UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, ~~2012~~ 2013

Commission File Number: 0-12214

DALECO RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	23-2860734
(State or other jurisdiction of	(I.R.S. Employer
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
incorporation or organization)	Identification No.)
17 Wilmont Mews, 5th Floor West Chester, Pennsylvania 19382 (Address of principal executive offices) (Zip Code)	(610) 429-0181 (Registrant’s telephone number, including are code)

17 Securities ~~Wilmont~~registered ~~Mews,~~under ~~5th~~Section ~~Floor~~12(b) of the Act: None

~~West~~ Securities ~~Chester,~~registered ~~Pennsylvania~~under ~~19382~~Section 12(g) of the Act:

~~(Address~~ Common ofStock, ~~principal~~Par ~~executive~~Value ~~offices)~~$.01

(~~Zip~~Title ~~Code~~of class)

(610) 429-0181

(Registrant’s telephone number, including are code)

Securities registered under Section 12(b) of the Act: None Securities registered under Section 12(g) of the Act: Title of each class Common Shares, Par Value $.01

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act. Yes ¨ No x

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Other than this Form 10-K.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'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-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company x

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates on March 31, ~~2012~~2013, was approximately $67,900,000. This amount is based on the average bid and asked price of the Registrant’s common stock on the ~~NASDAQ~~ Over the Counter ~~Market,~~Markets ~~Bulletin Board~~ ("~~OTCBB~~OTCQB") on that date. Shares of common stock beneficially held by executive officers and directors of the Registrant are not included in the computation. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

49 72,~~441~~468,~~058~~458 shares of common ~~shares~~stock, $0.01 par value, were outstanding on December 31, ~~2012~~2013.

DOCUMENTS INCORPORATED BY REFERENCE - None.

DALECO RESOURCES CORPORATION

FORM 10-K

FOR THE YEAR ENDED SEPTEMBER 30, ~~2012~~2013

TABLE OF CONTENTS

PART I
Item 1.	~~Business~~	Business	4
Item 1A.	~~Risk Factors~~	Risk Factors	1317
Item 1B.	~~Unresolved Staff Comments~~	Unresolved Staff Comments	1317
Item 2.	~~Properties~~	Properties	1317
Item 3.	~~Legal Proceedings~~	Legal Proceedings	1620
Item 4.	~~Mine Safety Disclosures~~	Mine Safety Disclosures	1620
PART II
Item 5.	~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1620
Item 6.	~~Selected Financial Data~~	Selected Financial Data	2025
Item 7.	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2126
Item 7A.	~~Quantitative and Qualitative Disclosures about Market Risk~~	Quantitative and Qualitative Disclosures about Market Risk	2938
Item 8.	~~Financial Statements and Supplementary Data~~	Financial Statements and Supplementary Data	2939
Item 9.	~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	6579
Item 9A.	~~Controls and Procedures~~	Controls and Procedures	6579
Item 9B.	~~Other Information~~	Other Information	6680
PART III
Item 10.	~~Directors, Executive Officers and Corporate Governance~~	Directors, Executive Officers and Corporate Governance	6680
Item 11.	~~Executive Compensation~~	Executive Compensation	7185
Item 12.	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	7994
Item 13.	~~Certain Relationships and Related Transactions and Director Independence~~	Certain Relationships and Related Transactions and Director Independence	8097
Item 14.	~~Principal Accounting Fees and Services~~	Principal Accounting Fees and Services	84100
PART IV
Item 15.	~~Exhibits, Financial Statement Schedules~~	Exhibits, Financial Statement Schedules	84102
SIGNATURES			93111

-2-

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Some of the information, including all of the estimates and assumptions, in this report contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this report, including, but not limited to, statements regarding our future financial position, business strategy, budgets, projected costs, savings and plans, objectives of management for future operations, legal strategies, and legal proceedings, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, or “continue” or the negative thereof or variations thereon or similar terminology. Except for statements of historical or present facts, all other statements contained in this report are forward-looking statements. The forward-looking statements may appear in a number of places and include statements with respect to, among other things: business objectives and strategic plans; operating strategies; acquisition strategies; drilling wells; oil and gas reserve estimates (including estimates of future net revenues associated with such reserves and the present value of such future net revenues); estimates of future production of oil, natural gas and minerals; expected results or benefits associated with recent acquisitions; marketing of oil, gas and minerals; expected future revenues and earnings, and results of operations; future capital, development and exploration expenditures; expectations regarding cash flow and future borrowings sufficient to fund ongoing operations and debt service, capital expenditures and working capital requirements; nonpayment of dividends; expectations regarding competition; impact of the adoption of new accounting standards and the Company’s financial and accounting systems; and effectiveness of the Company’s control over financial reporting.

These forward-looking statements are subject to numerous assumptions, risks, and uncertainties. Factors that may cause our actual results, performance, or achievements to be materially different from those anticipated in forward-looking statements include, among others, the following:

•· adverse economic conditions in the United States and globally; · difficult and adverse conditions in the domestic and global capital and credit markets; · domestic and global demand for oil and natural gas and non-metallic minerals; · volatility of the market prices for crude oil and natural gas and non-metallic minerals; · the effects of government regulation, permitting, and other legal requirements; · the geologic quality of our properties with regard to, among other things, the existence of non-metallic minerals and hydrocarbons in economic quantities; · uncertainties about the estimates of our oil and natural gas reserves and our non-metallic mineral resources; · our ability to increase our production and oil and natural gas income and non-metallic mineral sales through exploration and development; · our ability to successfully apply horizontal drilling techniques and tertiary recovery methods; · the number of well locations to be drilled, the cost to drill, and the time frame within which they will be drilled; · the effects of adverse weather on operations; · drilling and operating risks; · the availability of equipment, such as drilling rigs, transportation pipelines and mining equipment; · changes in our oil and gas drilling and minerals development plans and related budgets; · the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity; · uncertainties associated with environmental matters and permitting and other regulations affecting our operations and planned activities; and · uncertainties associated with our legal proceedings and their outcome.

• difficult and adverse conditions in the domestic and global capital and credit markets;

• domestic and global demand for oil and natural gas and non-metallic minerals;

• volatility of the market prices for crude oil and natural gas and non-metallic minerals;

• the effects of government regulation, permitting, and other legal requirements;

• the geologic quality of our properties with regard to, among other things, the existence of non-metallic minerals and hydrocarbons in economic quantities;

• uncertainties about the estimates of our oil and natural gas reserves and our non-metallic mineral resources;

• our ability to increase our production and oil and natural gas income and non-metallic mineral sales through exploration and development;

• our ability to successfully apply horizontal drilling techniques and tertiary recovery methods;

• the number of well locations to be drilled, the cost to drill, and the time frame within which they will be drilled;

• the effects of adverse weather on operations;

• drilling and operating risks;

• the availability of equipment, such as drilling rigs, transportation pipelines and mining equipment;

• changes in our oil and gas drilling and minerals development plans and related budgets;

• the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity;

uncertainties associated with environmental matters and permitting and other regulations affecting our operations and planned activities; and

• uncertainties associated with our legal proceedings and their outcome.

Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the respective document. Other unknown or unpredictable factors may cause actual results to differ materially from those projected by the forward-looking statements. Most of these factors are difficult to anticipate and may be beyond our control. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.

-3-

PART I

Item 1. Business.

General

~~Daleco~~ Daleco Resources Corporation (~~the~~ “~~Company~~DRC”) is a Nevada corporation ~~and~~(organized ~~its~~in Nevada in 2002). DRC’s Articles provide for, among other things, authorized capital stock of ~~100,000,000~~150 million shares of common stock and 20 million shares of preferred stock. By vote of the shareholders at DRC’s annual meeting on June 20,~~000~~ 2013,~~000~~ DRC’s authorized shares of ~~preferred~~common stock were increased to 150 million shares from 100 million shares. The Company's ~~assets~~(as that term is defined below) segments consist of two separate categories: oil and natural gas and non-metallic minerals. ~~The~~DRC ~~Company~~ is a ~~natural resources~~ holding company whose subsidiaries are engaged in: (i) the exploration, development and production of oil and gas; (ii) the exploration for naturally occurring minerals; (iii) the ~~marketing~~production ~~and sales~~ of such minerals; and (iv) the marketing and sales of ~~products utilizing~~such ~~the Company’s~~ minerals. ~~The Company~~DRC’s wholly-owned subsidiaries include: Westlands Resources Corporation, (“WRC”); Deven Resources, Inc., (“DRI”); DRI Operating Company, Inc., ~~Deerlick~~(“DRIOP”); ~~Royalty Partners I,~~ Tri-Coastal Energy, Inc., (“TCEI”); Clean Age Minerals, Inc., (“CAMI”); CA Properties, Inc. (“CAPI”); International Aggregation and Trading Company, LLC (“IATC”); Sustainable Forest Industries, Inc. (“SFI”); and The Natural Resources Exchange, Inc. (“NREX”) (hereinafter, DRC, WRC, DRI, DRIOP, TCEI, CAMI, CAPI, IATC, SFI and NREC are sometimes collectively referred to as the “Company”). IATC, TCEI, SFI and NREX are inactive.

~~Tri~~ All of the Company’s oil and gas properties are located onshore within the continental United States of America. The Company, through its wholly-~~Coastal~~owned ~~Energy~~subsidiaries, ~~Inc.~~WRC, ~~Sustainable~~DRIOP ~~Forest~~and ~~Industries~~DRI, ~~Inc.~~ owns and ~~The~~operates ~~Natural~~oil ~~Resources~~and ~~Exchange~~gas properties located in Pennsylvania, ~~Inc~~Texas and West Virginia. ~~are~~The ~~inactive~~Company owns overriding royalty interests in (i) two wells in Pennsylvania and (ii) one well in Texas. The Company does not own working interests in the two wells located in Pennsylvania that it operates.

~~All of the Company’s oil and gas properties are located~~ ~~onshore within the continental United States of America.~~ The Company, ~~through~~does ~~its~~not ~~wholly-owned~~refine ~~subsidiaries,~~any ~~Westland~~crude ~~Resources Corporation,~~oil ~~DRI~~or ~~Operating~~market, ~~Company~~at ~~and Deven Resources~~retail, ~~Inc.,~~any ~~owns and operates~~ oil ~~and~~or ~~gas~~petroleum ~~properties located in Pennsylvania, Texas and West Virginia~~products. The Company ~~owns~~does ~~overriding~~not ~~royalty~~own ~~interests~~any indrilling ~~(i) two wells in Pennsylvania and (ii) one well in Texas~~rigs. ~~The~~ ~~Company~~All ~~does~~of ~~not~~its ~~own~~drilling ~~working~~activities ~~interests~~are inperformed ~~the~~by ~~wells~~independent ~~located~~drilling ~~in Pennsylvania that it operates~~contractors.

~~The~~ DRI ~~Company~~is ~~does~~the ~~not~~managing ~~refine~~general ~~any~~partner ~~crude~~of ~~oil~~Deerlick orRoyalty ~~market~~Partners I, ata ~~retail~~Pennsylvania general partnership, ~~any~~ ~~oil~~which orowns ~~petroleum~~overriding ~~products.~~royalty ~~The~~interests ~~Company~~in ~~does~~seventy ~~not~~wells ~~own~~in ~~any~~the ~~drilling~~Deerlick ~~rigs~~Coalbed Methane Field located in Tuscaloosa County, Alabama. ~~All~~DRI is also the sole shareholder of ~~its~~DRIOP ~~drilling~~which ~~activities~~operates ~~are~~wells ~~performed~~and byhas ~~independent drilling~~oil ~~contractors~~and ongas ainterests ~~contract~~in ~~basis~~West Virginia and Pennsylvania.

~~Deven~~ As ~~Resources,~~of ~~Inc.~~September ~~(“DRI”)~~30, is2013, the ~~managing~~Company ~~general partner~~owned ofworking ~~Deerlick~~interests ~~Royalty~~in ~~Partners~~28 I,wells ain ~~Pennsylvania~~Texas ~~general~~and ~~partnership,~~West ~~which~~Virginia. ~~owns~~Throughout ~~overriding~~the ~~royalty~~twelve ~~interests~~month inperiod ~~seventy wells~~beginning inOctober ~~the~~1, ~~Deerlick~~2012 ~~Coalbed~~and ~~Methane~~ending ~~Field~~September ~~located~~30, in2013 ~~Tuscaloosa County~~(“2013”), ~~Alabama.~~the ~~DRI~~Company ishas ~~also~~experienced ~~the~~an ~~sole~~average ~~shareholder~~increase of ~~DRI~~3% ~~Operating Company~~in ~~which~~the ~~operates~~unit ~~wells~~of ~~and~~production ~~has~~weighted average sales price it received for its oil and natural gas ~~interests~~products inas ~~West~~compared ~~Virginia~~to the twelve month period beginning October 1, 2011 and ~~Pennsylvania~~ending September 30, 2012 (“2012”).

~~As of September 30~~ CAMI, ~~2012,~~through ~~the~~its ~~Company~~ wholly-owned ~~working~~subsidiary, ~~interests in~~CAPI 28(hereinafter ~~wells~~CAMI inand ~~Texas~~CAPI ~~and~~are ~~West~~sometimes ~~Virginia.~~collectively ~~Throughout~~referred ~~the~~to ~~twelve~~as ~~month~~“CAM”), ~~period~~owns ~~beginning~~a ~~October~~fee 1title interest, ~~2011~~leasehold interest and ~~ending~~Federal ~~September~~Placer ~~30,~~and ~~2012, the~~Lode ~~Company~~mining ~~has~~claims ~~experienced~~containing annon-metallic ~~average~~and ~~decrease~~other ofminerals 5% in ~~the~~Texas, ~~unit~~New ofMexico ~~production~~and ~~weighted~~Utah. ~~average~~CAM ~~sales~~is ~~price~~presently itengaged ~~received~~in ~~for~~the ~~its oil~~exploration ~~and~~for ~~natural~~such ~~gas~~minerals. ~~products~~CAM asintends ~~compared~~ to mine the ~~twelve~~minerals ~~month~~through ~~period~~the ~~beginning~~use ~~October~~of 1,contract ~~2010~~miners and ~~ending~~arrangements ~~September~~with ~~30,~~its ~~2011~~joint venture partner.

~~Clean~~ In ~~Age~~February ~~Minerals~~2010, ~~Inc.,~~the ~~through~~Company ~~its~~entered ~~wholly-owned~~into ~~subsidiary, CA~~a ~~Properties,~~License ~~Inc.~~Agreement ~~(collectively~~concerning ~~“CAMI”),~~two ~~owns~~US amethod ~~fee~~patents ~~title~~for ~~interest,~~the ~~leasehold~~treatment ~~interest~~of ~~and~~sanitary ~~Federal~~wastewaters. ~~Placer~~Such ~~and~~patents ~~Lode mining~~utilize ~~claims~~the ~~containing~~Company’s ~~non-metallic~~zeolite. The license applies to the US and ~~other~~covers ~~minerals~~the inuse ~~Texas,~~of ~~New~~the ~~Mexico~~technology ~~and~~in ~~Utah.~~water, ~~CAMI~~wastewater isand ~~presently~~waste ~~engaged~~treatment in ~~the~~animal ~~exploration for~~feed ~~such~~operations, ~~minerals.~~agriculture, ~~CAMI~~and ~~intends~~aquaculture. toIn ~~mine~~addition, the ~~minerals~~license ~~through~~applies to the ~~use~~treatment of ~~contract~~sanitary ~~miners~~wastewater on Federal facilities, military bases and ~~arrangements~~lands ~~with~~administered ~~its~~by ~~joint~~the ~~venture partner~~US Bureau of Indian Affairs.

In During ~~February 2010~~2013, the Company ~~entered~~filed ~~into~~several aprovisional ~~License~~patents ~~Agreement concerning~~relating ~~two~~to USthe ~~method~~use ~~patents~~of ~~for~~its ~~the~~CA ~~treatment~~Series ofengineered ~~sanitary~~products ~~wastewaters.~~in ~~Such~~various ~~patents~~novel ~~utilize~~systems ~~the~~and ~~Company’s zeolite~~processes. Specifically, ~~The license~~the ~~applies~~provisional patents relate to ~~the~~a USsystem and ~~covers~~method ~~the~~for ~~use~~applying ofa ~~the~~zeolitic ~~technology~~material inuseful ~~water,~~for ~~wastewater~~converting ~~and~~a contaminated waste ~~treatment~~material inthat ~~animal~~is ~~feed~~environmentally ~~operations~~unacceptable, ~~agriculture~~ to a relatively harmless substance which is environmentally acceptable, and, ~~aquaculture.~~more ~~In addition~~particularly, ~~the~~applying ~~license~~a ~~applies~~material towith ~~the~~an ~~treatment~~effective amount of ~~sanitary~~zeolite ~~wastewater~~for ontreating ~~Federal~~waste ~~facilities,~~water. Additional ~~military bases~~processes ~~and~~include ~~lands~~utilizing ~~administered~~similar bysystem ~~the~~designs USin ~~Bureau~~acid ofmine ~~Indian~~drainage, ~~Affairs~~animal feed, agriculture, aquaculture, and other industrial purposes.

~~OIL AND NATURAL~~ ~~GAS~~ 4

~~Beginning at page 89 of this report, a glossary of oil and natural~~ ~~gas~~FEI/DTE ~~terms~~Stock ~~used~~Purchase ~~throughout this report is included. See Item 8 of Part II for additional information relating to the oil and natural gas activities of the Company.~~Agreement

~~Property~~ On ~~Acquisition~~March 25, 2013, the Company finalized a Stock Purchase Agreement (“SPA”) with Far East Investments, LLC, a California limited liability company (“FEI”) and ~~Disposition~~DTE Investment Ltd., a British Virgin Island company (“DTE”) (hereinafter FEI and DTE are sometimes collectively referred to as the “Investors” and individually as an “Investor”). The Investors paid the Company $1.5 million for 15 million shares of the Company’s common stock, par value $.01 (“Common Stock”) and warrants for the purchase of up to a total of 18 million shares of Common Stock to the Investors (“FEI/DTE Warrants”). The FEI/DTE Warrants have a term of five (5) years (“Term”) and may be exercised at a price of $0.20 per share (“Exercise Price”). In the third through fifth years of the Term, the Exercise Price may be satisfied by exchanging Common Stock at the current market price. The FEI/DTE Warrants may be exercised in whole or in part at any time during the Term. See Note 9.

~~During~~ Under ~~fiscal 2012,~~ the ~~Company~~SPA ~~acquired~~for ~~certain~~so ~~working~~long ~~interests in~~as ~~its~~the ~~operated~~Investors ~~properties~~retain in51% ~~Texas.~~or ~~During~~more ~~fiscal~~of ~~2012,~~ the ~~Company~~Common ~~sold~~Stock ~~certain~~issued ~~oil~~under ~~and~~the ~~natural~~SPA ~~gas~~(7,650,000 ~~leasehold deep rights for cash of $898~~shares),~~335.~~ ~~The~~the ~~oil~~Investors ~~and~~are ~~natural~~entitled ~~gas~~to ~~leasehold~~request ~~deep rights~~ that ~~were sold were undeveloped, and as such not income-producing to~~ the Company. ~~During~~nominate ~~fiscal~~for ~~2011~~election, ~~the~~by ~~Company did not acquire any oil and gas properties or drilling prospects. Within~~ the ~~oil and~~shareholders ~~gas~~of ~~sector,~~ the Company ~~faces competition from entities possessing substantially larger financial resources and staffs. The demand for domestically produced oil and natural gas should remain~~ at the ~~current~~Company’s ~~levels~~annual inmeeting ~~the foreseeable future especially in light~~ of ~~worldwide demand~~shareholders, ~~the~~two ~~turmoil~~persons insuitable ~~the~~to ~~Middle~~serve ~~East,~~as ~~decreased~~directors ~~production~~of ~~from Central America and political instability in South America. Domestic and increasing world demands, especially in~~ the ~~Pacific Basin, for crude oil and natural gas will continue to increase~~Company.

A provision of the Agreement requires that the Company shall not make any public announcement or statement concerning the Agreement other than that which the Company is required to disclose on Form 8-4-K and other required filings with the Securities and Exchange Commission. See Exhibit 10.27. The Company, consistent with its obligations under the securities laws, is required to seek confidential treatment of the information set forth in the Annex and Exhibits to the SPA.

~~The domestic oil industry is subject to the fluctuations inherent~~ inOIL ~~the~~AND ~~global~~NATURAL energy industry. Natural gas and crude oil prices have fluctuated on the spot market and each is a commodity traded on the mercantile exchange. However, most of the Company’s products (natural gas and crude oil) are sold under contracts that provide the Company with competitive pricing within its operating areas. While the demand for domestic natural gas remains favorable, the ongoing development of shale gas resources plays has significantly increased the available domestic natural gas supplies. In response, the price received for natural gas has declined within the existing domestic markets. Alternative markets and uses for natural gas are being developed and such should have a favorable impact on the demand for and the stabilization of natural gas prices with the United States.GAS

~~During fiscal 2013, the Company intends to continue to focus~~ ~~on:~~Beginning ~~(i)~~at ~~identifying~~page 110 of ~~niche~~this ~~acquisition~~report, ~~and~~a ~~developmental~~glossary ~~opportunities~~of ~~within the~~ oil and natural gas ~~sector~~terms ~~that~~used ~~can~~throughout bethis ~~economically~~report ~~exploited, and~~is ~~(ii)~~included. ~~identifying~~See ~~third~~Item ~~parties~~8 ~~who~~of ~~will,~~Part ~~either~~II ~~individually~~for oradditional ininformation ~~conjunction~~relating ~~with~~to the ~~Company,~~oil ~~develop~~and ~~certain~~natural gas activities of the Company~~’s leasehold interests~~.

~~Marketing~~ Recent ~~and~~Significant ~~Production of Oil and Gas, Delivery Commitment~~Activity

~~The Company does not refine or engage in retail sales of any~~ ~~petroleum~~Texas ~~products.~~Railroad ~~All~~Commission ofEnforcement ~~its~~Action production is sold, at the wellhead, to a variety of customers, which include pipelines, oil and natural gas gathering firms and other purchasers, pursuant to written agreements. Sales of oil and natural gas are customarily made at prevailing market prices or tied to a benchmark price under long-term contracts. Typically, oil purchase agreements are of short duration and provide for market sensitive pricing. Natural gas contracts are of a longer duration. The Company is a party to two long-term natural gas sales contracts which contain provisions concerning annual price adjustments and two contracts that renew annually. The Company is not obligated to provide a fixed and determinable quantity of oil and/or natural gas under existing contracts or agreements.

~~The~~ In ~~availability~~September of2013, aWRC ~~market~~received ~~for~~an ~~oil~~enforcement ~~and~~action ~~natural~~from ~~gas~~the ~~produced from~~Texas Railroad Commission (“RRC”). Due to the ~~properties~~enforcement ofaction, the ~~Company~~renewal ~~and~~of ~~prices~~WRC’s ~~received~~operator's ~~are~~permit ~~dependent~~was ~~upon~~suspended ~~numerous~~until ~~factors,~~such ~~substantially~~action ~~all~~is resolved. Certain of ~~which~~WRC’s ~~are~~operated ~~beyond the~~wells ~~control~~continue ofto ~~the~~pump ~~Company.~~and ~~Such~~oil ~~factors~~is ~~include~~stored ~~the~~oil ~~level~~in production tanks. Certain of ~~domestic~~WRC’s ~~production,~~operated wells are not producing as the ~~availability~~respective ofproduction ~~imported~~tanks have reached their capacity limitations. WRC is not permitted to sell oil ~~and~~until ~~gas,~~its ~~actions taken~~operator’s bypermit ~~foreign~~is ~~producing~~renewed. As ~~nations~~such, the ~~availability~~Company's ofconsolidated ~~distribution~~revenues ~~and~~for ~~transportation~~the ~~facilities~~first ~~and~~quarter ~~capacity~~of ~~thereon,~~2014 will be significantly lower than the ~~availability and~~first ~~price~~quarter of ~~fuels~~2013. ~~competitive~~Depending ~~with~~on ~~oil~~the ~~and~~timing ~~gas~~of the resolution of the renewal of such permit, ~~world~~the ~~and~~Company's ~~domestic~~consolidated ~~demand~~revenues for ~~oil~~the ~~and~~second ~~gas~~quarter ~~and~~of ~~refined~~2014 ~~products,~~may ~~governmental~~also ~~regulations, environmental~~be ~~restrictions,~~higher ~~drilling~~or ~~moratoriums~~lower ~~and~~than ~~taxation~~the second quarter of 2013. Management ~~Such~~of ~~factors~~the ~~make~~company itanticipates ~~impracticable~~the renewal of the operator’s permit to ~~predict~~be ~~with~~completed ~~any~~during ~~degree~~the second quarter of ~~certainty~~ ~~future~~2014; ~~demand~~however ~~for~~there orcan ~~prices~~be ofno assurances as to when the ~~oil~~renewal orof ~~gas~~WRC’s ~~produced~~operator’s permit will be approved by the ~~Company~~RRC and when the sales of oil from WRC’s operated properties will resume.

~~Production of oil and gas is generally not considered to be~~ ofAsset aPurchase seasonal nature, although severe weather conditions can temporarily curtail or preclude producing activities. Demand for natural gas is fairly constant over the entire year as a result of the increased demand for natural gas to fuel electric power generation and ~~other~~Sale commercial uses. Gas production from certain wells operated by the Company in West Virginia has been curtailed occasionally by the transporting pipeline. The Company has never experienced any other difficulties in selling any of its oil or gas.Agreement

~~Customers~~ On October 6, 2013, the Company entered into an Asset Purchase and Sale Agreement (“APA”) pursuant to which the Company agreed to sell its interest in certain oil and natural gas leasehold deep rights for certain properties located in Burleson County, Texas (“Properties”), for cash, subject to adjustment as to any title defect that is not cured within the timeframe permitted by such agreement. On November 5, 2013, the closing date was delayed from November 6, 2013, to December 6, 2013, in accordance with the APA to allow the Company to address title issues raised by the buyer on November 1, 2013. A First Amendment to the APA was entered into on December 5, 2013, extending the “Delayed Closing Date” until December 17, 2013. On December 17, 2013, the parties closed on the sale of 280 net acres attributable to the Company’s interest in the Properties covered by this portion of the transaction. The Company received $448,038 at the closing and will recognize gain in the amount of proceeds when received. The oil and natural gas leasehold deep rights that were sold were undeveloped, and as such not income-producing to the Company. On December 16, 2013, a Second Amendment to the APA was entered into by the Company and the Buyer to extend the Delayed Closing Date to January 16, 2014, as to certain Properties to allow the parties to continue to address the Buyer’s concerns about certain issues with the remaining Properties that did not close on December 17, 2013. On January 13, 2014, a Third Amendment to the APA was entered into by the Company and the Buyer to extend the Delayed Closing Date to February 17, 2014.

~~The following table identifies the Company’s customers who purchased in excess of five percent (~~5~~%) of the Company’s oil and natural gas during the fiscal year ended September 30, 2012:~~

Name and Location of Purchaser		Percentage
ETC Texas Pipeline, Ltd.(1)	San Antonio, Texas		27	%
GulfMark Energy, Inc.	Houston, Texas		45	%
Sheridan Production Company LLC	Houston, TX		16	%
Volunteer Energy Services, Inc.	Pickerington, Ohio		10	%

Property Acquisition and Disposition

~~(1)~~ During ~~The~~2013, the Company’s ~~production~~did ofnot ~~natural~~acquire any oil and gas ~~from~~properties ~~its~~or ~~operated~~drilling ~~wells~~prospects. inDuring 2012, the ~~Giddings~~Company ~~Field,~~acquired ~~Texas,~~certain isworking ~~sold~~interests toin ~~ETC~~its operated properties in Texas. ~~Pipeline~~During 2012, ~~Ltd.~~the ~~pursuant~~Company tosold acertain ~~long~~oil ~~standing~~and ~~contract~~natural ~~expiring~~gas ~~January~~leasehold ~~31,~~deep ~~2014,~~rights ~~with~~in anPennsylvania ~~annual~~for ~~renewal~~cash ~~provision~~of ~~which~~$898,335. ~~covers~~The aoil ~~number~~and ofnatural ~~the~~gas ~~Company’s~~leasehold ~~Texas~~deep ~~leases.~~rights ~~Subject~~that towere ~~various~~sold ~~conditions~~were undeveloped, ~~ETC~~and ~~has~~as ~~agreed~~such not income-producing to ~~buy~~the ~~all~~Company. ofWithin the ~~Company’s~~oil ~~natural~~and gas ~~produced~~sector, ~~from~~ the ~~Giddings~~Company ~~Field.~~faces ~~The~~competition ~~Company~~from ~~receives~~entities ~~eighty~~possessing ~~percent~~substantially ~~(80%)~~larger offinancial ~~the~~resources ~~weighted~~and ~~average~~staffs. ~~monthly~~The ~~sales~~demand ~~price~~ for ~~liquid~~domestically ~~products~~produced ~~extracted~~oil ~~from~~and natural gas ~~delivered~~should toremain ~~ETC~~at ~~and~~the ~~eighty~~current ~~percent~~levels ~~(80%)~~in the foreseeable future especially in light of worldwide demand, the ~~resale~~turmoil ~~prices~~in ~~for~~the ~~dry~~Middle ~~residual~~East, ~~gas~~decreased production from Central America and political instability in South America. ~~Prices~~Domestic ~~received~~and byincreasing ~~the~~world ~~Company~~demands, ~~are~~especially ~~subject~~in tothe ~~deductions~~Pacific Basin, for ~~taxes,~~crude ~~compression~~oil and ~~similar~~natural ~~charges~~gas will continue to increase.

~~-5-~~ The domestic oil industry is subject to the fluctuations inherent in the global energy industry. Natural gas and crude oil prices have fluctuated on the spot market and each is a commodity traded on the mercantile exchange. However, most of the Company’s products (natural gas and crude oil) are sold under contracts that provide the Company with competitive pricing within its operating areas. While the demand for domestic natural gas remains favorable, the ongoing development of shale gas resources plays has significantly increased the available domestic natural gas supplies. In response, the price received for natural gas has declined within the existing domestic markets. Alternative markets and uses for natural gas are being developed and such should have a favorable impact on the demand for and the stabilization of natural gas prices with the United States.

The Company ~~does~~continues ~~not~~to ~~believe~~focus ~~that~~on: ~~the~~(i) ~~loss~~identifying ofniche ~~any~~acquisition ~~one~~and ofdevelopmental ~~these customers~~opportunities ~~would~~within ~~have~~the aoil ~~material~~and ~~adverse~~gas ~~effect~~sector ~~upon~~that ~~the~~can ~~Company’s~~be ~~revenues~~economically ~~since~~exploited, ~~there~~and ~~are~~(ii) ~~numerous~~identifying ~~purchasers~~third ofparties ~~oil~~who ~~and natural~~will, ~~gas~~either individually or in conjunction with the ~~areas~~Company, indevelop ~~which~~certain of the Company’s ~~operates~~leasehold interests.

Marketing and Production of Oil and Gas, Delivery Commitment

~~Substantially~~ The ~~all~~Company ~~the~~does ~~Company’s~~not ~~production~~refine or engage in retail sales of ~~oil~~any ~~and natural~~petroleum ~~gas~~products. inAll ~~Texas~~of its production is ~~attributable~~sold, toat the ~~Giddings~~wellhead, ~~Field~~to ~~located~~a invariety ~~the~~of ~~Austin~~customers, ~~Chalk~~which ~~Trend~~include ~~(see~~pipelines, ~~Item~~oil 2and –natural ~~Properties)~~gas ~~which represented~~gathering ~~72%~~firms and ~~66%~~other ofpurchasers, ~~total~~pursuant to written agreements. Sales of oil and natural gas ~~production~~are oncustomarily anmade ~~MCFE~~at ~~basis~~prevailing ~~for~~market ~~fiscal~~prices ~~2012~~or ~~and~~tied ~~2011,~~to ~~respectively~~a benchmark price under long-term contracts. ~~All~~Typically, ~~the~~oil ~~Company’s production~~purchase agreements are of ~~natural~~short duration and provide for market sensitive pricing. Natural gas incontracts ~~West~~are ~~Virginia~~of a longer duration. The Company is ~~attributable~~a party to ~~the~~two ~~Oriskany~~long-term ~~formation~~natural ofgas ~~the~~sales ~~Appalachian~~contracts ~~Basin’s~~which ~~Upper~~contain ~~Devonian Section~~provisions ~~which~~concerning ~~represented~~annual ~~28%~~price adjustments and ~~34%~~two ofcontracts ~~total~~that ~~oil~~renew ~~and~~annually. ~~natural~~The ~~gas~~Company ~~production~~is onnot anobligated ~~MCFE~~to ~~basis~~provide ~~for~~a ~~fiscal~~fixed ~~2012~~and determinable quantity of oil and/or ~~2011,~~natural ~~respectively~~gas under existing contracts or agreements.

The ~~following~~availability ~~table~~of ~~summarizes~~a market for oil and natural gas produced from the properties of the Company’s ~~net~~and prices received are dependent upon numerous factors, substantially all of which are beyond the control of the Company. Such factors include the level of domestic production, the availability of imported oil and ~~natural~~ gas, ~~production~~actions ~~for~~taken by foreign producing nations, the ~~periods~~availability ~~indicated~~of distribution and transportation facilities and capacity thereon, ~~shown~~the inavailability ~~barrels (“Bbls”)~~and price of fuels competitive with oil and gas, ~~thousand~~world ~~cubic~~and ~~feet~~domestic ~~(“Mcf”):~~demand for oil and gas and refined products, governmental regulations, environmental restrictions, drilling moratoriums and taxation. Such factors make it impracticable to predict with any degree of certainty future demand for or prices of the oil or gas produced by the Company.

	Fiscal Year Ended September 30
	2012		2011
Texas:
Oil (Bbls)		2,112		1,711
Gas (Mcf)		21,281		18,520
Average Bbls/day		6		5
Average Mcf/day		58		51
Pennsylvania:
Gas (Mcf)		192		25
Average Mcf/day		1		-
West Virginia:
Gas (Mcf)		12,931		14,534
Average Mcf/day		36		40
TOTALS:
Oil (Bbls)		2,112		1,711
Gas (Mcf)		34,404		33,079
Average Bbls/day		6		5
Average Mcf/day		96		91

Production of oil and gas is generally not considered to be of a seasonal nature, although severe weather conditions can temporarily curtail or preclude producing activities. Demand for natural gas is fairly constant over the entire year as a result of the increased demand for natural gas to fuel electric power generation and other commercial uses. Gas production from certain wells operated by the Company in West Virginia has been curtailed occasionally by the transporting pipeline. The Company has never experienced any other difficulties in selling any of its oil or gas.

~~The following table summarizes for the periods indicated the~~ ~~average price per barrel (“Bbl”) of oil, the average price per thousand cubic feet (“Mcf”) of natural gas~~ ~~and average sales price and production costs per gas equivalent. In determining the prices received by the Company, the revenues~~ ~~are attributed to the Company’s net revenue interests. Production costs incurred by the Company include expenses of operation~~ ~~attributable to the Company’s working interests. For the purpose of determining Mcf equivalents (“MCFE”), one~~ ~~Bbl of oil has been converted to gas equivalents at the rate of one Bbl per six Mcf.~~6

	Fiscal Year Ended September 30
	2012		2011
Texas
Average Sale Price Per Bbl	$	95.67	$	89.87
Average Sale Price Per Mcf	$	6.08	$	7.60
Pennsylvania
Average Sale Price Per Mcf	$	3.17	$	4.96
West Virginia
Average Sale Price Per Mcf	$	3.26	$	4.48
Combined Properties
Average Sale Price Per Bbl	$	95.67	$	89.87
Average Sale Price Per Mcf	$	4.98	$	6.28
Average Sale Price Per MCFE	$	7.93	$	8.34
Average Production Costs per MCFE	$	3.87	$	3.60

Customers

~~-6-~~ The following table identifies the Company’s customers who purchased in excess of five percent (5%) of the Company’s oil and natural gas during 2013:

Drilling Activity

Name and Location of Purchaser		Percentage
GulfMark Energy, Inc.	Houston, Texas	53	%
ETC Texas Pipeline, Ltd.⁽¹⁾	San Antonio, Texas	24	%
Sheridan Production Company LLC	Houston, Texas	13	%
Volunteer Energy Services, Inc.	Pickerington, Ohio	7	%

(1) The Company’s ~~did~~production ~~not~~of ~~participate~~natural gas from its operated wells in the ~~drilling~~Giddings ofField, ~~any~~Texas, ~~exploratory or~~is ~~development~~sold ~~wells~~to inETC ~~fiscal~~Texas ~~2012~~Pipeline, ~~or 2011~~Ltd. ~~Such~~pursuant ~~information~~to ~~should~~a ~~not~~long bestanding ~~considered~~contract ~~indicative~~expiring ofJanuary ~~future~~31, ~~performance~~2015, orwith ~~prospects~~ an annual renewal provision which covers a number of the Company’s Texas leases. ~~There~~Subject isto novarious ~~necessary~~conditions, ~~correlation~~ETC ~~between~~has agreed to buy all of the ~~number~~Company’s natural gas produced from the Giddings Field. The Company receives eighty percent (80%) of ~~producing~~the ~~wells,~~weighted ~~whether~~average ~~developmental~~monthly orsales ~~exploratory, completed~~price ~~during~~for ~~any~~liquid ~~period~~products extracted from natural gas delivered to ETC and eighty percent (80%) of the ~~aggregate~~resale ~~reserves~~prices orfor ~~future~~dry ~~net~~residual ~~income~~gas. ~~generated~~Prices received by the Company are subject to deductions for taxes, compression and similar charges.

~~Wells~~ The Company does not believe that the loss of any one of these customers would have a material adverse effect upon the Company’s revenues since there are numerous purchasers of oil and ~~Acreage~~natural gas in the areas in which the Company operates.

~~The Company owns no Undeveloped Acreage at September 30, 2012~~ ~~and 2011. Certain of the Developed Acreage owned by the Company are limited as to depths and/or formations. The following tables set forth certain information as of September 30, 2012 and 2011:~~Production

	2012				2011
Well Count	Gross Wells		Net Wells		Gross Wells		Net Wells
Texas		26		12.26		26		9.40
West Virginia		2		0.46		2		0.46
Total		28		12.72		28		9.86

Substantially all the Company’s production of oil and natural gas in Texas is attributable to the Giddings Field located in the Austin Chalk Trend (see Item 2 – Properties) which represented 79% and 72% of total oil and gas production on an MCFE basis for 2013 and 2012, respectively. All the Company’s production of natural gas in West Virginia is attributable to the Oriskany formation of the Appalachian Basin’s Upper Devonian Section which represented 21% and 28% of total oil and natural gas production on an MCFE basis for 2013 and 2012, respectively.

Developed Acreage	Gross Acres		Net Acres		Gross Acres		Net Acres
Texas		5,069		2,365		5,069		1,813
Pennsylvania		382		382		382		382
West Virginia		1,777		432		1,777		432
Total		7,228		3,179		7,228		2,627

The following table summarizes the Company’s net oil and natural gas production for the fiscal periods indicated, shown in barrels (“Bbls”) and, thousand cubic feet (“Mcf”):

Proved Reserves

	2013	2012
Texas:
Oil (Bbls)	2,575	2,112
Gas (Mcf)	23,606	21,281
Average Bbls/day	7	6
Average Mcf/day	65	58
Pennsylvania:
Gas (Mcf)	252	192
Average Mcf/day	1	1
West Virginia:
Gas (Mcf)	10,322	12,931
Average Mcf/day	28	36
TOTALS:
Oil (Bbls)	2,575	2,112
Gas (Mcf)	34,180	34,404
Average Bbls/day	7	6
Average Mcf/day	94	96

~~The Company causes to be prepared an annual estimate of its~~ ~~proved oil and gas reserves. These estimates are prepared by an independent consultant in a manner consistent with generally accepted~~ ~~procedures for such estimates. Proved developed reserves are estimated utilizing available data including but not limited to, the~~ ~~wells’ geologic information, operating performance and the prevailing market conditions.~~ 7

The ~~Company~~following ~~has~~table ~~not~~summarizes ~~filed~~the ~~reserve~~average ~~estimates~~sales ~~with~~price ~~any~~per ~~United States~~barrel ~~authority~~of ~~or agency~~oil, ~~other~~the ~~than~~average ~~estimates~~sales ~~previously~~price ~~filed~~per ~~with~~Mcf ~~the~~of ~~Securities~~natural gas and ~~Exchange~~average ~~Commission.~~sales ~~The~~price ~~following~~and ~~tables set~~production ~~forth~~costs per Mcfe for the ~~net~~fiscal ~~proved~~periods ~~developed~~indicated. ~~reserves~~In ofdetermining the ~~Company~~prices asreceived ofby ~~September~~the 30Company, ~~2012~~the ~~and~~revenues ~~2011~~are attributed to the Company’s net revenue interests. ~~All~~Production ofcosts incurred by the ~~reserves~~Company ~~are~~include ~~located~~expenses ~~on-shore within~~of operation attributable to the ~~United~~Company’s ~~States~~working interests.

