- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________ to ___________.

Commission file number: 333-90272

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE		56-1940918
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

99 Park Avenue, 16th Floor, New York, NY		10016
(Address of principal executive offices)		(Zip Code)

(212) 286-9197
(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. x Yes o 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 such shorted period that the registrant was required to submit and post such files). o Yes o 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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

	Large accelerated filer o	Accelerated filer o
	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

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

As of November 18, 2010, we had 125,881,197 shares of common stock issued and outstanding.

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Balance Sheets
	as of September 30, 2010 (Unaudited) and December 31, 2009	3
	Consolidated Statements of Operations
	for the Three and Nine Months Ended September 30, 2010 and 2009 (Unaudited)	4
	Consolidated Statements of Cash Flows
	for the Nine Months Ended September 30, 2010 and 2009 (Unaudited)	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	20
Item 4.	(Removed and Reserved)	20
Item 5.	Other Information	21
Item 6.	Exhibits	21

Signatures		22

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30,			December 31,
	2010			2009
ASSETS

CURRENT ASSETS
Cash	$	649,065		$	17,942
Accounts Receivable, net		72,585			5,706
Prepaid Expenses and Other Current Assets		–			112
TOTAL CURRENT ASSETS		721,650			23,760

OTHER ASSETS
Property and Equipment, Net of Accumulated Depreciation of $31,754 and $18,951, respectively		48,774			60,259
Other Assets		3,384			3,164
TOTAL OTHER ASSETS		52,158			63,423

TOTAL ASSETS	$	773,808		$	87,183

LIABILITIES AND SHAREHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts Payable and Accrued Expenses	$	674,258		$	591,493
Stock-Based Liability		118,748			–
Accrued Liability		1,285			–
Promissory Notes Payable		846,707			222,110
Loans Payable - Related Parties		110,765			386,265
Deferred Income		230,000			–
TOTAL CURRENT LIABILITIES		1,981,763			1,199,868

SHAREHOLDERS’ DEFICIT
Preferred Stock: $.0001 Par Value, Shares Authorized 25,000,000; No Shares Issued or Outstanding		–			–
Common Stock; $.0001 Par Value Shares Authorized 250,000,000 Shares Issued and Outstanding: 124,293,197 and 102,943,338 at September 30, 2010 and December 31, 2009, respectively		12,430			10,295
Additional Paid In Capital		24,038,062			22,541,820
Accumulated Deficit		(25,258,447	)		(23,664,800	)
TOTAL SHAREHOLDERS’ DEFICIT		(1,207,955	)		(1,112,685	)

TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	773,808		$	87,183

See notes to consolidated financial statements.

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Month Ended September 30, 2010			Three Month Ended September 30, 2009 (Restated)			Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009 (Restated)

REVENUES	$	101,957		$	54,704		$	266,932		$	2,054,704

COST OF REVENUES		57,206			–			186,939			1,355,000

GROSS PROFIT		44,751			54,704			79,993			699,704

OPERATING EXPENSES

Compensation Expense		166,168			22,660			731,942			623,062
Selling, General and Administrative		423,347			406,850			880,203			998,798
TOTAL OPERATING EXPENSES		589,515			429,510			1,612,145			1,621,860

OPERATING LOSS		(544,764	)		(374,806	)		(1,532,152	)		(922,156	)

OTHER INCOME (EXPENSE):

Interest Expense		(62,977	)		(4,860	)		(69,833	)		(8,090	)
Other Income		7,207			–			8,338			320
TOTAL OTHER EXPENSE		(55,770	)		(4,860	)		(61,495	)		(7,770	)

LOSS BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST		(600,534	)		(379,666	)		(1,593,647	)		(929,926	)

PROVISION FOR INCOME TAXES		–			18,239			–			18,239
MINORITY INTEREST		–			7,466			–			7,466

NET LOSS	$	(600,534	)	$	(353,961	)	$	(1,593,647	)	$	(904,221	)

NET LOSS PER COMMON SHARE – BASIC AND DILUTED	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

WEIGHTED AVERAGE PER COMMON SHARES OUTSTANDING – BASIC AND DILUTED		123,001,886			95,052,903			117,024,854			83,287,093

See notes to consolidated financial statements.

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2010			2009 (Restated)

NET LOSS	$	(1,593,647	)	$	(904,221	)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES

Non Cash Items:
Minority Interest		–			(7,466	)
Depreciation		12,486			35,351
Stock Based Compensation		534,533			–
Stock for Services		98,000			153,000
Amortization of Debt Discount		59,557			–
Amortization of Deferred Compensation		–			600,660
Changes in operating assets and liabilities:
Accounts Receivable		(66,879	)		(572,364	)
Deferred Costs		–			600,000
Prepaid Expenses and Other Current Assets		(108	)		(1,636	)
Other Assets		–			42,551
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses		314,050			328,076
Stock-Based Liability		118,748			–
Deferred Income		–			(1,455,900	)

NET CASH USED IN OPERATING ACTIVITES		(523,260	)		(1,181,949	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of fixed assets		(1,001	)		(1,052	)

NET CASH FROM FINANCING ACTIVITIES:

Issuance of Common Stock for cash, net of offering costs		815,594			600,000
Loans from Third Parties		660,000			–
Principal Repayments to Third Parties		(280,000	)		–
Repayments to Related Parties		(40,210	)		–
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,155,384			600,000

NET CHANGE IN CASH		631,123			(583,001	)

CASH - BEGINNING OF YEAR		17,942			700,001

CASH – END OF PERIOD	$	649,065		$	117,000

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	30,000		$	–
Cash paid for income taxes	$	–		$	–

See notes to consolidated financial statements.

