50  
 Average prices
               
 Oil ( perBbls)
  $ 93.41     $ 93.42  
 Gas (per Mcf)
    2.17       4.00  
 Total (per Boe)
  $ 82.56     $ 47.28  
 Production Costs per BOE
  $ 73.13     $ 765.68  
 
 
Oil, Natural Gas Liquids (“NGL”), and gas sales. Oil, NGL, and gas sales decreased $65,689, or 30%, for the three months ended July 31, 2012, to $150,604 from $216,293 for the three months ended July 31, 2011. Of the $65,689 decrease in oil, NGL, and gas sales, approximately $130,958 was attributable to a decrease in production volumes, partially offset by a $65,269 increase in the average price per Boe.  Production volumes decreased primarily due to the sales of the Encana Properties and the average price per Boe increased due to an increase in oil production as a percentage of total oil, NGL, and gas production.  Subject to commodity prices, we expect our oil, NGL, and gas sales to increase during 2012 due to increased production volumes from our drilling program.
 
Oil, NGL, and gas production. Production for the three months ended July 31, 2012 totaled 1,824 Boe (19.8 Boe/d), compared to 4,575 Boe (49.7 Boe/d) in the prior year period, a decrease of 60%.  Production for the three months ended July 31, 2012, was 86% oil, 13% gas, and 1% NGLs, compared to 36% oil, 64% gas, and 0% NGLs for the three months ended July 31, 2011. The decrease in production in the 2012 period is the result of the sale of the Encana properties.  Subject to commodity prices, which could impact drilling activity, we expect production to increase during 2012 due to our drilling program.

Lease operating expenses. Our lease operating expenses (“LOE”) increased $8,830, or 199% to $17,774 or $9.74 per Boe, for the three months ended July 31, 2012, from $8,944 or $1.95 per Boe, for the three months ended July 31, 2011. The increase in LOE for the three months ended July 31, 2012 was primarily due to the inclusion of three production months in 2012 as compared to two production months for 2011.  For the remainder of 2012, we expect LOE per Boe will decrease, compared to LOE per Boe for the three months ended July 31, 2012, due to anticipated production increases during the remainder of 2012.
 
Severance and production taxes. Our severance and production taxes decreased $10,460, or 59% to $7,336 for the three months ended July 31, 2012, from $17,796 for the three months ended July 31, 2011. The decrease in severance and production taxes was primarily a function of both the decrease in overall sales and an increase in oil sales as a percentage of total oil, NGL, and gas sales, as oil sales are taxed at a lower rate.  Severance and production taxes were approximately 4.9% and 8.2% of oil, NGL and gas sales for the respective periods.  For the remainder of 2012, we expect severance and production taxes as a percent of oil, NGL, and gas sales will remain relatively consistent compared to the severance and production taxes for the three months ended July 31, 2012.
 
General and administrative. Our general and administrative expenses (“G&A”) decreased $52,959 or 3.6%, to $1,426,786 for the three months ended July 31, 2012, from $1,479,745 for the three months ended July 31, 2011.  The decrease in G&A was primarily due to lower share-based compensation partially offset by higher salaries and benefits resulting from increased staffing.  For the remainder of 2012, we expect G&A to remain reasonably stable.  The following table summarizes G&A:

   
Three months ended July 31,
             
   
2012
   
2011
   
Change
   
% Change
 
 Share-based compensation
  $ 959,890     $ 1,182,397     $ (222,507 )     (19 )%
 Professional fees
    217,637       284,045       (66,408 )     (23 )
 Salaries and benefits
    173,093       11,581       161,512       1395  
 Other
    76,166       1,722       74,444       4323 %
 Total
  $ 1,426,786     $ 1,479,745     $ (52,959 )     (4 )%

Depletion, depreciation, and amortization. Our depletion, depreciation, and amortization expense (“DD&A”) increased $4,039 or 5%, to $82,465 for the three months ended July 31, 2012, from $78,426 for the three months ended July 31, 2011. Our DD&A per Boe increased by $2.21, or 166%, to $45.21 per Boe for the three months ended July 31, 2012, compared to $17.14 per Boe for the three months ended July 31, 2011.  The increase in DD&A and DD&A per Boe over the prior year period was primarily due to higher production relative to remaining estimated proved developed reserves after the sale of the Encana properties.  For the remainder of 2012, we expect DD&A per Boe will decrease, compared to DD&A per Boe for the three months ended July 31, 2012, due to an anticipated increase in proved developed producing reserves during the remainder of 2012.
 