Proved reserve estimates for the Company’s properties as of September 30, 2012 and 2011 were taken from reserve reports dated January 7, 2013 and February 2, 2012, respectively, prepared by Hall Energy, Inc. of Magnetic Springs, Ohio, with the figures utilizing constant product prices in accordance with reporting requirements. Hall Energy, Inc. is an independent petroleum engineering concern with an emphasis in the Appalachian and Ohio Basins.

	2013		2012
Texas
Average Sales Price Per Bbl	$	95.58	$	95.67
Average Sales Price Per Mcf	$	5.08	$	6.08
Pennsylvania
Average Sales Price Per Mcf	$	3.58	$	3.17
West Virginia
Average Sales Price Per Mcf	$	3.60	$	3.26
Combined Properties
Average Sales Price Per Bbl	$	95.58	$	95.67
Average Sales Price Per Mcf	$	4.63	$	4.98
Average Sales Price Per Mcfe	$	8.14	$	7.93
Average Production Costs per Mcfe	$	4.79	$	3.87

	September 30
	2012		2011
Net Proved Developed Reserves:
Oil (Bbls)
Texas		26,736		34,149
Gas (Mcf)
Texas		151,605		154,048
Alabama (1)		105,141		-
Pennsylvania		599		-
West Virginia		177,036		188,814
Total		434,381		342,862

Wells and Acreage

~~Substantially~~ The ~~all the~~ Company’s ~~proved~~owns ~~reserves~~no inUndeveloped ~~Texas are~~Acreage ~~attributable to the Giddings Field located in the Austin Chalk Trend (see Item 2 – Properties) which represented 52% and 66% of total net proved developed reserves on an MCFE basis~~ at September 30, ~~2012~~2013 and ~~2011, respectively~~2012. ~~All~~Certain ~~the Company’s proved reserves in West Virginia are attributable to the Oriskany formation~~ of the ~~Appalachian~~Developed ~~Basin’s~~Acreage ~~Upper~~owned ~~Devonian~~by ~~Section which~~the ~~represented~~Company ~~30%~~are ~~and~~limited ~~34%~~as ofto ~~total~~depths ~~net proved developed reserves on an MCFE basis at September 30, 2012~~ and/or ~~2011, respectively~~formations. ~~All~~ ~~the~~The ~~Company’s~~following ~~proved~~table ~~reserves~~sets inforth ~~Alabama~~certain ~~are~~information ~~attributable~~that tois the ~~Deerlick~~same ~~Coalbed~~as ~~Methane Field located in Tuscaloosa County, Alabama, which represented 18%~~ of ~~total net proved developed reserves on an MCFE basis at~~ September 30, ~~2012.~~2013 ~~The~~and ~~Company did not estimate reserves at September 30, 2011, for its interest in the Deerlick Coalbed Methane Field.~~2012:

-7-

Well Count	Gross Wells	Net Wells
Texas	26	12.26
West Virginia	2	0.46
Total	28	12.72

Developed Acreage	Gross Acres	Net Acres
Texas	5,069	2,365
Pennsylvania	382	382
West Virginia	1,777	432
Total	7,228	3,179

The Company has identified fifteen (15) potential development and redevelopment opportunities associated with its existing leasehold acreage in the Giddings Field located in the Austin Chalk Trend. The Company believes that the potential for the development of such locations will occur within the next few years as a result of renewed interest in the area of its properties. The prevailing oil price and the development of properties in “resource plays” in the area of the Company’s acreage are major factors contributing to such interest. At September 30, 2012, the Company has assigned probable and possible reserves to the fifteen (15) potential developmental locations. 8

~~Estimated~~ Drilling ~~Future Net Revenues and Present Worth~~Activity

~~Estimated~~ The Company did not participate in the drilling of any exploratory or development wells in 2013 or 2012. Such information should not be considered indicative of future ~~net~~performance ~~revenues~~or prospects of the Company’s. ~~proved net~~There ~~oil~~is ~~and~~no ~~gas~~necessary ~~reserves~~correlation atbetween the ~~date~~number ~~indicated~~of ~~and~~producing ~~the~~wells, ~~present~~whether ~~worth~~developmental ~~thereof~~or ~~employing~~exploratory, acompleted ~~ten~~during ~~percent~~any ~~(10%)~~period ~~discount~~and ~~factor~~the isaggregate ~~set forth~~reserves inor ~~the~~future ~~following~~net ~~tabulation:~~income generated.

	September 30
	2012		2011
Future Net Revenues :
Proved Developed Oil and Gas Reserves	$	2,669,449	$	3,369,816
Proved Undeveloped Oil and Gas Reserves	$	-	$	-
Total Proved Oil and Gas Reserves	$	2,669,449	$	3,369,816
Present Worth:
Proved Developed Oil and Gas Reserves	$	1,792,312	$	2,206,666
Proved Undeveloped Oil and Gas Reserves	$	-	$	-
Total Proved Oil and Gas Reserves	$	1,792,312	$	2,206,666

Proved Reserves

The ~~present~~Company ~~value~~causes to be prepared an annual estimate of ~~estimated~~its ~~future~~proved ~~net~~oil ~~revenues~~and ~~set~~gas ~~forth above~~reserves. isThese ~~computed~~estimates ~~using~~are ~~the~~prepared ~~estimated~~by ~~future~~an ~~net~~independent ~~revenues~~consultant ~~and~~in a ~~discount~~manner ~~factor~~consistent ofwith ~~ten~~generally ~~percent~~accepted ~~(10%)~~procedures ~~over~~for such estimates. Proved developed reserves are estimated utilizing available data including but not limited to, the ~~projected~~wells’ ~~life~~geologic ~~of each~~information, ~~property~~operating performance and the prevailing market conditions.

~~Petroleum~~ Proved ~~engineering~~reserve isestimates ~~not~~for ~~an exact science. Information relating to~~ the Company’s ~~oil~~properties ~~and~~as ~~gas reserves is based upon engineering estimates. Estimates~~ of ~~economically~~September ~~recoverable~~30, ~~oil~~2013 and ~~gas~~ ~~reserves~~2012 ~~and~~were oftaken ~~the future net revenues therefrom are based upon a number of variable factors and assumptions, such as historical production~~ from ~~the~~reserve ~~subject~~reports ~~properties~~dated ~~compared~~December ~~with production from other producing properties~~31, ~~the~~2013 ~~assumed effects of regulation by governmental agencies~~ and ~~assumptions~~January ~~concerning future oil and gas prices and future operating costs~~7, ~~severance and excise taxes~~2013, ~~development costs~~respectively, ~~work-over~~prepared ~~and~~by ~~remedial~~Hall ~~costs~~Energy, ~~all of which may in fact vary from actual results~~Inc. ~~All such estimates are to some degree speculative, and classifications~~ of ~~reserves~~Magnetic ~~are only attempts to define the degree of speculation involved. For these reasons~~Springs, ~~estimates of the economically recoverable reserves of oil and gas attributable to any particular group of properties~~Ohio, ~~classifications~~ ofwith ~~such reserves based on risk of recovery and estimates of~~ the ~~future~~figures ~~net~~utilizing ~~revenues~~constant ~~expected~~product ~~therefrom,~~prices ~~prepared by~~in ~~different~~accordance ~~engineers~~with orreporting byrequirements. ~~the~~Hall ~~same engineers at different times~~Energy, ~~may vary~~Inc. ~~The~~is ~~Company~~an ~~emphasizes~~independent ~~that~~petroleum ~~the~~engineering ~~actual~~concern ~~production, revenues, severance and excise taxes, development expenditures and operating expenditures~~ with ~~respect~~an toemphasis ~~its~~in ~~reserves~~the ~~will~~Appalachian ~~likely vary from such estimates,~~ and ~~such~~Ohio ~~variances may be material~~Basins. ~~Persons~~All ~~should not assume that the estimates~~ of the ~~Company's future~~ reserves are alocated ~~guaranteed~~on-shore ~~figure~~within the United States.

~~The present values shown above~~ ~~should not be construed as the current market value of the estimated oil and gas reserves attributable to the Company’s properties.~~ InThe ~~accordance~~following ~~with~~table ~~applicable~~sets ~~requirements~~forth of the ~~Securities and Exchange Commission, the estimated discounted future~~ net ~~revenues from~~ proved developed reserves ~~are based, generally, on prices and costs as~~ of the ~~date~~Company ~~of the estimate, whereas actual future prices and costs may be materially higher or lower. Actual future net revenues also will be affected by factors such~~ as ~~actual production, supply and demand for oil and gas, curtailments or increases in consumption by gas purchasers, changes in governmental regulations or taxation, the impact~~ of ~~inflation on operating costs, general and administrative costs and interest expense. Estimated future production is priced at the average price received for fiscal 2012 for the amounts at~~ September 30, ~~2012~~2013 and ~~the average~~2012: price received for fiscal 2011 for amounts at September 30, 2011. The method of calculating the estimated product prices is in accordance with the reserve estimation and disclosure requirements of ASC Topic 932, Extractive Industries – Oil and Gas which the Company adopted on September 30, 2010. The timing of actual future net revenues from proved reserves, and thus their actual present value, will be affected by the timing of the incurrence of expenses in connection with development of oil and gas properties. In addition, the ten percent (10%) discount factor, which is required by the Commission to be used to calculate discounted future net revenues for reporting purposes, is not necessarily the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the oil and gas industry. Discounted future net revenues, no matter what discount rate is used, are materially affected by assumptions as to the timing of future production and future expenses which may and often do prove to be inaccurate.

-8-

	September 30
	2013	2012
Net Proved Developed Reserves:
Oil (Bbls)
Texas	21,958	26,736
Gas (Mcf)
Texas	157,955	151,605
Alabama	15,397	105,141
Pennsylvania	1,172	599
West Virginia	122,465	177,036
Total	296,989	434,381
Mcfe
Texas	289,703	312,021
Alabama	15,397	105,141
Pennsylvania	1,172	599
West Virginia	122,465	177,036
Total	428,737	594,797

~~Reserves~~ Substantially ~~Reported~~all Tothe ~~Other~~Company’s ~~Agencies~~proved reserves in Texas are attributable to the Giddings Field located in the Austin Chalk Trend (see Item 2 – Properties) which represented 68% and 52% of total net proved developed reserves on an MCFE basis at September 30, 2013 and 2012, respectively. All the Company’s proved reserves in West Virginia are attributable to the Oriskany formation of the Appalachian Basin’s Upper Devonian Section which represented 28% and 30% of total net proved developed reserves on an MCFE basis at September 30, 2013 and 2012, respectively. All the Company’s proved reserves in Alabama are attributable to the Deerlick Coalbed Methane Field located in Tuscaloosa County, Alabama, which represented 4% and 18% of total net proved developed reserves on an MCFE basis at September 30, 2013 and 2012, respectively.

~~There~~ The ~~were~~Company nohas ~~estimates~~identified orfifteen ~~reserve~~(15) ~~reports~~potential ofdevelopment and redevelopment opportunities associated with its existing leasehold acreage in the Giddings Field located in the Austin Chalk Trend. The Company~~’s proved~~ ~~domestic~~believes ~~net~~that ~~oil~~the orpotential ~~gas~~for ~~reserves~~the ~~filed~~development ~~with~~of ~~any~~such ~~governmental~~locations ~~authority~~will oroccur ~~agency~~within ~~other~~the ~~than~~next few years as a result of renewed interest in the ~~Securities~~area of its properties. The prevailing oil price and ~~Exchange Commission~~the ~~during~~development of properties in “resource plays” in the ~~fiscal~~area ~~years~~of ~~ended~~the Company’s acreage are major factors contributing to such interest. At September 30, ~~2012~~2013, the Company has assigned probable and ~~2011~~possible reserves to the fifteen (15) potential developmental locations.

~~MINERAL INTERESTS~~9

~~Beginning~~ Estimated atFuture ~~page~~Net 92Revenues ~~of this report, a glossary of minerals~~ and ~~mining~~Present ~~terms used throughout this report is included. See Item 8 of Part II for additional information relating to the minerals activities of the Company.~~Worth

~~General~~ Estimated future net revenues of the Company’s proved net oil and gas reserves at the date indicated and the present worth thereof employing a ten percent (10%) discount factor is set forth in the following tabulation:

The mining and marketing of non-metallic industrial minerals is highly competitive; however, the Company believes that the locations and quality of its mineral deposits will benefit its future development and sales efforts. By definition, the Company is an Exploration Stage entity in respect to its mineral holdings. In 2005, the Company contracted Denali Enterprises to review available technical data associated with the quantification of the mineral deposits in connection with the Company’s exploration efforts. Such review reaffirmed the existence of sufficient mineral deposits to continue with such efforts. The Company’s ability to develop these mineral deposits is dependent on its success in bringing in strategic partners with experience in or a demand for specific minerals and raising capital through third parties. In June 2007, the Company and Tecumseh Professional Associates, Inc. (“TPA”) entered into a Restated Development and Operating Agreement in respect to the Sierra Kaolin deposit. Under the Restated Development and Operating Agreement the Company and TPA continued the evaluation of the Sierra Kaolin (See “Kaolin” below). Independently, the Company has continued the evaluation of its zeolite properties. The Company continues to sell raw zeolite to third parties as animal feed supplement and for other uses, and market its zeolite based products such as its ReNuGen™, a product utilized in wastewater treatment applications. At September 30, 2012, the Company was and continues to be involved in discussions with one or more potential joint venture partners for the development and testing of additional zeolite based products and to provide capital for market introduction.

		September 30
		2013	2012
Future Net Revenues:
Proved Developed Oil and Gas Reserves	$	1,919,319	$	2,669,449
Proved Undeveloped Oil and Gas Reserves		-		-
Total Proved Oil and Gas Reserves	$	1,919,319	$	2,669,449
Present Worth:
Proved Developed Oil and Gas Reserves	$	1,361,002	$	1,792,312
Proved Undeveloped Oil and Gas Reserves		-		-
Total Proved Oil and Gas Reserves	$	1,361,002	$	1,792,312

~~Mineral~~ The ~~Extraction~~present value of estimated future net revenues set forth above is computed using the estimated future net revenues and a discount factor of ten percent (10%) over the projected life of each property.

~~The~~ Petroleum ~~Company~~engineering ~~has~~is not ~~established~~an ~~large-scale~~exact ~~production~~science. ofInformation ~~any of~~relating ~~its~~to ~~mineral~~the ~~deposits. The~~ Company'’s ~~mineral~~oil ~~extraction~~and gas reserves is ~~conducted~~based byupon ~~third~~engineering ~~party~~estimates. ~~contractors~~Estimates ~~engaged~~of byeconomically ~~CAMI~~recoverable oroil ~~its~~and ~~joint venture~~gas ~~partners.~~reserves ~~The~~and ~~Company~~of ~~does~~the ~~not~~future ~~conduct~~net ~~any~~revenues ~~direct~~therefrom ~~extraction~~are ~~activities~~based upon a number of ~~its~~variable ~~own.~~factors Asand assumptions, such as historical production from the subject properties compared with production from other producing properties, the ~~Company~~assumed iseffects ~~subject~~of ~~to “pass~~regulation ~~through”~~by governmental agencies and assumptions concerning future oil and gas prices and future operating costs, ~~for~~severance ~~the~~and ~~extraction~~excise taxes, ~~crushing~~development orcosts, ~~preparation~~work-over and remedial costs, all of ~~its~~which ~~minerals~~may in fact vary from actual results. ~~Likewise~~All such estimates are to some degree speculative, and classifications of reserves are only attempts to define the ~~third~~degree ~~party~~of ~~operator is~~speculation ~~solely~~involved. ~~responsible~~For ~~for~~these reasons, estimates of the ~~type~~economically recoverable reserves of ~~equipment~~oil ~~utilized~~and gas attributable to any particular group of properties, classifications of such reserves based on ~~each~~risk ~~mineral~~of ~~site~~recovery and estimates of the future net revenues expected therefrom, ~~subject~~prepared toby different engineers or by the ~~third~~same ~~party~~engineers ~~contractor’s~~at ~~compliance with~~different ~~all~~times, ~~Federal~~may vary. The Company emphasizes that the actual production, ~~state~~revenues, severance and ~~local~~excise ~~laws~~taxes, ~~regulations~~development expenditures and ~~ordinances~~operating ~~for~~expenditures ~~the~~with ~~conduct~~respect ofto ~~operations,~~its ~~environmental~~reserves ~~protection~~will likely vary from such estimates, and ~~safety~~ such variances may be material. Persons should not assume that the estimates of ~~operations~~the Company's future reserves are a guaranteed figure.

~~Mineralized~~ The ~~Materials~~present values shown above should not be construed as the current market value of the estimated oil and gas reserves attributable to the Company’s properties. In accordance with applicable requirements of the Securities and Exchange Commission, the estimated discounted future net revenues from proved reserves are based, generally, on prices and costs as of the date of the estimate, whereas actual future prices and costs may be materially higher or lower. Actual future net revenues also will be affected by factors such as actual production, supply and demand for oil and gas, curtailments or increases in consumption by gas purchasers, changes in governmental regulations or taxation, the impact of inflation on operating costs, general and administrative costs and interest expense. Estimated future production is priced at the average price received for 2013 for the amounts at September 30, 2013 and the average price received for 2012 for amounts at September 30, 2012. The method of calculating the estimated product prices is in accordance with the reserve estimation and disclosure requirements of ASC Topic 932, Extractive Industries – Oil and Gas which the Company adopted on September 30, 2010. The timing of actual future net revenues from proved reserves, and thus their actual present value, will be affected by the timing of the incurrence of expenses in connection with development of oil and gas properties. In addition, the ten percent (10%) discount factor, which is required by the Commission to be used to calculate discounted future net revenues for reporting purposes, is not necessarily the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the oil and gas industry. Discounted future net revenues, no matter what discount rate is used, are materially affected by assumptions as to the timing of future production and future expenses which may and often do prove to be inaccurate.

~~Set forth below are the total gross acres, gross acres evaluated~~ ~~and~~Reserves ~~estimated~~Reported ~~gross~~To ~~quantities~~Other of Mineralized Materials associated with the gross acres evaluated for the Company’s kaolin claims in Sierra County, New Mexico, zeolite lease and fee acreage in Presidio County, Texas, and zeolite claims in Beaver County, Utah. These Mineralized Materials were evaluated and estimated by a Competent Person.Agencies

State	Mineral	Total Gross Acres		Gross Acres Evaluated		Gross Mineralized Materials (millions of tons)
New Mexico	Kaolin		2,720		264		55.3
Texas	Zeolite		5,200		438		75.7
Utah	Zeolite		220		-		-

No estimates of total, proved net oil and gas reserves have been filed with or included in reports to any Federal authority or agency, other than estimates filed with the Securities and Exchange Commission during 2013 and 2012.

~~-9-~~10

~~Zeolite~~ NON-METALLIC MINERALS

~~Texas - Through September 30, 2012, the Company mined approximately~~ ~~1,300~~Beginning ~~tons~~at ofpage 113 ~~material for the preparation~~ of ~~samples~~this ~~and test products. Approximately 100 tons have been sold or distributed as the Company’s trademarked ReNuGen™~~report, a ~~zeolite~~glossary ~~based,~~of ~~wastewater~~minerals ~~treatment product. During fiscal 2011~~ and ~~2010,~~mining ~~approximately 80~~terms ~~and~~used ~~120~~throughout ~~tons,~~this ~~respectively,~~report ~~were~~is ~~sold for use in certain agricultural oriented products~~included. ~~The~~See ~~Company~~Item ~~has~~8 ~~also~~of ~~provided~~Part ~~material for~~II ~~various environmental testing and waste purification projects and currently has approximately 1,000 tons available~~ for ~~product processing.~~additional ~~During~~information ~~fiscal~~relating ~~2006, the Company initiated a confirmation geologic field mapping project and commenced a resource definition program, as well as a core hole drilling and sampling program~~ to ~~delineate Mineralized Materials in sufficient quantities to support large scale mining operations. These efforts targeted 438 acres of~~ the ~~5,200~~minerals ~~acres~~activities held by the Company which are most likely to be subjected to initial development. During fiscal 2007, Krumrey Industrial Minerals, LLC, formerly known as KT Minerals, Inc. (“KIM”), completed the evaluation of the ~~target area. KIM has identified 75.7 million tons of Mineralized Materials associated with the target area. At September 30, 2012, the~~ Company ~~is also exploring alternatives for the development and marketing of additional zeolite based products for introduction into the industrial and environmental markets~~.

~~Utah – As of September 30, 2012, the Company is not conducting~~ ~~any~~Recent ~~exploration~~Significant ~~activities on the Three Creek zeolite deposit.~~Activity

~~Kaolin~~ During September 2013, the company produced saleable minerals from its zeolite mineral deposit in Texas (“Texas Zeolite”). The Company shipped 105 tons of zeolite from its Texas property to a processing and fulfillment facility in Pennsylvania. A portion of such material required additional processing and such processing was completed in October 2013. Backlog orders approximated $2,000 as of September 30, 2013. Sales of the processed and unprocessed product to identified customers commenced in October 2013. On December 16, 2013, the Company entered into an agreement for the purchase of extraction and crushing equipment of its contract operator of the property for $300,000. On January 16, 2014, the Company borrowed $250,000 from an unrelated party to fund the major portion of the purchase price and closed on the purchase of such equipment. The Company believes the capacity of such equipment is appropriate for anticipated extraction and crushing activities for the next three years. Depending on the level of sales activity, the Company may need to acquire or lease additional equipment. The Company has engaged a contract operator of such equipment and anticipates the commencement of larger-scale extraction activities to commence. The Company has also contracted certain micro-processing capabilities to prepare certain samples and test material.

~~The Company has 17 Federal Placer mining claims covering approximately~~ 2,720 acres and 8 Lode claims covering approximately 160 acres covering a portion of its existing holdings. The Company has maintained all of its claims during fiscal 2012. Through September 30, 2012, the Company has not produced commercial quantities of its Sierra Kaolin. Sierra Kaolin was mined in previous years for testing by prospective customers.General

~~Under~~ The ~~its~~mining ~~Revised~~ and ~~Restated~~marketing ~~Agreement~~of ~~with~~non-metallic ~~TPA~~industrial minerals is highly competitive; however, the ~~pre-development evaluation~~Company ~~program~~believes ofthat the ~~Company’s~~locations ~~Sierra~~and ~~Kaolin~~quality ~~claims~~of ~~was~~its ~~completed~~mineral ~~during~~deposits ~~fiscal~~will ~~year~~benefit ~~2010~~its future development and sales efforts. ~~This~~By ~~program~~definition, ~~focused~~the onCompany ~~evaluating~~ is in ~~detail~~the ~~approximately~~Development ~~173~~Stage ~~acres~~in ~~(+/-7%)~~respect ofto its Texas Zeolite and is in the ~~Company’s~~Exploration ~~2,720~~Stage ~~acre~~in respect to its Sierra Kaolin mineral ~~claim~~holdings ~~block~~in ~~which~~New isMexico ~~most~~(“Sierra ~~likely~~Kaolin”) toand beits ~~subjected to~~zeolite ~~initial~~mineral ~~development~~holdings in Utah (“Utah Zeolite”). During ~~fiscal~~2012 ~~2008~~and 2013, KTsales ~~Minerals,~~of ~~Inc.~~non-metallic ~~identified~~minerals ~~55.3~~did ~~million~~not ~~tons~~account offor ~~Mineralized~~15 ~~Materials~~percent ~~based~~or onmore ~~a total~~of the consolidated revenue of 53the ~~verifiable~~Company. ~~drill~~The ~~holes~~business ~~representing~~of 6this segment has not been,~~310~~ ~~feet~~and ofit ~~subsurface~~is ~~material~~not anticipated that it will be, seasonal.

In ~~1965~~2005, ~~twenty~~the ~~core~~Company ~~holes~~contracted ~~were~~Denali ~~drilled~~Enterprises ~~which~~to ~~produced~~review ~~3,087 feet~~available technical data associated with the quantification of ~~core~~the ~~samples.~~mineral Indeposits ~~1976,~~in 17connection ~~core~~with ~~holes~~the ~~were~~Company’s ~~drilled~~exploration ~~which~~efforts. ~~produced~~Such ~~1,784~~review ~~feet~~reaffirmed the existence of ~~core~~sufficient ~~samples~~mineral deposits to continue with such efforts. ~~During~~The ~~fiscal~~Company’s ~~2005,~~ability 16to ~~core holes~~explore ~~were~~and ~~drilled~~develop its mineral deposits is dependent on aits 32success ~~acre~~in ~~area~~bringing ~~from~~in ~~which~~strategic ~~1,442~~partners ~~feet~~with ofexperience ~~subsurface~~in ~~material~~or ~~was~~a ~~recovered.~~demand ~~During~~for ~~fiscal~~specific ~~year~~minerals ~~2006~~and raising capital through third parties. In June 2007, ~~this subsurface~~the ~~material~~Company ~~was~~and ~~broken~~Tecumseh ~~down~~Professional Associates, Inc. (“TPA”) entered into ~~over~~a ~~600~~Restated ~~samples~~Development ~~which~~and ~~were~~Operating ~~subjected~~Agreement in respect to ~~detailed~~the ~~testing~~Sierra atKaolin. ~~three~~Under ~~different~~the ~~laboratories. The~~Restated ~~testing~~Development ~~phase~~and ofOperating Agreement the ~~project~~Company ~~included~~and ~~roughly~~TPA ~~20,000~~continued ~~tests~~the ~~which~~evaluation ~~now~~of ~~comprise~~the anSierra ~~extensive~~Kaolin ~~Sierra~~(See “Kaolin” ~~data~~below). ~~base~~The Company has continued its independent evaluation of its zeolite properties. ~~This~~The ~~data base~~Company ~~was~~continues ~~then~~to ~~utilized~~sell byraw ~~the~~zeolite ~~consulting~~to ~~firm~~third ofparties ~~Pincock~~as animal feed supplement and for other uses, ~~Allen~~and &market ~~Holt~~its tozeolite ~~develop~~based ~~detailed~~products ~~geologic~~such ~~models~~as ofits ~~the~~ReNuGen™, ~~Sierra~~a ~~Kaolin deposit~~product ~~test~~utilized ~~area~~in wastewater treatment applications. ~~Based~~At onSeptember ~~this~~30, ~~work~~2013, itthe Company was ~~determined~~and ~~that~~continues ~~this~~to 32be ~~acre~~involved ~~core~~in ~~tested~~discussions ~~area~~with ~~contained~~one ~~approximately~~or ~~1.4~~more ~~million tons~~potential joint venture partners for the development and testing of ~~Mineralized~~additional ~~Materials~~zeolite based products and to provide capital for market introduction.

~~KIM conducted a re-evaluation of the potential Kaolin Mineralized~~ Materials associated with the project. The KIM re-evaluation considered the geologic and compositional data available from prior studies and incorporated the results of the mineral processing study completed by Ginn Mineral Technology, Inc. (“GMT”). Based on the GMT study a greater percentage of the project’s in situ minerals could be processed into marketable material as compared to prior indications. In addition, KIM evaluated and expanded the study area outside of the 32 acres encompassed by the TPA coring program to include acreage penetrated by an additional 53 historical core holes from which verifiable data could be obtained. As a result, KIM evaluated approximately 264 acres of the project and identified approximately 55.3 million tons of Mineralized Materials.Extraction

~~During~~ The ~~fiscal~~Company ~~2011~~has ~~and~~not ~~2012,~~established ~~TPA~~large-scale ~~proceeded~~production ~~with~~of ~~the~~any ~~next phase~~ of its mineral deposits at September 30, 2013. See the ~~project~~“Recent ~~which~~Significant ~~included:~~Activity” ~~(i)~~discussed ~~further~~above. ~~work~~The toTexas ~~quantify~~Zeolite ~~Mineralized~~extraction ~~Materials;~~is ~~(ii)~~conducted ~~product~~by ~~identification~~an ~~and~~independent ~~development; (iii)~~contractor ~~preparation~~engaged ofby ~~detail~~CAM. ~~process~~The ~~flow~~contemplated ~~sheets;~~Sierra ~~and,~~Kaolin ~~(iv)~~extraction ~~establishment~~activities are the responsibility of ~~equipment~~TPA ~~specifications,~~pursuant asto ~~well~~the asRestated ~~marketing~~Development and ~~capital~~ ~~requirements.~~Operating InAgreement ~~December~~between ~~2009,~~TPA and the ~~Sierra~~Company. ~~Kaolin~~No ~~Open~~extraction ~~Pit~~activities ~~Clay~~have ~~Mine~~occurred ~~project~~as ~~cleared~~regards the ~~regulatory~~Utah ~~review~~Zeolite. ~~and~~The ~~the~~Company ~~project’s definitive~~does ~~USDA~~not ~~Forest~~conduct ~~Service~~any ~~Plan~~direct ofextraction ~~Operations~~activities ~~was~~of ~~approved~~its own. ~~This~~As ~~will~~such, ~~facilitate~~ the ~~project~~Company ~~moving~~is subject to costs of independent contractors for the ~~next~~extraction, ~~phase~~crushing or preparation of its minerals. ~~These activities~~Any ~~will~~independent ~~continue~~contractor inis ~~fiscal~~required ~~2013~~to comply with all Federal, state and local laws, regulations and ordinances for the conduct of operations, environmental protection and safety of operations.

~~Marketing of Minerals and Marketing Agreements~~11

~~In December 2004, the Company~~ ~~entered~~Mineralized into a Memorandum of Understanding for development of Sierra Kaolin Deposit (“MOU”) with TPA for the management, development, exploration and marketing of the Company’s Sierra Kaolin claims, located in Sierra County, New Mexico (see Exhibit 10.9).Materials

~~-10-~~ Set forth below are the total acres, acres evaluated and estimated quantities of Mineralized Materials associated with the gross acres evaluated for the Company’s kaolin claims in Sierra County, New Mexico, zeolite lease and fee acreage in Presidio County, Texas, and zeolite claims in Beaver County, Utah. These Mineralized Materials were evaluated and estimated by a Competent Person.

Under the Company’s March 11, 2005 and June 7, 2007 agreements with TPA (see Exhibits 10.12 and 10.17, respectively), TPA has assumed the duties to mine, test, exploit, and market the Company’s Sierra Kaolin deposit.

State	Mineral	Total Gross Acres	Gross Acres Evaluated	Gross Mineralized Materials (millions of tons)	Total Net Acres	Net Mineralized Materials (millions of tons)
New Mexico	Kaolin ⁽¹⁾	2,720	264	38.0	952	13.3
Texas	Zeolite	5,200	438	54.8	5,200	54.8
Utah	Zeolite	220	-	-	220	-

~~Management~~(1) ofPursuant to the ~~Company~~Restated ~~directs~~Development ~~the~~and ~~activities~~Operating ~~pertaining to~~Agreement with TPA, (i) TPA shall earn 65 % of the ~~Company’s~~net ~~zeolite~~cash ~~minerals~~flow ~~and~~from ~~participates~~the Sierra Kaolin operations in the ~~decisions~~event ~~regarding~~TPA develops the ~~agreement~~property, ~~with~~including the construction and funding of an appropriate processing facility and (ii) TPA inshall ~~respect~~be entitled to 50% of the ~~marketing~~ sale proceeds in the event of ~~its~~a divestiture of the Sierra Kaolin property prior to its development by TPA.

~~Government Regulations~~ Zeolite

~~Oil~~ Texas - Through September 30, 2013, the Company mined approximately 1,400 tons of material for the preparation of samples and ~~Natural~~test ~~Gas~~products and material for various environmental testing and waste purification projects; 105 tons have been sold or distributed as the Company’s trademarked ReNuGen™, a zeolite based, wastewater treatment product; and 200 tons were sold for use in certain agricultural oriented products. The Company currently has approximately 115 tons available for product processing.

~~There~~ During ~~are~~fiscal ~~statutory~~2006, the Company initiated a confirmation geologic field mapping project and~~/or~~ ~~regulatory~~commenced ~~provisions~~a ~~regulating the~~resource ~~Company’s~~definition ~~oil~~program, as well as a core hole drilling and ~~natural~~sampling ~~gas~~program to delineate Mineralized Materials in sufficient quantities to support large scale mining operations. These ~~statutes~~efforts ~~allow~~targeted ~~administrative~~438 ~~agencies~~acres of the 5,200 acres held by the Company which are most likely to ~~promulgate~~be ~~regulations~~subjected into ~~connection~~ initial development. During fiscal 2007, Krumrey Industrial Minerals, LLC, formerly known as KT Minerals, Inc. (“KIM”), completed the evaluation of the target area. KIM has identified 54.8 million tons of Mineralized Materials associated with the ~~development~~target area. At September 30, ~~production~~2013, the Company is also exploring alternatives for the development and ~~sale~~marketing of ~~oil~~additional ~~and~~zeolite ~~natural~~based ~~gas,~~products for introduction into the industrial and toenvironmental ~~establish~~markets. ~~allowable~~See ~~rates~~“Recent ofSignificant ~~production~~Activities” above.

~~The Company’s activities are subject to laws and regulations~~ ~~relating~~Utah to– ~~environmental~~As ~~quality and pollution control. Although the cost~~ of ~~compliance~~September ~~with~~30, ~~such legislation and regulations has not been material to date~~2013, ~~such laws and regulations could substantially increase~~ the ~~cost of carrying on these activities and could prevent or delay the commencement or continuance of a given operation. The~~ Company ~~believes~~is ~~that~~not ~~existing~~conducting ~~legislation and~~any ~~regulations~~exploration ~~have~~activities ~~had no material adverse effect~~ on ~~its present method of operations. In~~ the ~~future,~~Three ~~Federal,~~Creek ~~state~~zeolite ~~and local environmental controls may require the Company to make significant expenditures, but neither the probability nor the magnitude of the expenditures, if any, can be predicted~~deposit.

~~The discharge of oil, natural gas or the by-products of drilling,~~ reworking and producing oil and natural gas into the air, soil or water may give rise to potential liabilities for the restoration of the environment and to third parties. A variety of Federal and state laws and regulations govern the environmental aspects of the production, transportation and processing of hydrocarbons and may, in addition to other laws and regulations, impose liability in the event of a discharge or seepage (whether or not accidental). Compliance with such laws and regulations could increase the cost of the exploration, production and development of oil and natural gas reserves. The Company does not currently anticipate that compliance will have a material adverse effect on the ability of the Company to continue in the exploration, development or production of its existing reserves and the development and/or acquisition of new reserves.Kaolin

The Company ~~does~~has ~~not~~17 ~~believe~~Federal ~~that~~Placer ~~its~~mining ~~environmental~~claims ~~risks~~covering ~~are materially~~approximately ~~different~~2,720 ~~from~~acres ~~those of comparable companies in the oil~~ and ~~gas~~8 ~~industry.~~Lode ~~The~~claims ~~Company~~covering ~~believes~~approximately ~~that~~160 itacres iscovering ina ~~substantial compliance~~portion ~~with~~of ~~all~~its existing ~~rules and regulations~~holdings. NoThe ~~assurance~~Company ~~can~~has bemaintained ~~given,~~all ~~however,~~of ~~that~~its ~~environmental~~claims ~~laws~~during ~~will~~fiscal ~~not,~~2013. inThrough ~~the future~~September 30, ~~result in more onerous regulations causing a marked increase in the cost of production~~2013, ~~development and exploration or otherwise adversely affect~~ the Company’s ~~operations~~has ornot ~~financial~~produced ~~ability~~commercial toquantities ~~maintain~~of its ~~existing~~Sierra ~~reserves~~Kaolin. ~~Although~~Sierra ~~the Company~~Kaolin ~~maintains~~was ~~insurance~~mined ~~coverage~~in ~~for~~previous ~~certain~~years ~~liabilities,~~for totesting ~~include~~by ~~insurance~~prospective ~~to cover specific environmental risks, such as seepage or discharge, other environmental risks may not be fully insurable~~customers.

~~Mineral~~ Pursuant ~~Interests~~to the Restated Development and Operating Agreement with TPA, the pre-development evaluation program of the Company’s Sierra Kaolin claims was completed during fiscal 2010. This program focused on evaluating in detail approximately 173 acres (+/-7%) of the Company’s 2,720 acre mineral claim block which is most likely to be subjected to initial development. During fiscal 2008, KT Minerals, Inc. identified 38.0 million gross tons of Mineralized Materials based on a total of 53 verifiable drill holes representing 6,310 feet of subsurface material.

The Company’s activities are subject to Federal and state laws and regulations relating to environmental quality and pollution control, safety rules as prescribed by Occupational Safety and Health Administration, and the provisions of the 1872 Mining Law and the 1976 Federal Land Policy Management Act. At present, the Company does not intend to engage in mining activities on its own. The Company intends to retain, and has to date retained, the services of outside contractors to carry out such activities (see the agreements with TPA as set forth as Exhibits 10.9, 10.12 and 10.17). The Company believes that such practices will result in substantial savings in the future. The Company’s mineral interests in New Mexico (kaolin) and Utah (zeolite) are on Federal lands. As such, the Company must also comply with the rules and regulations imposed for the development of Federal mining claims. The Marfa zeolite property in Texas is on fee and leased acreage and is subject to Federal and state laws and regulations governing open pit extraction.

~~Transportation~~ In 1965, twenty core holes were drilled which produced 3,087 feet of core samples. In 1976, 17 core holes were drilled which produced 1,784 feet of core samples. During fiscal 2005, 16 core holes were drilled on a 32 acre area from which 1,442 feet of subsurface material was recovered. During fiscal year 2006, this subsurface material was broken down into over 600 samples which were subjected to detailed testing at three different laboratories. The testing phase of the project included roughly 20,000 tests which now comprise an extensive Sierra Kaolin data base. This data base was then utilized by the consulting firm of Pincock, Allen & Holt to develop detailed geologic models of the Sierra Kaolin deposit test area. Based on this work, it was determined that this 32 acre core tested area contained approximately 1.4 million tons of gross Mineralized Materials.

~~Oil~~ KIM conducted a re-evaluation of the potential Kaolin Mineralized Materials associated with the project. The KIM re-evaluation considered the geologic and ~~Gas~~compositional data available from prior studies and incorporated the results of the mineral processing study completed by Ginn Mineral Technology, Inc. (“GMT”). Based on the GMT study, a greater percentage of the project’s in situ minerals may be processed into marketable material as compared to prior indications. In addition, KIM evaluated and expanded the study area outside of the 32 acres encompassed by the TPA coring program to include acreage penetrated by an additional 53 historical core holes from which verifiable data could be obtained. As a result, KIM evaluated approximately 264 acres of the project and identified approximately 38.0 million tons of gross Mineralized Materials.

~~Currently~~ TPA ~~the~~has ~~majority~~proceeded ofwith the ~~Company’s~~next ~~natural~~phases ~~gas~~of ~~is sold~~the toproject ~~interstate~~which ~~carriers.~~included: ~~The~~(i) ~~Company~~further ~~moves~~work ~~its~~to ~~gas~~quantify toMineralized ~~the~~Materials; ~~interstate~~(ii) ~~carriers~~product ~~over~~identification aand ~~gathering~~development; ~~system~~(iii) ~~owned~~preparation byof ~~the~~detail ~~Company or~~process ~~joint~~flow ~~venture~~sheets; ~~partners~~and in(iv) the ~~Company's~~establishment ~~wells.~~of ~~The~~equipment ~~Company~~specifications, ~~has~~as ~~experienced~~well noas ~~difficulty~~marketing inand ~~moving~~capital orrequirements. ~~selling~~In ~~its~~December ~~gas.~~2009, ~~The~~the ~~Company is~~Sierra ~~not~~Kaolin aOpen ~~regulated~~Pit ~~interstate/intrastate~~Clay ~~carrier~~Mine ofproject ~~natural~~cleared ~~gas~~the ~~and~~regulatory asreview ~~such~~and itthe isproject’s ~~not~~definitive aUSDA ~~regulated~~Forest ~~pipeline~~Service ~~under~~Plan ~~the~~of ~~National~~Operations ~~Gas Policy~~was ~~Act~~approved. ofThis ~~1983,~~will facilitate the ~~National~~project ~~Gas~~moving ~~Act~~to ofthe ~~1938~~next orphase. asThese aactivities ~~common~~will ~~carrier~~continue byin ~~applicable~~fiscal ~~state agencies~~2014.