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Unaudited Interim Financial Information

The consolidated balance sheet of Terra Energy & Resource Technologies, Inc. (“Terra”), a Delaware corporation, and Subsidiaries (collectively, the “Company”), and the related statements of operations and cash flows have been prepared by the Company, without audit, with the exception of the consolidated balance sheet dated as of December 31, 2009, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of the results of operations for the full year or any other interim period. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, filed on April 14, 2010. Certain prior period amounts have been reclassified to conform with current period presentation.

2.	GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred substantial losses from operations, sustained substantial cash outflows from operating activities, and has both a significant working capital deficiency and accumulated deficit at September 30, 2010. The above factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continued existence depends on its ability to obtain additional equity and/or debt financing to fund its operations and ultimately to achieve profitable operations. The Company is attempting to raise additional financing and has initiated a cost reduction strategy. Given the Company’s tight cash position, its ability to continue as a going concern is dependent on the Company (1) raising additional equity or debt financing or (2) the Company obtaining sufficient fee revenue from service business to support the operations of the Company. There can be no assurance that the Company will be successful in either effort.

3. SALES OF COMMON STOCK

In the three months ended March 31, 2010, the Company sold 52 units of the Company’s securities, with each unit consisting of 200,000 common shares and warrants, exercisable for five years at $0.05 per share, to purchase another 200,000 common shares, for gross proceeds of $520,000. In connection with the sale of 46 units, the Company paid the placement agent fees of 8% of the unit purchase price and warrants, exercisable for three years at $0.05 per share, to purchase 10,000 common shares for each unit sold.

In the three months ended June 30, 2010, the Company sold 41.045 units of the Company’s securities, as previously described, for gross proceeds of $410,450, and with the same placement agent fees of 8% of the purchase price and warrants for 10,000 shares for each unit sold.

In the three months ended September 30, 2010, the Company sold 2.487 units of the Company’s securities, as previously described, for gross proceeds of $24,870, and with the same placement agent fees of 8% of the purchase price and warrants for 10,000 shares for each unit sold.

During the three months ended March 31, 2010, June 30, 2010 and September 30, 2010, the Company paid $59,690, $62,450 and $17,586, respectively, in offering costs in connection with the transactions.

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. STOCK BASED COMPENSATION

In accordance with the standard “Share-Based Payment,” rules codified within ASC 718, the Company has accounted for its employee stock options and other stock options issued to outside consultants under the “modified prospective“ method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of the standard for all share-based payments granted after the effective date and (b) based on the requirements of the standard for all awards granted to employees prior to the effective date of the standard that remain unvested on the effective date. Accordingly, the fair market value for these options was estimated at the date of grant using a Black-Scholes option-pricing model based on the following assumptions:

	March 31, 2010	June 30, 2010	September 30, 2010
Risk-free rate	1.24%	1.24%	1.24%
Dividend yield	0.00%	0.00%	0.00%
Volatility factor	258%-265%	259%-265%	263%-268%
Expected term	3-5 years	3-5 years	3-5 years

Where applicable, the Company utilizes the simplified method from SEC Staff Accounting Bulletin 107 for calculation of the expected term.

The Company grants stock options and warrants to employees and outside consultants. The following tables summarize information about the stock option and warrant transactions, including warrants issued pursuant to financing transactions, for the indicated periods. As of September 30, 2010, the options and warrants outstanding had an intrinsic value of $918,887.

	Number of Options/Warrants			Weighted Average Exercise Price
Balance outstanding at December 31, 2009		98,265,000		$	0.09
Granted		13,795,000			0.06
Exercised		–			–
Cancelled/forfeited		–			–
Balance outstanding at March 31, 2010		112,060,000		$	0.08
Granted		9,218,450			0.05
Exercised		–			–
Cancelled/forfeited		(1,500,000	)		(0.34	)
Balance outstanding at June 30, 2010		119,778,450		$	0.08
Granted		4,976,270			0.05
Exercised		–			–
Cancelled/forfeited		–			–
Balance outstanding at September 30, 2010		124,754,720		$	0.08

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The stock options and warrants outstanding and exercisable at September 30, 2010 were in the following exercise price ranges:

		At September 30, 2010
		Outstanding						Exercisable
Range of Exercise Prices		Number of Options/Warrants		Weighted Average Remaining Years of Contractual Life		Weighted Average Exercise Price		Number of Options/Warrants		Weighted Average Exercise Price
$	0.00 – 0.047		251,000		3.7	$	0.04		251,000	$	0.04
$	0.05 – 0.10		103,988,720		2.5	$	0.06		103,988,720	$	0.06
$	0.11 – 0.15		50,000		2.5	$	0.11		50,000	$	0.11
$	0.16 – 0.20		10,000,000		1.8	$	0.16		10,000,000	$	0.16
$	0.21 – 0.49		10,450,000		1.9	$	0.22		10,450,000	$	0.22
$	0.50 – 0.80		15,000		0.4	$	0.50		15,000	$	0.50
			124,754,720		2.5	$	0.08		124,754,720	$	0.08

Options to Officers and Employees

In the three months ended March 31, 2010, the Company granted to employees an aggregate of 2,250,000 stock options, exercisable for five years at $0.10 per share. The stock options were fully vested at the grant date and have a combined value of $201,737 and were fully expensed.

