Savoy Energy Corp - FORM 10-Q

Attached files

file	filename
EX-31.1 - Savoy Energy Corp	v192500_ex31-1.htm
EX-31.2 - Savoy Energy Corp	v192500_ex31-2.htm
EX-32.1 - Savoy Energy Corp	v192500_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2010

¨	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period _________ to _________

Commission File Number: 333-151960

Savoy Energy Corporation

(Exact name of small business issuer as specified in its charter)

Nevada	26-0429687
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

11200 Westheimer, Suite 900

Houston, TX 77042

(Address of principal executive offices)

713.243.8788

(Issuer’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days x Yes ¨ 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 (§ 229.405 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 ¨ No ¨

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

¨ Large accelerated filer Accelerated filer	¨ Accelerated filer
¨ Non-accelerated filer	x Smaller reporting company

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 59,696,000 common shares as of July 30, 2010.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements	3

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4T:	Controls and Procedures	19

PART II – OTHER INFORMATION

Item 1:	Legal Proceedings	21

Item 1A:	Risk Factors	21

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3:	Defaults Upon Senior Securities	22

Item 4:	(Removed and Reserved)	22

Item 5:	Other Information	22

Item 6:	Exhibits	23

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:

Consolidated Balance Sheets (unaudited) as of June 30, 2010 and December 31, 2009;		4

Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2010 and 2009;		5

Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2010 and 2009;		6

Notes to Consolidated Financial Statements (unaudited);		7

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q and should be read in conjunction with the audited financial statements and notes to thereto contained in the Company’s annual report filed with the SEC on Form 10K for the year ended December 31, 2009. In the opinion of management, all adjustments consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2010 are not necessarily indicative of the results that can be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent year 2009 as reported in Form 10-K have been omitted.

SAVOY ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30,			December 31,
	2010			2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	73,252		$	60,345
Accounts receivable		1,058			2,372
Total current assets		74,310			62,717

OIL AND GAS PROPERTIES, FULL COST METHOD
Properties subject to amortization		821,216			761,987
Accumulated depletion, depreciation, amortization and impairment		(655,330	)		(650,813	)
Oil and gas properties, net		165,886			111,174

TOTAL ASSETS	$	240,196		$	173,891

LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	163,157		$	354,088
Advances from related party		151,003			151,003
Accrued interest payable		62,539			57,996
Notes payable		490,000			447,500
Total current liabilities		866,699			1,010,587

LONG-TERM LIABILITIES
Asset retirement obligations		11,535			9,683
TOTAL LIABILITIES		878,234			1,020,270

STOCKHOLDERS’ DEFICIT
Common stock, $.001 par value; 100,000,000 shares authorized, 59,696,000 and 31,296,000 shares issued and outstanding, respectively		59,696			31,296
Additional paid-in-capital		1,775,967			704,317
Accumulated deficit		(2,473,701	)		(1,581,992	)
Total stockholders’ deficit		(638,038	)		(846,379	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	240,196		$	173,891

See notes to consolidated financial statements.

SAVOY ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009

REVENUE
Oil and gas revenues	$	16,637		$	8,747		$	35,393		$	24,211
Total revenues		16,637			8,747			35,393			24,211

COSTS AND EXPENSES
Lease operating expenses		13,165			11,866			26,096			30,707
General and administrative expense		231,072			837,905			881,314			871,311
Depletion, depreciation, amortization and impairment expense		1,226			16,044			4,517			32,088
Accretion expense		926			-			1,852			-
Gain on sale of oil and gas properties		(233,320	)		-			(233,320	)		-
Total costs and expenses		13,069			865,815			680,459			934,106
Operating income (loss)		3,568			(857,068	)		(645,066	)		(909,895	)

OTHER EXPENSES
Interest expense		(2,913	)		(2,000	)		(4,543	)		(4,068	)
Loss on settlement of debt		(35,000	)		-			(242,100	)		-
Total other expenses		(37,913	)		(2,000	)		(246,643	)		(4,068	)

Net loss	$	(34,345	)	$	(859,068	)	$	(891,709	)	$	(913,963	)

Basic and diluted net loss per share	$	(0.00	)	$	(0.03	)	$	(0.02	)	$	(0.03	)

Weighted average common shares outstanding - basic and diluted		57,435,011			28,000,000			48,387,160			28,000,000

See notes to consolidated financial statements.

