Graphene & Solar Technologies Ltd - Annual Report: 2014 (Form 10-K)

vnge_10k.htm

FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2014

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

Commission file number: None

VANGUARD ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

COLORADO		27-2888719
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2 Blvd Place, 1700 Post Oak Blvd. #600 Houston Texas		77056
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (713) 627-2500

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class

Name of each exchange

on which registered

Securities registered pursuant to Section 12(g) of the Act: None.

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations 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 filing). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ
(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 Act): þ Yes o No

The aggregate market value of the voting stock held by non-affiliates of the registrant on March 31, 2014 was approximately $996,000.

As of December 15, 2014, the registrant had 975,623 outstanding shares of common stock.

Documents Incorporated by Reference: None

PART I

ITEM 1. BUSINESS.

We were incorporated in Colorado on June 21, 2010. Until June 2014 we were involved in the exploration and development of oil and gas properties in southeast Texas.

We were never able to earn a profit and in January of 2013 we began investigating the possibility of selling our oil and gas properties.

On March 31, 2014, we failed to make the interest payment on our convertible notes having an outstanding balance of $8,254,500. As a result, the note holders were entitled to declare the notes in default, in which case the principal amount of the notes, plus all accrued and unpaid interest, would be immediately due and payable.

With a view to paying our note holders, on June 17, 2014 we sold our oil and gas properties to Vast Exploration, Inc. for $5,500,000.

The proceeds from the sale were used to:

●	purchase the net profits interest held by Vanguard Net Profits, LLC for $230,619; and

●	pay the balance to the holders of the Convertible Notes.

In consideration for accepting less than the full amount due on their notes, and releasing their lien on our oil and gas properties, holders of notes in the remaining principal amount of $2,404,197 agreed to accept 860,380 shares of our common stock in payment of the notes and accrued interest. The Company subsequently issued the additional shares as payment for the notes and accrued interest in November 2014.

On August 19, 2014, a 100-for-1 reverse split of our common stock became effective.

The sale of our oil and gas properties represented the sale of substantially all of our assets.

Employees and Offices

As of December 15, 2014, we had one part-time employee.

Our office is located at 2 Blvd Place, 1700 Post Oak Blvd., Suite 600, Houston, Texas 77056. This office is leased month to month at a rate of $125 per month.

ITEM 1.A. RISK FACTORS.

Not applicable.

ITEM 1.B. UNRESOLVED STAFF COMMENTS.

Not Applicable

ITEM 2. PROPERTIES.

None.

ITEM 3. LEGAL PROCEEDINGS.

Not applicable

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Shown below is the range of high and low closing prices for our common stock for the periods indicated as reported by the FINRA. The market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.

Quarter Ended	High		Low

December 31, 2012	$	0.95	$	0.59
March 31, 2013	$	0.85	$	0.62
June 30, 2013	$	0.70	$	0.20
September 30, 2013	$	0.33	$	0.14

December 31, 2013	$	0.24	$	0.13
March 31, 2014	$	0.15	$	0.10
June 30, 2014	$	0.10	$	0.02
September 30, 2014 (1)	$	1.55	$	0.02

(1)	Price reflects a 100-for-1 stock split which became effective on August 19, 2014.

Holders of our common stock are entitled to receive dividends as may be declared by the Board of Directors. Our Board of Directors is not restricted from paying any dividends but is not obligated to declare a dividend. No cash dividends have ever been declared and it is not anticipated that cash dividends will ever be paid.

Our Articles of Incorporation authorize our Board of Directors to issue up to 5,000,000 shares of preferred stock. The provisions in the Articles of Incorporation relating to the preferred stock allow our directors to issue preferred stock with multiple votes per share and dividend rights which would have priority over any dividends paid with respect to the holders of our common stock. The issuance of preferred stock with these rights may make the removal of management difficult even if the removal would be considered beneficial to shareholders generally, and will have the effect of limiting shareholder participation in certain transactions such as mergers or tender offers if these transactions are not favored by our management.

As of December 15, 2014, we had approximately 100 shareholders of record.

We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate declaring or paying any dividends on our common stock for the foreseeable future. We currently intend to retain any future earnings to finance future growth. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and other factors the board of directors considers relevant.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As a result of the sale of our oil and gas properties, as discussed in Item 1 of this report, we do not have any material assets and our only activity is the search for a company that may be interested in merging with us.

Since we no longer have any assets and have only minimal operations, a comparison of our financial statements with any prior period would not be meaningful.

Contractual Obligations

Our material future contractual obligations as of December 15, 2014 were as follows:

		Total				2014
2012 Convertible notes		$	590,597			$	590,597

Critical Accounting Policies and New Accounting Pronouncements

See Note 2 to the financial statements included as part of this report, for a description of our critical accounting policies and the potential impact of the adoption of any new accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the financial statements and accompanying notes included with this report.

ITEM 9.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES.

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive and Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-K. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-K, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive and Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of September 30, 2014, our disclosure controls and procedures were effective.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of our Principal Executive and Financial Officer and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Warren Dillard, our Principal Executive and Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of September 30, 2014 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework (1992). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of September 30, 2014.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Our officers and directors are listed below. Our directors are generally elected at our annual shareholders’ meeting and hold office until the next annual shareholders’ meeting, or until their successors are elected and qualified. Our executive officers are elected by our directors and serve at their discretion.

Name	Age		Position

Warren Dillard		72	President, Chief Executive, Financial and Accounting Officer and a Director

Delton C. Drum		57	Vice President, Field Operations

Steven M. Powers		72	Vice President of Business Development, Secretary and a Director

Rick A. Wilber		67	Director

The principal occupations of our officers and directors during the past several years are as follows:

Warren M. Dillard has been our President, Chief Executive, Financial and Accounting Officer and a director since June 2010. Since February 2011 Mr. Dillard has been our Principal Financial and Accounting Officer. Since 2005, Mr. Dillard has served as the President and a director of Enercor, Inc., a private corporation involved in oil and gas exploration and development in the western United States. Since the spring of 2010, Mr. Dillard’s involvement with Enercor has been minimal. Mr. Dillard holds a degree in Accounting from Texas A & M University and an MBA in Finance from the Harvard Business School.

