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EXCEL - IDEA: XBRL DOCUMENT - MAVERICK MINERALS CORPFinancial_Report.xls
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - MAVERICK MINERALS CORPexhibit32-1.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - MAVERICK MINERALS CORPexhibit31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 2011

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT

For the transition period from _________to ________

Commission File No. 000-25515

MAVERICK MINERALS CORPORATION
(Exact name of registrant as specified in its charter)

Nevada 88-0410480
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

2501 Lansdowne Avenue, Saskatoon, Saskatchewan S7J 1H3
(Address of principal executive offices) (zip code)

306.343.5799
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ x ] No [   ]

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

Large accelerated filer [   ] Accelerated filer [   ]
Non-accelerated filer [   ] Smaller reporting company [ x ]
(Do not check if a 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 [   ] No [ x ]


1

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of securities under a plan confirmed by a court.
Yes [   ] No [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date:
As of November 17, 2011, there were 12,152,617 shares of common stock, par value $0.001, outstanding.


- 2 -

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Consolidated Balance Sheets
Unaudited
(Expressed in U.S. Dollars)

    September 30     December 31,  
    2011     2010  
             
Current Assets            
Cash $  4,810   $  64,767  
Advances to related party (Note 6)   43,729     43,614  
    48,539     108,381  
Long term asset            
Oil and gas leases (Note 3)   968,255     1,013,468  
TOTAL ASSETS $  1,016,794   $  1,121,849  
             
             
Current Liabilities            
Accounts payable $  148,902   $  118,352  
Accrued liabilities   1,000     25,975  
Accrued interest on loans payable (Note 6)   217,481     76,976  
Convertible debt (Note 5)   100,000     100,000  
Loans payable (Note 4)   1,179,993     1,049,743  
TOTAL CURRENT LIABILITIES   1,647,376     1,371,046  
             
Long term liabilities            
Loans payable (Note 4)   2,307,750     2,357,750  
Asset retirement obligation (Note 9)   50,000     50,000  
TOTAL LIABILITIES   4,005,126     3,778,796  
             
Capital Deficit            
Capital Stock (Note 7)            
Common Shares Authorized:
     750,000,000 common shares at $0.001 par value
 
   
 
Issued and fully paid 12,152,617 (December 31, 2010 - 11,602,617) common share
     Par value
 
12,153
   
11,603
 
Additional paid-in capital   8,010,051     7,616,851  
Shares to be issued   -     250,000  
Deficit, accumulated during the exploration stage   (11,011,409 )   (10,536,274 )
Accumulated other comprehensive income   873     873  
TOTAL CAPITAL DEFICIT   (2,988,332 )   (2,656,947 )
TOTAL LIABILITIES AND CAPITAL DEFICIT $  1,016,794   $  1,121,849  

The accompanying notes are an intergral part of these financial statements



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Consolidated Statements of Operations and Comprehensive Loss
Unaudited
(Expressed in U.S. Dollars)

    Cumulative From                          
    Date of Inception                          
    (April 21, 2003)   Three Months Ended     Nine Months Ended  
    to September 30     September 30     September 30  
    2011     2011     2010     2011     2010  
General and administration expenses                              
Audit fees $  483,345 $     4,429   $  7,273   $  92,857     44,709  
Freight   7,600     -     -           -  
Insurance   186,297     -     -           -  
Accounting, legal, engineering & consulting investor relations   547,965     20,811     104,216     35,206     126,396  
Management fees and stock based compensation (Notes 6 and 8   2,889,839     90,000     1,614,750     228,250     1,659,750  
Office   77,046     1,155     2,402     2,974     6,809  
Telephone and utilities   83,059     -     -           -  
Transfer agent fees   40,615     4,771     966     7,095     1,861  
Travel   293,298     9,884     9,981     40,467     23,188  
Wages and benefits   86,588     -     -     -     -  
Gain on disposal of assets   (795,231 )   -     -     -     -  
Write-down (recovery) on oil and gas leases (Note 3   2,830,409     -     -     (75,000 )   -  
    (6,730,830 )   (131,050 )   (1,739,588 )   (331,849 )   (1,862,713 )
Other income (expenses)                              
Interest expense (Note 6)   (274,621 )   (47,223 )   (9,378 )   (140,506 )   (28,951 )
Loss on settlement of loans payable (Note 7)   (3,458,690 )   -     (269,055 )   (500 )   (269,055 )
Loss on foreign exchange   (15,799 )   -     3,052     (2,280 )   4,398  
Gain on liabilities write-off   618,231     -     -     -     -  
    (3,130,879 )   (47,223 )   (275,381 )   (143,286 )   (293,608 )
                               
Loss from continuing operations   (9,861,709 )   (178,273 )   (2,014,969 )   (475,135 )   (2,156,321 )
                               
Loss from discontinued operations   (1,149,700 )   -     -     -     -  
                               
Loss for the period   (11,011,409 )   (178,273 )   (2,014,969 )   (475,135 )   (2,156,321 )
Other Comprehensive Income                              
Foreign currency translation adjustments   873     -     -     -     -  
Comprehensive Loss $  (11,010,536 ) $  (178,273 ) $  (2,014,969 ) $  (475,135 ) $  (2,156,321 )
                               
Loss per share - basic and diluted         ($0.01 )   ($0.18 )   ($0.04 )   ($0.20 )
Weighted average shares outstanding         12,152,617     10,945,111     12,065,438     10,634,567  

The accompanying notes are an intergral part of these financial statements



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Statement of Changes in Stockholders' Equity (Capital Deficit)
For the Period From date of inception on April 21, 2003 to Sept 30, 2011
Unaudited
(Expressed in U.S. Dollars)

                      Shares to be           Accumulated        
    Number of     Par Value     Additional        Issued           Other        
    Common     @$0.001     Paid-in     (Subscriptions     Accumulated     Comprehensive     Total Capital      
    Shares     Per Share     Capital     Receivable)     Deficit     Loss     Deficit  
Balance, April 21, 2003   10   $  -   $  -   $  -   $  -   $  -   $  -  
Adjustment for the issuance of                                          
 common stock on recapitalization   3,758,040     3,758     (3,758 )   -     -     -     -  
    3,758,050     3,758     (3,758 )   -     -     -     -  
Adjustment to capital deficit of the Company at the recapitalization date   417,603     418     (945,307 )   -     -     -     (944,889 )
    4,175,653     4,176     (949,065 )   -     -     -     (944,889 )
Shares issued for management services (Note 7)   150,000     150     104,850     -     -     -     105,000  
Currency translation adjustment   -     -     -     -     -     873     873  
Net loss for the period   -     -     -     -     (626,985 )   -     (626,985 )
Balance, December 31, 2003   4,325,653     4,326     (844,215 )   -     (626,985 )   873     (1,466,001 )
Shares issued for cash (Note 7)   1,000,000     1,000     24,000     -     -     -     25,000  
Shares subscribed but unissued   -     27,500     -     -     -     -     27,500  
Forgiveness of related party balances payable   -     -     1,027,791     -     -     -     1,027,791  
Net income for the year   -     -     -     -     71,698     -     71,698  
Balance, December 31, 2004   5,325,653     32,826     207,576     -     (555,287 )   873     (314,012 )
Shares subscribed but unissued   -     (27,500 )   -     -     -     -     (27,500 )
Shares issued for cash (Note 7)   2,750,000     2,750     24,750     -     -     -     27,500  
Cancellation of shares (Note 7)   (5,437,932 )   (5,438 )   5,438     -     -     -     -  
Compensation expense on share cancellation (Note 7)   -     -     44,720     -     -     -     44,720  
Shares issued for loan payable settlement (Note 7)   89,500     90     125,211     -     -     -     125,300  
Shares issued for cash (Note 7)   7,500     8     743     -     -     -     750  
Stock based compensation   -     -     140,438     -     -     -     140,438  
Net loss for the year   -     -     -     -     (1,036,098 )   -     (1,036,098 )
Balance, December 31, 2005   2,734,721     2,735     548,875     -     (1,591,385 )   873     (1,038,902 )
Shares issued for cash (Note 7)   6,000     6     594     (600 )   -     -     -  
Stock based compensation   -     -     11,401     -     -     -     11,401  
Net loss for the year   -     -     -     -     (128,774 )   -     (128,774 )
Balance, December 31, 2006   2,740,721     2,741     560,870     (600 )   (1,720,159 )   873     (1,156,275 )
Net loss for the year   -     -     -     -     (192,410 )   -     (192,410 )
Balance, December 31, 2007   2,740,721     2,741     560,870     (600 )   (1,912,569 )   873     (1,348,685 )
Share subscriptions paid (Note 7)   -     -     -     600     -     -     600  
Net income for the year   -     -     -     -     109,951     -     109,951  
Balance, December 31, 2008   2,740,721     2,741     560,870     -     (1,802,618 )   873     (1,238,134 )
Cancellation of shares (Note 7)   (2,000,000 )   (2,000 )   2,000     -     -     -     -  
Shares issued for loan payable settlement (Note 7)   8,950,000     8,950     3,571,050     -     -     -     3,580,000  
Shares issued for loan payable settlement (Note 7)   436,000     436     217,564     -     -     -     218,000  
Shares issued for consulting services (Note 7)   350,000     350     209,650     -     -     -     210,000  
Stock based compensation (Note 8)   -     -     43,321     -     -     -     43,321  
Net loss for the year   -     -     -     -     (3,433,469 )   -     (3,433,469 )
Balance, December 31, 2009   10,476,721     10,477     4,604,455     -     (5,236,087 )   873     (620,282 )
Shares issued upon conversion of debt (Note 7)   49,925     50     37,363     -     -     -     37,413  
Shares issued for loan payable settlement (Note 7)   725,971     726     1,015,633     -     -     -     1,016,359  
Shares issued for data purchase (Note 7)   350,000     350     367,150     -     -     -     367,500  
Stock based compensation (Note 8)   -     -     1,592,250     -     -     -     1,592,250  
Shares to be issued (Note 7)   -     -     -     250,000     -     -     250,000  
Net loss for the year   -     -     -     -     (5,300,187 )   -     (5,300,187 )
Balance, December 31, 2010   11,602,617     11,603     7,616,851     250,000     (10,536,274 )   873     (2,656,947 )
Shares issued for cash (Note 7)   500,000     500     249,500     -     -     -     250,000  
Shares issued for loan payable settlement (Note 7)   50,000     50     50,450     -     -     -     50,500  
Stock based compensation (Note 8)   -     -     93,250     -     -     -     93,250  
Shares to be issued (Note 7)   -     -     -     (250,000 )   -     -     (250,000 )
Net loss for period   -     -     -     -     (475,135 )   -     (475,135 )
Balance, September 30, 2011   12,152,617   $  12,153   $  8,010,051   $  -   $  (11,011,409 ) $  873   $  (2,988,332 )

The accompanying notes are an integral part of these financial statements



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
Unaudited
(Expressed in U.S. Dollars)

    Cumulative From              
    Date of Inception              
    (April 21, 2003)     Nine month period ended  
    to September 30     September 30  
    2011     2011     2010  
                   