 
Exploration costs.  Our exploration costs increased $25,507 of 100% to $25,507 for the three months ended July 31, 2012, from zero for the three months ended July 31, 2011. Our exploration costs per Boe increased by $13.98, or 100%, to $14.10 per Boe for the three months ended July 31, 2012, compared to zero per Boe for the three months ended July 31, 2011.  The increase in exploration costs and exploration costs per Boe over the prior year period was primarily due to delay rentals paid on the Wevco leases.  For the remainder of 2012, we expect exploration costs per Boe will increase, compared to exploration cost per Boe for the three months ended July 31, 2012, as we implement our drilling program.
 
Interest expense, net.  Our interest expense, net, increased $111,509, or 34%, to $441,509 for the three months ended July 31, 2012, from $330,000 for the three months ended July 31, 2011. This increase was primarily the result of a higher average debt level from the assumption of a note payable related to the acquisition of JHE and convertible notes payable during the 2012 period. We expect our interest expense to remain higher than the prior year period as a result of increased borrowings during 2012.
 
Loss on the sale of assets.  Loss on the sale of assets increased $89,847, or 100% to $89,847 for the three months ended July 31, 2012, from zero for the three months ended July 31, 2011. This increase was the result of the sale of assets during the three months ended July 31, 2012 as compared to no sales of assets during the same period of 2011.  We do not expect to sell any properties during the remainder of 2012.
 
Net loss. Net loss for the three months ended July 31, 2012, was $1,930,704, or $0.05 per basic and diluted share, compared to net loss of $5,096,311, or $0.13 per basic and diluted share, for the three months ended July 31, 2011. Net loss for the three months ended July 31, 2012, included a loss on the sale of assets of $89,847.  Net loss in the 2012 period was positively impacted by lower impairment expenses, production taxes, and general and administrative expenses, which were partially offset by the loss on sale of assets and higher lease operating expenses.  Net loss per basic and diluted share in the 2012 period decreased compared to the 2011 period as a result of both the lower net loss and lower weighted average number of shares outstanding.

 
Liquidity and Capital Resources

As of July 31, 2012, the Company had current assets of $147,884 consisting of $36,217 cash, $89,575 trade accounts receivable, $22,092 prepaid expenses and current liabilities of $2,838,034.  The current liabilities consist of the convertible note payable of $2,221,038, accounts payable of $412,859, accrued liabilities of $15,624, amounts due to related party of $24,521, and interest payable of $163,992. As of the Company’s year ended April 30, 2012, the Company had current assets of $1,428,470 and current liabilities of $4,591,611. The decrease in current liabilities between these two periods is primarily the result of the payment of a sellers note related to the acquisition of JHE.
 
As of July 31, 2012, the Company had a working capital deficit of $2,690,150, compared to a deficit of $3,163,141 as at April 30, 2012. We estimate that cash requirements of approximately $17,725,000 will be required for development and administration costs, and to fund working capital during the next twelve months. There can be no assurance that we will be successful in raising the required capital or that actual cash requirements will not exceed our estimates. Failure to raise needed financing could result in our having to discontinue our mining oil and gas development business.
 
As at July 31, 2012, we had a cumulative deficit of $13,179,188 compared to $11,248,483 as at April 30, 2012. We expect to incur further losses during the remainder of our fiscal year ending April 30, 2013.
  
On September 14, 2011, the Company issued the 6% Notes in the total amount of $1,500,000. The 6% Notes are due and payable on September 14, 2014, with interest at the rate of 6% per annum accruing on the unpaid principal amount, compounded annually. The 6% Notes are convertible at the option of the holder into shares of common stock of the Company at a conversion price of $1.50 per share.  The 6% Notes are redeemable prior to maturity at the option of the Company and can be prepaid  in whole or in part at any time without a premium or penalty, upon 5 business days’ notice; prior to which the holder of the 6% Note may convert the principal and interest into shares of common stock of the Company.
 
