(I.R.S. Employer Identification No.) (Address of principal (Zip Code) Registrant’s telephone number, including area code) None. common stock on October 31, 2011 as reported on the Over-the-Counter Markets. The number of shares outstanding of each of the Registrant's classes of common stock, as of FORCE FUELS, INC. PART I. Item Item Item Item Item 5. Market for Registrant’s Common Equity, Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Financial Statements Item 9. Changes Item 9A(T). Controls and Procedures Item 9B. Other Information PART III. Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence 18 Item 14. Principal Exhibits and Financial Statement Schedules 19 I. tandem. obligations through the issuance of additional shares of our common stock. our common stock. High Bid Low Bid $ 1.15 $ 0.30 $ 3.75 $ 3.75 $ * $ * $ * $ * $ * $ * $ * $ * $ * $ * $ * $ * The number of holders of record is based upon the actual number of holders registered at such date and does not include holders of shares registered in “street name” or persons, partnerships, associates, corporations, or other entities identified in security position listings maintained by depositories. the aggregate. $571,014 in the aggregate. OPERATIONS. the preparation of its consolidated financial statements. period incurred. sales. Expenses For the year ended July 31, 2011, net cash used in operations consisted primarily of a net loss of $750,157 plus non-cash expenses of $19,798 related to depreciation, depletion, amortization and accretion, expenses paid on behalf of the Company by a related party of $11,000, a gain on settlement of debt of $768,481, amortization of discount on debt of $65,198, and common stock issued for services and loan inducement of $779,083, and a reclassification of inventory to investment in oil and gas leases of $29,690. Additionally, changes in operating assets and liabilities impacted the net cash provided by operating activities. These changes included a decrease in accounts receivable of $7,451, a decrease in notes receivable – related parties of $7,500, a decrease in inventory of $81,980, an increase in deposits and prepaid expenses of $16,726, an increase in accounts payable and accrued expenses of $35,074, and an increase in accrued salaries of $315,252. other contractually narrow or limited purposes. Disclosure Controls and Procedures that: are reasonably likely to materially affect, our internal control over financial reporting. Name BENEFICIAL OWNER FORM 3 FORM 4 Thomas C. Hemingway 1 1 Lawrence Weisdorn 1 Donald Hejmanowski 1 Gary Cohee 1 1 11. Executive Compensation Name and Principal Position Fiscal Year Salary ($) Stock Awards ($) All Other Compensation ($) Total Compensation ($) Lawrence Weisdorn (1), 2008 $39,500 (2) $75,000 (3) -- $114,500 Ex-President, CEO, CFO, 2009 $180,000 (2) $180,000 and director Donald Hejmanowski (4), 2008 -- $36,000 (5) -- $36,000 Secretary and director 2009 $38,637 (6) $41,137 2010 $60,000 Thomas C. Hemingway) (7) 2008 -- $25,500 (8) -- $25,500 Ex-President, CEO, CFO, 2009 - - and Chairman 2010 $60,000 Oscar Luppi (9) 2008 - - - - Chairman, President and Chief 2009 - - - - Executive Officer 2010 $250,000 - - - Name and Address of Beneficial Owner (1) Number of Shares Beneficially Owned (1) Percent of Class Thomas C. Hemingway 1,000,000 (2) 12.76% Oscar Luppi 1503 South Coast Dr. Ste. 206 Costa Mesa, CA 92626 1,000,000 (2) 12.76% Donald Hejmanowski 500,000 (2) 6.38% All Directors and Officers as a group (3 persons) 2,500,000 (2) 31.9% ICE Conversions, Inc. (3) 400,000 (4) 5.10% Gary Cohee 1,000,000 12.76% 13. Certain Relationships and Related Transactions, and Director Independence 2008. In The Company July 31. Estimates To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. and Cash Equivalents As of July 31, 2011, the Company had a cash balance of $2,624. As of July 31, 2010, the Company had a cash balance of $86,842. As of July 31, 2011 and July 31, 2010, the Company had no cash equivalents. July 31, 2011, the Company reclassified the remaining balance of oil inventory to oil and gas properties. The Company current lease: Compensation registrants with the Securities and Exchange Commission (the “SEC”), guidance issued by the SEC. The Codification is a reorganization and compilation of all then-existing authoritative GAAP for nongovernmental entities, except for guidance issued by the SEC. The Codification is amended to effect non-SEC changes to authoritative GAAP. The Company’s adoption of ASU No. 2009-01 only changed the referencing convention of GAAP in Notes to the consolidated financial statements. entities with annual reporting periods ending on or after December 31, 2009. We adopted ASU 2010-03 effective January 1, 2011. permitted. The Company Equipment, net July 31, July 31, 2010 2009 Test equipment $ - $ 24,250 Well operating equipment 138,300 - Less: accumulated depreciation (4,939) (2,601) Property and equipment, net $ 133,361 $ 21,649 July 31, July 31, 2010 2009 Purchased intellectual property rights, cost $ - $ 430,000 Less: accumulated amortization - (43,000 ) Purchased intellectual property rights, net $ - $ 387,000 July 31, July 31, 2010 2009 Note payable to ERS, unsecured, due November 30, 2010 $ 500,000 $ - Note payable to Pemco, unsecured, due February 23, 2011 900,000 - Less: discount for imputed interest (31,879) - Notes payable, net $ 1,368,121 $ - Notes Payable July 31, July 31, 2010 2009 Note payable on January 29, 2009, 10% interest, unsecured and due on demand $ 35,960 $ 35,960 Note payable on June 1, 2009, 10% interest, unsecured and due on demand 13,738 13,738 Note payable on July 1, 2009, 10% interest, unsecured and due on demand 12,701 12,701 Note payable on October 1, 2009, 10% interest, unsecured and due on demand 10,658 - Note payable on July 16, 2009, 10% interest, secured by a pledge of 500,000 shares of the Company's common stock, due 90 days following closing 100,000 - Less: discount for value of warrants issued (33,310) - Notes payable, net $ 139,747 $ 62,408 Other Options, the Company determined that no beneficial conversion feature need be recognized on convertible notes payable executed as of July 31, 2010. As of July 31, 2011, no shares have been authorized or issued by the Company in satisfaction of the convertible notes payable. Stockholders’ Deficit July 31, July 31, 2010 2009 Advances from ICE and significant stockholders $ - $ 333,189 Other Oil and Gas Properties July 31, July 31, 2010 2009 Producing Activities Proved properties $ 1,258,292 $ - Accumulated depletion - - Net Oil and Gas Properties $ 1,258,292 $ - July 31, July 31, 2010 2009 Costs Incurred in Oil and Gas Acquisition and Development Activities Produced properties $ 1,258,292 $ - Accumulated depletion 133,361 - Total $ 1,391,653 $ - Income Taxes July 31, July 31, 2010 2009 Income tax expense at statutory rate $ (794,716) $ (155,892) Stock based expenses 521,050 19,110 Valuation allowance 273,666 136,782 Income tax expense per books $ - $ - July 31, July 31, 2010 2009 NOL Carryover $ 436,473 $ 165,807 Valuation allowance (436,473) (165,807) Net deferred tax asset $ - $ - Subsequent valued at $42,000 for services. July 31, July 31, 2010 2009 Proved leasehold costs $ 1,255,173 $ - Costs of wells and development 138,300 - Capitalize asset retirement obligations (36,622) - Total cost of oil and gas properties $ 1,356,851 $ - Unproved oil and gas properties $ - $ - Accumulated depreciation and depletion (4,939) - Net Capitalized Costs $ 1,351,912 $ - For the For the Year Ended Year Ended July 31, July 31, 2010 2009 Acquisition of Properties: Proved $ 1,258,292 $ - Unproved - - Exploration costs - - Development costs - - Total $ 1,258,292 $ - For the For the Year Ended Year Ended July 31, July 31, 2010 2009 Sales $ 7,451 $ - Production costs (25,000) - Depreciation and depletion (4,939) - Income tax benefit - - Results of operations for producing activities (excluding corporate overhead and interest costs) $ (22,488) $ - 2011: July 31, July 31, 2010 2009 Future cash inflows $ 25,616,435 $ - Future production costs (5,123,287) - Future development costs (7,684,931) - Future tax expense (2,561,664) - Future net cash flows 10,246,553 - Discounted for estimated timing of cash flows at 10% (5,488,636) - Standardized measure $ 4,757,917 $ - The following For the For the Year Ended Year Ended July 31, July 31, 2010 2009 Standardized measure, beginning of year $ - $ - Extensions, discoveries and improved recovery - - Revisions of previous estimates - - Purchases of minerals in place 4,797,917 - Sales of minerals in place - - Net change in proces and production costs - - Accretion of discount - - Oil and gas sales, net of production costs - - Changes in estimated future development costs - - Previously estimated development cost incurred - - Net change in income taxes - - Change in timing of estimated future production - - Standardized measure, end of year $ 4,797,917 $ - Articles of Incorporation 2.3(2) Certificate of Amendment to the Articles of Incorporation as filed with the Nevada Secretary of State on April 17, 2008. 2.4(3) Certificate of Amendment to the Articles of Incorporation as filed with the Nevada Secretary of State on May 27, 2008. 2002 Stock Option Plan as adopted July 15, 2002 10.2(5) Joint Venture Agreement by and between Force Fuels, Inc. and Ice Conversions, Inc. May 12, 2008. 10.3(6) Assignment and Contribution Agreement by and between Force Fuels, Inc. and Ice Conversions, Inc. effective July 31, 2008. Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. (2) Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K filed on May 06, 2008, and is incorporated by reference herein. (3) Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K filed on June 16, 2008, and is incorporated by reference herein. (4) Filed with the Securities and Exchange Commission in the Exhibits to Form S-8 filed on January 21, 2003. (5) Filed with the Securities and Exchange Commission in the Exhibits to Form 8-K filed on May 27, 2008, and is incorporated by reference herein. (6) Filed with the Securities and Exchange Commission in the Exhibits to Form 10-K/A filed on December 30, 2008, and is incorporated by reference herein.10-Kx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended July 31,2010o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _______ to _______Commission file number: 000-49993FORCE FUELS, INC.þ (Name of Small Business Issuer in its Charter)Nevada56-2284320For the fiscal year ended July 31, 2011o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Nevada 56-2284320 (State or other jurisdiction of incorporation or organization)incorporation or organization) 9262690265Executive Offices)Issuer's Telephone Number: 949 783 6723Former name, former address and former fiscal year if changed since last report)underpursuant to Section 12(b) of the Act:Noneunderpursuant to Section 12(g) of the Act: Common Stock, par value $.001stock, $0.001 per shareYes o Yes þNoxSection 15(d) for13(d) of the Act.Yes o Yes þNox
Yes xþ No o(229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10.10-K. þocompany,company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.xþ.
