UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~November 30~~February 28, ~~2008~~2009

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

For the transition period from___________ to_____________

Commission File Number: 0-27063

VALOR ENERGY CORP.

(Exact name of registrant as specified in its charter)

NEVADA 82-0381904

------ ----------

(State or other jurisdiction (I.R.S. employer

incorporation or organization) identification number)

121G Shuswap Street NW, Salmon Arm B.C. V1E 4P2

------------------------------------------

(Address of principal executive offices)

(250) 833-1985

(Registrant's telephone number, including area code: )

(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 [X ] No

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

Large accelerated filer

[ ]

Accelerated filer

[ ]

Non-accelerated filer

[ ]

Smaller reporting company [X]

(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Outstanding at Class of Common Stock ~~February~~June 2317, 2008 ------------------------ ------------------- $.001 par value ~~299~~646,~~911~~924,~~156~~289

FORM 10-Q

United States Securities and Exchange Commission

Washington, D.C. 20549

Valor Energy Corp.

Index PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets at ~~November~~February 3028, ~~2008~~2009 (unaudited) and May 31, 2008 (audited) Consolidated Statements of Operations for the three and ~~six~~nine-months ended ~~November~~February 3028, ~~2008~~2009 (unaudited) and ~~November~~February 3028, ~~2007~~2008 (unaudited) Consolidated Statements of Comprehensive Loss for the ~~six~~nine-months ended ~~November~~February 3028, ~~2008~~2009 (unaudited) and ~~November~~February 3028, ~~2007~~2008(unaudited) Consolidated Statement of Stockholders deficit for the ~~six~~nine-months ended ~~November~~February 3028, ~~2008~~2009 (unaudited) Consolidated Statements of Cash Flows for the ~~six~~nine-months ended ~~November~~February 3028, ~~2008~~2009 (unaudited) and ~~November~~February 3028, ~~2007~~2008 (unaudited) Notes to Consolidated Financial Statements (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 4T. Controls and Procedures PART II. - OTHER INFORMATION Item 1. Legal Proceedings Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits SIGNATURES

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements of

VALOR ENERGY CORP.

AND SUBSIDIARY

~~Six~~Nine-month periods ended ~~November~~February 3028, ~~2008~~2009 and ~~November~~February 3028, ~~2007~~2008

(Unaudited)


			VALOR ENERGY CORP.


Consolidated Balance Sheet
					(UNAUDITED)



				February 28, 2009	May 31, 2008
Assets


Current Assets
	Cash			$ 195,204	$ 44,629
	Accounts Receivable			2,010	3,379
	Notes Receivable			70,000	140,000
	Deposits and Prepaid Expenses			10,439	-
	Total Current Assets			277,653	188,008
Property and equipment, net				8,460	6,365
Investment in Hamill lease				474,214	756,292
	Total Assets			$ 760,327	$ 950,665

Liabilities and Stockholders' Deficit

Current Liabilities
	Accounts payable			$ 42,770	$ 95,029
	Accrued expenses			105,226	209,490
	Amounts due to related parties			199,496	159,996
	Convertible debentures, net of discount of $195,014 and $193,476 respectively			3,015,096	2,758,497
	Derivative liability			9,100,454	8,261,896
	Warrant liability			5	3,894
	Notes payable			166,221	200,259
		Total current liabilities		12,629,268	11,689,061

Stockholders' Deficit
	Preferred stock, $0.001 par value per share
		10,000,000 shares authorized. 2,007,194 shares
		issued and outstanding.		2,007	2,007
	Common stock, $0.001 par value, 10,000,000,000
		shares authorized, 312,905,360 and 104,980,000 shares issued and
		outstanding at February 28, 2009 and May 31, 2008, respectfuly.		312,905	104,980
	Additional paid in capital			5,804,338	5,915,860
	Accumulated deficit			(17,949,696)	(16,740,955)
	Foreign currency translation			(38,495)	(20,288)
		Total stockholders' deficit		(11,868,941)	(10,738,396)

Total Liabilities and Stockholders' Deficit				$ 760,327	$ 950,665

		VALOR ENERGY CORP.		~~VALOR ENERGY CORP.~~
						(UNAUDITED)
Consolidated Statements of Operations
					November 30, 2008	May 31, 2008
					(UNAUDITED)
					2007	2007
					Three months ended	Three months ended
Assets
					February 28, 2009	February 29, 2008
Current Assets
Revenue
	Cash				$ 172,586	$ 44,629
Equity in earnings of lease					$ 24,883	$ 147,506
	Accounts Receivable				9,278	3,379
Operating expenses
	Notes Receivable				80,000	140,000
	Selling, general and administrative				89,810	160,928
	Deposits and Prepaid Expenses				10,645	-
	Depreciation and depletion				38,235	177,877
	Total Current Assets				272,509	188,008
		Total operating expenses			128,045	338,805
Property and equipment, net					7,639	6,365
Income (loss) from operations					(103,162)	(191,299)
Investment in Hamill lease					559,244	756,292
Other income (expense)
	Total Assets				$ 839,392	$ 950,665
	Interest income (expense)				(157,626)	(20,312)
Liabilities and Stockholders' Deficit
	Interest income (expense ) related to convertible debt				(80,945)	5,672,083
Current Liabilities
	Accretion of covertable debt discount					(13,553)
	Accounts payable				$ 48,665	$ 95,029
	Gain on Sale of Tiger-Lynk					176,000
	Accrued expenses				216,607	209,490
	Other income				9,510
	Amounts due to related parties				180,496	159,996
	Other expense					(25,000)
	Convertible debentures, net of discount of $107,667 and $193,476 respectively				2,830,172	2,758,497
Total other income (expense)					(229,061)	5,789,218
	Derivative liability				8,932,146	8,261,896
Net income (loss)					$ (332,223)	$ 5,597,919
	Warrant liability				21	3,894
Weighted Average Shares Outstanding - Basic					266,847,091	100,000,000
	Notes payable				159,971	200,259
Net income (loss) Per Common Share - Basic and Fully Diluted					$ (0.00)	$ 0.06
		Total current liabilities			12,368,078	11,689,061
Weighted Average Shares Outstanding - Fully Diluted						100,871,212
Stockholders' Deficit
Net income Per Common Share - Fully Diluted						$ 0.06
	Preferred stock, $0.001 par value per share
		10,000,000 shares authorized. 2,007,194 shares
		issued and outstanding.			2,007	2,007
	Common stock, $0.001 par value, 10,000,000,000
			shares authorized, 237,294,156 and 104,980,000 shares issued and
			outstanding at November 30, 2008 and May 31, 2008, respectfuly.		237,294	104,980
	Additional paid in capital				5,877,680	5,915,860
	Accumulated deficit				(17,620,111)	(16,740,955)
	Foreign currency translation				(25,556)	(20,288)
		Total stockholders' deficit			(11,528,686)	(10,738,396)
Total Liabilities and Stockholders' Deficit					$ 839,392	$ 950,665

~~VALOR ENERGY CORP.~~		VALOR ENERGY CORP.
Consolidated Statements of Operations
~~(UNAUDITED)~~			(UNAUDITED)
			Three months ended	Three months ended
			Nine months ended	Nine months ended
			November 30, 2008	November 30, 2007
			February 28, 2009	February 29, 2008
Revenue
~~Equity in earnings of lease~~	Equity in earnings of lease		$ 52337,~~256~~935	$ 21210,~~713~~795
Operating expenses
	Selling, general and administrative		73269,~~146~~416	97325,~~060~~981
	Depreciation and depletion		50186,~~355~~749	43270,~~976~~524
		Total operating expenses	~~123~~456,~~501~~165	~~141~~596,~~036~~505
Income (loss) from operations			(71118,~~245~~230)	(~~119~~385,~~323~~710)
Other income (expense)
	Interest income (expense)		(58277,~~983~~326)	(~~106~~228,~~156~~880)
	Interest income (expense ) related to convertible debt		(53833,~~175~~131)	(413,~~148~~519,~~476)~~615
	Other income		17,365
	Accretion of convertible debt discount			(13,553)
	Other expense		(929)
	Gain on sale of Tiger-Lynk			176,000
Total other income (expense)			(95,722)	(4,254,632)
	Other Income		26,838
Net income (loss)			$ (166,967)	$ (4,373,955)
	Other expense		(6,892)	(25,000)
Weighted Average Shares Outstanding - Basic			217,607,635	100,000,000
Total other income (expense)			(1,090,511)	13,428,182
Net Loss Per Common Share - Basic and Fully Diluted			$ (0.00)	$ (0.04)
Net income (loss)			$ (1,208,741)	$ 13,042,472
Weighted Average Shares Outstanding - Basic			208,144,217	100,000,000
Net Loss Per Common Share - Basic			$ (0.01)	$ 0.13
Weighted Average Shares Outstanding - Fully Diluted				100,871,212
Net Income (Loss) Per Common Share - Fully Diluted				$ 0.13

		VALOR ENERGY CORP.
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
~~(UNAUDITED)~~			(UNAUDITED)
			Six months ended	Six months ended
			Nine months ended	Nine months ended
			November 30, 2008	November 30, 2007
			February 28, 2009	February 29, 2008
Revenue
Net Income (loss)			$ (1,208,741)	$ 13,042,472
	Equity in earnings of lease		$ 310,414	$ 63,289
Foreign currency translation			(18,207)	5,748
Operating expenses
Comprehensive Income (loss)			$ (1,226,948)	$ 13,048,220
	Selling, general and administrative		179,606	165,053
	Depreciation and depletion		148,514	92,647
		Total operating expenses	328,120	257,700
Income (loss) from operations			(17,706)	(194,411)
Other income (expense)
	Interest income (expense)		(119,700)	(208,568)
	Interest income (expense ) related to convertible debt		(752,186)	7,847,532
	Other Income		17,365
	Other expense		(6,929)
Total other income (expense)			(861,450)	7,638,964
Net income (loss)			$ (879,156)	$ 7,444,553
Weighted Average Shares Outstanding - Basic			178,859,575	100,000,000
Net Loss Per Common Share - Basic			$ (0.00)	$ 0.07
Weighted Average Shares Outstanding - Fully Diluted				100,920,000
Net Income (Loss) Per Common Share - Fully Diluted				$ 0.07

VALOR ENERGY CORP.
	VALOR ENERGY CORP
Consolidated Statements of Comprehensive Income
Consolidated Statement of Stockholders' Deficit
(UNAUDITED)
			Three months ended	Three months ended
						Paid	Foreign		Total
			November 30, 2008	November 30, 2007
	Preferred	Preferred	Common		Common	In	Currency	Accumulated	Stockholders'
Net Income (loss)			$ (879,156)	$ 7,444,553
	Stock	Stock	Stock		Stock	Capital	Translation	Deficit	Deficit
Foreign currency translation			(5,268)	253,618
Balance at May 31, 2008	2,007,194	2,007	104,980,000		104,980	5,915,860	(20,288)	(16,740,955)	(10,738,396)
Comprehensive Income (loss)			$ (884,424)	$ 7,698,171
For the period ending February 28, 2009
Issuance of common stock for conversion of debt			189,747,800		189,748	(173,345)			16,403
Issuance of common stock for services			12,677,560		12,678	41,322			54,000
Issuance of common stock for non-convertible debt			5,500,000		5,500	20,500			26,000
Foreign currency translation adjustment							(18,207)		(18,207)
Net income (loss)								(1,208,741)	(1,208,741)
Balance at February 28, 2009	2,007,194	2,007	312,905,360		312,905	5,804,338	(38,495)	(17,949,696)	(11,868,941)

	VALOR ENERGY CORP
		VALOR ENERGY CORP.
Consolidated Statement of Stockholders' Deficit
Consolidated Statements of Cash Flows
				(UNAUDITED)					~~(UNAUDITED)~~
							Paid	Foreign		Total
				Nine months ended	Nine months ended
	Preferred		Preferred		Common	Common	In	Currency	Accumulated	Stockholders'
				February 28, 2009	February 29, 2008
	Stock		Stock		Stock	Stock	Capital	Translation	Deficit	Deficit
Cash flows from operating activities:
Balance at May 31, 2008	2,007,194		2,007		104,980,000	104,980	5,915,860	(20,288)	(16,740,955)	(10,738,396)
	Net income (loss)			$ (1,208,741)	$ 13,042,472
For the period ending Nov 30, 2008
	Adjustments to reconcile net income (loss) to
Issuance of common stock for conversion of debt convertion					114,136,600	114,137	(100,002)			14,135
	net cash provided by operating activities:
Issuance of common stock for services					12,677,556	12,678	41,322			54,000
		Depreciation and depletion		186,749	270,524
Issuance of common stock for non-convertible debt					5,500,000	5,500	20,500			26,000
		Accretion of convertible debt discount		(1,538)	(213,515)
Foreign currency translation adjustment								(5,268)		(5,268)
		Undistributed equity of losses (earnings) of leases		120,440	(62,102)
Net income (loss)									(879,156)	(879,156)
		Change in derivative liability		838,558	(13,260,540)
Balance at Nov 30, 2008	2,007,194		$ 2,007		237,294,156	$237,294	$5,877,680	($25,556)	($17,620,111)	$ (11,528,686)
		Change in warrant liability		(3,889)	(32,008)
		Common stock Issued for services		6,000
		Gain on Sale of Tiger-Lynk			(176,000)
		Non-cash derivative interest debenture			227,068
Change in operating assets and liabilities
		Deposits and prepaids expenses		(10,439)
		Accounts receivable		1,369	(3,847)
		Accounts payable and accrued expenses		187,137	174,793
		Amounts due to related parties		39,500	22,500
		Net cash provided by operating activities		155,146	(10,655)
Cash flows from investing activities:
	Proceeds from sale of Tiger-Lynk			67,630	64,000
	Additional investment in Hamill lease			(25,111)	(187,757)
	Acquisition of equipment			(2,095)	(1,909)
		Net cash provided by (used in) investing activities		40,424	(125,666)
Cash flows from financing activities:
	Proceeds from the issuance of notes payable				108,680
	Payments on notes payable			(26,788)	(19,517)
		Net cash provided by (used in) financing activities		(26,788)	89,163
Non Cash Items
	Effect of foreign currency exchange rate on cash balance			(18,207)	5,748
	Net effect of non-cash items			(18,207)	5,748
Net increase (decrease) in cash				150,575	(41,410)
Cash at beginning of period				44,629	42,737
Cash at end of period				$ 195,204	$ 1,327
Changes in non-cash working captital
		Common stock issued for notes payable		$ 26,000
		Common stock issued for convertible debentures		16,403
		Common stock issued for accrued expenses		48,000
				$ 90,403