On February 8, 2012, the Company issued 10% convertible notes (the “February 10% Notes”) in the aggregate principal amount of $2,750,000, subject to the terms of the Inter-Creditor Agreement. The 10% Notes bear interest at the rate of 10% per annum on the unpaid principal balance, which is payable monthly in arrears on the first business day of each calendar month.  The 10% Notes are due and payable on February 8, 2013 (the “10% Maturity Date”) or at the election of the applicable holder on the earlier of (i) the closing of a financing transaction by the Company for aggregate proceeds in excess of $5,000,000, which excess amount shall be applied to the principal balance of the applicable holder’s 10% Note (based on the ratio of the principal amount of such holder’s 10% Note relative to the aggregate principal amount of all the 10% Notes); (ii) the sale or partial sale of JHE; (iii) the sale of all or substantially all of the assets of JHE; or (iv) an Event of Default (as defined in the 10% Notes).  The 10% Notes are convertible at the option of the holders into shares of common stock of the Company at the 10% Maturity Date or upon the occurrence of one or more of the triggering events set forth in clauses (i), (ii), and (iii) above, at a conversion price of $1.50 per share.
 
 
On March 14, 2012, the Company issued 10% convertible notes (the “March 10% Notes”) for cash in the aggregate principal amount of $500,000 (the “March 10% Note Issuance”), subject to the terms of the Addendum (as defined below).  The March 10% Notes bear interest at the rate of 10% per annum on the unpaid principal balance, which is payable monthly in arrears on the first business day of each calendar month.  The March 10% Notes are due and payable on March 14, 2013 (the “March 10% Maturity Date”) or at the election of the holder on the earlier of (i) the closing of a financing transaction by the Company for aggregate proceeds in excess of $5,000,000, which excess amount shall be applied to the principal balance of the holder’s March 10% Note ; (ii) the sale or partial sale of JHE; (iii) the sale of all or substantially all of the assets of JHE; or (iv) an Event of Default (as defined in the March 10% Notes).  The March 10% Note is convertible at the option of the holder into shares of common stock of the Company at the March 10% Maturity Date or upon the occurrence of one or more of the triggering events set forth in clauses (i), (ii), and (iii) above, at a conversion price of $1.50 per share. The proceeds of the March 10% Note Issuance were used to pay the Wevco Signing Bonus.  The balance of the proceeds of the March 10% Note Issuance were used for other general corporate purposes.
 
As of May 3, 2012, the Company issued 4,800,000 shares of common stock in connection with the exercise of 4,800,000 share purchase warrants as $0.50 per share. The Company received $2,400,000 in proceeds. The warrants were issued on June 15, 2011 in a private placement by the Company of 4,800,000 units at a price of $0.25 per unit, each unit consisted of one share of common stock and one common stock purchase warrant, exercisable to acquire one share of common stock of the Company at an exercise price of $0.50 through June 15, 2013. The terms of the offering are described in more detail on the Company’s Current Report on Form 8-K filed with the United States Securities and Exchange Commission on June 21, 2011.

On May 15, 2012, the Company closed a private placement of units to an Accredited Investor. Under the terms of the private placement, the Company issued 500,000 units at a price of $1.50 per unit. Each unit consists of one share of common stock of the Company and one half common share purchase warrant, each full warrant exercisable to purchase one share of common stock of the Company at $2.75 for a period of three years. $750,000 was raised by the Company in the private placement. The proceeds were partially used to pay the final payment of the Edsel Promissory Note, the June Extension Price and general corporate purposes.
   
Effective June 1, 2012, the Edsels and Circle Star entered into the Note Payment Agreement, whereby, the Company paid the Edsels $1,250,000 and conveyed to Orbis certain interests in properties held by JHE that were operated by Encana (“Encana Properties”).  The payment of $1,250,000 and the conveyance of the Encana Properties resulted in the Edsel Promissory Note being fully paid, and the Company was released from any further obligations to the Edsels under the Edsel Promissory Note, the Amended Pledge Agreement and the Novation.

On June 13, 2012, the Company entered into the Second Amendment to Leasehold Purchase Agreement (the “Second Wevco Amendment”) extending the closing date from May 31, 2012 until September 28, 2012 (the “Wevco Closing Date”). Pursuant to the Second Amendment, the Company paid Wevco a non-refundable $100,000 extension fee (the “June Extension Price”), and issued 600,000 shares of common stock of the Company (the “Wevco Extension Shares”) to Wevco. If the Wevco Purchase Price is paid on or before the Wevco Closing Date then the June Extension Price, the Wevco Signing Bonus and the First Extension Price shall be credited towards the Wevco Purchase Price. To date, $500,000 has been credited towards the Wevco Purchase Price.
 
