UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-K~~10K

~~(Mark~~☒ ~~One~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~[X] ANNUAL~~For ~~REPORT~~the ~~PURSUANT~~fiscal TOyear ~~SECTION~~ended 13December OR31, ~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~2014

~~For the Fiscal Year Ended December 31, 2012~~Or

[☐ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~Transition~~transition ~~Period~~period from ~~_____________~~_________ to ~~______________~~_____________

Commission ~~File~~file ~~Number~~number: 001-14665.

~~CLAIMSNET.COM~~(Exact ~~INC.~~name of registrant as specified in its charter)

(Name of registrant in its charter)

Delaware	75-2649230
State or other jurisdiction of	I.R.S. Employer
incorporation or organization	Identification No.

Delaware 75-26492304975 Voyager Drive, Dallas, Texas 75237

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

14860 Montfort Dr., Suite 250, Dallas, Texas 75254

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (972) 818-~~458-1701~~0720

Securities registered ~~under~~pursuant to Section 12(b) of ~~the~~this ~~Exchange~~ Act: ~~None~~

~~Securities~~Title ~~registered~~of ~~under~~each ~~Section~~class ~~12(g)~~Name of ~~the~~each ~~Exchange~~exchange ~~Act: Common~~on ~~Stock,~~which ~~$.001~~registered ~~par~~Common ~~value~~stock OTC

Indicate by check mark ~~whether~~if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities ~~Exchange~~ Act ~~of 1934~~. Yes ~~[_]~~ ☐ No ~~[X]~~☒

Indicate by ~~checkmark~~check ~~whether~~mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the ~~Exchange~~ Act. Yes [☐ ] No ~~[X]~~☒

Indicate by ~~checkmark~~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 ~~past~~preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~☒ No ~~[ ]~~☐

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 (ss. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ~~[X]~~ ☒ No [ ]☐

Indicate by ~~checkmark~~check mark if disclosure of delinquent filers inpursuant ~~response~~ to Item 405 of Regulation S-K (ss. 229.405 of this chapter) 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]~~☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. ~~(as~~See ~~defined~~definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the ~~Securities~~ Exchange Act. of(Check ~~1934~~One).

Large accelerated filer ~~[_]~~☐ Accelerated filer ~~[_]~~☐ Non-accelerated filer [☐ ] Smaller ~~Reporting~~reporting ~~Company~~company ~~[ X]~~☒

Indicate by check mark whether the ~~registrant~~Registrant is a shell company (as defined in Rule 12b-2 of the ~~Securities~~ Exchange Act ~~of 1934~~). Yes ~~[_]~~ ☐ No ~~[X]~~☒

The aggregate market value of the voting ~~and non-voting~~ common ~~equity~~stock held by non-affiliates, ~~based~~of on the ~~average~~registrant ofat March ~~bid and ask price of such common equity as of June 30~~31, ~~2012,~~2015 was $~~291~~8,~~095~~800,879.

~~State~~Number ~~the number~~ of shares ~~outstanding~~ of ~~each of~~ the ~~issuer'~~registrant’s ~~classes of~~ common stock, asoutstanding ofat March ~~the latest practicable date. Common Stock~~31, ~~$.001~~2015 ~~par~~was ~~value~~29, 35334,~~644,696 shares outstanding as of February 26, 2013~~264.

~~DOCUMENTS~~ANNUAL ~~INCORPORATED~~REPORT BYON ~~REFERENCE None.~~FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2014

TABLE OF CONTENTS

		Page
PART I

ITEM 1	Business	4
ITEM 1A	Risk Factors	8
ITEM 2	Properties	21
ITEM 3	Legal Proceedings	30
ITEM 4	Mine Safety Disclosures	30

PART II

ITEM 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
ITEM 6	Selected Financial Data	32
ITEM 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk
ITEM 8	Financial Statements and Supplementary Data	F-2
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	34
ITEM 9A	Controls and Procedures	35
ITEM 9B	Other Information	36

PART III

ITEM 10	Directors, Executive Officers, and Corporate Governance	36
ITEM 11	Executive Compensation	38
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	38
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	39
ITEM 14	Principal Accounting Fees and Services	39
ITEM 15	Subsequent Events	39

PART IV

ITEM 16	Exhibits, Financial Statement Schedules	40

SIGNATURES		41

Forward-Looking Statements

Certain statements contained in this Annual Report on Form 10-K are not statements of historical fact and constitute forward-looking statements within the meaning of the various provisions of the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, the statements specifically identified as forward-looking statements within this report. Many of these statements contain risk factors as well. In addition, certain statements in our future filings with the SEC, in press releases, and in oral and written statements made by or with our approvals which are not statements of historical fact constitute forward-looking statements within the meaning of the Securities Act and the Exchange Act. Examples of forward-looking statements, include, but are not limited to: (i) projections of capital expenditures, revenues, income or loss, earnings or loss per share, capital structure, and other financial items, (ii) statements about the plans and objectives of our management or board of directors including those relating to planned development of our oil and gas properties, (iii) statements of future economic performance and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “may,” “will” “might,” “should,” “plan,” “predict,” “project,” “envision,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Important factors that could cause actual results to differ materially from the forward looking statements include, but are not limited to:

	•		changes in production volumes, worldwide demand and commodity prices for oil and natural gas;
	•		changes in estimates of proved reserves;
	•		declines in the values of our oil and natural gas properties resulting in impairments;
	•		the timing and extent of our success in discovering, acquiring, developing and producing oil and natural gas reserves;
	•		our ability to acquire leases, drilling rigs, supplies and services on a timely basis and at reasonable prices;
	•		risks incident to the drilling and operation of oil and natural gas wells;
	•		future unanticipated production and development costs;
	•		the availability of sufficient pipeline and other transportation facilities to carry our production and the impact of these facilities on prices or costs;
	•		the effect of existing and future laws, governmental regulations and the political and economic climate of the United States of America and its individual states;
	•		changes in environmental laws and the regulation and enforcement related to those laws;
	•		the identification of and severity of environmental events and governmental responses to the events;
	•		legislative or regulatory changes, including retroactive royalty or production tax regimes, hydraulic-fracturing regulation, derivatives reform, and changes in state, federal and foreign income taxes;
	•		the effect of oil and natural gas derivatives activities; and
	•		conditions in the capital markets.

Such forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events.

See also “Risk Factors.”

CERTAIN DEFINITIONS

Unless the context otherwise requires, the terms “we,” “us,” “our,” “ours,” “the Company” or “TransCoastal” when used in this report refer to TransCoastal Corporation, together with our consolidated operating subsidiaries. When the context requires, we refer to these entities separately.

We have included below the definitions for certain terms used in this report:

AFE – Authority for expenditure.

After payout – With respect to an oil or natural gas interest in a property, refers to the time period after which the costs to drill and equip a well have been recovered.

Bbl – One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons.

Bbls/d or BOPD – Barrels per day.

Bcf – Billion cubic feet.

Bcfe – Billion cubic feet equivalent, determined using the ratio of six thousand cubic feet (Mcf) of natural gas to one Bbl of crude oil, condensate or natural gas liquids.

Before payout – With respect to an oil and natural gas interest in a property, refers to the time period before which the costs to drill and equip a well have been recovered.

Behind-pipe reserves – Those reserves expected to be recovered from completion interval(s) not yet open but still behind casing in existing wells.

BOE – Barrel of oil equivalent, determined using a ratio of six Mcf of natural gas equal to one barrel of oil equivalent.

Carried interest – A contractual arrangement, usually in a drilling project, whereby all or a portion of the working interest cost participation of the project originator is paid for by another party in exchange for earning an interest in such project.

Completion – The installation of permanent equipment for the production of oil or natural gas or, in the case of a dry hole, the reporting of abandonment to the appropriate agency.

Compression – A force that tends to shorten or squeeze, decreasing volume or increasing pressure.

DD&A – Depreciation, depletion and amortization.

Developed acreage – The number of acres which are allotted or assignable to producing wells or wells capable of production.

Development activities – Activities following exploration including the installation of facilities and the drilling and completion of wells for production purposes.

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

~~ITEM~~Dry 1.hole ~~BUSINESS~~or well – A well found to be incapable of producing hydrocarbons economically.

~~Claimsnet.com~~EUR ~~inc.~~– ~~(“Company”,~~Expected ~~“we”,~~ultimate ~~“our”,~~recovery orfrom ~~“us”) is~~ a Delaware corporation originally formed in April 1996. We are an electronic commerce company engaged in healthcare transaction processing for the medical and dental industries by means of the Internet. Our proprietary software, which was developed over the last fourteen years, enables the efficient communication of data between healthcare payers and their provider networks and trading partners (claims clearinghouses, third party administrators, preferred provider organizations, health maintenance organizations, claim re-pricing organizations, independent physician associations, and managed service organizations), for the purpose of conducting administrative transactions required to effect financial reimbursement for healthcare services. Our systems, in addition to providing electronic communication between various parties, improve editing and checking of data accuracy in medical claims without the need for changes to customers IT systems. Both the ease of data exchange as well ~~as the quality of the data being exchanged~~, ~~allows~~reservoir ~~users~~or ~~to realize increases in electronic transaction volumes compared to paper transactions~~field. These processes improve the speed and accuracy of the transactions and enhance the auto adjudication percentage rates, thereby improving the productivity of claims adjusters and the speed of medical reimbursements to healthcare providers. Included in this process is real-time editing of the claims data for compliance with format and content requirements of payers to satisfy payers specific processing requirements, again adding to people productivity and speed of reimbursement turn around times. In addition, our software provides for secure encryption of all claims data transmitted in compliance with the regulations of the United States Centers for Medicare and Medicaid Services (formerly HCFA).

WeExploitation ~~believe~~– ~~that~~The ~~the~~act ~~following~~of ~~are~~making ~~significant~~oil ~~advantages~~and ofgas ~~our~~property ~~electronic~~more ~~transaction~~profitable, ~~processing~~productive ~~services:~~or useful.

·Exploratory ~~the~~well ~~ability~~– A well drilled to ~~easily~~find ~~configure~~and ~~the~~produce ~~system~~oil toor ~~meet~~natural ~~the~~gas ~~specific~~reserves ~~needs~~not ofclassified ~~our~~as ~~clients~~proved, ~~both~~to find a new reservoir in ~~the~~a ~~format~~field ~~and~~previously ~~content~~found to be productive of ~~data~~oil ~~being~~or ~~exchanged;~~natural gas in another reservoir or to extend a known reservoir.

·Farm-in ~~the~~or ~~ability~~Farmout to– ~~accept~~An ~~input~~agreement ~~from~~where athe ~~variety~~owner of ~~sources~~a ~~(direct~~working ~~output~~interest ~~from~~in aan ~~provider’s~~oil ~~practice~~and ~~management~~natural ~~system,~~gas ~~EDI~~lease ~~files~~assigns ~~from~~the ~~clearinghouses~~working ~~and~~interest ~~trading~~or ~~partners,~~a ~~and~~portion ~~data~~thereof ~~conversion~~to ~~from~~another ~~scanned~~party ~~paper~~who ~~forms),~~desires ~~pre-process~~to drill on the ~~data,~~leased ~~improve~~acreage. Generally, the ~~data~~assignee is required to drill one or ~~reject~~more ~~the~~wells ~~transaction~~in ~~according~~order to ~~client-specific~~earn ~~business~~its ~~rules,~~interest ~~and~~in ~~deliver~~ the ~~data~~acreage. inThe assignor usually retains a ~~consistent~~royalty and/or ~~client~~reversionary interest in the lease. The interest received by the assignee is a “farm-~~defined~~in” ~~format;~~while the interest transferred by the assignor is a “farmout.”

·FASB ~~the~~– ~~ability~~The toFinancial ~~create~~Accounting ~~multiple~~Standards ~~custom website formats to be promoted by partners and sponsors without modification of the server-based processing systems;~~Board.

·Field ~~the~~– ~~ability~~An ofarea ~~healthcare~~consisting ~~providers~~of ~~utilizing~~a ~~their~~single ~~websites~~reservoir toor ~~interactively~~multiple ~~process~~reservoirs ~~claims~~all grouped on ~~the~~or ~~Internet~~related ~~and~~to ~~receive~~the ~~real~~same ~~time~~individual ~~edits~~geological ~~prior~~structural tofeature ~~claim~~and/or ~~submission;~~stratigraphic ~~and~~condition.

·GAAP ~~the~~– ~~minimal~~Generally ~~software~~accepted ~~and~~accounting ~~processing~~principles ~~power~~in ~~required~~the ~~for~~United ~~providers~~States toof ~~utilize our proprietary software; and~~America.

·Gross ~~EHNAC~~acres ~~certification~~or ~~statement~~gross wells – The total acres or wells, as the case may be, in which a working interest is owned.

WeHorizontal ~~believe~~drilling ~~that~~– ~~the~~A ~~services~~drilling ~~offered~~technique bythat ~~some~~permits ofthe ~~our~~operator ~~competitors~~to ~~are~~contact ~~generally~~and ~~based~~intersect ona ~~legacy~~larger ~~mainframe~~portion ~~technology,~~of ~~proprietary~~the ~~networks,~~producing ~~and~~horizon ~~proprietary~~than ~~file~~conventional ~~formats,~~vertical ~~which~~drilling ~~limit~~techniques ~~the~~that ~~ability~~may, ofdepending ~~those~~on ~~competitors~~horizon, toresult ~~offer~~in ~~interactive~~increased ~~Internet-based~~production ~~processing~~rates ~~services~~and ongreater anultimate ~~economical~~recoveries ~~basis~~of hydrocarbons.

WeInjection ~~generate~~well ~~recurring~~– ~~revenue~~A ~~primarily~~well ~~from~~to ~~implementation~~inject ~~fees~~gas, ~~development fees~~water, ~~license~~or ~~fees,~~liquefied ~~support~~petroleum ~~fees~~gas ~~and~~under ~~transaction-based~~high ~~fees.~~pressure Weinto ~~use~~a ~~the~~producing ~~services~~formation ofto ~~certain~~maintain ~~partners~~sufficient ~~and~~pressure ~~vendors~~ to ~~assist~~produce ~~with~~ the ~~conversion~~recoverable ~~of scanned paper forms, the printing of paper forms from electronic data, and the delivery of certain electronic transactions~~reserves.

~~ELECTRONIC~~Mineral ~~CLAIMS~~Rights ~~PROCESSING~~- ~~MARKET~~Ownership of minerals under a defined surface along with the legal right of access so the minerals can be extracted. Mineral rights can be separated and transferred from land ownership. Also called subsurface rights.

~~Healthcare~~MBbls ~~claims~~– ~~are~~One ~~traditionally~~thousand ~~processed~~barrels byof ~~clearinghouses~~crude ~~using~~oil a similar operating structure to that which exists in the credit card industry. A merchant that accepts a credit card for payment does not send payment requests directly to the bank that issued the card, but sends the payment request to a clearinghouse. The payment request is processed and transmitted to the appropriate bank. Healthcare claim clearinghouses accept, sort, process, edit, and then forward the claims to the appropriate payers, either electronically or onother ~~paper.~~liquid ~~Many of the major healthcare clearinghouses operate in a mainframe computer environment~~hydrocarbons. Furthermore, traditional clearinghouses process claims in off-line batches and return edit results to the submitters in a subsequent batch transmission. This operating configuration is both expensive and time consuming due to the source code changes required to continuously process claims correctly to meet payer requirements. In contrast, our healthcare transaction processing software system on the Internet is designed to operate in a real-time, open client-server configuration. This operating alternative offers the provider and payer a method of communicating directly in a rapid, accurate, and cost-effective manner.

MBOE – One thousand barrels of oil equivalent, determined using a ratio of six Mcf of natural gas equal to one barrel of oil equivalent.

Mbtu (Mmbtu) – Used as a standard unit of measurement for natural gas and provides a convenient basis for comparing the energy content of various grades of natural gas and other fuels. One cubic foot of natural gas produces approximately 1,000 BTUs, so 1,000 cubic feet of gas is comparable to 1 MBTU. MBTU is often expressed as MMBTU, which is intended to represent a thousand BTUs.

Mcf – One thousand cubic feet.

Mcf/d – One thousand cubic feet per day.

Mcfe – One thousand cubic feet equivalent determined by using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids, which approximates the relative energy content of crude oil, condensate and natural gas liquids as compared to natural gas. Prices have historically been higher or substantially higher for crude oil than natural gas on an energy equivalent basis although there have been periods in which they have been lower or substantially lower.

MMcf – One million cubic feet.

MMcf/d – One million cubic feet per day.

MMcfe – One million cubic feet equivalent.

Net acres or net wells – The product of the fractional working interests owned by gross acres or gross wells.

NGL’s – Natural gas liquids measured in barrels.

NRI or Net Revenue Interests – The share of production after satisfaction of all royalty, oil payments and other non-operating interests.

Normally pressured reservoirs – Reservoirs with a formation-fluid pressure equivalent to 0.465 PSI per foot of depth from the surface. For example, if the formation pressure is 4,650 PSI at a depth of 10,000 feet, the pressure is considered to be normal.

Over-pressured reservoirs – Reservoirs with a formation fluid pressure greater than 0.465 PSI per foot of depth from the surface.

Plant products – Liquids generated by a plant facility; including propane, iso-butane, normal butane, pentane and ethane.

Plugging and abandonment or P&A – Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another or to the surface. Regulations of many states require plugging of abandoned wells.

PV10% – The present value of estimated future revenues to be generated from the production of proved reserves calculated in accordance with United States Securities and Exchange Commission guidelines, net of estimated lease operating expense, production taxes and future development costs, using prices, as prescribed in the United States Securities and Exchange Commission rules, and costs as of the date of estimation without future escalation, without giving effect to non-property related expenses such as general and administrative expenses, debt service, depreciation, depletion and amortization, or Federal income taxes and discounted using and annual discount rate of 10%. PV10% is considered a non-GAAP financial measure as defined by the United States Securities and Exchange Commission.

Possible reserves - are those additional reserves that are less certain to be recovered than probable reserves. When deterministic methods are used, the total quantities ultimately recovered from a project have a low probability of exceeding proved plus probable plus possible reserves. When probabilistic methods are used, there should be at least a 10% probability that the total quantities ultimately recovered will equal or exceed the proved plus probable plus possible reserves estimates. Possible reserves may be assigned to areas of a reservoir adjacent to probable reserves where data control and interpretations of available data are progressively less certain. Frequently, this will be in areas where geoscience and engineering data are unable to define clearly the area and vertical limits of commercial production from the reservoir by a defined project. Possible reserves also include incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than the recovery quantities assumed for probable reserves. Possible reserves may be assigned where geoscience and engineering data identify directly adjacent portions of a reservoir within the same accumulation that may be separated from proved areas by faults with displacement less than formation thickness or other geological discontinuities and that have not been penetrated by a wellbore, and the Company believes that such adjacent portions are in communication with the known (proved) reservoir. Possible reserves may be assigned to areas that are structurally higher or lower than the proved area if these areas are in communication with the proved reservoir. Where direct observation has defined a highest known oil ("HKO") elevation and the potential exists for an associated gas cap, proved oil reserves should be assigned in the structurally higher portions of the reservoir above the HKO only if the higher contact can be established with reasonable certainty through reliable technology. Portions of the reservoir that do not meet this reasonable certainty criterion may be assigned as probable and possible oil or gas based on reservoir fluid properties and pressure gradient interpretations.

~~The~~Primary ~~Health~~recovery ~~Insurance~~– ~~Portability~~The ~~and~~first ~~Accountability~~stage ~~Act~~ of ~~1996~~hydrocarbon ~~(“HIPAA”)~~production ~~and the HITECH Act of 2009 include sections on administrative simplification requiring improved efficiency~~ in ~~health~~which ~~care~~natural ~~delivery~~reservoir bydrives standardizing electronic data interchange, and protection of confidentiality and security of health data through setting and enforcing standards. More specifically, HIPAA calls for (a) standardization of electronic patient health, administrative and financial data, (b) unique health identifiers for individuals, employers, health plans and health care providers, and (c) security standards protecting the confidentiality and integrity of "individually identifiable health information." All healthcare organizations are ~~affected,~~used including health care providers, health plans, employers, public health authorities, life insurers, clearinghouses, billing agencies, information systems vendors, service organizations, and universities. HIPAA calls for severe civil and criminal penalties for noncompliance. The provisions relating to ~~standards~~recover ~~for electronic transactions~~hydrocarbons, ~~including~~although ~~health~~some ~~claims~~form and equivalent managed care encounter information, became effective in October 2003 for clearinghouse and large payer organizations with implementation by all entities no later than October 2004. The provisions relating to standards for privacy were implemented in April 2003 for large organizations and April 2004 for small organizations. The provisions relating to security were implemented in April 2005. The provisions relating to national provider identifiers were implemented in May 2007. The ARRA, HITECH Act became effective in 2010, and the technical standards were updated with a full implementation compliance date of ~~January~~artificial 1,lift ~~2012.~~may ~~The~~be ~~HIPAA~~required ~~Omnibus Rule of January 2013 brings about changes~~ to ~~HIPAA~~exploit ~~Privacy~~declining ~~and~~reservoir ~~Security Regulations as well as updates to the HITECH Act~~drives. ~~These changes become effective during March 2013 with compliance dates in September 2013. In October 2014, the standards for the new ICD 10 codes will be mandated.~~

WeProbable ~~believe~~reserves - Are those additional reserves that ~~the~~are ~~convergence~~less ofcertain ~~HIPAA~~to ~~mandates~~be ~~and~~recovered ~~the~~than ~~proliferation~~proved ofreserves ~~Internet~~but ~~technology~~which, ~~will~~together ~~cause~~with ~~sweeping~~proved ~~changes~~reserves, inare ~~the~~as ~~healthcare~~likely ~~claims~~as ~~processing~~not ~~market~~to be recovered. At aWhen ~~minimum~~deterministic methods are used, it ~~will~~is ~~cause~~as ~~all~~likely ~~payers~~as tonot ~~implement~~that ~~secure~~actual ~~electronic~~remaining ~~transaction~~quantities ~~processing~~recovered ~~capabilities~~will ~~for~~exceed athe ~~full~~sum ~~menu~~ of ~~administrative~~estimated ~~transactions~~proved plus probable reserves. We ~~expect~~When ~~the~~probabilistic ~~universal~~methods ~~availability~~are ofused, ~~data~~there ~~exchange~~should ~~between~~be ~~healthcare~~at ~~organizations~~least toa ~~generate~~50% ~~growth~~probability inthat the ~~healthcare~~actual ~~EDI~~quantities ~~industry. If~~recovered will equal or exceed the ~~industry~~proved ~~evolves~~plus ~~toward~~probable ~~direct~~reserves ~~payer~~estimates. ~~submission~~Probable reserves may be assigned to areas of ~~claims~~a orreservoir ~~real-time~~adjacent ~~adjudication~~to proved reserves where data control or interpretations of ~~claims~~available data are less certain, weeven ~~believe~~if ~~our~~the ~~software~~interpreted ~~will~~reservoir continuity of structure or productivity does not meet the reasonable certainty criterion. Probable reserves may be ~~able~~assigned to ~~offer~~areas ~~efficient~~that ~~access~~are tostructurally ~~payers~~higher ~~and~~than ~~healthcare~~the ~~providers~~proved area if these areas are in communication with the proved reservoir. Probable reserves estimates also include potential incremental quantities associated with a ~~HIPAA-compliant~~greater ~~format~~percentage recovery of the hydrocarbons in place than assumed for proved reserves.

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

~~Our~~Proved ~~business~~developed ~~strategy~~nonproducing isreserves asor ~~follows:~~PDNP – Proved developed nonproducing reserves are proved reserves that are either shut-in or are behind-pipe reserves.

·Proved todeveloped ~~utilize~~producing ~~our~~reserves ~~technology~~or PDP – Proved developed reserves that are expected to ~~help~~be ~~healthcare~~recovered ~~organizations~~from ~~achieve~~completion ~~more~~intervals ~~efficient~~currently open in existing wells and ~~less~~able ~~costly~~to ~~administrative~~produce ~~operations;~~to market.

·Proved todeveloped ~~market~~reserves ~~our~~– ~~services~~Proved ~~directly~~reserves that are expected to ~~the~~be ~~provider~~recovered ~~and~~from ~~payer~~existing ~~community~~wells ~~and~~with ~~its~~existing ~~trading~~equipment ~~partners;~~and operating methods.

·Proved tooil ~~aggressively~~and ~~pursue~~gas reserves – Proved oil and ~~support~~gas ~~strategic~~reserves ~~relationships~~are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with ~~companies~~reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that ~~will~~renewal inis ~~turn~~reasonably ~~aggressively~~certain, ~~market~~regardless ~~our~~of ~~services~~whether deterministic or probabilistic methods are used for the estimation. The project to ~~large~~extract ~~volume~~the ~~healthcare~~hydrocarbons ~~organizations~~must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. (i) The area of the reservoir considered as proved includes: (A) the area identified by drilling and limited by fluid contacts, ~~including~~if ~~insurers~~any, ~~HMO’s~~and (B) adjacent undrilled portions of the reservoir that can, ~~third~~with ~~party~~reasonable ~~administrators~~certainty, ~~provider~~be ~~networks~~judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data. (ii) In the absence of data on fluid contacts, ~~re-pricing~~proved ~~organizations~~quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, ~~clinics~~engineering, ~~hospitals~~or performance data and reliable technology establishes a lower contact with reasonable certainty. (iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, ~~laboratories~~proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, ~~physicians~~engineering, or performance data and ~~dentists~~reliable technology establish the higher contact with reasonable certainty. (iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) the project has been approved for development by all necessary parties and entities, including governmental entities. (v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

·Proved toreserves ~~provide~~– ~~total~~The ~~claim~~estimated ~~management~~quantities ~~services~~of tocrude ~~payer organizations~~oil, ~~including~~natural ~~Internet~~gas ~~claim~~and ~~submission,~~natural ~~paper~~gas ~~claim~~liquids ~~conversion~~that geological and engineering data demonstrate with reasonable certainty to ~~electronic~~be ~~transactions,~~recoverable ~~and~~in ~~receipt~~future ofyears ~~EDI~~from ~~transmissions;~~known reservoirs under existing economic and operating conditions.

·Proved toundeveloped ~~continue~~location to– ~~expand~~A ~~our~~site ~~product~~on ~~offerings~~which toa ~~include~~development ~~additional~~well ~~transaction~~can ~~processing~~be ~~solutions,~~drilled ~~such~~consistent aswith ~~HMO~~spacing ~~encounter~~rules ~~forms,~~for ~~eligibility~~purposes ~~and~~of ~~referral~~recovering ~~verifications,~~proved ~~claim~~undeveloped ~~status inquiries, electronic remittance advices, claim attachments, and other healthcare administrative services, in order to diversify sources of revenue;~~reserves.

·Proved undeveloped reserves or PUD – Proved reserves that are expected to ~~license~~be ~~our~~recovered ~~technology~~from ~~for~~new ~~other~~wells ~~applications,~~on ~~including~~undrilled ~~stand-alone~~acreage ~~purposes,~~or ~~Internet~~from ~~systems~~existing ~~and~~wells ~~private~~where ~~label~~a ~~use,~~relatively ~~and~~major ~~for~~expenditure ~~original~~is ~~equipment~~required ~~manufacturers;~~for ~~and~~recompletion.

·Recompletion to– ~~seek~~The ~~merger~~completion ~~and~~for ~~acquisition~~production ~~opportunities~~of an existing wellbore in another formation from that ~~enhance~~in ~~our~~which ~~growth~~the ~~and~~well ~~profitability~~has ~~objectives~~been previously completed.

Re-engineering – A process involving a comprehensive review of the mechanical conditions associated with wells and equipment in producing fields. Our ~~business~~re-engineering ~~strategies~~practices ~~may~~typically ~~not~~result ~~succeed~~in a capital expenditure plan, which is implemented over time, to workover (see below) and were-complete ~~may~~wells ~~never~~and ~~achieve~~modify ~~our~~down-hole ~~business~~artificial ~~objectives~~lift equipment and surface equipment and facilities. The programs are designed specifically for individual fields to increase and maintain production, reduce down-time and mechanical failures, lower per-unit operating expenses, and therefore, improve field economics.

~~HEALTHCARE~~Reservoir ~~TRANSACTION~~– ~~PROCESSING~~A ~~SOFTWARE~~porous ~~AND~~and ~~SECURITY~~permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Our healthcare transaction processing software is designed for processing in-patient and outpatient healthcare claims and electronic remittance advice claims (ERA’s). The software is modular, providing valuable flexibility, and generally consists of the following components:

· core processing software developed by us which provides claims review, claims editing, and a "table-based" software coding of claims variables at a payer-specific level;

· data mapping software that allows us to accept a wide variety of data input formats;

· data format generating software developed by us that allows us to easily create a wide variety of data output formats;

· an integrated web-based user interface that can be easily configured to support co-branded and private-labeled deployment;

· industry standard website management software; and

· state-of-the-art commercial security and encryption software.

Our software replaces the expensive and time-consuming hard-coding routines required by traditional systems with a user-friendly system that is table-based. Our table-based systems makes payer-specific edits to meet the requirements of payers and avoids expensive onsite software changes. Our personnel input new edits. Once healthcare providers or trading partners connect to our secure website, our software edits claims on-line automatically, using a database containing more than 22,000 edit variables. In the event that a particular payer cannot accept submission of claims electronically, we either print and mail hard copies of the claims to these payers and charge the provider for this additional service or allow the provider to print and mail the claims.

~~Our~~Royalty ~~healthcare~~– ~~transaction~~The ~~processing~~portion ~~software~~of isoil, ~~a web-based system~~gas, ~~based~~and ~~upon~~minerals aretained ~~client-server~~by ~~computing~~the ~~model,~~lessor ~~and~~on ~~includes~~execution of a ~~variety~~lease ofor ~~different~~their ~~software~~cash ~~applications.~~value ~~Individual~~paid ~~applications~~by ~~work~~the ~~together~~lessee to ~~provide~~ the ~~extraction~~lessor ~~and~~or ~~encryption~~to ofone ~~claims~~who ~~from~~has aacquired ~~submitting~~possession ~~system~~of tothe ~~our~~royalty ~~Internet claims processing server~~rights, ~~where~~based ~~editing~~on ~~and formatting occurs in~~ a ~~secure~~percentage ~~environment.~~of ~~Our~~the ~~system~~gross ~~then~~production ~~delivers~~from the ~~claims~~property tofree ~~the~~and ~~payer~~clear ~~gateway.~~of ~~The~~all ~~different~~costs ~~software~~except ~~applications have been purchased, licensed, or developed by us~~taxes.

~~Our~~Royalty ~~website~~interest ~~user~~– ~~interface~~An isinterest ~~structured~~in ~~into~~an ~~three~~oil ~~sections: "PUBLIC INTERNET," "CLIENT EXTRANET"~~ and ~~"PRIVATE~~natural ~~INTRANET."~~gas ~~The~~property ~~PUBLIC~~entitling ~~INTERNET~~the ~~site~~owner ~~provides~~to ~~company background, product demonstrations, and customer enrollment forms. The CLIENT EXTRANET provides~~ a ~~secure~~share ~~individual~~of ~~customer~~oil ~~area~~or ~~for~~natural ~~private~~gas ~~customer~~production ~~communication~~free ~~and~~of ~~encrypted~~costs ~~claims~~of ~~transmission~~production. The United States Centers for Medicare and Medicaid Services (formerly HCFA) has defined security requirements for Internet communications including healthcare data. We operate in compliance with these requirements. The PRIVATE INTRANET site is designed for internal communications, website operating reports, customer support, and reporting.

~~Our~~SEC ~~personnel~~– ~~access~~The ~~the web server hosting environment remotely via a secure Virtual Private Network (VPN) for technical operations support~~U. ~~Examples~~S. ofSecurities ~~the type of support provided include migrating website changes to production, database administration,~~ and ~~Claims~~Exchange ~~Processing Engine monitoring and management~~Commission.

~~With~~Secondary ~~the~~recovery ~~exception~~– ofThe ~~the~~use ~~commercial~~of ~~software,~~water-flooding ~~such~~or asgas ~~that~~injection ~~provided~~to bymaintain ~~Microsoft,~~formation wepressure ~~have~~during ~~either~~primary ~~identified~~production ~~back-up~~and ~~sources~~to ~~for~~reduce ~~all~~ the ~~software~~rate ~~used~~of ~~or,~~decline ~~in the event~~ of ~~a business failure by~~ the ~~licensing~~original ~~vendor,~~reservoir ~~we own the source code~~drive.

~~TRAINING~~Shut-in ~~AND~~reserves ~~HARDWARE~~– ~~REQUIREMENTS~~Those reserves expected to be recovered from completion intervals that were open at the time the reserve was estimated but were not producing due to market conditions, mechanical difficulties or because production equipment or pipelines were not yet installed.

~~The~~Standardized ~~training~~Measure ~~for~~of ~~our~~Discounted ~~various~~Future ~~products~~Net ~~and~~Cash ~~services~~Flows is– ~~included~~Present invalue ~~the~~of ~~initial~~proved ~~setup~~reserves, ~~fee. User~~as ~~manuals~~adjusted ~~and~~to ~~reference~~give ~~information~~effect ~~are available online through our client extranet~~ to ~~the~~estimated ~~provider,~~future ~~seven~~abandonment ~~days a week~~costs, 24net ~~hours~~of aestimated ~~day.~~salvage ~~The~~value ~~tutorial~~of ~~and~~related ~~other training documents are always available at our web home page~~equipment, ~~the~~and ~~location~~estimated offuture ~~which~~income ~~is http://www~~taxes.~~claimsnet.com.~~

NoUndeveloped ~~significant~~acreage ~~hardware~~– ~~investment~~Lease byacreage ~~the~~on ~~customer~~which iswells ~~required~~have innot ~~order~~been todrilled ~~take~~or ~~advantage~~completed ~~of our services. We communicate with our payer gateways using our public FTP server with PGP encryption, secure FTP with SSL protocol, secure site-~~to~~-site~~ ~~VPN,~~a or point~~-to-point~~ ~~asynchronous~~that ~~communication~~would ~~protocol.~~permit ~~The client extranet system requires~~ the ~~provider~~production toof ~~use~~commercial aquantities ~~28,800~~of ~~bps~~oil ~~or better asynchronous modem~~ and anatural PCgas ~~with~~regardless ~~Windows95~~of orwhether ~~higher operating system installed. An Internet Service Provider,~~ such asacreage ~~SBCYahoo,~~contains ~~America~~proved ~~Online or Comcast/Roadrunner, offers local telecommunication to the Internet~~reserves. ~~Our customers are responsible for obtaining and maintaining their Internet Service Provider connection.~~

~~INTERNET/INTRANET~~Working interest or WI – The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and share of production, subject to all royalties, overriding royalties and other burdens and to share in all costs of exploration, development operations and all risks in connection therewith.