Delton C. Drum has been our Vice President for Field Operations since June 2010. Since 2003, Mr. Drum has been the President of C.F.O., Inc., an oil and gas firm involved in drilling and operating oil and gas wells. Since 1995, Mr. Drum has served as the Chief Executive Officer of Drum Equipment/ Drum Oil & Gas, Inc. Mr. Drum has approximately 30 years of experience in the oil and gas industry as an operator, driller and well owner.

Steven M. Powers has been a director since June 2010. Since February 2011, Mr. Powers has been our Vice President of Business Development and our Secretary. Since 2005, Mr. Powers has served as Chief Executive Officer, Chairman and a director of Enercor, Inc., a private corporation involved in oil and gas exploration and development. Prior to his association with Enercor, Mr. Powers was a real estate developer. Mr. Powers holds a degree in philosophy from the University of California at Santa Barbara as well as an MBA from the University of California at Los Angeles.

Rick A. Wilber has been a director since June 2010. Mr. Wilber has been a director of Synergy Resources Corporation, a publicly traded oil and gas exploration and development corporation, since September 2008. Mr. Wilber has been a Director of Ultimate Software Group Inc. since October 2002 and serves as a member of its audit and compensation committees. Since 1984, Mr. Wilber has been a private investor in, and a consultant to, numerous development stage companies. Mr. Wilber holds a Bachelor of Science degree from the U.S. Military Academy at West Point.

We believe that each of our directors’ experience in oil and gas exploration and business development qualifies him to serve as one of our directors.

Rick Wilber and Steven Powers are the members of our compensation committee. Our Board of Directors serves as our audit committee.

Rick Wilber is an independent director that term is defined in Section 803 A(2) of the NYSE MKT Company Guide. Warren Dillard acts as our financial expert.

We have adopted a code of ethics applicable to our principal executive, financial and accounting officers and persons performing similar functions.

ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes the compensation received by our principal executive and financial officers during the two years ended September 30, 2014.

						Restricted				Other
	Fiscal	Salary		Bonus		Stock Awards		Option Awards		Annual Compensation
Name and Principal Position	Year	(1)		(2)		(3)		(4)		(5)		Total

Warren Dillard	2014	$	147,500		--		--		--	$	--	$	147,500
President,	2013	$	155,000		--		--		--	$	40,000	$	195,000
Principal Executive,
Financial and Accounting Officer

Delton Drum	2014		--		--		--		--		--		--
Vice President	2013		--		--		--		--		--		--
Field Operations

Steven Powers	2014		3,642		--		--		--		--		3,642
Vice President of	2013		34,500		--		--		--		--		34,500
Business Development

R. Gerald Bailey	2013	$	180,000									$	180,000
Director (6)

(1)	The dollar value of base salary (cash and non-cash) earned.

(2)	The dollar value of bonus (cash and non-cash) earned.

(3)	The value of the shares of restricted stock issued as compensation for services computed in accordance with ASC 718 on the date of grant.

(4)	The value of all stock options computed in accordance with ASC 718 on the date of grant.

(5)	All other compensation received that could not be properly reported in any other column of the table.

(6)	Mr. Bailey resigned as a director on July 31, 2013. Mr. Bailey was compensated for providing consulting services to us during fiscal 2013 and 2012.

Long-Term Incentive Plans. We do not provide our officers or employees with pension, stock appreciation rights, long-term incentive or other plans.

Employee Pension, Profit Sharing or other Retirement Plans. We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.

Compensation of Directors During Year Ended September 30, 2014. During the year ended September 30, 2014, we did not compensate our directors for acting as such.

Compensation Committee Interlocks and Insider Participation. Rick Wilber and Steven Powers are the members of our compensation committee. During the year ended September 30, 2014, both Mr. Wilber and Mr. Powers participated in deliberations concerning executive officer compensation. During the year ended September 30, 2014, none of our officers was also a member of the compensation committee or a director of another entity, which other entity had one of its executive officers serving as one of our directors.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table shows the beneficial ownership of our common stock, as of December 15, 2014 by (i) each person whom we know beneficially owns more than 5% of the outstanding shares of our common stock, (ii) each of our officers, (iii) each of our directors, and (iv) all the officers and directors as a group. Unless otherwise indicated, each owner has sole voting and investment powers over his shares of common stock. Unless otherwise indicated, beneficial ownership is determined in accordance with the Rule 13d-3 promulgated under the Securities and Exchange Act of 1934, as amended, and includes voting or investment power with respect to shares beneficially owned.

	Number of Shares		Percentage of Class
Name and Address of Beneficial Owner	Beneficially Owned (1)		of Class

Warren M. Dillard
1700 Post Oak Blvd., #600
Houston, Texas 77056		--		--

Delton C. Drum
2626 Royal Trail Dr.
Kingwood, TX 77339		400		NIL

	Number of Shares		Percentage
Name and Address of Beneficial Owner	Beneficially Owned (1)		of Class

Steven M. Powers		7,750		1%
1999 Avenue of the Stars, Ste. 1100
Los Angeles, CA 90067

Rick A. Wilber		6,685		1%
10360 Kestrel Street
Plantation, FL 33324

All officers and directors as a group		14,835		2%
(4 persons)

______________

(1)	In connection with the sale of our oil and gas properties to Vast Exploration, the following persons have agreed to return their shares of our common stock to us for cancellation.