In the three months ended March 31, 2010, the Company granted to two employees an aggregate of 2,000,000 stock appreciation rights, exercisable for five years at $0.10 per share. The stock appreciation rights were fully vested at the grant date. The stock appreciation rights are revalued at the end of each reporting period as required by ASC-718 at which time the liability and compensation expense are adjusted. No shares of the Company’s common stock will be issued pursuant to the exercise of the stock appreciation rights and the associated liability is included in accounts payable. As of September 30, 2010, the rights have a combined value of $118,748.

Consultants

In the three months ended March 31, 2010, the Company issued to a consultant 162,611 common shares valued at $6,000 for financial and accounting services.

In the three months ended March 31, 2010, the Company granted to consultants stock options and warrants to purchase an aggregate of 1,145,000 common shares with a total value of $99,249. The stock options and warrants were fully vested at the grant date and were fully expensed with the exception of 545,000 warrants issued as offering costs with a total value of $50,972.

In the three months ended March 31, 2010, the Company amortized $11,115 of stock based compensation related to stock options issued to an officer in a prior year.

In the three months ended June 30, 2010, the Company issued to a consultant 30,848 common shares valued at $3,000 for financial and accounting services.

In the three months ended June 30, 2010, the Company granted to consultants stock options and warrants to purchase an aggregate of 1,009,450 common shares with a total value of $64,003. The stock options and warrants were fully vested at the grant date and were fully expensed with the exception of 395,450 warrants issued as offering costs with a total value $18,024.

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the three months ended June 30, 2010, the Company fully amortized $3,704 of stock based compensation related to stock options issued to an officer in a prior year.

In the three months ended September 30, 2010, the Company issued to consultants 1,300,000 common shares valued at $25,135 for financial and business services.

In the three months ended September 30, 2010, the Company granted to consultants stock options and warrants to purchase an aggregate of 4,478,870 common shares with a total value of $212,846. The stock options and warrants were fully vested at the grant date and were fully expensed with the exception of 24,870 warrants issued as offering costs with a total value $1,465.

In the three months ended September 30, 2010, the Company fully amortized $3,704 of stock based compensation related to stock options issued to an officer in a prior year.

5. RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2010, the Company repaid $40,210 to two officers for advances made in prior years.

6.	RESTATEMENT

In the Company’s previously filed 10-Q for the three and nine months ended September 30, 2009, stock based compensation expense related to the amortization of options and warrants of $2,396,793 was reported. It was discovered during the audit of the December 31, 2009 financial statements that compensation expense was overstated by $1,796,133 for the nine months ended September 30, 2009 due to errors in certain stock option valuations. As a result, compensation expense and accordingly the Company’s net loss have been reduced by this amount in the accompanying consolidated statement of operations for the three and nine months ended September 30, 2009. As a result of the restatement net loss per common share for the nine months ended September 30, 2010 reduced to $0.01 from $0.03 previously reported.

7. PROMISSORY NOTES PAYABLE

In March 2008, the Company settled a lawsuit with Baker Hughes Oilfield Operations Inc. Pursuant to the terms of settlement, 1,000,000 common shares were returned and cancelled in exchange for a promissory note due July 31, 2009 for $178,920 together with 12% interest from October 4, 2007. An additional $41,390 was added to the note during 2009. On November 6, 2009, the Company entered into an agreement with Baker Hughes setting forth a payment plan with respect to the debt, which calls for certain minimum monthly payments from service fee proceeds and an account receivable. During the three ended March 31, 2010, June 30, 2010, and September 30, 2010, the Company paid $55,000, $40,000, and $80,000, respectively, on the note payable. The outstanding balance of this note was $32,110 as of September 30, 2010. Any remaining principal balance is due in November 2010.

In November 2009, the Company was loaned $15,000 by a third party, non-interest bearing and due on January 31, 2010. The loan was repaid in January 2010.

In August 2010, the Company was loaned $600,000 by a third party, non-interest bearing and due in 65 days. The Company issued 600,000 shares to the lender and agreed to pay a $25,000 fee, due within eight weeks of the maturity date. The fair value of the stock issued and the $25,000 fee was recorded as a debt discount on the note and is being amortized throughout the term of the note. As of September 30, 2010, $20,307 has been amortized to interest expense.

TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In September 2010, the Company was loaned $60,000 by a third party, non-interest bearing and due on December 31, 2010. The Company issued 150,000 shares to the lender and agreed to pay a $30,000 fee, payable in $10,000 installments in each of September, October and November 2010. The fair value of the stock issued and the $30,000 fee was recorded as a debt discount on the note and was amortized throughout the term of the note. As of September 30, 2010, the entire amount, $38,250 has been amortized to interest expense.

8. SUBSEQUENT EVENTS

In October and November 2010, the Company sold to several accredited investors an aggregate of 7.94 units of the Company’s securities, with each unit consisting of 200,000 shares of common stock and warrants, exercisable for five years at $0.05 per share, to purchase 200,000 shares of common stock, for gross proceeds of $79,400. For each unit sold, the Company paid placement agent fees of 8% of the unit purchase price and warrants, exercisable for three years at $0.05 per share, to purchase 10,000 common shares.

Pursuant to a consulting arrangement effective as of December 8, 2009, in October and November 2010, the Company issued to a consultant stock options to purchase an aggregate of 100,000 common shares, exercisable for three years at $0.05 per share.

