6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 6-K

________________________________

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

________________________________

For the month of August 2010

Commission file number 1-33965

________________________________

QUATERRA RESOURCES INC.

(Translation of registrant’s name into English)

1100-1199 West Hastings Street

Vancouver, BC

V6E 3T5  Canada

(Address and telephone of principal executive offices)

________________________________

Indicate by check mark whether the registrant files or will file annual reports under the cover of Form 20-F or Form 40-F:

Form20-F o Form 40-F T

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  o

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o NoT

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______

SUBMITTED HEREWITH

Exhibits

99.1 Interim Financial Statements for quarter ended June 30, 2010

99.2 Management’s Discussion and Analysis for quarter ended June 30, 2010

99.3 CFO Certification of Financials

99.4 CEO Certification of Financials

SIGNATURES

Pursuant to the requirements of 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.

	QUATERRA RESOURCES INC.
Dated:  August 11, 2010	By /s/ Stacey Bligh
	Stacey Bligh, Asst. Corp. Secretary

EX-99.1

Exhibit 99.1

(An Exploration Stage Company)

Consolidated Financial Statements

June 30, 2010 (unaudited)

(Expressed in Canadian dollars, unless indicated otherwise)

Quaterra Resources Inc.

(An Exploration Stage Company)

Consolidated Balance Sheets

(Unaudited and Expressed in Canadian dollars)

		June 30, 2010			December 31, 2009
Assets
Current assets:
Cash and cash equivalents		$	8,732,238		$	4,795,220
Restricted cash			48,972			-
Investment	Notes 3 & 5(e)		17,667			26,000
Other receivables			279,281			60,323
Prepaids and deposits			270,348			177,603
Amount due from Joint Venture Partner	Note 5(a)		99,949			251,904
			9,448,455			5,311,050
Equipment	Note 4		193,970			163,094
Mineral properties	Note 5		41,272,285			36,091,683
Reclamation bonds			326,625			306,670
		$	51,241,335		$	41,872,497
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities		$	1,129,593		$	628,750
Due to related parties	Note 8		13,822			250,637
			1,143,415			879,387
Shareholders' Equity
Share capital	Note 7		74,358,443			63,168,843
Contributed surplus			13,591,965			13,453,030
Accumulated other comprehensive loss			(21,199	)		(12,866	)
Deficit			(37,831,289	)		(35,615,897	)
			50,097,920			40,993,110
		$	51,241,335		$	41,872,497

Nature of operations (Note 1)

Commitments (Note 9)

Subsequent events (Note 14)

(See accompanying notes to consolidated financial statements)

Approved on behalf of the

Board of Directors:

“Thomas Patton” (signed)	“Robert Gayton” (signed)
Thomas Patton	Robert Gayton

Page 2 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Consolidated Statements of Operations

(Unaudited and Expressed in Canadian dollars)

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
General Administrative Expenses
Administration	$	39,290		$	45,045		$	72,984		$	92,790
Amortization		14,312			17,867			28,622			35,733
Consulting		82,933			63,167			171,713			183,701
Directors' fees		33,125			27,125			57,250			48,750
Investor relations and communications		112,244			48,417			169,940			87,264
Office and general		125,837			86,997			215,192			275,923
Professional fees		122,233			151,323			239,850			216,224
Regulatory fees and taxes		81,276			(17,344	)		121,124			61,526
Salaries and benefits		196,877			107,285			384,820			235,269
Stock-based compensation (Note 7(c))		201,598			382,776			409,960			790,263
Transfer agent		6,166			8,648			22,271			15,140
Travel and promotion		33,730			1,759			72,006			19,753
Operating Expenses		(1,049,621	)		(923,063	)		(1,965,732	)		(2,062,336	)
Other
General exploration costs		(251,264	)		(38,899	)		(310,677	)		(162,123	)
Foreign exchange gain		187,015			409,851			7,474			183,215
Interest income		929			71			5,413			353
Interest and financing charges		(3,019	)		(163,173	)		(7,918	)		(335,060	)
Administration fees		30,614			2,621			56,048			7,366
Fair value of warrant re-pricing		-			(84,115	)		-			(84,115	)
		(35,725	)		126,356			(249,660	)		(390,364	)
Loss for the period		(1,085,346	)		(796,707	)		(2,215,392	)		(2,452,700	)
Unrealized gain (loss) on investment		1,334			-			(8,333	)		-
Comprehensive loss for the period	$	(1,084,012	)	$	(796,707	)	$	(2,223,725	)	$	(2,452,700	)
Loss per share - basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.03	)
Weighted average number of common shares outstanding		118,988,150			87,610,273			116,509,187			87,582,134

(See accompanying notes to consolidated financial statements)

Page 3 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(Unaudited and Expressed in Canadian dollars)

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
Operating Activities
Net loss for the period	$	(1,085,346	)	$	(796,707	)	$	(2,215,392	)	$	(2,452,700	)
Items not involving cash:
Amortization		14,312			17,867			28,622			35,733
Stock-based compensation		201,598			382,776			409,960			790,263
Shares issued for services		22,500			22,500			45,000			45,000
Fair value of warrant re-pricing		-			84,115			-			84,115
Interest expense on convertible notes		-			155,855			-			326,423
Unrealized foreign exchange (gain)		-			(310,522	)		-			(206,908	)
		(846,936	)		(444,116	)		(1,731,810	)		(1,378,074	)
Changes in non-cash working capital
Other receivables		(122,316	)		48,557			(218,958	)		103,899
Prepaid and deposits		(25,686	)		28,121			(92,745	)		107,139
Accounts payable and accrued liabilities		(172,550	)		67,381			(73,336	)		313,857
Due to related parties		(210,802	)		450,357			(236,815	)		728,799
Cash provided by (used in) operating activities		(1,378,290	)		150,300			(2,353,664	)		(124,380	)
Financing Activities
Shares issued for cash, net of share issue costs		5,515,141			-			10,518,075			33,220
Net proceeds from convertible notes		-			-			-			1,410,260
Cash provided by financing activities		5,515,141			-			10,518,075			1,443,480
Investing Activities
Expenditures on mineral properties		(1,618,108	)		(390,945	)		(4,250,923	)		(2,018,083	)
Due from Joint Venture partner		173,285			33,380			151,955			70,600
Purchase of equipment		-			-			(59,498	)		-
Refund (purchase) of reclamation bonds		(65,941	)		92,819			(19,955	)		92,819
Restricted cash		(2,245	)		56,028			(48,972	)		56,028
Cash used in investing activities		(1,513,009	)		(208,718	)		(4,227,393	)		(1,798,636	)
Increase (decrease) in cash during the period		2,623,842			(58,418	)		3,937,018			(479,536	)
Cash and cash equivalents, beginning of period		6,108,396			103,472			4,795,220			524,590
Cash and cash equivalents, end of period	$	8,732,238		$	45,054		$	8,732,238		$	45,054
Supplemental Cash Flow Information - Note 12

(See accompanying notes to consolidated financial statements)

Page 4 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Consolidated Statements of Shareholders’ Equity

(Unaudited and Expressed in Canadian dollars)\

	Common Shares
	Shares		Amount		Convertible Notes			Contributed Surplus			Deficit			Accumulated Other Comprehensive Loss			Total
Balance at December 31, 2008		87,463,483	$	48,318,994							$	(28,627,483	)	$	-		$	29,953,008
Common shares issued during the year:
Shares issued for cash, net of issue costs		15,227,410		8,790,689														8,790,689
Exercise of options		60,200		33,220														33,220
Exercise of warrants		1,670,000		1,100,905														1,100,905
Shares issued for services		178,483		90,000														90,000
Units issued for finders' fees		114,000							45,150									45,150
Shares issued for convertible notes		6,545,795		4,588,555														4,588,555
Shares issued for property		200,000		137,000														137,000
Equity portion of convertible note						(259,164	)											(259,164	)
Fair value of options and warrants exercised				109,480					(109,480	)								-
Stock-based compensation									3,419,775									3,419,775
Warrant modification expense									95,252									95,252
Unrealized loss on available-for-sale investment															(12,866	)		(12,866	)
Net loss for the year												(6,988,414	)					(6,988,414	)
Balance at December 31, 2009		111,459,371		63,168,843		-			13,453,030			(35,615,897	)		(12,866	)		40,993,110
Common shares issued during the period:
Shares issued for cash, net of issue costs		3,001,418		4,187,279														4,187,279
Exercise of options		493,000		451,100														451,100
Exercise of warrants		7,475,786		5,879,696														5,879,696
Shares issued for services		34,976		45,000														45,000
Shares issued for property (Note 5)		250,000		355,500														355,500
Fair value of options and warrants exercised				271,025					(271,025	)								-
Stock-based compensation									409,960									409,960
Unrealized loss on available-for-sale investment															(8,333	)		(8,333	)
Net loss for the period												(2,215,392	)					(2,215,392	)
Balance at June 30, 2010		122,714,551	$	74,358,443	$	-		$	13,591,965		$	(37,831,289	)	$	(21,199	)	$	50,097,920

(See accompanying notes to consolidated financial statements)

Page 5 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

1. NATURE OF OPERATIONS

Quaterra Resources Inc., along with its subsidiary companies (collectively “Quaterra” or “the Company”), is engaged in the acquisition and exploration of precious and base metal mineral properties in the United States and Mexico.