Name	Shares to be returned		Shares returned as of December 15, 2014

Warren Dillard		8,577		8,577
Steven Powers		8,577		827
Rick Wilber		2,500		2,500
RH Trust		2,450		2,450
Various shareholders		4,550		-

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

None.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Briggs & Veselka Co. audited our financial statements for the two years ended September 30, 2014. The following table shows the fees billed to us during the periods presented by Briggs & Veselka.

	Year Ended September 30, 2014		Year Ended September 30, 2013

Audit Fees	$	91,327	$	101,073
Audit-Related Fees	$	35,576	$	48,440
Tax Fees	$	18,256	$	21,909

Audit fees represent amounts billed for professional services rendered for the audit of our annual financial statements and reviews of our quarterly financial statements.

Audit-related fees represent amounts billed for consents related to regulatory filings, audit/review of financial statements included in our registration statements filed with the Securities and Exchange Commission, and consulting related to the implementation of accounting standards.

Tax fees include professional services for tax return preparation and income tax audit support.

The policy of our directors is to pre-approve all audit and non-audit services provided by our independent auditors.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following exhibits are filed with this Registration Statement:

Exhibits

3.1*		Articles of Incorporation
3.2*		Bylaws
4.1*		Form of Common Stock Certificate
4.2*		Form of Unit Certificate
4.3*		Form of Class A Warrant Certificate
4.5*		Form of Warrant Agreement
4.6*		Form of Representative's Warrant
4.7*		Non-Qualified Stock Option Plan
4.8**		Form of Series A Warrant
4.9**		Form of Series B Warrant
4.10**		Form of Series C Warrant
4.11**		Form of Series D Warrant
4.12**		Form of Series E Warrant
10.1*		Purchase Agreement between C.F.O., Inc. and Vanguard Energy Corporation
10.2*		Purchase Agreement between Sidekick Xploration, LLC and Enecor, Inc.
10.3*		Assignment between C.F.O., Inc. and Vanguard Energy Corporation
10.4*		Employment Agreement with Warren Dillard
10.7*		Farmout Agreement with Claire Oil & Gas, Inc.
10.8*		Operating Agreement with C.F.O, Inc.
10.9*		Farmout Agreement with Exxon/Mobil
10.10*		Form of Convertible Note
10.11*		Amendment to Farmout Agreement with Claire Oil & Gas, Inc.
10.12*		Form of Lock-Up Agreement required by State Securities Administrators
10.13		Agreement relating to sale of oil and gas properties to Vast Exploration, Inc.
14*		Code of Ethics
21*		Subsidiaries
31		Rule 13a-14(a) Certifications
32		Section 1350 Certifications

___________________

*		Incorporated by reference to the same exhibit filed with the Company’s Registration Statement on Form S-1 (File # 333-174194).
**		Incorporated by reference to the same exhibit filed with the Company’s registration statement on Form S-1 (File # 333-180987).

CONTENTS

		Page

Report of Independent Registered Public Accounting Firm		F-1

Consolidated Balance Sheets		F-2

Consolidated Statements of Operations		F-3

Consolidated Statements of Changes in Stockholders’ Deficit		F-4

Consolidated Statements of Cash Flows		F-5

Notes to the Consolidated Financial Statements		F-6

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Vanguard Energy Corporation

We have audited the accompanying consolidated balance sheets of Vanguard Energy Corporation (the "Company") as of September 30, 2014 and 2013 and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for each of the years then ended. Vanguard Energy Corporation’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based upon our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2014 and 2013, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming that Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has insufficient working capital, a stockholders’ deficit and recurring net losses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Briggs & Veselka Co.

Briggs & Veselka Co.

Houston, Texas

December 29, 2014

F-1

VANGUARD ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

	September 30,			September 30,
ASSETS	2014			2013

Current assets
Cash and cash equivalents	$	39,251		$	1,334,285
Accounts receivable		-			371,765
Other assets		12,500			16,055
Total current assets		51,751			1,722,105

Property and equipment
Oil and gas, on the basis of full cost accounting
Proved properties		-			12,994,766
Unproved properties and properties under
development, not being amortized		-			61,470
Furniture and equipment		-			26,946
Less: accumulated depreciation, depletion and amortization		-			(6,594,081	)
Total property and equipment		-			6,489,101

Debt issuance costs		83,654			538,700
Other assets		-			10,808

Total assets	$	135,405		$	8,760,714

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	578		$	113,314
Accrued interest payable		702,901			309,544
Other liabilities		8,600			12,650
Current portion of notes payable, net of discount of $71,754 and $0		2,923,040			-
Total current liabilities		3,635,119			435,508

Notes payable, net of discount of $0 and $441,132		-			7,813,368
Participation liability		-			465,551
Asset retirement obligations		-			177,685

Total liabilities		3,635,119			8,892,112

Commitments and contingencies		-			-

Stockholders' deficit
Preferred stock, $0.00001 par value; 5,000,000 shares
authorized, none issued or outstanding		-			-
Common stock, $0.00001 par value; 100,000,000 and 50,000,000
shares authorized at September 30, 2014 and 2013, respectively,
115,243 and 127,114 shares issued and outstanding at
September 30, 2014 and 2013, respectively (1)		127			127
Additional paid-in capital		5,522,204			5,522,204
Accumulated deficit		(9,022,045	)		(5,653,729	)

Total stockholders' deficit		(3,499,714	)		(131,398	)

Total liabilities and stockholders' deficit	$	135,405		$	8,760,714

(1) All common share amounts and per share amounts in these consolidated financial statements reflect the 100-for-1 reverse split of the issued and outstanding shares of common stock of the Company, effective August 19, 2014, including retroactive adjustment of common share amounts. See Note 6.