SAVOY ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Six			For the Six
	Months Ended			Months Ended
	June 30,			June 30,
	2010			2009
Cash flows from operating activities:
Net loss	$	(891,709	)	$	(913,963	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depletion, depreciation, amortization and impairment		4,517			32,088
Accretion expense		1,852			-
Stock based compensation		616,224			747,000
Loss on settlement of debt		242,100			-
Gain on sale of oil and gas properties		(233,320	)		-
Changes in assets and liabilities
Accounts receivable		1,314			4,382
Accounts payable and accrued liabilities		(12,162	)		8,124
Net cash used in operating activities		(271,184	)		(123,369	)

Cash flows from investing activities:
Proceeds from sale of oil and gas properties		233,320			-
Purchase of oil and gas properties		(59,229	)		-
Net cash provided by investment activities		174,091			-

Cash flows from financing activities:
Proceeds from issuance of debt		120,000			156,113
Repayment of debt		(10,000	)		(20,629	)
Net cash provided by financing activities		110,000			135,484

Net increase in cash and cash equivalents		12,907			13,115
Cash and cash equivalents, at beginning of year		60,345			-
Cash and cash equivalents, at end of year	$	73,252		$	13,115

Supplemental cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for income tax	$	-		$	-
Non cash investing and financing activities:
Return of capital	$	52,800		$	-
Common stock issued for debt	$	67,500		$	-
Common stock issued for accrued expenses	$	177,226		$	-

See notes to consolidated financial statements

SAVOY ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Savoy Energy Corporation ("the Company") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Savoy’s annual report filed with the SEC on Form 10-K for the year ended December 31, 2009. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent year 2009 as reported in Form 10-K have been omitted.

NOTE 2 – ORGANIZATION AND HISTORY

Savoy Energy Corporation (the “Company” or “we”) was incorporated as “Arthur Kaplan Cosmetics, Inc.” on June 25, 2007, in the State of Nevada. Our principal offices are located at 11200 Westheimer, Suite 900, Houston, TX 77042 and our telephone number is (713) 243-8788.

On March 31, 2009, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Plantation Exploration, Inc., a privately held Texas corporation (“Plantation Exploration”), and Plantation Exploration Acquisition, Inc. (“Acquisition Sub”), our newly formed wholly-owned Nevada subsidiary. In connection with the closing of this merger transaction, Acquisition Sub merged with and into Plantation Exploration (the “Merger”) on April 2, 2009, with the filing of articles of merger with the Texas Secretary of State. As a result of the Merger, Plantation Acquisition no longer exists and Plantation Exploration became our wholly-owned subsidiary.

Subsequently, on April 3, 2009, we merged with another wholly-owned subsidiary of our company, known as Savoy Energy Corporation in a short-form merger transaction under Nevada law and, in connection with this short form merger, changed our name to Savoy Energy Corporation.

Effective June 2, 2009, the Company’s board of directors approved a forward split of the Company’s common stock on the basis of four shares for each share issued and outstanding (4:1 split). The total number of authorized shares has not been changed. The Company’s financial statements reflect the stock split on a retro-active basis.

The results of operations and cash flows for the three month period ended March 31, 2009 included within the six month period ended June 30, 2009 reflect only the results of Arthur Kaplan Cosmetics, Inc., as the acquisition of Plantation Exploration, Inc., occurred on April 2, 2009. The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of Plantation Exploration, Inc had occurred as of the first day of the period presented:

	Six Months Ended June 30, 2009
Total revenues	$	39,675
Net loss		(946,054	)
Net loss per share—Basic		(0.03	)
Net loss per share—Diluted		(0.03	)

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.

Certain amounts in prior periods have been reclassified to conform to current period presentation.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company’s consolidated financial statements are based on a number of significant estimates, including oil and gas reserve quantities which are the basis for the calculation of depreciation, depletion and impairment of oil and gas properties, and timing and costs associated with its retirement obligations.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks and financial instruments which mature within three months of the date of purchase.

Fair Value of Financial Instruments

As at June 30, 2010, the fair value of cash, accounts receivable, accounts payable and notes payable approximate carrying values because of the short-term maturity of these instruments.

Oil and Gas Properties

The Company follows the full cost method of accounting for its oil and natural gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to income.