The Company incurred a net loss of $2,215,392 for six months ended June 30, 2010 (2009 - $2,452,700). As at June 30, 2010, the Company had an accumulated deficit of $37,831,289 (December 31, 2009 - $35,615,897) and working capital of $8,305,040 (December 31, 2009 - $4,431,663).

The ability of the Company to continue as a going concern and meet its commitments as they become due, including completion of the acquisition, exploration and development of its mineral properties, is dependent on the Company’s ability to obtain the necessary financing. The Company intends to fund its plan of operations from working capital and the proceeds of future financings. Future financings are expected to be obtained through joint ventures, exercise of warrants and options, equity financing or other means.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

These unaudited interim consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and are stated in Canadian dollars. As described in Note 15, accounting principles generally accepted in Canada differ in certain material respects from accounting principles generally accepted in the United States (“U.S. GAAP”).

These unaudited interim consolidated financial statements include the accounts of the Company, its wholly-owned integrated subsidiaries, Quaterra Alaska Inc. - incorporated in the United States, Minera Agua Tierra S.A. de C.V. - incorporated in Mexico, and Quaterra International Limited - incorporated in the British Virgin Islands, and its proportionate share of the accounts of its joint venture. All significant inter-company accounts and transactions have been eliminated on consolidation.

These unaudited interim consolidated financial statements do not contain all of the information or note disclosures required by Canadian GAAP for annual financial statements, and should be read in conjunction with the notes to the Company’s audited annual consolidated financial statements for the year ended December 31, 2009.

The accounting policies followed by the Company are set out in Notes 2 and 3 to the audited consolidated financial statements for the year ended December 31, 2009, and have been consistently followed in the preparation of these consolidated financial statements.

Page 6 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

3. INVESTMENT

The Company acquired common shares in Copper Ridge Exploration Inc. (“Copper Ridge”), which are classified as available-for-sale. The Copper Ridge shares were obtained in consideration for payments required pursuant to a property option agreement on the Duke Island property, located in Alaska, United States (Note 5(e)).

	Cost		Fair Value
Balance December 31, 2008	$	-	$	-
Acquisition, 66,667 Copper Ridge common shares		38,866		38,866
Fair value adjustment		-		(12,866	)
Balance December 31, 2009		38,866		26,000
Fair value adjustment		-		(8,333	)
Balance June 30, 2010	$	38,866	$	17,667

4. EQUIPMENT

Details of equipment are as follows:

	June 30, 2010						December 31, 2009
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Computer	$	37,482	$	29,192	$	8,290	$	37,482	$	26,685	$	10,797
Equipment and furniture		81,714		51,820		29,894		81,714		46,788		34,926
Software		59,866		53,978		5,888		59,866		49,963		9,903
Vehicles		275,230		125,332		149,898		215,732		108,264		107,468
	$	454,292	$	260,322	$	193,970	$	394,794	$	231,700	$	163,094

Page 7 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES

The total deferred exploration and acquisition costs of mineral properties for 2010 were as follows:

	Mexico				United States
	Nieves		Other		MacArthur		Yerington		Alaska		Uranium		Other		Total
Mineral Properties			Properties		Copper						Properties		Properties
Acquisition
Balance, December 31, 2009	$	1,413,183	$	795,977	$	1,069,819	$	1,659,336	$	275,707	$	3,951,141	$	2,171,767	$	11,336,930
Additions during the period		49,109		353,385		520,754		213,501		618		50,716		138,879		1,326,962
Balance, June 30, 2010		1,462,292		1,149,362		1,590,573		1,872,837		276,325		4,001,857		2,310,646		12,663,892
Exploration
Balance, December 31, 2009		2,017,463		3,521,777		8,299,960		739,824		2,410,713		7,391,365		373,651		24,754,753
Geological		54,312		403,932		439,498		6,375		4,488		68,302		60,930		1,037,837
Geophysical		46,133		603,992		9,799		-		540		3,739		-		664,203
Geochemical		37,563		34,227		224,546		-		-		-		816		297,152
Drilling		135,092		483,893		883,318		-		-		-		110,884		1,613,187
Technical Studies		7,466		26,332		-		13,505		-		-		-		47,303
Other		12,427		76,374		97,466		-		-		7,691		-		193,958
Additions during the period		292,993		1,628,750		1,654,627		19,880		5,028		79,732		172,630		3,853,640
Balance, June 30, 2010		2,310,456		5,150,527		9,954,587		759,704		2,415,741		7,471,097		546,281		28,608,393
Total acquisition and exploration at June 30, 2010	$	3,772,748	$	6,299,889	$	11,545,160	$	2,632,541	$	2,692,066	$	11,472,954	$	2,856,927	$	41,272,285

Page 8 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

The total deferred exploration and acquisition costs of mineral properties for 2009 were as follows

	Mexico					United States
	Nieves		Other			MacArthur		Yerington		Alaska		Uranium		Other			Total
Mineral Properties			Properties			Copper						Properties		Properties
Acquisition
Balance, December 31, 2008	$	1,355,726	$	632,868		$	812,380	$	1,338,894	$	254,772	$	3,534,618	$	1,628,601		$	9,557,859
Additions during the year		57,457		168,052			257,439		320,442		20,935		416,523		568,449			1,809,297
Write-offs during the year		-		(4,943	)		-		-		-		-		(25,283	)		(30,226	)
Balance, December 31, 2009		1,413,183		795,977			1,069,819		1,659,336		275,707		3,951,141		2,171,767			11,336,930
Exploration
Balance, December 31, 2008		1,734,890		3,173,142			7,452,228		689,125		2,357,173		6,982,347		938,307			23,327,212
Geological		53,689		255,987			396,159		49,839		44,336		209,249		66,408			1,075,667
Geophysical		-		-			-		-		-		-		-			-
Geochemical		35,113		28,221			102,055		-		-		-		34,303			199,692
Drilling		131,369		6,773			39,192		-		-		33,852		29,916			241,102
Technical Studies		31,379		-			115,069		-		-		-		-			146,448
Other		31,023		65,731			195,257		860		9,204		165,917		33,694			501,686
Additions during the year		282,573		356,712			847,732		50,699		53,540		409,018		164,321			2,164,595
Write-offs during the year		-		(8,077	)								-		(728,977	)		(737,054	)
Balance, December 31, 2009		2,017,463		3,521,777			8,299,960		739,824		2,410,713		7,391,365		373,651			24,754,753
Total acquisition and exploration at December 31, 2009	$	3,430,646	$	4,317,754			9,369,779	$	2,399,160	$	2,686,420	$	11,342,506	$	2,545,418		$	36,091,683

Page 9 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(a) Nieves Concessions, Mexico

The Company originally owned a 100% interest in the Nieves silver property located in northern Zacatecas, Mexico. In 2003 the Company entered into an agreement with the U.S.-based Blackberry Ventures 1, LLC (“Blackberry”). Pursuant to the terms of the agreement, Blackberry advanced US$1,500,000 to the Company and earned a 50% interest in the property. Accordingly, the Company owns the remaining 50% interest. All work plans are made in consultation with the joint venture partner Blackberry, which contributes its share of ongoing exploration costs plus a 10% administration fee.