~~-11-~~ Marketing of Minerals and Marketing Agreements

~~Mineral~~ In ~~Interests~~December 2004, the Company entered into a Memorandum of Understanding for development of Sierra Kaolin Deposit (“MOU”) with TPA for the management, development, exploration and marketing of the Company’s Sierra Kaolin claims, located in Sierra County, New Mexico (see Exhibit 10.9).

~~All~~ Under of the Company’s ~~mineral~~March ~~deposits~~11, ~~are~~2005 ~~serviced~~and ~~by all-weather~~June ~~paved~~7, or2007 ~~unpaved~~agreements ~~roads.~~with ~~The~~TPA ~~Marfa~~(see ~~zeolite~~Exhibits ~~property~~10.12 inand ~~Texas~~10.17, isrespectively), ~~adjacent~~TPA tohas aassumed ~~railroad~~the ~~line~~duties ~~that can be utilized~~ to ~~transport~~ ~~minerals~~mine, totest, ~~market.~~exploit, ~~The Utah zeolite~~ and ~~New~~market ~~Mexico~~the Company’s Sierra Kaolin ~~deposits also have access to rail lines but will require over-land transport prior to rail transport~~deposit.

~~Partnerships~~ On July 3, 2012, CAMI entered into an operating agreement for ZeoSure LLC (“ZLLC”) as one of ZLLC’s two managing members. ZLLC was formed for the purpose of developing human consumption products including but not limited to detoxification and digestive supplements and human consumable products utilizing CAPI’S Clinoptilolite zeolite mineral focusing on markets throughout the world with a primary emphasis on markets in the United States and Asia. CAMI and SafeHatch LLC, an entity controlled by an individual previously affiliated with the Musser Group, are the managing members and each owns 47.5% of ZLLC. The remaining 5% of ZLLC is owned by the Musser Group. The members of ZLLC intend to seek initial capital of $1 million from third parties and enter into product marketing and distribution agreements with participants active within the dietary supplements market. The operating agreement has not been ratified by the Audit Committee of the Board of Directors of the Company. ZLLC is seeking initial capital and attempting to identify viable product marketing and distribution partners. The Company has contracted certain micro-processing capabilities to prepare certain samples and clinical trial test material for ZLLC.

~~DRI~~ On ~~sponsored~~March ~~Deerlick~~25, ~~Royalty~~2013, ~~Partners~~in Iconnection ~~(“Partnership”) which~~with ~~was~~the ~~formed~~SPA inwith ~~April~~FEI ~~1993.~~and AsDTE, the ~~managing~~Company ~~general~~entered ~~partner,~~into ~~DRI~~an isExclusive ~~subject~~Sales toAgency ~~full~~and ~~liability~~Marketing ~~for~~Agreement with FEI (the ~~obligations~~“FEI ofMarketing ~~the~~Agreement”). ~~Partnership although~~The itFEI isMarketing ~~entitled~~Agreement grants to ~~indemnification~~FEI the right to act as the ~~extent~~Company’s ofexclusive ~~the~~marketing ~~assets~~and ofsales ~~the~~agent ~~Partnership.~~for ~~Since~~natural ~~“partnership~~resources ~~programs” constitute~~products aproduced, ~~“security”~~mined ~~under~~and/or sold by the ~~Securities~~Company, ~~Act~~excluding ofcertain ~~1933,~~human ~~Deven~~consumption ~~Resources~~products, ~~Inc~~in Asia excluding the nation of India. The Company is ~~also~~required ~~subject~~to pay a monthly fee of $10,000 to ~~potential~~an ~~liability~~ affiliate of FEI for ~~failure~~18 tomonths. ~~comply~~Through ~~with~~September ~~applicable~~30, ~~Federal~~2013, ~~and~~no ~~state~~sales ~~securities~~have ~~laws~~occurred ~~and~~relating ~~regulations~~to the FEI Marketing Agreement.

~~The~~ During ~~Partnership~~April ~~owns~~2013, ~~overriding~~the ~~royalty~~Company ~~interests~~hired ~~covering~~a ~~2,043 gross~~Vice ~~acres~~President inof Sales. Management of the ~~Deerlick~~Company ~~Creek~~directs ~~Coalbed~~the ~~Methane~~activities ~~field~~pertaining ~~located~~to the Company’s zeolite minerals and participates in ~~Tuscaloosa~~the ~~County,~~decisions ~~Alabama.~~regarding ~~The~~the ~~Partnership~~agreement iswith ~~structured~~TPA ~~on a~~in ~~carried~~respect ~~participation~~to ~~basis~~the marketing of the Sierra Kaolin.

~~Acquisitions/Mergers~~ In October 2013, the Company entered into a distribution agreement with an independent party in respect to such party’s distribution of the Company’s zeolite material for industrial absorption applications in the states of Arizona, California, Oregon and Washington.

During the past two fiscal years, the Company has not participated in any mergers. During fiscal 2012, the Company (1) incurred $47,078 of acquisition costs of proved developed producing properties and (2) did not incur any exploration or development costs. During fiscal 2011, the Company did not incur any property acquisition, exploration or development costs. 13

~~Patent~~ Government ~~and License Agreement~~Regulations

~~Patent~~ Oil and Natural Gas

~~CAMI was the owner of U.S. Patent No. 5,387,738 upon which an~~ ~~engineered~~There ~~product~~are isstatutory ~~based which utilizes all naturally occurring non-hazardous minerals for the remediation of sites contaminated with hazardous~~ and/or ~~toxic~~regulatory ~~materials.~~provisions ~~Such~~regulating ~~patent~~the ~~expired~~Company’s onoil ~~February~~and 7,natural ~~2012~~gas operations. ~~Typically,~~These ~~the~~statutes ~~remediation~~allow ofadministrative ~~these~~agencies ~~sites is necessary in order~~ to ~~meet~~promulgate ~~quality~~regulations ~~control~~in ~~regulation~~connection ~~for~~with ~~air~~the development, ~~land~~production and ~~water~~sale ~~enforced~~of byoil ~~the Environmental Protection Agency~~ and ~~various other~~natural ~~state~~gas, and ~~Federal~~to ~~environmental~~establish ~~regulatory~~allowable ~~agencies.~~rates ~~Such engineered products are marketed by CAMI as CA Series Engineered products. Each~~ of ~~these engineered environmental products is designed for specific project site requirements based on the nature of the on-site contaminant, the size of the project and specific treatment requirements~~production.

The CACompany’s ~~Series~~activities ~~Engineered~~are ~~products~~subject ~~have~~to laws and regulations relating to environmental quality and pollution control. Although the cost of compliance with such legislation and regulations has not been ~~proven~~material ~~effective~~to date, ~~through~~ such laws and regulations could substantially increase the ~~use~~cost of acarrying ~~catalytically~~on ~~enhanced~~these ~~chemical~~activities ~~exchange~~and ~~process,~~could inprevent ~~permanently~~or ~~changing~~delay ~~many~~the ~~hazardous~~commencement ~~metals~~or tocontinuance of a ~~non-hazardous state~~given operation. The Company believes that existing legislation and, ~~through~~regulations ~~molecular~~have ~~sieve~~had no material adverse effect on its present method of operations. In the future, Federal, state and~~/or~~ ~~absorption~~local ~~processes~~environmental controls may require the Company to make significant expenditures, inbut ~~removing~~neither ~~many~~the ~~hazardous~~probability ~~hydrocarbon~~nor ~~and~~the ~~nitrate~~magnitude ~~contaminants in~~of ~~connection~~the ~~with~~expenditures, ~~site~~if ~~remediation~~any, ~~projects~~can be predicted.

The ~~processing~~discharge of ~~contaminate~~oil, ~~materials~~natural ~~using~~gas or the CAby-products ~~Series technology~~of isdrilling, ~~designed~~reworking asand anproducing ~~on-site~~oil ~~operation.~~and ~~Internal~~natural ~~studies~~gas ~~have~~into ~~shown~~the ~~that~~air, ~~because~~soil or water may give rise to potential liabilities for the CArestoration ~~Series~~of ~~Engineered~~the ~~products~~environment ~~are designed~~and to bethird ~~used~~parties. atA variety of Federal and state laws and regulations govern the ~~remediation~~environmental ~~project~~aspects ~~site~~of the production, ~~substantial~~transportation ~~cost~~and ~~savings~~processing ~~can~~of behydrocarbons ~~generated~~and asmay, ~~compared~~in addition to other ~~remediation methods~~laws ~~requiring~~and ~~extraction~~regulations, ~~removal~~impose ~~and~~liability ~~incineration.~~in ~~The~~the ~~on-site~~event ~~use~~ of CAa ~~Engineered~~discharge ~~products~~or ~~can~~seepage ~~provide~~(whether aor ~~complete~~not ~~and~~accidental). ~~permanent environmental~~Compliance ~~cleanup~~with ofsuch ~~the~~laws ~~hazardous~~and ~~materials~~regulations incould ~~that~~increase the ~~treated~~cost ~~materials~~of ~~are~~the ~~converted~~exploration, ~~into~~production ~~non-hazardous~~and ~~permanently~~development ~~non-leachable substances~~of ~~that~~oil ~~can~~and ~~remain~~natural ingas ~~place~~reserves. ~~Through~~The ~~laboratory~~Company ~~and~~does ~~field~~not ~~tests,~~currently ~~the~~anticipate CAthat ~~Series~~compliance ~~Engineered~~will ~~products~~ have ~~been~~a ~~proven~~material ~~to be~~adverse ~~effective~~effect inon the ~~remediation~~ability of ~~contamination~~the ~~caused~~Company byto ~~hydrocarbons~~continue ~~and~~in ~~petroleum~~the ~~products~~exploration, ~~chemicals~~development ~~and~~or ~~toxic~~production ~~metallic~~of ~~compounds in~~its ~~rendering~~existing ~~the~~reserves ~~toxic~~ and ~~hazardous~~the ~~materials~~development toand/or aacquisition ~~permanently~~of ~~non-toxic~~new ~~and non-hazardous stage~~reserves.

~~License~~ The ~~Agreement~~Company does not believe that its environmental risks are materially different from those of comparable companies in the oil and gas industry. The Company believes that it is in substantial compliance with all existing rules and regulations. No assurance can be given, however, that environmental laws will not, in the future, result in more onerous regulations causing a marked increase in the cost of production, development and exploration or otherwise adversely affect the Company’s operations or financial ability to maintain its existing reserves. Although the Company maintains insurance coverage for certain liabilities, to include insurance to cover specific environmental risks, such as seepage or discharge, other environmental risks may not be fully insurable.

~~In February 2010, the Company entered into a License Agreement~~ ~~concerning~~Mineral two US method patents for the treatment of sanitary wastewaters. Such patents utilize the Company’s zeolite. The license applies to the US and covers the use of the patented technology in water, wastewater and waste treatment in animal feed operations, agriculture, and aquaculture. In addition, the license applies to the treatment of sanitary wastewater on Federal facilities, military bases and lands administered by the US Bureau of Indian Affairs.Interests

~~-12-~~ The Company’s activities are subject to Federal and state laws and regulations relating to environmental quality and pollution control, safety rules as prescribed by Occupational Safety and Health Administration, and the provisions of the 1872 Mining Law and the 1976 Federal Land Policy Management Act. At present, the Company does not intend to engage in mining activities on its own. The Company intends to retain, and has to date retained, the services of outside contractors to carry out such activities. The Company believes that such practices may result in substantial savings in the future. The Company’s Sierra Kaolin and Utah Zeolite are on Federal lands. As such, the Company must also comply with the rules and regulations imposed for the development of Federal mining claims. The Texas Zeolite is on fee and leased acreage and is subject to Federal and state laws and regulations governing open pit extraction.

~~Trademarks~~ Transportation

~~The Company has a trademark for the Company’s ReNuGen™,~~ aOil ~~product~~and ~~used to enhance the efficacy of conventional waste water treatment plants~~Gas

~~Employees~~ All of the Company’s oil is shipped via the tank trucks of the respective purchasers. Currently the majority of the Company’s natural gas is sold to interstate carriers. The Company moves its gas to the interstate carriers over a gathering system owned by the Company or joint venture partners in the Company's wells. The Company has experienced no difficulty in moving or selling its gas. The Company is not a regulated interstate/intrastate carrier of natural gas and ~~Contract~~as ~~Services~~such it is not a regulated pipeline under the National Gas Policy Act of 1983, the National Gas Act of 1938 or as a common carrier by applicable state agencies.

~~At September 30, 2012, the Company had three employees and engages~~ ~~the~~Mineral ~~services of its Chief Accounting Officer pursuant to his employment agreement, as amended.~~Interests

On ~~February~~All ~~25,~~of ~~2011,~~ the Company’s ~~entered~~mineral ~~into~~deposits aare ~~Consulting~~serviced ~~Services~~by ~~Agreement~~all-weather ~~with~~paved ~~the~~or ~~Musser~~unpaved ~~Group, LLC (“Musser Group”) to perform consulting services for the Company through February 2013~~roads. The ~~Company~~Texas ~~engaged~~Zeolite ~~the~~property ~~Musser~~is ~~Group,~~adjacent anto ~~independent~~a ~~contractor,~~railroad toline ~~provide~~that ~~advisory~~can ~~and~~be ~~consulting~~utilized ~~services~~ to ~~the~~ ~~Company.~~transport ~~The~~minerals ~~Musser Group is engaged~~ to provide (i) managed services; (ii) strategic business planning and implementation; and (iii) assistance in directing and executing the implementation of any strategies approved by the Board of Directors of the Companymarket. The ~~Musser~~Utah ~~Group’s~~Zeolite ~~primary~~and ~~focus~~Sierra isKaolin ~~the~~deposits ~~analysis~~also ~~and~~have ~~validation~~access ofto ~~market~~rail ~~opportunities~~lines ~~for~~but ~~the~~will ~~commercialization of~~require ~~products~~over-land ~~within~~transport ~~the~~prior ~~Company’s~~to ~~mineral~~rail ~~segment~~transport.

The Company employs the services of consulting scientists, geologists and engineers, as well as those of nonaffiliated operating companies that conduct the actual oil and gas field operations and mineral extraction/processing. The Company operates oil and natural gas wells in Pennsylvania, Texas and West Virginia from its Pennsylvania office utilizing contract pumpers to perform actual field operations. The Company’s non-operated wells are monitored out of the Company’s Pennsylvania office.14

~~The Company’s mineral lease, fee interest and mining claims~~ are operated by contract mining entities and are monitored from its Pennsylvania office and by TPA under its agreement covering the Company’s Sierra Kaolin deposit. The Company considers its relations with its consultants to be satisfactory.Partnerships

~~Item~~ DRI 1Asponsored Deerlick Royalty Partners I (“DRP”) which was formed in April 1993. ~~Risk~~As ~~Factors~~the managing general partner, DRI is subject to full liability for the obligations of DRP although it is entitled to indemnification to the extent of the assets of DRP. As “partnership programs” constitute a “security” under the Securities Act of 1933, DRI is also subject to potential liability for failure to comply with applicable Federal and state securities laws and regulations. DRP owns overriding royalty interests covering 2,043 gross acres in the Deerlick Creek Coalbed Methane field located in Tuscaloosa County, Alabama.

~~Not required as the registrant is a smaller reporting company.~~ Acquisitions/Mergers

~~Item~~ Oil ~~1B.~~and ~~Unresolved~~Gas ~~Staff~~Segment ~~Comments.~~

~~Not~~ During ~~required~~the aspast two fiscal years, the ~~registrant~~Company ishas anot ~~smaller~~participated ~~reporting~~in ~~company~~any mergers. During 2013, the Company did not incur any property acquisition, exploration or development costs. During 2012, the Company (1) incurred $47,078 of acquisition costs of proved developed producing properties and (2) did not incur any exploration or development costs.

~~Item~~ Minerals 2.Segment ~~Properties.~~

~~OIL~~ During ~~AND~~the ~~NATURAL~~past ~~GAS~~two ~~INTERESTS~~fiscal years, the Company has not participated in any mergers. During 2013 and 2012, the Company did not incur any property acquisition, exploration or development costs.

~~Texas~~ Patent and License Agreement

~~Substantially all of the Texas properties are located in the~~ Austin Chalk Trend. The Austin Chalk Trend consists of the Austin Chalk, Buda, Georgetown and Edwards formations, extends for approximately 300 miles in length and 50 miles across, and is encountered at depths of 5,500 to 18,000 feet. These reservoirs are generally of low permeability. Historically, these formations were considered to be economically marginal except in areas where the reservoir rocks are highly fractured. In later years, stimulation by mechanical fracturing of the rock resulted in increasing hydrocarbon recoveries and extensive development of the Trend. Ongoing technical developments using horizontal drilling techniques allow the well bore to intersect, if present, series of vertical fracture systems instead of a single one, thus resulting in higher rates of production and recoverable reserves, at the cost of a more expensive drilling effort. Whether an individual well will be economic, even if horizontally drilled, depends largely upon intersecting fractured portions of the formation, which cannot be predicted. Certain locales appear to contain more fracturing than others. It is not unusual for an individual well to produce as much as forty percent (40%) of the primary recoverable reserves during the first two years of production and the remainder over a period of ten to fifteen years. The Company is presently evaluating joint venturing with third parties to develop its Texas Properties. The Company operates twenty-five (25) wells and owns a working interest in a well that it does not operate in Texas.Patent

As part of the acquisition of Clean Age Minerals, Inc., the Company also acquired U.S. Patent No. 5,387,738. This patent, owned by Clean Age Minerals, Inc. (previously owned by Matrix-13Loc, Inc., which was acquired by Clean Age Minerals, Inc., as a result of Matrix-Loc’s merger with Clean Age Minerals, Inc., as of March 18, 2002), deals with a reagent and process for the remediation of water and contaminated soils. Such patent was based upon an engineered product which utilizes all naturally occurring non-hazardous minerals for the remediation of sites contaminated with hazardous and/or toxic materials. Such patent expired on February 7, 2012. Typically, the remediation of these sites is necessary in order to meet quality control regulation for air, land and water enforced by the Environmental Protection Agency and various other state and Federal environmental regulatory agencies. Such engineered products are marketed by CAMI as CA Series Engineered products. Each of these engineered environmental products is designed for specific project site requirements based on the nature of the on-site contaminant, the size of the project and specific treatment requirements.

~~West~~ The ~~Virginia~~CA Series engineered products have been proven effective, through the use of a catalytically enhanced chemical exchange process, in permanently changing many hazardous metals to a non-hazardous state and, ~~Pennsylvania~~through molecular sieve and/or absorption processes, in removing many hazardous hydrocarbon and nitrate contaminants in connection with site remediation projects.

The ~~Company’s~~processing ~~hydrocarbon~~of ~~production~~contaminated inmaterials ~~West~~using ~~Virginia~~ the CA Series technology is indesigned ~~the~~as ~~producing~~an ~~zone~~on-site ofoperation. ~~the~~Internal ~~Oriskany~~studies ~~formation~~have ofshown that because the ~~Appalachian~~CA ~~Basin’s~~Series ~~Upper~~engineered ~~Devonian~~products ~~Section.~~are ~~The~~designed ~~Company~~to ~~has~~be ~~working interests~~used inat ~~two~~the ~~wells~~remediation inproject ~~West~~site, ~~Virginia~~substantial ~~for~~cost ~~which~~savings itcan ~~acts~~be generated as ~~operator~~compared to other remediation methods requiring extraction, removal and incineration. The ~~Company~~on-site ~~operates~~use ~~two~~of ~~wells~~CA inSeries ~~which~~engineered itproducts ~~owns~~can noprovide ~~working interest~~a complete and ~~owns~~permanent ~~overriding~~environmental ~~royalty~~cleanup ~~interests~~of the hazardous materials in ~~two~~that ~~other~~the ~~wells~~treated ~~which~~materials itare ~~does~~converted ~~not~~into ~~operate~~non-hazardous permanently non-leachable substances that ~~produce~~can ~~from~~remain in place. Through laboratory and field tests, the ~~Balltown~~CA ~~Formation~~ Series Engineered products have been proven to be effective in ~~Pennsylvania~~the remediation of contamination caused by hydrocarbons and petroleum products, chemicals and toxic metallic compounds in rendering the toxic and hazardous materials to a permanently non-toxic and non-hazardous stage.

~~Alabama~~ During 2013, the Company filed several provisional patents relating to the use of their CA Series engineered products in various novel systems and processes. Specifically, the provisional patents relate to a system and method for applying a zeolitic material useful for converting a contaminated waste material that is environmentally unacceptable, to a relatively harmless substance which is environmentally acceptable, and, more particularly, applying a material with an effective amount of zeolite for treating waste water. Additional processes include utilizing similar system designs in acid mine drainage, animal feed, agriculture, aquaculture, and other industrial purposes.

DRI acts as the managing general partner of Deerlick Royalty Partners I, a Pennsylvania general partnership (“DRP”). DRP owns an overriding royalty interest in 71 wells located in the Deerlick Creek Coalbed Methane Field in Tuscaloosa County, Alabama, in the Black Warrior Basin.15

~~Operating~~ License ~~Hazards and Uninsured Risks~~Agreement

~~The~~ In February 2010, the Company’s ~~oil~~entered ~~and~~into ~~gas~~a ~~operations~~License ~~are~~Agreement ~~subject~~concerning totwo ~~all~~ US method patents for the treatment of sanitary wastewaters. Such patents utilize the ~~risks~~Company’s ~~normally~~zeolite. ~~incident~~The license applies to the ~~exploration~~US ~~for~~ and ~~production~~covers ofthe ~~oil~~use ~~and~~of ~~gas,~~the ~~including~~patented ~~mechanical~~technology ~~failures,~~in ~~blow-outs~~water, ~~cratering,~~ ~~pollution~~wastewater and ~~fires~~waste treatment in animal feed operations, ~~each~~agriculture, ofand ~~which~~aquaculture. ~~could~~In ~~result~~addition, inthe ~~damage~~license applies to orthe ~~destruction~~treatment of ~~oil~~sanitary ~~and~~wastewater ~~gas~~on ~~wells~~Federal ~~or production~~ facilities or, ~~damage~~military tobases ~~persons~~ and ~~property.~~lands ~~While~~administered by the ~~Company~~US ~~maintains~~Bureau ~~$3,000,000~~ of ~~all~~Indian ~~risks~~Affairs. ~~liability~~The ~~policies~~initial inperiod ~~amounts~~of ~~that~~the itagreement ~~believes are~~was ~~adequate,~~for ~~the~~three ~~insurance~~years; ~~may~~thereafter, ~~not~~the ~~cover~~agreement ~~all~~shall ~~potential~~automatically ~~operational~~renew ~~risks.~~for ~~The~~additional ~~occurrence~~consecutive terms of afive ~~significant~~years ~~event~~unless ~~not~~the ~~fully~~Company ~~insured against~~gives ~~could~~the ~~have~~other aparties ~~material~~not ~~adverse~~less ~~effect~~than onninety ~~the~~(90) ~~Company’s~~days ~~financial~~written ~~position.~~notice Inprior to the ~~coming~~end ~~year,~~of the ~~Company~~existing ~~plans~~term ~~to seek~~of ~~participation~~its inelection ~~certain~~not ~~types~~to ofrenew ~~exploratory~~the oragreement ~~developmental~~for ~~drilling~~an ~~prospects~~additional term. InThe ~~these~~Company ~~instances,~~is required to pay a royalty to the ~~Company~~licensor ~~has~~based ~~historically expanded~~on ~~its~~the ~~insurance~~license ~~coverage~~fees toreceived ~~cover~~from sub-licensees of the ~~specific~~Company ~~risk~~that ~~associated~~employ ~~with~~the ~~those~~licensed ~~types~~process ofor ~~operations~~processes. The Company ~~will~~has made ~~continue to~~the ~~conduct~~minimum ~~its~~annual payment ~~normal~~of ~~day-~~$12,000 to~~-day~~ ~~activities~~maintain asthe ~~operator~~License ~~of its wells~~Agreement.

~~Title to Oil and Gas Properties~~ Trademarks

The Company has a trademark for the Company’s ~~interests~~“ReNuGen™”, ina ~~producing~~product ~~and~~used ~~non-producing acreage~~to ~~are~~enhance in the ~~form~~efficacy of ~~direct~~conventional orwaste ~~indirect~~water ~~interests~~treatment ~~in leases~~plants. ~~Each~~During of2013, the Company applied for a trademark for its ~~properties~~two isadditional ~~subject~~engineered, tozeolite-based ~~customary~~products, ~~royalty~~Cite-CleanTM ~~interests in~~and ~~amounts~~ZoilTechTM. Cite-CleanTM ~~prevailing~~is inan ~~the~~all-natural ~~area~~mineral inbased ~~which~~non-hazardous ~~the~~absorbent. ~~oil~~The ~~and~~Cite-CleanTM ~~gas~~product ~~lease~~has ~~was~~been ~~taken,~~tested ~~overriding~~and ~~royalty~~proven ~~interests~~effective in various industrial, ~~liens~~commercial ~~incident~~and todo-it-yourself ~~operating agreements,~~residential ~~liens~~settings for ~~current~~the ~~taxes~~absorption and ~~other~~retention ~~burdens~~of ~~and~~fluids. ZoilTechTM ~~mineral~~is ~~encumbrances~~a ~~and~~natural ~~restrictions.~~mineral ~~The~~based ~~Company~~environmentally ~~believes~~friendly ~~that~~soil ~~none of~~treatment. ~~these~~The ~~burdens~~ZoilTechTM ~~materially~~product ~~interferes~~has ~~with~~been ~~the~~tested ~~use~~and ofshown ~~such~~to ~~properties,~~be effective in ~~the~~enhancing ~~operation~~moisture ofretention, ~~the~~balancing ~~Company’s~~nutrient ~~business~~levels orand ~~the profitability~~controlling ofodors ~~the~~in ~~Company’s~~commercial ~~investment~~and ~~therein~~residential applications.

As Employees ~~is customary in the oil~~ and ~~gas~~Contract industry, only a preliminary investigation of title is made at the time of acquisition of undeveloped properties. Detailed investigations are generally made, including, in most cases, receiving a title opinion of local counsel, prior to the commencement of drilling operations. A thorough examination of title was performed with respect to substantially all of the Company’s producing properties. Also, prior to the acquisition of properties, the Company has received an opinion of title, satisfactory to counsel to the Company, on a majority (in value) of the assets acquired. The Company believes that it has defensible title to substantially all of its properties.Services

~~MINERAL~~ At ~~INTERESTS~~September 30, 2013, the Company has four employees and engages the services of its Chief Accounting Officer pursuant to his employment agreement, as amended.

~~Minerals~~ On ~~Holdings~~February 25, 2011, the Company entered into a Consulting Services Agreement with the Musser Group, LLC (“Musser Group”) to perform consulting services for the Company and such agreement has been extended through February 2014. The Company engaged the Musser Group, an independent contractor, to provide advisory and consulting services to the Company. The Musser Group is engaged to provide (i) managed services; (ii) strategic business planning and implementation; and (iii) assistance in directing and executing the implementation of any strategies approved by the Board of Directors of the Company. The Musser Group’s primary focus is the analysis and validation of market opportunities for the commercialization of products within the Company’s mineral segment.

~~Through~~ In ~~its~~March ~~wholly-owned subsidiary~~2013, ~~CAMI,~~ the Company ~~owns a~~engaged ~~fee~~an ~~title~~investor ~~interest,~~relations ~~leasehold~~firm ~~interests~~to ~~and~~assist ~~Federal~~management ~~mining~~in ~~claims~~such ~~containing~~activities ~~non-metallic~~for ~~minerals~~one inyear. ~~the~~The ~~States~~Company ofissued ~~Texas~~600,000 ~~New Mexico~~shares ~~and~~(valued ~~Utah~~at $0.11 ~~Title~~per toshare) ~~and~~of ~~rights~~Common inStock to the ~~properties~~IR ~~are~~Firm ~~held~~and bysuch CAcontract ~~Properties,~~requires ~~Inc.~~monthly ~~(“CAPI”)~~payments of cash of $5,000 aduring ~~wholly-owned~~the ~~subsidiary~~ term of ~~CAMI~~the agreement.

~~Texas~~ On April 1, 2013, pursuant to the SPA, the Company entered into an agreement with a law firm for an attorney to perform legal services for and representation of the Company for a flat fee of $5,000 per month. Such attorney represented FEI and DTE in connection with the SPA.

~~Marfa~~ The ~~Zeolite~~Company employs the services of consulting scientists, geologists and engineers, as well as those of nonaffiliated operating companies that conduct oil and gas field operations and mineral extraction/processing. The Company operates oil and natural gas wells in Pennsylvania, Texas and West Virginia from its Pennsylvania office utilizing contract pumpers to perform the field operations. The Company’s non-operated wells are monitored from the Company’s Pennsylvania office.

~~CAPI is the lessee under a 5,200 acre lease containing high~~ ~~grade zeolite, located 32 miles south of Marfa in Presidio County, Texas. The lease terms call for royalty payments of $3.00 per~~ ~~ton of zeolite removed from the property with a minimum royalty of $30,000 per year. CAPI has the option to terminate the annual~~ ~~royalty payments by paying a lump sum of $400,000. CAPI owns, in fee, approximately 188 acres of land encompassed by and contained~~ ~~within the bounds of the 5,200 acre zeolite leasehold. During fiscal 2012, the Company paid the minimum royalty of $30,000.~~ 16

~~-14-~~ The Company’s mineral lease, fee interest and mining claims are operated by contract mining entities and are monitored from its Pennsylvania office and by TPA under its agreement pertaining to covering the Company’s Sierra Kaolin deposit. The Company considers its relations with its consultants to be satisfactory.

~~Location~~ Item 1A. Risk Factors.

~~The Company's zeolite deposit is located 32 miles south of Marfa,~~ ~~Texas,~~Not onrequired ~~State~~as ~~Highway~~the ~~169,~~registrant ~~then 2 miles west on an all-weather dirt road. A railroad~~ is ~~immediately adjacent to the Company's leasehold and fee mineral interests. The Company's leasehold and fee mineral holdings are on private property. For~~ a ~~map~~smaller ofreporting ~~the location of the Company’s zeolite deposit, see Exhibit 99~~company.1.

~~Geologic~~ Item ~~Setting~~1B. Unresolved Staff Comments.

~~The zeolite bearing formation is an altered tuffaceous material~~ ~~that~~Not isrequired ~~exposed~~as ~~in several road cuts in~~ the ~~area.~~registrant ~~The zeolite present~~ is ~~the~~a ~~mineral~~smaller ~~Clinoptilolite~~reporting company.

~~New~~ Item ~~Mexico~~2. Properties.

~~Sierra~~ OIL ~~Kaolin~~AND NATURAL GAS INTERESTS

~~CAPI owns 17 placer mining claims~~ on 2,720 acres and 8 Lode claims covering 160 acres, all located in Sierra County, New Mexico, encompassing its Sierra Kaolin deposit. The Federal mining claims are burdened by a royalty interest of 7% of net proceeds derived from mining operations. TPA paid $20,160 to the Bureau of Land Management (“BLM”) in 2012 to maintain CAPI’s Federal mineral claims. Such payment by TPA was in accordance with the provisions of the Restated Development and Operating Agreement (See Exhibit 10.17) with the Company.Texas

~~Location~~ Substantially all of the Texas properties are located in the Austin Chalk Trend in Burleson, Brazos and Lee Counties, Texas. The Austin Chalk Trend consists of the Austin Chalk, Buda, Georgetown and Edwards formations, extends for approximately 300 miles in length and 50 miles across, and is encountered at depths of 5,500 to 18,000 feet. These reservoirs are generally of low permeability. Historically, these formations were considered to be economically marginal except in areas where the reservoir rocks are highly fractured. In later years, stimulation by mechanical fracturing of the rock resulted in increasing hydrocarbon recoveries and extensive development of the Trend. Ongoing technical developments using horizontal drilling techniques allow the well bore to intersect, if present, series of vertical fracture systems instead of a single one, thus resulting in higher rates of production and recoverable reserves, at the cost of a more expensive drilling effort. Whether an individual well will be economic, even if horizontally drilled, depends largely upon intersecting fractured portions of the formation, which cannot be predicted. Certain locales appear to contain more fracturing than others. It is not unusual for an individual well to produce as much as forty percent (40%) of the primary recoverable reserves during the first two years of production and the remainder over a period of ten to fifteen years. The Company is presently evaluating joint venturing with third parties to develop its Texas Properties. The Company operates twenty-five (25) wells and owns a working interest in a well that it does not operate in Texas.

~~The Sierra Kaolin claims are located on a paved road (State~~ ~~Highway~~West ~~59)~~Virginia ~~near~~and Winston, NM, some 40 miles west of Truth or Consequences, NM. The claims are located on Federal lands administered by the Bureau of Land Management. For a map of the location of the Company’s Kaolin claims, see Exhibit 99.1.Pennsylvania

~~Geologic~~ The ~~Setting~~Company’s hydrocarbon production in West Virginia is in the producing zone of the Oriskany formation of the Appalachian Basin’s Upper Devonian Section. The Company has working interests in two wells in West Virginia for which it acts as operator. The Company operates two wells in which it owns no working interest and owns overriding royalty interests in two other wells which it does not operate that produce from the Balltown Formation in Pennsylvania.

~~The Sierra Kaolin project~~ ~~lies near the eastern margin of the Datil-Mogollon volcanic field, a region dominated by Tertiary caldera-related volcanic rocks.~~Alabama

~~The Sierra Kaolin is considered~~ toDRIOP beacts aas ~~primary~~the ~~hydrothermal~~managing ~~deposit~~general ~~that~~partner ~~was~~of ~~formed~~DRP. inDRP ~~situ.~~owns ~~The~~an ~~Sierra~~overriding ~~Kaolin~~royalty isinterest ~~part~~in of70 anwells ~~advanced~~located ~~argillic~~in ~~alteration~~the ~~assemblage that~~Deerlick ~~includes~~Creek ~~kaolinite~~Coalbed ~~(AI4(Si4O10)(OH)8)~~Methane ~~and~~Field ~~related~~in ~~mineral~~Tuscaloosa ~~species~~County, ~~possibly including dickite and halloysite~~Alabama, ~~alunite~~in ~~(KAI3(OH)8(SO4)2)~~the ~~and~~Black ~~chalcedonic~~Warrior ~~and/or opaline quartz (hydrous amorphous silica)~~Basin.

~~Utah~~ Operating Hazards and Uninsured Risks

~~Beaver~~ The ~~Zeolite~~Company’s oil and gas operations are subject to all of the risks normally incident to the exploration for and production of oil and gas, including mechanical failures, blow-outs, cratering, pollution and fires, each of which could result in damage to or destruction of oil and gas wells or production facilities or damage to persons and property. While the Company maintains $3,000,000 of all risks liability policies in amounts that it believes are adequate, the insurance may not cover all potential operational risks. The occurrence of a significant event not fully insured against could have a material adverse effect on the Company’s financial position. In the coming year, the Company plans to seek participation in certain types of exploratory or developmental drilling prospects. In these instances, the Company has historically expanded its insurance coverage to cover the specific risk associated with those types of operations. The Company will continue to conduct its normal day-to-day activities as operator of its wells.

CAPI owns 11 placer mining claims (Three Creek) covering approximately 220 acres of zeolite located in Beaver County, Utah. The Company considers the zeolite in this deposit to be of a high grade. During fiscal year 2012, the Company paid $6,160 to the Bureau of Land Management to maintain its federal mining claims.17

~~Location~~ Title to Oil and Gas Properties

The ~~Beaver~~Company’s ~~zeolite~~interests ~~claims~~in producing and non-producing acreage are ~~located~~in onthe aform ~~paved~~of ~~road~~direct ~~(State Highway~~or ~~153)~~indirect 18interests ~~miles~~in ~~east~~leases. Each of ~~Beaver,~~its ~~Utah.~~properties ~~The~~is ~~claims~~subject ~~are~~to oncustomary ~~Federal~~royalty ~~Lands~~interests ~~administered~~in byamounts prevailing in the ~~Bureau~~area ofin ~~Land~~which ~~Management~~the oil and gas lease was taken, overriding royalty interests, liens incident to operating agreements, liens for current taxes and other burdens and mineral encumbrances and restrictions. ~~For a~~The ~~map~~Company believes that none of these burdens materially interferes with the ~~location~~use of such properties, in the operation of the Company’s ~~Utah~~business ~~zeolite~~or ~~claims,~~the ~~see~~profitability ~~Exhibit~~of 99the Company’s investment therein.1.

~~Geologic~~ As ~~Setting~~is customary in the oil and gas industry, only a preliminary investigation of title may be made at the time of acquisition of undeveloped properties. Detailed investigations are generally made, including, in most cases, receiving a title opinion of local counsel, prior to the commencement of drilling operations. A thorough examination of title was performed with respect to substantially all of the Company’s producing properties. Also, prior to the acquisition of properties, the Company has received an opinion of title, satisfactory to counsel to the Company, on a majority (in value) of the assets acquired. The Company believes that it has defensible title to substantially all of its properties.

~~The deposit is geologically located in an altered tuffaceous~~ ~~formation~~MINERAL ~~associated with widespread volcanic activity of the area.~~INTERESTS

~~-15-~~ Minerals Holdings

~~Mining~~ CAPI owns fee title interest, leasehold interests and Federal mining claims containing non-metallic minerals in the States of Texas, New Mexico and Utah. Title to and rights in the properties are held by CAPI, a wholly-owned subsidiary of CAMI.

~~The Company has periodically~~ ~~extracted zeolite from its deposit in~~ Texas through the use of contract miners. The mining of all of the Company’s mineral deposits is exclusively conducted through surface mining. The quantities of extracted volumes were commensurate with demands for the minerals and to comply with the Company's lease obligations. The Company, under its agreements with Tecumseh Professional Associates, Inc. (“TPA”) (see Exhibits 10.12 and 10.17) extracted sufficient quantities of Sierra Kaolin for qualitative and quantitative analysis of the mineral’s commercial properties. All of the extraction of the Company's current mineral holdings is expected to be done by surface mining. At each of the locations, the areas disturbed by extractive operations have been limited to initial ten acre permit sites in New Mexico and under 100 acres in Texas in accordance with applicable state regulations.

~~The Company's Texas zeolite~~ ~~deposit~~Marfa will be mined on a periodic basis to meet existing obligations and to support development of new and emerging markets. Initial production of the Company’s Sierra Kaolin has been conducted by TPA for testing. Commercial development and marketing will be conducted in accordance with the Sierra Kaolin Restated Development and Operating Agreement (See Exhibit 10.17). In December 2009, the Sierra Kaolin Open Pit Clay Mine project cleared the regulatory review. The project’s definitive USDA Forest Service Plan of Operations has been approved. This will facilitate the project moving to the next phase.Zeolite

At CAPI is the ~~present~~lessee ~~time~~under a 5,200 asacre alease ~~result~~containing ofhigh ~~its~~grade ~~limited~~zeolite, ~~activities~~located ~~on its~~32 ~~mineral~~miles ~~properties~~south of Marfa in Presidio County, ~~the~~Texas. ~~Company~~The ~~believes~~lease ~~that~~terms ~~its~~call ~~share~~for royalty payments of ~~the~~$3.00 ~~reclamation~~per ~~costs~~ton ~~currently~~of ~~associated~~zeolite removed from the property with ~~its~~a ~~activities~~minimum royalty of $30,000 per year which is due annually through November 2014. The lease can be extended for eight successive periods of ten years each. CAPI has the option to terminate the annual royalty payments by paying a lump sum of $400,000. CAPI owns, in fee, approximately 188 acres of land encompassed by and contained within the bounds of the 5,200 acre zeolite leasehold. During each of 2013 and 2012, the Company paid the minimum royalty of $1030,000.

~~Item 3. Legal Proceedings.~~ Location

~~During October 2009, a working interest owner commenced an action~~ ~~against~~The ~~a subsidiary of the~~ Company's ~~(“WRC”)~~zeolite indeposit ~~the~~is ~~District~~located ~~Court~~32 ofmiles ~~Burleson~~south ~~County, Texas, for an accounting~~ of ~~expenses and revenues for six wells. WRC~~Marfa, ~~through its~~ Texas ~~counsel~~, ~~had~~on ~~filed~~State aHighway ~~general denial of the claim. In November 2009~~169, ~~WRC~~then ~~provided the~~2 ~~plaintiff~~miles ~~with~~west aon ~~complete~~an ~~accounting for~~ all-weather ~~wells~~dirt ~~in question~~road. ~~The~~A ~~plaintiff~~railroad ~~sought~~is ~~additional~~immediately ~~discovery~~adjacent ~~and~~to ~~WRC~~the ~~provided additional~~Company's ~~information.~~leasehold ~~During July 2012, WRC~~ and ~~certain~~fee ~~owners~~mineral ~~of overriding royalty and working~~ interests. inThe ~~oil~~Company's leasehold and ~~gas~~fee ~~wells operated~~mineral byholdings ~~WRC~~are ~~agreed~~on toprivate ~~the~~property. ~~general~~For ~~terms of~~ a ~~settlement~~map ~~agreement. Pursuant to the settlement agreement (effective September 1, 2012), WRC paid $120,000 in cash for (i) settlement~~ of ~~all amounts due from WRC to such certain owners and (ii)~~ the ~~acquisition of~~location ~~the working interest ownership position~~ of the ~~respective~~Company’s ~~entities.~~zeolite ~~The~~deposit, ~~parties~~see ~~entered~~Exhibit ~~into mutual releases and the litigation was terminated with prejudice~~99.1.