		VALOR ENERGY CORP.
Consolidated Statements of Cash Flows
(UNAUDITED)
			Six months ended	Six months ended
			November 30, 2008	November 30, 2007
Cash flows from operating activities:
	Net income (loss)		$ (879,156)	$ 7,444,553
	Adjustments to reconcile net income (loss) to
	net cash provided by operating activities:
		Depreciation and depletion	148,494	92,647
		Accretion of convertible debt discount	85,809
		Undistributed equity of losses (earnings) of leases	73,665	20,871
		Change in derivative liability	670,250	(7,831,068)
		Change in warrant liability	(3,873)	(16,464)
		Common stock Issued for services	6,000
Change in operating assets and liabilities
		Deposits and prepaids expenses	(10,645)
		Accounts receivable	(5,899)	(1,220)
		Accounts payable and accrued expenses	23,623	290,710
		Amounts due to related parties	20,500	18,000
		Net cash provided by operating activities	128,768	18,029
Cash flows from investing activities:
	Proceeds from sale of Tiger-Lynk		57,630
	Additional investment in Hamill lease		(25,111)	(138,975)
	Acquisition of equipment		(1,274)	(1,692)
		Net cash provided by (used in) investing activities	31,245	(140,667)
Cash flows from financing activities:
	Proceeds from the issuance of notes payable			75,680
	Payments on notes payable		(26,788)	(14,997)
		Net cash provided by (used in) financing activities	(26,788)	60,683
Non Cash Items
	Effect of foreign currency exchange rate on cash balance		(5,268)	250,855
	Net effect of non-cash items		(5,268)	250,855
Net increase (decrease) in cash			(127,957)	188,900
Cash at beginning of period			44,629	42,737
Cash at end of period			$ 172,586	$ 231,637
Changes in non-cash working captital
		Common stock issued for notes payable	$ 26,000
		Common stock issued for convertible debentures	14,134
		Common stock issued for accrued expenses	48,000
			$ 88,134

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

NOTE 1 - ORGANIZATION

Valor Energy Corp. (the "Company", “Valor” or "VLRN") was incorporated under the laws of the State of Nevada in 1996. Since May of 2003, the Company has been actively involved in Oil and Natural Gas production and development. The Company holds non-operated interests in natural gas properties in the US.

The Company owns a 20 percent working interest and a 16 percent net revenue interest in the Sargent South Field, Hamill & Hamill lease, a 3,645-acre natural gas producing property located in Matagorda County, Texas. The Company’s interest applies to all depths from surface to 7000 feet, with the exception of three currently non-producing wells, number 19, 14 and 1-R, of which the Company has no interest in. During September of 2006, the Company expanded its South Sargent interests by acquiring the same interest rights in 4 State leases contiguous with the Company’s existing acreage and extending 1,610 acres into the off-shore Gulf-of-Mexico. These 4 leases have a five year term and expire on April 4, 2011, pending production development. All of the Company’s South Sargent interests, both onshore and offshore, are subject to the Joint Operating Agreement with New Century Energy Corp (See Note 12).

Basis of Presentation

Certain information and footnote disclosures normally in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission; however, management believes the disclosures which are made are adequate to make the information presented not misleading. These consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended May 31, 2008 and Management's Discussion and Analysis of Financial Condition and Results of Operations.

The financial information of the Company and its wholly owned subsidiary, Valor Industries Ltd., for the ~~six~~nine months ended ~~November~~February 3028, ~~2008~~2009 and ~~November~~February 3028, ~~2007~~2008, has not been audited. However, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the periods presented have been included therein. The results of operations for the first ~~three~~nine months of the year are not necessarily indicative of the results of operations that might be expected for the entire year.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Valor Industries Ltd. ("VIL"). All significant intercompany balances and transactions have been eliminated.

Business Operations

As of ~~November~~February 3028, ~~2008~~2009 the Company operated primarily in the United States, although its corporate offices are in Canada. The Company currently operates in a single business segment and a brief description of the business operations of each Company is as follows:

VIL provides management services to VLRN and its working interests in the Sargent South field, Hamill property (See Note 5).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

The Company has experienced recurring losses, has a working capital deficiency of $1112,~~528~~351,~~686~~615 and an accumulated deficit of $17,~~620~~949,~~111~~696 as of ~~November~~February 3028, ~~2008~~2009. The Company’s current investments are limited to its investments in certain natural gas producing properties in Texas. Future realization of the Company’s investments will depend upon obtaining debt and/or equity financing to allow for the development of oil and gas properties, of which there can be no assurance. Over the next twelve months, management is confident that sufficient working capital will be obtained from a combination of revenue and external financing to meet the Company's liabilities and commitments as they become payable. The Company has in the past successfully relied on private

1110

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

placements of common stock, loans from private investors, sale of assets and the exercise of common stock warrants, in order to sustain operations. The Company increased the total number of authorized shares to provide for the conversion of debentures for equity, use equity positions as incentive for attracting professionals, payment of professionals, sell additional shares for cash and potentially use equity as payment for mergers and acquisitions. There can be no assurance that management’s plans will be successful. Failure to obtain sufficient working capital from external financing will cause the Company to curtail its operations.

Accordingly, the consolidated financial statements are accounted for as if the Company is a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or other adjustments that might be necessary should the Company be unable to continue as a going concern.

Concentration

The Company currently has a 100% concentration of its revenues coming from the proceeds of its investment in the Sargent South Field, Hamill lease.

Cash

Cash consists of a checking account. While cash held by financial institutions may at times exceed federally insured limits, management believes that no material credit or market risk exposure exists due to the high quality of the institutions. The Company has not experienced any losses on such accounts.

Revenue Recognition

The Company’s ~~currently has no~~ operating activities ~~other~~currently ~~than~~consist solely of its working interests in oil and gas producing properties (See Note 5).The Company recognizes revenue from its investments in gas properties on the accrual basis in proportion to its ownership interest. Net revenue includes revenue from gas sales less direct lease operating expenses. Lease operating expenses include monthly obligations to monitor and maintain production, including monitoring personnel, electricity and sales equipment rental fees.

The Company records estimated amounts of natural gas revenue based on volumetric calculations under its natural gas sales contract.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using declining balance and straight-line methods over the estimated useful lives of the depreciable assets. The estimated useful lives used range from three to five years. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term. Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions. Management uses a successful efforts method to account for leasehold costs where maintenance and repairs are charged to expense as incurred; additions and betterments are capitalized. Upon retirement or sale, the cost and related accumulated depreciation of the disposed assets are removed, and any resulting gain or loss is credited or charged to operations.

Long-Lived Assets

The Company performs a review for impairment of proved natural gas properties on a depletable unit basis when circumstances suggest there is a need for such review in accordance with Financial Accounting Standards Board No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). To determine if a depletable unit is impaired, the Company compares the carrying value of the depletable unit to the undiscounted future net cash flows by applying managements’ estimates of future natural gas prices to the estimated future production of natural gas reserves over the economic life of the property. Future net cash flows are based upon estimates of proved reserves. In addition, other factors such as probable and possible reserves are taken into consideration when justified by economic conditions and actual or planned drilling or other development activities. For a property determined to be impaired, an impairment loss equal to the difference between the carrying value and the estimated fair value of the impaired property will be recognized. Fair value, on a depletable unit basis, is estimated to the present value of the aforementioned

1211

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

expected future net cash flows. Any impairment charge incurred is recorded in accumulated depreciation, depletion, impairment and amortization to reduce the recorded basis in the asset. Each part of this calculation is subject to a large degree of judgment, including the determination of the depletable units’ reserves, future cash flows and fair value. For the periods ended ~~November~~February 3028, ~~2008~~2009 and ~~2007~~2008, no impairments have been recorded on proved properties.

Unproved natural gas properties are periodically assessed and any impairment in value is charged to impairment expense. The costs of unproved properties, which are determined to be productive, are transferred to proved natural gas properties and amortized on a unit of production basis. For the periods ended ~~November~~February 3028, ~~2008~~2009 and ~~2007~~2008, no impairments have been recorded on unproved properties.

Investment in Sargent South, Hamill Lease – On-shore and Offshore

The Company accounts for its investments in the lease at cost initially, and the cost is adjusted for the Company’s net revenue interest in the leases net revenue. The cost of the investments are increased by additional contributions to and reduced by distributions from the lease. The Company reviews the value of the lease at least annually.

The Company depletes the acquisition cost of the lease using the units-of-production method as the related gas and oil reserves are produced so that each unit of gas or oil produced is assigned a pro rata portion of the unamortized acquisition cost plus additional improvements. The unit cost is computed on the basis of the total estimated units of gas or oil reserves.

Amounts Due to Related Parties

All amounts due to related parties are non-interest bearing and payable on demand.

Income Taxes

The Company utilizes Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN 48”) as an interpretation of FASB Statement No. 109, Accounting for Income Taxes (“SFAS 109”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109 and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 was effective for fiscal year ending May 31, 2008. The Company did not record any liability for uncertain tax positions or any related interest or penalties. All tax years since inception remain open to IRS audit.

Stock-Based Compensation

The Company accounts for stock-based awards in accordance with SFAS No. 123(R) "share-based payment", which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company's valuation techniques previously utilized for options in footnote disclosures required under SFAS No. 123, "Accounting for Stock Based Compensation", as amended by SFAS No. 148, "Accounting for Stock Based Compensation Transition and Disclosure".

1312

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

Since the Company did not issue stock options to employees during the period ended ~~November~~February 3028, ~~2008~~2009, or ~~2007~~2008, there is no effect on net loss or earnings per share had the Company applied the fair value recognition provisions of SFAS No. 123(R) to stock-based employee compensation. When the Company issues shares of common stock to employees and others, the shares of common stock are valued based on the market price at the date the shares of common stock are approved for issuance.

Earnings Per Share

SFAS No. 128, "Earnings Per Share," requires presentation of basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS").

Basic EPS is computed by dividing earnings available to common stockholders by the weighted-average number of outstanding common shares during the period.

For computing Diluted EPS for outstanding warrants the Company uses the “Treasury Stock Method”. For Computing Dilutive EPS, for convertible debt, the Company uses the “If Converted Method”.

Warrants Issued in Conjunction With Convertible Debt

The Company allocates the proceeds received from convertible debt between the liability and the warrants issued in conjunction with the debt, based on their relative fair values, at the time of issuance. The amount allocated to the warrants is recorded as additional paid-in capital and as a discount to the related convertible debt. The discount is amortized to interest expense on a yield basis over the term of the related convertible debt using the effective interest method.

Comprehensive Income

The Company has determined that the Company’s net income (loss) and foreign currency translation adjustments were the only components of its comprehensive income as of ~~November~~February 3028, ~~2008~~2009, and ~~November~~February 3028, ~~2007~~2008, respectively.

Segment and Geographic Information

The Financial Accounting Standards Board issued SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” effective in 1998. SFAS No. 131 requires enterprises to report financial information and descriptive information about reportable operating segments. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company evaluated SFAS No. 131 and determined that the Company operates in only one segment.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. SFAS No. 107, “Disclosure about Fair Value of Financial Instruments,” requires certain disclosures regarding the fair value of financial instruments. The fair values of the Company's cash, accounts receivable, notes receivable, accounts payable, accrued expenses, amounts due to related parties, convertible debentures and notes payable approximate their carrying values due to the relatively short periods to maturity of these instruments. The amounts shown for notes payable also approximate fair value because current interest rates offered to the Company for debt of similar maturities are substantially the same.

Convertible Debt Financing and Derivative Liabilities

The Company has issued convertible debt securities with non-detachable conversion features and detachable warrants. The Company accounts for such securities in accordance with Emerging Issues Task Force Issue Nos. 98-5, 00-19, 00-27, 05-02, 05-04 and 05-08, and SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended.

In accordance with SFAS 133, the holder’s conversion right provision, interest rate adjustment provision, liquidated damages clause, cash premium option, and the redemption option (collectively, the debt features) contained in the terms governing the notes are not

1413

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

clearly and closely related to the characteristics of the notes. Accordingly, the debt features qualify by SFAS 133 to be accounted for separately from the debt instrument and recorded as derivative financial instruments.

At each balance sheet date, the Company adjusts the derivative financial instruments to their estimated fair value and analyzes the instruments to determine their classification as a liability or equity. At May 31, 2008, the estimated fair value of the Company’s derivative liability was $8,261,896 as well as a warrant liability of $3,894. The estimated fair value of the debt features was determined using the probability weighted averaged expected cash flows / Lattice Model. The model uses several assumptions including: historical stock price volatility (utilizing a rolling 120 day period), risk free interest rate (3.50%), remaining maturity, and the closing price of the Company’s commons stock to determine estimated fair value of the derivative liability. In valuing the debt features at ~~November~~February 3028, ~~2008~~2009, the Company used the closing price of $0.0001 and the respective conversion and exercise prices for the warrants. For the ~~three~~nine month period ended ~~November~~February 3028, ~~2008~~2009, there was a decrease in the market value of the Company’s common stock from $0.009 at May 31, 2008 to $0.0001 at ~~November~~February 3028, ~~2008~~2009.

Translation of Foreign Currency

The Company's functional currency and its reporting currency is the United States dollar. The Company's subsidiary, VIL, operates in Canada and its operations are conducted in Canadian currency and therefore its functional currency is the Canadian dollar. In consolidation, foreign currency translation gains and losses are included in other comprehensive income.

Recent Accounting Pronouncements

There ~~are~~is no new accounting pronouncements not previously disclosed that are not yet effective but expected to affect the Company’s consolidated financial statements.

