UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þx ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

December 31, 2011 For the fiscal year ended December 31, ~~2010~~2011

o¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file no. 0-30502

JOHN D. OIL AND GAS COMPANY

(Exact name of Registrant as specified in its charter)

MARYLAND

94-6542723

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

8500 STATION STREET, SUITE 345, MENTOR, OHIO 44060 ~~(Address~~ ~~of principal executive office)~~

(Address of principal executive office)

Registrant’s telephone number, including area code: (440) 255-6325

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act: SHARES OF COMMON STOCK

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

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

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

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 o ¨ No x o

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. x þ

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

Large accelerated filer o¨ Accelerated filer o¨ Non-accelerated filer o¨ Smaller reporting company þx

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

On ~~March~~June 125, ~~2011~~2012, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $~~213~~47,~~822~~041 computed as the average bid and asked price of $.040088 per share times the total shares held by non-affiliates of 5,345,549. The Registrant had 9,067,090 shares of common stock outstanding on ~~March~~June 125, ~~2011~~2012.

DOCUMENTS INCORPORATED BY REFERENCE: None

JOHNTable D.of OIL AND GAS COMPANY INDEX TO ANNUAL REPORT ON FORM 10-K Contents

	Page
PART I
Glossary of Terms		3
Item 1. Business		5
Item 1A. Risk Factors		7
Item 2. Properties		13
Item 3. Legal Proceedings		15
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities		16
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 8. Consolidated Financial Statements and Supplementary Data		25
Item 9A. Controls and Procedures		25
Item 9B. Other Information		26
PART III
Item 10. Directors, Executive Officers and Corporate Governance		27
Item 11. Executive Compensation		28
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		28
Item 13. Certain Relationships and Related Transactions, and Director Independence		30
Item 14. Principal Accountant Fees and Services		33
PART 1V
Item 15. Exhibits and Financial Statement Schedules		33
EX-31.1
EX-31.2
EX-32.1
EX-99.1

JOHN D. OIL AND GAS COMPANY

INDEX TO ANNUAL REPORT

ON FORM 10-K


PART I		Page

	Glossary of Terms	3
Item 1.	Business	5
Item 1A.	Risk Factors	7
Item 2.	Properties	14
Item 3.	Legal Proceedings	16

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 8.	Consolidated Financial Statements and Supplementary Data	25
Item 9A.	Controls and Procedures	26
Item 9B.	Other Information	27

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	27
Item 11.	Executive Compensation	28
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	29
Item 13.	Certain Relationships and Related Transactions, and Director Independence	30
Item 14.	Principal Accountant Fees and Services	32

PART 1V

Item 15.	Exhibits and Financial Statement Schedules	33

PART I

Glossary of Terms

As commonly used in the natural gas and oil industry and as used in this Annual Report on Form 10-K, the following terms have the following meanings:

Bbl. One stock tank barrel or 42 U.S. gallons liquid volume.

Development well. A well drilled within the proved area of a natural gas or oil reservoir to the depth of a stratigraphic horizon known to be productive.

Developed acres. Acres spaced or assigned to productive wells.

Dry hole or well. A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production would exceed production expenses and taxes.

Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structure feature and/or stratigraphic condition.

Gross acres or gross wells. The total acres or wells, as the case may be, in which a working interest is owned.

Mcf. One thousand cubic feet.

Mcfe. One thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.

Net acres or net wells. The sum of the fractional working interests owned in gross acres or gross wells, as the case may be.

Oil. Crude oil, condensate and natural gas liquids.

Productive well. A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceeds production expenses and taxes.

Proved developed reserves. Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional natural gas and oil expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included in “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

Proved reserves. Proved natural gas and oil reserves are the estimated quantities of natural gas, natural gas liquids and crude oil which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e. prices based on the average of the first day of each month in the previous year and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based on future conditions.

Proved undeveloped drilling location. A site on which a development well can be drilled consistent with spacing rules for purposes of recovering proved undeveloped reserves.

Proved undeveloped reserves or PUDs. Reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Estimates for proved undeveloped reserves are not attributed to any acreage from which an application of fluid injection or other improved recovery techniques is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.

Reservoir. A porous and permeable underground formation containing a natural accumulation of ~~produce-able~~ producible natural gas and/or oil that is confined by impermeable rock or water barriers and is individual and separate from other reserves.

Standardized Measure. Standardized Measure is the present value of estimated future net revenues to be generated from the production of proved reserves, determined in accordance with the rules and regulations of the SEC (using prices and costs in effect as of the date of estimation) without giving effect to non-property related expenses such as general and administrative expense, debt service and future income tax expenses or to depreciation, depletion and amortization and discounted using an annual discount rate of 10%. Our Standardized Measure does not include future income tax expenses.

Successful well. A well capable of producing natural gas and/or oil in commercial quantities.

Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of natural gas and oil regardless of whether such acreage contains proved reserves.

Working interest. The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.

Workover. Operations on a producing well to restore or increase production.

Item 1. Business

John D. Oil and Gas Company, formerly Liberty Self-Stor, Inc. (the “Company”), is a corporation organized under the laws of the State of Maryland that was formed in 1999.

The Company was originally a self-storage company from 1999 to 2005 when it sold all but two of its facilities. By May 2007, one self-storage facility in Painesville remained which generated revenue through self-storage rentals and retail leases. In 2006, the Company entered into the business of drilling natural gas wells in Northeast Ohio, and extracting and producing natural gas with oil as a by-product of the process. The Company currently has fifty-~~eight~~seven producing wells. ~~The Company cannot guarantee success under its business plan as drilling wells for oil and natural gas is a high-risk enterprise and there is no guarantee the Company will become profitable.~~

Due to the on-going issues relating to the loan with RBS Citizens, N.A. dba Charter One, the Company is currently undergoing a re-organization process after filing for bankruptcy under Chapter 11 on January 13, 2012. There is no guarantee the outcome will be for the Company’s best interests.

Oil and Natural Gas Overview.

The Company had redirected its efforts to natural gas exploration to increase cash flow and enhance shareholder value. At December 31, ~~2010~~2011, the Company had fifty-~~eight~~seven producing wells. The Company’s wells are mostly operator-owned by ~~John~~the ~~D. Oil and Gas~~ Company, although there are a limited number of joint interest wells.

The Company is also an owner and the managing member of Kykuit Resources, LLC (“Kykuit”), which leases natural gas and oil rights to ~~166~~71,~~745~~018 net acres located in the Montana Breaks area of Montana. The partnership has drilled eight wells which have not shown any production to date. Therefore, ~~Kykuit decided~~ in ~~2010~~2011 tothe ~~write-off~~Company ~~the~~recorded ~~remaining~~an ~~balance~~impairment charge of ~~the~~$750,000 ~~intangibles~~on ~~for~~its ~~these wells~~investment. The Company had previously written-off a portion of the intangibles in 2009.

The Company is also an owner and managing member of Lucky Brothers LLC, which had drilled one well in 2008. At December 31, 2011, the well was shut in and has not produced since April 2011.

Oil and Natural Gas Competition. The industry is intensely competitive, and we compete with other companies that have significantly greater resources. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Many of our larger competitors not only drill for and produce natural gas and oil, but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for natural gas and oil properties and evaluate, bid for and purchase a greater number of properties than our financial or human resources permit. In addition, these companies may have a greater ability to continue drilling activities during periods of low natural gas and oil prices and to absorb the burden of present and future federal, state, local and other laws and regulations. Our inability to compete effectively with larger companies could have a material adverse impact on our business activities, financial condition and results of operations.

Oil and Natural Gas Environmental and Other Regulations. The oil and natural gas business is regulated extensively at the federal, state and local levels. Environmental and other governmental laws and regulations have increased the costs to plan, design, drill, install, operate and abandon natural gas and oil wells. Under these laws and regulations, industry participants could be liable for personal injuries, property damage and other damages. These laws and regulations may:

•

require the acquisition of various permits before drilling commences;

•

require the installation of expensive pollution control equipment;

•

restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities;

•

limit or prohibit drilling activities on lands lying within wilderness, wetland and other protected areas;

•

require remedial measures to prevent pollution from former operations, such as pit closure and plugging of abandoned wells;

•

impose substantial liabilities for pollution resulting from operations; and

• with respect to operations affecting federal lands or leases, require preparation of a resource management plan, an environmental assessment, and/or an environmental impact statement.

•

with respect to operations affecting federal lands or leases, require preparation of a resource management plan, an environmental assessment, and/or an environmental impact statement.

Failure to comply with these laws and regulations could result in the suspension or termination of operations and subject companies to administrative, civil and criminal penalties. Moreover, public interest in environmental protection has increased in recent years, and environmental organizations have opposed, with some success, certain drilling projects.

The environmental laws and regulations applicable to the Company and its operations include, among others, the following United States federal laws and regulations:

•

Clean Air Act, and its amendments, which governs air emissions;

•

Clean Water Act, which governs discharges to waters of the United States;

•

Comprehensive Environmental Response, Compensation and Liability Act, which imposes liability where hazardous releases have occurred or are threatened to occur;

•

Energy Independence and Security Act of 2007, which prescribes new fuel economy standards and other energy saving measures;

•

National Environmental Policy Act, which governs oil and gas production activities on federal lands;

•

Resource Conservation and Recovery Act, which governs the management of solid waste;

•

Safe Drinking Water Act, which governs the underground injection and disposal of wastewater; and

•

U.S. Department of Interior regulations, which impose liability for pollution cleanup and damages.

On the state level, significant change in the Ohio oil and natural gas industry occurred in September 2004. House bill 278 became the effective law of Ohio, which recognizes the Ohio Division of Mineral Resources Management, or “DMRM,” as the sole and exclusive authority to regulate the permitting, location and spacing of oil and gas wells. The result was the effective elimination of township and municipal regulation that significantly disrupted new oil and natural gas development. The change streamlines previously cumbersome permitting and regulation imposed by townships and municipalities, since a centralized agency, the DMRM now handles all permitting and enforces the laws regulating drilling and producing activities.

Self-Storage Overview.

As of December 31, ~~2010~~2011, the Company owned and operated one self-storage facility which includes retail and office space located in Painesville, Ohio. The Painesville self-storage facility was acquired in October of 2000 with 32,~~495~~395 of rentable square footage situated on 3.20 acres including 366 units with outside space available for parking vehicles. The self-storage units are inside and difficult to rent due to limited accessibility by using an elevator or stairs. In addition, the Painesville building facility has 22,285 square feet of office and retail space to lease.

The self-storage facility is operated through a partnership agreement between Liberty Self-Stor Ltd. (“Ltd”) and ~~John~~the ~~D. Oil and Gas~~ Company. Ltd has a 70.1% equity interest and the Company has a 29.9% equity interest in the operating partnership of LSS I Limited Partnership (“LSS I”). The members of Ltd consist of Richard M. Osborne, Chairman and Chief Executive Officer of the Company, ~~Thomas~~ Thomas J. Smith, a director and the former President and Chief Operating Officer of the Company, and Retirement Management Company, an Ohio corporation owned by Mr. Osborne. These members have Class A limited partnership interests that are redeemable for cash or, at the election of the Company, convertible into shares of the Company’s stock based on an exchange factor. The current exchange factor is .1377148 of a share for each unit. ~~LSS I~~LSSI’s losses reduced the initial investment to a receivable and therefore the Company wrote-off the minority interest in 2006 as it was deemed not to be collectible.

Investment Policy.

Management, in its sole discretion, may change or modify the Company’s investment objective.

Activities of the Company. Subject to Maryland law, the Company has the ability to:

•

issue senior securities;

•

borrow money;

•

make loans;

•

underwrite securities of other issuers;

•

engage in the purchase or sale of investments;

•

offer securities in exchange for property;

•

repurchase or otherwise reacquire its shares or other securities; and

•

provide annual reports and other reports to stockholders which contain annual audited financial statements.

The Company could borrow money necessary to acquire properties, could offer preferred senior securities, could offer interests of the operating partnership in exchange for properties, and prepare annual reports with audited financial statements. The Company has no current plans to engage in any of the other listed activities. During each of the last three years, the Company filed annual and quarterly reports with the SEC. The Company’s ability to engage in any of the above activities is subject to change without the approval of stockholders.

Principal Offices.

The Company’s principal executive offices are located at 8500 Station Street, Suite 345, Mentor, Ohio 44060 and its telephone number is 440-255-6325.

Federal Income Tax.

Effective January 1, 2006, the Company became a “C” Corporation for tax purposes.

Employees.

~~The~~At ~~Company~~December 31, 2011, ~~currently~~the ~~employs~~Company employed six full-time ~~employees~~and one part-time employee. None of the Company’s employees are covered by a collective bargaining agreement. The Company considers its employee relations to be excellent.

Item 1A. Risk Factors

Risks related to Our Chapter 11 Bankruptcy

We filed for reorganization under Chapter 11 of the Bankruptcy Code on January 13, 2012 and are subject to the risks and uncertainties associated with Chapter 11 proceedings.

For the duration of our Chapter 11 proceedings, our operations, including our ability to execute our business plan, are subject to the risks and uncertainties associated with bankruptcy, include the following:

•

our ability to prosecute, confirm and consummate a Plan of Reorganization (the “Plan”), which has not yet been proposed as of the date of this filing;

•

the actions and decisions of our creditors and other third parties who have interests in our Chapter 11 proceedings that may be inconsistent with our plans;

•

our ability to obtain court approval with respect to motions in the Chapter 11 proceedings prosecuted from time to time;

•

our ability to obtain and maintain normal terms with consultants, vendors and service providers;

•

risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for us to confirm a proposed Plan, to appoint a Chapter 11 trustee or to convert our bankruptcy to a Chapter 7 proceeding.

Because of the risks and uncertainties associated with our Chapter 11 proceedings, the ultimate impact that events that occur during these proceedings will have on our business, financial condition and results of operations cannot be accurately predicted or quantified. Additionally, the outcome of any confirmed Plan may result in substantial dilution of our existing shareholders, the sale of substantially all of our assets, and/or the failure of the Company to continue as a publicly reporting company, which could cause any investment in the Company to become worthless.

A plan of reorganization may result in holders of our common stock receiving no distribution on account of their interests and cancellation of their common stock.

Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, post-petition liabilities and prepetition liabilities must be satisfied in full before stockholders are entitled to receive any distribution or retain any property under a plan of reorganization. The ultimate recovery to creditors and/or stockholders, if any, will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 bankruptcy proceeding to each of these constituencies or what types or amounts of distributions, if any, they would receive. A plan of reorganization could result in holders of our common stock receiving no distribution on account of their interests and may even result in the cancellation of their existing stock. If certain requirements of the Bankruptcy Code are met, a plan of reorganization can be confirmed notwithstanding its rejection by the class comprising the interests of our equity security holders. Therefore, an investment in our common stock is highly speculative and may become worthless in the future upon approval of a plan, without any required approval or consent of such shareholders.

The U.S. Bankruptcy Code may restrict our ability to operate.

Under the Bankruptcy Code, all debtors must obtain bankruptcy court approval to, among other things:

•

sell assets outside the ordinary course of business;

•

consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; and

•

obtain financing secured by the Company’s assets.

•

In addition, if a trustee is appointed to operate the Company while in Chapter 11 bankruptcy, the trustee would assume control of our assets.

Risks Related to Our Oil and Natural Gas Business

The report of our independent registered public accounting firm questions our ability to continue as a going concern.

Our independent ~~auditors~~registered ~~have~~public accounting firm has indicated in their audit report for the year ended December 31, ~~2010~~ 2011 in an explanatory paragraph that, due to our recurring losses, ~~and~~ our ~~outstanding debt of $10.5~~working ~~million~~capital ~~that~~deficit, ~~is largely due~~ and ~~being~~our ~~held~~filing byvoluntary apetitions ~~forbearance~~for ~~agreement~~bankruptcy relief, there is substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustment that might result from the outcome of this uncertainty. See Note 2 — Going Concern of the Company’s Consolidated Financial Statements for more information. If the Company is unable to continue as a going concern, you will lose your investment.

In the event we are unable to refinance our line of credit ~~which is currently due and being held by a forbearance agreement until July of 2011~~ or obtain substitute financing, we may not be able to continue as a going concern.

At December 31, ~~2010~~2011, our outstanding debt totaled over $10.5 million, including a $9.5 million line of credit with RBS Citizens, N.A. dba Charter One. ~~The line of credit is guaranteed by~~ Mr. Osborne, our CEO and Chairman of the Board., ~~Our~~is ~~line~~a ofco-borrower ~~credit~~and ~~matured~~guarantor on ~~August 1, 2009. On August 20, 2009,~~ the ~~Company~~line ~~received a declaration~~ of ~~default~~credit. ~~with~~Our ~~respect to its~~ line of credit ~~with~~ ~~Charter~~matured ~~One.~~on On August 241, 2009~~, Charter One received a judgment in its favor against the Company, Mr~~. ~~Osborne,~~ and the Richard M. Osborne Trust (of which Mr. Osborne is the sole trustee), jointly and severally, for the amount of $9.5 million plus interest and late charges as well as attorneys’ fees, costs and other amounts payable under the loan agreement.

7On June 18, 2010, the Company, along with Mr. Osborne, the Richard M. Osborne Trust, Great Plains Exploration, LLC and Oz Gas Ltd. (companies owned by Mr. Osborne), entered into a Forbearance Agreement with Charter One pursuant to which Charter One agreed to forbear from enforcing its rights and remedies under the Company’s fully-drawn $9.5 million line of credit as well as the other parties’ loan agreements until July 1, 2011, subject to no further events of default including the payments due under the Forbearance Agreement.

On ~~June~~July 181, ~~2010~~2011, the ~~Company,~~forbearance ~~along~~period ~~with~~expired ~~Mr. Osborne,~~and the ~~Richard~~Company M.did ~~Osborne~~not ~~Trust,~~pay ~~Great~~off ~~Plains Exploration,~~the ~~LLC~~line ~~and~~of ~~Oz Gas Ltd~~credit. ~~(companies owned by Mr.~~On October ~~Osborne)~~3, ~~entered~~2011, ~~into~~Charter aOne ~~Forbearance Agreement~~instituted ~~with~~an ~~Charter~~action ~~One~~titled ~~pursuant~~RBS toCitizens, ~~which~~N.A. dba Charter One ~~agreed~~v. toJohn ~~forbear~~D. ~~from~~Oil ~~enforcing its rights~~ and ~~remedies~~Gas ~~under~~Co., ~~the~~et. ~~Company’s fully-drawn $9~~al.~~5 million~~ ~~line~~in ofthe ~~credit~~United asStates ~~well~~District asCourt ~~the~~Northern ~~other~~District ~~parties’~~of ~~loan~~Ohio ~~agreements~~Eastern ~~until~~Division ~~July 1,~~claiming ~~2011,~~a ~~subject~~default ~~to no~~under ~~further~~the ~~events~~line of credit ~~default~~and ~~including~~seeking ~~the~~to ~~payments~~foreclose ~~due~~upon ~~under~~property of the ~~Forbearance~~Company ~~Agreement.~~securing ~~Pursuant to~~ the ~~Forbearance~~line ~~Agreement~~of credit and ~~during~~to ~~the~~appoint ~~forbearance~~a ~~period,~~receiver for the ~~parties~~Company ~~must~~and ~~pay~~certain ~~Charter~~companies ~~One $400,000~~owned ~~per~~or ~~month,~~controlled ~~including~~by aMr. Osborne. ~~$40~~On November 21,~~000~~ ~~per month forbearance fee~~2011, ~~until~~the ~~all~~court ~~amounts~~issued ~~under~~an ~~the loan~~order ~~agreements~~appointing ~~have~~a ~~been~~receiver ~~paid~~to inmarshal ~~full.~~and ~~See~~maintain ~~Note~~the 5value ~~“Line~~of the assets of ~~Credit~~the ~~and~~Company ~~Long-Term~~as ~~Debt”~~well toas ~~the~~certain ~~Company’s consolidated~~companies ~~financial~~owned ~~statements~~or ~~for~~controlled ~~more~~by ~~information~~Mr. Osborne.

On January 13, 2012, the Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United Stated Bankruptcy Court for the Western District of Pennsylvania. Pursuant to an order of the bankruptcy court entered on January 19, 2012, the previously appointed receiver returned custody and control of all of the Company’s property and records to management of the Company. Since that time, the Company has continued in possession of its assets and is operating its business as a debtor in possession pursuant to the Bankruptcy Code.

See Note 5 “Line of Credit and Long-Term Debt” to the Company’s consolidated financial statements for more information.

We do not have the available cash to repay the line of credit. If we are unsuccessful in refinancing the line of credit or if we are unsuccessful in obtaining substitute financing, there is substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we cannot continue as a going concern, your investment in the Company could become devalued or even worthless.

If we are unable to refinance our existing debt or obtain financing in the amounts and on terms acceptable to us or we are unable to meet our future cash commitments, we may be unable to continue our business and as a result may be required to scale back or cease operations of our business, the result of which would be that you could lose some or all of your investment.

In addition, we require substantial capital expenditures to maintain and/or grow oil and gas production and reserves. To date, we have been dependent on debt financing to meet our cash requirements and have incurred losses totaling approximately $13.4 0 million for the year ended December 31, ~~2010~~2011, our ~~fifth~~sixth consecutive year of net losses. ~~As of December 31, 2010, we reported negative net working capital.~~ We do not expect to be profitable in ~~2011~~2012. We can provide no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:

•

drilling and completion costs for further wells increase beyond our expectations;

•

market prices for our production decline beyond our expectations;

•

production levels do not meet our expectations; or

•

we encounter greater costs associated with general and administrative expenses.

The occurrence of any of these events could adversely affect our ability to meet our business plans.

We depend on debt or equity financing to pay for our exploration and operations. The current economic environment makes it more difficult to obtain equity financing on acceptable terms to address our liquidity issues. Capital may not continue to be available if necessary to meet these continuing costs, or if capital is available that it will be on terms acceptable to us. In addition, we may not be able to meet our future cash commitments.

If we are unable to obtaining financing in the amounts and on terms acceptable to us or if we are unable to meet our future cash commitments, we may be unable to continue our business and as a result may be required to scale back or cease operations of our business, the result of which would be that you could lose some or all of your investment. In addition, if we are unsuccessful in refinancing the line of credit or obtaining substitute financing, we will likely be unable to continue our business and as a result may be required to scale back or cease operations of our business, the result of which would be that you could lose some or all of your investment.

8 9

We had a material weakness in our internal control over financial reporting and therefore, we may not be able to accurately report our financial results or prevent fraud.

In our annual report on Form 10-K, we are required to furnish a report by our management on our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002. Such report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting was effective. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our size and staff limitations have prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within the internal control system. At times, we have one person responsible for processing transactions and reporting them. This lack of segregation of duties led our management to conclude that as of December 31, ~~2010~~2011 and ~~2009.~~ 2010:

•

our internal controls over financial reporting were not effective, and

•

our disclosure controls and procedures are not effective to give reasonable assurance that the information required to be disclosed in reports that we file under the Exchange Act are recorded, processed and reported as and when required.

Our failure to maintain effective internal controls could harm our operating results or cause us to fail to meet certain reporting obligations. Ineffective internal controls may have also caused investors to lose confidence in our reported financial information, which may have negatively affected our stock.

Our Revenues ~~will~~ depend on natural gas prices.

Our revenue, profitability and cash flow depend upon the prices and demand for natural gas. The natural gas market is very volatile and the current drop in market prices has significantly affected our financial results and may impede our growth. This decline in the current market price severely affects the viability of drilling in this market, because the lower cash flow makes it economically difficult to incur the high costs of drilling a well. Developments in federal regulation pertaining to the sale, transportation and marketing of natural gas also will continue to impact future pricing and natural gas contracts.

The price we receive for our natural gas production will be determined by the availability of favorable purchase contracts, market forces, as well as short and long-term volume commitments. Our current plan will be to analyze available markets, with consideration of both price and terms, and to enter into those arrangements we believe to be in the best interest of the Company. We believe the current market pricing is too low to allow for long-term gas purchase agreements and that spot market sales are the only pricing available at this time. We expect that we will be able to sell all natural gas produced from our wells to either utility companies, marketing affiliates of pipeline companies, natural gas marketing firms, or a variety of industrial or commercial consumers of natural gas. However, we cannot guarantee our strategy will be effective.

Natural gas markets are subject to many factors.

The deliverability and price of natural gas are subject to supply and demand market forces as well as the effects of state and federal regulatory policies and developments. Prices for natural gas may fluctuate widely in response to relatively minor changes in the supply of and demand for natural gas, market uncertainty and a variety of additional factors that are beyond our control, such as:

•

the domestic and foreign supply of and demand for natural gas;

•

the price and level of foreign imports;

•

the level of consumer product demand;

•

weather conditions;

•

overall domestic and global economic conditions;

•

political and economic conditions in natural gas and oil producing countries, including those in the Middle East and South America;

•

the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

•

the impact of the U.S. dollar exchange rates on natural gas and oil prices;

•

technological advances affecting energy consumption;

•

domestic and foreign governmental regulations and taxation;

•

the impact of energy conservation efforts;

•

the proximity and capacity of natural gas pipelines and other transportation facilities; and

•

the price and availability of alternative fuels.

Prices received for natural gas produced in the Appalachian Basin are generally higher than national averages due to the proximity to markets in the Northeast but remain subject to the seasonal market forces. In the past, the prices of natural gas have been extremely volatile, and we expect this volatility to continue.

Locations that we decide to drill may not be productive.

The cost of drilling, completing and operating a well is often uncertain, and cost factors ~~can~~ can adversely affect the economics of a well. Our efforts will not be ~~uneconomic~~economical if we drill dry holes or wells that are productive but do not produce enough to be commercially viable after drilling, operating and other costs. These wells may need to be written -down ~~to the estimated fair value~~. The Company expects to conduct ~~its~~any drilling programs in the Appalachian Basin into sandstone formations of the Clinton group and similar formations. These formations frequently are characterized by low permeability, ~~rapid~~ rapid production decline assuming unrestricted production, and other geological characteristics which may limit the profit potential of wells drilled to these target formations. Although many wells drilled to these formations are completed, it is possible for a productive well to provide an amount of revenue which is insufficient to return the costs incurred in drilling and completing the well.

Actual quantities and present value of our proved reserves may prove to be lower than we have estimated.

~~This~~The reserve report prepared by Schlumberger Data and Consulting Services contains estimates of our proved reserves and the estimated future net revenue from our proved reserves. Determining these estimates is a complex process with estimates based upon various assumptions relating to review and decisions about engineering and geological data for each well. These estimates are particularly sensitive to lower market prices which tend to reduce reserves since average or lower producing wells may not produce enough to offset the expenses needed to operate the wells. At December 31, ~~2010~~2011 and ~~2009~~2010, the Company was significantly affected by by lower market prices ~~compared~~and toshowed ~~the~~higher ~~previous~~depletion ~~few~~expense than in prior years.

Our development operations require substantial capital expenditures.

The natural gas and oil industry is capital intensive. We have made, and if we are to continue operations would have to continue to make, substantial capital expenditures in our business for the development, production and acquisition of natural gas reserves. We have financed capital expenditures primarily with equity infusions from existing investors, cash flow from operations and proceeds from loans. WeThese ~~cannot guarantee that these~~ sources of funds ~~will~~are benot adequate to fund our capital needs.

We face significant competition.

The natural gas and oil industry is intensely competitive, and we compete with other companies that have significantly greater resources. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Many of our larger competitors not only drill for and produce natural gas and oil, but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for natural gas and oil properties and evaluate, bid for and purchase a greater number of properties than our financial or human resources permit. In addition, these companies may have a greater ability to continue drilling activities during periods of low natural gas and oil prices and to absorb the burden of present and future federal, state, local and other laws and regulations. Our inability to compete effectively with larger companies could have a material adverse impact on our business activities, financial condition and results of operations.

10 We depend on a third party to manage our business.

~~Table~~We have an agreement with Great Plains Exploration, LLC (“Great Plains”) to manage our oil and natural gas operations. Great Plains is owned by Richard M. Osborne, our Chairman and CEO. Great Plains assists in the drilling process, tends our wells, transports our natural gas, and purchased and resold our production through November of ~~Contents~~2011. If Great Plains fails to provide us with these services, or if the timeliness and quality of Great Plains’ services are not adequate, our business would be negatively impacted. Great Plains filed for bankruptcy under Chapter 11 on January 11, 2012. The outcome of the bankruptcy proceeding could seriously, negatively impact our operations.

WeIn ~~depend~~November onof 2011, the Company signed a ~~related~~contract ~~third~~with ~~party~~Gas Natural Service Company, LLC to ~~manage~~sell ~~our~~the ~~business~~Company’s natural gas. See Exhibits 10.15 and 10.16 to the annual report on Form 10-K for more information. The pipeline costs continue to be charged to the Company separately from Great Plains.

We have an agreement with Great Plains Exploration, LLC (“Great Plains”) to manage our oil and natural gas operations. Great Plains is owned by Richard M. Osborne, our Chairman and CEO. Great Plains assists in the drilling process, tends our wells, transports our natural gas and purchases and resells our production as well. If Great Plains fails to provide us with these services, or if the timeliness and quality of Great Plains’ services are not adequate, our business would be negatively impacted.

Our business depends on gathering and transportation facilities owned by others.