: Yes o No xþThevoting and non-votingregistrant’s common equitystock held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business dayregistrant was $204,360. This aggregate market value is estimated solely for purposes of this report and is based on the closing price for the registrant’s most recently completed fiscal year was $1,728,438. December 22, 2010October 31, 2011 is 7,841,875,13,544,375, all of one class, $.001$0.001 par value per share, of which 4,841,8758,846,875 were held by non-affiliates of the registrant.*Affiliates for For the purpose of this item refers to the registrant'sreport, it has been assumed that all officers and directors and/or any persons or firms (excluding those brokerage firms and/or clearing houses and/or depository companies holding registrant's securities as record holders only for their respective clienteles' beneficial interest) owning 5% or more of the registrant's common stock, both of record and beneficially.ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARSCheck whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d)are affiliates of the Exchange Act afterregistrant. The statements made herein shall not be construed as an admission for determining the distributionaffiliate status of securities under a plan confirmed by a court.any person.Yes o No oDOCUMENTS INCORPORATED BY REFERENCEThe following documents are herewith incorporated by reference:Transitional Small Business Disclosure FormatYes o No xTABLE OF CONTENTS PAGEItem 1. Business 3 1.Business12.Properties73.Legal Proceedings74.Submission of Matters to a Vote of Security Holders7Item 4. (Removed and Reserved) 11 PART II.PART II. and Related Stockholder Matters and Issuer PurchasesPurchase of Equity Securities8Selected Financial Data 12 Item 7. 9Quantitative and Qualitative Disclosures about Market Risk 15 Item 8. (see pages F-2 through F-4)15 inIn and Disagreements with Accountants on Accounting and Financial Disclosure111212131517AccountingAccountant Fees and Services18PART IV. Item 15. Financial StatementsF-1Signature Page15Exhibit Index16IItem 1 - BUSINESSForce Fuels, Overview was originally incorporated in the State of Nevada on July 15, 2002. Our name was changed fromOn May 14, 2008 DSE Fishman changed its name to Force Fuels, Inc. on May 13, 2008. Unless (“the contextCompany”). At that time the primary focus of the Company became the development and marketing of a proprietary, zero emission hydrogen fuel cell/electric battery hybrid drive system for automotive utilization. In October 2009 the Company retained new management and began the process of exploring the feasibility of acquiring, developing and marketing of green energy products as well as regulated and standardized energy based products, including traditional hydrocarbon based oil and gas and solar and wind energy.requires,stated, all references to the "Company"“Company”, "Force Fuels", “we”,“we,” “our”, “ours”,“us” and “us”words of similar import, refer to Force Fuels, Inc.its wholly-owned subsidiary Great American Coffee Company, Inc.Assignmentmanagement of oil, gas and Contribution Agreement betweenalternative energy operations.ICE Conversions, Inc.On July 31, 2008 we entered into an assignment and contribution agreement (“Assignment and Contribution Agreement”) with Lawrence Weisdorn and ICE Conversions, Inc. to operate a business engageddischarge its liabilities in the development, manufacture and marketingnormal course of electric drive systems for installation in short-haul commercial trucks.business. The transactions contemplated by the Assignment and Contribution Agreement include:(a) The contribution, transfer and licensecontinuation of certain assets and intellectual property rights of ICE to the Company;(b) The grant of 1,000,000 shares of Common Stock to ICE; by subsequent agreement 600,000 of these shares were returned, to the Company for cancelation, on December 9, 2009.(c) Confirmationas a going concern is dependent upon the ability of the previous grant of 2,500,000 shares of Common Stock to Lawrence Weisdorn pursuant to a consulting agreement; by subsequent agreement these shares were returned on, August 31, 2009, for cancelation.(d) Cash payment of $400,000 from the Company to ICE, made payable as follows: 100,000 onacquire oil and gas properties or before March 15, 2009 and $300,000 on or before June 15, 2009.(e) on January 30, 2009 ICE agreedobtain necessary financing to extend the timeline for the $400,000 cash payment to allow Force Fuels to make 8 separate installment payments, each in the amount of $50,000, due on or before the last day of each quarter of Force Fuel’s fiscal year, commencing with the first installment due on or before April 30, 2010continue operations, and the eighth and final payment due on or before January 31, 2012.The Assignment and Contribution Agreement replaced the Joint Venture Agreement dated May 12, 2008. Five hundred thousand (500,000)attainment of the 1,500,000 shares previously issued to ICE were to be cancelled onprofitable operations. At July 31, 2008, pursuant2011, the Company had a working capital deficit of $1,275,767 and had accumulated losses of $3,801,802. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The Company’s Consolidated Financial Statements included elsewhere in this Report do not include any adjustments to the termsrecoverability and classification of the Assignmentrecorded asset amounts and Contribution Agreement.In Junel 2010, the agreement was amended effective April 2010. By virtueclassification of liabilities that amendment, the company returned to ICE all of the intellectual property rights described above and received, in exchange, intellectual property rights for the development of a hydrogen/electric hybrid automobile. For this non-monetary exchange of assets, the fair value of neither the asset received nor the assets relinquished is determinable within reasonable limits and hence, the new asset has been recorded at the book value of the relinquished asset. In addition, ICE cancelled the $400,000 debt owing to ICE for the acquisition of the above referenced intellectual property rights.In the first half of the year, we began expanding our activities in other energy-related fields with the intention of developing its presence in the traditional and alternative energy fields. The first step toward the implementation of our strategy involved the acquisition of 13 developed oil leases in Southern Kansas through the signing of a purchase agreement with PEMCO, an Oklahoma Oil Field operator. In the last few months,might be necessary should the Company has been finalizing financing, buildingbe unable to continue as a technical infrastructuregoing concern.developing a plan for the refurbishing and development of the oil leases.1PropertiesFor these reasons, as of the date of this filing the company intends to move itstois on property acquisition, exploration, and development activities related to oil, gas and electrical production. These energy-based activities include traditional hydrocarbon-based oil and gas development, as well as “green” or “alternative” energy, which includes solar and wind electrical generation.1) The purchase of marginally producing shallow oil wells, which are relatively inexpensive to operate and can be optimized with existing technologies;2) The purchase of leases with potential for additional drilling in proven producing areas; and3) The acquisition of in-house know-how to further optimize production through stimulation, refurbishing and site optimization.· The drilling of shallow oil wells from 600 to 3,000 feet deep, which are relatively inexpensive to operate and can be optimized with existing technologies · The purchase of marginally producing shallow oil wells; · The purchase of leases with potential for additional drilling in proven producing areas; and · The acquisition of in-house know-how to further optimize production through stimulation, refurbishing and site optimization. over 2,600approximately 2,500 acres of oil producing land leases with 49 oil strippers and 5 natural gas siteswells located in southernsoutheast Kansas.Subsequently,fieldproperty mostly drilled to the Redd Sands formation. Currently the production has been generated from approximately four wells. The balances of electrical energy production,the wells have been inactive for a period of time.focus solely on the exploitation of proven and established technologies that can generatesell to Pemco a positive return on investment and tax benefits applicable to green energy and oil revenues. While naturally taking full advantage of current government assistance and incentives, placing a significant premium on the economic self-sustainability of all our projects and how new technologies and policies may affect us.The company intends to continue to leverage its Intellectual Property assets through further development, expansion and marketingfifty percent (50%) interest in four of the technology licensedthirteen leases originally acquired by the Company under the Purchase Agreement. The Company will sell these interests for all amounts owed by the Company to Pemco and all other parties under the Purchase Agreement. The four leases are referred to as the Mann, Mann AB, Bayless, and Doebrook leases. With regard to the nine remaining leases originally acquired by the Company under the Purchase Agreement, Pemco will become the operator of drilling operations for each of those leases and subject to a separate development agreement to be executed in the future.ICE Conversions, Inc. Thisexisting operations will be divided equally between Pemco and the Company; (ii) any new development be funded by the Company and the execution plan will be performed by Pemco; and, (iii) revenue (after operating expenses and cost of financing) generated from the new development will be implemented throughallocated seventy five percent (75%) to the creationCompany and twenty five percent (25%) to Pemco.a fully owned subsidiary.This drive train technology consistsfinancing) generated will be allocated seventy five percent (75%) to the Company and twenty five percent (25%) to Pemco.a proprietary, zero emission hydrogen fuel cell/electric battery hybrid drive system. and relies on hydrogen fuel cells to produce electricity and acts as a range extender for electric drive vehicles. TheJuly 31, 2011, the Company is currently in the process of selecting a manufacturer to build the first prototypes. The Company intends to combine components purchased from various suppliers and partner those items with its proprietary technology and integrate allhas sold 776 of the parts into complete electric drive vehicles. Industry OverviewEnergy SectorAccording960 barrels of oil which was considered as inventory as of July 31, 2010. Effective July 31, 2011, the Company has reclassified the balance of the inventory to government forecast, the price range, in 2007 dollars, for crude oil for the next 10 years will remain in the range between $80 and $115 per barrel.1 US crude oil production in 2008 was 4,950,000 barrels per day. 21% of electrical energy generated in the US in 2007 was from natural gas. 52% of US households are heated with natural gas. The majority of hydrogen produced in the United States is through reforming of natural gas.Status of Oil Reserves in the United StatesIn 2007, the United States had 2% more proven reserves than in 2006.2 During the last 10 years, new yearly proven reserves have compensated for 96% of total oil production3 (thus not effectively reducing total available and proven oil reserves significantly).Opportunities for Entry in the sectorA large number of oil and gas wells in the United States are owned by small producers and individuals. The aging of the owner population, the current economic crisis and recent improvements in extracting and stimulation technologies are providing a unique opportunity:Poorly producing wells and smaller properties often are run without access to technical expertise and are not maintained correctly. Often, production can be increased simply by a small investment in maintenance and updated equipment.Small property owners looking to “cash out” are too smallproperties. large operators.Producers do not have access to funds for production optimization like stimulation or well depth modification.Down spacing. Several locations are candidates for higher well densities and increased production, which, combined with a drastic drop in drilling and pumping equipment costs, make established reserves development desirable.New low cost technologies applicable to low/non-producing small plots. Recent improvement in technologies, once difficult to control, like nitrogen stimulation or, too expensive to implement on a smallHydrogen/Electric VehiclesThe emerging fuel cell and hydrogen vehicle industry offers a technological option to increasing worldwide energy costs coupled with, the long-term availability of petroleum reserves and environmental concerns.Fuel cell, bio-diesel, electric and hydrogen hybrid vehicles, as a result of higher efficiency, reduced noise and lower tailpipe emissions, have emerged as a potential alternative to existing conventional internal combustion engine vehicles. Fuel cell industry participants are currently targeting the transportation and hydrogen refueling infrastructure markets. We believe that our hydrogen and hybrid enabling products of fuel storage, fuel delivery, battery and electronic control systems along with our vehicle-level system integration experience can be effectively applied in these markets. Fuel cell and hydrogen-powered hybrid vehicles are being designed to provide clean, quiet power for a variety of applications in transportation, fleet, industrial, and military vehicles. In the automotive market, each of DaimlerChrysler, Ford, General Motors, Honda, Hyundai, Nissan, and Toyota Motor Corporation have unveiled fuel cell vehicles. General Motors is anticipated to begin close to the end of the decade mass production of fuel cell vehicles; DaimlerChrysler is anticipated to begin by 2012 to 2015; and Toyota is anticipated to begin by 2015. A new study from Pike Research has emerged suggesting that fuel cell vehicles are ripe for an explosive increase in volume.1 EIA 2009 yearly forecast of crude oil prices. http://www.eia.doe.gov/oiaf/forecasting.html2 DOE report on current oil and gas reserves 2008Pike predicts fuel cell vehicles (FCVs) will reach 670,000 in annual sales volume by 2020. Though the predicted volume is much higher than we anticipated, the study suggests that automakers will adopt fuel cell technology at a rapid rate over the next ten years, leading to high annual output. Of the 670,000 in annual sales, the U.S. will lead the way with 134,049 FCVs, China will hold a close second at 129,241 and Germany will round out the top three with 126,783 annual sales of FCVs.We believe, as this technology of the future is being commercialized, this program has helped expedite the expansion of a hydrogen infrastructure and bridge the technology gap between conventional gasoline vehicles and fuel cell vehicles.1) Intellectual PropertyThe emerging fuel cell and hydrogen vehicle industry offers a technological option to increasing worldwide energy costs coupled with, the long-term availability of petroleum reserves and environmental concerns. Fuel cell, bio-diesel, electric and hydrogen hybrid vehicles, as a result of higher efficiency, reduced noise and lower tailpipe emissions, have emerged as a potential alternative to existing conventional internal combustion engine vehicles. Fuel cell industry participants are currently targeting the transportation and hydrogen refueling infrastructure markets. We believe that our hydrogen and hybrid enabling products of fuel storage, fuel delivery, battery and electronic control systems along with our vehicle-level system integration experience can be effectively applied in these markets.Fuel cell and hydrogen-powered hybrid vehicles are being designed to provide clean, quiet power for a variety of applications in transportation, fleet, industrial, and military vehicles. In the automotive market, each of DaimlerChrysler, Ford, General Motors, Honda, Hyundai, Nissan, and Toyota Motor Corporation have unveiled fuel cell vehicles. General Motors is anticipated to begin close to the end of the decade mass production of fuel cell vehicles; DaimlerChrysler is anticipated to begin by 2012 to 2015; and Toyota is anticipated to begin by 2015. A new study from Pike Research has emerged suggesting that fuel cell vehicles are ripe for an explosive increase in volume. Pike predicts fuel cell vehicles (FCVs) will reach 670,000 in annual sales volume by 2020. Though the predicted volume is much higher than we anticipated, the study suggests that automakers will adopt fuel cell technology at a rapid rate over the next ten years, leading to high annual output. Of the 670,000 in annual sales, the U.S. will lead the way with 134,049 FCVs, China will hold a close second at 129,241 and Germany will round out the top three with 126,783 annual sales of FCVs.Hydrogen-powered hybrid and other hydrogen vehicles can begin to drive the demand for the refueling infrastructure of this clean fuel, a critical component to fuel cell vehicle commercialization. The South Coast Air Quality Management District located in Diamond Bar, Southern California, is positioning the Los Angeles, Orange and Riverside Counties to be ready for fuel cell vehicles by initiating a hydrogen-powered hybrid program. In January 2006, 30 hydrogen hybrid Toyota Priuses were obtained by fleets located in Southern California. The objective of this effort, funded by the South Coast Air Quality Management District, was to stimulate the early demand for hydrogen, expedite the development of infrastructure, and provide a bridge to fuel cell vehicles. We believe, as this technology of the future is being commercialized, this program has helped expedite the expansion of a hydrogen infrastructure and bridge the technology gap between conventional gasoline vehicles and fuel cell vehicles. We, also, believe that this can be the model for other markets where fuel cell vehicles will emerge, such as North America, Europe and Asia-Pacific. As such, we intend to initially focus our marketing efforts of hydrogen hybrid systems in Southern California. As the strategic importance of national oil reserves becomes increasingly evident, the full exploitation of existing reserves and low yield wells have come under the spotlight. In the United States, one in six barrels of oil produced comes from a marginal well. Such wells are defined as producing less than 10 barrels of crude per day. In the U.S., marginal wells account for over 80% of all active wells. As new extraction technologies mature and become economically feasible for use on marginal wells, the potential value of these untapped resources increases. In addition, recent economic turmoil and an aging population of independent oil producers has created a convergence of events that, together with projected oil prices well over $70 per barrel, represent an unique opportunity for dynamic new entrants to the industry. For these reasons, the company remains confident that its long term plan to enter the traditional and alternative energy arenas will meet with significant success.Business Strategy1) Intellectual PropertyWe intend to utilize the intellectual property to establish a position as a provider of high performance zero emission sports cars. We will leverage our alternative fuel, electronic control, electric and hybrid electric drive systems, and hydrogen handling and refueling capabilities and experience to select off-the-shelf components for assembly into a variety of hybrid energy vehicles. We will diversify our customer base for these vehicles to include OEMs, OEM dealer networks and other strategic alliance and distribution partners.Products1) Intellectual PropertyWe will focus on marketing zero-emission Vehicles to a variety of alternate energy and green minded individuals, OEM dealer networks, as well as end-user consumers. We are uniquely positioned to leverage our knowledge and experience about alternative fuels, electronic controls, hydrogen and hybrid hydrogen/electric drive systems, and hydrogen handling and refueling. We intend to become part of the truly pollution free or reduced pollution solution and alternative energy conversion systems solution for today’s drivers.At the present time we are completing a working, proof of concept prototype vehicle suitable for testing and demonstration of performance. The production version concept body pictured below will need to be engineered for DOT crash testing. The body will have to be built and the interior designed. At the present time, third party products exist for the various components that Cheetah intends to install in the production version concept vehicle. We have not made public announcements regarding the availability of our new vehicle. We believe acquisition of supplies, costs of assembly and other costs related to the production of the Vehicles will require the investment of a material amount of our current and future assets. We intend to become a one stop solution to provide a truly pollution free or reduced pollution, alternative energy conversion solution for today’s drivers. To accomplish this we will be producing and marketing the following alternative energies vehicles:Cheetah EV (Electric Vehicle)We are designing and will be marketing a battery only, 400 HP, 1,400 FT/LB of torque, zero emission electric Supercar. This plugin battery electric drive system eliminates dependence on gasoline, and eliminates pollution associated with burning fossil fuels. As with other battery only electric vehicles the Cheetah EV will have a limited driving range.Cheetah HEV (Hydrogen Electric Vehicle)We will also offer the 400 HP, 1,400 FT/LB of torque, zero emission Supercar powered by the proprietary Cheetah hydrogen/electric hybrid drive system. Hydrogen fuel cells produce electricity on demand and as such are used as range extenders for electric vehicles. All of the performance attributes of the vehicle are determined by the battery dominant power train. The addition of this optional hydrogen/electric hybrid drive system is expected to provide a driving range of greater than 300 miles. This hydrogen/electric hybrid drive system also eliminates dependence on gasoline, and eliminates pollution associated with burning fossil fuels.Competition1) Intellectual PropertyIn the fuel cell and hydrogen industry, our expertise will be in alternative fuel high performance vehicles. We do not manufacture fuel cells or fuel reformers or the parts we will use in our vehicles. We may face competition from traditional automotive component suppliers, such as Bosch, Delphi, Siemens, and Visteon, and from motor vehicle OEMs that develop alternative fuel systems internally. Also, Tesla, Fisker and Quantum are now the leading providers of alternative fuel technologies to the automotive industry and have already established a significant marketplace presence.We believe that our competitors, such as Tesla, Fisker and Quantum, have technology leadership and integration expertise derived from many years of experience with vehicle development and assembly programs whereas we are a recently formed company with a limited track-record. Our foreseeable competitors typically focus on proprietary components, whereas we will focus on integrating preexisting components into the “best-available composite vehicle”. Also, some offer complete packaged fuel systems based upon their own advanced technologies, including gaseous fuel storage, fuel metering and electronic controls.EmployeesThe Company currently has one (1) full-time management employee, and several consultants that provide services on an as needed basis.SubsidiariesGreat American Coffee Company remains an inactive wholly-owned subsidiary with no current operations.Item 1A – RISK FACTORSRisk factors related to concentration of sales.Our future financial condition and results of operations will depend upon prices received for our oil and natural gas asare volatile and are subject to wide fluctuations depending on numerous factors beyond our control, including seasonality, economic conditions, foreign imports, political conditions in other energy producing countries, market actions by the Organization of the Petroleum Exporting Countries (“OPEC”), and domestic government regulations and policies. Substantially all of our production is sold pursuant to agreements with pricing based on prevailing commodity prices, subject to adjustment for regional differentials and similar factors.asestablished companies that have substantially larger operating staffs and greater capital resources than we do. Our ability to acquire additional properties and to discover reserves in the costsfuture will depend upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment.finding, acquiring, developingoil and producing reserves. Prices fornatural gas from the Company’s operations. States in which the Company operates have statutory provisions regulating the production and sale of oil and natural gas, including provisions regarding deliverability. These statutes, along with the regulations interpreting the statutes, generally are intended to prevent waste of oil and natural gas and to protect correlative rights to produce oil and natural gas by assigning allowable rates of production to each well or proration unit.fluctuationsvarious federal and state laws and regulations to protect the environment. Various federal and state agencies are considering, and some have adopted, other laws and regulations regarding environmental controls that could increase our cost of doing business. These laws and regulations may require the acquisition of a permit by operators before drilling commences; the prohibition of drilling activities on certain lands lying within wilderness areas or where pollution arises; and the imposition of substantial liabilities for pollution resulting from drilling operations, particularly operations in offshore waters or on submerged lands. The cost of oil and natural gas development and production also may increase because of the cost of compliance with such legislation and regulations, together with any penalties resulting from failing to comply with the legislation and regulations. Ultimately, the Company may bear some of these costs.