Estimates

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

NOTE 3 - NOTES RECEIVABLE

During October of 2006 the Company acquired all rights, title and interest to the patented Tiger•Lynk underwater manipulator system. ~~The Company had in the past advanced $100,000 for the construction of one of these machines, which was partially completed.~~ On February 20, 2008, the Company finalized an agreement to sell all rights, title and interest in the Tiger-Lynk technology to Hollund Industrial Robotics Systems Inc, a privately held Canadian company (HIRS) and a Company controlled by a former director, Mr. Lonnie Hayward. The agreement with HIRS includes the mechanical arm assembly that was partially completed and stored at the Company's participating manufacturing facility in Kamloops British Columbia. Terms of the sale were amended in March 2008 and again in June 2008, in an Addendum and Addendum B agreement respectively, whereby the Company received a zero interest bearing note of $250,100 from Holland Industrial Robotics Inc (“HIRS”). The note is secured with a first priority interest in the technology in an event of default. The June 2008 Addendum B agreement modified the terms of payment, such that the amount payable to the Company was reduced from the $205,100 principal amount remaining to $140,000, a reduction of $65,100. The Company has received payments of $30,000 in July 2008, in accord with new payment terms, leaving a balance owing as of August 31, 2008 of $110,000. The remaining payment for the balance owing of $110,000 to be paid in four payments; $30,000 due Sept 15, 2008 and three payments due on the 1st day of December 2008, January 2009, and February of 2009. The total receivable outstanding is included in the consolidated financial statements. During September 2008, the Company received $27,630 in cash and $2,370 debt forgiveness on amounts due Holland CEO, totaling the $30,000. This amount was due for the September 15, 2008 payment under the terms of the latest amendment to its agreement with Hollund. The Company has not received payments due as of December 1, 2008, or January 1, 2009. ~~(See~~During ~~Note~~January 122009, the Company signed an Extension Agreement, amending the prior agreement with Hollund. As terms of the agreement, Hollund will pay the Company the $70,000 balance owing on the purchase of TigerLynk, plus $15,000 in overdue consulting fees incurred by the Company, the aggregate of which payable in 3 payments specifically as follows; i) $25,000 due February 2, 2009, ii) $25,000 due April 2, 2009 and iii) $45,000 due May 2, 2009. The new Extension Agreement reasserts the Company’s right to foreclose in the event of default on the new payment terms. At February 28, 2009, the Company had received the

During November 2008, the Company signed an agreement to provide consulting services to Hollund Industrial Marine Inc, related to the design and construction of a Tigerlynk 120 underwater manipulator system. Terms of the agreement call for the Company to receive $12,500 (US) per month in consulting fees, upon project financing, plus certain bonus compensation and conditional exclusive 14

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

~~rights~~February to2, ~~employ~~2009 ~~and~~payment, ~~market~~leaving ~~the~~a ~~TigerLynk~~balance ~~underwater~~owing ~~manipulator~~of ~~system~~$70,000 to(See ~~the~~Note ~~offshore oil and gas industry~~12).

During November 2008, the Company signed an agreement to provide consulting services to Hollund Industrial Marine Inc, related to the design and construction of a TigerLynk 120 underwater manipulator system. Terms of the agreement call for the Company to receive $12,500 (US) per month in consulting fees, upon project financing, plus certain bonus compensation and conditional exclusive rights to employ and market the TigerLynk underwater manipulator system to the offshore oil and gas industry. As of January 1, 2009, the agreement for consulting services has been suspended indefinitely.

On December 12, 2008, the Company received a letter from Horsepower Intellectual Property Law (“Horsepower”) informing that Mr. Gary Ackles was attempting to rescind all of the technology rights as defined in the October 17, 2006 Technology Purchase and Sale Agreement (“Agreement”). Mr. Ackles based his claim on an allegation that Aquatic Cellulose International Corp (the Company’s former name) was in violation of the Agreement by failing to pay Ackles a final cash payment of $40,000 due upon signing. On December 22, 2008, the Company retained the services of Doak Sheriff LLP (“Doak Sheriff”)of Kelowna, British Columbia, Canada, to respond to this allegation that the Company considered false and potentially damaging to the existing agreement to sell this technology to HIRS, as reported on above. On December 29, 2008, Doak Sheriff delivered a letter to Horsepower on behalf of the Company denying the allegation and including as exhibits to the letter copies of the Company’s bank records confirming the payment made to Ackles account and an acknowledgment letter signed by Ackles at the time of the transaction confirming that he had received the payment. The letter also informed Horsepower that the Company may only consider the matter closed upon Ackles completing the transfer of the Patents into the name of the Company (See Note 12).

NOTE 4 - NOTES PAYABLE

In September 2003, the Company signed an agreement with an investor to provide a loan of approximately $28,000 that would be exchanged for shares pending the Company increasing its authorized shares. The note is convertible into 200,000 shares of the Company’s common stock. During July 2004, the Company received an additional short-term loan in the amount of approximately $8,000, which was used, along with Company’s available cash, to fund the purchase of the 50 percent ownership interest in the Prado field lease. The Company agreed to repay the $8,000 once funding became available and agreed to pay interest at 20 percent of the amount borrowed over the next 12 months. Following the closing of the $250,000 convertible debentures in August 2004, the investor declined the repayment in favor of re-investing his principal and 20 percent proceeds with the Company. Thus, the total aggregate of the loan is $36,791 and is included in notes payable in these consolidated financial statements.

During January 2006, the Company received a loan of $50,000 from a Mr. Don Morgan of Portland Oregon. The Company agreed to repay the loan in over 24 monthly payments with 10 percent interest. The loan was paid in full at November 30, 2008. During Oct 2007, the Company received ana ~~additional~~ zero interest bearing loan of $75,680 from Mr. Don Morgan. The company agrees to repay the principal plus an additional $75,000 over three years. ~~During~~As of the period ended ~~November 30~~February28, ~~2008~~2009 there were principal payments of $24,500 made. This note is included in notes payable (See Note 12).

During July and September 2006, the Company received a loan, bearing interest at 8% annually, from Mr. Lonnie Hayward, a consultant to the Company, and a Company controlled by Mr. Hayward for an aggregate amount of $180,000. Funds were used to cover costs associated with the development of the Hamill lease. The Company agreed to pay Mr. Hayward $200,000 in return for his loan at such time as the Company is able. In October 2006, the Company made a partial payment to Mr. Hayward in the amount of $120,000. During November 2006, May 2007 and June 2007 the Company made principal and interest payments aggregating $22,500 leaving a balance remaining of $78,120 as of March 1, 2008. During March of 2008, Mr. Hayward cancelled this debt as part of the agreement with ~~Hollund~~HIRS (See Note 3).

During November 2006, the Company accepted a loan from Mr. Peter Matousak for $15,000. The proceeds were paid directly to NewsUSA, a North American news media service, on the Company’s behalf representing a payment on the Company’s media contract. In the agreement with Mr. Matousak the Company Board of Directors approved to issue Matousak 500,000 shares of Company stock with piggy back registration rights and to be issued pending shareholders approval of the proxy to increase the Company’s authorized shares and change the Company name. During September 2008, the Company issued these restricted shares as per the agreement.

As part of the agreement reached with Hollund Industrial Robotics Inc during January 2008, and amended in February, March and June of 2008, the Company signed a “Termination & Transfer Agreement” with Hollund Industrial Inc. (“Hollund”), the parent company of HIRS, and Gary Ackles. The agreement stipulates that Hollund will assume all obligations to Gary Ackles for technology royalties and stock commitments. Additionally, the Company agreed to pay Ackles $33,000 as compensation for signing the agreement and relinquishing the Company from any further liabilities to Ackles. During July 2008 the company issued 5,000,000 shares as partial payment of $11,000 towards the outstanding balance. This left a balance remaining of $22,000 and is included in Notes Payable.

~~NOTE 5 – INVESTMENT IN HAMILL LEASE~~15

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 (UNAUDITED)

agreement and relinquishing the Company from any further liabilities to Ackles. During July 2008 the company issued 5,000,000 shares as partial payment of $11,000 towards the outstanding balance. This left a balance remaining of $22,000 and is included in Notes Payable (See Note 12).

NOTE 5 – INVESTMENT IN SARGENT SOUTH (HAMILL LEASE)

The investment in Hamill lease consists of the following at November 30, 2008:

Balance at beginning of period

$756,293

Additional investment

25,111

Proportionate equity in natural gas revenue

~~331~~371,~~121~~105

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2008 (UNAUDITED)

Receipt of earnings in Hamill lease

(~~404~~491,~~787~~544)

Depletion of investment cost

(~~148~~186,~~494~~749)

$~~559~~474,~~244~~216

The Hamill lease represents a significant equity investment of the Company. The following table presents ~~six~~nine-months total revenue, expenses and net income for the Hamill lease, as well as the Company’s proportionate share.

For the Three-month period ended	November 30, 2008		November 30, 2007
	LEASE TOTAL	VLRN %	LEASE TOTAL	VLRN %
TOTAL REVENUE	$433,299	$69,327	$243,370	$38,939
TOTAL LEASE OPERATING EXPENSES	$85,355	$17,071	$86,130	$17,226
NET INCOME	$347,944	$52,256	$157,240	$21,713
For the six-month period ended	November 30, 2008		November 30, 2007
	LEASE TOTAL	VLRN %	LEASE TOTAL	VLRN %
TOTAL REVENUE	$2,069,511	$331,121	$607,797	$92,602
TOTAL LEASE OPERATING EXPENSES	$103,535	$20,707	$146,565	$29,313
NET INCOME	$1,965,976	$310,414	$461,232	$63,289


For the Three-month period ended	February 28, 2009
	LEASE TOTAL	VLRN %	LEASE TOTAL	VLRN %
TOTAL REVENUE	$249,895	$39,983	$1,042,141	$166,743
TOTAL LEASE OPERATING EXPENSES	$75,500	$15,100	$86,130	$19,237
NET INCOME	$174,395	$24,883	$956,011	$147,506

For the nine-month period ended	February 28, 2009
	LEASE TOTAL	VLRN %	LEASE TOTAL	VLRN %
TOTAL REVENUE	$2,319,407	$371,106	$1,649,938	$259,345
TOTAL LEASE OPERATING EXPENSES	$165,855	$33,171	$146,565	$48,550
NET INCOME	$2,153,552	$337,935	$1,503,373	$210,795

NOTE 6 – ACCRUED EXPENSES

Accrued expenses consist of the following at ~~November~~February 3028, ~~2008~~2009:

Accrued interest

$ ~~175~~52,~~723~~868

Accrued professional fees

2019,~~945~~941

Accrued payroll liability

1718,~~429~~314

~~Unearned~~Amount ~~revenue~~on deposit for Subsidiary

2 15,~~980~~000

~~GST tax return~~ 16

(470)

$216,607

NOTE 7 – AMOUNTS DUE TO RELATED PARTIES

Amounts due to related parties consist of the following at November 30, 2008:

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

~~Unpaid~~GST ~~license~~tax agreement between Legacy Systems and Company $ 80,000 Unpaid consulting fees due to Sheridan Westgarde (See Note 10) 30,000 Unpaid consulting fees due to Les Westgarde 16,496 Unpaid consulting fees due Gary Patterson (See Note 12) 10,000 Funds borrowed from Legacy Systems 44,000 $ 180,496return

(897)

$105,226

NOTE 7 – AMOUNTS DUE TO RELATED PARTIES

Amounts due to related parties consist of the following at February 28, 2009:

Unpaid license agreement between Legacy

Systems and Company $ 80,000

Unpaid consulting fees due to Sheridan Westgarde

(See Note 10) 39,000

Unpaid consulting fees due to Les Westgarde 25,496

Unpaid consulting fees due Gary Patterson

(See Note 12) 11,000

Funds borrowed from Legacy Systems 44,000

$199,496

All amounts due to related parties are non-interest bearing and payable on demand.

During October 2006, the Company completed a settlement agreement with Legacy, whereby the Company will exchange 1.08 percent of its issued and outstanding shares, following the increase in the Company’s authorized shares, for the total of $124,000 owed to Legacy, comprised of $80,000 for unpaid licensing fees and a $44,000 loan. ~~Since~~As ~~the completion~~ of ~~the~~February ~~increase~~28, in2009 ~~authorized~~ the Company ~~has~~had not issued these shares, ~~but~~(See ~~expects~~Note ~~to in the near future~~12).

During May 2008, the Company ratified an agreement to settle all commitments made to Mr. Harvey Smith. The agreement calls for the Company to pay Mr. Smith $15,000 in cash, on or before September 1, 2008, as release of all prior commitments the Company has made in cash or stock. During July 2008, the Company paid Smith $2,000 towards the settlement. During September 2008, the Company paid to Harvey Smith the $13,000 balance owing, thereby terminating any further commitments to Smith, as per the terms of the settlement agreement.

NOTE 8 - CONVERTIBLE NOTES AND WARRANTS

Prior to May 2003, the Company issued convertible debentures aggregating $780,800 are payable bear interest at 10 percent, due on a quarterly basis, and are secured by a first priority interest in the Company's assets. Any amount of principal or interest due under the debentures, which is not paid when due will bear interest at 15 percent per annum from the due date thereof until the amount is paid. Debentures aggregating $780,800 at May 31, 2003, were amended in December 2003 to be convertible into the Company's common shares at 40 percent of the average of the lowest three inter-day sales prices during the twenty trading days immediately preceding the conversion date.

During March 2004 and August 2004, the Company issued a $900,000 and $250,000, respectively, of convertible notes and warrants. Convertible debentures payable bear interest at 10 percent, due on a quarterly basis, and are secured by a first priority interest in the Company's assets. Any amount of principal or interest due under the debentures, which is not paid when due will bear interest at 15 percent per annum from the due date thereof until the amount is paid. These debentures were convertible, at the investors’ sole option, into common shares at the lesser of $0.004 per share (fixed conversion price) or 25 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date. 17

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

Debentures aggregating $780,800 at May 31, 2003, were amended in December 2003 to be convertible into the Company's common shares at 40 percent of the average of the lowest three inter-day sales prices during the twenty trading days immediately preceding the conversion date.

On April 29,2007, the Company and the investors agreed to increase the discount percentage on the then outstanding notes from 70% to 75%. If, at any time, the Company issues or sells any shares of common stock for no or below market consideration (dilutive issuance), then immediately upon the dilutive issuance, the fixed conversion price will be reduced to the amount of the consideration per share received by the Company in such dilutive issuance. The number of common shares issuable upon the conversion of the debentures is limited to 4.9 percent in beneficial ownership by the debenture holders and its affiliates of the outstanding shares of common stock. Once the maximum amount of common shares has been issued, in lieu of any further right to convert the debentures, the Company shall pay to the debenture holder, an amount equal to 130 percent of the then outstanding principal amount of the debenture plus accrued and unpaid interest and other related charges within fifteen business days of the maximum conversion date. If the Company exercises its right to prepay the debentures, the Company will make payment to the debenture holders in an amount equal to 150 percent of the sum of the then outstanding principal amount of the debentures plus accrued and unpaid interest on the unpaid principal amount of the debenture to the optional prepayment date plus any other related penalties. The debentures do not automatically convert to common shares on their due dates.