~~Our~~Workover ~~processing~~– ~~configuration~~Operations ~~requires~~on noa ~~electronic~~producing ~~claims~~well ~~processing software~~ to ~~reside~~restore ator ~~the~~increase ~~level of the healthcare provider~~production. ~~All editing and formatting takes place at our Internet application server site. All software updates and all format changes are available instantly to all customers.~~

~~Our~~PART processing does not take place on the Internet, but rather in an extranet configuration. The main advantage of this approach is to assure that the communication between our servers and a user takes place in a highly controlled, secure, and encrypted environment.I

~~The~~ITEM ~~dual~~1 ~~encryption~~– ~~utilized by us occurs at the browser software and application server level. All processing and data storage occurs behind a firewall, providing secure and controlled access to all data.~~BUSINESS

~~CUSTOMERS~~Overview of Our Business

WeTransCoastal ~~view~~Corporation ~~our~~("Company" ~~customers~~or ~~as (1~~"TransCoastal") ~~the~~was ~~payers~~incorporated ~~accepting~~in ~~claims, (2)~~ the ~~strategic~~State ~~partners~~of ~~and~~Delaware ~~affiliates~~in ~~with~~June ~~which~~1999 wein ~~jointly operate, and (3)~~ the ~~healthcare~~original ~~providers~~name ~~submitting~~of ~~claims~~Claimsnet.com, ~~Revenues~~Inc. ~~received~~("Claimsnet") ~~from~~and ~~one~~has ~~customer represented~~ a ~~significant~~fiscal ~~portion~~year ofend ~~our total revenues during the last two years. Revenues received from this customer represented 34%~~ of ~~our~~December ~~revenues for 2012 and 41% for 2011~~31.

We ~~enter~~are ~~into~~an ~~agreements~~oil ~~with~~and ~~our~~gas ~~clients.~~exploration ~~Generally,~~and ~~such~~production ~~agreements~~company ~~protect~~focused ~~our~~primarily ~~intellectual~~in ~~property~~the ~~rights~~development of oil and ~~define~~gas ~~the~~reserves ~~financial~~in ~~terms~~the state of ~~our relationship~~Texas. WeOur ~~require~~revenue ~~each~~comes ~~healthcare~~from ~~provider~~the ~~using~~sale ~~our~~of ~~services~~the hydrocarbons we produce and to ~~enter~~a ~~into~~small anextent ~~agreement,~~from ~~usually~~the bytrading ~~agreeing~~of tooil ~~abide~~and bygas ~~the~~properties. ~~terms~~The ofCompany ~~our~~has ~~standard~~acquired ~~license~~or ~~agreement~~divested ~~via~~over ~~our~~100 ~~website. We~~wells ~~also~~in ~~enter~~Texas, ~~into~~and ~~agreements~~has ~~with~~over ~~the~~200 ~~commercial~~undeveloped ~~medical~~locations on over 6000 acres of leased oil and ~~dental~~gas ~~payers~~property orlocated ~~clearinghouses~~primarily in the panhandle area of west Texas. In addition to ~~which~~maintaining daily operations on our producing wells we ~~submit~~also ~~processed~~drill ~~claims.~~new ~~Generally~~wells, ~~such~~rehabilitate ~~agreements~~old ~~provide~~wells ~~for~~and ~~setup~~actively ~~fees,~~engage ~~recurring~~in ~~flat~~locating ~~rate~~additional ~~fees,~~oil and ~~transaction~~gas ~~fees~~leases. ~~that~~A wecomplete ~~receive~~list ~~for~~of ~~certain~~the ~~transactions~~oil and ~~transaction~~gas ~~fees~~properties ~~that~~the weCompany ~~pay~~currently ~~for~~owns ~~other~~or ~~transactions~~in which it has an interest is contained in the "Properties" section below.

History and Acquisitions

Prior to May 9, 2013 our business plan was to develop an electronic commerce company engaged in healthcare transaction processing for the medical and dental industries by means of the internet. On May 9, 2013 we acquired a majority interest in TransCoastal Corporation, a Texas corporation (“TransCoastal – Texas”) through an Amended Acquisitions Agreement. We issued a total of 3,721,036 shares of our Series F Preferred Stock (“Preferred Stock”), with an additional 194,920 shares of Preferred Stock to be issued as of June 30, 2013, in consideration for the common stock of TransCoastal – Texas. Each share of Preferred Stock issued has the attribute of having the voting right equal to 1,170.076 shares of common stock thereby giving the selling TransCoastal – Texas stockholders control of the corporation with the ability to vote 99.2% of all the votes eligible to vote for any matter brought before our equity holders. TransCoastal – Texas has one subsidiary, CoreTerra Operating LLC through which the primary oil and gas operations of TransCoastal are accomplished.

On May 9, 2013 the Company placed all of the assets and liabilities constituting the pre-acquisition non-oil and gas assets of our business operations into a separate wholly-owned subsidiary of the Company, ANC Holdings, Inc. (“ANC”). We determined that we could not make ANC profitable and that revenues from its operations would be insufficient to service its debt. On June 27, 2013 we sold ANC to certain debt holders of the Company in consideration for the debt holders assumption of the Company indebtedness owed to them. Once the sale of ANC was complete, the Company's sole business became oil and gas development and production.

Upon written consent of a majority of our stockholders we changed our name from Claimsnet to TransCoastal Corporation, instituted a 200 to 1 reverse stock split and increased our authorized shares from 110,000,000 to 275,000,000 with 250,000,000 shares being designated common and 25,000,000 designated as preferred stock by filing amendments to the Company's Certificate of Incorporation with the Delaware Secretary of State effective July 1, 2013.

Consistent with our view of the industry our primary focus is to acquire and operate additional producing oil and gas leases and wells, and acquire additional oil and gas prospect leases. In the past we have primarily acquired producing oil and gas properties with opportunities for future development and contracted well operations to contractors. Our new focus is a change in our business philosophy but one which we believe is better responsive to the oil and gas business opportunities available to us.

During 2011, we were able to acquire CoreTerra Operating, LLC a Texas limited liability company which is now a subsidiary of the Company. CoreTerra is located in Pampa, Texas and acts as our primary operator and properties manager for our oil and gas properties. Our operating company may from time to time, drill and act as a contact operator for third party wells. We receive fees both for the drilling of the well and once the well is completed monthly fees for acting as the operator. We have found this beneficial not only from a revenue basis but also by expanding our knowledge base of different production fields. However as stated previously, we are currently concentrating on developing our own wells and therefore we are unlikely to receive drilling fees in the near future. We do however continue to receive some fees for those wells we do not own but act as a contract operator.

~~VENDORS~~Since 2000, our efforts have focused primarily on the development of oil and gas reserves in Texas. The Company has acquired or divested over100 wells in this region, and has over 200 undeveloped locations on over 6000 acres of leased oil and gas property and additional leasing activities are on-going. A complete list of the oil and gas properties the Company currently owns or in which it has an interest is contained in the "Properties" section below.

WeWhile ~~view~~Liquid ~~our~~Natural ~~vendors~~Gas as (1LNG) may represent the ~~payers~~future toin ~~whom~~natural wegas ~~transmit~~the ~~claims,~~near ~~and~~term ~~(2)~~trend ~~the~~is ~~strategic~~for ~~partners~~natural gas prices to stay low and ~~affiliates~~are ~~with~~unlikely ~~which~~to weclimb ~~jointly~~above ~~operate,~~$5.50 ~~Costs~~per ~~associated~~mcf ~~with~~in ~~two~~the ~~vendors~~near ~~represented~~future. aConsequently ~~significant~~while ~~portion~~the ofCompany ~~our~~will ~~total~~continue ~~cost~~to take advantage of ~~revenues~~values ~~during~~in ~~the~~assets ~~last~~located ~~two~~in ~~years. Cost~~gas ofproducing ~~revenues~~areas ~~paid~~our main focus, for the foreseeable future, will be to ~~these~~continue ~~two~~to ~~vendors~~acquire ~~represented~~new ~~23%~~assets ofand develop our ~~cost~~current assets in those geographical locations which produce primarily crude oil. We believe that the price of ~~revenues~~crude ~~for~~oil ~~2012~~which ~~and~~is ~~25%~~currently priced around $50 per bbl will continue close to that level for ~~2011~~the next few years.

WeBusiness enter into agreements with our vendors. Generally, such agreements protect our intellectual property rights and define the financial terms of our relationship. Generally, such agreements provide for transaction fees that we pay for certain transactions.Strategy

~~MARKETING~~Our goal is to build long-term stockholder value by growing reserves and production revenues in a cost-efficient manner. To accomplish our goal, we plan to carry out a balanced program of (1) developing our multi-year inventory in the Brown Dolomite oil and gas properties near Pampa, Texas, and expand into other areas such as the Permian Basin and Wolfcamp oil shale play (2) operating as a low-cost producer, (3) pursuing strategic, complementary acquisitions and (4) maintaining financial flexibility. The following are key elements of our strategy:

~~Our~~● Develop ~~marketing~~our ~~strategy~~properties. isWe ~~two-fold~~believe we have a large inventory of drilling locations on our 1,422 undeveloped acres that provide us the ability to continue to increase production and reserves at a competitive cost. In addition the primary geological formation for our future development efforts, the Brown Dolomite, typically yields wells with a historical 40 year productive life. Consequently the Company will pursue development of their own properties rather than act as a contract driller/operator for third parties as we have done in the past. We plan to dedicate substantially all of our 2014 and 2015 exploration and development drilling budget to our current owned properties. Focusing on our regional approach allows us to develop operating, technical and regional expertise important to interpreting geological and operating trends, enhancing production rates and maximizing well recovery.

~~First,~~● Operate our properties as a low-cost producer. We strive to minimize our operating costs by concentrating our assets within geographic areas where we ~~created~~can ~~strategic~~consolidate ~~partnerships~~operating ~~with~~control ~~organizations~~and, ~~that:~~thus, create operating efficiencies. We operate 100% of our reserve base and plan to continue to operate a substantial portion of our producing properties in the future. Operating control allows us to better manage timing and risk as well as the cost of exploration and development, drilling and ongoing operations.

·● Acquire ~~are~~strategic, ~~engaged~~complementary assets. TransCoastal targets the acquisition of mature assets in ~~electronic~~oil and ~~claims~~gas ~~processing~~fields which display long-lived, high-quality production, heavily weighted in oil and/or ~~expect~~liquids rich natural gas production. We evaluate acquisitions based on decline profiles, reserve life and seek to ~~benefit~~take byadvantage ~~using~~of ~~our~~any ~~advanced~~operational ~~technology;~~in-efficiencies of the target operator. TransCoastal predominantly values the targets discounted cash flows from its proved developed producing category. TransCoastal requires the acquisition targets to have long term production histories with relatively predictable decline curves. Ideally, acquisition targets reserves remain largely underdeveloped and possess multiple Proved Un-developed (PUD) locations with what management believes are low-risk development opportunities. TransCoastal attempts to diminish the effects of potentially declining commodity prices by hedging up to 90% of its forecasted cash flows from operations. We do this in the form of swaps, collars or put options.

·Development ~~serve or are engaged in direct sales~~ and ~~marketing~~Exploration to the healthcare market and desire to expand the products and services they offer to their clients without incurring substantial costs by using our advanced technology in a co-branded or private-label arrangement.Activities

WeEconomic ~~have~~factors ~~established~~prevailing ~~several~~in ~~valuable~~the ~~strategic~~oil ~~relationships~~ and ~~are~~gas ~~actively~~industry ~~seeking~~change ~~additional~~from ~~partners~~time ~~for~~to ~~alliances~~time. The uncertain nature and ~~joint~~trend ~~ventures,~~of ~~including~~economic ~~managed~~conditions ~~care~~and ~~companies,~~energy ~~Internet~~policy ~~service~~in the oil and ~~information~~gas ~~providers,~~business ~~traditional~~generally ~~healthcare~~make ~~information~~flexibility ~~systems~~of ~~providers,~~operating ~~clearinghouses,~~policies ~~payer~~important ~~organizations,~~in achieving desired profitability. We intend to evaluate continuously all conditions affecting our potential activities and ~~consulting~~to ~~firms~~react to those conditions, ~~each~~as ~~seeking~~we ~~solutions~~deem appropriate from time to time by engaging in businesses we believe will be the ~~costly~~most ~~handling~~profitable offor ~~healthcare~~us. ~~claims~~Given the current high price for crude oil and the lower price for natural gas we currently are concentrating our acquisitions in the Texas panhandle and other ~~administrative~~oil ~~transactions~~producing areas of Texas.

WeIn ~~may~~addition, ~~never~~in ~~secure~~order ~~any~~to finance future development and exploration activities, we will be seeking additional ~~alliances~~equity and debt funding and we may sponsor or ~~joint~~manage ~~venture~~public ~~relations~~or private partnerships depending upon the number, size and ifeconomic wefeasibility doof our generated prospects, the level of participation of industry partners and various other factors. However, potential investors should note that there can be no assurance that we will be able to enter into such ~~alliances~~financing arrangements or ~~joint~~that ~~venture~~if ~~relationships~~we ~~may~~are ~~never~~able ~~result~~to inenter ~~material~~into ~~revenues~~such orarrangements, we will be ~~profitable~~able to achieve any profitability as a result of our operations.

Second, we have had and continue to reassess from time to time, a direct sales force with a direct sales campaign to the PPO, HMO, TPA, Medical Insurance carrier, and provider marketplace. We continue to review these sales and marketing policies to enable us to accelerate revenue growth. However, such efforts may not be successful.Subsidiaries

InTransCoastal ~~support~~Corporation, ofa ~~our~~Texas ~~marketing strategy~~corporation, weis ~~have~~99.6% ~~been~~owned ~~and~~by ~~are~~us. ~~presently~~CoreTerra Operating LLC, a ~~member~~Texas oflimited ~~the~~liability ~~Cooperative~~company, ~~Exchange~~a ~~Association~~wholly-owned subsidiary of TransCoastal Corp. Texas, anis ~~organization~~a ~~seeking~~licensed toand ~~expand~~bonded ~~the~~oil ~~delivery~~and ofgas ~~HIPAA-defined~~operator ~~transactions~~in toTexas and is registered with the ~~nation’s~~Texas ~~healthcare~~Railroad ~~payers,~~Commission. ~~and~~CoreTerra ~~whereby~~Operating ~~member~~is responsible for drilling and ~~non-member~~maintaining production ~~organizations~~of ~~transmit~~all ~~claims~~of toTransCoastal’s ~~each~~oil ~~other~~and asgas ~~required~~properties.

~~Additionally~~Healthexchange.net, wea ~~have~~Delaware ~~entered into several relationships with strategic partners for the marketing of our services and use of our proprietary technology~~corporation, including arrangements entered into with business-to-business healthcare transaction service providers and application service providers such as DST Health (formerly Synertech Systems, Inc.), SourceLynx and Tela Sourcing to operate or provide each a cowholly-~~branded~~owned orsubsidiary ~~private-labeled version~~ of ~~our claims processing application to be marketed by~~ the ~~other party either directly throughout the United States or, as part of its own Internet-based service~~Company.

COMPETITION

Several large companies such as Emdeon, RelayHealth, Availity, ENS Ingenix and MedAvant dominate the claims processing industry in which we operate. Each of these companies operates a regional or national clearinghouse of medical and dental claims. In most cases, these companies have large existing capital and software investments and focus on large healthcare providers, such as hospitals and large clinics, or act as wholesale clearinghouses for smaller electronic claims processing companies. We estimate, based on information from various trade journals, that in addition to these large competitors, there are at least 100 or more small independent electronic claims processing companies and clearinghouses which operate as local sub-clearinghouses for the processing of medical and dental claims, many of which are larger and have greater financial resources than we do.

A number of additional companies, several of which have greater financial resources and marketing capabilities than us, have announced that they intend to enter the claims processing industry. Some of these companies have indicated a desire to primarily serve the payer community and some are primarily focused on the provider community.

All of these companies are considered competitors; however, several of these companies are already our strategic partners for co-branded or private label solutions using our technology.

We believe that the flexibility, configurability, and operational efficiency of our claims processing system will allow us to compete effectively in the payer market and to partner with clearinghouses and other vendors in the provider market. We anticipate that competition will increase in the processing of claims on the Internet. No assurance can be given that any significant revenues will result or that we will successfully compete in any market in which we conduct or may conduct operations.

~~EMPLOYEES~~Significant Debt Instruments

AsCurrently, the Company’s debt consists of ~~December~~a 31$15,750,000 ~~2012~~loan with Greenbank, weN.A. ~~had~~(“Greenbank”). aThe ~~total~~note ofis ~~thirteen~~current ~~employees.~~and ~~Twelve~~in compliance with Greenbank's requirements and covenants by way of ~~these~~a ~~employees~~forbearance ~~were~~agreement ~~full-time~~executed ~~employees~~on February 20, 2015 and ~~one~~filed ~~was~~with the SEC on a ~~part-time~~Form ~~employee~~8-K. ~~Two~~The forbearance applies to all existing and anticipated events of ~~these~~default ~~employees~~in ~~were~~regards ~~executive~~to ~~officers,~~the ~~two~~loan ~~were~~until ~~key~~April ~~employees~~6, ~~and~~2015. ~~nine~~The ~~were~~note ~~technical~~matures ~~and~~June ~~service~~1, ~~personnel~~2015. ~~None~~Stuart ofG. ~~our~~Hagler, ~~employees~~A.W. ~~were~~Westmoreland, ~~represented~~and byDavid aJ. ~~labor~~May, ~~organization.~~are ~~Some~~officers and directors of ~~our~~the ~~employees~~Company ~~have~~and ~~been~~all ~~granted~~three ~~incentive~~provide ~~stock~~personal ~~options~~guarantees oron ~~warrants,~~our ~~and~~debt. wePlease ~~believe~~see ~~that~~subsequent weevents ~~have~~section afor ~~satisfactory~~notes ~~relationship~~relating ~~with~~to ~~our~~this ~~employees~~Debt Instrument.

~~SIGNIFICANT~~During ~~SUBSEQUENT~~the ~~EVENTS~~year ended December 31, 2014, the Company entered into a debt agreement with an individual, Dalton Lott, a related party. The principal amount of the debt consists of $1,500,000 with 5.5% annual interest. The note consists of monthly interest only payments from January 1 thru June 1, 2015. Beginning July 1, 2015, interest and principal payments are due every month for 60 months. Dalton Lott is the father in law of the Company’s Chief Executive Officer, Stuart Hagler.

~~None.~~Governmental Regulations

Both state and federal authorities regulate the extraction, production, transportation, and sale of oil, gas, and minerals. The executive and legislative branches of government at both the state and federal levels have periodically proposed and considered proposals for establishment of controls on alternative fuels, energy conservation, environmental protection, taxation of crude oil imports, limitation of crude oil imports, as well as various other related programs. If any proposals relating to the above subjects were to be enacted, we cannot predict what effect, if any, implementation of such proposals would have upon our operations. A listing of the more significant current state and federal statutory authority for regulation of our current operations and business are provided below.

Federal Regulatory Controls

Historically, the transportation and sale of natural gas in interstate commerce have been regulated by the Natural Gas Act of 1938 (the ("NGA"), the Natural Gas Policy Act of 1978 (the "NGPA") and associated regulations by the Federal Energy Regulatory Commission ("FERC"). The Natural Gas Wellhead Decontrol Act (the "Decontrol Act") removed, as of January 1, 1993, all remaining federal price controls from natural gas sold in "first sales." The FERC’s jurisdiction over natural gas transportation was unaffected by the Decontrol Act.

In 1992, the FERC issued regulations requiring interstate pipelines to provide transportation, separate or "unbundled," from the pipelines’ sales of gas (Order 636). This regulation fostered increased competition within all phases of the natural gas industry. In December 1992, the FERC issued Order 547, governing the issuance of blanket market sales certificates to all natural gas sellers other than interstate pipelines, and applying to non-first sales that remain subject to the FERC’s NGA jurisdiction. These orders have fostered a competitive market for natural gas by giving natural gas purchasers access to multiple supply sources at market-driven prices. Order No. 547 increased competition in markets in which we sell our natural gas.

Recently a new wave of legislation and regulation at the federal level has been initiated. Our operations are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Without limiting the generality of the foregoing, these laws and regulations may:

●

require the acquisition of a permit before drilling commences;

●

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

●

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

●

require remedial measures to mitigate pollution from former operations, such as plugging abandoned wells; and

●

impose substantial liabilities for pollution resulting from our operations.

Our operations use hydraulic fracturing to drill new oil and gas wells. Hydraulic fracturing is a process that is used to release hydrocarbons, particularly natural gas, from certain geological formations. The process involves the injection of water (typically mixed with significant quantities of sand and small quantities of chemical additives) under pressure into the formation to fracture the surrounding rock and stimulate movement of hydrocarbons through the formation. The process is typically regulated by state oil and gas commissions and has been exempt (except when the fracturing fluids or propping agents contain diesel fuels) since 2005 from United States federal regulation pursuant to the Safe Drinking Water Act.

~~ITEM~~Legislation 1Ahas been introduced before Congress to provide for federal regulation of hydraulic fracturing, including, for example, requiring disclosure of chemicals used in the fracturing process or seeking to repeal the exemption from the Safe Drinking Water Act. ~~RISK~~If ~~FACTORS~~adopted, such legislation would add an additional level of regulation and necessary permitting at the federal level and could make it more difficult to complete wells using hydraulic fracturing. Similar laws and regulations with respect to chemical disclosure also exist or are being considered by the United States Department of Interior and in several states, including certain states in which we operate, that could restrict hydraulic fracturing.

INFuture ~~ADDITION~~United TOStates ~~THE~~federal, ~~OTHER~~state ~~INFORMATION~~or INlocal ~~THIS~~laws ~~REPORT~~or regulations could significantly restrict, ~~THE~~or ~~FOLLOWING~~increase ~~FACTORS~~costs ~~SHOULD~~associated BEwith ~~CONSIDERED~~hydraulic ~~CAREFULLY~~fracturing INand ~~EVALUATING~~make ~~OUR~~it ~~BUSINESS~~more ~~AND~~difficult ~~PROSPECTS~~or costly for producers to conduct hydraulic fracturing operations, which could result in a decline of our exploration and production. New laws and regulations, and new enforcement policies by regulatory agencies, could also expressly restrict the quantities, sources and methods of water use and disposal in hydraulic fracturing and otherwise increase our costs and our customers’ cost of compliance, which could minimize water use and disposal needs even if other limits on drilling and completing new wells were not imposed. Any decline in exploration and production or any restrictions on water use and disposal could result in a decline in our drilling and rework activity and have a material adverse effect on our business, financial condition, results of operations and cash flows.

~~CONDITIONS~~The ~~EXIST~~recent ~~WHICH~~trend ~~CAUSE~~toward ~~SUBSTANTIAL~~stricter ~~DOUBT~~standards ~~ABOUT~~in ~~OUR~~environmental ~~ABILITY~~legislation TOand ~~CONTINUE~~regulation ASis Alikely ~~GOING~~to ~~CONCERN~~continue. The enactment of stricter legislation or the adoption of stricter regulation could have a significant impact on our operating costs, as well as on the oil and gas industry in general.

~~The~~State ~~report~~Regulatory of our independent registered public accounting firm with respect to our financial statements as of December 31, 2012 and for the year then ended contains an explanatory paragraph with respect to our ability to continue as a going concern.Controls

~~Management~~In ~~believes~~each ~~that~~state ~~available~~where ~~cash~~we ~~resources,~~conduct ~~together~~or ~~with~~contemplate ~~anticipated~~oil ~~revenues from operations~~ and ~~the~~gas ~~proceeds~~activities, ofthese ~~recently completed financing~~ activities ~~may~~are ~~not~~subject ~~be sufficient~~ to ~~satisfy~~various ~~our capital requirements through June 30, 2013~~regulations. ~~Necessary~~The ~~additional~~regulations ~~capital~~relate ~~may~~to ~~not~~the beextraction, ~~available on a timely basis or on acceptable terms~~production, iftransportation atand ~~all.~~sale Ifof weoil ~~are~~and ~~unable~~natural ~~to maintain or obtain sufficient capital~~gas, wethe ~~may~~issuance beof ~~unable~~drilling ~~to repay debt obligations as they become due~~permits, ~~may~~the bemethods ~~forced~~of todeveloping ~~significantly~~new ~~reduce operating expenses to a point which would be detrimental to business operations~~production, ~~curtail~~the ~~research~~spacing and ~~development~~operation ~~activities, sell certain business assets or discontinue some or all~~ of ~~our business operations~~wells, ~~take~~the ~~other~~conservation ~~actions~~of ~~which~~oil ~~could~~and benatural ~~detrimental~~gas toreservoirs ~~business prospects~~ and ~~result~~other insimilar ~~charges~~aspects ~~which~~of ~~could~~oil ~~be material to our operations~~ and ~~financial~~gas ~~position, or cease~~ operations ~~altogether~~. In ~~the event that any future financing is effected~~particular, to the ~~extent~~State itof ~~includes~~Texas ~~equity~~(where ~~securities,~~we ~~the~~have ~~holders~~conducted ofour ~~the~~oil ~~common stock~~ and ~~preferred~~gas ~~stock~~operations ~~may~~to ~~experience~~date) ~~additional~~regulates ~~dilution. In~~ the ~~event~~rate of adaily ~~cessation~~production ofallowable ~~operations,~~from ~~there~~both ~~may~~oil ~~not~~and begas ~~sufficient~~wells ~~assets~~on toa ~~fully~~market ~~satisfy~~demand ~~all~~or ~~creditors,~~conservation inbasis. ~~which~~At ~~case~~ the ~~holders~~present oftime, ~~equity~~no ~~securities~~significant ~~may~~portion ~~be unable to recoup any~~ of ~~their~~our ~~investment.~~production ~~Therefore,~~has webeen ~~are~~curtailed ~~exploring~~due ~~alternatives~~to inreduced ~~both~~allowables. ~~the~~We ~~short~~know ~~and~~of ~~long~~no ~~term~~proposed regulation that ~~may~~will ~~relieve~~significantly impede our ~~cash flow difficulties~~operations.

WEState ~~HAVE~~Environmental ~~A HISTORY OF NET LOSSES AND LIMITED REVENUES, WE ANTICIPATE FURTHER LOSSES AND WE HAVE A WORKING CAPITAL DEFICIT.~~Regulations

WeOur ~~have~~extraction, ~~incurred~~production ~~net~~and ~~losses~~drilling ~~since~~operations ~~inception~~are ~~and~~subject ~~expect~~ to ~~continue~~environmental toprotection ~~operate~~regulations atestablished aby ~~loss for the foreseeable future. For the years ended December 31~~federal, ~~2008~~state, ~~2009, 2010, 2011~~ and ~~2012,~~local weagencies. ~~incurred~~To ~~net~~the ~~losses~~best of ~~$650,000,~~our ~~$364~~knowledge,~~000,~~ ~~$287,000,~~we ~~$125,000~~believe ~~and~~that ~~$199,000,~~we ~~respectively. As~~are ofin ~~December~~compliance ~~31,~~with ~~2008,~~the ~~2009,~~applicable ~~2010,~~environmental ~~2011~~regulations ~~and~~established ~~2012,~~by wethe ~~had~~agencies ~~working~~with ~~capital~~jurisdiction ~~deficits~~over ofour ~~$789,000, $1,067,000, $1,243,000, $1,321,000 and $1,570,000, respectively~~operations. We ~~generated~~are ~~revenues~~acutely ofaware ~~$2,080,000,~~that ~~$2,207,000, $2,326,000, $2,346,000 and $2,511,000 for~~ the ~~years~~applicable ~~ended~~environmental ~~December~~regulations ~~31,~~currently ~~2008,~~in ~~2009,~~effect ~~2010,~~could ~~2011 and 2012, respectively, which~~ have ~~not allowed us to become~~ a ~~viable,~~material ~~stable~~detrimental ~~participant~~effect inupon our ~~industry. See~~earnings, ~~“Management’s~~capital ~~Discussion~~expenditures, ~~and~~or ~~Analysis~~prospects offor ~~Financial Condition and Results of Operations”~~profitability.

IfOur wecompetitors ~~continue~~are subject to ~~operate~~the atsame aregulations ~~loss~~ and ~~are~~therefore, ~~unable~~the existence of such regulations does not appear to ~~increase~~have any material effect upon our ~~working~~position ~~capital~~with respect to our competitors. The Texas Legislature has mandated a regulatory program for the management of hazardous wastes generated during crude oil and natural gas exploration and production, wegas ~~may~~processing, beoil ~~unable~~and togas ~~continue~~waste toreclamation ~~operate~~and ~~our~~transportation ~~business~~operations. The disposal of these wastes, as governed by the Railroad Commission of Texas, is becoming an increasing burden on the industry.

~~ONE~~As ~~CUSTOMER~~discussed ~~GENERATED~~above Athe ~~SIGNIFICANT~~likelihood ~~PORTION~~of OFincreased ~~OUR~~level ~~REVENUES~~of ~~AND~~regulations ~~THE~~at ~~LOSS~~the OFfederal ~~THIS~~level ~~CUSTOMER~~will ~~COULD~~also ~~HAVE~~have Aa ~~MATERIAL~~corresponding ~~ADVERSE~~regulatory ~~EFFECT~~action ONat ~~OUR~~the ~~BUSINESS~~state ~~PROSPECTS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~level.

Revenues ~~received~~ from ~~one~~oil ~~customer~~and ~~represented~~gas aproduction ~~significant~~are ~~portion~~subject ofto ~~our~~taxation ~~total~~by ~~revenues~~the ~~during~~state ~~the~~in ~~last~~which ~~two~~the ~~years~~production occurred. ~~Revenues~~ ~~received~~In ~~from~~Texas, ~~this~~the ~~customer~~state ~~represented~~receives ~~34%~~a ofseverance ~~our~~tax ~~revenues~~of 4.6% for ~~2012~~oil production and 417.5% for ~~2011~~gas production. ~~The~~These ~~loss~~high ofpercentage ~~this~~state ~~customer~~taxes ~~could~~can have a ~~material~~significant ~~adverse~~impact ~~effect~~upon onthe ~~our~~economic ~~business,~~viability ~~prospects,~~of ~~financial~~marginal ~~condition,~~wells that we may produce and ~~results~~require plugging of ~~operations~~wells sooner than would be necessary in a less arduous taxing environment.

~~BECAUSE~~Marketing WEand ~~HAVE~~Transportation NOT BEEN ABLE TO ACHIEVE PROFITABLE OPERATIONS OR OBTAIN A MEANINGFUL POSITION WITHIN OUR INDUSTRY, OUR BUSINESS REMAINS LIMITED AND WE ARE THEREFORE PRONE TO ALL OF THE RISKS INHERENT IN THE ESTABLISHMENT OF A NEW BUSINESS VENTURE AND OUR SUCCESS IS HIGHLY SPECULATIVE.Regulations

~~Although~~Sales weof ~~have~~natural ~~been~~gas ~~operating since April 1997, we~~ are ~~prone~~affected toby ~~all of~~ the ~~risks~~availability, ~~inherent~~terms toand ~~the~~cost ~~establishment~~ of atransportation. ~~new~~The ~~business~~price ~~venture.~~and ~~Organized~~terms infor ~~April~~access ~~1996,~~to wepipeline ~~were~~transportation aare ~~development~~subject ~~stage~~to ~~company~~extensive ~~through~~federal ~~March~~and ~~31,~~state ~~1997~~regulation. From ~~March~~1985 ~~1997~~to ~~until~~the ~~September 2002~~present, weseveral ~~operated~~major asregulatory achanges ~~full~~have ~~service~~been ~~clearinghouse~~implemented ~~serving~~by ~~primarily~~Congress ~~healthcare~~and ~~providers. In~~the ~~September~~Federal ~~2002,~~Energy weRegulatory ~~sold~~Commission ~~our~~("FERC") ~~healthcare~~that ~~provider~~affect ~~clearinghouse~~the ~~service~~economics ~~contracts~~of tonatural agas ~~strategic partner to generate cash~~production, ~~simplify~~transportation ~~our operations,~~ and ~~focus our attention on the payer market~~sales. We ~~endeavored~~In toaddition, ~~diversify~~FERC ~~our~~is ~~business~~continually ~~during~~proposing ~~the~~and ~~year~~implementing ~~ended~~new ~~December~~rules ~~31,~~affecting ~~2000,~~segments ~~through~~of anthe ~~asset~~natural ~~acquisition,~~gas ~~which~~industry, ~~due~~most tonotably ~~delay~~interstate innatural ~~market~~gas ~~readiness~~transmission companies, ~~resulted~~which inremain asubject ~~large~~to ~~non-recurring~~FERC’s ~~loss~~jurisdiction. As aThese ~~result~~initiatives ofmay ~~this~~also ~~loss,~~affect wethe ~~changed~~intrastate ~~our~~transportation ~~sales~~of ~~and~~gas ~~marketing~~under ~~strategy~~certain ~~and therefore should be viewed as having initiated our current operations in 2003~~circumstances. ~~Consequently,~~ ~~you~~The ~~should~~stated ~~consider~~purpose ~~the likelihood~~ of ~~our~~many ~~future success to be highly speculative in light~~ of ~~our~~these ~~operating~~regulatory ~~history,~~changes ~~our~~is ~~limited~~to ~~resources~~promote ~~and~~competition ~~problems,~~among ~~expenses, risks, and complications frequently encountered by companies in~~ the ~~early~~various ~~stages~~sectors of ~~development,~~the ~~particularly~~natural ~~companies~~gas inindustry ~~new~~ and ~~rapidly~~these ~~evolving~~initiatives ~~markets,~~generally ~~such~~reflect asmore ~~electronic~~light-handed ~~commerce~~regulation. ~~To address these risks, we must, among other things:~~

·Our ~~maintain~~sales of crude oil and ~~increase~~condensate ~~our~~are ~~strategic~~currently ~~partnerships~~not regulated and are made at market prices. In a number of instances, however, the ability to transport and sell such products are dependent on pipelines whose rates, terms and conditions of service are subject to FERC jurisdiction under the Interstate Commerce Act. However, we do not believe that these regulations affect us any differently than other crude oil producers.

·Acquisition ~~maintain~~of Other Assets and ~~increase~~Leveraging ~~our~~of ~~customer~~Assets ~~base,~~Acquired

·The ~~implement~~Company intends to acquire additional assets of a similar type and ~~successfully~~nature ~~execute~~as ~~our~~the ~~business~~assets it currently has including new and ~~marketing~~existing ~~strategy~~hydrocarbon wells and oil and gas leases. In the event Company is unable to acquire the additional assets it plans to acquire it will take the Company significantly longer to implement profitable revenue producing activities. Any pro forma financial projections would then need to be adjusted to reflect the change in circumstances. If the Company should successfully acquire additional assets the assets may or may not be in the same geographical location as the assets we currently own as the Company reserves the right to acquire assets or operate in any geographic locations management believes, in their sole judgment, to be in the best interest of the Company.