Depletion and depreciation of proved oil and gas properties is calculated on the units-of-production method based upon estimates of proved reserves. Such calculations include the estimated future costs to developed proved reserves. Oil and gas reserves are converted to a common unit of measure based on the energy content of 6,000 cubic feet of gas to one barrel of oil. Costs of undeveloped properties are not included in the costs subject to depletion. These costs are assessed periodically for impairment.

The fair value of an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The present value of the estimated asset retirement costs is capitalized as part of the carrying amount of the long-lived asset. For The Company, asset retirement obligations (“ARO”) relate to the plugging and abandonment of drilled oil and gas properties. The amounts recognized are based upon numerous estimates including future retirement costs; future recoverable reserve quantities and reserve lives; and the credit-adjusted risk-free interest rate.

Ceiling test

In applying the full cost method, The Company performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of property and equipment is compared to the value of its proved reserves discounted at a 10-percent interest rate of future net revenues, based on current economic and operating conditions, plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved properties included in costs being amortized, less the income tax effects related to book and tax basis differences of the properties.

Oil and gas properties, not subject to amortization

The amortization of the oil and gas properties not classified as proved begins when the oil and gas properties become proved, or their values become impaired. The Company assesses the realizability of its properties not characterized as proved on at least an annual basis or when there is or has been an indication that an impairment in value may have occurred. The impairment of properties not classified as proved is assessed based on management’s intention with regard to future exploration and development of individually significant properties, and the Company’s ability to secure capital funding to finance such exploration and development. If the result of an assessment indicates that a property is impaired, the amount of the impairment is added to the capitalized costs in its full cost pool and they are amortized over production from proved reserves

As of June 30, 2010, the carrying value of all oil and gas properties was subject to amortization. The Company has no carrying value for properties not subject to amortization.

Revenue Recognition

Revenues from the sale of oil and natural gas are recognized when the product is delivered at a fixed or determinable price, title has transferred, and collectability is reasonably assured and evidenced by a contract. For oil sales, this occurs when the customer's truck takes delivery of oil from the operators’ storage tanks.

The Company follows the “sales method” of accounting for oil and natural gas revenue, so it recognizes revenue on all natural gas or crude oil sold to purchasers, regardless of whether the sales are proportionate to its ownership in the property. A receivable or liability is recognized only to the extent that the Company has an imbalance on a specific property greater than its share of the expected remaining proved reserves.

Costs associated with production are expensed in the period incurred.

Stock-Based Compensation

Stock-based compensation expense includes the estimated fair value of equity awards vested during the reporting period. The expense for equity awards vested during the reporting period is determined based upon the grant date fair value of the award and is recognized as expense over the applicable vesting period of the stock award using the straight-line method.

Deferred Taxes

Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and accrued tax liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Earnings per Share of Common Stock

Basic net income per share calculations are determined by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted net income per share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During the reporting period when they are anti-dilutive, common share equivalents, if any, are not considered in the computation.

Recent Accounting Pronouncements

The Company does not expect recent accounting standards or interpretations issued or recently adopted to have a material impact on the Company’s consolidated financial position, operations or cash flows.

Dividends

Dividends declared on our common stock are reflected as adjustments to retained earnings to the extent a surplus of retained earnings will exist after giving effect to the dividends. To the extent retained earnings are insufficient to fund the distributions; such payments constitute a return of contributed capital rather than earnings and are accounted for as a reduction to paid-in capital.

NOTE 4 - GOING CONCERN

The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of June 30, 2010, the Company has a working capital deficit, has generated limited revenues and has an accumulated deficit. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

In order to continue as a going concern and achieve a profitable level of operations, the Company will need, among other things, additional capital resources and to develop a consistent source of revenues. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's operations.

The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern

NOTE 5 – OIL AND GAS PROPERTIES

On March 31, 2010, the Company secured a 2.75% working and revenue interest in the Glass 59 #2 commitment well in Sterling County, Texas that is operated by Bright & Company. During the six months ended June 30, 2010, the Company made payments totaling $24,891 of drilling and completion costs.

In June 2010, the Company acquired the Davis-Cornell oil and gas lease for $28,800. The lease acreage is located in Gonzales County, Texas, and is comprised of 144 acres. The Company acquired a 75% undivided working interest in the lease, and the sellers retained a 25% undivided working interest.