On July 9, 2012, the Company entered into the Amendment to the Purchase and Sale Agreement (the “BlueRidge Amendment”) with BlueRidge Petroleum Corporation, Walter F. Brown, Kirk T. and/or Rebecca L. Rundle as JTRS, First Equity Resources, LLC, G. Jeff Mowry and Marsha S. Mowry Trust Dated July 9, 2007, Harold C. Porter Family Trust, Bobbie D. Porter Living Trust dated December 13, 2004, Porter Oil Properties, LLC, OA Operating, Inc., and Swann Resources, Inc. (collectively the “BlueRidge Sellers”). The Amendment amends the Purchase and Sale Agreement entered into by the same parties on April 17, 2012 (the “BlueRidge Purchase Agreement”).

Pursuant to the BlueRidge Purchase Agreement, the Company agreed to purchase certain interests in oil and gas leases in Rawlins, Sheridan and Graham Counties, Kansas, as more fully described in Exhibit A to the BlueRidge Purchase Agreement in return for $5,308,375 and 560,000 shares of common stock of the Company, with a closing date of July 1, 2012. Pursuant to the BlueRidge Purchase Agreement, the Company agreed to purchase interests in 17,168 acres in Rawlins County, 12,518 acres in Sheridan County and 12,781 acres in Graham County.
 
The BlueRidge Amendment modified the terms of the BlueRidge Purchase Agreement by reducing the acreage of the leases in Graham County by 1,760 acres, and by granting the Company an option to purchase the properties in Rawlins and Graham Counties. The BlueRidge Amendment further modified the terms of the BlueRidge Purchase Agreement, whereby the Company paid $50,000 to the BlueRidge Sellers and issued 2,611,000 Common Shares to the BlueRidge Sellers for the interests in Sheridan County.
 
 
Pursuant to the BlueRidge Amendment, the Company has the option (the “BlueRidge Option”) to purchase interests in 80,871 acres in Kansas (including the properties in the Rawlins and Graham Counties noted above), by making a cash payment of $10,108,875 and by delivering the number of Common Shares equal to $1,000,000, based on the market price of the Common Shares on the date before closing of the BlueRidge Option, on or before September 28, 2012.
 
The Company does not currently have sufficient cash to fund its working capital requirements or to make the payment under the Second Wevco Amendment of $4,500,000 due on or before September 28, 2012 or the payment of $10,108,875 under the BlueRidge Amendment. Consequently, in order to avoid defaulting on its payment obligations under the Second Wevco Amendment and the BlueRidge Amendment and to fund its working capital requirements, the Company will need to obtain additional financing, through the issuance of equity or debt.  There can be no assurance that the Company will be able to raise sufficient financing to satisfy its obligations under the Second Wevco Amendment and the BlueRidge Amendment.

Subsequent to the period covered by this report, the Company entered into the Debt Conversion Agreement with holder of the March 10% Note and G. Jonathan Pina. The March 10% Note was convertible at $1.50 per share of common stock of the Company. The Company agreed to reduce the conversion price to $0.4677 per share as an incentive to convert the full principal and accrued interest under the March 10% Note into shares of common stock of the Company. The Company agreed to issue to the holder of the March 10% Notes 1,100,000 shares of common stock of the Company which shall constitute full, fair and adequate consideration for the relinquishment of the March 10% Note, the unpaid interest under the March 10% Note of $14,516.13, and the Addendum.

Given that we have not achieved profitable operations to date, our cash requirements are subject to numerous contingencies and risks beyond our control, including operational and development risks, competition from well-funded competitors, and our ability to manage growth. We can offer no assurance that the Company will generate cash flow sufficient to achieve profitable operations or that our expenses will not exceed our projections.
 
We estimate that we will require approximately $17,725,000 over the next twelve months to fund our capital requirements. We do not currently have sufficient capital to fund these commitments. Therefore, we need to raise approximately $17,725,000 in debt or equity financing in the next twelve months. There can be no assurance that such additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. Unprecedented disruptions in the credit and financial markets in the past eighteen months have had a significant material adverse impact on a number of financial institutions and have limited access to capital and credit for many companies. These disruptions could, among other things, make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations. If we are unable to obtain additional or alternative financing on a timely basis and are unable to generate sufficient revenues and cash flows, we will be unable to meet our capital requirements and will be unable to continue as a going concern.  In the event we are able to secure the needed funding, we will evaluate farm-outs, joint ventures, and other alternatives to fund drilling on our acreage in Kansas.

We anticipate generating losses in the near term, and therefore, may be unable to continue operations in the future.  To secure additional capital, we will have to issue debt or equity or enter into a strategic arrangement with a third party.  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 funds through bank loans, lines of credit, or any other sources.
 
The following chart provides an overview of our contractual obligations during the period from August 1, 2012 through April 30, 2013, and from May 1, 2013 through April 30, 2015.
 