Pursuant to an agreement for consulting services, effective as of June 1, 2010, in October and November 2010, the Company issued to the consultant stock options to purchase an aggregate of 4,000 common shares, exercisable for five years at prices ranging from $0.05 to 0.06 per share.

Pursuant to an agreement for consulting services, effective as of July 1, 2010, in October and November 2010, the Company issued to the consultant an aggregate of 98,000 options, exercisable for five years at prices ranging from $0.05 to $0.06 per share.

Pursuant to an agreement for consulting services, effective as of August 10, 2010, in September 2010, the Company issued to the consultant 300,000 common shares.

Pursuant to an agreement for consulting services, dated as of September 2, 2010, in October 2010, the Company issued to the consultant 100,000 options, exercisable for five years at $0.04 per share.

On October 15, 2010, the Company issued 300,000 options to a consultant, exercisable for five years at $0.04 per share.

On October 27, 2009, the Company granted stock options, exercisable for five years at $0.03 per share, to several employees and a consultant, as follows: Alexandre Agaian, President, 5,000,000 options; Dmitry Vilbaum, Chief Executive Officer, 5,000,000 options; Susan Fox, 100,000 options; Kenneth Oh, 500,000 options, and Dan Brecher, 500,000 options.

ITEM 2.

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

“Forward - Looking” Information

These management discussion and analysis contain forward-looking statements and information that are based on our management’s beliefs, as well as assumptions made by, and information currently available to our management. These forward-looking statements are based on many assumptions and factors, and are subject to many conditions, including our continuing ability to obtain additional financing, ability to attract new customers, competitive pricing for our services, any change in our business model from providing services to natural resources exploration companies to engaging in exploration activities, and demand for our products, which depends upon the condition of the oil industry. Except for the historical information contained in this report, all forward-looking information are estimates by our management and are subject to various risks, uncertainties and other factors that may be beyond our control and may cause results to differ from our management’s current expectations, which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

The following discussion of our financial condition and results of operations should be read in conjunction with the information set forth in our audited consolidated financial statements for the year ended December 31, 2009, and the related notes, included in our Annual Report on Form 10-K.

INTRODUCTORY NOTE

Operating Entities

Our business operations, prior to fiscal 2009, were conducted primarily through wholly-owned operating subsidiaries, Terra Insight Corporation through August 2008, and Terra Insight Services, Inc. since September 2008.

Our Operations and Plans

During fiscal 2009 and the current fiscal year, we focused on identifying new technologies for potential acquisition, marketing and promotion of services, and on obtaining additional investment capital to restart our service and exploration efforts, to restructure our operations to reduce our operating costs, and to create case studies demonstrating the value of our proprietary satellite-based sub-terrain prospecting (“STeP”) technology for locating natural resources. We intend to demonstrate the value of our STeP technology by pursuing a fee for service business model with exploration companies, which may include seeking royalties on the exploration project, as well as a farm-in strategy of investing in drilling projects when our STeP technology concurs with the available seismic studies on the projects. Our goal is to demonstrate a success rate which is better than industry averages and thereby establish the value of our technology while generating minerals and hydrocarbon reserves and internally generating cash flow to support our cost of operations.

Our goal is to enter into services agreements whereby we provide our services, such as providing site location and depth locations, to natural resource exploration companies in exchange for service fees, with regard to a specific natural resource exploration property.

While we have oil exploration experience, we need substantial additional capital to conduct oil exploration activities alone. We continue to seek joint ventures to assist in our operations, including examining, drilling, operating and financing such activities. We will determine our plan for future leases we acquire based on our ability to fund such projects.

In the nine months ended September 30, 2010, we provided analysis services to four customers pursuant to which we generated $266,932 in revenues.

Current Status of Operations

We have incurred large operating losses and have a working capital deficit of approximately $1.26 million at September 30, 2010. These factors raise substantial doubt about our ability to continue as a going concern.

Our source of revenue have been from providing mapping and analytic services to exploration, drilling and mining companies, using an integrated approach with proprietary attributes to gather, manage and interpret geologic and satellite data to improve the assessment of natural resources. We also seek to generate revenue from projects that we undertake through joint venture and similar relationships with third parties.

We generated approximately $5.7 million in revenues since inception in 2005 through fiscal 2009; however, due to significant capital expenditures requisite for drilling and mining operations, our revenues from our service business has not been sufficient to support our operational expenses and proposed business activities. Since inception through September 30, 2010, we have supported our operations primarily through the sale of preferred stock, common stock, and convertible debentures, and noncontrolling interests in drilling limited partnerships, including sales of common stock of $670,000 in fiscal 2009 and $955,320 in the nine months ended September 30, 2010.

Our ability to continue as a going concern is dependent on our ability to obtain new capital and generate revenue from service operations. There can be no assurance that we will be successful in obtaining additional funding or, in the event we are successful in obtaining additional funding, that the terms of such funding will be on terms advantageous to us.

CRITICAL ACCOUNTING POLICIES

Several of our accounting policies involve significant judgments and uncertainties. The policies with the greatest potential effect on our results of operations and financial position are our ability to estimate the degree of impairment to unproved oil and gas properties. For accounts receivable, we estimate the net collectibility, considering both historical and anticipated trends as well as the financial condition of the customer.

Revenue Recognition

Revenue is recognized when the survey is delivered to the customer and collectibility of the fee is reasonably assured. Amounts received in advance of performance and/or completion of such services are recorded as deferred revenue.