During June 2010, the Company entered into an option agreement with a shareholder and working interest participant in certain oil and gas properties located in Gonzales County, Texas to allow the shareholder to put their interest in the properties to the Company. Pursuant to the option agreement, Savoy agreed to issue 2,640,000 shares of common stock to the shareholder, together with future monthly payments of $5,000 per month to the shareholder until the holding period lapses and the restrictive legend can be removed from the face of the share certificate. Upon the restriction removal, the monthly payment will cease and the shareholder has the option to assign their interest in the oil and gas properties to Savoy. The 2,640,000 shares of common stock granted to the shareholder were valued at $52,800, based on fair market value using quoted market prices on the date of grant and was recorded as a return of capital to the shareholder.

In May 2010, the Company sold certain overriding royalty interests to Lucas Energy, Inc. for $92,568. The overriding royalty interests are associated with the Company’s producing wells in the Austin Chalk formation. The Company retained its existing working interests in the Austin Chalk producing formation. The proceeds of $92,568 were recorded as a gain on sale of oil and gas properties.

In June 2010, the Company sold a 92.5% undivided interest in its Eagle Ford formation “deep rights” located in Gonzales County, Texas to Lucas Energy, Inc. for $140,752. The “deep rights” sold are unevaluated oil and gas properties associated with the Company’s producing wells in the Austin Chalk formation. The Company retained its existing working interests in the Austin Chalk producing formation. The proceeds of $140,752 were recorded as a gain on sale of oil and gas properties.

NOTE 6 – NOTES PAYABLE

On September 24, 2008 Plantation Exploration, Inc. entered into a financing agreement with Oil Investment Leases, Inc. (OIL) for cash advances totaling $290,000. On January 27, 2009 and May 4, 2009, the Company amended the September 24, 2008 agreement with OIL for advance cash payments under the demand loan and to assign the debt from Plantation Exploration to Savoy. The amended agreements provided for total borrowings of $335,000 and $360,000, respectively, due on demand. The interest is payable in-kind at 5,000 shares of common stock of the Company for each month the debt remains unpaid. During the six months ended June 30, 2010, the Company has made payment reductions totaling $77,500. As of June 30, 2010, the outstanding balance of advances from OIL was $282,500.

On December 17, 2009, the Company borrowed $37,500 from a non-related third party bearing interest at 6% per annum. The loan is unsecured and the principal and accrued and unpaid interest is payable at maturity on June 30, 2010. The Company used the proceeds for working capital. The outstanding balance of $37,500 has been classified as current debt at June 30, 2010. On July 1, 2010 the outstanding balance on this loan plus accrued interest was repaid in full.

On December 29, 2009, the Company borrowed $50,000 from two non-related third parties bearing interest at 5% per annum. The loans are unsecured and the principal and accrued and unpaid interest is payable at maturity on June 30, 2010. The Company used the proceeds for working capital. The outstanding aggregate balance of $50,000 has been classified as current debt at June 30, 2010. One of the notes with an outstanding principal balance of $25,000 plus accrued interest was repaid on July 1, 2010; the other note with an outstanding principal balance of $25,000 plus accrued interest was repaid in full on July 6, 2010.

On March 19, 2010, the Company borrowed $40,000 from non-related third parties bearing interest at 5% per annum. The loans are unsecured and the principal and accrued and unpaid interest is payable at maturity on September 30, 2010. The Company is using the proceeds for working capital. The outstanding balance of $40,000 has been classified as current debt at June 30, 2010.

On March 22, 2010, the Company borrowed $40,000 from non-related third parties bearing interest at 5% per annum. The loans are unsecured and the principal and accrued and unpaid interest is payable at maturity on September 30, 2010. The Company is using the proceeds for working capital. The outstanding balance of $40,000 has been classified as current debt at June 30, 2010.

On April 21, 2010, the Company borrowed $40,000 from non-related third parties bearing interest at 5% per annum. The loans are unsecured and the principal and accrued and unpaid interest is payable at maturity on December 31, 2010. The Company is using the proceeds for working capital. The outstanding balance of $40,000 has been classified as current debt at June 30, 2010.

NOTE 7 – RELATED PARTY TRANSACTIONS

From time to time, the Company receives cash advances from related parties, including stockholders and their affiliates, to cover operating expenses. The advances do not bear interest and are due upon demand. During the six months ended June 30, 2010, the Company received no additional cash advances. As of June 30, 2010, the outstanding balance of advances from related party was $151,003.