Operating Activities                  
Net loss for the period $  (11,011,409 ) $  (475,135 ) $  (2,156,321 )
Adjustments to reconcile net loss for the period to cash used in operating activities            
Impairment (recovery) of investment in oil and gas leases   3,250,368     (75,000 )   -  
Gain on disposal of assets   (933,995 )   -     -  
Gain on liabilities write-off   (618,231 )   -     -  
Stock based compensation   1,925,380     93,250     1,592,250  
Depreciation   277,578     -     -  
Shares issued for services   105,000     -     -  
Loss on settlement of loan payable   3,458,690     500     269,055  
Changes in non-cash working capital items         -     -  
Accounts payable   1,715,119     30,550     45,471  
Accrued liabilities   6,582     (24,975 )   33,837  
Accrued interest   213,687     140,505     -  
Advances to related party   (43,729 )   (115 )   (43,700 )
Cash used in operating activities   (1,654,960 )   (310,420 )   (259,408 )
                   
Investing Activities                  
Investment in oil and gas leases   (2,428,296 )   (12,525 )   (113,048 )
Proceeds from the sale of working interests   650,000     -     -  
Proceeds from sale of equipment   57,738     57,738     -  
Prepaid expenses   (2,000,565 )   -     -  
Purchase of property and equipment   (311,367 )   -     -  
Refund on oil and gas deposi   75,000     75,000     -  
Cash (used in) provided by investing activities   (3,957,490 )   120,213     (113,048 )
                   
Financing Activities                  
Proceeds from (repayment of) convertible debt   35,625     -     -  
Proceeds from bank overdraft   -     -     -  
Repayment of loans payable   (70,000 )   -     -  
Shares issued for cash   303,850     -     -  
Proceeds from loans payable   5,346,912     130,250     2,665,493  
Cash provided by financing activities   5,616,387     130,250     2,665,493  
                   
Increase (decrease) in cash during the period   3,937     (59,957 )   2,293,037  
Effect of cumulative currency translation   873     -     -  
Cash, beginning of the period   -     64,767     6,024  
Cash, end of the period $  4,810   $  4,810   $  2,299,061  
                   
                   
Supplemental Cash Flow information                  
Interest paid $  35,000   $  -   $  -  
Non-cash investing and financing activities:                  
Impairment in oil and gas leases   419,959     -     -  
Investment in oil and gas leases in exchange for notes payable to Veneto   1,455,000     -     -  
Transfer of leases in settlement of notes payable   1,455,000     -     -  
Assignment of accounts payable from transfer of leases   193,764     -     -  
Settlement of loan payable   1,481,469     -     762,269  
Forgiveness of related party balances payable   1,028,291     500     -  
Forgiveness of loan payable   311,400     -     -  
Shares issued for property services   210,000     -     -  
Exchange of accounts payable for convertible debt   100,000     -     -  
Shares issued for data purchase   367,500     -     367,500  
Shares issued on conversion of debt   35,625     -     35,625  
Shares issued for accrued interest on conversion of debt   1,778     -     1,778  
Asset retirement obligation   50,000     -     -  

The accompanying notes are an intergral part of these financial statements



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN

Maverick Minerals Corporation (“the Company”) was incorporated on August 27, 1998 under the Company Act of the State of Nevada, U.S.A. to pursue opportunities in the business of franchising fast food distributor systems. On May 23, 2001, the Company changed its direction to the energy and mineral resource fields, as an exploration stage company, and still is an exploration stage company.

On April 21, 2003 the Company closed a transaction, as set out in the Purchase Agreement (the “Agreement) with UCO Energy Corporation (“UCO”) to purchase the outstanding equity of UCO. To facilitate the transaction, the Company consolidated its share capital at a ratio of one for five. Subsequent to the share consolidation, the Company issued 3,758,040 common shares in exchange for all the issued and outstanding common shares of UCO. As a result of the transaction, the former shareholders of UCO held approximately 90% of the issued and outstanding common shares of the Company. The acquisition of UCO was recorded as a reverse acquisition for accounting purposes as a recapitalization of UCO. A net distribution of $944,889 was recorded in connection with the common stock of the Company for the acquisition of UCO in respect of the Company’s net liabilities at the acquisition date. The Company had minimal assets and had liabilities owing to suppliers as well as amounts owing under agreements with third parties as well as related parties and as there were no other business interests, the Company was acting as a public shell company. The financial statements are now presented as a continuation of UCO. UCO was in the business of pursuing opportunities in the coal mining industry. The Company has since disposed of its mining interests and is currently an exploration stage company engaged in the acquisition, exploration, and development of prospective oil and gas properties. The Company’s current business focus is to implement the terms of the Farmout Agreement (Note 3).

These accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at September 30, 2011, the Company has negative working capital of $1,599,017 (December 31, 2010 - $1,262,665), and has an accumulated deficit of $11,011,409 at September 30, 2011. The continuation of the Company is dependent upon obtaining a successful new exploration project, the continuing support of creditors and stockholders as well as achieving and maintaining a profitable level of operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management anticipates that it requires approximately $2,625,000 to cover general and administrative expenses and estimated expenditures related to the oil and gas leases (Note 3) over the twelve months ending September 30, 2012 to continue operations. The majority of this anticipated requirement will be funded by the $142,250 available on the Company’s $500,000 revolving loan obtained during the year ended December 31, 2009 which bears interest at an annual rate of 8%, by future equity issuances and by debt financing. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totaling $1,647,376. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company plans to raise necessary cash through equity issuances and/or debt financing. Amounts raised will be used to continue the development of the Company's explorations activities, and for other working capital purposes.

Management cannot provide any assurances that the Company will be successful in any of its plans. Although there are no assurances that management's plans will be realized, management believes that the Company will be able to continue operations in the future. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 2. INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2010. The Company follows the same accounting policies in the preparation of interim reports.

Results of the operations for the interim periods are not indicative of future results.

  (a)

New Accounting Pronouncements

     
 

In April 2010, the FASB issued Accounting Standards Update No. 2010-12 which amends topic 718 “Compensation— Stock Compensation”. The amendment addresses the classification of employee share- based payments awards with an exercise price denominated in the currency of a market in which the underlying equity security trades, stating that a share-based award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s shares trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity. This new provision is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2010. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.


Note 3. OIL AND GAS LEASES

On December 14, 2009, the Company entered into a farm-out agreement (the “Farmout Agreement”) with Southeastern Pipe Line Company (“SEPL”) pursuant to which the Company acquired the right to earn an interest in certain oil and gas mineral leases located in Fort Bend and Wharton Counties, Texas (collectively, the “Leases”) and to the lands covered thereby subject to certain conditions, including the following:

  i)

Payment of a non-refundable fee of $350,000 to SEPL (paid);

     
  ii)

Commencement of continuous and actual drilling operations on an oil or gas well to a good and workmanlike manner with due diligence and to a depth sufficient for testing on the undeveloped Leases on or prior to December 14, 2010;

     
  iii)

Completion of drilling on every drillable tract of the undeveloped Leases prior to commencing drilling operations on the developed Leases;

     
  iv)

Completion of the drilling of at least four wells on the undeveloped acreage, to a good and workmanlike manner with due diligence and to a depth sufficient for testing, and commence commercial production on such wells within 120 days after completion of drilling with the option to pay $250,000 per well to opt out of the requirement to drill up to two of the four wells;

     
  v)

Upon earning the interest in the Leases, the Company agrees to enter into a Joint Operating Agreement to govern operations by the parties on the Leases, and SEPL agrees to assign its 100% interest in the Leases to the Company subject to reserving an overriding royalty interest equal to the difference between all the existing lease burdens of record in effect as of October 1, 2009 and 30%, thereby delivering to the Company a 70% net revenue interest in the Leases; and




MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 3. OIL AND GAS LEASES – continued

  vi)

The Company granting an option to SEPL pursuant to which SEPL may after all drilling and completion cost have been recovered by the Company, back-in a 25% of eight-eighths working interest (subject to proportionate reduction if the Company’s acreage covers less than the entirety of the mineral interest under the proration spacing unit drilled), on a well-by-well basis.

Pursuant to the terms of the Farmout Agreement, if the Company met the commitment to commence the drilling operations on the first test well by December 14, 2010 described below and provided the Company establishes commercial production and meets the requirements for the first well tested, the Company will have an option to develop additional wells within 180 days after the completion of the first well tested or subsequent wells tested. Also, pursuant to the terms of the agreement the Company agreed to indemnify SEPL and its affiliates from all claims arising from the drilling or operations of the first test well or any subsequent wells tested.

In connection with these leases the Company issued 350,000 shares as payment for geological data (Note 7). The Company entered into a letter agreement dated December 6, 2010 (the “Letter Agreement”) with an accredited investor (the “Purchaser”) pursuant to which the Purchaser and his nominee acquired a fifteen percent (15%) working interest in the Company’s initial test well being drilled in Fort Bend County, Texas having the permitted name of Lankford Trust No. 1 (the “Initial Test Well”) for the sum of $500,000. In accordance with the terms of the Letter Agreement, the Company and the Purchaser concurrently entered into a joint operating agreement dated effective December 6, 2010 pursuant to which each party agreed to pay or deliver, or cause to be paid or delivered, all burdens and liabilities on its share of the production in regards to the Well, but not in excess of thirty percent (30%) and to indemnify, defend and hold the other party free from any liability therefore. As a condition of the Letter Agreement and joint operating agreement, the Purchaser and/or their nominees will be entitled to receive a 25% share from any proceeds of the Well until such time as their initial investment of $500,000 has been repaid after which time the distribution to the Purchaser reverts to 15% in accordance with their interest in the Well. The $500,000 received for the sale of the working interest has been applied against the costs capitalized to Oil and Gas Leases.

Effective December 7, 2010, the Company entered into a joint operating agreement with Arrowdog, LLP (“Arrowdog”) pursuant to which Arrowdog acquired a three percent (3%) working interest in the Initial Test Well for the sum of $150,000. Pursuant to the terms of the joint operating agreement each party agreed to pay or deliver, or cause to be paid or delivered, all burdens and liabilities on its share of the production in regards to the Well, but not in excess of thirty percent (30%) and to indemnify, defend and hold the other party free from any liability therefore. As a condition of the agreement Arrowdog will be carried for a 3% working interest to completion or until plug and abandonment without further cost.

Thereafter, Arrowdog will be responsible for their pro-rata share of expenses for maintenance and production with the Company. The $150,000 received for the sale of the working interest has been applied against the costs capitalized to Oil and Gas Leases.

On January 22, 2011 Maverick completed drilling of its Initial Test Well on the Company's 4,513 acre Farm-Out property in Fort Bend County, Texas. The initial test well was spud on December 9, 2010.

Based on the results of the drilling program on the Initial Test Well subsequent to year end it was determined that zones drilled were not commercially productive, despite the presence of significant down hole pressure and strong natural gas shows during drilling. The target sands were poorly developed and not suitable for a completion attempt. Accordingly, the decision was made to not set production casing and as a result the Company’s engineers have now completed plugging the well pursuant to regulations of the Texas Railway Commission.