On January 31, 2008, the Company replaced certain accrued and unpaid interest due under the terms of its convertible notes with the issuance of three additional convertible debentures of $55,657, $48,302 and $123,109 respectively, for an aggregate of $227,068. These convertible debentures payable bear interest at 2 percent, due on a quarterly basis, and are secured by a first priority interest in the Company's assets. Any amount of principal or interest due under the debentures, which is not paid when due will bear interest at 15 percent per annum from the due date thereof until the amount is paid. These debentures were convertible, at the investors' sole option, into common shares at 30 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date.

On May 30, 2008, the Company replaced certain accrued and unpaid interest due under the terms of its convertible notes with the issuance of four additional convertible debentures of $247,440, $144,175, $147,503 and $258,722 respectively, for an aggregate of $797,840. These convertible debentures payable bear interest at 2 percent, due on a quarterly basis, and are secured by a first priority interest in the Company's assets. Any amount of principal or interest due under the debentures, which is not paid when due will bear interest at 15 percent per annum from the due date thereof until the amount is paid. These debentures are convertible, at the investors' sole option, into common shares at 25 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date.

On May 30, 2008, the Company and the holders of the Company’s convertible notes agreed to amend all outstanding convertible notes. The amendment replaces all references to “fixed conversion price” and replaces them with the term “variable conversion price”. The amendment allows the value of the conversion price to effectively “float” with the value of the market price of the stock with no upper limit should the market value of the stock increase. The conversion price is calculated as 25 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date.

During December 2008, the Company issued five convertible debentures of $30,644, $58,370, $64,336, $118,760 and $2,430 respectively, for an aggregate of $274,540 in accordance with § 4(2) and Rule 506 under the Securities Act of 1933, as amended. These debentures were issued pursuant to the Securities Purchase Agreement of March 2004 and bear interest at 2 percent, due on a quarterly basis, and are convertible, at the investors' sole option, into common shares at 75 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date. Proceeds of the debentures were used to pay certain unpaid interest that had accrued on the Company’s outstanding convertible debt. The investors of these securities were accredited investors.

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 (UNAUDITED)

After a thorough analysis and review of the terms of the note and respective covenants, the Company has determined the appropriate method of accounting is including the entire debt as a current liability on the balance sheet, since the debt is immediately convertible at the option of the holder.

The proceeds from the financing transactions were allocated to the debt features and to the warrants based upon their fair values. After the latter allocations, the remaining value, if any, is allocated to the Note on the financial statements.

The debt discount is being accreted using the effective interest method over the term of the note. The value of the discount on the converted notes on the books is being accreted over the term of the note (two years). For the ~~six~~nine-~~months~~month period ended ~~November~~February 3028, ~~2008~~2009, and ~~November~~February 3029, ~~2007~~2008, the Company accreted $85149,~~809~~762 and $0(13,553), respectively, of debt discount related to the notes.

Warrants Issued

The estimated fair values of the warrants at issuance were as follows:

19 Date of Warrants Issued Number of Warrants Value at Issuance Initial Volatility Factor March 22, 2004 900,000 $ 3,585 254 % August 6, 2004 250,000 $ 552 254 %

~~VALOR~~These ~~ENERGY~~amounts ~~CORP~~have been classified as a derivative instrument and recorded as a liability on the Company’s balance sheet in accordance with current authoritative guidance. The ~~AND~~estimated ~~SUBSIDIARY~~fair value of the warrants was determined using the Black-Scholes option-pricing model with a closing price of on the date of issuance and the respective exercise price, a 5 year term, and the volatility factor relative to the date of issuance. The model uses several assumptions including: historical stock price volatility (utilizing a rolling 120 day period), risk-free interest rate (3.50%), remaining time till maturity, and the closing price of the Company’s common stock to determine estimated fair value of the derivative liability. In valuing the warrants at May 31, 2008, the Company used the closing price of $0.009, the respective exercise price, the remaining term on each warrant, and a volatility of 303%. In accordance with the provisions of SFAS No. 133, Accounting for Derivative Instruments, the Company is required to adjust the carrying value of the instrument to its fair value at each balance sheet date and recognize any change since the prior balance sheet date as a component of Other Income (Expense). For the three month period ended February 28, 2009, the warrant derivative liability had decreased to a value of $5, which resulted in an “Other income” item of $16 for the three month period ended February 28, 2008. The Company used a closing price of $0.0001, the respective exercise prices, remaining time till maturity and 325% volatility factor.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2008 (UNAUDITED)

Date of Warrants Issued	Number of Warrants	Value at Issuance		Initial Volatility Factor
March 22, 2004	900,000	$	3,585	254	%
August 6, 2004	250,000	$	552	254	%

These amounts have been classified as a derivative instrument and recorded as a liability on the Company’s balance sheet in accordance with current authoritative guidance. The estimated fair value of the warrants was determined using the Black-Scholes option-pricing model with a closing price of on the date of issuance and the respective exercise price, a 5 year term, and the volatility factor relative to the date of issuance. The model uses several assumptions including: historical stock price volatility (utilizing a rolling 120 day period), risk-free interest rate (3.50%), remaining time till maturity, and the closing price of the Company’s common stock to determine estimated fair value of the derivative liability. In valuing the warrants at May 31, 2008, the Company used the closing price of $0.009, the respective exercise price, the remaining term on each warrant, and a volatility of 303%. In accordance with the provisions of SFAS No. 133, Accounting for Derivative Instruments, the Company is required to adjust the carrying value of the instrument to its fair value at each balance sheet date and recognize any change since the prior balance sheet date as a component of Other Income (Expense). For the three month period ended November 30, 2008, the warrant derivative liability had decreased to a value of $21, due in part to a decrease in the market value of the Company’s common stock to $0.0001 from $0.0005 at August 31, 2008, which resulted in an “Other income” item of $325 for the three month period ended November 30, 2008. The Company used a closing price of $0.0001, the respective exercise prices, remaining time till maturity and 361% volatility factor.

The recorded value of such warrants can fluctuate significantly based on fluctuations in the market value of the underlying securities of the issuer of the warrants, as well as in the volatility of the stock price during the term used for observation and the term remaining for the warrants.

Debt Features

In accordance with SFAS 133, the debt features provision (collectively, the features) contained in the terms governing the notes are not clearly and closely related to the characteristics of the notes. Accordingly, the features qualified as embedded derivative instruments at issuance and, because they do not qualify for any scope exception within SFAS 133, they were required by SFAS 133 to be accounted for separately from the debt instrument and recorded as derivative financial instruments.

Pursuant to the terms of the notes, these notes are convertible at the option of the holder, at anytime on or prior to maturity. There is an additional interest rate adjustment feature, a liquidated damages clause, a cash premium option as well as the redemption option. The debt features represents an embedded derivative that is required to be accounted for apart from the underlying notes. At issuance ~~of the notes, the debt features had an estimated initial fair value as follows, which was recorded as a discount to the Notes and a derivative liability on the consolidated balance sheet.~~

Date of Note	Amount of Notes		Debt Features Value at Issuance		Initial Carrying Value
May 31, 2003	$	780,800	$	1,281,362	$	(500,562)
March 22, 2004	$	900,000	$	768,413	$	128,002
August 6, 2004	$	250,000	$	209,989	$	39,459
January 31, 2008	$	227,068	$	561,545	$	(334,477)
May 30, 2008	$	797,840	$	2,504,972	$	(1,707,132)

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

~~In subsequent periods, if the price~~ of the ~~security changes~~notes, the ~~embedded derivative financial instrument related to the~~ debt features ~~will~~had bean ~~adjusted~~estimated toinitial ~~the~~ fair value ~~with~~as ~~the~~follows, ~~corresponding~~which ~~charge or credit to Other Expense or Income. The estimated fair value of the debt features~~ was ~~determined~~recorded ~~using~~as ~~the probability weighted averaged expected cash flows / Lattice Model with the closing price on original date of issuance,~~ a ~~conversion~~discount ~~price~~to ~~based on~~ the ~~terms~~Notes ~~of the respective contract, a period based on the terms of the notes,~~ and a ~~volatility~~derivative ~~factor~~liability on the date of issuance. In valuing the debt features at November 30, 2008, the company used the closing price of $0.0001 and the respective conversion price, a remaining term coinciding with each contract, and a volatility of 361%. For the six months ended November 30, 2008 the estimated value of the debt features increased to $8,932,146, thus during the three-month period ended November 30, 2008, the company recorded Other Expense on the consolidated ~~statement~~balance ~~of operations for the change in fair value of the debt features related to these notes of $14,336 for the three-month period ending November 30, 2008~~sheet.


Date of Note	Amount of Notes		Debt Features Value at Issuance		Initial Carrying Value
May 31, 2003	$	780,800	$	1,281,362	$	(500,562)
March 22, 2004	$	900,000	$	768,413	$	128,002
August 6, 2004	$	250,000	$	209,989	$	39,459
January 31, 2008	$	227,068	$	561,545	$	(334,477)
May 30, 2008	$	797,840	$	2,504,972	$	(1,707,132)

In subsequent periods, if the price of the security changes, the embedded derivative financial instrument related to the debt features will be adjusted to the fair value with the corresponding charge or credit to Other Expense or Income. The estimated fair value of the debt features was determined using the probability weighted averaged expected cash flows / Lattice Model with the closing price on original date of issuance, a conversion price based on the terms of the respective contract, a period based on the terms of the notes, and a volatility factor on the date of issuance. In valuing the debt features at February 28, 2009, the company used the closing price of $0.0001 and the respective conversion price, a remaining term coinciding with each contract, and a volatility of 325%. For the nine months ended February 28, 2009 the estimated value of the debt features increased to $9,100,454, thus during the three-month period ended February 28, 2009, the company recorded Other Expense on the consolidated statement of operations for the change in fair value of the debt features related to these notes of $17,008 for the three-month period ending February 28, 2009.

The recorded value of the debt features related to the notes can fluctuate significantly based on fluctuations in the fair value of the Company’s common stock, as well as in the volatility of the stock price during the term used for observation and the term remaining for the warrants.

The significant fluctuations can create significant income and expense items on the financial statements of the Company.

Because the terms of the 2003 - 2008 convertible notes (“notes”) require such classification, the accounting rules required additional convertible notes and non-employee warrants to also be classified as liabilities, regardless of the terms of the new notes and / or warrants. This presumption has been made due to the Company no longer having the control to physical or net share settle subsequent convertible instruments because it is tainted by the terms of the notes. Were the notes to not have contained those terms or even if the transactions were not entered into, it could have altered the treatment of the other notes and the conversion features of the latter agreement may have resulted in a different accounting treatment from the liability classification. The 2005 notes and warrants, as well as any subsequent convertible notes or warrants, will be treated as derivative liabilities until all such provisions are settled.

For the three-month period ended ~~November~~February 3028, ~~2008~~2009 and ~~November~~February 3029, ~~2007~~2008, the Company recorded other expense of $5380,~~175~~945 and ~~other expense of~~ $45,~~148~~672,~~476~~083 respectively, related to the value of the debt features and value of the warrants. A tabular reconciliation of this adjustment follows:

INTEREST INCOME (EXPENSE) RELATED TO CONVERTIBLE DEBT	Three-month November 30, 2008	Three-month November 30, 2007
2003 and 2004 and 2008 Derivative Liability	$ (14,336)	$ (4,136,924)
2003 and 2004 Warrant Liability	325	(11,552)
Accretion of 2003 convertible debt	-	-
Accretion of 2004 convertible debt	-	-
Accretion of 2008 convertible debt	(39,164)
Total Interest Income (Expense) related to Convertible Debt	(53,175)	(4,148,476)


INTEREST INCOME (EXPENSE) RELATED TO CONVERTIBLE DEBT	Three-month February 28, 2009	Three-month February 29, 2008

2003 and 2004 and 2009 Derivative Liability	$ (17,008)	$ 5,656,489
2003 and 2004 Warrant Liability	16	15,594
Accretion of 2003 convertible debt	-	-
Accretion of 2004 convertible debt	-	-

For the six-month period ended November 30, 2008 and November 30, 2007, the Company recorded other expense of $752,186 and other expense of $7,847,532 respectively, related to the value of the debt features and value of the warrants. A tabular reconciliation of this adjustment follows:20

INTEREST INCOME (EXPENSE) RELATED TO CONVERTIBLE DEBT	Six-month November 30, 2008	Six-month November 30, 2007
Three-month period ended August 31:	$ (699,011)	$ 11,996,008
Three-month period ended November 30:	(53,175)	(4,148,476)

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 (UNAUDITED)


Accretion of 2008 convertible debt	(63,953)
Total Interest Income (Expense) related to Convertible Debt	(80,945)	5.672,083

For the nine-month period ended February 28, 2009 and February29, 2008, the Company recorded other expense of $833,131 and $13,519,615 respectively, related to the value of the debt features and value of the warrants. A tabular reconciliation of this adjustment follows:


INTEREST INCOME (EXPENSE) RELATED TO CONVERTIBLE DEBT	Nine-month February 28, 2009	Nine-month February 29, 2008
Three-month period ended August 31:	$ (699,011)	$ 11,996,008
Three-month period ended November 30:	(53,175)	(4,148,476)
Three-month period ended February 28:	(80,945)	5,672,083
Total Interest (Income) Expense related to Convertible Debt	(833,131)	13,519,615

The balance of the carrying value of the convertible debt as of February 28, 2009 is:


$	2,758,497	May 31, 2008 value
	(1,538)	accretion of convertible debt
	(16,403)	Payments on convertible debt
	274,540	New debenture
$	3,015,096	February 28, 2009 carrying value of debt

The balance of the carrying value of the derivative liability as of February 28, 2009 is:


$	8,261,896	May 31, 2008 value of derivative liability
	0	Change in values of 2003 derivative liability
	630,000	decrease in values of 2004 derivative liability
	40,250	increase in values of 2008 derivative liability
	168,308	Increase in value of 2009 derivative liability
$	9,100,454	February 28, 2009 value of derivative liability

The balance of the carrying value of the warrant liability as of February 28, 2009 is:


$	3,894	May 31, 2008 value of warrant liability
	0	Change in values of 2003 warrant liability
	(3,889)	Income, decrease in values of 2004 warrant liability

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

~~Total~~$ ~~Interest~~5 ~~(Income)~~November ~~Expense~~30, ~~related~~2008 tovalue ~~Convertible~~of ~~Debt~~warrant ~~(752,186) 7,847,532~~liability

~~The~~In ~~balance~~connection ofwith ~~the~~these ~~carrying~~convertible ~~value~~debentures, of the ~~convertible~~Company ~~debt~~had as$52,868 of ~~November~~accrued 30interest at February 28, ~~2008~~2009 which is: included in accrued expenses in these consolidated financial statements.