Obligations            
   
Amount
August 1, 2012 to
April 30, 2013
($)
   
Amount
May 1, 2013 through
 April 30, 2015
($)
 
6% Convertible Notes due September 14, 2014 (i)
  $
  -
   
$
1,500,000
 
10% Convertible Notes due February 8, 2013 (ii)
 
2,750,000
     
-
 
Salary payments to G. Jonathan Pina (iii)
   
135,000
     
35,322
 
Salary Payments to S. Jeffrey Johnson (iv)
   
150,000
     
83,333
 
Confederate Park Office Space (v)
   
11,700
     
11,700
 
WevCo Acquisition Agreement (vi)
   
4,500,000
     
  -
 
BlueRidge Acquisition (vii)
   
10,108,875
     
-
 
Total
 
$
17,655,575
   
$
1,630,355
 
 
 
(i) The 6% Convertible Notes are due and payable on September 14, 2014 and accrue interest at a rate of 6% per annum and payable at maturity.

(ii) The 10% Convertible Notes are due and payable on February 8, 2013 and pay interest at a rate of 10% per annum, payable monthly.
 
(iii) Monthly installments of $15,000 for a two-year term, beginning July 11, 2011.
 
(iv) Annual salary in the amount of 200,000 starting on October 1, 2011 with no set payment intervals for a two-year term.
 
(v) Two year lease for 1,325 square feet of office space commencing from January 1, 2012 through January 31, 2014 at $1,300 per month.

(vi) Per Second WevCo Amendment, $4,500,000 due on or before September 28, 2012.

(vii) Per the BlueRidge Amendment, $10,108,875 due on or before September 28, 2012.

Going Concern Consideration

There is substantial doubt about the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon continued financial support from the Company’s shareholders, the ability of the Company to obtain necessary financing to continue operations, and the attainment of profitable operations. The Company can give no assurance that future financing will be available to it on acceptable terms if at all or that it will attain profitability. These factors raise substantial doubt about our ability to continue as a going concern.

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.

Item 3.                 Quantitative and Qualitative Disclosures About Market Risk.
 
Not applicable.

Item 4.                 Controls and Procedures.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) during the quarter ended July 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II.             OTHER INFORMATION

Item 1.                 Legal Proceedings.

Other than as listed below, we know of no material, active, or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation there such claim or action involves damages for more than 10% of our current assets. There are no proceedings in which any of our company’s directors, officers, or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our company’s interest.
 
As a public company with listed equity securities, we need to comply with laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act or the Dodd-Frank Act, and related regulations of the SEC, which we would not be required to comply with as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will significantly increase our costs and expenses. We need to:

Landers

On June 16, 2011, Circle Star acquired all of the outstanding equity interest in JHE. JHE was party to a litigation related to a mineral interest in the well known as Landers #1 (“Landers #1”) that was initiated in November 2008 in the District Court 82nd Judicial District, Robertson County, Texas. The litigation involved a multi-party trespass to try title suit to determine the ownership of Landers #1. Ross L. Martella III originally sought a temporary restraining order, but the lawsuit evolved into a trespass to try title action under Chapter 22 of the Texas Property Code. A Final Judgment was rendered in the suit in November, 2010 and it became final and non-appealable in December, 2010. Subsequently, two additional litigation matters involving Landers #1 were initiated. As of June 10, 2011, one of the suits was dismissed and Orbis has agreed to indemnify JHE in connection with the remaining litigation related to Landers #1.
 
The parties consider the lawsuits to be a nuisance and Circle Star does not believe the Landers #1 litigation to be material due to Orbis’ agreement to indemnify, hold harmless and defend at its sole cost and expenses, Circle Star and its respective successors and assigns from any and all claims and/or costs associated with these lawsuits or any other claim which might be made against the interests that are subject to such litigation.
 
The property that is subject to the litigation was assigned to Orbis on June 12, 2012 pursuant to the Note Payment Agreement.

Cottonwood

On or about June 18, 2012, the Company’s registered agent was served with a complaint (Civil Action No. 12-CV-327-CVE-PJC) filed in the United States District Court for the Northern District of Oklahoma by Cottonwood Natural Resources, Ltd. (“Cottonwood”).  Cottonwood alleges breach of contract and fraud in connection with a Purchase and Sale Agreement dated April 19, 2012 between the company and Cottonwood (the “Cottonwood Purchase Agreement”) related to the purchase of certain oil and gas interests in approximately 14,640 acres in Finney County, Kansas (the “Finney Property”).  Cottonwood filed the complaint after the Company terminated the Cottonwood Purchase Agreement after the Company determined that Cottonwood had options to title to less than 12,908.46 net acres and Cottonwood failed to disclose all material facts related to the Finney Property. Cottonwood is seeking damages of at least $4,324,180. Management believes that the allegations by Cottonwood are without merit and the Company intends to vigorously defend against the claims.  The Company is evaluating potential counterclaims against Cottonwood.
 