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 3. OIL AND GAS LEASES – continued

As a result drilling and direct exploration and asset retirement obligation costs, plus 25% of all other costs described in the table below are considered evaluated costs and are subject to amortization.

Besides drilling, exploration and asset retirement obligation costs, which are directly related to the Initial Test Well, the Company also included 25% of all other costs described in the table below in its impairment assessment on the basis that these costs were incurred in connection with the Farmout Agreement where it is previously disclosed (Note 3(iv)) that one of the conditions of the Farmout Agreement is the completion of the drilling of at least four wells and determined it appropriate to include 25% of these costs in the impairment assessment on the Initial Test Well. The costs were offset against the incidental revenue of $650,000 received from selling working interests relating to the Initial Test Well.

As a result management has determined that costs capitalized to date relating to the drilling and exploration of the Initial Test Well are impaired and have recorded a writedown on its oil and gas exploration expenditures capitalized of $904,844 as at December 31, 2010 on the statement of operations. There was no further impairment for the nine month period ended September 30, 2011.

Net carrying costs as at September 30, 2011 and December 31, 2010:

      September 30,     December 31,  
      2011     2010  
  Deposit on oil and gas leases $  350,000   $  350,000  
  Drilling and exploration   1,121,558     1,167,021  
  Consulting costs   235,113     235,113  
  Legal costs   17,116     17,116  
  Geologist services   381,812     381,562  
  Geological data   367,500     367,500  
  Asset retirement obligation   50,000     50,000  
  Incidental revenue   (650,000 )   (650,000 )
      1,873,099   $  1,918,312  
  Write down of Oil & Gas leases   (904,844 )   (904,844 )
  Interest in Oil & Gas leases $  968,255   $  1,013,468  

In addition, $2,000,565 was paid in deposits to the Operator of the Initial Test Well as a prepayment for future drilling work to be completed on the well subsequent to year end which were also included on the impairment assessment on the Initial Test Well and it was determined that these amounts were also impaired. As a result this amount, along with the $904,844 amount disclosed above, have been recorded as a write-down of oil and gas leases totaling $2,905,409 for the year ended December 31, 2010 on the statement of operations. During the nine month period ended September 30, 2011 the Company received a $75,000 refund on deposits paid to the Operator of the Initial Test Well and as a result this amount was recorded as a recovery on oil and gas leases. As at September 30, 2011, no amounts remain unapplied from the amounts deposited to the Operator of the Initial Test Well.

Unevaluated property costs, primarily including portions of the deposit on oil and gas leases, consulting, legal, geologist services and geological data costs, being excluded from the amortizable evaluated property base, consisted of $585,322 incurred in 2011 (December 31, 2010 - $585,072). These costs are directly related to the acquisition and evaluation of unproved properties. The excluded costs and related reserves are included in the amortization base as the properties are evaluated and proved reserves are established or impairment is determined. The Company expects that the majority of these costs will be evaluated over the next one to three years. The Company’s unevaluated property balance of $968,255 at September 30, 2011 reflects a $45,213 decrease as compared to the December 31, 2010. The decrease relates to the sale of excess casing and tubing of $57,738 which was recorded as a recovery on oil and gas leases offset by approximately $12,525 of additional payments for drilling and exploration and geologist services incurred during the nine month period ended.



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 4. LOANS PAYABLE

The Company has the following loans payable:

      September 30,     December 31,  
      2011     2010  
  Art Brokerage – Current(a) $  89,993   $  89,743  
  Art Brokerage – Current(b)   540,000     540,000  
  Art Brokerage – Term Loan(d)   450,000     400,000  
  Ms. Nancy A. Vevoda(a)   25,000     -  
  Mr. Alonzo B. Leavell(a)   20,000     20,000  
  Bear Lair LLC(e)   55,000     -  
      1,179,993     1,049,743  
  Art Brokerage – Term Loan (d)   1,950,000     2,000,000  
  Senergy Partners LLC(c)   357,750     357,750  
      2,307,750     2,357,750  
    $  3,487,743   $  3,407,493  

  (a)

These amounts are unsecured; bear no interest, with no specific terms of repayment.

     
  (b)

These amounts are unsecured; bear interest at 5% per annum, with no specific terms of repayment.

     
  (c)

This credit facility is unsecured, bears interest at 8% per annum, maturing on December 31, 2012 (see Note 7). The remaining amount available under this credit facility is $142,250 as at September 30, 2011.

     
  (d)

On September 20, 2010, the Company entered into a loan agreement (the “Loan Agreement”) with Art Brokerage, Inc. (“Art Brokerage”), pursuant to which Art Brokerage provided the Company with a non- revolving term loan in the amount of $2,400,000 having an interest rate of 5% per annum. The loan matures on April 1, 2015 with interest calculated and compounded monthly, payable on the 1st day of each calendar month commencing May 1, 2011. In addition to the monthly interest payments, the Company will make monthly principal payments in the amount of $50,000, commencing on May 1, 2011 and continuing on the 1st day of each month until the Company’s indebtedness is repaid in full. The loan matures on April 1, 2015. On May 25, 2011 the Company and the creditor agreed to amend the Loan Agreement to allow the Company to postpone commencement of the monthly principal and interest payments until January 1, 2012. All other terms and conditions with respect to the original Loan Agreement remain unchanged. As a result, $100,000 previously classified as current loans payable has been reclassified to long-term loans payable.

     
 

As a condition of the Loan Agreement, during the term of the loan, the Company agreed, among other things, to maintain its property assets and undertakings in good repair, to obtain and maintain all licenses and permits necessary to own and operate its assets and agreed not to, without the prior consent of Art Brokerage, change its name, change its corporate structure, change its fiscal year end, incur further indebtedness, grant any liens against its properties or assets unless permitted, make any advances or loans to any person, assign or transfer its intellectual property, or permit its unfinanced capital expenditures to exceed $300,000 per annum.

     
 

In addition and as further collateral of the Company’s indebtedness under the Loan Agreement, the Company and Art Brokerage entered into a pledge and security agreement dated September 20, 2010, pursuant to which the Company agreed to pledge to Art Brokerage a first priority security interest in all of the shares of capital stock of Eskota Energy Corporation, the wholly-owned subsidiary of the Company, and all proceeds with respect to such stock.




MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 4. LOANS PAYABLE – continued

  (d)

- continued

     
 

In connection with the negotiation of the Loan Agreement with Art Brokerage, the Company was required to enter into an amendment to its existing loan with Senergy Partners LLC, an affiliate of Art Brokerage. Under the terms of an amendment agreement dated September 15, 2010, entered into by the Company with Senergy Partners LLC (“Senergy”), the parties agreed that if and at such time Art

     
 

Brokerage enters into a loan agreement with the Company with respect to a loan of $2,400,000, the existing loan agreement between the parties dated February 13, 2009 providing for up to $1,000,000 in principal to the Company (the “Senergy Loan”) would be amended to provide that upon entry into the Loan Agreement the outstanding balance of principal and accrued interest under the Senergy Loan could not exceed a maximum limit of $500,000.

     
 

As a further condition of the Loan Agreement, the Company agreed to enter into a general security agreement dated September 20, 2010 creating a security over the Company’s present and after-acquired personal property and over the Company’s real property and other assets.

     
 

Both Senergy and Art Brokerage are beneficially controlled by a significant shareholder of the Company.

     
  (e)

On September 30, 2011, the Company entered in to a loan agreement with Bear Lair LLC, a Nevada Corporation, to reflect advances made to the Company during fiscal 2011. The loan is due in one year on September 30, 2012 and bears no interest rate or specific terms of repayment beyond the initial term.

     
 

Principal repayments over the remaining terms of the loans as at September 30th are as follows:


           2011 $  1,179,993  
           2012   507,750  
           2013   600,000  
           2014   600,000  
           2015   600,000  
Total $  3,487,743  

Note 5. CONVERTIBLE DEBT

  a)

On November 26, 2009, the Company issued a convertible note in the amount of $100,000 to a related party to settle an outstanding payable of $100,000. This convertible note is due on demand, and bears interest at 8% per annum. The debt is convertible into common shares at a conversion rate of $0.30 per share.

     
  b)

On December 11, 2009, the Company issued a convertible note in the amount of $35,625. This convertible note was due on June 11, 2010 and bore interest at 8% per annum. The debt was convertible into common shares at $0.75 per share. The Company has the right to prepay any portion of the principal amount of this debenture without prior written consent of the holder. This note was converted during the year ended December 31, 2010.

Both convertible notes are accounted for in accordance with ASC 470-20 which requires the Company to classify as equity any amounts representing a beneficial conversion feature. As both conversion prices exceed the fair value of the underlying common shares on the issue date, no beneficial conversion feature is recognized under ASC 470-20 and the entire proceeds are classified as debt until such time as they are converted to equity.



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 5. CONVERTIBLE DEBT - continued

As both conversion prices exceed the fair value of the underlying common shares on the issue date, no beneficial conversion feature is recognized under ASC 470-20 and the entire proceeds are classified as debt until such time as they are converted to equity. Accordingly, the convertible notes are presented on the consolidated balance sheets as a liability. No convertible notes discount is recognized.

      September 30,     December 31,  
      2011     2010  
  Issuance of convertible note (a) $  100,000   $  100,000  
    $  100,000   $  100,000  

Note 6. RELATED PARTY TRANSACTIONS

Effective September 23, 2010, the Company entered into two consulting agreements, one with the President, CEO and CFO (the “President”) and one with the Secretary. As consideration for the performance of consulting services under the agreement, the Company agreed to pay the President and Secretary $10,000 and $5,000 per month and a one-time bonus of $250,000 and $100,000, respectively, upon the spudding of the Company’s first commercial well drilled on the Company’s Farmout Acreage, as such term is defined under the Company’s farmout agreement with Southeastern Pipeline Company dated December 7, 2009. Under the agreement the President and Secretary were also granted stock options to acquire 700,000 and 400,000 shares of common stock, respectively, at an exercise price of $1.05 per share until August 20, 2015 in accordance with the terms of the Company’s 2009 Stock Option Plan. The agreement is for a term of three years. Notwithstanding the three year term, the agreement may be terminated at any time by the Company without notice in the event the President breaches the terms of this agreement.

Management fees of $45,000 and $135,000 were charged to expense in these financial statements for the three and nine month periods ended September 30, 2011 (September 30, 2010 - $22,500 and $67,500) respectively.

During the nine month period ended September 30, 2011 the Company advanced $115 to the Company’s president and secretary to pay for future expenses incurred by the individuals on behalf of the Company bringing the total amount of advances to related parties to $43,729 (December 31, 2010 - $43,614). The advances are non-interest bearing and have no specific terms of repayment.

During the three and nine month periods ended September 30, 2011, the Company incurred $45,221 and $134,505 (September 30, 2010 - $Nil) respectively in interest charges on loans payable to a significant shareholder of the Company. Included in accrued interest on loans payable is $206,086 (December 31, 2010 - $65,581) payable to related parties as at September 30, 2011.

Note 7. SHARE CAPITAL

As explained in Note 1, on April 21, 2003 the Company issued 3,758,040 common shares in exchange for all the issued and outstanding common shares of UCO.