The Nieves concessions are subject to a maximum 3% net smelter return royalty (“NSR”) to the original concession holders, which the Company may purchase at any time for US$2,000,000. In addition, Kennecott Exploration Company, the optionor in the initial Underlying Agreement, retains NSR royalties of 2% on certain core claims and 1% on certain peripheral claims. Commencing January 26, 2004, an annual advance minimum royalty payment (“AMR”) of US$75,000 is due to the concession holders until the commencement of commercial production. On January 24, 2007, this NSR was purchased by Royal Gold Inc.

During the period ended June 30, 2010, the Company received $541,524 from Blackberry in respect to its share of ongoing exploration costs that were incurred on the property. As of June 30, 2010, $99,949 (2009 - $251,904) was due from Blackberry.

(b) Other Properties, Mexico

(1) Goldcorp - Investment Framework Agreement (“IFA”)

On January 29, 2010, the Company entered into an IFA with Goldcorp Inc. (“Goldcorp”) for its mining properties in central Mexico (except the Nieves property). The IFA provides Goldcorp with an option to acquire an interest in these properties in return for funding a two-year generative exploration program through a private placement investment of US$10 million in the Company; US$4 million in 2010 (received, see Note 7(a)) and US$6 million in 2011.

In the aggregate the number of shares acquired by Goldcorp shall not exceed more than 9.9% of the issued and outstanding shares of the Company.

The terms of the option allow Goldcorp to acquire up to 65% in any property held by the Company by spending an additional US$2 million over a two-year period on advanced exploration on that property and by completing a feasibility study.  Thereafter, Goldcorp will solely fund operations at the property until a production decision is made, at which point the Company will be responsible for contributing its proportionate share of expenditures.

On February 5, 2010, Goldcorp selected the Sierra Sabino property for advanced exploration and has incurred US$410,258 in exploration expenditures as of June 30, 2010.

Page 10 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(b) Other Properties, Mexico (Continued)

(2) Santo Domingo, Mexico (part of IFA)

On January 6, 2010, the Company entered into an option agreement with La Cuesta International Inc. (“LCI”), pursuant to which the Company has an option to acquire a 100% interest in four mineral concessions located in Durango, Mexico, known as the Santo Domingo prospect. Total consideration consists of US$7.5 million in cash payments, 100,000 common shares of the Company and $50,000 in work expenditures as follows:

(i) US$10,000 (paid) on effective date; US$10,000 by July 31, 2010 (paid); 100,000 common shares (issued) and US$50,000 work expenditures by December 31, 2010

(ii) US$30,000 in 2011

(iii) US$40,000 in 2012

(iv) Commencing January 1, 2013, US$25,000 every six months.

The property is subject to 1% NSR on materials removed from the property, and 0.5% on any properties acquired within a specified area. The Company shall pay a minimum of US$25,000 per calendar quarter or the NSR, whichever is greater, upon commencing mining operations.

(3) Tecolote (formerly East Durango), Mexico (part of IFA)

On September 30, 2008, the Company and EXMIN Resources Inc. (“EXMIN”) entered into an agreement allowing the Company to earn a 75% interest in EXMIN’s Tecolote Property, Mexico. Under the terms of the agreement, the Company can earn a 75% interest in the property by spending US$500,000 in exploration costs before September 30, 2012 plus making cash payments as follows:

(i) US$40,000 (paid)

(ii) US$20,000 on September 30, 2010

(iii) US$40,000 on September 30, 2011

(c) MacArthur Claim, United States

Pursuant to an agreement entered into in October 2005, as amended January 9, 2010, with North Exploration LLC, the Company acquired the right to earn an interest in certain unpatented mining claims covering the former MacArthur copper-oxide mine, in the Yerington district of Lyon County, Nevada.  The Company may elect to acquire the property by making the following payments:

(i) US$335,000 (paid)

(ii) US$300,000 (paid before January 15, 2010) and 150,000 shares (issued)

(iii) US$1,572,000 on or before January 15, 2011

The property is subject to a 2% NSR, which may be reduced to 1% for US$1,000,000.

Page 11 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(d) Yerington, United States

On May 1, 2007, the Company received approval from the appropriate US court for the acquisition of all Arimetco assets in the Yerington Mining District. The purchase price comprises US$500,000 cash and 250,000 common shares of the Company. The original 180-day due diligence review period that began on July 13, 2007 was extended to October 12, 2010. Up to June 30, 2010, the Company had paid a US$300,000 non-refundable deposit and issued 250,000 common shares (issued), and may elect to acquire a 100% interest in the property by making a further payment of US$200,000 on closing once the due diligence review has been completed.

The property is subject to a 2% NSR to a maximum of US$7,500,000 on commencement of commercial production.

(e) Alaska Properties (Duke Island and Herbert Glacier), United States

On September 29, 2009, the Company signed an option agreement with Copper Ridge for its 100% owned Duke Island property located in southeast Alaska. The agreement provides that Copper Ridge can earn up to a 51% interest by issuing 66,667 common shares (received) and spending $3,000,000 on exploration by December 31, 2012, with a minimum of $750,000 to be spent by December 31, 2010.  Copper Ridge may increase its interest in the property to 65% by spending an additional $2,000,000 on exploration by December 31, 2013.

Pursuant to an agreement made in November 2007, the Company acquired the right to earn an interest in certain mining claims, known as the Herbert Glacier. To earn a 100% interest, the Company is required to make annual payments of US$12,000 from November 2007 to 2011, US$20,000 from November 2012 to 2017, and US$30,000 from November 2018 and every consecutive anniversary thereafter.  Up to June 30, 2010, the Company has paid US$36,000.

The property is subject to a NSR as follows:

(i) 3.0% on gold prices less than US$400

(ii) 3.5% on gold prices between US$401 and US$500

(iii) 4.0% on gold prices between US$501 and US$600

(iv) 5.0% on gold prices above US$601

On June 17, 2010, the Company signed an option agreement with Grande Portage Resources for the Herbert Glacier property. Under the terms of the agreement, Grande Portage can earn a 51% interest by spending US$750,000 on or before June 15, 2011, and has the option to earn an additional 14% interest by spending US$500,000 on or before June 15, 2012.

If Grande Portage earns an interest, the two parties will form a joint venture to further explore and develop the property. If the interest of either party falls to 10% or less, it will revert to a 1% NSR, which maybe acquired by the other party at any time for US$1 million.

Page 12 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(f) Uranium Properties (Arizona, Utah and Wyoming), United States

Pursuant to a June 2005 agreement with North Exploration LLC, the Company acquired an option to purchase mining claims situated in Arizona, Utah and Wyoming.  The Company is required to make the following payments and issue common shares as follows:

(i) US$300,000 and 600,000 shares (paid and issued)

(ii) US$200,000 on or before September 6, 2010

The agreement is subject to a 2% NSR payable upon commencement of commercial production, which can be reduced to 1% for US$1,000,000.

Pursuant to an August 2006 agreement, as amended August 14, 2009, with Nustar Exploration LLC, the Company leased 18 claims in the Arizona strip district.  The Company is required to pay the following:

(i) US$90,000 (paid)

(ii) US$100,000 on or before August 10, 2011

This agreement is subject to a 4% royalty payable upon commencement of commercial production of which 3% royalty can be bought back for US$500,000.

The lawsuit filed in September 2008 against the U.S. Secretary of Interior, the U.S. Department of Interior and U.S. Bureau of Land Management for authorizing uranium exploration on one million acres of public land near Grand Canyon was dismissed on February 22, 2010. The Company’s rights to explore and develop its uranium claims on Arizona strip were unaffected.

(g) Other Properties, United States

(1) Cave Peak Molybdenum Prospect

Pursuant to an option agreement made in March 2007, the Company may acquire a 100% interest in certain prospect permits. The option payments are as follows:

(i) US$160,000 (paid)

(ii) US$70,000 on or before March 27, 2010 (paid)

(iii) US$150,000 on or before March 27, 2011

(iv) US$220,000 on or before March 27, 2012

This property is subject to a royalty of 6.25% on commencement of commercial production.