NOTE 8 – STOCK OPTIONS AND WARRANTS

Summary information regarding stock option activity is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at 12/31/09		8,000,000	$	1.00
Granted		-		-
Exercised		-		-
Cancelled/Expired		-		-
Outstanding at 06/30/10		8,000,000	$	1.00

Options outstanding and their relative exercise price at June 30, 2010 are as follows:

Exercise Price	Number of shares		Remaining life	Aggregate Intrinsic Value (In-the- money) Options
1.00		8,000,000	3.5 years	$	-
		8,000,000		$	-

NOTE 9 - COMMON STOCK

On January 26, 2010, the Company issued 1,000,000 common shares valued at $56,000, based on the fair market value using quoted market prices on the date of grant to Excelsus Capital Partners, LLC for services rendered. The value of the shares were recognized in the Company’s consolidated results of operations for the three months ended March 31, 2010.

On February 1, 2010, the Company issued 800,000 common shares valued at $44,800, based on fair market value using quoted market prices on the date of grant to Rio Sterling Holdings, LLC for payment on the Company’s note payable with Oil Investment Leases, Inc. (OIL) in the amount of $12,500 and recorded a realized loss of $32,300 on settlement of debt.

On February 1, 2010, the Company issued 800,000 common shares valued at $44,800, based on fair market value using quoted market prices on the date of grant to Barclay Lyons, LLC for payment on the Company’s note payable with Oil Investment Leases, Inc. (OIL) in the amount of $12,500 and recorded a realized loss of $32,300 on settlement of debt.

On February 1, 2010, the Company issued 1,250,000 common shares valued at $70,000, based on fair market value using quoted market prices on the date of grant to Tombstone Capital, LLC for payment on the Company’s note payable with Oil Investment Leases, Inc. (OIL) in the amount of $12,500 and recorded a realized loss of $57,500 on settlement of debt.

On March 4, 2010, the Company issued 10,000,000 common shares valued at $330,000, based on fair market value using quoted market prices on the date of grant to Arthur Bertagnolli in satisfaction of accrued but unpaid employment compensation due to Arthur Bertagnolli of $43,500 and recorded a compensation expense of $286,500 in exchange for services rendered.

On March 4, 2010, the Company issued 2,000,000 common shares valued at $66,000, based on fair market value using quoted market prices on the date of grant to for investment banking services rendered.

On March 4, 2010, the Company issued 3,000,000 common shares valued at $99,000, based on fair market value using quoted market prices on the date of grant for investment banking services rendered.

On March 4, 2010, the Company issued 500,000 common shares valued at $16,500, based on fair market value using quoted market prices on the date of grant for legal services rendered.

On March 18, 2010, the Company issued 1,500,000 common shares valued at $52,500, based on fair market value using quoted market prices on the date of grant to Rio Sterling Holdings, LLC for payment on the Company’s note payable with Oil Investment Leases, Inc. (OIL) in the amount of $10,000 and recorded a realized loss of $42,500 on settlement of debt.

On March 18, 2010, the Company issued 1,500,000 common shares valued at $52,500, based on fair market value using quoted market prices on the date of grant to Barclay Lyons, LLC for payment on the Company’s note payable with Oil Investment Leases, Inc. (OIL) in the amount of $10,000 and recorded a realized loss of $42,500 on settlement of debt.

On April 15, 2010, the Company issued 1,500,000 common shares valued at $45,000, based on fair market value using quoted market prices on the date of grant to Rio Sterling Holdings, LLC for payment on the Company’s note payable with Oil Investment Leases, Inc. (OIL) in the amount of $10,000 and recorded a realized loss of $35,000 on settlement of debt.

On April 26 and May 26, 2010, the Company issued 2,350,000 common shares valued at $58,500, based on fair market value using quoted market prices on the date of grant for consultanting services rendered.

On May 26, 2010, the Company issued 1,700,000 common shares valued at $153,400, based on fair market value using quoted market prices on the date of grant to Directors in satisfaction of accrued but unpaid director fees of $133,726 and recorded an expense of $19,674 in exchange for services rendered.

On May 26, 2010, the Company issued 500,000 common shares valued at $11,500, based on fair market value using quoted market prices on the date of grant for legal services rendered.