~~The Company is a party to certain pending legal proceedings.~~ ~~Management~~Geologic ~~of the Company believes such proceedings to be ordinary routine litigation incidental to the business as discussed in Notes to the Consolidated Financial Statements included in Item 8.~~Setting

~~Item~~ The 4zeolite bearing formation is an altered tuffaceous material that is exposed in several road cuts in the area. ~~Mine~~The ~~Safety~~zeolite ~~Disclosures~~present is the mineral Clinoptilolite.

~~None.~~ New Mexico

~~PART~~ Sierra IIKaolin

~~Item~~ 5CAPI owns 17 placer mining claims on 2,720 acres and 8 Lode claims covering 160 acres, all located in Sierra County, New Mexico, encompassing its Sierra Kaolin deposit. ~~Market~~ The ~~for~~Federal ~~Registrant’s~~mining ~~Common~~claims ~~Equity~~are burdened by a royalty interest of 7% of net proceeds derived from mining operations. TPA paid $20,160 ~~Related~~to ~~Stockholder~~the ~~Matters~~Bureau of Land Management (“BLM”) in 2013 and ~~Issuer~~2012 ~~Purchases~~to maintain CAPI’s Federal mineral claims. Such payment by TPA was in accordance with the provisions of ~~Equity~~the ~~Securities~~Restated Development and Operating Agreement (See Exhibit 10.17) with the Company.

~~Description of Securities~~18

~~Pursuant to the Company’s~~ Articles of Incorporation, the Company is authorized to issue 100,000,000 shares of common stock, par value $0.01 per share, and 20,000,000 shares of preferred stock, par value of $0.01 per share. Below is a description of the Company’s outstanding securities, including common stock, preferred stock, options, warrants and convertible debt.Location

~~-16-~~ The Sierra Kaolin claims are located on a paved road (State Highway 59) near Winston, NM, some 40 miles west of Truth or Consequences, NM. The claims are located on Federal lands administered by the Bureau of Land Management. For a map of the location of the Company’s Kaolin claims, see Exhibit 99.1.

~~Common~~ Geologic ~~Stock~~Setting

~~Each holder of the Company’s common stock is entitled~~ to one vote for each share held of record. Holders of common stock have no preemptive, subscription, conversion, or redemption rights. Upon liquidation, dissolution or winding-up, the holders of common stock are entitled to receive the Company’s net assets pro rata. Each holder of common stock is entitled to receive ratably any dividends declared by the board of directors out of funds legally available for the payment of dividends. The ~~Company~~Sierra ~~has~~Kaolin ~~not~~project ~~paid~~lies ~~any~~near ~~dividends on its common stock and does not contemplate doing so in~~ the ~~foreseeable~~eastern ~~future.~~margin ~~The Company anticipates that any earnings generated from operations will be used to finance its growth. As~~ of the ~~fiscal~~Datil-Mogollon ~~year~~volcanic ~~ended September 30~~field, ~~2012,~~a ~~the~~region ~~Company~~dominated ~~had~~by ~~49,441,058~~Tertiary ~~shares~~caldera-related ofvolcanic ~~common stock issued and outstanding~~rocks.

~~Preferred~~ The ~~Stock~~Sierra Kaolin is considered to be a primary hydrothermal deposit that was formed in situ. The Sierra Kaolin is part of an advanced argillic alteration assemblage that includes kaolinite (AI4(Si4O10)(OH)8) and related mineral species, possibly including dickite and halloysite, alunite (KAI3(OH)8(SO4)2) and chalcedonic and/or opaline quartz (hydrous amorphous silica).

~~The Company is authorized to issue 20,000,000 shares of preferred~~ ~~stock, par value $0.01 per share, with no voting power.~~Utah

~~As of September 30, 2012, there were: no shares of Series~~ ABeaver ~~preferred stock issued and outstanding; 135,000 shares of Series B 8% Cumulative Convertible Preferred Stock (“Series B Preferred Stock”) issued and outstanding.~~Zeolite

~~The~~ CAPI ~~Series~~owns B11 ~~Preferred~~placer ~~Stock~~mining ~~was~~claims ~~issued~~(Three inCreek) ~~the~~covering ~~acquisition~~approximately ~~of Clean~~220 ~~Age~~acres ~~Minerals,~~of ~~Inc.~~zeolite located in ~~September~~Beaver ~~2000~~County, Utah. The ~~Series~~Company Bconsiders ~~Preferred~~the ~~Stock~~zeolite ~~can~~in bethis ~~converted~~deposit to ~~common~~be ~~stock at 85%~~ of ~~the~~a ~~average closing~~high ~~price~~grade. During of2013 ~~the~~and 52012, ~~days before~~ the ~~date~~Company ofpaid ~~conversion with a minimum amount of~~ $~~1.25 per share. Thus~~6,160 atto ~~September 30, 2012,~~ the ~~135,000~~Bureau ~~shares~~ of ~~Series~~Land BManagement ~~Preferred~~to ~~Stock~~maintain ~~were~~its ~~convertible~~federal ~~into~~mining ~~1,080,000 shares of Common Stock~~claims.

~~Further, the shares of Series B Preferred Stock (i) earn dividends~~ at the rate of 8% per annum computed on the basis of a 365 day year, and (ii) have priority in liquidation to the extent of the stated value of $10.00 per share plus any unpaid dividends over any other preferred stock, common stock or any other stock issued after September 19, 2000. At September 30, 2012, the liquidation preference totals $3,284,239 (stated value of $1,350,000 plus arrearages in cumulative dividends of $1,934,239).Location

~~Market~~ The ~~Information~~Beaver zeolite claims are located on a paved road (State Highway 153) 18 miles east of Beaver, Utah. The claims are on Federal Lands administered by the Bureau of Land Management. For a map of the location of the Company’s Utah zeolite claims, see Exhibit 99.1.

~~The Company's Common Stock trades on the NASDAQ Over the Counter~~ ~~Market,~~Geologic Bulletin Board ("OTCQB"). The symbol for the Company's shares is DLOV. The following table shows the high and low closing bid prices as quoted on the OTCBB for the fiscal quarters indicated and the quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The Company’s fiscal year ends September 30.Setting

2012	High		Low
First Quarter	$	0.24	$	0.09
Second Quarter	$	0.25	$	0.13
Third Quarter	$	0.20	$	0.11
Fourth Quarter	$	0.16	$	0.09
2011		High		Low
First Quarter	$	0.17	$	0.13
Second Quarter	$	0.20	$	0.12
Third Quarter	$	0.40	$	0.17
Fourth Quarter	$	0.30	$	0.09

The deposit is geologically located in an altered tuffaceous formation associated with widespread volcanic activity of the area.

~~Holders~~ Mining

~~Common~~ The ~~Equity~~Company has periodically extracted zeolite from its deposit in Texas through the use of contract miners. The mining of all of the Company’s mineral deposits is exclusively conducted through surface mining. The quantities of extracted volumes were commensurate with demands for the minerals and to comply with the Company's lease obligations. The Company, under its agreements with Tecumseh Professional Associates, Inc. (“TPA”) (see Exhibits 10.12 and 10.17) extracted sufficient quantities of Sierra Kaolin for qualitative and quantitative analysis of the mineral’s commercial properties. All of the extraction of the Company's current mineral holdings is expected to be done by surface mining. At each of the locations, the areas disturbed by extractive operations have been limited to initial ten acre permit sites in New Mexico and under 100 acres in Texas in accordance with applicable state regulations.

As The ofCompany's ~~September~~Texas ~~30,~~zeolite ~~2012,~~deposit ~~the~~will ~~current~~be ~~outstanding~~mined ~~amount~~on a periodic basis to meet existing obligations and to support development of ~~shares~~ new and emerging markets. Initial production of ~~common~~the ~~stock~~Company’s ~~was~~Sierra ~~49,441,058~~Kaolin has been conducted by TPA for testing. Commercial development and marketing will be conducted in accordance with ~~approximately~~the ~~2,000~~Sierra ~~holders~~Kaolin ofRestated ~~record~~Development and Operating Agreement (~~inclusive~~See Exhibit 10.17). In December 2009, the Sierra Kaolin Open Pit Clay Mine project cleared the regulatory review. The project’s definitive USDA Forest Service Plan of ~~brokerage~~Operations ~~house~~has ~~"street~~been ~~accounts")~~approved.

~~Preferred~~ At ~~Equity~~the present time, as a result of its limited activities on its mineral properties, the Company believes that its share of the reclamation costs currently associated with its activities is approximately $10,000.

~~As of September 30, 2012, there were no shares of Series A Preferred Stock issued and outstanding and there were 16 holders of the 135,000 shares of Series B Preferred Stock issued and outstanding.~~19

~~-17-~~ Operating Hazards and Uninsured Risks

~~Dividends~~ The Company’s minerals operations are subject to all of the risks normally incident to the exploration for and production of non-metallic industrial minerals, including mechanical failures, pollution and fires, each of which could result in damage to or destruction of production facilities or damage to persons and property. While the Company maintains $3,000,000 of all risks liability policies in amounts that it believes are adequate, the insurance may not cover all potential operational risks. The occurrence of a significant event not fully insured against could have a material adverse effect on the Company’s financial position. The Company has historically expanded its insurance coverage to cover the specific risk associated with its operations.

~~Common Stock - The Company has never paid a dividend~~ onItem ~~its common stock~~3. ~~The~~Legal ~~Company has no plans to pay any dividends on its common stock in the near future~~Proceedings. ~~The Company intends to retain all earnings, if any, for the foreseeable future for use in its business operations.~~

~~Series~~ During AOctober ~~Preferred~~2009, ~~Stock~~a -working Nointerest ~~shares~~owner commenced an action against a subsidiary of ~~Series~~the ACompany ~~Preferred Stock~~(“WRC”) ~~were~~in ~~issued~~the ~~during~~District ~~fiscal~~Court ~~2012~~of Burleson County, Texas, for an accounting of expenses and ~~2011.~~revenues Nofor ~~shares~~six ~~were~~wells. ~~outstanding~~WRC, atthrough ~~September~~its 30Texas counsel, ~~2012~~had filed a general denial of the claim. In November 2009, ~~2011~~WRC provided the plaintiff with a complete accounting for all wells in question. The plaintiff sought additional discovery and ~~2010~~WRC provided additional information. During ~~fiscal~~July ~~2011~~2012, WRC and certain owners of overriding royalty and working interests in oil and gas wells operated by WRC agreed to the ~~Company~~general terms of a settlement agreement. Pursuant to the settlement agreement (effective September 1, 2012), WRC paid $59120,~~338~~000 in cash for (i) settlement of ~~dividends~~all onamounts ~~the~~due ~~Company's~~from ~~Series~~WRC Ato ~~Preferred~~such ~~Stock~~certain byowners ~~issuing~~and ~~237,352~~(ii) ~~shares~~the acquisition of ~~Common~~the ~~Stock~~working ~~(see Note~~interest 6ownership position of the ~~Notes~~respective toentities. ~~Consolidated~~The ~~Financial~~parties ~~Statements)~~entered into mutual releases and the litigation was terminated with prejudice.

~~Series~~ The BCompany 8%is ~~Cumulative~~a ~~Convertible~~party ~~Preferred~~to ~~Stock~~certain ~~- No~~pending ~~shares~~legal ofproceedings ~~Series~~in BBurleson ~~Preferred~~County, ~~Stock~~Texas, ~~par~~each ~~value~~seeking to terminate WRC’s leasehold interest for failure to further develop the respective leases, for an accounting and for failure to properly pay royalties. WRC has filed a denial of $0all claims.01 ~~per~~The ~~share,~~royalties in question were ~~issued~~held ~~during~~in ~~fiscal~~suspense ~~2012~~due to the death of the royalty owner and ~~2011.~~the ~~During~~failure ~~fiscal~~of ~~2012, 10,000~~the ~~shares~~heirs to give WRC timely notice of ~~Series~~their Binheritance. ~~Preferred~~Additionally, ~~Stock~~under Texas law, since the leases were ~~converted~~properly ~~into~~being 80held by production from commercial wells,~~000~~ ~~shares~~WRC ofwas ~~Common~~not ~~Stock~~obligated asto ~~discussed~~undertake inadditional ~~Note~~drilling ~~7of~~on the ~~Notes~~ leases to ~~Consolidated~~develop ~~Financial~~other ~~Statements~~productive reservoirs. ~~During~~WRC, ~~fiscal~~through ~~years~~its ~~2012~~Texas ~~and~~litigation ~~2011~~counsel, ~~there~~are ~~were~~seeking noto ~~cash~~amicably ~~dividend~~resolve ~~payments~~these insuits. ~~respect~~Should tothese two suits be timely resolved, the ~~Series~~ Bleases ~~Preferred~~affected ~~Stock~~by these suits will be part of the sale of the deep rights on February 17, 2014 (see Recent Significant Activity - Asset Purchase and Sale Agreement included in Item 1).

~~The~~ Management ~~only~~of ~~dividends paid prior to fiscal 2011 on~~ the Company~~'s Series~~ Bbelieves ~~Preferred~~such ~~Stock~~proceedings ~~were~~to inbe ~~shares~~ordinary ofroutine ~~Common~~litigation ~~Stock~~incidental atto the ~~time~~business ofas ~~conversion~~discussed ofin ~~the~~Notes ~~respective~~to ~~shares~~the ofConsolidated ~~such~~Financial ~~Preferred~~Statements ~~Stock into~~included ~~Common~~in ~~Stock~~Item 8.

~~At September 30, 2011, dividends payable on Series B Preferred~~ ~~shares~~Item ~~totaled $1,914,558~~4. AtMine ~~September~~Safety ~~30, 2010, dividends payable totaled $1,857,895 - Series A of $59,338 and Series B of $1,798,557~~Disclosures. As of October 1, 2011, the beginning of fiscal 2012, the Company no longer accrues dividends on the Series B Preferred shares due to the very low probability that the holders of the Series B Preferred shares will elect to convert such shares into shares of Common Stock. Also, the Company is not required to pay dividends by issuing shares of its Common Stock. The Company intends to pay dividends on the Series B Preferred shares when its financial condition makes any such payment appropriate.

~~During the third quarter of 2012, Carl Haessler, a Director,~~ accepted 73,854 shares of Common Stock as satisfaction for any and all dividends due him ($92,318 of which $88,319 were accrued) in respect to his direct holdings of 30,000 shares of Series B 8% Cumulative Convertible Preferred Stock through the date of the conversion of 10,000 of such sharesNone. ~~See Note 7.~~

~~At September 30, 2012, the arrearages in cumulative dividends~~ onPART ~~the Series B Preferred Stock totals $1,934,239.~~II

~~Recent~~ Item ~~Sales~~5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of ~~Unregistered~~Equity Securities.

~~Settlement~~ Description ~~Agreement~~of ~~& Convertible Note Payable~~Securities

On Pursuant ~~July~~to ~~12, 2011,~~ the Company’s ~~entered~~Articles ~~into~~of ~~a Settlement Agreement with Dov Amir (“Amir”)~~Incorporation, ~~a former director of~~ the Company, ~~whereby,~~is ~~among~~authorized ~~other~~to ~~provisions,~~issue ~~(a)~~150 ~~the~~million ~~Company issued 412,292~~ shares of ~~Common~~common ~~Stock~~stock, (par value $0.2501 per share), inand ~~payment~~20 ofmillion ashares ~~portion~~ of ~~amounts~~preferred ~~due~~stock, topar ~~Amir~~value onof ~~a note payable (~~$~~45,485)~~0.01 ~~and~~per ~~Series A~~share. ~~Preferred~~During ~~Stock~~June ~~Dividends ($59~~2013,~~338);~~ ~~(b)~~DRC’s ~~the~~authorized ~~option~~shares ~~granted~~of tocommon ~~Amir~~stock inwere ~~December~~increased ~~2009~~ to ~~purchase~~150 ~~500,000~~million shares offrom ~~Common~~100 ~~Stock became~~million ~~fully~~shares. ~~vested;~~Below ~~(c)~~is ~~certain~~a ~~assets~~description of ~~Amir shall remain pledged as collateral for~~ the Company’s ~~note~~outstanding ~~payable to First Citizens Bank; and (d) the Company entered into a note payable to Amir for the balance of all amounts due Amir ($391~~securities,~~154).~~ ~~The note~~including ~~matures~~common ~~on December 31~~stock, ~~2015~~preferred ~~with interest at 4% per annum~~stock, ~~compounded annually. The note does not require any interim payments by the Company. Further~~options, ~~Amir~~warrants ~~was granted the right to convert any~~ and ~~all~~convertible ~~amounts due him under the note into shares of Common Stock at a conversion price of $0~~debt.~~25 per share.~~

~~During April 2012, the Board and the Audit Committee approved~~ ~~and the Company paid $70,000 in cash and issued 140,000 shares of~~ Common Stock to Amir in payment of interest due of $11,471 and a $128,529 reduction in the principal balance of the note. See the above discussion regarding the Company’s note payable to First Citizens Bank. The total consideration (cash and common stock) of $93,800 was $46,200 less than the $140,000 of total principal reduction and interest paid; however, the total consideration paid of $93,800 was $1,400 less than the $95,200 if-converted value of the principal and interest. The if-converted value was determined based on the conversion price of $0.25 per share per the terms of the note and valuing the 560,000 if-converted shares at $0.17 per share.

Each holder of the Company’s common stock is entitled to one vote for each share held of record. Holders of common stock have no preemptive, subscription, conversion, or redemption rights. Upon liquidation, dissolution or winding-~~18-~~up, the holders of common stock are entitled to receive the Company’s net assets pro rata. Each holder of common stock is entitled to receive ratably any dividends declared by the board of directors out of funds legally available for the payment of dividends. The Company has not paid any dividends on its common stock and does not contemplate doing so in the foreseeable future. The Company anticipates that any earnings generated from operations will be used to finance its growth. As of September 30, 2013, there were 72,468,458 shares of common stock issued and outstanding.

~~Payment Related to a CAMI Note Payable~~ 20

~~During April 2012, the Board and the Audit Committee approved~~ ~~the~~Preferred ~~payment of $50,000 in cash and the issuance of 158,290 shares of Common~~ Stock in full satisfaction of a note due an affiliate of Mr. Haessler, a Director. The note had a principal balance $58,938 and accrued and unpaid interest related to such note totaled $60,044 at the time of repayment. The Company valued the stock at $25,327 based on the closing price of $0.16 per share. The total consideration payment (cash and common stock) of $75,327 was $43,655 less than the $118,982 of principal and interest owed by the Company.

~~Shares~~ The ~~Issued~~Company inis ~~Satisfaction~~authorized to issue 20,000,000 shares of ~~Dividend~~preferred ~~Payment~~stock, ~~Obligation Associated~~par value $0.01 per share, with no voting power. As of September 30, 2013, there were: no shares of Series A preferred stock issued and outstanding; 135,000 shares of Series B 8% Cumulative Convertible Preferred Stock (“Series B Preferred Stock”) issued and outstanding. The Series B Preferred Stock (stated value of $10.00 per share) was issued in the acquisition of Clean Age Minerals, Inc. in September 2000. The Series B Preferred Stock can be converted to common stock at 85% of the average closing price of the 5 days before the date of conversion with a minimum amount of $1.25 per share. Thus, at September 30, 2013, the 135,000 shares of Series B Preferred Stock were convertible into 1,080,000 shares of Common Stock.

~~During May 2012, Carl Haessler, a Director, elected to convert~~ 10Further,~~000~~ the shares of Series B ~~8% Cumulative Convertible~~ Preferred Stock ~~into~~(i) ~~80,000~~earn ~~registered~~dividends ~~shares of Common Stock~~ at the ~~conversion~~ rate of ~~$1.25~~8% per ~~share~~annum ofcomputed ~~Common~~on ~~Stock.~~the ~~Also,~~basis ~~Mr.~~of ~~Haessler~~a ~~accepted~~365 73day year,~~854~~ ~~unregistered~~and ~~shares~~(ii) ofhave ~~Common~~priority ~~Stock~~in asliquidation ~~satisfaction for~~to ~~any~~the ~~and~~extent ~~all~~of ~~dividends~~the ~~due~~stated ~~him~~value ~~($92,318~~ of ~~which~~ $~~88,319~~10.00 ~~were~~per ~~accrued)~~share inplus ~~respect~~any tounpaid ~~his~~dividends ~~direct holdings~~over ofany 30other preferred stock,~~000~~ ~~shares~~common ofstock ~~Series~~or Bany 8%other ~~Cumulative~~stock ~~Convertible~~issued ~~Preferred~~after ~~Stock~~September ~~through~~19, ~~the~~2000. ~~date~~At ofSeptember 30, 2013, the ~~conversion~~liquidation preference totals $3,392,239 (stated value of 10$1,350,000 plus arrearages in cumulative dividends of ~~such~~ ~~shares~~$2,042,239).

~~Issuer~~ Market ~~Purchases of Equity Securities~~Information

The Company's ~~does~~Common ~~not~~Stock ~~have a~~trades ~~stock~~on ~~purchase~~the ~~program~~Over the Counter Markets ("OTCQB"). The symbol for ~~its~~the ~~equity~~Company's ~~securities~~shares is DLOV. The following table shows the high and low closing bid prices as quoted on the OTCBB for the fiscal quarters indicated and the quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The Company’s fiscal year ends September 30.

Securities Authorized for Issuance Under Equity Compensation Plans

2013	High		Low
First Quarter	$	0.09	$	0.05
Second Quarter	$	0.11	$	0.05
Third Quarter	$	0.18	$	0.09
Fourth Quarter	$	0.16	$	0.08

2012	High		Low
First Quarter	$	0.24	$	0.09
Second Quarter	$	0.25	$	0.13
Third Quarter	$	0.20	$	0.11
Fourth Quarter	$	0.16	$	0.09

~~The following table contains information as of September 30,~~ 2012, regarding securities authorized for issuance under equity compensation plans including the Non-Qualified Independent Director Stock Option Plan and individual compensation arrangements (see “Recent Sales of Unregistered Securities – Option and Warrants” below):Holders

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category	(a)		(b)		(c)
Equity compensation plans approved by security holders		400,000	$	0.22		400,000
Equity compensation plans not approved by security holders		1,750,000	$	0.21		-
Total (1)		2,150,000	$	0.21		400,000

Common Equity

~~(1)~~ As ~~See~~of ~~Note~~September 230, to2013, the ~~Summary~~current ~~Compensation~~outstanding ~~Table~~amount ~~included in Item 11 concerning the contingently issuable (i) grant~~ of ~~600,000~~ shares of common stock ~~and~~was ~~(ii)~~72,468,458 ~~option~~with ~~for~~approximately ~~the~~2,000 ~~purchase~~holders of ~~1.2~~record ~~million~~(inclusive ~~shares~~ of ~~common~~brokerage ~~stock~~house "street accounts").

~~Options~~ Preferred ~~and Warrants~~Equity

~~Options (1)~~ toAs ~~Purchase~~of ~~Shares~~September 30, 2013, there were no shares of ~~Common~~Series A Preferred Stock issued and outstanding and there were 16 holders of the 135,000 shares of Series B Preferred Stock issued and outstanding.

	Fiscal 2012			Fiscal 2011
Outstanding and Exercisable at beginning of period (2)		2,550,000			1,800,000
Granted (3)		-			950,000
Cancelled		-			-
Expired (4) (5) (6)		(400,000	)		(200,000	)
Exercised		-			-
Outstanding and Exercisable at end of period(7)		2,150,000			2,550,000

Dividends

Common Stock -~~19-~~ The Company has never paid a dividend on its common stock. The Company has no plans to pay any dividends on its common stock in the near future. The Company intends to retain all earnings, if any, for the foreseeable future for use in its business operations.

~~(1)~~ Series ~~The~~A ~~Company~~Preferred ~~accounts~~Stock ~~for all stock~~-~~based~~ ~~compensation~~No ~~(options)~~shares inof ~~accordance~~Series ~~with~~A ~~the~~Preferred ~~Financial~~Stock ~~Accounting~~were ~~Standard~~issued ~~Board,~~during or2013 ~~FASB,~~and ~~Accounting~~2012. ~~Standard~~No ~~Codification,~~shares orwere ~~ASC,~~outstanding ~~Topic~~at ~~718.~~September ~~Under~~30, ~~ASC 718~~2013, ~~the~~2012 ~~fair value of stock options~~ and ~~compensation costs are measured as of the grant date~~2011.

(2) In December 2009, the Board of Directors granted (a) an option to purchase 200,000 shares of stock to a Director (Lord Gilbert) under the Company’s Non-qualified Independent Director Stock Option Plan, (b) an option to purchase 500,000 shares of Common Stock to a Director (Dov Amir) and (c) an option to purchase 500,000 shares of Common Stock to the President/Director (Gary J. Novinskie). The options are exercisable through December 2014 at an exercise price of $0.21 per share. The options vest 50% in December 2010 and 25% in each of December 2011 and 2012. Mr. Amir resigned from the Board of Directors on July 11, 2011. The Company entered into a Settlement Agreement with Mr. Amir on July 12, 2011, and his option became fully vested. See Note 6 of the Notes to Consolidated Financial Statements.

~~(3)~~ Series InB ~~April~~8% ~~2011,~~Cumulative ~~the~~Convertible ~~Board~~Preferred ofStock ~~Directors~~- ~~granted~~No ~~(a)~~shares anof ~~option~~Series toB ~~purchase~~Preferred ~~200~~Stock,~~000~~ ~~shares~~par value of ~~stock to a Director (Charles T~~$0.01 ~~Maxwell)~~per ~~under~~share, ~~the~~were ~~Company’s~~issued ~~Non-qualified~~during ~~Independent~~2013 ~~Director~~and ~~Stock~~2012. ~~Option~~During ~~Plan~~2012, ~~(b) an option to purchase 500~~10,000 shares of ~~Common~~Series ~~Stock~~B toPreferred aStock ~~Director~~were ~~(Robert~~converted E.into ~~Martin) and (c) an option to purchase 250~~80,000 shares of Common Stock toas ~~the~~discussed ~~Chief~~in ~~Accounting~~Note ~~Officer~~7 ~~(Richard~~of W.the ~~Blackstone).~~Notes ~~The~~to ~~options~~Consolidated ~~are~~Financial ~~exercisable~~Statements. ~~through~~During ~~April~~fiscal ~~2016~~years at2013 anand ~~exercise~~2012, ~~price~~there ofwere ~~$0.22~~no ~~per~~cash ~~share.~~dividend ~~The~~payments ~~options vest 50%~~ in ~~April~~respect ~~2012~~to ~~and~~the ~~25%~~Series inB ~~each~~Preferred ~~of April 2013 and 2014~~Stock.

~~(4)~~ The ~~During~~only ~~fiscal~~dividends ~~2006,~~paid ~~Charles~~prior T.to ~~Maxwell~~fiscal ~~was~~2012 ~~granted~~on anthe ~~option~~Company's toSeries ~~purchase~~B ~~200,000~~Preferred ~~shares~~Stock ofwere ~~stock~~in atshares ~~an exercise price~~ of ~~$0.48~~Common ~~per~~Stock ~~share~~at ~~under~~ the ~~Company’s~~time ~~Non-qualified~~of ~~Independent~~conversion ~~Director~~of ~~Stock~~the ~~Option~~respective ~~Plan.~~shares ~~The~~of ~~option~~such ~~expired~~Preferred ~~during~~Stock ~~fiscal~~into ~~2011~~Common Stock.

~~(5)~~ At ~~During~~September ~~fiscal~~30, ~~2007~~2011, ~~the~~dividends ~~Company~~payable ~~granted~~on anshares ~~option~~of ~~for~~Series B Preferred Stock totaled $1,914,558. At September 30, 2010, dividends payable totaled $1,857,895 - Series A of $59,338 and Series B of $1,798,557. As of October 1, 2011, the ~~purchase~~beginning of ~~200~~2012,~~000~~ the Company no longer accrues dividends on the shares of ~~Common~~Series B Preferred Stock due to ~~Richard~~the W.very ~~Blackstone,~~low anprobability ~~officer~~that the holders of the ~~Company.~~Series ~~The~~B ~~option~~Preferred ~~was~~Stock ~~exercisable~~will ~~through~~elect ~~October~~to ~~2011,~~convert atsuch anshares ~~exercise~~into ~~price~~shares of $0Common Stock.67 ~~per~~Also, ~~share~~the Company is not required to pay dividends by issuing shares of its Common Stock. The ~~option~~Company ~~expired~~intends ~~unexercised~~to ~~during~~pay ~~fiscal~~dividends ~~2012~~on the shares of Series B Preferred Stock when its financial condition makes any such payment appropriate.

~~(6)~~ During ~~fiscal~~the ~~2007,~~third ~~David~~quarter Aof ~~Grady~~2012, ~~was~~Carl ~~granted~~Haessler, ana ~~option~~Director toat ~~purchase~~that ~~200~~time,~~000~~ accepted 73,854 shares of ~~stock~~Common atStock anas ~~exercise~~satisfaction ~~price~~for any and all dividends due him ($92,318 of which $~~0.28~~88,319 ~~per~~were ~~share~~accrued) ~~under~~in ~~the~~respect ~~Company’s~~to ~~Non-qualified~~his ~~Independent~~direct ~~Director~~holdings of 30,000 shares of Series B Preferred Stock ~~Option~~through ~~Plan~~the date of the conversion of 10,000 of such shares. ~~The~~See ~~option~~Note ~~expired~~7 ~~during~~of ~~fiscal~~the ~~2012~~Notes to Consolidated Financial Statements.

~~(7)~~ At ~~Options to purchase 1,650,000 shares outstanding as of~~ September 30, ~~2012 are held by current officers~~2013, ~~directors and employees of~~ the ~~Company~~arrearages ~~(“Insiders”).~~in ~~The~~cumulative ~~exercise~~dividends ~~prices~~on ~~for~~ the ~~options~~Series ~~held~~B byPreferred ~~Insiders~~Stock ~~range~~totals ~~from~~ $~~0.21~~2,042,239, ~~per~~of ~~share~~which to $~~0.22~~1,826,239 ~~per~~has ~~share~~been accrued (~~average~~see ~~exercise~~Note ~~price~~9 of ~~$0.22~~the ~~per~~Notes ~~share~~to Consolidated Financial Statements).

~~Warrants to Purchase~~ ~~Shares~~Recent Sales of ~~Common~~Unregistered ~~Stock~~Securities

~~At September 30, 2012, warrants for the purchase of 3,100,000~~ ~~shares~~Non-qualified ofIndependent ~~stock~~Director atStock anOption ~~average exercise price of $0.15 per share are outstanding.~~Plan

On ~~January~~December 1227, ~~2011~~2012, ~~Sonata~~David ~~Investment~~A ~~Company~~Grady, ~~Ltd.~~a ~~loaned $60,000~~Director toof the Company ~~pursuant~~at tothat ~~a promissory note of same~~ date., ~~The~~was ~~Company~~granted ~~issued~~an ~~warrants~~option ~~for~~to ~~the~~ purchase ~~of 500~~200,000 shares of ~~stock~~Common Stock at an exercise price of $0.1206 per share under the Company’s Non-qualified Independent Director Stock Option Plan. The ~~warrants~~option ~~expire~~was onexercisable through December ~~31,~~2017. The option was scheduled to vest 50% in December 2013 and 25% in each of December 2014 and 2015. At the Company’s Annual Meeting of Shareholders in June 2013, Mr. Grady was not re-elected to serve as a Director; accordingly, the option expired unexercised in accordance with its terms.

On ~~February~~November 2521, ~~2011~~2013, ~~the~~Michael ~~Company~~Carter, ~~entered~~Stanley ~~into~~Porfido ~~a Consulting Services Agreement with the Musser Group (see Item 7 - Management’s Discussion~~ and ~~Analysis~~Raymond ofSobieski, ~~Financial~~Directors ~~Condition and Results~~ of ~~Operations – CONSULTING SERVICES AGREEMENT). In addition to certain registered securities,~~ the Company ~~issued~~as toof ~~individuals associated~~August ~~with~~21, ~~the~~2013, ~~Musser~~were ~~Group~~each ~~warrants~~granted ~~for~~an ~~the~~option to purchase ~~of 2~~200,~~500,~~000 shares of Common Stock at an exercise price of $0.1514 per share under the Company’s Non-qualified Independent Director Stock Option Plan. The ~~warrants~~options ~~may~~are ~~not~~exercisable bethrough ~~exercised~~November ~~unless~~2018. ~~and~~The ~~until~~option ~~the~~vests ~~average~~50% ~~bid~~in November 2014 and ~~asking~~25% ~~closing~~in ~~price~~each of ~~the~~November ~~Company’s~~2015 ~~Common Stock~~and ~~exceeds~~2016. $1On February 10, 2014, Mr.00 ~~per~~Porfido ~~share~~resigned ~~for~~from athe ~~period~~Board ofand, ~~thirty~~accordingly, ~~consecutive~~the ~~trading~~option ~~days.~~granted ~~The~~to ~~warrants~~him ~~are~~expired ~~exercisable~~effective ~~through~~with ~~February~~his ~~24, 2016~~resignation.

~~On April 26, 2011, the Company granted a warrant for the purchase~~ ofCAMI ~~100,000 shares of Common Stock to an engineering consultant to the Company. The warrant is exercisable through April 25, 2016, at an exercise price of $0.22 per share.~~Debt

~~Issuer~~ Under ~~Purchases~~the terms of ~~Equity~~the ~~Securities~~agreement dated March 25, 2013, with Alice Haessler, Mrs. Haessler received $20,000 in cash and 50,000 shares of Common Stock in full settlement of the obligation owed to Alice Haessler.

~~The~~ 2013 ~~Company~~Private ~~does not have a stock purchase program for its equity securities.~~Placement

~~Item~~ 6Commencing in January 2013, the Company offered a private placement under the provisions of Regulation D promulgated under the Securities Act of 1933, as amended. ~~Selected~~The ~~Financial~~2013 ~~Data~~Private Placement consists of up to five hundred thousand dollars ($500,000) for the issuance of up to 5 million shares of Common Stock at $0.10 per share and warrants to purchase up to 2 million shares of Common Stock at an exercise price of $0.50 per share. The warrants expire on January 16, 2018. As of September 30, 2013, the Company has received cash totaling $411,000 for the sale of 4,110,000 shares of Common Stock and warrants to purchase 1,644,000 shares of Common Stock. The fair value of the warrants was determined to be $120,983 using the Black-Scholes valuation model.

~~Not required as the registrant is a smaller reporting company.~~22

~~-20-~~ FEI/DTE Stock Purchase Agreement

~~Item~~ ~~7. Management’s~~On ~~Discussion~~March 25, 2013, the Company sold 15 million shares of Common Stock and ~~Analysis~~issued warrants to purchase up to a total of ~~Financial~~18 ~~Condition~~million shares of Common Stock to the Investors (“FEI/DTE Warrants”) for $1,500,000. The FEI/DTE Warrants have a term of five (5) years (“Term”) and ~~Results~~may be exercised at a price of ~~Operations~~$0.20 per share (“Exercise Price”). In the third through fifth years of the Term, the Exercise Price may be satisfied by exchanging Common Stock at the current market price. The FEI/DTE Warrants may be exercised in whole or in part at any time during the Term. The fair value of the warrants was determined to be $806,838 using the Black-Scholes valuation model.

~~Forward~~ Option ~~Looking~~and ~~Statements~~Grant to Chief Executive Officer (“CEO”)

~~The~~ Effective ~~forward-looking~~March ~~statements~~25, in2013, ~~this~~the ~~section~~Company ~~and~~granted ~~other~~(i) ~~parts~~ 600,000 shares of ~~this~~Common ~~report~~Stock ~~involve~~and ~~risks~~(ii) and ~~uncertainties~~an ~~including~~option ~~statements~~for ~~regarding~~the ~~our~~purchase ~~plans~~of 1.2 million shares of Common Stock to Michael Parrish, ~~objectives~~Chief Executive Officer of the Company. The 600,000 ~~goals~~shares are issuable at the rate of 100,000 ~~strategies~~shares at the end of each of the six months commencing April 30, 2013, and ~~financial performance~~as such the average issuance price was $0.10 ~~Our~~per ~~actual~~share. ~~results~~Also, ~~could~~effective ~~differ~~March ~~materially~~25, ~~from~~2013, the ~~results~~Company ~~anticipated~~granted inan ~~these~~option ~~forward-looking~~for ~~statements~~the aspurchase aof ~~result~~ 1.2 million shares of ~~various~~Common ~~factors~~Stock to Mr. ~~See~~Parrish ~~the~~at ~~“CAUTIONARY~~an ~~STATEMENTS~~exercise ~~REGARDING~~price ~~FORWARD-LOOKING~~of ~~STATEMENTS”~~$0.14 ~~contained~~per share. The option is exercisable through May 21, 2015 and vests 50% on ~~page~~each 3of May 21, 2013 and 2014. The fair value of ~~this Annual~~the ~~Report~~option onwas ~~Form~~determined 10to be $119,737 using the Black-KScholes valuation model.

~~All forward-looking statements speak only as of the date made.~~ ~~All~~Forbearance ~~subsequent~~and ~~forward-looking~~Certain ~~statements~~Other are expressly qualified in their entirety by the cautionary statements above. Except as may be required by law, the Company undertakes no obligation to update any forward-looking statement or reflect events or circumstances after the date on which the forward-looking statement is made, or to reflect the occurrence (or non-occurrence) of anticipated (or unanticipated) events or circumstances.Agreements

~~Overview~~ As a condition precedent to entering into the FEI/DTE Stock Purchase Agreement, the Company was required to enter into (i) forbearance agreements with certain of its major creditors and debtors (“Certain Creditors”) (“Forbearance Agreements”), (ii) the Second Amendment to Employment Agreement with Mr. Blackstone, Vice President and Chief Accounting Officer (“Blackstone Agreement”) and (iii) the First Amendment to Employment Agreement with Mr. Novinskie, President and Chief Financial Officer (“Novinskie Agreement”).). The Forbearance Agreements provide for the Certain Creditors to agree to forbear from making a demand on the Company for payment of their debt for a period of two years from the date of the SPA. The Certain Creditors, Blackstone and/or Novinskie are entitled to receive accelerated payment of their debt should the Company, among other things, (i) have net income, (ii) sell equity securities or (iii) sell assets in excess of stated amounts (see notes 1, 6, 7 and 11 of the notes to Consolidated Financial Statements for discussions regarding the Forbearance Agreements, the Blackstone Agreement and the Novinskie Agreement).

~~This Management's Discussion and Analysis of Financial Condition~~ ~~and~~Convertible ~~Results~~Note ofPayable Operations ("MD&A") describes the matters that we consider important in understanding the results of our operations for the fiscal year ended September 30, 2012 and our financial condition as of September 30, 2012. Our fiscal year begins on October 1 and ends on September 30. Unless otherwise noted, references to ~~"year"~~Dov pertain to our fiscal year; for example, 2012 refers to fiscal 2012, which is the period from October 1, 2011 to September 30, 2012. In the discussion that follows, we analyze the results of our operations for fiscal 2012, including the trends in our overall business, followed by a discussion of our financial condition. The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto, all included elsewhere in this report.Amir

~~Results~~ On May 3, 2013, the Company paid cash of ~~Operations:~~$70,000 and issued 498,000 shares of Common Stock in full satisfaction of all amounts due Amir pursuant to the note. The Company determined the value of the cash and shares of Common Stock (at $0.17 per share) to be $154,660.