Our securities should be purchased only by persons who can afford to lose their entire investment in us. You should carefully consider the following risk factors and other information in this filing before deciding to become a holder of our securities. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent.otheradditional factors that are beyond our control. These factors includecontrol, including: worldwide political instability, especially in the Middle East, the foreign supplyand domestic supplies of crude oil and natural gas, the price of foreign imports,gas; the level of consumer product demanddemand; weather conditions and natural disasters; domestic and foreign governmental regulations; the price and availability of alternative fuels.No established market for ourautomotive technology.Therefuels; political instability or armed conflict in oil producing regions; the price and level of foreign imports; and overall domestic and global economic conditions.no established market for our automotive technology. This technology has never been sold before and the risk exists for the establishment of a new market. We are counting on a new market developing and that the new market will accept our technology as opposedextremely difficult to other alternatives. The new market may not develop or may not develop in time to allow us to continue our operations.Ourlack of operating history.We had no operations prior to the transfer to the Company on July 31, 2008 of assets pursuant to the Assignment and Contribution Agreement with ICE, and the acquisition on April 23, 2010 of the business of extractingpredict future crude oil and natural gas from existingprice movements with any certainty. Declines in crude oil wells on 2600 acresand natural gas prices may materially adversely affect our financial condition, liquidity, ability to finance planned capital expenditures and results of operations. Further, oil and gas prices do not move in the state of Kansas. We have insufficient operating history upon which an evaluation of our future performance and prospects can be made.Our business plan is unproven.withand we may not be able to operate profitably in the near future, if at all.track record to determine if our planned businessassurance that we will be financially viableable to obtain such financing on attractive terms, if at all.successful. Our projected revenues from our business may fall shortif we are profitable, that we will achieve a level of profitability that will provide a return on invested capital or that will result in an increase in the market value of our targeted goalssecurities. Accordingly, we are subject to the risk that, because of these factors and our profit marginsother general business risks noted throughout these “Risk Factors,” we may likewise not be achieved. Untilable to profitably execute our plan of operation.are actually in the marketplace forwill be able to generate revenues or maintain any line of business that might prove to be profitable. Our ability to continue as a demonstrable period of time, it is impossiblegoing concern and to determine ifexecute our business strategies will be successful.Wewill need financing which may not be available.We have not establishedis subject to our ability to generate a sourceprofit or obtain necessary funding from outside sources, including obtaining additional funding from the sale of equity our securities and/or debt financing and will require such financing to establish our business and implement our strategic plan.obtaining additional credit from various financial institutions or other lenders. If we are unable to develop our business, we may have to discontinue operations or cease to exist, which would be detrimental to the value of our common stock. We can make no assurances that our business operations will develop and provide us with significant cash to continue operations. See “Liquidity and Capital Resources” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Going Concern” note to “Item 8. Financial Statements and Supplementary Data.”financingliability of our officers and directors and provide for indemnification by us of our officers and directors to the full extent permitted by Nevada corporate law. Our Articles of Incorporation generally provides that our officers and directors shall have no personal liability to us or our shareholders for monetary damages for breaches of their fiduciary duties as directors, except for breaches of their duties of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, acts involving unlawful payment of dividends or unlawful stock purchases or redemptions, or any transaction from which a director derives an improper personal benefit. Such provisions substantially limit our shareholders' ability to hold officers and directors liable for breaches of fiduciary duty and may require us to indemnify our officers and directors.insufficienta highly speculative activity. Even when fully and correctly utilized, modern well completion techniques such as hydraulic fracturing and horizontal drilling do not guarantee that we will find crude oil and/or natural gas in our wells. Hydraulic fracturing involves pumping a fluid with or without particulates into a formation at high pressure, thereby creating fractures in the rock and leaving the particulates in the fractures to ensure that the fractures remain open, thereby potentially increasing the ability of the reservoir to produce oil or gas. Horizontal drilling involves drilling horizontally out from an existing vertical well bore, thereby potentially increasing the area and reach of the well bore that is in contact with the reservoir. Our future drilling activities may not be successful and, if unsuccessful, such failure would have an adverse effect on our future results of operations and financial condition. We cannot assure you that our overall drilling success rate or our drilling success rate for activities within a particular geographic area will not decline. We may identify and develop prospects through a number of methods, some of which do not include lateral drilling or hydraulic fracturing, and some of which may be unproven. The drilling and results for these prospects may be particularly uncertain. Our drilling schedule may vary from our capital budget. The final determination with respect to the drilling of any scheduled or budgeted prospects will be dependent on a number of factors, including, but not limited to: the results of previous development efforts and the acquisition, review and analysis of data; the availability of sufficient capital resources to us and the other participants, if any, for the drilling of the prospects; the approval of the prospects by other participants, if any, after additional data has been compiled; economic and industry conditions at the time of drilling, including prevailing and anticipated prices for crude oil and natural gas and the availability of drilling rigs and crews; our financial resources and results; the availability of leases and permits on reasonable terms for the prospects; and the success of our drilling technology.operating losses or liabilities. We cannot predict the availability of insurance or the availability of insurance at premium levels that justify our purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations. We may elect to self-insure if management believes that the cost of insurance, although available, is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations.incur, we may substantially curtail or terminateadversely affect our operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interestsfinancial condition and results of existing stockholders.6operations.andand/or satisfy obligations.weour Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of shares of our stock. In addition, if a trading market develops for our common stock, we may attempt to raise capital by sellingrestricted shares of our common stock possibly ator our preferred stock. Our Board of Directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares of common stock. In addition, our Board of Directors is authorized, without shareholder action or vote, to establish various classes or series of preferred stock from time to time and to determine the rights, preferences and privileges of any unissued classes or series including, among other matters, any dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms, the number of shares constituting any such series and the description thereof, and to issue any such shares. Our Board of Directors may, without shareholder approval, issue shares of a discount to market. class or series of preferred stock with voting and conversion rights that could adversely affect the voting power of the holders of the common stock and may have the effect of delaying, deferring or preventing a change in control of us. These actions will result in dilution of the ownership interests of existing shareholders, and that dilution may be material.Force Fuels Common Stock haslittleprior tradingliquidity,at all.there can be no assurancesfall, including: actual or anticipated variations in our quarterly results of operations; changes in market valuations of companies in our industry; changes in expectations of future financial performance; fluctuations in stock market prices and volumes; issuances of dilutive common stock or other securities in the future; the addition or departure of key personnel; announcements by us or our competitors of acquisitions, investments or strategic alliances; and the increase or decline in the price of oil and natural gas.any tradingthe proceeds from sales of our common stock may not equal or exceed the prices you paid for it plus the costs and fees of making the sales.develop.There is a minimal tradingdecrease the market for our Common Stock. No assurance can be given that an orderly trading market or any trading market will ever develop for our Common Stock.In addition, Force Fuels common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for the common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Also,The impact of any such issuances of our common stock on our market price may be increased as a result of the fact that our common stock marketis thinly, or infrequently traded. The exercise of any options or warrants or the vesting of any restricted stock that we may grant to directors, executive officers, employees, and others in general has experienced extreme pricethe future, the issuance of common stock in connection with acquisitions, and volume volatility that has especially affectedother issuances of our common stock could have an adverse effect on the market prices of securities of many companies. At times, this volatility has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of theour common stock. In addition, future issuances of our common stock regardlessor preferred stock may be dilutive to existing shareholders. Any sales of the Company’s actual operating performance.The trading pricesubstantial amounts ofourCommon Stock is likely to be subject to significant fluctuations.There can be no assurance as to the prices at which Force Fuels common stock will trade, if any trading market develops at all. Until the Common Stock is fully distributed and an orderly market develops, the price at which such stock trades may fluctuate significantly and may be lower or higher than the price that would be expected for a fully distributed issue. Prices for the Common Stock will be determined in the marketplace and may be influenced by many factors, including:depth and liquidity ofperception that such sales might occur, could lower the marketdevelopments affecting the business price of Force Fuels generally and the impact of those factors referred to below in particular,investor perception of Force Fuels, andGeneral economic and market conditions.Item 2 - DESCRIPTION OF PROPERTYItem 3 - LEGALhas one outstandinggenerally sells its oil and natural gas at prices then prevailing on the "spot market" and does not have any material long term contracts for the sale of natural gas at a fixed price.approximately $25,000$1,142,739, or alternatively the fair value of services of plaintiff of $413,973, or greater, plus interest. The principal causes of action are breach of contract; and, common count for services rendered arising out of claims for allegedly unpaid wages and future wages. As of July 31, 2011, the Company has accrued $435,947 related to Mr. Luppi’s service to the Company which it anticipates resolving withinis recorded as accrued officers salaries on the next quarter.Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNone7accompanying balance sheet.