In July 2003, the Company issued 150,000 common shares to the Company’s CEO in exchange for management services. The transaction was recorded at the quoted market price of $0.07 per common share and resulted in compensation expense of $105,000. No consideration was received by the Company in the exchange of shares for management services.



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 7. SHARE CAPITAL - continued

In June 2004, the Company issued 1,000,000 common shares at a price of $0.25 for proceeds of $25,000.

During the year ended December 31, 2004, an agreement was reached between the Company, UCO and its creditors releasing the Company and UCO from any further obligations in relation to amounts owing.

As a result, $1,027,791 of payables and liabilities that were owing to related parties was forgiven and recorded against additional paid-in capital. The remaining balance owing to unrelated creditors was recorded as a gain.

In January 2005, the Company issued 2,750,000 common shares at a price of $0.01 for proceeds of $27,500.

In June 2005, the Company cancelled 5,437,932 common shares, under an agreement with certain stockholders, which included the former stockholders of UCO, and two other stockholders including the CEO of the Company. The former stockholders of UCO surrendered the majority of the shares which was approximately 95% of the total common shares that they held at the time.

As a result of the share cancellation, one single common stockholder emerged as the majority stockholder with approximately 76% of the total issued and outstanding common shares. In addition, the CEO’s percentage common share holding increased and resulted in compensation expense of $44,720.

In July 2005, the Company issued 89,500 common shares at a price of $0.60 to settle an amount owing with respect to a loan payable. The transaction was recorded at the quoted market price of $1.40 and resulted in a loss on settlement of loan payable of $71,600.

In September 2005, the Company issued 7,500 common shares at a price of $0.10 for cash proceeds of $750 in relation to the exercise of stock options.

In April 2006, the Company issued 6,000 common shares at a price of $0.10 for $600 in relation to the exercise of stock options.

In 2007 and 2008 there were no share capital transactions.

On February 2, 2009 a major shareholder returned to treasury 2,000,000 common shares of the Company for nil consideration in contemplation of further share issuances (as described below).

  (a)

The Company entered into a loan agreement with Senergy on February 13, 2009, pursuant to which the Company established an unsecured revolving loan of up to $1,000,000, later amended to $500,000 (Note 4(c)), (the “Credit Facility”). The outstanding principal amount of the Credit Facility together with all the accrued and unpaid interest and all other amounts outstanding there under are due and payable in full on December 31, 2012, the maturity date. Outstanding principal under the Credit Facility bears interest at an annual rate of 8%.

     
  (b)

In connection with the Company entering into the Credit Facility and Debt Settlement Agreement with Senergy, the Company entered into an Assignment and Assumption Agreement with Senergy and Art Brokerage, Inc. (“ABI”) dated February 13, 2009, pursuant to which ABI assigned to Senergy all of its right, title and interest to a debt (the “Assigned Debt”) of $447,500 owed by the Company to ABI.




MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 7. SHARE CAPITAL - continued

  (c)

On February 13, 2009, the Company entered into a debt settlement and subscription agreement (the “Debt Settlement Agreement”) with Senergy in consideration of Senergy entering into the Credit Facility. Pursuant to the terms of the Debt Settlement Agreement, the company agreed to issue to Senergy 8,950,000 shares of the Company common stock in settlement of a $447,500 debt owed to Senergy.

     
 

As a result of these transactions, Senergy acquired 8,950,000 shares or 92.3% of the Company’s issued and outstanding common stock. The Company issued 8,950,000 common shares to settle an amount owing with respect to a loan payable totaling $447,500. The transaction was recorded at the quoted market price of $0.40 and resulted in a loss on settlement of loan payable of $3,132,500.

On August 11, 2009 the Company's articles of incorporation were amended and restated to increase the number of authorized shares of its common stock from 100,000,000 to 750,000,000. In addition the Company's articles of incorporation were amended and restated to authorize 100,000,000 shares of preferred stock with a par value of $0.001, which may be divided into and issued in series, with such designations, rights, qualifications, preferences, limitations and terms as fixed and determined by the Company's board of directors.

On September 24, 2009 the Company issued a further 436,000 shares to settle $218,000 owed to ABI. The transaction was recorded at the quoted market price of $0.30 and was treated as a capital transaction which resulted in a charge to equity of $218,000.

On December 11, 2009 the Company issued 175,000 shares each to two consultants, (350,000 shares total) for geological consulting services. The transactions were recorded at the quoted market price of $0.60 per share for total consideration of $210,000 which was capitalized to Oil and Gas Leases on the balance sheet (Note 3).

Effective December 31, 2009 the Company effected a ten (10) for one (1) reverse stock split of the Company’s issued and outstanding shares of common stock. Shares and per share amounts have been retroactively restated to reflect the reverse stock split.

On July 19, 2010 the Company issued 49,925 common shares upon conversion of its Convertible Debenture dated December 11, 2009 in the principal amount of $35,625 and outstanding interest to July 19, 2010 of $1,788 (Note 5(b)).

On July 27, 2010 the Company entered into a data purchase agreement with two individuals (collectively the “Vendors”), pursuant to which the Company agreed to purchase from the Vendors geologic data relating to certain oil and gas mineral leases located in Texas, including among other things: electric logs, seismic work, seismic reprocessing, data from the Texas Railroad Commission. In consideration for the acquisition of the geologic data from the Vendors the Company issued 350,000 shares of the common stock of the Company to the Vendors. The transactions were recorded at the quoted market price of $1.05 per share for total consideration of $367,500 which was capitalized to Oil and Gas Leases on the balance sheet (Note 3).

On September 7, 2010 the Company issued a further 725,971 shares to settle $762,269 owed to ABI. The transaction was recorded at the quoted market price of $1.40 and resulted in a loss on settlement of loan payable of $254,090.

On December 21, 2010, the Company completed a private placement of 500,000 shares of its common stock at a price of $0.50 for gross proceeds of $250,000 to an offshore subscriber pursuant to Regulation S of the Securities Act of 1933. The offering was completed in connection with the above noted sale of a 15% working interest in the Well. These shares were issued on February 11, 2011.



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 7. SHARE CAPITAL - continued

On February 28, 2011 the Company entered into debt settlement and subscription agreements with two subscribers pursuant to which the Company settled an aggregate of $50,000 debt in consideration of the issuance of 50,000 shares on March 7, 2011. The debt related to certain amounts owed to Art Brokerage by third parties that were subsequently assigned to the Company. The transaction was recorded at the quoted market price of $1.01 and result in a loss on settlement of loan payable of $500.

Note 8. STOCK OPTION PLAN

Stock options

The stock option plan of the Company provides for the granting of up to 7,500,000 stock options to key employees, directors and consultants, of common shares of the Company. Under the stock option plan, the granting of incentive and non-qualified stock options, exercise prices and terms are determined by the Board of Directors.

On June 1, 2009, the Company’s board of directors adopted the 2009 Stock Option Plan. The purpose of the 2009 stock option plan is to retain the services of valued key employees and consultants of the Company.

During the year ended December 31, 2009, there were 115,000 options granted to directors and 30,000 options granted to consultants.

All options granted were fully vested at the date of issuance which resulted in a stock-based compensation expense of $43,321 being charged to operations during the year ended December 31, 2009. These options are exercisable at a price of $0.40 per option and expire on December 31, 2012. The fair value of these options granted was approximately $0.30 per share on the grant date in 2009.

During the year ended December 31, 2010, there were 1,100,000 options granted to officers and a director of the Company. All options granted were fully vested at the date of issuance which resulted in a stock-based compensation expense of $1,592,250 being charged to operations during the year ended December 31, 2010. These options are exercisable at a price of $1.05 per option and expire on August 20, 2015. The fair value of these options granted was approximately $1.45 per share on the grant date.

On January 13, 2011 the Company granted 50,000 options with an exercise price of $1.50 to two consultants of the Company which expire on January 13, 2013. All options granted were fully vested at the date of issuance which resulted in a stock-based compensation expense of $93,250 being charged to operations during the nine months ended September 30, 2011. The fair value of these options granted was approximately $1.98 per share on the grant date in 2011.

Weighted average assumptions used in calculating compensation expense in respect of options granted using the Black-Scholes option pricing model were as follows:

    2011  
Risk-free interest rate   0.59%  
Dividend yield   Nil  
Expected volatility   259%  
Weighted average expected life of options   2 years  

No stock options were exercised, cancelled or expired during the nine month period ended September 30, 2011 and 2010.

The following is a summary of the status of the Company’s stock options as of September 30, 2011 and the stock option activity during the nine month period ended September 30, 2011:



MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
September 30, 2011
(Expressed in U.S. Dollars)
(Unaudited)

Note 8. STOCK OPTION PLAN - continued

    Number of     Exercise  
    Options     Price  
Outstanding at December 31, 2009   145,000   $ 0.40  
Granted   1,100,000   $ 1.05  
Outstanding at December 31, 2010   1,245,000   $ 1.03  
Granted   50,000   $ 1.50  
Outstanding at September 30, 2011   1,295,000   $ 1.03  

All options that were outstanding were exercisable at September 30, 2011 and December 31, 2010 as a result of all options being fully vested upon grant.

At September 30, 2011, the Company had share purchase options outstanding as follows:

                Aggregate  
Exercise Price   Number of Options     Expiry Date     Intrinsic Value  
$0.40   145,000     December 31, 2012   $  -  
$1.50   50,000     January, 13, 2013     -  
$1.05   1,100,000     August 20 2015     -  
September 30, 2011   1,295,000         $  -  
December 31, 2010   1,245,000         $  779,000  

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $0.35 per share as of September 30, 2011 (December 31, 2010 – $1.60), which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options vested and exercisable as of September 30, 2011 was Nil (December 31, 2010 – 1,245,000).

Note 9. ASSET RETIREMENT OBLIGATIONS

The Company is required to plug and abandon any wells which it has drilled. The Company estimated its asset retirement obligations based on its understanding of the requirements to reclaim and clean-up its Oil & Gas properties. The Company estimated that total payments of approximately $50,000 would be required to return the property to its normal state as at September 30, 2011. The following is a summary of asset retirement obligations:

             Balance, December 31, 2009 $  -  
             Additions   50,000  
             Balance, December 31, 2010 and September 30,      
2011 $  50,000  

The fair value of the Company's asset retirement obligations are determined using discounted cash flow methodologies based on inputs that are not readily available in public markets. The fair value of the asset retirement obligations is reflected on the balance sheet as follows.

Description   Level 1     Level 2           Level 3  
Asset Retirement Obligations         -     -   $    50,000  
Total         -     -   $  50,000  


- 3 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

  • risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;
  • results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;
  • mining and development risks, including risks related to accidents, equipment breakdowns, labour disputes or other unanticipated difficulties with or interruptions in production;
  • the potential for delays in exploration or development activities or the completion of feasibility studies;
  • risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;
  • risks related to commodity price fluctuations;
  • the uncertainty of profitability based upon our history of losses;
  • risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration and development projects;
  • risks related to environmental regulation and liability;
  • risks that the amounts reserved or allocated for environmental compliance, reclamation, post- closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;
  • risks related to tax assessments;
  • political and regulatory risks associated with mining development and exploration; and
  • other risks and uncertainties related to our prospects, properties and business strategy.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to the common shares in our capital stock.