The marketability of our natural gas production depends in part on the availability, proximity and capacity of gathering and pipeline systems owned by third parties. The amount of natural gas that can be produced and sold is subject to curtailment in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage to the gathering or transportation system, or lack of contracted capacity in the system. The curtailments arising from these and similar circumstances may last from a few days to several months. To the extent that the Company’s wells are shut-in, even temporarily, revenues otherwise available to the Company will be reduced accordingly.

We depend on a key customer for sales of our natural gas and oil.

We sell all of our natural gas and oil production from the wells we operate to ~~Great~~Gas ~~Plains,~~Natural ~~which in~~Service ~~turn~~Company, ~~sells~~ LLC, a ~~significant~~subsidiary ~~portion~~ of ~~our~~Gas ~~production~~Natural ~~volume~~Inc., to a ~~limited~~publicly ~~number~~traded ofnatural ~~customers.~~gas ~~To the~~utility ~~extent~~holding ~~these~~company ~~customers reduce the volume~~ of ~~natural~~which ~~gas~~Richard ~~that~~M. ~~they~~Osborne, ~~purchase~~our ~~from Great Plains~~chairman, we ~~might~~and ~~not~~chief beexecutive ~~able~~officer, tois ~~advantageously~~also ~~sell~~chairman, ~~all~~CEO ofand ~~our~~a ~~production~~significant shareholder.

Our business is hazardous.

Hazards such as geological ~~unconformities~~nonconformities, unexpected pressures and other unforeseen conditions are sometimes encountered in drilling wells. On occasion, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could reduce funds available for drilling, resulting in the loss of properties of the Company. We may be subjected to liability for pollution and other damages or may lose a significant portion of our properties due to hazards against which we cannot insure or may not elect to insure because of prohibitive premium costs or for other reasons. Government regulations relating to environmental matters also could increase our costs of doing business or require us to cease operations in certain areas. We will require an independent drilling contractor to insure against hazards and other risks normally encountered in its business. However, there can be no assurance as to the extent and the cost of such coverage. An uninsured claim against us could reduce our capital significantly or cause us to alter or terminate our drilling program.

The oil and natural gas industry is highly regulated.

Our operations are regulated extensively at the federal, state and local levels. Environmental and other governmental laws and regulations have increased the costs to plan, design, drill, install, operate and abandon natural gas and oil wells. Under these laws and regulations, we could also be liable for personal injuries, property damage and other damages. Failure to comply with these laws and regulations could result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, public interest in environmental protection has increased in recent years, and environmental organizations have opposed, with some success, certain drilling projects.

Risks Related to the Company

We need to raise additional capital, which may not be available to us and may limit our operations or growth.

We need additional capital to fund the implementation of our business plan and to repay our debt. We cannot provide assurances that any necessary subsequent financing will be obtained. The Company’s future liquidity and capital requirements are difficult to predict as they depend upon many factors, including the success of its drilling operations and competing market developments. We may need to raise additional funds in order to meet working capital requirements or additional capital expenditures or to take advantage of other opportunities. We cannot be certain that the Company will be able to obtain additional financing on favorable terms or at all. We have been unable to raise needed capital and our growth and operations may have been impeded. In addition, if we are able to raise additional capital by selling additional shares of common or preferred stock, your percentage ownership in the Company will be diluted.

We have been unable to profitably operate the oil and natural gas assets we have acquired.

In considering whether to invest in the Company, an investor should consider that we commenced our oil and gas operations in January 2006 and that we have been unable to earn a profit since then. To date, we have failed to implement our business model and strategy successfully.

Our management team owns a controlling interest in the Company.

Richard M. Osborne, our Chairman and CEO, and Thomas J. Smith, former president and a current board member, own or control an aggregate 41.0% of our outstanding shares, or 52.3% if their partnership units in LSS I were converted into shares. Accordingly, management possesses a near controlling vote on all matters submitted to a vote of our shareholders and has the ability to elect all members of our board of directors and to control our management and affairs. This concentration of ownership may have the effect of preventing or discouraging transactions involving an actual or a potential change of control of our Company, regardless of whether a premium is offered over then-current market prices.

Our management team is subject to various conflicts of interest.

Great Plains Exploration, LLC, a company owned by Richard M. Osborne, our Chairman and CEO, manages our oil and natural gas business. ~~and~~Gas Natural Service Company, LLC purchases all the gas we produce. Gas Natural Service Company, LLC is a subsidiary of ~~our~~Gas ~~natural~~Natural ~~gas~~Inc., ~~production~~in which Mr. Osborne is the largest stockholder and an officer of the company. We lease our executive offices from OsAir, Inc., a company owned by Mr. Osborne. Mr. Osborne is the sole manager of Liberty Self-Stor II, Ltd., which makes trucks available for short-term rental to the public at our self-storage facility and also provides other merchandise at this facility. The Company purchases ~~well~~ well supplies from Big Oats Oilfield Supply Company, a company owned by Mr. Osborne. The Company has borrowed money from Oz Gas Ltd., a company owned by Mr. Osborne, for payments made on the Company’s behalf to Charter One during 2010. The Company’s wells are serviced by Great Plains Exploration, LLC, also a company owned by Mr. Osborne and also the primary customer for natural gas and oil production from the wells operated by the Company. Orwell Trumbull Pipeline Co, LLC owns the gathering lines for the wells operated by the Company and is in turn owned by Mr. Osborne.

~~These~~13 arrangements create inherent conflicts of interest, although we believe that the terms we receive from Mr. Osborne’s companies are competitive with those we would receive from unaffiliated companies. In addition, members of our management team are participating in other affiliated oil and natural gas drilling enterprises or organizations or associations formed for the development of oil and natural gas properties, some of which may be competitive with the Company. The Company may compete with these other companies for drill sites and customers to purchase their products, creating further conflicts of interest. Management is not restricted in the conduct of any of these additional activities. No specific method for the resolution of these or other conflicts of interest has been devised.

These arrangements create inherent conflicts of interest, although we believe that the terms we receive from Mr. Osborne’s companies are competitive with those we would receive from unaffiliated companies. In addition, members of our management team are participating in other affiliated oil and natural gas drilling enterprises or organizations or associations formed for the development of oil and natural gas properties, some of which may be competitive with the Company. The Company may compete with these other companies for drill sites and customers to purchase their products, creating further conflicts of interest. Management is not restricted in the conduct of any of these additional activities. No specific method for the resolution of these or other conflicts of interest has been devised.

Item 2. Properties

The Company’s principal executive offices are located at 8500 Station Street, Suite 345, Mentor, Ohio 44060. These offices are leased from OsAir, Inc., a company owned by Mr. Osborne. The lease was extended for a three year term on March 26, 2009 at $2,000 per month from $1,350 per month, through April 1, 2012. The Company anticipates extending its lease with OsAir, Inc. after the documents are approved by the bankruptcy court. As of June 14, 2012, the lease has not been approved.

Oil and Natural Gas Wells

At December 31, ~~2010~~2011, the Company had fifty-~~eight~~seven producing wells. The wells are mostly operator-owned by ~~John~~the ~~D. Oil and Gas~~ Company, although there are a limited number of wells in which we own a joint interest. All of our wells are located in Northeast Ohio. Reports were filed in ~~2010~~2011 and ~~2009~~2010 to federal authorities providing total proved net oil and natural gas reserves and production.

The following table presents the net oil and natural gas production, net sales, average sale price and average unit costs per mcfe for the periods indicated:

	2010		2009
	2011		2010
Net Production
Natural Gas (mcf)		~~383~~297,~~503~~834		~~698~~383,~~731~~503
Oil (bbl)		85,~~876~~047		98,~~186~~876
Natural Gas Equivalent (mcfe)		~~436~~328,~~757~~116		~~753~~436,~~847~~757
Net Sales
Natural Gas	$	1771,~~647,951~~052	$	31,~~348~~647,~~750~~951
Oil		~~455~~298,~~898~~474		~~362~~455,~~918~~898
Total Sales	$	21,~~103~~069,~~849~~526	$	32,~~711~~103,~~668~~849
Average Sale Price
Natural Gas (mcf)	$	42.3059	$	4.7930
Oil (bbl)	$	5159.3614	$	~~39.~~51.36
Natural Gas Equivalent (mcfe)	$	43.8226	$	4.9282
Average Unit Costs per mcfe
Well operating expenses	$	~~664~~588,~~699~~242	$	~~687~~664,~~182~~699
Average Cost/mcfe	$	1.5279	$	01.9152

Estimated Proved Reserves. The preparation of our natural gas and oil reserve estimates were completed in accordance with our prescribed internal control procedures, which include verification of input data delivered to our third-party reserve specialist, as well as a multi-functional management review.

The following table presents the Company’s estimated gross proved oil and natural gas reserves, which are all located in the continental United States, based on reserve reports prepared by Schlumberger Data and Consulting Services in 2010 and 2009. The reserves calculated at December 31, 2010 and 2009 were impacted by lower pricing compared to the previous few years. Effective for the year end 2009, SEC reporting rules require that year-end reserve calculations and future cash inflows be based on the simple average of the first day of the month price for the previous twelve month period. The 12-month average pricing for 2010 used in the above table for natural gas sold at the Henry Hub, Louisiana was $4.376 and Ergon West Virginia Oil was $73.73. The 12-month average pricing for 2009 used in the above table for natural gas sold at the Henry Hub, Louisiana was $3.867 and West Texas Intermediate oil at Cushing, Oklahoma was $61.18. Additionally five wells went online in 2009.

The technical person responsible for review of our reserve estimates at Schlumberger Data and Consulting Services meets the requirements regarding qualifications, independence, objectivity and confidentiality set forth in the Standards Pertaining to Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. This firm does not own an interest in our properties or is employed on a contingent fee basis. The Schlumberger report was prepared in accordance with generally accepted petroleum engineering and evaluation principles and is attached as Exhibit 99.1 to this Annual Report on Form 10-K.

	2010						2009
	Natural Gas			Oil			Natural Gas			Oil
	(MCF)			(BBLs)			(MCF)			(BBLs)
Proved developed and undeveloped reserves:
Beginning of year		2,512,800			28,800			2,146,600			17,500
Revision of previous estimates, extensions and other additions		347,800			13,400			792,000			17,600
Net reserve additions		—			—			272,900			2,900
Production		(383,500	)		(8,900	)		(698,700	)		(9,200	)
End of year		2,477,100			33,300			2,512,800			28,800
Proved developed reserves:
Beginning of year		2,512,800			28,800			2,146,600			17,500
End of year		2,477,100			33,300			2,512,800			28,800

Productive Wells. The following table presents the information relating to the productive wells in which we owned a working interest during the years ended December 31, 2010 and 2009. Productive wells consist of producing wells and wells capable of production. The Company’s wells are drilled to produce natural gas with oil being a by-product. Gross wells are the total number of producing wells in which we have an interest, and net wells are the sum of our fractional working interests owned in gross wells.

	Gross		Net
Productive Wells:
Operated		53		51
Non-Operated Properties		5		2
Total		58		53

Drilling Activity. The Company began its drilling activity in 2006, concentrating its efforts on development properties. During 2010, the Company ceased its drilling program. The Company’s drilling activity significantly declined in 2009 due to the lack of availability of cash resources. The following table presents information relating to wells completed during the year ended 2009:

	2009
	Gross		Net
Gross wells:
Productive		4		4
Dry		1		1
Total		5		5

~~The~~Estimated ~~decline~~Proved inReserves. ~~the~~The ~~overall market~~preparation ~~price over the last couple~~ of ~~years~~our ~~severely~~natural ~~affected~~gas ~~the~~and ~~viability~~oil ofreserve ~~drilling,~~estimates ~~and our lower~~were ~~cash~~completed ~~flow~~in ~~makes~~accordance itwith ~~economically~~our ~~difficult~~prescribed tointernal ~~incur~~control ~~the~~procedures, ~~high~~which ~~costs~~include verification of ~~drilling~~input adata ~~well.~~delivered ~~The~~to ~~Company anticipates~~our ~~commencing~~third-party ~~the~~reserve ~~drilling~~specialist, ~~program~~ as ~~soon~~well as ~~cash~~a ~~resources~~multi-functional ~~are~~management ~~available for drilling~~review.

~~Developed~~The following table presents the Company’s estimated gross proved oil and ~~Undeveloped~~natural ~~Acreage~~gas reserves, which are all located in the continental United States, based on reserve reports prepared by Schlumberger Data and Consulting Services in 2011 and 2010. ~~The~~Effective ~~following~~for ~~presents~~the ~~information~~year ~~relating~~end to2009, ~~developed~~SEC reporting rules require that year-end reserve calculations and future cash inflows be based on the simple ~~undeveloped~~average ~~acreage~~of ~~that~~the first day of the ~~Company~~month ~~currently~~price ~~has~~for ~~leased~~the previous twelve month period. ~~Developed~~The ~~are~~12-month ~~those~~average ~~properties~~pricing ~~that~~for ~~are currently~~2011 ~~drilled~~used in the report prepared by Schlumberger Data and ~~undeveloped~~Consulting ~~acreage~~Services ~~relates~~attached toas ~~lease~~Exhibit ~~acres~~99.1 onfor ~~which~~natural ~~wells~~gas ~~have~~sold ~~not~~at ~~been~~the ~~drilled~~Henry orHub, ~~completed~~Louisiana was $4. 118 and Ergon West Virginia Oil was $93.23. The 12-month average pricing for 2010 for natural gas sold at the Henry Hub, Louisiana was $4.376 and Ergon West Virginia Oil was $73.73.

Developed Acreage

Undeveloped Acreage

Gross

Net

Gross

Net

Geographic Area:

Ohio

2,558

2,745

The technical person responsible for review of our reserve estimates at Schlumberger Data and Consulting Services meets the requirements regarding qualifications, independence, objectivity and confidentiality set forth in the Standards Pertaining to Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. This firm does not own an interest in our properties nor is employed on a contingent fee basis. The Schlumberger report was prepared in accordance with generally accepted petroleum engineering and evaluation principles and is attached as Exhibit 99.1 to this Annual Report on Form 10-K.

Present Activities. As of December 31, 2010, the Company’s drilling activities have become minimal until it has cash flow to handle the drilling costs.


	2011						2010
	Natural Gas			Oil			Natural Gas			Oil
	(MCF)			(BBLs)			(MCF)			(BBLs)
Proved developed and undeveloped reserves:
Beginning of year		2,477,100			33,300			2,512,800			28,800
Revision of previous estimates, extensions and other additions		(267,400	)		(1,100	)		347,800			13,400
Net reserve additions		—			—			—			—
Production		(297,800	)		(5,000	)		(383,500	)		(8,900	)

End of year		1,911,900			27,200			2,477,100			33,300

Proved developed reserves:
Beginning of year		2,477,100			33,300			2,512,800			28,800

End of year		1,911,900			27,200			2,477,100			33,300

~~Leases~~Productive Wells. The ~~rights~~following totable ~~drill~~presents anthe ~~oil~~information ~~and~~relating ~~natural~~to ~~gas~~the ~~well~~productive onwells ain which ~~parcel~~we ofowned ~~property~~a ~~are~~working ~~dependent~~interest on during the ~~producer~~years ~~securing~~ended aDecember 31, ~~land~~2011 ~~lease~~and ~~for~~2010. ~~the~~Productive ~~mineral~~wells ~~rights~~consist toof ~~drill~~producing ~~for~~wells ~~the~~and ~~oil~~wells ~~and~~capable ~~natural~~of ~~gas~~production. ~~Typically~~ ~~the~~The ~~lease~~Company’s ~~agreement~~wells ~~will~~are ~~rent~~drilled ~~the rights~~ to ~~the~~produce ~~minerals~~natural ongas ~~the~~with ~~property~~oil ~~for~~being a ~~specific~~ ~~time~~by-product. ~~frame,~~Gross ~~varying~~wells ~~from~~are ~~one~~the tototal ~~ten~~number ~~years.~~of Anproducing ~~executed~~wells ~~lease~~in ~~with~~which awe ~~producer~~have ~~gives~~an ~~exclusive~~interest, ~~rights for~~and ~~drilling~~net onwells are the ~~property~~sum ~~and~~of ~~another~~our ~~agreement~~fractional ~~cannot~~working beinterests ~~signed~~owned ~~until~~in itgross ~~has expired~~wells.

Insurance. The Company has purchased a commercial liability policy to cover its oil and natural gas activities. The Company’s management uses its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to acquiring appropriate insurance on the Company’s investments at a reasonable cost and on suitable terms that are at or above the current state requirement listed in State Senate Bill 165 which was passed in 2010.


	Gross		Net
Productive Wells:
Operated		52		51
Non-Operated Properties		5		2

Total		57		53

Drilling Activity. The Company began its drilling activity in 2006, concentrating its efforts on development properties. During 2010, the Company ceased its drilling program, due to the lack of availability of cash resources.

The decline in the current market price severely affects the viability of drilling, and our lower cash flow makes it economically difficult to incur the high costs of drilling a well.

Developed and Undeveloped Acreage. The following table presents information relating to developed and undeveloped acreage that the Company currently has leased. Developed acreage represents those properties that are currently drilled and undeveloped acreage relates to leased acres on which wells have not been drilled or completed. The rights to drill an oil and natural gas well on a parcel of property are dependent on the producer securing a land lease for the mineral rights to drill for the oil and natural gas. Typically the lease agreement will rent the rights to the minerals on the property for a specific time frame, varying from one to ten years. Most of the lease agreements that the Company held were for three year terms beginning in 2006. The majority of the lease agreements not drilled have expired as of December 31, 2011. An executed lease with a landowner gives exclusive rights for drilling on the property and another agreement cannot be signed until it has expired.

Developed Acreage

Undeveloped Acreage

Gross

Net

Gross

Net

Geographic Area:

Ohio

2,143

280

Present Activities. As of December 31, 2011, the Company’s drilling activities had ceased, while during 2010 drilling activities were minimal.

Insurance. The Company has purchased a commercial liability policy to cover its oil and natural gas activities. The Company’s management uses its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to acquiring appropriate insurance on the Company’s investments at a reasonable cost and on suitable terms that are at or above the current state requirement listed in State Senate Bill 165 which was passed in 2010. Subsequently, during the first quarter of 2012 when the Company’s policy expired, it was renewed at additional cost to the Company due to the Chapter 11 filing on January 13, 2012.

Depreciation. Development costs of proved oil and natural gas properties, including estimated dismantlement, restoration and abandonment costs and acquisition costs, are depreciated and depleted on a well by well basis by the units-of-production method using estimated proved developed reserves.

Item 3. Legal Proceedings.

As previously reported, on August 20, 2009, the Company received a declaration of default with respect to its $9.5 million line of credit with RBS Citizens, N.A. dba Charter One. On August 24, 2009, Charter One received a judgment in its favor against the Company, Mr. Osborne, and the Richard M. Osborne Trust (of which Mr. Osborne is the sole trustee), jointly and severally, for the amount of $9.5 million plus interest and late charges as well as attorneys’ fees, costs and other amounts payable under the loan agreement.

On June 18, 2010, the Company, ~~along~~and other ~~with Mr. Osborne~~parties, ~~the Richard M. Osborne Trust, Great Plains Exploration, LLC~~ and OzCharter ~~Gas~~One ~~Ltd. (companies owned by Mr. Osborne),~~ entered into a ~~Forbearance Agreement~~forbearance ~~with~~agreement ~~Charter~~(“the ~~One~~Forbearance Agreement”), pursuant to which Charter One ~~agreed~~would to forbear from enforcing its rights and remedies under the Company’s ~~fully-drawn $9.5 million~~ line of credit as well as the other parties’ loan agreements until July 1, 2011, subject to no further events of default including the payments due under the Forbearance Agreement. Pursuant to the Forbearance Agreement and during the forbearance period, the parties must pay Charter One $400,000 per month, including a $40,000 per month forbearance fee, until all amounts under the loan agreements have been paid in full. See Note 5 “Line of Credit and Long-Term Debt” to the Company’s consolidated financial statements for more information.

15On July 1, 2011, the forbearance period expired and the Company did not pay off the line of credit. On October 3, 2011, Charter One instituted an action titled RBS Citizens, N.A. dba Charter One v. John D. Oil and Gas Co., et. al. in the United States District Court Northern District of Ohio Eastern Division claiming a default under the line of credit and seeking to foreclose upon property of the Company securing the line of credit and to appoint a receiver for the Company and certain companies owned or controlled by Mr. Osborne. On November 21, 2011, the court issued an order appointing a receiver to marshal and maintain the value of the assets of the Company as well as certain companies owned or controlled by Mr. Osborne.

See Note 5 “Line of Credit and Long-Term Debt” to the Company’s consolidated financial statements for more information.

PART II

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

Market Information. The Company’s shares of common stock, $0.001 par value per share, trade on the Over-the-Counter Bulletin Board Market, or OTCBB, under the symbol “JDOG.” The symbol was changed to “JDOQ” on January 13, 2012 and to “JDOQE” during April 2012.

The following table sets forth the high and low closing sale prices as reported on the OTCBB for the Company’s common stock for each quarter within the Company’s last two fiscal years. Because the Company’s common stock is traded on the OTCBB, these quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

2011	HIGH		LOW
First Quarter	$	0.08	$	0.04
Second Quarter		0.08		0.03
Third Quarter		0.07		0.03
Fourth Quarter		0.04		0.02
2010	HIGH		LOW
First Quarter	$	0.15	$	0.04
Second Quarter		0.06		0.03
Third Quarter		0.06		0.03
Fourth Quarter		0.10		0.03

2009	HIGH		LOW
First Quarter	$	0.40	$	0.15
Second Quarter		0.20		0.10
Third Quarter		0.20		0.05
Fourth Quarter		0.18		0.07

Holders. As of April 23, 2012, the Company’s shares of common stock were held of record by approximately 1,592 shareholders. Since the Company has not recently mailed a proxy requesting a reply from the stockholders, the number of additional stockholders owning stock held by brokerage firms and other financial institutions is difficult to determine at this time.

~~Holders~~Dividends. AsThe Company paid no cash distributions to its common stockholders during 2011 and 2010. However, the Company declared $108,000 in preferred stock dividends for each of ~~February~~the years ended December 1831, 2011 and 2010 and paid $80,778 and $108,000 in preferred stock dividends for each of the years ended December 31, 2011 and 2010, respectively. The Company’s ~~shares~~is ofrestricted by its loan agreement with Charter One from paying dividends on its common stock ~~were~~or ~~held~~making cash distributions to its stockholders and from paying dividends in excess of ~~record~~those byregularly accruing on not more than two million ~~approximately~~dollars ~~1,595~~of ~~shareholders~~preferred stock. ~~Since~~Additionally due to the ~~Company~~receivership ~~has~~in ~~not~~the ~~recently~~fourth ~~mailed~~quarter of 2011 and the filing under Chapter 11 of the Bankruptcy Code on January 13, 2012, the payment of dividends was temporarily disallowed. Failure to pay dividends on a ~~proxy~~timely ~~requesting~~basis results in the imposition of a ~~reply~~ ~~from~~default rate of 10% per annum that continues until the ~~stockholders,~~default is cured by the ~~number~~Company by payment of ~~additional~~all ~~stockholders~~accrued ~~owning~~dividends. ~~stock~~Further, ~~held~~the initial default by ~~brokerage~~the Company entitles the ~~firms~~holders ~~and~~of ~~other~~the ~~financial~~Series ~~institutions~~A isPreferred ~~difficult~~Shares to ~~determine~~elect, atas ~~this~~a ~~time~~class, one director to the Company’s Board of Directors who shall serve until the Series A Preferred Shares are liquidated or converted. As of January 1, 2012, the Company became liable for the default rate on the unpaid dividends at December 31, 2011.

~~Dividends.~~17 The Company paid no cash distributions to its stockholders during 2010 and 2009. However, the Company declared and paid $108,000 in preferred stock dividends for each of the years ended December 31, 2010 and 2009. The Company is restricted by its loan agreement with Charter One from paying dividends on its common stock or making cash distributions to its stockholders and from paying dividends in excess of those regularly accruing on not more than two million dollars of preferred stock.

Issuance of Common Stock. The Company did not issue common stock to its directors or employees during 2010 or 2009.

Issuance of Preferred Stock. The Company did not issue preferred shares during 2010 or 2009.

Purchases of Common Stock. The Company did not purchase any shares of its common stock in 2010 or 2009.

Issuance and Purchase of Common Stock. The Company did not issue or purchase any shares of its common stock in 2011 or 2010.

Issuance of Preferred Stock. The Company did not issue preferred shares during 2011 or 2010.

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

John D. Oil and Gas Company, formerly Liberty Self-Stor, Inc. is a corporation organized under the laws of the State of Maryland.

The Company entered into the business of extracting and producing oil and natural gas products during 2006. The Company currently has two segments: one that is drilling and operating natural gas wells with oil as a by-product in Northeast Ohio and one composed of the remaining self-storage facility located in Painesville, Ohio. The Company cannot guarantee success under its business plan as drilling wells for oil and natural gas is a high-risk enterprise and there is no guarantee the Company will become profitable. To date, the Company’s oil and gas operations have not been profitable. The decline in the ~~overall~~ current market price of natural gas ~~over the last couple of years~~ severely ~~affected~~affects the viability of any future drilling because our lower cash flow makes it economically difficult to incur the high costs of drilling a well. Additionally, our production will continue to decline if the Company is not drilling any new wells. ~~Although the oil production is profitable with the higher oil market pricing, this revenue is not enough to offset the lower natural gas production and operating expenses.~~

Without additional wells being drilled and the Company’s substantial debt financing, the Company will continue to show losses and be unprofitable. Therefore, the Company is concerned about its future’s viability as a going concern.

~~As previously disclosed in the Company’s Form 8-K filed on June 25, 2010 with the Securities and~~On ~~Exchange Commission, on~~ June 18, 2010, the Company, ~~along~~and ~~with~~other ~~Mr. Osborne~~parties, ~~the Richard M. Osborne Trust, Great Plains~~ and OzCharter ~~Gas~~One ~~Ltd. (companies owned by Mr. Osborne), have~~ entered into a ~~Forbearance~~ ~~Agreement~~forbearance ~~with~~agreement ~~Charter~~(“the ~~One~~Forbearance Agreement”), pursuant to which Charter One ~~agreed~~would to forbear from enforcing its rights and remedies under the Company’s ~~fully-drawn $9.5 million~~ line of credit as well as the other parties’ loan agreements until July 1, 2011, subject to no further events of default including the payments due under the Forbearance Agreement. Pursuant to the Forbearance Agreement and during the forbearance period, the parties must pay Charter One $400,000 per month, including a $40,000 per month forbearance fee, until all amounts under the loan agreements have been paid in full. At December 31, 2010, the Loan Parties were in compliance with the required payments. See Note 5 “Line of Credit and Long-Term Debt” to the Company’s consolidated financial statements for more information.

~~Discussions~~On ~~with~~July 1, ~~Charter~~2011, ~~One~~the ~~are~~forbearance ~~ongoing~~period expired and ~~there~~the isCompany nodid ~~certainty~~not ~~that~~pay ~~these~~off ~~discussions~~the ~~will result~~line ~~in satisfactory terms~~ of acredit. ~~revised~~On ~~loan~~October 3, ~~agreement~~2011, orCharter aOne ~~revised~~instituted an ~~loan~~action ~~agreement~~titled atRBS ~~all~~Citizens, N.A. If dba Charter One ~~demands~~v. ~~repayment~~John ofD. ~~the~~Oil ~~outstanding~~and ~~amounts~~Gas ~~payable~~Co., atet. al. in the ~~end~~United States District Court Northern District of ~~the~~Ohio ~~forbearance period,~~Eastern ~~the~~Division ~~Company~~claiming ~~does~~a ~~not~~default ~~have~~under the ~~available~~line ~~cash~~of credit and seeking to ~~repay~~foreclose upon property of the Company securing the line of credit and ~~will~~to ~~need financing~~appoint ~~from~~a ~~other~~receiver ~~sources~~for tothe ~~repay~~Company ~~Charter~~and ~~One.~~certain Ifcompanies ~~alternative~~owned ~~financing~~or iscontrolled ~~not~~by ~~available~~Mr. Osborne. On November 21, 2011, the court issued an order appointing a receiver to marshal and maintain the value of the assets of the Company ~~will~~as ~~default~~well ~~and~~as ~~may~~certain becompanies ~~unable~~owned toor ~~continue~~controlled ~~operations~~by Mr. Osborne.

Discussions with Charter One are ongoing but there is no certainty that these discussions will result in satisfactory terms for a revised loan agreement. See Note 5 “Line of Credit and Long-Term Debt” to the Company’s consolidated financial statements for more information.

During August 2009, Liberty Self Stor, LTD defaulted on its $1.2 million loan from First Merit Bank, N.A. On May 11, 2010, Liberty Self Stor, LTD and First Merit Bank signed a loan modification agreement which waived the prior defaults. The terms of the mortgage include a five year term, maturing on June 1, 2014, with a ten year amortization period at a variable rate of the 30 day LIBOR plus 250 basis points. Monthly payments include principal of $10,370 plus interest.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. A “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company believes the following critical accounting policies present our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Principles of Consolidation

Pursuant to the terms of the partnership agreement of LSS I, the Company, as sole general partner, controls LSS I. Accordingly, the Company accounts for its investment in LSS I utilizing the consolidation method. The investment in an unconsolidated affiliate, Kykuit Resources, LLC, is accounted for using the equity method. All significant inter-company transactions and balances have been eliminated. The well in Lucky Brothers is accounted for as a joint ~~interest~~ venture interest.