~~Selected~~ Option ~~information~~and ~~for~~Grant ~~2012~~to ~~and~~Vice ~~2011:~~President of Sales

	2012			2011
Revenues	$	670,047		$	664,111
Net Loss	$	(772,759	)	$	(1,648,258	)
Oil and Gas Production and Cost Information:
Production:
Oil (Bbl)		2,112			1,711
Gas (Mcf)		34,404			33,079
MCFE		47,076			43,345
Average price:
Oil (per barrel)	$	95.67		$	89.87
Gas (per Mcf)	$	4.98		$	6.28
Per MCFE	$	7.93		$	8.34
Lease Operating Expenses and Production and Severance Taxes per MCFE	$	4.31		$	4.10

Effective May 8, 2013, the Company granted an option for the purchase of 50,000 shares of common stock to Joseph Sverapa, Vice President of Sales, at an exercise price of $0.20 per share. The option is exercisable through May 2018. The option vests 50% in May 2014 and 25% in each of May 2015 and 2016. The fair value of the option was determined to be $8,878 using the Black-Scholes valuation model.

~~______________________________~~ On August 28, 2013, the Company entered into a Securities Exchange and Settlement Agreement (the “SESA”) with Mr. Benediktson. Pursuant to the SESA, the parties have agreed to settle all obligations between them. The Company (i) issued 2,169,400 shares of the Company’s common stock and (ii) released from escrow the 1 million shares of the Company’s common stock which were collateral for a note receivable from Mr. Benediktson. Such settlement resulted in reductions of $915,887 of accrued bonus expense due to Mr. Benediktson, $37,448 of accounts receivable due from Mr. Benediktson and the principal balance of and interest due pursuant to a certain note receivable from Mr. Benediktson ($444,559).

~~Bbl~~ Note =Payable ~~Barrels~~– ofEquipment ~~oil~~Purchase

~~Mcf~~ As =additional ~~One~~consideration ~~Thousand~~in ~~cubic~~connection ~~feet~~with the borrowing of ~~gas~~$250,000 on January 16, 2014, the Company (i) issued a warrant, exercisable through January 15, 2017, to an unrelated party for the purchase of 300,000 shares of Common Stock at an exercise price of $0.15 per share and (ii) extended the expiration date to December 31, 2016, of previously issued warrants for the purchase of 500,000 shares of Common Stock at an exercise price of $0.15 per share.

~~MCFE~~ Securities =Authorized ~~One~~for ~~Thousand~~Issuance ~~cubic~~Under ~~feet~~Equity ofCompensation ~~gas equivalent~~Plans

~~CONSULTING~~ At ~~SERVICES~~the ~~AGREEMENT~~Annual Meeting of Shareholders in June 2013, the Shareholders approved the increase in the authorized number of shares of Common Stock to be allocated to the Non-Qualified Independent Director Stock Option Plan from 800,000 shares to 1.6 million shares and to extend the term of such plan so that awards may be made through the Company’s Annual Meeting in 2016.

On February 25, 2011, the Company entered into a Consulting Services Agreement with the Musser Group, LLC (“Musser Group”) to perform consulting services for the Company through February 2013. The Company engaged the Musser Group, an independent contractor, to provide advisory and consulting services to the Company. The Musser Group is engaged to provide (i) managed services; (ii) strategic business planning and implementation; and (iii) assistance in directing and executing the implementation of any strategies approved by the Board of Directors of the Company. The Musser Group’s primary focus is the analysis and validation of market opportunities for the commercialization of products within the Company’s mineral segment. See “COMMERCIALIZATION OF EXISTING ASSETS” below.23

The following table contains information as of September 30, 2013, regarding securities authorized for issuance under equity compensation plans including the Non-~~21-~~Qualified Independent Director Stock Option Plan and individual compensation arrangements (see “Recent Sales of Unregistered Securities – Option and Warrants” below):

The Company issued 2,400,000 shares of Common Stock to individuals associated with the Musser Group in connection with the Consulting Services Agreement with the Musser Group. Also, the Company issued to individuals associated with the Musser Group warrants for the purchase of 2,500,000 shares of Common Stock at an exercise price of $0.15 per share. The warrants may not be exercised unless and until the average bid and asking closing price of the Company’s Common Stock exceeds $1.00 per share for a period of thirty consecutive trading days. The warrants are exercisable through February 24, 2016. The Company filed a registration statement under the Securities Act of 1933 on Form S-8 for the shares of Common Stock issued to individuals associated with the Musser Group. The Company determined the fair value of the shares of Common Stock and the warrants issued to individuals associated with the Musser Group to be $735,153 and recorded such amount as prepaid consulting fees. The prepaid consulting fees are being amortized over the life of the agreement.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category	(a)		(b)	(c)
Equity compensation plans approved by security holders ^{(1) (2)}	400,000	$	0.22	1,200,000
Equity compensation plans not approved by security holders	3.000,000	$	0.18	-
Total	3,400,000	$	0.19	1,200,000

OIL AND NATURAL GAS OPERATIONS

	(1)	On June 2, 2013, Lord Gilbert, a Director, passed away. On December 1, 2013, an option, previously granted to Lord Gilbert for the purchase of 200,000 shares of Common Stock under the Company’s Non-qualified Independent Director Stock Option Plan, expired unexercised.
	(2)	On November 13, 2013, Michael Carter, Stanley Porfido and Raymond Sobieski, Directors of the Company as of August 21, 2013, were each granted an option to purchase 200,000 shares of Common Stock at an exercise price of $0.14 per share under the Company’s Non-qualified Independent Director Stock Option Plan. The options are exercisable through November 2018. The options vest 50% in November 2014 and 25% in each of November 2015 and 2016. On February 10, 2014, Mr. Porfido resigned from the Board and, accordingly, the option granted to him expired effective with his resignation.

~~See~~ Options ~~Notes 3, 13~~ and ~~14 of Notes to Consolidated Financial Statements.~~Warrants

~~Oil~~ Options ~~and~~(1) ~~Gas~~to ~~Sales~~Purchase Shares of Common Stock:

Oil and Gas Sales increased to $373,443 for 2012 from $361,348 for 2011. See the table above in respect to production, average prices and lease operating expenses and production and severance taxes per MCFE. The average price per MCFE of sales of oil and gas production decreased 5% and oil and gas production (on an MCFE basis) increased 9%. The increase in total production experienced during 2012 is primarily a result of wells being brought back “on-line” (certain wells had been “off-line” during 2011 and a portion of 2012 for repair) which offset the anticipated decline in production from the wells. At September 30, 2012, two wells in Texas were off-line awaiting repairs to certain mechanical items such as tubing, rods, down-hole pumps and/or pumping units. Generally, a well is off-line for less than two months; however, rig availability from third party contractors impacts the timing of the well work.

	2013			2012
Outstanding at beginning of fiscal year		2,150,000			2,550,000
Granted		1,450,000	^(2)(3)(4)		-
Cancelled		-			-
Expired		(200,000)	⁽⁴⁾		(400,000)	⁽⁵⁾⁽⁶⁾
Exercised		-			-
Outstanding at end of fiscal year⁽⁷⁾		3,400,000			2,150,000

Gain on Sale of Oil and Gas Properties

	(1)	The Company accounts for all stock-based compensation (options) in accordance with the Financial Accounting Standard Board, or FASB, Accounting Standard Codification, or ASC, Topic 718. Under ASC 718, the fair value of stock options and compensation costs are measured as of the grant date.
	(2)	Effective March 25, 2013, the Company granted an option for the purchase of 1.2 million shares of Common Stock to Michael Parrish, Chief Executive Officer of the Company, at an exercise price of $0.14 per share. The option is exercisable through May 21, 2015 and vests 50% on each of May 21, 2013 and 2014. The fair value of the option was determined to be $119,737 using the Black-Scholes valuation model.
	(3)	Effective May 8, 2013, the Company granted an option for the purchase of 50,000 shares of Common Stock to Joseph Sverapa, Vice President of Sales, at an exercise price of $0.20 per share. The option is exercisable through May 2018. The option vests 50% in May 2014 and 25% in each of May 2015 and 2016. The fair value of the option was determined to be $8,878 using the Black-Scholes valuation model.
	(4)	Effective December 27, 2012, David A. Grady was granted an option to purchase 200,000 shares of Common Stock at an exercise price of $0.06 per share under the Company’s Non-qualified Independent Director Stock Option Plan. At the Company’s Annual Meeting of Shareholders in June 2013, Mr. Grady was not re-elected to serve as a Director; accordingly, the option expired unexercised in accordance with its terms.
	(5)	During fiscal 2007, the Company granted an option for the purchase of 200,000 shares of Common Stock to Richard W. Blackstone, an officer of the Company. The option was exercisable through October 2011, at an exercise price of $0.67 per share. The option expired unexercised during fiscal 2012.
	(6)	During fiscal 2007, David A Grady, was granted an option to purchase 200,000 shares of Common Stock at an exercise price of $0.28 per share under the Company’s Non-qualified Independent Director Stock Option Plan. The option expired during fiscal 2012.
	(7)	Options for the purchase of 2,900,000 shares of Common Stock outstanding as of September 30, 2013 are held by current officers, directors and employees of the Company (“Insiders”). The exercise prices for the options held by Insiders range from $0.14 per share to $0.22 per share (average exercise price of $0.18 per share).

On January 20, 2012, the Company entered into a purchase and sale agreement (the “PSA”) pursuant to which the Company agreed to sell certain oil and natural gas leasehold deep rights for cash of $898,335, subject to adjustment as to any title defect that is not cured within the timeframe permitted by the PSA. The sale closed on March 28, 2012. The Company received $898,335 at the closing and recognized gain in the amount of proceeds received. The oil and natural gas leasehold deep rights that were sold were undeveloped, and as such not income-producing to the Company.24

~~Well~~ Warrants ~~Management~~to ~~Revenue~~Purchase Shares of Common Stock

At September 30, 2013, warrants for the purchase of 22,744,000 shares of Common Stock at an average exercise price of $0.22 per share are outstanding.

~~Well~~ On ~~Management~~January ~~Revenue~~12, ~~increased~~2011, 1%the toRevocable ~~$287~~Trust Created by Ian B. Jacobs under Agreement dated November 25,~~446~~ ~~for~~1999 ~~2012~~(“RTCIBJ”), ~~from~~ loaned $~~285~~60,~~758~~000 ~~for~~to ~~2011~~the Company pursuant to a promissory note of same date. The ~~increase~~Company isissued ~~primarily~~warrants afor ~~result~~the purchase of ~~certain~~500,000 ~~wells~~shares ~~being~~of ~~brought~~Common ~~back~~Stock ~~“on-line”~~at asan ~~discussed~~exercise ~~above~~price of $0. ~~The~~15 ~~amounts~~per ~~which~~share. The ~~may~~warrants bewere ~~charged~~to byexpire ~~the~~on ~~Company~~December ~~for~~31, ~~well~~2015; ~~management~~however, ~~are~~as ~~set~~additional ~~forth~~consideration in connection with the ~~joint~~borrowing ~~operating~~of ~~agreements~~$250,000 ~~governing~~from ~~the wells~~Standard ~~operated~~Energy byCompany (“SECO”) on January 16, 2014, the Company extended the expiration date to December 31, 2016. The trustee of RTCIBJ is affiliated with SECO.

On February 25, 2011, the Company entered into a Consulting Services Agreement with the Musser Group (see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations – CONSULTING SERVICES AGREEMENT). In addition to certain registered securities, the Company issued to individuals associated with the Musser Group warrants for the purchase of 2,500,000 shares of Common Stock at an exercise price of $0.15 per share. The warrants may not be exercised unless and until the average bid and asking closing price of the Company’s Common Stock exceeds $1.00 per share for a period of thirty consecutive trading days. The warrants are exercisable through February 24, 2016.

~~Lease~~ On ~~Operating~~April ~~Expenses~~26, ~~and~~2011, ~~Production~~the ~~and~~Company ~~Severance Taxes~~granted a warrant for the purchase of 100,000 shares of Common Stock to an engineering consultant to the Company. The warrant is exercisable through April 25, 2016, at an exercise price of $0.22 per share.

~~Lease~~ ~~Operating~~On ~~Expenses~~March ~~and~~25, ~~Production~~2013, ~~and~~in ~~Severance~~connection ~~Taxes~~with ~~Tax~~the ~~per~~FEI/DTE ~~MCFE~~Stock Purchase Agreement, the Company issued warrants for ~~2012~~the ~~increased~~purchase ~~14%~~of ~~from~~up ~~2011~~to 18 million shares of Common Stock. ~~Lease~~The ~~Operating~~FEI/DTE ~~Expenses~~Warrants ~~and Production~~have a term of five (5) years and ~~Severance~~may ~~Tax~~be ~~totaled~~exercised ~~$202,905~~at ~~for~~a ~~2012~~price ~~and~~of $~~177,631~~0.20 ~~for~~per ~~2011~~share. ~~The increase~~In ~~experienced~~the ~~during~~third ~~2012~~through isfifth ~~primarily~~years ~~a result~~ of ~~costs~~such ~~($41~~term,~~919)~~ ~~incurred~~the toexercise ~~restore~~price ~~production~~may ~~from~~be ~~certain~~satisfied ~~wells~~by ~~as discussed~~exchanging ~~above~~Common Stock at the current market price. The FEI/DTE Warrants may be exercised in whole or in part at any time during such term.

~~Depreciation~~ In connection with the 2013 Private Placement through September 30, ~~Depletion~~2013, ~~and~~the ~~Amortization~~Company -has ~~Oil~~issued ~~and~~warrants ~~Gas~~for the purchase of 1,644,000 million shares of Common Stock at an exercise price of $0.50 per share. The warrants expire on January 16, 2018.

~~Depreciation, depletion and amortization (“DD&A”)~~ –Issuer ~~Oil~~Purchases ~~and Gas totaled $60,000 for 2012 and $99,344 for 2011. This 40% decrease is primarily the result~~ of ~~the~~Equity ~~upward revision of proved developed reserves at the end of 2011 resulting primarily from the increase in oil and gas prices which the Company receives for its oil and gas production.~~Securities

~~-22-~~ The Company does not have a stock purchase program for its equity securities.

~~MINERALS~~ Item ~~OPERATIONS~~6. Selected Financial Data.

~~See~~ Not ~~Note~~required 4as ofthe ~~Notes~~registrant tois ~~Consolidated~~a ~~Financial~~smaller ~~Statements~~reporting company.

~~The Company is an Exploration Stage company in respect to its mineral holdings.~~25

~~Minerals~~ Item ~~Sales~~7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Minerals sales decreased 46% to $5,626 for 2012 from $10,374~~ ~~for~~Forward ~~2011.~~Looking ~~This decrease in mineral sales primarily resulted from no shipments of zeolite being made during 2012 in respect to the feed supplements.~~Statements

~~Minerals~~ The ~~Exploration~~forward-looking ~~Expenses~~statements in this section and other parts of this report involve risks and uncertainties including statements regarding our plans, objectives, goals, strategies, and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of various factors. See the “CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS” contained on page 3 of this Annual Report on Form 10-K.

~~The~~ ~~Company~~All ~~did~~forward-looking ~~not~~statements ~~incur~~speak ~~Minerals~~only ~~Exploration~~as ~~Expenses~~of ~~during~~the ~~2012~~date ~~and 2011~~made. ~~Minerals~~All ~~Exploration~~subsequent ~~Expenses~~forward-looking statements are ~~primarily~~expressly ~~for~~qualified ~~costs associated~~in ~~with~~their entirety by the ~~exploration~~cautionary ofstatements ~~the~~above. ~~mineral~~Except ~~deposits~~as ~~and~~may ~~quantification~~be ofrequired ~~Mineralized~~by ~~Materials.~~law, ~~These expenses~~the ~~are~~Company ~~primarily~~undertakes ~~for~~no ~~costs~~obligation ~~associated~~to ~~with~~update ~~the~~any ~~exploration~~forward-looking ~~and~~statement ~~quantification~~or ofreflect ~~mineral~~events ~~resources~~or ~~and~~circumstances ~~mineral~~after ~~reserves. Such~~the ~~expenses~~date ~~related~~on towhich the ~~kaolin~~forward-looking ~~reserves~~statement ~~were~~is made, or to reflect the ~~responsibility~~occurrence (or non-occurrence) of ~~the~~anticipated ~~Company’s~~(or ~~partner~~unanticipated) events or circumstances.

~~Minerals Operating Expenses and Other Costs~~ Overview

~~Minerals~~ ~~operating~~This ~~expenses~~Management's Discussion and ~~other~~Analysis ~~costs~~of ~~decreased~~Financial toCondition ~~$19,121~~and ~~for~~Results ~~2012~~of asOperations ~~compared~~("MD&A") todescribes ~~$48,873 for 2011. During 2012 and 2011,~~ the ~~Company paid~~matters ~~$6,160~~that ~~and~~we ~~$1,380,~~consider ~~respectively,~~important toin understanding the ~~Bureau~~results of ~~Land~~our ~~Management~~operations ~~(“BLM”)~~for tothe ~~maintain~~fiscal ~~its~~year ~~federal~~ended ~~mining~~September ~~claims in~~30, ~~Utah~~2013 and ~~such~~our ~~increase~~financial ~~was~~condition ~~the~~as ~~result~~ of ~~the~~September ~~revised~~30, ~~method~~2013. byOur ~~which~~fiscal ~~the~~year ~~BLM~~begins ~~re-calculated~~on ~~the~~October ~~annual~~1 ~~mineral~~and ~~rights~~ends ~~maintenance fee~~on ~~nationwide~~September 30. ~~The~~Unless ~~2011~~otherwise ~~amount includes $20~~noted,~~691~~ ofreferences ~~expense~~to ~~relating~~"year" pertain to ~~the~~our ~~fair~~fiscal ~~value~~year; offor aexample, ~~warrant~~2013 ~~granted~~refers to anfiscal ~~engineering~~2013, ~~consultant for~~which is the ~~purchase~~period offrom ~~100~~October 1,~~000~~ ~~shares~~2012 ofto ~~Common~~September ~~Stock~~30, to2013. In the ~~Company~~discussion asthat ~~discussed~~follows, inwe analyze the ~~notes~~results toof ~~consolidated~~our ~~financial~~operations ~~statements. Tecumseh~~for ~~Professional~~fiscal ~~Associates~~2013, ~~Inc.~~including ~~(“TPA”) paid $20,160 to~~ the ~~BLM~~trends in ~~2012~~our tooverall ~~maintain~~business, ~~CAPI’s~~followed ~~Federal~~by ~~mineral~~a ~~claims~~discussion inof ~~New~~our ~~Mexico~~financial condition. ~~Such~~The ~~payment~~following bydiscussion ~~TPA~~should ~~was~~be read in ~~accordance~~conjunction with ~~the provisions~~our ofconsolidated ~~the~~financial ~~Restated~~statements ~~Development~~ and ~~Operating~~the ~~Agreement~~notes ~~(see~~thereto, ~~Exhibit~~all ~~10.17)~~included ~~with~~elsewhere ~~the~~in ~~Company~~this report.

~~DD&A~~ Results of Operations - ~~Minerals~~Selected information for 2013 and 2012:

DD&A - Minerals totaled $253,612 for 2012 and $591,084 for 2011. Such amounts represent amortization of Patent Rights and Patent License Rights. The Company’s patent expired in February 2012. Once the Company produces commercial quantities of any of its mineral deposits, the Company will use the unit-of-production method in calculating cost depletion.

	2013		2012
Oil and gas sales	$	404,225	$	373,443
Well management revenues	$	262,813	$	287,446
Total operating revenues	$	679,489	$	670,047
Impairment of prepaid mineral royalties	$	(539,237)	$	-
Gain on sale of oil and gas properties	$	-	$	898,335
Gain on debt forgiveness	$	112,330	$	43,655
Impairment of interest receivable on subscriptions receivable	$	-	$	(207,025)
Net Loss	$	(2,024,509)	$	(772,759)
Oil and Gas Production and Cost Information:
Production:
Oil (Bbl)		2,575		2,112
Gas (Mcf)		34,180		34,404
MCFE		49,630		47,076
Average price:
Oil (per barrel)	$	95.58	$	95.67
Gas (per Mcf)	$	4.63	$	4.98
Per Mcfe	$	8.14	$	7.93
Lease Operating Expenses and Production and Severance Taxes per Mcfe	$	5.23	$	4.31

~~DD&A~~Bbl -= ~~OTHER~~Barrels of oil Mcf = One Thousand cubic feet of gas Mcfe = One Thousand cubic feet of gas equivalent

~~DD&A - Other totaled $5,228 for 2011. The related assets~~ ~~were fully depreciated as of the end of 2011.~~ 26

~~GENERAL~~ FEI/DTE ~~AND~~STOCK ~~ADMINISTRATIVE EXPENSES~~PURCHASE AGREEMENT

~~These~~ On ~~expenses~~March ~~increased~~25, ~~28%~~2013, tothe ~~$1,318,177~~Company ~~for~~finalized ~~2012~~a asStock ~~compared to~~Purchase $1Agreement (“SPA”) with Far East Investments,~~032~~ LLC,~~080~~ ~~for~~a ~~2011.~~California ~~The~~limited ~~Company~~liability ~~recorded~~company ~~stock-based~~(“FEI”) ~~compensation~~and ~~expense~~DTE ofInvestment ~~$97~~Ltd.,~~326~~ a British Virgin Island company (“DTE”) (hereinafter FEI and ~~$101,906~~DTE ~~for~~are ~~2012~~sometimes collectively referred to as the “Investors” and ~~2011,~~individually ~~respectively~~as an “Investor”). The Investors paid the Company ~~recorded~~$1.5 ~~amortization~~million ~~expense~~for 15 million shares of ~~$366~~the Company’s common stock,~~575~~ ~~and~~par value $~~217,341~~.01 in(“Common ~~2012~~Stock”) and ~~2011,~~warrants ~~respectively,~~for ~~related~~the purchase of up to ~~the~~a ~~consulting~~total ~~services agreement~~of ~~fees~~18 ~~paid~~million toshares ~~individuals~~of ~~associated~~Common ~~with~~Stock to the ~~Musser~~Investors ~~Group~~(“FEI/DTE inWarrants”). ~~2011~~The ~~(see~~FEI/DTE ~~CONSULTING~~Warrants ~~SERVICES~~have ~~AGREEMENT~~a ~~discussion~~term ~~above~~of five (5)~~. Also,~~ ~~during~~years ~~2012,~~(“Term”) ~~the~~and ~~Company~~may ~~incurred~~be aexercised ~~compensation~~at ~~expense~~a price of $~~87,500~~0.20 inper ~~connection~~share ~~with~~(“Exercise Price”). In the ~~employment~~third through fifth years of athe ~~new~~Term, ~~CEO~~the inExercise ~~May 2012.~~Price ~~See~~may be satisfied by exchanging Common Stock at the ~~notes~~current tomarket ~~financial~~price. ~~statements~~The ~~for~~FEI/DTE ~~additional~~Warrants ~~information~~may be exercised in ~~respect~~whole toor ~~employment~~in ~~agreements,~~part ~~stock-based~~at ~~compensation expense~~any ~~and~~time ~~prepaid~~during ~~consulting~~the ~~services~~Term. ~~agreement~~See ~~fees~~Note 9.

~~INTEREST~~ Under ~~EXPENSE~~the SPA for so long as the Investors retain 51% or more of the Common Stock issued under the SPA (7,650,000 shares), the Investors are entitled to request that the Company nominate for election, by the shareholders of the Company at the Company’s annual meeting of shareholders, two persons suitable to serve as directors of the Company.

~~Interest~~ A ~~expense~~provision ~~decreased~~of ~~17%~~the toAgreement ~~$313,371~~requires ~~for~~that ~~2012~~the asCompany ~~compared to~~shall ~~$379,690~~not ~~for~~make ~~2011.~~any ~~The~~public ~~decrease~~announcement ofor ~~$66,319~~statement isconcerning ~~primarily~~the ~~attributable~~Agreement other than that which the Company is required to ~~(1)~~disclose ~~interest~~on ~~expense~~Form ~~recognized~~8-K asand aother ~~result~~required offilings ~~debt~~ with the Securities and ~~vendor~~Exchange ~~settlements~~Commission. ofThe ~~$28~~Company,~~733~~ inconsistent ~~2011~~with ~~and~~its ~~(2)~~obligations ~~interest~~under ~~expense~~the ofsecurities ~~$37~~laws,~~207~~ ~~related~~is required to ~~certain~~seek ~~defaulted~~confidential ~~debt~~treatment ~~payments~~of ~~recognized~~ the information set forth in ~~2011~~the Annex and Exhibits to the SPA.

~~-23-~~ OIL AND NATURAL GAS OPERATIONS

~~IMPAIRMENT~~ See OFNotes ~~SUBSCRIPTIONS~~3, ~~RECEIVABLE~~13 ~~AND~~and ~~INTEREST~~14 ~~RECEIVABLE~~of Notes to Consolidated Financial Statements.

~~As of September 30, 2012, management of the Company believes~~ ~~that~~Oil ~~the collection of the principal balance of~~ and ~~interest~~Gas due pursuant to certain notes receivable is in doubt (see Note 11 of the Notes to Consolidated Financial Statements). The Company changed to the recovery method in accounting for the notes receivable and interest thereon. Accordingly, the principal and interest will be recorded when, and if, collected. This change to the recovery method resulted in the recognition of $207,025 as an impairment of the interest receivable at September 30, 2012.Sales

~~PROVISION~~ Oil ~~FOR~~and ~~DOUBTFUL~~gas ~~ACCOUNT~~sales –increased ~~PROCEEDS~~to ~~RECEIVABLE FROM~~$404,225 ~~PRIOR~~for ~~SALE~~2013 OFfrom ~~OIL~~$373,443 ~~AND~~for ~~GAS~~2012. ~~PROPERTIES~~See the table above in respect to production, average prices and lease operating expenses and production and severance taxes per Mcfe. The average price per Mcfe of sales of oil and gas production increased 3% and oil and gas production (on a Mcfe basis) increased 5%. The increase in total production experienced during 2013 is primarily a result of wells being brought back “on-line” (certain wells had been “off-line” during 2012 and a portion of 2013 for repair) which offset the anticipated decline in production from the wells and the Company purchasing working interests in certain wells during the fourth quarter of 2012. At September 30, 2013, two wells in Texas were off-line awaiting repairs to certain mechanical items such as tubing, rods, down-hole pumps and/or pumping units. Generally, a well is off-line for less than two months; however, rig availability from third party contractors impacts the timing of the well work.

As In of September 302013, ~~2012~~WRC received an enforcement action from the Texas Railroad Commission (“RRC”). Due to the enforcement action, ~~management~~the renewal of WRC’s operator's permit was suspended until such action is resolved. Certain of WRC’s operated wells continue to pump and oil is stored oil in production tanks. Certain of WRC’s operated wells are not producing as the respective production tanks have reached their capacity limitations. WRC is not permitted to sell oil until its operator’s permit is renewed. As such, the Company's ~~believes that~~consolidated revenues for the ~~collection~~first quarter of a2014 ~~portion~~will be significantly lower than the first quarter of a2013. ~~$50~~Depending on the timing of the resolution of the renewal of such permit,~~000~~ ~~receivable~~the ~~relating~~Company's consolidated revenues for the second quarter of 2014 may also be higher or lower than the second quarter of 2013. Management of the company anticipates the renewal of the operator’s permit to be completed during the ~~sale~~second quarter of ~~certain~~2014; ~~oil~~however there can be no assurances as to when the renewal of WRC’s operator’s permit will be approved by the RRC and ~~gas~~when the sales of oil from WRC’s operated properties ~~during~~will ~~2008~~resume. is WRC’s operated properties in ~~doubt~~Texas produced 362 net barrels of oil but WRC had no oil sales from such properties. ~~Accordingly,~~During the ~~Company~~first ~~recognized~~quarter aof ~~provision~~2013, ~~for~~WRC’s ~~doubtful~~operated ~~account~~properties in Texas produced 493 net barrels of oil, WRC sold 574 net barrels of oil from such properties and WRC recognized oil revenue of $2553,~~000~~094 ~~during~~from ~~2012~~such properties.

~~Gain~~ Gain on ~~debt~~Sale ~~forgiveness~~of Oil and Gas Properties

~~During~~ On January 20, 2012, the Company ~~recognized~~entered ~~gain~~into ona ~~debt~~purchase ~~forgiveness~~ and sale agreement pursuant to which the Company agreed to sell certain oil and natural gas leasehold deep rights for cash of $43898,~~655~~335, subject to adjustment as ~~discussed~~to any title defect that is not cured within the timeframe permitted by the purchase and sale agreement. The sale closed on March 28, 2012. The Company received $898,335 at the closing and recognized gain in ~~Note~~the 6amount of ~~the~~proceeds ~~Notes~~received. toThe ~~Consolidated~~oil ~~Financial~~and ~~Statements~~natural gas leasehold deep rights that were sold were undeveloped, and as such not income-producing to the Company.

~~Liquidity~~ Well ~~and~~Management ~~Capital Resources~~Revenue

~~The~~ Well ~~Company’s~~management ~~cash~~revenue ~~flow~~decreased ~~used~~9% ~~for~~to ~~operating activities was~~ $~~531~~262,~~108~~813 for ~~2012~~2013 ~~and~~from $~~122~~287,~~366~~446 for ~~2011~~2012. ~~Accounts~~The ~~payable~~decrease ~~and~~is ~~revenue~~primarily ~~payable~~the ~~decreased~~result ~~$297,422~~of ~~during~~the ~~fiscal~~Company ~~2012.~~purchasing ~~Funds have~~working ~~been~~interests ~~and are being deployed~~ in ~~efforts~~certain towells ~~enhance~~during the ~~commercial~~fourth ~~viability~~quarter of ~~the~~2012. ~~Company’s~~The ~~existing~~amounts ~~resource~~which ~~assets, to~~may ~~identify~~be ~~potential~~charged ~~expansion~~by ~~opportunities and to retire obligations associated with~~ the Company’s ~~assets.~~for ~~The~~well ~~Company’s net~~management ~~cash~~are atset ~~September~~forth ~~30,~~in ~~2012~~the ~~totaled~~joint ~~$190,738.~~operating ~~See~~agreements ~~“Sale~~governing ofthe ~~Oil~~wells ~~and~~operated ~~Gas~~by ~~Property~~the ~~Leasehold Deep Rights” below~~Company.

~~See Note 9 of the Notes to Consolidated Financial Statements~~ ~~regarding~~Lease ~~the~~Operating ~~cumulative~~Expenses ~~dividends~~and inProduction ~~arrears~~and ofSeverance ~~$1,934,239 at September 30, 2012, applicable to the Series B 8% Cumulative Convertible Preferred Stock.~~Taxes

As Lease ofOperating ~~September~~Expenses ~~30,~~and ~~2012,~~Production ~~the~~and ~~Company~~Severance ~~and~~Taxes ~~certain~~for of2013 ~~its~~increased ~~subsidiaries were~~28% infrom ~~default~~2012. ofLease ~~various~~Operating ~~obligations~~Expenses and ~~certain~~Production ~~debt~~and ~~obligations~~Severance ~~(see~~Tax ~~Notes~~totaled 1$259,683 6for 2013 and $202,905 7for 2012. Expenses incurred to restore production from certain wells as discussed above totaled $50,330 9and $41,919 10for 2013 and 112012, respectively. The balance of the ~~Notes~~increase toexperienced ~~Consolidated Financial~~during ~~Statements).~~2013 ~~Such~~is ~~defaulted~~primarily ~~obligations~~a atresult ~~September~~of ~~30,~~the ~~2012~~Company ~~include~~purchasing working interests in certain wells during the ~~following:~~fourth quarter of 2012.

Amounts included in accounts payable:
Consulting Fees and Interest due to Patent Licensor (see Note 5)	$	42,009
Blackstone Consulting Services (see Notes 7 and 11)		187,403
EV&T – fees and expenses (see Note 6)		271,791
Accrued salary expense (see Note 7 and 11)		690,798
Accrued Expense Reimbursements (see Note 7)		19,051
EV&T note payable and accrued interest (see Note 6)		1,066,978
CAMI notes payable and accrued interest (see Note 6)		941,450
7.25% Convertible Debentures and accrued interest (see Notes 6 and 7)		52,913
Notes Payable – Related Parties and accrued interest (see Note 7)		98,934
Total	$	3,371,327

	27

~~The majority of the above amounts are owed to related parties.~~ ~~Such~~Depreciation, ~~related~~Depletion ~~parties~~ and ~~EV&T~~Amortization ~~are~~- ~~working~~Oil ~~with~~and ~~the Company to achieve the ultimate extinguishment of the obligations as the Company attempts to achieve profitability within its mineral segment.~~Gas

~~During March 2012~~ Depreciation, ~~the~~depletion ~~Board~~and ofamortization ~~Directors of the Company~~ (“~~Board’~~DD&A”) ~~created~~ a– ~~sub-committee~~Oil ofand ~~the~~Gas ~~Board~~totaled ~~with~~$48,000 ~~oversight~~for ~~responsibilities~~2013 ~~in respect to the approval~~ and ~~administration~~$60,000 offor ~~the~~2012. ~~Company’s disbursement~~This ~~activities~~20% indecrease ~~light~~is ofprimarily the ~~proceeds~~result ~~from~~of the ~~sale~~upward revision of ~~certain~~proved ~~oil~~developed ~~and~~reserves ~~gas~~at ~~properties (~~the ~~“Sub-committee”). The~~end ~~Sub-committee was composed~~ of ~~three~~2012 ~~Directors~~resulting ~~(Messrs.~~primarily ~~Gilbert,~~from ~~Grady and Maxwell) with Mr. Blackstone (Vice President and Chief Accounting Officer) reporting to~~ the ~~Sub-committee~~increase in ~~respect~~estimated tofuture ~~such~~production ~~matters.~~from ~~Such~~certain ~~Sub-committee’s~~wells ~~activities~~being ~~and oversight~~brought ~~were~~back ~~substantially~~“on-line” ~~concluded~~during ~~by the end of May~~ 2012.

~~-24-~~ MINERALS OPERATIONS

~~To obtain capital in the past, the Company’s capital obtainment~~ ~~methods~~See ~~have~~Note ~~included~~4 ~~selling~~of ~~its~~Notes ~~interest in certain oil and gas properties, and borrowing funds from and issuing Common Stock~~ to ~~related~~Consolidated ~~and~~Financial ~~unrelated parties, as well as utilizing joint venture structures~~Statements. If the Company is not successful in increasing its operating cash flows and the preceding financing methods are not available, the Company may not be able to sustain its operations and may need to seek alternative actions to preserve shareholder value.

~~Liquidity is a measure of a Company’s ability to access~~ ~~cash.~~ The Company ~~has~~is ~~historically~~in ~~addressed its long-term liquidity requirements through~~ the ~~issuance~~Development ofStage ~~equity~~in ~~securities~~respect ~~and borrowings~~to ~~or debt financing for certain activities. The Company estimates~~ its ~~capital~~Texas ~~needs~~Zeolite ~~to approximate $1 million for fiscal 2013~~ and ~~approximately~~is $4in ~~million over~~ the ~~next~~Exploration ~~two~~Stage ~~years~~in respect to ~~satisfy~~its ~~debt~~Sierra ~~payments~~Kaolin tomineral ~~unrelated~~holdings ~~parties,~~in ~~pay~~New ~~current~~Mexico ~~operating costs~~ and ~~expenses,~~its ~~and~~zeolite tomineral ~~fund~~holdings ~~the~~in ~~Company’s growth initiatives~~Utah. ~~The Company believes the related parties will continue working with the Company to achieve the ultimate extinguishment of obligations due such parties.~~

~~At present, the Company does not have in place a credit facility~~ orMinerals other line of credit upon which it may draw. As operating activities increase, the Company will evaluate the need for such a credit facility. For desired acquisitions or project enhancements, the Company must seek project specific financing. See Note 4 of the Notes to Consolidated Financial Statements regarding ZeoSure LLC. None of the Company’s properties are encumbered.Sales

~~The prices the Company receives for its oil and gas and the~~ ~~level~~Minerals ofsales ~~production~~(zeolite) ~~have~~increased a36% ~~significant impact on the Company’s cash flows. The Company is unable~~ to ~~predict~~$7,652 ~~with~~for ~~any~~2013 ~~degree of~~from ~~certainty~~$5,626 ~~the~~for ~~prices~~2012. ~~the~~This ~~Company~~increase ~~will~~in ~~receive~~mineral ~~for~~sales ~~its~~primarily ~~future~~resulted ~~oil~~from ~~and~~initial ~~gas~~shipments ~~production and the success~~ of ~~the~~product ~~Company’s~~generated ~~exploration, exploitation~~by ~~and production activities. Increases in~~ the increased sales efforts of the Company’s ~~minerals,~~(see ~~which~~“COMMERCIALIZATION toOF ~~date~~EXISTING ~~have~~ASSETS” ~~not been mined in substantial commercial quantities, will also affect cash flow~~below).

~~In an effort to address the liquidity shortfall, the Company~~ ~~continues~~Minerals ~~its~~Exploration cost containment procedures which had included staff decreases, sold certain of its oil and gas properties, and is evaluating the sale of certain additional oil and gas properties. It may take months and possibly longer to sell these properties at a suitable price. The market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand that are beyond our control. We cannot predict whether we will be able to sell a property for the price or on terms acceptable to us or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of any property.Expenses

In The ~~November~~Company ~~2010,~~did not incur minerals exploration expenses during 2013 and 2012. Minerals exploration expenses are primarily for costs associated with the ~~Company~~exploration ~~issued~~of ~~357,677~~the ~~shares~~mineral deposits and quantification of ~~its~~Mineralized ~~Common Stock~~Materials. ~~(consideration~~These toexpenses are primarily for costs associated with the ~~vendor~~exploration and quantification of ~~$42,921)~~mineral inresources ~~partial~~and ~~payment~~mineral ofreserves. aSuch ~~delinquent~~expenses ~~payable~~related ~~due~~to athe ~~vendor~~Sierra Kaolin property were the responsibility of athe ~~subsidiary~~operator of the ~~Company~~property, Tecumseh Professional Associates, Inc.

~~During 2011, the Company issued Debentures (see Note 6 of Notes~~ toMinerals ~~Consolidated~~Operating ~~Financial~~Expenses ~~Statements) totaling $64,000. The purchasers of $49,000 of such Debentures elected to immediately convert such holdings into Common Stock~~ and ~~the~~Other ~~Company issued 350,000 shares of Common Stock at an average conversion price of $0.14 per share. The Company closed the offering period for the Debentures in January 2012.~~Costs

On Minerals ~~January~~operating ~~12,~~expenses ~~2011,~~and another ~~unrelated~~costs ~~party~~increased ~~loaned~~57% ~~the~~to ~~Company~~$30,083 for 2013 from $6019,~~000~~121 for 2012. The ~~note,~~increase ~~which~~primarily ~~was~~resulted ~~satisfied~~from inresearch ~~March~~and ~~2012~~development expenditures of $7,956 ~~required~~in ~~monthly~~2013 ~~payments~~as compared to no such expenditures in 2012. During each of ~~principal~~2013 and ~~interest.~~2012, ~~The~~the Company ~~used~~paid $6,160 to the ~~proceeds~~ Bureau of Land Management (“BLM”) to ~~satisfy~~maintain ~~certain~~its ~~delinquent~~federal ~~payables.~~mining Inclaims ~~connection~~in ~~with~~Utah. ~~this~~Tecumseh ~~loan~~Professional Associates, ~~the~~Inc. ~~Company~~(“TPA”) ~~issued~~paid ~~warrants~~$20,160 ~~for~~to the ~~purchase~~BLM ofin ~~500,000~~each ~~shares~~ of ~~Common~~2013 ~~Stock~~and at2012 ato ~~purchase~~maintain ~~price~~CAPI’s ofFederal ~~$0.15~~mineral ~~per~~claims ~~share~~in New Mexico. ~~The~~Such ~~warrants~~payment ~~expire~~by onTPA ~~December~~was ~~31,~~in ~~2015~~accordance with the provisions of the Restated Development and Operating Agreement with the Company.

~~During July 2011, the Company entered into a Settlement Agreement~~ with Dov Amir (“Amir”), a former director of the Company, whereby, among other provisions, (a) the Company issued 419,292 shares of Common Stock ($0.25 per share) in payment of a portion of amounts due to Amir on a note payable ($45,485) and Series DD&A ~~Preferred~~- Stock Dividends ($59,338); (b) the option granted to Amir in December 2009 to purchase 500,000 shares of Common Stock became fully vested; (c) certain assets of Amir shall remain pledged as collateral for the Company’s note payable to First Citizens Bank; and (d) the Company entered into a note payable to Amir for the balance of all amounts due Amir ($391,154). The note matures on December 31, 2015 with interest at 4% per annum, compounded annually. The note does not require any interim payments by the Company. Further, Amir was granted the right to convert any and all amounts due him under the note into shares of Common Stock at a conversion price of $0.25 per share. During the third quarter of 2012, the Company made a payment on the note as discussed in Note 6 of the Notes to Consolidated Financial Statements.Minerals

DD&A -~~25-~~ minerals totaled $4,556 for 2013 and $253,612 for 2012. Such amounts represent amortization of Patent Rights and Patent License Rights. The Company’s patent expired in February 2012.