·Once ~~continue~~the toCompany ~~develop~~has acquired the oil and ~~upgrade~~gas ~~our~~assets ~~technology~~it ~~and~~intends ~~transaction-processing~~to ~~systems~~acquire, the Company may leverage those assets by borrowing from a financial source and using the assets as collateral. While this strategy will increase the available funds for Company use it will require the Company to pay debt service from its cash flow.

·There ~~continually~~can ~~update~~be no assurance that the Company will be able to achieve its objectives as its plans are dependent upon a number of factors including but not limited to the availability of additional debt and ~~improve~~equity ~~our~~capital, ~~website~~the price it receives for its oil and gas production, the performance of the economy, the availability of adequate materials, skilled employees and managers and the activities of our competition.

·Management ~~provide~~Employment ~~superior customer service,~~Contracts

·The ~~respond~~Company recently executed amended employment agreements with its four primary officers: Stuart G. Hagler, David May, Wilber A. Westmoreland and Derrick May. The employment agreements have a two (2) year term with automatic one year extensions beyond the original term. Compensation is broken down into a base monthly salary, monthly bonus and annual stock award. The agreements for Hagler, May and Westmoreland provide for a base salary of $15,000 per month and a monthly bonus calculated at six percent (6%) of the Company's operating income above $150,000 per month with a maximum monthly bonus of $30,000. The annual stock award can be either 200,000 or 100,000 shares depending on whether the officer has earned less than or more than an average of $20,000 per month for any contract year. The agreement for Derrick May calls for a base salary of $10,000 per month and a monthly bonus calculated at four percent (4%) of the Company's operating income above $150,000 per month with a maximum monthly bonus of $15,000. Derrick's annual stock award can be either 75,000 or 50,000 shares depending on whether the Derrick has earned less than or more than an average of $10,000 per month for any contract year. The employment agreements can be found at Annex B to ~~competitive~~our ~~developments~~Schedule 14C filed with the SEC on November 18, 2014.

·ITEM ~~appropriately~~1A ~~evaluate~~- ~~merger~~RISK ~~and acquisition opportunities, and~~FACTORS

·Described ~~attract,~~below ~~retain,~~are certain risks that we believe are applicable to our business and ~~motivate~~the ~~qualified~~oil ~~personnel~~and gas industry in which we operate. There may be additional risks that are not presently material or known. You should carefully consider each of the following risks and all other information set forth in this Annual Report on Form 10-K.

WeThe ~~may~~risks ~~not~~and beuncertainties ~~successful~~described inbelow ~~addressing~~are ~~all~~not orthe ~~some~~only ofones ~~these~~we face. Additional risks, and ~~our~~uncertainties, ~~failure~~other than those we describe below, that are not presently known to dous soor ~~could~~that ~~have~~we acurrently ~~material~~believe ~~adverse~~are ~~effect~~immaterial, onmay also impair our business operations. If any of the following risks occur, ~~prospects~~our business, financial condition, and results of operations could be harmed.

~~OUR~~RISKS ~~FUTURE~~RELATED ~~OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY DUE~~ TO ~~A VARIETY OF FACTORS, MANY OF WHICH ARE OUTSIDE~~ OUR ~~CONTROL.~~COMPANY

InWe ~~comparison~~do ~~with~~not ~~our~~intend ~~principal~~to ~~competitors,~~pay wedividends ~~are~~on aour ~~relatively~~common ~~young~~stock ~~company in the rapidly evolving~~ and, ~~highly~~consequently, ~~competitive~~your ~~Internet-based~~only ~~medical~~opportunity ~~claims~~to ~~processing~~achieve ~~industry. Our~~a ~~ability~~return toon ~~achieve~~your ~~operating~~investment ~~results~~is inif ~~this~~the ~~industry~~price ~~will~~of ~~depend~~our onstock ~~several~~appreciates. ~~factors, including:~~

·We do not plan to declare dividends on shares of our common stock in the foreseeable future. Additionally, our notes purchase agreement places certain restrictions on our ability to ~~satisfy~~pay ~~capital~~cash ~~requirements~~dividends. inConsequently, anyour only opportunity to achieve a return on your investment ~~climate~~in ~~that~~us ~~may~~will be ~~somewhat~~if ~~more~~the ~~reluctant~~market ~~generally~~price toof ~~invest~~our incommon ~~Internet~~stock ~~companies~~appreciates, which may not occur, and you sell your shares at a profit. There is no assurance that the price of our common stock will ever exceed the price that you pay.

· our ability to retain existing customers, attract new customers at a steady rate, and maintain customer satisfaction in an industry in which significant changes are occurring,

· our ability to introduce new sites, services and products,

· our ability to effectively develop, implement and reposition our products, services and marketing efforts,

· the effect of announcements or introductions of new sites, services, and products by our competitors in a rapidly evolving industry,

· price competition or price increases in our industry,

· our ability to upgrade and develop our systems and infrastructure in a timely and effective manner,

· the amount of traffic on our website,

· the occurrence of technical difficulties, system downtime, or Internet brownouts to which we are acutely sensitive insofar as our medical claims processing service is Internet-based,

· the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations, and infrastructure which cannot be predicted with any large degree of accuracy in light of the rapidly evolving nature of the medical claims processing industry,

· our ability to comply with existing and future government regulations such as HIPAA, and

· general economic conditions and economic conditions specific to the Internet, electronic commerce, and the medical claims processing industry.

If we are unable to handle or satisfactorily respond to these factors, we may be unable to achieve the operating results we aim to achieve and the market price of our common stock would likely be materially adversely affected.

~~OUR~~Future ~~MARKETING~~sales ~~STRATEGY~~of ~~HAS~~our ~~NOT~~common ~~BEEN~~stock ~~SUFFICIENTLY~~in ~~TESTED~~the ~~AND~~public ~~MAY~~market ~~NOT~~could ~~RESULT~~lower INour ~~SUCCESS~~stock price, and any additional capital raised by us through the sale of equity or convertible securities will dilute your ownership in us.

ToWe ~~penetrate~~may ~~our~~sell ~~target~~shares ~~market,~~of wecommon ~~will~~stock ~~have~~in topublic ~~exert~~offerings ~~significant~~or ~~efforts~~otherwise ~~and~~issue ~~devote~~additional ~~material~~shares ~~resources~~of tocommon ~~create~~stock ~~awareness~~or ofconvertible ~~and~~securities. ~~demand~~We ~~for~~have ~~our~~filed ~~products~~a ~~and~~registration ~~services. We~~statement ~~may~~with ~~never~~the ~~experience~~SEC ~~material~~on ~~sales~~Form S-8 providing for the registration of 5,000,000 shares of our ~~products~~common ~~and~~stock ~~services. Our~~reserved ~~strategy~~for ~~may~~issuance ~~never~~under beour ~~successful~~2013 ~~and~~stock weincentive ~~may~~plan ~~never~~which ~~have~~was ~~adequate~~approved ~~resources~~by toour ~~support~~stockholders. ~~direct~~Subject ~~marketing~~to the satisfaction of ~~our~~vesting ~~products~~conditions and ~~services. Our~~restrictions ~~failure~~applicable to ~~develop~~our affiliates under Rule 144 under the Securities Act shares registered under our ~~marketing~~registration ~~capabilities,~~statement ~~successfully~~on Form S-8 will be available for resale immediately in the public market without restriction. We cannot predict the size of future issuances of our ~~products~~common stock or ~~services~~the effect, orif ~~recover~~any, ~~the~~that ~~cost~~future issuances and sales of shares of our ~~services~~common ~~would~~stock will have aon ~~material~~the ~~adverse~~market ~~effect~~price onof our ~~business,~~common ~~prospects~~stock. Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), ~~financial~~or ~~condition~~the perception that such sales could occur, ~~and~~may ~~results~~adversely affect prevailing market prices of ~~operations~~our common stock.

IFWe WEhave ~~ARE~~a ~~UNABLE~~significant TOamount ~~UPGRADE~~of ~~OUR~~debt ~~SYSTEMS,~~that ASrequires WEa ~~BELIEVE~~significant ISamount ~~CURRENTLY~~of ~~REQUIRED,~~our WEcash ~~MAY~~flow BEto ~~UNABLE~~service TOas ~~PROCESS~~our ANassets ~~INCREASED~~are ~~VOLUME~~highly OFleveraged ~~CLAIMS~~any ORdefault ~~MAINTAIN~~of ~~COMPLIANCE~~our ~~WITH~~indebtedness ~~REGULATORY~~could ~~REQUIREMENTS~~result in the loss of all or a significant portion of our producing assets.

AWe ~~key~~currently ~~element~~have oflong ~~our~~term ~~strategy~~liabilities isin tothe ~~generate~~form ~~a high volume~~ of ~~traffic~~bank ~~on,~~debt ~~and~~in ~~use~~the amount of $15,750,000 ~~our~~which ~~website~~requires ~~and~~a ~~processing~~monthly ~~system. We~~debt ~~are~~service ~~currently~~payment ~~processing~~of ~~less~~roughly ~~than~~$61,000 ~~10 million medical claims~~ per ~~year~~month inwhich anuses ~~industry~~a ~~that~~significant ~~processes~~amount ~~approximately 4.7 billion claims annually. If the volume~~ of ~~traffic on~~ our ~~website~~non-payroll orcash ~~the~~and ~~number~~is ofsecured ~~claims submitted~~ by ~~customers~~our ~~substantially~~producing ~~increases,~~well asassets. weOur ~~hope~~monthly ~~to achieve~~revenues, wewhile ~~will~~currently ~~have~~sufficient to ~~expand~~meet ~~and further upgrade~~ our ~~technology~~debt service, ~~claims~~do ~~processing~~not ~~systems,~~provide ~~and~~adequate ~~network~~cash ~~infrastructure~~ to ~~accommodate~~allow ~~these~~us ~~increases~~to orgrow our ~~systems~~Company ~~may~~or ~~suffer~~provide ~~from~~a ~~unanticipated~~significant ~~system~~cushion ~~disruptions, slower response times, degradation~~ in ~~levels~~the ofevent ~~customer~~our ~~service,~~revenues ~~impaired~~should ~~quality~~decrease. ~~and~~Any ~~speed~~default of ~~claims~~our ~~processing,~~indebtedness ~~and~~could ~~delays~~result in ~~reporting~~our ~~accurate~~creditors ~~financial~~foreclosing ~~information,~~on ~~all of which will cause~~ our ~~customers~~producing towell ~~suffer~~assets bywhich ~~receiving~~would ~~payments~~result ~~later~~in ~~than~~the ~~otherwise.~~Company Weseeking ~~operate~~protection inunder anthe ~~industry~~bankruptcy ~~that~~laws isor ~~undergoing~~ceasing ~~change~~as ~~due~~a togoing ~~increasing~~concern. ~~regulatory~~We ~~requirements,~~have ~~some~~entered ofinto ~~which~~a ~~require~~forbearance usagreement toregarding ~~upgrade~~ our ~~systems. We~~outstanding ~~may~~debt bethat ~~unable~~forgives toany ~~effectively~~existing ~~upgrade~~or ~~and~~anticipated ~~expand~~events ~~our~~of ~~claims~~default ~~processing~~under ~~system~~the orloan toagreement ~~integrate~~until ~~smoothly~~April ~~any~~6, ~~newly~~2015 ~~developed~~as orfiled ~~purchased modules~~ with ~~our~~the ~~existing~~SEC ~~systems,~~in ~~which could have~~ a ~~material~~Form ~~adverse~~8-K ~~effect~~ on ~~our~~February ~~business~~20, ~~prospects, financial condition, and results of operations~~2015.

~~BECAUSE~~We WErely ~~DEPEND~~heavily ~~UPON~~upon ~~ONLY~~our ~~TWO~~executive ~~SITES~~officers ~~FOR~~and ~~OUR~~have ~~COMPUTER~~very ~~SYSTEMS~~limited WEaccounting ~~ARE~~and ~~VULNERABLE~~financial ~~TO THE EFFECTS OF NATURAL DISASTERS, COMPUTER VIRUSES, AND SIMILAR DISRUPTIONS~~staff.

~~Our~~We ~~ability~~have toa ~~successfully~~reliance ~~receive~~upon ~~and~~our ~~process~~executive ~~claims~~officers ~~and~~to ~~provide~~perform ~~high-quality~~all ~~customer~~of ~~service largely depends on~~ the ~~efficient~~duties ~~and uninterrupted operation~~ of ~~our computer and communications hardware systems. Our proprietary software serving~~ the ~~majority of our customers currently resides solely on our servers, most of which are currently located in a monitored server facility in Dallas, Texas~~business. Our ~~systems~~accounting and ~~operations~~financial ~~are~~staff inis avery ~~secured facility with hospital-grade electrical power~~limited, ~~redundant~~which telecommunications connections to the Internet backbone, uninterruptible power supplies, and generator back-up power facilities. Furthermore, we maintain copies of our system and backup copies of our data at off-site locations for backup and disaster recovery. Despite such safeguards, we remain vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, break-ins, tornadoes, earthquake, terrorist attacks, and similar events. In addition, we may ~~not,~~hinder ~~and may not in the future, carry sufficient business interruption insurance to compensate us for losses that may occur. Despite~~ our ~~implementation~~ability ~~of network security measures, our servers may be vulnerable~~ to ~~computer~~conduct viruses, physical or electronic break-ins, and similar disruptions, which could lead to interruptions, delays, loss of data, or the inability to accept and process customer claims. The occurrence of any of these events could have a material adverse effect on our business, ~~prospects, financial condition, and results of operations~~efficiently.

WEOur ~~RELY~~amended ONand ~~INTERNALLY~~restated ~~DEVELOPED~~certificate ~~ADMINISTRATIVE~~of ~~SYSTEMS~~incorporation ~~THAT~~and ~~ARE~~amended ~~INEFFICIENT~~and restated bylaws and Delaware law contain provisions that could discourage acquisition bids or merger proposals, ~~WHICH~~which ~~MAY~~may ~~PUT~~adversely USaffect ATthe Amarket ~~COMPETITIVE~~price ~~DISADVANTAGE~~of our common stock.

~~Some~~Our ofamended ~~the~~and ~~systems~~restated ~~and~~certificate ~~processes~~of ~~used~~incorporation byauthorizes our ~~business~~board ~~office~~of directors to ~~prepare~~issue ~~information~~preferred ~~for~~stock ~~financial,~~without ~~accounting,~~stockholder ~~billing,~~approval. ~~and~~If ~~reporting~~our ~~may~~board beof ~~less~~directors ~~efficient~~elects ~~than~~to ~~our~~issue ~~competitors.~~preferred ~~These~~stock, ~~inefficiencies~~it ~~may~~could ~~place~~be usmore atdifficult for a ~~competitive~~third ~~disadvantage~~party ~~when compared~~ to ~~competitors~~acquire ~~with more efficient systems~~us. WeIn ~~intend~~addition, tosome ~~continue~~provisions of our ~~ongoing~~amended ~~efforts to upgrade~~ and ~~expand~~restated ~~our~~certificate ~~administrative~~of ~~systems~~incorporation and toamended ~~integrate~~and ~~newly-developed~~restated ~~and~~bylaws ~~purchased~~could ~~modules~~make ~~with~~it ~~our~~more ~~existing~~difficult ~~systems~~for ina ~~order~~third party to ~~improve~~acquire ~~the~~control ~~efficiency~~ of ~~our reporting methods~~us, ~~although~~even weif ~~are~~the ~~unable~~change toof ~~predict~~control ifwould orbe ~~when~~beneficial ~~these~~to ~~upgrades~~and ~~will~~desirable ~~improve~~by our ~~competitive~~stockholders, ~~position~~including: ~~or whether we will have sufficient resources to implement these upgrades.~~

●

a classified board of directors, so that only approximately one-third of our directors are elected each year;

●

limitations on the removal of directors;

●

limitations on the ability of our stockholders to call special meetings; and

●

advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders.

Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from engaging in business combination transactions with us.

Our Board of Directors does not contain a majority of independent members and we do not have an Audit Committee. Good corporate governance practices call for the inclusion of independent members of our Board of Directors. Independent Board Directors act as a check on management and can assure that it acts in the best interests of all of our Company’s stakeholders. With our lack of independent Board members, we run a higher risk that our management could make subjective decisions without benefit of more measured independent guidance, rather than for the benefit of all of our shareholders. An independent Audit Committee qualitatively enhances a company’s internal controls over financial reporting. Among its functions, independent Audit Committees review the financial reporting, internal controls safeguarding Company assets, interact with auditors, may oversee material financial decisions and provide a sounding board for individuals who believe that there are irregularities in a Company’s accounting policies and procedures. With our lack of an Audit Committee at this time, we run a greater risk that a significant error or irregularity could occur that could be materially damaging to our shareholders.

WERISKS ~~HAVE~~RELATED ~~LIMITED SENIOR MANAGEMENT RESOURCES, AND WE NEED~~ TO ~~ATTRACT AND RETAIN HIGHLY SKILLED PERSONNEL; WE MAY BE UNABLE TO EFFECTIVELY MANAGE GROWTH WITH~~ OUR ~~LIMITED RESOURCES.~~BUSINESS

Our ~~senior~~exploration ~~management~~appraisal ~~currently consists of Don Crosbie, our Chief Executive Officer,~~ and ~~Laura~~development ~~Bray,~~activities ~~our~~are ~~Chief~~subject ~~Financial Officer. We have limited staff, requiring employees~~ to ~~handle~~many arisks ~~large~~which ~~and~~may ~~diverse~~affect ~~amount of responsibility. Expansion of~~ our business would place a significant additional strain on our limited managerial, operational, and financial resources. In such event, we will be required to expand our operational and financial systems and to expand, train, and manage our work force in order to manage the expansion of our operations. Our failure to fully integrate our new employees into our operations could have a material adverse effect on our business, prospects, financial condition, and results of operations. Our ability to ~~attract~~profitably ~~and~~extract ~~retain~~oil ~~highly~~reserves ~~skilled~~or ~~personnel~~achieve istargeted ~~critical to our operations and expansion~~returns. WeIn ~~face competition for these types of personnel from other technology companies and more established organizations~~addition, ~~many~~continued ofgrowth ~~which~~requires ~~have~~that ~~significantly larger operations and greater financial, marketing, human, and other resources than~~ we ~~have.~~acquire ~~We may not be successful in attracting~~ and ~~retaining~~successfully ~~qualified~~develop ~~personnel~~additional onoil ~~a timely basis, on competitive terms, or at all~~reserves. ~~If we are not successful in attracting and retaining these personnel, our business, prospects, financial condition, and results of operations will be materially adversely affected.~~

~~BECAUSE~~Oil OFand ~~THEIR~~gas ~~SPECIALIZED~~exploration ~~KNOWLEDGE~~may OFinvolve ~~OUR~~unprofitable ~~PROPRIETARY~~efforts, ~~TECHNOLOGY~~not ~~AND~~only ~~THE~~from ~~MEDICAL~~dry ~~CLAIMS~~wells, ~~PROCESSING~~but ~~INDUSTRY~~from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, WEoperating ~~DEPEND~~and ~~UPON~~other ~~OUR~~costs. ~~SENIOR~~Completion ~~MANAGEMENT~~of ~~AND~~a ~~CERTAIN~~well ~~KEY~~does ~~PERSONNEL;~~not ~~THE~~assure ~~LOSS~~a ORprofit ~~UNAVAILABILITY~~on OFthe ~~ANY~~investment OFor ~~THEM~~recovery ~~COULD~~of ~~PUT~~drilling, UScompletion ATand Aoperating ~~COMPETITIVE~~costs. ~~DISADVANTAGE;~~In ~~OUR~~addition, ~~LIMITED~~drilling ~~RESOURCES~~hazards ~~WILL~~or ~~ADVERSELY~~environmental ~~AFFECT~~damage ~~OUR~~could ~~ABILITY~~greatly TOincrease ~~HIRE~~the ~~ADDITIONAL~~cost ~~MANAGEMENT~~of ~~PERSONNEL~~operations, and various field operating conditions may negatively affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions. While diligent well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and can be expected to negatively affect revenue and cash flow levels to varying degrees.

WeOur ~~currently~~Future ~~depend~~Success ~~upon~~Depends ~~the~~Upon ~~efforts~~Our ~~and~~Ability ~~abilities~~To ~~of our senior executives and key employees~~Find, ~~currently~~Develop ~~comprised~~And ofAcquire ~~Don~~Additional ~~Crosbie,~~Oil ~~our~~And ~~Chief~~Gas ~~Executive~~Reserves ~~Officer,~~That ~~Laura~~Are ~~Bray,~~Economically our Chief Financial Officer, Gary Austin, our Vice President of Operations, and Scott Spurlock, our Vice President of Development, each of whom has a distinctive body of knowledge regarding electronic claims submissions and related technologies, the medical claims processing industry and our servicesRecoverable. We may be unable to retain and motivate remaining personnel for an extended period of time in this environment. The additional loss or unavailability of the services of any senior management or such key personnel for any significant period of time could have a material adverse effect on our business, prospects, financial condition, and results of operations. We have not obtained key-person life insurance on any of our senior executives or key personnel. In addition, we do not have employment agreements with any of our senior executives or key personnel.

WEThe ~~MAY~~rate BEof ~~UNABLE~~production TOfrom ~~PROTECT~~oil ~~OUR~~and ~~INTELLECTUAL~~natural ~~PROPERTY~~gas ~~RIGHTS~~properties ~~AND~~declines WEas ~~MAY~~reserves BEare ~~LIABLE~~depleted. ~~FOR~~As ~~INFRINGING~~a ~~THE~~result, ~~INTELLECTUAL~~we ~~PROPERTY~~must ~~RIGHTS~~continually OFlocate ~~OTHERS~~and develop or acquire new oil and gas reserves to replace those being depleted by production. We must do this even during periods of low oil and gas prices when it is difficult to raise the capital necessary to finance activities. Without successful exploration or acquisition activities, our reserves and revenues will decline. A future increase in our reserves will depend not only on our ability to explore and develop any properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or prospects. We cannot guaranty that we will be able to continue to locate satisfactory properties for acquisition or participation. Moreover, if such acquisitions or participations are identified, we may determine that current markets, terms of acquisition and participation or pricing conditions make such acquisitions or participations economically disadvantageous. We cannot guaranty that commercial quantities of oil will be discovered or acquired by us.

~~Our~~Oil ~~business is based in large part upon the proprietary nature of our services~~ and ~~technologies. Accordingly,~~Gas ~~our~~Drilling ~~ability~~Is toA compete effectively will depend on our ability to maintain the proprietary nature of these services and technologies, including our proprietary software and the proprietary software of others with which we have entered into software licensing agreements. We hold no patents and rely on a combination of trade secrets and copyright laws, nondisclosure, and other contractual agreements and technical measures to protect our rights in our technological knowHigh-~~how~~Risk ~~and proprietary services~~Activity. In addition, we have been advised that trademark and service mark protection of our corporate name is not available. We depend upon confidentiality agreements with our officers, directors, employees, consultants, and subcontractors to maintain the proprietary nature of our technology. These measures may not afford us sufficient or complete protection, and others may independently develop know-how and services similar to ours, otherwise avoid our confidentiality agreements, or produce patents and copyrights that would materially and adversely affect our business, prospects, financial condition, and results of operations. We believe that our services are not subject to any infringement actions based upon the patents or copyrights of any third parties; however, our know-how and technology may in the future be found to infringe upon the rights of others. Others may assert infringement claims against us, and if we should be found to infringe upon their patents or copyrights, or otherwise impermissibly utilize their intellectual property, our ability to continue to use our technology could be materially restricted or prohibited. If this event occurs, we may be required to obtain licenses from the holders of their intellectual property, enter into royalty agreements, or redesign our products so as not to utilize their intellectual property, each of which may prove to be uneconomical or otherwise impossible. Licenses or royalty agreements required in order for us to use this technology may not be available on terms acceptable to us, or at all. These claims could result in litigation, which could materially adversely affect our business, prospects, financial condition, and results of operations.

~~BECAUSE~~Our WEfuture ~~ARE~~success ~~NOT~~will ~~CURRENTLY~~depend ~~PAYING~~on ~~CASH~~the ~~DIVIDENDS~~success of our drilling programs. In addition to the numerous operating risks described in more detail below, ~~INVESTORS~~these ~~WILL~~activities ~~LIKELY~~involve ~~HAVE~~the TOrisk ~~SELL~~that ~~OUR~~no ~~SHARES~~commercially INproductive ~~ORDER~~oil TOor ~~REALIZE~~gas ~~THEIR~~reservoirs ~~INVESTMENT~~will be discovered. In addition, we are often uncertain as to the future cost or timing of drilling, completing and producing wells. Furthermore, our drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including, but not limited to, the following:

~~Whether~~● weunexpected ~~pay~~drilling cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, and any other factor that the board of directors decides is relevant. In view of our losses and substantial financial requirements, we will not be in a position to pay cash dividends at any time in the reasonable future. Holders of our common stock may have to sell all or a part of their shares in order to recover all or a part of their investment.conditions;

●

pressure or irregularities in formations;

●

equipment failures or accidents;

●

adverse weather conditions;

●

inability to comply with governmental requirements; and

●

shortage or delays in the availability of drilling rigs and the delivery of equipment.

If we experience any of these problems, our ability to conduct operations could be adversely affected.

Factors Beyond Our Control Affect Our Ability To Market Oil And Gas.

Our ability to market oil and gas from our wells depends upon numerous factors beyond our control. These factors include, but are not limited to, the following:

●

the level of domestic production and imports of oil and gas;

●

the proximity of gas production to gas pipelines;

●

the availability of pipeline capacity;

●

the demand for oil and gas by utilities and other end users;

●

the availability of alternate fuel sources;

●

the effect of inclement weather;

●

state and federal regulation of oil and gas marketing; and

●

federal regulation of gas sold or transported in interstate commerce.

WEIf ~~HAVE~~these Afactors ~~LIMITED~~were ~~NUMBER~~to OFchange ~~SHARES~~dramatically, OFour ~~OUR~~ability ~~COMMON~~to ~~STOCK~~market ~~REMAINING~~oil ~~AVAILABLE~~and ~~FOR~~gas ~~ISSUANCE~~or obtain favorable prices for our oil and gas could be adversely affected.

~~Although~~The ~~our~~Marketability ~~articles~~Of ofOur ~~incorporation~~Production ~~authorize~~May ~~the~~Be ~~issuance~~Dependent ofUpon ~~40,000,000~~Transportation ~~shares~~Facilities ofOver ~~common~~Which ~~stock,~~We weHave ~~have~~No ~~issued or reserved for issuance a total of 39,056,196 shares~~Control. To the extent we need to sell common stock to raise capital or desire to issue common stock for any other reason, such as a merger, acquisition, or settlement of debt, we may not have a sufficient quantity of common stock to do so. In this event, we may be forced to abandon such plans or consider utilizing preferred stock or debt securities, among other things, or seek approval of our stockholders to amend our certificate of incorporation to increase the number of shares of common stock authorized for issuance.

~~SOME~~The ~~PROVISIONS~~marketability OFof ~~OUR~~our ~~CERTIFICATE~~production OFdepends ~~INCORPORATION~~in ~~AND~~part ~~BY-LAWS~~upon ~~MAY~~the ~~DETER~~availability, ~~OUR~~proximity, ~~ACQUISITION~~and capacity of pipelines, natural gas gathering systems and processing facilities. Any significant change in market factors affecting these infrastructure facilities could harm our business. We deliver some of our oil and natural gas through gathering systems and pipelines that we do not own. These facilities may not be available to us in the future.

AThe ~~number~~Majority ofOf ~~provisions~~Our ofSales ~~our~~Are ~~certificate~~With ofA ~~incorporation,~~Limited asNumber ~~amended,~~Of ~~and Delaware law may be deemed to have an anti-takeover effect~~Purchasers. ~~Our~~The ~~certificate~~majority of ~~incorporation and by-laws provide that~~ our ~~board~~hydrocarbon ofsales ~~directors~~are isto ~~divided~~highly ~~into two classes serving staggered two-year terms~~regulated, ~~resulting~~well incapitalized ~~approximately one-half of the directors being elected each year and contain other provisions relating to voting and the removal of the officers and directors~~entities. The ~~Further,~~number ~~our by-laws contain provisions which regulate the introduction~~ of ~~business~~entities atthat ~~annual~~can ~~meetings~~purchase of our ~~stockholders~~products byare ~~other~~limited ~~than~~in the ~~board~~areas ofthey ~~directors.~~can Inservice ~~addition,~~due ~~we are subject~~ to ~~the~~significant ~~anti-takeover provisions of Section 203 of the Delaware General Corporation Law. In general~~capital, ~~this~~and ~~statute~~regulatory ~~prohibits~~requirements ato ~~publicly~~enter ~~held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after~~ the ~~date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner~~market.

InFor ~~addition,~~the ~~our~~years ~~certificate~~ended ofDecember ~~incorporation~~31, as2014 ~~amended~~and 2013, ~~authorizes~~revenues ~~our~~from ~~board~~the ofCompany’s ~~directors~~36 toand 44 ~~issue~~producing ~~up to 4~~leases,~~000,000~~ ~~shares of preferred stock~~respectively, ranged ~~which~~from ~~may~~approximately be0.1% ~~issued~~to in31.1% ~~one~~and or0.1% ~~more~~to ~~series~~11.8%, ~~the~~respectively, ~~terms~~ of ~~which~~total ~~may be determined at the time of issuance by the board of directors~~oil, ~~without~~natural ~~further action by stockholders~~gas, and ~~may~~related ~~include~~product ~~voting~~sales. ~~rights~~These ~~(including~~36 ~~the right to vote as a series on particular matters), preferences as to dividends~~ and ~~liquidation~~44, ~~conversion~~respectively, ~~and~~leases ~~redemption rights, and sinking fund provisions that~~ are ~~unfavorable~~located toin ~~the~~various ~~holders~~counties of ~~our outstanding securities~~Texas.

~~These~~For ~~anti-takeover~~the ~~provisions~~years ~~may~~ended ~~make~~December a31, ~~takeover~~2014 orand ~~change~~2013, inthe ~~control~~oil ~~of us more difficult~~ and ~~therefore~~natural ~~deprive~~gas ~~security~~produced ~~holders~~by ofthe ~~benefits~~Company ~~that~~is ~~could~~sold ~~result~~and ~~from~~marketed ~~such~~to 9 anand 11 ~~attempt~~purchasers, ~~such~~respectively. asAccordingly, the ~~realization~~Company’s ofentire aoil ~~premium~~and ~~over~~natural ~~the~~gas ~~market~~sales ~~price.~~receivable ~~Moreover,~~balance ~~the~~at ~~issuance~~December of31, ~~additional~~2014 ~~shares~~and of2013 ~~common~~was ~~stock~~comprised orof ~~preferred~~amounts ~~stock~~due tofrom ~~persons~~its 9 ~~friendly~~and to11, ~~the~~respectively, ~~board~~purchasers. ~~could~~Oil ~~make~~and itnatural ~~more~~gas ~~difficult~~sales toreceivable ~~remove~~are ~~incumbent~~included ~~management~~in ~~and~~the ~~directors~~accounts ~~from~~receivable, ~~office~~net ~~even~~on ifthe ~~such~~accompanying ~~change~~consolidated ~~were~~balance ~~to be favorable to security holders generally~~sheets.

~~ISSUANCE~~Third OFParty ~~NEW~~Credit ~~SERIES~~Risk. The OFCompany ~~PREFERRED~~is ~~STOCK~~or ~~COULD~~may ~~MATERIALLY~~be ~~ADVERSELY~~exposed ~~AFFECT~~to third ~~HOLDERS~~party OFcredit ~~COMMON~~risk ~~STOCK~~through ~~AND~~its ~~ANY~~contractual ~~EXPANSION~~arrangements ORwith ~~SALES~~its ~~OPPORTUNITIES~~current or future marketers of its petroleum and natural gas production and other parties. In the event such entities fail to meet their contractual obligations to the Company, such failures could have a material adverse effect on our cash flow from operations.

WeOil ~~may~~and benatural ~~required~~gas toprices ~~issue~~are ~~a new series of preferred stock for continued funding of operations~~volatile. If ~~so,~~A ~~our~~substantial ~~board~~decrease ofin ~~directors~~oil ~~has the right to create~~ and ~~issue,~~natural ~~without~~gas ~~stockholder~~prices approval, a new series of preferred stock with expansive rights regarding voting and liquidation preferences superior to owners of our common stock stockholders. Therefore, any issuance of preferred stock could ~~materially~~ adversely affect ~~the rights of holders of shares of~~ our ~~common~~financial ~~stock and reduce the value of our common stock~~results. In addition, specific rights granted to holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party. The ability of the board of directors to issue preferred stock could have the effect of rendering more difficult, delaying, discouraging, preventing, or rendering more costly an acquisition of us or a change in control of us, thereby preserving our control by the current stockholders.

~~INTERNET~~Our ~~SECURITY~~future ~~POSES~~financial ~~RISKS~~condition, TOresults ~~OUR~~of ~~ENTIRE~~operations ~~BUSINESS~~and the carrying value of our oil and natural gas properties depend primarily upon the prices we receive for our oil and natural gas production. Oil and natural gas prices historically have been volatile and likely will continue to be volatile in the future, especially given world geopolitical conditions. Our cash flow from operations is highly dependent on the prices that we receive for oil and natural gas. This price volatility also affects the amount of our cash flow available for capital expenditures and our ability to borrow money or raise additional capital. The amount we can borrow or have outstanding under or bank credit facility is subject to semiannual redeterminations. Oil prices are likely to affect us more than natural gas prices because approximately 70% of our proved reserves are oil. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include:

~~The~~● ~~electronic submission of healthcare claims and other electronic healthcare transaction processing services by means of our proprietary software involves~~ the ~~transmission~~level ~~and analysis~~ of ~~confidential~~consumer ~~and~~demand ~~proprietary~~for ~~information~~oil ~~of the patient, the healthcare provider, or both, as well as our own confidential~~ and ~~proprietary~~natural information. The compromise of our security or misappropriation of proprietary information could have a material adverse effect on our business, prospects, financial condition, and results of operations. We rely on encryption and authentication technology licensed from other companies to provide the security and authentication necessary to effect secure Internet transmission of confidential information, such as medical information. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the technology used by us to protect customer transaction data. Anyone who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against security breaches or to minimize problems caused by security breaches. Concerns over the security of the Internet and other online transactions and the privacy of users may also inhibit the growth of the Internet and other online services generally, and the website in particular, especially as a means of conducting commercial transactions. To the extent that our activities or the activities of others involve the storage and transmission of proprietary information, such as diagnostic and treatment data, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. Our security measures may not prevent security breaches. Our failure to prevent these security breaches may have a material adverse effect on our business, prospects, financial condition, and results of operations.gas;

●

the domestic and foreign supply of oil and natural gas;

●

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

●

the price of foreign oil and natural gas;

●

domestic governmental regulations and taxes;

●

the price and availability of alternative fuel sources;

●

weather conditions, including hurricanes and tropical storms in and around the Gulf of Mexico;

●

market uncertainty;

●

political conditions in oil and natural gas producing regions, including the Middle East; and

●

worldwide economic conditions.