Accounts Receivable

For accounts receivable, if any, we estimate the net collectibility, considering both historical and anticipated trends as well as the financial condition of the customer.

RESULTS OF OPERATIONS

Revenues

For the three months ended September 30, 2010, revenues from services increased to $101,957 from $54,704 in the three months ended September 30, 2009. For the nine months ended September 30, 2010, revenues from services decreased by $1,787,772 to $266,932 from $2,054,704 in the nine months ended September 30, 2009. We rendered mapping services pursuant to minor service contracts with one and four customers during the three and nine months ended September 30, 2010, respectively. We rendered mapping services pursuant to minor service contracts with two customers during the three and nine months ended September 30, 2009.

Generally, our services on a cash basis are pursuant to individual contracts for specific services to be performed over a short time frame, and are not a recurring source of revenues. The lack of significant revenue during the three and nine months ended September 30, 2010 arose principally from our seeking to perform services for an ownership or royalty interest in projects or leaseholds rather than for a cash service fee, while we were engaged in one significant services contract in the first quarter of 2009. In addition, in 2010, we were concentrating on seeking potential joint venture partners in exploiting our technology and other opportunities presented to us.

We anticipate that, subject to global economic conditions and willingness of potential clients to expand capital on exploration activities, during the next twelve months, if we achieve our capital raising goals of focusing on fee for service work, we will be engaged in joint ventures and internal resource projects. The purpose of focusing on internal resource projects is to generate reserves and to establish that the technology can increase the success rate in oil, gas and other mineral exploration projects. There can be no assurance that if we obtain the needed financing we will be successful in establishing the efficacy of our technology. We will also seek to find potential joint venture partners with whom the technology can be used to gain participation interests in projects as well as fee for service revenue. There can be no assurance that we will be successful in finding such joint venture partners. Until we negotiate and enter into definitive agreements for ownership or royalty interests as compensation, we have no basis for predicting when or how much revenue could be generated from such ownership or royalty interests, or from the exploitation of our land leases, if and when drilling is commenced. Negotiations in connection with ownership or royalty positions often take longer than the negotiations for fee for service arrangements.

Current economic conditions may cause a decline in business and in exploration related spending which could adversely affect our business and financial performance. Our business and operating results are impacted by the health of exploration companies, domestic and international, engaged in oil and gas and other exploration activities. Our business and financial performance may be adversely affected by current and future economic conditions, such as a reduction in research and development and other spending by exploration companies.

Cost of Revenues

Costs associated with revenue for the three months ended September 30, 2010 and 2009 were $57,206 and $0, respectively. Costs associated with revenue for the nine months ended September 30, 2010 and 2009 were $186,939 and $1,355,000, respectively. Historically, our cost of revenues has consisted primarily of payments to the Institute for analysis services. Our fees payable to the Institute under our prior arrangement with the Institute were subject to negotiation on a per project basis and accordingly our costs varied on a project basis. On April 27, 2009, we terminated our license and services arrangement with the Institute and acquired certain of its technologies that we have utilized in our operations. Based on our historical activities, we anticipate that our costs of revenue will ordinarily be approximately 60% of revenue.

Operating Expenses

Operating expenses for the three months ended September 30, 2010 increased by $160,005, or 37%, to $589,515 from $429,510 in the three months ended September 30, 2009. Operating expenses for the three months ended September 30, 2010 as a percentage of revenue were approximately 578%.

Operating expenses for the nine months ended September 30, 2010 decreased by $9,715, or 1%, to $1,612,145 from $1,621,860 in the nine months ended September 30, 2009. Operating expenses for the nine months ended September 30, 2010 and 2009 as a percentage of revenue were approximately 604% and 79%, respectively.

Operating expenses for the three months ended September 30, 2010 consisted primarily of professional and consulting fees of approximately $357,036, employee salaries and benefits of approximately $166,168, stock based compensation increase of $50,038 due partially to the revaluation of the stock appreciation rights at period end, rent expense of $7,500, and travel expenses of approximately $16,543. Operating expenses for the three months ended September 30, 2009 consisted primarily of professional fees of approximately $30,000, management salaries and benefits of approximately $120,545, travel expenses of approximately $13,037, and stock based compensation of approximately $110,000. The majority of the professional fees result from legal and accounting fees, and from the engagement of various consultants to assist us in marketing our business.

Our operating expenses increased during the three months ended September 30, 2010 in comparison to the three months ended September 30, 2009 primarily due to an increase in compensation expense. Excluding compensation expense, our operating expenses increased during the three months ended September 30, 2010 in comparison to the three months ended September 30, 2009 due to an increase in professional and consulting fees and travel expenses associated with the development and servicing of projects.

Operating expenses for the nine months ended September 30, 2010 consisted primarily of professional and consulting fees of approximately $615,977, employee salaries and benefits of approximately $731,942, stock based compensation of approximately $357,409, rent expenses of $51,200, and travel expenses of approximately $66,615. Operating expenses for the nine months ended September 30, 2009 consisted primarily of professional fees of approximately $211,811, management salaries and benefits of approximately $395,486, and travel expenses of approximately $34,665, and stock based compensation of approximately $534,533.

Operating expenses during the nine months ended June 30, 2010 decreased in comparison to the nine months ended June 30, 2009 primarily due to a decrease in operating expenses, offset by an increase in compensation expenses.