Greene Litigation
 
 On June 19, 2012, the Company’s filed a petition with the District Court of Clark County, Kansas, Sixteenth Judicial District (Case No. 2012-CV-12) against Green Brothers Land Company, LLC, Greene Ranch Enterprises, Inc., David M. Greene, Jr., Marcia Greene, Thomas E. Greene, Janice C. Greene, Joseph B. Greene and Billie Greene (collectively the “Defendants”), requesting the return of a deposit pursuant to the termination of a certain Land Real Estate Sales Contract (the “Greene Agreement”) entered into between Circle Star and the Defendants on March 6, 2012, pursuant to which Circle Star would have acquired from the Defendants certain interests in 6,518 acres of land in Kansas. Pursuant to the Greene Agreement, Circle Star delivered a $50,000 deposit that was refundable due a default by the sellers. Circle Star terminated the Green Agreement as a result of defects in title which the Defendants did not cure within the time period set forth in the Greene Agreement. Prior to the litigation, Circle Star pursued an out of court settlement but was unsuccessful. Circle Star intends to vigorously pursue the recovery of the deposit in an efficient and expeditious manner.
 

Item 1A.              Risk Factors.

Not applicable.

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

As of May 3, 2012, the Company issued 4,800,000 shares of common stock in connection with the exercise of 4,800,000 share purchase warrants as $0.50 per share. The Company received $2,400,000 in proceeds. The warrants were issued on June 15, 2011 in a private placement by the Company of 4,800,000 units at a price of $0.25 per unit, each unit consisted of one share of common stock and one common stock purchase warrant, exercisable to acquire one share of common stock of the Company at an exercise price of $0.50 through June 15, 2013. The terms of the offering are described in more detail on the Company’s Current Report on Form 8-K filed with the United States Securities and Exchange Commission on June 21, 2011.
 
The common stock issued in connection with the exercise of the warrants was issued to non-U.S. persons outside of the United States in off-shore transactions. The shares were not registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and are deemed “restricted securities” (as defined in Rule 144(a)(3) of the Securities Act). The securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The securities were issued pursuant to exemptions available under Regulation S from the registration requirements of the Securities Act.

On May 15, 2012, the Company closed a private placement of units to an "Accredited Investor" (as defined in Rule 501(a) of the Securities Act.  Under the terms of the private placement, the Company issued 500,000 units at a price of $1.50 per unit. Each unit consists of one share of common stock of the Company and one half common share purchase warrant, each full warrant exercisable to purchase one share of common stock of the Company at $2.75 for a period of three years. $750,000 was raised by the Company in the private placement.
 
The units, shares, warrants and underlying shares of the private placement were not registered under the Securities Act or the laws of any state.  Accordingly, the units, shares, warrants and underlying shares are “restricted securities” (as defined in Rule 144(a)(3) of the Securities Act) and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. The shares, warrants and underlying securities were placed pursuant to exemptions from the registration requirements of the Securities Act provided by Rule 506 of Regulation D and Section 4(a)(2) thereof.

On June 13, 2012, the Company entered into the Wevco Second Amendment extending the closing date from May 31, 2012 until September 28, 2012 of  the Wevco Purchase Agreement for all of Wevco’s rights, title, and working interest in and to certain oil and gas leases, containing up to 64,575 net acres, more or less, situated in Gove and Trego Counties, Kansas, described more fully in Exhibit A to the Wevco Purchase Agreement. Pursuant to the Wevco Second Amendment, the Company paid Wevco a non-refundable $100,000 extension fee on June 13, 2012 and issued 600,000 shares of common stock of the Company to Wevco.

The common shares issued to Wevco have not been and will not be registered under Securities Act, or the laws of any state of the United States.  Accordingly, the common shares are “restricted securities” (as defined in Rule 144(a)(3) of the Securities Act) and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. The common shares will be issued pursuant to exemptions from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof.