ITEM 4. (REMOVED AND RESERVED)IIItem 5 -II. AND RELATED STOCKHOLDER MATTERSOur AND ISSUER PURCHASES OF EQUITY SECURITIES.ishas been quoted on the Over the Counter Bulletin Board (OTCBB)OTC Pink market under the symbol FOFU. “FOFU”.following table sets forth, for the periods indicated, the reportedquarterly high and low closing bid quotationsinformation for our common stock as reported onfor each full quarterly period in the OTCBB. The bid prices reflect inter-dealer quotations, do not include retail markups, markdowns, or commissions, and do not necessarily reflect actual transactions. Quarter Ended July 31, 2010 April 30, 2010 January 31, 2010 October 31, 2009 July 31, 2009 April 30, 2009 January 31, 2009 October 31, 2008 * Our common stock had no active trading market until April 27, 2010 2011 2010 Quarter High Low High Low First $ 0.65 $ 0.26 $ * $ * Second $ 0.48 $ 0.07 $ * $ * Third $ 0.26 $ 0.10 $ 3.75 $ 3.75 Fourth $ 0.15 $ 0.06 $ 1.15 $ 0.30 HoldersWe currently have 224any cash dividends on shares of our Common Stockcommon stock and do not anticipate that we will pay dividendsdoing so in the foreseeable future. We intendIn addition, our current policy is to applyretain any earnings to fund the development offinance operations and expand our business. The purchase of shares of Common Stock is inappropriate for investors seeking current or near term income.On January 29, 200960,0001,294,366 shares of the Company’s common stock to three individualsfor services valued at $388,310 in exchange for professional and consulting services rendered at $0.10 per share having an aggregate value of $6,000.pursuant to an employment agreement issued 1,000,000 shares of its common stock to Oscar Luppithe Company’s chief executive officer as a signing bonus for entering into an Employment Agreement dated October 1, 2009. The shares were valued at $0.30 per share, having a value at $300,000.On January 28,$300,000 in the aggregate.1,122,366148,000 shares of the Company’s common stock to three entities for consulting services, at $0.30 per share, having an aggregate value of $336,710. On March 16, 2010 the Company issued 22,000 shares of the Company’s common stock to two entities for consulting services rendered at $0.30 per share, having an aggregate value of $6,600.On March 30, 2010 the Company issued 150,000 shares of the Company’s common stock to two entities for consulting services rendered at $0.30 per share, having an aggregate value of $45,000.On April 30, 2010 the Company issued 138,000 shares of the Company’s common stock upon conversion of convertible promissory notes at an average price of $4.07 per share, having an aggregatea value of $561,613.the Company’s common stock as an inducement to a lender as a loan inducement fee.an unrelated third-party lender. The shares were valued at $0.89 per share, having an aggregate value of $133,500.On$133,500 in the aggregate. 10,000 shares of common stock. Company’s common stock upon conversion of a promissory note at a price of $0.94 per share, having an aggregate value of $9,400.Subsequent toyear ended July 31, 20102011, the Company issued 181,7464,481,746 shares of common stock for services valued at $739,484 in the Company’s Common Stock, to 2 entitiesaggregate.consulting services; 50,000an extension of maturity date on notes payable. The shares were valued at $25,000; 31,746$24,000 in the aggregate.$33,333; and 100,000$15,600 in the aggregate.$65,000; and 60,000 shares to a lender as partial compensation, for a $30,000 loan, valued at $15,600. Each of$225,000 in the issuances described above was a privately negotiated transaction made in reliance uponaggregate.exemption from registration provided in Section 4(2) ofyear ended July 31, 2011, the Securities Act of 1933.As of the close of business on December 22, 2010, there were 7,841,875Company cancelled 12,500 previously issued shares of our Common Stock, par value $0.001 per share, issued and outstanding. Item 7 - MANAGEMENT'SOPERATIONS Annual Report on Form 10-K includes current beliefs, expectationsdiscussion and other forward lookinganalysis contains forward-looking statements the realizationthat involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of which may be adversely impacted by any of thecertain factors, discussed or referenced throughout this Form 10-K, including, but not limited to, factorsthose set forth in this Report.heading, “Item 1A. Risk Factors”circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors. Actual results may differ from these estimates.Part I above.had no operations prior torecognizes oil and natural gas revenue under the transfer tosales method of accounting for its interests in producing wells as crude oil and natural gas is produced and sold from those wells. Under the sales method, the Company on July 31, 2008does not recognize the value of assets pursuant to the Assignment and Contribution Agreement with ICE.Under the terms of the Assignment and Contribution Agreement, the Company has undertaken to raise capital and to make payments to ICE in an aggregate amount of $400,000, $100,000 of which was due on or before March 15, 2009; and $300,000 of which was due on or before June 15, 2009. The payment obligations were to accelerate and become immediately dueits crude oil inventory in the event of any nonpayment or bankruptcy. If the Company fails to raise these funds and pay its obligations to ICE, the Company will be unable to continue to conduct its business. On January 30, 2009 ICE and the Company entered into an extension agreement to extend the timeline for the $400,000 cash payment as follows; force Fuels shall make (8) separate installment payments, eachfinancial statements. Costs associated with production are expensed in the amount of $50,000, due on or before the last day of each quarter of Force Fuels’ fiscal year, commencing with the first installment due on or before April 30, 2010 and the eighth and final payment due on or before January 31, 2012.During2010, we realized our first oil revenues. We realized $7,451 from2011, the Company recognized cost of goods sold of $43,359 related to the sale of inventory. For the year ended July 31, 2011, the Company did not have any cost of goods sold related to oil produced by our Kansas wells compared to $-0- during 2009.expenses2010 totaled $1,915,561 compared to $397,701 for 2009. The increase was2011 were $1,461,290, a decrease of $454,271 or approximately 24% from total operating expenses of $1,915,561. This decrease in primarily the result of significant increasesa decrease in stock based compensation of $300,000 and a decrease in impairment of intellectual property rights, and general and administrative expenses. We issued stock and warrantsof $344,000 offset by an increase in lease operating expenses of $37,394, or approximately 150% to various consultants. The stock based compensation expense in 2010 was $300,000 compared to $6,000 in 2009. Our research and development expense decreased from $115,434 in 2009 to $-0- in 2010 as we focused on our oil projects. Our general and administrative expenses increased from $170,767 in 2009 to $1,022,481 in 2010. Officer compensation expense increased from $105,500 in 2009 to $224,080 in 2010.Other Income (Expenses)During 2010 we recorded a loss on the settlement of debt of $310,014 compared to $-0- in 2009. We also recorded a loss on disposal of assets in the amount o f$19,915 during$62,394 for the year ended DecemberJuly 31, 2010, of which there was no comparable loss during 2009. Our interest expense increased2011 from $2,022 in 2009 to $43,850 in 2010.Net LossOur net loss$25,000 for the year ended July 31, 2010, was $2,281,889 comparedan increase in salary and wages – officers of $184,987, or approximately 83% to $399,723$409,067 for 2009. This translates to $0.29 per share compared to $0.05, respectively.Liquidity and Cash FlowsWe used $181,316 of cash in our operating activities duringthe year ended July 31, 2011 from $224,080 for the year ended July 31, 2010, a decrease in general and administrative expense of $75,511, or approximately 7% to $945,031 for the year ended July 31, 2011 from $1,017,542 for the year ended July 31, 2010, and an increase in depletion, depreciation, amortization, and accretion of $19,798, or approximately 300% compared to $371,538 during 2009. The increased$4,939 for the year ended July 31, 2010.was due to our expansion in toon settlement of debt of $310,014, a loss on disposal of assets of $19,915, and interest expense of $43,850.oil extraction industry. We used $24,250 of cash in our investing activities to purchase equipment in 2009year ended July 31, 2011 or $0.09 per share compared to $-0-a net loss of $2,281,889 or $0.29 per share for the year ended July 31, 2010.$268,158 during$158,500 for the year ended July 31, 20102011 compared to $395,597 during 2009. During 2010 we used $100,000$268,158 of net cash to repayprovided for the year ended July 31, 2010. Net cash provided by financing activities for the year ended July 31, 2011 consisted of $124,300 in proceeds from convertible notes payable. We received $356,158 aspayable, $29,200 in proceeds from convertible notes payable – related parties, $75,000 in proceeds from notes payable, during 2010 compared to $62,408 during 2010. We also received $12,000 pursuant to related partya repayment of notes payable during 2010, comparedof $45,000, and a payment for cancellation of common stock of $25,000.$333,189 in 2009. We have $86,842a number of cashfactors, including market conditions, investor acceptance of our business plan and investor sentiment. These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us. There can be no assurance that financing will be available to us on hand as of July 31, 2010. We expectfavorable terms or at all. If we are unable to receive substantial revenues from our oil production but the revenues will notobtain additional financing, we may be sufficient to meet our cash flow requirements. We also had a deficit in working capital of $1,856,684 as of July 31, 2010. Accordingly, we expectunable to continue to rely on the sale of our debt and equity instruments for at least the next 12 months.Recently issued accounting pronouncements.In May 2009, the FASB issued ASC 855 (previously SFAS 165, Subsequent Events). ASC 855 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 will be effective for interim or annual period ending after June 15, 2010 and will be applied prospectively. The Company adopted the requirements of this pronouncement during the quarter ended July 31, 2010. The adoption of SFAS 165 didoperations.an impact on its consolidated resultsany relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of operationsfacilitating off-balance sheet arrangements or consolidated financial position.June 2009,January 2010, the FASB issued ASC 810, (previously SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. SFAS 167 is effective for fiscal years beginning after June 15, 2010.In June 2009, the FASB issued ASC 105 (previously SFAS No. 168, The FASBFinancial Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("GAAP"Board (“FASB”) - a replacement of FASB Statement No. 162), which will become the source of authoritative accounting principles generally accepted in the United States recognized by the FASB to be applied to nongovernmental entities. The Codification is effective in the third quarter of 2009, and accordingly, the Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 and all subsequent public filings will reference the Codification as the sole source of authoritative literature. The Company does not believe that this will have a material effect on its consolidated financial statements. In June 2009, the FASB issued amended standards for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal year 2010 and we are currently evaluating the impact that adoption will have on our consolidated financial statements.In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at2010-06, “Improving Disclosures about Fair Value which providesMeasurements”. ASU 2010-06 requires additional guidance on the measurementdisclosures about fair value measurements including transfers in and out of liabilities at fair value. These amended standards clarify that in circumstances in whichLevels 1 and 2 and a quoted price in an active markethigher level of disaggregation for the identical liabilitydifferent types of financial instruments. For the reconciliation of Level 3 fair value measurements, information about purchases, sales, issuances and settlements are presented separately. ASU 2010-06 is not available, we are required to useeffective for interim and annual reporting periods beginning after December 15, 2009 with the quoted priceexception of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standardsrevised Level 3 disclosure requirements, which are effective for usinterim and annual reporting periods beginning after December 15, 2010. Comparative disclosures are not required in the fourth quarteryear of fiscal year 2009adoption.not expectedused in estimating proved oil and gas quantities, and provides guidance on geographic area with respect to have a significant impact on our consolidated financial statements.Critical accounting policiesThe preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Aninformation about significant reserves. ASU 2010-03 must be applied prospectively as a change in accounting policyprinciple that is considered to be critical if it requires aninseparable from a change in accounting estimate to be made basedand is effective for entities with annual reporting periods ending on assumptionsor after December 31, 2009.matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.Because of our limited level of operations, we have not had to make material assumptions or estimates other than our assumption that we are a going concern.Seasonality.Our business is not seasonal.8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA8. Financial Statements and Supplementary Data.The financial statements filed as part of this Annual Report on Form 10-K are set forth on theF-2F-1 through F-4 of this report and are incorporated herein by reference.F-15.9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREOn October 6, 2009 Li9. Changes in and Company resigned as the Registrants registered public accounting firm. The reportsDisagreements with Accountants on Accounting and Financial Disclosure.Li and Company on the Registrant’s financial statements for the fiscal years ending July 31, 2007 and July 31, 2008 did not contain any adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope or accounting principles other than an explanatory paragraph as to the Company’s ability to continue as a going concern. During the two fiscal years, referred to above, there were no disagreements between the registrant and Li and Company on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of Li and Company would have caused Li and Company to make reference to the matter in its reports on the Registrant’s consolidated financial statements for such years.On November 17, 2009 the Company engaged Kabani and Company, Inc. as its registered public accounting firm. Kabani and Company resigned on November 15, 2010. There were no significant disagreements between Kabani and the Company on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures which, if not resolved to the satisfaction of Kabani and Company would have caused Kabani and Company to make reference to the matter in its reports on the Registrants financial statements for such years.On November 16, 2010 the Company engaged Sadler, Gibb and Associates as its registered public accounting firm.Item 9AT – CONTROLS AND PROCEDURESOur Chief Executive Officer, who is also our Chief Financial Officer (the “Certifying Officer”), has evaluated the effectiveness of the design and operation of ourJuly 31, 2009. Based on this evaluation, our Certifying Officer has concluded1934 (the "Exchange Act"), that our disclosure controls and procedures were ineffectiveare designed to ensure that information required to be disclosed by us in our periodicthe reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified for each reportin the Securities and Exchange Commission's rules and forms and that such information is presentedaccumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.The Certifying Officer has further indicated that there were no significant changes in We carried out an evaluation, under the supervision and with the participation of our internal controls or other factors that could significantly affect such controls subsequent to the date of his evaluation,management, including our principal executive officer and there were no corrective actions with regard to significant deficiencies and material weaknesses. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectivesprincipal financial officer, of the systemeffectiveness of our disclosure controls are met, and noprocedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of the period covered by this Report. Based on the evaluation of these disclosure controls can provide absolute assuranceand procedures, the Chief Executive Officer and Chief Financial Officer concluded that all control issuesour disclosure controls and instancesprocedures were not effective as of fraud, if any, within a company have been detected.Evaluation ofJuly 31, 2011.Controls overControl Over Financial ReportingThe Certifying Officer also responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a processset of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reportingprinciples (“GAAP”) and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; · provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; · provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and · provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. may occur or that the degree of compliance with the policies or procedures may deteriorate.The Certifying Officer our internal control over financial reporting as of July 31, 2009. This assessment is2011 based on the criteria for effective internal control describedframework set forth in Internal Control — Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.itsthis assessment, hemanagement concluded that ourthe Company’s internal control over financial reporting was not effective as of July 31, 2010 was not effective in2011. specific areasassessment described in the “Disclosure Controls and Procedures” section above, and as specifically described in the paragraphs below.As of July 31, 2010 the Certifying Officermanagement identified the following specificcontrol deficiencies that represent material weaknesses in the Company’s internal controls over its financial reporting processes:12at July 31, 2011:Policies and Procedures for the Financial Close and Reporting Process — Currently there are no policies or procedures that clearly define the roles in the financial close and reporting process. The various roles and responsibilities related to this process should be defined, documented, updated and communicated. Failure to have such policies and procedures in place amounts to a material weakness to the Company’s internal controls over its financial reporting processes.Adequacy of Accounting Systems at Meeting Company Needs — The accounting system in place at the time of the assessment lacks the ability to provide high quality financial statements from within the system, and there were no procedures in place or built into the system to ensure that all relevant information is secure, identified, captured, processed, and reported within the accounting system. Failure to have an adequate accounting system with procedures to ensure the information is secure and accurately recorded and reported amounts to a material weakness to the Company’s internal controls over its financial reporting processes.Segregation of Duties — The Certifying Officer has identified a significant general lack of definition and segregation of duties throughout the financial reporting processes. Due to the pervasive nature of this issue, the lack of adequate definition and segregation of duties amounts to a material weakness to the Company’s internal controls over its financial reporting processes.· Policies and Procedures for the Financial Close and Reporting Process — Currently there are no policies or procedures that clearly define the roles in the financial close and reporting process. The various roles and responsibilities related to this process should be defined, documented, updated and communicated. Failure to have such policies and procedures in place amounts to a material weakness to the Company’s internal controls over its financial reporting processes. · Adequacy of Accounting Systems at Meeting Company Needs — The accounting system in place at the time of the assessment lacks the ability to provide high quality financial statements from within the system, and there were no procedures in place or built into the system to ensure that all relevant information is secure, identified, captured, processed, and reported within the accounting system. Failure to have an adequate accounting system with procedures to ensure the information is secure and accurately recorded and reported amounts to a material weakness to the Company’s internal controls over its financial reporting processes. · Segregation of Duties — The Certifying Officer has identified a significant general lack of definition and segregation of duties throughout the financial reporting processes. Due to the pervasive nature of this issue, the lack of adequate definition and segregation of duties amounts to a material weakness to the Company’s internal controls over its financial reporting processes. The Company will create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to review by other members of management as well as the Company’s outside accountant. In addition, we plan to enhance and test our month-end and year-end financial close process. Additionally, our board of directors will increase its review of our disclosure controls and procedures. We also intend to develop and implement policies and procedures for the financial close and reporting process, such as identifying the roles, responsibilities, methodologies, and review/approval process. We believe these actions will remediate the material weaknesses by focusing additional attention and resources in our internal accounting functions. However, the material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.· The Company will create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to review by other members of management as well as the Company’s outside accountant. In addition, we plan to enhance and test our month-end and year-end financial close process. Additionally, our board of directors will increase its review of our disclosure controls and procedures. We also intend to develop and implement policies and procedures for the financial close and reporting process, such as identifying the roles, responsibilities, methodologies, and review/approval process. We believe these actions will remediate the material weaknesses by focusing additional attention and resources in our internal accounting functions. However, the material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. annual reportAnnual Report does not include an attestation report of ourthe Company’s registered public accounting firm regarding internal control over financial reporting. The Certifying Officer’sManagement’s report was not subject to attestation by ourthe Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities ofCommission that section , and is not incorporated by reference into any filing ofpermit the Company whether made beforeto provide only management’s report in this Annual Report.after the date hereof, regardless of any general incorporation language in such filing.10 - DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEOn October 1, 2009 the Board of10. Directors, accepted Mr. Lawrence Weisdorn voluntary resignation from his positions of Director, President, Chief Executive officerOfficers and Chief Financial Officer of the Registrant. There were no disagreements or misunderstandings relating to the Registrant’s operation, policies or practices between the Board and Mr. Weisdorn leading to his resignation. Mr. Weisdorn cancelled, effective May 1, 2009 the October 21, 2009 employment agreement entered into between himself and the Registrant and agreed to cancel all wages accrued but unpaid as of April 30, 2009.13Corporate Governancename, agenames and positionages of all of our directors and executive officers certain non-executiveas of October 31, 2011 along with their current positions with the Company. All directors hold office until the next annual meeting of stockholders or until their successors have been elected and qualified. Our executive officers are elected by our Board of Directors and directors: serve at its discretion.AgeAge Position and Offices with the CompanyOscar Luppi (1)46Chairman of the Board, President, 55 Chief Executive Officer and DirectorDonald Hejmanowski (2)50Secretary, and DirectorThomas C. Hemingway (3)52Interim Treasurer, Director(1)Pursuant to an employment agreement dated October 1, 2009,Oscar Luppi was appointed Chairman of the Board President and Charles B. Mathews 47 Chief ExecutiveFinancial Officer and was elected as a director concurrently therewith.(2)Pursuant to an employment agreement dated October 21, 2008,Donald Hejmanowski was appointed 52 Secretary and Vice President of Business Development. Mr. Hejmanowski was elected as a director concurrently therewith. On October 1, 2009 Mr. Hejmanowski cancelled the employment agreement effective May 1, 2009 and agreed to cancel all unpaid wages accrued but unpaid as of April 30, 2009.Director(3) resigned from his positions as President, Chief Executive Officer and Chief Financial Officer effective October 21, 2008. On October 1, 2009 Mr. Hemingway, resigned his position of Chairman of the board, and without compensation, was appointed interim Treasurer.BiographiesOscar Luppi (46)– Mr. Luppi has served as the President, Chief Executive Officer and Chairman of the Board of Directors of the Registrant from October 1, 2009 to the present. From May 1990 to the present, Mr. Luppi has served as President of International Patent, Manufacturing and Services, Inc., a private investment company. From March 2001 through October 2007, Mr. Luppi also served as President of Phonica SpA., an Italian telecom company.Donald Hejmanowski – Director andCorporateSecretary Don has served as a Director of the Company and Corporate Secretary from November 1, 2009 to the present. He is also currently the Secretary, Treasurer and a Director of H Y D, Inc., a Nevada corporation, a position he has held from 2002 to the present. HYD is in the business of providing business consulting services. Mr. Hejmanowski also served as the Vice-President of Corporate Communications and a Director of Vision Industries Corp. from December 2008 until May 2010. Vision Industries Corp. is a provider of electric/hydrogen hybrid powered vehicles and turnkey hydrogen fueling systems. He also has served as a Director of Ice Conversions, Inc., a California corporation, from November 2005 to March 2010. Ice Conversions is in the business of developing electric drive systems for installation in short-haul commercial trucks. From April 2006 to February 2009, he served as a Director of US Farms, Inc., a Nevada corporation.US Farms, Inc. is a diversified commercial farming and nursery company. From January 2006 to September 2007, he was a Director of Cyclone Energy, Inc., a California corporation that sought to develop, distribute, and market alternative fuels and hydrogen fuels through the existing gas station infrastructure. He also served as a Director of LitFunding Corp. from June 2005 to September 2006. LitFunding Corp. provided funding for litigation primarily for plaintiffs’ attorneys. From November 2002 to April 2005, Don served as a consultant to American Water Star, Inc. a water bottling and distribution company.(52) – Mr. Hemingwayhas been the Chief Executive Officer since May 2011 and has served as the Chairman of the Registrant from May 9, 2006 to the present and has previously served as the Chief Executive Officer and Chief Financial Officer of the Registrant from May 9, 2006 to October 21, 2008. Mr. Hemingway has served as the Chairman, Chief Operating Officer and Secretary of NextPhase Wireless, Inc., a broadband connectivity solutions provider from January 2007 to the present. On June 13, 2008, Mr. Hemingway became Interim Chief Financial Officer of NextPhase Wireless, Inc. and on September 4, 2008, Mr. Hemingway was named Chief Executive Officer. Mr. Hemingway has also served as the President and Chief Executive Officer of Redwood Investment Group, an investment banking trust, from June 2003 to the present. Mr. Hemingway previously served as Chairman and Chief Executive Officer of Oxford Media, a next generation media distribution company, from 2004 to 2006; and as Chairman and Chief Executive Officer of Esynch Corporation, developer and marketer of video-on-demand services and video streaming through the Internet, from 1998 to 2003.SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCECharles B. Mathews has served as the Chief Financial Officer since September 5, 2011. Mr. Mathews currently serves as CFO for SunRidge International, a publicly traded company that is a manufacturer of medical devices. Mr. Mathews also serves as CFO at BCM Energy Partners, Inc., an oil and gas focused public company. Mr. Mathews has been the Managing Partner of Mathews & Mann, LLC, an accounting and business-consulting firm in Phoenix, Arizona, since October 2000. From October 2010 to April 2011, Mr. Mathews was Chief Financial Officer for Global Entertainment Corporation, an integrated event and entertainment company. From December 2007 to March 2009, Mr. Mathews was Chief Financial Officer of Education 2020, a virtual education company focused on students in grades 6-12. From March 2004 to November 2007, Mr. Mathews was Executive Vice President and Chief Financial Officer of Quepasa Corporation, a publicly traded leading Hispanic internet portal. Mr. Mathews is a Certified Public Accountant, and earned his B.A. in Business Administration from Alaska Pacific University and an M.B.A. from Arizona State University.of 1934, as amended (the “EXCHANGE ACT”), requires the Company’sthat our directors and executive officers, and directors and persons who beneficially own more than ten percent10% of a registered class of the Company’sour equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of common stock and the other equity securities of the Company. These reporting persons are required by the regulations of the SEC to furnish the Companyus with copies of these reports.To the Company’s knowledge, basedall Section 16(a) forms they file.itsa review of the copies of Section 16(a)the forms and other specified written representations furnished to us, our review of the reports that have been filed and the representations of the reporting persons, we believe that all filing requirements applicable to these persons were complied with during the fiscal year ended July 31, 2011. Form 3 Form 4 Thomas C. Hemingway 1 - Donald Hejmanowski 1 - Gary Cohee 1 - the following table showshas adopted a Code of Ethics that applies to all of the late filingsits Directors, officers, employees, consultants, contractors and agents. The Code of Ethics has been reviewed and approved by the Board of Directors. A copy of the Code of Ethics is posted on the Company’s officers, directors or greater than ten percent beneficial owners known to the Company of a Form 3 or any Forms 4 during or with respect to fiscal years 2008 or 2007. 11 - EXECUTIVE COMPENSATIONOn October 21, 2008, the Company experienced a change in management as reported to the Securities Exchange Commission on the Company’s Form 8-K filed October 23, 2008. Such filing is heretofore incorporated by reference. On October 1, 2009 the Company had a further management change, reported to the Securities Exchange Commission on the Company’s Form 8-K filed October 2, 2009. Such filing is heretofore incorporated by reference.management.management as of July 31, 2011. There have been no stock options granted to employees or management during the years covered in the table below, and no employee stock options are currently outstanding.Name and Principal Position Fiscal Year Donald Hejmanowski 2010 $ 60,000 $ - $ - $ 60,000 Secretary and director 2011 $ 60,000 $ - $ - $ 60,000 Thomas C. Hemingway (1) 2010 $ 60,000 $ - $ - $ 60,000 President, CEO, CFO, and Chairman 2011 $ 129,139 $ 107,500 $ - $ 236,639 Oscar Luppi (2) 2010 $ 250,000 $ - $ - $ 250,000 Ex-President, CEO and Chairman 2011 $ 159,028 $ - $ - $ 159,028 SUMMARY COMPENSATION TABLE (1)Pursuant to an employment agreement effective October 21, 2008, Lawrence Weisdorn was appointed President, Chief Executive Officer and Chief Financial Officer of the Company. On October 1, 2009, Mr. Weisdorn resigned from all of those positions.(2)Accrued salary pursuant a consulting agreement entered into on May 12, 2008, and replaced by an employment agreement dated October 21, 2008. $145,000 was paid against these accrued items and the remaining balance of $74,500, by agreement was forgiven and written off.(3)Grant of 2,500,000 shares valued at $0.03 per share pursuant to a consulting entered in to May 12, 2008. These shares were subsequently returned to the transfer agent on August 31, 2009, for cancellation.(4)(6)Pursuant to an employment agreement effective October 21, 2008, Donald Hejmanowski was appointed Secretary and Vice President of Business Development of the Company and was entitled to remuneration of $6,500 per month. That fee was accrued through April 30, 2009. The employment agreement was cancelled effective May 1, 2009 and the accrued amount of $38,637 was written off. A compensation agreement was entered into on October 29,2009 to remunerate him at the rate of $5,000 per month effective November 1, 2009.(5)Grant of 1,200,000 shares valued at $0.03 per share pursuant to a consulting agreement entered into May 12, 2008.(7)(8)Grant of 850,000 shares valued at $0.03 per share for services rendered to the company.(9)DIRECTOR COMPENSATIONOur current directors received no compensation for their services as director during fiscal years 2008 and 2009. There were no stock options granted to directors during fiscal years 2008 and 209, other than those referred to, in Item 11(9), above and no other director stock options are currently outstanding.
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Mattersnumber and percentagebeneficial ownership of common stock of the shares of the Company’s Common Stock ownedCompany as of JulyOctober 31, 2009 by all persons2011 for the following: (i) each person or entity who is known to the Company whoto beneficially own more than 5% of the outstanding number of such shares by all directors of the Company,Company's common stock; (ii) each of the Company's Directors; (iii) the Company's Chief Executive Officer and byPresident and Chief Financial Officer; and (iv) all officersDirectors and directorsexecutive officers of the Company as a group. The number and percentage of shares beneficially owned is determined under Rule 13d-3 as promulgated under the Securities Exchange Act of 1934, as amended, by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or dispositive power and also any shares that the individual has the right to acquire within sixty days of October 31, 2011 through the exercise of any stock option or other right. Unless otherwise indicated in the footnotes, each ofperson has sole voting and dispositive power (or shares such power) with respect to the stockholders hasshares shown as beneficially owned. Except as otherwise indicated, and subject to applicable community property laws, the persons named in this table have sole voting and investment power with respect to theall shares beneficially owned.