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

F-2

VANGUARD ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Fiscal Year			Fiscal Year
	Ended			Ended
	September 30, 2014			September 30, 2013
Revenues
Oil and gas sales	$	1,676,231		$	4,644,356

Costs and expenses
Lease operating expense		544,045			714,669
Production taxes		77,253			214,127
Depreciation, depletion and amortization		984,200			1,850,814
Impairment of O&G Properties		861,579			3,634,312
Asset retirement obligation accretion		29,088			23,186
General and administrative		904,414			1,373,122
Total costs and expenses		3,400,579			7,810,230

Loss from operations		(1,724,348	)		(3,165,874	)

Other income (expense)
Other income		2,645			7,386
Interest income		233			1,340
Gain on settlement of participation liability		171,772			-
Interest expense		(1,458,898	)		(1,864,379	)
Change in fair value of warrant and
conversion feature liabilities		-			652,765
Change in estimate of participation liability		-			969,731
Other equipment write-off		20,819			-
Loss on debt extinguishment		(380,539	)		-
Total other expense		(1,643,968	)		(233,157	)

Loss before income taxes		(3,368,316	)		(3,399,031	)
Provision for income taxes		-			-
Net loss	$	(3,368,316	)	$	(3,399,031	)

Loss per share – Basic and diluted	$	(26.92	)	$	(26.74	)
Weighted average number of
common shares (2)		125,130			127,114

(2) All common share amounts and per share amounts in these consolidated financial statements reflect the 100-for-1 reverse split of the issued and outstanding shares of common stock of the Company, effective August 19, 2014, including retroactive adjustment of common share amounts. See Note 6.

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

F-3

VANGUARD ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS' DEFICIT

											Total
	Common Stock					Additional		Accumulated			Stockholders’
	Shares			Amount		Paid In Capital		Deficit			Equity



Balance at September 30, 2012 (3)		127,114		$	127	$	5,522,204	$	(2,254,698	)	$	3,267,633

Net loss		-			-		-		(3,399,031	)		(3,399,031	)


Balance at September 30, 2013		127,114		$	127	$	5,522,204	$	(5,653,729	)	$	(131,398	)

Return of common stock		(11,871	)		-		-		-			-

Net loss		-			-		-		(3,368,316	)		(3,368,316	)

Balance at September 30, 2014 (3)		115,243		$	127	$	5,522,204		(9,022,045	)	$	(3,499,714	)

(3) All common share amounts and per share amounts in these consolidated financial statements reflect the 100-for-1 reverse split of the issued and outstanding shares of common stock of the Company, effective August 19, 2014, including retroactive adjustment of common share amounts. See Note 6.

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

F-4

VANGUARD ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

	Fiscal Year			Fiscal Year
	Ended			Ended
	September 30, 2014			September 30, 2013

Cash flows from operating activities
Net loss	$	(3,368,316	)	$	(3,399,031	)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation, depletion and amortization		941,294			1,850,814
Impairment of oil and gas properties		861,579			3,634,312
Amortization of debt issuance costs		274,740			318,712
Gain on settlement of participation liability		(171,772	)		-
Loss on debt extinguishment		380,539			-
Asset retirement obligation accretion		29,088			81,275
Amortization of debt discount		169,145			272,200
Accretion of participation liability		(63,160	)		(138,323	)
Other equipment write-off		20,819			-
Change in estimate of participation liability		-			(969,731	)
Change in fair value of warrant and conversion
feature liabilities		-			(652,765	)
Change in operating assets and liabilities:
Accounts receivable		343,194			243,866
Other assets		14,363			(5,161	)
Accounts payable		(112,736	)		(284,967	)
Accrued interest payable		393,357			-
Other liabilities		(4,050	)		(22,518	)
Net cash from operating activities		(291,916	)		928,683

Cash flows from investing activities
Capital expenditures on oil and gas properties		(1,012,793	)		(2,357,368	)
Proceeds from sale of oil and gas properties		5,500,000			-
Purchase of furniture and equipment		-			(2,452	)
Net cash from investing activities		4,487,207			(2,359,820	)

Cash flows from financing activities
Repayment of note payable		(5,259,706	)		(325,000	)
Settlement of participation liability		(230,619	)		-
Net cash from financing activities		(5,490,325	)		(325,000	)

Net change in cash and cash equivalents		(1,295,034	)		(1,756,137	)

Cash and cash equivalents
Beginning of period		1,334,285			3,090,422

End of period	$	39,251		$	1,334,285

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

F-5

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION

Vanguard Energy Corporation (the "Company") was organized under the laws of the State of Colorado on June 21, 2010. The Company commenced operations on July 19, 2010 and has been engaged in the acquisition, development and operation of onshore oil and gas properties in Texas.

Going Concern –These financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses since its inception and will require capital for future operating activities to take place. The Company's ability to raise funding through the future issuances of debt or common stock is unknown. The obtainment of additional financing, the successful development of a plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern.

Future issuances of the Company's equity or debt securities will be required in order for the Company to finance operations and continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation— The consolidated financial statements include the accounts of Vanguard Energy Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company's fiscal year-end is September 30. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows

Reclassifications – Certain amounts previously presented for prior periods have been reclassified to conform to the current presentation. The reclassifications had no effect on net loss, working capital or equity previously reported.

Recently Issued Accounting Pronouncements – Various accounting standards updates have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries. No new accounting pronouncements have been issued that are likely to have a material impact to the Company’s consolidated financial statements.

Cash and Cash Equivalents—The Company considers all highly liquid instruments purchased with a maturity date of three months or less to be cash equivalents.

Oil and Gas Properties— As of September 30, 2014 the Company does not have any oil and gas properties as further explained in Note 3. Prior to the disposal of its oil and gas properties, the Company followed the full cost accounting method to account for oil and natural gas properties. Under the full cost accounting method, costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.

F-6

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized as depreciation, depletion and amortization expense using the units-of-production method based on estimated proved recoverable oil and gas reserves.

The costs associated with unevaluated and unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.