NOTE 10 – COMMITMENTS, CONTINGENCIES AND LITIGATION

During January 2010, the Company entered into a consulting agreement with an unrelated third party and paid the consultant a commitment fee of $5,000 and issued the consultant 1,000,000 fully vested shares of common stock (see Note 9). The Company amended the consulting agreement in March 2010 that extended the term for twelve months from the date of the amendment and issued the consultant 5,000,000 fully vested shares of common stock (2,000,000 shares on March 4, 2010 valued at $66,000 and 3,000,000 shares on March 4, 2010 valued at $99,000 – See Note 9). As amended, the consulting agreement includes the following commitments:

i.	The consultant will receive $5,000 per month for twelve months;

ii.	The consultant will receive a referral fee of 10% cash and 10% equity of the aggregate amount of each successful equity financing;

iii.	The consultant will receive a referral fee of 5% cash and 5% equity of the aggregate amount of each successful debt financing.

During March 2010, the Company executed an investor relations agreement whereby the Company agreed to pay an initial payment of $15,000 and 100,000 shares of the Company’s common stock. The Company paid the $15,000 and has accrued the value of the 100,000 common shares of $3,200, based on the fair market value using quoted market prices on the date of grant. The Company has committed to pay the consultant $15,000 per month for six months, automatically renewed for another six months and thereafter renewable by mutual agreement. The commons shares were not issued as of June 30, 2010.

The Company’s Employment Agreement with Arthur Bertagnolli provides for certain compensation and benefits based on the Company’s achievement of specified milestones. As of June 30, 2010, none of those milestones have been achieved. Under certain circumstances, Mr. Bertagnolli is also entitled to an additional payment upon sale of the Company.

Panos Industries, LLC v. Savoy Energy Corporation, et. al., District Court, Clark County, Nevada Case # A-10-612340-C.

On March 19, 2010, this action was filed in the above-entitled Court seeking damages “…in excess of $50,000” based upon monies which the Plaintiff claims were advanced by Plaintiff on behalf of the Company. As of this date, the Company has filed an Answer to the complaint and has filed a Cross-Complaint against the Plaintiff. The Plaintiff has filed a Motion to Dismiss the Cross-Complaint, which is pending. While the outcome of this matter cannot be predicted, the Company specifically denies that it is indebted to Plaintiff and believes that any claims purportedly asserted in the lawsuit are without merit. The Company further believes that it has meritorious claims against Plaintiff which arose in connection with the merger of the Company’s predecessor (Arthur Kaplan Cosmetics, Inc.) with Plantation Exploration, Inc. and in connection with the aftermath of the merger. The Company intends to vigorously defend any claims asserted by the Plaintiff and to aggressively prosecute its claims against the Plaintiff. Even if the Company is ultimately successful in defending this action, it will incur legal fees and other expenses in connection with such defense, the amount of which cannot be predicted at this time. Such expenses could have a material impact on the Company’s future operating results and have an adverse impact on the Company’s funds available for its operations.

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

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We are in the business of re-entering, re-completing, extracting oil, and selling oil from previously drilled wells in the United States. Our plan of operations is to economically extract a significant amount of the “left-behind” oil from previously drilled sites.

We currently hold leases on and are producing oil from the following wells: our working interests in Ali-O No.1, Rozella Kifer No. 1, Zavadil No.1 and our 5.0% overriding royalty interest in W.L. Barnett ET AL #1 & #2. We also own a 2.75% working interest in the Glass 59 #2 well and a 75% working interest in the Davis-Cornell oil and gas lease. We will continue our workover efforts on these wells, and seek to duplicate our successful efforts with other wells. We have retained a petroleum consulting firm specializing in geological analyses of oil wells, to work with us to locate and screen a number of abandoned oil wells prospects for viability. Our evaluations include an assessment of production potential of each well using geological evaluations including the use of seismic data as available. In addition to the wells that we are currently have in operation, we have also already identified 34 other wells as targets for acquisition: six that are producing and 28 that have been abandoned but have seismic or other data indicating that they are favorable candidates for recompletion or workover.

Once we have determined which wells have the greatest production potential and are most likely to respond to our workover efforts, we will then pursue acquiring interests in those wells. We will then engage in workover operations as with our previous wells, primarily through horizontal drilling and acidization. We hope to extract and sell crude oil through a third party purchaser.