Page 13 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(g) Other Properties, United States (Continued)

(2) Willow Creek Molybdenum Prospect

On October 11, 2008, as amended October 26, 2009, the Company secured an option with the Willow Creek Discovery Group, LLC to acquire 100% of the Willow Creek porphyry molybdenum prospect in south western Montana. The Company has the right to earn a 100% interest in the property by making the following AMR payments to the Willow Creek Discovery Group totalling US$2,505,000 over a six-year period and issuing 200,000 common shares of the Company:

(i) US$105,000 and 200,000 shares (paid and issued)

(ii) US$150,000 or US$50,000 and 100,000 shares on October 11, 2010

(iii) US$150,000 on October 11, 2011

(iv) US$350,000 on October 11, 2012

(v) US$750,000 October 11, 2013

(vi) US$1,000,000 October 11, 2014

The agreement is subject to a 2% NSR payable upon commencement of commercial production. In the event royalty payments are imposed by government agencies such that the total royalty exceeds the equivalent of 4% NSR, the Company can exercise the right to reduce the NSR to the optionor by 1% for $1,000,000 within one year of commencement of commercial production.

(3) Copper Canyon Project

Pursuant to an agreement in November 2007, as amended October 9, 2009, the Company acquired the right to earn an interest in certain mining claims, known as the Copper Canyon Project in Mineral County, Nevada. To earn a 100% interest, the Company is required to make payments totalling US$625,000 as follows:

(i) US$85,000 (paid)

(ii) US$190,000 on or before November 6, 2010

(iii) US$350,000 on or before November 6, 2011

The property is subject to a 2.5% NSR, which can be reduced to 2.0% for US$500,000.

Should the Company decide to commence commercial production, a payment of US$750,000 is due within five business days from the date the decision is made.

Page 14 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(g) Other Properties, United States (Continued)

(4) Gray Hills

Pursuant to an agreement made in July 2007, as amended July 24, 2009, the Company entered into a lease with an option to purchase certain mining claims, known as the Gray Hills claims in Lyon County, Nevada. To earn a 100% interest, the Company is required to make payments as follows:

(i) US$75,000 (paid)

(ii) US$35,000 on or before July 11, 2010 (paid)

(iii) US$40,000 on or before July 11, 2011 and each anniversary until such time the option to purchase the property is exercised by the Company or the optionee chooses to withdraw from the lease

The Company may exercise its option to purchase the property at any time, for US$500,000. The property is subject to a 3% NSR, up to 2% of which may be reduced by the Company for US$500,000 per 1%.

(5) South West Tintic and Peg Leg

On May 29, 2009, the Company signed an earn-in agreement with Freeport-McMoRan Exploration Corporation of Phoenix, Arizona (“FMEC”) for the Company’s South West Tintic project in Utah. Under the terms of the agreement, FMEC has the exclusive right and option to acquire a 70% ownership interest in this property by making a US$275,000 property payment and by spending US$4,725,000 on exploration costs over four years. To keep the option in good standing, FMEC must make a minimum expenditure of US$750,000 by August 29, 2010.

Pursuant to an agreement made in March 2007, the Company acquired the right to earn an interest in certain unpatented mining claims, which forms part of the South West Tintic Claims in Juba County, Utah. To earn a 100% interest, the Company is required to make US$1,000,000 option payments over 10 years, of which US$60,000 has been paid by the Company, US$40,000 by FMEC and the remaining US$900,000 to be paid by FMEC under the earn-in agreement.

Alternatively, the Company may acquire the property at any time by paying US$1,000,000 less any previously paid amounts. The property is subject to a 2% NSR, which may be reduced to 1% for US$1,000,000.

On August 27, 2009, the Company signed an earn-in agreement with FMEC for the Company’s Peg Leg copper project in Arizona. FMEC has the exclusive right and option to acquire a 70% interest in the Peg Leg project by spending US$3,000,000 on exploration by December 31, 2012.

Page 15 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(g) Other Properties, United States (Continued)

(6) Wassuk Copper Project (formerly Majuba Hill)

Pursuant to an agreement made in December 2007, as amended December 2, 2009, the Company acquired the right to earn an interest in certain mining claims, known as the Majuba Hill in Mineral County, Nevada. To earn a 100% interest, the Company is required to make payments totaling US$2,930,000 by December 10, 2015 as follows:

(i) US$230,000 (paid)

(ii) US$250,000 on or before December 10, 2010

(iii) US$250,000 on or before December 10, 2011

(iv) US$500,000 on or before December 10, 2012

(v) US$500,000 on or before December 10, 2013

(vi) US$500,000 on or before December 10, 2014

(vii) US$700,000 on or before December 10, 2015

The Company must also incur US$1,000,000 cumulative exploration expenditures by December 10, 2012.  Should the Company incur less than US$1,000,000, the Company must pay the shortfall to the vendor by December 10, 2012.

On commencement of commercial production, the property is subject to a 3% NSR, which may be reduced to 2% for US$1,000,000.

(h) Realization

The Company’s investment in and expenditures on mineral property interests comprise a significant portion of the Company’s assets. Realization of the Company’s investment in the assets is dependent on establishing legal ownership of the property interest, on the attainment of successful commercial production or from the proceeds of its disposal. The recoverability of the amounts shown for the mineral property interest is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of the property interest, and upon future profitable production or proceeds from the disposition thereof.

(i) Title

Although the Company has taken steps to ensure the title to the mineral properties in which it has interests, in accordance with industry standards for the current stage of exploration of such properties, these procedures may not guarantee the Company’s title. Property title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.

Page 16 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

5. MINERAL PROPERTIES (Continued)

(j) Environmental

The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous material and other matters.  The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties and properties in which it has previously had an interest.  The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation. The Company is not aware of any existing environmental problems related to any of its current or former properties that may result in material liability to the Company.

Environmental legislation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company’s operations may cause additional expenses and restrictions.

If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the property may be diminished or negated.

6. CONVERTIBLE NOTES

The convertible notes issued as part of private placement units in tranches on November 27, 2008, December 19, 2008 and January 15, 2009, as well as interest payable, were fully converted during the year ended December 31, 2009. As a result 6,545,795 common shares were issued.

Each unit consisted of one convertible promissory note (“Notes”) and one non-transferable warrant exercisable at a price of US$0.75 for 24 months from the date of issuance. The notes bore interest at a rate of 10% per annum, maturing 24 months from date of issuance or upon conversion or redemption.

The warrants contained a provision that allows the Company to accelerate the expiry date of the warrants in the event its common shares trade at a closing price of greater than US$1.00 per share for a period of 10 consecutive days at any time after issue of the warrant. In such case, the warrants will expire on the thirtieth day after a notice is given to the holders of the notes.  The Company accelerated the expiry date of these warrants to May 25, 2010 and as of June 30, 2010 all these warrants were either exercised or expired unexercised (see Note 7).

Page 17 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

6. CONVERTIBLE NOTES (Continued)

Prior to conversion, the net value assigned to the liability component on issuance was calculated as the present value of the principal and interest payments using an effective interest of 15% as follows:

	December 31, 2009
Liability component of convertible notes - beginning of year	$	2,953,370
Present value of convertible notes on issue		1,356,114
Interest		518,520
Conversion of convertible notes		(4,583,310	)
Foreign exchange revaluation		(244,694	)
Liability component of convertible notes - end of year	$	-
Equity component of convertible notes - beginning of year	$	259,164
Equity component of convertible notes on issue		119,986
Conversion of equity component of convertible notes		(379,150	)
Equity component of convertible notes - end of year	$	-

7. SHARE CAPITAL

(a)  Common stock

Authorized - unlimited common shares without par value.

On February 4, 2010, the Company completed a private placement of 3,001,418 units for gross proceeds of US$4.0 million ($4,231,999) received from Goldcorp pursuant to the IFA dated January 29, 2010. Each unit consists of one common share and one-half of one share warrant with an exercise price of US$1.76 ($1.89) per full warrant expiring February 4, 2012.