All items classified as unproved property are assessed on a quarterly basis for possible impairment or reduction in value. Properties are assessed on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of various factors, including, but not limited to, the following: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization.

Under full cost accounting rules for each cost center, capitalized costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income taxes, may not exceed an amount (the "cost ceiling") equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current prices and operating conditions, discounted at ten percent (10%), plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to operations. For purposes of the ceiling test calculation, current prices are defined as the unweighted arithmetic average of the first day of the month price for each month within the 12 month period prior to the end of the reporting period. Prices are adjusted for basis or location differentials. Unless sales contracts specify otherwise, prices are held constant for the productive life of each well. Similarly, current costs are assumed to remain constant over the entire calculation period.

During the fourth quarter of fiscal year 2013 and based on the October 1, 2013 Reserve Report, the cost ceiling analysis established that the Company’s proved properties required the recording of an impairment reduction. The Company recorded an impairment expense of $3,634,312 as a result of reductions in estimated proved reserves. Revised calculations of proved reserves were based on detailed analysis of producing formations drive systems and declines in production from certain wells at a greater rate than previously experienced. The interpretation of 3D seismic during the fiscal fourth quarter of 2013 provided additional input and helped delineate the field more precisely, resulting in limiting the estimates of remaining recoverable oil. The production declines resulted in greater DD&A expense of $919,313 during the fourth quarter. These adjustments were offset somewhat by a reduction in the Participation Liability of $969,731 resulting from lower estimated net cash flows from certain wells in which outside parties had a 20% net profits interest.

As discussed in Note 3, the Company recognized impairment charges of $861,579 during fiscal year 2014 for the amount by which the carrying value of its oil and gas properties exceeded the net proceeds from their sale.

F-7

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition—Oil and gas sales result from undivided interests held by the Company in oil and gas properties. Sales of oil and gas produced from oil and gas operations are recognized when the product is delivered to the purchaser and title transfers to the purchaser. The Company had no natural gas sales imbalance positions at September 30, 2014 or 2013. Charges for gathering and transportation are included in production expenses.

Asset Retirement Obligations—The Company recorded a liability for asset retirement obligations ("ARO") associated with its oil and gas wells when those assets are placed in service. The corresponding cost is capitalized as an asset and included in the carrying amount of oil and gas properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value. Since the Company sold all its oil and gas assets in the 3rd quarter of 2014, no additional ARO was recorded. As of September 30, 2014 the Company did not have an ARO liability.

Capitalized Interest—Interest is capitalized as part of the historical cost of developing and constructing assets for significant projects. Significant oil and gas investments in unproved properties, significant exploration and development projects for which depreciation, depletion and amortization expense is not currently recognized, and exploration or development activities that are in progress qualify for interest capitalization. Interest is capitalized until the asset is ready for service. Capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depletion or impairment, along with other capitalized costs related to that asset.

Debt Issuance Costs—Costs incurred in connection with the issuance of long-term debt are capitalized and amortized over the term of the related debt.

Participation Liability—In prior periods the Company recognized a participation liability related to a net profits interest granted to persons who purchased the Company’s 2010 Convertible Promissory Notes. The net profits interest was held by Vanguard Net Profits, LLC and covered some of the Company’s oil and gas properties. On June 17, 2014, the Company settled the net profits interests for $230,619. The Company recognized a gain on the settlement of the participation liability of $171,772 during the quarter ended June 30, 2014 as a result.

The Company incurred expense associated with the net profits interest during the nine-month period ended June 30, 2014 of fiscal year 2014. This amount is reported as interest expense in the consolidated statement of operations. The Company also made a final payment of $84,577 under this arrangement during year ended September 30, 2014.

Conversion Feature Liability and Warrant Liabilities—The conversion feature liability and warrant liabilities are recorded at fair value based upon valuation models utilizing relevant factors such as expected life, estimated volatility, risk-free interest and expected dividend rate. Changes in the fair value of these liabilities are reported in the statements of operations.

Stock-Based Compensation—The Company accounts for employee stock-based compensation using the fair value method. The fair value attributable to stock options is calculated based on the Black-Scholes option pricing model and is amortized to expense over the service period which is equivalent to the time required to vest the stock options.

F-8

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Income Taxes—Income taxes are provided based on the liability method for financial reporting purposes. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.

Uncertain tax positions are recognized in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

The Company is required to file federal income tax returns in the United States and in various state and local jurisdictions. The Company's tax returns filed since inception are subject to examination by taxing authorities in the jurisdictions in which it operates in accordance with the normal statutes of limitations in the applicable jurisdiction.

Earnings (Loss) Per Share—Basic earnings (loss) per share have been calculated based upon the weighted-average number of common shares outstanding. The calculation of diluted weighted-average shares outstanding for 2014 and 2013 excludes 162,142 shares and 176,110 shares, respectively, issuable pursuant to outstanding warrants, stock options and debt conversion features because their effect is anti-dilutive.

Concentration of Credit Risk—The Company is subject to credit risk resulting from the concentration of its oil and natural gas receivables with significant purchasers. One purchaser accounted for all of the Company's oil and gas sales revenues for 2014 and 2013. The Company does not require collateral. While the Company believes its recorded receivable will be collected, in the event of default the Company would follow normal collection procedures. The Company does not believe the loss of this purchaser would materially impact its operating results as oil and gas are fungible products with well-established markets and numerous purchasers.

At times, the Company would maintain deposits in federally insured financial institutions in excess of federally insured limits. Management would monitor the credit ratings and concentration of risk with these financial institutions on a continuing basis to safeguard cash deposits.

Fair Value Measurements—The carrying value of cash and cash equivalents, accounts receivable, and accounts payable, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of long-term debt was determined by discounting future cash flows using rates currently available to the Company for debt with similar terms and remaining maturities. The Company calculated that the estimated fair value of the long term debt is not significantly different than the carrying value of the debt. The participation liability associated with outstanding long-term debt was determined by utilizing a present value factor of 10 applied to proved developed reserves associated with the wells drilled with the proceeds of the notes.