4630 Campus Dr. Ste. 101
Newport Beach CA 92660
22525 Pacific Coast Hwy, Suite #101
Malibu, CA 90265
22525 Pacific Coast Hwy, Suite #101
Malibu, CA 90265
PMB Securities
4630 Campus Dr. Suite 101
Newport Beach, CA 92660
of common stock held by them. Amount and Nature of Beneficial Percent Title of Class Name and Address of Beneficial Owner Ownership of Class (a) Common Thomas C. Hemingway 1,950,000 14.40 % Chairman and Chief Executive Officer 1503 South Coast Dr. Ste. 206 Costa Mesa, CA 92626 Common Charles B. Mathews 125,000 0.92 % Chief Financial Officer 1503 South Coast Dr. Ste. 206 Costa Mesa, CA 92626 Common Donald Hejmanowski 1,000,000 7.38 % Director 1503 South Coast Dr. Ste. 206 Costa Mesa, CA 92626 Common Gary Cohee 1,400,000 10.34 % PMB Securities 4630 Campus Dr. Ste. 101 Newport Beach, CA 92660 Common ALL EXECUTIVE OFFICERS AND 3,075,000 23.70 % DIRECTORS AS A GROUP (3 Persons) (1)For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of July 31, 2009.(2)For purposes of computing the percentage of outstanding shares of common stock held by each person or group of persons named above, any security which such person or persons has or have the right to acquire within such a date is deemed to be outstanding but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Except community property laws, the Company believes, based on information supplied by such persons, that the persons named in this table have sole voting and investment power with respect to all shares of common stock which they beneficially own.(3)Lawrence Weisdorn resigned from all executive and Board positions effective October 1, 2009. Both he and Donald Hejmanowski both currently serve as officers and directors of ICE Conversions, Inc.(4)These are the number of shares outstanding after the 1,500,000 shares are cancelled and replaced by the issuance of 1,000,000 shares pursuant to the terms of the Assignment and Contribution Agreement.13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCELawrence Weisdorn was granted 2,500,000 shares of Common Stock and had accrued, as of July 31, 2009, $219,500 in compensation pursuant to a consulting agreement dated May 12, 2008 which was subsequently replaced by an employment agreement dated October 21, 2009 and was appointed President, Chief Executive Officer and Chief Financial Officer of the Company, and elected as a director of the Company concurrently therewith. Mr. Weisdorn subsequently resigned from all executive and board positions, terminated the employment agreement as of May 1, 2009 and forgave any accrued but unpaid salary as of April 30, 2009. Additional Total Common Stock Preferred Stock Paid-in Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Deficit Balance – July 31, 2009 7,682,763 $ 7,683 - $ - $ 329,750 $ (769,756 ) $ (432,323 ) Common stock issued for signing bonus 1,000,000 1,000 - - 299,000 - 300,000 Common stock issued for services 1,294,366 1,294 - - 387,016 - 388,310 Common stock issued upon conversion of debt 148,000 148 - - 570,866 - 571,014 Common stock issued for inducement of loan 150,000 150 - - 133,350 - 133,500 Cancellation of common stock (3,800,000 ) (3,800 ) - - 3,800 - - Forgiveness of debt by shareholder - - - - 739,689 - 739,689 Fair value of warrants granted - - - - 80,047 - 80,047 Net loss - - - - - (2,281,889 ) (2,281,889 ) Balance – July 31, 2010 6,475,129 $ 6,475 - $ - $ 2,543,518 $ (3,051,645 ) $ (501,652 ) Common stock issued for services 4,481,746 $ 4,482 - $ - 735,002 - 739,484 Common stock issued for extension of notes payable 200,000 200 - - 23,800 - 24,000 Common stock issued for inducement of loan 60,000 60 - - 15,540 - 15,600 Common stock issued upon default of note 500,000 500 - - 224,500 - 225,000 Cancellation of common stock (12,500 ) (13 ) - - (24,987 ) - (25,000 ) Net loss - - - - - (750,157 ) (750,157 ) Balance – July 31, 2011 11,704,375 $ 11,704 - $ - $ 3,517,373 $ (3,801,802 ) $ (272,725 ) OPERATIONSSUBSIDIARY For the Year Ended July 31, 2011 2010 Operating activities: Net loss $ (750,157 ) $ (2,281,889 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depletion, depreciation, amortization, and accrection 19,798 6,673 Amortization of intangible assets - 43,000 Impairment of intellectual property rights - 344,000 Expenses paid on behalf of the Company by a related party 11,000 - (Gain) loss on settlement of debt (768,481 ) 310,014 Loss on disposal of assets - 19,915 Amortization of discount on debt 65,198 32,835 Stock-based compensation - 300,000 Common stock issued for services and loan inducement 779,083 521,810 Fair value of warrants - 40,063 Reclassification of inventory to investment in oil and gas property (29,690 ) - Changes in operating assets and liabilities: Accounts receivable 7,451 (7,451 ) Notes receivable - related party 7,500 - Inventory 81,980 - Deposits and prepaid expenses (16,726 ) - Accounts payable and accrued expenses 35,074 178,884 Accrued salaries 315,252 310,830 Net cash used in operating activities (242,718 ) (181,316 ) Investing activities: Net cash Provided by (used in) financing activities - - Financing activities: Proceeds from convertible notes payable 124,300 356,158 Proceeds from convertible notes payable - related party 29,200 - Proceeds from notes payable 75,000 - Repayment of notes payable (45,000 ) (100,000 ) Payment for cancellation of common stock (25,000 ) - Due to related parties - 12,000 Net cash provided by financing activities 158,500 268,158 Net decrease in cash (84,218 ) 86,842 Cash, beginning of period 86,842 - Cash, end of period $ 2,624 $ 86,842 (a development stage company) (“DSE Fishman”) was incorporated under the laws ofin the State of Nevada inon July 15, 2002. On May 14, 2008 DSE Fishman changed its name to Force Fuels, Inc. (“the Company”). At that time the primary focus of the Company became the development and marketing of a proprietary, zero emission hydrogen fuel cell/electric battery hybrid drive system for automotive utilization. In October 2009 the Company retained new management and began the process of exploring the feasibility of acquiring, developing and marketing of green energy products as well as regulated and standardized energy based products, including traditional hydrocarbon based oil and gas and solar and wind energy.Assignment and Contribution Agreement between the Company and ICE Conversions, Inc.assignmentAssignment and contribution agreementContribution Agreement (“Assignment and Contribution Agreement”) with Lawrence Weisdorn and ICE Conversions, Inc. to operate a business engaged in the development, manufacture and marketing of electric drive systems for installation in short-haul commercial trucks. The transactions contemplated by the Assignment and Contribution Agreement include:(a) The contribution, transfer and license of certain assets and intellectual property rights of ICE to the Company;(b) The grant of 1,000,000 shares of Common Stock to ICE; by subsequent agreement 600,000 of these shares were returned, to the Company, for cancelation, on December 9, 2009.(c) Confirmation of the previous grant of 2,500,000 shares of Common Stock to Lawrence Weisdorn pursuant to a consulting agreement; by subsequent agreement these shares were returned on, August 31, 2009, for cancelation.(d) Cash payment of $400,000 from the Company to ICE, made payable as follows: 100,000 on or before March 15, 2009 and $300,000 on or before June 15, 2009.(e) included:(a) The contribution, transfer and license of certain assets and intellectual property rights of ICE to the Company; (b) The grant of 1,000,000 shares of Common Stock to ICE; by subsequent agreement 600,000 of these shares were returned, to the Company, for cancellation, on December 9, 2009. (c) Confirmation of the previous grant of 2,500,000 shares of Common Stock pursuant to a consulting agreement; by subsequent agreement these shares were returned on, August 31, 2009, for cancellation. (d) Cash payment of $400,000 from the Company to ICE, made payable as follows: 100,000 on or before March 15, 2009 and $300,000 on or before June 15, 2009. Five hundred thousand (500,000)Pursuant to the terms of the Assignment and Contribution Agreement, 500,000 of the 1,500,000 shares previously issued to ICE were to be cancelled on July 31, 2008, pursuant to the terms of the Assignment and Contribution Agreement.AprilJune 2010, the agreement was amended further.effective April 2010. By virtue of that amendment, the company returned to ICE all of the intellectual property rights described above and received, in exchange, intellectual property rights for the development of a hydrogen/electric hybrid automobile. For this non-monetary exchange of assets, the fair value of neither the asset received nor the assets relinquished is determinable within reasonable limits and hence, the new asset has been recorded at the book value of the relinquished asset. In addition, ICE cancelled the $400,000 debt owing to ICE for the acquisition of the above referenced intellectual property rights.NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accompanying audited Fiscal Year, and Principles of Consolidationhave been preparedare presented in accordance with accounting principles generally accepted in the United States, of America (“and are expressed in U.S. GAAP”) and withdollars. These consolidated financial statements include the rules and regulationsaccounts of the United States SecuritiesCompany and Exchange Commission (“SEC”) to Form 10-K.its wholly-owned subsidiaries Force Fuels Services, Inc., Great American Coffee Company, and Cheetah Motor Corp. All inter-companyintercompany transactions and balances and transactions have been eliminated.F-9FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009NOTE 2– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)ReclassificationCertain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.Development stage companyishas elected a development stage company as defined by ASC 915. The Company is still devoting substantially allfiscal year-end of its efforts to establishing the businesses. estimatesconformityaccordance with accounting principlesUnited States generally accepted in the United States of America (“U.S. GAAP”)accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the datesdate of the financial statements and the reported amounts of revenue and expenses duringin the reporting period. ActualThe Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results couldof which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from thosethe Company's estimates.equivalentsinvestmentsinstruments with a maturity of three months or less when purchasedat the time of issuance to be cash equivalents.equipment,Equipment, netcos.cost. Depreciation is computed using the straight-line method over the estimated useful lives of 7 years. The cost of assets sold or retired and the related amounts of accumulated depreciation are removed from the accounts in the year of disposal. Any resulting gain or loss is reflected in current operations. Expenditures for maintenance and repairs are charged to operations as incurred. The capitalized cost of the oil properties will be amortized based on the units-of-production method. Costs incurred for property acquisition and further development activity will be capitalized and amortized as previously noted.Purchased intellectual property righthas adopteduses the guidelines as set outfull cost method of accounting for oil and natural gas properties. Under this method, all acquisition, exploration and development costs, including certain payroll, asset retirement costs, other internal costs, and interest incurred for the purpose of finding oil and natural gas reserves, are capitalized. Internal costs that are capitalized are directly attributable to acquisition, exploration and development activities and do not include costs related to production, general corporate overhead or similar activities. Costs associated with production and general corporate activities are expensed in ASC 350 for purchased intellectual property right. Under the requirements as set out in ASC 350,period incurred. Proceeds from the Company amortizessale of oil and natural gas properties are applied to reduce the capitalized costs of acquired intellectual property right overoil and natural gas properties unless the remaining legal lives,sale would significantly alter the relationship between capitalized costs and proved reserves, in which case a gain or loss is recognized.useful lives,future development costs, and asset retirement costs under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 410 “Asset Retirement and Environmental Obligations” (FASB ASC 410), are amortized using the unit-of-production method based on proved reserves. Capitalized costs of oil and natural gas properties, net of accumulated amortization and deferred income taxes, are limited to the total of estimated future net cash flows from proved oil and natural gas reserves, discounted at ten percent, plus the cost of unevaluated properties. The estimated future net cash flows at July 31, 2011 were determined using a price estimate of $66 per barrel. Under certain specific conditions, companies could elect to use subsequent prices for determining the estimated future net cash flows. The use of subsequent pricing is no longer allowed. See “New Pronouncements” below for additional detail regarding the new rules. There are many factors, including global events that may influence the production, processing, marketing and price of oil and natural gas. A reduction in the valuation of oil and natural gas properties resulting from declining prices or production could adversely impact depletion rates and capitalized cost limitations. Capitalized costs associated with properties that have not been evaluated through drilling or seismic analysis, including exploration wells in progress at July 31, 2011 and 2010, are excluded from the termunit-of-production amortization. Exclusions are adjusted annually based on drilling results and interpretative analysis.contract, whichevernet full cost pool with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. If it is shorter. Purchased intellectual property rights were deemed todetermined that the relationship is significantly altered, the corresponding gain or loss will be fully impairedrecognized in the consolidated statements of operations.written off duringgas properties are amortized using the units of production method. For the year ended July 31, 2010.Impairment2011, the Company did not amortize any costs associated with production as the oil sales were primarily from inventory acquired. As of long-lived assetsfollowsreclassified $26,690 in oil inventory to oil and gas properties.provisionsfull cost method, the Company performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of ASC 360property and equipment is compared to the “estimated present value” of its proved reserves discounted at a 10-percent interest rate of future net revenues, based on current economic and operating conditions at the end of the period, plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved properties included in costs being amortized, less the income tax effects related to book and tax basis differences of the properties. If capitalized costs exceed this limit, the excess is charged as an impairment expense. During the years ended July 31, 2011 and 2010, no impairment of oil and gas properties was recorded.