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As used in this quarterly report, the terms “we”, “us”, “our”, the “Company” and “Maverick” mean Maverick Minerals Corporation and our subsidiary, Eskota Energy Corporation, unless otherwise indicated.

Our Current Business

We are currently an exploration stage company engaged in the acquisition, exploration, and development of prospective oil and gas properties. Our current business focus is to implement the terms of the Farmout Agreement pursuant to which we intend to earn an interest in certain oil and gas mineral leases located in Fort Bend and Wharton Counties, Texas owned by Southeastern Pipe Line Company (“SEPL”). Subject to receipt of additional financing our initial operations during the next quarter are to attempt a completion in the newly discovered oil targets and determining if the initial test well is viable. If the well is not viable, we intend to plug the well. Our 2010 drilling program targeted the Wilcox Trend, a vast depositional sand zone with a history of natural gas and condensate production. The Wilcox Trend is articulated into the upper, middle, and lower Wilcox.

In October, 2010 we engaged a Texas based contractor to commence drill site construction in preparation for the drilling of the Company’s Initial Test Well Fort Bend County, Texas in December, 2010. The construction of location services included widening of an existing 2,000 foot access road and foundational re-enforcement with crushed limestone. In addition, contractors constructed the requisite drilling pad of approximately 1.5 acres in anticipation of rig mobilization. On January 22, 2011 Maverick successfully completed drilling its Initial Test Well to 13,500 on the Company’s 4,513 acre Farm-Out property in Fort Bend County, Texas. The Initial Test Well was spud on December 9, 2010 and reached its targeted depth of 13,500 feet on day 44 of the drilling program. The Company’s independent log analyst and project engineer concurred at that time that the targeted Wilcox zones were not commercially productive, despite the presence of significant down hole pressure and strong natural gas shows during drilling. The target sands were poorly developed and not suitable for a completion attempt. Accordingly, the decision was made to not set production casing and to look up hole for completion opportunities. The first completion attempt was a potential oil reservoir near 8,000’. The Yegua sand was indicated as potentially productive from open hole log analysis but proved to be non-productive after testing. The second completion attempt was made on a shallow Miocene zone. There had not been an open hole log across this interval but a significant gas show was seen on the mud log while drilling this interval. The zone was perforated and swab tested during the week of March 14-19, 2011 but yielded no significant gas. Maverick’s engineers have completed plugging the Lankford Trust No. 1 pursuant to regulations of the Texas Railway Commission. Concurrent with our entry into the Farmout Agreement, we acquired from a consulting geologist, detailed proprietary geology on the property subject to the Farmout Agreement. The dataset includes seismic and geological interpretations of the underlying geology from historic data. In addition, we obtained access to log data from a well drilled to 12,200 feet in 2003 on the Farm-Out Acreage. Management’s intent is to conduct further work on log and seismic data in order to determine whether or not to abandon the Initial Test Well.

As a result of test results showing that zones drilled were not commercially productive management determined that the direct costs capitalized in relation to the Initial Test Well were impaired as at December 31, 2010.

Management determined that costs relating to drilling and direct exploration and asset retirement obligation costs, plus 25% of all costs relating to the Farm-Out Acreage as a whole should be considered evaluated costs and thus be subject to amortization. Besides drilling, exploration and asset retirement obligation costs, which are directly related to the Initial Test Well, the Company also included 25% of all other costs relating to the Farm-Out Acreage as a whole in its impairment assessment on the basis that these costs were incurred in connection with the Farmout Agreement where it is previously disclosed (Note 3(iv)) that one of the conditions of the Farmout Agreement is the completion of the drilling of at least four wells and thus determined it appropriate to include 25% of these costs in the impairment assessment on the Initial Test Well. The costs were offset against the incidental revenue of $650,000 received from selling working interests relating to the Initial Test Well.

The farm-out agreement allows the Company 120 days to complete the Lankford Trust #1 well and 180 days thereafter to commence drilling a new well. Accordingly, a decision to amend the farmout agreement, drill a new well or have the agreement lapse will occur in Q4.

Given the significant lead time to requisition a drilling rig and the financing required there is a significant risk that the Company will see it’s farm-out agreement lapse before it has the opportunity to drill a second well. In such a circumstance the Company would suffer a significant loss on its investment and there is no guarantee it could re-enter an agreement for further drilling on the farm out property on terms acceptable to the company. It is the goal of the Company, however, to explore every opportunity to leverage the investment made and data gained on the subject property to date.


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Farm-out Agreement with Southeastern Pipe Line Company

On December 14, 2009, we entered into a farmout agreement with Southeastern Pipe Line Company pursuant to which we acquired the right to earn an interest in certain oil and gas mineral leases located in Fort Bend and Wharton Counties and to the lands covered thereby (collectively, the “Leases”). The Farmout Agreement is subject to certain conditions, including the following:

  (i)

Payment of a non-refundable fee of $350,000 to SEPL (the “Fee”), which fee has been paid;

     
  (ii)

Commencement of continuous and actual drilling operations on an oil or gas well (the “Initial Test Well”) to an objective formation (as such term is defined in the agreement) on the undeveloped Leases on or prior to December 14, 2010 (the “Completion Date”) which condition has been met;

     
  (iii)

Completion of drilling on every drillable tract of the undeveloped Leases prior to commencing drilling operations on the developed Leases;

     
  (iv)

Completion of the drilling of at least four wells on the undeveloped acreage to the objective formation and commence commercial production on such wells within 120 days after completion of drilling with the option to pay $250,000 per well to opt out of the requirement to drill up to two of the four wells;

     
  (v)

Upon earning the interest in the Leases, Maverick agrees to enter into a Joint Operating Agreement in the form of AAPL 610 Model Form 1989 with 2005 COPAS accounting procedure to govern operations by the parties on the Leases, and SEPL agrees to assign its 100% interest in the Leases to Maverick subject to reserving an overriding royalty interest equal to the difference between all the existing lease burdens of record in effect as of October 7, 2009 and 30%, thereby delivering to Maverick a 70% net royalty interest in the Leases; and

     
  (vi)

Maverick granting an option to SEPL pursuant to which SEPL, may, after all drilling and completion costs have been recovered by Maverick, back-in 25% of an eight-eighths working interest (subject to proportionate reduction if Maverick’s acreage covers less than the entirety of the mineral interest under the proration spacing unit drilled), on a well-by-well basis.

The Company completed its review of the Initial Test Well during Q2 2011. It was determined after P & A that no further entries would be economical and the 120 day period allowed for completion under the terms of the Company’s farmout agreement expired in Q2, 2011. Thereafter a 180 day period allowed under the agreement to commence drilling a second well began. Accordingly, a decision to amend the farmout agreement, drill a new well or have the agreement lapse will occur in Q4 of fiscal 2011.

General

The following is a discussion and analysis of our plan of operation for the three and nine month period ended September 30, 2011, and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our consolidated unaudited financial statements and the notes thereto included elsewhere in this quarterly report. Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise.

Plan of Operation

We are currently an exploration stage company engaged in the acquisition, exploration, and development of prospective oil and gas properties in Texas. Our current business focus is to implement the terms of the Farmout Agreement, entered into by the Company in December 2009, pursuant to which we intend to earn an interest in certain oil and gas mineral leases located in Fort Bend and Wharton Counties, Texas and presently owned by SEPL. Our Plan of Operation will begin with a review of the data obtained through the drilling of our Initial Test Well. Based on the results of that review, the Company will determine if the acquisition of further geophysical data is warranted both for the present drill site block and the Farm Out Acreage as a whole. The Company remains in compliance with the performance timetable as set out in the Farm Out Agreement on the date of the filing of this report. Thereafter, a decision will be made with respect to drilling a second exploration well, subject to suitable financing on terms acceptable to the Company, but in any event no such drilling is contemplated before the fourth quarter of 2011 in keeping with the terms of the Company’s Farm Out Agreement. The Company is reviewing a small number of new opportunities for oil and gas exploration and development in Texas, some of which have production components as well as development opportunities. The Company believes that it is feasible to contemplate, based on discussions with interested parties, a stock-predicated acquisition based on the strong capital structure that was implemented by the Company in 2010. Management will review these opportunities diligently; however, no guarantee can be given that any transaction as outlined herein will occur in the time frame covered by this Plan of Operation.


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Finally, the Company has a history of acquiring mineral properties outside of the oil and gas arena including silver and coal properties previously owned and produced by the Company. At a time of strong commodity markets for these and other metals and minerals, the Company will not hesitate to exploit any opportunity to utilize its experience gained over the past decade to enter into an agreement for the acquisition and development of a metal or mineral property.

Our estimated expenses over the next twelve months are as follows:

Cash Requirements during the Next Twelve Months

                                                                             Expense ($)
Cost to drill New Exploration Well 2,200,000
Consulting and Due Diligence 75,000
Professional Fees 100,000
General and Administrative expenses 250,000
Total 2,625,000

To date we have funded our operations primarily with loans from shareholders. In addition to funding our general, administrative and corporate expenses we are obligated to address certain current liabilities. We will need to raise additional funds to meet these current liabilities. To raise these funds we may be required to increase shareholder loans, incur new borrowings or issue new equity which may be dilutive to existing shareholders. Other than our loan agreements with Senergy Partners LLC and Art Brokerage, Inc., we currently have no agreement in place to raise funds for current liabilities and no guarantee can be given that we will be able to raise funds for this purpose on terms acceptable to our company. Failure to raise funds for general, administrative and corporate expenses and current liabilities could result in a severe curtailment of our operations.

Any advance in the oil and gas development strategy set-out herein will require additional funds. These funds may be raised through equity financing, debt financing or other sources which may result in further dilution of the shareholders percentage ownership in the Company.

On February 13, 2009, we entered into a loan agreement with Senergy Partners LLC (“Senergy”), a private Nevada limited liability corporation, pursuant to which the Company received a revolving loan of up to $1,000,000 (the “Credit Facility”). The outstanding principal amount of the Credit Facility together with all accrued and unpaid interest and all other amounts outstanding thereunder are due and payable in full on December 31, 2012, the maturity date. Outstanding principal under the Credit Facility bears interest at an annual rate of 8%. As a condition of the Credit Facility, the Company agreed to use funds received under the Credit Facility solely for the purpose of funding ongoing general and administrative expenses, consulting and due diligence expenses, or professional fees and joint venture programs. As at September 30, 2011, the Company has drawn $357,750 on the credit facility with Senergy.

