Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and the other financial information included elsewhere in this report. Certain statements contained in this report, including, without limitation, statements containing the words "believes," "anticipates," "expects" and words of similar import, constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

Overview

The Company does not currently engage in any business activities that provide cash flow. The Company is currently in the exploration stage.

On July 8, 2009, the Company had signed an option agreement with Morgan Creek Energy Corp. to acquire up to a 50% Working Interest (40.75% Net Revenue Interest) in Morgan Creeks' approximately 13,000 acre entire Frio Draw Prospect located in Curry County, New Mexico. Under the terms of the agreement, FormCap is required to drill and complete two mutually defined targets on the acreage to earn its interest.

Following the initial two wells, Morgan Creeks' management and land team will work with FormCap to establish additional targets on the Frio draw based on technical data and drill results. The two companies will jointly fund additional targets and have committed to a minimum five holes drill program in order to effectively test the Frio Draw.

On September 25, 2009, the Company has received a letter from Morgan Creek Energy Corp. terminating the Option Agreement between FormCap Corp. and Morgan Creek Energy Corp. on the Frio Draw Prospect in New Mexico.

On October 20, 2009, the company acquired 5,313 acres of oil and gas leases ("leases"), all with primary terms of five years initiated in June 2009. The leases, known as the Weber City Prospect, are located in Curry County, New Mexico, which lies on the eastern most side of New Mexico bordering the State of Texas. The Company had acquired a 100% working interest (80% Net Revenue Interest) from Atlas Larunas LLC for $250,000.

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On February 15, 2011, the Company assigned all its rights in the leases to Rich Investments Ltd. ("Rich") and Leare Developments Ltd. ("Leare"), under the terms of a loans settlement agreement whereby Rich and Leare accepted the assignment of the leases in full and final satisfaction of the outstanding indebtedness of the Company to each of Rich and Leare.

Results of Operations for the quarters ended March 31, 2011 and 2010.

The operating results and cash flows are presented for the quarters ended March 31, 2011 and 2010 and for the period of inception to March 31, 2011.

Revenues. There was no revenue for the quarters ended March 31, 2011 and 2010.

Operating Expenses. For the quarter ended March 31, 2011, we had total operating expenses of $76,875 as compared to $226,630 for the quarter ended March 31, 2010. This was accounted for mainly by the fair value of a block of common shares issued in March 2010 to induce the counter-party to sign a Oil & Gas Farm-in, Operating & Consulting Agreement with the Company.

Interest Expense. The quarter ended March 31, 2011 had interest expense of $13,800, compared to $44,515 for three months ended March 31, 2010. This was because of the amortization in the latter period, of the Beneficial Conversion Feature ("BCF") of the Convertible Notes Payable. As the BCF was completely amortized in 2010, there was no similar amortization expense in 2011.

Gain on settlement of debts. There was realized in the quarter ended March 31, 2011, a gain on settlement of debts of $311,466 (March 31, 2010: nil). The gain arose from the agreed exchange of the Company's oil & gas lease rights for the forgiveness of two debts in their entirety, plus all outstanding interest and financing fee owed.

Net Income. The net income for the quarter ended March 31, 2011 was $220,791 as compared to a net loss of $271,145, for the quarter ended March 31, 2010. The significantly different periodic results were mainly attributed to the gain on settlement of debts.