WEThese ~~WILL~~factors ~~ONLY~~and BEthe ~~ABLE~~volatility TOof ~~EXECUTE~~the ~~OUR~~energy ~~BUSINESS~~markets ~~PLAN~~generally IFmake ~~ELECTRONIC~~it ~~COMMERCE~~extremely ~~CONTINUES~~difficult TOto ~~GROW~~predict ~~GENERALLY~~future ~~AND~~oil ~~SPECIFICALLY~~and INnatural ~~THE~~gas ~~HEALTH~~price ~~CARE~~movements ~~INDUSTRY~~with any certainty. Also, oil and natural gas prices do not necessarily move in tandem. Declines in oil and natural gas prices would not only reduce revenue, but could reduce the amount of oil and natural gas that we can produce economically and, as a result, could have a material adverse effect upon our financial condition, results of operations, oil and natural gas reserves and the carrying values of our oil and natural gas properties. If the oil and natural gas industry experiences significant price declines, we may, among other things, be unable to meet our financial obligations or make planned expenditures.

~~The~~Significant ~~public~~capital inexpenditures ~~general,~~are and the healthcare industry in particular, may not accept the Internet and other online services as a viable commercial marketplace for a number of reasons, including potentially inadequate development of the necessary network infrastructure or delayed development of enabling technologies and performance improvements. To the extent that the Internet and other online “business to business” services continue to experience significant growth in the number of users, their frequency of use, or in their bandwidth requirements, the infrastructure for the Internet and online services may be unable to support the demands placed upon them. In addition, the Internet or other online services could lose their viability due to delays in the development or adoption of new standards and protocols required to ~~handle~~conduct increased levels of Internet activity, or due to increased governmental regulation. Changes in or insufficient availability of, telecommunications services to support the Internet or other online services also could result in slower response times and adversely affect usage of the Internet and other online services generally and our product and services in particular. If use of the Internet and other online services does not continue to grow or grows more slowly than we expect, if the infrastructure for the Internet and other online services does not effectively support the growth that may occur, or if the Internet and other online services do not become a viable commercial marketplace, our business~~, prospects, financial condition, and results of operations could be materially adversely affected~~.

WEThe ~~MAY~~development ~~NOT~~of BEour ~~ABLE~~business TOand ~~ADAPT~~operations, ASexcluding ~~THE~~acquisition ~~INTERNET~~activities, ~~ELECTRONIC~~requires ~~COMMERCE~~substantial capital expenditures. We will fund our capital expenditures through a combination of cash flows from operations and borrowings under our bank credit facilities and, ~~AND~~to ~~CUSTOMER~~the ~~DEMANDS~~extent ~~CONTINUE~~those TOsources ~~EVOLVE~~are not sufficient, we may fund capital expenditures from the proceeds of debt and equity issuances. Future cash flows from operations are subject to a number of risks and variables, such as the level of production of our customers, prices of natural gas and oil, and the other risk factors discussed herein. Our ability to obtain capital from other sources, such as the Markets, is dependent upon many of those same factors as well as the orderly functioning of credit and Markets. To the extent we fail to have adequate funds, we could be required to reduce our capital spending, or pursue other funding alternatives, which in turn could adversely affect our business and results of operations.

~~The~~We ~~Internet~~Face ~~and~~Strong ~~the~~Competition ~~medical~~From ~~claims~~Other ~~processing~~Energy ~~industry~~Companies ~~are~~That ~~characterized~~May ~~by:~~Negatively Affect Our Ability To Carry On Operations.

·We ~~rapid~~operate ~~technological~~in ~~change~~the highly competitive areas of oil and gas exploration, development and production. Factors that affect our ability to successfully compete in the marketplace include, but are not limited to, the following:

·● ~~changes~~the inavailability ~~user~~of funds and ~~customer~~information ~~requirements~~relating ~~and~~to ~~preferences,~~a property;

·● ~~changes~~the instandards ~~federal~~established ~~legislation~~by ~~and~~us ~~regulation,~~for the minimum projected return on investment;

·● ~~frequent~~the ~~new~~availability ~~product~~of ~~and~~alternate ~~service~~fuel ~~introductions~~sources; ~~embodying new technologies,~~ and

·● the ~~emergence~~intermediate transportation of ~~new industry standards and practices that could render our existing website and proprietary technology and systems obsolete~~gas.

Our ~~success~~competitors ~~will~~include ~~depend~~major integrated oil companies, insubstantial ~~part~~independent energy companies, onaffiliates ~~our~~of ~~ability~~major ~~to:~~interstate and intrastate pipelines and national and local gas gatherers. Many of these competitors possess greater financial and other resources than we do.

·The ~~enhance~~inability ~~and~~to ~~improve~~control ~~the~~other ~~responsiveness~~associated ~~and~~entities ~~functionality~~could ofadversely affect our ~~online claims processing services,~~business.

·To ~~license~~the ~~leading~~extent ~~technologies~~that ~~useful~~we indo not operate all of our properties, our success depends in part upon operations on certain properties in which we may have an interest along with other business ~~and~~entities. Because we have no control over such entities, we are able to ~~enhance~~neither ~~our~~direct ~~existing~~their ~~services~~operations, nor ensure that their operations on our behalf will be completed in a timely and efficient manner. Any delay in such business entities’ operations could adversely affect our operations.

·There ~~comply~~Are ~~with~~Risks ~~all~~In ~~applicable~~Acquiring ~~regulations~~Producing ~~regarding our industry and the Internet,~~Properties.

·We ~~develop~~constantly ~~new~~evaluate ~~services~~opportunities to acquire oil and ~~technology~~natural ~~that~~gas ~~address~~properties ~~the~~and ~~increasingly~~frequently ~~sophisticated~~engage in bidding and ~~varied~~negotiating ~~needs~~for ofthese acquisitions. If successful in this process, we may alter or increase our ~~prospective~~capitalization through the issuance of additional debt or ~~current~~equity ~~customers~~securities, ~~and~~the sale of production payments or other measures. Any change in capitalization affects our risk profile.

·A ~~respond~~change toin ~~technological~~capitalization, ~~advances~~however, ~~and~~is ~~emerging~~not ~~industry~~the ~~standards~~only ~~and~~way ~~practices~~acquisitions onaffect aour ~~cost-effective~~risk ~~and~~profile. ~~timely~~Acquisitions ~~basis~~may alter the nature of our business. This could occur when the character of acquired properties is substantially different from our existing properties in terms of operating or geologic characteristics.

The development of our website and other proprietary technology will involve significant technical and business risks and require material financial commitment. We may not be able to adapt successfully to such demands. Our failure to respond in a timely manner to changing market conditions or customer requirements could have a material adverse effect on our business, prospects, financial condition, and results of operations.

WEOperating ~~HAVE~~Hazards ~~NOT~~May ~~SUCCESSFULLY~~Adversely ~~COMPETED~~Affect ~~AND~~Our ~~MAY~~Ability ~~NOT~~To BEConduct ~~ABLE TO COMPETE EFFECTIVELY IN OUR INDUSTRY~~Business.

~~Based~~Our onoperations ~~total~~are ~~assets~~subject ~~and~~to ~~annual~~risks ~~revenues~~inherent ~~for~~in the ~~fiscal~~oil ~~year~~and ~~ended~~gas ~~in 2012~~industry, weincluding ~~are~~but ~~significantly smaller than the majority of our national competitors. We have~~ not ~~successfully~~limited ~~competed~~to ~~and may not in~~ the ~~future successfully compete in any market in which we conduct or may conduct operations.~~following:

~~REGULATORY~~● ~~AND LEGAL UNCERTAINTIES COULD HARM OUR BUSINESS.~~blowouts;

We● are not currently subject to direct regulation by any government agency other than laws or regulations applicable to electronic commerce, but we process information which, by law, must remain confidential. The U.S. Centers for Medicare and Medicaid Services (formerly HCFA) has defined security requirements for Internet communications including healthcare data. We must operate in compliance in all material respects with these requirements. Due to the increasing popularity and use of the Internet and other online services, federal, state, and local governments may adopt laws and regulations, or amend existing laws and regulations, with respect to the Internet or other online services covering issues such as user privacy, pricing, content, copyrights, distribution, and characteristics and quality of products and services. Furthermore, the growth and development of the market for electronic commerce may prompt calls for more stringent consumer protection laws to impose additional burdens on companies conducting business online. The adoption of any additional laws or regulations may decrease the growth of the Internet or other online services, which could, in turn, decrease the demand for our services and increase our cost of doing business, or otherwise have a material adverse effect on our business, prospects, financial condition, and results of operations. Moreover, the relevant governmental authorities have not resolved the applicability to the Internet and other online services of existing laws in various jurisdictions governing issues such as property ownership and personal privacy, and it may take time to resolve these issues definitively. Any new legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and other online services could have a material adverse effect on our business, prospects, financial condition, and results of operations.cratering;

~~THE~~● ~~MARKET PRICE FOR OUR COMMON STOCK MAY BE HIGHLY VOLATILE.~~explosions;

~~The~~● ~~market~~uncontrollable ~~price~~flows of ~~our common stock has experienced~~oil, ~~and~~gas ~~may continue to experience, significant volatility. Our operating results, announcements by us~~ or ~~our~~well competitors regarding acquisitions or dispositions, new procedures or technology, changes in general conditions in the economy, and general market conditions have caused and could in the future cause the market price of our common stock to fluctuate substantially. The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies’ common stock and have often been unrelated to the operating performance of these companies. There are many days on which there are no trades or a low volume of trades of our common stock and the lack of trading volume may contribute to the volatility of the market price of our common stock.fluids;

~~OUR~~● ~~COMMON STOCK TRADES ON THE OTC BULLETIN BOARD~~fires; ~~OUR COMMON STOCK IS SUBJECT TO “PENNY STOCK” RULES.~~

~~Since~~● ~~the~~pollution; opening of trading on March 6, 2002, our common stock has been trading in the over-the-counter market on the OTC Bulletin Board (“OTCBB”) established for securities that do not meet the Nasdaq Capital Market listing requirements. As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, our shares.and

As● a result and based on the fact that our common stock trades below $5.00 per share, our common stock is subject to the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell these securities to persons other ~~than~~environmental ~~established customers as defined under applicable rules and institutional accredited investors~~risks. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase, and must have received the purchaser’s written consent to the transaction prior to sale. As a result, the ability of broker-dealers to sell our common stock and the ability of purchasers of our stock to sell their shares in the secondary market is materially adversely affected.

~~FUTURE~~These ~~SALES~~risks OFcould ~~COMMON~~result ~~STOCK~~in BYsubstantial ~~OUR~~losses ~~EXISTING~~to ~~STOCKHOLDERS~~us ~~COULD~~from ~~ADVERSELY~~injury ~~AFFECT~~and ~~OUR~~loss ~~STOCK~~of ~~PRICE~~life, damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. Governmental regulations may impose liability for pollution damage or result in the interruption or termination of operations.

~~The~~Losses ~~market~~and ~~price~~liabilities offrom ~~our~~uninsured ~~common~~or ~~stock~~underinsured ~~could~~drilling ~~decline~~and asoperating aactivities ~~result~~could ofhave ~~sales of~~ a ~~large~~material ~~number~~adverse ofeffect ~~shares~~on of our ~~common~~financial ~~stock~~condition ~~in the market, or the perception that these sales could occur. These sales also might make it more difficult for us to sell equity securities in the future at a time~~ and ~~at a price that we deem appropriate~~operations.

Although we intend to maintain several types of insurance to cover our operations, we may not be able to maintain adequate insurance in the future at rates we consider reasonable, or losses may exceed the maximum limits under our insurance policies. If a significant event that is not fully insured or indemnified occurs, it could materially affect our financial condition and results of operations.

Compliance with environmental and other government regulations could be costly and could negatively impact production.

Our operations are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Without limiting the generality of the foregoing, these laws and regulations may:

●

require the acquisition of a permit before drilling commences;

●

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

●

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

●

require remedial measures to mitigate pollution from former operations, such as plugging abandoned wells; and

●

impose substantial liabilities for pollution resulting from our operations.

The recent trend toward stricter standards in environmental legislation and regulation is likely to continue. The enactment of stricter legislation or the adoption of stricter regulation could have a significant impact on our operating costs, as well as on the oil and gas industry in general.

Our operations could result in liability for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages. We could also be liable for environmental damages caused by previous property owners. As a result, substantial liabilities to third parties or governmental entities may be incurred which could have a material adverse effect on our financial condition and results of operations. We maintain insurance coverage for our operations, but we do not believe that insurance coverage for environmental damages that occur over time or complete coverage for sudden and accidental environmental damages is available at a reasonable cost. Accordingly, we may be subject to liability or may lose the privilege to continue exploration or production activities upon substantial portions of our properties if certain environmental damages occur.

AsOur ofoperations February 26, 2013, we had outstanding 35,644,696 shares of common stock, of which approximately 22,854,856 shares were "restricted securities" as that term is defined under Rule 144 promulgated under the Securities Act of 1933, as amended. These restricted shares are ~~eligible~~subject ~~for sale under Rule 144 at various times. We have entered into registration rights agreements currently requiring us~~ to ~~register~~United ~~the~~States ~~resale of approximately 3~~federal,~~411,500~~ ~~shares~~state ofand ~~our~~local ~~common~~laws ~~stock, including shares of common stock issuable upon the exercise of warrants~~ and ~~options.~~regulations Norelating ~~prediction can be made as~~ to ~~the effect~~health, ~~if any~~safety, ~~that~~transportation ~~sales~~and ofprotection ~~shares~~ of ~~common~~natural ~~stock~~resources orand the ~~availability~~environment, ofincluding ~~such~~those ~~shares~~relating ~~for sale will have on the market prices of our common stock prevailing from time~~ to ~~time.~~waste ~~Nevertheless,~~management ~~the~~and ~~possibility~~transportation ~~that~~and ~~substantial~~disposal ~~amounts~~ of ~~our~~salt-water ~~common stock may be sold in the public market may adversely affect prevailing market prices for the common stock~~ and ~~could~~other ~~impair our ability to raise capital through the sale of our equity securities~~materials.

~~CAUTIONARY~~For ~~NOTES~~example, ~~REGARDING~~we ~~THE~~are ~~FORWARD-LOOKING~~subject ~~STATEMENTS~~to environmental regulation relating to the operation of our wells, which can pose some risks of environmental liability, including leakage from the wells to surface or subsurface soils, surface water or groundwater. Liability under these laws and regulations could result in cancellation of well operations, fines and penalties, expenditures for remediation, and liability for property damage and personal injuries.

~~This~~Failure ~~report~~to ~~contains~~comply ~~forward-looking~~with ~~statements~~these ~~that~~laws ~~are~~and ~~based~~regulations oncould ~~our~~result ~~current~~in ~~expectations,~~the ~~assumptions~~assessment of significant administrative, ~~beliefs~~civil or criminal penalties, ~~estimates~~imposition of cleanup and ~~projections~~site ~~about~~restoration ~~our~~costs ~~company~~and liens, ~~our~~revocation ~~industry~~of permits, and ~~other~~orders ~~related~~to ~~industries~~limit or cease certain operations. ~~The~~In ~~forward-looking~~addition, ~~statements~~certain ~~are~~environmental ~~subject~~laws toimpose ~~various~~strict ~~risks~~and/or joint and ~~uncertainties~~several ~~that~~liability, which could cause ~~actual~~us ~~results~~ to ~~differ~~become ~~materially~~liable ~~from~~for ~~those~~the ~~described~~conduct inof ~~the~~others ~~forward-looking~~or ~~statements.~~for ~~Generally,~~consequences ~~these~~of ~~forward-looking~~our ~~statements~~own ~~can~~actions bethat ~~identified~~were byin compliance with all applicable laws at the ~~use~~time of ~~forward-looking~~those ~~terminology~~actions. Future events, such as ~~“anticipate,”~~the ~~“believe,”~~discovery ~~“estimate~~of currently unknown matters,” ~~“expect~~spills caused by future pipeline ruptures,” ~~“intend~~changes in existing environmental laws and regulations or their interpretation,” ~~“plan~~and more vigorous enforcement policies by regulatory agencies,” ~~“project~~may give rise to additional expenditures or liabilities,” ~~“should”~~which could impair our operations and ~~variations~~adversely ofaffect ~~such~~our ~~words~~business orand ~~similar~~results ~~expressions~~of operations.

We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances. Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements include the risk factors discussed under the heading “Risk Factors” in this report, the risk factors discussed in the documents incorporated by reference herein, and the following:

· our ability to raise additional capital and secure additional financing;

· our ability to successfully implement our revised business strategy;

· our ability to market our services;

· our ability to develop and maintain strategic partnerships or alliances;

· our ability to maintain and increase our customer base;

· our ability to protect our intellectual property rights;

· our ability to further develop our technology and transaction processing system;

· our ability to respond to competitive developments;

· our ability to attract and retain our executive officers and key employees;

· our ability to comply with government regulations;

· the effects of natural disasters, computer viruses and similar disruptions to our computer systems;

· threats to Internet security; and

· acceptance of the Internet and other online services in the healthcare industry and in general.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

We currently lease 4,703 square feet of office space at a rent of approximately $6,927 per month, at 14860 Montfort Dr, Suite 250, Dallas, Texas 75254. The lease expires May 31, 2013. We believe that, in the event alternative or larger offices are required, such space is available at competitive rates. For our servers, we currently utilize at a cost of approximately $3,510 per month E-Link Systems, including a nationwide DS-3 backbone, a substantial dedicated web server management facility, and a 24-hour per day, 7 day per week Network Operations pursuant to an agreement expiring on November 30, 2013. We may obtain an extension of this arrangement, which may result in a material increase in cost.

~~ITEM~~Improvements 3.in ~~LEGAL~~or ~~PROCEEDINGS~~new discoveries of alternative energy technologies could have a material adverse effect on our financial condition and results of operations.

WeBecause ~~are~~our ~~not~~business ~~currently~~depends aon ~~party~~the tolevel of activity in the oil and natural gas industry, any improvement in or new discoveries of alternative energy technologies (such as wind, solar, geothermal, fuel cells and biofuels) that increase the use of alternative forms of energy and reduce the demand for oil and natural gas could have a material ~~legal~~adverse ~~proceedings~~impact on our business, financial condition and results of operations. In addition, technological changes could decrease the quantities of water required for hydro-fracturing operations or otherwise affect demand for our services.

~~ITEM~~Increased 4.regulation ~~MINE~~of ~~SAFETY~~hydraulic ~~DISCLOSURES~~fracturing, including regulation of the quantities, sources and methods of water use and disposal, could result in reduction in drilling and completing new oil and natural gas wells or minimize water use or disposal, which could adversely impact the demand for our services.

~~Not~~Our ~~Applicable~~Company success depends, in large part, on our level of exploration and production of oil and gas. Our operations use hydraulic fracturing to drill new oil and gas wells. Hydraulic fracturing is a process that is used to release hydrocarbons, particularly natural gas, from certain geological formations. The process involves the injection of water (typically mixed with significant quantities of sand and small quantities of chemical additives) under pressure into the formation to fracture the surrounding rock and stimulate movement of hydrocarbons through the formation. The process is typically regulated by state oil and gas commissions and has been exempt (except when the fracturing fluids or propping agents contain diesel fuels) since 2005 from United States federal regulation pursuant to the Safe Drinking Water Act.

The EPA is conducting a comprehensive study of the potential environmental impacts of hydraulic fracturing activities, and a committee of the United States House of Representatives is also conducting an investigation of hydraulic fracturing practices. The results of the EPA study and House investigation could lead to restrictions on hydraulic fracturing. The EPA is currently working on new guidance for application of the Safe Drinking Water Act permits for drilling or completing processes that use fracturing fluids or propping agents containing diesel fuels. In addition, the EPA proposed regulations under the federal Clean Air Act in July 2011 regarding certain criteria and hazardous air pollutant emissions from hydraulic fracturing wells and, in October 2011, announced its intention to propose regulations by 2014 under the federal Clean Water Act to regulate wastewater discharges from hydraulic fracturing and other gas production. Legislation has been introduced before Congress to provide for federal regulation of hydraulic fracturing, including, for example, requiring disclosure of chemicals used in the fracturing process or seeking to repeal the exemption from the Safe Drinking Water Act. If adopted, such legislation would add an additional level of regulation and necessary permitting at the federal level and could make it more difficult to complete wells using hydraulic fracturing. Similar laws and regulations with respect to chemical disclosure also exist or are being considered by the United States Department of Interior and in several states, including certain states in which we operate, that could restrict hydraulic fracturing.

Future United States federal, state or local laws or regulations could significantly restrict, or increase costs associated with hydraulic fracturing and make it more difficult or costly for producers to conduct hydraulic fracturing operations, which could result in a decline of our exploration and production. New laws and regulations, and new enforcement policies by regulatory agencies, could also expressly restrict the quantities, sources and methods of water use and disposal in hydraulic fracturing and otherwise increase our costs and our customers’ cost of compliance, which could minimize water use and disposal needs even if other limits on drilling and completing new wells were not imposed. Any decline in exploration and production or any restrictions on water use and disposal could result in a decline in our drilling and rework activity and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our business is difficult to evaluate.

Our future financial results depend primarily on (1) our ability to discover commercial quantities of oil and gas; (2) the market price for oil and gas; (3) our ability to continue to generate potential exploration prospects; and (4) our ability to fully implement our exploration and development program. We cannot predict that our future operations will be profitable. In addition, our operating results may vary significantly during any financial period. These variations may be caused by significant periods of time between discovery and development of oil or gas reserves, if any, in commercial quantities.

Oil and natural gas prices are volatile and a decline in oil and natural gas prices can significantly affect our financial results and impede our growth.

The marketability of our oil and gas production depends in part upon the availability, proximity and capacity of gas gathering systems, pipelines and processing facilities. Federal and state regulation of oil and gas production and transportation, general economic conditions, changes in supply and changes in demand all could adversely affect our ability to produce and market our oil and natural gas. If market factors were to change dramatically, the financial impact could be substantial because we would incur expenses without receiving revenues from the sale of production. The availability of markets is beyond our control.

~~PART~~We IImay not discover commercially productive reserves.

~~ITEM~~Our 5future success depends on our ability to economically locate oil and gas reserves in commercial quantities. ~~MARKET~~Except ~~FOR~~to ~~REGISTRANT’S~~the ~~COMMON~~extent ~~EQUITY~~that we acquire properties containing proved reserves or that we conduct successful exploration and development activities, ~~RELATED~~or ~~STOCKHOLDER~~both, ~~MATTERS~~our proved reserves, ~~AND~~if ~~ISSUER~~any, ~~PURCHASES~~will OFdecline ~~EQUITY~~as ~~SECURITIES~~reserves are produced. Our ability to locate reserves is dependent upon a number of factors, including our participation in multiple exploration projects and our technological capability to locate oil and gas in commercial quantities. We cannot predict that we will have the opportunity to participate in projects that economically produce commercial quantities of oil and gas in amounts necessary to create a positive cash flow for TransCoastal or that the projects in which we elect to participate will be successful. There can be no assurance that our planned projects will result in significant reserves or that we will have future success in drilling productive wells at economical reserve replacement costs.

~~Our~~Exploratory ~~common~~drilling ~~stock, par value $0.001 (“Common Stock”),~~ is ~~traded~~a ~~on the OTC Bulletin Board (“OTCBB”) under the symbol "CLAI.OB". The following table sets forth the quarterly~~ high ~~and~~risk ~~low~~activity ~~close~~with ~~prices,~~many asuncertainties ~~reported~~that bycould ~~the~~adversely ~~OTCBB~~affect ~~for~~our ~~the period from January 1~~business, ~~2011~~financial ~~through~~condition ~~December~~or ~~31,~~results ~~2012:~~of operations.

	HIGH		LOW
2011
Three months ended March 31, 2011		0.06		0.03
Three months ended June 30, 2011		0.04		0.03
Three months ended September 30, 2011		0.03		0.02
Three months ended December 31, 2011		0.04		0.02
2012
Three months ended March 31, 2012		0.03		0.01
Three months ended June 30, 2012		0.02		0.01
Three months ended September 30, 2012		0.02		0.01
Three months ended December 31, 2012		0.01		0.01

Exploratory drilling involves numerous risks, including the risk that we will not find any commercially productive oil or gas reservoirs. The cost of drilling, completing and operating wells is often uncertain, and a number of factors can delay or prevent drilling operations, including:

~~All~~● ~~price~~unexpected ~~quotations~~drilling ~~represent inter-dealer prices~~conditions, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. As of February 26, 2013, there were approximately 92 holders of record of the Common Stock, based upon the stockholder listing provided by our transfer agent. Our transfer agent is Continental Stock Transfer & Trust Co, its phone number is 212-509-4000 and its fax number is 212-509-5150.

~~DIVIDEND~~● ~~POLICY~~pressure or irregularities in formations,

We● ~~have~~equipment ~~not~~failures ~~paid~~or ~~any cash dividends on our Common Stock and~~accidents, in view of net losses and our operating requirements, do not intend to pay cash dividends in the foreseeable future. If we achieve profitability, we intend to retain future earnings for reinvestment in the development and expansion of our business. Delaware law, where we are incorporated, contains certain restrictions on the payment of dividends. Any credit agreements, which we may enter into with institutional lenders but as of February 26, 2013 have not, may restrict our ability to pay dividends. Any preferred stock stockholders may receive preferential rights in the distribution of dividends, if any. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, and any other factors that our board of directors determines to be relevant.

~~SECURITIES~~● ~~AUTHORIZED~~adverse ~~FOR~~weather ~~ISSUANCE UNDER EQUITY COMPENSATION PLANS~~conditions,

~~The~~● ~~information~~compliance ~~required~~with bygovernmental ~~Item 201(d) of Regulation S-K is set forth in Item 12 below.~~requirements,

~~ITEM~~● 6.shortages ~~SELECTED~~or ~~FINANCIAL~~delays ~~DATA.~~in the availability of drilling rigs and the delivery of equipment, and

~~Not~~● ~~applicable~~shortages of trained oilfield service personnel.

~~ITEM~~Our 7future drilling activities may not be successful, nor can we be sure that our overall drilling success rate or our drilling success rate for activities within a particular area will not decline. ~~MANAGEMENT'S~~Unsuccessful ~~DISCUSSION~~drilling ~~AND~~activities ~~ANALYSIS~~could OFhave ~~FINANCIAL~~a ~~CONDITION~~material ~~AND~~adverse ~~RESULTS~~effect OFon ~~OPERATIONS~~our results of operations and financial condition. Also, we may not be able to obtain any options or lease rights in potential drilling locations that we identify. Although we have identified a number of potential exploration projects, we cannot be sure that we will ever drill them or that we will produce oil or gas from them or any other potential exploration projects.

~~OVERVIEW~~Our exploration and development activities are subject to reservoir and operational risks which may lead to increased costs and decreased production.

AsEven ofwhen ~~December~~oil 31and gas is found in what is believed to be commercial quantities, ~~2012~~reservoir risks, wewhich ~~had~~may abe ~~working~~heightened ~~capital~~in ~~deficit~~new discoveries, ~~defined~~may bylead to increased costs and decreased production. These risks include the ~~excess~~inability ofto ~~current~~sustain ~~liabilities~~deliverability ~~over~~at ~~current~~commercially ~~assets,~~productive levels as a result of ~~$1,570,000~~decreased ~~and~~reservoir ~~stockholders'~~pressures, ~~deficit~~large amounts of $1water,~~573,000~~ or other factors that might be encountered. We ~~generated~~As ~~revenues~~a result of $2these types of risks,~~511,000~~ ~~for~~most ~~the~~lenders ~~year~~will ~~ended~~not ~~December~~loan 31funds secured by reserves from newly discovered reservoirs, ~~2012.~~which Wewould have ~~incurred~~a ~~net~~negative ~~losses~~impact ~~since~~on ~~inception~~our ~~and~~future ~~had~~liquidity. anOperational ~~accumulated~~risks ~~deficit~~include ofhazards ~~$46~~such as fires,~~504~~ explosions,~~000~~ atcraterings, ~~December~~blowouts, 31uncontrollable flows of oil, ~~2012. We~~gas ~~expect~~or towell ~~continue~~fluids, topollution, ~~operate~~releases atof atoxic ~~loss~~gas ~~for~~and ~~the~~encountering ~~foreseeable~~formations ~~future~~with abnormal pressures. WeIn addition, we may ~~never~~be ~~achieve~~liable ~~profitability~~for environmental damage caused by previous owners of property we own or lease. In ~~addition~~As a result, ~~during~~we ~~the~~may ~~year~~face ~~ended~~substantial ~~December~~liabilities 31to third parties or governmental entities, ~~2012~~which could reduce or eliminate funds available for exploration, ~~net~~development ~~cash~~or ~~used~~acquisitions inor ~~operating~~cause ~~activities~~us ~~was~~to ~~$99~~incur substantial losses. The occurrence of any one of these significant events,~~000~~ if it is not fully insured against, could have a material adverse effect on our financial condition and results of operations.

We have been in existence since 1996, have operated under several different business strategies. The relationships between revenue and cost of revenue, and between gross profit and operating expenses reflected in the financial information included in this report may not represent future expected financial results.

WeOur ~~generally~~operations ~~enter~~require ~~into~~large ~~services~~amounts ~~agreements with our customers to provide access to our software application for processing~~ of ~~customer~~capital ~~transactions. We operate the software application for all customers~~ and ~~the~~we ~~customers~~may ~~are~~be ~~not~~unable ~~entitled~~ to ~~ownership~~obtain ofneeded ~~our~~capital ~~software at any time during~~ or atfinancing ~~the end of the agreements. The customers either host the application~~ on ~~their~~satisfactory ~~own servers or access our hosted software platform via the Internet. Our revenue is derived from customers paying implementation fees and transaction fees~~terms, ~~both of~~ which ~~may~~could belead ~~subject~~ to ~~monthly~~a ~~minimum~~loss ~~provisions,~~of ~~and~~properties ~~time~~ and ~~materials charges for additional services. Customer agreements may also provide for development fees related to private labeling of our software platform (i.e. access to our servers through~~ a ~~website~~decline ~~which is~~ in ~~the~~our ~~name~~natural ofgas and~~/or~~ ~~has~~oil ~~the look and feel of the customer’s other websites) and some customization of the offering and business rules~~reserves.

WeOur ~~have~~current ~~been~~development ~~dependent~~plans onwill ~~issuances~~require ofus ~~our~~to ~~capital~~make ~~stock~~large ~~and~~capital ~~loans~~expenditures ~~from~~for ~~related~~the ~~parties~~exploration toand ~~meet~~development of our ~~capital~~oil and ~~liquidity~~gas ~~needs~~projects. WeAlso, ~~anticipate~~ we ~~will~~must ~~continue~~secure tosubstantial ~~require~~capital ~~similar~~to ~~infusions~~explore ofand ~~capital~~develop ~~for~~our ~~the~~other ~~foreseeable~~potential ~~future~~projects. Historically, ~~although~~we ~~our~~have ~~ability~~funded toour docapital soexpenditures ~~may~~through bethe ~~impaired~~issuance asof aequity ~~result~~and ofsome ~~the~~debt. ~~limited~~Volatility ~~number~~in ofthe ~~shares~~price of our Common Stock, wewhich ~~have~~may ~~authorized~~be ~~but~~significantly ~~unissued~~influenced by our drilling and ~~not~~production ~~already~~activity, ~~reserved~~may ~~for~~impede ~~another~~our ~~purpose~~ability to raise money quickly, if at all, through the issuance of equity at acceptable prices. ~~There~~Future iscash noflows ~~assurance~~and wethe availability of financing will be ~~able~~subject to ~~obtain~~a number of variables, such ~~funding.~~as:

~~PLAN~~● OFour ~~OPERATIONS~~success in locating and producing reserves in other projects;

~~Our~~● ~~business~~the ~~strategy~~level ~~is set forth in detail in ITEM 1. BUSINESS. We anticipate that our primary source~~ of ~~revenues~~production will be revenue paid by healthcare payers and vendors for private-label or co-branded licenses and services. Historically, our primary sources of revenue were fees paid by healthcare providers for insurance claims and patient statement services and fees from ~~medical~~existing ~~and~~wells; ~~dental payers for processing claims electronically. We expect most of our revenues to be recurring in nature.~~and

~~Our~~● ~~principal~~prices ~~costs to operate are technical and customer support, transaction-based vendor services, sales and marketing, research and development, acquisition~~ of ~~capital~~oil ~~equipment,~~ and ~~general and administrative expenses~~gas. We intend to continue to develop and upgrade our technology and transaction-processing systems and continually update and improve our website to incorporate new technologies, protocols, and industry standards, but may not have the resources to do so. Selling, general and administrative expenses include all corporate and administrative functions that serve to support our current and future operations and provide an infrastructure to support future growth. Major items in this category include management and staff salaries and benefits, travel, professional fees, network administration, business insurance, and rent.

~~CRITICAL~~Issuing ~~ACCOUNTING~~equity ~~POLICIES~~securities to satisfy our financing requirements could cause substantial dilution to our existing stockholders.

~~REVENUE~~● ~~RECOGNITION~~our being more vulnerable to competitive pressures and economic downturns; and

We● ~~generally~~restrictions enter into services agreements with our customers to provide access to our hosted software platform for processing of customer transactions. We operate the software application for all customers and the customers are not entitled to ownership of our software at any time during or at the end of the agreements. The end users of our software application access our hosted software platform or privately hosted versions of our software application via the internet with no additional software required to be located on the customer’s systems. Customers pay implementation fees, transaction fees and time and materials charges for additional services. Revenues primarily include fees for implementation and transaction fees, which may be subject to monthly minimum provisions. Customer agreements may also provide for development fees related to private labeling of our ~~software platform (i~~operations.e. access to our servers through a web site which is in the name of and/or has the look and feel of the customer’s other web sites) and some customization of the offering and business rules. We account for our service agreements, entered into prior to January 1, 2011, by combining the contractual revenues from development, implementation, license, support and certain additional service fees and recognizing the revenue ratably over the expected period of performance. For these agreements, we used an estimated expected business arrangement term of three years which is currently the term of the typical contracts signed by our customers. To the extent that implementation fees are received in advance of recognizing the revenue, we deferred these fees and recorded deferred revenue. We recognize service fees for transactions and some additional services as the services are performed. As a result of the new revenue recognition guidance relating to arrangements with multiple deliverables, we evaluate all new contract agreements individually to determine the fair value of the different deliverables and if they can be treated as separate units of accounting. The new guidance had no significant impact on our revenue recognition policy for any new contract agreements entered into during 2011 and 2012. We expense the costs associated with our customer service agreements as those costs are incurred.