(b) Share Purchase Warrants

The following summarizes information about the warrants outstanding:

	June 30, 2010					December 31, 2009
	Number of Warrants			Weighted Average Exercise Price		Number of Warrants			Weighted Average Exercise Price
Outstanding, beginning of the period		21,584,701		$	0.80		6,104,041		$	0.85
Issued:
Private placement		1,500,709		$	1.89		15,341,410		$	0.75
Convertible notes		-		$	-		1,950,500		$	0.94
Expired		(37,001	)	$	0.85		(141,250	)	$	0.68
Exercised		(7,475,786	)	$	0.79		(1,670,000	)	$	0.66
Outstanding, end of the period		15,572,623		$	1.67		21,584,701		$	0.80

Page 18 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

7. SHARE CAPITAL (Continued)

(b) Share Purchase Warrants (Continued)

The following summarizes information about the warrants outstanding at June 30, 2010:

Expiry Date	Exercise Price		June 30, 2010		December 31, 2009
November 27, 2010	$	0.75 US		-		1,921,458
December 19, 2010	$	0.75 US		-		2,441,333
January 15, 2011	$	0.75 US		-		1,880,500
September 29, 2011	$	0.75		8,663,540		9,666,206
October 28, 2011	$	0.75		5,408,374		5,675,204
February 4, 2012	$	1.76 US		1,500,709		-
				15,572,623		21,584,701

On April 21, 2010, the Company accelerated the expiry date of 6,120,958 outstanding warrants related to convertible notes to May 25, 2010. Of these warrants, 6,083,957 were exercised and 37,001 expired unexercised.

(c) Stock Options

The Company has a stock option plan (the “Plan”) allowing for the reservation of common shares issuable under the Plan to a maximum 10% of the number of issued and outstanding common shares of the Company at any given time. The term of any stock option granted under the Plan may not exceed five years and the exercise price may not be less than the closing price of the Company’s shares on the last business day immediately preceding the date of grant, less any permitted discount. On an annual basis, the Plan requires approval by the Company’s shareholders and submission for regulatory review and acceptance. Stock options are exercisable once they have vested under the terms of the grant. The following summarizes information about the Company’s options outstanding:

	June 30, 2010					December 31, 2009
	Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Outstanding, beginning of the period		9,237,000		$	1.56		7,200,500		$	2.56
Granted		470,000		$	1.86		4,880,000		$	1.00
Cancelled (due to modification)		(17,000	)	$	1.55		(2,575,000	)	$	3.24
Expired		(106,000	)	$	2.48		(50,000	)	$	0.62
Forfeited		-		$	-		(158,300	)	$	3.10
Exercised		(493,000	)	$	0.92		(60,200	)	$	0.55
Outstanding, end of the period		9,091,000		$	1.60		9,237,000		$	1.56

The weighted average remaining contractual life of options granted as of June 30, 2010 was 3.15 years (December 31, 2009 – 3.55 years).  The weighted average grant date fair value of options during the period ended June 30, 2010 was $0.95 (December 31, 2009 - $0.93).

Page 19 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

7. SHARE CAPITAL (Continued)

(c) Stock Options (Continued)

At June 30, 2010, the aggregate intrinsic value of the outstanding stock options is $1,319,720 (December 31, 2009 - $6,672,850).

The allocation of stock-based compensation included in the statements of operations was as follows:

	June 30, 2010				June 30, 2009
	Number of Options Granted		Stock-based Compensation		Number of Options Granted		Stock-based Compensation
Consultants		270,000	$	215,346		-	$	297,919
Officers		200,000		194,614		-		363,059
Employees		-		-		-		129,285
Total		470,000	$	409,960		-	$	790,263

The Company used the following weighted average assumptions to fair value the options granted using the Black-Scholes option pricing model.

	June 30, 2010			June 30, 2009
Risk-free interest rate		2.89	%		3.84	%
Expected share price volatility		91.85	%		85.33	%
Expected option life in years		3.0			3.0
Forfeiture rate		0	%		0	%
Expected dividend yield		0	%		0	%

The following summarizes information about the stock options outstanding and exercisable at June 30, 2010:

Page 20 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

7. SHARE CAPITAL (Continued)

(d) Stock Options (Continued)

Price		Fair Value		Date	June 30, 2010		December 31, 2009
$	0.35	$	0.20	August 9, 2010		212,000		270,000
$	0.40	$	0.30	January 29, 2011		200,000		200,000
$	1.04	$	0.81	March 27, 2011		125,000		125,000
$	1.00	$	1.24	May 19, 2011		50,000		75,000
$	1.12	$	1.16	June 12, 2011		100,000		100,000
$	1.55	$	1.17	July 28, 2011		1,364,000		1,431,000
$	1.55	$	1.17	August 23, 2011		100,000		100,000
$	1.50	$	1.00	September 25, 2011		100,000		100,000
$	3.33	$	1.98	July 20, 2012		805,000		836,000
$	3.45	$	2.05	March 31, 2013		150,000		150,000
$	3.30	$	1.87	June 19, 2013		945,000		970,000
$	0.98	$	0.52	November 9, 2014		2,265,000		2,575,000
$	1.02	$	0.51	November 9, 2014		2,205,000		2,305,000
$	2.00	$	1.22	January 14, 2015		170,000		-
$	1.80	$	0.85	April 1, 2015		100,000		-
$	1.76	$	0.97	April 22, 2015		200,000		-
						9,091,000		9,237,000

The aggregate intrinsic value of stock options exercised during the period ended June 30, 2010 was $140,180 (December 31, 2009 - $12,532).

8. RELATED PARTY TRANSACTIONS

The Company had the following related party transactions during the six months ended June 30:

(a) $251,792 (2009 - $206,036) was charged by a company of which a director and officer is the principal for administration, professional fees, office and general, and investor relations and communications.  As of June 30, 2010, $13,822 (December 31, 2009 - $31,578) was still owing to the company and is included in due to related parties (Note 9(b)).

(b) $87,500 of consulting fees (2009 - $23,990) were recorded to a company of which an officer is the principal.

(c) $1,857 of professional fees (2009 - $7,477) were charged by a law firm of which a director is the principal. As of June 30, 2010, $nil (December 31, 2009 - $1,344) was owing.

(d) On March 17, 2009, the Company borrowed US$200,000 from the CEO at an annual interest rate of 4.5% due within one year and unsecured. During the period ended June 30, 2010, the loan was fully repaid including $10,578 interest expense (December 31, 2009 - US$207,151; $217,715).

The above transactions are conducted in the normal course of business and were measured at the amount of consideration established and agreed by the parties.

Page 21 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

9. COMMITMENTS

The Company has the following annual commitments in respect to mineral option payments, office leases and service agreements:

	Mineral Property (cash payment) (a)		Office Lease (b)		Total
Year ending December 31, 2010	$	944,300	$	75,000	$	1,019,300
Year ending December 31, 2011		3,187,412		150,000		3,337,412
Year ending December 31, 2012		1,352,042		75,000		1,427,042
Year ending December 31, 2013		1,570,285		-		1,570,285
Year ending December 31, 2014		1,857,727		-		1,857,727
Year ending December 31, 2015		899,587		-		899,587
Year ending December 31, 2016		154,367		-		154,367
Year ending December 31, 2017		154,367		-		154,367
Year ending December 31, 2018		165,013		-		165,013
	$	10,285,100	$	300,000	$	10,585,100

(a) The Company is required to make option payments and other expenditure commitments to maintain the properties and continue to earn its interest.

(b) During 2007, the Company entered into a service agreement with Manex Resource Group (“Manex”) for its Vancouver office space, administration and corporate secretarial services at a monthly rate of $12,500. The agreement can be cancelled at anytime upon one year’s notice. The current expiry date is June 30, 2012 (Note 8(a)). The Company also has one office lease in Kanab, Utah, and Yerington, Nevada, United States.

(c) In January 2007, the Company engaged Roman Friedrich & Company Ltd. to provide financial and advisory services to the Company. The retainer fee was $15,000 per month of which 50% was paid in cash and 50% was payable in common shares of the Company. The agreement was amended to $7,500 per month commencing September 1, 2009 until terminated, payable solely in shares of the Company. As of June 30, 2010, $15,000 was due in shares of the Company.

10. CAPITAL MANAGEMENT

The Company considers its capital under management to consist of shareholders’ equity. The Company manages the capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the Company’s assets.

The Company’s objectives of capital management are intended to ensure the entity’s ability to support the Company’s normal operating requirements on an ongoing basis, continue the development and exploration of its mineral properties, and support any expansionary plans.

To effectively manage the entity’s capital requirements, the Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company ensures that there is sufficient cash, and short-term investments to meet its short-term business requirements.