Accounts Receivable

The Company has certain trade receivables consisting of oil and natural gas sale obligations due under normal trade terms. ~~The~~Through October, 2011, the Company ~~currently~~sold its production to Great Plains Exploration LLC, a related party, that filed for protection under Chapter 11 of the bankruptcy code on January 11, 2012. Effective November, 2011 the Company sells its production to Gas Natural Service Company, a related party, through an oil and natural gas agreement, extending credit on an unsecured basis to them. In evaluating its allowance for possible losses, the Company performs a review of outstanding receivables. The trade receivables outstanding are typically three months of natural gas production due to the timing and accounting treatment by the main distribution pipeline company in Northeast Ohio and related party accounting treatments. AtDuring the last quarter of 2011, the main distribution pipeline company in Northeast Ohio changed its accounting methods and timing of payment to a calendar month with payments being distributed one month later. See Exhibit 10.15 and 10.16 to the annual report on Form 10-K for more information. Because the Company owes accounts payable to Great Plains Exploration in excess of the amounts due from them at December 31, ~~2010~~2011, and has the right to offset the receivable against its payable, at December 31, 2011 and ~~2009~~2010, the Company’s credit evaluation ~~indicated~~ has determined that it has no need for an allowance for possible losses and had no such losses in ~~2010~~2011 and ~~2009~~2010.

The Company’s accounts receivable, arising from the self-storage business, are due from individuals as well as business entities. Tenants are required to pay their rent on the first of each month. Past due amounts are those that are outstanding longer than the contractual payment terms. If an account is more than 75 days past due, the Company generally writes off the balance directly to expense. For such past due accounts, the Company has the right to auction the contents of the rented space, which allows for recovery of written-off balances. Any such recoveries are credited to income when received. Approximately, $3,000 and $2,000 of bad debt expense, net of recoveries, was incurred in ~~2010~~2011 and ~~2009~~2010, respectively.

Property and Equipment

All property and equipment is depreciated using the straight-line method over estimated useful lives of twenty five years for buildings and improvements and five to seven years for furniture and equipment.

~~The~~19 Company uses the successful efforts method of accounting for oil and natural gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Upon sale or retirement of a proved property, the cost and accumulated depreciation and depletion and amortizations are eliminated from property accounts and the resultant gain or loss is recognized.

ExploratoryTable drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. The Company is involved in exploratory drilling only to the extent that it is a partner of Kykuit, which is doing exploratory drilling in Montana. The Company is an owner and managing member of Kykuit, an unconsolidated affiliate. Contents

The Company uses the successful efforts method of accounting for oil and natural gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Upon sale or retirement of a proved property, the cost and accumulated depreciation, depletion and amortization are eliminated from property accounts and the resultant gain or loss is recognized.

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. The Company is involved in exploratory drilling only to the extent that it is a partner of Kykuit Resources, LLC, which is doing exploratory drilling in Montana. The Company is an owner and managing member of Kykuit, an unconsolidated affiliate. At December 31, 2011 and 2010, the percentages of ownership were 23.17% and 21.79%, respectively.

Development costs of proved oil and natural gas properties, including estimated dismantlement, restoration, abandonment costs and acquisition costs, are depreciated and depleted on a well by well basis by the units-of-production method using estimated proved developed reserves. The costs of oil and natural gas properties are periodically assessed for impairment.

Asset Impairment

The Company reviews its self-storage property and capitalized well costs for impairment when events or changes in circumstances indicate the carrying amounts of the properties may not be recoverable. When such conditions exist, management estimates future cash flows from operations and ultimate disposition of the individual properties. This income approach to determine the fair value of ~~these~~ these assets is based on level 3 inputs, including estimated reserve quantities, gas prices, operating costs and discount rates. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the ~~carrying~~ carrying amount to the related property’s estimated fair market value would be recorded and an impairment loss would be recognized. The Company wrote off ~~$-0- in~~one ~~2010~~well ~~and~~amounting ~~the~~to ~~costs~~$162,003 ~~related~~in to2011 ~~one well~~and ~~amounting~~no towells ~~$145,444~~were written off in ~~2009~~2010.

Asset Retirement Obligation

The Company accounts for its asset retirement obligations in accordance with generally accepted accounting principles in the United States of America (“GAAP”) which requires the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For the Company, asset retirement obligations primarily relate to the abandonment, dismantling and plugging of oil and natural gas wells. The present value of of the estimated asset retirement cost is capitalized as part of the long-lived asset. The capitalized asset retirement cost is depreciated and the asset retirement obligation is accreted over the estimated life of the well. The Company plugged no wells in ~~2010~~2011 and ~~two wells during 2009~~2010.

Revenue Recognition

The Company recognizes revenue from its oil and natural gas interests in producing wells as oil and natural gas is sold to a purchaser at a fixed or determinable price when delivery has occurred, ~~title~~ title and risk of loss have transferred to the purchaser and the collectability of revenue is reasonably assured. The Company has a management agreement with a related party to transport the Company’s natural gas production through the related party’s pipeline and include this natural gas with the related party’s natural gas in order to fulfill production volume contracts they currently have in place. The Company utilizes the sales method to account for gas production volume imbalances. Under this method, revenue is recognized only when gas is produced and sold on the Company’s behalf. The Company had no material gas imbalances at December 31, ~~2010~~2011.

Income Taxes

Effective January 1, 2006, the Company became a “C” Corporation for tax purposes.

In establishing a provision for income taxes, the Company must estimate when in the future certain items will affect taxable income. Deferred taxes are recorded for future tax consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not.

The Company has net operating loss carry forwards (NOLS) and a valuation allowance to offset any tax effects. The Company has no unrecognized tax benefits and therefore, there was no effect on the Company’s effective tax rate. Any tax penalties or interest expense will be recognized in income tax expense. No interest and penalties were accrued as of December 31, ~~2010~~2011 or ~~2009~~2010, or paid during the periods then ended. The Company does not anticipate a significant change over the next twelve months to any tax liability.

The Company is open to federal and state tax audits until the applicable statute of limitations expire. There are currently no federal or state income tax examinations underway for the Company. ~~The~~ ~~tax~~Generally, ~~years~~the ~~after~~three ~~2007~~previous tax years remain open to examination by the major taxing jurisdictions in which we operate, although no material changes to unrecognized tax positions are expected within the ~~next~~ next twelve months. The Company does, however, have prior year net operating losses which remain open for examination.

Liquidity and Capital Resources

Liquidity represents the Company’s ability to generate sufficient amounts of cash to meet its financial commitments. The Company’s cash flow from operating and financing activities will not be sufficient to meet its anticipated operating requirements in the foreseeable future.

The Company requires substantial capital expenditures to maintain and/or grow production and reserves. We depend on debt or equity financing to pay for exploration and operations. The current economic environment makes it more difficult to obtain debt or equity financing on acceptable terms to address our liquidity issues. Capital may not be available to meet these continuing costs, or if capital is available, it may not be on terms acceptable to us.

The Company’s $9.5 million line of credit with Charter One matured on August 1, 2009. On August 20, 2009, Charter One received a judgment in its favor against the Company, Mr. Osborne and the Richard M. Osborne Trust, jointly and severally for $9.5 million plus interest and late charges.

On June 18, 2010, the Company, ~~along~~and ~~with~~other ~~Richard M. Osborne~~parties, ~~the Trust, Great Plains~~ and OzCharter ~~Gas Ltd.~~One ~~(companies owned by Mr. Osborne), have~~ entered into a ~~Forbearance~~forbearance ~~Agreement~~agreement ~~with~~(“the ~~Charter~~Forbearance ~~One~~ Agreement”), pursuant to which Charter One ~~will~~would forbear from enforcing its rights and remedies under the Company’s line of credit as well as the other parties’ loan agreements until July 1, 2011, subject to no further events of default including the payments due under the Forbearance Agreement.

~~The~~On ~~Company~~July 1, Mr2011, the forbearance period expired and the Company did not pay off the line of credit. On October ~~Osborne~~3, ~~the~~2011, ~~Trust~~Charter One instituted an action titled RBS Citizens, ~~Great~~N.A. ~~Plains~~dba ~~and~~Charter OzOne ~~Gas~~v. ~~are~~John ~~collectively~~D. ~~referred~~Oil toand Gas Co., et. al. in the United States District Court Northern District of Ohio Eastern Division claiming a default under the line of credit and seeking to foreclose ~~Forbearance~~upon ~~Agreement~~property of the Company securing the line of credit and ~~herein~~to asappoint a receiver for the ~~“Loan~~Company ~~Parties~~and certain companies owned or controlled by Mr.” Osborne. On November 21, 2011, the court issued an order appointing a receiver to marshal and maintain the value of the assets of the Company as well as certain companies owned or controlled by Mr. Osborne.

~~Under~~On January 13, 2012, the ~~Forbearance~~Company ~~Agreement~~filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United Stated Bankruptcy Court for the Western District of Pennsylvania. Pursuant to an order of the bankruptcy court entered on January 19, 2012, ~~Charter~~the ~~One~~previously appointed receiver returned custody and control of all of the Company’s ~~agreement~~property and records to ~~forbear~~management isof ~~conditioned~~the ~~upon~~Company. Since that time, the Company has continued in possession of its assets and ~~subject~~is operating its business as a debtor in possession pursuant to the ~~following~~Bankruptcy ~~conditions:~~ Code.

• Payment by the Loan Parties of a forbearance fee of $40,000 per month during the forbearance period;

• No material adverse change in the condition of the Loan Parties;

• An assignment and grant of a security interest by the Company and Great Plains of each of their ownership interests in the Alpha and Panzica wells;

• A pledge by the Loan Parties of their ownership interests in Kykuit Resources LLC ; and

• A pledge by Mr. Osborne of not less than 800,000 shares of common stock of Gas Natural Inc. with such stock having a market value of not less than $9.6 million pursuant to a pledge agreement.

In addition, commencing July 1, 2010 and each month thereafter until all amounts under the judgments and loan agreements have been paid in full, the Loan Parties shall pay Charter One $400,000, including the $40,000 forbearance fee. The Company had previously felt they would pay one third of the $400,000, but due to lack of cash, they have decided to accrue interest and one third of the $40,000 monthly fee and legal fees. The monthly $400,000 is being paid by the other Loan Parties. Such payments by the Loan Parties shall be applied first to Charter One’s fees and expenses, second to accrued but unpaid interest due under the judgments, and third to principal amounts due under the judgments. Charter One has applied a default rate to the loan from January 4, 2010 thru June 18, 2010. The Company does not agree with the default rate and therefore has not booked approximately $171,000 of additional interest expense. It is the Company’s position that the interest for the period from judgment date to forbearance date should remain at the original contract rate at the date of judgment, based upon the per diem interest amount expressly stated in that judgment. Attorneys for the Company also support that position and have so stated in letters to Charter One and for purposes of the annual audit. Charter One contends that the judgments will bear interest at LIBOR plus 1.75% with a LIBOR floor of 3.00%. The Company believes that there is an interest rate cap of 3.00%. The parties are in discussions regarding the applicable interest rate. If the Loan Parties repay $10 million and if after application of such repayment the outstanding balance of the judgments does not exceed 65% of the current producing reserve value (as that term is defined in the Loan Agreements) of the Company, Great Plains and Oz Gas, then the pledge of Mr. Osborne’s Kykuit interests and his Gas Natural Inc. shares shall be released. In addition, the Company must deposit all proceeds of its operations into accounts maintained by Charter One but during the forbearance period Charter One will not take any action to set off funds in any such account.

The forbearance period is effective until July 1, 2011, subject to the earlier termination upon the occurrence of any events of default by any of the Loan Parties, including non-payment of any amounts due by any of the Loan Parties under the Forbearance Agreement. See Note 5 “Line of Credit and Long-Term Debt” to the Company’s consolidated financial statements for more information.

Discussions with Charter One are ongoing but there is no certainty that these discussions will result in satisfactory terms for a revised loan agreement.

20 21

~~Because~~During ~~the~~August ~~Company~~2009, ~~does~~Liberty ~~not~~Self ~~have~~Stor, ~~the~~LTD ~~available~~defaulted ~~cash~~on toits ~~repay~~$1.2 ~~the~~million ~~line~~loan offrom ~~credit,~~First ifMerit ~~the~~Bank, ~~required~~N.A. On ~~payments~~May 11, ~~are~~, ~~not~~2010, ~~made~~Liberty byand ~~the~~First ~~Company~~Merit orsigned ~~any~~a ofloan modification agreement which waived the ~~other~~prior ~~Loan~~defaults ~~Parties,~~and orcontinued ~~other~~the ~~events~~terms ofset ~~default occur,~~forth under the ~~Forbearance~~original ~~Agreement~~loan orcommitment ifletter ~~prior~~dated toMarch 25, ~~the~~2009 ~~end~~for of the ~~forbearance~~Painesville ~~period~~facility. Those ~~the~~terms ~~Company is~~include ~~unsuccessful~~a infive ~~refinancing~~year ~~its~~term, ~~line~~maturing ofon ~~credit~~June 1, 2014, with ~~Charter~~a ~~One~~ten oryear ifamortization ~~the~~period ~~Company~~at ~~is unsuccessful~~a invariable ~~obtaining~~rate ~~substitute~~of ~~financing,~~the ~~there~~30 isday ~~substantial~~LIBOR ~~doubt~~plus ~~about~~250 ~~the~~basis ~~Company’s ability~~points. toMonthly ~~continue~~payments asinclude aprincipal ~~going~~of ~~concern~~$10,370 plus interest.

During August 2009, Liberty Self Stor, LTD defaulted on its $1.2 million loan from First Merit Bank, N.A.

On May 11, 2010, Liberty and First Merit signed a loan modification agreement which waived the prior defaults and continued the terms set forth under the original loan commitment letter dated March 25, 2009 for the Painesville facility. Those terms include a five year term, maturing on June 1, 2014, with a ten year amortization period at a variable rate of the 30 day LIBOR plus 250 basis points. Monthly payments include principal of $10,370 plus interest.

The items affecting operating cash flow and cash and cash equivalents are discussed more fully in the “Material Changes in Results of Operations” section.

The Company’s current assets decreased $4630,~~487~~206 or 85.39%, to $~~515~~485,~~640~~434 at December 31, ~~2010~~2011 from $~~562~~515,~~127~~640 at December 31, ~~2009~~2010. Current assets at December 31, ~~2010~~2011 were lower than at December 31, ~~2009~~ 2010 largely due to the decrease in accounts receivable from related parties.

The Company’s current liabilities ~~decreased~~increased $~~955~~1,~~755~~431,578, or 813.59% to $1011,~~306~~737,~~221~~799 at December 31, ~~2010~~2011, from $1110,~~261~~306,~~976~~221 at December 31, ~~2009~~2010. The ~~decrease~~increase is primarily due to ~~moving the Painesville~~accounts ~~property~~payable ~~loan~~and ~~from~~accounts ~~current~~payable ~~liabilities~~ to ~~long~~related ~~term debt after settling with First Merit Bank N~~parties.~~A..~~

The Company had a positive cash flow from operating activities of $~~426~~649,~~710~~351 for the year ~~ended~~ ended December 31, ~~2010~~2011 compared to a positive cash flow of $~~865~~426,~~896~~710 for the year ended December 31, ~~2009~~ 2010. The ~~decreased~~increased positive cash flow is a result of ~~less~~more cash collected on accounts receivable in ~~2010~~2011 as compared to ~~2009,~~2010 ~~net~~and of fewer accounts payable paid in ~~2010~~2011 than in ~~2009~~2010.

The Company had a negative cash flow from investing activities of $~~223~~434,~~160~~584 for the year ended December 31, ~~2010~~2011 compared to a negative cash flow of $~~696~~223,~~252~~160 for the year ended December 31, ~~2009~~ 2010. The year ended ~~2010~~2011 ~~improved~~showed ~~compared~~additional ~~to 2009 largely due to reduced~~ cash investments in Kykuit ~~and in oil and natural gas wells~~Resources, LLC net of ~~additional~~fewer expenditures for property and equipment purchases in ~~2010~~ 2011 as compared to ~~2009~~2010.

The Company had a negative cash flow from financing activities of $~~205~~206,~~606~~907 for the year ended December 31, ~~2010~~2011 compared to a negative cash flow of $~~225~~205,~~873~~606 for the year ended December 31, ~~2009.~~ ~~The negative cash flow for the year ended December 31,~~ 2010 ~~decreased largely due to the receipt of loan funds for a new vehicle~~.

The following table sets forth the maturity dates and the total of the Company’s long-term debt and line of credit as of December 31, ~~2010~~2011, as well as future commitments under the Company’s office space lease.

	Payments Due by Period
	Less than 1
Contractual Obligations	Less than 1year		1-3 years		4-5 years		Total
Contractual Obligations	Year		1-3 years		4-5 years		Total
Long-Term Debt	$	137,161	$	801,115	$	—	$	938,276
Long-Term Debt	$	136,812	$	274,709	$	652,884	$	1,064,405
Line of Credit		9,480,187		—		—		9,480,187
Operating Lease*		246,000		~~6,000~~—		—		306,000
Total Contractual Cash Obligations	$	9,~~640~~623,~~999~~348	$	~~280~~801,~~709~~115	$	~~652,884~~—	$	10,~~574~~424,~~592~~463

* The operating lease for office space is leased from OsAir, Inc., a company owned by Mr. Osborne. The lease was extended for a three year term on March 26, 2009 at $2,000 per month from $1,350 per month, through April 1, 2012, which is reflected in the above table. The Company anticipates extending its lease with OsAir, Inc. after the documents are approved by the bankruptcy court. As of June 14, 2012, the extension has not been approved.

The items affecting operating cash flow and cash and cash equivalents are discussed more fully in the “Material Changes in Results of Operations” section.

21 22

Material Changes in Results of Operations

Revenues from Operations

Total revenues from operations decreased $1,~~408~~202,~~463~~884, or 3445.86%, to $21,~~636~~433,~~782~~898 for the year ended December 31, ~~2010~~2011, compared to $42,~~045~~636,~~245~~782 for the same period in ~~2009~~2010. The decrease is due to lower natural gas production, since new wells are not being drilled, ~~and~~ production from existing wells is decreasing, and continuing lower contract pricing. Additionally in 2010, ~~offset~~a bylarge ~~the~~ real estate property tax refund was received.

Expenses from Operations

Total operating expenses ~~decreased~~increased $2414,~~720~~702,~~865,~~ or 4010.43%, to $4,~~020~~435,~~625~~327 for the year ended December 31, ~~2010~~2011 from $64,~~741~~020,~~490~~625 for the same period in ~~2009~~2010. This ~~decrease~~increase is primarily attributable to ~~a decrease~~an increase in ~~depreciation,~~loss ~~depletion~~from ~~and~~our ~~amortization~~unconsolidated ~~and~~affiliate ~~impairment~~due ~~expenses~~to onan ~~our~~impairment ~~wells~~write-down and a ~~decrease~~ inCompany ~~loss~~well ~~from~~being ~~our~~impaired ~~unconsolidated~~in ~~affiliate~~2011, compared to the same period in ~~2009~~2010.

Interest expense increased $2471,~~744~~895, or 515.52%, to $~~473~~545,~~302~~197 for the year ended December 31, ~~2010~~ 2011 compared to $~~448~~473,~~558~~302 for the same period in ~~2009~~2010. Interest expense was ~~slightly~~ higher in ~~2010~~2011 due to a full year of the higher ~~default~~forbearance rate being charged ~~during~~on ~~part of~~ the ~~year,~~Company’s ~~while~~line ~~2009~~of ~~was~~credit ~~also~~compared ~~high due~~ to ~~eight~~ ~~months of charges for~~ a ~~swap~~partial ~~agreement~~year ~~which~~of ~~matured~~that rate in ~~August 2009~~2010.

Accretion expense for the year ended December 31, ~~2010~~2011 was $2446,~~580~~654 compared to $4524,~~905~~580 for the same period in ~~2009.~~2010 due to the decrease in the overall remaining well lives as identified in the reserve report.

Oil and natural gas production costs decreased $2276,~~483~~457, or 311.35%, to $~~664~~588,~~699~~242 for the year ended December 31, ~~2010~~2011 compared to $~~687~~664,~~182~~699 for the same period in ~~2009~~2010. The decrease is primarily the result of a decrease in ~~water hauling,~~ service rig ~~rental~~rentals, ~~and~~accruals ~~well~~for ~~repairs~~county ~~and~~production ~~maintenance,~~ taxes partially offset by ~~higher~~more ~~payments~~water hauling and ~~accruals~~parts for ~~county~~wells. ~~production~~The ~~taxes~~year ended 2010 was higher also due to the expensing of well costs for permitted and ~~telemeter~~undrilled ~~charges~~properties.

Self-storage property operating expenses increased $234,~~985~~265, or 203.91%, to $~~138~~142,~~524~~789 for the year ended December 31, ~~2010~~2011 compared to $~~114~~138,~~539~~524 for the same period in ~~2009~~2010. The increase is largely due to repairs, ~~utility payments~~ and ~~snowplowing~~higher ~~expenses~~utility payments.

Legal and professional fees decreased $11120,~~196~~236, or 333.07%, to $~~356~~236,~~658~~422 for the year ended December 31, ~~2010~~ 2011 compared to $~~367~~356,~~854~~658 for the same period in ~~2009~~2010. ~~Although~~The ~~the~~ legal ~~and~~expenses ~~professional~~in ~~fees decreased for~~ the year ended ~~December 31,~~ 2010 ~~compared to the same period in 2009, both years are~~ ~~significantly~~were higher ~~than~~largely isdue ~~usual for the Company. The large expenses are directly related~~ to the forbearance settlement on June 18, 2010 with RBS Citizens, N.A. whereby the Company ~~has~~ had to pay its attorney expenses and the bank’s as part of the court settlement.

Property taxes and insurance expenses ~~decreased~~increased $618,~~262~~184, or 4410.67%, to $7684,~~230~~414 for the year ended December 31, ~~2010~~2011 compared to $~~137~~76,~~492~~230 for the same period in ~~2009~~2010. The ~~decrease~~increase is largely due to ~~a reduction in~~ the ~~property~~normalization ~~values,~~of ~~and consequently~~ the ~~property~~ taxes, on two parcels at the Painesville self-storage facility ~~and~~after ~~the~~a ~~non-renewal~~large ofreduction ~~the Directors~~ and ~~Officers~~refund ~~insurance plan during 2009. The reduction~~ in ~~property values and property taxes resulted from a reassessment requested by the Company~~2010.

General and administrative expenses ~~decreased~~increased $~~157~~27,~~959~~196, or 204.75%, to $~~605~~632,~~023~~219 for the year ended December 31, ~~2010~~2011 compared to $~~762~~605,~~982~~023 for the same period in ~~2009~~2010. The ~~decrease~~increase in general and administrative expenses for the year ended December 31, ~~2010~~2011 is largely due to aan ~~decrease~~increase in ~~employees~~ ~~and~~employee ~~benefits,~~expenses ~~director meeting expense,~~ and ~~fewer expenditures in most categories~~benefits.

22Loss from unconsolidated affiliate expense increased $658,114 to $833,626 for the year ended December 31, 2011 compared to $175,512 for the same period in 2010. The loss included an impairment of $750,000 on the Company’s investment due to dry wells.

The Company wrote off one well with a net book value of $162,003 as an impairment expense due to lack of production.

Depreciation, depletion and amortization expenses decreased $342,336, or 22.7%, to $1,163,761 for the year ended December 31, 2011 compared to $1,506,097 for the same period in 2010. The current depletion expense continues to be high largely due to the reduction in the Company’s depletable base and lower production.

Loss from unconsolidated affiliate expense decreased $474,908 for the year ended December 31, 2010 compared to for the same period in 2009. The Company recorded impairment losses of $143,197 and $588,309 in 2010 and 2009, respectively.

Impairment and dry well costs from operations for the year ended December 31, 2010 was $0 compared to $145,444 for one well during the same period in 2009. Impairments and dry wells could happen in future years, particularly in an aggressive drilling program or when market prices of production is very low, as is the current case.

Depreciation, depletion and amortization expenses decreased $1,875,017, or 55.5%, to $1,506,097 for the year ended December 31, 2010 compared to $3,381,114 for the same period in 2009. The current depletion expense is lower than the same period in 2009 largely due to the reduction in the Company’s depletable base from prior year expense.

Net Loss

The Company had a net loss from operations of $13,~~383~~001,~~843~~429, for the year ended December 31, ~~2010~~ 2011 compared to a net loss of $21,~~696~~383,~~245~~843 for the same period in ~~2009~~2010. The ~~large~~increase ~~reduction~~ in the net loss was ~~due~~a result toof ~~decreased~~the ~~depreciation,~~large ~~depletion,~~reduction ~~and~~in ~~amortization~~natural ~~expenses,~~gas ~~that~~production ~~were~~revenue ~~partially offset by a reduction~~ in ~~production~~2011, ~~revenue;~~the ~~decreased~~ impairment ~~loss~~recorded onfor ~~Kykuit;~~the ajoint ~~refund~~venture, ~~of real estate taxes in 2010;~~ and ~~lower~~the ~~operating~~write-off ~~expenses~~of asone ~~compared to 2009~~well.

Net Income/Loss attributable to Non-Controlling Interest

The Company had a net ~~income~~ loss attributable to its non-controlling interest in LSS I of $~~103~~15,~~972~~589 for the year ended December 31, ~~2010~~2011 and a net ~~loss~~income of $81103,~~544~~972 for the same period in ~~2009~~2010. Although LSS I has usually recorded a loss in prior periods, during the year ended December 31, 2010, it had income due to the decrease in the property values on the Painesville property infor which a tax refund payment was received.

Net Loss attributable to John D. Oil and Gas Company

The Company had a net loss attributable to John D. interests of $12,~~487~~985,~~815~~840 for the year ended December 31, ~~2010~~2011 compared to a net loss of $21,~~614~~487,~~701~~815 for the same period in ~~2009~~2010. The loss in ~~2010~~ 2011 is ~~less~~higher compared to ~~2009~~2010 largely due to ~~reduced~~the ~~operating~~large ~~expenses~~reduction ~~and~~in ~~depletion~~natural ~~expense,~~gas ~~while~~production ~~2010~~revenue ~~also~~in ~~had~~2011, ~~reduced~~the ~~natural~~impairment ~~gas~~recorded ~~production~~for ~~revenue~~the ~~from~~joint ~~decreased~~venture, ~~production~~and ~~volumes~~the ~~and lower~~write-off ~~pricing~~of ~~than~~one ~~2009~~well.

Interest Rate Risk

Interest rate risk is the risk that interest rates will increase, which will result in an increase in the Company’s interest expense on its variable rate loans.

The loan on the Painesville facility and the Charter One line of credit, totaling approximately $10.5 million, are tied to variable interest rates. If the Company’s interest rates on the loans were to increase by 1% per year, the Company’s interest expense would increase approximately $105,000 on an annual basis. The Company’s line of credit was previously fixed through the use of an interest rate swap until August 2009 which had minimized the risk. Additionally the line of credit interest rate iswas fixed at 4.75% for one year until July 2011. The Company continues to accrue interest at 4.75% on the line of credit. However if interest rates increase, the Company’s results of operations may be materially and adversely affected.

Off-Balance Sheet Arrangements

The Company had one off-balance sheet arrangement at December 31, ~~2010~~2011, with respect to its investment in Kykuit. While the Company is not liable for the contribution obligations of other members of Kykuit Resources, LLC, the Company is investing additional funds since other members are not investing at this time. During ~~2010~~2011 and ~~2009~~2010, the Company invested cash of $93409,~~440~~200 and $~~514~~93,~~414~~440, respectively, in Kykuit as part of their cash calls and to make up the difference for other members not investing.

Forward-Looking Statements

Statements that are not historical facts, including statements about the Company’s confidence in its prospects and strategies and its expectations about growth, are forward-looking statements that involve risks and uncertainties. These risks and uncertainties, many of which are beyond our control, may include statements about our:

•

ability to continue as a going concern;

•

our ability to successfully reorganize in bankruptcy;

•

liquidity and our ability to meet our debt obligations;

•

business strategy;

•

financial strategy;

•

drilling locations;

•

natural gas and oil reserves;

•

realized natural gas and oil prices;

•

production volumes;

•

lease operating expenses, general and administrative expenses and finding and development costs;

•

future operating results; and

•

plans, objectives, expectations and intentions.

All of these types of statements, other than statements of historical fact, included in this report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of these terms or other comparable terminology.

The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe these estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. We caution all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section and elsewhere in this report. All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Income Taxes

Effective January 1, 2006, the Company became a “C” Corporation for tax purposes.

At December 31, ~~2010~~2011 and ~~2009~~2010, the Company had net operating loss carry forwards (NOLS) for future years of approximately $1618.6 million and $1516.9 6 million, respectively. These NOLS will expire at various dates through ~~2028~~2031. Utilization of the NOLs could be limited if there is a substantial change in ownership of the Company and is contingent on ~~future~~ future earnings. In addition, the Company has a $41,187 alternative minimum tax (AMT) credit that carries forward indefinitely.

Recently Issued Accounting Pronouncements

~~Disclosures~~The ~~about~~Company ~~the~~reviewed ~~Credit~~recently ~~Quality~~issued, ofbut ~~Financing~~not ~~Receivables~~yet effective accounting pronouncements and ~~the~~does ~~Allowance~~not ~~for~~believe ~~Credit~~any ~~Losses~~ such pronouncements will have a material impact on the financial statements.