If our revenues were to decrease due to lower oil and gas prices, decreased production or other reasons, and if we could not obtain capital through a credit facility or otherwise, our ability to execute our development plans, obtain and replace reserves, or maintain production levels could be greatly limited.

Oil and gas prices are volatile and an extended decline in prices could hurt our business prospects.

Our future profitability and rate of growth and the anticipated carrying value of our oil and gas properties will depend heavily on then prevailing market prices for oil and gas. We expect the markets for oil and gas to continue to be volatile. If we are successful in continuing to establish production, any substantial or extended decline in the price of oil or gas could:

●

have a material adverse effect on our results of operations;

●

limit our ability to attract capital;

●

make the formations we are targeting significantly less economically attractive;

●

reduce our cash flow and borrowing capacity; and

●

reduce the value and the amount of any future reserves.

Various factors beyond our control will affect prices of oil and gas, including:

●

worldwide and domestic supplies of oil and gas;

●

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

●

political instability or armed conflict in oil or gas producing regions;

●

the price and level of foreign imports;

●

worldwide economic conditions;

●

marketability of production;

●

the level of consumer demand;

●

the price, availability and acceptance of alternative fuels;

●

the availability of processing and pipeline capacity;

●

weather conditions; and

●

actions of federal, state, local and foreign authorities.

These external factors and the volatile nature of the energy markets make it difficult to estimate future prices of oil and gas. In addition, sales of oil and gas are seasonal in nature, leading to substantial differences in cash flow at various times throughout the year.

~~SOFTWARE~~Oil ~~FOR~~and ~~SALE~~gas ORreserve ~~LICENSE~~estimates may not be accurate.

WeThere ~~begin~~are ~~capitalizing~~numerous ~~costs~~uncertainties ~~incurred~~inherent in ~~developing~~estimating quantities of proved oil and natural gas reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond our control. Reserve engineering is a ~~software~~subjective ~~product~~process ~~once~~of ~~technological~~estimating ~~feasibility~~underground accumulations of oil and natural gas that cannot be measured in any exact way, and the ~~product~~accuracy ~~has~~of ~~been~~any ~~determined~~reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. ~~Capitalized~~As ~~computer~~a ~~software~~result, ~~costs~~estimates ~~include~~made ~~direct~~by ~~labor~~different engineers often vary from one another. In addition, results of drilling, testing and ~~labor-related~~production ~~costs~~subsequent to the date of an estimate may justify revisions of such estimates, and such revisions, if significant, would change the schedule of any further production and development drilling. ~~The~~ ~~software~~Potential isrevisions ~~amortized~~due ~~over~~to ~~its~~an ~~expected~~overstatement ~~useful~~of ~~life~~the Company's oil and natural gas reserves, would also have adverse implications on our balance sheet and operating results, most specifically to the carrying value of 3our ~~years~~oil orand natural gas properties and the ~~contract~~results ~~term~~of our depletion expense. Accordingly, asreserve ~~appropriate~~estimates are generally different, and often materially so, from the quantities of oil and natural gas that are ultimately recovered. Furthermore, estimates of quantities of proved reserves and their PV-10 value may be affected by changes in crude oil and gas prices because the Company’s quantity estimates are based on prevailing prices at the time of their determination.

~~Management~~Hedging ~~evaluates~~our ~~the~~production ~~recoverability,~~may ~~valuation,~~result ~~and amortization of capitalized costs of software that we sell, lease or otherwise market, whenever events or changes~~ in ~~circumstances indicate that the carrying valuation on the software may not be recoverable~~losses. ~~As part of this review, management considers the expected undiscounted future net cash flows. If they are less than the stated value, capitalized software costs will be written down to fair value.~~

~~RECENT~~We ~~ACCOUNTING~~currently ~~PRONOUNCEMENTS~~have limited hedging agreements in place. However, we may in the future enter into arrangements to further reduce our exposure to fluctuations in the market prices of oil and natural gas. We may enter into oil and gas hedging contracts in order to increase credit availability. Hedging will expose us to risk of financial loss in some circumstances, including if:

In● ~~December~~production 2010, FASB issued Accounting Standards Update (“ASU”) No. 2010-28 When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts, which modifies goodwill impairment testing for reporting units with a zero or negative carrying amount. As a result of the new guidance, an entity can no longer assert that a reporting unit is not required to perform the second step of the goodwill impairment test because the carrying amount of the reporting unit is zero or negative, despite the existence of qualitative factors that indicate goodwill is more likely than not impaired. The amended guidance in ASU 2010-28 was effective for public entities for fiscal years, and for interim periods within those years, beginning after December 15, 2010, with early adoption prohibited. The Company’s adoption of this new pronouncement in 2011 has resulted in the impairment of $138,000 of goodwill. The goodwill was carried on the Company’s books as a result of the acquisition of Acceptius, Inc. (“Acceptius”) in fiscal year 2008. The cumulative effect of this new guidance was recognized as an adjustment to accumulated deficit as of the adoption date. In September 2011, FASB issued ASU 2011-08, Testing Goodwill for Impairment, which allows entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two step goodwill impairment test described in ASC topic 350. The amended guidance in ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning December 31, 2011, with early adoption permitted. The Company adopted this new guidance as of December 31, 2011. The adoption did not have a material impact on our consolidated financial statements or footnote disclosures.expected;

~~RESULTS~~● OFthe ~~OPERATIONS~~other party to the contract defaults on its obligations; or

~~COMPARISON~~● OFthere ~~THE~~is ~~YEARS~~a ~~ENDED~~change ~~DECEMBER~~in ~~31,~~the ~~2012~~expected ~~AND~~differential ~~2011~~between the underlying price in the hedging agreement and actual prices received.

~~REVENUES~~In addition, hedging may limit the benefit we would otherwise receive from increases in the prices of oil and gas. Further, if we do not engage in hedging, we may be more adversely affected by changes in oil and gas prices than our competitors who engage in hedging.

~~Revenues~~Accounting ~~increased~~rules 7%may torequire $2write-downs,~~511,000~~ inwhich ~~2012~~may ~~from~~result ~~$2,346,000~~ in ~~2011. The~~a ~~increase~~charge ~~in revenues was primarily due~~ to ~~the increased revenues from our existing customers~~earnings. ~~Revenues~~We ~~received~~may ~~from~~incur ~~one~~write-downs ~~customer~~of ~~represented~~the anet ~~significant~~book ~~portion~~values of our ~~total~~oil ~~revenues~~and ~~during~~natural ~~the~~gas ~~last~~properties ~~two~~that ~~years. Revenues~~would ~~received~~adversely ~~from~~affect ~~this customer represented 34% of~~ our ~~revenues~~equity ~~for 2012~~ and ~~41% for 2011~~earnings.

~~COST~~We OFutilize ~~REVENUES~~the full cost method of accounting for costs related to our natural gas and oil properties. Under the full cost method, we are subject to quarterly calculations of a "ceiling" or limitation on the amount of our oil and gas properties that can be capitalized on our balance sheet. If the net capitalized costs of our oil and gas properties exceed the cost center ceiling, we are subject to a write-down of our net oil and gas properties to the extent of such excess. A capitalized cost ceiling test impairment also reduces earnings and impacts stockholders' equity in the period of occurrence and results in lower amortization expense in future periods. The discounted present value of our proved reserves is a major component of the ceiling calculation and represents the component that requires the most subjective judgments.

~~Cost~~The ofrisk ~~revenues~~that ~~was~~we ~~$1,928,000~~will inbe ~~2012~~required ~~compared~~ to ~~$1,748,000~~write ~~for~~down the ~~prior~~carrying ~~year,~~value ~~an increase~~ of ~~10%.~~oil ~~The~~and ~~four~~natural ~~recurring~~gas ~~components~~properties ofincreases ~~cost~~when ofnatural ~~revenues~~gas ~~are~~and ~~data~~crude ~~center~~oil ~~expenses,~~prices ~~third~~are ~~party~~depressed ~~transaction~~or ~~processing~~volatile. ~~expenses~~In addition, ~~customer~~a ~~support~~write-down ~~operation~~of ~~expenses~~proved oil and ~~amortization~~natural ofgas ~~software. Data~~properties ~~center~~may ~~expenses~~occur ~~were~~if ~~$42,000~~we ~~for~~experience ~~the~~substantial ~~year~~downward ~~ended~~adjustments ~~December~~in ~~31,~~our ~~2012~~estimated ~~compared~~proved ~~with $42~~reserves,~~000~~ ~~for~~or ~~2011.~~if ~~Third~~purchasers ~~party~~cancel ~~transaction~~long-term ~~processing~~contracts ~~expenses~~for ~~were~~our ~~$1,056,000~~natural ingas ~~2012~~production. ~~compared~~An toexpense ~~$963,000~~recorded in ~~2011,~~one anperiod ~~increase~~may ofnot ~~10%.~~be ~~The~~reversed ~~increase~~ in ~~third~~a ~~party~~subsequent ~~transaction~~period ~~processing~~even ~~expenses~~though ~~was~~higher ~~primarily~~natural ~~attributable~~gas toand ~~new~~crude ~~contracts~~oil ~~with~~prices ~~clearing~~may ~~houses.~~have ~~Customer support operations expense~~ increased bythe ~~12%~~applicable toceiling ~~$830,000~~ in ~~2012~~the ~~from~~subsequent ~~$741,000 in 2011~~period. ~~The~~ ~~increase~~This inand ~~customer~~other ~~support~~factors ~~operations~~could ~~expenses~~cause ~~was~~us ~~primarily attributable~~ to anwrite ~~increase~~down inour ~~support~~natural ~~personnel.~~gas ~~Software amortization~~ and ~~development~~oil ~~project~~properties ~~amortization~~or ~~expenses~~other ~~decreased~~assets ~~to $0~~ in ~~2012~~the ~~compared~~future toand ~~$2,000~~incur ina ~~2011.~~non-cash ~~The~~charge ~~decrease~~against ~~was~~future ~~primarily attributable to software and equipment fully amortized in 2012~~earnings.

~~RESEARCH~~We ~~AND~~face ~~DEVELOPMENT~~risks related to title to the leases we enter into that may result in additional costs and affect our operating results.

~~Research~~It is customary in the oil and ~~development~~gas ~~expenses~~industry ~~were~~to ~~$14~~acquire a leasehold interest in a property based upon a preliminary title investigation. If the title to the leases acquired is defective,~~000~~ we could lose the money already spent on acquisition, or incur substantial costs to cure the title defect, including any necessary litigation. If a title defect cannot be cured, we will not have the right to participate in ~~2012~~the development of or production from the leased properties. In addition, it is possible that the terms of our oil and ~~$13~~gas leases may be interpreted differently depending on the state in which the property is located. For instance,~~000~~ royalty calculations can be substantially different from state to state, depending on each state’s interpretation of lease language concerning the costs of production. We cannot guarantee that there will be no litigation concerning the proper interpretation of the terms of our leases. Adverse decisions in ~~2011~~any litigation of this kind could result in material costs or the loss of one or more leases.

Our leases primary terms may expire prior to drilling.

Oil and gas leases have a primary term in which drilling or operations must commence; otherwise, the lease will expire. As such, we may have insufficient capital to drill leases or economic conditions may change which make the leases not commercially viable or equipment and man power may not be available to drill during the primary term. If any of this occurs, we will have to write the value of the leases off in the current earnings period in which they expire.

~~SELLING,~~Our ~~GENERAL~~industry ~~AND~~is ~~ADMINISTRATIVE~~highly competitive and many of our competitors have more resources than we do.

~~Selling,~~We ~~general~~compete in oil and ~~administrative~~gas ~~expenses~~exploration ~~were~~with ~~$745,000~~a number of other companies. Many of these competitors have financial and technological resources vastly exceeding those available to us. We cannot be sure that we will be successful in ~~2012~~acquiring and developing profitable properties in the face of this competition. In addition, ~~compared~~from ~~with~~time ~~$689~~to time,~~000~~ inthere ~~2011~~may be competition for, anand ~~increase~~shortage of, 8%exploration, drilling and production equipment. ~~The~~These shortages could lead to an increase isin ~~primarily~~costs ~~related~~and delays in operations that could have a material adverse effect on our business and our ability to ~~reinstatement~~develop inour ~~2012~~properties. Problems of ~~voluntary~~this ~~pay~~nature ~~reductions~~also ~~taken~~could byprevent ~~management~~us ~~for~~from producing any oil and gas we discover at the ~~first~~rate ~~half~~we ofdesire ~~2011~~to do so.

~~INTEREST~~Technological ~~EXPENSE~~changes could put us at a competitive disadvantage.

~~Interest~~The ~~expense~~oil ~~was~~and ~~$23,000~~gas ~~for~~industry ~~2012~~is ~~compared~~characterized ~~with~~by ~~$21,000~~rapid ~~for~~and ~~2011~~significant technological advancements and introductions of new products and services using new technologies. ~~Included~~As innew ~~the~~technologies ~~2012~~develop, ~~expense~~we ~~was~~may ~~$23~~be placed at a competitive disadvantage,~~000~~ ~~related~~and competitive pressures may force us to ~~interest~~implement onthose ~~notes~~new ~~payable~~technologies at a substantial cost. If other oil and gas exploration and development companies implement new technologies before we do, those companies may be able to ~~related~~provide ~~parties~~enhanced capabilities and superior quality compared with ~~$20,000~~what ~~for~~we ~~2011~~are able to provide. ~~Interest~~We ofmay ~~$1,000~~not ~~was~~be ~~paid~~able to ~~vendors~~respond into ~~2011~~these ~~for~~competitive ~~financing~~pressures ~~fees~~and implement new technologies on a timely basis or at an acceptable cost. If we are unable to utilize the most advanced commercially available technologies, our business could be materially and adversely affected.

~~LIQUIDITY~~Our ~~AND~~industry ~~CAPITAL~~is ~~RESOURCES~~heavily regulated and increases the costs of our operations.

~~For~~Federal, state and local authorities extensively regulate the ~~year~~oil ~~ended~~and ~~December~~gas 31industry. Legislation and regulations affecting the industry are under constant review for amendment or expansion, ~~2012~~raising the possibility of changes that may affect, ~~net~~among ~~cash~~other ~~used~~things, inthe ~~operating~~pricing ~~activities~~or marketing of ~~$99,000~~oil ~~was~~and ~~primarily~~gas ~~attributable~~production. toState aand ~~net~~local ~~loss~~authorities regulate various aspects of ~~$199~~oil and gas drilling and production activities,~~000,~~ ~~adjusted~~including ~~for~~the ~~depreciation~~drilling of wells (through permit and ~~amortization~~bonding requirements), the spacing of $1wells,~~000~~ the unitization or pooling of oil and agas ~~decrease~~properties, inenvironmental ~~other~~matters, ~~working~~safety ~~capital~~standards, ~~accounts~~the sharing of ~~$98~~markets,~~000~~ production limitations, plugging and anabandonment, ~~increase~~and indrill ~~deferred~~site ~~revenue~~restoration. The overall regulatory burden on the industry increases the cost of $1doing business,~~000~~ which, in turn, decreases profitability.

~~For~~Our ~~the~~operations ~~year~~must ~~ended~~comply ~~December~~with ~~31,~~complex ~~2011,~~environmental net cash used in operating activities of $178,000 was primarily attributable to a net loss of $125,000, adjusted for depreciation and amortization of $3,000 offset by a change in other working capital accounts of $48,000 and a decrease in deferred revenue of $8,000regulations.

Our operations are subject to complex and constantly changing environmental laws and regulations adopted by federal, state and local governmental authorities. New laws or regulations, or changes to current requirements, could have a material adverse effect on our business. We ~~engaged~~will incontinue noto ~~investing~~be ~~activities~~subject ~~during~~to uncertainty associated with new regulatory interpretations and inconsistent interpretations between state and federal agencies. We could face significant liabilities to the ~~years~~government ~~ended~~and ~~December~~third 31parties for discharges of oil, ~~2012~~natural gas, produced water or other pollutants into the air, soil or water, and ~~2011~~we could have to spend substantial amounts on investigations, litigation and remediation. We cannot be sure that existing environmental laws or regulations, as currently interpreted or enforced, or as they may be interpreted, enforced or altered in the future, will not have a material adverse effect on our results of operations and financial condition.

~~Net~~Our ~~cash~~business ~~provided~~depends byon ~~financing~~transportation ~~activities~~facilities inowned ~~2012 was $100,000 as a result of proceeds from debt financing from related parties. Net cash provided~~ by ~~financing activities in 2011 was $195,000 as a result of proceeds from debt financing from related parties~~others.

~~Management~~The ~~believes~~marketability ~~that available cash resources, together with anticipated revenues from operations and the proceeds~~ of ~~recently~~our ~~completed~~potential ~~financing~~oil ~~activities~~ and ~~funding~~gas ~~commitments~~production ~~may~~depends ~~not~~in bepart ~~sufficient~~on tothe ~~satisfy our capital requirements through June 30~~availability, ~~2013.~~proximity ~~Necessary~~and ~~additional~~capacity ~~capital~~of ~~may~~pipeline ~~not~~systems beowned ~~available on a timely basis~~ or onoperated ~~acceptable~~by ~~terms,~~third ifparties. atFederal ~~all.~~and Instate ~~any~~regulation of ~~these~~oil ~~events,~~and wegas ~~may~~production beand ~~unable to repay debt obligations as they become due~~transportation, ~~forced~~tax ~~to significantly reduce operating expenses to a point that would be detrimental to business operations, curtail research~~ and ~~development~~energy ~~activities~~policies, ~~sell~~changes ~~certain~~in ~~business~~supply ~~assets~~and ordemand ~~discontinue some or all of our business operations, take other actions which could be detrimental to business prospects~~ and ~~result~~general ineconomic ~~charges~~conditions ~~which~~ could beadversely ~~material~~affect to our ~~operations~~ability ~~and financial position, or cease operations altogether. In the event that any future financing is effected,~~ to ~~the extent it includes equity securities~~produce, ~~the~~gather ~~holders of our common stock~~ and ~~preferred~~transport ~~stock~~oil may experience additional dilution. In the event of a cessation of operations, there may not be sufficient assets to fully satisfy all creditors, in which case the holders of equity securities may be unable to recoup any of their investment. Therefore, we are exploring alternatives in both the short and ~~long~~natural ~~term that may relieve our cash flow difficulties~~gas.

WeAttempts are considering voluntarily deregistering our class of common stock under the Securities Exchange Act of 1934, which may be accomplished by filing a Form 15 with the Securities and Exchange Commission (“SEC”). This action may occur prior to ~~March~~grow ~~31, 2013, and is not predicated on notice to or approval from stockholders. Upon the filing of a Form 15,~~ our ~~obligation~~business tocould ~~file~~have certain reports with the SEC, including Forms 10-K, 10-Q and 8-K, would be suspended, and other filing requirements would terminate upon the effectiveness of deregistration. The Company’s Board of Directors and its management will make this decision after careful consideration and review of the cumulative costs and the pros and cons of being an ~~SEC~~adverse ~~reporting issuer~~effect. The Company is concerned that the incremental cost of compliance with general SEC regulations and reporting requirements may not provide a discernible benefit to the Company’s stockholders. The savings derived from deregistration are expected to be significant. Deregistration may also allow management to devote more time and resources to build up and maintain the business. If the Company deregisters its common stock, it may discontinue providing performance data and audited financial statements. If the Company deregisters its common stock and ceases filing periodic reports with the SEC (including Forms 10-K, 10-Q and 8-K), it expects its common stock to be delisted from trading on the OTCQB. Further, in the event of any deregistration, no assurance can be given that the Company’s common stock will be quoted on the Pink Sheets or otherwise traded at all.

OnBecause ~~August 17, 2012, the Company sent all stockholders~~ of ~~record~~our assmall ~~of June 20~~size, ~~2012~~we adesire ~~Definitive~~to ~~Information~~grow ~~Statement~~rapidly onin ~~Schedule~~order ~~14C~~to ~~disclosing~~achieve ~~the~~certain ~~vote~~economies ~~by the Company's Board~~ of ~~Directors~~scale. ~~and~~Although bythere ~~the~~is ~~holders~~no ofassurance athat ~~majority~~this ofrapid ~~stockholders~~growth aswill ~~of June 20~~occur, ~~2012~~to (the ~~"Holders")~~extent inthat ~~favor~~it ofdoes ~~a 1~~occur,~~000-to-1~~ ~~reverse~~it ~~stock~~will ~~split~~place ofa ~~the~~significant ~~Company's~~strain ~~outstanding~~on ~~Common~~our ~~Stock~~financial, intechnical, ~~conjunction~~operational ~~with~~and aadministrative ~~merger~~resources. orAs ~~acquisition~~we ~~transaction~~increase ~~(the~~our ~~"Split"). However,~~services ~~both~~and enlarge the ~~Board~~number of ~~Directors~~projects ~~and~~we ~~the~~are ~~Holders~~evaluating ~~approved~~or ~~this~~in ~~action~~which ~~subject~~we toare ~~the~~participating, ~~sole~~there ~~discretion~~will ofbe ~~the~~additional ~~Board~~demands ofon ~~Directors~~our ~~to not effect~~financial, technical and ~~abandon,~~administrative ~~the~~resources. ~~Split~~The atfailure ~~any~~to ~~time~~continue ~~before~~to ~~effectiveness. At~~upgrade ~~this~~our ~~time~~technical, ~~the~~administrative, ~~Board~~operating ofand ~~Directors~~financial ~~has~~control ~~not~~systems ~~pursued~~or ~~effecting~~ the ~~Split,~~occurrence ~~but~~of ~~may~~unexpected doexpansion sodifficulties, inincluding ~~its~~the ~~sole~~recruitment ~~discretion~~and inretention ~~the~~of ~~future. If~~geoscientists and ~~when effected~~engineers, ~~the~~could ~~Split~~have ~~would~~a ~~not~~material ~~result~~adverse ineffect anon ~~increase~~our ~~or decrease in the number of authorized shares of Common Stock~~business, ~~nor~~financial ~~change~~condition ~~the~~and ~~par~~results ~~value per share~~ of ~~Common Stock~~operations.

~~OFF-BALANCE~~RISKS ~~SHEET~~RELATED ~~ARRANGEMENTS~~TO OUR EQUITY STOCK

~~None~~Our directors and officers of the Company own a significant majority of our common stock and the ability of other stockholders to influence the Company and its affairs is limited.

~~ITEM~~Three 7Aof our executive officers and directors control approximately 61% of our issued and outstanding shares of our voting Common Stock. ~~QUANTITATIVE~~ ~~AND~~They ~~QUALITATIVE~~therefore ~~DISCLOSURE~~have ~~ABOUT~~the ~~MARKET~~current ~~RISK~~ability to control the affairs of the Company and to determine the path our Company will take. All other Common Stock stockholders will not have sufficient voting power to override or otherwise influence any vote taken by the stockholders of the Company.

~~Not~~Our ~~applicable~~Common Stock may continue to be subject to penny stock regulation.

Our Common Stock is presently subject to additional disclosure requirements for penny stocks mandated by the Penny Stock Reform Act of 1990. The SEC Regulations generally define a penny stock to be an equity security that is not traded on a national exchange and has a market price of less than $5.00 per share. Depending upon our stock price, we may be included within the SEC Rule 3a51-1 definition of a penny stock and have our Common Stock considered to be a "penny stock," with trading of our Common Stock covered by Rule 15g-9 promulgated under the Securities Exchange Act of 1934. Under this rule, broker-dealers who recommend such securities to persons other than established customers and accredited investors must make a special written disclosure to, and suitability determination for, the purchaser and receive the purchaser’s written agreement to a transaction prior to sale. The regulations on penny stocks limit the ability of broker-dealers to sell our Common Stock and thus may also limit the ability of purchasers of our Common Stock to sell their securities in the secondary market. Our Common Stock will not be considered "penny stock" if our net tangible assets exceed $2,000,000 or our average revenue is at least $6,000,000 for the previous three years.

The Financial Industry Regulatory Authority sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority or FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for shares of our common stock.

Our Common Stock could be subject to a disproportionately high number of sales, which could cause the market price of our Common Stock to drop significantly, even if our business is doing well.

A disproportionately high number of sales might occur because of the long period of time during which investors have not been able to sell any portion of their investment in the Company. If there were a large number of shares sold, it could result in significant downward pressure on the market price for our Common Stock.

Trading of our common stock may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

There is currently a limited market for our common stock and the volume of our common stock traded on any day may vary significantly from one period to another. Our common stock is quoted on OTC Market’s OTCQB. Trading in stock quoted on OTC Market’s OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The availability of buyers and sellers represented by this volatility could lead to a market price for our common stock that is unrelated to operating performance. Moreover, OTC Market’s OTCQB is not a stock exchange, and trading of securities quoted on OTC Market’s OTCQB is often more sporadic than the trading of securities listed on a stock exchange like NASDAQ. There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for our stockholders to resell their stock.

Raising additional capital and acquiring additional companies may substantially dilute existing shareholders.

Our intention is to grow the Company significantly which will require us to issue additional common stock should we raise additional capital through both public and private offerings. We may also issue additional common stock in the acquisition of or merger with other companies we may acquire. The effect of both these activities would result in the significant dilution of the Company’s current stockholders.

~~ITEM~~Our ~~8. FINANCIAL~~Board ~~STATEMENTS~~of Directors can issue preferred stock with terms that are preferential to our common stock.

~~Below~~Pursuant isto anour ~~index~~articles of ~~financial~~incorporation, ~~statements. The~~as ~~financial~~amended, ~~statements~~our ~~required~~Board of Directors may issue additional preferred stock without action by ~~this~~our ~~item~~stockholders, ~~begin~~with atin ~~page~~such 22series ~~hereof~~and classes, and with rights and preferences related thereto, determined by the Board of Directors. Rights or preferences could include, among other things:

		Page
Report of Independent Registered Public Accounting Firm		22
Consolidated Balance Sheets – December 31, 2012 and 2011		23
Consolidated Statements of Operations for the Years Ended December 31, 2012 and 2011		24
Consolidated Statements of Changes in Stockholders’ Deficit for the Years Ended December 31, 2012 and 2011		25
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011		26
Notes to Consolidated Financial Statements		27

●

the establishment of dividends which must be paid prior to declaring or paying dividends or other distributions to our common stockholders;

●

greater or preferential liquidation rights that could negatively affect the rights of common stockholders; and

●

the right to convert the preferred stock at a rate or price that would have a dilutive effect on the outstanding shares of our Common Stock.

To facilitate the acquisition of TransCoastal -Texas in May 2013 our Broad of Directors authorized the issuance of a series of Preferred Stock designated as Series F. As of December 31, 2014 our Board of Directors has approved the sale of two different series of Preferred Stock: Series G and Series H.

We make estimates and assumptions in connection with the preparation of TransCoastal’s Condensed Consolidated Financial Statements, and any changes to those estimates and assumptions could have a material adverse effect on our results of operations.

In connection with the preparation of TransCoastal’s Condensed Consolidated Financial Statements, we use certain estimates and assumptions based on historical experience and other factors. Our most critical accounting estimates are described in "Management Discussion and Analysis of Financial Condition and Results of Operations" in this report. In addition, as discussed in Note 4 to the Consolidated Financial Statements, we make certain estimates, including decisions related to provisions for legal proceedings and other contingencies. While we believe that these estimates and assumptions are reasonable under the circumstances, they are subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material adverse effect on our results of operations.

Failure of the Company’s internal control over financial reporting could harm its business and financial results.

The management of TransCoastal is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of the Company assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s financial statements would be prevented or detected. Failure to maintain an effective system of internal control over financial reporting could limit the Company’s ability to report its financial results accurately and timely or to detect and prevent fraud. In addition, a restatement of the Company’s oil and natural gas reserves may also have adverse implications on the Company’s carrying value of its oil and natural gas properties, depletion calculation and standard measures of oil and gas disclosures.

Item II. Properties

Operations

Oil and Gas Leases and Wells

The Company’s 36 Oil and Gas lease properties consist of approximately 7,310 gross/ 6,065 net acres, which are primarily held by production. The Properties comprise approximately 64 producing wells generating net production of approximately 71 bbls/day and 401 mcf/day during fiscal year 2014. Cash flow used in operations for TransCoastal for the twelve months ending 12/31/14 was approximately $1.5 million. The majority of the Company’s asset base is comprised of long life Panhandle hydrocarbon production in wells that all produce oil, natural gas liquids and natural gas. The following is a table showing our developed and undeveloped lease acreage followed by a list and legal description of our oil and gas leases located in the state of Texas and Louisiana.

Developed and Undeveloped Acreage

Developed Acres

Undeveloped Acres

Gross

Net

Gross

Net

Total:

7,310

6,065

1,422

978

~~REPORT~~Lease OFName ~~INDEPENDENT~~and ~~REGISTERED~~Location ~~PUBLIC~~of ~~ACCOUNTING~~TransCoastal ~~FIRM~~Oil and Gas Leases

To the Board of Directors and Stockholders of

Lease	County	Abstract	Survey	Block	Section
Bell	Gray	447	I. & G.N. RR	3	134
Brown	Gray	447	I. & G.N. RR	3	152, 137, 128, 138
Brown "A"	Gray	447	I. & G.N. RR	3	152, 137, 128, 138
Cobb	Gray	447	I. & G.N. RR	3	121
Crow	Gray	447	I. & G.N. RR		152, 137, 128, 138
Daube	Montague	247	ET RR, CO
Donald and Donald	Montague	247	ET RR, CO	3
Enserch	Gray	247	I. & G.N. RR	3	131
Faith	Gray	447	I. & G.N. RR	3	135
Jackson	Gray	447	I. & G.N. RR	3	152, 137, 128, 138
Jackson "A"	Gray	447	I. & G.N. RR	3	152, 137, 128, 138
Kramer	Montague	247	ET RR, CO
Heitholt	Gray	447	I. & G.N. RR	3	152, 137, 128, 138
Cobb	Gray	447	I. & G.N. RR	3	164, 165, 141, 148
Heaston	Gray	447	I. & G.N. RR	3	164, 165, 141, 148
Leopold B,C,A	Gray	447	I. & G.N. RR	3	164, 165, 141, 148
Skoog	Gray	447	I. & G.N. RR	3	164, 165, 141, 148
Skoog A	Gray	447	I. & G.N. RR	3	164, 165, 141, 148
Pugh	Stephens	630, 565, 1592, 330	T&P RR CO	5	4, 1338, 1337, 11
Savell	Shelby	385	R. Jarvis
Mayfield B&C	Hutchinson		D&P RR CO	R	2, 5
Meers A,C,SSB,LW	Gray	447	I. & G.N. RR	3	107
W.G. Kinzer	Carson	447	I. & G.N. RR	3	112
Walberg	Gray	447	I. & G.N. RR	3	118
Wall	Gray	447	I. & G.N. RR	3	131
Stevenson A	Hutchinson		D&P RR CO	R	2, 5
Gene Borders	Shelby		Holt, M S
Bill Phillips	Hutchinson		TC RR CO	M-24	8
TJ Boney	Carson		I. & G.N. RR	4	110
Couba DuLarge	St. Charles (LA)		I. & G.N. RR	T-19S	36

Claimsnet.com, Inc.

We have audited the accompanying consolidated balance sheets of Claimsnet.com, Inc. and Subsidiaries, (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated 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 consolidated 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. An audit includes 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. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 consolidated financial position of Claimsnet.com, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the consolidated financial statements, the Company has generated losses since inception, incurred negative cash flows from operations, and has a working capital and stockholders’ deficit at December 31, 2012. Additionally, management does not believe that available cash resources, anticipated revenues from operations, or proceeds from financing activities and funding commitments will be sufficient to satisfy the Company’s near term capital requirements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Whitley Penn LLP

Dallas, Texas

February 26, 2013

~~CLAIMSNET~~The Company currently receives production from 74 wells located on the above leases.~~COM~~ ~~INC~~Of the 64 wells it operates 62 of the wells through its operating subsidiary CoreTerra. ~~AND~~The ~~SUBSIDIARIES~~remaining 2 wells are operated by unrelated third party operators. The following is a listing of our wells, the lease location and the field name:

CONSOLIDATED BALANCE SHEETS

TYPE OF RESERVE	LEASE/WELL NAME	FIELD
Proved Producing	Stevenson 'A' - #2	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #4	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #8	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #9	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #10	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #13	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #16	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #17	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #18	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #20	Panhandle Hutchinson County Fld.
Proved Producing	Stevenson 'A' - #27	Panhandle Hutchinson County Fld.
Proved Producing	Faith #1	Panhandle Gray County Field
Proved Producing	Faith #2	Pan Handle Gray County Field
Proved Producing	Magic - #3	Panhandle Carson County Field
Proved Producing	Magic - #4	Panhandle Carson County Field
Proved Producing	Enserch - #1	Panhandle Carson County Field
Proved Producing	Cobb - #1	Panhandle Gray County Field
Proved Producing	Cobb - #4	Panhandle Gray County Field
Proved Producing	Bell #2	Panhandle Gray County Field
Proved Producing	Bell #3	Panhandle Gray County Field
Proved Producing	Bell #4	Panhandle Gray County Field
Proved Producing	Bell #5	Panhandle Gray County Field
Proved Producing	Meers L & W - #1	Panhandle Gray County Field
Proved Producing	Walberg - #1	Panhandle Gray County Field
Proved Producing	Short - #1	Panhandle Gray County Field
Proved Producing	Short - #7	Panhandle Gray County Field
Proved Producing	Saunders - #B-7-7	Panhandle Gray County Field
Proved Producing	Heaston - #1	Panhandle Gray County Field
Proved Producing	Heaston - #2	Panhandle Gray County Field
Proved Producing	Heaston - #3	Panhandle Gray County Field
Proved Producing	Heaston - #4	Panhandle Gray County Field
Proved Producing	Heaston - #5	Panhandle Gray County Field
Proved Producing	Heaston - #6	Panhandle Gray County Field
Proved Producing	Heaston - #8	Panhandle Gray County Field

(In thousands, except share data)

	December 31,
	2012			2011
ASSETS
CURRENT ASSETS
Cash and equivalents	$	41		$	40
Accounts receivable, net of allowance for doubtful accounts of $4 and $5		314			318
Prepaid expenses and other current assets		31			32
Total current assets		386			390
EQUIPMENT, FIXTURES AND SOFTWARE
Total equipment, fixtures and software, net		-			1
TOTAL ASSETS	$	386		$	391
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	332		$	277
Accrued payroll and other current liabilities		129			114
Accrued interest – related parties		140			117
Deferred revenues – current portion		10			8
Notes payable to related parties – current portion		1,285			1,185
Convertible notes payable to related parties		60			10
Total current liabilities		1,956			1,711
LONG-TERM LIABILITIES
Deferred revenues – long-term portion		3			4
Note payable to related party		-			50
Total long-term liabilities		3			54
Total liabilities		1,959			1,765
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS' DEFICIT
Convertible preferred stock, $.001 par value; 4,000,000 shares authorized; 0 shares outstanding as of December 31, 2012 and 720 Shares of Series D (liquidation preference of $180) and 50 shares of Series E (liquidation preference of $15) issued and outstanding, convertible into common shares at 1,000 common shares per 1 convertible preferred share as of December 31, 2011		-			-
Common stock, $.001 par value; 40,000,000 shares authorized; 35,644,696 shares issued and outstanding as of December 31, 2012 and 34,874,696 shares issued and outstanding as of December 31, 2011		36			35
Additional capital		44,895			44,896
Accumulated deficit		(46,504	)		(46,305	)
Total stockholders' deficit		(1,573	)		(1,374	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	386		$	391

See notes to consolidated financial statements.