Fair value is defined as the price that would be received to sell an asset or price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in determining fair value are classified for disclosure purposes according to a hierarchy that prioritizes those inputs based upon the degree to which they are observable. The three levels of the fair-value-measurement hierarchy are as follows:

●	Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2—Inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

●	Level 3—Unobservable inputs reflecting the Company's own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

F-9

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In determining fair value, the Company utilizes observable market data when available, or models that incorporate observable market data. In addition to market information, the Company incorporates transaction-specific details that, in management's judgment, market participants would take into account in measuring fair value. The Company utilizes the most observable inputs available for the valuation technique employed. If a fair value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement of both financial and nonfinancial assets and liabilities are characterized based upon the lowest level of input that is significant to the fair value measurement.

NOTE 3 –SALE OF OIL AND GAS PROPERTIES/ PAYMENT OF CONVERTIBLE NOTES

During 2012, the Company sold $8,254,500 of Convertible Promissory Notes. On March 31, 2014 the Company failed to make the scheduled interest payments on the notes. As a result, the note holders were entitled to declare the notes in default, in which case the principal amount of the notes plus all accrued and unpaid interest would be immediately due and payable.

The Company’s inability to make the interest payment to the note holders was the result of the expenditure of considerable capital to work over some of the Company’s wells. The costs of the work far exceeded the Company’s expectations and yet the work was required in order to get the wells back into production. This depleted the Company’s cash position far below its expectations. Further, although the initial work on those wells was successful in boosting production momentarily, further complications resulted in lower production than anticipated, which was not adequate to replenish the cash expended and enable the Company to make required interest payments.

With a view to paying its note holders, the Company, on June 17, 2014 sold its oil and gas properties to Vast Exploration, Inc. for $5,500,000, after obtaining approvals from the holders of a majority of the Company’s outstanding shares of common stock and approvals of a majority of note holders. An impairment charge of $880,213 was recognized during the quarter ended March 31, 2014 for the amount by which the carrying value of the Company’s oil and gas properties exceeded the estimated net proceeds from the planned sale. The Company adjusted the impairment charge by $(18,634) during the quarter ended June 30, 2014 based on final closing of the transaction. The total impairment as of September 30, 2014 is $861,579.

The Company used the proceeds from the sale as follows:

Pay holders of the convertible notes	$	5,259,706
Purchase the net profits interest held by Vanguard Net Profits, LLC		230,619
Pay legal and closing costs		9,675
	$	5,500,000

A loss on early extinguishment of debt totaling $380,539 was recognized during the quarter ended June 30, 2014 for the write-off of a portion of the debt issuance costs and debt issuance discount associated with the debt repayment. After the payment of the $5,259,706, convertible notes totaling $2,994,794 remain to be paid together with accrued interest of $702,902. As of September 30, 2014 the unamortized discount on the convertible notes totaled $71,754. Interest expense for the amortization of debt issuance cost and discount on the notes for the period ending September 30, 2014 was $445,078. The effective interest rate of the convertible notes was 28.3% for the fiscal years ending September 30, 2014 and 2013.

In consideration for accepting less than the full amount due on the notes, and releasing their lien on the Company’s oil and gas properties, holders of notes in the approximated principal of amount of $2,404,197 as a group, have agreed to received 860,381 shares in the Company’s stock in payment of the remaining balances on their notes, plus accrued interest. The Company subsequently issued the additional shares as payment for the notes and accrued interest in November 2014.

F-10

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – ASSET RETIREMENT OBLIGATIONS

The Company had asset retirement obligations for any wells that were permanently removed from service. Since the Company sold all its oil and gas assets in the 3rd quarter of 2014, the Company no longer has any ARO liability. For the purpose of determining the fair value of ARO during the fiscal years presented, the Company used the following assumptions:

	September 30, 2014
Inflation rate		4	%
Estimated asset life	9.5 years
Credit adjusted risk free interest rate		18	%

The following table shows:

Asset retirement obligations at September 30, 2012	$	96,410

Additional retirement obligations incurred		(28,291	)
Change in estimate		111,598
Accretion expense		23,186
Settlements		(25,218	)

Asset retirement obligations at September 30, 2013	$	177,685

Accretion expense		(158,513	)
Settlements		(19,172	)

Asset retirement obligations at September 30, 2014	$	-

F-11

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – INCOME TAXES

The provision for income taxes consists of the following:

	Fiscal Year		Fiscal Year
	Ended		Ended
	September 30, 2014		September 30, 2013

Current	$	-	$	-
Deferred		-		-

Total	$	-	$	-

The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate (34%) on operations as follows:

	Fiscal Year		Fiscal Year
	Ended		Ended
	September 30, 2014		September 30, 2013

Income tax expense computed at statutory rates	$	(1,129,553)	$	(1,137,194	)
Non-deductible items		(898,411)		(220,623	)
Change in valuation allowance		2,027,964		1,357,817

Total	$	-	$	-

F-12

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The components of the net deferred tax asset were as follows:

	September 30, 2014			September 30, 2013
Deferred tax assets
Net operating loss carryforwards	$	5,165,180		$	3,665,319
Stock-based compensation		222,936			222,936
Deferred tax liability - oil & gas properties		(794,263	)		(1,380,769	)
Participation liability		(332,041	)		(273,638	)
Subtotal		4,261,812			2,233,848
Valuation allowance		(4,261,812	)		(2,233,848	)
Net deferred tax asset	$	-		$	-

A valuation allowance has been established to offset reported deferred tax assets. The Company's accumulated net operating losses were approximately $15,000,000 at September 30, 2014 and begin to expire if not utilized in the year 2033.