· Level 1: Observable inputs such as quoted prices in active markets; · Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and · Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. its long-lived assets. The Company’s long-lived assets,an asset retirement obligation in the period in which include test equipmentit is incurred and purchased intellectual property rights, are reviewed for impairment whenever events or changesa corresponding increase in circumstances indicate that the carrying amount of an asset may not be recoverable.The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived assetasset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or grouploss is recognized.long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any,crude oil using the sales method of accounting. Under this method, the Company recognizes revenues when oil is delivered and title transfers.excessweighted average number of shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted net income (loss) per share on the potential exercise of the carrying amount overequity-based financial instruments is not presented where anti-dilutive.fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company determined that purchased intellectual property rights were deemed to be fully impairedearnings (loss) per share, basic and written-off during the yeardiluted, for years ended July 31, 2010.F-10 For the Year Ended July 31, 2011 2010 Net loss $ (750,157 ) $ (2,281,889 ) Weighted average common shares outstanding 8,726,860 7,773,790 Earnings per share: $ (0.09 ) $ (0.29 ) FORCE FUELS, INC. AND SUBSIDIARYAccounting for Income Taxes. (A Development Stage Company)Notes todeferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carry forwards.Consolidated Financial StatementsForopinion of management, it is more likely than not that some portion or all of the Years Ended July 31, 2010 and 2009 NOTE 2– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Fair value of financial instrumentsThe Company follows ASC 825 in accounting for its financial instruments. The fair value of a financial instrument is the amount at which the instrument coulddeferred tax asset will not be exchanged in a current transaction between willing parties. The carrying amounts of financialrealized. Deferred tax assets and liabilities such as accrued expenses, approximate their fair values becauseare adjusted for the effect of changes in tax laws and rates on the date of enactment.short maturity of these instruments. The Company’s note payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at July 31, 2010.Research and developmentThe Company follows ASC 730 in accounting for research and development costs. Accordingly, research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment, material and testing costs for research and development as well as research and development arrangements with unrelated third party research and development institutions.Revenue recognitionThe Company follows the guidance of ASC 605 for revenue recognition. The Company will recognize revenues when it is realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company will derive majority of its revenue from sales of oil produced by its wells.The Company uses the sales method to account for sales of crude oil and natural gas. Under this method, revenues are recognized based on actual volumes of oil and gas sold to purchasers. The volumes sold may differ from the volumes to which the Company is entitled based on the interest in the properties. These differences create imbalances which are recognized as a liability only when the imbalance exceeds the estimate of remaining reserves. Costs associated with production are expensed in the period incurred. For the Years Ended July 31, 2012 2013 Office lease $ 47,032 $ 8,425 compensationaccounted for its stock based compensation under the recognition and measurement principles ofadopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004) FASB Codification Topic 740, “Share-Based Payment” (“SFAS No. 123R”)(ASC 718) using the modified prospective method for transactions inStock Compensation,” under which the Company obtains employee services in share-based payment transactionsrecords stock-based compensation expense for warrants and stock options granted to employees, directors and officers using the fair value method. Under this method, stock-based compensation is recorded over the vesting period of the warrant and option based on the fair value of the warrant and option as of the grant date. The fair value of each warrant and option granted is estimated using the Black-Scholes option pricing model that takes into account, on the grant date, the exercise price, expected life of the warrant and/or option, the price of the underlying security, the expected volatility, expected dividends on the underlying security, and the Financial Accounting Standards Board Emerging Issues Task Force Issue No. 96-18 “Accounting For Equity Instruments That Are Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling Goods Or Services” (“EITF No. 96-18”) for share-based payment transactions with parties other than employees provided in SFAS No. 123R(ASC 718). All transactionsrisk-free interest rate. Transactions in which goods or services are the consideration received from non-employees in exchange for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrumentinstruments issued, whichever is more reliably measurable. The measurement date useddetermineadditional paid-in capital. Consideration received on the fair valueexercise of warrants and options, together with the equity instrument issuedamount previously credited to additional-paid in capital, is recognized as an increase in common stock.earlier of the dateCompany adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on which the third-party performance is complete or the date on which it is probable that performance will occur. F-11FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009 NOTE 2– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Income taxesThe Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 168, “The FASB Accounting for Income Taxes” (“SFASStandards Codification™ and the Hierarchy of Generally Accepted Accounting Principles” (“ASU No. 109”2009-01”)(ASC 740). Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable incomeASU No. 2009-01 re-defines authoritative generally accepted accounting principles in the years in which those temporary differences are expectedUnited States of America (“GAAP’) for nongovernmental entities to be recovered or settled. The effect on deferred tax assets and liabilitiescomprised of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.Net loss per common shareBasic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive common shares outstanding as of July 31, 2010 or 2009.Cash flows reportingThe Company follows the provisions of ASC 230 for cash flows reporting and accordingly classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230 to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.Reporting segmentsASC 280 establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. Currently, ASC 280 has no effect on the Company’s consolidated financial statements as substantially all of the Company’s operations are conducted in one industry segment.Oil and Gas Properties, Successful Efforts MethodThe Company uses the successful efforts method of accounting for oil and gas producing activities. Under the successful efforts method, costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells that find proved reserves, and to drill and equip development wells are capitalized. Costs to drill exploratory wells that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining unproved properties are expensed as incurred. The Company evaluates its proved oil and gas properties for impairment on a field-by-field basis whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable. The Company follows ASC 360 for these evaluations. Unamortized capital costs are reduced to fair value if the undiscounted future net cash flows from our interest in the property’s estimated proved reserves are less than the asset’s net book value.F-12FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Oil and Gas Properties, Successful Efforts Method (Continued)Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Other unproved properties are amortized based on the Company's experience of successful drilling and average holding period. Capitalized costs of producing oil and gas properties, after considering estimated dismantlement and abandonment costs and estimated salvage values, are depreciated and depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives.Under ASC 932, drilling costs for exploratory wells are initially capitalized but generally must be charged to expense unless the wells are determined to be successful within one year after completion of drilling. Circumstances that permit continued capitalization of exploratory drilling costs are addressed by ASC 932. The one-year limitation may be exceeded for an exploratory well only if sufficient reserves have been found to justify its completion and sufficient progress has been made in assessing the reserves and the economic and operating viability of the project. If the exploratory well does not meet both criteria, its capitalized costs are expensed, net of any salvage value. Annual disclosures are required under ASC 932 to provide information about management’s evaluation of capitalized exploratory well costs, including disclosure of (i) net changes from period to period in the costs for wells that are pending the determination of proved reserves, (ii) the amount of any exploratory well costs that have been capitalized for more than one-year after the completion of drilling and (iii) an aging of suspended exploratory well costs and the number of wells affected. On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income. On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained.Recently issued accounting pronouncementsIn December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification (“ASC”) and, for Statement 166. OctoberJanuary 2010, FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements”. ASU 2010-06 requires additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and a higher level of disaggregation for the different types of financial instruments. For the reconciliation of Level 3 fair value measurements, information about purchases, sales, issuances and settlements are presented separately. This standard is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of revised Level 3 disclosure requirements, which are effective for interim and annual reporting periods beginning after December 15, 2010. Comparative disclosures are not required in the year of adoption. We adopted the provisions of the standard on January 1, 2010, which did not have a material impact on our financial statements.Accounting Standards Update 2009-15, AccountingASU 2010-03, "Oil and Gas Reserve Estimations and Disclosures" (ASU 2010-03). ASU 2010-03 aligns the current oil and gas reserve estimation and disclosure requirements of ASC Topic 932 with the changes required by the United States Securities and Exchange Commission (SEC) final rule, "Modernization of Oil and Gas Reporting," as discussed below. ASU 2010-03 expands the disclosures required for Own-Share Lending Arrangementsequity method investments, revises the definition of oil and gas producing activities to include nontraditional resources in Contemplation of Convertible Debt Issuancereserves unless not intended to be upgraded into synthetic oil or Other Financing. This Accounting Standards Updategas, amends the FASB Accounting Standard Codificationdefinition of proved oil and gas reserves to require 12-month average pricing in estimating reserves, amends and adds definitions in the Master Glossary that are used in estimating proved oil and gas quantities, and provides guidance on geographic area with respect to disclosure of information about significant reserves. ASU 2010-03 must be applied prospectively as a change in accounting principle that is inseparable from a change in accounting estimate and is effective for EITF 09-1. October 2009,May 2011, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements. This update changeda new accounting standard on fair value measurements that clarifies the accounting model for revenue arrangements that include both tangible productsapplication of existing guidance and software elements. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. F-13FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009 NOTE 2– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Recently issued accounting pronouncements (Continued)In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for thedisclosure requirements, changes certain fair value measurement of investments in certain entities that calculate net assetprinciples and requires additional disclosures about fair value per share (or its equivalent). Itmeasurements. The standard is effective for interim and annual periods endingbeginning after December 15, 2009.2011. Early applicationadoption is permitted in financial statements for earlier interim and annual periods that have not been issued. In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance” (“EITF 09-1”). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009. Share-lending arrangements that have been terminated as a result of counterparty default prior to December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that begins on or after June 15, 2009. has reviewed the above pronouncements and does not expect anythe adoption of the provisionsthis accounting guidance to have a material effectimpact on the financial position, results of operations or cash flows of the Company.NOTE 3–DEVELOPMENT STAGE ACTIVITIES AND GOING CONCERNThe Company is currently in the development stage and has conducted minimal operations to date. While pursuing the development and marketing of hydrogen/electric hybrid automobiles, the Company has focused on the process of acquiring oil producing properties and on April 23 entered into an agreement with Pemco, LLC, to acquire thirteen oil producing properties.As reflected in the accompanyingits consolidated financial statements the Company hadand related disclosures.deficit accumulated during development stagematerial impact on our financial position or results of $2,651,645 atoperations.and had a net loss of $1,881,889 for the fiscal year ended July 31, 2010 with minimal revenues since inception. Although the Company has not recorded significant revenue through July 31, 2010, it has been accumulating an inventory of oil, in storage tanks, and has recorded revenues subsequent to the year end.While the Company is attempting to commence operations and generate revenues, the Company’s cash position is not sufficient enough to support the Company’s operations. Management intends to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that these efforts will succeed and that the Company will continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise capital and to generate sufficient revenues. The consolidated financial statements do not include any adjustments that would be necessary if the Company is unablehave been reclassified to continue as a going concern.F-14FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notesconform to the Consolidated Financial StatementsForpresentation in the Years Ended July 31, 20102011 consolidated financial statements.2009 NOTE 4 – PROPERTY AND EQUIPMENT,NET20102011 and July 31, 20092010 are summarized as follows: July 31, July 31, 2011 2010 Well operating equipment $ 138,300 $ 138,300 Less: accumulated depreciation (24,737 ) (4,939 ) Property and equipment, net $ 113,563 $ 133,361 2009 was $6,673 respectively.$2,601 respectively.NOTE 5 – PURCHASED INTELLECTUAL PROPERTY RIGHTSOn July 31, 2008, the Company acquired, from ICE Conversions, Inc., a prototype electric battery-powered Freightliner and all electric drive components installed or to be installed and associated intellectual property rights (“Purchased Intellectual Property Right”) for (i) 1,000,000 shares of its common stock, and (ii) a cash payment of $400,000, payable as follows: $100,000 payable on or before March 15, 2009, and $300,000 payable on or before June 15, 2009. The Purchased Intellectual Property Right is collateralized by a first priority perfected lien on all of the Company’s assets in favor of ICE. The management of the Company determined that this transaction represented the acquisition of an asset-the intellectual property right - instead of a business. Pursuant to ASC 805 a business is a self-sustaining integrated set of activities and assets conducted and managed for the purpose of providing a return to investors. A business consists of (a) inputs, (b) processes applied to those inputs, and (c) resulting outputs that are used to generate revenues. For a transferred set of activities and assets to be a business, it must contain all of the inputs and processes necessary for it to continue to conduct normal operations after the transferred set is separated from the transferor, which includes the ability to sustain a revenue stream by providing its outputs to customers. The prototype and related intellectual property right which the Company acquired was a specific application of electric vehicle to Class 8 Trucks, a work in progress, and did not contain any of the inputs and processes necessary for it to continue to conduct normal operations after the transferred set is separated from ICE Conversions, Inc., the transferor. The intellectual property right acquired was valued at $430,000 representing (i) an aggregate cash payment of $400,000 from the Company to ICE and (ii) the issuance of 1,000,000 shares of Common Stock to ICE valued at $0.03 per share or $30,000.On January 30, 2009 ICE extended the timeline for the $400,000 payment in cash to eight (8) separate installment payments of $50,000, due on or before the last day of each quarter of Force Fuel’s fiscal year, commencing with the first installment due on or before April 30, 2010 and the eighth and final payment due on or before January 31, 2012.On December 15, 2009 an additional 600,000 of 1,000,000 shares were cancelled by agreement between the parties.In April 2010, the Company and ICE further amended the Assignment and Contribution agreement. By virtue of that amendment, the company returned to ICE all of the intellectual property rights described above and received, in exchange, intellectual property rights for the development of a hydrogen/electric hybrid automobile. For this non-monetary exchange of assets, the fair value of neither the asset received nor the assets relinquished is determinable within reasonable limits and hence, the new asset has been recorded at the book value of the relinquished asset. In addition, ICE cancelled the $400,000 debt owing to ICE for the acquisition of the above referenced intellectual property rights.F-15FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009 NOTE 5 – PURCHASED INTELLECTUAL PROPERTY RIGHTS (Continued)Purchased intellectual property right, at cost, at July 31, 2010 and July 31, 2009, consisted of the following: Amortization expense for the fiscal year ended July 31, 2010 and 2009 was $43,000 and $43,000 