If we are successful in raising new capital or generating substantial service projects, we would expect our operating expenses to increase as we would have the capital to engage in various oil and gas and mining exploration projects. The increase in operating expenses could result from the hiring of geologists and other oil and gas professionals to assist us in carrying out the farm-in aspect of our business strategy. Travel related expenses could increase in the future, as many of our customers, and prospective customers and projects, and the territories for which our services are requested or utilized, are located in western United States and in foreign countries. Further, if sufficient funding were available, we would contemplate opening a Houston service center which would decrease travel related expenses but would increase office expenses significantly.

Our employee compensation expenses may increase if we are successful in raising new capital. The increase could result from the hiring of geologists, consultants and other oil and gas professionals to assist the Company in carrying out the farm-in aspect of our business strategy. Travel related expenses could increase in the future, as many of our customers, and prospective customers and projects, and the territories for which our services are requested or utilized, are located in western United States and in foreign countries. Alternatively, if sufficient funding were available, we would contemplate opening a Houston office which would decrease travel and entertainment expenses but would increase office expenses significantly.

Interest Expense

In the three months ended September 30, 2010 and 2009, we had net interest expense of $62,977 and $4,860, respectively. In the nine months ended September 30, 2010 and 2009, we had net interest expense of $69,833 and $8,090, respectively. The increase in net interest expense is primarily due to an increase in interest expenses associated with loans.

Net Loss

The net losses for the three months ended September 30, 2010 and 2009 were $600,534 and $353,961, respectively. The increase in net loss during the three months ended September 30, 2010 compared to the three months ended September 30, 2009 principally resulted from increased compensation expenses, in addition to an increase in operating expenses, and increased interest expenses. For the three months ended September 30, 2010 and 2009, our net loss per common share (basic and diluted) attributable to common shareholders was $0.00 and $0.00, respectively.

The net losses for the nine months ended September 30, 2010 and 2009 were $1,593,647 and $904,221, respectively. The increase in net loss during the nine months ended September 30, 2010 compared to the same period in 2009 principally resulted from an increase in an increase in stock compensation expenses and in interest expenses. For the nine month ended September 30, 2010 and 2009, our net loss per common share (basic and diluted) attributable to common shareholders was $0.01 and $0.01, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity have been proceeds generated by the sale of our common stock, convertible debentures, and preferred stock to private investors, short-term loans, and sales of noncontrolling interests in limited partnerships. During the nine months ended September 30, 2010, our cash increased by $631,123. Of the increase in cash, $523,260 was used in operating activities, $1,001 was used in investing activities, and $1,155,384 was provided by financing activities.

Current economic conditions may cause a decline in business and consumer spending which could adversely affect our business and financial performance. Our operating results are impacted by the health of the North American economy as well as economies worldwide. Our business and financial performance may be adversely affected by current and future economic conditions, such as a reduction in the availability of credit, financial market volatility, recession, and the reluctance of potential clients to engage in exploration activities in light of recent economic conditions. Additionally, we may experience difficulties in scaling our operations to react to such economic pressures.

Operating Activities

Cash flows from operating activities resulted in deficit cash flows of $523,260 for the nine months ended September 30, 2010, as compared with deficit cash flows of $1,181,949 for the nine months ended September 30, 2009.

For the nine months ended September 30, 2010, cash flows from operating activities resulted in deficit cash flows of $523,260, primarily due to a net loss of $1,593,647 plus non-cash charges of $704,576, adjustments for an increase in prepaid expenses and other current assets of $20,801, an increase in accounts receivable of $66,876, an increase in accounts payable and accrued expenses of $314,050. The most significant drivers behind the decrease in our non-cash working capital were charges for stock based compensation of $534,533.

For the nine months ended September 30, 2009, cash flows from operating activities resulted in deficit cash flows of $1,181,949, primarily due to a net loss of $904,221, plus non-cash charges of $781,545, adjustments for a decrease in deferred costs of $600,000, an increase in accounts receivable of $572,364, an increase in prepaid expenses and other current assets of $1,636, and a decrease in other assets of $42,551. The most significant drivers behind the decrease in our non-cash working capital were charges for common stock and options issued to consultants of $153,000, and charges for stock options issued to employees of $600,660.

Investing Activities

Cash used for investing activities for the nine months ended September 30, 2010 and 2009 was $1,001 and $1,052, respectively.

For the nine months ended September 30, 2010, cash flows from investing activities resulted in a deficit of $1,001, due to the purchase of fixed assets.

Depending on our available funds and other business needs, it is our intention to engage in fee for service activities, and engage in a farm-in strategy during the next twelve months in which we make small investments in the exploration projects of others. There is no assurance we will have the financing to pursue this strategy or if pursued that it will be successful in developing reserves of hydrocarbons.

Financing Activities

For the nine months ended September30, 2010, cash provided by financing activities was $1,155,384, consisting of $815,594 from the sales of units of common stock and warrants to several investors, and loans in the amount of $660,000 and principal repayments in the amount of $320,210. For the nine months ended September 30, 2009, cash provided by financing activities was $600,000, from the sales of common stock and warrants to four investors.

Future Needs

Our management has concerns as to the ability of our company to continue as a going concern in the absence of raising additional equity capital, debt financing or obtaining significant new fee for service business. We believe that our available cash is inadequate to support our month-to-month obligations for the next twelve months. Establishing ownership or other interests in natural resource exploration projects will require significant capital resources.