NOTE 6 – STOCKHOLDERS' EQUITY

On August 19, 2014, upon receiving approval from the Financial Industry Regulatory Authority, a 100-for-1 reverse split of the Company’s common stock became effective. Common share amounts and per share amounts in these financial statements have been retroactively adjusted to reflect the reverse split.

Preferred Stock—5,000,000 shares authorized none issued or outstanding.

Common Stock—The Company is authorized to issue an aggregate of 100,000,000 shares of common stock with $0.00001 par value.

In July and November 2014, 11,871 and 2,450 shares previously issued to the Company’s founders were returned the Company, respectively.

F-13

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Warrants—The following table summarizes certain information regarding outstanding warrants as of September 30, 2013 and 2012: As of September 30, 2014 these warrants were no longer trading in the OTC market. The last quote on August 16, 2014 was $-0-.

			Exercise		Shares Issuable Upon Exercise of Warrants (1)
Series	Issuance Date	Expiration Date	Price		2014		2013
Series A	December 1, 2010	October 31, 2014	$	400		17,000		17,000
Series B	December 1, 2010	October 31, 2014	$	120		3,400		3,400
Series B	December 1, 2010	October 31, 2014	$	400		1,700		1,700
Series C	February 28, 2011	February 28, 2016	$	200		15,000		15,000
Series D	February 28, 2011	February 28, 2016	$	120		1,500		1,500
Class A	December 2, 2011	November 29, 2016	$	150		48,000		48,000
Series E	June 29, 2012	June 15, 2017	$	155		2,963		2,963
Series E	July 6, 2012	June 15, 2017	$	155		725		725
Series E	July 31, 2012	June 15, 2017	$	155		572		572
Series E	September 5, 2012	June 15, 2017	$	155		1,114		1,114

(1) Shares and prices are adjusted for the 100-1 reverse stock including retrospective adjustment.

NOTE 7 – STOCK-BASED COMPENSATION

On January 10, 2011, the Board of Directors approved a Non-Qualified Stock Option Plan (the "Plan") which authorizes the issuance of up to 1,500,000 shares of Company common stock to persons that exercise options granted pursuant to the Plan. The Company's employees, directors, officers, consultants and advisors are eligible to be granted options pursuant to the Plan, provided however that bona fide services must be rendered by such consultants or advisors, and such services must not be in connection with the offer or sale of securities in a capital-raising transaction.

Options for the purchase of 850,000 shares of the Company's common stock were issued to members of executive management and the Board of Directors on January 10, 2011. The stock options had an exercise price of $1.00 per share and were fully vested on the date of grant. The Company recognized stock-based compensation expense of $243,731 during 2011 related to the issuance of these options. The Company’s officers and consultants surrendered these options in July 2014.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Management Agreements – In June 2010, the Company entered into an agreement with an entity controlled by its Chief Executive Officer ("CEO") to provide for his personal part-time management consulting services for $7,500 per month, on a month-to-month basis. Also in June 2010, the Company entered into a consulting services agreement with its Chairman of the Board to provide for his personal part-time management consulting services for $3,000 per month, on a month-to-month basis. Beginning in January 2011, the monthly payments were increased to $12,500 for the CEO and $10,000 for the Chairman. In May 2011, these consulting arrangements were replaced with employment agreements for each executive. In May 2013 the consulting arrangement were set at $10,000 for the CEO and $-0- for the Chairman. The Chairman resigned following the May 2013 modification.

F-14

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Office Lease – The Company leases office space under an operating lease. Rent expense for 2014 and 2013 totaled $48,841 and $72,474, respectively. As of July 1, 2014 the Company is no longer leasing office space. The Company has a month-to-month virtual office lease in Houston. The lease for the satellite office in Los Angeles was allowed to expire.

NOTE 9 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of September 30, 2014 and 2013:

			September 30,		September 30,
	Level		2014		2013

Participation liability		3	$	-	$	465,551

The following tables present a reconciliation of those liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Participation Liability

Balance at September 30, 2013	$	465,551
Purchases, issuances and settlements		(230,619	)
(Gains) losses included in earnings		(234,932	)

Balance at September 30, 2014	$	-

F-15

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – SUPPLEMENTAL CASH FLOW INFORMATION

	Fiscal Year		Fiscal Year
	Ended		Ended
	September 30, 2014		September 30, 2013

Interest paid	$	312,111	$	1,435,660
Interest capitalized (non-cash)		-		63,040

Noncash investing and financing activities:
Asset retirement obligations incurred		29,088		-
Capital expenditures included in accounts payable		-		16,591

NOTE 11 – SUPPLEMENTAL INFORMATION RELATING TO OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)

Results of operations. Results of operations for producing activities consist of all activities for the exploration, production and sale of oil and gas. Net revenues from production include only the revenues from the production and sale of oil and natural gas. Production costs are those incurred to operate and maintain wells and related equipment and facilities used in oil and gas operations. Income tax expense is calculated by applying the current statutory tax rates to the revenues after deducting costs, which include depreciation, depletion and amortization allowances, after giving effect to permanent differences. The results of operations exclude general office overhead and interest expense attributable to oil and gas activities.

	Fiscal Year Ended September 30, 2014			Fiscal Year Ended September 30, 2013
Net revenues from production
Third-party sales	$	1,676,231		$	4,644,356

Production costs
Lease operating expense		544,045			714,669
Production taxes		77,253			214,127
Asset retirement obligation accretion		29,088			23,186
		650,386			951,982
Impairment of O&G Properties		861,579			3,634,312
Depreciation, depletion and amortization		984,200			1,846,583
		(819,934	)		(1,788,521)
Income tax expense		-			-
Results of operations from producing activities	$	(819,934	)	$	(1,788,521)

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development. Amounts reported as costs incurred include both capitalized costs and costs charged to expense during the year for oil and gas property acquisition, exploration and development activities. Costs incurred also include new asset retirement obligations established in the current year, as well as increases or decreases to the asset retirement obligations resulting from changes to cost estimates during the year. Exploration costs presented below include the costs of drilling and equipping successful exploration wells, as well as dry hole costs, leasehold impairments, geological and geophysical expenses, and the costs of retaining undeveloped leaseholds. Development costs include the costs of drilling and equipping development wells, and construction of related production facilities.

