NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying unaudited consolidated financial statements follows.

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

Preferred Stock – Our shares of preferred stock are convertible based on a certain future common stock price which is not certain to occur which would define them as optionally redeemable.  Consequently, these instruments are properly classified as equity and not debt.  The Company evaluated the preferred stock for a Beneficial Conversion Feature (“BCF”) at the date of issuance and concluded that no BCF was incurred at the date of issuance.

Equipment sales - Revenues from the sale of oil and gas related equipment are recognized at the time of sale, when the significant risks and rewards of ownership have been transferred to the buyer and the recovery of the consideration is probable.

The Company has evaluated all the recent accounting pronouncements through the filing date and believes that none of them will have a material effect on the Company.