Page 22 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

10. CAPITAL MANAGEMENT (Continued)

There were no changes in the Company’s approach to capital management during the six months ended June 30, 2010. The Company is not subject to external restrictions on its capital.

11. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

The Company’s activities expose it to a variety of risks arising from financial instruments. These risks and management’s objectives, policies and procedures for managing these risks are disclosed as follows.

Fair Value

The following table sets forth the Company’s financial assets measured at fair value by level within the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
Investment	$	17,667	$	-	$	-	$	17,667

The following provides a comparison of carrying and fair values of each classification of financial instruments as at June 30, 2010 and December 31, 2009 respectively:

June 30, 2010	Loans and Receivables		Available-for-Sale		Held-for-Trading		Held-to-Maturity		Other Financial Liabilities		Total Carrying Value
Financial assets
Cash and cash equivalents					$	8,732,238					$	8,732,238
Restricted cash							$	48,972			$	48,972
Investment			$	17,667							$	17,667
Other receivables	$	28,226									$	28,226
Amount due from Joint Venture Partner		99,949									$	99,949
Financial liabilities
Accounts payable and accrued liabilities									$	1,129,593	$	1,129,593
	$	128,175	$	17,667	$	8,732,238	$	48,972	$	1,129,593

Dececmber 31, 2009	Loans and Receivables		Available-for-Sale		Held-for-Trading		Held-to-Maturity		Other Financial Liabilities		Total Carrying Value
Financial assets
Cash and cash equivalents					$	4,795,220					$	4,795,220
Investment			$	26,000							$	26,000
Other receivables	$	1,659									$	1,659
Amount due from Joint Venture Partner		251,904									$	251,904
Financial liabilities
Accounts payable and accrued liabilities									$	628,750	$	628,750
	$	253,563	$	26,000	$	4,795,220	$	-	$	628,750

Page 23 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

11. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Continued)

Fair Value (Continued)

The recorded amounts for cash and cash equivalents, restricted cash, other receivables, amount due from Joint Venture Partner, and accounts payable and accrued liabilities approximate their fair value due to their short-term nature. The fair value of the investment is based on active market prices at the quarter end date.

The fair value amount due to related party has not been disclosed as the fair value cannot be reliably measured.

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks: currency risk, interest rate risk and other price risk.

Currency Risk

The Company operates internationally and is exposed to foreign exchange risk from fluctuations in exchange rates between the Canadian dollar and various currencies, primarily US dollars and Mexican pesos. The Company has not hedged its exposure to foreign currency fluctuations.

The Company is exposed to currency risk as follows:

	June 30, 2010					December 31, 2009
	US$			Pesos		US$			Pesos
Cash	$	7,205,567		$	34,271	$	1,593,545		$	61,683
Other receivables and restricted cash		66,513					-			638,668
Due from Joint Venture Partner		93,884					239,680			-
Reclamation bonds		316,453					291,789			-
Accounts payable and accrued liabilities		(947,339	)				(452,444	)		-
Due to related parties		-					(207,151	)		-
Net foreign exposure	$	6,735,078		$	34,271	$	1,465,419		$	700,351

Based on the above net foreign currency exposures as at June 30, 2010, and assuming all other variables remain constant, a 5% weakening or strengthening of the Canadian dollar against a) the US dollar would result in a change of $381,668 (December 31, 2009 - $161,870) in the Company’s loss; and b) the Mexican peso would have no material impact in the Company’s loss.

Page 24 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

11. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Continued)

Interest Rate Risk

The Company’s cash and cash equivalents are held in bank accounts that earn interest at variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated fair value as of June 30, 2010. The Company manages interest rate risk by maintaining an investment policy that focuses primarily on preservation of capital and liquidity.

Other Price Risk

Other price risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from currency risk or interest rate risk. The Company’s investment is carried at market value, and is therefore directly affected by fluctuations in the market value of the underlying securities. The Company’s sensitivity analysis suggests that a 15% change in market prices would change the value of the investment by $2,667.

Credit Risk

Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.

The Company manages credit risk, in respect of cash and cash equivalents by purchasing highly liquid, short-term investment-grade securities held through large Canadian financial institutions. Included in cash equivalents is $6,323,000 in guaranteed investment certificates earning interest at 0.60% cashable at any time. The amount due from Joint Venture Partner is not exposed to significant credit risk as the Company has a strong and continuing working relationship with the joint venture partner.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities and through the management of its capital structure. Accounts payable and accrued liabilities of $1,129,593 (December 31, 2009 - $628,750) are due in the third quarter of fiscal 2010.

Page 25 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

12. SUPPLEMENTAL CASH FLOW INFORMATION

	Three months ended				Six months ended
	June 30, 2010		June 30, 2009		June 30, 2010		June 30, 2009
Cash Items
Interest paid	$	-	$	-	$	-	$	-
Income tax paid	$	-	$	-	$	-	$	-
Non-Cash Items
Mineral property expenditures included in accounts payable	$	986,021	$	464,314	$	986,021	$	464,314
Shares issued for mineral properties	$	205,500	$	50,000	$	355,500	$	50,000
Cash and cash equivalents
Cash	$	2,409,238	$	45,054	$	2,409,238	$	45,054
Term deposits and bankers acceptance		6,323,000		-		6,323,000		-
	$	8,732,238	$	45,054	$	8,732,238	$	45,054

13. SEGMENTED INFORMATION

The Company has one business segment, the acquisition and exploration of mineral properties. The Company’s major non-current assets are distributed by geographic locations as follows:

	June 30, 2010						December 31, 2009
			Mineral		Total				Mineral		Total
	Equipment		Properties		Assets		Equipment		Properties		Assets
Canada	$	8,409	$	-	$	8,083,566	$	11,896	$	-	$	4,648,633
Mexico		109,592		10,072,637		11,240,060		60,909		7,748,400		8,178,767
U.S.A		75,969		31,199,648		31,917,709		90,289		28,343,283		29,045,097
Total	$	193,970	$	41,272,285	$	51,241,335	$	163,094	$	36,091,683	$	41,872,497

14. SUBSEQUENT EVENTS

Subsequent to June 30, 2010,

a) 60,000 warrants were exercised at an average exercise price of $0.75 per share and 150,000 stock options were exercised at $0.35 per share.

b) On August 5, 2010, the Company announced that Caracle Creek International Consulting Inc. has completed an updated NI43-101 compliant independent resource estimate for its Nieves silver property in Mexico.

Page 26 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

15. RECONCILIATION OF CANADIAN AND U.S.GAAP

Canadian GAAP varies in certain significant respects from the principles and practices generally accepted in the United States (“U.S. GAAP”). The effect of the principal measurement differences on the Company’s consolidated financial statements is quantified below. The accounting policies followed by the Company under U.S. GAAP are set out in Notes 17 to the audited consolidated financial statements for the year ended December 31, 2009.

	June 30, 2010			December 31, 2009
Total assets - Canadian GAAP	$	51,241,335		$	41,872,497
Deferred expenditures on mineral properties		(32,246,639	)		(27,954,375	)
Total assets - U.S. GAAP	$	18,994,696		$	13,918,122
Total liabilities - Canadian GAAP	$	1,143,415		$	879,387
Derivative liability - warrants		659,192			8,477,944
Total liabilities - U.S. GAAP		1,802,607			9,357,331
Total shareholders' equity - Canadian GAAP		50,097,920			40,993,110
Expenditures on mineral properties		(32,246,639	)		(27,954,375	)
Derivative liability - adjustment to warrants		(659,192	)		(8,477,944	)
Total shareholders' equity - U.S. GAAP		17,192,089			4,560,791
Total Liabilities and Shareholders' Equity - U.S. GAAP	$	18,994,696		$	13,918,122

The adjustments to the statements of operations would be as follows:

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
Loss for the period - Canadian GAAP	$	(1,085,346	)	$	(796,707	)	$	(2,215,392	)	$	(2,452,700	)
Expenditures on mineral properties		(2,118,365	)		(320,776	)		(4,292,264	)		(1,128,114	)
Interest expense on convertible notes		-			(47,567	)		-			(93,775	)
Realized gain on derivative liability		4,647,708			-			4,647,708			-
Unrealized gain (loss) on derivative liability		466,439			210,941			3,171,044			(626,032	)
Net income (loss) for the period - U.S. GAAP		1,910,436			(954,109	)		1,311,096			(4,300,621	)
Deficit, Beginning of period - U.S. GAAP		(71,296,411	)		(57,019,720	)		(70,697,071	)		(53,673,208	)
Deficit, end of period - U.S. GAAP	$	(69,385,975	)	$	(57,973,829	)	$	(69,385,975	)	$	(57,973,829	)
Net loss per common share - Canadian GAAP	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.03	)
Net gain (loss) per common share - U.S. GAAP	$	0.02		$	(0.01	)	$	0.01		$	(0.05	)
Weighted average number of shares outstanding		118,988,150			87,610,273			116,509,187			87,582,134

Page 27 of 28

Quaterra Resources Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements June 30, 2010

(Unaudited and Expressed in Canadian dollars)

15. RECONCILIATION OF CANADIAN AND U.S.GAAP (Continued)

The adjustments to the consolidated statements of cash flows would be as follows:

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
Operating activities - Canadian GAAP	$	(1,378,290	)	$	150,300		$	(2,353,664	)	$	(124,380	)
Adjustments for mineral expenditures		(1,636,696	)		(249,135	)		(3,718,084	)		(1,528,314	)
Cash used in operating activities - U.S. GAAP		(3,014,986	)		(98,835	)		(6,071,748	)		(1,652,694	)
Investing activities - Canadian GAAP		(1,513,009	)		(208,718	)		(4,227,393	)		(1,798,636	)
Reclassification of expenditures on mineral properties		1,636,696			249,135			3,718,084			1,528,314
Cash provided by (used in) investing activities - U.S. GAAP		123,687			40,417			(509,309	)		(270,322	)
Cash provided by financing activities - Canadian & U.S. GAAP		5,515,141			-			10,518,075			1,443,480
Increase (decrease) in cash during the period		2,623,842			(58,418	)		3,937,018			(479,536	)
Cash, beginning of period		6,108,396			103,472			4,795,220			524,590
Cash, end of period - U.S. GAAP	$	8,732,238		$	45,054		$	8,732,238		$	45,054

The Company’s financial assets measured at fair value by level within the fair value hierarchy would be as follows:

	Level 1		Level 2		Level 3		Total
Investment	$	17,667	$	-	$	-	$	17,667
Derivative liability - warrants			$	659,792			$	659,792

The derivative liability – warrants would be classified as held-for-trading.

Page 28 of 28

EX-99.2

Exhibit 99.2

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Dated: August 9, 2010

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Introduction

This Management’s Discussion and Analysis (“MD&A”) of Quaterra Resources Inc. (“Quaterra” or the “Company”) has been prepared by management in accordance with the requirements under National Instrument 51-102 as of August 9, 2010, and provides comparative analysis of Quaterra’s financial results for the six months ended  June 30, 2010 and 2009.

The following information should be read in conjunction with the Company’s consolidated financial statements for the six months ended June 30, 2010 and audited consolidated financial statements for the year ended December 31, 2009 and the related notes thereto.  The Company reports its financial position, results of operations and cash flows in accordance with Canadian generally accepted accounting principles (“GAAP”). All amounts contained herein are in Canadian dollars.

Quaterra is a Canadian-based, junior exploration company focused on making significant mineral discoveries in North America. It is currently exploring for copper, precious metals, molybdenum, and uranium in the United States and Mexico. The Company’s preference is to acquire a 100% interest in properties on reasonable terms and maintain this interest through initial evaluation.

The Company’s shares are listed on the TSX Venture Exchange under the symbol “QTA” and NYSE AMEX “QMM”.  Additional information related to Quaterra is available on the Company’s website at www.quaterraresources.com, on SEDAR at www.sedar.com or the United States Securities and Exchange Commission www.sec.gov.

Certain forward-looking statements are discussed in the MD&A with respect to the Company’s activities and future financial results. The Company cautions investors that any forward-looking statements by the Company are not guarantees of future performance, as they are subject to significant risks and uncertainties that may cause projected results or events to differ materially from actual results or events.

Dr. Thomas C. Patton, P. Geo., the President and Chief Executive Officer, and Mr. Eugene Spiering, Vice President Exploration of the Company are the qualified persons responsible for the preparation of the technical information included in this MD&A.

Overall Performance

Corporate Development

On April 21, 2010, the Company accelerated the expiry dates of the US dollar share purchase warrants related to the convertible notes of the Company issued on November 27, 2008, December 19, 2008 and January 15, 2009 to May 25, 2010, after which time these warrants would expire and be of no value.

The Company’s shares have traded at a closing price of greater than US$1.00 per share for a period of 10 consecutive trading days on the NYSE Amex. Management of the Company decided it would be beneficial for both the Company and its shareholders to accelerate these warrants..  On May 25, 2010, 6,083,957 of these accelerated warrants were exercised while 37,001 were expired unexercised.  US$4.6 million proceeds were received and will be used to continue exploration and update the resource estimates for the Company’s MacArthur copper, Nieves silver properties and for general administration.

Page 2 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

On February 4, 2010, the Company completed a private placement with Goldcorp Inc. (“Goldcorp”) pursuant to the binding Investment Framework Agreement (“IFA”) signed on January 29, 2010. The private placement consists of 3,001,418 units at $1.41 for gross proceeds of US$4.0 million. Each unit comprises one common share of the Company and one-half of a share purchase warrant exercisable at US$1.76 per share for a period of two years.  The funds will be used in the Company’s generative exploration program in central Mexico.

Mr. Gerald Prosalendis was appointed as an officer of the Company by the Board of Directors in March 2010. Mr. Prosalendis has held similar positions in other companies including Western Silver Corporation which was sold to Glamis Gold Ltd. for $1.6 billion in 2006. Mr. Prosalendis will bring his experience in corporate strategy, markets, shareholder relations and communications to the Company.

Corporate Development - Property

Option Agreement in Alaska: on June 17, 2010, the Company signed an option agreement with Grande Portage Resources Ltd. for its Herbert Glacier gold property located 20 miles north of Juneau, Alaska. According to the term of the agreement, Grande Portage may earn up to a 65% interest in the property by spending US$1.25 million over two years.

In the first year Grande Portage earns a 51% interest in the property by spending US$750,000 on or before June 15, 2011. In the second year Grande Portage has the option to earn an additional 14% interest by spending US$500,000 on or before June 15, 2012.

If Grande Portage earns an interest, the two parties will form a joint venture for the further exploration and development of the property, with each party bearing its proportionate share of costs. If the interest of either party falls to 10% or less, it will revert to a 1% net smelter return royalty, which may be acquired by the other party at any time for US$1 million.

Goldcorp Investment Framework Agreement (IFA): The Company entered into an agreement with Goldcorp of Vancouver, B.C. on January 29, 2010. Goldcorp has an opportunity to acquire an interest in certain mining properties held by the Company in central Mexico, in return for funding a two-year generative exploration program by Quaterra through a private placement of US$10 million in the Company, US$4 million in 2010 and US$6 million in 2011.

In the aggregate the number of shares acquired by Goldcorp shall not total more than 9.9% of the issued and outstanding shares of the Company. In the event that this restriction would prevent the purchase of the full amount of the second placement shares, or exercise of any of the warrants by Goldcorp, the Company may either:

a) Consent in writing to Goldcorp owning more than 9.9% of the issued and outstanding shares of the Company; or

b) Extend the warrants if applicable; or

c) Cause a third party, or the Company, to buy these shares which would put Goldcorp higher than the 9.9% ownerships limitation.

Goldcorp has an option to acquire up to 65% in any property in the central Mexico interest, with the exception of Nieves, by spending US$2 million over a two-year period on advanced exploration and by completing a bankable feasibility study. Thereafter, Goldcorp will solely fund operations at the property until a production decision is made, at which point Quaterra will be responsible for contributing its proportionate share of expenditures.

Page 3 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

On February 5, 2010, Goldcorp selected the Company’s Sierra Sabino property as its first advanced project.

Santo Domingo, Mexico - On January 13, 2010, the Company finalized an option agreement with La Cuesta International, Inc. (“LCI”) to acquire a 100% interest in the Santo Domingo prospect located in Durango, Mexico about 120 kilometers west-northwest of Torreon.