In July 2010, the FASB issued ASU No. 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” This ASU amends disclosure requirements with respect to the credit quality of financing receivables and the related allowance for credit losses. Entities will be required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about their financing receivables and related allowance for credit losses. Disclosures to be made as of the end of a reporting period are effective for the Company’s reporting period ending December 31, 2010; and the disclosures about activity that occurs during a reporting period will be effective for the Company’s reporting period ending March 31, 2011. Since this ASU will only amend disclosure requirements, not accounting practice, the adoption of this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

The Company reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe any such pronouncements will have a material impact on the financial statements.

Item 8. Financial Statements and Supplementary Data

The Company’s Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements are filed as part of this report.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, ~~2010~~2011, the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our chief executive officer and chief financial officer each concluded that the Company’s disclosure controls and procedures were not effective in light of the identification of a material weakness in the Company’s internal controls over financial reporting as discussed below.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining an adequate system of internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f) . The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Consolidated Financial Statements for external purposes in accordance with generally accepted accounting principles defined in the Exchange Act.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.

We carried out an evaluation under the direction of our chief executive officer and chief financial officer, of the effectiveness of our internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control over Financial Reporting — Guidance for Smaller Public Companies (2006).” Based on that evaluation, our management concluded that our internal controls over financial reporting were not effective as of December 31, ~~2010~~2011 due to control deficiencies that constitute a material weakness.

25In connection with management’s assessment of our internal control over financial reporting described above, management has identified the following material weakness in our internal control over financial reporting as of December 31, 2011:

In connection with management’s assessment of our internal control over financial reporting described above, management has identified the following material weakness in our internal control over financial reporting as of December 31, 2010:

The Company’s size and staff limitations have prevented it from being able to employ sufficient resources to enable the Company to have an adequate level of supervision and segregation of duties within the internal control system. At times, the Company has one person responsible for processing transactions and reporting them. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely fail to detect errors in spreadsheets, calculations or other documentation. Existing management attempts to provide oversight for most functions but lack of personnel makes the task virtually impossible in some situations. In addition this lack of segregation of duties led management to conclude that the Company’s disclosure controls and procedures were not effective to give reasonable assurance that the information required to be disclosed in reports that the Company files under the Exchange Act are recorded, processed and reported as and when required. These control deficiencies could result in a material misstatement in our interim or annual financial statements that would not be prevented or detected on a timely basis.

In order to mitigate this material weakness, all financial reports are reviewed by ~~two of~~ the Company’s board members for reasonableness. All unexpected results are investigated.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Notwithstanding the material weakness described above, to the best of their knowledge, the Company’s management believes that the financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

The Company has reduced its office staff which hampers the Company’s ability to maintain adequate segregation of duties which led to control deficiencies that constitute a material weakness in our internal control over financial reporting.

Attestation Report of Independent Registered Public Accounting Firm

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

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers. Below are the names, ages, positions and certain other information concerning our current directors and executive officers:

Richard M. Osborne, 6566, has been chairman, chief executive officer and a director of John D. Oil and Gas since September ~~1999~~ 1998. He has been a director since 2003, chairman of the board since 2005 and chief executive officer since November 2007 of Gas Natural Inc., a publicly-held public utility company. He is the president and chief executive officer of OsAir, Inc., a company he founded in 1963, which operates as a property developer and manufacturer of industrial gases for pipeline delivery. From 2006 to February 2009 he was a director of Corning Natural Gas Corporation, a publicly-held public utility company in Corning, New York and from September 2008 to January 2009 he was a director of PVF Capital Corp., a publicly-held holding company for Park View Federal Savings Bank in Solon, Ohio. In November 2011, the United States District Court issued an order appointing a receiver to marshal and maintain the value of the assets of the Company, Great Plains Exploration, LLC and Oz Gas, Ltd., companies owned by the Richard M. Osborne Trust, of which Mr. Osborne is trustee, in connection with an action brought by RBS Citizens, N.A. dba Charter One. In January and February 2012, Great Plains Exploration, Oz Gas and the Company filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court. The bankruptcy proceedings are ongoing. Richard Osborne’s background as chairman and chief executive officer of various public companies and many years of experience owning and managing companies in energy and utility related industries provides the board with invaluable management and operational direction.

Gregory J. Osborne, 3233, ~~has~~served ~~been~~as our president and chief operating officer ~~of John D. Oil~~ and ~~Gas since April 2006 and~~ a director ~~since~~from ~~February~~ 2006. ~~From~~to ~~2003 until joining John D. Oil and Gas~~January 28, ~~he was president of Great Plains Exploration LLC~~2012, anwhen ~~oil~~he ~~and~~resigned ~~gas~~to ~~exploration~~become ~~company~~president ~~based in Mentor, Ohio that owns~~ and ~~operates~~chief ~~oil~~operating ~~and~~officer ~~gas~~of ~~wells.~~Energy ~~From~~West ~~2001~~Resources, ~~until joining Great Plains~~Inc., hea ~~served~~subsidiary ~~as executive vice president~~ of ~~Orwell~~Gas Natural ~~Gas Company~~Inc., a ~~regulated~~publicly-held ~~gas~~ public utility company ~~operating in Ohio~~. He is a director of Gas Natural ~~Inc.,~~and ~~a publicly-held public utility company. He is~~ the son of Richard Osborne, our chairman and chief executive officer. ~~Gregory Osborne’s managerial experience and service on the board of various energy related companies provides the board with a wide range of industry specific knowledge.~~

~~Thomas~~Timothy JP. ~~Smith~~Reilly, 6633, ~~has~~was ~~been~~promoted ato the ~~director~~position of President and C.O.O. of John D. Oil and Gas ~~since~~Company ~~1998~~in January 2012. InHe ~~November 2007,~~has ~~he was~~been ~~appointed~~in ~~vice~~the ~~president~~Oil and ~~chief~~Gas ~~financial~~industry ~~officer~~for ofthe ~~Gas~~last ~~Natural~~five ~~Inc.,~~years aas ~~publicly-held public~~lead ~~utility~~Geologist ~~company.~~with HeJohn ~~also~~D. ~~served~~Oil asand Gas ~~Natural Inc~~Company.’s ~~interim~~During ~~president~~that ~~from~~time, ~~August 2007~~Timothy ~~to November 2007~~has ~~and~~overseen ~~has~~the permitting, ~~been~~drilling aand ~~director~~completion of ~~Gas~~all ~~Natural~~wells ~~Inc~~drilled. ~~since~~He ~~2003.~~has ~~From~~also ~~1999~~assisted toin ~~2006~~the production of the current wells, heas ~~served~~ well as ~~our~~taken ~~president~~care ~~and~~of ~~chief~~landowner ~~operating~~issues ~~officer.~~and Mrquestions. ~~Smith’s~~ ~~financial~~Prior ~~and~~to ~~disclosure~~working ~~experience gained~~at John D., Timothy worked as ~~the~~a ~~chief~~Geologist ~~financial~~and ~~officer~~Wetland Delineation ofSpecialist ~~publicly-held~~at ~~companies~~RP Consultants, asInc. ~~well~~He asreceived his ~~experience~~Bachelor asof ~~a director~~Science ofdegree ~~energy~~from Muskingum College in 2000 and ~~utility~~his ~~related~~Master ~~companies~~of ~~provides~~Science ~~extensive~~degree ~~specialized~~in ~~knowledge~~Geology ~~and expertise~~from toSouthern ~~our~~Illinois ~~board~~University in 2004.

Carolyn Coatoam, 65, was appointed chief financial officer and assistant secretary of John D. Oil and Gas on December 31, 2010. Ms. Coatoam has been employed as a consultant to Richard M. Osborne, the Company’s Chief Executive Officer, since June 2009. From 1996 to 2009, she worked for the consulting firm of Niche Systems & Support, Inc., on an assignment to a publicly-held distributor of industrial products. Ms. Coatoam began her career with Deloitte & Touche. Subsequently, she served as the chief financial officer for Mr. Concrete Inc. and Coatoam & Co. Inc. until 2005. She is an inactive certified public accountant.

Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of our common stock. Our officers, directors and greater than 10% stockholders are required by the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely on review of copies of reports furnished to us or written representations that no reports were required, we believe that all Section 16(a) filing requirements were met timely in 2010.

Code of Business Conduct and Ethics. The Company has adopted a code of conduct and ethics that applies to all officers, directors and employees of John D. Oil and Gas, including our principal executive officer, principal financial officer, principal accounting officer, and any person performing similar functions. A copy of the code is available on our website at www.johndoilandgas.com. Any amendments or waivers to our code of conduct and ethics that apply to our chief executive officer or chief financial officer will be promptly disclosed to our stockholders.

Audit Committee. Following the resignations of the audit committee members and most of the remaining directors on August 26, 2009, the Company was left with only three directors (Richard M. Osborne, Gregory J. Osborne and Thomas J. Smith), none of whom are independent pursuant to applicable laws and regulations and listing standards of NASDAQ. Currently, our board does not have a separately-designated audit committee and the entire board acts as the audit committee. Mr. Smith would qualify as an “audit committee financial expert” but he is not independent.

Thomas J. Smith, 67, has been a director of John D. Oil and Gas since 1998. In November 2007, he was appointed vice president and chief financial officer of Gas Natural Inc., a publicly-held public utility company. He also served as Gas Natural Inc.’s interim president from August 2007 to November 2007 and has been a director of Gas Natural Inc. since 2003. From 1999 to 2006, he served as our president and chief operating officer. Mr. Smith’s financial and disclosure experience gained as the chief financial officer of publicly-held companies, as well as his experience as a director of energy and utility related companies provides extensive specialized knowledge and expertise to our board.

CarolynT. Coatoam, 66, was appointed chief financial officer and assistant secretary of John D. Oil and Gas on December 31, 2010. Ms. Coatoam has been employed as a consultant to Richard M. Osborne, the Company’s Chief Executive Officer, since June 2009. From 1996 to 2009, she worked for the consulting firm of Niche Systems & Support, Inc., on an assignment to a publicly-held distributor of industrial products. Ms. Coatoam began her career with Deloitte & Touche. Subsequently, she served as the chief financial officer for Mr. Concrete Inc. and Coatoam & Co. Inc. until 2005. She is an inactive certified public accountant.

Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of our common stock. Our officers, directors and greater than 10% stockholders are required by the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely on review of copies of reports furnished to us or written representations that no reports were required, we believe that all Section 16(a) filing requirements were met timely in 2011.

Code of Business Conduct and Ethics. The Company has adopted a code of conduct and ethics that applies to all officers, directors and employees of John D. Oil and Gas, including our principal executive officer, principal financial officer, principal accounting officer, and any person performing similar functions. A copy of the code is available on our website at www.johndoilandgas.com. Any amendments or waivers to our code of conduct and ethics that apply to our chief executive officer or chief financial officer will be promptly disclosed to our stockholders.

Audit Committee. Following the resignations of the audit committee members and most of the remaining directors on August 26, 2009, the Company was left with only three directors (Richard M. Osborne, Gregory J. Osborne and Thomas J. Smith), none of whom are independent pursuant to applicable laws and regulations and listing standards of NASDAQ. Currently, our board does not have a separately-designated audit committee and the entire board acts as the audit committee. Mr. Smith would qualify as an “audit committee financial expert” but he is not independent. Subsequently on January 28, 2012, Gregory J. Osborne resigned as President, COO and Director.

Item 11. Executive Compensation

Director and Executive Officer Compensation Decisions. Our chairman and chief executive officer generally determines the compensation for our executive officers and compensation is then approved by the full board. We do not have a compensation committee. Our board believes a compensation committee is not necessary because of the level and type of compensation paid to our executive officers and because executive officer compensation is approved by our full board. The ~~compensation~~ ~~of our outside directors was also approved by our full~~ board. ~~The board~~ also administers our Amended and Restated 1999 Stock Option and Award Plan.

Summary Compensation Table. The following table summarizes the compensation paid by us to our chairman and chief executive officer and any other executive officer receiving more than $100,000 in total compensation annually. We do not believe that our compensation practices are reasonably likely to have a material adverse effect on the Company.

							All Other
Name and Principal Position	Year		Salary($)		Bonus($)		All OtherCompensation($)		Total($)
Name and			Salary		Bonus		Compensation		Total
Richard M. Osborne,		2011		—		—		—		—
Principal Position	Year		($)		($)		($)		($)
Chairman and Chief Executive Officer*		2010		—		—		—		—
Richard M. Osborne, Chairman and Chief Executive Officer*		2010		—		—		—		—
Gregory J. Osborne,		2011	$	110,000		—		—	$	110,000
		2009		—		—		—		—
President and Chief Operating Officer		2010	$	110,000		—		—	$	110,000
Gregory J. Osborne, President and Chief Operating Officer		2010		110,000		—		—		110,000
		2009		110,000		2,000		—		112,000

*	Richard Osborne does not receive compensation for serving as our chairman and chief executive officer.

Executive Officer Outstanding Equity Awards at December 31, 2010. None of our executive officers had any outstanding equity awards at December 31, 2010.

Executive Officer Employment Agreements. None of our executive officers has an employment agreement with us.

Director Compensation. Richard M. Osborne, Gregory J. Osborne and Thomas J. Smith did not receive compensation for serving on our board during 2010.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth the amount and nature of the beneficial ownership of our common stock as of March 29, 2010 by each person known by us to own more than 5% of the outstanding shares, each director, each executive officer in our summary compensation table, and all our current directors and executive officers as a group.

	Beneficial Ownership(1)
Name and Address(2)	Shares			Convertible Securities			Total			Percent
Richard M. Osborne		3,654,541	(3)		1,021,966	(4)		4,676,507	(5)		46.4	%
Richard A. Bonner		500,000	(6)		250,000	(7)		750,000	(6)(7)		8.0	%
PO Box 1359 Middlefield, Ohio 44062
S&A Investments		—			500,000	(8)		500,000	(8)		5.2	%
10474 Broadview Road Broadview Heights, Ohio 44147
Gregory J. Osborne		151,000			—			151,000			1.7	%
Thomas J. Smith		62,000			6,852	(9)		68,852	(9)		*
All directors and officers as a group (4 individuals)

* less than 1%

(1)		Unless otherwise indicated, we believe that all persons named in the table have sole investment and voting power over the shares of common stock owned.
(2)		Unless otherwise indicated, the address of each of the beneficial owners identified is c/o John D. Oil and Gas Company, 8500 Station Street, Suite 345, Mentor, Ohio 44060.
(3)		Includes (1) 3,503,541 shares owned by the Richard M. Osborne Trust, an Ohio trust of which Richard Osborne is the sole trustee, and (2) 151,000 shares owned by Gregory Osborne which Richard Osborne has the right to vote.
(4)		Includes (1) 5,188,528 limited partnership interests of LSS I Limited Partnership, a Delaware limited partnership, owned by Richard Osborne that are presently convertible into 714,537 shares of our common stock, (2) 1,869,292 limited partnership interests of LSS I owned by Retirement Management Company, of which Richard Osborne is the sole stockholder, that are presently convertible into 257,429 shares of our common stock and (3) 50,000 warrants to purchase 50,000 shares of common stock that are presently exercisable.
(5)		Includes (1) 3,503,541 shares owned by the Richard M. Osborne Trust, (2) 151,000 shares owned by Gregory Osborne which Richard Osborne has the right to vote, (3) limited partnership interests of LSS I owned by Richard Osborne that are presently convertible into 714,537 shares of our common stock, (4) limited partnership interests of LSS I owned by Retirement Management Company that are presently convertible into 257,429 shares of our common stock, and (5) warrants to purchase 50,000 shares of common stock that are presently exercisable.
(6)		Based solely on information in the Schedule 13D filed with the SEC on May 11, 2006.
(7)		Includes 250 shares of our Series A convertible preferred stock that are presently convertible into 250,000 shares of our common stock.
(8)		Includes 500 shares of our Series A convertible preferred stock that are presently convertible into 500,000 shares of our common stock. Based solely on information in the Schedule 13D filed with the SEC on February 21, 2007.
(9)		Includes 49,753 limited partnership interests of LSS I owned by Mr. Smith that are presently convertible into 6,852 shares of our common stock.

Executive Officer Outstanding Equity Awards at December 31, 2011. None of our executive officers had any outstanding equity awards at December 31, 2011.

~~Equity~~Executive ~~Compensation~~Officer ~~Plan~~Employment ~~Information~~Agreements. None of our executive officers have an employment agreement with us.

~~The~~Director ~~following~~Compensation. ~~table~~Richard ~~summarizes information, as of December 31, 2010, relating to our Amended and Restated 1999 Stock Option and Award Plan~~M. ~~The plan provides for the issuance of up to 300~~Osborne,~~000 shares~~ ofGregory ~~common stock to key employees, officers and directors~~J. AsOsborne ~~of December 31, 2010, there were 35,000 shares of restricted stock~~ and noThomas ~~options outstanding and the maximum number of shares available for future grant under the plan was 265,000 shares~~J. ~~Under~~Smith ~~the~~did ~~plan, the option price may~~ not receive becompensation ~~less~~for ~~than~~serving ~~100% of the common stock fair market value~~ on ~~the date of grant (in the event of incentive stock options, 110% of the fair market value if the employee owns more than 10% of~~ our ~~outstanding~~ ~~common~~board ~~stock)~~during 2011.

Number of

securities

Weighted-

remaining available

to be issued upon

average

for future issuance

exercise of

exercise price of

under equity

outstanding

compensation plans

options, warrants

(excluding securities

Plan category

and rights

reflected in column (a))

Equity compensation plans approved by security holders

35,000

0.65

265,000

Equity compensation plans not approved by security holders

—

Total

35,000

0.65

265,000

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth the amount and nature of the beneficial ownership of our common stock as of March 31, 2012 by each person known by us to own more than 5% of the outstanding shares, each director, each executive officer in our summary compensation table, and all our current directors and executive officers as a group.


	Beneficial Ownership⁽¹⁾
Name and Address⁽²⁾	Shares			Convertible Securities			Total			Percent
Richard M. Osborne		3,654,541	⁽³⁾		1,021,966	⁽⁴⁾		4,676,507	⁽⁵⁾		46.4	%
Richard A. Bonner PO Box 1359 Middlefield, Ohio 44062		500,000	⁽⁶⁾		250,000	⁽⁷⁾		750,000	⁽⁶⁾⁽⁷⁾		8.0	%
S&A Investments 10474 Broadview Road Broadview Heights, Ohio 44147		—			500,000	⁽⁸⁾		500,000	⁽⁸⁾		5.2	%
Gregory J. Osborne		151,000			—			151,000			1.7	%
Thomas J. Smith		62,000			6,852	⁽⁹⁾		68,852	⁽⁹⁾		*

*	less than 1%

(1)	Unless otherwise indicated, we believe that all persons named in the table have sole investment and voting power over the shares of common stock owned.

(2)	Unless otherwise indicated, the address of each of the beneficial owners identified is c/o John D. Oil and Gas Company, 8500 Station Street, Suite 345, Mentor, Ohio 44060.

(3)	Includes (1) 3,503,541 shares owned by the Richard M. Osborne Trust, an Ohio trust of which Richard Osborne is the sole trustee, and (2) 151,000 shares owned by Gregory Osborne which Richard Osborne has the right to vote.

(4)

Includes (1) 5,188,528 limited partnership interests of LSS I Limited Partnership, a Delaware limited partnership, owned by Richard Osborne that are presently convertible into 714,537 shares of our common stock, (2) 1,869,292 limited partnership interests of LSS I owned by Retirement Management Company, of which Richard Osborne is the sole stockholder, that are presently convertible into 257,429 shares of our common stock and (3) 50,000 warrants to purchase 50,000 shares of common stock that are presently exercisable.

(5)

Includes (1) 3,503,541 shares owned by the Richard M. Osborne Trust, (2) 151,000 shares owned by Gregory Osborne which Richard Osborne has the right to vote, (3) limited partnership interests of LSS I owned by Richard Osborne that are presently convertible into 714,537 shares of our common stock, (4) limited partnership interests of LSS I owned by Retirement Management Company that are presently convertible into 257,429 shares of our common stock, and (5) warrants to purchase 50,000 shares of common stock that are presently exercisable.

(6)	Based solely on information in the Schedule 13D filed with the SEC on May 11, 2006.

(7)	Includes 250 shares of our Series A convertible preferred stock that are presently convertible into 250,000 shares of our common stock.

(8)	Includes 500 shares of our Series A convertible preferred stock that are presently convertible into 500,000 shares of our common stock. Based solely on information in the Schedule 13D filed with the SEC on February 21, 2007.

(9)	Includes 49,753 limited partnership interests of LSS I owned by Mr. Smith that are presently convertible into 6,852 shares of our common stock.

Equity Compensation Plan Information

The following table summarizes information, as of December 31, 2011, relating to our Amended and Restated 1999 Stock Option and Award Plan. The plan provides for the issuance of up to 300,000 shares of common stock to key employees, officers and directors. As of December 31, 2011, there were 35,000 shares of restricted stock and no options outstanding and the maximum number of shares available for future grant under the plan was 265,000 shares. Under the plan, the option price may not be less than 100% of the common stock fair market value on the date of grant (in the event of incentive stock options, 110% of the fair market value if the employee owns more than 10% of our outstanding common stock).


Plan category	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))
Equity compensation plans approved by security holders		35,000	$	0.65		265,000
Equity compensation plans not approved by security holders		0		—		0
Total		35,000	$	0.65		265,000

Item 13. Certain Relationships and Related Transactions, and Director Independence

~~Richard M~~Mr. Osborne, ~~our chairman and chief executive officer,~~ is the sole manager of Liberty Self-Stor II, Ltd., an Ohio limited liability company, which ~~owns~~is the owner of a truck rental business, ~~that provides~~which makes trucks available for short-term rental to the general public, including tenants of ~~our~~the Company’s self-storage facility, and provides for the retail sale of locks, boxes, packing materials, ~~propane gas~~ and related merchandise at the self-storage facility. ~~John~~The D.Company ~~Oil~~has ~~and~~entered ~~Gas~~into ~~has~~ a cost sharing agreement with Liberty Self-Stor II, Ltd. with respect to the sharing of employees and space at the ~~offices~~office of the self-storage facility for the benefit of both companies. ~~As of December 31, 2010,~~ Liberty Self-Stor II, Ltd. owed usthe ~~$3,806~~Company funds associated with these transactions, as well as for cash advances between the companies., which are included in accounts receivable from related parties in the accompanying consolidated balance sheets and listed in the table below.

OnThe ~~December 28,~~Company ~~1999,~~leases ~~our~~its ~~stockholders approved the lease of our~~ executive offices from OsAir, Inc., a company owned by Mr. Osborne. The current lease has ~~had~~ a three year term maturing on ~~March~~April 311, ~~2009~~ 2012 for $12,~~350~~000 per month. ~~The~~Rent ~~lease~~expense ~~was~~totaled ~~extended~~$24,000 onfor ~~March~~the years ending December 2531, ~~2009~~2011 ~~for~~and a2010, ~~three~~and ~~year~~is ~~term~~included atin ~~$2,000~~general ~~per month~~and administrative expenses. AsThe ofCompany ~~December 31,~~anticipates ~~2010,~~extending its ~~$24~~lease with OsAir,~~000~~ ofInc. ~~this~~after ~~expense~~the isdocuments ~~included~~are inapproved ~~our~~by ~~general~~the ~~and administrative~~bankruptcy ~~expenses~~court. As of June 14, 2012, the lease has not been approved.

On September 28, 2006, the Company entered into an unsecured loan agreement for a line of credit with a one year term with Mr. Osborne and Charter One Bank for up to $5.0 million dollars in total borrowings with interest at a rate of 1.75% over LIBOR adjusted monthly. The Charter One liability was jointly loaned, so the Company and Mr. Osborne were each liable for the debt of the other.

The loan was subsequently revised several times until on March 28, 2008, the Company entered into the First Amended and Restated Loan and Security Agreement (the “Loan Agreement”) between the Company, Mr. Osborne (the Company and Mr. Osborne together, the “Borrowers”), and Charter One. The Loan Agreement extended the maturity date to August 1, 2009, continuing with the original interest rate calculation of 1.75% over LIBOR adjusted monthly. Under the agreement, only the Company could borrow on the line of credit when any amounts are paid down against the $9.5 million outstanding on the loan. The Company and Great Plains Exploration LLC, a company owned by Mr. Osborne (“Great Plains”), agreed that the related party loan of $3.8 million from Great Plains was satisfied in full and terminated upon the Company’s entry into the new Charter One loan and assumption of the $3.8 million portion of the line of credit drawn by Mr. Osborne. Therefore, the Company had $9.5 million in outstanding debt to Charter One and $0 in outstanding debt to Great Plains at March 31, 2008. As part of this loan agreement, Mr. Osborne has pledged several real estate properties that he personally owns, to provide sufficient collateral allowing the Company to enter into the loan agreement. The Company did not meet the reserve collateral requirements for a $9.5 million loan without additional collateral.

The Company’s $9.5 million line of credit with Charter One matured on August 1, 2009. On August 20, 2009, Charter One received a judgment in its favor against the Company and Mr. Osborne, related to the $9.5 million line of credit. The average balance during 2010 was $9.5 million and the weighted average interest rate was 3.55%. The average balance during 2009 was $9.5 million and the weighted average interest rate was 2.12%.

On June 18, 2010, the Company, Mr. Osborne, the Richard M. Osborne Trust (the “Trust”), Great Plains, and Oz Gas, Ltd. (companies owned by Mr. Osborne) entered into a Forbearance Agreement with Charter One regarding the Company’s $9.5 million line of credit under the Loan Agreement and regarding the $25.0 million loan agreement between Great Plains, Oz Gas and Mr. Osborne and Charter One, dated August 2, 2007 (together, the “Loan Agreements”). The Company, Mr. Osborne, the Trust, Great Plains and Oz Gas are collectively referred to in the Forbearance Agreement and herein as the “Loan Parties.”

Pursuant to the Forbearance Agreement and during the forbearance period, Charter One agreed to, among other things, forbear from exercising its rights and remedies arising out of the judgments and the Loan Agreements and to stay any action on its motion for the appointment of a receiver.

~~Under~~Effective January 1, 2006, the ~~Forbearance~~Company ~~Agreement,~~entered ~~Charter~~into ~~One’s~~a ~~agreement~~contract towith ~~forbear~~Great isPlains ~~conditioned~~for ~~upon~~well operations and ~~subject to~~sale of natural gas and oil production, net of pipeline costs. The term of the ~~following~~agreement ~~conditions:~~ was one year from the effective date. It was extended as of January 1, 2007.

•During ~~Payment~~the byfall ~~the~~of ~~Loan~~2011, ~~Parties~~the ofCompany signed a ~~forbearance~~base ~~fee~~contract ofwith ~~$40~~Gas Natural Service Company,~~000~~ ~~per~~LLC ~~month~~to ~~during~~sell the ~~forbearance~~Company’s ~~period;~~natural gas. The agreement is open-ended and can be terminated by either party with thirty days written notice. See Exhibit 10.15 and 10.16 to the annual report on Form 10-K for more information. The pipeline costs continue to be charged to the Company separately from Great Plains.

•The NoCompany ~~material~~is ~~adverse~~a ~~change~~fifty inpercent partner and the ~~condition~~operating manager of Lucky Brothers LLC, a company whose other partners are almost all related to Mr. Osborne. The partnership owns one well at December 31, 2011. The purpose of Lucky Brothers LLC is to engage in a joint venture for drilling wells. The Company has invested $174,392 in well tangibles and intangibles at December 31, 2011 and 2010. The well is currently not operating due to high volumes of water flowing into the ~~Loan~~pipe. ~~Parties;~~

• An assignment and grant of a security interest by the Company and Great Plains Exploration of each of their ownership interests in the Alpha and Panzica wells;

• A pledge by the Loan Parties of their ownership interests in Kykuit Resources LLC; and

• A pledge by Mr. Osborne of not less than 800,000 shares of common stock of Gas Natural Inc. with such stock having a market value of not less than $9.6 million pursuant to a pledge agreement.

In addition, commencing July 1, 2010 and each month thereafter until all amounts under the judgments and loan agreements have been paid in full, the Loan Parties shall pay Charter One $400,000, including the $40,000 forbearance fee. The Company had previously planned to pay one third of the $400,000, but due to lack of cash, they have decided to accrue interest and one third of the $40,000 monthly fee and legal fees. The monthly $400,000 is being paid by the other Loan Parties. Such payments by the Loan Parties shall be applied first to Charter One’s fees and expenses, second to accrued but unpaid interest due under the judgments, and third to principal amounts due under the judgments. Charter One contends that the judgments will bear interest at LIBOR plus 1.75% with a LIBOR floor of 3.00%. The Company believes that there is an interest rate cap of 3.00%. The parties are in discussions regarding the applicable interest rate. If the Loan Parties repay $10 million and if after application of such repayment the outstanding balance of the judgments does not exceed 65% of the current producing reserve value (as that term is defined in the Loan Agreements) of the Company, Great Plains and Oz Gas, then the pledge of Mr. Osborne’s Kykuit interests and his Gas Natural Inc. shares shall be released. In addition, the Company must deposit all proceeds of its operations into accounts maintained by Charter One but during the forbearance period Charter One will not take any action to set off funds in any such account.