On July 9, 2012, the Company entered into the Amendment to BlueRidge Amendment with the BlueRidge Sellers. The BlueRidge Amendment amends the Purchase and Sale Agreement entered into by the same parties on April 17, 2012 (the “BlueRidge Purchase Agreement”) by reducing the acreage of the leases in Graham County by 1,760 acres, and by granting the Company an option to purchase the properties in Rawlins and Graham Counties. The BlueRidge Amendment further modifies the terms of the BlueRidge Purchase Agreement, whereby the Company agreed to pay $50,000 to the BlueRidge Sellers (which has already been paid) and to issue 2,611,000 Common Shares (which has already been issued) to the BlueRidge Sellers for the interests in Sheridan County.

The common shares issued to the BlueRidge Sellers have not, and will not be, registered under the Securities Act, or the laws of any state of the United States.  Accordingly, the common shares are “restricted securities” (as defined in Rule 144(a)(3) of the Securities Act) and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. The common shares will be issued pursuant to exemptions from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof.
 

Subsequent to the period covered by this quarterly report, the Company offered and sold the following securities pursuant to exemptions from the registration requirements under the Securities Act, which transactions were previously disclosed in the previous Quarterly Report on Form 10-Q or Current Reports on Form 8-K.

On August 24, 2012, the Company entered into a Debt Conversion Agreement (the “Debt Conversion Agreement”) with holder of the March 10% Note and G. Jonathan Pina. The March 10% Note was convertible at $1.50 per share of common stock of the Company. The Company agreed to reduce the conversion price to $0.4677 per share as an incentive to convert the full principal and accrued interest under the March 10% Note into shares of common stock of the Company. The Company agreed to issue to the holder of the March 10%, 1,100,000 shares of common stock of the Company which shall constitute full, fair and adequate consideration for the relinquishment of the Note, the unpaid interest under the March 10% Note of $14,516.13, and the Addendum.
 
The Company issued to the holder of the March 10% Note, 1,100,000, shares of common stock of the Company. The Common Shares have not been and will not be registered Securities Act, or the laws of any state of the United States.  Accordingly, the common shares are “restricted securities” (as defined in Rule 144(a)(3) of the Securities Act) and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. The Common Shares will be issued pursuant to exemptions from the registration requirements of the Securities Act provided by Section 3(a)(9) thereof.

Item 3.                 Defaults Upon Senior Securities.

None.

Item 4.                 Mine Safety Disclosures.

Not applicable.

Item 5.                 Other Information.
   
Nominating Committee
 
There have not been any material changes to the procedures by which security holders may recommend nominees to the Company’s Board.

 
Item 6.                 Exhibits.
 
Exhibit
Description
3.1
Articles of Incorporation (included as Exhibit 3.1 to the Form S-1 filed August 6, 2008, and incorporated by reference); and Certificate of Amendment (included as Exhibit 3.1 to the Form 8-K filed on July 1, 2011)
 
3.2
Amended and Restated Bylaws (included as Exhibit 10.7 to the 8-K filed June 21, 2011, and incorporated by reference)
 
10.1
Membership Interest Purchase Agreement, dated effective June 10, 2011 (included as Exhibit 10.1 to the Form 8-K filed on June 21, 2011)
 
10.2
Amended and Restated Pledge and Security Agreement, dated effective June 10, 2011 (included as Exhibit 10.2 to the Form 8-K filed on June 21, 2011)
 
10.3
Novation and Assignment, dated effective June 10, 2011 (included as Exhibit 10.3 to the Form 8-K filed on June 21, 2011)
 
10.4
Promissory Note, dated effective January 1, 2011 (included as Exhibit 10.4 to the Form 8-K filed on June 21, 2011)
 
10.5
Installment Agreement (included as Exhibit 10.5 to the Form 8-K filed on June 21, 2011)
 
10.6
Form of Subscription Agreement  (included as Exhibit 10.6 to the Form 8-K filed on June 21, 2011)
 
10.7
Contribution Agreement entered into between Felipe Pati and the Company (included as Exhibit 10.1 to the Form 8-K filed on July 12, 2011)
 
10.8
Circle Star Energy Corp. 2011 Stock Option Plan (included as Exhibit 10.2 to the Form 8-K filed on July 12, 2011)
 
10.9
G. Jonathan Pina Employment Agreement (included as Exhibit 10.1 to the Form 8-K filed on July 13, 2011)
 
10.10
 
Consulting Agreement effective June 15, 2011, between Big Sky Management Ltd. and Digital Valleys Corp. (included as Exhibit 10.10 to the Annual report on Form 10-K/A filed on August 16, 2011)
 