On September 20, 2010, we entered into a loan agreement (the “Loan Agreement”) with Art Brokerage, Inc., pursuant to which Art Brokerage provided the Company with a non-revolving term loan in the principal amount of $2,400,000 having an interest rate of 5% per annum. The loan matures on April 1, 2015. As a condition of the Loan Agreement, the Company agreed to enter into a general security agreement dated September 20, 2010 creating a security over the Company’s present and after-acquired personal property and over the Company’s real property and other assets. In addition and as further security of the Company’s indebtedness under the Loan Agreement, the Company and Art Brokerage entered into a pledge and security agreement dated September 20, 2010, pursuant to which the Company agreed to pledge to Art Brokerage a first priority security interest in all of the shares of capital stock of Eskota Energy Corporation, the wholly owned subsidiary of the Company, and all proceeds with respect to such stock. The Company intends to use the funds from the $2,400,000 loan to commence development of the Company’s initial test well on its Farm-Out property located in southwest Texas. Both Senergy and Art Brokerage are beneficially owned by Donna Rose, an affiliate of the Company.


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In May, 2011, the Company entered into an amendment to its September 20, 2010 loan agreement with Art Brokerage, Inc. (the “Lender”) to postpone the commencement date for payment of the principal and interest on its loan from May 1, 2011 to January 1, 2012. Under the terms of the original loan agreement the Lender provided the Company with a non-revolving term loan in the principal amount of $2,400,000 at the interest rate of 5% per annum, calculated and compounded monthly, maturing on April 1, 2015.

On September 30, 2011, the Company entered in to a loan agreement with Bear Lair LLC, a Nevada Corporation, to reflect advances made to the Company during fiscal 2011. The loan is due in one year on September 30, 2012, and bears no interest rate or specific terms of repayment beyond the initial term.

RESULTS OF OPERATIONS

Three and Nine Month Summary                        
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Revenue $  -   $  -   $  -   $  -  
General and Administrative Expenses   131,050     1,739,588     331,849     1,862,713  
Other expenses (income)   47,223     275,381     143,286     293,608  
Net Loss $ 178,273   $ 2,014,969   $ 475,135   $ 2,156,321  

Revenue

We have had no operating revenues for the three and nine month periods ended September 30, 2011 and 2010. We anticipate that we will not generate any revenues until we generate additional financing to support our planned operations and locate a prospective property through which we can pursue our plan of operation.

Operating Costs and Expenses

The major components of our expenses for the quarter are outlined in the table below:

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Management Fees and stock based compensation $ 90,000   $ 1,614,750   $ 228,250   $ 1,659,750  
Audit Fees   4,429     7,273     92,857     44,709  
Transfer Agent Fees   4,771     966     7,095     1,861  
Accounting, legal, engineering and consulting, investor relations   20,811     104,216     35,206     126,396  
Travel   9,884     9,981     40,467     23,188  
Office   1,155     2,402     2,974     6,809  
Write-down (recovery) on oil and gas leases   -     -     (75,000 )   -  
Total Expenses $ 131,050   $ 1,739,588   $ 331,849   $ 1,862,713  


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General and Administrative

The decrease in our general and administrative expenses for the three month period ended September 30, 2011 was primarily due to:

  (a)

Audit Fee decrease of 39% reflects change in audit work requirements from active drilling preparation to results analysis with a significant decrease in capital budgets to be recorded.

     
  (b)

Accounting, legal, engineering & consulting experienced an 80% decrease due to the completion of active drilling activity following the drilling of the initial test well.

     
  (c)

Management fees and stock based compensation decreased due to the significant drop in stock based compensation recorded in the same period of 2010

The decrease in our general and administrative expenses for the nine month period ended September 30, 2011 was primarily due to:

  (a)

Accounting, legal, engineering & consulting experienced a 72% decrease due to decreased drilling activity and the decreased need for technical and professional services.

     
  (b)

Management Fees and stock based compensation decreased 86% due to the significant drop in stock based compensation recorded in the same period of 2010.

Liquidity and Capital Resources

Working Capital




Nine Months
Ended
September 30,
2011

Year Ended
December 31, 2010
Current Assets $ 48,359 $ 108,381
Current Liabilities 1,647,376 1,371,046
Working Capital Deficiency $ (1,599,017) $ (1,262,665)

Cash Flows




Nine Months
Ended
September 30,
2011
Nine Months Ended
September 30, 2010

Cash used in Operating Activities $ (310,420) $ (259,408)
Cash provided by (used in) Investing Activities                      120,213 (113,048)
Cash provided by Financing Activities                      130,250 2,665,493
Net Increase (decrease) in Cash $ (59,957) $ (2,293,037)

We had a cash balance of $4,810 and negative working capital of $1,599,017as of September 30, 2011 compared to cash of $108,381 and negative working capital of $1,262,665 as of December 31, 2010. We anticipate that we will incur approximately $250,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. We will require $2,625,000 for costs associated with our plan of operation over the next twelve months. Accordingly, we will need to obtain additional financing in order to complete our full business plan.

Cash used in operating activities for the nine month period ended September 30, 2011 was $310,420 as compared to cash used in operating activities for the same period in 2010 of $259,408. Cash used in operating activities increased during the nine month period as a result of increases in audit costs during the year as well as increases in management fees, transfer agent fees and travel fees. Cash provided by (used in) investing activities for the nine month period ended September 30, 2011 was $120,213 as compared to cash used in investing activities for the same period in 2010 of ($113,048). The increase in cash used in investing activities was primarily due to the refund deposits paid to the Operator of the Initial Test Well and the sale of some excess casing and tubing to a third party purchaser. Cash provided by financing activities for the nine month period ended September 30, 2011 was $130,250 compared to cash provided by financing activities for the same period in 2010 of $2,665,493. The large decrease in cash provided by financing activities was primarily due to the $2.4 million loan proceeds received from Art Brokerage, Inc. in 2010 with no comparable loan proceeds received in the current year.


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Discontinued Operations

In March 2006, management determined to not proceed further with the Eskota Leases and entered into negotiations with Veneto to relieve the Company of their obligation under the note payable to Veneto. As a result, revenues, cost of goods sold, and gains and losses associated with the property have been reflected as loss from discontinued operations on the accompanying financial statements.

In July 2006, Veneto and Eskota entered into a Mutual Release agreement releasing Eskota of its note payable in the amount of $1,400,000, and in return Eskota assigned and transferred back to Veneto all its right, title and interest in the unitized lease, as well as the rights to the Knox Lease. In addition, Veneto assumed responsibility of all payables owing in relation to the properties, and any future obligations related to the properties. As a result, Eskota recorded a net gain of $138,764 on the assumption of payables by Veneto, and has been reflected as income from discontinued operations on the accompanying financial statements.

Loans Payable

The Company has the following loans payable:

      September 30, 2011     December 31, 2010  
  Art Brokerage – Current(a) $  89,993   $  89,743  
  Art Brokerage – Current(b)   540,000     540,000  
  Art Brokerage – Term Loan(d)   450,000     400,000  
  Ms. Nancy A. Vevoda(a)   25,000     -  
  Mr. Alonzo B. Leavell(a)   20,000     20,000  
  Bear Lair LLC(e)   55,000     -  
      1,179,993     1,049,743  
  Art Brokerage – Term Loan(d)   1,950,000     2,000,000  
  Senergy Partners LLC(c)   357,750     357,750  
    $  3,487,743   $  3,407,493  

  (a)

These amounts are unsecured, bear no interest, with no specific terms of repayment.

  (b)

These amounts are unsecured, bear interest at 5% per annum, with no specific terms of repayment.

  (c)

This credit facility is unsecured, bears interest at 8% per annum, maturing on December 31, 2012. The remaining amount available under this credit facility is $142,250 as at September 30, 2011.

  (d)

On September 20, 2010, the Company entered into a loan agreement (the “Loan Agreement”) with Art Brokerage, Inc. (“Art Brokerage”), pursuant to which Art Brokerage provided the Company with a non-revolving term loan in the principal amount of $2,400,000 having an interest rate of 5% per annum. The loan matures on April 1, 2015 and is calculated and compounded monthly, payable on the 1st day of each calendar month, commencing May 1, 2011. In addition to the monthly interest payments, the Company will make monthly principal payments in the amount of $50,000, commencing on May 1, 2011 and continuing on the 1st day of each month until the Company’s indebtedness is repaid in full. The loan matures on April 1, 2015. On May 25, 2011 the Company and the creditor agreed to amend the Loan Agreement to allow the Company to postpone commencement of the monthly principal and interest payments until January 1, 2012. All other terms and conditions with respect to the Loan Agreement remain unchanged. As a result, $250,000 previously classified as current loans payable has been reclassified to long-term loans payable. As a condition of the Loan Agreement, during the term of the loan, the Company agreed, among other things, to maintain its property assets and undertakings in good repair, to obtain and maintain all licenses and permits necessary to own and operate its assets and agreed not to, without the prior consent of Art Brokerage, change its name, change its corporate structure, change its fiscal year end, incur further indebtedness, grant any liens against its properties or assets unless permitted, make any advances or loans to any person, assign or transfer its intellectual property, or permit its unfinanced capital expenditures to exceed $300,000 per annum.



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In addition and as further security of the Company’s indebtedness under the Loan Agreement, the Company and Art Brokerage entered into a pledge and security agreement dated September 20, 2010, pursuant to which the Company agreed to pledge to Art Brokerage a first priority security interest in all of the shares of capital stock of Eskota Energy Corporation, the wholly owned subsidiary of the Company, and all proceeds with respect to such stock. The Company intends to use the funds from the $2,400,000 loan to commence development of the Company’s initial test well on its Farm-Out property located in southwest Texas. In connection with the negotiation of the Loan Agreement with Art Brokerage, the Company was required to enter into an amendment to its existing loan with Senergy Partners LLC, an affiliate of Art Brokerage. Under the terms of an amendment agreement dated September 15, 2010, entered into by the Company with Senergy Partners LLC (“Senergy”), the parties agreed that if and at such time Art Brokerage enters into a loan agreement with the Company with respect to a loan of $2,400,000, the existing loan agreement between the parties dated February 13, 2009 providing for up to $1,000,000 in principal to the Company (the “Senergy Loan”) would be amended to provide that upon entry into the Loan Agreement the outstanding balance of principal and accrued interest under the Senergy Loan could not exceed a maximum limit of $500,000. As a further condition of the Loan Agreement, the Company agreed to enter into a general security agreement dated September 20, 2010 creating a security over the Company’s present and after-acquired personal property and over the Company’s real property and other assets. In May, 2011, the Company entered into an amendment to its September 20, 2010 loan agreement with Art Brokerage, Inc. (the “Lender”) to postpone the commencement date for payment of interest on its loan from May 1, 2011 to January 1, 2012. Under the terms of the original loan agreement the Lender provided the Company with a non-revolving term loan in the principal amount of $2,400,000 at the interest rate of 5% per annum, calculated and compounded monthly, maturing on April 1, 2015.

     
  (e)

On September 30, 2011the company entered in to a loan agreement with Bear Lair LLC, a Nevada Corporation, to reflect advances made to the Company during fiscal 2011. The loan is due in one year on September 30, 2012 and bears no interest rate or specific terms of repayment beyond the initial term.

Going Concern

The audited financial statements accompanying our annual report on Form 10-K for the year ended December 31, 2010 have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of September 30, 2011, we had cash of $4,810 and we estimate that we will require approximately $2,625,000 or costs associated with our plan of operation over the next twelve months. Accordingly, we do not have sufficient funds for planned operations and we will be required to raise additional funds.