Because the Company does not have the available cash to repay the line of credit, if the required payments are not made by the Company or any of other Loan Parties, or other events of default occur, under the Forbearance Agreement or if prior to the end of the forbearance period the Company is unsuccessful in refinancing the line of credit with Charter One or if the Company is unsuccessful in obtaining substitute financing, there is substantial doubt about the Company’s ability to continue as a going concern.

Discussions with Charter One are ongoing but there is no certainty that these discussions will result in satisfactory terms of a revised loan agreement or a revised loan agreement at all. If Charter One demands repayment of the outstanding amounts payable at the end of the forbearance period, the Company does not have the available cash to repay the line of credit and will need financing from other sources to repay Charter One.

Effective January 1, 2006, the Company entered into a contract with Great Plains for well operations and sale of natural gas and oil production, net of pipeline costs. The term of the agreement was one year from the effective date. It was extended as of January 1, 2007 and shall be extended for consecutive one year periods unless terminated earlier.

The Company is a fifty percent partner and the operating manager of Lucky Brothers LLC, a company whose other partners are almost all related to Mr. Osborne. The partnership owned one well at December 31, 2010. The purpose of Lucky Brothers LLC is to engage in a joint venture for drilling wells. The Company has invested $174,392 in well tangibles and intangibles at December 31, 2010 and 2009.

The Company purchases well supplies from Big Oats Oilfield Supply Company, a company owned by Mr. Osborne.

AtThe Company is an owner and managing member of an unconsolidated affiliate, Kykuit Resources LLC (“Kykuit”), which is accounted for using the equity method of accounting. The Company had a 23.17% and a 21.79% ownership in Kykuit at December 31, 2011 and 2010, respectively. On June 18, 2010, the Company ~~had~~pledged aits ~~$12,000~~interest ~~invoice~~in ~~outstanding~~Kykuit to OzCharter ~~Gas~~One ~~Ltd~~in connection with the Forbearance Agreement. At December 31, 2011, the investment by the Company in this venture was $312,527 which includes cash totaling $1,658,980, a ~~company~~cumulative ~~owned~~net bybook Mrloss in the investment of $1,717,003 and additional cash commitments of $370,550. The cumulative net book loss of $1,717,003 at December ~~Osborne~~31, ~~for~~2011 ~~payments~~included ~~made~~monthly onlosses since inception totaling $378,694 and impairment losses totaling $1,338,309. At December 31, 2010, the investment by the Company’s ~~behalf~~in tothis ~~Charter~~venture ~~One~~was ~~during~~$736,953 ~~2010~~which includes cash totaling $1,496,330, an accounts payable of $124,000 and a cumulative net book loss of $883,377. Additional information is disclosed in Note 4 to the financial statements included in this Form 10-K.

~~The~~Mr. Osborne, the Company’s ~~paid~~Chairman ~~Orwell~~and ~~Trumbull~~Chief ~~Pipeline~~Executive Officer, ~~LLC~~and Gas Natural Inc., a publicly-held public utility company ~~owned~~of bywhich Mr. Osborne is the Chairman, ~~for~~Chief ~~telemeter charges~~Executive Officer and a significant stockholder, owns interests in ~~2010~~Kykuit. Mr. Osborne’s personal interests in Kykuit were pledged to Charter One in connection with the Forbearance Agreement.

In 2009, the Company advanced operating funds to Sleepy Hollow Oil and Gas, LLC, a company owned by Mr. Osborne.

On February 28, 2006, we entered into a registration rights agreement with the Richard M. Osborne Trust, of which Richard Osborne is the sole trustee, and any other stockholders who become parties to the agreement pursuant to its terms, which provides, among other things, certain piggyback registration rights to the stockholders who are parties to the agreement and that we will file a registration statement with the SEC upon the demand of the Osborne Trust.

The following tables summarize the related party transactions for accounts receivable of oil and natural gas production, capitalized costs for wells, outstanding accounts payable, revenues received and payments paid for expenses to related parties for the periods indicated. The accounts receivable from various companies owned by Mr. Osborne in the accompanying consolidated balance sheets represent amounts owed to the Company for minor cost sharing transactions and are listed in the following table for the years ended December 31, 2011 and 2010.


	2011		2010
Accounts Receivable:
Great Plains Exploration, LLC.	$	145,440	$	435,268
Gas Natural Service Company, LLC		73,471		—
Liberty Self Stor II		4,914		3,806
Sleepy Hollow Oil and Gas, LLC		100,000		—
Various Other Related Companies		65,906		4,628

	$	389,731	$	443,702

Accounts Payable:
Great Plains Exploration, LLC.	$	788,257	$	14,012
Big Oats Oilfield Supply Company		102,152		23,111
Kykuit Resources LLC		398,050		160,391
Various Other Related Companies		15,351		25,218

	$	1,303,810	$	222,732

On August 3, 2007, Kykuit Resources, LLC purchased from Hemus, Ltd. a 75% interest in certain oil, natural gas and mineral rights located in the Montana Breaks area of Montana. At the same time, Kykuit and Hemus executed a joint venture development agreement pursuant to which Kykuit agreed to develop and operate all of their joint leasehold interests in the Montana Breaks. On May 1, 2008, Kykuit entered into an assignment pursuant to which Hemus assigned all of its remaining rights, title and interest in certain oil and natural gas and mineral leases located in Montana to Kykuit for $250,000. John D. Oil and Gas is the managing member of Kykuit and currently owns 21.79% of Kykuit. The current investment by John D. Oil and Gas in this venture was $736,953 at December 31, 2010.


	2011		2010
Great Plains Exploration, LLC:
Capitalized Costs for Well Property and Equipment	$	23,687	$	—
Revenue From the Sale of Oil and Natural Gas Production, net of pipeline transportation costs	$	887,899	$	1,828,647
Well Management, Water Hauling and Service Rig	$	417,451	$	395,892
Gas Natural Service Company
Revenues	$	80,309	$	—
Big Oats Oilfield Supply Company:
Purchases	$	69,799	$	22,193
Orwell Trumbull Pipeline, LLC
Operating expenses	$	—	$	2,000

Richard Osborne owns interests in Kykuit. Gas Natural, Inc., a publicly-held public utility company of which Richard Osborne is the chairman and chief executive officer and a significant stockholder, also owns an interest in Kykuit. Thomas J. Smith, a director of John D. Oil and Gas, is also vice president, chief financial officer and a director of Gas Natural, Inc.

	2010		2009
Accounts Receivable Oil and Gas Sales:
Great Plains Exploration, LLC.	$	435,268	$	423,566
Liberty Self Stor II		3,806		727
Lucky Brothers		—		38,983
Various Related Companies		4,628		1,308
	$	443,702	$	464,584
Accounts Payable:
Great Plains Exploration, LLC.	$	14,012	$	47,144
Big Oats Oilfield Supply Company		23,111		—
Kykuit Resources LLC		160,391
Orwell Natural Gas		1,296
Osair, Inc.		11,922		—
OzGas Ltd.		12,000		—
	$	222,732	$	47,144

	2010		2009
Great Plains Exploration, LLC:
Capitalized Costs for Well Property and Equipment	$	—	$	140,410
Revenues
Revenue From the Sale of Oil and Natural Gas Production, net of pipeline transportation costs	$	1,828,647	$	3,519,851
Operating expenses
Well Management, Water Hauling and Service Rig	$	395,892	$	506,337
Big Oats Oilfield Supply Company:
Purchases	$	22,193	$	—
Orwell Trumbull Pipeline, LLC
Operating expenses	$	2,000	$	—

We believe that the terms of the transactions and the agreements described above are on terms at least as favorable as those which we could have obtained from unrelated parties. On-going and future transactions with related parties will be:

•

on terms at least as favorable as those that we could obtain from unrelated parties,

•

for bona fide business purposes, and

• approved by a majority of disinterested and non-employee directors~~, if any~~.

Director Independence. Following the resignations of the audit committee members and most of the remaining directors on August 26, 2009, the Company was left with only three directors (Richard M. Osborne, Gregory J. Osborne and Thomas J. Smith), none of whom are independent pursuant to applicable laws and regulations and listing standards of NASDAQ. Currently, our board does not have a separately-designated audit committee and the entire board acts as the audit committee. Mr. Smith would qualify as an “audit committee financial expert” but he is not independent. Subsequently on January 28, 2012, Gregory J. Osborne resigned as President, COO and Director.

Item 14. Principal Accountant Fees and Services

Maloney + Novotny, our independent auditors, billed $91101,~~520~~042 in ~~2010~~2011 and $9691,~~648~~520 in ~~2009~~2010 for audit fees for the audit of our annual consolidated financial statements, the review of financial statements included in our quarterly reports on Form 10-Q, and services that are typically rendered in connection with statutory and regulatory filings or engagements. Maloney + Novotny did not render any other services to us in ~~2010~~2011 and ~~2009~~2010.

~~Audit Committee~~ Pre-Approval Policies and Procedures. The Company’s directors approved the engagement of the auditors engaged by John D. Oil and Gas to render audit or permissible non-audit services for the year ended December 31, ~~2010~~2011. The directors also reviewed the scope of any audit and other assignments given to our auditors to assess whether these assignments would affect their independence. In ~~2010~~2011, the Company’s directors reviewed all services provided by Maloney + Novotny to ensure that they were within the scope previously approved.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Exhibit No.		Description	~~Description~~
2.1	~~2.1~~	Agreement and Plan of Merger, dated as of December 28, 1999, by and among Meridian Point Realty Trust ‘83, the Company and Liberty Self-Stor Limited Partnership (Exhibits A and B to the Agreement and Plan of Merger are Exhibits 3.1 and 3.2, respectively) (Filed as Exhibit 2.1 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)	Agreement and Plan of Merger, dated as of December 28, 1999, by and among Meridian Point Realty Trust ‘83, the Company and Liberty Self-Stor Limited Partnership (Exhibits A and B to the Agreement and Plan of Merger are Exhibits 3.1 and 3.2, respectively) (Filed as Exhibit 2.1 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)
3.1	~~3.1~~	Articles of Incorporation of the Company (Filed as Exhibit 3.1 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)	~~Articles of Incorporation of the Company (Filed as Exhibit 3.1 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)~~
3.2	~~3.2~~	Articles of Amendment of Articles of Incorporation of the Company dated June 27, 2005 (Filed as Exhibit 3.1 to Registrant’s Form 8-K dated July 1, 2005 and incorporated herein by reference.)	~~Articles of Amendment of Articles of Incorporation of the Company dated June 27, 2005(Filed as Exhibit 3.1 to Registrant’s Form 8-K dated July 1, 2005 and incorporated herein by reference.)~~
3.3	~~3.3~~	Articles Supplementary to John D. Oil and Gas Company’s Articles of Incorporation, as amended, restated and supplemented dated February 12, 2008 (Filed as Exhibit 3.1 to Registrant’s Form 8-K dated February 12, 2008 and incorporated herein by reference.)	Articles Supplementary to John D. Oil and Gas Company’s Articles of Incorporation, as amended, restated and supplemented dated February 12, 2008 (Filed as Exhibit 3.1 to Registrant’s Form 8-K dated February 12, 2008 and incorporated herein by reference.)
3.4	~~3.4~~	Bylaws of the Company (Filed as Exhibit 3.2 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)	~~Bylaws of the Company (Filed as Exhibit 3.2 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)~~
4.1		Registration Rights Agreement between the Company and the Richard M. Osborne Trust dated February 28, 2006 (Filed as Exhibit 4.1 to Registrant’s Form 8-K dated February 24, 2006 and incorporated herein by reference.)
9.1		Voting Trust Agreement between the Company, Richard M. Osborne and Gregory J. Osborne dated February 16, 2006 (Filed as Exhibit 7.1 to Registrant’s Form SC 13D/A dated April 11, 2006 and incorporated herein by reference.)
10.1†		Amended and Restated 1999 Stock Option and Award Plan of the Company (Filed as Annex A to Registrant’s Definitive Proxy Statement filed on April 30, 2009 and incorporated herein by reference.)
10.2		Lease between OsAir, Inc. and the Company (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)
10.3		Lease between OsAir, Inc and the Company dated March 26, 2009 (Filed as Exhibit 10.4 to Registrant’s Form 10-K dated December 31, 2008 and incorporated herein by reference.)
10.4		Agreement of Limited Partnership of LSS I Limited Partnership, dated December 29, 1999. (Filed as Exhibit 10.3 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)
10.5		Cost Sharing Agreement, by and between Liberty Self-Stor, Ltd. and Liberty Self-Stor II, Ltd. dated December 28, 1999 (Filed as Exhibit 10.7 to Registrant’s Form 10-KSB, dated March 15, 2000 and incorporated herein by reference.)
10.6		Contract among Acquiport/Amsdell I Limited Partnership and/or its nominee, Liberty Self-Stor, Ltd. and Liberty Self-Stor II, Ltd dated September 7, 2004 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated September 10, 2004 and incorporated herein by reference.)

Exhibit No.			Description
10.7		Amended and Restated First Amendment to Agreement of Limited Partnership of LSS I Limited Partnership dated March 29, 2006 (Filed as Exhibit 10.9 to Registrant’s form 10-KSB, dated March 31, 2006 and incorporated herein by reference)
	4.1		Registration Rights Agreement between the Company and the Richard M. Osborne Trust dated February 28, 2006 (Filed as Exhibit 4.1 to Registrant’s Form 8-K dated February 24, 2006 and incorporated herein by reference.)
10.8		Stock Subscription Agreement between the Company and the Richard M. Osborne Trust dated February 28, 2006 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated March 2, 2006 and incorporated herein by reference.)
	9.1		Voting Trust Agreement between the Company, Richard M. Osborne and Gregory J. Osborne dated February 16, 2006 (Filed as Exhibit 7.1 to Registrant’s Form SC 13D/A dated April 11, 2006 and incorporated herein by reference.)
10.9		Stock Subscription Agreement between the Company and Terence P. Coyne dated February 28, 2006 (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated March 2, 2006 and incorporated herein by reference.)
	10.1	†	Amended and Restated 1999 Stock Option and Award Plan of the Company (Filed as Annex A to Registrant’s Definitive Proxy Statement filed on April 30, 2009 and incorporated herein by reference.)
10.10		Common Stock Purchase Warrant granted to Richard M. Osborne dated June 20, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated June 20, 2008 and incorporated herein by reference.)
	10.2		Lease between OsAir, Inc. and the Company (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)
10.11		Letter agreement between the Company and Great Plains Exploration, LLC relating to the transfer of oil and natural gas wells dated as of January 1, 2006 (Filed as Exhibit 10.1 to Registrant’s Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)
	10.3		Lease between OsAir, Inc and the Company dated March 26, 2009 (Filed as Exhibit 10.4 to Registrant’s Form 10-K dated December 31, 2008 and incorporated herein by reference.)
10.12		Oil and Gas Operations and Sale Agreement between the Company and Great Plains Exploration, LLC dated as of January 1, 2006 (Filed as Exhibit 10.2 to Registrant’s Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)
	10.4		Agreement of Limited Partnership of LSS I Limited Partnership, dated December 29, 1999. (Filed as Exhibit 10.3 to Registrant’s Form 8-K dated January 12, 2000 and incorporated herein by reference.)
10.13		Amendment No 1 to Oil and Gas Operations and Sale Agreement between the Company and Great Plains Exploration, LLC dated as of November 14, 2006 (Filed as Exhibit 10.4 to Registrant’s Form 10-QSB dated September 30, 2006 and incorporated by reference.)
	10.5		Cost Sharing Agreement, by and between Liberty Self-Stor, Ltd. and Liberty Self-Stor II, Ltd. dated December 28, 1999 (Filed as Exhibit 10.7 to Registrant’s Form 10-KSB, dated March 15, 2000 and incorporated herein by reference.)
10.14		Amendment No. 2 to Oil and Gas Operations and Sale Agreement dated as of January 12, 2009 by and between the Company and Great Plains Exploration, LLC (Filed as Exhibit 10.1 to the Registrant’s 8-K dated January 12, 2009 and incorporated herein by reference.)
	10.6		Contract among Acquiport/Amsdell I Limited Partnership and/or its nominee, Liberty Self-Stor, Ltd. and Liberty Self-Stor II, Ltd dated September 7, 2004 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated September 10, 2004 and incorporated herein by reference.)
10.15*		Base Contract for Sale and Purchase of Natural Gas between the Company and Gas Natural Service Company, LLC dated November 25, 2011.
	10.7		Amended and Restated First Amendment to Agreement of Limited Partnership of LSS I Limited Partnership dated March 29, 2006 (Filed as Exhibit 10.9 to Registrant’s form 10-KSB, dated March 31, 2006 and incorporated herein by reference)
10.16*		Intrastate Natural Gas Sales Contract, Amendment to the Base Contract for Sale and Purchase of Natural Gas between the Company and Gas Natural Service Company, LLC dated November 25, 2011.
	10.8		Stock Subscription Agreement between the Company and the Richard M. Osborne Trust dated February 28, 2006 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated March 2, 2006 and incorporated herein by reference.)
10.17		Revolving Demand Note of the Company payable to the Richard M. Osborne Trust dated as of January 1, 2006 (Filed as Exhibit 10.3 to Registrant’s Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)
	10.9		Stock Subscription Agreement between the Company and Terence P. Coyne dated February 28, 2006 (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated March 2, 2006 and incorporated herein by reference.)
10.18		Purchase and Sale Agreement between the Company and Buckeye Storage of Gahanna LLC dated as of October 5, 2006 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated October 12, 2006 and incorporated herein by reference.)
	10.10		Common Stock Purchase Warrant granted to Richard M. Osborne dated June 20, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated June 20, 2008 and incorporated herein by reference.)
10.19		First Amended and Restated Loan and Security Agreement between RBS Citizens, N.A., d/b/a Charter One, Richard M. Osborne and the Company, dated as of March 28, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated March 28, 2008 and incorporated herein by reference.)
	10.11		Letter agreement between the Company and Great Plains Exploration, LLC relating to the transfer of oil and natural gas wells dated as of January 1, 2006 (Filed as Exhibit 10.1 to Registrant’s Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)
10.20		Revolving Credit Note of the Company and Richard M. Osborne in favor of RBS Citizens, N.A., d/b/a Charter One, dated as of March 28, 2008 (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated March 28, 2008 and incorporated herein by reference.)
	10.12		Oil and Gas Operations and Sale Agreement between the Company and Great Plains Exploration, LLC dated as of January 1, 2006 (Filed as Exhibit 10.2 to Registrant’s Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)
	10.13		Amendment No 1 to Oil and Gas Operations and Sale Agreement between the Company and Great Plains Exploration, LLC dated as of November 14, 2006 (Filed as Exhibit 10.4 to Registrant’s Form 10-QSB dated September 30, 2006 and incorporated by reference.)

Exhibit No.			Description
10.21		Loan Amendment Agreement between the Company, Great Plains Exploration, LLC and Richard M. Osborne dated March 28, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 10-Q dated March 28, 2008 and incorporated herein by reference.)
	10.14		Amendment No. 2 to Oil and Gas Operations and Sale Agreement dated as of January 12, 2009 by and between the Company and Great Plains Exploration, LLC (Filed as Exhibit 10.1 to the Registrant’s 8-K dated January 12, 2009 and incorporated herein by reference.)
10.22		Assignment and Assumption of Lease Purchase and Sale Agreement and First Amendment of Lease Purchase and Sale Agreement entered into as of August 3, 2007 between Great Plains Exploration, LLC and Kykuit Resources, LLC (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
	10.15		Revolving Demand Note of the Company payable to the Richard M. Osborne Trust dated as of January 1, 2006 (Filed as Exhibit 10.3 to Registrant’s Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)
10.23		Lease Purchase and Sale Agreement dated March 21, 2007 between Hemus, Ltd. and Great Plains Exploration, LLC and First Amendment to Lease Purchase and Sale Agreement dated July 24, 2007 (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
	10.16		Purchase and Sale Agreement between the Company and Buckeye Storage of Gahanna LLC dated as of October 5, 2006 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated October 12, 2006 and incorporated herein by reference.)
10.24		Joint Venture Development Agreement between Kykuit Resources, LLC and Hemus, Ltd, effective August 3, 2007 (Filed as Exhibit 10.3 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
	10.17		First Amended and Restated Loan and Security Agreement between RBS Citizens, N.A., d/b/a Charter One, Richard M. Osborne and the Company, dated as of March 28, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated March 28, 2008 and incorporated herein by reference.)
10.25		Assignment of Oil, Gas and Mineral Leases dated May 1, 2008 between Hemus, Ltd. and Kykuit Resources, LLC (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
	10.18		Revolving Credit Note of the Company and Richard M. Osborne in favor of RBS Citizens, N.A., d/b/a Charter One, dated as of March 28, 2008 (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated March 28, 2008 and incorporated herein by reference.)
10.26		Transfer and Acceptance of Membership Interest dated May 29, 2008 between the Company and Geis Coyne Oil and Gas, LLC (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
	10.19		Loan Amendment Agreement between the Company, Great Plains Exploration, LLC and Richard M. Osborne dated March 28, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 10-Q dated March 28, 2008 and incorporated herein by reference.)
10.27		Second Amended and Restated Operating Agreement of Kykuit Resources, LLC dated May 29, 2008 (Filed as Exhibit 10.3 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
	10.20		Assignment and Assumption of Lease Purchase and Sale Agreement and First Amendment of Lease Purchase and Sale Agreement entered into as of August 3, 2007 between Great Plains Exploration, LLC and Kykuit Resources, LLC (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
10.28		Purchase and Sale Agreement dated June 11, 2008 between Macum Energy, Inc., Harold and Eva Holden Living Trust dated 1995, Harold and Eva Holden, Trustees, Winifred Gas Partnership, Goodridge Resources, Inc., Vincent T. Larse, Dr. David T. Larsen, Pic Productions, Inc., Stanley and Beverly Stott Living Trust dated 4/30/96, Stanley and Beverly Stott, Trustees, Faith Drilling Inc., and Kykuit Resources, LLC (Filed as Exhibit 10.4 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
	10.21		Lease Purchase and Sale Agreement dated March 21, 2007 between Hemus, Ltd. and Great Plains Exploration, LLC and First Amendment to Lease Purchase and Sale Agreement dated July 24, 2007 (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
10.29		Cognovit Promissory Note of the Company dated August 3, 2007 (Filed as Exhibit 10.4 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
	10.22		Joint Venture Development Agreement between Kykuit Resources, LLC and Hemus, Ltd, effective August 3, 2007 (Filed as Exhibit 10.3 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
10.30		Cognovit Promissory Note of the Company dated August 28, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated August 28, 2007 and incorporated herein by reference.)
	10.23		Assignment of Oil, Gas and Mineral Leases dated May 1, 2008 between Hemus, Ltd. and Kykuit Resources, LLC (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
10.31		Cognovit Promissory Note of the Company dated September 12, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated September 12, 2007 and incorporated herein by reference.)
	10.24		Transfer and Acceptance of Membership Interest dated May 29, 2008 between the Company and Geis Coyne Oil and Gas, LLC (Filed as Exhibit 10.2 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
10.32		Cognovit Promissory Note of the Company dated October 10, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated October 10, 2007 and incorporated herein by reference.)
	10.25		Second Amended and Restated Operating Agreement of Kykuit Resources, LLC dated May 29, 2008 (Filed as Exhibit 10.3 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
10.33		Cognovit Promissory Note of the Company dated November 20, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated November 20, 2007 and incorporated herein by reference.)
10.34		Cognovit Promissory Note of the Company dated November 30, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated November 30, 2007 and incorporated herein by reference.)

Exhibit No.			Description
10.35		Cognovit Promissory Note of the Company dated May 23, 2008 (Filed as Exhibit 10.5 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
	10.26		Purchase and Sale Agreement dated June 11, 2008 between Macum Energy, Inc., Harold and Eva Holden Living Trust dated 1995, Harold and Eva Holden, Trustees, Winifred Gas Partnership, Goodridge Resources, Inc., Vincent T. Larse, Dr. David T. Larsen, Pic Productions, Inc., Stanley and Beverly Stott Living Trust dated 4/30/96, Stanley and Beverly Stott, Trustees, Faith Drilling Inc., and Kykuit Resources, LLC (Filed as Exhibit 10.4 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
10.36		Cognovit Promissory Note of the Company dated May 27, 2008 (Filed as Exhibit 10.6 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
	10.27		Cognovit Promissory Note of the Company dated August 3, 2007 (Filed as Exhibit 10.4 to Registrant’s Form 8-K dated August 3, 2007 and incorporated herein by reference.)
10.37		Cognovit Promissory Note of the Company dated February 13, 2009 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated February 13, 2009 and incorporated herein by reference.)
	10.28		Cognovit Promissory Note of the Company dated August 28, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated August 28, 2007 and incorporated herein by reference.)
10.38		Letter from Richard M. Osborne guaranteeing Charter One loan debt dated March 26, 2009 (Filed as Exhibit 10.37 to Registrant’s Form 10-K dated December 31, 2008 and incorporated herein by reference.)
	10.29		Cognovit Promissory Note of the Company dated September 12, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated September 12, 2007 and incorporated herein by reference.)
10.39		Cognovit Promissory Note of John D Oil and Gas Company dated April 7, 2009 (Filed as Exhibit 10.38 to Registrant’s Form 10-K dated December 31, 2008 and incorporated herein by reference.)
	10.30		Cognovit Promissory Note of the Company dated October 10, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated October 10, 2007 and incorporated herein by reference.)
10.40		Cognovit Promissory Note of John D Oil and Gas Company (amended) dated May 22, 2009 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated May 27, 2009 and incorporated herein by reference.)
	10.31		Cognovit Promissory Note of the Company dated November 20, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated November 20, 2007 and incorporated herein by reference.)
10.41		Forebearance Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the Company, Great Plains Exploration, LLC, OzGas LTD., Richard M. Osborne and The Richard M. Osborne Trust (Filed as Exhibit 10.1 to the Registrant’s Form 8-K dated June 25, 2010 and incorporated herein by reference.)
	10.32		Cognovit Promissory Note of the Company dated November 30, 2007 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated November 30, 2007 and incorporated herein by reference.)
10.42		Assignment & Security Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the Company and Great Plains Exploration, LLC (Filed as Exhibit 10.2 to the Registrant’s Form 8-K dated June 25, 2010 and incorporated herein by reference.)
	10.33		Cognovit Promissory Note of the Company dated May 23, 2008 (Filed as Exhibit 10.5 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
10.43		Pledge Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the Company and Richard M. Osborne (Filed as Exhibit 10.3 to the Registrant’s Form 8-K dated June 25, 2010 and incorporated herein by reference.)
	10.34		Cognovit Promissory Note of the Company dated May 27, 2008 (Filed as Exhibit 10.6 to Registrant’s Form 8-K dated May 1, 2008 and incorporated herein by reference.)
10.44		Purchase and Sale Agreement effective as of January 30, 2008 between Liberty Self Stor, Ltd. and Richard M. Osborne, Trustee (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated December 28, 2007 and incorporated herein by reference.)
	10.35		Cognovit Promissory Note of the Company dated February 13, 2009 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated February 13, 2009 and incorporated herein by reference.)
10.45		Operating Agreement of Lucky Brothers, LLC dated October 7, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 10-Q dated September 30, 2008 and incorporated herein by reference.)
	10.36		Letter from Richard M. Osborne guaranteeing Charter One loan debt dated March 26, 2009 (Filed as Exhibit 10.37 to Registrant’s Form 10-K dated December 31, 2008 and incorporated herein by reference.)
10.46		Operating Contract between the Company, Lucky Brothers, LLC and Great Plains Exploration, LLC dated October 7, 2008 (Filed as Exhibit 10.2 to Registrant’s Form 10-Q dated September 30, 2008 and incorporated herein by reference.)
	10.37		Cognovit Promissory Note of John D Oil and Gas Company dated April 7, 2009 (Filed as Exhibit 10.38 to Registrant’s Form 10-K dated December 31, 2008 and incorporated herein by reference.)
10.47		Drilling Contract between the Company and Great Plains Exploration, LLC dated October 7, 2008 (Filed as Exhibit 10.3 to Registrant’s Form 10-Q dated September 30, 2008 and incorporated herein by reference.)
	10.38		Cognovit Promissory Note of John D Oil and Gas Company (amended) dated May 22, 2009 (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated May 27, 2009 and incorporated herein by reference.)
31.1*		Section 302 Certification of Chairman of the Board and Chief Executive Officer (principal executive officer) pursuant to the Sarbanes-Oxley Act of 2002
	10.39		Forebearance Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the Company, Great Plains Exploration, LLC, OzGas LTD., Richard M. Osborne and The Richard M. Osborne Trust (Filed as Exhibit 10.1 to the Registrant’s Form 8-K dated June 25, 2010 and incorporated herein by reference.)
31.2*		Section 302 Certification of Chief Financial Officer (principal financial officer) pursuant to the Sarbanes-Oxley Act of 2002
	10.40		Assignment & Security Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the Company and Great Plains Exploration, LLC (Filed as Exhibit 10.2 to the Registrant’s Form 8-K dated June 25, 2010 and incorporated herein by reference.)

