2. GOING CONCERN

Financial Condition

The Company’s financial statements for the three months and six months ended January 31, 2012 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company had a net loss for the six months ended January 31, 2012 of $8,162,687 compared to net income for the six months ended January 31, 2011 of $433,552. As of January 31, 2012, the Company has $139,147 of cash on hand and a working capital deficit of $14,871,901. The Company had $7,365,167 of debt mature on January 31, 2012 as discussed in Note 5.The Company’s working capital deficiency in conjunction with the Company’s history of operating losses raises doubt regarding the Company’s ability to continue as a going concern.

Management Plans to Continue as a Going Concern

The Company’s ability to continue as a going concern is highly dependent upon (i) management’s ability to increase operating cash flows through existing biodiesel production (ii), management’s ability to work out an extension agreement with the current bank, or locate and obtain alternative financing, to fund the $7,365,167 in notes that matured on January 31, 2012 (iii) the ability to obtain the capital needed to initiate the tar sand operations.