Given the significant lead time to requisition a drilling rig and the financing required there is a significant risk that the Company will see it’s farm-out agreement with Southeastern Pipe Line Company lapse before it has the opportunity to drill a second well. In such a circumstance the Company would suffer a significant loss on its investment and there is no guarantee it could re-enter an agreement for further drilling on the farm out property on terms acceptable to the company. It is the goal of the Company, however, to explore every opportunity to leverage the investment made and data gained on the subject property to date.

These circumstances raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph to our independent auditors’ report on the December 31, 2010 and 2009 consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.

The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.


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Future Financings

We had a cash balance of $4,810 and negative working capital of $1,599,017as of September 30, 2011 compared to cash of $64,767 and negative working capital of $1,262,665 as of December 31, 2010, and we estimate that we will require approximately $2,625,000 or costs associated with our plan of operation over the next twelve months. Accordingly, although we have access to additional funds through our line of credit with Senergy, we do not have sufficient funds for planned operations and we will be required to raise additional funds for operations. We anticipate continuing to rely on equity sales of our common shares or shareholder loans in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Risks And Uncertainties

Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections and estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”.

We are an exploration stage company implementing a new business plan.

We are an exploration stage company with only a limited operating history upon which to base an evaluation of our current business and future prospects, and we have just begun to implement our business plan. If we do discover oil or gas resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. If we discover a major reserve, there can be no assurance that such a reserve will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail. Given the significant lead time to requisition a drilling rig and the financing required there is a significant risk that the Company will see it’s farm-out agreement with Southeastern Pipe Line Company lapse before it has the opportunity to drill a second well. In such a circumstance the Company would suffer a significant loss on its investment and there is no guarantee it could re-enter an agreement for further drilling on the farm out property on terms acceptable to the company. Failure to do so will result in the loss of all our interest in the Farmout Agreement with SEPL.

We have had negative cash flows from operations and if we are not able to obtain further financing, our business operations may fail.

We had a negative working capital of $1,599,017 as of September 30, 2011 and require additional funds, either from equity or debt financing, to maintain our daily operations and to develop any wells under the Farmout Agreement. Obtaining additional financing is subject to a number of factors, including market prices for oil and gas, investor acceptance of our interest pursuant to the Farmout Agreement, and investor sentiment. Financing, therefore, may not be available on acceptable terms, if at all. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital, however, will result in dilution to existing shareholders. If we are unable to raise additional funds when required, we may be forced to delay our plan of operation and our entire business may fail.


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We currently do not generate revenues, and as a result, we face a high risk of business failure.

The only interest in property we have is pursuant to the Farmout Agreement. From the date of our incorporation, we have primarily focused on the location and acquisition of mineral and oil and gas properties. We have not generated any revenues to date. In order to generate revenues, we will incur substantial expenses in the evaluation and development of the Initial Well. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from our activities, our entire business may fail. There is no history upon which to base any assumption as to the likelihood that we will be successful in our plan of operation, and we can provide no assurance to investors that we will generate any operating revenues or achieve profitable operations.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

At September 30, 2011, we had an accumulated deficit of $(2,988,332)and a negative working capital of $1,599,017. These circumstances raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph to our independent auditors’ report on our consolidated financial statements for the year ended December 31, 2010. Although our consolidated financial statements raise substantial doubt about our ability to continue as a going concern, they do not reflect any adjustments that might result if we are unable to continue our business.

If we are required for any reason to repay our outstanding secured convertible debentures or any other indebtedness, we would be required to deplete our working capital, if available, or raise additional funds.

If we are required to repay the secured convertible debentures or any other indebtedness for any reason, we would be required to use our limited working capital and raise additional funds. If we are unable to repay the secured convertible debentures or any other indebtedness when required, we may be required to sell substantial assets of our company. In addition, the lenders could commence legal action against our company and foreclose on all of our assets to recover the amounts due. Any such sale or legal action would require our company to curtail or possibly cease our operations.

Market conditions or operation impediments may hinder our access to oil and gas markets or delay our potential production.

Our ability to develop the farmout acreage depends in part upon the availability, proximity and capacity of pipelines, natural gas gathering systems and processing facilities. This dependence is heightened where this infrastructure is less developed. Therefore, even if drilling results are positive in certain areas of our oil and gas properties, a new gathering system may need to be built to handle the potential volume of oil and gas produced. We might be required to shut in wells, at least temporarily, for lack of a market or because of the inadequacy or unavailability of transportation facilities. If that were to occur, we would be unable to realize revenue from those wells until arrangements were made to deliver production to market.

Even if we are able to establish any oil or gas reserves on the farmout acreage, our ability to produce and market oil and gas is affected and also may be harmed by:

  • inadequate pipeline transmission facilities or carrying capacity;

  • government regulation of natural gas and oil production;

  • government transportation, tax and energy policies;

  • changes in supply and demand; and

  • general economic conditions.


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The potential profitability of oil and gas ventures depends upon factors beyond the control of our company.

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas, which may be acquired or discovered, will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. These factors cannot be accurately predicted and the combination of these factors may result in our company not receiving an adequate return on invested capital.

Oil and gas operations are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal, state, and local laws and regulations, which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages, which it may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities, which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insure or which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Shortages of rigs, equipment, supplies and personnel could delay or otherwise adversely affect our cost of operations or our ability to operate according to our business plans.

If drilling activity increases worldwide, a shortage of drilling and completion rigs, field equipment and qualified personnel could develop. These costs have recently increased sharply and could continue to do so. The demand for and wage rates of qualified drilling rig crews generally rise in response to the increasing number of active rigs in service and could increase sharply in the event of a shortage. Shortages of drilling and completion rigs, field equipment or qualified personnel could delay, restrict or curtail our exploration and development operations, which could in turn harm our operating results.


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The geographic concentration of all of our properties in Texas subjects us to an increased risk of loss of revenue or curtailment of production from factors affecting those areas.

The geographic concentration of all of our leasehold interests in Texas means that our properties could be affected by the same event should the regions experience:

  • severe weather;

  • delays or decreases in production, the availability of equipment, facilities or services;

  • delays or decreases in the availability of capacity to transport, gather or process production; or

  • changes in the regulatory environment.

The oil and gas exploration and production industry is historically a cyclical industry and market fluctuations in the prices of oil and gas could adversely affect our business.

Prices for oil and gas tend to fluctuate significantly in response to factors beyond our control. These factors include:

  • weather conditions in the United States and wherever our property interests are located;

  • economic conditions, including demand for petroleum-based products, in the United States and the rest of the world;

  • actions by OPEC, the Organization of Petroleum Exporting Countries;

  • political instability in the Middle East and other major oil and gas producing regions;

  • governmental regulations, both domestic and foreign;

  • domestic and foreign tax policy;

  • the pace adopted by foreign governments for the exploration, development, and production of their national reserves;

  • the price of foreign imports of oil and gas;

  • the cost of exploring for, producing and delivering oil and gas;

  • the discovery rate of new oil and gas reserves;

  • the rate of decline of existing and new oil and gas reserves;

  • available pipeline and other oil and gas transportation capacity;

  • the ability of oil and gas companies to raise capital;

  • the overall supply and demand for oil and gas; and

  • the availability of alternate fuel sources.

Changes in commodity prices may significantly affect our capital resources, liquidity and expected operating results. Price changes will directly affect revenues and can indirectly impact expected production by changing the amount of funds available to reinvest in exploration and development activities. Reductions in oil and gas prices not only reduce revenues and profits, but could also reduce the quantities of reserves that are commercially recoverable. Significant declines in prices could result in non-cash charges to earnings due to impairment.


- 15 -

Changes in commodity prices may also significantly affect our ability to estimate the value of producing properties for acquisition and divestiture and often cause disruption in the market for oil and gas producing properties, as buyers and sellers have difficulty agreeing on the value of the properties. Price volatility also makes it difficult to budget for and project the return on acquisitions and the development and exploitation of projects. We expect that commodity prices will continue to fluctuate significantly in the future.

Our interests are held in the form of leases that we may be unable to retain.

The interest in our property are held under leases and working interests in leases. If we or the holder of a lease fails to meet the specific requirements of the lease regarding delay or non-payment of rental payments or we or the holder of the lease fail to meet the minimum level of evaluation some or all of our leases may terminate or expire. There can be no assurance that any of the obligations required to maintain each lease will be met. The termination or expiration of our leases or the working interests relating to leases may reduce our opportunity to exploit a given prospect for oil production and thus have a material adverse effect on our business, results of operation and financial condition.

We may not be able to develop oil and gas reserves on a timely and/or economically viable basis.

Our Farmout Agreement with SEPL requires us to commence commercial production on our Initial Test Well within 120 days after completion of drilling. To the extent that we succeed in discovering oil and/or natural gas reserves on our Initial Test Well, we cannot assure that we will be able to commence commercial production on our Initial Test Well within the 120 days nor can we assure that these reserves will be capable of production levels we project or in sufficient quantities to be commercially viable. On a long-term basis, our viability depends on our ability to find or acquire, develop and commercially produce additional oil and gas reserves. Without the addition of reserves through exploration, acquisition or development activities, our reserves and production will decline over time as reserves are produced. Our future reserves will depend not only on our ability to develop then-existing properties, but also on our ability to identify and acquire additional suitable producing properties or prospects, to find markets for the oil and natural gas we develop and to effectively distribute our production into our markets. We may not be able to find, develop or acquire additional reserves at acceptable costs.

Future oil and gas exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States, Canada, or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitability.

If we are unable to hire and retain key personnel, we may not be able to implement our plan of operation and our business may fail.

Our success will be largely dependent on our ability to hire and retain highly qualified personnel. This is particularly true in the highly technical businesses of mineral and oil and gas exploration. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or we may fail to retain such employees after they are hired. At present, we have not hired any key personnel. Our failure to hire key personnel when needed will have a significant negative effect on our business.


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Because our executive officers do not have formal training specific to oil and gas exploration, there is a higher risk our business will fail.

While Robert Kinloch, our director and one of our executive officers, has experience managing a mineral exploration company, he does not have formal training as a geologist. Donald Kinloch does not have formal training specific to mineral and gas exploration. Accordingly, our management may not fully appreciate many of the specific requirements related to working within the mining and oil and gas industry. Our management decisions may not take into account standard engineering or managerial approaches commonly used by such companies. Consequently, our operations, earnings, and ultimate financial success could be negatively affected due to our management’s lack of experience in the industry.

Our executive officers have other business interests, and as a result, they may not be willing or able to devote a sufficient amount of time to our business operations, thereby limiting the success of our company.

Robert Kinloch presently spends approximately 60% of his business time and Donald Kinloch presently spends approximately 20% of his business time on business management services for our company. At present, both Robert and Donald Kinloch spend a reasonable amount of time in pursuit of our company’s interests. Due to the time commitments from Robert and Donald Kinloch’s other business interests, however, they may not be able to provide sufficient time to the management of our business in the future and our business may be periodically interrupted or delayed as a result of their other business interests.