Exhibit No.			Description
32.1*		Certification of Chairman of the Board and Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	10.41		Pledge Agreement dated June 18, 2010 between RBS Citizens, N.A., dba Charter One, the Company and Richard M. Osborne (Filed as Exhibit 10.3 to the Registrant’s Form 8-K dated June 25, 2010 and incorporated herein by reference.)
99.1*		Letter from Schlumberger Data & Consulting Services about Reserve Economics
	10.42		Purchase and Sale Agreement effective as of January 30, 2008 between Liberty Self Stor, Ltd. and Richard M. Osborne, Trustee (Filed as Exhibit 10.1 to Registrant’s Form 8-K dated December 28, 2007 and incorporated herein by reference.)
	10.43		Operating Agreement of Lucky Brothers, LLC dated October 7, 2008 (Filed as Exhibit 10.1 to Registrant’s Form 10-Q dated September 30, 2008 and incorporated herein by reference.)
	10.44		Operating Contract between the Company, Lucky Brothers, LLC and Great Plains Exploration, LLC dated October 7, 2008 (Filed as Exhibit 10.2 to Registrant’s Form 10-Q dated September 30, 2008 and incorporated herein by reference.)
	10.45		Drilling Contract between the Company and Great Plains Exploration, LLC dated October 7, 2008 (Filed as Exhibit 10.3 to Registrant’s Form 10-Q dated September 30, 2008 and incorporated herein by reference.)
	31.1	*	Section 302 Certification of Chairman of the Board and Chief Executive Officer (principal executive officer) pursuant to the Sarbanes-Oxley Act of 2002
	31.2	*	Section 302 Certification of Chief Financial Officer (principal financial officer) pursuant to the Sarbanes-Oxley Act of 2002
	32.1	*	Certification of Chairman of the Board and Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	99.1	*	Letter from Schlumberger Data & Consulting Services about Reserve Economics

* Filed herewith ~~† Management agreement or compensatory plan or arrangement~~

†	Management agreement or compensatory plan or arrangement

SIGNATURES

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

Dated: March 31, 2011	JOHN D. OIL AND GAS COMPANY
Dated: June 14, 2012		JOHN D. OIL AND GAS COMPANY
	~~By:~~	~~/s/ Richard M. Osborne~~By:	/s/ Richard M. Osborne
		Richard M. Osborne
		Chairman and Chief Executive Officer (Principal Executive Officer)
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Richard M. Osborne Richard M. Osborne Chairman, Chief Executive Officer and Director (Principal Executive Officer)		Dated: March 31, 2011
/s/ Richard M. Osborne		Dated: June 14, 2012
/s/ Carolyn Coatoam Carolyn Coatoam Chief Financial Officer (Principal Financial and Accounting Officer)		Dated: March 31, 2011
Richard M. Osborne
/s/ Gregory J. Osborne Gregory J. Osborne, President and Director		Dated: March 31, 2011
Chairman, Chief Executive Officer and Director
/s/ Thomas J. Smith Thomas J. Smith, Director		Dated: March 31, 2011
(Principal Executive Officer)
/s/ Carolyn T. Coatoam		Dated: June 14, 2012
Carolyn T. Coatoam
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Timothy P. Reilly		Dated: June 14, 2012
Timothy P. Reilly, President and Director
/s/ Thomas J. Smith		Dated: June 14, 2012
Thomas J. Smith, Director

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of ~~John~~ ~~D. Oil and Gas Company~~

~~We have audited the accompanying consolidated balance sheets of~~ John D. Oil and Gas Company (a Maryland corporation) and Subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We have audited the accompanying consolidated balance sheets of John D. Oil and Gas Company (a Maryland corporation) and Subsidiary as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits 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 financial statements are free of material misstatement. The Company is 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 circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of John D. Oil and Gas Company and Subsidiary as of December 31, ~~2010~~2011 and ~~2009~~2010, and the results of their operations and their cash flows for each of the two years in the period ended December 31, ~~2010~~2011, in conformity with accounting principles generally accepted in the United States of America.

As more fully described in Note 2,. to the consolidated financial statements, the Company ~~has~~ has suffered recurring losses, ~~and~~ has ~~$9.5 million~~a ofworking ~~debt~~capital ~~currently~~deficit, ~~due~~ and ~~subject~~has tofiled ~~a forbearance~~voluntary petitions for bankruptcy relief that ~~raises~~raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Maloney + Novotny LLC

Cleveland, Ohio ~~March 31,~~ ~~2011~~

June 14, 2012

John D. Oil and Gas Company and Subsidiary ~~Consolidated~~ ~~Balance Sheets~~

	December 31, 2010			December 31, 2009
ASSETS
Current Assets:
Cash	$	20,016		$	22,072
Accounts Receivable		47,312			57,748
Accounts Receivable from Related Parties		443,702			464,584
Other Current Assets		4,610			17,723
Total Current Assets		515,640			562,127
Property and Equipment, Net		7,465,911			8,985,937
Investment in Unconsolidated Affiliate		736,953			705,965
Other Assets		—			5,495
TOTAL ASSETS	$	8,718,504		$	10,259,524
LIABILITIES AND EQUITY
Current Liabilities:
Line of Credit		9,480,187			9,497,024
Current Maturities of Long Term Debt		136,812			1,145,174
Accounts Payable		276,452			370,675
Accounts Payable to Related Parties		222,732			47,144
Accrued Expenses		190,038			201,959
Total Current Liabilities		10,306,221			11,261,976
Long Term Debt, Net of Current Maturities		927,593			—
Asset Retirement Obligation		654,493			680,056
Commitments and Contingencies		—			—
Equity:
Serial Preferred Stock — $.001 par value: 2,000,000 shares authorized, 1,350 shares issued and outstanding		1			1
Common Stock — $.001 par value: 50,000,000 shares authorized; 9,067,090 shares issued and outstanding		9,067			9,067
Paid-in Capital		30,277,787			30,273,239
Accumulated Deficit		(32,746,986	)		(31,151,171	)
Total John D. Oil and Gas Company Equity		(2,460,131	)		(868,864	)
Non-Controlling Interest		(709,672	)		(813,644	)
Total Equity		(3,169,803	)		(1,682,508	)
TOTAL LIABILITIES AND EQUITY	$	8,718,504		$	10,259,524

Consolidated Balance Sheets

December 31, 2011 and 2010


	2011			2010
ASSETS
Current Assets:
Cash	$	27,876		$	20,016
Accounts Receivable		65,730			47,312
Accounts Receivable from Related Parties		389,731			443,702
Other Current Assets		2,097			4,610

Total Current Assets		485,434			515,640
Property and Equipment, Net		6,181,591			7,465,911
Investment in Unconsolidated Affiliate		312,527			736,953

TOTAL ASSETS	$	6,979,552		$	8,718,504

LIABILITIES AND EQUITY
Current Liabilities:
Line of Credit		9,480,187			9,480,187
Current Maturities of Long Term Debt		137,161			136,812
Accounts Payable		597,462			276,452
Accounts Payable to Related Parties		1,303,810			222,732
Accrued Expenses		219,179			190,038

Total Current Liabilities		11,737,799			10,306,221
Long Term Debt, Net of Current Maturities		801,115			927,593
Asset Retirement Obligation		717,207			654,493
Commitments and Contingencies		—			—
Equity (Deficit):
Serial Preferred Stock—$.001 par value: 2,000,000 shares authorized, 1,350 shares issued and outstanding		1			1
Common Stock—$.001 par value: 50,000,000 shares authorized; 9,067,090 shares issued and outstanding		9,067			9,067
Paid-in Capital		30,280,450			30,277,787
Accumulated Deficit		(35,840,826	)		(32,746,986	)

Total John D. Oil and Gas Company Shareholder’s Equity		(5,551,308	)		(2,460,131	)
Non-Controlling Interest		(725,261	)		(709,672	)

Total Equity (Deficit)		(6,276,569	)		(3,169,803	)

TOTAL LIABILITIES AND EQUITY	$	6,979,552		$	8,718,504

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

John D. Oil and Gas Company and Subsidiary ~~Consolidated~~ ~~Statements of Operations and Comprehensive Income For The Years Ended December 31, 2010 and 2009~~

	2010			2009
Revenues
Oil and Natural Gas Sales	$	2,103,849		$	3,711,668
Self-Storage Operation Revenues		339,345			333,569
Interest and Other		193,588			8
Total Revenues		2,636,782			4,045,245
Operating Expenses
Interest		473,302			448,558
Accretion		24,580			45,905
Oil and Natural Gas Production Costs		664,699			687,182
Self-Storage Property Operating Expense		138,524			114,539
Legal and Professional Fees		356,658			367,854
Property Taxes and Insurance		76,230			137,492
General and Administrative		605,023			762,982
Loss from Unconsolidated Affiliate		175,512			650,420
Impairment		—			145,444
Depreciation, Depletion and Amortization		1,506,097			3,381,114
Total Operating Expenses		4,020,625			6,741,490
Net Loss		(1,383,843	)		(2,696,245	)
Net Income (Loss) attributable to Non-controlling Interest		103,972			(81,544	)
Net Loss attributable to John D. Oil and Gas Company	$	(1,487,815	)	$	(2,614,701	)
Other Comprehensive Income All attributable to John D. Oil and Gas Company:
Change in Fair Value of Cash Flow Hedge		—			133,880
Comprehensive Loss	$	(1,487,815	)	$	(2,480,821	)
Weighted Average Shares Outstanding- Basic and Diluted		9,067,090			9,067,090
Loss per Common Share — Basic and Diluted	$	(0.16	)	$	(0.31	)

Consolidated Statements of Operations

For The Years Ended December 31, 2011 and 2010


	2011			2010
Revenues
Oil and Natural Gas Sales	$	1,069,526		$	2,103,849
Self-Storage Operation Revenues		346,667			339,345
Interest and Other		17,705			193,588

Total Revenues		1,433,898			2,636,782
Operating Expenses
Interest		545,197			473,302
Accretion		46,654			24,580
Oil and Natural Gas Production Costs		588,242			664,699
Self-Storage Property Operating Expense		142,789			138,524
Legal and Professional Fees		236,422			356,658
Property Taxes and Insurance		84,414			76,230
General and Administrative		632,219			605,023
Loss from Unconsolidated Affiliate		833,626			175,512
Impairment		162,003			—
Depreciation, Depletion and Amortization		1,163,761			1,506,097

Total Operating Expenses		4,435,327			4,020,625

Net Loss		(3,001,429	)		(1,383,843	)
Net Income (Loss) attributable to Non-controlling Interest		(15,589	)		103,972

Net Loss attributable to John D. Oil and Gas Company	$	(2,985,840	)	$	(1,487,815	)

Weighted Average Shares Outstanding - Basic and Diluted		9,067,090			9,067,090

Loss per Common Share – Basic and Diluted	$	(0.34	)	$	(0.16	)

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

John D. Oil and Gas Company and Subsidiary ~~Consolidated~~ ~~Statements of Shareholders’ Equity For The Years Ended December 31, 2010 and 2009~~

										Accumulated
										Other			Non-
	Preferred		Common		Paid-in		Accumulated			Comprehensive			Controlling
	Stock		Stock		Capital		Deficit			Income (Loss)			Interest			Total
Balance at December 31, 2008	$	1	$	9,067	$	30,268,691	$	(28,428,470	)	$	(133,880	)	$	(732,100	)	$	983,309
Restricted Common Stock Award						4,548											4,548
Dividends Declared and Paid								(108,000	)								(108,000	)
Net Loss								(2,614,701	)					(81,544	)		(2,696,245	)
Change in Fair Value of Cash Flow Hedge											133,880						133,880
Balance at December 31, 2009	$	1	$	9,067	$	30,273,239	$	(31,151,171	)	$	—		$	(813,644	)	$	(1,682,508	)
Restricted Common Stock Award						4,548											4,548
Dividends Declared and Paid								(108,000	)								(108,000	)
Net Income (Loss)								(1,487,815	)					103,972			(1,383,843	)
Balance at December 31, 2010	$	1	$	9,067	$	30,277,787	$	(32,746,986	)	$	—		$	(709,672	)	$	(3,169,803	)

Consolidated Statements of Shareholders’ Equity

For The Years Ended December 31, 2011 and 2010


	Preferred Stock		Common Stock		Paid-in Capital		Accumulated Deficit			Non- Controlling Interest			Total
Balance at December 31, 2009	$	1	$	9,067	$	30,273,239	$	(31,151,171	)	$	(813,644	)	$	(1,682,508	)
Restricted Common Stock Award						4,548								4,548
Dividends Declared								(108,000	)					(108,000	)
Net Income (Loss)								(1,487,815	)		103,972			(1,383,843	)

Balance at December 31, 2010	$	1	$	9,067	$	30,277,787	$	(32,746,986	)	$	(709,672	)	$	(3,169,803	)
Restricted Common Stock Award						2,663								2,663
Dividends Declared								(108,000	)					(108,000	)
Net Loss								(2,985,840	)		(15,589	)		(3,001,429	)

Balance at December 31, 2011 (audited)	$	1	$	9,067	$	30,280,450	$	(35,840,826	)	$	(725,261	)	$	(6,276,569	)

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

John D. Oil and Gas Company and Subsidiary ~~Consolidated~~ ~~Statements of Cash Flows~~

	For The Years Ended December 31,
	2010			2009
Cash Flows from Operating Activities:
Net Loss	$	(1,383,843	)	$	(2,696,245	)
Adjustments to Reconcile Net Loss to Net Cash Provided By Operating Activities
Accretion		24,580			45,905
Loss from Unconsolidated Affiliate		175,512			650,420
Loss from Uncompleted wells		93,506			—
Impairment		—			145,444
Depreciation, Depletion and Amortization		1,506,097			3,381,114
Restricted Common Stock Award		4,548			4,548
Changes in Operating Assets and Liabilities:
Accounts Receivable		31,318			940,895
Other Current Assets		13,113			38,479
Other Assets		5,495			55,129
Accounts Payable		(31,695	)		(1,612,062	)
Accrued Expenses		(11,921	)		(87,731	)
Net Cash Provided By Operating Activities		426,710			865,896
Cash Flows from Investing Activities:
Purchases of Property and Equipment		(119,642	)		—
Expenditures for Unconsolidated Affiliate		(93,440	)		(367,127	)
Expenditures for Oil and Natural Gas Wells		(10,078	)		(329,125	)
Net Cash Used In Investing Activities		(223,160	)		(696,252	)
Cash Flows from Financing Activities:
Dividends Paid to Preferred Stockholders		(108,000	)		(108,000	)
Proceeds from Related Party Note Payable		—			600,000
Proceeds from Long Term Debt		63,956			—
Payments on Line of Credit		(16,837	)		—
Principal Payments on Related Party Debt		—			(600,000	)
Principal Payments on Long Term Debt		(144,725	)		(117,873	)
Net Cash Used In Financing Activities		(205,606	)		(225,873	)
Net Decrease in Cash		(2,056	)		(56,229	)
Cash, Beginning of Period		22,072			78,301
Cash, End of Period	$	20,016		$	22,072
Supplemental Disclosure of Cash flow Information:
Interest Paid on Borrowings	$	473,576		$	443,549

Consolidated Statements of Cash Flows

For The Years Ended December 31, 2011 and 2010


	2011			2010
Cash Flows from Operating Activities:
Net Loss	$	(3,001,429	)	$	(1,383,843	)
Adjustments to Reconcile Net Loss to Net Cash Provided By Operating Activities
Accretion		46,654			24,580
Loss from Unconsolidated Affiliate		833,626			175,512
Loss from Uncompleted Wells		—			93,506
Impairment		162,003			—
Depreciation, Depletion and Amortization		1,163,761			1,506,097
Restricted Common Stock Award		2,663			4,548
Changes in Operating Assets and Liabilities:
Accounts Receivable		440,246			31,318
Other Current Assets		2,513			13,113
Other Assets		—			5,495
Accounts Payable		997,395			(31,695	)
Accrued Expenses		1,919			(11,921	)

Net Cash Provided By Operating Activities		649,351			426,710
Cash Flows from Investing Activities:
Purchases of Property and Equipment		(9,987	)		(119,642	)
Expenditures for Unconsolidated Affiliate		(409,200	)		(93,440	)
Expenditures for Oil and Natural Gas Wells		(15,397	)		(10,078	)

Net Cash Used In Investing Activities		(434,584	)		(223,160	)
Cash Flows from Financing Activities:
Dividends Paid to Preferred Stockholders		(80,778	)		(108,000	)
Proceeds from Long Term Debt		—			63,956
Payments on Line of Credit		—			(16,837	)
Principal Payments on Long Term Debt		(126,129	)		(144,725	)

Net Cash Used In Financing Activities		(206,907	)		(205,606	)

Net Increase/Decrease in Cash		7,860			(2,056	)
Cash, Beginning of Period		20,016			22,072

Cash, End of Period	$	27,876		$	20,016

Supplemental Disclosure of Cash flow Information:
Interest Paid on Borrowings	$	28,659		$	473,576

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

John D. Oil and Gas Company and Subsidiary ~~Notes~~ ~~to Consolidated Financial Statements For The Years Ended December 31, 2010 and 2009~~

Notes to Consolidated Financial Statements

For The Years Ended December 31, 2011 and 2010

1. Summary of Significant Accounting Policies

General

John D. Oil and Gas Company, formerly Liberty Self-Stor, Inc. (the “Company”), is a corporation organized under the laws of the State of Maryland.

The Company was originally a self-storage company from 1999 to 2005 when it sold all but two of its facilities. By May 2007, one self-storage facility in Painesville remained which generates revenue through self-storage rentals and retail leases. The self-storage facility is operated through a partnership agreement between Liberty Self-Stor Ltd. (“Ltd”) and the Company. Ltd has a 70.1% equity interest and the Company has a 29.9% equity interest in the operating partnership of LSS I Limited Partnership (“LSS I”). The members of Ltd consist of Richard M. Osborne, Chairman and Chief Executive Officer of the Company, Thomas J. Smith, a director and the former President and Chief Operating Officer of the Company, and Retirement Management Company, an Ohio corporation owned by Mr. Osborne. These members have Class A limited partnership interests that are redeemable for cash or, at the election of the Company, convertible into shares of the Company’s stock based on an exchange factor. The current exchange factor is .1377148 of a share for each unit.

In 2006, the Company entered into the business of extracting and producing oil and natural gas products, drilling oil and natural gas wells in Northeast Ohio. The Company currently has fifty-~~eight~~ seven producing wells. ~~The~~Due ~~Company~~to ~~cannot~~the ~~guarantee~~on-going ~~success~~issues ~~under~~relating ~~its~~to ~~business~~the ~~plan~~loan ~~as drilling~~with ~~wells~~RBS ~~for~~Citizens, ~~oil~~N.A. ~~and~~dba ~~natural~~Charter ~~gas~~One, the Company is currently undergoing a ~~high~~re-~~risk~~organization ~~enterprise~~process ~~and~~after ~~there~~filing isfor bankruptcy under Chapter 11 on January 13, 2012. There is no guarantee the ~~Company~~ outcome will ~~become~~be ~~profitable~~for the Company’s best interests.

Principles of Consolidation

Pursuant to the terms of the partnership agreement of LSS I Limited Partnership, the Company, as sole general partner, controls LSS I. Accordingly, the Company accounts for its investment in LSS I utilizing the consolidation method. The investment in an unconsolidated affiliate, Kykuit Resources LLC (“Kykuit”) is accounted for using the equity method. All significant inter-company transactions and balances have been eliminated. The well in Lucky Brothers is accounted for as a joint ~~interest~~ venture interest.

Use of Estimates

The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, costs and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates all of these estimates, including those related to the provision for possible losses, deferred tax assets and liabilities, depreciation and depletion, and certain accrued liabilities. The Company bases estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company’s financial statements are based on a number of significant estimates, including collectability of receivables, selection of useful lives for property and equipment and timing and costs associated with its retirement obligations. Estimates of economically recoverable oil and natural gas reserve quantities and future net cash flows depend on a number of variable factors and assumptions that are hard to predict and may vary considerably from actual results. Estimated oil and natural gas reserve quantities are the basis for the calculation of depreciation, depletion and impairment of oil and natural gas properties.

The Company’s oil and natural gas business makes it vulnerable to changes in wellhead prices of crude oil and natural gas. Such prices have been volatile in the past and can be expected to continue to be volatile. Proved reserves are based on current oil and natural gas prices and estimated reserves, which is considered a significant estimate by the Company, and is subject to change.

Accounts Receivable

The Company has certain trade receivables consisting of oil and natural gas sale obligations due under normal trade terms. ~~The~~Through October, 2011, the Company ~~currently~~sold its production to Great Plains Exploration LLC, a related party, that filed for protection under Chapter 11 of the bankruptcy code on January 11, 2012. Effective November, 2011 the Company sells its production to Gas Natural Service Company, a related party, through an ~~oil~~ oil and natural gas agreement, extending credit on an unsecured basis to them. In evaluating its allowance for possible losses, the Company performs a review of outstanding receivables. The trade receivables outstanding are typically three months of natural gas production due to the timing and accounting treatment by the main distribution pipeline company in Northeast Ohio and related party accounting treatments. AtDuring the last quarter of 2011, the main distribution pipeline company in Northeast Ohio changed its accounting methods and timing of payment to a calendar month with payments being distributed one month later. See Exhibit 10.15 and 10.16 to the annual report on Form 10-K for more information. Because the Company owes accounts payable to Great Plains Exploration in excess of the amounts due from them at December 31, ~~2010~~2011, and ~~2009~~has the right to offset the receivable against its payable, at December 31, 2011 and 2010, the Company’s credit evaluation ~~indicated~~ has determined that it has no need for an allowance for possible losses and had no such losses in ~~2010~~2011 and ~~2009~~2010.

The Company’s accounts receivable, arising from the self-storage business, are due from individuals as well as business entities. Tenants are required to pay their rent on the first of each month. Past due amounts are those that are outstanding longer than the contractual payment terms. If an account is more than 75 days past due, the Company generally writes off the balance directly to expense. For such past due accounts, the Company has the right to auction the contents of the rented space, which allows for recovery of written-off balances. Any such recoveries are credited to income when received. Approximately $3,000 and $2,000 of bad debt expense was incurred in ~~2010~~2011 and ~~2009~~2010, respectively.

Property and Equipment

The Company uses the successful efforts method of accounting for oil and natural gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized ~~when~~ when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Upon sale or retirement of a proved property, the cost and accumulated depreciation, ~~and~~ depletion and ~~amortizations~~amortization are eliminated from property accounts and the resultant gain or loss is recognized.

Asset Impairment

The Company reviews its self-storage property and capitalized well costs for impairment when events or changes in circumstances indicate the carrying amounts of the properties may not be recoverable. When such conditions exist, management estimates future cash flows from operations and ultimate disposition of the individual properties. This income approach to determine the fair value of these assets is based on level 3 inputs, including estimated reserve quantities, gas prices, operating costs and discount rates. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related property’s estimated fair market value would be recorded and an impairment loss would be recognized. The Company wrote off $-0- in 2010 and the costs related to one well amounting to $145,444 in 2009.

Asset Impairment

The Company reviews its self-storage property and capitalized well costs for impairment when events or changes in circumstances indicate the carrying amounts of the properties may not be recoverable. When such conditions exist, management estimates future cash flows from operations and ultimate disposition of the individual properties. This income approach to determine the fair value of these assets is based on level 3 inputs, including estimated reserve quantities, gas prices, operating costs and discount rates. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related property’s estimated fair market value would be recorded and an impairment loss would be recognized. The Company wrote off one well amounting to $162,003 in 2011 and $0 in 2010.

Asset Retirement Obligation

The Company accounts for its asset retirement obligations in accordance with generally accepted accounting principles in the United States of America (“GAAP”) which requires the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For the Company, asset retirement obligations primarily relate to the abandonment, dismantling and plugging of oil and natural gas wells. The present value of the estimated asset retirement cost is capitalized as part of the long-lived asset. The capitalized asset retirement cost is depreciated and the asset retirement obligation is accreted over the estimated life of the well.

The following table presents the Company’s asset retirement obligation activity for the years ended December 31:

	2010			2009
	2011			2010
Asset retirement obligations, beginning of the year	$	~~680~~654,~~056~~493		$	~~674~~680,~~517~~056
Liabilities incurred during the year		~~4,551~~—			—4,551
Revisions in estimated cash flows		~~(54~~16,~~694~~060	)		(1454,~~366~~694	)
Liabilities settled during the year		—			~~(26,000~~—	)
Accretion expense		2446,~~580~~654			4524,~~905~~580
Asset retirement obligations, end of the year	$	~~654~~717,~~493~~207		$	~~680~~654,~~056~~493

The Company plugged no wells in ~~2010~~2011 and ~~two wells in 2009~~2010.

Revenue Recognition

The Company recognizes revenue from its oil and natural gas interests in producing wells as oil and natural gas is sold to a purchaser at a fixed or determinable price when delivery has occurred, title and risk of loss have transferred to the purchaser and the collectability of revenue is reasonably assured. The Company has a management agreement with a related party to transport the Company’s natural gas production through the related party’s pipeline and include this natural gas with the related party’s natural gas in order to fulfill production contracts they currently have in place. The payment of revenues during the fourth quarter was shifted from one related party to another. The Company uses the sales method to account for any gas production volume imbalances. Under this method, revenue is recognized only when gas is produced and sold on the Company’s behalf. The Company had no material gas imbalances at December 31, ~~2010~~2011 and ~~2009~~2010.

The Company’s revenue from self-storage operations is derived primarily from monthly rentals of self-storage units. Rental revenue is recognized in the period the rent is earned which is typically on a monthly basis.

The Company also leases certain commercial space in its Painesville property under long-term lease agreements through December 31, 2019. Total lease revenue related to these leases was $~~214~~226,~~469~~761 and $~~199~~214,~~029~~469 for the years ended December 31, ~~2010~~2011 and ~~2009~~2010, respectively. Revenue under these long-term lease agreements is recognized on a straight-line basis over the respective lease terms.

Future minimum lease revenue from operations under non-cancelable leases excluding options to renew for each of the five succeeding annual periods ending December 31 and thereafter are as follows:

2011	$	219,210
2012		207,676
2013		201,684
2014		183,288
2015		137,916
Thereafter		162,110
	$	1,111,884

Future minimum lease revenue from operations under non-cancelable leases excluding options to renew for each of the five succeeding annual periods ending December 31 and thereafter are as follows:


2012	$	207,678
2013		201,688
2014		183,288
2015		137,916
2016		49,440
Thereafter		112,670

	$	892,680

Stock-Based Compensation

On June 16, 2009 at the Company’s Annual Meeting, of the stockholders who voted, 81.7% voted to approve amendments to the Company’s stock option plan. The plan was extended another ten years, through January 1, 2019.

Of the 300,000 stock options that may be granted, none were outstanding as of December 31, ~~2010~~2011 and ~~2009~~2010. ~~Stock~~A ~~options totaling 25,000 shares at a weighted average price of $0.56 were terminated in the second quarter of 2009 when an employee was no longer employed by the Company. Additionally, the~~ former President and Chief Operating Officer of the Company was granted 35,000 restricted shares that amortize ratably over a five year vesting period ~~until~~through August of 2011. ~~The compensation~~Compensation expense recorded for the restricted shares was $2,663 and $4,548 for the years ended December 31, ~~2010~~2011 and ~~2009~~ ~~was $4,548~~2010.

On June 20, 2008, the Company granted a warrant to purchase 50,000 shares of common stock to Richard M. Osborne in return for Mr. Osborne providing collateral for the Company’s credit facility with RBS Citizens, N.A., d/b/a Charter One (“Charter One”). The fair value of the warrant was expensed in 2008. The warrant has an exercise price of $1.00 per share and a term of five years.

Income Taxes

Effective January 1, 2006, the Company became a “C” Corporation for tax purposes.

The Company has net operating loss carry forwards (NOLS) and a valuation allowance to offset any tax effects. The Company has no unrecognized tax benefits and therefore, there is no anticipated effect on the Company’s effective tax rate. Any tax penalties or interest expense will be recognized in income tax expense. No interest and penalties were accrued as of December 31, ~~2010~~ 2011 or 2010 ~~2009,~~ or paid during the periods then ended. The Company does not anticipate a significant change over the next twelve months to any tax liability.

The Company is open to federal and state tax audits until the applicable statute of limitations expire. There are currently no federal or state income tax examinations underway for the Company. Generally, ~~The~~the three previous tax years ~~after 2007~~ remain open to examination by the major taxing jurisdictions in which we operate, although no material changes to unrecognized tax positions are expected within the next twelve months. The Company does, however, have prior year net operating losses which remain open for examination.

Fair Value of Financial Instruments

The fair value of the Company’s financial instruments is determined by using available market information and appropriate valuation methodologies. The Company’s principal financial instruments are cash, accounts receivable, accounts payable and debt. Cash, accounts receivable and accounts payable, due to their short maturities and liquidity, are carried at amounts which reasonably approximate fair value. Based upon rates available for similar borrowings, the Company’s book value approximated the fair value of its debt at December 31, 2010 and December 31, 2009.