$	2,758,497	May 31, 2008 value
	85,809	accretion of convertible debt
	(14,134)	Payments on convertible debt
$	2,830,172	November 30, 2008 carrying value of debt

The balance of the carrying value of the derivative liability as of November 30, 2008 is:

$	8,261,896	May 31, 2008 value of derivative liability
	0	Change in values of 2003 derivative liability
	630,000	decrease in values of 2004 derivative liability
	40,250	increase in values of 2008 derivative liability
$	8,932,146	November 30, 2008 value of derivative liability

The balance of the carrying value of the warrant liability as of November 30, 2008 is:

$	3,894	May 31, 2008 value of warrant liability
	0	Change in values of 2003 warrant liability
	(3,873)	Income, decrease in values of 2004 warrant liability
$	21	November 30, 2008 value of warrant liability

In connection with these convertible debentures, the Company had $175,723 of accrued interest at November 30, 2008 which is included in accrued expenses in these consolidated financial statements.

All convertible debentures are issued to the same group, thus no conflict exists with security in the first priority interest in the Company’s assets.

During the ~~six~~nine-month period of this report the Board of Directors approved the issuance of ~~114~~189,~~136~~747,~~600~~800 shares to four investors upon the conversion of $1416,~~134~~403 of debt related to the notes pursuant to the 2004 Securities Purchase Agreement. We relied on the exemptions from registration afforded by Section 4(2) of the Securities Act of 1933 and Rule 506 and 144(k) of Regulation D of the General Rules and Regulations ~~thereunder~~there under for the sale of convertible notes and the issuance of shares upon conversion.

(See Note 12 – Subsequent Events)

NOTE 9 – STOCKHOLDERS’ DEFICIT

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2008 (UNAUDITED)

Common Stock

The Company has authorized 10,000,000,000 shares of $0.001 par common stock. As of ~~November~~February 3028, ~~2008~~2009 and ~~2007~~2008, ~~237~~312,~~294~~905,~~156~~360 and 100,000,000 shares respectively were issued and outstanding (See Note 8, 11 and 12).

In accordance with the debenture agreement (See Note 8), the Company is required to, during the period the conversion rights exists, reserve from its authorized and unissued common stock a sufficient number of shares to provide for the issuance of common stock upon the full conversion of the debentures.

During June 2008, the Company reached a settlement with Richard Smith of Falls Church, Virginia. Smith claimed that he had used his shares to pay for certain promotional services rendered to the Company by Novak Capital of Seattle Washington. As a result, during June 2008, the Company issued 6,000,000 restricted shares to Mr. Smith to settle his claim.

During June 2008, the Company’s Board approved the issuance of 6,677,556 restricted shares to Dejoya Griffith, as settlement of $48,000 in accounts payable related to the preparing of schedules for journal entries related to FAS 133 accounting standards for derivative instruments.

During July 2008 the company issued 5,000,000 shares as partial payment of $11,000 towards the outstanding balance owed to Gary Ackles (See Note 12).

During the period of this report the Company’s Board of Directors approved the issuance of common shares for debt per agreements with investors (See Note 8).

Preferred Stock

The Company has authorized 10,000,000 shares of $0.001 par Preferred stock. The Board of Directors has the authority to issue preferred stock and to fix and determine its series, relative rights and preferences.

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2009 (UNAUDITED)

On March 30, 2007, the Board of Directors approved a new series of 5,000,000 convertible preferred stock allocated from the Company’s 10,000,000 authorized preferred shares. A Certificate of Designation was filed with the Nevada Secretary of State assigning certain preferential rights to these shares including; i) one Series A Convertible Preferred share has the equivalent of 1000 common share votes, ii) one Series A Convertible Preferred share will have the right, at the exclusive option of the holder, to convert to 61 common shares of the Company, once such shares become available through the increase in the Company’s authorized common shares, iii) these shares also have ratchet provision rights, registration rights and piggy back registration rights, as well as 10:1 liquidation rights. Shareholders can determine all of the rights and preferences of the Series A Convertible Preferred shares by consulting the Certificate of Designation as filed with the Nevada Secretary of State.

During May 2007, Mr. Lonnie Hayward and Sheridan Westgarde, CEO of the Company, signed agreements to irrevocably waive certain rights associated with the conversion of their Series A Convertible Preferred stock into the Company's common stock.

As part of the agreement with Hollund during January 2008, as amended in February, March and June 2008, Mr. Lonnie Hayward, a former director of the Company, canceled all of his Series A Convertible Preferred stock held.

As of ~~November~~February 3028, ~~2008~~2009, 2,007,194 shares of Series A Convertible Preferred stock are issued.

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2008 (UNAUDITED)

NOTE 10 - RELATED PARTY TRANSACTIONS

During July 2008, the Company signed an agreement with Gary Paterson to provide investor relations services to the Company for a term of one month. The Company agreed to pay Paterson $4,000, $2,000 in cash, paid in arrears, and $2,000 in restricted stock at a fixed price of $0.002. During August 2008, the Company agreed to continue to pay Paterson, as per the terms of the original one month deal, on a month-to-month basis. During November 2008, the Company changed the arrangement with Paterson such that he would receive the stock component only as compensation through December 2008. During January 2009, the Company decided to terminate all payments to Gary Paterson due to the current financial and equity market conditions (See Note 12).

OnDuring ~~November~~July 152004, ~~2007,~~the ~~Mr.~~Company ~~Lonnie~~received ~~Hayward~~short ~~resigned~~term loans from its CEO, a consultant and another individual for a total of $42,000, which was used, along with Company’s available cash, to fund the ~~board~~purchase of ~~directors~~a ~~and~~50 aspercent ~~vice~~ownership ~~president~~position in a oil lease that the Company has since sold. The Company ~~has~~agreed noto ~~immediate~~repay ~~plans~~the loan amount borrowed once funding becomes available and agreed to ~~fill~~pay ~~these~~an ~~vacancies~~additional ~~(See~~20 ~~Note~~percent 3of the amount borrowed over the next 12 months. Following the closing of the $250,000 convertible debentures in August 2004, the CEO and 9)the consultant were repaid their principal amounts plus 10 percent, while the other individual declined repayment in favor of re-investing his principal and proceeds with the Company. As of the date of this filing the remaining 10 percent has not been paid.

During ~~October~~May ~~2006~~2004, the Company’s ~~Board~~borrowed ~~of Directors approved a new contract for Mr. Sheridan Westgarde, the Company’s CEO. The contract has a three-year term commencing September 1, 2006 and providing for monthly consulting fees of~~ $744,~~500, of which $6,~~000 isfrom ~~payable~~Legacy inSystems ~~cash and the remaining $1~~Corporation,~~500~~ ~~in stock for services rendered. In addition, the Board of Directors renewed the commitment, made in the previous April 1, 2003 agreement, to make the CEO~~ a ~~significant shareholder in the~~ Company ~~with~~owned aby ~~share position of 5 percent of~~ the ~~new~~former ~~authorized share volume of the Company or at Westgarde’s option, a 27 percent ownership position in the issued and outstanding shares following initial issuance to stakeholders~~CEO. ~~Additionally,~~The ~~this~~security ~~new~~for ~~contract contains a termination provision providing Mr. Westgarde a 24 month severance and a guarantee on his un-issued stock. During April 2007,~~ the ~~Board~~loan ofwas ~~Directors approved~~ the ~~issuance~~aquatic oftimber ~~1,350,000~~harvesting ~~shares~~equipment of(See ~~Series~~Notes A7 ~~Convertible Preferred stock to Sheridan Westgarde as settlement of the Company’s commitment to make Mr. Westgarde a twenty seven percent owner of the Company’s issued~~ and ~~outstanding shares, calculated following all issuances of stock to certain stake holders (See Note 9~~12).

As of March 31, 2007, approximately $137,948 was owed to Mr. Westgarde for unpaid consulting fees and $46,360 for stock loaned to the Company. During April 2007, the Board of Directors approved the issuance of 446,349 shares of Series A Convertible Preferred stock to Sheridan Westgarde as settlement of all amounts owed to Mr. Westgarde for consulting and stock Mr. Westgarde previously loaned to the Company. As of the period ended November 30, 2008, Mr. Westgarde is owed $30,000 stock (See Note 9).

During July 2004, the Company received short term loans from its CEO, a consultant and another individual for a total of $42,000, which was used, along with Company’s available cash, to fund the purchase of the 50 percent ownership position in the Prado Field lease (See Note 7). The Company agreed to repay the loan amount borrowed once funding becomes available and agreed to pay an additional 20 percent of the amount borrowed over the next 12 months. Following the closing of the $250,000 convertible debentures in August 2004, the CEO and the consultant were repaid their principal amounts plus 10 percent, while the other individual declined repayment in favor of re-investing his principal and proceeds with the Company. As of the date of this filing the remaining 10 percent has not been paid.

During May 2004, the Company borrowed $44,000 from Legacy Systems Corporation, a Company owned by the former CEO. The security for the loan was the aquatic timber harvesting equipment (See Notes 7 and 11).

NOTE 11 – SCHEDULE 14C INFORMATION STATEMENT

In March of 2008, Stockholders approved the amendment to the Company’s articles of incorporation to increase the authorized capital to 10,000,000,000 shares and change the Company name to Valor Energy Corp, to better identify with the Company’s current business focus. During March of 2008, the Company filed a revised PRER 14C information statement. The revision to the prior PRER 14C, filed in June of 2007, was due i) in response to comments received from the Securities and Exchange Commission on July 20, 2007, and August 24, 2007, ii) a new shareholder vote that took place on March 7, 2008, approving the increase in authorized shares to 10,000,000,000.

The increase in authorized shares is allowing the Company to facilitate conversion of existing convertible debt.

The Company has made certain stock commitments prior to the March 2008 increase in the authorized shares. The Company had committed 1.08% of the issued and outstanding share volume to Legacy Systems for settlement of Amounts Due (See Note 7 and 12).

2423

VALOR ENERGY CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2008~~2009 (UNAUDITED)

NOTE 12 – SUBSEQUENT EVENTS

~~During~~As ~~January~~of March 2009, the Company ~~has~~is ~~chosen~~in tonegotiations ~~cease paying Gary Paterson due~~ to restructure the ~~current~~note ~~financial~~payable ~~and~~with ~~equity~~Mr. ~~market~~Don ~~conditions~~Morgan (See Note 104).

~~Subsequent~~On April 7, 2009, Gary Ackles signed a Release document, whereby he recanted all allegations previously leveled against the Company and/or with respect to the ~~period~~TigerLynk oftechnology. ~~this~~Prior ~~report~~to these the ~~Board~~Company had purchased the technology from Ackles and subsequently sold to Hollund Industrial Robotics Inc, in an agreement dated January 2008 and amended in February, March and June of ~~Directors~~2008. ~~has~~As ~~approved~~part of that negotiation the ~~issuance~~Company ofsigned 62a “Termination & Transfer Agreement” with Hollund Industrial Inc. (“Hollund”),~~617~~ HIRS parent company,~~000 additional~~ ~~shares~~and Gary Ackles, whereby Hollund would assume all obligations to ~~four~~Gary ~~investors~~Ackles ~~upon~~for ~~the~~technology ~~conversion~~royalties ofand ~~$1,879~~stock ~~(updated~~commitments. ~~02/19/09) of~~The ~~debt~~Company ~~related~~agreed to pay Ackles $33,000 as compensation for signing the ~~notes~~agreement ~~pursuant~~and torelinquishing the ~~2004~~Company ~~Securities~~from ~~Purchase~~any ~~Agreement~~further liabilities to Ackles. WeDuring ~~relied~~July on2008 the ~~exemptions~~company ~~from~~issued ~~registration~~5,000,000 ~~afforded~~shares byas ~~Section~~partial ~~4(2)~~payment of $11,000 towards the ~~Securities~~outstanding ~~Act~~balance. ofThe ~~1933~~Release ~~and~~signed ~~Rule~~by ~~506~~Ackles ~~and~~on ~~144(k)~~April of7, ~~Regulation~~2009, Dtherefore, also provided for a payment to Ackles of $5,000 Canadian dollars, which the ~~General~~Company ~~Rules~~paid, and ~~Regulations~~Ackles ~~thereunder~~accepted, ~~for~~as releasing the ~~sale~~Company offrom ~~convertible~~any ~~notes~~further ~~and~~obligations ~~the~~to ~~issuance~~Ackles ofin ~~shares~~cash ~~upon~~or ~~conversion~~stock (See ~~Note~~Notes 83 and 4).

~~During~~On ~~January~~April 16, 2009, the Company ~~issued~~had ~~five~~not ~~convertible~~received ~~debentures~~the ofApril ~~$30~~1,~~644,~~ ~~$58,370,~~2009 ~~$64,336,~~payment ~~$118,760~~due ~~and~~from $2Hollund,~~430~~ ~~respectively,~~in ~~for~~regards anto ~~aggregate~~the purchase of ~~$274~~the Tigerlynk technology,~~540~~ inand ~~accordance~~subsequently ~~with~~informed §Hollund ~~4(2)~~by ~~and~~letter ~~Rule~~that ~~506~~they were in default under the ~~Securities~~terms ~~Act~~ of ~~1933,~~the asJanuary ~~amended.~~29, ~~These~~2009 ~~debentures~~Extension ~~were~~Agreement. ~~issued~~Hollund ~~pursuant~~also failed to make the ~~Securities~~May ~~Purchase~~1, ~~Agreement~~2009 ofpayment, ~~March~~however ~~2004~~on ~~and~~May ~~bear~~7, ~~interest~~2009, atthe 2Company ~~percent,~~received ~~due~~from onHollund a ~~quarterly~~smaller ~~basis~~payment of $15,000 and ~~are~~had ~~convertible,~~not atpursued ~~the~~any ~~investors'~~default ~~sole~~action. ~~option,~~At ~~into~~the ~~common~~date ~~shares~~of atthis 75filing ~~percent~~the ofoutstanding ~~the~~balance ~~average~~receivable ofis ~~the~~$55,000 ~~lowest~~(See ~~three~~Note ~~inter-day~~3). ~~sales~~On ~~prices~~June ~~during~~16, 2009, the ~~twenty~~Company ~~days~~issued ~~immediately~~a ~~preceding~~second ~~the~~letter ~~conversion~~to ~~date.~~Hollund ~~Proceeds~~proposing ofa ~~the~~discount ~~debentures~~incentive ~~were~~to ~~used~~encourage Hollund to pay ~~certain~~the ~~unpaid~~amount ~~interest~~in ~~that~~default. ~~had~~As ~~accrued~~of on the ~~Company’s~~date ~~outstanding~~of ~~convertible~~filing ~~debt.~~this ~~The~~agreement ~~investors~~the ofCompany ~~these~~has ~~securities~~not ~~were~~received ~~accredited~~a ~~investors~~response ~~(See~~to ~~Note~~this 8)proposal.