~~On January 20, 2012, the Company entered into a purchase and~~ ~~sale~~Once ~~agreement (~~the ~~“PSA”) pursuant to which the~~ Company ~~agreed~~produces tocommercial ~~sell~~quantities ~~certain oil and natural gas leasehold deep rights for cash~~ of ~~$898,335, subject to adjustment as to~~ any ~~title~~of ~~defect~~its ~~that~~mineral isdeposits, ~~not cured within~~ the ~~timeframe permitted by the PSA. The sale closed on March 28, 2012. The~~ Company ~~received~~will ~~$898,335~~use at the ~~closing and recognized gain in the amount~~ unit-of ~~proceeds received. The oil and natural gas leasehold deep rights that were sold were undeveloped, and as such not income~~-~~producing~~production tomethod ~~the Company.~~in ~~See~~calculating ~~Note~~cost ~~3 of the Notes to Consolidated Financial Statements~~depletion. ~~The Company used the proceeds for general working capital purposes.~~

~~During April 2012, the Company paid $50,000 in cash and issued~~ ofImpairment ~~158,290 shares~~ of ~~Common~~Prepaid ~~Stock~~Mineral ~~in full satisfaction of a note due an affiliate of Carl A. Haessler, a Director, as discussed in Note 6 of the Notes to Consolidated Financial Statements.~~Royalties

~~During~~ As ~~May~~part ~~2012,~~of ~~Carl~~our ~~Haessler,~~annual aimpairment ~~Director,~~test ~~elected~~as toof ~~convert 10~~September 30,~~000~~ ~~shares~~2013, ofand ~~Series~~in Bconnection 8%with ~~Cumulative~~the ~~Convertible~~Company ~~Preferred~~entering ~~Stock~~the ~~into~~production ~~80,000~~phase ~~shares~~ of ~~Common~~its ~~Stock~~Texas atZeolite minerals in the ~~conversion~~fourth ~~rate~~quarter of ~~$1.25~~ ~~per~~2013, ~~share~~we assessed the estimated future benefit of ~~Common~~the ~~Stock.~~royalty ~~Also,~~advances Mrpaid. This ~~Haessler~~assessment ~~accepted~~was ~~73,854~~based ~~shares~~on ofthe ~~Common~~expected ~~Stock~~production asfrom ~~satisfaction~~the ~~for~~mineral ~~any~~properties. Although ~~and~~we ~~all~~are ~~dividends due~~optimistic ~~him~~about ~~($92,318~~the future cash flow of ~~which~~our ~~$88~~mineral properties,~~319~~ ~~were~~the ~~accrued)~~future inresults ~~respect~~from toour ~~his~~sales ~~direct~~efforts ~~holdings~~and ofmarket 30growth cannot be assured. Based upon this information,~~000~~ ~~shares~~we ofhave ~~Series~~determined Bthat 8%we ~~Cumulative~~are ~~Convertible Preferred~~uncertain ~~Stock~~when ~~through~~we ~~the~~will ~~date~~be ofable to realize the ~~conversion~~prepaid ofmineral ~~10,000~~royalties ofand ~~such~~that ~~shares.~~these ~~See~~assets ~~Note~~may 7not ofbe ~~the~~recoverable ~~Notes~~through tofuture ~~Consolidated~~operations; ~~Financial Statements~~therefore, we recognized an impairment expense of $539,237 in 2013.

~~On August 23, 2012, the Company, entered into an agreement with~~ ~~Michael~~GENERAL D.AND ~~Parrish~~ADMINISTRATIVE to become the Chief Executive Officer and a director of the Board of Directors of the Company. The initial term of Mr. Parrish’s employment was effective as of May 18, 2012. See Note 11 of Notes to Consolidated Financial Statements.EXPENSES

~~Commercialization~~ ofThese ~~Existing~~expenses ~~Assets~~increased 27% to $1,672,371 for 2013 as compared to $1,318,177 for 2012.

The Company ~~has~~incurred ~~identified~~compensation ~~fifteen~~expense ~~(15)~~of ~~potential~~$284,500 ~~development~~ and ~~redevelopment~~$87,500 ~~opportunities~~during ~~associated~~2013 ~~with~~and ~~its~~2012, ~~existing~~respectively, ~~leasehold acreage~~ in ~~Texas.~~connection ~~The~~with ~~Company believes that~~ the ~~potential for~~employment ~~the development~~ of ~~such locations will occur within the next few years as~~ a ~~result~~new ofCEO ~~renewed interest~~ in ~~the~~May ~~area of its properties~~2012. ~~The~~ On ~~prevailing~~April ~~oil price and the development of properties in “resource plays” in the area of the Company’s acreage are major factors contributing to such interest. At September 30~~22, ~~2011 and 2012~~2013, the Company ~~has~~employed ~~assigned probable and possible reserves to the fifteen (15) potential developmental locations. The Company is actively seeking financing of approximately $2.5 million for~~ its ~~share~~Vice ofPresident ~~the estimated drilling and completion costs~~ of ~~such development opportunities~~Sales. ToDuring ~~obtain the capital necessary to develop these~~2013, the Company ~~(1)~~incurred ~~continues~~expenses, toincluding ~~seek~~salary, ~~project~~of ~~specific~~$76,270 ~~funding~~in ~~commitments~~connection ~~and~~with ~~other~~its ~~capital~~increased ~~funding~~marketing ~~alternatives and~~activities ~~(2)~~relating isto ~~evaluating~~its ~~the sale of certain oil and gas producing properties~~zeolite.

~~The Company continues to pursue plans to commercialize its kaolin~~ and zeolite projects which are critical for the Company to achieve profitability and establish the Company as a market innovator in industrial minerals. Those plans have progressed from the data acquisition and analysis phase into ongoing mineral processing and facility design phase. The Company ~~and~~recorded ~~its current partner and potential other partners are actively investigating various commercial applications for its mineral~~ stock-based ~~products.~~compensation ~~The~~expense ~~Company~~of ~~continues~~$148,109 ~~to focus on establishing business~~ and or$97,326 ~~financial relationships~~for ~~that~~2013 ~~will provide the necessary capital to effectively exploit its kaolin~~ and ~~zeolite~~2012, ~~mineral resource holdings~~respectively.

~~Zeolite~~ In connection with the SPA, the Company entered into an Exclusive Sales Agency and Marketing Agreement with FEI (“FEI Marketing Agreement”). The FEI Marketing Agreement grants to FEI the right to act as the Company’s exclusive marketing and sales agent for natural resources products produced, mined and/or sold by the Company, excluding the Company’s ZeoSure products, in Asia excluding the nation of India. From April through September 2013, in connection with the FEI Marketing Agreement, the Company paid $60,000 to Far East Investments (USA) LLC, an affiliate of FEI. Through September 30, 2013, no sales transactions relating to the Marketing Agreement had occurred.

In respect to sanitary wastewater treatment applications, the Company continues to supply material for use in a sequential batch reactor facility located in Pennsylvania and the Company has provided material for a confirmation test of the use of its ReNuGen(TM) product in an alternate design treatment plant. Certain small scale tests have progressed to the point where larger scalable pilot tests of commercial applications for zeolite are in progress in respect to soil additives, animal waste treatment and treatment of industrial wastewaters.28

In The ~~October, 2009, the~~ Company ~~entered~~recorded ~~into~~amortization anexpense ~~agreement~~of to$151,237 ~~sell zeolite~~and to$366,575 ~~be used~~ in ~~certain~~2013 ~~agricultural~~and ~~applications~~2012, ~~limited~~respectively, related to ~~feed~~the ~~supplements~~consulting inservices aagreement ~~ten~~fees ~~state~~paid ~~area~~to inindividuals ~~the~~associated ~~south-central~~with ~~part of~~ the ~~US.~~Musser ~~The~~Group ~~Company~~in ~~has made limited shipments since fiscal 2010~~2011. The Company ~~made~~recorded noamortization ~~shipments~~expense ~~during fiscal 2012. The development~~ of ~~this~~$35,441 ~~market~~and ~~has~~consulting ~~been~~fee ~~hampered~~expense ~~as a result~~ of ~~economic~~$30,000 ~~and~~in ~~environmental~~2013 ~~factors~~related ~~affecting~~to the ~~purchaser.~~investor ~~During~~relations ~~August~~firm ~~2012, the~~consulting ~~Company~~services ~~gave~~agreement. ~~notice~~The toCompany ~~the~~incurred ~~purchaser~~additional tolegal ~~terminate~~expense ~~the~~of ~~agreement~~$30,000 in ~~October~~2013 ~~2012~~related ~~pursuant~~ to ~~the~~a ~~notice~~legal ~~provision~~services ~~provided in the~~ agreement. ~~The~~with ~~Company intends to seek alternatives for~~ the ~~sale~~Secretary of ~~its~~the ~~zeolite~~Company. toSee be“CONSULTING ~~used~~SERVICES inAGREEMENTS” ~~agricultural applications~~below.

~~-26-~~ Provision for Doubtful Accounts – Proceeds Receivable from Prior Sale of Oil and Gas Properties

~~In February 2010, the Company entered into a License Agreement~~ ~~concerning~~As ~~two~~of USSeptember ~~method~~30, ~~patents~~2013 ~~for~~and ~~the~~2012, ~~treatment~~management of ~~wastewaters. Such patents utilize~~ the Company’s ~~zeolite.~~believes ~~The~~that ~~license applies to~~ the UScollection ~~and~~of ~~covers~~a ~~the~~portion ~~use~~ of ~~the~~a ~~technology in water~~$50,000 ~~wastewater~~receivable ~~and~~relating ~~waste treatment in animal feed operations, agriculture, and aquaculture. In addition, the license applies~~ to the ~~treatment~~sale of ~~sanitary~~certain ~~wastewater~~oil ~~on Federal facilities, military bases~~ and ~~lands~~gas ~~administered~~properties byduring ~~the~~2008 USis ~~Bureau~~in ~~of Indian Affairs~~doubt. ~~The Company issued 140~~Accordingly,~~000~~ ~~shares of its Common Stock in consideration for~~ the ~~License Agreement. The~~ Company ~~recorded~~recognized ~~$40,907~~a asprovision ~~Patents~~for ~~License~~doubtful ~~Rights~~accounts ~~based on an average price~~ of $~~0.29~~25,000 ~~per~~during ~~share~~2012.

~~On April 8, 2011, in connection with the efforts of the Musser~~ ~~Group,~~INTEREST the Company entered into a Material Supply and Joint Venture Agreement between CAMI (wholly-owned subsidiary) and VitaminSpice, Inc. (“VSI”) pursuant to which CAMI agrees to supply Clinoptilolite (zeolite) to VSI in connection with the introduction by VSI of detoxification products into targeted geographic markets. VSI is obligated to utilize CAMI as its sole supplier of Clinoptilolite. The agreement does not specify any minimum quantity supply requirements of CAMI. In addition to an initial price per ton for Clinoptilolite to be sold to VSI, CAMI will share in the profits from the sales of such products by VSI. CAMI has provided material to VSI for use in product and market strategy development, as well as potential clinical studies. The Company made no shipments of product to VSI and the Company has not received any orders from VSI. VSI has not met certain performance standards as set forth in the agreement. On April 13, 2012, the Company gave notice to VSI and terminated the agreement pursuant to the provision in respect to termination for cause.EXPENSE

On Interest ~~July~~expense 3,decreased ~~2012,~~16% ~~CAMI~~to ~~entered~~$262,630 ~~into an operating agreement~~ for ~~ZeoSure~~ ~~LLC~~2013 ~~(“ZLLC”)~~ as ~~one~~compared ofto ~~ZLLC’s~~$313,371 ~~two~~for ~~managing members~~2012. ~~ZLLC~~The ~~was~~decrease ~~formed for the purpose~~ of ~~developing~~$50,741 ~~human consumption~~is ~~products~~primarily ~~including~~attributable ~~but not limited~~ to ~~detoxification~~(1) ~~and digestive supplements and human consumable products utilizing CAPI’S Clinoptilolite zeolite mineral focusing on markets throughout the world with~~ a ~~primary~~decrease ~~emphasis on markets~~ in ~~the United~~amortization ~~States~~expense and ~~Asia.~~(2) ~~CAMI~~a ~~and~~decrease ~~SafeHatch~~in ~~LLC,~~interest anexpense ~~entity~~as ~~controlled~~a byresult anof payments ~~individual~~of ~~previously~~certain ~~affiliated~~debt ~~with~~obligations ~~the~~in ~~Musser~~2012 ~~Group, are the managing members~~ and ~~each owns 47~~2013.5% ofDuring ~~ZLLC.~~2013 ~~The~~and ~~remaining~~2012, ~~5% of ZLLC is owned by~~ the ~~Musser~~Company ~~Group.~~recognized ~~The members of ZLLC intend to seek initial capital of~~ $16,648 ~~million from third parties~~ and ~~enter~~$31,605, ~~into~~respectively, ~~product~~as ~~marketing~~interest ~~and~~expense ~~distribution~~regarding ~~agreements with participants active within~~ the ~~dietary~~amortization ~~supplements market in the next few months. The operating agreement has not been ratified by the Audit Committee~~ of ~~the~~discounts ~~Board~~on ofdebt ~~Directors of the Company~~issuances. ~~Other than seeking initial capital, ZLLC had no activity through September 30, 2012.~~

~~Kaolin~~ IMPAIRMENT OF SUBSCRIPTIONS RECEIVABLE AND INTEREST RECEIVABLE

~~The~~ As ~~efforts~~ of ~~the~~September ~~Company~~30, ~~and Tecumseh Professional Associates~~2013, ~~Inc.~~ ~~(“TPA”)~~management toof ~~evaluate~~ the ~~Sierra~~Company ~~Kaolin~~believes ~~deposit~~that ~~are~~the ~~ongoing.~~collection ~~The~~of ~~venture’s~~the ~~efforts~~principal tobalance ~~commercialize~~of ~~the~~and ~~Sierra Kaolin~~interest ~~deposit~~due ~~have~~pursuant ~~focused~~to ona ancertain ~~initial~~note ~~target~~receivable ~~area~~is ~~encompassing~~in ~~approximately~~doubt 32(see ~~acres~~Note ~~out~~11 of the ~~project’s~~Notes ~~2,740~~to ~~acres. The~~Consolidated ~~test~~Financial ~~minerals~~Statements). ~~extracted~~As ~~from~~of ~~the~~September ~~target~~30, ~~area~~2012, ~~have~~the ~~been~~Company ~~processed~~changed ~~into~~to ~~product~~the ~~formulations~~recovery ~~determined~~method byin ~~independent~~accounting ~~consultants to~~for bethe ~~suitable~~certain ~~(a)~~notes ~~for~~receivable ~~coatings, fillers~~ and ~~pigments~~interest ~~for~~thereon. ~~use~~Accordingly, ~~within~~ the ~~paint~~principal and ~~paper~~interest ~~manufacturing~~will ~~industries~~be recorded when, and ~~(b)~~if, ~~as an additive in cement formulations~~collected. ~~The~~This ~~analysis~~change ~~results~~to of the ~~processed~~recovery ~~minerals~~method ~~with~~resulted ~~respect~~in tothe ~~its~~recognition ~~physical~~of ~~properties including brightness~~$207,025 ~~color,~~as ~~opacity,~~an ~~strength,~~impairment ~~and~~of ~~oil~~the ~~absorption~~interest ~~have~~receivable ~~indicated~~at ~~that~~September ~~commercially~~30, ~~viable products can be produced from the deposit’s extracted minerals~~2012.

~~In December 2009, the Sierra Kaolin Open Pit Clay Mine project~~ ~~cleared~~Gain the regulatory review process and the project’s definitive USDA Forest Service Plan of Operations was approved. Mine site plans have been prepared to facilitate planned extraction operations. Since receiving project approval, the venture, with the assistance of its consultants, has made technical presentations of the product formulations to entities active (a) in the specialty cement applications and (b) on ~~both~~debt the demand and supply sides of the coatings, fillers and pigments sectors of the paint and paper industries. While the feedback from these presentations has been encouraging, market conditions within the paper and housing industries have not been favorable; however, interest in the Sierra Kaolin deposit’s minerals for use in meta-kaolin applications has remained favorable. As such the project manager is focusing its commercialization efforts in this area.forgiveness

During ~~fiscal~~2013 and 2012, ~~in addition to~~ the ~~meta-kaolin~~Company ~~applications, because~~recognized ofgain ~~its~~on ~~natural~~debt ~~brightness,~~forgiveness ~~interest has been expressed relative to the use~~ of ~~the~~$112,330 ~~Sierra~~and ~~Kaolin~~$43,655, ~~material~~respectively, as adiscussed ~~possible economic substitute and/or extender for titanium oxide within the filter and coating industries. TPA has also been~~ in ~~discussions with~~Note ~~entities~~6 ~~within~~of the ~~mining~~Notes ~~sector relative~~ to ~~other~~Consolidated ~~joint~~Financial ~~venture opportunities involving the mineral claims controlled by the Sierra Kaolin project~~Statements. ~~To date, the discussions have been exploratory in nature.~~

~~Off-balance~~ ~~Sheet~~CONSULTING ~~Arrangements,~~SERVICES ~~CONTRACTUAL OBLIGATIONS AND COMMITMENTS~~AGREEMENTS

We doMusser ~~not have off-balance sheet arrangements~~Group, financings, or other relationships with unconsolidated entities or other persons, also known as “Variable Interest Entities,” that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures. However, the request for project financing for ZeoSure LLC is being presented to potential third parties and management of the Company will evaluate alternative financing structures as part of any negotiations with those potential sources of capital. Also, the company intends to request project financing for the (15) potential development and redevelopment opportunities associated with its existing leasehold acreage in Texas and management of the Company will evaluate alternative financing structures as part of any negotiations with those potential sources of capital.

~~-27-~~ On February 25, 2011, the Company entered into a Consulting Services Agreement with the Musser Group, LLC (“Musser Group”) to perform consulting services for the Company through February 2013. During February 2013, the agreement was extended through February 2014 at no cost to the Company. The Company has engaged the Musser Group, an independent contractor, to provide advisory and consulting services to the Company. The Musser Group is engaged to provide (i) managed services; (ii) strategic business planning and implementation; and (iii) assistance in directing and executing the implementation of any strategies approved by the Board of Directors of the Company. The Musser Group’s primary focus is the analysis and validation of market opportunities for the commercialization of products within the Company’s mineral segment. See “COMMERCIALIZATION OF EXISTING ASSETS” below.

We The ~~have~~Company ~~various~~issued ~~contractual~~2,400,000 ~~obligations~~shares ~~that~~of ~~are~~Common ~~appropriately recorded~~Stock asto ~~liabilities~~individuals associated with the Musser Group in ~~our~~connection ~~consolidated~~with ~~financial~~the ~~statements~~initial Consulting Services Agreement with the Musser Group. ~~Certain~~Also, ~~other~~the ~~items~~Company ~~are~~issued ~~not~~to ~~recognized~~individuals asassociated ~~liabilities~~with inthe ~~our consolidated~~Musser ~~financial~~Group ~~statements.~~warrants ~~Examples~~for the purchase of ~~items~~2,500,000 ~~not~~shares ~~recognized~~of asCommon ~~liabilities~~Stock inat ~~our~~an ~~consolidated~~exercise ~~financial~~price ~~statements~~of ~~are commitments~~$0.15 toper ~~purchase~~share. ~~goods~~The warrants may not be exercised unless and ~~services~~until ~~that~~the ~~have~~average ~~not~~bid ~~yet~~and ~~been~~asking ~~received~~closing orprice ~~rendered,~~of ~~respectively,~~the asCompany’s Common Stock exceeds $1.00 per share for a period of ~~September~~thirty ~~30,~~consecutive ~~2012~~trading days. The warrants are exercisable through February 24, ~~and~~ ~~future~~2016. ~~minimum~~The ~~lease~~Company ~~payments~~filed a registration statement under the Securities Act of 1933 on Form S-8 for the ~~use~~shares of ~~property~~Common ~~and~~Stock ~~equipment~~issued ~~under~~to ~~operating~~individuals ~~lease~~associated ~~agreements~~with the Musser Group. ~~See~~The ~~Note~~Company 8determined the fair value of ~~Notes~~the shares of Common Stock and the warrants issued to ~~Consolidated~~ ~~Financial~~individuals ~~Statements~~associated with the Musser Group to be $735,153 and recorded such amount as prepaid consulting fees. The prepaid consulting fees were amortized over the life of the respective agreement.

Certain contractual obligations classified as noncurrent liabilities in the consolidated balance sheet as of September 30, 2012 include long-term debt ($239,717), accrued bonus expense ($1,373,831) and Series B 8% Cumulative Convertible preferred Stock Dividends accrued ($1,826,239). See Item 8.29

~~New~~ Investor ~~Accounting~~Relations ~~Standards~~Firm

~~For~~ In ~~details~~March 2013, the Company engaged an investor relations firm (“IR Firm”) to assist management in such activities for one year. The Company issued 600,000 shares (valued at $0.11 per share) of ~~applicable~~Common ~~new~~Stock ~~accounting~~to ~~standards~~the IR Firm and such contract requires monthly payments of cash of $5,000 ~~please~~during the term of the agreement. The Company is amortizing the prepaid consulting fees of $66, ~~refer~~000 toover ~~Note~~the 2term of ~~Notes~~the tocontract ~~Consolidated~~with ~~Financial~~the ~~Statements~~IR Firm and unamortized consulting fees total $30,559 at September 30, 2013.

~~Critical~~ ~~Accounting~~Legal ~~Policies~~Services

~~General~~ On -April ~~The~~1, ~~preparation~~2013, ~~of financial statements~~ in accordance with ~~accounting standards generally accepted in~~ the ~~United~~requirements ~~States~~of ~~requires~~Section ~~management~~6.1 toof ~~make~~the ~~estimates~~SPA, ~~and assumptions that affect both~~ the ~~recorded~~Company ~~values~~entered ofinto ~~assets~~an ~~and~~agreement ~~liabilities~~with atan ~~the~~attorney ~~date~~to ofperform ~~the~~corporate ~~financial~~governance ~~statements~~ and ~~the~~securities ~~revenues~~law ~~recognized and~~services ~~expenses~~for ~~incurred during the reporting period. Our estimates~~ and ~~assumptions~~representation ~~affect our recognition~~ of ~~deferred expenses, bad debts, income taxes,~~ the ~~carrying~~Company ~~value of our long-lived assets and our provision~~ for ~~certain~~a ~~contingencies.~~flat Wefee ~~evaluate the reasonableness~~ of ~~these~~$5,000 ~~estimates~~per ~~and~~month. ~~assumptions~~The ~~continually~~attorney ~~based~~represented onFEI ~~a combination of historical information~~ and ~~other~~DTE ~~information~~in ~~that~~connection ~~comes to~~with ~~our~~the ~~attention~~SPA. ~~that~~Such ~~may~~attorney ~~vary~~became ~~our~~the ~~outlook~~Secretary ~~for~~of the ~~future.~~Company ~~Actual~~on ~~results~~September ~~may~~18, ~~differ from these estimates under different assumptions~~2013.

~~We suggest that the Summary of Significant Accounting Policies,~~ asLiquidity ~~described in Note 2 of Notes to Consolidated Financial Statements, be read in conjunction with this Management’s Discussion~~ and ~~Analysis~~Capital ~~of Financial Condition and Results of Operations. We believe the critical accounting policies that most impact our consolidated financial statements are described below.~~Resources

~~Going Concern -~~ The ~~financial statements have been prepared on the basis of a going concern, which contemplates that the~~ Company’s ~~will~~cash beflow ~~able~~used ~~to realize assets and discharge liabilities~~ in ~~the~~operating ~~normal~~activities ~~course~~was of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be required to liquidate its assets. For 2012 and 2011, the Company incurred a net loss applicable to common shareholders of $~~677,734 and $~~1,~~764~~126,~~258,~~060 ~~respectively~~for 2013. ~~The~~Such ~~ability~~use of ~~the~~cash ~~Company~~flow toreflects ~~meet~~the ~~its~~use ~~current liabilities~~ of $5335,~~381,664~~000 ~~and~~in ~~its~~payments ~~total~~required ~~liabilities~~by ~~of $8,836,810 at September 30, 2012, and to continue as a going concern is dependent upon~~ the ~~availability~~Forbearance ~~of future funding~~Agreements, ~~achieving~~Novinskie ~~profitability~~Agreement ~~within its mineral segment,~~ and ~~ongoing~~Blackstone ~~profitability~~Agreement ~~within~~as ~~its~~discussed ~~oil and~~below ~~gas~~in ~~operations. If~~ the ~~Company~~FEI/DTE isStock ~~unable~~Purchase toAgreement ~~continue as a going concern, there is uncertainty relative to full recoverability of its assets~~section.

~~Fair Value of Financial Instruments~~ - The Company’s ~~only~~net ~~financial~~cash ~~instruments are~~ (aunrestricted) ~~cash,~~at ~~securities~~September ~~available for future sale~~30, ~~and~~2013 ~~short-term~~totaled ~~trade receivables~~$140, ~~payables, and debt, and (b) a long-term note payable to a bank~~607. ~~The~~ ~~carrying~~Restricted ~~amounts reported in the accompanying consolidated financial statements for~~ cash, ~~securities~~deposits ~~available~~– ~~for~~equity ~~future~~issuances are ~~sale,~~discussed ~~and~~below ~~short-term~~in ~~trade receivables, payables and debt approximate fair values because of~~ the ~~immediate~~SPA ~~nature~~Additional ofProvisions ~~short-term maturities of these financial instruments~~section. ~~The Company has no long-term or short-term bank debt outstanding at September 30, 2012.~~

~~Receivables~~ To -obtain Incapital in the ~~normal course of business~~past, wethe ~~extend credit~~Company’s tocapital ~~our~~obtainment ~~customers~~methods onhave aincluded ~~short-term~~selling ~~basis.~~its ~~Our~~interest ~~principal~~in ~~customers~~certain ~~are major~~ oil and ~~natural~~ gas ~~exploration~~properties, ~~development~~ and ~~production~~ ~~companies.~~borrowing ~~Credit~~funds ~~risks~~from ~~associated~~and ~~with~~issuing ~~these~~Common ~~customers~~Stock ~~are~~to ~~considered~~related ~~minimal.~~and ~~Dealings~~unrelated ~~with smaller~~parties, ~~local~~as ~~companies, particularly~~well ~~with~~as ~~the~~utilizing ~~current~~joint ~~difficulties~~venture instructures. ~~equity~~If ~~and~~the ~~credit~~Company ~~markets,~~is ~~pose~~not ~~the~~successful ~~greatest~~in ~~risks.~~increasing Weits ~~routinely~~operating ~~review~~cash ~~our~~flows ~~accounts receivable balances~~ and ~~make~~the ~~provisions~~preceding ~~for~~financing ~~doubtful~~methods ~~accounts as necessary. Accounts~~ are ~~reviewed~~not onavailable, ~~a case by case basis and losses are recognized in~~ the ~~period~~Company ifmay ~~we determine it is likely that receivables will~~ not be ~~fully~~able ~~collected.~~to Wesustain ~~may~~its ~~also~~operations ~~provide~~and amay ~~general provision~~need ~~for~~to ~~accounts~~seek ~~receivables~~alternative ~~based~~actions onto ~~existing~~preserve ~~economic~~shareholder ~~conditions~~value.

Liquidity is a measure of a Company’s ability to access cash. The Company has historically addressed its long-~~28-~~term liquidity requirements through the issuance of equity securities and borrowings or debt financing for certain activities. The Company estimates its capital needs to approximate $1 million for fiscal 2014 and approximate $4 million for fiscal 2015 to satisfy debt payments, pay current operating costs and expenses, and to fund the Company’s growth initiatives.

~~Subscriptions Receivable and Interest Receivable –~~ AsAt ~~of September 30~~present, ~~2012, management of~~ the Company ~~believes~~does ~~that~~not ~~the~~have ~~collection~~in ofplace ~~the~~a ~~principal~~credit ~~balance~~facility ofor ~~and~~other ~~interest~~line ~~due pursuant to certain notes receivable is in doubt (see Note 11~~ of ~~the~~credit ~~Notes~~upon towhich ~~Consolidated~~it ~~Financial~~may ~~Statements)~~draw. As ofoperating ~~September~~activities 30increase, ~~2012,~~ the Company ~~changed~~will toevaluate the ~~recovery~~need ~~method in accounting~~ for ~~the~~such ~~notes~~a ~~receivable~~credit ~~and interest thereon~~facility. For ~~Accordingly,~~desired ~~the~~acquisitions ~~principal and~~or ~~interest~~project ~~will be recorded when~~enhancements, ~~and if, collected. This change to~~ the ~~recovery~~Company ~~method~~must ~~resulted~~seek inproject ~~the~~specific ~~recognition of $207,025 as an impairment of the interest receivable at September 30, 2012~~financing. ~~The~~See ~~principal~~Note ~~balance~~4 of the ~~notes~~Notes ~~receivable~~to ~~($576,000)~~Consolidated ~~was previously~~Financial ~~reflected~~Statements asregarding ~~subscriptions~~ZeoSure ~~receivable~~LLC. ~~Additional~~None ~~paid-in capital was reduced by $576,000 as~~ of ~~September 30, 2012, to reflect~~ the ~~impairment~~Company’s ofproperties ~~the~~are ~~notes receivable~~encumbered.

~~Oil~~ The ~~and~~prices ~~gas~~the ~~properties~~Company -receives ~~The~~for ~~Company~~its ~~follows~~oil ~~the~~and ~~successful efforts~~gas ~~method~~and the level of ~~accounting~~production ~~for~~have ~~the~~a ~~costs~~significant ofimpact ~~exploration~~on ~~and~~the ~~development~~Company’s ~~activities~~cash flows. ~~Costs~~The ofCompany ~~successful~~is ~~exploration~~unable ~~wells,~~to ~~development wells~~predict, ~~and~~with ~~direct~~any ~~acquisition~~degree ~~costs~~ of ~~developed~~certainty ~~and~~the ~~undeveloped~~prices ~~leases~~the ~~containing~~Company ~~proved~~will ~~reserves~~receive ~~are~~for ~~capitalized~~its ~~and~~future ~~amortized on~~oil aand ~~unit-of-~~gas production ~~method~~and ~~over~~ the ~~life~~success of the ~~related~~Company’s ~~reserves.~~exploration, ~~Costs~~exploitation ofand ~~exploratory~~production ~~wells~~activities. ~~found~~Increases toin bethe ~~dry~~sales ~~are~~of ~~expensed. Support~~the ~~equipment~~Company’s ~~and~~minerals, ~~other~~which ~~property~~to ~~and~~date ~~equipment~~have ~~recorded~~not atbeen ~~cost~~mined ~~are~~in ~~amortized~~substantial ~~using~~commercial ~~the~~quantities, ~~straight-line~~will ~~method~~also ~~over~~affect ~~their~~cash ~~estimated useful lives~~flow.

~~Mineral~~ ~~properties~~In –an ~~The~~effort ~~Company~~to ~~has~~address ~~recorded~~the liquidity shortfall, the ~~acquisition~~Company sold certain of ~~Clean~~its ~~Age~~oil ~~Minerals~~and gas properties in 2012, ~~Inc~~is selling certain oil and gas properties in 2014 and is evaluating the sale of certain additional oil and gas properties., It may take months and ~~associated~~possibly ~~minerals~~longer ~~rights~~to sell these properties at ~~cost~~ a suitable price. The ~~Company~~market ~~has~~is ~~not~~affected ~~produced~~by ~~large-scale~~many ~~quantities~~factors, ofsuch ~~any~~as general economic conditions, availability of ~~its~~financing, ~~mineral~~interest ~~deposits~~rates and other factors, including supply and demand that are beyond our control. ~~Once~~ We cannot predict whether we will be able to sell a property for the ~~Company~~price ~~produces~~or ~~commercial~~on ~~quantities~~terms ofacceptable to us or whether any ofprice ~~its~~or ~~mineral~~other ~~deposits,~~terms ~~the~~offered ~~Company~~by ~~will~~a ~~use~~prospective purchaser would be acceptable to us. We cannot predict the ~~unit-~~length of~~-production~~ ~~method~~time ~~in calculating~~needed ~~cost~~to ~~depletion~~find a willing purchaser and to close the sale of any property.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of — Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. At September 30~~, 2012 and 2011, we reviewed our long-lived assets and determined no impairment was necessary.~~

~~Item~~ On 7AJanuary 20, 2012, the Company entered into a purchase and sale agreement (the “PSA”) pursuant to which the Company agreed to sell certain oil and natural gas leasehold deep rights for cash of $898,335, subject to adjustment as to any title defect that is not cured within the timeframe permitted by the PSA. ~~Quantitative~~The sale closed on March 28, 2012. The Company received $898,335 at the closing and ~~Qualitative~~recognized ~~Disclosures~~gain ~~About~~in ~~Market~~the ~~Risk~~amount of proceeds received. The oil and natural gas leasehold deep rights that were sold were undeveloped, and as such not income-producing to the Company. See Note 3 of the Notes to Condensed Consolidated Financial Statements. The Company used the proceeds for general working capital purposes.

~~Not~~ During ~~required~~April as2012, the ~~registrant~~Company ispaid $50,000 in cash and issued of 158,290 shares of Common Stock in full satisfaction of a ~~smaller~~note ~~reporting~~due ~~company~~an affiliate of Carl A. Haessler, a Director at that time, as discussed in Note 6 of the Notes to Consolidated Financial Statements.

~~Item~~ During May 2012, Carl Haessler, a Director at that time, elected to convert 10,000 shares of Series B 8% Cumulative Convertible Preferred Stock into 80,000 shares of Common Stock at the conversion rate of $1.25 ~~Financial~~per ~~Statements~~share of Common Stock. Also, Mr. Haessler accepted 73,854 shares of Common Stock as satisfaction for any and ~~Supplementary~~all ~~Data~~dividends due him ($92,318 of which $88,319 were accrued) in respect to his direct holdings of 30,000 shares of Series B 8% Cumulative Convertible Preferred Stock through the date of the conversion of 10,000 of such shares. See Note 7 of the Notes to Condensed Consolidated Financial Statements.

On August 23, 2012, the Company, entered into an agreement with Michael D. Parrish to become the Chief Executive Officer and a director of the Board of Directors of the Company. The ~~following~~initial ~~financial~~term ~~statements~~of Mr. Parrish’s employment was effective as of May 18, 2012. In November 2012, the employment contract with Mr. Parrish was renewed. Such contract was orally amended in December 2012 to reflect a change in base salary. Effective March 25, 2013, the Company granted (i) 600,000 shares of common stock and (ii) and an option for the purchase of 1.2 million shares of common stock to Mr. Parrish (see Note 8). Pursuant to Section 4.8 of the SPA, Mr. Parrish’s employment has been extended through December 31, 2013. Mr. Parrish and the Compensation Committee of the Board of the Company are ~~included~~in ~~herein:~~discussions regarding the contract.

~~Audited~~ The ~~Financial~~Company ~~Statements~~shall use the proceeds from the transaction with FEI and ~~Supplemental~~DTE ~~Financial~~(discussed ~~Information:~~below) in an effort to establish additional profitable revenue generating activities. The Company is implementing its plan and creating sales, marketing, and distribution programs. The Company has employed a Vice President of Sales and intends to use internal and external resources to focus on mineral sales. In anticipation of increased sales, the Company’s plans include handling, storage and transportation modifications for the mineral properties. Also, the Company plans to continue its workover operations and other activities in certain of its Texas and West Virginia oil and gas properties to enhance its existing revenue stream and profitability.

* SPA ~~Report~~Additional ~~of Independent Registered Public Accounting Firm~~Provisions

* In ~~Consolidated~~connection ~~Balance~~with ~~Sheets~~the SPA the Company entered into an Exclusive Sales Agency and Marketing Agreement with FEI (“FEI Marketing Agreement”). The FEI Marketing Agreement grants to FEI the right to act as the Company’s exclusive marketing and sales agent for natural resources products produced, mined and/or sold by the Company, excluding the Company’s ZeoSure products (see Note 4), in Asia excluding the nation of India. As of September 30, 2013, the Company and FEI are actively seeking to aggregate certain petroleum products and coal supplies owned by others for export to identified buyers in Asia. The completion of these identified transactions is contingent on the finalization of financial and supply arrangements.

* As a condition precedent to entering into the FEI/DTE Stock Purchase Agreement, the Company was required to enter into (i) forbearance agreements with certain of its major creditors and debtors (“Certain Creditors”) (“Forbearance Agreements”), (ii) the Second Amendment to Employment Agreement with Mr. Blackstone, Vice President and Chief Accounting Officer (“Blackstone Agreement”) and (iii) the First Amendment to Employment Agreement with Mr. Novinskie, President and Chief Financial Officer (“Novinskie Agreement”). The Forbearance Agreements provide for the Certain Creditors to agree to forbear from making a demand on the Company for payment of their debt for a period of two years from the date of the SPA. The Certain Creditors, Blackstone and/or Novinskie are entitled to receive accelerated payment of their debt should the Company, among other things, (i) have net income, (ii) sell equity securities, (iii) sell assets in excess of stated amounts and/or (iv) if the Company permits an Event of Default (as defined in the respective agreements) (“Accelerated Payments”). See notes 1, 6, 7 and 11 of the notes to Consolidated Financial Statements offor ~~Operations~~discussions regarding the Forbearance Agreements, the Blackstone Agreement and the Novinskie Agreements. At September 30, 2013, the Company is not required to make Accelerated Payments to the Certain Creditors, Blackstone or Novinskie.

* Consolidated Statements of Shareholders’ Equity31

* The ~~Consolidated~~SPA ~~Statements~~contains provisions that restrict the use of ~~Cash~~the ~~Flows~~$1.5 million received by the Company as follows:

* Notes to Consolidated Financial Statements

	Initial		Restricted cash at
	Restriction		September 30,
	per the SPA		2013
Forbearance Agreements, Novinskie Agreement and Blackstone Agreement	$	350,000	$	15,000
Marketing Agreement payments to FEI		120,000		60,000
Other marketing and sales activities		360,000		283,730
Transaction closing costs and related		80,000		3,383
Oil and gas properties activities		75,000		23,000
Mineral properties activities		50,000		35,000
Future general and administrative expenses		345,000		225,650
Other costs and expenses		120,000		48,045
Total	$	1,500,000	$	693,808

~~-29-~~ 2013 Private Placement

~~REPORT~~ Commencing OFin ~~INDEPENDENT~~January ~~REGISTERED~~2013, ~~PUBLIC ACCOUNTING~~the ~~FIRM~~Company offered a private placement under the provisions of Regulation D promulgated under the Securities Act of 1933, as amended (the “2013 Private Placement”). The 2013 Private Placement consists of up to five hundred thousand dollars ($500,000) for the issuance of up to 5 million shares of Common Stock at $0.10 per share and warrants to purchase up to 2 million shares of Common Stock at an exercise price of $0.50 per share. The warrants expire on January 16, 2018. The Company will utilize the proceeds of this private placement for general working capital purposes. At September 30, 2013, the Company had received cash totaling $411,000 for the sale of 4,110,000 shares of Common Stock and warrants to purchase 1,644,000 shares of Common Stock.

To Convertible ~~the~~Note ~~Board~~Payable ofto ~~Directors~~Dov ~~and Shareholders~~Amir

On May 3, 2013, the Company paid cash of ~~Daleco~~$70,000 ~~Resources~~and ~~Corporation~~issued 498,000 shares of Common Stock in full satisfaction of all amounts due Amir pursuant to the note. The Company determined the value of the cash and shares of Common Stock (at $0.17 per share) to be $154,660. The if-converted value of the Convertible Note Payable on such date was $183,051. Accordingly, the Company recognized $95,802 as gain on debt forgiveness as a result of such full satisfaction of the note.