Recently Issued Accounting Pronouncements

InThe ~~July 2010,~~Company ~~the~~reviewed ~~FASB~~all ~~issued~~recently ~~ASU No. 2010-20~~issued, ~~“Disclosures~~but ~~about~~not ~~the~~yet Credit Quality of Financing Receivables and the Allowance for Credit Losses.” This ASU amends disclosure requirements with respect to the credit quality of financing receivables and the related allowance for credit losses. Entities will be required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about their financing receivables and related allowance for credit losses. Disclosures to be made as of the end of a reporting period are effective ~~for the Company’s reporting period ending December 31~~, ~~2010;~~accounting pronouncements and ~~the~~does ~~disclosures~~not ~~about~~believe ~~activity~~any ~~that~~such ~~occurs~~pronouncements ~~during a reporting period~~ will ~~be effective for the Company’s reporting period ending March 31, 2011. Since this ASU will only amend disclosure requirements, not accounting practice, the adoption of this ASU did not~~ have a ~~material~~ material impact on the ~~Company’s~~ financial ~~position, results of operations or cash flows~~statements.

The Company reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe any such pronouncements will have a material impact on the financial statements.

Reclassifications

Certain reclassifications of prior year comparative amounts have been made to conform to ~~the December 31,~~current ~~2010~~period presentation. These reclassifications had no effect on net loss or shareholder’s equity as previously reported.

2. Going Concern

The Company’s independent registered public accounting firm has indicated in their audit report in an explanatory paragraph that the Company has suffered recurring losses, ~~and~~ has ~~$9.5 million~~a ofworking ~~debt currently~~capital ~~due~~deficit, and ~~subject~~has tofiled avoluntary ~~forbearance~~petitions ~~agreement~~for bankruptcy relief that raises substantial doubt about its ability to continue as a going concern at December 31, ~~2010~~2011. The Company’s audited consolidated financial statements as of December 31, ~~2010~~2011 have been prepared on the assumption that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. The Company has incurred substantial losses, which have strained its financial resources, ~~and~~ the Company’s liabilities exceed its assets at December 31, ~~2010. The Company’s $9.5 million line of credit with RBS Citizens~~2011, ~~N.A. d/b/a Charter One (“Charter One”) was due August 1, 2009~~ and ~~was in default. On August 24, 2009, Charter One received a judgment in its favor against~~ the Company ~~and~~has ~~Mr. Osborne~~filed ~~related~~voluntary topetitions this debt. On June 18, 2010, the Company, and other parties, and Charter One entered into a forbearance agreement, (“the Forbearance Agreement”) pursuant to which Charter One will forbear from enforcing its rights and remedies under the Company’s line of credit as well as the other parties’ loan agreements until July 1, 2011, subject to no further events of default including the payments due under the Forbearance Agreement. The Company does not have the available cash to repay the line of credit with Charter One. The Company is meeting with Charter One on a regular basis to reach a loan agreement satisfactory to both parties. Additionally, the Company is seeking funds from other financial institutions. See Note 5 “Line of Credit and Long Term Debt” to these consolidated financial statements for ~~more~~bankruptcy ~~information~~relief.

3.On ~~Property~~June 18, 2010, the Company, and ~~Equipment~~other related parties, and Charter One entered into a forbearance agreement (“the Forbearance Agreement”), pursuant to which Charter One agreed to forbear from enforcing its rights and remedies under the Company’s line of credit as well as the other related parties’ loan agreements until July 1, 2011, subject to no further events of default including the payments due under the Forbearance Agreement.

~~Property~~On July 1, 2011, the forbearance period expired and ~~equipment~~the ~~consists~~Company ofdid not pay off the ~~following~~line atof ~~December~~credit. On October ~~31:~~3, 2011, Charter One instituted an action titled RBS Citizens, N.A. dba Charter One v. John D. Oil and Gas Co., et. al. in the United States District Court Northern District of Ohio Eastern Division claiming a default under the line of credit and seeking to foreclose upon property of the Company securing the line of credit and to appoint a receiver for the Company and certain companies owned or controlled by Mr. Osborne. On November 21, 2011, the court issued an order appointing a receiver to marshal and maintain the value of the assets of the Company as well as certain companies owned or controlled by Mr. Osborne.

	2010			2009
Oil and Natural Gas Properties:
Proved Properties	$	16,473,401		$	16,516,743
Unproved Properties		79,308			169,536
Well Material Inventory		50,349			50,349
Accumulated Depletion		(10,613,130	)		(9,250,963	)
Total Oil and Natural Gas Properties		5,989,928			7,485,665
Other Property and Equipment:
Land		307,780			307,780
Building and Improvements		2,402,983			2,357,822
Furniture and Equipment		248,120			173,640
Accumulated Depreciation		(1,482,900	)		(1,338,970	)
Total Other Property and Equipment		1,475,983			1,500,272
Property and Equipment, Net	$	7,465,911		$	8,985,937

For the duration of our Chapter 11 proceedings, our operations, including our ability to execute our business plan, are subject to the risks and uncertainties associated with bankruptcy.

See Note 5 “Line of Credit and Long Term Debt” to these consolidated financial statements for more information.

3. Property and Equipment

Property and equipment consists of the following at December 31:


	2011			2010
Oil and Natural Gas Properties:
Proved Properties	$	16,513,149		$	16,473,401
Unproved Properties		71,018			79,308
Well Material Inventory		50,349			50,349
Accumulated Depletion		(11,788,062	)		(10,613,130	)

Total Oil and Natural Gas Properties		4,846,454			5,989,928
Other Property and Equipment:
Land		307,780			307,780
Building and Improvements		2,402,983			2,402,983
Furniture and Equipment		257,270			248,120
Accumulated Depreciation		(1,632,896	)		(1,482,900	)

Total Other Property and Equipment		1,335,137			1,475,983

Property and Equipment, Net	$	6,181,591		$	7,465,911

4. Investment in Unconsolidated Affiliates

The Company is an owner and managing member of an unconsolidated affiliate, Kykuit Resources LLC, which is accounted for using the equity method of accounting. The Company began investing in Kykuit during the third quarter of 2007. In 2008, the Company sold 25% of its interest in Kykuit at cost for approximately $1.4 million. The Company had an 18.8% ownership in Kykuit at ~~December~~ December 31, 2008. Some of the Kykuit partners opted out of further cash investments during 2009, increasing the Company’s ownership ~~percentage~~percentages. atAt December 31, ~~2009~~2011 toand ~~20.83%.~~2010, ~~The~~the ~~Company’s investment~~percentages ~~was~~of ~~further~~ownership ~~increased~~were to23.17% and 21.79% ~~at December 31~~, ~~2010.~~ respectively.

At December 31, ~~2010~~2011, the investment by the Company in this venture was $~~736~~312,~~953~~527 which included a ~~loss~~ ~~in the investment of $143,197; an account payable of $124,000; and a cumulative net book~~ loss of ~~$883,377.~~during ~~At December 31, 2009,~~ the ~~investment~~year ~~by the Company~~ in ~~this venture was $705,965~~ ~~which included a loss in~~ the investment of $~~588~~83,~~309~~626, an ~~account~~impairment ~~payable~~loss of $10750,~~490~~000 and aadditional ~~cumulative net~~cash ~~book~~commitments ~~loss~~ of $~~119~~370,~~556~~550. The ~~Company’s~~impairment ~~recorded~~charge ~~loss~~ of $~~143~~750,~~197~~000 inis ~~2010~~due ~~represented~~to ~~21.79% of a reduction in on undrilled leases, which was also recorded by Kykuit. The Company recorded a loss of $588,309 on~~ the ~~investment~~write-off ~~representing 20.83%~~ of andrilling ~~85%~~costs ~~reduction~~related into ~~the~~dry ~~value of the exploratory wells in Kykuit at December 31, 2009~~holes. ~~Kykuit~~At ~~recorded an impairment expense on its books at~~ December 31, 2010, ~~which had~~ the ~~same~~investment ~~affect~~by ~~after~~ the Company ~~85%~~in ~~reduction~~this toventure ~~the~~was ~~Company.~~$736,953 ~~The Company~~which ~~did~~included ~~not~~a ~~record any additional~~ loss ~~for~~during ~~this~~the ~~transaction~~year in ~~2010. The following table displays~~ the ~~balance~~investment ~~sheet~~ of ~~Kykuit at December 31~~$143,197 ~~2010,~~ and ~~2009~~additional ~~and~~cash ~~the~~commitments ~~income~~of ~~statement~~$124,000. ~~for the same years ended:~~

Kykuit Resources LLC Balance Sheet

	December 31, 2010			December 31, 2009
Current Assets	$	429,656		$	115,893
Unproved Leaseholds and Development Costs		3,647,721			6,957,065
Furniture and Fixtures, Net of Depreciation		20,373			31,747
Other Assets		15,726			24,087
	$	4,113,476		$	7,128,792
Current Liabilities	$	677,331		$	832,728
Paid in Capital		7,436,674			6,786,675
Accumulated Deficit		(4,000,529	)		(490,611	)
	$	4,113,476		$	7,128,792

Kykuit Resources LLC. Statement of Operations For The Years Ended December 31, 2010 and 2009

	2010			2009
Total Revenues	$	—		$	—
Total Expenses		3,509,918			304,543
Net Loss	$	(3,509,918	)	$	(304,543	)

5. Line of Credit and Long-Term Debt

On September 28, 2006, the Company entered into an unsecured loan agreement for a line of credit with a one year term with Mr. Richard M. Osborne, the Company’s Chairman and CEO, and Charter One Bank for up to $5.0 million dollars in total borrowings with interest at a rate of 1.75% over LIBOR adjusted monthly. The Charter One liability was jointly loaned, so the Company and Mr. Osborne were each liable for the debt of the other.

The ~~loan~~following ~~was~~table ~~subsequently~~displays ~~revised several times until on March 28, 2008,~~ the ~~Company~~unaudited ~~entered~~balance ~~into the~~sheets ~~First~~of ~~Amended~~Kykuit ~~and~~at ~~Restated Loan and Security Agreement (the “Loan Agreement”) between the Company, Richard M. Osborne (the Company and Mr.~~December ~~Osborne together~~31, ~~the “Borrowers”)~~2011, and ~~Charter One.~~2010 The Loan Agreement extended the maturity date to August 1, 2009, continuing with the original interest rate calculation of 1.75% over LIBOR adjusted monthly. Under the agreement, only the Company could borrow on the line of credit when any amounts are paid down against the $9.5 million outstanding on the loan. The Company and ~~Great Plains Exploration LLC a company owned by Mr.~~ ~~Osborne (“Great Plains”), agreed that~~ the ~~related~~unaudited ~~party~~statements ~~loan~~ of ~~$3.8 million~~operations ~~from~~for ~~Great Plains was satisfied in full and terminated upon~~ the ~~Company’s~~same ~~entry~~years ~~into~~ended: the new Charter One loan and assumption of the $3.8 million portion of the line of credit drawn by Mr. Osborne. Therefore, the Company had $9.5 million in outstanding debt to Charter One and $0 in outstanding debt to Great Plains at March 31, 2008. As part of this loan agreement, Mr. Osborne has pledged several real estate properties that he personally owns, to provide sufficient collateral allowing the Company to enter into the loan agreement. The Company did not meet the reserve collateral requirements for a $9.5 million loan without additional collateral.

~~The~~Kykuit ~~Company’s~~Resources ~~$9.5 million~~LLC line of credit matured on August 1, 2009. On August 20, 2009, Charter One received a judgment in its favor against the Company and Mr. Osborne related to the $9.5 million line of credit. The average balance during 2010 was $9.5 million and the weighted average interest rate was 3.55%. The average balance during 2009 was $9.5 million and the weighted average interest rate was 2.12%.

~~The~~Balance ~~Company’s~~Sheet line of credit with Charter One was almost fully drawn for $9.5 million at December 31, 2010 at a rate of 4.75%. Charter One contends that the interest rate at December 31, 2010 is LIBOR plus 1.75% with a LIBOR floor of 3.00%. The Company believes that there is an interest rate cap of 3.00%. The parties are in discussions regarding the applicable interest rate. Also, Charter One has applied a default rate to the loan from January 4, 2010 thru June 18, 2010. The Company does not agree with the default rate and therefore has not booked approximately $171,000 of additional interest expense. It is the Company’s position that the interest for the period from judgment date to forbearance date should remain at the original contract rate at the date of judgment, based upon the per diem interest amount expressly stated in that judgment. Attorneys for the Company also support that position and have so stated in letters to Charter One and for purposes of the annual audit.


	December 31, 2011			December 31, 2010
Current Assets	$	770,324		$	429,656
Unproved Leaseholds and Development Costs		3,648,808			3,647,721
Furniture and Fixtures, Net of Depreciation		8,999			20,373
Other Assets		6,039			15,726

	$	4,434,170		$	4,113,476

Current Liabilities	$	57,173		$	677,331
Paid in Capital		8,756,675			7,436,674
Accumulated Deficit		(4,379,678	)		(4,000,529	)

	$	4,434,170		$	4,113,476

~~Pursuant~~Kykuit toResources ~~the~~LLC Forbearance Agreement and during the forbearance period, Charter One agreed to, among other things, forbear from exercising its rights and remedies arising out of the judgments and the Loan Agreements and to stay any action on its motion for the appointment of a receiver.

~~Under~~Statement ~~the~~of ~~Forbearance~~Operations ~~Agreement, Charter One’s agreement to forbear is conditioned upon and subject to the following conditions:~~

• Payment by the Loan Parties of a forbearance fee of $40,000 per month during the forbearance period;


	For The Years Ended December 31,
	2011			2010
Total Revenues	$	—		$	—
Total Expenses		379,149			3,509,918

Net Loss	$	(379,149	)	$	(3,509,918	)

•5. NoLine ~~material~~of ~~adverse~~Credit ~~change~~and inLong-Term ~~the~~Debt ~~condition of the Loan Parties;~~

•On AnSeptember 28, ~~assignment~~2006, ~~and~~the ~~grant~~Company entered into an unsecured loan agreement for a line of credit with a ~~security~~one ~~interest~~year byterm with Mr. Richard M. Osborne, the Company’s Chairman and ~~GPE~~CEO, ofand ~~each~~RBS ofCitizens, ~~their~~N.A. ~~ownership~~dba ~~interests~~Charter One (“Charter One”) for up to $5.0 million dollars in total borrowings with interest at a rate of 1.75% over LIBOR adjusted monthly. The Charter One liability was jointly loaned, so the ~~Alpha~~Company and ~~Panzica~~Mr. Osborne ~~wells;~~were each liable for the debt of the other.

	•		A pledge by the Loan Parties of their ownership interests in Kykuit Resources LLC; and
	•		A pledge by Mr. Osborne of not less than 800,000 shares of common stock of Gas Natural Inc. with such stock having a market value of not less than $9.6 million pursuant to a pledge agreement.

The loan was subsequently revised several times until on March 28, 2008, the Company entered into the First Amended and Restated Loan and Security Agreement between the Company, Richard M. Osborne, and Charter One. The 2008 agreement extended the maturity date to August 1, 2009, continuing with the original interest rate calculation of 1.75% over LIBOR adjusted monthly. Under the agreement, only the Company could borrow on the line of credit after any amounts were paid down against the $9.5 million outstanding on the loan. The Company and Great Plains Exploration LLC a company owned by Mr. Osborne (“Great Plains”), agreed that the related party loan of $3.8 million from Great Plains was satisfied in full and terminated upon the Company’s entry into the new Charter One loan and assumption of the $3.8 million portion of the line of credit drawn by Mr. Osborne. As a result, the Company had $9.5 million in outstanding debt to Charter One and no outstanding debt to Great Plains at March 31, 2008. As part of this loan agreement, Mr. Osborne personally pledged several real estate properties to Charter One. These pledges were necessary because the Company did not meet the reserve collateral requirements for a $9.5 million loan without additional collateral.

The average balance on the Charter One line during 2011 was $9.5 million and the weighted average interest rate was 4.75%. During 2010 the average balance was $9.5 million and the weighted average interest rate was 3.55%. The line of credit with Charter One was fully drawn for $9.5 million at December 31, 2010 at a rate of 4.75%. Charter One contends that the interest rate at December 31, 2010 is LIBOR plus 1.75% with a LIBOR floor of 3.00%. The Company believes that there is an interest rate cap of 3.00%. The parties are in discussions regarding the applicable interest rate. Also, Charter One has applied a default rate to the loan from January 4, 2010 thru June 18, 2010. The Company does not agree with the default rate and therefore has not booked approximately $171,000 of additional interest expense. It is the Company’s position that the interest for the period from judgment date to forbearance date should remain at the original contract rate at the date of judgment, based upon the per diem interest amount expressly stated in that judgment. Attorneys for the Company also strongly support that position and have so stated in letters to Charter One and for purposes of the annual audit.

InThe ~~addition,~~Charter ~~commencing~~One ~~July 1,~~line ~~2010~~of ~~and~~credit ~~each~~matured ~~month~~on ~~thereafter~~August 1, ~~until~~2009. ~~all~~On ~~amounts~~August 20, ~~under the judgments and loan agreements have been paid in full~~2009, ~~the Loan Parties shall pay~~ Charter One obtained ~~$400,000,~~a ~~including~~judgment ~~the~~in ~~$40,000~~its ~~forbearance~~favor ~~fee.~~against ~~The~~the Company ~~had~~and ~~previously~~Mr. Osborne ~~felt~~related ~~they~~to ~~would~~the ~~pay one~~line ~~third~~ of ~~the~~credit. ~~$400~~On June 18,~~000,~~ ~~but due to lack of cash~~2010, ~~they have decided to accrue interest and one third of~~ the ~~$40~~Company,~~000 monthly~~ ~~fee and legal fees~~Mr. ~~The monthly $400~~ Osborne,~~000~~ ~~is being paid by~~ the ~~other Loan~~Richard ~~Parties~~M. ~~Such~~Osborne ~~payments~~Trust, byGreat ~~the~~Plains, ~~Loan~~and ~~parties~~Oz ~~shall~~Gas, beLtd. ~~applied~~(a ~~first~~company toowned ~~Charter~~by ~~One’s fees and~~Mr. Osborne) ~~expenses~~(together, ~~second to accrued but unpaid interest due under~~ the ~~judgments,~~“Loan ~~and~~Parties”) ~~third~~entered tointo ~~principal amounts~~a ~~due~~Forbearance ~~under~~Agreement ~~the~~with ~~judgments.~~ Charter One ~~contends~~regarding ~~that~~ the ~~judgments~~Company’s ~~will bear interest at LIBOR plus 1~~$9.~~75%~~5 ~~with~~million aline ~~LIBOR floor~~ of ~~3.00%.~~credit ~~The~~and ~~Company~~a ~~believes that there is an interest rate cap of 3~~$25.~~00%.~~0 ~~The~~million ~~parties~~loan ~~are~~agreement inbetween ~~discussions~~Great ~~regarding~~Plains, ~~the~~Oz ~~applicable~~Gas ~~interest~~and ~~rate~~Mr. Osborne Ifand ~~the Loan~~Charter ~~Parties~~One, ~~repay~~dated ~~$10~~August ~~million~~2, ~~and~~2007. ifPursuant ~~after~~to ~~application of such repayment~~ the ~~outstanding~~forbearance ~~balance~~agreement ofand ~~the judgments~~during ~~does not exceed 65% of~~ the ~~current~~forbearance ~~producing~~period, ~~reserve~~Charter ~~value~~One ~~(as~~agreed ~~that~~to, ~~term~~among isother ~~defined~~things, ~~in the~~forbear ~~Loan~~from ~~Agreements)~~exercising ofits ~~the~~rights ~~Company, Great Plains~~ and Ozremedies ~~Gas,~~arising ~~then~~out ~~the pledge~~ of ~~Mr. Osborne’s Kykuit~~the ~~interests~~judgments and ~~his Gas Natural Inc. shares shall be released. In addition,~~ the ~~Company~~loan ~~must~~agreements ~~deposit~~with ~~all proceeds of its operations into accounts maintained by Charter One but during~~ the ~~forbearance~~ ~~period~~Loan ~~Charter~~Parties ~~One~~and ~~will~~to ~~not~~stay ~~take~~ any action toon ~~set~~its ~~off~~motion ~~funds~~for inthe ~~any~~appointment ~~such~~of ~~account~~a receiver.

~~The~~Each ~~forbearance~~month ~~period~~starting ~~is effective until~~ July 1, ~~2011~~2010, ~~subject~~until all toamounts under the ~~earlier~~judgments ~~termination~~and ~~upon~~loan agreements were paid in full, the ~~occurrence~~ Loan Parties agreed to pay Charter One $400,000, including a $40,000 forbearance fee. The Company expected to pay one third of ~~any~~the ~~events~~$400,000, but due to lack of ~~default~~cash, bydecided to ~~any~~accrue interest and one third of the $40,000 monthly fee and legal fees. The monthly $400,000 was previously paid by the other Loan Parties, ~~including~~until ~~non-payment~~the forebearance period ended. Interest was accrued for the last six months of ~~any~~2011. The monthly payments are applied first to Charter One’s fees and expenses, second to accrued but unpaid interest due under the judgments, and third to principal amounts due byunder ~~any~~the ofjudgments. Charter One contends that the ~~Loan~~judgments ~~Parties~~bear ~~under~~interest at LIBOR plus 1.75% with a LIBOR floor of 3.00%. The Company believes that there is an interest rate cap of 3.00%. The parties are in discussions regarding the ~~Forbearance~~applicable ~~Agreement~~interest rate.

~~Because~~On July 1, 2011, the ~~Company~~forbearance ~~does~~period ~~not~~expired ~~have~~and the ~~available~~Company ~~cash~~did tonot ~~repay~~pay off the line of credit. On October 3, if2011, ~~the~~Charter ~~required payments~~One ~~are~~instituted ~~not~~an ~~made~~action bytitled ~~the~~RBS ~~Company~~Citizens, orN.A. ~~any~~dba ofCharter ~~other~~One v. ~~Loan~~John ~~Parties~~D. Oil and Gas Co., oret. ~~other~~al. ~~events~~in the United States District Court Northern District of Ohio Eastern Division claiming a default ~~occur,~~ under the ~~Forbearance~~line ~~Agreement~~of orcredit ifand ~~prior~~seeking to ~~the~~foreclose ~~end~~upon property of the ~~forbearance~~Company ~~period~~securing the ~~Company~~line of credit and to isappoint ~~unsuccessful~~a inreceiver ~~refinancing~~for the ~~line~~Company ofand ~~credit~~certain ~~with~~companies ~~Charter~~owned ~~One~~ or ifcontrolled by Mr. Osborne. On November 21, 2011, the ~~Company~~court ~~is unsuccessful~~issued inan ~~obtaining~~order ~~substitute~~appointing ~~financing,~~a ~~there~~receiver isto ~~substantial~~marshal ~~doubt~~and ~~about~~maintain the value of the assets of the Company~~’s ability~~ toas ~~continue~~well as certain acompanies ~~going~~owned ~~concern~~or controlled by Mr. Osborne.

~~Discussions~~On ~~with~~January 13, ~~Charter~~2012, ~~One~~the ~~are~~Company ~~ongoing~~filed ~~but~~a ~~there~~voluntary ispetition nofor ~~certainty~~relief ~~that~~under Chapter ~~these~~11 ~~discussions~~of ~~will result~~the inBankruptcy ~~satisfactory~~Code ~~terms~~in ofthe aUnited ~~revised~~States ~~loan~~Bankruptcy ~~agreement~~Court orfor athe ~~revised~~Western ~~loan~~District ~~agreement~~of ~~at all~~Pennsylvania. ~~If Charter~~Pursuant ~~One~~to ~~demands~~an ~~repayment~~order of the ~~outstanding~~bankruptcy ~~amounts~~court ~~payable~~entered aton January 19, 2012, the ~~end~~previously ofappointed ~~the~~receiver ~~forbearance~~returned custody and ~~period,~~control of all of the Company’s ~~does~~property ~~not~~and ~~have~~records to management of the ~~available~~Company. ~~cash~~Since tothat ~~repay~~time, the ~~line~~Company has continued in possession of ~~credit~~its assets and ~~will~~is ~~need financing~~operating ~~from~~its ~~other~~business ~~sources~~as a debtor in possession pursuant to ~~repay~~the ~~Charter~~Bankruptcy ~~One~~Code.

~~The~~Discussions ~~Painesville~~with ~~facility~~Charter ~~was~~One ~~encumbered~~are byongoing, abut ~~mortgage~~there ~~with~~is ~~First~~no ~~Merit~~guaranty ~~Bank,~~these Ndiscussions will be successful.A. byBecause ~~agreement dated~~the ~~June 9,~~Company ~~2009.~~does ~~The~~not ~~loan~~have the ~~was~~available ~~deemed~~cash to berepay inthe ~~default~~line byof ~~First~~credit ~~Merit~~with ~~Bank~~Charter One, ~~N.A~~if inthe ~~August 2009 when~~Company is unable to reach an accommodation with Charter One ~~sought~~or ~~judgments~~refinance ~~against~~the line of credit, there is substantial doubt about the Company’s ~~regarding~~ability ~~its~~to ~~line~~continue ofas ~~credit.~~a going concern.

OnThe ~~May 11,~~Painesville ~~2010,~~facility ~~Liberty~~was ~~Self~~encumbered ~~Stor,~~by ~~LTD~~a ~~and~~mortgage with First Merit ~~Bank~~, N.A. ~~signed~~by ~~a loan modification~~ agreement ~~which~~dated ~~waived the prior defaults. The terms of the mortgage include a five year term, maturing on~~ June 19, ~~2014,~~2009. ~~with~~The aloan ~~ten year amortization period at a variable rate of the 30 day~~was ~~LIBOR~~deemed ~~plus~~to ~~250~~be ~~basis~~in ~~points.~~default ~~Monthly~~by ~~payments~~First ~~include~~Merit ~~principal of $10~~Bank,~~370~~ ~~plus interest~~N.A. ~~The current~~in ~~rate~~August on2009 ~~December 31,~~when ~~2010~~Charter ~~was~~One ~~2.76%.~~sought ~~The~~judgements ~~principal~~against ~~amount~~the ofCompany ~~the~~regarding ~~loan~~its asline of ~~December 31, 2010 and 2009 were $1,010,364 and $1,145,174, respectively~~credit.

~~The~~On ~~repayment~~May 11, ~~terms~~2010, ~~for~~Liberty ~~the~~Self ~~Painesville~~Stor, LTD and First Merit Bank, N.A signed a loan ~~includes~~modification agreement which waived the ~~following~~prior ~~principal~~defaults. ~~payments~~The ~~over~~terms of the mortgage include a five year term, maturing on ~~next~~June 1, ~~four~~2014, ~~years~~with ~~ending~~a ten year amortization period at a variable rate of the 30 day LIBOR plus 250 basis points. Monthly payments include principal of $10,370 plus interest. The current rate on December 31, ~~are~~2011 aswas ~~follows:~~2.77%. The principal amount of the loan as of December 31, 2011 and 2010 were $896,294 and $1,010,364, respectively.

2011	$	124,440
2012		124,440
2013		124,440
2014		637,044
		1,010,364
Less current portion		(124,440	)
	$	885,924

InThe ~~February 2010,~~repayment ~~the~~terms ~~Company~~for ~~entered~~the ~~into~~Painesville a loan ~~for~~includes the ~~purchase~~following ~~of a vehicle which matures in February 2015. The interest rate is fixed at 2.90%. The outstanding~~ principal ~~amount of the loan as of December 31, 2010 was $54,041. The future minimum loan~~ payments over the next ~~five~~three years ending December 31 are as follows:

2011	$	12,372
2012	$	124,440
2012		12,730
2013		124,440
2013		13,099
2014		647,414
2014		13,479
		896,294
2015		2,361
Less current portion		124,440
		54,041
	$	771,854
Less current portion		(12,372	)
	$	41,669

~~For~~In February 2010, the ~~years~~Company ~~ended~~entered ~~December 31,~~into ~~2010~~a ~~and~~loan ~~2009~~for ~~respectively,~~the purchase of a vehicle which matures in February 2015. The interest rate is fixed at 2.90%. The outstanding principal amount of the ~~Company~~loan ~~expensed~~as ~~$473~~of December 31,~~302~~ ~~and~~ 2011 was $~~427~~41,~~122~~982. inThe ~~interest~~future onminimum ~~its~~loan ~~debt~~payments ~~instruments.~~ over the next four years ending December 31 are as follows:


2012	$	12,721
2013		13,090
2014		13,469
2015		2,702

		41,982
Less current portion		12,721

	$	29,261

For the years ended December 31, 2011 and 2010 respectively, the Company expensed $545,197 and $473,302 in interest on its debt instruments.

6. Notes Payable to Related Party

The Company entered into an agreement with Mr. Osborne for an unsecured revolving demand note dated January 1, 2006. Interest is payable annually at the prime rate with principal being due on demand. The revolving demand note does not include an expiration date or a limit on the amount that the Company may borrow. The prime rate at December 31, 2011 and 2010 was 3.25%. There were no outstanding balances under the note at December 31, ~~2010~~2011 and ~~2009~~2010, respectively.

OnAs ~~February 13,~~there ~~2009,~~have ~~Great~~been ~~Plains~~no ~~loaned~~previous ~~the Company $600,000 to fund the Company’s ongoing~~or ~~capital~~current ~~requirements.~~borrowings Onon ~~July 25,~~this ~~2009~~note, ~~the Note and~~ interest ~~outstanding~~expense on the ~~$600,000~~related ~~loan from~~party ~~Great~~note, ~~Plains~~was ~~were~~$0 ~~fully~~for ~~paid. The Company used~~ the ~~receipt~~years ofended ~~currently~~December 31, ~~owed~~2011 ~~production funds~~ and ~~additional~~2010, ~~advance monies against the production receivable to make the payment~~respectively.