Our current business plan for fiscal 2010 calls for us to perform our exploration technology services to other companies and to farm-in on eight to twelve prospects. This business plan calls for our company to raise approximately $7.1 million in the next twelve months. If we are unable to raise such funding, we will not be able to act on our business plan as we currently intend. To the extent we raise a lesser amount, we will only be able to act on our business plan on a limited basis.

Under our business model, we do not anticipate incurring significant research and development expenditures during the next twelve months; however, subject to available capital, we may seek to acquire certain innovative exploration technologies and build geochemical facilities.

We do not anticipate the sale of any significant property, plant or equipment during the next twelve months. Depending on our future business prospects and the growth of our business, and the need for additional employees, we may seek to lease new executive office facilities or to open offices in Texas.

As of September 30, 2010, we had 19 employees (including employees of corporate subsidiaries), of which 6 persons worked on a full-time basis. Our future employment plans are uncertain given our working capital deficit and lack of revenues and are subject to available working capital.

We are seeking to raise approximately $7.1 million to pursue development efforts during the next twelve months. We plan to use this money to engage in several farm-in projects. It is our intention to sell securities and incur debt when the terms of such transactions are deemed favorable to us and as necessary to fund our current and projected cash needs. While we have raised capital to meet our working capital and financing needs in the past, additional financing is required in order to meet our current and projected cash flow deficits from operations and farm-in on oil and gas properties to create a holding of 8 to 12 natural resource interests in U.S. oil and gas prospects. We are seeking financing, which may take the form of equity, convertible debt or debt, in order to provide the necessary working capital.

There can be no assurance that we will be successful in obtaining such funding or, in the event we are successful, that the terms of such funding will be on terms advantageous to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing authorized shares of common or preferred stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. However, if we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this will have a material adverse effect on our business, results of operations, liquidity and financial condition, and we will have to delay our planned or proposed operations and development and continue to conduct activities on a limited scale.

INFLATION

We do not expect inflation to have a significant impact on our business in the future.

SEASONALITY

We do not expect seasonal aspects to have a significant impact on our business in the future.

OFF-BALANCE SHEET ARRANGEMENT

To date, we do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.

GOING CONCERN MATTERS

The reports of the independent registered public accounting firms on our December 31, 2009 and 2008 financial statements included in our Annual Reports for the years ended December 31, 2009 and 2008 stated that our recurring losses from operations and net capital deficiency, raise substantial doubt about our ability to continue as a going concern. If we are unable to raise new investment capital, we will have to discontinue operations or cease to exist, which would be detrimental to the value of our common and preferred stock. We can make no assurances that our business operations will develop and provide us with significant cash to continue operations.

We have a working capital deficiency as a result of our large operational losses. We have been and are seeking financing, which may take the form of equity, convertible debt or debt, in order to provide the necessary working capital. There is no guarantee that we will be successful in consummating a financing transaction. Further, in the event we obtain an offer of private or public funding, there is no assurance that such funding would be on terms favorable to us. The failure to obtain such funding will threaten our ability to continue as a going concern.

Our ability to continue as a going concern is subject to our ability to develop profitable operations, and, in the absence of revenues from operations, to our ability to raise additional equity or debt capital and to develop profitable operations. We continue to experience net operating losses. During fiscal years 2009 and 2008, we focused on restructuring our operations to reduce operating costs and in seeking capital.

The primary issues management will focus on in the immediate future to address the going concern issues include: seeking institutional investors for debt or equity investments in our Company, and initiating negotiations to secure short term financing through promissory notes or other debt instruments on an as needed basis.

To improve our liquidity, our management has been actively pursuing additional financing through discussions with investment bankers, venture capital firms and private investors. There can be no assurance that we will be successful in our efforts to secure additional financing.

In fiscal 2009 and in the current fiscal year, we focused on obtaining additional investment capital to restart our service and exploration efforts, and to create case studies demonstrating the value of the STeP technology. We plan to continue such efforts during the next twelve months, subject to the receipt of adequate financing. We intend to demonstrate the value of our licensed technology by pursuing (i) a fee for service business model with exploration companies, which may include seeking royalties on the exploration project and (ii) a farm-in strategy of investing in drilling projects when our STeP technology concurs with the available seismic studies on the projects. Our goal is to demonstrate success rates which are better than industry averages and thereby establish the value of our technology while generating hydrocarbon reserves and internally generating cash flow to support our cost of operations.

Our goal continues to be to enter into agreements whereby we provide our services, such as providing site locations and depth locations, to natural resource exploration companies in exchange for royalties or ownership rights, and fees, with regard to a specific natural resource exploration property. We may also seek to finance or otherwise participate in the efforts to recover natural resources from such properties. While we have oil exploration experience, we need substantial additional capital to conduct oil exploration activities alone. We continue to seek joint ventures to develop our operations, including examining, drilling, operating and financing such activities. We will determine our plan for our existing leases and for future leases we acquire based on our ability to fund such projects.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Principal Financial Officer (“PFO”) of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the CEO and PFO concluded that our disclosure controls and procedures were not effective as of September 30, 2010 due to deficiencies in the staffing of our financial accounting department.

(b) Changes in Internal Controls Over Financial Reporting

There were no changes that occurred during the quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 1A. RISK FACTORS

Not applicable.

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

Each of the issuances and sales of securities described below was deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. No advertising or general solicitation was employed in offering the securities. Each purchaser is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) or an accredited investor (as defined in Rule 501 of Regulation D), and each received adequate information about the Company or had access to such information, through employment or other relationships, to such information.