Risks Relating to Our Common Stock

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.

Our articles of incorporation authorize the issuance of up to 750,000,000 shares of common stock with a par value of $0.001 per share. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will reduce the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.

Our common stock is illiquid and shareholders may be unable to sell their shares.

There is currently a limited market for our common stock and we can provide no assurance to investors that a market will develop. If a market for our common stock does not develop, our shareholders may not be able to re-sell the shares of our common stock that they have purchased and they may lose all of their investment. Public announcements regarding our company, changes in government regulations, conditions in our market segment or changes in earnings estimates by analysts may cause the price of our common shares to fluctuate substantially. In addition, stock prices for junior oil and gas companies fluctuate widely for reasons that may be unrelated to their operating results. These fluctuations may adversely affect the trading price of our common shares.

Penny stock rules will limit the ability of our stockholders to sell their stock.

The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny


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stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a shareholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, 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. 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 its shares.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of our development. We are engaged in the business of identifying, acquiring, exploring and developing commercial reserves of oil and gas. Our properties are in the exploration stage only and are without known reserves of oil and gas. Accordingly, we have not generated any revenues nor have we realized a profit from our operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.

We do not intend to pay dividends on any investment in the shares of stock of our company.

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.

Risks Related to Our Company

Our by-laws contain provisions indemnifying our officers and directors.

Our by-laws provide the indemnification of our directors and officers to the fullest extent legally permissible under the Nevada corporate law against all expenses, liability and loss reasonably incurred or suffered by him in connection with any action, suit or proceeding. Furthermore, our by-laws provide that our board of directors may cause our company to purchase and maintain insurance for our directors and officers, and we have implemented director and officer insurance coverage.


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Our by-laws do not contain anti-takeover provisions and thus our management and directors may change if there is a take-over of our company.

We do not currently have a shareholder rights plan or any anti-takeover provisions in our by-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company. If there is a take-over of our company, our management and directors may change.

Because most of our directors and officers are residents of other countries other than the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our directors and officers.

Most of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company’s management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff:

  (i)

Lack of a sufficient number of independent directors for our board and audit committee. We currently have no independent director on our board, which is comprised of one director. As a publicly-traded company, we strive to have a majority of our board of directors be independent;

     
  (ii)

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended December 31, 2010, we had limited staff that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected;

     
  (iii)

There is a lack of sufficient supervision and review by our corporate management;

     
  (iv)

Insufficient corporate governance policies. Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management;



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  (v)

Our company’s accounting personnel does not have sufficient technical accounting knowledge relating to accounting for income taxes and complex US GAAP matters. Management corrected any errors prior to the release of our company’s December 31, 2010 consolidated financial statements; and

     
  (vi)

Our company’s accounting personnel does not have sufficient technical accounting knowledge relating to accounting for oil and gas and related US GAAP accounting matters including evaluation of unproved properties and performing a ceiling test. Management corrected any errors prior to the release of our company’s December 31, 2010 consolidated financial statements.

Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. Subject to receipt of additional financing, we intend to undertake the below remediation measures to address the material weaknesses described in this annual report. Such remediation activities include the following:

  (1)

We continue to recruit two or more additional independent board members to join our board of directors and will consider the adoption of an audit committee at such time as additional board members are retained;

     
  (2)

We intend to retain a qualified CFO to assist in the preparation of our public filings and assist on accounting matters; and

     
  (3)

We intend to continue to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes.

The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

It should be noted that while our management believes our disclosure controls and procedures provide a reasonable level of assurance, they do not expect that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 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 our 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 controls. The design of any system of internal control 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, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

There were no changes in our internal control over financial reporting during the three month period ended September 30, 2011 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

.


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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, active, or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation where such claim or action involves damages for more than 10% of our current assets. There are no proceedings in which any of our company’s directors, officers, or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our company’s interest.

ITEM 1A. RISK FACTORS.

Not Applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

None.


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ITEM 6. EXHIBITS

Exhibit  
Number Description
3.1

Amended and Restated Articles (incorporated by reference from our Form 10-Q Quarterly report, filed on August 14, 2009)

 

3.2

Bylaws (incorporated by reference from our Form 10SB Registration Statement, filed on August 8, 1999)

 

3.3

Amended Bylaws (incorporated by reference from our Annual Report on Form 10-KSB, filed on April 24, 2008)

 

4.1

Specimen Stock Certificate (incorporated by reference from our Form 10-SB Registration Statement, filed on August 8, 1999)

 

10.1

Non-Qualified Stock Option Plan (incorporated by reference from our Form S-8 Registration Statement, filed on September 12, 2002)

 

10.2

Mutual Release Agreement between Eskota Energy Corporation and Veneto Exploration, LLC and Assignment of Oil and Gas Leases dated July 6, 2006 (incorporated by reference from our Quarterly Report on Form 10-QSB for the period ended June 30, 2006)

 

10.3

Purchase Agreement between Maverick Minerals Corporation, UCO Energy Corporation and the shareholders of UCO Energy, dated April 21, 2003 (incorporated by reference from our Annual Report on Form 10-KSB filed on May 19, 2004)

 

10.4

Loan Agreement and Civil Action Covenant between Art Brokerage Inc., Eskota Energy Corporation and Maverick Minerals Corporation (incorporated by reference from our Quarterly Report on Form 10-QSB for the period ended June 30, 2006)

 

10.5

Loan Agreement between Alonzo B. Leavell and Maverick Minerals Corporation dated July 20, 2005 (incorporated by reference from our Quarterly Report on Form 10-QSB for the period ended June 30, 2006)

 

10.6

Loan Agreement between Alonzo B. Leavell and Maverick Minerals Corporation dated April 27, 2005 (incorporated by reference from our Quarterly Report on Form 10-QSB for the period ended June 30, 2006)

 

10.7

Management Agreement dated as at March 5, 2003 between Maverick Minerals Corp. and Robert Kinloch (incorporated by reference from our Quarterly Report on Form 10-QSB for the period ended June 30, 2006)

 

10.8

Management Agreement dated as at June 1, 2005 between Maverick Minerals Corp. and Robert Kinloch (incorporated by reference from our Quarterly Report on Form 10-QSB for the period ended June 30, 2006)

 

10.9

Deed of Release dated November 31, 2008 with Pride of Aspen LLC (incorporated by reference from our Current Report on Form 8-K filed on December 3, 2008)

 

10.10

Assignment and Assumption Agreement dated February 10, 2009 among Art Brokerage, Inc., Senergy Partners LLC and Maverick Minerals Corp. (incorporated by reference from our Current Report on Form 8-K filed on February 20, 2009)

 

10.11

Loan Agreement dated as of February 13, 2009 between Maverick Minerals Corp. and Senergy Partners LLC (incorporated by reference from our Annual Report on Form 10-K filed on April 13, 2009)

 

10.12

Debt Settlement and Subscription Agreement dated as of February 13, 2009 between Maverick Minerals Corp. and Senergy Partners LLC (incorporated by reference from our Current Report on Form 8-K filed on February 20, 2009)



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Exhibit  
Number Description
10.13

2009 Stock Option Plan (incorporated by reference from our Form 10-Q Quarterly report, filed on August 14, 2009)

 

10.14

Debt Settlement and Subscription Agreement dated as of September 24, 2009 between Maverick Minerals Corp. and The Art Brokerage Inc. (incorporated by reference from our Form 10-Q Quarterly report, filed on November 16, 2009)

 

10.15

Farmout Agreement dated as of December 7, 2009 between Southeastern Pipe Line Company and Maverick Minerals Corporation (incorporated by reference from our Form 8-K Current report, filed on December 18, 2009)

 

10.16

Subscription Agreement between Maverick Minerals Corporation and Robert Kinloch dated November 26, 2009 (incorporated by reference from our Form 8-K Current report, filed on December 10, 2009)

 

10.17

Convertible Debenture dated November 26, 2009 (incorporated by reference from our Form 8-K Current report, filed on December 10, 2009)

 

10.17

Subscription Agreement and Convertible Debenture dated December 17, 2009 between Maverick Minerals Corporation and David Steiner.

 

10.18

Debt Settlement and Subscription Agreement between Maverick Minerals Corporation and Art Brokerage, Inc. dated September 7, 2010 (incorporated by reference from our Form 8-K Current report, filed on September 16, 2010)

 

10.19

Loan Agreement dated September 20, 2010 (and related security agreements) between Maverick Minerals Corporation and Art Brokerage, Inc. (incorporated by reference from our Form 8-K Current report, filed on September 24, 2010)

 

10.20

Pledge and Security Agreement dated September 20, 2010 between Maverick Minerals Corporation and Art Brokerage, Inc. (incorporated by reference from our Form 8-K Current report, filed on September 24, 2010)

 

10.21

Security Agreement dated September 20, 2010 between Maverick Minerals Corporation and Art Brokerage, Inc. (incorporated by reference from our Form 8-K Current report, filed on September 24, 2010)

 

10.22

Amendment Agreement dated September 15, 2010 between Maverick Minerals Corporation and Art Brokerage, Inc. (incorporated by reference from our Form 8-K Current report, filed on September 24, 2010)

 

10.23

Consulting Agreement dated September 23, 2010 between Maverick Minerals Corporation and Robert Kinloch (incorporated by reference from our Form 8-K Current report, filed on September 24, 2010)

 

10.24

Consulting Agreement dated September 23, 2010 between Maverick Minerals Corporation and Donald Kinloch (incorporated by reference from our Form 8-K Current report, filed on September 24, 2010)

 

10.25

Form of Subscription Agreement dated December 21, 2010 (incorporated by reference from our Form 8-K Current report, filed on December 28, 2010)

 

10.26

Joint Operating Agreement dated effective December 6, 2010 between Maverick Minerals Corporation, Getty Resources Inc. and James Kearney (incorporated by reference from our Form 8-K Current report, filed on December 28, 2010)

 

10.27

Joint Operating Agreement dated effective December 7, 2010 between Maverick Minerals Corporation and Arrowdog, LLP (incorporated by reference from our Form 8-K Current report, filed on December 28, 2010)



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Exhibit  
Number Description
10.28

Letter Agreement dated December 6, 2010 between Maverick Minerals Corporation and John Kearney (incorporated by reference from our Form 8-K Current report, filed on December 28, 2010)

   
14.1

Code of Ethics (incorporated by reference from our Annual Report on Form 10-KSB, filed on April 24, 2008)

   
31.1*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

   
32.1*

Certification of Chief Executive Officer and Chief Financial Officer pursuant Section 906 Certifications under Sarbanes-Oxley Act of 2002

   
101.INS*

XBRL INSTANCE DOCUMENT

101.SCH*

XBRL TAXONOMY EXTENSION SCHEMA

101.CAL* XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF* XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB* XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE* XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

* Filed herewith.


- 24 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MAVERICK MINERALS CORPORATION

By /s/ Robert Kinloch  
  Robert Kinloch  
  President, Chief Executive Officer and Chief Financial Officer  
  (Principal Executive Officer, Principal Accounting Officer  
  and Principal Financial Officer)  
     
Date: November 18, 2011