F-16

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

	Fiscal Year Ended September 30, 2014		Fiscal Year Ended September 30, 2013
Property acquisitions
Unproved	$	-	$	19,206
Proved		-		-
Exploration		-		373,731
Development				1,947,841

Total Costs Incurred	$	-	$	2,340,778

Capitalized costs. Capitalized costs include the cost of properties, equipment and facilities for oil and natural-gas producing activities. Capitalized costs for proved properties include costs for oil and natural-gas leaseholds where proved reserves have been identified, development wells, and related equipment and facilities, including development wells in progress.

	September 30, 2014		September 30, 2013
Capitalized costs
Unproved properties	$	-	$	61,470
Proved properties		-		12,994,766
		-		13,056,236
Less: Accumulated DD&A		-		6,587,955
Net capitalized costs	$	-	$	6,468,281

Oil and Gas Reserve Information. Pressler Consultants, Inc., an independent engineering firm, prepared the estimates of the proved reserves, future production, and income attributable to the leasehold interests as of September 30, 2013. The estimated proved net recoverable reserves presented below include only those quantities that were expected to be commercially recoverable at prices and costs in effect at the balance sheet dates under the then existing regulatory practices and with conventional equipment and operating methods. Proved Developed Reserves represent only those reserves estimated to be recovered through existing wells. Proved Undeveloped Reserves include those reserves that may be recovered from new wells on undrilled acreage or from existing wells on which a relatively major expenditure for recompletion or secondary recovery operations is required. All of the Company's Proved Reserves were located onshore in the continental United States of America. A reserve report for the September 30, 2014 was not prepared.

F-17

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Discounted future cash flow estimates like those shown below are not intended to represent estimates of the fair value of oil and gas properties. Estimates of fair value should also consider unproved reserves, anticipated future oil and gas prices, interest rates, changes in development and production costs and risks associated with future production. Because of these and other considerations, any estimate of fair value is subjective and imprecise.

The following table sets forth estimates of the proved oil and gas reserves (net of royalty interests) for the Company and changes therein, for the periods indicated.

Estimated Quantities of Proved Reserves

	Oil
	(Bbls)

September 30, 2012		725,864
Revisions of prior estimates		(555,738	)
Purchases of reserves in place		-
Production		(45,758	)

September 30, 2013		124,368

	September 30, 2014		September 30, 2013
Estimated Quantities of Proved Developed Reserves		-		124,368
Estimated Quantities of Proved Undeveloped Reserves		-		-

The proved developed reserves estimate of 124,368 net barrels as of September 30, 2013 is a material reduction from that estimated as of last fiscal year end. Net production of 45,758 barrels accounted for a portion of the reduction, but the balance was due to calculations of reservoir potential that was influenced by further detailed analysis of the producing formations drive systems and the declines in production from certain wells at a greater rate than previously experienced. The interpretation of 3D seismic during the fourth quarter of fiscal year 2013 provided additional input and helped delineate the field more precisely, resulting in lowering the estimates of remaining recoverable oil.

A Reserve Report was not prepared for period ending September 30, 2014 as the Company did not own any oil and gas properties at that date.

Standardized Measure of Discounted Future Net Cash Flows. The Standardized Measure related to proved oil and gas reserves is summarized below. Future cash inflows were computed by applying a twelve month average of the first day of the month prices adjusted for differentials to estimated future production, less estimated future expenditures (based on year end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expense. Future income tax expenses are calculated by applying appropriate year-end tax rates to future pretax net cash flows, less the tax basis of properties involved. Future net cash flows are discounted at a rate of 10% annually to derive the standardized measure of discounted future net cash flows. This calculation procedure does not necessarily result in an estimate of the fair market value or the present value of the Company.

F-18

VANGUARD ENERGY CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Standardized Measure of Oil and Gas

	September 30, 2014		September 30, 2013			September 30 2012
Future cash inflows	$	-	$	12,943629		$	74,669,619
Future production costs		-		(3,557,348	)		(9,364,444	)
Future development costs		-		(804,500	)		(6,175,000	)
Future income taxes		-		-			(13,639,715	)

Future net cash flows		-		8,581,781			45,490,460
Discount of future net cash flows at 10% per annum		-		(2,104,010	)		(8,509,198	)

Standardized measure of discounted future net cash flows	$	-	$	6,477,771		$	36,981,262

The following table sets forth the changes in standardized measure of discounted future net cash flows relating to proved oil and gas reserves for the periods indicated.

Changes in Standardized Measure

	Fiscal Year Ended September 30, 2014		Fiscal Year Ended September 30, 2013			Fiscal Year Ended September 30, 2012
Sales of oil and gas produced, net of production costs	$	-	$	(3,692,374	)	$	(2,532,636	)
Purchases of minerals in place		-		-			-
Net change due to revisions in quantity estimates		-		(28,337,652)			17,466,030
Net changes in prices and production costs		-		(11,151,435)			3,134,171
Accretion of discount before income taxes		-		3,698,126			2,269,050
Changes in timing and other		-		8,979,844			(6,045,848)

Net change	$	-	$	(30,503,491)		$	14,290,767

F-19

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 29th. day of December, 2014.

	VANGUARD ENERGY CORPORATION

	By:	/s/ Warren Dillard
		Warren Dillard, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of l934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Warren Dillard	Principal Executive, Financial and Accounting Officer and Director	December 29, 2014
Warren Dillard

/s/ Steven M. Powers	Director	December 29, 2014
Steven M. Powers

	Director
Rick A. Wilber