~~During~~Subsequent ~~January~~to ~~2009,~~ the ~~Company~~period ~~signed~~of anthis ~~Extension~~report ~~Agreement, amending~~ the ~~prior~~Board ~~agreement~~of ~~with~~Directors ~~Hollund.~~has Asapproved ~~terms~~the issuance of ~~the agreement~~228,552,700 ~~Hollund~~additional ~~will~~shares ~~pay~~to ~~the~~four ~~Company~~investors upon the ~~balance~~conversion of ~~the~~$6,857 ~~amount~~of ~~owed~~debt onrelated to the ~~purchase~~notes ofpursuant ~~Tigerlynk,~~to ~~plus~~the ~~$15,000~~2004 inSecurities ~~cash,~~Purchase ~~payable~~Agreement. inWe 3relied ~~payments~~on ~~specifically~~the asexemptions ~~follows;~~from i)registration ~~$25,000~~afforded ~~due~~by ~~February~~Section 4(2~~, 2009, ii~~) ~~$25,000~~of ~~due~~the ~~April~~Securities 2,Act ~~2009~~of 1933 and ~~iii)~~Rule ~~$45,000~~506 ~~due~~and ~~May~~144(k) 2,of ~~2009.~~Regulation InD ~~the event~~ of ~~default~~the ~~upon~~General ~~new~~Rules ~~payment~~and ~~terms,~~Regulations ~~Hollund~~thereunder ~~will~~for ~~risk~~the ~~forfeiture~~sale of ~~all~~convertible ~~rights~~notes ~~title~~ and ~~interest~~the toissuance ~~Tigerlynk,~~of atshares ~~the~~upon ~~Company’s~~conversion ~~discretion~~(See Note 8).

25On May 11, 2009, the Company Board of Directors approved the issuance of 4,466,233 common shares, bearing restrictive legend, to Legacy Systems Corp. The shares issued were to satisfy the terms of the October 23, 2006 agreement (See Note 7).

During May 2009, our joint-interest partner, New Century Energy Corp, completed a plan of reorganization under US Bankruptcy, that resulted in a new company, NCEY Holdings Corp (“NCEY”), assuming all joint-interest rights to the Sargent South Field, Hamill and Hamill lease previously held be New Century, as well as assuming all rights and obligations of our March 2004 Joint Operating Agreement.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS:

This report contains forward looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those set forth under "Risk Factors" in this Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report. The following discussion and analysis should be read in conjunction with "Selected Financial Data" and the Company's financial statements and notes thereto included elsewhere in this report.

PLAN OF OPERATIONS

VALOR ENERGY CORP. ("Valor ”, “the Company" or “VLRN”) is a Nevada Corporation originally organized as Aquatic Cellulose Ltd. ("ACL") and was incorporated in March of 1996. During April 2008, the Company changed its name from Aquatic Cellulose International Corp to Valor Energy Corp. Valor is an independent oil and gas investment, development and production company, engaged in the acquisition and development of crude oil and natural gas reserves and production initially in the state of Texas of the United States. Valor’s head office is located in Salmon Arm, British Columbia, Canada.

The Company owns a 20 percent working interest and a 16 percent net revenue interest in the Sargent South Field, Hamill & Hamill lease, a 3,645-acre natural gas producing property located in Matagorda County, Texas. The Company’s interest applies to all depths from surface to 7000 feet, with the exception of three currently non-producing wells, number 19, 14 and 1-R, of which the Company has no interest in. During September of 2006, the Company expanded its South Sargent interests by acquiring the same working interest percentage in 4 State leases contiguous with the Company’s existing acreage and extending 1,610 acres into the off-shore Gulf of Mexico. These 4 leases have a five year term and expire on April 4, 2011, pending production

2625

development. All of the Company’s South Sargent interests, both onshore and offshore, are subject to our Joint Operating Agreement. ~~with~~During May 2009, our original joint-interest partner, New Century Energy Corp, completed a plan of reorganization under US Bankruptcy, that resulted in a new company, NCEY Holdings Corp (“NCEY”), assuming all rights and obligations of our March 2004 Joint Operating Agreement, as well as assuming all joint-interest rights to the Sargent South Field, Hamill and Hamill lease as previously held be New Century Energy Corp.

Valor plans to grow its business by investing in acquisitions, development, and production and sale of natural gas and crude oil, while also investigating opportunities for investment in alternative energy production. Valor plans to further expand its investments and cash flow by capitalizing on modern technological developments in the area of oil and gas production development. New technology since the development of the computer industry has allowed for better identification of by-passed reserves in previously discovered oil and gas fields. Geological analysis using “Direct Hydrocarbon Indicator” (DHI) tools and methods, as well as improved 3D seismic data processing have been successfully used to enhance and revitalize previously developed and currently developed oil and gas producing sites.

Valor’s overall goal is to maximize corporate value through profitable growth in our oil and gas reserves. This will be achieved through balanced portfolio consisting of;

Development of existing production wells.

Application of new technology to historically producing reservoirs targeting significant by-passed reserves.

Acquisitions of producing reserves.

Acquisitions of working production interests and royalties.

Acquisitions of alternative energy production interests.

OIL AND GAS ACTIVITIES

- SARGENT SOUTH FIELD (ON-SHORE), MATAGORDA COUNTY, TEXAS

The Company acquired 20% of the working interest in the Sargent South Field from Century Resources Inc in March 2004. The Sargent South Field is located onshore in Matagorda County, Texas, east of Matagorda Bay. The leasehold is approximately 3,645 acres.

At present, the Company receives revenue from two producing wells on the Hamill Lease; Hamill #2, and Hamill #17, with daily production in excess of approximately ~~1,300~~791 MCF of gas per day (MCFGPD), however, the Company can provide no assurances that the current completions will continue to produce at this rate, if at all.

The Hamill Lease development benefits from a license to a 10 square mile 3-D seismic survey ("3-D") that was acquired by ~~Century~~NCEY. This 3-D seismic survey is currently being used in the development planning of the property and new drilling locations have already been identified for drilling in 2009 and 2010. The process of interpreting the 3-D ~~data will be an ongoing, with results from any new wells being integrated into the interpretation.~~

data will be an ongoing, with results from any new wells being integrated into the interpretation.

We continue to participate in an ongoing workover and recompletion project that has been underway in the Sargent South Field since January of 2005.

27During November 2007 and again in September 2008 the Hamill #17 well was worked over. The well was gravel packed to stop production of formation sand. The well was restored and currently produces gas from perforations in a stray sand at 5,630 feet at the rate of 241 MCF per day on a 9/64 inch choke with a flowing tubing pressure of 480 psi.

During November 2007 and again in September 2008 the Hamill #17 well was worked over. The well was gravel packed to stop production of formation sand. The well was restored and currently produces gas from perforations in a stray sand at 5,630 feet at the rate of 695 MCF per day on a 9/64 inch choke with a flowing tubing pressure of 700 psi.

During March of 2008, the Company assigned all rights to Hamill #14 well, to all depths, to Century Resources Inc, in exchange for approximately $95,000 in recompletion costs associated with the well. The Company retained a “back-in” right should production be established above 7,000 feet. To execute on this right to back-in, the Company would be required to pay its 20% share of all unpaid prior and new recompletion costs.

In March 2004, the Hamill #10 well, a shut-in well on the lease, was recompleted with established production in the 3,345 foot sand. During August 2007, workover operation commenced on the Hamill #10 well after the well ceased producing gas during August 2007. This well is currently shut-in and being evaluated for possible recompletion.

During third quarter of 2007, the Hamill #2 well was shut in and the well was cleaned out in November 2007. The well is currently producing at the rate of approximately ~~630~~550 MCF per day on ana 10/64 inch choke, with a flowing tubing pressure of ~~600~~480 psi.

The Hamill #11 well is currently shut-in.

- SARGENT SOUTH OFFSHORE

On September 18, 2006 the Company paid to New Century its 20 percent pro-rata share, totaling $68,634 for 1,610 acres State of Texas oil and gas leases in the offshore area of Matagorda County, Texas. Four new leases totaling 1,610 acres have been acquired by the Company, and this acreage is contiguous with our onshore Sargent South Field acreage. The new leases are subject to our Joint Operating Agreement with ~~New~~NCEY ~~Century~~Holdings ~~Energy~~ Corp and have a term of five years and expire on April 4, 2011. As yet, there have been no drilling activities commenced on these leases.

- BROOKSHIRE DOME FIELD AREA

The Company previously had a fifty percent (50%) working interest participation in oil and gas leases comprised by the twenty five acre Isaac Holliday tract in the William Cooper Survey in Waller County, Texas (Brookshire Dome Field Area). During the period ended May 31, 2008, the Company had written down the value of its Brookshire interests, on the grounds that the leases have expired and the Company does not intend to pursue the development any further.

2827

Cooper Survey in Waller County, Texas (Brookshire Dome Field Area). During the period ended May 31, 2008, the Company had written down the value of its Brookshire interests, on the grounds that the leases have expired and the Company does not intend to pursue the development any further.

SUMMARY OF OBJECTIVES

The short-term objectives of Valor are to achieve successful growth in the two focus areas of the Company’s business plan. They are as follows:

OIL AND NATURAL GAS RESERVES AND REVENUE:

Development of its current working interest in the Sargent South Field in Matagorda County Texas. Development of its current working interest in the Sargent South Field Offshore acreage, also located in Matagorda County Texas.

Identifying acquisition targets for future development and additional growth.

Valor’s long-term objectives are as follows:

Develop a balanced investment portfolio of oil and natural gas producing properties and, eventually, exploration of undeveloped project with potential for high rate of return in production proceeds and reserves.

OUTLOOK

Over the next twelve months, management believes that existing cash flows from the Sargent South lease production will be sufficient to meet the Company’s cash commitments as they become payable. A more detailed discussion of the Company’s liabilities and management’s opinions regarding those liabilities is as follows:

Our objective in 2009 and on into 2010 is to continue to use our cash flows from operations to meet our operating expenses and working capital requirements. In the past the revenue generated from the sale of our proportionate share of natural gas from the Sargent South lease has been sufficient to pay the Company’s share of lease operating expenses and most of the Company’s general operating expenses. As of the filing of this report, natural gas prices have experienced dramatic declines since mid 2008. Management can provide no guarantees as to the future price and believe that further volatility should be expected. Should the price of natural gas continue to fall it will severely impact our ability to maintain current levels of operations and would likely result in us having to curtail existing operations.

We have successfully used loans from private investors, Company officers, as well as cash raised from the sale of working interests, to pay for capital improvements to the Sargent South leases. Through the issuance of preferred stock for debt we have been able to reduce the demand for cash that would otherwise be needed to pay these notes.

The Company has a substantial amount of debt in the form of convertible debentures. Since our increase in our authorized shares in March of 2008, we have been able to execute conversions of debt for common shares in accord with the terms of our notes. Making these conversions has allowed us to avoid being defaulted on these notes, an action which would likely result in the note holders seeking relief by exercising their first priority interest in the Company’s assets, and, in all likelihood, resulting in the discontinuation of our operations. In making these conversions however, the volume of stock in our market has placed downward pressure on the market price of our stock. Since the reduction of our debt upon each conversion is based on a discount to the market price of the stock and the stock price has been low, the interest on the notes has been greater than the amount of debt relinquishment we have experience on the conversions. Since the Company does not have sufficient cash to pay these notes and the debt continues to grow, our ability to use equity to make acquisitions and raise capital has been restricted. The convertible debt also contains freestanding embedded derivatives which result in the recording of derivative liabilities on the Company’s balance sheet that significantly exceed our ability to pay with cash. Because these derivative liabilities are calculated on a quarterly basis and based on the market price of the Company’s stock, our financial condition and results of operations are subject to high volatility.

We ~~plan~~are tocurrently ~~solve~~focused ~~these~~on ~~issues~~identifying ~~by working to gain control of our debt by either i) increasing~~ the ~~market~~options ~~price~~available ofto ~~our~~us ~~stock~~that orwould ~~ii)~~allow ~~agreeing~~us to ~~some~~continue ~~form of restructure~~ to ~~our~~expand ~~convertible~~and ~~debt~~grow oroperations aand ~~combination~~service ofour ~~both approaches~~debt. By solving the issues surrounding our debt we believe that this will ~~allow~~enhance usour ability to use equity positions as incentive for attracting and paying professionals, as well as sell additional shares for cash to help us execute and finance our business plan. Though no plans exist at this time, we may in the future use equity as payment for mergers and acquisitions. Such issuances of additional Company stock will have a dilutive effect on common stock holders.

As of ~~November~~February 3028, ~~2008~~2009, the Company is utilizing two employees, ~~under contract,~~ to manage 100 percent of the administration and business development.

Results Of Operations

For the Three-Month Ended ~~November~~February 3028, ~~2008~~2009 Compared to ~~November~~February 3028, ~~2007~~2008

The Company recognized revenues, including its equity interest in Sargent South lease in the amount of $6924,~~621~~883 for the three-months ended ~~November~~February 3028, ~~2008~~2009, compared with $21147,~~713~~506 for the three-months ended ~~November~~February 3028, ~~2007~~2008. The ~~increase~~decrease in revenue is primarily due to ~~increased~~significant ~~production,~~decrease ~~the overall increases~~ in the selling price of ~~our~~ natural gas combined with ~~receipts~~decrease ~~from~~in ~~the~~production ~~sale~~during ofthe ~~TigerLynk~~three ~~(See~~month ~~Note 3 – Notes to Consolidated Financial Statements)~~period.