CLAIMSNET.COM INC. AND SUBSIDIARIES

Proved Producing	Heaston - #10	Panhandle Gray County Field
Proved Producing	Heaston - #12	Panhandle Gray County Field
Proved Producing	J J Wall - #2	Panhandle Gray County Field
Proved Producing	J J Wall - #3	Panhandle Gray County Field
Proved Producing	J J Wall - #6	Panhandle Gray County Field
Proved Producing	J J Wall - #7	Panhandle Gray County Field
Proved Producing	J J Wall - #8	Panhandle Gray County Field
Proved Producing	J J Wall - #10	Panhandle Gray County Field
Proved Producing	J J Wall - #11	Panhandle Gray County Field
Proved Producing	J J Wall - #12	Panhandle Gray County Field
Proved Producing	J J Wall - #14	Panhandle Gray County Field
Proved Producing	Kinzer - #3	Panhandle Gray County Field
Proved Producing	Kinzer - #4	Panhandle Gray County Field
Proved Producing	Leopold 'B' - #2	Panhandle Gray County Field
Proved Producing	Montague County - Daube #1	Eanes Field
Proved Producing	Montague County - Donald & Donald #4	Eanes Field
Proved Producing	Montague County - Donald & Donald #5	Eanes Field
Proved Producing	Montague County - Donald & Donald #6	Eanes Field
Proved Producing	Montague County - Kramer #1	Eanes Field
Proved Producing	Shelby County - Savell A #1H	Se Martinsville (James Lime) Field
Proved Producing	Shelby County - Savell #2H	Se Martinsville (James Lime) Field
Proved Producing	Shelby County - Savell C #3H	Se Martinsville (James Lime) Field
Proved Producing	Stephens County - Pugh #6 (JV1)	Moon, Se (Marble Falls)
Proved Producing	Stephens County - Pugh #7 (JV2)	Moon, Se (Marble Falls)
Proved Producing	Stephens County - Pugh #8 (JV3)	Moon, Se (Marble Falls)
Proved Producing	Stephens County - Pugh #9 (JV4)	Moon, Se (Marble Falls)
Proved Producing	Stephens County - Pugh #10 (JV5)	Moon, Se (Marble Falls)
Proved Producing	Stephens County - Pugh #11 (JV6)	Moon, Se (Marble Falls)
Proved Producing	Stephens County - Pugh #12 (JV7)	Moon, Se (Marble Falls)
Proved Producing	Fortenberry 2H	Wise County Field
Proved Non-Producing	Bill Phillips - #1	Panhandle Hutchinson County Fld.
Proved Non-Producing	Bill Phillips - #2	Panhandle Hutchinson County Fld.
Proved Non-Producing	Bill Phillips - #3	Panhandle Hutchinson County Fld.
Proved Non-Producing	Bill Phillips - #4	Panhandle Hutchinson County Fld.
Proved Non-Producing	Bill Phillips - #5	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #4	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #5	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #9	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #10	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #11	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #12	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #13	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #14	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #15	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #16	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #20	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #21	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #22	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #25	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #26	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #27	Panhandle Hutchinson County Fld.
Proved Non-Producing	Stevenson 'A' - #28	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #1	Panhandle Hutchinson County Fld.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31,
	2012			2011
REVENUES	$	2,511		$	2,346
COST OF REVENUES		1,928			1,748
GROSS PROFIT		583			598
OPERATING EXPENSES
Research and development		14			13
Selling, general and administrative		745			689
Total operating expenses		759			702
LOSS FROM OPERATIONS		(176	)		(104	)
OTHER INCOME (EXPENSE)
Interest expense – related parties		(23	)		(20	)
Interest expense - other		-			(1	)
Total other income (expense)		(23	)		(21	)
NET LOSS	$	(199	)	$	(125	)
NET LOSS PER COMMON SHARE (BASIC AND DILUTED)	$	(0.00	)	$	(0.00	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (BASIC AND DILUTED)		35,123			34,875

See notes to consolidated financial statements.

CLAIMSNET.COM INC. AND SUBSIDIARIES

Proved Non-Producing	Mayfield 'C' #2	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #3	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #4	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #5	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #6	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #13	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #15	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #16	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'C' #18	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #1	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #2	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #3	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #4	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #5	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #6	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #7	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #8	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #9	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #10	Panhandle Hutchinson County Fld.
Proved Non-Producing	Mayfield 'B' #11	Panhandle Hutchinson County Fld.
Proved Non-Producing	WAB - #1	Panhandle Carson County Field
Proved Non-Producing	WAB - #3	Panhandle Carson County Field
Proved Non-Producing	WAB - #4	Panhandle Carson County Field
Proved Non-Producing	Boney - #10	Panhandle Carson County Field
Proved Non-Producing	Boney - #12	Panhandle Carson County Field
Proved Non-Producing	Boney - #13	Panhandle Carson County Field
Proved Non-Producing	Boney - #16	Panhandle Carson County Field
Proved Non-Producing	Boney - #19	Panhandle Carson County Field
Proved Non-Producing	Boney - #20	Panhandle Carson County Field
Proved Non-Producing	Boney - #21	Panhandle Carson County Field
Proved Non-Producing	Boney - #22	Panhandle Carson County Field
Proved Non-Producing	Boney - #23	Panhandle Carson County Field
Proved Non-Producing	Boney - #24	Panhandle Carson County Field
Proved Non-Producing	Boney - #25	Panhandle Carson County Field
Proved Non-Producing	Cobb - #5	Panhandle Gray County Field
Proved Non-Producing	Walberg - #8	Panhandle Gray County Field
Proved Non-Producing	Walberg - #9	Panhandle Gray County Field
Proved Non-Producing	Walberg - #11	Panhandle Gray County Field
Proved Non-Producing	Short - #4	Panhandle Gray County Field
Proved Non-Producing	Short - #6	Panhandle Gray County Field
Proved Non-Producing	Short 'B' #2	Panhandle Gray County Field
Proved Non-Producing	Short 'A' #1	Panhandle Gray County Field
Proved Non-Producing	Short 'A' #4	Panhandle Gray County Field
Proved Non-Producing	Heaston - #7	Panhandle Gray County Field
Proved Non-Producing	Heaston - #8	Panhandle Gray County Field
Proved Non-Producing	Heaston - #9	Panhandle Gray County Field
Proved Non-Producing	J J Wall - #1	Panhandle Gray County Field
Proved Non-Producing	J J Wall - #4	Panhandle Gray County Field
Proved Non-Producing	J J Wall - #6	Panhandle Gray County Field
Proved Non-Producing	J J Wall - #9	Panhandle Gray County Field
Proved Non-Producing	Leopold 'B' - #1	Panhandle Gray County Field
Proved Non-Producing	Leopold 'B' - #3	Panhandle Gray County Field
Proved Non-Producing	Leopold 'B' - #4	Panhandle Gray County Field
Proved Non-Producing	Leopold 'B' - #5	Panhandle Gray County Field
Proved Non-Producing	Leopold 'B' - #6	Panhandle Gray County Field
Proved Non-Producing	Leopold 'B' - #7	Panhandle Gray County Field
Proved Non-Producing	Leopold 'B' - #8	Panhandle Gray County Field
Proved Non-Producing	Heithold - #102	Panhandle Gray County Field

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(In thousands)

	Number of Preferred Shares Outstanding			Preferred Stock		Number of Common Shares Outstanding		Common Stock		Additional Capital			Accumulated Deficit			Total Stockholders’ Deficit
Balances at December 31, 2010		1			-		34,875		35		44,896			(46,042	)		(1,111	)
Cumulative effect of adoption of an accounting standard		-			-		-		-		-			(138	)		(138	)
Net loss		-			-		-		-		-			(125	)		(125	)
Balances at December 31, 2011		1		$	-		34,875	$	35	$	44,896		$	(46,305	)	$	(1,374	)
Preferred stock converted into common stock		(1	)		-		770		1		(1	)		-			-
Net loss		-			-		-		-		-			(199	)		(199	)
Balances at December 31, 2012		-		$	-		35,645	$	36	$	44,895		$	(46,504	)	$	(1,573	)

See notes to consolidated financial statements.

CLAIMSNET.COM INC. AND SUBSIDIARIES

Proved Non-Producing	Heithold - #103	Panhandle Gray County Field
Proved Non-Producing	Heithold - #106	Panhandle Gray County Field
Proved Non-Producing	Heithold - #107	Panhandle Gray County Field
Proved Non-Producing	Brown - #204	Panhandle Gray County Field
Proved Non-Producing	Brown - #205	Panhandle Gray County Field
Proved Non-Producing	Brown - #207	Panhandle Gray County Field
Proved Non-Producing	Brown - #208	Panhandle Gray County Field
Proved Non-Producing	Brown - #210	Panhandle Gray County Field
Proved Non-Producing	Brown - #212	Panhandle Gray County Field
Proved Non-Producing	Brown - #213	Panhandle Gray County Field
Proved Non-Producing	Brown - #214	Panhandle Gray County Field
Proved Non-Producing	Brown - #216	Panhandle Gray County Field
Proved Non-Producing	Brown - #217	Panhandle Gray County Field
Proved Non-Producing	Brown - #218	Panhandle Gray County Field
Proved Non-Producing	Jackson - #306	Panhandle Gray County Field
Proved Non-Producing	Crow - #401	Panhandle Gray County Field
Proved Non-Producing	Crow - #404	Panhandle Gray County Field
Proved Non-Producing	Crow - #407	Panhandle Gray County Field
Proved Non-Producing	Crow - #410	Panhandle Gray County Field
Proved Non-Producing	Brown 'A' #501	Panhandle Gray County Field
Proved Non-Producing	Brown 'A' #502	Panhandle Gray County Field
Proved Non-Producing	Brown 'A' #504	Panhandle Gray County Field
Proved Non-Producing	Brown 'A' #505	Panhandle Gray County Field
Proved Non-Producing	Brown 'A' #506	Panhandle Gray County Field
Proved Non-Producing	Brown 'A' #507	Panhandle Gray County Field
Proved Non-Producing	Leopold 'A' #1	Panhandle Gray County Field
Proved Non-Producing	Leopold 'A' #2	Panhandle Gray County Field
Proved Non-Producing	Leopold 'A' #4	Panhandle Gray County Field
Proved Non-Producing	Leopold 'A' #6	Panhandle Gray County Field
Proved Non-Producing	Leopold 'A' #7	Panhandle Gray County Field
Proved Non-Producing	Leopold 'A' #8	Panhandle Gray County Field
Proved Non-Producing	Leopold 'C' #1	Panhandle Gray County Field
Proved Non-Producing	Leopold 'C' #2	Panhandle Gray County Field
Proved Non-Producing	Leopold 'C' #3	Panhandle Gray County Field
Proved Non-Producing	Leopold 'C' #4	Panhandle Gray County Field
Proved Non-Producing	Leopold 'C' #5	Panhandle Gray County Field
Proved Non-Producing	Skoog #1	Panhandle Gray County Field
Proved Non-Producing	Skoog #2	Panhandle Gray County Field
Proved Non-Producing	Skoog #3	Panhandle Gray County Field
Proved Non-Producing	Skoog #4	Panhandle Gray County Field
Proved Non-Producing	Skoog 'A' #1	Panhandle Gray County Field
Proved Non-Producing	Skoog 'A' #1	Panhandle Gray County Field
Proved Non-Producing	Skoog 'A' #1	Panhandle Gray County Field
Proved Non-Producing	Skoog 'A' #1	Panhandle Gray County Field
Proved Non-Producing	Montague County - Daube #2	Eanes Field
Proved Non-Producing	Shelby County - Gene Borders #2H	Angie, James Lime
Salt Water Disposal Well	Stevenson 'A' - #14	Panhandle Hutchinson County Fld.
Salt Water Disposal Well	Magic - #2	Panhandle Carson County Field
Salt Water Disposal Well	Cobb - #2	Panhandle Gray County Field
Salt Water Disposal Well	Walberg - #9	Panhandle Gray County Field
Salt Water Disposal Well	Short #2	Panhandle Gray County Field
Salt Water Disposal Well	J J Wall - #5W	Panhandle Gray County Field
Salt Water Disposal Well	Kinzer - #2W	Panhandle Gray County Field
Salt Water Disposal Well	Brown - #211G	Panhandle Gray County Field
Salt Water Disposal Well	Crow - #406	Panhandle Gray County Field
Undeveloped Acreage	St. Chareles, Parrish, LA - 170 Acres	Herbert Sand
Undeveloped Acreage	Shelby County - Savell Area - 752 acres	Angie, James Lime Depth
Undeveloped Acreage	Shelby County - Gene Borders Area - 500 acres	Haynesville Depth

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(199	)	$	(125	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1			3
Changes in operating assets and liabilities:
Accounts receivable		4			21
Prepaid expenses and other current assets		1			(1	)
Accounts payable, accrued payroll, accrued interest and other liabilities		93			(68	)
Deferred revenues		1			(8	)
Net cash used in operating activities		(99	)		(178	)
CASH FLOWS FROM INVESTING ACTIVITIES:
		-			-
Net cash from investing activities		-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - related parties		100			195
Net cash provided by financing activities		100			195
NET INCREASE IN CASH AND EQUIVALENTS		1			17
CASH AND EQUIVALENTS, BEGINNING OF YEAR		40			23
CASH AND EQUIVALENTS, END OF YEAR	$	41		$	40
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	-		$	2
Cash paid for taxes	$	-		$	-

See notes to consolidated financial statements.

~~CLAIMSNET.COM~~From ~~INC~~the above wells the Company receives certain hydrocarbon production in the form of oil, natural gas and condensates which it markets to third party purchasers. ~~AND~~The ~~SUBSIDIARIES~~following chart lists our net production, total sales and average price we experienced from our wells in the last two fiscal years:

~~NOTES~~Year TOEnded ~~CONSOLIDATED~~December ~~FINANCIAL~~31, ~~STATEMENTS~~

DECEMBER 31, 2012 AND 2011

	2014		2013
Net Production:
Oil (Bbl)		26,390		26,106
Natural Gas (Mcf)		150,878		152,470
Barrel of Oil Equivalent (Boe)		51,536		51,517
Productive Wells		64		66

Oil and Natural Gas Sales:
Oil (in thousands)	$	2,468	$	2,449
Natural Gas (in thousands)	$	1,350	$	1,279
Total (thousands)	$	3,818	$	3,728

Average Sales Price:
Oil ($ per Bbl)	$	93.54	$	93.80
Natural Gas ($ per Mcf)	$	8.94	$	8.39
Barrel of Oil Equivalent ($ per Boe)	$	74.08	$	72.36

Oil and Natural Gas Costs:
Lease Operating Expenses (in thousands)	$	678	$	948
Production taxes (in thousands)	$	210	$	199
Other operating expenses (in thousands)		-		-
Average production cost per Boe	$	17.23	$	22.26

~~NOTE~~As ~~A--ORGANIZATION,~~part ~~BACKGROUND~~of ~~AND~~our ~~LIQUIDITY~~ongoing business we continue to develop the potential of our existing leases primarily through the drilling of new wells. The following table displays our development costs for the last two fiscal years:

Claimsnet.com inc. ("Claimsnet.com" or the "Company") is a Delaware corporation originally formed in April 1996. The Company owns, operates and licenses software used for processing medical insurance claims on the Internet. The Company completed an initial public offering in April 1999.

(in thousands)	Year Ended December 31,
	2014		2013
Unproved prospects	$	0	$	0
Proved prospects	$	0	$	860
Development and exploration costs	$	586	$	716
Total asset retirement cost incurred	$	31	$	37
Total consolidated operations	$	614	$	1,613

~~During~~Oil ~~2011~~ and ~~2012,~~Natural ~~the~~Gas Company entered into unsecured related party notes as detailed in NOTE E to these consolidated financial statements. In addition, the Company incurred interest on unsecured related party notes as detailed in NOTE E to these consolidated financial statements.Reserves

~~The~~Controls ~~Company~~Over ~~has~~Reserve ~~generated~~Report losses since inception and has incurred negative cash flow from operations. Through 2012, the Company generated minimal revenues and relied on an initial public offering, private equity placements, secured and unsecured debt, the sale of certain assets, and funding from a related entity to fund its operations and development activities. The Company’s business strategy and organization has been modified on several occasions in an effort to improve near-term financial performance.Preparation

~~Management~~Our ~~believes~~long ~~that~~term ~~available~~prospects ~~cash~~for ~~resources,~~continuing ~~together~~to ~~with~~extract ~~anticipated~~oil ~~revenues~~and ~~from~~gas ~~operations~~are ~~and~~directly ~~the~~related ~~proceeds~~to ofour ~~recently~~oil ~~completed~~and ~~financing~~gas ~~activities~~reserves. ~~may~~Estimates ~~not~~of beproved ~~sufficient~~reserves toat ~~satisfy~~December ~~the~~31, ~~Company’s~~2014, ~~capital~~were ~~requirements~~prepared ~~through~~by ~~June~~PeTech 30Enterprises, ~~2013~~Inc., ~~Necessary~~independent ~~additional~~petroleum ~~capital~~consultants, ~~may not be available on~~ a ~~timely~~Texas ~~basis~~registered orengineering onfirm. ~~acceptable~~The ~~terms,~~technical ifperson atresponsible ~~all.~~for ~~Accordingly,~~preparing the ~~Company~~reserve ~~may~~estimates beis ~~unable~~an toindependent ~~repay~~petroleum ~~debt~~engineer ~~obligations~~and asgeoscientist ~~they~~that ~~become~~meet ~~due,~~the ~~forced~~requirements toregarding ~~significantly~~qualifications, ~~reduce~~independence, ~~operating~~objectivity, ~~expenses~~and toconfidentiality aset ~~point~~forth ~~which~~in ~~would~~the beStandards ~~detrimental~~Pertaining to ~~business~~the ~~operations,~~Estimating ~~curtail research~~ and ~~development~~Auditing ~~activities,~~of ~~sell~~Oil ~~business~~and ~~assets~~Gas orReserves ~~discontinue~~Information ~~some~~promulgated orby ~~all~~the Society of ~~its~~Petroleum ~~business~~Engineers. ~~operations~~Specifically, ~~take~~our ~~other~~reserve ~~actions~~report ~~which~~was ~~could~~prepared beby ~~detrimental~~Mr. toAmiel ~~business~~David ~~prospects~~PhD, ~~and~~a ~~result~~Texas inregistered ~~charges~~petroleum ~~which~~engineer ~~could~~with beover ~~material~~40 toyears ~~the~~of ~~Company’s~~field ~~operations~~experience. ~~and~~Mr. ~~financial~~David ~~position,~~has ora ~~cease~~Doctorate ~~operations~~from ~~altogether. In~~Stanford ~~the~~University ~~event~~in ~~that~~Petroleum ~~any future financing is effected~~Engineering, toan ~~the~~MBA ~~extent~~from ~~it includes equity securities,~~ the ~~holders~~University of ~~the~~Pittsburgh, ~~common~~an ~~stock~~MSE ~~and~~in ~~preferred~~Chemical ~~stock~~Engineering ~~may~~from ~~experience additional dilution. In~~ the ~~event~~University of Pennsylvania and a ~~cessation~~Bachelor's of ~~operations,~~Science ~~there~~Degree ~~may~~in ~~not~~Petroleum beEngineering ~~sufficient~~from ~~assets~~the toUniversity ~~fully~~of ~~satisfy~~Tulsa. ~~all~~The ~~creditors,~~reserve inreport ~~which~~is ~~case~~then ~~the~~reviewed ~~holders~~and ofapproved ~~equity~~by ~~securities~~our ~~may~~in-house bepetroleum ~~unable~~engineers toand ~~recoup any of their investment~~geoscientists.

NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Claimsnet.com and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

CASH AND EQUIVALENTS

Cash and equivalents include time deposits, certificates of deposits and all highly liquid debt instruments with original maturities of three months or less when purchased.

The Company maintains deposits primarily in one financial institution, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation. At December 31, 2012 and 2011, the Company had no cash in excess of federally insured limits. The Company has experienced no losses related to uninsured deposits.

REVENUE RECOGNITION

We generally enter into services agreements with our customers to provide access to our hosted software platform for processing of customer transactions. We operate the software application for all customers and the customers are not entitled to ownership of our software at any time during or at the end of the agreements. The end users of our software application access our hosted software platform or privately hosted versions of our software application via the internet with no additional software required to be located on the customer’s systems. Customers pay implementation fees, transaction fees and time and materials charges for additional services. Revenues primarily include fees for implementation and transaction fees, which may be subject to monthly minimum provisions. Customer agreements may also provide for development fees related to private labeling of our software platform (i.e. access to our servers through a web site which is in the name of and/or has the look and feel of the customer’s other web sites) and some customization of the offering and business rules. We account for our service agreements, entered into prior to January 1, 2011, by combining the contractual revenues from development, implementation, license, support and certain additional service fees and recognizing the revenue ratably over the expected period of performance. For these agreements, we used an estimated expected business arrangement term of three years which is currently the term of the typical contracts signed by our customers. To the extent that implementation fees are received in advance of recognizing the revenue, we deferred these fees and recorded deferred revenue. We recognize service fees for transactions and some additional services as the services are performed. As a result of the new revenue recognition guidance, relating to arrangements with multiple deliverables, we evaluate all new contract agreements individually to determine the fair value of the different deliverables and if they can be treated as separate units of accounting. The new guidance had no significant impact on our revenue recognition policy for any new contract agreements entered into during 2011 and 2012. We expense the costs associated with our customer service agreements as those costs are incurred.

~~SOFTWARE~~The ~~FOR~~reserve ~~SALE~~report ORwas ~~LICENSE~~prepared as of December 31, 2014, under United States Securities and Exchange Commission pricing requirements. The 2014 reserve report summary is an exhibit to this report.

The Company begins capitalizing costs incurred in developing a software product once technological feasibility of the product has been determined. No software development costs were capitalized in 2012 or 2011. Software development costs of $0 and $2,000 were amortized in 2012 and 2011, respectively. Capitalized computer software costs include direct labor and labor-related costs both internally and externally. The software is amortized after it is put into use over its expected useful life of 3 years.

Year Ended December 31, 2014

Estimated Proved Natural Gas and Oil Reserves:
Net natural gas reserves (MMcf):
Proved developed		6,347
Proved undeveloped		3,788
Total		10,135
Net oil reserves (MBbls):
Proved developed		3,349
Proved undeveloped		3,223
Total		6,572
Estimated Present Value of Net Proved Reserves:
PV-10 value (in thousands)
Proved developed	$	96,884
Proved undeveloped		86,909
Total	$	183,793

Prices Used in Calculating Reserves:
Natural gas (per Mcf)	$	4.35
After adjustments for liquids and BTU content	$	10.81
Oil (per Bbl)	$	91.48
After adjustments for liquids and BTU content	$	90.46

~~Management~~The ~~evaluates~~following ~~the~~table ~~recoverability,~~is ~~valuation,~~a ~~and~~tabular ~~amortization~~representation of ~~capitalized software costs to be sold, leased, or otherwise marketed whenever events or changes in circumstances indicate that~~ the ~~carrying~~estimate ~~amount~~for ofour ~~the~~proved ~~software~~developed ~~may~~and ~~not~~undeveloped bereserves: recoverable. As part of this review, management considers the expected undiscounted future net cash flows. If the cash flows are less than the stated value, capitalized software costs would be written down to fair value.

EQUIPMENT, FIXTURES AND INTERNAL USE SOFTWARE

				Natural Gas
	Crude Oil (Bbl)			(Mcf)
PROVED-DEVELOPED AND UNDEVELOPED RESERVES
December 31, 2012		6,388,820			10,236,050

Revisions of previous estimates		245,536			372,343
Extensions and discoveries
Acquisitions of reserves		7,760			47,007
Production		(26,106	)		(152,470	)

December 31, 2013		6,616,010			10,502,930

Revisions of previous estimates		(13,850	)		(217,302	)
Extensions and discoveries
Disposition of reserves		(4,000	)		-
Production		(26,390	)		(150,878	)

December 31, 2014		6,571,820			10,134,750

PROVED DEVELOPED RESERVES
December 31, 2014		3,349,330			6,346,880
December 31, 2013		3,313,400			6,609,080

Equipment and fixtures are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the depreciable assets, which range from three to seven years. Internal use software is amortized using the straight-line method over the estimated useful life of three years. Maintenance and repairs are expensed as incurred. Significant replacements and betterments are capitalized. Depreciation expense related to equipment and fixtures totaled $1,000 and $1,000 in 2012 and 2011, respectively.Marketing

~~GOODWILL~~Our ability to market oil and natural gas often depends on factors beyond our control. The potential effects of governmental regulation and market factors, including alternative domestic and imported energy sources, available pipeline capacity, and general market conditions, are not entirely predictable.

InNatural ~~December~~gas ~~2010,~~is ~~FASB~~generally ~~issued~~sold ~~ASU~~pursuant ~~No. 2010-28 When~~ to ~~Perform~~individually ~~Step~~negotiated 2gas ofpurchase ~~the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts~~contracts, which ~~modifies~~vary ~~goodwill~~in ~~impairment~~length ~~testing~~from ~~for~~spot ~~reporting~~market ~~units~~sales ~~with a zero or negative carrying amount. As a result~~ of ~~the new guidance, an entity can no longer assert that~~ a ~~reporting~~single ~~unit~~day ~~is not required~~ to ~~perform~~term ~~the~~agreements ~~second step of the goodwill impairment test because the carrying amount of the reporting unit is zero or negative, despite the existence of qualitative factors~~ that ~~indicate~~may ~~goodwill~~extend isseveral ~~more likely than not impaired~~years. ~~The~~Customers ~~amended~~who ~~guidance~~purchase innatural ~~ASU~~gas ~~2010-28~~include ~~was~~marketing ~~effective~~affiliates ~~for~~of ~~public~~the ~~entities~~major ~~for~~oil ~~fiscal years,~~ and ~~for~~gas ~~interim periods within those years~~companies, ~~beginning~~pipeline ~~after December 15~~companies, ~~2010,~~natural ~~with~~gas ~~early~~marketing ~~adoption prohibited. The Company’s adoption of this new pronouncement in 2011 resulted in the impairment of $138~~companies,~~000~~ ofand ~~goodwill. The goodwill was carried on the Company’s books as~~ a ~~result~~variety of ~~the~~commercial ~~acquisition~~and ofpublic ~~Acceptius~~authorities, ~~Inc.~~industrial, ~~(“Acceptius”)~~and ininstitutional ~~fiscal~~end-users ~~year~~who ~~2008.~~ultimately ~~The~~consume ~~cumulative effect of this new guidance has been recognized as an adjustment to accumulated deficit as of~~ the ~~adoption date~~gas. InGas ~~September~~purchase ~~2011,~~contracts ~~FASB~~define ~~issued~~the ~~ASU~~terms ~~2011-08,~~and ~~Testing~~conditions ~~Goodwill~~unique ~~for Impairment, which allows entities~~ to ~~first~~each ~~assess qualitative factors to determine whether it is more likely than not that the fair value~~ of athese ~~reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two step goodwill impairment test described in ASC topic 350~~sales. The ~~amended~~price ~~guidance~~received ~~in ASU 2011-08 is effective~~ for ~~annual~~natural ~~and~~gas ~~interim~~sold ~~goodwill~~on ~~impairment~~the ~~tests~~spot ~~performed~~market ~~for~~may ~~fiscal~~vary ~~years beginning December 31~~daily, ~~2011,~~reflecting ~~with~~changing ~~early~~market ~~adoption permitted~~conditions. The ~~Company~~deliverability ~~adopted~~and ~~this~~price ~~new guidance as~~ of ~~December~~natural ~~31,~~gas ~~2011.~~are ~~The~~subject ~~adoption~~to ~~did~~both ~~not~~governmental ~~have~~regulation aand ~~material~~supply ~~impact~~and ondemand ~~our consolidated financial statements or footnote disclosures~~forces.

~~INCOME~~The ~~TAXES~~Company sells natural gas to one of five customers, Regency Energy Partners, DCP Midstream, LLC, Targa Midstream, Davis Gas Processing, and Upstream. All five customers are well capitalized and regulated. The Company does not anticipate any customer becoming unable to perform under their agreement.

Deferred income taxes are provided for the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation reserves are provided for the deferred tax assets when, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Interest costs and penalties related to income taxes are classified as interest expense and general and administrative costs, respectively, in the Company’s consolidated financial statements. For the years ended December 31, 2012 and 2011, the Company did not recognize any interest or penalty expense related to income taxes or any uncertain tax positions. The Company determined the amounts of unrecognized tax benefits are not reasonably likely to significantly increase or decrease within the next 12 months. The Company is currently subject to a three year statute of limitations by major tax jurisdictions. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction.

~~LOSS~~Oil ~~PER~~produced ~~SHARE~~is sold at the prevailing field price to one or more of a number of unaffiliated purchasers in the area. Generally, purchase contracts for the sale of oil are cancelable on 30 days’ notice. The price paid by these purchasers is an established market or "posted" price that is offered to all producers.

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for each respective year. Common stock equivalents, representing convertible preferred stock, convertible debt, options and warrants totaling approximately 3,411,500 and 5,076,500 shares at December 31, 2012 and 2011, respectively, are not included in the diluted loss per share as they would be antidilutive. Accordingly, diluted and basic loss per share are the same.Competition

~~SEGMENT~~We ~~REPORTING~~compete with major integrated oil and natural gas companies and independent oil and natural gas companies in all areas of our operation. In particular, we compete for property acquisitions and for the equipment and labor required to operate and develop these properties. Many of our competitors have substantially greater financial and other resources than we have. Larger competitors may be able to absorb the burden of any changes in federal, state and local laws and regulations more easily than we can, which could adversely affect our competitive position. Our competitors also may be able to pay more for exploratory prospects and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than we can. Further, our competitors may have technological advantages and may be able to implement new technologies more rapidly than we can. Our ability to explore for natural gas and oil prospects and to acquire additional properties in the future will depend on our ability to conduct operations, to evaluate and select suitable properties and to consummate transactions in this highly competitive environment. In addition, most of our competitors have operated for a much longer time than we have and have demonstrated the ability to operate through industry cycles.

~~The~~At ~~Company~~various ~~operated~~times ~~during~~we ~~the~~may ~~two~~experience ~~years~~occasional ~~presented~~or prolonged shortages or unavailability of drilling rigs, drill pipe and other material used in aoil ~~single~~and ~~segment~~natural gas drilling. Such unavailability could result in ~~accordance~~increased ~~with~~costs, ~~current~~delays ~~accounting~~in ~~guidance~~timing of anticipated development or cause interests in undeveloped oil and natural gas leases to lapse.

~~CONCENTRATION~~Title OFto ~~CREDIT RISK AND SIGNIFICANT CUSTOMERS~~Properties

~~Revenues~~In ~~received~~most situations, as is customary in the oil and gas industry, only a preliminary title examination is conducted at the time we acquire oil and gas leases covering properties for possible drilling operations. Prior to the commencement of drilling operations, a more complete title examination of the drill site tract is usually conducted by independent attorneys or landmen. Once production from ~~one~~a ~~customer~~given ~~represented~~well ~~34%~~is established, we prepare a division order title report indicating the proper parties and percentages for payment of ~~our~~production ~~revenues~~proceeds, including royalties. The level of title examination often differs from property to property. Our properties are subject to customary royalty interests, liens incident to operating agreements, liens for ~~2012~~current taxes and ~~41%~~other ~~for~~burdens ~~2011~~which we believe do not materially interfere with the use of or affect the carrying value of our properties.

~~Trade accounts receivable are stated at the amount the~~ Company ~~expects~~Offices to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectibility of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The Company generally does not require collateral. At December 31, 2012, the Company had one customer that made up 43% of the outstanding accounts receivable balance. At December 31, 2011, the Company had one customer that made up 50% of the outstanding accounts receivable balance.

~~Cost~~The ofCompany ~~revenues~~currently ~~paid~~leases office space at the Dallas Executive Jet Center, 4975 Voyager Drive, Dallas, Texas 75237. The Company entered into a Lease Agreement on October 1, 2014, to ~~two~~lease ~~vendors~~2,600 ~~represented~~square ~~23%~~feet of ~~our~~office ~~cost~~space ofin ~~revenues~~Dallas, Texas for ~~2012~~a term of 12 months and ~~25%~~expiring ~~for~~on ~~2011~~October 1, 2015. The Company pays monthly rent of $2,500 and utilities of approximately $700.

~~USE~~In OFNovember ~~ESTIMATES~~2009, ~~AND~~the ~~ASSUMPTIONS~~Company purchased office, garage and yard space located at 2601 W. Kentucky, Pampa, Texas 79065. This property consists of an acre of land and a free-standing single story building that is approximately 10,000 square feet in size.

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. On an ongoing basis, management evaluates its estimates, including those related to customer programs and incentives including expected customer business arrangement periods, bad debts, contingencies and litigation. Estimates are based on historical experience and on various other assumptions that are believed to be 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. Estimates could change based on changing historical experience and changes in circumstances and assumptions. Actual results could vary from the estimates that were used.Employees

~~ADVERTISING~~The ~~COSTS~~Company headquarters and its subsidiary employ twenty-one (21) full-time employees. The employees are assigned to the following departments: administrative, accounting, and operations.

~~Advertising~~Available ~~costs are expensed as incurred. Advertising costs of $2,000 and $3,000 were incurred for each of the years ended December 31, 2012 and 2011, respectively.~~Information

~~FAIR~~We ~~VALUE~~file OFannual, ~~FINANCIAL~~quarterly ~~INSTRUMENTS~~and current reports, proxy statements and other information electronically with the United States Securities and Exchange Commission (“SEC”). You may read and copy any materials we file with the United States Securities and Exchange Commission at the United States Securities and Exchange Commission’s Public Reference Room at 100 F. Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the United States Securities and Exchange Commission at 1-800-SEC-0330. The United States Securities and Exchange Commission maintains an internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the United States Securities and Exchange Commission, including our filings.