~~We have audited the accompanying consolidated balance sheets~~ ofSecurities ~~Daleco~~Exchange ~~Resources Corporation~~ and ~~Subsidiaries~~Settlement as of September 30, 2012 and 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.Agreement

We On ~~conducted~~August ~~our~~28, ~~audits~~2013, inthe ~~accordance~~Company ~~with~~entered ~~the~~into ~~standards~~a ~~of the~~Securities ~~Public~~Exchange ~~Company~~and ~~Accounting~~Settlement ~~Oversight~~Agreement ~~Board~~ (~~United~~the ~~States~~“SESA”). ~~Those~~with ~~standards~~Stephan ~~require~~V. ~~that~~Benediktson, wea ~~plan~~former ~~and~~officer ~~perform~~of the ~~audits~~Company. Pursuant to ~~obtain reasonable~~the ~~assurance~~SESA, ~~about whether~~ the ~~consolidated~~parties ~~financial~~have ~~statements~~agreed ~~are~~to ~~free~~settle ofall ~~material~~obligations ~~misstatement~~between them. The Company is(i) ~~not required~~issued ~~to have~~2,169,400 ~~nor~~shares ~~were~~of wethe ~~engaged~~Company’s tocommon ~~perform,~~stock anand ~~audit~~(ii) ofreleased ~~its~~from ~~internal~~escrow ~~control~~the ~~over~~1 ~~financial~~million ~~reporting.~~shares ~~Our~~of ~~audit~~the ~~included consideration~~Company’s ofcommon ~~internal~~stock ~~control~~which ~~over~~were ~~financial~~collateral ~~reporting~~for as a ~~basis~~note ~~for~~receivable ~~designing~~from ~~audit~~Mr. ~~procedures~~Benediktson. ~~that~~Such ~~are~~settlement ~~appropriate~~resulted in ~~the circumstances,~~reductions ~~but~~of ~~not~~$915,887 ~~for~~of ~~the~~accrued ~~purpose~~bonus ofexpense ~~expressing~~due anto ~~opinion~~Mr. onBenediktson, ~~the~~$37,448 ~~effectiveness~~ of ~~the~~accounts ~~Company’s~~receivable ~~internal~~due ~~control~~from ~~over financial reporting~~Mr. ~~Accordingly,~~Benediktson weand ~~express~~the noprincipal ~~such~~balance ~~opinion.~~of Anand ~~audit~~interest ~~includes~~due ~~examining,~~pursuant onto a ~~test~~certain ~~basis,~~note ~~evidence~~receivable ~~supporting the~~from ~~amounts~~Mr. ~~and~~Benediktson ~~disclosures~~($444,559). inThe ~~the~~principal ~~consolidated~~balance ~~financial~~and ~~statements.~~interest Anthereon ~~audit~~was ~~also~~impaired ~~includes~~as ~~assessing~~discussed ~~the~~in ~~accounting~~Note ~~principles used~~11 ~~and~~of ~~significant~~the ~~estimates~~Notes ~~made~~to byConsolidated ~~management~~Financial Statements. Accordingly, asthe ~~well~~Company asdid ~~evaluating~~not ~~the~~recognize ~~overall~~any ~~financial~~gain ~~statement~~or ~~presentation.~~loss Weas ~~believe that~~a ~~our~~result ~~audits~~of ~~provide~~the asettlement ~~reasonable~~of ~~basis~~all ~~for~~obligations ~~our~~between ~~opinion~~the parties.

In A ~~our~~provision ~~opinion,~~of the ~~consolidated~~Agreement ~~financial~~requires ~~statements~~that ~~referred to~~the ~~above~~Company ~~present~~shall ~~fairly,~~not inmake ~~all~~any ~~material~~public ~~respects,~~announcement ~~the~~or ~~financial~~statement ~~position~~concerning ofthe ~~Daleco~~Agreement ~~Resources~~other ~~Corporation~~than ~~and~~that ~~Subsidiaries~~which asthe ~~of September~~Company ~~30,~~is ~~2012~~required ~~and~~to ~~2011,~~disclose ~~and~~on ~~the~~Form ~~results~~8-K ~~of their operations~~ and ~~cash~~other ~~flows~~filings ~~for the years then ended, in conformity~~ with ~~accounting principles generally accepted in~~ the ~~United~~Securities ~~States~~and ofExchange ~~America~~Commission.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered significant recurring net losses and negative operating cash flow, which raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.32

~~/s/~~ Certain ~~VASQUEZ~~Debt &and ~~COMPANY~~Other ~~LLP Vasquez & Company LLP~~Obligations

~~Los~~ As ~~Angeles~~of September 30, ~~California~~2013, the Company and certain of its subsidiaries were in default of various obligations and certain debt obligations classified as current liabilities in the accompanying balance sheet as set forth in the following table:

~~January~~ Such 31defaulted obligations at September 30, 2013 include the following:

-30-

Amounts included in accounts payable:
Consulting services and interest due a licensor	$	19,009
EV&T – fees, expenses and accrued interest (subject to forbearance agreement)		213,040
CAMI notes payable and accrued interest:
Subject to forbearance agreements		830,534
Not subject to forbearance agreements		32,171
EV&T note and interest (subject to forbearance agreement)		1,202,318
Note payable to related party and interest thereon (subject to forbearance agreement)		69,587
7.25% Convertible Debentures and interest due a related party (subject to forbearance agreement)		46,689
Note payable to former related party and interest thereon (subject to forbearance agreement)		19,949
Amounts included in accrued compensation expense:
Subject to forbearance agreements		597,009
Not subject to forbearance agreements		94,791
Total	$	3,125,097

~~DALECO~~ See ~~RESOURCES~~Note 9 ~~CORPORATION~~of ~~AND~~the ~~SUBSIDIARIES~~Notes ~~CONSOLIDATED~~to ~~BALANCE~~Consolidated ~~SHEETS~~Financial ~~SEPTEMBER~~Statements regarding the cumulative dividends in arrears of $2,042,239 at September 30, ~~2012~~2013, ~~AND~~applicable ~~2011~~to the Series B 8% Cumulative Convertible Preferred Stock.

	2012			2011
ASSETS
Current Assets:
Cash and Equivalents	$	190,738		$	48,917
Accounts Receivable, Net of Allowance for Doubtful Accounts of $25,000 and $0, respectively		242,182			582,761
Prepaid Consulting Services Agreement Fees		151,237			366,575
Other Current Assets		8,615			7,424
Total Current Assets		592,772			1,005,677
Other Assets:
Patent Rights		-			6,594,500
Accumulated Amortization of Patent Rights		-			(6,354,520	)
Net Patent Rights		-			239,980
Patents License Rights		40,907			40,907
Accumulated Amortization of Patents License Rights		(36,351	)		(22,719	)
Net Patents License Rights		4,556			18,188
Prepaid Mineral Royalties- Long-term		509,254			479,268
Interest Receivable		-			188,253
Restricted Cash Deposits		109,609			108,478
Prepaid Consulting Services Agreement Fees		-			151,237
Securities Available for Future Sale		-			1
Total Other Assets		623,419			1,185,405
Property, Plant and Equipment:
Mineral Properties, at cost		9,877,128			9,877,128
Accumulated Depreciation, Depletion and Amortization		(95,000	)		(95,000	)
Net Mineral Properties		9,782,128			9,782,128
Oil and Gas Properties, at cost		4,471,590			4,424,512
Accumulated Depreciation, Depletion and Amortization		(4,096,939	)		(4,036,939	)
Net Oil and Gas Properties		374,651			387,573
Office Equipment, Furniture and Fixtures, at cost		61,502			61,502
Accumulated Depreciation		(61,502	)		(61,502	)
Net Office Equipment, Furniture and Fixtures		-			-
Total Net Property, Plant and Equipment		10,156,779			10,169,701
Total Assets	$	11,372,970		$	12,360,783

Recent Significant Activity

~~SEE~~ Oil ~~ACCOMPANYING~~and ~~AUDITORS’~~Gas ~~REPORT AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Segment

On October 6, 2013, the Company entered into an Asset Purchase and Sale Agreement (“APA”) pursuant to which the Company agreed to sell its interest in certain oil and natural gas leasehold deep rights for certain properties located in Burleson County, Texas (“Properties”), for cash, subject to adjustment as to any title defect that is not cured within the timeframe permitted by such agreement. On November 5, 2013, the closing date was delayed from November 6, 2013, to December 6, 2013, in accordance with the APA to allow the Company to address title issues raised by the buyer on November 1, 2013. A First Amendment to the APA was entered into on December 5, 2013, extending the “Delayed Closing Date” until December 17, 2013. On December 17, 2013, the parties closed on the sale of 280 net acres attributable to the Company’s interest in the Properties covered by this portion of the transaction. The Company received $448,038 at the closing and will recognize gain in the amount of proceeds received. The oil and natural gas leasehold deep rights that were sold were undeveloped, and as such not income-~~31-~~producing to the Company. The Company shall use the proceeds for general working capital purposes. On December 16, 2013, a Second Amendment to the APA was entered into by the Company and the Buyer to extend the Delayed Closing Date to January 16, 2014 as to certain Properties to allow the parties to continue to address the Buyer’s concerns about certain issues with the remaining Properties that did not close on December 17, 2013. On January 13, 2014, a Third Amendment to the APA was entered into by the Company and the Buyer to extend the Delayed Closing Date to February 17, 2014.

~~DALECO~~ Texas ~~RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2012 AND 2011~~Zeolite

	2012			2011
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	1,312,526		$	1,516,760
Revenue Payable to Oil and Gas Royalty and Other Working Interest Owners		917,144			1,010,332
Federal and State Income Taxes Payable		192,427			192,427
Accrued Interest Expense		1,099,441			985,079
Accrued Salary Expense		690,798			697,353
Accrued Expense Reimbursements		19,051			19,051
EV&T Note Payable		567,213			567,213
CAMI Notes Payable		455,943			514,881
Notes Payable - Related Parties		85,256			85,256
7.25% Convertible Debentures, net of unamortized discount of $4,515 at September 30, 2012		40,485			-
Premium Finance Note Payable		1,380			-
Note Payable - Other, net of unamortized discount of $7,397 at September 30, 2012		-			33,328
Note Payable – First Citizens Bank – Current Portion		-			15,000
Total Current Liabilities		5,381,664			5,636,680
Long-term Debt:
Note Payable – First Citizens Bank – Long-term Portion		-			15,454
7.25% Convertible Debentures, net of unamortized discount of $6,992 at September 30, 2011		-			38,008
Convertible Note Payable, net of unamortized discount of $22,908 and $44,639, respectively		239,717			346,515
Total Long-term Debt		239,717			399,977
Convertible Accrued Interest on Convertible Note Payable		5,359			3,489
Accrued Bonus Expense		1,373,831			1,373,831
Series B 8% Cumulative Convertible Preferred Stock Dividends Accrued		1,826,239			1,914,558
Future Abandonment Costs		10,000			10,000
TOTAL LIABILITIES		8,836,810			9,338,535
Commitments and Contingencies (see Note 8)
SHAREHOLDERS’ EQUITY:
Preferred Stock – 20,000,000 shares authorized
Series A Preferred Stock – par value $0.01 per share (outstanding: none)		-			-
Series B 8% Cumulative Convertible Preferred Stock – par value $0.01 per share (outstanding: 2012 – 135,000 shares; 2011 - 145,000 shares; liquidation preference of $1,350,000 and $1,450,000, respectively, plus arrearages in cumulative dividends of $1,934,239 and $1,914,558, respectively (see Note 9)		1,350			1,450
Common Stock – 100,000,000 shares authorized – par value $0.01 per share (outstanding: 2012 – 49,441,058 shares; 2011 – 48,988,914 shares)		494,411			489,889
Additional Paid-in Capital		46,418,820			46,718,270
Accumulated Deficit		(44,378,421	)		(43,605,662	)
Subscriptions Receivable		-			(576,000	)
Accumulated Other Comprehensive Loss		-			(5,699	)
TOTAL SHAREHOLDERS’ EQUITY		2,536,160			3,022,248
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	11,372,970		$	12,360,783

During September 2013, the company produced saleable minerals from its zeolite mineral deposit in Texas (“Texas Zeolite”). The Company shipped 105 tons of zeolite from its Texas property to a processing and fulfillment facility in Pennsylvania. A portion of such material required additional processing and such processing was completed in October 2013. Backlog orders approximated $2,000 as of September 30, 2013. Sales of the processed and unprocessed product to identified customers commenced in October 2013. On December 16, 2013, the Company entered into an agreement for the purchase of the extraction and crushing equipment of its contract operator of the property for $300,000. On January 16, 2014, the Company borrowed $250,000 from an unrelated party to fund the major portion of the purchase price and closed on the purchase of such equipment. The Company believes the capacity of such equipment is appropriate for anticipated extraction and crushing activities for the next three years. Depending on the level of sales activity, the Company may need to acquire or lease additional equipment. The Company has engaged a contract operator of such equipment and anticipates the commencement of larger-scale extraction activities to commence in February 2014. The Company has also contracted certain micro-processing capabilities to prepare certain samples and test material, including digestive supplements and human consumable products for ZLLC.

~~SEE ACCOMPANYING AUDITORS’ REPORT AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~33

~~-32-~~ Accelerated Payments

~~DALECO~~ The ~~RESOURCES~~Certain ~~CORPORATION~~Creditors, ~~AND~~Blackstone ~~SUBSIDIARIES~~and/or ~~CONSOLIDATED~~Novinskie ~~STATEMENTS~~are OFentitled ~~OPERATIONS~~to ~~FOR~~receive ~~THE~~accelerated ~~YEARS~~payment ~~ENDED~~of ~~SEPTEMBER~~their 30debt as discussed above. The Company may be required to make Accelerated Payments as a result of the (i) issuances of shares of Common Stock and (ii) the sale of certain oil and gas leasehold rights since the dates of the Forbearance Agreements, ~~2012~~Novinskie ~~AND~~Agreement ~~2011~~and Blackstone Agreement as such issuances and sale did not restrict the use of proceeds from such transactions. The Company anticipates making any required Accelerated Payments in a timely manner.

	2012			2011
Revenues:
Oil and Gas Sales	$	373,443		$	361,348
Well Management Revenue		287,446			285,758
Royalty Receipts		3,532			6,631
Mineral Sales		5,626			10,374
Total Operating Revenues		670,047			664,111
Expenses:
Lease Operating Expenses - Oil and Gas		182,027			155,929
Operating Expenses and Other Costs - Minerals		19,121			48,873
Production and Severance Taxes – Oil and Gas		20,878			21,702
Depreciation, Depletion and Amortization		313,612			695,656
General and Administrative Expenses		1,318,177			1,032,080
Total Expenses		1,853,815			1,954,240
Loss From Operations		(1,183,768	)		(1,290,129	)
Other Income (Expense):
Interest and Dividend Income		20,114			21,561
Interest Expense		(313,371	)		(379,690	)
Gain on Sale of Oil and Gas Properties		898,335			-
Impairment of Interest Receivable on Subscriptions Receivable		(207,025	)		-
Gain on Debt Forgiveness		43,655			-
Provision for Doubtful Account – Proceeds Receivable from Prior Sale of Oil and Gas Properties		(25,000	)		-
Impairment of Securities Available for Future Sale		(5,699	)		-
Total Other Income (Expense), Net		411,009			(358,129	)
Loss Before Income Taxes		(772,759	)		(1,648,258	)
Taxes based on Income		-			-
Net Loss		(772,759	)		(1,648,258	)
Preferred Stock Dividends		(112,000	)		(116,000	)
Net Loss Applicable to Common Shareholders	$	(884,759	)	$	(1,764,258	)
Basic and Fully Diluted Net Loss per share	$	(0.02	)	$	(0.04	)
Weighted-average number of shares of Common Stock Outstanding		49,187,396			47,423,457

Commercialization of Existing Assets

~~SEE~~ The ~~ACCOMPANYING~~Company ~~AUDITORS~~has identified fifteen (15) potential development and redevelopment opportunities associated with its existing leasehold acreage in Texas. The Company believes that the potential for the development of such locations will occur within the next few years as a result of renewed interest in the area of its properties. The prevailing oil price and the development of properties in “resource plays” in the area of the Company’s ~~REPORT AND~~acreage ~~NOTES~~are TOmajor ~~CONSOLIDATED~~factors ~~FINANCIAL~~contributing ~~STATEMENTS~~to such interest. At September 30, 2012 and 2013, the Company had assigned probable and possible reserves to the fifteen (15) potential developmental locations. The Company is actively seeking financing of approximately $2.5 million for its share of the estimated drilling and completion costs of such development opportunities. To obtain the capital necessary to develop these, the Company (1) continues to seek project specific funding commitments and other capital funding alternatives and (2) is evaluating the sale of certain oil and gas producing properties.

~~-33-~~ The Company continues to pursue plans to commercialize its kaolin and zeolite projects which are critical for the Company to achieve profitability and establish the Company as a market innovator in industrial minerals. Those plans have progressed from the data acquisition and analysis phase into ongoing mineral processing and facility design phase. The Company and its current partner and potential other partners are actively investigating various commercial applications for its mineral based products. The Company continues to focus on establishing business and or financial relationships that will provide the necessary capital to effectively exploit its kaolin and zeolite mineral resource holdings.

~~DALECO~~ In ~~RESOURCES~~connection ~~CORPORATION~~with ~~AND~~the ~~SUBSIDIARIES~~SPA, ~~CONSOLIDATED~~the ~~STATEMENTS~~Company OFentered ~~SHAREHOLDERS~~into an Exclusive Sales Agency and Marketing Agreement with FEI (“Marketing Agreement”). The Marketing Agreement grants to FEI the right to act as the Company’s ~~EQUITY~~exclusive ~~FOR~~marketing ~~THE~~and ~~YEARS~~sales ~~ENDED~~agent ~~SEPTEMBER~~for 30natural resources products produced, ~~2012~~mined ~~AND~~and/or ~~2011~~sold by the Company, excluding the Company’s ZeoSure products (see Note 4 of the Notes to Consolidated Financial Statements), in Asia excluding the nation of India.

	Series A Preferred Stock		Series B Cumulative Convertible Preferred Stock						Common Stock				Additional Paid-in			Accumulated			Subscriptions			Accumulated Other Comprehensive			Total Shareholders’
	Shares		Shares			Amount			Shares		Amount		Capital			Deficit			Receivable			Loss			Equity
Balance, September 30, 2010		-		145,000		$	1,450			45,461,945	$	454,619	$	45,574,252		$	(41,841,404	)	$	(576,000	)	$	(5,605	)	$	3,607,312
7.25% Convertible Debentures:
Conversion into Common Stock										350,000		3,500		45,500												49,000
Interest Expense and Premium Resulting from Beneficial Conversion Feature														24,786												24,786
Vendor Settlement: Issuance of Common Stock and Interest Expense recognized										357,677		3,577		46,498												50,075
January 2011 Note Payable: Issuance of Warrants to purchase Common Stock (Note Discount)														33,337												33,337
Consulting Services Agreement : Issuance of Common Stock and Warrants to purchase Common Stock										2,400,000		24,000		711,153												735,153
Issuance of Warrants to purchase Common Stock to Consulting Engineer														20,691												20,691
Amir Settlement Agreement: Issuance of Common Stock, Interest Expense recognized and Discount on Convertible Note										419,292		4,193		160,147												164,340
Other Comprehensive Loss																							(94	)		(94	)
Stock-based Compensation Expense														101,906												101,906
Preferred Dividends Accrued																	(116,000	)								(116,000	)
Net Loss																	(1,648,258	)								(1,648,258	)
Balance, September 30, 2011		-		145,000			1,450			48,988,914		489,889		46,718,270			(43,605,662	)		(576,000	)		(5,699	)		3,022,248
Issuance of Common Stock in Payment of Debt and Interest										298,290		2,983		101,281												104,264
Conversion of Series B Preferred Stock into Common Stock				(10,000	)		(100	)		80,000		800		(700	)											-
Issuance of Common Stock in Fulfillment of Series B Preferred Stock Dividend Obligation										73,854		739		78,643												79,382
Impairment of Subscriptions Receivable														(576,000	)					576,0000						-
Other Comprehensive Loss																							5,699			5,699
Stock-based Compensation Expense														97,326												97,326
Net Loss																	(772,759	)								(772,759	)
Balance, September 30, 2012		-		135,000		$	1,350			49,441,058	$	494,411	$	46,418,820	)	$	(44,378,421	)	$	-		$	-		$	2,536,160

Zeolite

~~SEE~~ In ~~ACCOMPANYING~~respect ~~AUDITORS’~~to ~~REPORT~~sanitary ~~AND~~wastewater ~~NOTES~~treatment TOapplications, ~~CONSOLIDATED~~the ~~FINANCIAL~~Company ~~STATEMENTS~~continues to supply material for use in a sequential batch reactor facility located in Pennsylvania and the Company has provided material for a confirmation test of the use of its ReNuGen(TM) product in an alternate design treatment plant. Certain small scale tests have progressed to the point where larger scalable pilot tests of commercial applications for zeolite are in progress in respect to soil additives, animal waste treatment and treatment of industrial wastewaters.

In October, 2009, the Company entered into an agreement to sell zeolite to be used in certain agricultural applications limited to feed supplements in a ten state area in the south-~~34-~~central part of the US. The Company has made limited shipments since fiscal 2010. The Company made no shipments during fiscal 2012. The development of this market has been hampered as a result of economic and environmental factors affecting the purchaser. During August 2012, the Company gave notice to the purchaser to terminate the agreement in October 2012 pursuant to the notice provision provided in the agreement. The Company intends to seek alternatives for the sale of its zeolite to be used in agricultural applications.

~~DALECO~~ In ~~RESOURCES~~February ~~CORPORATION~~2010, ~~AND~~the ~~SUBSIDIARIES~~Company ~~CONSOLIDATED~~entered ~~STATEMENTS~~into OFa ~~CASH~~License ~~FLOWS~~Agreement ~~FOR~~concerning ~~THE~~two ~~YEARS~~US ~~ENDED~~method ~~SEPTEMBER~~patents 30for the treatment of wastewaters. Such patents utilize the Company’s zeolite. The license applies to the US and covers the use of the technology in water, ~~2012~~wastewater ~~AND~~and ~~2011~~waste treatment in animal feed operations, agriculture, and aquaculture. In addition, the license applies to the treatment of sanitary wastewater on Federal facilities, military bases and lands administered by the US Bureau of Indian Affairs. The Company issued 140,000 shares of its Common Stock in consideration for the License Agreement. The Company recorded $40,907 as patents license rights based on an average price of $0.29 per share. Such patent license rights are fully amortized as of September 30, 2013.

	2012			2011
Cash Flows From Operating Activities:
Net Loss	$	(772,759	)	$	(1,648,258	)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used In) Operations:
Depreciation, Depletion and Amortization		313,612			695,656
Provision for Future Abandonment Costs		-			10,000
Amortization of Prepaid Consulting Services Agreement		366,575			217,341
Amortization of Discount on Notes Payable		29,128			28,239
Amortization of Discount on 7.25% Convertible Debentures		2,477			2,573
Gain on Debt Forgiveness		(43,655	)		-
Provision for Doubtful Account - Proceeds Receivable from Prior Sale of Oil and Gas Properties		25,000			-
Impairment of Securities Available for Future Sale		5,699			-
Impairment of Interest Receivable on Subscriptions Receivable		207,025
Non-cash Charge for Issuance of Securities		-			20,691
Non-cash Charge as Interest Expense		-			45,590
Stock Based Compensation Expense		97,326			101,906
Gain on Sale of Oil and Gas Properties		(898,335	)		-
Changes in Operating Assets and Liabilities:
Receivables		296,807			(217,615	)
Other Current Assets		(1,190	)
Prepaid Mineral Royalties		(29,986	)		(29,758	)
Restricted Cash Deposits		(1,131	)		(2,517	)
Accounts Payable		(204,234	)		351,846
Revenue Payable		(93,188	)		100,637
Accrued Interest Expense		176,276			198,465
Other Accrued Expenses		(6,555	)		2,838
Net Cash Used in Operating Activities		(531,108	)		(122,366	)
Cash Flows From Investing Activities:
Acquisition of Proved Developed Producing Oil and Gas Properties		(47,078	)		-
Proceeds from Sale of Oil and Gas Properties		898,335			-
Net Cash Provided By Investing Activities		851,257			-
Cash Flows From Financing Activities:
Payments on Notes and Debt		(197,980	)		(61,943	)
Proceeds from Borrowings		19,652			111,779
Net Cash Provided By (Used in) Financing Activities		(178,328	)		49,836
Net Change in Cash and Equivalents		141,821			(72,530	)
Cash and Equivalents at Beginning of Year		48,917			121,447
Cash and Equivalents at End of Year	$	190,738		$	48,917

	34

~~SEE~~ On ~~ACCOMPANYING~~April ~~AUDITORS’~~8, ~~REPORT AND~~2011, ~~NOTES~~in TOconnection ~~CONSOLIDATED~~with ~~FINANCIAL~~the ~~STATEMENTS~~efforts of the Musser Group, the Company entered into a Material Supply and Joint Venture Agreement between CAMI (wholly-owned subsidiary) and VitaminSpice, Inc. (“VSI”) pursuant to which CAMI agrees to supply Clinoptilolite (zeolite) to VSI in connection with the introduction by VSI of detoxification products into targeted geographic markets. VSI is obligated to utilize CAMI as its sole supplier of Clinoptilolite. The agreement does not specify any minimum quantity supply requirements of CAMI. In addition to an initial price per ton for Clinoptilolite to be sold to VSI, CAMI will share in the profits from the sales of such products by VSI. CAMI has provided material to VSI for use in product and market strategy development, as well as potential clinical studies. The Company made no shipments of product to VSI and the Company has not received any orders from VSI. VSI has not met certain performance standards as set forth in the agreement. On April 13, 2012, the Company gave notice to VSI and terminated the agreement pursuant to the provision in respect to termination for cause.

~~-35-~~ On July 3, 2012, CAMI entered into an operating agreement for ZeoSure LLC (“ZLLC”) as one of ZLLC’s two managing members. ZLLC was formed for the purpose of developing human consumption products including but not limited to detoxification and digestive supplements and human consumable products utilizing CAPI’S Clinoptilolite zeolite mineral focusing on markets throughout the world with a primary emphasis on markets in the United States and Asia. CAMI and SafeHatch LLC, an entity controlled by an individual previously affiliated with the Musser Group, are the managing members and each owns 47.5% of ZLLC. The remaining 5% of ZLLC is owned by the Musser Group. The members of ZLLC intend to seek initial capital of $1 million from third parties and enter into product marketing and distribution agreements with participants active within the dietary supplements market in the next few months. The operating agreement has not been ratified by the Audit Committee of the Board of Directors of the Company. Other than seeking initial capital and attempting to identify viable product marketing and distribution partners, ZLLC had no activity through September 30, 2013 (see “Recent Significant Activity” above).

~~DALECO~~ Since ~~RESOURCES~~hiring ~~CORPORATION~~its ~~AND~~Vice ~~SUBSIDIARIES~~President ~~CONSOLIDATED~~of ~~STATEMENTS~~Sales OFin ~~CASH~~April ~~FLOWS~~2013, ~~FOR~~the ~~THE~~Company ~~YEARS~~has ~~ENDED~~increased ~~SEPTEMBER~~its 30efforts to develop and expand viable markets for zeolite based products. In general these potential markets are based on the results of prior testing efforts. As such, ~~2012~~the ~~AND~~Company ~~2011~~has begun to introduce an absorbent product, Cite-Clean™ for use in minimizing unintended industrial discharges and a natural product additive for municipal compost producer to control odors and enhance the eventual nutrient uptake by plants in agricultural and horticultural applications.

	2012			2011
Supplemental Information:
Income Taxes Paid	$	-		$	-
Interest Paid	$	55,126		$	15,359
Supplemental Disclosure of Non-cash Transactions:
Issuance of Common Stock in Satisfaction of Series B 8% Cumulative Preferred Stock Dividend Arrearages due a Related Party	$	88,319		$	-
Conversion of Series B 8% Cumulative Preferred Stock into Common Stock	$	100,000		$	-
Issuance of Common Stock in Payment of Principal on Convertible Note Payable	$	70,000		$	-
Issuance of Common Stock in Payment of Principal and Interest on CAMI Note Payable due a Related Party	$	34,264		$	-
Preferred Dividends Not Paid, Accumulated and Accrued	$	-		$	116,000
Preferred Dividends Not Paid, Arrearage Accumulated	$	112,000		$	-
Impairment of Subscriptions Receivable	$	(576,000	)	$	-
Issuance of Common Stock in connection with Vendor Settlement	$	-		$	42,921
Issuance of Warrants for the Purchase of Common Stock to Consulting Engineer	$	-		$	20,691
Consulting Services Agreement activity:
Issuance of Common Stock	$	-		$	360,000
Issuance of Warrants for the Purchase of Common Stock	$	-		$	375,153
Amir Settlement Agreement:
Issuance of Common Stock in Payment of Series A Preferred Stock Dividends	$	-		$	59,338
Issuance of Common Stock in Payment of Note Payable	$	-		$	45,485
Interest Expense recognized	$	-		$	12,579
Issuance of Convertible Note Payable:
Payment of Accrued Interest	$	-		$	120,318
Payment of Accrued Salary Expense	$	-		$	270,836
Discount on Convertible Note Payable	$	-		$	46,938
Issuance of 7.25% Convertible Debenture in Payment of Principal and Interest on Note Payable - Related Party	$	-		$	20,000
Issuance of 7.25% Convertible Debenture in Payment of Consulting Fees due a Related Party	$	-		$	14,000
Conversion of 7.25% Convertible Debentures into Common Stock	$	-		$	49,000
Interest Expense Resulting from Issuance of Common Stock in connection with Vendor Settlement	$	-		$	7,154
Interest Expense Resulting from Beneficial Conversion Feature of 7.25% Convertible Debentures	$	-		$	25,857
Discount on Note Payable Resulting from Issuance of Warrants for the Purchase of Common Stock	$	-		$	33,337
Discount (Premium) on 7.25% Convertible Debentures resulting from Beneficial Conversion Feature	$	-		$	(1,071	)

Kaolin

~~SEE ACCOMPANYING~~ ~~AUDITORS~~The efforts of the Company and Tecumseh Professional Associates, Inc. (“TPA”) to evaluate the Sierra Kaolin deposit are ongoing. The venture’s ~~REPORT~~efforts ~~AND~~to ~~NOTES~~commercialize TOthe ~~CONSOLIDATED~~Sierra ~~FINANCIAL~~Kaolin ~~STATEMENTS~~deposit have focused on an initial target area encompassing approximately 32 acres out of the project’s 2,740 acres. The test minerals extracted from the target area have been processed into product formulations determined by independent consultants to be suitable (a) for coatings, fillers and pigments for use within the paint and paper manufacturing industries, and (b) as an additive in cement formulations. The analysis results of the processed minerals with respect to its physical properties including brightness, color, opacity, strength, and oil absorption have indicated that commercially viable products can be produced from the deposit’s extracted minerals.

In December 2009, the Sierra Kaolin Open Pit Clay Mine project cleared the regulatory review process and the project’s definitive USDA Forest Service Plan of Operations was approved. Mine site plans have been prepared to facilitate planned extraction operations. Since receiving project approval, the venture, with the assistance of its consultants, has made technical presentations of the product formulations to entities active (a) in the specialty cement applications and (b) on both the demand and supply sides of the coatings, fillers and pigments sectors of the paint and paper industries. While the feedback from these presentations has been encouraging, market conditions within the paper and housing industries have not been favorable; however, interest in the Sierra Kaolin deposit’s minerals for use in meta-~~36-~~kaolin applications has remained favorable. As such the project manager is focusing its commercialization efforts in this area.

~~DALECO~~ During ~~RESOURCES~~fiscal ~~CORPORATION~~2012, ~~AND~~in ~~SUBSIDIARIES~~addition ~~NOTES~~to TOthe ~~CONSOLIDATED~~meta-kaolin ~~FINANCIAL~~applications, ~~STATEMENTS~~because ~~FOR~~of ~~THE~~its ~~YEARS~~natural ~~ENDED~~brightness, ~~SEPTEMBER~~interest 30has been expressed relative to the use of the Sierra Kaolin material as a possible economic substitute and/or extender for titanium oxide within the filter and coating industries. TPA has also been in discussions with entities within the mining sector relative to other joint venture opportunities involving the mineral claims controlled by the Sierra Kaolin project. To date, ~~2012~~the ~~AND~~discussions ~~2011~~have been exploratory in nature.

~~1. CONTINUED OPERATIONS~~35

~~The~~ ~~financial~~During ~~statements~~2013, ~~have~~third ~~been~~party ~~prepared~~interest onin the ~~basis~~Sierra ofKaolin aProject ~~going~~has ~~concern,~~increased. ~~which~~Management ~~contemplates~~of ~~that~~the ~~Daleco~~Company ~~Resources~~believes ~~Corporation~~the market for fillers and ~~its~~ ~~subsidiaries~~coatings (the ~~“Company”)~~historical ~~will~~primary beuses ~~able~~for toKaolin ~~realize~~products) ~~assets~~have ~~and~~begun ~~discharge~~to ~~liabilities~~recover, inwhile the ~~normal~~interest ~~course~~in ofMeta-Kaolin ~~business. Accordingly,~~products ~~they~~in dothe ~~not~~Southwestern ~~give~~United ~~effect~~States has continued to ~~adjustments~~increase. ~~that~~This ~~would~~later bemarket ~~necessary~~is ~~should~~of particular interest to the Company bebecause ~~required~~test todata ~~liquidate~~indicates that its ~~assets. At~~Sierra ~~September~~Kaolin ~~30,~~mineral ~~2012,~~has ~~the~~specific ~~Company’s~~physical ~~current~~and ~~assets~~chemical ~~total~~properties ~~$592,772.~~that ~~For~~support ~~the~~its ~~fiscal~~use ~~year~~in ~~ended~~the ~~September~~application. ~~30,~~TPA ~~2012,~~as the ~~Company incurred~~project’s amanager ~~net~~is ~~loss~~aggressively ~~applicable~~pursuing tothese ~~common~~commercialization ~~shareholders of $884,759~~opportunities. ~~The~~ ~~ability~~Pursuant ofto the ~~Company~~Restated toDevelopment ~~meet~~and ~~its~~Operating ~~current~~Agreement ~~liabilities~~with ~~of $5~~TPA,~~381,664~~ ~~and~~(i) ~~its~~TPA ~~total~~shall ~~liabilities~~earn 65 % of ~~$8,836,810~~the ~~and~~net tocash ~~continue as~~flow afrom ~~going~~the ~~concern~~Sierra isKaolin ~~dependent~~operations ~~upon~~in the ~~availability~~event ofTPA ~~future~~develops ~~funding~~the property, ~~achieving~~including ~~profitability~~the ~~within~~construction ~~its~~and ~~mineral~~funding ~~segment~~of ~~and ongoing~~an ~~profitability~~appropriate ~~within~~processing ~~its~~facility ~~oil~~ and ~~gas~~(ii) ~~operations.~~TPA Ifshall ~~the~~be ~~Company~~entitled ~~is unable~~ to ~~continue~~50% asof athe ~~going~~sale ~~concern,~~proceeds ~~there~~in isthe ~~uncertainty relative~~event toof ~~full~~a ~~recoverability~~divestiture of ~~its~~the ~~assets.~~Sierra ~~The~~Kaolin ~~financial~~property ~~statements~~prior doto ~~not~~its ~~reflect~~development ~~any~~by ~~adjustments relating to these uncertainties~~TPA.

~~On February 25, 2011, the Company entered into a Consulting~~ ~~Services~~Off-balance ~~Agreement~~Sheet ~~with the Musser Group~~Arrangements, ~~LLC~~CONTRACTUAL ~~(“Musser~~OBLIGATIONS ~~Group”)~~AND to perform consulting services for the Company through February 2013. The Company engaged the Musser Group, an independent contractor, to provide advisory and consulting services to the Company. The Musser Group is engaged to provide (i) managed services; (ii) strategic business planning and implementation; and (iii) assistance in directing and executing the implementation of any strategies approved by the Board of Directors of the Company. The Musser Group’s primary focus is the analysis and validation of market opportunities for the commercialization of products within the Company’s mineral segment.COMMITMENTS

~~The~~ We ~~Company~~do ~~will~~not ~~continue~~have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “Variable Interest Entities,” that have or are reasonably likely to ~~seek~~have ~~out~~a ~~and~~current ~~entertain~~or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures. However, the request for project ~~specific~~ ~~funding~~financing ~~commitments~~for ZeoSure LLC is being presented to potential third parties and ~~other~~management of the Company will evaluate alternative financing structures as part of any negotiations with those potential sources of capital. ~~funding~~Also, ~~alternatives~~the ifcompany intends to request project financing for the (15) potential development and ~~when~~redevelopment ~~they~~opportunities ~~become~~associated ~~available~~with its existing leasehold acreage in Texas and management of the Company will evaluate alternative financing structures as part of any negotiations with those potential sources of capital.

As ofWe ~~September~~have ~~30,~~various ~~2012,~~contractual ~~the~~obligations ~~Company~~that ~~and~~are ~~certain~~appropriately ofrecorded ~~its~~as ~~subsidiaries~~liabilities ~~were~~ in ~~default~~our ofconsolidated ~~various~~financial ~~obligations~~statements. ~~and~~Certain ~~certain~~other ~~debt~~items ~~obligations classified~~are asnot ~~Current~~recognized ~~Liabilities~~as liabilities in ~~the~~our ~~accompanying~~consolidated ~~Balance~~financial ~~Sheet~~statements. asExamples ~~set~~of ~~forth~~items not recognized as liabilities in ~~the~~our ~~following~~consolidated ~~table.~~financial ~~Such defaulted~~statements ~~obligations~~are atcommitments to purchase goods and services that have not yet been received or rendered, respectively, as of September 30, ~~2012~~2013, ~~include~~and future minimum lease payments for the ~~following:~~use of property and equipment under operating lease agreements.

Amounts included in accounts payable:
Consulting Fees and Interest due to Patent Licensor (see Note 5)	$	42,009
Blackstone Consulting Services (see Notes 7 and 11)		187,403
EV&T – fees and expenses (see Note 6)		271,791
Accrued salary expense (see Note 7 and 11)		690,798
Accrued Expense Reimbursements (see Note 7)		19,051
EV&T note payable and accrued interest (see Note 6)		1,066,978
CAMI notes payable and accrued interest (see Note 6)		941,450
7.25% Convertible Debentures and accrued interest (see Notes 6 and 7)		52,913
Notes Payable – Related Parties and accrued interest (see Note 7)		98,934
Total	$	3,371,327

Certain contractual obligations classified as noncurrent liabilities in the consolidated balance sheet as of September 30, 2013 include accrued bonus expense ($457,944) and Series B 8% Cumulative Convertible Preferred Stock Dividends accrued ($1,826,239). See Note 9 of the Notes to Consolidated Financial Statements regarding the cumulative dividends in arrears of $2,042,239 at September 30, 2013, applicable to the Series B 8% Cumulative Convertible Preferred Stock.

~~The majority of the above amounts are owed to related parties.~~ ~~Such~~New ~~related~~Accounting ~~parties and EV&T are working with the Company to achieve the ultimate extinguishment of the obligations as the Company attempts to achieve profitability within its mineral segment.~~Standards

~~To obtain capital in the past, the Company’s capital obtainment~~ ~~methods~~For ~~have~~details ~~included~~of ~~selling~~applicable ~~its~~new ~~interest~~accounting ~~in certain oil and gas properties~~standards, ~~and borrowing funds from and issuing Common Stock to related and unrelated parties~~please, asrefer ~~well as utilizing joint venture structures. If the Company is not successful in increasing its operating cash flows and the preceding financing methods are not available, the Company may not be able~~ to ~~sustain~~Note ~~its~~2 ~~operations and~~of ~~may~~Notes ~~need~~ to ~~seek~~Consolidated ~~alternative~~Financial ~~actions to preserve shareholder value~~Statements.

~~Liquidity is a measure of a Company’s ability to access~~ ~~cash.~~Critical ~~The~~Accounting Company has historically addressed its long-term liquidity requirements through the issuance of equity securities and borrowings or debt financing for certain activities. At present, the Company does not have in place a credit facility or other line of credit upon which it may draw. As operating activities increase, the Company will evaluate the need for such a credit facility. For desired acquisitions or project enhancements, the Company must seek project specific financing. See Note 4 regarding ZeoSure LLC. None of the Company’s properties are encumbered.Policies

~~-37-~~ General

~~DALECO~~ The ~~RESOURCES~~preparation ~~CORPORATION~~of ~~AND~~financial ~~SUBSIDIARIES~~statements ~~NOTES~~in TOaccordance ~~CONSOLIDATED~~with ~~FINANCIAL~~accounting ~~STATEMENTS~~standards ~~FOR~~generally ~~THE~~accepted ~~YEARS~~in ~~ENDED~~the ~~SEPTEMBER~~United 30States requires management to make estimates and assumptions that affect both the recorded values of assets and liabilities at the date of the financial statements and the revenues recognized and expenses incurred during the reporting period. Our estimates and assumptions affect our recognition of deferred expenses, ~~2012~~bad ~~AND~~debts, ~~2011~~income taxes, the carrying value of our long-lived assets and our provision for certain contingencies. We evaluate the reasonableness of these estimates and assumptions continually based on a combination of historical information and other information that comes to our attention that may vary our outlook for the future. Actual results may differ from these estimates under different assumptions.