Operating expenses for the three-months ended November 30, 2008 and 2007 were $123,501 and $141,036, respectively, for a decrease of $17,535 or 12%. The decrease was attributable to a decrease in selling, general and administrative expenses of $23,914 and an increase of $6,379 in depreciation and depletion in connection with increased production from the Sargent South lease. The Company expects to incur costs 29

30Operating expenses for the three-months ended February 28, 2009 and 2008 were $128,045 and $338,805, respectively, for a decrease of $210,760 or 62%. The decrease was attributable to a decrease in selling, general and administrative expenses of $71,118 and a decrease of $139,642 in depreciation and depletion in connection with decreased production from the Sargent South field. The Company expects to incur costs relating to the improvement and development of the Sargent South field, as well as working interest acquisitions (See Note 5 - Notes to Consolidated Financial Statements).

~~relating~~For to the ~~improvement~~Nine-Month ~~and~~Ended ~~development~~February ~~of the Sargent South field~~28, as2009 ~~well~~Compared ~~as working interest acquisitions (See Notes 5 - Notes~~ to ~~Consolidated~~February ~~Financial~~28, ~~Statements).~~2008

~~For~~The Company recognized revenues, including its equity interest in Sargent South lease in the ~~Six~~amount of $337,935 for the nine-~~Month~~months ~~Ended~~ended ~~November~~February 3028, 2009, compared with $210,795 for the nine-months ended February 28, 2008. ~~Compared~~The increase in revenue is primarily due to ~~November~~the ~~30,~~significant ~~2007~~increase in the selling price of our natural over the same period of the previous year.

~~The~~Operating ~~Company~~expenses ~~recognized~~for ~~revenues~~the six-months ended February 28, ~~including~~2009 ~~its~~and ~~equity~~2008 ~~interest~~were in$456,165 ~~Sargent~~and ~~South~~$596,505, ~~lease~~respectively, infor ~~the~~a ~~amount~~decrease of $~~327~~140,~~779~~340 ~~for~~or ~~the~~24%. ~~six-months~~The ~~ended~~decrease ~~November~~was ~~30,~~attributable ~~2008,~~to ~~compared~~an ~~with~~decrease ~~$63~~in selling,~~289~~ ~~for~~general ~~the~~and ~~six-months~~administrative ~~ended~~expenses ~~November~~of 30$56,565 ~~2007.~~and ~~The~~a ~~increase~~decrease of $83,775 in ~~revenue~~depreciation isand ~~primarily~~depletion ~~due~~in toconnection ~~increased~~with decreased production, from the ~~overall~~Sargent ~~increases~~South inlease. ~~the~~The ~~selling~~Company ~~price~~expects ofto ~~our~~incur ~~natural~~costs ~~gas~~relating ~~combined~~to ~~with~~the ~~receipts~~improvement ~~from~~and development of the ~~sale~~Sargent ofSouth ~~TigerLynk~~field, as well working interest acquisitions (See Note ~~3 and~~ 5 –- Notes to Consolidated Financial Statements).

Operating expenses for the six-months ended November 30, 2008 and 2007 were $328,120 and $257,700, respectively, for an increase of $70,420 or 27%. The increase was attributable to an increase in selling, general and administrative expenses of $14,553 and an increase of $55,867 in depreciation and depletion in connection with increased production from the Sargent South lease. The Company expects to incur costs relating to the improvement and development of the Sargent South field, as well working interest acquisitions (See Notes 5 - Notes to Consolidated Financial Statements).

Liquidity and Capital Resources

Net cash provided by (used in) operating activities for the three-months periods ended ~~November~~February 3028, ~~2008~~2009 and ~~November~~February 3028, ~~2007~~2008 was $~~126~~155,~~398~~146 and ($1810,~~029~~655), respectively, for an increase in cash provided by operating activities of $~~108~~165,~~369~~801. During the ~~six~~nine-month periods ended ~~November~~February 3028, ~~2008~~2009, and ~~November~~February 3028, ~~2007~~2008, the Company funded its operations primarily by means of revenue.

Net cash provided by (used in) investment activities for the ~~six~~nine-month ended ~~November~~February 3028, ~~2008~~2009 and ~~November~~February 3028, ~~2007~~2008 was $3340,~~615~~424 and ($~~140~~125,~~667~~666) respectively. The difference in cash provided by investment activity between ~~2008~~2009 and ~~2007~~2008 was due primarily to ~~proceeds from the sale of Tiger-Lynk combined with~~ a reduction in the ~~amount~~investment ~~invested~~ in ~~the~~ Sargent South ~~lease~~field (Hamill Lease). (See Note ~~3 and~~ 5 – Notes to Consolidated Financial Statements).

Net cash ~~used~~provided inby financing activities was ($26,788) and $6089,~~683~~163 for the ~~six~~nine-month ended ~~November~~February 3028, ~~2008~~2009 and ~~2007~~2008, respectively.

During Oct 2007, the Company received a zero interest bearing loan of $75,680 from Mr. Don Morgan. The company agrees to repay the principal plus an additional $75,000 over three years. During the period ended ~~November~~February 3028, ~~2008~~2009 there was principal payments made of $1924,500 (See Notes 4 and 12 - Notes to Consolidated Financial Statements).

~~For the period ended November~~ 30~~, 2008, cash was raised by operating activities and collections on notes receivable. For the period ended November 30, 2007, cash was raised by the issuance of debt.~~

31For the period ended February 28, 2009 and February 28, 2007, cash was raised by operating activities and collections on notes receivable.

At ~~November~~February 3028, ~~2008~~2009 the Company had cash of $~~172~~195,~~586~~204 and total current assets of $~~272~~277,~~509~~653.

As of ~~November~~February 3028, ~~2008~~2009, the Company had a working capital deficiency of $1112,~~528~~351,~~686~~615 and an accumulated deficit of $17,~~620~~949,~~111~~696. Over the next twelve months, management is confident that sufficient working capital will be obtained from a combination of revenue and external financing to meet the Company's cash commitments as they become payable. The Company has in the past successfully relied on private placements of common stock, loans from private investors, sale of assets and the exercise of common stock warrants, in order to sustain operations. The Company has completed the increase in the total number of its authorized shares to provide for the conversion of debentures for equity, use equity positions as incentive for attracting professionals, payment of professionals, sell additional shares for cash and potentially use equity as payment for mergers and acquisitions (See Note 11 - Notes to Consolidated Financial Statements). There can be no assurance that management plans will be successful. Failure to obtain sufficient working capital from external financing will cause the Company to curtail its operations.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to financing of operations and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of the Company's financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, primarily the valuation of its investments, the use of estimates for natural gas reserve information and the realization of net operating loss and tax credit carry-forwards. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in our Annual Report on Form 10-KSB for the fiscal year ended May 31, 2008.

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Mr. Sheridan B. Westgarde, the principal executive officer and principal financial officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the end of the period covered by this report. Based on this evaluation, Mr. Westgarde concluded that during the period of this report our disclosure controls and procedures were not effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i.) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding disclosure. As part of our management’s assessment of internal controls over financial reporting as of May 31, 2008, we identified material weaknesses in our internal controls which we viewed as an integral part of our disclosure controls and procedures. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. The material weaknesses, identified below, as of ~~November~~February 3028, ~~2008~~2009 have not been remediated.

In connection with the preparation of our financial statements for the year ended May 31, 2008, certain internal control weaknesses became evident to Mr. Westgarde, that, in the aggregate, represent material weakness, including;

(i) lack of segregation of incompatible duties;

(ii) Insufficient Board of Directors representation.

(iii) Excessive unrecorded adjustments

As part of the communications by Peterson Sullivan, LLP, or Peterson Sullivan, with Mr. Westgarde, our sole director and chief executive officer, with respect to Peterson Sullivan’s audit procedures for fiscal 2008, Peterson Sullivan informed Mr. Westgarde that these deficiencies constituted material weaknesses, as defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is integrated with an Audit of Financial Statements,” established by the Public Company Accounting Oversight Board, or PCAOB.

In accordance with Section 404 of the Sarbanes-Oxley Act of 2002, we intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies as our resources allow. We intend to consider the results of our remediation efforts and related testing as part of our on-going assessment of the effectiveness of our internal control over financial reporting in future periods.

Changes in internal controls

~~During the period covered by this report there have been no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our~~ 32

33During the period covered by this report there have been no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended February 28, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

internal controls over financial reporting that occurred during the quarter ended November 30, 2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On December 12, 2008, the Company received a letter from Horsepower Intellectual Property Law (“Horsepower”) informing that Mr. Gary Ackles ~~had~~was ~~acted~~attempting to rescind all of the technology rights as defined in the October 17, 2006 Technology Purchase and Sale Agreement (“Agreement”). Mr. Ackles based his claim on an allegation that Aquatic Cellulose International Corp (the Company’s former name ~~at the time of the transaction~~) was in violation of the Agreement by failing to pay Ackles a final cash payment ~~due upon signing~~ of $40,000 due upon signing. On December 22, 2008, the Company retained the services of Doak Sheriff LLP (“Doak Sheriff”)of Kelowna, British Columbia, Canada, to respond to this allegation that the Company ~~considers~~considered false and potentially damaging to its existing agreement to sell this technology to Hollund Industrial Robotics Systems Inc. (See Item 5.). On December 29, 2008, Doak Sheriff delivered a letter to Horsepower on behalf of the Company denying the allegation and including as exhibits to the letter copies of the Company’s bank records confirming the payment made to Ackles account and an acknowledgment letter signed by Ackles at the time of the transaction confirming that he had received the payment. The letter also informed Horsepower that the Company may only consider the matter closed upon Ackles completing the transfer of the Patents into the name of the Company. AsOn April 7, 2009, Gary Ackles signed a Release document, whereby he recanted all allegations he made against the Company and/or with respect to the Technology. Prior to these events the Company had concluded an agreement with Hollund Industrial Robotics Inc, (“HIRS”) dated January 2008 and amended in February, March and June of 2008, for the ~~date~~sale of ~~this~~the ~~filing~~Tigerlynk robotic manipulator technology. As part of that negotiation the Company issigned ~~considering~~a ~~legal~~“Termination ~~action~~& Transfer Agreement” with Hollund parent company, Hollund Industrial Inc. (“Hollund”) and Gary Ackles whereby Hollund would assume all obligations to ~~recover~~Gary ~~expenses~~Ackles for technology royalties and ~~potential~~stock ~~damages~~commitments. ~~incurred~~The Company agreed to pay Ackles $33,000 as compensation for signing the agreement and relinquishing the Company from any further liabilities to Ackles. During July 2008 the company issued 5,000,000 shares as partial payment of $11,000 towards the outstanding balance. The Release signed by Ackles on April 7, 2009, therefore, also provided for a ~~result~~payment to Ackles of ~~these~~$5,000 ~~actions~~Canadian dollars, which the Company paid, and Ackles accepted, as releasing the Company from any further obligations to Ackles in cash or stock (See Notes 3, 4 and 12 - Notes to Consolidated Financial Statements).

During November 2008, the Company engaged the firm of Adams & Reese LLP, to act as representation for the Company in the State of Texas. The engagement is not related to any involvement by the Company in legal proceedings, but rather is for the purpose of monitoring of the bankruptcy proceedings of the Company’s joint interest partner, New Century Energy Corp. During May 2009, our original joint-interest partner, New Century Energy Corp, completed a plan of reorganization under US Bankruptcy, that resulted in a new company, NCEY Holdings Corp (“NCEY”), assuming all joint-interest rights to the Sargent South Field, Hamill and Hamill lease previously held be New Century . The Company’s assets and operations have currently not been affected and are not expected to be affected by the completion of the plan of reorganization.

ITEM 2. UNREGISTER SALE OF EQUITY AND USE OF PROCEEDS

~~None~~During the nine-month period of this report the Board of Directors approved the issuance of 189,747,800 shares to four investors upon the conversion of $16,337 of debt related to the notes pursuant to the 2004 Securities Purchase Agreement. We relied on the exemptions from registration afforded by Section 4(2) of the Securities Act of 1933 and Rule 506 and 144(k) of Regulation D of the General Rules and Regulations thereunder for the sale of convertible notes and the issuance of shares upon conversion (See Note 8 - Notes to Consolidated Financial Statements).

~~RECENT~~Subsequent ~~SALES~~to OFthe ~~UNREGISTERED~~period ~~SECURITIES~~of this report the Board of Directors has approved the issuance of 228,552,700 shares to four investors upon the conversion of $6,857 of debt related to the notes pursuant to the 2004 Securities Purchase Agreement. We relied on the exemptions from registration afforded by Section 4(2) of the Securities Act of 1933 and Rule 506 and 144(k) of Regulation D of the General Rules and Regulations thereunder for the sale of convertible notes and the issuance of shares upon conversion (See Note 8 - Notes to Consolidated Financial Statements).

During December 2008, the ~~six-month~~Company ~~period~~issued five convertible debentures of ~~this~~$30,644, ~~report~~$58,370, ~~the~~$64,336, ~~Board~~$118,760 ofand ~~Directors~~$2,430 ~~approved~~respectively, ~~the~~for ~~issuance~~an aggregate of ~~114~~$274,~~136,600~~540 ~~shares~~in toaccordance ~~four~~with ~~investors~~§ ~~upon~~4(2) and Rule 506 under the ~~conversion~~Securities Act of ~~$14~~1933,~~134~~ ofas ~~debt~~amended. ~~related~~These todebentures ~~the~~were ~~notes~~issued pursuant to the ~~2004~~ Securities Purchase Agreement of March 2004 and bear interest at 2 percent, due on a quarterly basis, and are convertible, at the investors' sole option, into common shares at 75 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date. WeProceeds ~~relied~~of the debentures were used to pay certain unpaid interest that had accrued on the Company’s outstanding convertible debt. The investors of these securities were accredited investors (See Note 8 – Notes to Consolidated Financial Statements).

~~exemptions~~percent, ~~from~~due ~~registration~~on ~~afforded~~a byquarterly ~~Section~~basis, ~~4(2)~~and ofare convertible, at the ~~Securities~~investors' ~~Act~~sole ofoption, ~~1933~~into ~~and~~common ~~Rule~~shares ~~506~~at ~~and~~30 ~~144(k)~~percent of ~~Regulation~~the Daverage of the ~~General~~lowest ~~Rules~~three ~~and~~inter-day ~~Regulations~~sales ~~thereunder~~prices ~~for~~during the ~~sale~~twenty days immediately preceding the conversion date. Proceeds of ~~convertible~~the ~~notes~~debentures ~~and~~were used to pay certain unpaid interest that had accrued on the ~~issuance~~Company’s outstanding convertible debt. The investors of ~~shares~~these ~~upon~~securities ~~conversion~~were accredited investors (See Note 8 -– Notes to Consolidated Financial Statements).