Our strategy is to concentrate on existing low maintenance production, exploit low risk sidetrack drilling opportunities as and when identified, and use the accumulated information and results to advance operations.

Large oil companies with high overhead costs require high production rates for wells to be economically viable. Our small size and lower overhead allows profitably extraction of oil at low production rates. Our goal is to turn wells rendered uneconomical and abandoned by large companies into profitable ones.

We continue to find ways to reduce expenses and increase efficiency. Recently, decisions were made to convert all applicable wells to operate on electricity. The Company believes that electricity is cheaper as an energy source and also electric motors have lower maintenance expenses than gas-operated engines. To further this end, plans were made to install the “Jack Shaft Reducer” on our Rozella Kifer Well. The Jack Shaft Reducer is expected to both increase efficiency and decrease maintenance costs which will in turn extend the life of the well’s production, although this cannot be quantified at this time.

On March 27, 2010 the Zavadil #1 well was placed online and closely monitored under full electric power. This is the second producing well that the Company has operating under full electric power. The Company will now begin the process to convert its Ali-O #1 oil well to operate under full electric power.

Developments in Expansion of Wells

In March 2010, the Company secured a 2.75% working and revenue interest in the Glass 59 #2 commitment well in Sterling County, Texas that is operated by Bright & Company. During the six months ended June 30, 2010, the Company has made payments totaling $24,891 of drilling and completion costs.

In June 2010 the Company acquired the Davis-Cornell oil and gas lease for $28,800. The lease acreage is located in Gonzales County, Texas, and is comprised of 144 acres. The Company acquired a 75% undivided working interest in the lease, and the sellers retained a 25% undivided working interest.

During June 2010, the Company entered into an option agreement with a shareholder and working interest participant in certain oil and gas properties located in Gonzales County, Texas to allow the shareholder to put their interest in the properties to the Company. Pursuant to the option agreement, Savoy agreed to issue 2,640,000 shares of common stock to the shareholder, together with future monthly payments of $5,000 per month to the shareholder until the holding period lapses and the 144 restrictive legend can be removed from the face of the share certificate. Upon the restriction removal, the monthly payment will cease and the shareholder has the option to assign their interest in the oil and gas properties to Savoy. The 2,640,000 shares of common stock granted to the shareholder was valued at $52,800, based on fair market value using quoted market prices on the date of grant and was recorded as a return of capital to the shareholder.

Results of Operations for the Three Months Ended June 30, 2010 and 2009

Revenues. Our total revenue reported for the three months ended June 30, 2010 was $16,637 compared to $8,747 in the comparable period for the prior year. The increase was primarily due to increased pricing and production.

Lease Operating Expenses. The lease operating expenses for the three months ended June 30, 2010 were $13,165, compared to $11,866 in the comparable period of the prior year.

Depreciation, Depletion, Amortization and Impairment. Depreciation, depletion, amortization and impairment for the three months ended June 30, 2010 was $1,226 compared to $16,044 in the comparable period the prior year. The decrease was due to impairment recognized in the prior comparable period.

General and Administrative Expense. General and administrative expense for the three months ended June 30, 2010 decreased to $231,072 from $837,905 for the comparable quarter in 2009, a decrease of $606,833. The decrease in general and administrative expense was largely attributable to the recognition of stock compensation expense in the prior year’s comparable quarter.

Gain on Sale of Oil and Gas Properties. During the three months ended June 30, 2010, the sale by the Company of certain oil and gas properties netted the Company an aggregate of $233,320 (see Developments in Expansion of Wells, above).

Other Income (Expenses). We recorded interest expense of $2,913 for the three months ended June 30, 2010 compared to $2,000 in the comparable quarter the prior year. In addition, the Company recorded a loss on the settlement of certain debt of $35,000.

Results of Operations for the Six Months Ended June 30, 2010 and 2009

Revenues. Our total revenue reported for the six months ended June 30, 2010 was $35,393 compared to $24,211 in the comparable period for the prior year. The increase was primarily due to increased pricing and production.

Lease Operating Expenses. The lease operating expenses for the six months ended June 30, 2010 were $26,096, compared to $30,707 in the comparable period of the prior year.

Depreciation, Depletion, Amortization and Impairment. Depreciation, depletion, amortization and impairment for the six months ended June 30, 2010 was $4,517, compared to $32,088 in the comparable period the prior year. The decrease was due to impairment recognized in the prior comparable period.