In the three months ended September 30, 2010, the Company sold to two accredited investors an aggregate of 2.487 units of the Company’s securities, with each unit consisting of 200,000 shares of common stock and warrants, exercisable for five years at $0.05 per share, to purchase 200,000 shares of common stock, for gross proceeds of $24,870. For each unit sold, the Company paid placement agent fees of 8% of the unit purchase price and warrants, exercisable for three years at $0.05 per share, to purchase 10,000 shares of common stock. The Company applied the net proceeds to its working capital.

On August 1, 2010, the Company issued 200,000 shares pursuant to a consulting agreement, dated as of July 27, 2010, for business consulting services.

On August 6, 2010, in connection with a prospective financing arrangement, the Company issued 500,000 shares of common stock in payment of a due diligence fee.

On August 10, 2010, the Company issued 300,000 shares pursuant to a consulting agreement, dated as of August 10, 2010, for business consulting services. The initial term was for a one month period, and the term may be extended on a month to month basis. Under the consulting agreement, the consultant is entitled to 300,000 shares of common stock for each month of services. On September 13, 2010, the Company issued an additional 300,000 shares pursuant to the consulting arrangement.

On August 24, 2010, the Company issued 600,000 shares in connection with an agreement for a $600,000, 0% promissory note. The note was for a 65 day term, subject to extension for an additional 30 days. In consideration of the note, the Company also agreed to pay a $25,000 fee within eight weeks of the original due date, and an additional $10,000 in the event the term was extended.

On September 1, 2010, the Company issued 150,000 shares in connection with an agreement for a $60,000, 0% promissory note. The note is to mature on December 31, 2010, provided, however, that the Company is to prepay the principal and a fee under certain circumstances, such as certain financing events. In consideration of the note, the Company also agreed to pay a $30,000 fee, with minimums of $10,000 payable in each of September, October and November 2010.

Pursuant to a consulting arrangement with Ivan Railyan effective as of December 8, 2009, in the three months ended September 30, 2010, the Company issued to the consultant options to purchase an aggregate of 150,000 shares of common stock, exercisable for three years at prices ranging from $0.047 to $0.085 per share. Under the consulting arrangement, on a monthly basis for services through December 8, 2010, the consultant is entitled to options to purchase 50,000 shares of common stock, exercisable for three years and with an exercise price equal to the closing price of the Company's common stock on the last trading day prior to issuance. In October and November 2010, the Company issued 100,000 options, exercisable at $0.05 per share, under the consulting arrangement.

On June 1, 2010, the Company entered into an agreement for consulting services. Pursuant to the consulting agreement, in July 2010, the Company issued to the consultant stock options to purchase 49,500 shares of common stock, exercisable for five years at $0.04 per share.

On June 1, 2010, the Company entered into an agreement for consulting services, as amended, through June 30, 2011. Pursuant to the consulting agreement, in the three months ended September 30, 2010, the Company issued to the consultant stock options to purchase an aggregate of 6,000 common shares, exercisable for five years at prices ranging from $0.04 to 0.06 per share. In October and November 2010, the Company issued an additional 4,000 options, exercisable at prices ranging from $0.05 to $0.06 per share, under the consulting arrangement. Additional options to purchase 2,000 shares of common stock are to be issued on a monthly basis for the remainder of the service period, exercisable for five years and with an exercise price equal to the closing price of the Company's common stock on the last trading day prior to issuance.

On July 1, 2010, the Company entered into a consulting agreement with Arista Capital Group, LLC for services for a period of one year. Pursuant to the consulting agreement, the consultant is entitled to, on a monthly basis, options to purchase 49,500 shares of common stock, exercisable for five years and with an exercise price equal to the closing price of the Company's common stock on the last trading day prior to issuance. Effective October 1, 2009, the number of options was reduced to 49,000 options. In the three months ended September 30, 2010, the Company issued an aggregate of 148,500 options, exercisable at prices ranging from $0.04 to $0.06 per share, under the consulting arrangement. In October and November 2010, the Company issued an additional 98,000 options, exercisable at prices ranging from $0.05 to $0.06 per share, under the consulting arrangement.

On August 6, 2010, in connection with an analysis services project, the Company issued to three consultants options to purchase an aggregate of 600,000 shares of common stock, exercisable for three years at $0.05 per share.

Pursuant to a consulting agreement with Outrigger Investments, Inc., for services from July 1, 2010 to October 28, 2010. the Company issued to the consultant options to purchase 3,500,000 shares of common stock, exercisable for five years at $0.05 per share, in the three months ended September 30, 2010, and an additional 100,000 options, exercisable for five years at $0.04 per share, in October 2010,

On October 15, 2010, the Company issued 300,000 options to a consultant, exercisable for five years at $0.04 per share.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. (REMOVED AND RESERVED)

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

Exhibit		Description
11		Statement re: computation of per share earnings is hereby incorporated by reference to "Financial Statements" of Part I - Financial Information, Item 1 – Financial Statements, contained in this Form 10-Q.
31.1*		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)
31.2*		Certification of Principal Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)
32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2*		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350

* Filed herewith

SIGNATURES

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

	TERRA ENERGY & RESOURCE TECHNOLOGIES, INC.

Dated: November 22, 2010	By:	/s/ Dmitry Vilbaum
		Dmitry Vilbaum
		Chief Executive Officer

Dated: November 22, 2010	By:	/s/ Alexandre Agaian
		Alexandre Agaian
		Principal Financial Officer