respectively. NOTE 6 – PURCHASE OF OIL PROPERTIESaggregatedwas $1,500,000 (including all of the associated equipment already in place amounting to $138,300 and approximately nine hundred sixty (960)960 barrels of oil in storage amounting to $81,980 which has been considered as inventory.inventory). A deposit of $100,000 was paid at closing which reduced the amount due and owing to Pemco to $900,000, to be secured through a collateralized non-interest bearing promissory note to be paid, in equal monthly installments of $100,000,commencing one month after the initial closing and continuing for nine months. The remaining balance of $500,000 is to be paid to Energy Recovery Systems. The terms of the agreement with Energy Recovery Systems were not finalized as of the date of this report. The Company has imputed $58,375 of interest on the promissory notes at the rate of 10%10 percent per annum. NOTE 7 July 31, July 31, 2011 2010 Note payable to ERS, unsecured, due November 30, 2010 $ - $ 500,000 Note payable to Pemco, unsecured, due February 23, 2011 - 900,000 Less: discount for imputed interest - (31,879 ) Notes payable, net $ - $ 1,368,121 NOTES PAYABLE20102011 and July 31, 20092010 consisted of the following: F-16FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to July 31, July 31, 2011 2010 Note payable on January 29, 2009, 10% interest, unsecured and due on demand $ 35,960 $ 35,960 Note payable on June 1, 2009, 10% interest, unsecured and due on demand 13,738 13,738 Note payable on July 1, 2009, 10% interest, unsecured and due on demand 12,710 12,710 Note payable on October 1, 2009, 10% interest, unsecured and due on demand 10,658 10,658 Note payable on July 16, 2009, 10% interest, secured by a pledge of 500,000 shares of the Company's common stock, due 90 days following closing 100,000 100,000 Note payable on September 23, 2010, 8.0% interest, unsecured, convertible into common stock at a price of $0.50 per share, due 90 days from issuance date 30,000 - Note payable on September 23, 2010, 1.0% interest, unsecured, convertible into common stock at a price of $0.50 per share, due 90 days from issuance date 29,200 Note payable on November 18, 2010, zero percent interest, unsecured, convertible into Common stock at a 50% discount to market 50,000 - Note payable on February 28, 2011, 8% interest, unsecured, convertible into common stock at a price of $0.25 per share at the time of conversion 5,000 - Note payable on March 2, 2011, 5% interest, unsecured, convertible into common stock at a price of $0.25 per share at the time of conversion 5,000 - Note payable on March 28, 2011, 5% interest, unsecured, convertible into common stock at a price of $0.20 per share at the time of conversion 30,300 - Note payable on April 22, 2011, 1% interest, unsecured and due on demand 50,000 - Note payable on June 3, 2011, 1% interest, unsecured and due on demand 25,000 Note payable on July 25, 2011, 10% interest, unsecure, convertible into common stock at a price of $0.15 per share at the time of conversion 15,000 Discount on beneficial conversion feature - (33,319 ) Notes payable, net $ 412,566 $ 139,747 Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009 NOTE 7 – NOTES PAYABLE (Continued)Aboveabove notes payable are due to unrelated parties andexcept for $29,200 which is a part of the September 23, 2010 convertible note payable. The related interest expense on these notes for the fiscal yearyears ended July 31, 2011 and 2010 was $85,849 and 2009 was $13,816, respectively. In accordance with ASC 470-20 – Debt with Conversion and $2,022, respectively. NOTE 8STOCKHOLDERS’ EQUITY (DEFICIT)On February 14, 200960,0001,294,366 shares of its Common Stock to three (3) consultantscommon stock for professional services rendered, valued at $0.10 per share, or $6,000$388,310 in the aggregate.its Common Stockcommon stock to the Company’s chief executive officer as a signing bonus for entering into an Employment Agreement dated October 1, 2009. The shares were valued at $0.30 per share, or $300,000 in the aggregate.On January 28,1,122,366 shares to various consultants for services provided to the Company. The shares were valued at $0.30 per share, or $336,710 in the aggregate.On March 16, 2010 and March 30, 2010 the Company issued 172,000 shares, of its common stock to various consultants for services provided to the Company. The shares were valued at $0.30 per share, or $51,600 in the aggregate.Between March 1 and April 30, 2010 the Company issued 138,000148,000 shares of common stock upon conversion of convertible promissory notes at an average pricea value of $4.07 per share, or $561,613$571,014 in the aggregate.at $0.89 per share, or $133,500 in the aggregate.On July 31, 2010 the Company issued 10,000 shares of common stock upon conversion of convertible promissory notes at a price of $1.00 per share, or $10,000 in the aggregate.F-17FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)Stock Option Plan (Continued)20102011 or 2009.2010. The number of shares issued under the Plan was 1,500,000 adjusted to 150,000 shares as a result of the Reverse Stock Split. The Company has not issued any options out of the above plan and hence, no options were outstanding as of July 31, 2011 and 2010.NOTE 9RELATED PARTY TRANSACTIONSAdvances from related partiesAdvances from related parties at July 31, 2010Contingencies, Environmental and July 31, 2009 consist of the following: The advances bear no interest and have no formal repayment terms.NOTE 10 – ENVIRONMENTAL AND OTHER CONTINGENCIESF-18FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009 NOTE 10 – ENVIRONMENTAL AND OTHER CONTINGENCIES (Continued)2010.2011 and 2010, respectively.NOTE 11OIL AND GAS PROPERTIESDepletion expense forThe Company did not recognize any depletion during the yearyears ended July 31, 2010 and 2009 amounted to $-0- and $-0-, respectively.2011 or 2010. Gains and losses on sales and disposals are included in the statements of operations. As of July 31, 20102011 and 20092010 oil and gas properties consisted of the following: July 31, July 31, 2011 2010 Producing Activities Proved properties $ 909,671 $ 1,258,292 Accumulated depletion - - Net Oil and Gas Properties $ 909,671 $ 1,258,292 NOTE 12 July 31, July 31, 2011 2010 Costs Incurred in Oil and Gas Acquisition and Development Activities Produced properties $ 909,671 $ 1,258,292 Accumulated depletion - - Total $ 909,671 $ 1,258,292 INCOME TAXESF-19FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009NOTE 12 – INCOME TAXES (Continued)39%43% to the net loss before provision for income taxes for the following reasons: July 31, July 31, 2011 2010 Income tax recovery at statutory rates $ 1,128,034 $ 794,716 Permanent differences 1,084,210 521,050 Valuation allowance change (2,212,244 ) (1,315,766 ) Provision for income taxes $ - $ - July 31, July 31, 2011 2010 Net operating loss carryforward $ 878,313 $ 436,473 Valuation allowance (878,313 ) (436,473 ) Net deferred income tax asset $ - $ - $1,119,000$1,560,000 for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. For the Years Ended July 31, 2011 2010 Cash paid for: Interest $ - $ 6,545 Income taxes $ - $ - Non cash financing activities: Forgiveness of debt from related party $ - $ 739,689 Issuance of promissory note for investment in oil lease rights and related assets $ - $ 1,500,000 Sale of working interest in oil and gas leases in exchange for settlement of notes payable $ 380,334 $ - NOTE 13SUBSEQUENT EVENTSto July 31, 2010 the Company’s $100,000 note payable to Juggernaut Financial Group (“Juggernaut”) came into a state of default. As a result of the default,Eventsrelinquished 500,000issued 220,000 shares, of its common stock to Juggernaut. These 500,000valued at $24,200 for services.had beenvalued at $24,200 for services.to Juggernaut as loan collateral upon300,000 shares, valued at $24,000 for services.closing ofCompany issued 300,000 shares, valued at $21,000 for services.note agreement, with the provision that Juggernaut would receive all necessary rights and privileges associated with theCompany issued 700,000 shares, in the event of default. The note balance was not satisfied by the issuance of the 500,000 shares, hence the note, along with all related accrued interest, remains in default and due in full.Subsequent to July 31, 2010, the Company’s $73,057 note payable to Yocca Law Group came into a state of default.855-10,855, Company management has reviewed all material events through the date of this report and there are no additional subsequent events to report. F-20 AND SUBSIDIARY(A Development Stage Company)Notes toConsolidated Financial StatementsForAccounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) No. 2010-03, "Oil and Gas Reserve Estimations and Disclosures" (ASU No. 2010-03). This update aligns the Years Ended July 31, 2010 and 2009SUPPLEMENTARY INFORMATION ON OIL AND GASDEVELOPMENTAND PRODUCING ACTIVITIES(UNAUDITED)The following supplemental unaudited information regarding the Company’scurrent oil and gas activities is presented pursuant to thereserve estimation and disclosure requirements of SFASthe Extractive Industries - Oil and Gas topic of the FASB Accounting Standards Codification (ASC Topic 932) with the changes required by the final rule of the Securities and Exchange Commission (the “SEC”), "Modernization of Oil and Gas Reporting." ASU No. 69.2010-03 must be applied prospectively as a change in accounting principle that is inseparable from a change in accounting estimate and is effective for entities with annual reporting periods ending on or after December 31, 2009.standardized measuredata for a given reservoir may also change substantially over time as a result of discounted future net cash flowsnumerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions (upward or downward) to existing reserve estimates may occur from time to time. Although reasonable effort is computedmade to ensure that reserve estimates reported represent the most accurate assessments possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures. See ITEM 1A. Risk Factors.applying constant pricesactual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.estimated future productionestimates of proved oil and gasdeveloped or proved undeveloped or probable undeveloped reserves less estimated future expenditures (based on period-end costs) to be incurred in developing and producingas of that date.lessincluding proved developed and proved undeveloped reserves, at July 31, 2011, as estimated future income tax expenses (based on period-end statutory tax rates) to be incurred on pre-tax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10 percent per year to reflect the estimated timing of the future cash flows. All operations of the Company are located in the United States. (1) by Warpath Energy, Inc. At July 31, 2011 At July 31, 2010 Net Proved Developed Reserves Crude Oil (Bbls) 606,447 606,447 Net Proved Undeveloped Reserves Crude Oil (Bbls) 10,624,053 10,624,053 Natural Gas (Mcf) - - Oil Equivalents (Boe) 10,624,053 10,624,053 Net Proved Developed and Undeveloped Reserves Crude Oil (Bbls) 11,230,500 11,230,500 Natural Gas (Mcf) - - Oil Equivalents (Boe) 11,230,500 11,230,500 Activities: (2) Activities At July 31, 2011 At July 31, 2010 Proved leasehold costs $ 876,841 $ 1,221,670 Costs of wells and development - - Capitalized asset retirement costs 32,830 36,622 Total cost of oil and gas properties 909,671 1,258,292 Accumulated depreciation and depletion - - Net Capitalized Costs $ 909,671 $ 1,258,292 Activities: Acquisition of properties Proved $ 909,671 $ 1,258,292 Exploration costs - - Development costs - - Net Capitalized Costs $ 909,671 $ 1,258,292 (3) Results of Operations for Oil and Gas Producing Activities:
Activities F-21FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to. The following table sets forth the Consolidated Financial StatementsFor the Years Ended July 31, 2010results of operations for oil and 2009SUPPLEMENTARY INFORMATION ON OIL AND GASDEVELOPMENTAND PRODUCING ACTIVITIES(Continued)(UNAUDITED)(4) Reserve Quantity InformationOur proved reserves at July 31, 2010 are set forth below:OilGas(MBbls)(MMcf)Proved developed producing606,447-Proved developed non-producing--Proved undeveloped10,624,053- Total Proved, at July 31, 201011,230,500-A summary of changes in reserve quantitiesgas producing activities for the yearsyear ended July 31, 2010 and 2009 are set forth below: Crude oil revenues $ 44,555 $ 7,451 Production costs (62,394 ) (25,000 ) Depreciation and depletion (19,798 ) (4,939 ) Results of operations for producing activities, excluding corporate overhead $ (37,637 ) $ (22,488 ) OilGas(MBbls)(MMcf) Proved reserves at July 31, 2008--Revisions of previous estimates--Purchases of minerals in place--Extensions and discoveries--Production-- Proved reserves at July 31, 2009--Revisions of previous estimates--Purchases of minerals in place11,230,500-Extensions and discoveries--Production--Sales of minerals in place-- Proved reserves at July 31, 201011,230,500-During the years ended July 31, 2010 and 2009, the Company had reserve studies and estimates prepared on its various properties. The difficulties and uncertainties involved in estimating proved oil and gas reserves makes comparisons between companies difficult. Estimation of reserve quantities is subject to wide fluctuations because it is dependent on judgmental interpretation of geological and geophysical data.(5) Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas ReservesReserves. F-22FORCE FUELS, INC. AND SUBSIDIARY(A Development Stage Company)Notes to the Consolidated Financial StatementsFor the Years Ended July 31, 2010 and 2009SUPPLEMENTARY INFORMATION ON OIL AND GASDEVELOPMENTAND PRODUCING ACTIVITIES(Continued)(UNAUDITED)schedule summarizes changesinformation has been developed utilizing procedures prescribed by ASC Topic 932 and is based on crude oil and natural gas reserves and production volumes estimated by the Company’s independent petroleum consultants. The estimates were based on a $66 crude oil price. The following information may be useful for certain comparison purposes, but should not be solely relied upon in evaluating the Company or its performance. Further, information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of the Company.flow relating to proved oil and gas reserves: The preceding schedules relating to provedflows from projected production of the Company’s oil and gas reserves standardized measureas of discounted future net cash flows andJuly 31, 2011: July 31, July 31, 2011 2010 Future cash inflows $ 17,880,784 $ 25,616,435 Future production costs (3,576,157 ) (5,123,287 ) Future development costs (5,364,236 ) (7,684,931 ) Future income tax expense (1,788,092 ) (2,561,664 ) Future net cash inflows 7,152,299 10,246,553 10% annual discount for estimated timing of cash flows (3,831,178 ) (5,488,636 ) Standardized measure of discounted future net cash flows $ 3,321,121 $ 4,757,917 have their foundation in engineering estimates of future net revenues thatfor the year ended July 31, 2011: July 31, July 31, 2011 2010 Beginning of period $ 4,797,917 $ - Extensions, discoveries and improved recovery - - Revisions of previous estimates - - Purchases of reserves in place - 4,797,917 Sales of reserves in place (1,476,796 ) - Net change in process and production costs - - Accretion of discount - - Sales of oil and natural gas produced, net of production costs - - Changes in estimated future development cost - Development costs incurred - - Net change in income taxes - Change in timing of estimated future production - - End of period $ 3,321,121 $ 4,797,917 derived from proved reserves and prepared using the prevailing economic conditions. These reserve estimates are made from evaluations conducted by independent geologists, of such properties and will be periodically reviewed based upon updated geological and production data. Estimates of proved reserves are inherently imprecise.Subsequent development and production of Company's reserves will necessitate revising the present estimates. In addition, information provided in the above schedules does not provide definitive information as the results of any particular year but, rather, helps explain and demonstrate the impact of major factors affecting the Company's oil and gas producing activities. Therefore, the Company suggests that all of the aforementioned factors concerning assumptions and concepts should be taken into consideration when reviewing and analyzing this information.F-23SIGNATURESPursuantfiled herewith or incorporated herein pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.Exhibit FORCE FUELS, INC.2.1(1) Bylaws Date: December 23, 2010By:/s/ Oscar Luppi2.2(1) Oscar LuppiPresident,Chief Executive Officer22EXHIBIT INDEXExhibit No.Description2.1(1)Bylaws2.2(1)Consulting Agreement with Lawrence Weisdorn effective May 12, 2008.10.5(6)*10.6(6)Employment Agreement of Lawrence Weisdorn dated October 21, 2008.10.7(6)*3131.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. 32 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002. _____________________* This exhibit references a Management Compensation Plan or Arrangement(1)* This exhibit references a Management Compensation Plan or Arrangement (1) Filed with the Securities and Exchange Commission in the Exhibits to Form 10-SB filed on September 9, 2002, and is incorporated by reference herein. 23