~~Cash,~~Our ~~accounts~~internet ~~receivable,~~address ~~accounts~~is ~~payable~~www.transcoastal.net. ~~and~~We ~~other~~make ~~liabilities~~available ~~are~~free ~~carried~~of atcharge ~~amounts~~on ~~that~~or ~~reasonably~~through ~~approximate~~our ~~their~~internet ~~fair~~site ~~values~~our ~~due~~Annual toReport ~~their~~on ~~short~~Form ~~term~~10-K, ~~nature.~~quarterly ~~Notes~~reports ~~payable~~on ~~may~~Form ~~not~~10-Q, ~~approximate~~current ~~fair~~reports ~~value.~~on ~~Notes~~Form ~~payable~~8-K ~~are with related parties~~ and asamendments ato ~~result~~those doreports ~~not~~filed ~~bear~~or ~~market~~furnished ~~rates~~pursuant ofto ~~interest.~~Section ~~Management~~13(a) ~~believes~~or ~~based~~15(d) onof ~~its~~the ~~current~~Exchange ~~financial~~Act ~~position~~as ~~that~~soon itas ~~could~~reasonably ~~not~~practicable ~~obtain~~after ~~third~~we ~~party~~electronically ~~financing,~~file ~~and as~~ such ~~can~~material ~~not~~with, ~~estimate~~or ~~the~~furnish ~~fair~~it ~~value~~to, of the ~~notes payable~~SEC.

~~NOTE~~ITEM ~~C—PROPERTY~~3 ~~AND~~- ~~EQUIPMENT~~LEGAL PROCEEDINGS

~~Property~~The ~~and~~Company ~~equipment~~is ~~consists~~involved in various legal proceedings, including the proceedings specifically discussed below. Management of the ~~following~~Company atbelieves ~~December~~that ~~31,~~any ~~(in~~liability ~~thousands):~~not listed below that may arise as a result of these proceedings will not have a material adverse effect on the financial condition of the Company and its subsidiaries taken as a whole unless otherwise noted.

	2012			2011
Computer hardware and software	$	524		$	524
Software development costs		1,999			1,999
Furniture and fixtures		31			31
Office equipment		28			28
Leasehold improvements		35			35
		2,617			2,617
Less accumulated depreciation and amortization		(2,617	)		(2,616	)
	$	-		$	1

In 2013, litigation began between a subsidiary of the Company and a third party. The Company was the defendant in the litigation pertaining to wells drilled for the third party and the lack of support for charges assessed during drilling. The litigation was settled in December of 2013. Chief amongst the details of the settlement were that the monetary issues were to be settled during arbitration in March 2014. The arbitration hearing was had and it was decided the Company must pay an award of $580,000 to the plaintiff party. This litigation had an adverse material effect on the financials of the Company for 2013 as the “loss on turnkey contracts” disclosed within the financial statements are a result of this litigation.

~~NOTE~~ In ~~D--INCOME~~January ~~TAXES~~2015, the Company settled outstanding litigation with a third party. The settlement calls for the Company to make a payment of $15,000 on January 6, 2015 and subsequent payments of $5,000 due on the first of each month from February through November 2015. The total balance of the settlement has been expensed and accrued.

~~There~~ITEM ~~was~~4 no- ~~provision~~MINE orSAFETY ~~benefit for federal or state income taxes during the two years ended December 31, 2012 and 2011.~~DISCLOSURES

~~The~~Not ~~differences between the actual income tax benefit and the amount computed by applying the statutory federal tax rate to the loss before incomes taxes are as follows (in thousands):~~applicable.

	Year Ended December 31,
	2012			2011
Benefit computed at federal statutory rate	$	(68	)	$	(43	)
Permanent differences		13			13
Increase (decrease) in valuation reserve		(8	)		25
State income tax		9			5
Change in prior year estimate		63			5
	$	9		$	5

PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market information

Our common stock is quoted on OTCQB under the symbol “TCEC.”

The ~~components~~following table shows the quarterly range of high and low bid information for our common stock over the ~~deferred~~fiscal ~~tax~~quarters ~~assets~~for the last two fiscal years as quoted on OTCQB. We obtained the following high and ~~liabilities~~low ~~are~~bid information from OTCQB. These over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. Investors should not rely on historical prices of our common stock as ~~follows:~~an indication of its future price performance. On December 31, 2014, the closing price of our common stock as reported by OTCQB was $0.30 per share and is reflective of the effect of our 200 for one reverse split which took effect July 1, 2013.

	December 31,
The Quarter Ended*	HIGH			LOW
	2012			2011
March 31, 2013	$	6.00		$	2.00
Deferred tax assets:
June 30, 2013		4.00			2.00
Net operating loss carryforwards	$	15,255		$	15,269
September 30, 2013		6.00			1.45
Fixed assets		13			13
December 31, 2013	$	1.50		$	1.11
Allowance for doubtful accounts		1			2
Deferred revenue		4			4
Other		109			102
Total deferred tax assets		15,382			15,390
Other deferred tax liabilities		-			-
Valuation allowance for deferred tax assets		(15,382	)		(15,390	)
Deferred income tax assets, net of deferred tax liabilities	$	-		$	-

At December 31, 2012, the Company has approximately $44,410,000 of federal net operating loss carryforwards, which began to expire in 2013 subject to certain limitations as described below. The Company has approximately $156,000 of state tax credits for unused net operating losses as of December 31, 2012.

The Quarter Ended*	HIGH		LOW


March 31, 2014	$	1.75	$	0.10
June 30, 2014		1.75		0.25
September 30, 2014		1.01		0.23
December 31, 2014	$	0.82	$	0.15

As ~~a result~~ of ~~stock~~December ~~issued~~31, ~~during 2008 and 2009~~2014, ~~the~~there ~~Company~~were ~~may have experienced~~ an ~~ownership~~estimated ~~change~~371 asholders ~~defined~~of inrecord ~~Internal~~of ~~Revenue~~our ~~Code~~common ~~section~~stock, ~~382. As~~exclusive aof ~~result,~~objecting ~~the~~beneficial ~~Company’s~~owners ~~ability~~(individuals towho ~~use~~deposit ~~net~~shares ~~operating~~with ~~loss~~a ~~carryforwards~~broker and ~~certain~~don’t ~~other~~wish ~~deductions~~ to ~~offset~~provide ~~future taxable income may be limited. The annual limit is an amount equal~~ to the ~~value of the~~ Company atpersonal ~~the date of an ownership change multiplied by approximately 5%~~information). ~~In addition, as the ability to generate future taxable income is highly uncertain, the Company has recorded a valuation allowance against all of its net deferred tax assets.~~

~~NOTE E--RELATED PARTY TRANSACTIONS~~Dividends

OnTo ~~September 7~~date, ~~2012,~~we ~~the~~have ~~Company~~not ~~issued~~paid anany ~~unsecured~~dividends ~~promissory~~on ~~note~~our ~~upon~~common ~~receipt~~stock ofnor ~~$25,000~~established ~~from~~a ~~Mr.~~policy J.concerning Rpayment of Common Stock dividends. ~~Schellenberg,~~Any apayment ~~related~~of ~~party~~dividends ~~(“Schellenberg”).~~in ~~The~~the ~~note~~future ~~bears~~will ~~interest~~be atdetermined by the ~~rate~~Board of ~~1.75%~~Directors ~~per~~in ~~annum. Payment~~light ~~equal~~of toconditions ~~the~~then ~~principal~~existing, ~~and~~including ~~accrued~~restrictions ~~and~~imposed ~~unpaid~~by ~~interest~~our onpreferred ~~the~~stock ~~note~~then ~~are~~outstanding, ~~due~~if onany, ~~demand~~our ~~with~~earnings, ~~seven~~financial ~~days~~condition, ~~written~~capital ~~notice~~requirements and debt covenants, if any, and the tax treatment of any such dividends.

On April 26, 2012, the Company issued an unsecured promissory note upon receipt of $25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payment equal to the principal and accrued and unpaid interest on the note are due on demand with seven days written notice.

On February 8, 2012, the Company issued an unsecured promissory note upon receipt of $25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payment equal to the principal and accrued and unpaid interest on the note are due on demand with seven days written notice.

On January 17, 2012, the Company issued an unsecured promissory note upon receipt of $25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payment equal to the principal and accrued and unpaid interest on the note are due on demand with seven days written notice.

On November 30, 2011, the Company issued an unsecured promissory note upon receipt of $25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payments equal to the principal and accrued and unpaid interest on the note are due on demand.

On October 31, 2011, the Company issued an unsecured promissory note upon receipt of $25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payments equal to the principal and accrued and unpaid interest on the note are due on demand.

On September 29, 2011, the Company issued an unsecured promissory note upon receipt of $25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payments equal to the principal and accrued and unpaid interest on the note are due on demand.

On September 27, 2011, the Company entered into Amendment Number 2 to that certain Unsecured Promissory Note by and between Claimsnet and Novinvest Associated S.A , a related party, dated September 9, 2010. Pursuant to the amendment, effective September 9, 2011, the Due Date on Unpaid Principal and Interest was changed to September 9, 2013. All other terms of the original agreement remain in effect.

On August 29, 2011, the Company issued an unsecured promissory note upon receipt of $25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payments equal to the principal and accrued and unpaid interest on the note are due on demand.

OnUnregistered ~~July~~Sales ~~27, 2011, the Company issued an unsecured promissory note upon receipt~~ of ~~$25,000 from Schellenberg. The note bears interest at the rate of 1.75% per annum. Payments equal to the principal and accrued and unpaid interest on the note are due on demand.~~Equity

OnFrom ~~May~~October 3,2013 ~~2011~~through July 2014, ~~the~~a ~~Company~~total ~~issued an unsecured promissory note upon receipt~~ of ~~$40~~1,~~000 from National Financial Corporation~~290,250 ashares ~~related~~of ~~party.~~Series ~~The~~G ~~note~~preferred ~~bears~~stock ~~interest~~were atsold ~~the~~for ~~rate~~a sum of $1,290,250.~~75% per annum. Payments equal to the principal and accrued and unpaid interest on the note are due on demand.~~

OnThe ~~March~~Series 2,G ~~2011,~~preferred stock carries an 8% annual dividend and may be converted any time after the first year at the request of the shareholder or the Company ~~issued~~into antwo ~~unsecured~~(2) ~~promissory~~shares ~~note~~of ~~upon~~common ~~receipt~~stock of ~~$15~~the Company and two (2) warrants that will allow the holder,~~000~~ for a period of two years from ~~Mr.~~the ~~Thomas~~date ~~Michel~~of issue, ato ~~director.~~acquire ~~The~~one ~~note~~additional ~~bears~~share ~~interest~~of the Company’s common stock for each warrant at ~~the~~a ~~rate~~purchase price of 1$3.75% per ~~annum~~share. ~~Payments~~ ~~equal~~The toSeries ~~the~~G ~~principal~~preferred ~~and~~stock ~~accrued~~issued ~~and~~in ~~unpaid~~2014 ~~interest~~resulted onin ~~the~~a ~~note~~beneficial ~~are~~conversion ~~due~~feature onat ~~demand~~the date of issuance.

OnPrior ~~March~~to 2,the ~~2011,~~acquisition of TransCoastal-Texas by TransCoastal the ~~Company~~Board ~~issued~~of anDirectors ~~unsecured~~of ~~promissory~~TransCoastal–Texas ~~note~~authorized ~~upon~~and ~~receipt~~sold 243,750 shares of ~~$15,000~~Series ~~from~~A ~~Schellenberg~~8% Convertible Preferred Stock for $487,500. The ~~note~~offering ~~bears~~was ~~interest~~accomplished atunder ~~the~~Rule ~~rate~~506 Regulation D as an exempt offering under Section 4(2) of 1the Act.~~75%~~ ~~per~~At ~~annum. Payments~~the ~~equal~~time toof the ~~principal~~acquisition ~~and~~the ~~accrued~~holders converted two for one into 487,500 common shares of TransCoastal–Texas and ~~unpaid~~were ~~interest~~exchanged onfor TransCoastal shares after the ~~note~~acquisition. There ~~are~~were ~~due~~dividends onpaid ~~demand~~in the amount of $39,000 prior to the conversion.

~~NOTE~~Exemption Ffrom ~~--STOCK~~Registration ~~BASED COMPENSATION ARRANGEMENTS~~Claimed

The ~~Company's~~initial ~~1997~~issuance ~~Plan~~of ~~provides~~the ~~for~~Preferred Shares described above were issued by us in reliance upon an exemption from the ~~issuance~~registration torequirements ~~employees,~~of ~~officers~~the Securities Act of 1933, ~~directors~~as amended, provided by Sections 4(2) and ~~consultants~~4(5) in that all participants were Accredited Investors as that term is defined in Rule 501 Regulation D. All of ~~incentive~~the individuals and/or ~~non-qualified~~entities ~~options~~listed above that purchased the unregistered securities were all known to ~~acquire~~us 1and our management,~~307~~ through pre-existing business relationships,~~692~~ ~~shares~~as oflong ~~common~~standing ~~stock~~business associates, friends, and employees. ~~The~~All ~~options~~purchasers ~~are~~were provided access to beall ~~issued~~material atinformation, ~~fair~~which ~~market~~they ~~value~~requested, asand ~~defined,~~all information necessary to verify such information and ~~generally~~were ~~vest~~afforded ~~33%~~access ~~each~~to ~~anniversary~~our ofmanagement ~~the~~in ~~date~~connection with their purchases. All purchasers of the ~~option~~unregistered ~~grant~~securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to us. ~~Options~~All ~~generally~~certificates ~~expire~~or 10agreements ~~years~~representing ~~from~~such ~~the~~securities ~~date~~that ofwere ~~grant~~issued ~~and~~contained ~~automatically~~restrictive ~~expire~~legends, onprohibiting ~~termination~~further transfer of ~~employment~~the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.

~~The~~ITEM ~~Company's~~6 ~~Directors'~~– ~~Plan~~SELECTED ~~provides~~FINANCIAL for the issuance to non-employee directors of options to acquire 361,538 shares of common stock. The options are to be issued at fair market value, as defined, and vest on the first anniversary from the date of the option grant. Options generally expire 10 years from the date of grant and automatically expire one year from the date upon which the participant ceases to be a Director.DATA

~~The~~Not ~~Company did not grant any options for the years ended December 31, 2012 and 2011.~~Applicable

~~There~~ITEM ~~was~~7 no– ~~share-based~~MANAGEMENT ~~compensation~~DISCUSSION ~~expense~~AND ~~related~~ANALYSIS toOF ~~share-based~~FINANCIAL ~~awards~~CONDITION ~~for~~AND ~~the~~RESULTS ~~years~~OF ~~ended December 31, 2012 and 2011.~~OPERATIONS

~~The~~ MANAGEMENT ~~following~~DISCUSSION ~~table~~AND ~~summarizes~~ANALYSIS ~~the~~OF ~~stock~~FINANCIAL ~~option~~CONDITION ~~activity~~AND ~~under~~RESULTS ~~the~~OF ~~two Plans related to the Company:~~OPERATIONS

	NUMBER OF SHARES		PER SHARE EXERCISE PRICE				WEIGHTED AVERAGE EXERCISE PRICE
Outstanding options-December 31, 2010		700,676		$0.30	-	1.25	$	0.40
Granted		-			-			-
Expired and/or Cancelled		30,000		0.50	-	1.25		1.13
Outstanding options-December 31, 2011		670,676		$0.30	-	0.60	$	0.36
Granted		-			-			-
Expired and/or Cancelled		270,676		0.30	-	0.60		0.38
Outstanding options-December 31, 2012		400,000			$0.35		$	0.35
Options exercisable-December 31, 2012		400,000			$0.35		$	0.35

The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal years ended December 31, 2014 and 2013, included elsewhere in this report. The following Management Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements”. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “may,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. The forward-looking statements contained in this report involve a number of risks and uncertainties, many of which are outside of our control. Factors that could cause actual results to differ materially from projected results include, but are not limited to, those discussed in “Risk Factors” elsewhere in this report. Although we believe that the assumptions underlying the forward-looking statements contained in this report are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. Except as required by applicable laws including the securities laws of the United States, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

~~Outstanding~~Our options as of December 31, 2012, had a weighted average remaining contractual life of approximately 1.2 years. Vested options had a weighted average remaining contractual life of 1.2 years as of December 31, 2012. At December 31, 2012, options available for grant under the Company’s 1997 Plan were 907,692. There were no options available for grant under the Company’s Directors’ Plan. There was no intrinsic value for unvested and vested options at December 31, 2012.Business

We are an oil and gas exploration and production company. We acquire oil and gas leases from landowners in geographical locations which we believe have the potential for the successful drilling of new wells to locate commercial quantities of oil and gas or which have existing wells which we believe can be rehabilitated or stimulated to produce additional quantities of hydrocarbons. Once the wells are drilled or acquired we operate the wells to manage their production and market the oil and gas produced. We also receive fees to operate wells not owned by us.

~~The~~RESULTS ~~following~~OF ~~table summarizes the warrant activity related to employee grants:~~OPERATIONS

	NUMBER OF SHARES		PER SHARE EXERCISE PRICE				WEIGHTED AVERAGE EXERCISE PRICE
Outstanding warrants- December 31, 2010		2,399,324		$0.15	-	0.35	$	0.18
Granted		-			-			-
Expired and/or Cancelled		-			-			-
Outstanding warrants-December 31, 2011		2,399,324		$0.15	-	0.35	$	0.18
Granted		-			-			-
Expired and/or Cancelled		24,324			0.35			0.35
Outstanding warrants-December 31, 2012		2,375,000		$0.15	-	0.29	$	0.17
Warrants exercisable-December 31, 2012		2,375,000		$0.15	-	0.29	$	0.17

For the year ended December 31, 2014 compared to year ended December 31, 2013:

~~Outstanding~~During ~~employee~~the ~~warrants~~year asended December 31, 2014, production increased 284 barrels of oil as compared to 26,106 sold in 2013. During the year ended December 31, ~~2012~~2014, ~~had~~we aproduced 1,592 ~~weighted~~MCF ~~average~~less of ~~remaining~~gas ~~contractual~~as ~~life~~compared ofto ~~approximately~~152,470 6sold ~~years~~in 2013. Our ~~Vested~~average ~~employee~~price ~~warrants~~per ~~had~~barrel asold ~~weighted~~during 2014 decreased by $.27 from the $3.81 in 2013. Our average ~~remaining~~price ~~contractual~~per ~~life~~MCF of(adjusted 6for ~~years~~liquids atcontent) ~~December~~sold ~~31,~~during ~~2012~~2014 increased by $.55 ~~There~~from ~~was~~the no$8.39 ~~intrinsic~~in ~~value~~2013. These ~~for~~items ~~unvested~~increased ~~and~~our ~~vested~~revenues ~~employee~~from ~~warrants~~oil atin ~~December~~2014 31by $19,000 ~~2012~~and increased our revenues from gas in 2014 by $71,000.

In addition to employee warrants, the Company had 600,000 warrants to non-employees outstanding at December 31, 2012, with an exercise price of $0.15 that expire June 3, 2013.

	Net Production					Price					Revenue
																							Net Cash
	Oil		Gas			Oil ($)			Gas ($)		Oil ($)		Gas ($)		Total ($)		Taxes ($)			LOE ($)				($)
For the year ended December 31, 2013		26,106		152,470			93.81			8.39		2,449,000		1,279,000		3,728,000		199,000			948,000			2,581,000
For the year ended December 31, 2014		26,390		150,878			93.54			8.94		2,468,000		1,350,000		3,818,000		210,000			678,000			2,930,000
Variance		284		(1,592	)		(.27	)		.55		19,000		71,000		90,000		(11,000	)		(278,000	)		349,000

Revenue. During the year ended December 31, 2014 the Company generated revenues of $4,555,000, an increase of $933,000 or 25% as compared to the same period last year. The increase in revenue was primarily driven by the derivative income of the Company.

During the year ended December 31, 2014 the Company generated revenues from oil and gas sales of $3,818,000 an increase of $90,000 or 2% as compared to the same period last year.

Total Expenses. During the year ended December 31, 2014, total expenses, which are comprised of depreciation, operating costs and general and administrative expenses, were $5,570,000 compared to $7,025,000 during the same period in 2013. This change represents a decrease of $1,455,000 or 21%. The decrease is primarily due to lower professional and legal fees as a result of prior settled litigation and the costs of becoming a public entity incurred in 2013. The company also incurred losses on turn key contracts in 2013 as a result of drilling done for a third party in 2012.

LIQUIDITY AND CAPITAL RESOURCES

Summary of Cash Flows. Net cash used in operating activities of $1,481,000 for the twelve months ended December 31, 2014 increased from cash used in operating activities of $1,654,000 during the same period in 2013. This change represents a decrease of $173,000. The decrease is primarily due to the increase in net income of $2,358,000 due to the lack of loss on turnkey contracts for third party drilling in 2014 and increased expenses as a result of ongoing litigation and the costs of becoming a public entity in 2013.

Net cash used in investing activities of $275,000 was utilized to develop our oil and gas assets during the year ended 2014. This is a decrease of $596,000 from the same period in 2013.

Net cash provided by financing activities decreased by $1,375,000 as the Company contributed a considerable amount of cash toward repaying its line of credit with Green Bank.

As of December 31, 2014, the Company currently has no material agreements for capital expenditures.

As of December 31, 2014, the current terms of the Company’s credit facility with Green Bank are $15,750,000, that matures on June 1, 2015 with a 4-4.5% annual floating interest rate, which requires an approximate monthly payment of $61,000. On February 20, 2015, Melody Business Finance purchased the loan from Green Bank and entered into a Forbearance Agreement filed with the SEC on a Form 8-K. The forbearance is for any existing or anticipated events of default and lasts until April 6, 2015.

Since inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund our operations through the equity and debt financing. We currently intend to raise our needed additional working capital primarily through private placement offerings of our common and preferred stock. However we may also consider doing a public offering as an alternative. There can be no assurance that any private or public offering we may undertake will be successful or raise sufficient capital to fund our business plan. If we raise additional financing by issuing common stock, our existing stockholders’ ownership will be diluted. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There is no assurance that we will be able to maintain operations at a level sufficient for investors to obtain a return on their investment in our common stock.

~~NOTE G~~Off-~~-NOTES~~Balance ~~PAYABLE~~Sheet ~~TO RELATED PARTIES~~Arrangements

~~The~~From ~~following~~time-to-time, iswe aenter ~~summary~~into ofoff-balance ~~notes~~sheet ~~payable~~arrangements and transactions that can give rise to ~~related~~off-balance ~~parties~~sheet atobligations. As of December 31:, 2014, the off-balance sheet arrangements and transactions that we had entered into included operating lease agreements, personal guarantees of our line of credit with Green Bank by three of the officers and majority stockholders and gas transportation commitments. The Company does not believe that these arrangements are reasonably likely to materially affect its liquidity or availability of, or requirements for, capital resources currently or in the future.

	2012		2011
Note payable to a Director. Principal due on demand with30 days notice; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 5% 1/1/09).	$	30,000	$	30,000
Note payable to a Director. Principal due on demand with 30 days notice; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 5% 1/1/09).		20,000		20,000
Note payable to a Director. Principal due on demand with 30 days notice; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10)		30,000		30,000
Note payable to a Director. Principal due on demand with 30 days notice; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10)		35,000		35,000
Note payable to a Director. Principal due on demand with 30 days notice; unsecured. Interest payable at 1.75%.		15,000		15,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 8% 1/1/09).		100,000		100,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 5% 1/1/09; amended from 7% 3/20/08).		100,000		100,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 5% 1/1/09).		50,000		50,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 5% 1/1/09).		50,000		50,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 5% 1/1/09).		50,000		50,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 5% 1/1/09).		100,000		100,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10).		100,000		100,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10).		75,000		75,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10).		100,000		100,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10).		25,000		25,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10).		80,000		80,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		40,000		40,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 9.5% 1/1/09).		35,000		35,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 8% 1/1/09).		10,000		10,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		15,000		15,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		25,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		25,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		25,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		25,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		25,000
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		-
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		-
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		-
Note payable to a 5% shareholder. Principal due on demand; unsecured. Interest payable at 1.75%.		25,000		-
Current notes payable – related parties	$	1,285,000	$	1,185,000
Note payable to a 5% shareholder. Principal due 9/9/2013 (amended from 9/9/11 on 9/27/11); unsecured. Interest payable at 1.75% (amended from 3% 12/1/10). (2)		-		50,000
Note payable – related party	$	-	$	50,000

Application of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.

We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time. Actual results may vary from our estimates due to changes in circumstances, politics, global economics, general business conditions and other factors. Our significant estimates are related to the valuation of warrants and options.

There are accounting policies that we believe are significant to the presentation of our financial statements. The most significant of these accounting policies relates to the accounting for our research and development expenses and stock-based compensation expense.

Stock-based Compensation

We account for all stock-based payments and awards under the fair value based method.

Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if we had paid cash instead of paying with or using equity based instruments. The cost of the stock-based payments to non-employees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.

We account for the granting of share purchase options to employees using the fair value method whereby all awards to employees will be recorded at fair value on the date of the grant. The fair value of all share purchase options are expensed over their vesting period with a corresponding increase to additional capital surplus. Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in additional capital surplus, is recorded as an increase to share capital.

We use the Black-Scholes option valuation model to calculate the fair value of share purchase options at the date of the grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in assumptions can materially affect the fair value estimate and therefore the Black-Scholes model does not necessarily provide a reliable single measure of the fair value of our share purchase options.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None. Change in auditing firm previously disclosed on Form 8-K and filed with the SEC on June 19, 2014.

~~The~~ITEM ~~following~~9A. isCONTROLS aAND ~~summary~~PROCEDURES ~~of convertible note payable at December 31:~~

		2012		2011
Convertible note payable to a Director. Principal due on demand (amended from November 30, 2010 on 12/1/10), unsecured. Interest payable at 1.75% (amended from 3% 12/1/10; amended from 8% 1/1/09). (1)		10,000		10,000
Convertible note payable to a 5% shareholder. Principal due 9/9/13 (amended from 9/9/11 on 9/27/11); unsecured. Interest payable at 1.75% (amended from 3% 12/1/10). (2)		50,000		-
Convertible note payable – related party	$	60,000	$	10,000

Failure of the Company’s internal control over financial reporting could harm its business and financial results.

~~(1)~~The ~~Payments~~management ~~equal~~of toTransCoastal ~~the~~is ~~principal~~responsible ~~and~~for ~~accrued~~establishing and ~~unpaid~~maintaining ~~interest~~effective oninternal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the ~~note~~reliability ~~are~~of ~~due~~financial onreporting ~~demand.~~for Atexternal purposes in accordance with accounting principles generally accepted in the ~~option~~United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the ~~holder,~~Company’s attransactions; ~~any~~providing ~~time~~reasonable orassurance ~~from~~that ~~time~~transactions toare ~~time~~recorded ~~prior~~as tonecessary for preparation of the ~~maturity~~financial ~~date~~statements; providing reasonable assurance that receipts and expenditures are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, ~~all~~use or ~~any~~disposition ~~portion~~ of the ~~outstanding~~Company ~~principal~~assets ~~may~~that could have a material effect on the financial statements would be ~~converted~~prevented ~~into~~or detected on a ~~number~~timely basis. Because of ~~shares~~its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s ~~common~~financial ~~stock~~statements atwould abe ~~conversion~~prevented ~~price~~or ofdetected. ~~36,500~~Failure ~~shares~~to ~~per~~maintain ~~$10,000~~an effective system of ~~principal.~~internal ~~Interest~~control isover ~~payable~~financial onreporting ~~maturity~~could limit the Company’s ability to report its financial results accurately and timely or to detect and prevent fraud.

~~(2)~~Evaluation ~~Payments equal to the principal and accrued and unpaid interest on the note are due on demand. At the option~~ of ~~both~~Disclosure ~~parties~~Controls ~~upon the maturity date, all or any portion of the outstanding principal~~ and ~~interest~~Procedures may be converted into a number of shares of the Company’s common stock at a conversion price of $.125 per share. As of December 31, 2011, this note payable was not considered convertible as the Company did not have sufficient shares of authorized but unissued common stock. As of December 31, 2012, this note is classified as a convertible note payable – related party as the Company has sufficient shares of authorized and unissued common stock.

~~NOTE~~Our Hmanagement, with the participation of our chief executive officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-~~COMMITMENTS~~15(e) ~~AND~~under ~~CONTINGENCIES~~the Exchange Act) as of December 31, 2014. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and (b) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

~~LEASES~~Based on the evaluation of our disclosure controls and procedures as of December 31, 2014, our Chief Executive Officer concluded that, as of such date, our disclosure controls and procedures were ineffective, due to the material weaknesses in our internal control over financial reporting described below.

~~The~~Management’s ~~Company~~Annual ~~leases~~Report ~~office space under a lease agreement that expires~~ on ~~May~~Internal ~~31,~~Control ~~2013.~~Over ~~Rent~~Financial ~~expense~~Reporting totaled $81,000 and $78,000 for each of the years ended December 31, 2012 and 2011, respectively. The Company leases servers and web server management facilities under an agreement that expires in 2013. The Company has also entered into a software license commitment related to HIPAA validation software that expires in 2013.

~~From~~Our ~~time~~management tois ~~time~~responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the ~~normal~~supervision ~~course~~and with the participation of ~~business~~our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the ~~Company~~effectiveness isof aour ~~party~~internal tocontrol ~~various~~over ~~matters~~financial ~~involving~~reporting ~~claims~~as orof ~~possible~~December ~~litigation. Currently~~31, ~~there~~2014 ~~are~~based noon ~~such~~the ~~asserted~~guidelines ~~claims~~established in the updated 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. (COSO).

~~NOTE~~Because ~~I--RETIREMENT~~of ~~PLAN~~its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collision or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. 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 established policies or procedures may deteriorate.

~~The~~A ~~Company~~material ~~utilizes~~weakness is a ~~third~~control ~~party~~deficiency, ~~for~~or ~~the~~a ~~processing~~combination ~~and administration~~ of ~~its~~control ~~payroll~~deficiencies, ~~and~~that ~~benefits.~~results ~~Under~~in ~~the~~more ~~agreement,~~than ~~the~~a ~~third~~remote ~~party~~likelihood isthat ~~legally~~ a ~~co-employer~~material ofmisstatement ~~all~~ of the ~~Company's~~annual ~~employees,~~or ~~which~~interim ~~are~~financial ~~covered~~statements bywill ~~the~~not ~~third~~be ~~party's~~prevented ~~401(k)~~or ~~retirement plan~~detected. ~~Under~~As ~~the~~a ~~plan,~~result ~~employer~~of ~~contributions~~our ~~are~~management’s ~~discretionary.~~assessment ~~During~~of ~~2012,~~ the ~~Company~~effectiveness ~~made~~of ~~$4,000~~internal incontrol ~~matching~~over ~~contributions~~financial ~~and paid $3~~reporting,~~000~~ inwe ~~fees.~~have ~~During~~identified ~~2011,~~ the ~~Company~~following ~~made~~material ~~$3,000~~weaknesses inthat ~~matching~~existed ~~contributions~~as ~~and~~of ~~paid~~December $331,~~000~~ ~~in fees.~~2014:

~~NOTE~~1. ~~J--~~Inadequate ~~--SUBSEQUENT~~and ~~EVENTS~~ineffective controls over the financial statement close process.

~~None~~In conjunction with the year-end financial close, our procedures and controls to ensure that accurate financial statements in accordance with generally accepted accounting principles could be prepared and reviewed on timely basis were not operating effectively. Such ineffective procedures and controls include (a) ineffective segregation of duties; (b) insufficient documentation of accounting policies and procedures and retention of historical accounting portions. As a result of the above deficiencies, material and less significant post-closing adjustments were identified by our independent registered public accounting firm, Whitley Penn LLP, and recorded in our financial statements as of and for the year ended December 31, 2014

2. Inadequate staffing within the accounting organization.

During 2014, there were numerous changes in our accounting personnel, both on staff and third party support. This has led to our not having a sufficient number of experienced personnel in the accounting organization to provide reasonable assurance that transactions are being recorded as necessary to ensure timely preparation of financial statements in accordance with generally accepted accounting principles, including the preparation of our Annual Report on Form 10-K. We consider this weakness to be a material weakness in the operation of entity-level controls and operation level controls. The ineffectiveness of such controls can result in misstatement to assets, liabilities, revenues, and expenses.

Our management concluded that, due to the material weaknesses described above, we did not maintain effective internal control over financial reporting as of December 31, 2014.

~~ITEM 9~~3. ~~CHANGES~~Remedial ~~IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.~~actions

~~None~~In an effort to remediate the identified deficiencies, we have commenced, and are continuing to implement, a number of changes to our internal control over financial reporting. These following changes will be made before the end of 2015:

~~ITEM~~• ~~9A.~~Proper ~~CONTROLS~~accounting ~~AND~~procedures ~~PROCEDURES~~will be put in place • Monthly reconciliation of the financials.

~~DISCLOSURE~~Additionally, ~~CONTROLS~~in ~~AND~~response ~~PROCEDURES~~to the identified deficiencies, we intend to implement additional remedial measures, including but not limited to the following:

We• ~~maintain~~Hiring ~~“disclosure~~additional ~~controls~~accounting ~~and~~personnel; ~~procedures,” as defined in Rules 13a-15(e)~~ and ~~15d-15(e)~~• ~~under~~Improving the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our ~~management,~~documentation ~~including our principal executive officer~~ and ~~principal~~training ~~financial~~related ~~officer, as appropriate,~~ to ~~allow~~policies ~~timely decisions regarding required disclosure. In designing~~ and ~~evaluating our disclosure controls and~~ procedures, ~~management~~for ~~recognized~~the ~~that disclosure~~ controls ~~and~~related ~~procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives, and we necessarily are required~~ to ~~apply~~ our ~~judgment~~significant inaccounts ~~evaluating the cost-benefit relationship of possible disclosure controls~~ and ~~procedures~~processes.

~~Our~~Changes management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2012 and concluded that the disclosure controls and procedures were not effective, because certain deficiencies involving internal controls constituted a material weakness as discussed below. The material weakness identified did not result in ~~the~~Internal ~~restatement~~Control ofover ~~any~~Financial ~~previously~~Reporting reported financial statements or any other related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s consolidated financial statements for the current reporting period.