~~Subsequent~~On toMay ~~the~~11, ~~period~~2009, ~~of this report~~ the Company Board of Directors ~~has~~ approved the issuance of 624,~~617~~466,~~000~~233 common shares, tobearing ~~four~~restrictive ~~investors upon the conversion of $1~~legend,~~879~~ ~~(update prior~~ to ~~filing)~~Legacy ofSystems ~~debt~~Corp. ~~related~~The toshares ~~the~~issued ~~notes~~were ~~pursuant~~ to ~~the~~satisfy ~~2004 Securities Purchase Agreement. We relied on~~ the ~~exemptions~~terms ~~from registration afforded by Section 4(2)~~ of the ~~Securities~~October ~~Act~~23, of2006 ~~1933~~agreement ~~and Rule 506 and 144~~(k)See ofNote ~~Regulation~~7 ~~D of the General Rules~~ and ~~Regulations thereunder for the sale of convertible notes and the issuance of shares upon conversion (See~~ Note 812 -– Notes to Consolidated Financial Statements).

~~Subsequent~~On toMay ~~the~~12, ~~period of this report and during January~~ 2009, the Company ~~issued~~Board ~~five convertible debentures~~ of ~~$30,644,~~Directors ~~$58,370,~~approved ~~$64,336, $118,760 and $2,430 respectively, for an aggregate of $274,540 in accordance with § 4(2) and Rule 506 under~~ the ~~Securities~~issuance ~~Act~~ of ~~1933~~33, ~~as amended. These debentures were issued pursuant to the Securities Purchase Agreement of March 2004 and bear interest at 2 percent~~666,667 ~~due~~common ~~on a quarterly basis~~shares, ~~and~~bearing ~~are~~restrictive ~~convertible~~legend, atto ~~the~~Mr. ~~investors'~~Gary ~~sole option~~Paterson, ~~into~~for ~~common~~services ~~shares~~rendered ~~at 75 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date. Proceeds of the debentures were used~~ to ~~pay certain unpaid interest that had accrued on~~ the Company’s ~~outstanding~~from ~~convertible~~July ~~debt.~~2008 ~~The~~thru ~~investors~~to ofDecember ~~these~~2008 ~~securities were accredited investors~~ (See Note 810 – Notes to Consolidated Financial Statements).

On January 31, 2008, Valor issued three convertible debentures of $55,657, $48,302 and $123,109 respectively, for an aggregate of $227,068 in accordance with § 4(2) and Rule 506 under the Securities Act of 1933, as amended. These debentures were issued pursuant to the Securities Purchase Agreement of March 2004 and bear interest at 2 percent, due on a quarterly basis, and are convertible, at the investors' sole option, into common shares at 30 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date. Proceeds of the debentures were used to pay certain unpaid interest that had accrued on the Company’s outstanding convertible debt. The investors of these securities were accredited investors (See Note 8 – Notes to Consolidated Financial Statements).

On May 30, 2008, Valor issued four convertible debentures of $247,440, $144,175, $147,503 and $258,722 respectively, for an aggregate of $797,840 in accordance with § 4(2) and Rule 506 under the Securities Act of 1933, as amended. These debentures were issued pursuant to the Securities Purchase Agreement of March 2004 and bear interest at 2 percent, due on a quarterly basis, and are convertible, at the investors' sole option, into common shares at 25 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date. Proceeds of the debentures were used to pay certain unpaid interest that had accrued on the Company’s outstanding convertible debt. The investors of these securities were accredited investors (See Note 8 – Notes to Consolidated Financial Statements).

On May 30, 2008, the Company and the holders of the Company’s convertible notes agreed to amend all outstanding convertible notes. The amendment replaces all references to “fixed conversion price” and replaces them with the term “variable conversion price”. The conversion price is calculated as 25 percent of the average of the lowest three inter-day sales prices during the twenty days immediately preceding the conversion date (See Note 8 - Notes to Consolidated Financial Statements).

During June 2008, the Company reached a settlement with Richard Smith of Falls Church, Virginia. Smith claimed that he had used shares previously held by him to pay for certain promotional services rendered to the Company by Novak Capital of Seattle Washington. As a result, during June 2008, the Company issued 6,000,000 restricted shares to Mr. Smith to settle his claim (See Note 9 – Notes to Consolidated Financial Statements).

As part of the agreement reached with Hollund Industrial Robotics Inc during January 2008 and amended in February, March and June of 2008, the Company signed a “Termination & Transfer Agreement” with Hollund and Gary Ackles. The agreement stipulates that Hollund will assume all obligations to Gary Ackles for technology royalties and stock commitments. Additionally, the Company agreed to pay Ackles $33,000 as compensation for signing the agreement and relinquishing the Company from any further liabilities to Ackles. During July 2008 the company issued 5,000,000 shares as partial payment of $11,000 towards the outstanding balance. This left a balance remaining of $22,000 and is included in Notes Payable of the consolidated financial statements (See Notes 3 and 4 - Notes to Consolidated Financial Statements).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES:

None.

ITEM 4. SUBMISSION OF MATTERS OF A VOTE TO SECURITY HOLDERS

In March of 2008, Stockholders approved the amendment to the Company’s articles of incorporation to increase the authorized capital to 10,000,000,000 shares and change the Company name to Valor Energy Corp, to better identify with the Company’s current business focus. During March of 2008, the Company filed a revised PRER 14C information statement. The revision to the prior PRER 14C, filed in June of 2007, was due i) in response to comments received from the Securities and Exchange Commission on July 20, 2007, and August 24, 2007, ii) a new shareholder vote that took place on March 7, 2008 approving the increase in authorized shares to 10,000,000,000 (See Note 11 - Notes to Consolidated Financial Statements).

ITEM 5. OTHER INFORMATION

During October of 2006 the Company acquired all rights, title and interest to the patented Tiger•Lynk underwater manipulator system. During January 2008, and amended in February, March and June 2008, the Company signed an agreement to sell all rights, title and interest in the Tiger-Lynk technology to Hollund Industrial Robotics Systems Inc, a privately held Canadian company (HIRS). The agreement with HIRS includes the mechanical arm assembly stored at the Company's participating manufacturing facility in Kamloops British Columbia. Terms of the sale were amended in a Letter Agreement dated February 20, 2008. Those terms include the Company being relinquished of all prior commitments in royalties and stock, made to Gary Ackles, and the Company receiving $314,000 from HIRS, comprised of $64,000 in deposits already paid and 10 equal payments of $25,000, commencing March 1, 2008 and finishing December 1, 2008. Additionally, the terms of the sale include Mr. Lonnie Hayward, a principal of HIRS, and former Director of the Company, agreeing to relinquish to the Company all common and/or preferred stock held by him at the time of the transaction. In the event of default on the payment terms all rights acquired by HIRS per the agreement shall terminate at the discretion of the Company (See Notes 3 - Notes to Consolidated Financial Statements).

receiving $314,000 from HIRS, comprised of $64,000 in deposits already paid and 10 equal payments of $25,000, commencing March 1, 2008 and finishing December 1, 2008. Additionally, the terms of the sale include Mr. Lonnie Hayward, a principal of HIRS, and former Director of the Company, agreeing to relinquish to the Company all common and/or preferred stock held by him at the time of the transaction. In the event of default on the payment terms all rights acquired by HIRS per the agreement shall terminate at the discretion of the Company (See Notes 3 - Notes to Consolidated Financial Statements).

During March 2008, the Company agreed to an Addendum to the Letter Agreement with Hollund Industrial Robotics Inc. (HIRS), dated February 20, 2008. The addendum sets out the arrangement whereby, the Legacy Investment Club would receive 750,000 shares of common stock of Hollund Industries Inc (parent company of HIRS and traded on the “PinkSheets” trading system). The Company agreed to accept this arrangement as settlement of the March 1, 2008 payment of $25,000 due as per the Purchase and Sale agreement with Hollund (See Note 3 - Notes to Consolidated Financial Statements). Legacy Investment Club agreed to accept the stock as settlement of amounts owed to them by the Company (See Note 3 - Notes to Consolidated Financial Statements).

During June 2008, the Company agreed to an additional amendment to its agreement dated January 20, 2008, as amended February 20, 2008, with Hollund Industrial Robotics Inc. whereby the amounts receivable of $205,100, as of May 31, 2008, was reduced to $140,000. Additionally, the terms of payment were amended to; $30,000 due July 15, 2008, $30,000 due September 15, 2008 and the remainder of $80,000 will be paid in three payments due on the first day of December 2008, January 2009 and February 2009. The terms of this amendment included Hollund no longer being in default of the agreement with new terms of default stipulating that as long as Hollund makes the July and September 2008 payments in a timely fashion the Company will waive its right to act upon any further payment default until February 2, 2009. On January 29, 2009, the Company signed an Extension Agreement with Hollund whereby Hollund agreed to pay Valor the balance of the $80,000 left unpaid on the purchase of Tigerlynk and $15,000 in unpaid consulting services rendered to Hollund regarding the on-going development of the TigerLynk system. As per the terms of the Extension agreement Hollund paid $25,000 on or before February 1, 2009, and committed to pay the balance remaining in two additional payments; a $25,000 payment on April 1, 2009, and the last payment of $45,000 on May 1, 2009. The agreement further clarified that any default of the terms of this latest Extension agreement would allow for the Company to rescind the Technology purchase, as provided under the terms of the original Purchase and Sale Agreement dated January 20, 2008. On April 1, 2009, Hollund failed to make the required payment resulting in the Company providing a letter dated April 16, 2009, informing Hollund of the default condition. On May 1, 2009, Hollund failed to make the required payment. On May 7, 2009, Hollund made a payment of $15,000, leaving a balance outstanding of $55,000. The Company has not taken any action regarding the default on the payments (See Note 3 and 12 - Notes to Consolidated Financial Statements).

37During July 2008, the Company signed an agreement with Gary Paterson to provide investor relations services to the Company for a term of one month. The

three payments due on the first day of December 2008, January 2009 and February 2009. The terms of this amendment included Hollund no longer being in default of the agreement with new terms of default stipulating that as long as Hollund makes the July and September 2008 payments in a timely fashion the Company will waive its right to act upon any further payment default until February 2, 2009. As of the date of this filing the Company has not received the full amount of the September 15, 2008 payment, nor the December 1, 2008, or January 1, 2009 payments (See Note 3 - Notes to Consolidated Financial Statements).36

~~During July 2008, the~~ Company ~~signed an agreement with Gary Paterson to provide investor relations services to the Company for a term of one month. The Company~~ agreed to pay Paterson $4,000, $2,000 in cash, paid in arrears, and $2,000 in restricted stock at a fixed price of $0.002. During August 2008, the Company agreed to continue to pay Paterson, as per the terms of the original one month deal, on a month-to-month basis. During November 2008, the Company changed the arrangement with Paterson such that he would receive the stock component of the compensation thru December 2008. During January 2009, the Company has chosen to cease paying Mr. Paterson due to the current financial and equity market conditions (See Notes 10 and 12 - Notes to Consolidated Financial Statements).

ITEM 6.

EXHIBITS AND REPORTS IN FORM 8-K

(a) Exhibits

10.1

~~Agreement~~January to29, ~~Provide~~2009 ~~Consulting~~Extension ~~services~~Agreement towith Hollund.

10.2

April 16, 2009 Letter to Hollund informing of Default.

10.3

April 7, 2009 RELEASE executed by Gary Ackles.

10.4

December 30, 2008 Interest Debentures (5)

31.1

Certification of the Chief Executive Officer And Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the Chief Executive Officer And Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

(b)

Reports on Form 8-K:

38Subsequent to the period of this report, on May 19, 2009, a report filed on Form 8K reported that Effective May 18, 2009, the client auditor relationship between Valor Energy Corp. (the "Company") and Peterson Sullivan LLP (“Peterson Sullivan”) was terminated as Peterson Sullivan LLP was dismissed by the Company. Effective May 18, 2009, the Company engaged K.R. Margetson Ltd. ("Margetson") as its principal independent public accountant for the fiscal year ended May 31, 2009. The decision to change accountants was recommended, approved and ratified by the Company's Board of Directors effective May 18, 2009.

~~None~~ 37

Peterson Sullivan's report on the financial statements of the Company for the fiscal years ended May 31, 2007 and May 31, 2008, and any later interim period reviewed by Peterson, did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles except for concerns about the Company's ability to continue as a going concern.

In connection with the audit of the Company's fiscal years ended May 31, 2007 and May 31, 2008, and any later interim period reviewed by Peterson Sullivan, there were no disagreements between Peterson Sullivan and the Company on a matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Peterson Sullivan would have caused Peterson Sullivan to make reference to the subject matter of the disagreement in connection with its report on the Company's financial statements.

There have been no reportable events as provided in Item 304(a)(iv) of Regulation S-K during the Company's fiscal years ended May 31, 2007 and May 31, 2008, and any later interim period, including the interim period up to and including the date the relationship with Peterson Sullivan ceased.

The Company has authorized Peterson Sullivan to respond fully to any inquiries of any new auditors hired by the Company relating to their engagement as the Company's independent accountant. The Company has requested that Peterson Sullivan review the disclosure and Peterson Sullivan has been given an opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of the Company's expression of its views, or the respect in which it does not agree with the statements made by the Company herein. Such letter is filed as an exhibit to this Report.

The Company has not previously consulted with Margetson regarding either (i) the application of accounting principles to a specific completed or contemplated transaction; (ii) the type of audit opinion that might be rendered on the Company's financial statements; or (iii) a reportable event (as provided in Item 304(a)(iv)(B) of Regulation S-B) during the Company's fiscal years ended May 31, 2007 and May 31, 2008, and any later interim period reviewed by Peterson Sullivan. Margetson has reviewed the disclosure required by Item 304 (a) before it was filed with the Commission and has been provided an opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of the Company's expression of its views, or the respects in which it does not agree with the statements made by the Company in response to Item 304 (a). Margetson did not furnish a letter to the Commission.

SIGNATURES

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

Dated: ~~March~~ 2June 25, 2009

By: /s/ Sheridan B. Westgarde

-----------------------------------

Chief Executive Officer

3938

Filing Compare · VALOR ENERGY CORP