General and Administrative Expense. General and administrative expense for the six months ended June 30, 2010 was substantially unchanged at $881,313 compared to $871,311 for the comparable period in 2009.

Gain on Sale of Oil and Gas Properties. During the six months ended June 30, 2010, the sale by the Company of certain oil and gas properties netted the Company an aggregate of $233,320 (see Developments in Expansion of Wells, above).

Other Income (Expenses). We recorded interest expense of $4,543 for the six months ended June 30, 2010 compared to $4,068 in the comparable period the prior year. In addition, the Company recorded a loss on the settlement of certain debt of $242,100.

Liquidity and Capital Resources

As of June 30, 2010, we had total current assets of $74,310. Our total current liabilities as of June 30, 2010 were $866,699. Thus, we had a working capital deficit of $792,389 as of June 30, 2010.

Operating activities used $271,184 in cash for the six months ended June 30, 2010. Our net loss of $891,709 was the primary component of our negative operating cash flow, offset by non-cash expenses—common stock-based compensation and loss on the settlement of a debt. Cash flows provided by investing activities were $174,091 during the six months ended June 30, 2010 compared to $0 in the comparable six months of the prior year related to the acquisition of oil and gas interests. Cash flows provided by financing activities during the quarter ended June 30, 2010 was $110,000 consisting of proceeds from notes payable of $120,000, less repayments of $10,000.

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We have negative working capital and rely on proceeds from equity and loans to fund our operations. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Going Concern

Our financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of the date of this report, we have generated losses from operations, have an accumulated deficit and a working capital deficiency. These factors raise substantial doubt regarding our ability to continue as a going concern.

In order to continue as a going concern and achieve a profitable level of operations, we will need, among other things, additional capital resources and to develop a consistent source of revenues. Our continuation as a going concern is dependent upon the continued financial support from our shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from our planned business.

Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Off Balance Sheet Arrangements

As of June 30, 2010, there were no off balance sheet arrangements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4T.

Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2010. The Company's internal control over financial reporting is a process and procedures designed under the supervision of the Company's Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Based upon that evaluation, our Chief Executive Officer who is also our Principal Financial Officer concluded that, as of June 30, 2010, our disclosure controls and procedures over financing reporting were not effective. This conclusion was based on the existence of the material weaknesses in our internal control over financial reporting previously disclosed and discussed below. There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2010. To address the need for more effective internal controls, management has plans to improve the existing controls and implement new controls as our financial position and capital availability improves. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

A material weakness is a deficiency, or a combination of 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.

We identified and continue to have the following material weakness in our internal controls over financial reporting:

There is a lack of segregation of duties and technical accounting expertise. Our financial reporting and all accounting functions are performed by an external consultant with no oversight by a professional with accounting expertise. Our management does not possess accounting expertise and hence our controls over the selection and application of accounting policies in accordance with generally accepted accounting principles were inadequate and constitute a material weakness in the design of internal control over financial reporting. This weakness is due to the Company’s lack of working capital to hire additional staff.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

The Company is a party to the following litigation:

Panos Industries, LLC v. Savoy Energy Corporation, et. al., District Court, Clark County, Nevada Case # A-10-612340-C.

Item 1A:

Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

On April 15, 2010, the Company issued 1,500,000 common shares valued at $45,000, based on the fair market value using quoted market prices on the date of grant to Rio Sterling Holdings, LLC for payment on the Company’s note payable with Oil Investment Leases, Inc. (OIL) in the amount of $10,000 and recorded a realized loss of $35,000 on settlement of debt.

On April 26 and May 26, 2010, the Company issued 2,350,000 common shares valued at $58,500, based on fair market value using quoted market prices on the date of grant to consultants for services rendered.

On May 26, 2010, the Company issued 500,000 common shares valued at $11,500, based on fair market value using quoted market prices on the date of grant to Robert L. B. Diener for services rendered.

The above issuances were performed in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act.

Item 3.

Defaults upon Senior Securities

None

Item 4.

(Removed and Reserved)

None

Item 5.

Other Information

None

Item 6.

Exhibits

Exhibit Number		Description of Exhibit

31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SAVOY ENERGY CORPORATION

Date:	August 3, 2010

	By:	/s/ Arthur Bertagnolli
		Arthur Bertagnolli
	Title:	Chief Executive Officer and Chief Financial Officer

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