~~MANAGEMENT’S~~Except ~~ANNUAL~~as ~~REPORT~~described ONabove, ~~INTERNAL~~during ~~CONTROL~~its ~~OVER~~assessment ~~FINANCIAL~~of ~~REPORTING~~our internal control over financial reporting our management identified no change in our internal control over financial reporting that occurred during the fourth quarter of 2014 that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

~~Our~~ITEM ~~management~~9B is– ~~responsible~~OTHER for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.INFORMATION

~~Our~~Forbearance ~~management,~~Agreement ~~including~~with ~~our~~Melody ~~principal executive officer~~ and ~~principal~~potential ~~accounting~~restructuring ~~officer, conducted an evaluation~~ of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded that the disclosure controls and procedures were not effective, because certain deficiencies involving internal controls constituted a material weakness. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company~~’s annual or interim financial statements will not be prevented or detected on a timely basis.~~

The ~~material~~Company ~~weakness~~has ~~relates~~entered tointo ~~the~~a ~~monitoring~~Forbearance ~~and~~Agreement ~~review~~with ofMelody ~~work~~Business ~~performed~~Finance, byLLC ~~our~~(the ~~Chief~~“New ~~Financial~~Lender”) ~~Officer~~pursuant into the ~~preparation~~New ofLender ~~consolidated~~assuming ~~financial~~the ~~statements,~~Loan ~~footnotes~~Agreement dated May 2011 with Green Bank N.A. and ~~financial~~was ~~data~~originally ~~provided~~disclosed toin the Company’'s ~~registered~~Form ~~public~~8-K ~~accounting~~filed ~~firm~~with inthe ~~connection~~SEC ~~with~~on ~~the~~February ~~annual~~24, ~~audit~~2015. ~~All~~ ofThe ~~our~~principal ~~financial~~amount ~~reporting~~of the note is ~~carried~~$15,750,000 ~~out~~with bya ~~our~~maturity ~~Chief~~date ~~Financial~~of ~~Officer~~June 1, ~~and~~2015. weThe doNew ~~not~~Lender ~~have~~has anagreed ~~audit~~to ~~committee. This~~enter ~~lack~~into ofa ~~accounting~~Forbearance ~~staff~~Agreement ~~results~~regarding inall a“Existing ~~lack~~Events of ~~segregation~~Default” ofas ~~duties~~well ~~and~~as ~~accounting~~agreed ~~technical~~upon ~~expertise~~“Anticipated ~~required~~Events toof beDefault” ~~proficient~~pursuant into ~~applying~~the ~~complex~~default ~~accounting~~provisions ~~and~~of ~~regulatory~~the ~~guidance~~existing ~~mainly~~Loan ~~related~~Agreement. toThe ~~accounting~~Forbearance ~~for~~Agreement ~~stock~~alters ~~options~~or ~~and~~adds ~~taxes.~~several ~~These~~ material ~~weaknesses~~terms ~~result~~to in the ~~Company~~Loan ~~not~~Agreement ~~having~~and ~~the~~stockholders ~~ability~~are strongly urged to ~~establish~~read ~~and~~the ~~maintain~~Forbearance Agreement attached as an ~~effective~~exhibit ~~system~~to ofthe ~~internal~~above ~~control~~described Form 8-K.

InThe ~~order~~continuance toof ~~mitigate this material weakness to~~ the ~~fullest~~Forbearance ~~extent~~Agreement ~~possible,~~by ~~all~~Melody ~~financial~~is ~~reports~~conditioned ~~are~~upon ~~reviewed~~a byrestructuring ~~the~~of ~~Chief Operating Officer,~~ the ~~Chief~~Company ~~Executive~~agreeable ~~Officer~~to asMelody. ~~well~~Currently as the ~~Board~~Company ofis ~~Directors~~in ~~for~~discussions ~~reasonableness. All~~with ~~unexpected~~Melody ~~results~~regarding ~~are~~the ~~investigated.~~restructuring Atand ~~any~~as ~~time,~~of ifthe itdate ~~appears~~of ~~that~~this ~~any~~Form ~~control~~10-K ~~can~~the becomponents ~~implemented~~of tothe ~~continue~~restructuring tohave ~~mitigate~~not ~~such~~been ~~weaknesses,~~agreed ~~it is immediately implemented~~upon. AsThe ~~soon~~restructuring ~~as our finances allow, we~~ will ~~hire~~likely ~~sufficient~~have ~~accounting~~a ~~staff~~substantial ~~and~~negative ~~implement~~impact ~~appropriate~~on ~~procedures~~the ~~for~~stockholders ~~monitoring and review~~ of ~~work~~the ~~performed by our Chief Financial Officer~~Company.

Should the Company fail to come to an agreement with Melody then Melody will have the option to foreclose on the Loan Agreement or continue the forbearance. It should be noted that in the event that the Company and Melody fail to come to an agreement on the restructuring the Forbearance Agreement requires the Company to pay Melody a non-refundable closing fee in the amount of $2,000,000. In such an event it is likely that the Company will have no choice but to seek the protection of the United States Bankruptcy Court.

PART III

ITEM 10: Directors and Executive Officers

Directors and Executive Officers

NAME	AGE		POSITION	Director/Officer Since
Don Crosbie		70	President, ANC Holdings, LLC and Chairman of the Board of Directors.		2002
Stuart G. Hagler		51	Chief Executive Officer, Director		2013
W.A. Westmorland		53	President-Operations, Director		2013
David May		51	President-Acquisitions, Director		2013
Derrick May		25	Corporate Secretary		2013

Don Crosbie was the former President, Chief Executive Officer of ANC Holdings, LLC that was sold in June of 2013 by the Company. He is our former President and current Chairman of the Board positions he has held since October 2002. From July 2001 until October 2002, Mr. Crosbie was President and CEO of Xactimed, a claims processing and clearing house company serving the hospital market. From September 2000 to July 2001, Mr. Crosbie served as CFO and President of North American Operations of Blue Wave Systems, a high density DSP board supplier to the telecom infrastructure market, including media gateways and 2 ½ and 3 G wireless.

Stuart G. Hagler, is a director and Chief Executive Officer for TransCoastal and has been with TransCoastal since its inception in 1998. He is also a Manager and Member of TransCoastal Partners, LLC, a company that manages oil and gas joint venture partnerships. In 1987 he received his Bachelor's degree in Economics from Southern Methodist University in Dallas, Texas and in 2009 he received his Master's Degree in Business Administration from the same school. His primary responsibility as CEO is overseeing the day-to-day activities and managing the strategic direction of TransCoastal.

W. A. Westmoreland, is a director and President-Operations for TransCoastal and has been with TransCoastal since its inception in 1998 and serves as a Manager and Member of TransCoastal Partners, LLC, a company that manages oil and gas joint venture partnerships. Mr. Westmoreland's primary responsibility is overseeing operation of the corporations existing wells and supervising the drilling of the corporation's new wells through TransCoastal's operating subsidiary CoreTerra Operating LLC.

David J. May, is a director and President-Acquisitions for TransCoastal and has been with TransCoastal since its inception in 1998. Mr. May is also a Manager and Member of TransCoastal Partners, LLC. His primary responsibilities are for lease acquisition working directly with prospect generation sources, and the due diligence associated with those properties.

~~This~~ Regulatory annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this annual report.actions

~~CHANGES~~On INApril ~~INTERNAL~~16, ~~CONTROL~~2008, ~~OVER~~Stuart ~~FINANCIAL~~Hagler, ~~REPORTING~~David May, W.A. Westmoreland, TransCoastal Partners, LLC, and the Couba Du Large Joint Venture entered into a Stipulation with the California Securities Commissioner, without admitting or denying any of the opinions or findings in the Desist and Refrain Order, that alleged that joint venture interests were offered and sold in California by TransCoastal Partners and the named individuals "without being qualified in violation of California Corporations Code section 25110". The aforementioned parties settled with the State of California stipulating and agreeing to the finality of the Desist & Refrain Order, which prevents them from offering securities in California unless the securities are qualified under applicable California securities law as registered securities or exempt therefrom.

~~There~~Derrick ~~were~~A. noMay ~~changes~~Corporate Secretary. Derrick was appointed Corporate Secretary in ~~our~~May ~~internal~~of ~~control~~2013. ~~over~~Derrick ~~financial~~originally ~~reporting~~joined ~~that~~TransCoastal ~~occurred~~in ~~during~~February ~~the~~of ~~quarter~~2013 ~~ended~~as ~~December~~their 31Financial Analyst. Derrick graduated from Oklahoma State University in Stillwater, Oklahoma in 2012. ~~that~~He ~~have~~was ~~materially~~on ~~affected~~the Dean’s List during his tenure there and was awarded a B.S. in Finance. Derrick previously served an internship at Highland Capital Management in Dallas. Mr. May is currently enrolled in the MBA program at Southern Methodist University in Dallas, orTexas. ~~are~~Derrick ~~reasonable~~is ~~likely~~the toson ~~materially~~of ~~affect~~David May, ~~our~~a ~~internal~~director ~~control~~and ~~over~~our ~~financial~~President ~~reporting~~- Acquisitions.

~~ITEM~~Compliance ~~9B.~~with ~~OTHER~~Section ~~INFORMATION.~~16(a) of the Securities Exchange Act of 1934

~~None~~Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports that they file.

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2014, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners have complied.

Code of Ethics

We have adopted a code of ethics (within the meaning of Item 406(b) of Regulation S-K) that applies to our Board, Chief Executive Officer, Chief Financial Officer and such other persons designated by our Board or an appropriate committee thereof. The code of ethics is designed to deter wrongdoing and to promote honest and ethical conduct and full, fair, accurate, timely and understandable disclosure in our SEC reports and other public communications. The code of ethics promotes compliance with applicable governmental laws, rules and regulations. We have posted our policy on our website at www.transcostal.net.

Composition of the Board

Our Board currently consists of four members, including our Chief Executive Officer. We are currently seeking additional directors that qualify as independent directors under the independence requirements of Rule 10A-3 of the Exchange Act.

Board Leadership Structure

Our Board understands that there is no single generally accepted approach to providing board leadership and that given the dynamic and competitive environment in which we operate, the right board leadership structure may vary as circumstances warrant. To this end, our Board has no policy mandating the combination or separation of the roles of Chairman and Chief Executive Officer and believes the matter should be discussed and considered from time to time as circumstances change. Currently, the roles of Chairman and Chief Executive Officer are filled by the separate individuals. This leadership structure is appropriate for us at this time as we are a smaller company and we believe this structure provides clarity of leadership.

Board Oversight of Risk Management

Our full Board oversees our risk management process. Our Board oversees a company-wide approach to risk management, carried out by management. Our full Board determines the appropriate risk for us generally, assesses the specific risks faced by our company and reviews the steps taken by management to manage those risks.

~~PART~~While ~~III~~the full Board maintains the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas. In particular, our compensation committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements and the incentives created by the compensation awards it administers. Our audit committee oversees management of enterprise risks as well as financial risks and potential conflicts of interests. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant committee or the full Board, as appropriate, with additional review or reporting on risks conducted as needed or as requested by the Board and its committees.

ITEM ~~10.~~11: ~~DIRECTORS,~~Executive ~~EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.~~Compensation

~~MANAGEMENT~~Officers

~~Our~~The ~~directors,~~Company ~~executive~~recently executed amended employment agreements with its four primary officers: Stuart G. Hagler, David May, Wilber A. Westmoreland and ~~key~~Derrick ~~employees~~May. The employment agreements have a two (2) year term with automatic one year extensions beyond the original term. Compensation is broken down into a base monthly salary, ~~their~~monthly ~~ages~~bonus and annual stock award. The agreements for Hagler, May and ~~their~~Westmoreland ~~positions~~provide ~~held~~for a base salary of $15,000 per month and a monthly bonus calculated at six percent (6%) of the Company's operating income above $150,000 per month with usa ~~are~~maximum monthly bonus of $30,000. The annual stock award can be either 200,000 or 100,000 shares depending on whether the officer has earned less than or more than an average of $20,000 per month for any contract year. The agreement for Derrick May calls for a base salary of $10,000 per month and a monthly bonus calculated at four percent (4%) of the Company's operating income above $150,000 per month with a maximum monthly bonus of $15,000. Derrick's annual stock award can be either 75,000 or 50,000 shares depending on whether the Derrick has earned less than or more than an average of $10,000 per month for any contract year. The employment agreements can be found as ~~follows:~~Annex B to our Schedule 14C filed with the SEC on November 18, 2014.

NAME	AGE	POSITION
Don Crosbie	68	President, Chief Executive Officer, Chairman of the Board of Directors and Class I Director
Laura M. Bray	54	Chief Financial Officer
Gary J. Austin	67	Vice President of Operations
John C. Willems, III	56	Class II Director
Thomas Michel	60	Class II Director
K. Scott Spurlock	44	Vice President of Development

In addition to their salary the officers receive certain benefits such as health insurance similar to the benefits received by the other employees of the Company. The Company may, at its sole discretion, obtain a “key man” life insurance policy on each of its officers with the Company being the beneficiary of such insurance.

~~The~~ITEM ~~following~~12: isSecurity ~~certain~~Ownership ~~summary~~of ~~information~~Certain ~~with~~Beneficial ~~respect~~Owners toand ~~our~~Management ~~executive officers, directors~~ and ~~key~~Related ~~employees.~~Stockholder Matters

~~DON~~The ~~CROSBIE~~following ~~has~~table ~~served~~summarizes ascertain ~~our~~information ~~President,~~as ~~Chief~~of ~~Executive~~December ~~Officer~~31, ~~and~~2014 ~~Chairman~~with ofrespect to the ~~Board~~beneficial ~~since~~ownership ~~October~~of ~~2002.~~our ~~From~~Common ~~July~~Stock ~~2001~~by ~~until~~(1) ~~October~~our ~~2002~~directors, ~~Mr.~~(2) ~~Crosbie~~our ~~was~~Presidents ~~President~~ and ~~CEO~~Chief ofExecutive ~~Xactimed,~~Officer ~~a claims processing~~ and ~~clearinghouse~~our ~~company~~most ~~serving~~highly-compensated ~~the~~executive ~~hospital~~officers ~~market.~~as Inof ~~the~~December ~~year he was at Xactimed~~31, it2014 ~~experienced~~(or aany ~~dramatic~~executive ~~turnaround,~~officer ~~with~~who ~~revenue~~would ~~growing~~have ~~150%~~been ~~over~~among the ~~prior~~most ~~year~~highly-compensated ~~and~~but ~~an operating profit was achieved as compared to a significant operating loss~~ for the ~~prior~~fact ~~year. From~~that ~~September~~such ~~2000~~an toindividual ~~July~~was ~~2001,~~not ~~Mr.~~serving ~~Crosbie served~~ as ~~CFO~~an ~~and~~executive ~~President~~officer ofas ~~North American Operations~~ of ~~Blue~~December ~~Wave Systems~~31, a2014) ~~high~~whose ~~density~~total ~~DSP~~salary ~~board~~and ~~supplier~~bonus tofor the ~~telecom~~fiscal ~~infrastructure~~year ~~market,~~ended ~~including~~December ~~media~~31, ~~gateways~~2014 ~~and~~exceeded 2$120,000 ½for ~~and~~services 3in Gall ~~wireless.~~capacities ~~He joined Blue Wave with a corporate strategic direction~~ to ~~identify and complete a sale of~~ the ~~company.~~Company ~~This~~(collectively, ~~was accomplished in July 2001 with~~ the ~~sale~~"Named ofExecutive ~~the~~Officers"), ~~company~~(3) tostockholders ~~Motorola~~known ~~for~~by ~~$125~~us ~~million. From September 1999~~ to ~~June~~own ~~2000,~~beneficially ~~Mr.~~5% ~~Crosbie~~or ~~served~~more ~~as President, COO and CFO~~ of ~~Ypay.com, an internet start up company in~~ the ~~free~~shares ~~ISP/media rich advertising space. From June 1997 to December 1998, Mr. Crosbie served as CEO~~ of ~~Rheumatology~~our ~~Research~~Common ~~International~~Stock, ~~a Site Management Organization performing clinical trials for pharmaceutical~~ and ~~biotech~~(4) ~~companies~~all ~~in pre-FDA approval trials for new arthritis drugs. Prior to Rheumatology Research International, Mr. Crosbie served as founder, Chairman and CEO~~ of ~~ComVest~~our ~~Partners~~Named ~~Inc., an institutional research boutique with an emphasis on networking, wireless, voice and remote access; and~~ Executive ~~Vice~~Officers ~~President~~ and ~~Chief~~directors ~~Financial~~as ~~Officer of InterVoice Inc,~~ a ~~high technology provider of customized voice response systems~~group. ~~The~~As ~~breadth~~ of ~~Mr.~~December ~~Crosbie’s~~31, ~~experience~~2014, ~~led~~ the ~~board~~Company tohad ~~believe~~29,334,264 ~~this~~shares ~~individual~~of isCommon ~~qualified~~Stock toissued ~~serve~~and ~~on the board of directors~~outstanding.

~~LAURA~~Beneficial M.ownership ~~BRAY,~~is adetermined ~~Certified~~in ~~Public~~accordance ~~Accountant,~~with ~~was~~the ~~promoted~~rules toof ~~Chief~~SEC. ~~Financial~~Under ~~Officer~~SEC inrules, ~~November~~a ~~2004.~~person ~~Ms.~~is ~~Bray~~deemed ~~joined~~to ~~Claimsnet~~be asa ~~Controller~~"beneficial inowner" ~~January~~of ~~2003~~a ~~from~~security ~~Xactimed,~~if ~~where~~that ~~she~~person ~~served~~has asor ~~Controller.~~shares ~~Xactimed~~voting ispower aor ~~claims~~investment ~~processing~~power, ~~and~~which ~~clearing~~includes ~~house~~the ~~company~~power ~~serving~~to dispose of or to direct the ~~hospital~~disposition ~~market~~of such security. ~~Ms.~~ ~~Bray~~A ~~has~~person ~~more~~is ~~than~~also 30deemed ~~years~~to ofbe ~~financial~~a ~~management~~beneficial ~~experience,~~owner ~~including~~of ~~Accounting~~any ~~Manager~~securities of ~~Blue~~which ~~Wave~~that ~~Systems,~~person has a ~~high~~right ~~density~~to ~~DSP~~acquire ~~board~~beneficial ~~supplier~~ownership towithin ~~the~~60 ~~telecom~~days. ~~infrastructure~~Securities ~~market,~~that ~~and~~can ~~Controller~~be ofso ~~EFS,~~acquired aare ~~software~~deemed ~~sales~~to ~~and~~be ~~document~~outstanding ~~management~~for ~~services~~purposes ~~firm.~~of ~~Ms.~~computing ~~Bray~~such ~~began~~person’s ~~her~~ownership ~~career~~percentage, inbut ~~the~~not ~~audit~~for ~~division~~purposes of ~~Alexander~~computing ~~Grant~~any &other Coperson’s percentage., ~~followed~~Under bythese rules, more than ~~ten~~one ~~years~~person asmay ~~Business~~be ~~Manager~~deemed ~~and~~to ~~Controller~~be ina beneficial owner of the ~~radio~~same ~~broadcasting~~securities ~~industry~~and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

GARY J. AUSTIN joined us in March 2004 as our Chief Operating Officer. In April 2009, Mr. Austin resigned his position as an officer of the company and continued to be employed as Vice President of Operations. From September 2002 to December 2003, Mr. Austin served as the President and Chief Operating Officer of Gold Lake Technologies Corporation, a document management services firm. From March 1999 to September 2002, Mr. Austin served as the Senior Vice President and Chief Operating Officer of GTESS Corporation, a health claim processing service provider. Mr. Austin previously held a variety of executive and management positions with Peerless Group, Electronic Data Systems, Shared Medical Systems, and Crittenden Memorial Hospital.

JOHN C. WILLEMS, III has served as a director of our Company since 1998. Mr. Willems has handled some of our Company’s legal needs since April 1996. Mr. Willems has been a solo practitioner in Dallas, Texas since November of 1998 representing a variety of business clients. From September 1993 through October of 1998, Mr. Willems was an attorney with the law firm of McKinley, Ringer & Zeiger, PC, (formerly McKinley, Hinton & Ringer, PC) in Dallas, Texas, practicing in the area of business law. From January 1982 to August 1993, Mr. Willems was employed by the law firm of SettlePou, PC (formerly Settle, Pou & Melton), also located in Dallas, Texas. The breadth of Mr. Willems’s experience led the board to believe this individual is qualified to serve on the board of directors.

~~THOMAS~~The ~~MICHEL~~following ~~was~~table ~~elected~~is asbased aupon ~~director~~information ofsupplied ~~our~~by ~~Company~~officers, indirectors ~~February~~and ~~2002. Since~~principal ~~1996,~~stockholders ~~Mr.~~and ~~Michel~~Schedules ~~has~~13D ~~been~~and a13G ~~Principal~~filed ofwith ~~Switzerland~~the ~~based~~SEC ~~CIMA~~and ~~Consulting~~information supplied by our transfer agent, AGSecurities Transfer Corporation, as of ~~which~~the hemost ~~was~~recent apracticable ~~founder,~~date. ~~and~~Unless ~~which~~otherwise ~~provides~~indicated ~~financial~~in the footnotes to this table and ~~fund~~subject ~~raising~~to ~~services~~community inproperty ~~the~~laws ~~form~~where applicable, we believe that each of ~~venture~~the ~~capital,~~stockholders ~~private~~named ~~equity,~~in this table has sole voting and ~~bridge~~investment ~~loan~~power ~~facilities. From~~with ~~1980~~respect to ~~1996,~~the heshares ~~served~~indicated inas ~~various~~beneficially ~~capacities~~owned. atApplicable ~~Swiss~~percentages ~~Bank~~are ~~Corporation~~based inon ~~Zurich~~29, ~~Switzerland~~334,264 ~~such~~shares asoutstanding VPon ~~Financial~~December ~~Planning~~31, ~~and~~2014 ~~Head~~provided ofthat ~~SBC~~any ~~Portfolio~~additional ~~Management,~~shares ~~Inc.,~~of common stock that a ~~subsidiary~~stockholder ofhas the ~~Bank. Mr.~~right ~~Michel~~to ~~currently~~acquire ~~serves~~within on60 ~~the~~days ~~Board~~after December 31, 2014 pursuant to grants of ~~Directors~~stock ~~for~~options ~~Best~~or ~~243~~awards ~~AG,~~of anrestricted ~~automobile~~stock ~~servicing~~are ~~company.~~deemed Heto ~~was~~be ~~during~~outstanding and beneficially owned by the ~~last~~person ~~several~~holding ~~years~~such aoptions ~~Board~~or ~~Member~~restricted ofstock ~~different~~for ~~companies~~the inpurpose of computing the ~~sectors~~number of ~~medical~~shares ~~treatment~~beneficially owned and ~~skincare~~the ~~products. The~~percentage ~~breadth~~ownership of ~~Mr.~~such ~~Michel’s~~person, ~~experience~~but ~~led~~are ~~the~~not ~~board~~deemed to ~~believe~~be ~~this~~outstanding ~~individual~~for isthe ~~qualified~~purpose toof ~~serve~~computing on the ~~board~~percentage ownership of ~~directors~~any other person.

K.STOCK ~~SCOTT~~BENEFICIALLY ~~SPURLOCK~~OWNED ~~has~~BY ~~served~~OR asDIRECTORS ~~our~~AND ~~Vice~~EXECUTIVE President of Development since joining us in June of 1997 through our acquisition of Medica Systems, Inc., a software development company serving the healthcare industry. From September 1994 through June 1997, Mr. Spurlock served as the Vice President and acted as architect and lead developer of a majority of the software developed by Medica. Mr. Spurlock has extensive software development experience in the healthcare arena, including over 20 years developing software for medical electronic data interchange (EDI). From August 1993 to September 1994, Mr. Spurlock was a Senior Developer for Vision Software, a vendor of healthcare practice management system software. Previously, Mr. Spurlock was an independent consultant developing customized accounting, appointment and patient record programs for various hospitals and medical groups.OFFICERS

Mr. Crosbie and Ms. Bray are our executive officers. The Company’s officers are appointed by our board of directors and do not have employment, severance or change of control agreements. They are employed on an “at will” basis and may be removed by our board of directors in accordance with the Company’s Bylaws and the provisions of the Delaware General Corporation Law (“DGCL”). To the best of our knowledge, no director or executive officer has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.

Name and address of beneficial owner	Class of Security	Amount and Beneficial Ownership		Percent of Class
Don Crosbie, Chairman of the Board of Directors	Common Stock		76,629		.3	%
17304 Preston Rd., Suite 700
Dallas TX 75252

Stuart Hagler, Chief Executive Officer	Common Stock		6,736,750		22.9	%
17304 Preston Rd., Suite 700
Dallas TX 75252

A.W. Westmoreland, President of Operations	Common Stock		5,331,269		19.8	%
17304 Preston Rd., Suite 700
Dallas TX 75252

Dave May, President of Acquisitions	Common Stock		5,832,019		18.1	%
17304 Preston Rd., Suite 700
Dallas TX 75252

All our directors and executive officers as a group			17,976,667		61.1	%

~~STRUCTURE~~ITEM OF13: Certain ~~THE~~Relationships ~~BOARD~~and OFRelated ~~DIRECTORS~~Transactions, and Director Independence

~~Our~~There ~~board~~have ofbeen ~~directors~~no ~~is divided into two classes with each class consisting of~~transactions, asor ~~nearly~~proposed ~~as possible~~transactions, ~~one-half~~which ofhave ~~the~~materially ~~total~~affected ~~number~~or ofwill ~~directors~~materially ~~constituting~~affect ~~the~~us ~~entire~~in ~~board~~which ofany ~~directors. The Class I~~ director ~~currently is Mr. Crosbie~~, ~~whose~~executive ~~term~~officer ~~expires~~or atbeneficial ~~the~~holder ~~next annual meeting~~ of ~~stockholders,~~more ~~which~~than ~~may~~5% beof ~~held~~the inoutstanding ~~2013.~~common ~~The Class II directors currently are Messrs. Willems and Michel~~stock, ~~whose~~or ~~terms~~any ~~expire at the following annual meeting~~ of ~~stockholders.~~their ~~Each~~respective ~~director is elected for a term of two years~~relatives, ~~except when the election is by the board to fill a vacancy~~spouses, inassociates ~~which~~or ~~case~~affiliates, ~~the~~has ~~director’s~~had ~~term~~or ~~expires~~will athave ~~the~~any ~~next~~direct ~~annual~~or ~~meeting~~material ofindirect ~~stockholders~~interest. ~~and~~We ishave ~~subject~~no topolicy ~~removal~~regarding ~~from~~entering ~~office~~into intransactions ~~accordance~~ with ~~the~~affiliated ~~Company’s Bylaws and the provisions of the DGCL~~parties. ~~A director may hold office after the expiration of his term until his successor is elected and qualified subject to removal as set forth above.~~

~~There~~During ~~are~~the noyear ~~family~~ended ~~relationships~~December ~~between~~31, or2012, ~~among~~the ~~our~~Company ~~directors~~was ~~and~~issued ~~executive~~a ~~officers~~note payable, related party of approximately $125 from a member of the Company management. During the year ended December 31, 2013, the related party forgave this note payable owed by the company as described in Note 12 to the Consolidated Financial Statements.

~~DIRECTOR~~ITEM ~~INDEPENDENCE~~14: Principal Accounting Fees and Services

The ~~standards relied upon in determining whether a director is “independent” are those of the Nasdaq, which include the~~ following ~~objective~~table ~~standards:~~presents ~~(a)~~fees afor ~~director~~professional ~~who~~audit isservices anperformed ~~employee,~~by orWhitley ~~whose~~Penn ~~immediate~~LLP ~~family~~for ~~member (defined as a spouse, parent, child, sibling, father- and mother-in-law, son- and daughter-in-law and anyone, other than a domestic employee, sharing~~ the ~~director’s~~audit ~~home) is an executive officer~~ of ~~the~~our ~~Company,~~annual ~~would~~financial ~~not~~statements ~~be independent~~ for a period of three years after termination of such relationship; (b) a director who receives, or whose immediate family member receives, compensation of more than $120,000 during any period of twelve consecutive months from the ~~Company,~~fiscal ~~except~~year ~~for~~ended ~~certain~~December ~~permitted payments~~31, ~~would~~2014 ~~not~~and ~~be independent~~ for aprofessional ~~period~~audit ofservices ~~three~~performed ~~years~~by ~~after~~Rothstein ~~ceasing~~Kass toLLP ~~receive~~for ~~such amount; (c) a director who is or who has an immediate family member who is, a current partner of~~ the ~~Company’s outside auditor or who was, or who has an immediate family member who was, a partner or employee of the Company’s outside auditor who worked on the Company’s~~ audit ~~at any time during any~~ of ~~the~~our ~~past~~annual ~~three~~financial ~~years~~statements would not be independent until a period of three years after the termination of such relationship; (d) a director who is, or whose immediate family member is, employed as an executive officer of another company where any of the Company’s present executive officers serve on the other company’s compensation committee would not be independent for ~~a period of three years after~~ the end of such relationship; and (e) a director who is, or who has an immediate family member who is, a partner in, or a controlling shareholder or an executive officer of any organization that makes payments to, or receives payments from, the Company for property or services in an amount that, in any single fiscal year, ~~exceeds~~ended ~~the~~December ~~greater of $200~~31,~~000,~~ ~~or 5% of such other company’s consolidated gross revenues, would not be independent until a period of three years after falling below such threshold~~2013.

In applying the above-referenced standards, we have determined that the Company’s current “independent” directors are: John C. Willems, III and Thomas Michel.

	2014		2013
Audit Fees (1)	$	117,674	$	134,916
Total Fees	$	117,674	$	134,916

~~AUDIT~~(1) ~~COMMITTEE~~Audit fees include professional services rendered for (i) the audit of our annual financial statements for the fiscal years ended December 31, 2014 and 2013, (ii) the reviews of the financial statements included in our quarterly reports on Form 10-Q for such years and (iii) the reviews of the S-1 filed during 2014.

AtITEM ~~present,~~15: we do not have a separately standing audit committee and our entire board of directors acts as our audit committee. None of the members of our board of directors meet the definition of “audit committee financial expert” as defined in Item 407(d) of Regulation S-K promulgated by the Securities and Exchange Commission. We have not retained an audit committee financial expert because we do not believe that we can do so without undue cost and expense. MoreoverExhibits, weFinancial ~~believe~~Statement ~~that the present members of our board of directors, taken as a whole, have sufficient knowledge and experience in financial affairs to effectively perform their duties.~~Schedules

The Company entered into a Material Definitive Agreement as filed on a Form 8K with the SEC on February 24, 2015.

TransCoastal Corporation has entered into a Forbearance Agreement with Melody Business Finance, LLC (the “New Lender”) pursuant to the New Lender assuming the Loan Agreement dated May 2011 with Green Bank N.A. The principal amount of the note is $15,750,000 with a maturity date of June 1, 2015. The New Lender has agreed to enter into a Forbearance Agreement regarding all “Existing Events of Default” as well as agreed upon “Anticipated Events of Default” pursuant to the default provisions of the existing Loan Agreement. In addition the Forbearance Agreement alters or adds material terms to the Loan Agreement including:

1.	Contract rate of interest is changed to a payment in kind interest rate of fifteen percent (15%).
2.	The rate of interest upon default is twenty one percent (21%).
3.	Commits the Company to engage in best efforts to negotiate and pursue a plan of reorganization of the Company by April 6, 2015 and calls for implementation of the reorganization plan within 90 days from the date of execution of the agreement. In the event that the Company takes any course of action that is inconsistent with the reorganization, or fails to exercise such best efforts, and, in either case, the Reorganization is not consummated the Company shall pay to the New Lender, a non-refundable closing fee in an amount equal to $2,000,000 payable in immediately available funds and pay all reasonable professional fees and expenses of New Lender and its counsel. As of the date hereof the parties have not agreed to any material terms regarding the restructuring agreement.
4.	Changes the law governing the Loan Agreement from Texas to New York.

~~SECTION~~Exhibit ~~16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE~~List:

~~Section~~EXHIBIT 16(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), requires officers, directors and persons who beneficially own more than 10% of a class of our equity securities registered under the Exchange Act to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us during fiscal 2012 and Forms 5 and amendments thereto furnished to us with respect to fiscal 2012, or written representations that Form 5 was not required for fiscal 2012, we believe that all Section 16(a) filing requirements applicable to each of our officers, directors and greater-than-ten-percent stockholders were fulfilled in a timely manner. We have notified all known beneficial owners of more than 10% of our common stock of their requirement to file ownership reports with the Securities and Exchange Commission.INDEX

CODE OF ETHICS

Exhibit Number	Description
(3)	Articles of Incorporation and Bylaws
3.1* *	Certificate of Incorporation as amended (incorporated by reference to an exhibit to our Form 8-K filed on July 3, 2013 File No. 001-14665, Ex. 10.1)
3.1(a)**	Certificate of Designation of Series F Preferred Stock (incorporated by reference to an exhibit to our Form 8K filed on May 15, 2013 File No. 001-14665, Ex. 3(i))
3.1(b)**	Certificate of Designation of Series G Preferred Stock (incorporated by reference to an exhibit to our Form S-1 filed on October 4, 2013 File No. 001-14665, Ex. 3.1(b))
3.1(c)**	Certificate of Designation of Series H Preferred Stock (incorporated by reference to an exhibit to our Form S-1/A filed on May 9, 2014 File No. 001-14665, Ex. 3.1(c))
3.2**	Bylaws as amended (incorporated by reference to an Annex B to our Definitive 14A filed on August 9, 2013 File No. 001-14665)
(4)	Instruments defining rights of security holders, including indentures
4.1**	Specimen Stock Certificate (incorporated by reference to an exhibit on Form 10-Q filed on August 14, 2013 File No. 001-14665, Ex. 4.1(1))
(10)	Material Contracts
10.1**	Amended Acquisition Agreement by and between Claimsnet.com, Inc. and TransCoastal Corporation (incorporated by reference to an exhibit on Form 10-Q filed on May 7, 2013 File No. 001-14665, Ex. 2.2))
10.2**	Stock Purchase Agreement for sale of ANC Holdings, Inc. (incorporated by reference to an exhibit on Form 8-K filed on July 3, 2013 File No. 001-14665)
10.3* *	2013 Stock Incentive Program (incorporated by reference to Annex A on Form DEF 14A filed on August 9, 2013 File No. 001-14665)
10.4#	Amended Executive Employment Agreement with Stuart Hagler dated November 14, 2014 (incorporated by reference to Annex B to schedule 14C filed on November 18, 2014 File No. 001-14665)
10.5#	Amended Executive Employment Agreement with David May dated November 14, 2014 (incorporated by reference to Annex B to schedule 14C filed on November 18, 2014 File No. 001-14665)
10.6#	Amended Executive Employment Agreement with W.A. Westmoreland dated November 14, 2014 (incorporated by reference to Annex B to schedule 14C filed on November 18, 2014 File No. 001-14665)
10.7#	Amended Executive Employment Agreement with Derrick May dated November 14, 2014 (incorporated by reference to Annex B to schedule 14C filed on November 18, 2014 File No. 001-14665)
10.8**	Amended Loan Agreement with Green Bank, N.A. (incorporated by reference to an exhibit to our Form S-1 filed on October 4, 2013 File No. 333-191566, Ex. 10.8)
10.9**	First Amendment to Loan Agreement with Green Bank, N.A. (incorporated by reference to an exhibit to our Form S-1 filed on October 4, 2013 File No. 333-191566, Ex. 10.9)
10.10**	Second Amendment to Loan Agreement with Green Bank, N.A. (incorporated by reference to an exhibit to our Form S-1 filed on October 4, 2013 File No. 333-191566,

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