Interest expense on related party notes payable, included in total interest was $0 and $21,436 for the years ended December 31, 2010 and 2009, respectively.

7. Stockholder’s Equity

Effective February 12, 2008, the Company filed Articles Supplementary to its Articles of Incorporation, as amended, restated and supplemented with the State Department of Assessment and Taxation of Maryland designating 5,000 Series A Preferred Shares, par value $0.001 per share. Dividends accumulate on the Series A Preferred Shares at the rate of 8% per annum and must be ~~paid~~ paid on a quarterly basis. Failure to pay dividends on a timely basis results in the imposition of a default rate of 10% per annum that continues until the default is cured by the Company by payment of all accrued dividends. Further, the initial default by the Company entitles the holders of the Series A Preferred Shares to elect, as a class, one director to the Company’s Board of Directors who shall serve until the Series A Preferred Shares are liquidated or converted. Due to the receivership in the fourth quarter of 2011 and the filing of Chapter 11 of the Bankruptcy Code on January 13, 2012, the payment of dividends was temporarily disallowed. As of January 1, 2012, the Company became liable for the default rate on the unpaid dividends at December 31, 2011.

The Series A Preferred Shares have voting rights only with respect to certain extraordinary actions that would impair the rights of holders of the Series A Preferred Shares, such as a merger, reorganization or issuance of a class or series of stock on parity with or senior to the Series A Preferred Shares. Each of the Series A Preferred Shares is convertible into common shares by dividing the sum of $1,000 and any accrued but unpaid dividends on the Series A Preferred Shares by the conversion price of $1.00 (the “Conversion Price”). The Conversion Price is proportionately increased (or decreased, as the case may be) for combinations, stock splits and similar events that would affect the number of shares of the Company’s common stock outstanding. The Series A Preferred Shares have a liquidation preference of $1,000 per share, plus any accrued but unpaid dividends.

The Company sold an aggregate of 1,350 shares of its Series A Convertible Preferred Shares in a private placement to a total of nine accredited investors during the first six months of 2008. All Series A Preferred Shares were sold at a price of $1,000 per share for a total of $1,350,000 with no underwriting discounts or commissions, as no underwriters were used to facilitate the transactions.

The Company ~~did~~paid ~~not~~no ~~issue~~cash distributions to its common stockholders during 2011 and 2010. However, the Company declared $108,000 in preferred stock dividends for each of the years ended December 31, 2011 and 2010 and paid $80,778 and $108,000 in preferred stock dividends for each of the years ended December 31, 2011 and 2010, respectively. The Company is restricted by its loan agreement with Charter One from paying dividends on its common stock or ~~2009.~~making cash distributions to its stockholders and from paying dividends in excess of those regularly accruing on not more than two million dollars of preferred stock. Additionally due to the receivership in the fourth quarter of 2011 and the filing of Chapter 11 of the Bankruptcy Code on January 13, 2012, the payment of dividends was disallowed.

The Company did not issue common or preferred stock in 2011 or 2010.

8. Earnings/Loss Per Share

Basic income (loss) per share of common stock for the years ended December 31, ~~2010~~2011 and ~~2009~~ 2010 is determined by dividing net income (loss) less declared preferred stock dividends by the weighted average number of shares of common stock outstanding during the period.

The restricted stock awards, Class A Limited Partnership conversion and warrants for the years ended December 31, ~~2010~~2011 and ~~2009~~2010 were anti-dilutive and had no effect on diluted earnings per share. The Company’s Class A Limited Partnership exchange factor is .1377148 per share.

The Company paid no cash distributions to its common stockholders during ~~2010~~2011 and ~~2009~~ 2010. However, the Company declared $108,000 in preferred stock dividends for each of the years ended December 31, 2011 and 2010 and paid $80,778 and $108,000 in preferred stock dividends for ~~both~~each of the years ended December 31, ~~2010~~2011 and 2010, ~~2009~~respectively.

9. Income Taxes

The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income from continuing operations is as follows:

	2010						2009
	2011						2010
	Amount			%			Amount			%
Provision (benefit) based on the federal statutory rate	$	(~~506~~1,005,000	)		(34.0	)	$	(~~889~~506,000	)		(34.0	)
Increase in valuation allowance		~~506~~1,005,000			34.0			~~889~~506,000			34.0
	$	—			—		$	—			—

The following table represents the Company’s significant deferred tax assets and liabilities at December 31, 2010 and 2009:

	2010			2009
Deferred tax assets
Net operating loss carry forwards	$	5,645,000		$	5,420,000
AMT credit		41,100			41,100
Total Deferred assets		5,686,100			5,461,100
Deferred tax liabilities
Oil and natural gas properties, principally due to differences in depreciation, depletion and amortization		(1,425,000	)		(1,750,000	)
Net Deferred tax assets		4,261,100			3,711,100
Valuation allowance		(4,261,100	)		(3,711,100	)
Net Deferred tax assets	$	—		$	—

AtThe ~~December 31,~~following ~~2010~~table ~~and~~represents ~~2009,~~ the Company’s ~~had~~significant ~~net~~deferred ~~operating~~tax ~~loss~~assets ~~carry forwards (NOLS) for future years of approximately $16.6~~ and ~~$15.9 million,~~liabilities ~~respectively. These NOLS will expire~~ at ~~various~~ dates through 2028. Utilization of the NOLs could be limited if there is a substantial change in ownership of the Company and is contingent on future earnings. In addition, the Company paid $41,187 for alternative minimum tax (AMT)December ~~in 2006~~31, ~~creating~~2011 aand ~~tax~~2010: ~~credit that carries forward indefinitely.~~


	2011			2010
Deferred tax assets
Net operating loss carry forwards	$	6,310,000		$	5,645,000
AMT credit		41,100			41,100

Total deferred assets		6,351,100			5,686,100
Deferred tax liabilities
Oil and natural gas properties, principally due to differences in depreciation, depletion and amortization		(1,115,000	)		(1,425,000	)

Net deferred tax assets		5,236,100			4,261,100
Valuation allowance		(5,236,100	)		(4,261,100	)

Net deferred tax assets	$	—		$	—

At December 31, 2011 and 2010, the Company had net operating loss carry forwards (NOLS) for future years of approximately $18.6 and $16.6 million, respectively. These NOLS will expire at various dates through 2031. Utilization of the NOLs could be limited if there is a substantial change in ownership of the Company and is contingent on future earnings. In addition, the Company paid $41,187 for alternative minimum tax (AMT) in 2006, creating a tax credit that carries forward indefinitely.

The Company has provided a valuation allowance equal to 100% of the total net deferred asset in recognition of the uncertainty regarding the ultimate amount of the net deferred tax asset that will be realized. In 2006, the Company began operating in the oil and natural gas business, which is subject to many risks. The Company also expects to continue generating tax losses in the next few years due to timing differences.

10. Other Related Party Transactions

Mr. Osborne is the sole manager of Liberty Self-Stor II, Ltd., an Ohio limited liability company, which is the owner of a truck rental business, which makes trucks available for short-term rental to the general public, including tenants of the Company’s self-storage facility, and provides for the retail sale of locks, boxes, packing materials and related merchandise at the self-storage facility. The Company has entered into a cost sharing agreement with Liberty Self-Stor II, Ltd. with respect to the sharing of employees and space at the office of the self-storage facility for the benefit of both companies. Liberty Self-Stor II, Ltd. owed the Company funds associated with these transactions, as well as for cash advances between the companies, which are included in accounts receivable from related parties in the accompanying consolidated balance sheets and listed in the table below.

The Company leases its executive offices from OsAir, Inc., a company owned by Mr. Osborne ~~for $2,000 per month~~. The current lease has a three year term maturing on April 1, 2012 for $2,000 per month. Rent expense totaled $24,000 ~~and $22,050~~ for the years ending December 31, ~~2010~~2011 and ~~2009~~2010, ~~respectively,~~ and is included in general and administrative expenses. The Company anticipates extending its lease with OsAir, Inc. after the documents are approved by the bankruptcy court.

Effective January 1, 2006, the Company entered into a contract with Great Plains for well operations and sale of natural gas and oil production, net of pipeline costs. The term of the agreement was one year from the effective date. It was extended as of January 1, 2007 ~~and shall be extended for consecutive one year periods unless terminated earlier~~.

~~The~~During ~~Company is a fifty percent partner and~~ the ~~operating~~fall ~~manager~~ of ~~Lucky Brothers LLC~~2011, athe ~~company whose~~Company ~~other~~signed ~~partners~~a ~~are~~contract ~~almost~~with ~~all~~Gas ~~related~~Natural toService ~~Mr. Osborne. The partnership owns one well at December 31~~Company, ~~2010. The purpose of Lucky Brothers~~ LLC is to ~~engage~~sell inthe aCompany’s ~~joint~~natural ~~venture for drilling wells~~gas. The ~~Company~~pipeline ~~has~~costs continue ~~invested~~to ~~$174,392~~be incharged ~~well~~to ~~tangibles~~the ~~and~~Company ~~intangibles~~separately atfrom ~~December 31,~~Great ~~2010 and 2009~~Plains.

The Company purchases well supplies from Big Oats Oilfield Supply Company, a company owned by Mr. Osborne.

At December 31, 2010, the Company had a $12,000 invoice outstanding to Oz Gas Ltd., a company owned by Mr. Osborne, for payments made on the Company’s behalf to Charter One. See Note 5 “Line of Credit and Long Term Debt” to these consolidated financial statements for more information.

In 2010, the Company paid Orwell Trumbull Pipeline, LLC, a company owned by Mr. Osborne, for telemeter charges.

The Company is an owner and managing member of an unconsolidated affiliate, Kykuit Resources LLC (“Kykuit”), which is accounted for using the equity method of accounting. The Company had a 21.79% and a 20.83% ownership in Kykuit at December 31, 2010 and 2009, respectively. On June 18, 2010, the Company pledged its interest in Kykuit to Charter One in connection with the Forbearance Agreement. For the year ended December 31, 2010, the Company paid $93,440, including $10,940 previously recorded in accounts payable. Additionally the Company had $124,000 in accounts payable for a cash call and $36,391 in accounts payable for borrowed funds owed to Kykuit. The investment by the Company in this venture is $736,953 which includes cash totaling $1,496,330, an accounts payable of $124,000 and a cumulative net book loss of $883,377 at December 31, 2010. Additional information is disclosed in Note 4 to these financial statements.

~~Mr. Osborne,~~The ~~the~~ Company’s ~~Chairman~~is ~~and~~a ~~Chief~~fifty ~~Executive~~percent ~~Officer,~~partner and ~~Gas~~the ~~Natural~~operating ~~Inc.~~manager of Lucky Brothers LLC, a company whose ~~publicly-held~~other ~~public~~partners ~~utility~~are ~~company~~almost ofall ~~which~~related to Mr. Osborne. isThe ~~the~~partnership ~~Chairman~~owns one well at December 31, ~~Chief~~2011. ~~Executive~~The ~~Officer and~~purpose aof ~~significant~~Lucky ~~stockholder,~~Brothers ~~owns~~LLC ~~interests~~is to engage in ~~Kykuit.~~a Mrjoint venture for drilling wells. ~~Osborne’s~~ ~~personal~~The ~~interests~~Company has invested $174,392 in well ~~Kykuit~~tangibles ~~were~~and ~~pledged~~intangibles at December 31, 2011 and 2010. The well is currently not operating due to ~~Charter~~high ~~One~~volumes inof ~~connection~~water ~~with~~flowing into the ~~Forbearance Agreement~~pipe.

The Company purchases well supplies from Big Oats Oilfield Supply Company, a company owned by Mr. Osborne.

The Company is an owner and managing member of an unconsolidated affiliate, Kykuit Resources LLC (“Kykuit”), which is accounted for using the equity method of accounting. The Company had a 23.17% and a 21.79% ownership in Kykuit at December 31, 2011 and 2010, respectively. On June 18, 2010, the Company pledged its interest in Kykuit to Charter One in connection with the Forbearance Agreement. At December 31, 2011, the investment by the Company in this venture was $312,527 which includes cash totaling $1,658,980, a cumulative net book loss in the investment of $1,717,003 and additional cash commitments of $370,550. The cumulative net book loss of $1,717,003 at December 31, 2011 included monthly losses since inception totaling $378,694 and impairment losses totaling $1,338,309. At December 31, 2010, the investment by the Company in this venture was $736,953 which includes cash totaling $1,496,330, an accounts payable of $124,000 and a cumulative net book loss of $883,377. Additional information is disclosed in Note 4 to these financial statements.

Mr. Osborne, the Company’s Chairman and Chief Executive Officer, and Gas Natural Inc., a publicly-held public utility company of which Mr. Osborne is the Chairman, Chief Executive Officer and a significant stockholder, own interests in Kykuit. Mr. Osborne’s personal interests in Kykuit were pledged to Charter One in connection with the Forbearance Agreement.

In 2009, the Company advanced operating funds to Sleepy Hollow Oil and Gas, LLC, a company owned by Mr. Osborne.

	2010		2009
	2011		2010
Accounts Receivable Oil and Gas Sales:
Accounts Receivable:
Great Plains Exploration, LLC.	$	~~435~~145,~~268~~440	$	~~423~~335,~~566~~268
Liberty Self Stor II		3,806		727
Gas Natural Service Company, LLC		73,471		—
Lucky Brothers		—		38,983
Liberty Self Stor II		4,914		3,806
Various Related Companies		4,628		1,308
Sleepy Hollow Oil and Gas, LLC		100,000		100,000
	$	443,702	$	464,584
Various Related Companies		65,906		4,628
	$	389,731	$	443,702
Accounts Payable:
Great Plains Exploration, LLC.	$	14788,~~012~~257	$	4714,~~144~~012
Big Oats Oilfield Supply Company		23102,~~111~~152		—23,111
Kykuit Resources LLC		~~160~~398,~~391~~050		160,391
Orwell Natural Gas		1,296
Various Related Companies		15,351		25,218
Osair, Inc.		11,922		—
	$	1,303,810	$	222,732
OzGas Ltd.		12,000		—
	$	222,732	$	47,144

Great Plains Exploration, LLC:	2010		2009
Capitalized Costs for Well Property and Equipment	$	—	$	140,410
Revenues
Revenue From the Sale of Oil and Natural Gas Production, net of pipeline transportation costs	$	1,828,647	$	3,519,851
Operating expenses
Well Management, Water Hauling and Service Rig	$	395,892	$	506,337
Big Oats Oilfield Supply Company:
Purchases	$	22,193	$	—
Orwell Trumbull Pipeline, LLC Operating expenses	$	2,000	$	—

Marc C. Krantz, a director and secretary of the Company until August 26, 2009, is the managing partner of the law firm of Kohrman Jackson & Krantz PLL, which provides legal services to the Company.

J. R. Smail, a director of the Company until August 26, 2009, is the operator of five wells in which the Company has joint interest. At December 31, 2009, the consolidated financial statements included accounts receivable for oil and gas sales of $13,551; revenue from oil and gas sales of $84,265; and operating expenses of $41,708 from Smail.


	2011		2010
Great Plains Exploration, LLC:
Capitalized Costs for Well Property and Equipment	$	23,687	$	—
Revenue From the Sale of Oil and Natural Gas Production, net of pipeline transportation costs	$	887,899	$	1,828,647
Well Management, Water Hauling and Service Rig	$	417,451	$	395,892
Gas Natural Service Company
Revenues	$	80,309	$	—
Big Oats Oilfield Supply Company:
Purchases	$	69,799	$	22,193
Orwell Trumbull Pipeline, LLC
Operating expenses	$	—	$	2,000

11. Financial Information Relating to Industry Segments

The Company reports operating segments and reportable segments by business activity according to GAAP, “Disclosure about Segments of an Enterprise and Related Information.” The Company includes revenues from external customers, interest revenue and expense, depreciation, depletion and amortization and other operating expenses in its measure of segment profit or loss.

The Company’s operations are classified into two principal industry segments. The following table presents the ~~twelve~~years ~~months~~ ended December 31, ~~2010~~2011 and ~~2009~~2010:

	Oil and Gas			Self-Storage
Year ended December 31, 2011	Oil and GasProduction			Self-StorageFacilities			Total
Twelve Months ended December 31, 2010	Production			Facilities			Total
Revenues from external customers	$	1,069,526		$	346,667		$	1,416,193
Revenues from external customers	$	2,103,849		$	339,345		$	2,443,194
Interest and other revenue		17,577			128			17,705
Interest and other revenue		15,670			177,918			193,588
Total Revenue		1,087,103			346,795			1,433,898
Total Revenue		2,119,519			517,263			2,636,782
Interest Expense		520,898			24,299			545,197
Interest Expense		437,497			35,805			473,302
Accretion Expense		46,654			—			46,654
Accretion Expense		24,580			—			24,580
Property Operating Costs		588,242			142,789			731,031
Property Operating Costs		664,699			138,524			803,223
Other Operating expenses		874,755			78,300			953,055
Other Operating expenses		933,909			104,002			1,037,911
Loss from Unconsolidated Affiliate		833,626			—			833,626
Loss from Unconsolidated Affiliate		175,512			—			175,512
Impairments		162,003			—			162,003
Impairments		—			—			—
Depreciation, depletion and amortization		1,040,117			123,644			1,163,761
Depreciation, depletion and amortization		1,384,450			121,647			1,506,097
Total Operating Expenses		4,066,295			369,032			4,435,327
Total Operating Expenses		3,620,647			399,978			4,020,625
Net Income (Loss)	$	(2,979,192	)	$	(22,237	)	$	(3,001,429	)
Net Income (Loss)	$	(1,501,128	)	$	117,285		$	(1,383,843	)
Property and Equipment additions	$	18,732		$	6,652		$	25,384
Property and Equipment additions	$	83,173		$	46,547		$	129,720
Total Assets	$	5,721,957		$	1,257,595		$	6,979,552
Total Assets	$	7,346,068		$	1,372,436		$	8,718,504

	Oil and Gas			Self-Storage
Twelve Months ended December 31, 2009	Production			Facilities			Total
Revenues from external customers	$	3,711,668		$	333,569		$	4,045,237
Interest and other revenue		8			—			8
Total Revenue		3,711,676			333,569			4,045,245
Interest Expense		412,637			35,921			448,558
Accretion Expense		45,905			—			45,905
Property Operating Costs		687,182			114,539			801,721
Other Operating expenses		1,089,434			178,894			1,268,328
Loss from Unconsolidated Affiliate		650,420			—			650,420
Impairments		145,444			—			145,444
Depreciation, depletion and amortization		3,260,576			120,538			3,381,114
Total Operating Expenses		6,291,598			449,892			6,741,490
Net Loss	$	(2,579,922	)	$	(116,323	)	$	(2,696,245	)
Property and Equipment additions	$	329,125		$	—		$	329,125
Total Assets	$	8,790,619		$	1,468,905		$	10,259,524


Year ended December 31, 2010	Oil and Gas Production			Self-Storage Facilities		Total
Revenues from external customers	$	2,103,849		$	339,345	$	2,443,194
Interest and other revenue		15,670			177,918		193,588

Total Revenue		2,119,519			517,263		2,636,782
Interest Expense		437,497			35,805		473,302
Accretion Expense		24,580			—		24,580
Property Operating Costs		664,699			138,524		803,223
Other Operating expenses		933,909			104,002		1,037,911
Loss from Unconsolidated Affiliate		175,512			—		175,512
Depreciation, depletion and amortization		1,384,450			121,647		1,506,097

Total Operating Expenses		3,620,647			399,978		4,020,625

Net Income (Loss)	$	(1,501,128	)	$	117,285	$	(1,383,843	)

Property and Equipment additions	$	83,173		$	46,547	$	129,720

Total Assets	$	7,346,068		$	1,372,436	$	8,718,504

12. Commitments and Contingencies

Environmental Matters

The oil and gas industry is subject, by its nature, to environmental hazards and clean-up costs. At this time, management knows of no substantial costs from environmental accidents or events for which it may be currently liable.

Oil and Gas Contracts

Effective January 1, 2006, the Company entered into a contract with Great Plains Exploration, LLC for well operations and sale of natural gas and oil production to third parties. The term of the agreement was one year from the effective date. It was extended as of January 1, 2007 and shall be extended for consecutive one year periods unless terminated earlier. The original contract was amended November 14, 2006 and filed as exhibit 10.4 to our Form 10-QSB for the quarter ended September 30, 2006. The Amendment No. 1 to the Oil and Gas Operations and Sale Agreement modified the original terms to create less cumbersome paperwork in tracking cost sharing between the companies.

~~13.~~Effective ~~Supplemental~~November 25, ~~Disclosures~~2011, ~~About~~the ~~Oil~~Company ~~and~~entered ~~Natural~~into a contract with Gas ~~Producing~~Natural ~~Activities —~~Service ~~Unaudited~~Company, LLC for the sale and purchase of natural gas.

The pipeline costs associated with the selling of natural gas continue to be charged to the Company separately from Great Plains. Additionally, Great Plains continues to handle the maintenance of the well operations.

13. Supplemental Disclosures About Oil and Natural Gas Producing Activities—Unaudited

Estimated Proved Reserves

Users of this information should be aware that the process of estimating quantities of “proved” crude oil and natural gas reserves is very complex. There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of the Company, such as additional development activity, evolving production history and reassessment of the viability of production under varying prices and other economic conditions. As a result, revision to existing estimates may occur.

There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures including many factors beyond the control of the Company. In December 2008, the SEC announced that it had approved revisions designed to modernize the oil and gas company reserves reporting requirements. In addition, in January 2010 the FASB issued an accounting standard update to provide consistency with the SEC rules. We adopted the rules effective December 31, 2009 and the rule changes, including those related to pricing and technology, which are included in our reserves estimates.

Application of the new rules resulted in the use of lower prices at December 31, 2010 and 2009 for both oil and gas than would have resulted under the previous rules, which required use of year-end oil and gas prices. Because of the changes in assumptions, the 2010 and 2009 reserve valuations below may not be comparable to those of prior years. The estimated future cash flows are determined based on the prior 12 month average prices for crude oil, current allowable prices (adjusted for periods beyond the contract period to prior 12 month average prices) applicable to expected natural gas production, estimated production of proved crude oil and natural gas reserves, estimated future production and development costs of reserves and future retirement obligations (net of salvage), based on current economic conditions, and the estimated future income tax expense, based on year-end statutory tax rates (with consideration of future tax rates already legislated) to be incurred on pretax net cash flows less the tax basis of the properties involved. Such cash flows are then discounted using a 10% rate.

~~The~~There ~~following~~are ~~table~~numerous ~~presents~~uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures including many factors beyond the control of the Company’s. ~~estimated~~In ~~gross~~December 2008, ~~proved~~the SEC announced that it had approved revisions designed to modernize the oil and ~~natural~~ gas ~~reserves,~~company ~~which~~reserves ~~are~~reporting ~~all~~requirements. ~~located~~In addition, in January 2010 the ~~continental~~FASB ~~United~~issued ~~States~~an ~~and~~accounting ~~all~~standard ~~are~~update ~~based~~to onprovide ~~reserve~~consistency ~~reports prepared~~with bythe ~~Schlumberger~~SEC ~~Data~~rules. ~~and~~We ~~Consulting~~adopted ~~Services for~~ the ~~years~~rules ~~ended~~effective December 31:, 2009 and the rule changes, including those related to pricing and technology, which are included in our reserves estimates.

	2010						2009
	Natural Gas			Oil			Natural Gas			Oil
	(MCF)			(BBLs)			(MCF)			(BBLs)
Proved developed and undeveloped reserves:
Beginning of year		2,512,800			28,800			2,146,600			17,500
Revision of previous estimates, extensions and other additions		347,800			13,400			792,000			17,600
Net reserve additions		—			—			272,900			2,900
Production		(383,500	)		(8,900	)		(698,700	)		(9,200	)
End of year		2,477,100			33,300			2,512,800			28,800
Proved developed reserves:
Beginning of year		2,512,800			28,800			2,146,600			17,500
End of year		2,477,100			33,300			2,512,800			28,800

Application of the new rules resulted in the use of higher pricing for oil at December 31, 2011 and lower pricing for oil at December 31, 2010 than would have resulted under the previous rules, which required use of year-end oil and gas prices. Because of the changes in assumptions, the 2011 and 2010 reserve valuations below may not be comparable to those of prior years. The estimated future cash flows are determined based on the prior 12 month average prices for crude oil, current allowable prices (adjusted for periods beyond the contract period to prior 12 month average prices) applicable to expected natural gas production, estimated production of proved crude oil and natural gas reserves, estimated future production and development costs of reserves and future retirement obligations (net of salvage), based on current economic conditions, and the estimated future income tax expense, based on year-end statutory tax rates (with consideration of future tax rates already legislated) to be incurred on pretax net cash flows less the tax basis of the properties involved. Such cash flows are then discounted using a 10% rate.

The following table presents the Company’s estimated gross proved oil and natural gas reserves, which are all located in the continental United States and are based on reserve reports prepared by Schlumberger Data and Consulting Services for the years ended December 31:


	2011						2010
	Natural Gas (MCF)			Oil (BBLs)			Natural Gas (MCF)			Oil (BBLs)
Proved developed and undeveloped reserves:
Beginning of year		2,477,100			33,300			2,512,800			28,800
Revision of previous estimates, extensions and other additions		(267,400	)		(1,100	)		347,800			13,400
Net reserve additions		—			—			—			—
Production		(297,800	)		(5,000	)		(383,500	)		(8,900	)

End of year		1,911,900			27,200			2,477,100			33,300

Proved developed reserves:
Beginning of year		2,477,100			33,300			2,512,800			28,800

End of year		1,911,900			27,200			2,477,100			33,300

Capitalized Costs Relating to Oil and Natural Gas Producing Activities for the years ended December 31.

	2010			2009
	2011			2010
Proved oil and natural gas properties	$	16,~~473~~513,~~401~~149		$	16,~~516~~473,~~743~~401
Unproved oil and natural gas properties		7971,~~308~~018			~~169~~79,~~536~~308
Well Material inventory		50,349			50,349
Total		16,~~603~~634,~~058~~516			16,~~736~~603,~~628~~058
Accumulated depreciation, depletion and amortization		(1011,~~613~~788,~~130~~062	)		(910,~~250~~613,~~963~~130	)
Net capitalized costs	$	54,~~989~~846,~~928~~454		$	75,~~485~~989,~~665~~928

Costs Incurred in Oil and Natural Gas Producing Activities for the years ended December 31.

	2010		2009
Property acquisition costs	$	317	$	3,047
Development costs	$	10,626	$	340,443

Costs Incurred in Oil and Natural Gas Producing Activities for the years ended December 31.


	2011		2010
Property acquisition costs	$	—	$	317
Development costs	$	—	$	10,626

Standardized Measure of Discounted Future Net Cash Flows at December 31, (in thousands of dollars).

	2010			2009
	2011			2010
Future cash inflows from sales of oil and gas	$	1511,~~439~~832		$	1315,~~794~~439
Future production and development costs		(87,~~661~~146	)		(8,~~207~~661	)
Future asset retirement obligations		(1,~~635~~574	)		(1,~~449~~635	)
Future income tax expense		(1,~~749~~058	)		(1,~~407~~749	)
Future net cash flows		32,~~349~~054			23,~~731~~394
Future net cash flows 10% annual discount for estimated timing of cash flows		(~~1,390~~845	)		(1,~~186~~390	)
Standardized measure of discounted future net cash flows	$	21,~~004~~209		$	12,~~545~~004

Effective for the year ended 2009, SEC reporting rules required that year-end reserve calculations and future cash inflows be based on the simple average of the first day of the month price for the previous twelve month period. The 12-month average pricing for ~~2010~~2011 used in the above table for natural gas sold at the Henry Hub, Louisiana was $4.~~376~~118 and Ergon West Virginia Oil was $7393.7323. The 12-month average pricing for ~~2009~~2010 used in the above table for natural gas sold at the Henry Hub, Louisiana was $34.~~867~~376 and Ergon West ~~Texas~~Virginia ~~Intermediate~~Oil ~~oil at Cushing, Oklahoma~~ was $6173.1873.

Future operating expenses are based on year end costs and assume continuation of existing economic conditions.

Changes in the Standardized Measure of Discounted Future Net Cash Flow at December 31, (in thousands of dollars).

	2010			2009
	2011			2010
Balance, beginning of year	$	12,~~545~~004		$	31,~~522~~545
Extensions, discoveries and other additions		—			~~412~~—
Revision of quantity estimates		~~974~~(709	)		~~985~~974
Sales of oil and gas, net of production costs		~~(445~~393	)		(~~1,936~~445	)
Net change in prices and production costs		~~471~~(1,221	)		~~(1,668~~471	)
Net change in income taxes		~~(342~~691	)		~~1,004~~(342	)
Accretion of discount		~~155~~200			~~352~~155
Other		(~~354~~149	)		(~~1,126~~354	)
Balance, end of year	$	21,~~004~~209		$	12,~~545~~004

The methodology and assumptions used in calculating the standardized measure are those required by GAAP. It is not intended to be representative of the fair market value of the Company’s proved reserves. The valuation of revenues and costs does not necessarily reflect the amounts to be received or expended by the Company. In addition to the valuations used, numerous other factors are considered in evaluating known and prospective oil and gas reserves.

JOHNTable D.of OIL AND GAS COMPANY INDEX TO ANNUAL REPORT ON FORM 10-K Contents

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Filing Compare · JOHN D. OIL & GAS CO