10.11
Form of 6% Series A Convertible Note (included as Exhibit 10.1 to the Form 8-K filed on September 19, 2011)
 
10.12
Executive Employment Agreement entered into between the Company and S. Jeffrey Johnson (included as Exhibit 10.1 to the Form 8-K filed on October 14, 2011)
 
10.13
Letter Agreement dated December 1, 2011 (included as Exhibit 10.1 to the Form 8-K filed on December 7, 2011)
 
10.14
Amending Agreement among the Company and G. Jonathan Pina entered into on December 21, 2011 (included as Exhibit 10.1 to the Form 8-K filed on December 23, 2011)
 
10.15
Membership Interest Purchase Agreement between the Company and Colonial Royalties, LLC dated December 30, 2011 (included as Exhibit 10.1 to the Form 8-K filed on January 5, 2012)
 
10.16
Amending Agreement among the Company and S. Jeffrey Johnson entered into on February 29, 2012 (included as Exhibit 10.1 to the Form 8-K filed on March 6, 2012)
 
10.17
Form of 10% Convertible Note (February 2012) (included as Exhibit 10.15 to the Quarterly Report on Form 10-Q filed on March 16, 2012)
 
10.18
Inter-Creditor Agreement (included as Exhibit 10.16 to the Quarterly Report on Form 10-Q filed on March 16, 2012)
 
10.19
First Amendment to Assignment and Novation Agreement (included as Exhibit 10.17 to the Quarterly Report on Form 10-Q filed on March 16, 2012)
 
10.20
First Amendment to Amended and Restated Membership Interest Pledge and Security Agreement (included as Exhibit 10.18 to the Quarterly Report on Form 10-Q filed on March 16, 2012)
 
 
 
10.21
Leasehold Purchase Agreement dated March 8, 2012 (included as Exhibit 10.19 to the Quarterly Report on Form 10-Q filed on March 16, 2012)
 
10.22
Form of 10% Convertible Note (March 2012) (included as Exhibit 10.20 to the Quarterly Report on Form 10-Q filed on March 16, 2012)
 
10.23
Addendum to March 2012 Convertible Note Subscription Agreement (included as Exhibit 10.21 to the Quarterly Report on Form 10-Q filed on March 16, 2012)
 
10.24
Amendment to Leasehold Purchase Agreement dated April 24, 2012 among the Company and Wevco Production, Inc. (included as Exhibit 10.1 to the Current Report on Form 8-K filed on April 30, 2012)
 
10.25
Second Amendment to Leasehold Purchase Agreement dated June 12, 2012 among the Company and Wevco Production, Inc. (included as Exhibit 10.1 to the Current Report on Form 8-K filed on June 19, 2012)
 
10.26
Purchase and Sale Agreement dated April 17, 2012 (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 13, 2012)
 
10.27
Amendment to the Purchase and Sale Agreement dated July 9, 2012 (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 13, 2012)
 
10.28
Debt Conversion Agreement (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 30, 2012)
 
16.1
Letter from Silberstein Unger, PLLC dated January 5, 2012 (included as Exhibit 99.1 to the Form 8-K filed on January 5, 2012)
 
31.1
 
31.2
 
32.1
 
32.2
 
99.1
Report of LaRoche Petroleum Consultants dated June 8, 2012 (included as Exhibit 99.1 to the Company’s Annual Report on Form 10-K filed on August 13, 2012)
 
99.2
Report of LaRoche Petroleum Consultants dated June 29, 2012  (included as Exhibit 99.2 to the Company’s Annual Report on Form 10-K filed on August 13, 2012)
 
101.INS
XBRL Instance Document *
 
101.SCH
XBRL Taxonomy Extension Schema Document *
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase *
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document *
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document *
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document *
 
  
*Pursuant to Rule 405(a)(2) of Regulation S-T, the Company will furnish the XBRL Interactive Data Files with detailed footnote tagging as Exhibit 101 in an amendment to this Form 10-Q within the permitted 30-day grace period granted for the first quarterly period in which detailed footnote tagging is required.
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
CIRCLE STAR ENERGY CORP.
 
       
Dated: September 19, 2012
By:
/s/ S. Jeffrey Johnson
 
   
S. Jeffrey Johnson, Chief Executive Officer
 
   
(Principal Executive Officer)
 
       
Dated: September 19, 2012
By:
/s/ G. Jonathan Pina
 
   
G. Jonathan Pina, Chief Financial Officer
 
   
(Principal Financial Officer)