~~The prices the Company receives for its oil and gas and the~~ ~~level~~We ofsuggest ~~production~~that ~~have a significant impact on~~ the ~~Company’s~~Summary ~~cash~~of ~~flows.~~Significant ~~The~~Accounting ~~Company~~Policies, isas ~~unable~~described toin ~~predict,~~Note ~~with~~2 ~~any degree~~ of ~~certainty~~Notes ~~the~~to ~~prices~~Consolidated ~~the~~Financial ~~Company~~Statements, ~~will~~be ~~receive~~read ~~for~~in ~~its~~conjunction ~~future~~with ~~oil~~this ~~and~~Management’s ~~gas~~Discussion ~~production~~ and ~~the~~Analysis ~~success~~ of ~~the~~Financial ~~Company’s~~Condition ~~exploration, exploitation~~ and ~~production~~Results ~~activities~~of Operations. ~~Increases~~We inbelieve the ~~sales~~critical ofaccounting ~~the~~policies ~~Company’s~~that ~~minerals,~~most ~~which~~impact toour ~~date~~consolidated ~~have~~financial ~~not~~statements ~~been~~are ~~mined in~~described ~~substantial commercial quantities, will also affect cash flow~~below.

~~In an effort to address the liquidity shortfall, the Company~~ ~~continues~~Going ~~its~~Concern cost containment procedures which had included staff decreases, sold certain of its oil and gas properties, and is evaluating the sale of certain additional oil and gas properties. It may take months and possibly longer to sell these properties at a suitable price. The market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand that are beyond our control. We cannot predict whether we will be able to sell a property for the price or on terms acceptable to us or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of any property.

The financial statements have been prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be required to liquidate its assets. For 2013 and 2012, the Company incurred a net loss applicable to common shareholders of $2,132,509 and $884,759, respectively. ~~BASIS~~The OFability ~~PRESENTATION~~of the Company to meet its current liabilities of $5,459,700 and its total liabilities of $7,753,883 at September 30, 2013, and to continue as a going concern is dependent upon the availability of future funding, achieving profitability within its mineral segment, and ongoing profitability within its oil and gas operations. If the Company is unable to continue as a going concern, there is uncertainty relative to full recoverability of its assets.

~~Description of Business~~36

~~Daleco Resources Corporation (“DRC”) is a Nevada~~ ~~corporation~~Fair ~~and~~Value ~~its Articles provide for authorized capital stock~~ of ~~100,000,000~~Financial shares of common stock and 20,000,000 shares of preferred stock. The Company is a natural resources holding company whose subsidiaries are engaged in (i) the exploration, development and production of oil and gas; (ii) the exploration for naturally occurring minerals; (iii) the marketing and sales of such minerals; and (iv) the marketing and sales of patented products and processes utilizing the Company’s minerals. The Company's assets consist of two separate categories: oil and gas and non-metallic minerals. The Company’s wholly-owned active subsidiaries include Westlands Resources Corporation, Deven Resources, Inc., DRI Operating Company, Inc., Clean Age Minerals, Inc. and CA Properties, Inc.Instruments

~~Clean~~ The ~~Age~~Company’s ~~Minerals,~~only ~~Inc.,~~financial ~~through~~instruments ~~its~~are ~~subsidiary~~cash, CAshort-term ~~Properties, Inc.~~trade ~~(collectively “CAMI”)~~receivables, ~~owns fee interests~~payables, ~~leasehold~~and ~~interests~~debt. ~~and~~The ~~federal~~carrying ~~mining~~amounts ~~claims~~reported ~~containing~~in ~~non-metallic minerals~~the ~~(kaolin~~accompanying ~~and~~consolidated ~~zeolite)~~financial instatements ~~the~~for ~~states~~cash, ofshort-term ~~New~~trade ~~Mexico~~receivables, ~~Texas~~payables and ~~Utah.~~debt ~~CAMI~~approximate isfair ~~presently~~values ~~engaged~~because inof the ~~exploration~~immediate ~~for~~nature ~~such minerals~~of ~~and~~short-term ~~intends~~maturities toof ~~mine~~these ~~the~~financial ~~minerals~~instruments. ~~through~~The ~~the~~Company ~~use~~has ofno ~~contract~~long-term ~~miners~~or ~~and~~short-term ~~arrangements~~bank ~~with~~debt ~~its~~outstanding ~~joint~~at ~~venture~~September ~~partners~~30, 2013.

~~The Company, through its subsidiaries, Westland Resources Corporation,~~ DRI Operating Company and Deven Resources, Inc., owns and operates oil and gas properties in Texas and West Virginia. The Company owns (a) working interests in wells in Texas and West Virginia and (b) overriding royalty interests in (i) seventy wells in the Deerlick Coalbed Methane Field in Alabama and (ii) two wells in Pennsylvania and (iii) one well in Texas.Receivables

In ~~February~~the ~~2010~~normal course of business, ~~the~~we ~~Company~~extend ~~entered~~credit ~~into~~to our customers on a ~~License~~short-term ~~Agreement concerning~~basis. ~~two~~Our USprincipal ~~method~~customers ~~patents~~are ~~for~~major ~~the~~oil ~~treatment~~and ofnatural ~~wastewaters~~gas exploration, development and production companies. ~~Such~~Credit ~~patents~~risks ~~utilize~~associated ~~the~~with ~~Company’s~~these ~~zeolite.~~customers ~~The~~are ~~license applies~~considered tominimal. ~~the~~Dealings USwith ~~and~~smaller, ~~covers~~local ~~the~~companies, ~~use~~particularly ofwith the ~~patented~~current ~~technology~~difficulties in ~~water~~equity and credit markets, ~~wastewater~~pose ~~and~~the ~~waste~~greatest ~~treatment~~risks. inWe ~~animal~~routinely ~~feed~~review ~~operations, agriculture,~~our ~~and~~accounts ~~aquaculture.~~receivable Inbalances ~~addition,~~and ~~the~~make ~~license~~provisions ~~applies~~for todoubtful ~~the~~accounts ~~treatment~~as ofnecessary. ~~sanitary~~Accounts ~~wastewater~~are reviewed on ~~Federal~~a ~~facilities,~~case ~~military bases~~by case basis and ~~lands~~losses ~~administered~~are byrecognized in the USperiod ~~Bureau~~if ofwe ~~Indian~~determine ~~Affairs~~it is likely that receivables will not be fully collected. ~~See~~We ~~Note~~may 5also ~~and~~provide ~~the~~a ~~“Intangible~~general ~~Assets”~~provision ~~section~~for ~~below~~accounts receivables based on existing economic conditions.

~~The Company is primarily engaged in oil and gas activities and~~ ~~the~~Subscriptions ~~exploration~~Receivable for non-metallic minerals. We follow accounting standards set by the Financial Accounting Standard Board, commonly referred to as “FASB”. The FASB sets generally accepted accounting principles (“GAAP”) that we follow to ensure we consistently report our financial position, results of operations, and ~~cash~~Interest flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification, sometimes referred to as the “Codification” or “ASC”. From time to time, the FASB may issue an Accounting Standards Update (“ASU”) which may impact the financial statements and disclosures therein (see “Recent Accounting Pronouncements”).Receivable

~~Use~~ As of ~~Estimates~~September 30, 2013, management of the Company believes that the collection of the principal balance of and interest due pursuant to a certain note receivable is in doubt (see Note 11 of the Notes to Consolidated Financial Statements). As of September 30, 2012, the Company changed to the recovery method in accounting for the notes receivable and interest thereon. Accordingly, the principal and interest will be recorded when, and if, collected. This change to the recovery method resulted in the recognition of $207,025 as an impairment of the interest receivable at September 30, 2012. The principal balance of the notes receivable ($576,000) was previously reflected as subscriptions receivable. Additional paid-in capital was reduced by $576,000 as of September 30, 2012, to reflect the impairment of the notes receivable.

~~The preparation of financial statements in conformity with GAAP~~ ~~requires~~Oil ~~management to make estimates~~ and ~~assumptions~~gas that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from these estimates.properties

The Company follows the successful efforts method of accounting for the costs of exploration and development activities. Costs of successful exploration wells, development wells, and direct acquisition costs of developed and undeveloped leases containing proved reserves are capitalized and amortized on a unit-38of-production method over the life of the related reserves. Costs of exploratory wells found to be dry are expensed. Support equipment and other property and equipment recorded at cost are amortized using the straight-line method over their estimated useful lives.

~~DALECO~~ Mineral ~~RESOURCES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011~~properties

~~Significant~~ The ~~estimates~~Company ~~made~~recorded inthe ~~preparing~~acquisition ~~these~~of ~~Consolidated~~Clean ~~Financial Statements~~Age ~~include~~Minerals, ~~among other things~~Inc., ~~estimates of the proved oil~~ and ~~natural~~associated ~~gas~~minerals ~~reserve~~rights ~~volumes~~on ~~used~~September in19, ~~calculating Depletion~~2000, ~~Depreciation~~ ~~and~~at ~~Amortization~~cost ~~(“DD&A”)~~as ~~expense;~~based on the ~~estimated~~stated ~~future cash flows and fair~~ value of ~~properties used in determining~~ the ~~need~~Series ~~for~~B ~~any~~Preferred ~~impairment~~Stock ~~write-down;~~issued ~~volumes~~which ~~and~~was ~~prices~~less ~~for~~than ~~revenues accrued; estimates of~~ the ~~fair~~appraised value of ~~equity-based~~ ~~compensation~~the ~~awards;~~entity ~~deferred~~acquired. The ~~tax~~Company ~~valuation~~has ~~and~~not ~~the~~produced ~~timing~~large-scale ~~and~~quantities ~~amount~~ of ~~future~~any ~~abandonment~~of ~~costs~~its ~~used~~mineral ~~in calculating asset retirement obligations~~deposits. ~~Future~~The ~~changes~~Company is in the ~~assumptions~~production ~~used~~phase ~~could~~of ~~have~~its aTexas ~~significant~~Zeolite ~~impact~~as onsaleable ~~reported~~minerals ~~results~~have inbeen ~~future periods.~~extracted ~~The~~(produced) ~~significant~~from ~~estimates~~such ~~are~~mineral ~~based~~deposit. onOnce ~~current~~the ~~assumptions~~Company ~~that~~produces ~~may~~commercial bequantities ~~materially~~of ~~affected~~any byof ~~changes~~its tomineral ~~future~~deposits, ~~economic conditions such as~~ the ~~market~~Company ~~prices~~will ~~received~~use ~~for~~the ~~sales~~ unit-of-production ~~volumes~~method ofin ~~oil~~calculating ~~and~~cost ~~natural gas, interest rates and our ability to generate future income~~depletion.

~~Basis~~ Impairment of ~~Consolidation~~Long-Lived Assets

~~The~~ Long-lived ~~consolidated~~assets ~~financial~~are ~~statements~~reviewed ~~have~~for ~~been~~impairment ~~prepared~~whenever events or changes in ~~accordance~~ ~~with~~circumstances ~~generally~~indicate ~~accepted~~that ~~accounting~~the ~~principles~~carrying amount of an asset may not be recoverable. Recoverability of assets to be held and ~~include~~used ~~the~~is ~~accounts~~measured by comparison of ~~Daleco~~the ~~Resources~~carrying ~~Corporation,~~amount ~~its~~of ~~wholly-owned subsidiaries~~an ~~and~~asset ~~their~~to ~~wholly-owned~~future ~~subsidiaries:~~net ~~Westlands~~cash ~~Resources~~flows ~~Corporation~~expected ~~(“WRC”),~~to ~~Sustainable~~be ~~Forest~~generated ~~Industries, Inc~~by the asset., ~~Deven~~If ~~Resources~~such assets are considered to be impaired, ~~Inc~~the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets., ~~DRI~~At ~~Operating~~September ~~Company~~30, ~~(“DRIOP”)~~2013, ~~Tri~~we reviewed our long-~~Coastal~~lived ~~Energy,~~assets ~~Inc.,~~and ~~Clean~~determined ~~Age~~that ~~Minerals,~~the ~~Inc~~prepaid mineral royalties were impaired as discussed in Note 2 of the Notes to Consolidated Financial Statements. ~~(“CAMI”), CA~~At ~~Properties~~September 30, ~~Inc.~~2012, we reviewed our long-lived assets and ~~The~~determined ~~Natural~~no ~~Resources~~impairment ~~Exchange,~~was ~~Inc~~necessary.

~~Tri~~ Long-~~Coastal~~Lived ~~Energy,~~Assets ~~Inc.,~~to ~~Sustainable~~be ~~Forest~~Disposed ~~Industries, Inc. and The Natural Resources Exchange, Inc. are inactive.~~Of

~~The~~ Assets ~~Company’s~~to ~~investments~~be indisposed ~~oil~~of ~~and gas leases~~ are ~~accounted for~~reported ~~using~~at ~~proportionate~~the ~~consolidation~~lower ~~whereby~~of the ~~Company’s~~carrying ~~pro~~amount ~~rata~~or ~~share~~fair ofvalue ~~each~~less ofcosts ~~the~~to ~~assets,~~sell. ~~liabilities,~~The ~~revenues~~oil and ~~expenses~~ ofgas ~~the~~leasehold ~~investments~~rights ~~are~~subject ~~aggregated~~to ~~with~~a ~~those~~purchase ofand ~~the~~sale ~~Company~~agreement indated ~~its~~October ~~financial~~6, ~~statements.~~2013, ~~The~~have ~~Company’s~~no ~~investments~~ carrying amount in ~~minerals~~the ~~are~~accompanying ~~accounted~~Consolidated ~~for~~Balance ~~using~~Sheets ~~purchase~~as ~~accounting~~of ~~methods~~September 30, 2013 and 2012.

~~Certain reclassifications have been made to prior period financial~~ ~~statements~~Environmental ~~to conform to the current presentation.~~Remediation

~~Cash~~ The Company's policy is to accrue environmental and ~~Cash~~cleanup ~~Equivalents~~related costs of a noncapital nature when it is both probable that a liability has been incurred and when the amount can be reasonably estimated. The Company accrues for certain environmental remediation related activities for which commitments or cleanup plans have been developed or for which costs or minimum costs can be reasonably estimated. It is reasonably possible that, due to uncertainties associated with defining the nature and extent of contamination, application of laws and regulations by regulatory authorities and changes in remediation technology, the ultimate cost of remediation could materially change in the future. Any liability established would not necessarily be the minimum or maximum liability, but based upon the Company's experience and the advice of its outside consultants; ~~Restricted~~ ~~Cash~~it ~~Deposits~~would most accurately reflect the Company's liability based on the information currently available. As a general rule, the Company accrues remediation costs for continuing operations on a discounted basis and does not accrue for normal operating and maintenance costs for site monitoring and compliance requirements. It has not been necessary for the Company to record any environmental remediation costs for 2013 and 2012.

~~Cash and cash equivalents include cash and investments with~~ ~~original~~Asset ~~maturities~~Retirement ofObligation ~~three months or less. The Company’s net cash at September 30, 2012, totaled $190,738.~~

~~Restricted~~ The ~~cash~~Company ~~deposits~~may ~~totaling~~have ~~$109,609~~an atobligation ~~September~~to 30retire property, ~~2012~~ plant, ~~are~~and ~~classified~~equipment asat ~~Other~~the ~~Assets~~end of their useful fives. The Company performs periodic reviews for any changes in ~~the~~facts ~~accompanying~~and ~~Balance~~circumstances ~~Sheets~~that asmight ~~they~~enable ~~support~~it ~~financial~~to ~~assurance~~determine ~~requirements~~a ~~for~~reasonable estimate of any asset retirement obligation (“ARO”). When an ARO is necessary, the Company’s ~~operations~~estimates ofthe ~~its~~fair ~~mineral~~value, ~~properties~~establishes a liability, and ~~its~~increases ~~oil~~the ~~and~~carrying ~~gas~~value ~~properties~~of inthe ~~certain~~assets ~~states~~by asa ~~follows:~~corresponding amount.

Texas and West Virginia Oil and Gas Operations Bonding Requirements		$	60,010
New Mexico Minerals Operations Bonding Requirements		$	49,599

An ARO associated with the retirement of a tangible long-lived asset is required to be recognized as a liability in the period in which it is incurred and becomes determinable. Under this method, when liabilities for dismantlement and abandonment costs, excluding salvage values, are initially recorded, the carrying amount of the related assets (mineral, oil and natural gas properties) is increased. The fair value of the ARO asset and liability is measured using expected future cash outflows discounted at the credit-adjusted risk-free interest rate. Accretion of the liability is recognized each period using the interest method of allocation, and the capitalized cost is depleted over the useful life of the related asset. The estimated residual salvage values are taken into account in determining amortization and depreciation rates.

~~Accounts~~ Generally, ~~Receivable~~the salvage value of the Company’s producing wells or mining deposits is expected to exceed the cost of site restoration and abandonment. To date, mining and exploration activities of the Company's mineral deposits have been conducted by contract mining companies. As mining activity increases, the Company may accrue site restoration costs as appropriate.

Our trade accounts receivable, which are primarily from oil and natural gas sales and joint interest billings, are recorded at the invoiced amount and include production receivables. The production receivable is valued at the invoiced amount and does not bear interest. Accounts receivable also include joint interest billing receivables which represent billings to the non-operators associated with the drilling and operation of wells and are based on those owners’ working interests in the wells. We have assessed the financial strength of our customers and joint owners and determined that an allowance of $25,000 for estimated uncollectible amounts was necessary at September 30, 2012; no allowance for estimated uncollectible amounts was necessary at September 30, 2011.37

~~Subscriptions~~ As ~~Receivable~~of September 30, 2013 and ~~Interest~~2012, ~~Receivable~~the Company has accrued future abandonment costs of $10,000 of costs associated with the potential abandonment and restoration of a mining deposit that was abandoned prior to fiscal 2010.

~~As of September 30, 2012, management of the Company believes~~ ~~that~~Item ~~the collection of the principal balance of and interest due pursuant to certain notes receivable is in doubt (see Note 11 of the Notes to Consolidated Financial Statements)~~7A. AsQuantitative ~~of September 30, 2012, the Company changed to the recovery method in accounting for the notes receivable~~ and ~~interest~~Qualitative ~~thereon.~~Disclosures ~~Accordingly,~~About ~~the~~Market ~~principal and interest will be recorded when, and if, collected~~Risk. This change to the recovery method resulted in the recognition of $207,025 as an impairment of the interest receivable at September 30, 2012. The principal balance of the notes receivable ($576,000) was previously reflected as subscriptions receivable. Additional paid-in capital was reduced by $576,000 as of September 30, 2012, to reflect the impairment of the notes receivable.

~~-39-~~ Not required as the registrant is a smaller reporting company.

~~DALECO RESOURCES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011~~38

~~Inventory~~ Item 8. Financial Statements and Supplementary Data.

We The ~~have~~following noaudited ~~inventory~~financial atstatements ~~September~~are ~~30,~~included ~~2012.~~herein:

~~Prepaid~~* ~~Consulting~~Reports ~~Services~~of ~~Agreement~~Independent ~~Fees~~Registered Public Accounting Firms * Consolidated Balance Sheets * Consolidated Statements of Operations * Consolidated Statements of Shareholders’ Equity * Consolidated Statements of Cash Flows * Notes to Consolidated Financial Statements

~~The~~ ~~prepaid~~The ~~consulting~~following ~~fees~~unaudited ~~are~~supplementary information ~~being~~is ~~amortized~~included ~~over~~herein ~~the~~in ~~two~~Notes ~~year~~13 ~~life of the agreement. At September 30, 2012, Prepaid Consulting Services Agreement Fees totaled $151,237~~ and ~~was~~14 ~~classified as a Current Asset. Amortization~~ of ~~$366,575~~the ~~and~~Notes ~~$217,341,~~to ~~respectively,~~Consolidated isFinancial ~~included in General and Administrative Expenses during fiscal 2012 and 2011. See Note 9.~~ Statements:

~~Intangible~~* ~~Assets~~Estimated Net Quantities of Proved Oil and Gas Reserves * Standardized Measure of Discounted Future Net Cash Flow from Estimated Production of Proved Oil and Gas Reserves * Summary of Changes in Standardized Measure of Discounted Future Net Cash Flows

At September 30, 2012, the intangible assets consisted of Net Patent License Rights of $4,556. The Patent Rights were amortized over the life of such patent, which expired in fiscal 2012. The Patent License Rights are being amortized over the initial term of the agreement. Such initial term expires in fiscal 2013. See Note 5.39

~~Prepaid~~ REPORT ~~Mineral~~OF ~~Royalties~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~The~~ To ~~Company receives a credit in~~ the ~~nature~~Board of ~~prepaid~~Directors ~~mineral royalties for advance royalties paid on the Marfa zeolite lease located in Presidio County, Texas. At September 30, 2012~~ and 2011, Prepaid Mineral Royalties were $509,254 and $479,268, respectively. Such amounts are classified as Other Assets in the accompanying Balance Sheets. No portion has been classified as a current asset as the Company’s agreements concerning sales of such mineral do not have any minimum supply requirements as discussed in Note 8.

~~Mineral~~ Shareholders ~~Properties~~of ~~and~~Daleco ~~Reserves~~Resources Corporation

~~The~~ ~~Company~~We ishave anaudited ~~Exploration~~the ~~Stage~~accompanying ~~company~~consolidated inbalance ~~respect~~sheet toof ~~its~~Daleco ~~mineral~~Resources ~~holdings~~Corporation and Subsidiaries as ~~such,~~of ~~no proved reserves are estimated. At~~ September 30, ~~2012~~2013, and ~~2011,~~the ~~Net~~related ~~Mineral~~consolidated ~~Properties~~statements ~~were~~of $9operations,~~782,128.~~ ~~The Company~~shareholders’ ~~previously~~equity, ~~amortized~~and ~~its~~cash ~~mineral~~flows ~~properties~~for atthe ayear ~~nominal~~then ~~amortization~~ended. ~~rate~~These asconsolidated ~~the~~financial ~~Company~~statements ~~has~~are ~~not~~the ~~produced~~responsibility ~~commercial quantities~~ of ~~any of its mineral deposits. Once~~ the Company’s ~~produces~~management. ~~commercial~~Our ~~quantities~~responsibility ofis ~~any~~to ofexpress ~~its~~an ~~mineral~~opinion ~~deposits,~~on ~~the~~these ~~Company~~consolidated ~~will use~~financial ~~the~~statements ~~unit-of-production~~based ~~method~~on inour ~~calculating cost depletion~~audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company ~~has~~is ~~recorded~~not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the ~~acquisition~~circumstances, but not for the purpose of ~~Clean~~expressing ~~Age~~an ~~Minerals~~opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, ~~Inc~~ we express no such opinion. ~~and~~An ~~associated~~audit ~~minerals~~includes ~~rights~~examining, aton ~~cost~~a ~~(see~~test ~~Note~~basis, 4)evidence supporting the amounts and disclosures in ~~September~~the ~~2000~~consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

~~Oil~~ In our opinion, the 2013 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Daleco Resources Corporation and ~~Natural~~Subsidiaries ~~Gas~~as ~~Property~~of September 30, ~~Depreciation~~2013, ~~Depletion~~ and ~~Amortization~~the ~~(DD&A)~~results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We The ~~account~~accompanying ~~for~~consolidated ~~natural~~financial ~~gas~~statements ~~and~~for ~~oil exploration and production activities under~~ the ~~successful~~year ~~efforts~~ended ~~method~~September of30, ~~accounting.~~2013 ~~Proved~~have ~~developed~~been ~~natural~~prepared ~~gas~~assuming ~~and~~that ~~oil~~the ~~property~~Company ~~acquisition~~will ~~costs~~continue ~~are capitalized~~as ~~when incurred. Unproved properties with individually significant acquisition costs are assessed periodically on~~ a ~~property-by- property~~going ~~basis,~~concern. ~~and~~As ~~any~~discussed ~~impairment~~ in ~~value~~Note is1 ~~recognized.~~to If the ~~unproved~~consolidated ~~properties~~financial ~~are determined to be productive~~statements, the ~~appropriate related~~Company ~~costs~~has ~~are~~suffered ~~transferred~~significant torecurring ~~proved~~net ~~natural~~losses ~~gas~~from ~~and~~operations ~~oil properties. Natural gas~~ and ~~oil~~negative ~~exploration~~operating ~~costs~~cash flow, ~~other~~which ~~than~~raise ~~the~~substantial ~~costs of~~doubt ~~drilling~~about ~~exploratory~~its ~~wells,~~ability ~~are charged~~ to ~~expense~~continue as ~~incurred.~~a ~~The~~going ~~costs~~concern. ofManagement’s ~~drilling~~plans ~~exploratory~~concerning ~~wells~~these matters are ~~capitalized~~also ~~pending determination~~described ofin ~~whether~~Note ~~they~~1 ~~have~~to ~~discovered~~the ~~proved~~consolidated ~~commercial~~financial ~~reserves~~statements. IfThe ~~proved~~consolidated ~~commercial~~financial ~~reserves~~statements ~~are~~do not ~~discovered,~~include ~~such drilling~~any ~~costs~~adjustments ~~are~~that ~~expensed.~~might ~~Costs~~result tofrom ~~develop proved reserves, including~~ the ~~costs~~outcome of ~~all~~these ~~development well and related equipment used in the production of natural gas and oil, are capitalized~~uncertainties.

~~DD&A~~/s/ isMAYER ~~calculated~~HOFFMAN ~~using~~MCCANN ~~the unit-of-production method on estimated proved oil and gas reserves at the field, lease, unit or well level~~P. ~~In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas are established based on estimates made by our independent engineers~~C. We ~~periodically~~Mayer ~~review~~Hoffman ~~estimated~~McCann proved reserve estimates and make changes as needed to DD&A expenses to account for new wells drilled, acquisitions, divestitures and other events which may have caused significant changes in our estimated proved developed producing reservesP. ~~The costs of unproved properties are withheld from the depletion base until such time as they are either developed or abandoned~~C. ~~When~~Plymouth ~~proved reserves are assigned~~Meeting, ~~the~~PA ~~cost~~February of the property is added to costs subject to depletion calculations. Non-producing properties consist of undeveloped leasehold costs and costs associated with the purchase of certain proved undeveloped reserves. Undeveloped leasehold cost is allocated to the associated producing properties as the undeveloped acreage is developed. Individually significant non-producing properties are periodically assessed for impairment of value. Service properties14, ~~equipment and other assets are depreciated using the straight-line method over their estimated useful lives of three to 30 years.~~2014

-40-

~~DALECO~~ REPORT ~~RESOURCES~~OF ~~CORPORATION~~INDEPENDENT ~~AND~~REGISTERED ~~SUBSIDIARIES~~PUBLIC ~~NOTES~~ACCOUNTING ~~TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011~~FIRM

~~When circumstances indicate that an asset may be impaired, we~~ ~~compare~~To ~~expected undiscounted future cash flows at a producing field to~~ the ~~unamortized~~Board ~~capitalized cost~~ of ~~the~~Directors ~~asset. If the future undiscounted cash flows, based on our estimate of future natural gas~~ and oil prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is calculated by discounting the future cash flows at an appropriate risk-adjusted discount rate. When evaluating our unproved oil and gas properties, we utilize active market prices for similar acreage to use as a comparison tool against the carrying value of our properties. If the active market prices for similar acreage do not support our carrying values we then utilize estimates of future value that will be created from the future development of these properties. If future estimated fair value of these properties is lower than the capitalized cost, the capitalized cost is reduced to the estimated future fair value.Shareholders

~~Expenditures for repairs and maintenance to sustain production~~ ~~from~~of ~~the~~Daleco ~~existing~~Resources producing reservoirs are charged to expense as incurred. Expenditures to recomplete a current well in a different unproved reservoir are capitalized pending determination that economic reserves have been added. If the recompletion is not successful, the expenditures are charged to expense.Corporation

~~Significant~~ We ~~tangible~~have ~~equipment~~audited ~~added~~the oraccompanying ~~replaced~~consolidated ~~that~~balance ~~extends the~~sheet ~~useful~~of orDaleco ~~productive~~Resources ~~life~~Corporation and Subsidiaries as of September 30, 2012, and the ~~property~~related isconsolidated ~~capitalized.~~statements ~~Expenditures~~of tooperations, ~~construct~~shareholders’ ~~facilities~~equity, orand ~~increase~~cash flows for the ~~productive~~year ~~capacity from~~then ~~existing~~ended. ~~reservoirs~~These consolidated financial statements are ~~capitalized~~the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

~~Upon~~ We ~~the~~conducted ~~sale~~our oraudit ~~retirement~~in ofaccordance awith ~~proved~~the ~~natural~~standards ~~gas~~of orthe ~~oil~~Public ~~property, or~~Company anAccounting ~~entire~~Oversight ~~interest~~Board in(United ~~unproved~~States). ~~leaseholds,~~Those ~~the~~standards ~~cost~~require that we plan and ~~related~~perform ~~accumulated~~the ~~DD&A~~audit ~~are~~to ~~removed~~obtain ~~from~~reasonable ~~the~~assurance ~~property~~about ~~accounts and~~whether the ~~resulting~~consolidated ~~gain~~financial orstatements ~~loss~~are free of material misstatement. The Company is ~~recognized~~not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. ~~For~~Our ~~sales~~audit included consideration of internal control over financial reporting as a ~~partial~~basis ~~interest~~for designing audit procedures that are appropriate in ~~unproved~~the ~~leaseholds~~circumstances, but not for ~~cash~~the orpurpose ~~cash~~of ~~equivalents~~expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, ~~sales~~ ~~proceeds~~we ~~are~~express ~~first~~no ~~applied~~such asopinion. An audit includes examining, on a ~~reduction~~test ofbasis, evidence supporting the ~~original~~amounts ~~cost~~and ofdisclosures in the ~~entire~~consolidated ~~interest~~financial instatements. An audit also includes assessing the ~~property~~accounting principles used and ~~any~~significant ~~remaining~~estimates ~~proceeds are~~made ~~recognized~~by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a ~~gain~~reasonable basis for our opinion.

~~Natural~~ In ~~Gas~~our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Daleco Resources Corporation and ~~Oil~~Subsidiaries ~~Reserve~~as ~~Quantities~~of September 30, 2012, and the results of their operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

~~Our~~ ~~estimate~~The ofaccompanying ~~proved~~financial ~~reserves~~statements ishave ~~based~~been onprepared ~~the~~assuming ~~quantities of oil and natural gas~~ that ~~engineering and geological analyses demonstrate, with reasonable certainty, to be recoverable from established reservoirs in~~ the ~~future~~Company ~~under~~will ~~current~~continue ~~operating~~as ~~and economic parameters. For the years ended September 2012 and 2011, Hall Energy, Inc. (“HEI”) prepared~~ a ~~consolidated~~going ~~reserve and economic evaluation of our proved oil and gas reserves~~concern. ~~The~~As ~~preparation~~discussed ~~of our proved reserve estimates are completed~~ in ~~accordance~~Note ~~with our~~1 ~~internal~~to ~~control procedures, which include~~ the ~~verification~~financial ~~of input data used by HEI~~statements, asthe ~~well~~Company ashas ~~management~~suffered ~~review~~significant ~~and~~recurring ~~approval. Reserves and their relation to estimated future~~ net ~~cash~~losses ~~flows impact our depletion~~ and ~~impairment~~negative ~~calculations.~~operating Ascash ~~a result~~flow, ~~adjustments to~~which ~~depletion~~raise ~~and~~substantial ~~impairment~~doubt ~~are~~about ~~made~~its ~~concurrently~~ability ~~with changes~~ to ~~reserve~~continue ~~estimates.~~as ~~Estimates~~a ofgoing ~~our~~concern. Management’s ~~crude~~plans regarding ~~oil and natural gas reserves, and the projected cash flows derived from~~ these ~~reserve estimates,~~matters are ~~prepared~~also bydescribed ~~HEI~~ in ~~accordance~~Note ~~with~~1 ~~guidelines established by the SEC, including the rule revisions designed~~ to ~~modernize~~ the ~~oil~~financial ~~and gas company reserves reporting requirements and which we adopted effective September 30, 2010~~statements. The ~~independent~~financial ~~reserve engineer~~statements ~~estimates~~do ~~reserves~~not ~~annually~~include onany ~~September~~adjustments ~~30.~~that ~~This~~might ~~annual~~result ~~estimate~~from ~~results in a new DD&A rate, which we use for~~ the ~~preceding~~ ~~fourth~~outcome ~~quarter~~of ~~after~~these ~~adjusting for fourth quarter production~~uncertainties.

~~Office~~/s/ ~~Equipment~~VASQUEZ & COMPANY LLP Vasquez & Company LLP Los Angeles, ~~Furniture and~~CA ~~Fixtures~~January 31, 2013

~~Office Equipment, Furniture and Fixtures are recorded at cost and depreciated using the straight-line method over a period of three to seven years.~~41

~~Impairment~~DALECO ofRESOURCES ~~Long-Lived~~CORPORATION ~~Assets~~AND ~~and~~SUBSIDIARIES ~~Long-Lived~~CONSOLIDATED ~~Assets to~~BALANCE beSHEETS ~~Disposed~~SEPTEMBER Of30, 2013 AND 2012

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company generally assesses its oil and gas properties on a field-by-field basis utilizing its current estimate of future revenues and operating expenses. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. At September 30, 2012 and 2011, we reviewed our long-lived assets and determined no impairment was necessary.

	2013		2012
ASSETS
Current Assets:
Cash	$	140,607	$	190,738
Accounts receivable, net of allowance for doubtful accounts of $25,000 at September 30, 2013 and 2012		257,761		242,182
Inventory		40,500		-
Prepaid consulting fees		30,559		151,237
Other current assets		26,461		8,615
Total Current Assets		495,888		592,772
Other Assets:
Patent rights		6,620		-
Accumulated amortization of patent rights		-		-
Net patent rights		6,620		-
Patents license rights		40,907		40,907
Accumulated amortization of patents license rights		(40,907)		(36,351)
Net patents license rights		-		4,556
Prepaid mineral royalties- long-term		-		509,254
Restricted cash deposits – operations		109,681		109,609
Restricted cash deposits – equity issuances		693,808		-
Total Other Assets		810,109		623,419
Property, Plant and Equipment:
Mineral properties, at cost		9,877,128		9,877,128
Accumulated depreciation, depletion and amortization		(95,000)		(95,000)
Net mineral properties		9,782,128		9,782,128
Oil and gas properties, at cost		4,471,590		4,471,590
Accumulated depreciation, depletion and amortization		(4,144,939)		(4,096,939)
Net oil and gas properties		326,651		374,651
Office equipment, furniture and fixtures, at cost		61,502		61,502
Accumulated depreciation		(61,502)		(61,502)
Net office equipment, furniture and fixtures		-		-
Total Net Property, Plant and Equipment		10,108,779		10,156,779
TOTAL ASSETS	$	11,414,776	$	11,372,970

~~Capital~~ SEE ~~Leases~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~As of September 30, 2012, we had no capital leases. As a lessee, we determine if a lease is a capital lease if it meets one of four of the following criteria:~~42

• DALECO ~~The~~RESOURCES ~~ownership~~CORPORATION ofAND ~~the~~SUBSIDIARIES CONSOLIDATED ~~leased~~BALANCE ~~property~~SHEETS SEPTEMBER ~~transfers to us by the end of the lease term~~30, or2013 ~~shortly~~AND ~~thereafter, in exchange for the payment of a nominal fee.~~2012

-41-

	2013		2012
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,317,771	$	1,312,526
Revenue payable to oil and gas royalty and other working interest owners		969,649		917,144
Federal and state income taxes payable		192,427		192,427
Accrued interest expense		1,151,911		1,099,441
Accrued compensation expense		691,800		690,798
Accrued expense reimbursements		-		19,051
EV&T note payable		567,213		567,213
CAMI notes payable		435,943		455,943
Notes payable - related parties		60,000		85,256
7.25% convertible debentures, net of unamortized discount of $2,044 and $4,515 at September 30, 2013 and 2012, respectively		42,956		40,485
Premium finance note payable		11,519		1,380
Note Payable - other		18,511		-
Total Current Liabilities		5,459,700		5,381,664
Long-term Liabilities:
Long-term Debt:
Convertible note payable, net of unamortized discount of $22,908 at September 30, 2012		-		239,717
Convertible accrued interest on convertible note payable		-		5,359
Accrued bonus expense		457,944		1,373,831
Series B 8% cumulative convertible preferred stock dividends accrued		1,826,239		1,826,239
Future abandonment costs		10,000		10,000
TOTAL LIABILITIES		7,753,883		8,836,810

Commitments and Contingencies (see Note 8)

SHAREHOLDERS’ EQUITY:
Preferred Stock – 20,000,000 shares authorized
Series A preferred stock – par value $0.01 per share (issued and outstanding: none)		-		-
Series B 8% cumulative convertible preferred stock – par value $0.01 per share (issued and outstanding: 135,000 shares); liquidation preference of $1,350,000 plus arrearages in cumulative dividends of $2,042,239 and $1,934,239, respectively (see Note 9)		1,350		1,350
Common Stock – 150,000,000 and 100,000,000 shares authorized, respectively – par value $0.01 per share (issued and outstanding: 72,468,458 and 49,441,058 shares, respectively) (see Note 9)		724,685		494,411
Additional Paid-in Capital		47,980,786		45,989,639
Warrants (issued and outstanding) to purchase 22,744,000 and 3,100,000 shares of Common Stock, respectively		1,357,002		429,181
Accumulated deficit		(46,402,930)		(44,378,421)
TOTAL SHAREHOLDERS’ EQUITY		3,660,893		2,536,160
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	11,414,776	$	11,372,970

~~DALECO~~ SEE ~~RESOURCES CORPORATION AND SUBSIDIARIES~~ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011~~

~~• The lease contains a bargain purchase option.~~ 43

•DALECO ~~The~~RESOURCES ~~lease~~CORPORATION ~~term~~AND isSUBSIDIARIES ~~equal~~CONSOLIDATED toSTATEMENTS ~~75%~~OF orOPERATIONS ~~more~~FOR ofTHE ~~the~~YEARS ~~estimated~~ENDED ~~economic~~SEPTEMBER ~~life~~30, of2013 ~~the~~AND ~~leased property.~~2012

• The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executor costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90% of the excess of the fair value of the leased property to the lessor at the lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.

	2013		2012
Revenues:
Oil and gas sales	$	404,225	$	373,443
Well management revenue		262,813		287,446
Royalty receipts		4,799		3,532
Mineral sales		7,652		5,626
Total Operating Revenues		679,489		670,047

Expenses:
Lease operating expenses - oil and gas		237,661		182,027
Production and severance taxes – oil and gas		22,022		20,878
Operating and other expenses - minerals		30,083		19,121
Impairment of prepaid mineral royalties		539,237		-
Depreciation, depletion and amortization		52,556		313,612
General and administrative expenses		1,672,371		1,318,177
Total Expenses		2,553,930		1,853,815
Loss From Operations		(1,874,441)		(1,183,768)

Other Income (Expense):
Interest and dividend income		232		20,114
Interest expense		(262,630)		(313,371)
Gain on sale of oil and gas properties		-		898,335
Impairment of interest receivable on subscriptions receivable		-		(207,025)
Gain on debt forgiveness		112,330		43,655
Provision for doubtful account – proceeds receivable from prior sale of oil and gas properties		-		(25,000)
Impairment of securities available for future sale		-		(5,699)
Total Other Income (Expense), Net		(150,068)		411,009
Loss before income taxes		(2,024,509)		(772,759)
Taxes based on income		-		-
Net loss		(2,024,509)		(772,759)
Preferred stock dividends, arrearage accumulated (see Note 9)		(108,000)		(112,000)
Net loss applicable to common shareholders	$	(2,132,509)	$	(884,759)
Basic and fully diluted net loss per share	$	(0.04)	$	(0.02)
Weighted-average number of shares of common stock outstanding		60,135,389		49,187,396

~~Future~~ SEE ~~Abandonment~~NOTES ~~Costs~~TO CONSOLIDATED FINANCIAL STATEMENTS

~~An asset retirement obligation (“ARO”)~~ ~~associated with the retirement of a tangible long-lived asset is required to be recognized as a liability in the period in which~~ ~~it is incurred and becomes determinable. Under this method, when liabilities for dismantlement and abandonment costs, excluding~~ ~~salvage values, are initially recorded, the carrying amount of the related assets (mineral, oil and natural gas properties) is~~ ~~increased. The fair value of the ARO asset and liability is measured using expected future cash outflows discounted at the~~ ~~credit-adjusted risk-free interest rate. Accretion of the liability is recognized each period using the interest method of allocation,~~44 ~~and the capitalized cost is depleted over the useful life of the related asse~~

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