Quaterra has the right to earn a 100% interest in the property by paying LCI a total consideration of US$7.5 million, which includes semi-annual lease/pre-production payments and a 1% Net Smelter Return royalty payment. Quaterra also issued 100,000 common shares to LCI.

This property is included in the Goldcorp IFA agreement.

Exploration

On June 16, 2010, the Company announced commencement of drilling at South West Tintic, Duke Island and Willow Creek projects. Drilling results are expected to be released in the early fall of 2010.

On April 21, 2010, the Company announced that recent drilling at its 100%-owned MacArthur copper project in the Yerington District, Nevada has expanded the extent of copper mineralization. A total of 19,110 feet drilled in 32 reverse circulation holes and three deep core holes has tested undrilled areas north and west of the pit; expanded the partially explored Gallagher area; and has begun to delineate the extent of mineralization in the Northwest Target area located 2,500 feet northwest of the pit. The mineralized zone remains open for continued expansion on three sides.

On April 20 and February 17, 2010, the Company and its joint venture partner Blackberry Ventures 1, LLC announced the results from the in-fill drilling program at its Nieves silver property in Zacatecas, Mexico. All 29 holes totaling 6,118.7 meters were drilled within the La Quinta stockwork veinlet deposit, a series of veins and veinlets located along the Concordia-Gregorio Vein. The purpose was to in-fill the core area of the known deposit for 200 meters along strike and up to 200 vertical meters below surface. Holes were drilled on 25-meter centers between existing holes drilled on 50-meter centers. Results confirm the continuity of both high-grade and bulk mineable mineralization at the La Quinta deposit, which remains open along strike and at depth. La Quinta stockwork mineralization has now been traced by drilling for almost 1,00 0 meters along strike and has been tested by close-spaced drilling for over 200 meters of this distance. The shallow and uniform nature of mineralization makes it attractive for possible open pit mining.

Update on Mineral Properties

MacArthur Property – Nevada

The Company’s MacArthur project is targeting the definition of a secondary copper deposit capable of sustaining a large run-of-mine heap leach operation using SXEW processing for low cost copper production.  Exploration drilling on the property is delineating a large blanket of shallow, acid soluble copper mineralization in fractured granodiorite and quartz monzonite intruded by porphyry dike swarms. The 50 to 150 foot thick, tabular zone of secondary copper (oxides and chalcocite) has now been defined over an area of nearly two square miles, but the ultimate size of the deposit remains unknown.

Page 4 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Following the completion of 80,000 feet of exploration drilling in 49 core holes and 124 reverse circulation holes, Quaterra contracted Tetra Tech of Denver, Colorado to prepare a NI43-101 compliant independent technical report and resource estimate on the MacArthur project in January 2009.

The results of the MacArthur drilling program have been supported by an interpretation of a helicopter-borne aeromagnetic survey coupled with an inversion of historical and recent IP data.  The interpretation is both indicative of mineralization presently identified on the project and encouraging for future growth of the deposit though additional drilling.

A new phase of drilling was initiated shortly after the POO approval. Since commencing in early December 2009, the ongoing program has completed a total of 35,686 feet of drilling in 58 reverse circulation holes and three deep core holes. The reverse circulation drilling is targeting locations on a 500 feet by 500 feet grid to extend the known resources of the project while investigating the open margins of the higher grade intercepts in undrilled areas around the MacArthur pit.

Assay results from the recent round of drilling have demonstrated the continuity of both chalcocite and primary chalcopyrite mineralization in a previously undrilled terrain north and west of the oxide resource at the MacArthur Pit and included a test of the North Porphyry Target located north of the MacArthur pit. The North Porphyry Target was identified by three earlier Quaterra drill holes that intersected porphyry copper style sulfide mineralization below the low-angle MacArthur fault zone over a strike length of 1,000 feet.

The Company plans to extend the drilling program at MacArthur into the third quarter of 2010 to define the limits of the principal zones of acid soluble copper mineralization by drill holes located on a grid of 500 by 500 feet.  The current program has completed a rough definition of the northern limits but the southern and western limits to acid soluble copper mineralization in the Gallagher area remain open to extension.  Although the drilling program is too wide spaced to add to the measured or indicated resources of the property, a significant addition is expected to the inferred resources when the 43-101 estimate is updated as part of a technical report expected for completion early in the fourth quarter of this year.  The information from the shallow drilling program will be reviewed together with th e results of previous deep drilling and geophysical surveys to target future deep holes in search of a porphyry copper center.

Acquisition costs incurred to June 30, 2010 were $1,590,573 and exploration expenditures were $9,954,587 for a total of $11,545,160.  Acquisition costs incurred to December 31, 2009 were $1,069,819 and exploration expenditures were $8,299,960 for a total of $9,369,779. A payment of US$350,000 for the purchase of the PIT claims will be deducted from the final payment due to North Exploration LLC for the MacArthur properties.

Yerington – Nevada

The Arimetco assets in the Yerington Mining District have been under review since Quaterra received approval of the U.S. court to acquire the property in May 2007. The original 180 day review year has been extended until October 12, 2010. A series of environmental, legal and technical due diligence studies have been completed.

Page 5 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

The Chambers Group Inc. and Golder Associates Inc. completed a Phase 1 Environmental Site Assessment Report (“ESA”) in April 2009 to identify conditions indicative of releases or threatened releases of hazardous substances. The report identifies some environmental concerns related to the project, but nothing extraordinary for operations of similar size and vintage. The study allows the Company to establish liability protection as a bona fide prospective purchaser and must be updated prior to closing the transaction. SRK Consulting (U.S.), Inc. completed this update on January 11, 2010.

Legal due diligence has addressed most of the issues related to the Arimetco assets with a few items pending near term completion.  A legal description of the property has been completed including a chain of title report.  Water rights for the mine have been extended and assigned to the property. Further extensions will require the Company to show that substantial work has been accomplished toward the goal of putting the water rights to full beneficial use. The most important remaining issues are completing agreements with the EPA, Nevada state agencies and the Atlantic Richfield Company (“ARC”) that will define, limit and protect the Company from existing liabilities on the property.

Technical due diligence has concentrated on reviewing and compiling a wealth of historical data in the Anaconda Library in Laramie, Wyoming.  To assist in the review, numerous reports, maps and historical drilling data have been scanned and entered into an internal data base.  An initial review has been completed of both past production and remaining mineralization in and around the Yerington pit. The area contains significant under-explored potential for copper mineralization.

Although the process has been slow, the Arimetco assets merit the efforts required for acquisition. The Yerington mine is the center of a prolific copper district and can provide Quaterra not only with additional exploration targets but increased flexibility when considering production alternatives. Subject to successful completion of due diligence, Quaterra plans to explore the property as part of its ongoing exploration program at MacArthur. Significant tonnages of copper oxide and sulfide mineralization remain below and peripheral to the Yerington pit and much of the area between the pit and the MacArthur deposit remains under-explored, including the large and only partially delineated Bear deposit.

Acquisition costs incurred to June 30, 2010 were $1,872,837 and exploration expenditures were $759,704 for a total of $2,632,541.  Acquisition costs incurred to December 31, 2009 were $1,659,336 and exploration expenditures were $739,824 for a total of $2,399,160.

Alaska Properties

Duke Island – Alaska

 On September 29, 2009, the Company signed an option agreement with Copper Ridge Exploration Inc. (“Copper Ridge”) for the Company’s Duke Island copper-nickel-platinum-palladium property in southeast Alaska.

The Agreement provides that Copper Ridge can earn up to a 51% interest in the Duke Island Property by issuing one million pre-consolidation shares to the Company and spending $3 million on exploration by December 31, 2012.  The amount of $750,000 of the $3 million is a firm commitment to be spent by December 31, 2010. The firm commitment of $600,000 will be allocated to drilling expenses to target the intrusive to a depth of up to 2,000 feet. Copper Ridge may increase its interest in the Duke Island Property to 65% by spending an additional $2 million on exploration by December 31, 2013.

Page 6 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Copper Ridge has completed geologic mapping, and detailed geochemical sampling over the core of the main Marquis prospect. A 1,500 meter drill test of the highest priority drill targets is planned to be carried out during the 2010 field season.

Herbert Glacier Gold Project – Alaska

 The U.S. Forest Service has approved the Company’s Plan of Operations drilling permit for the Herbert Glacier Project. The permit approves drilling from six sites to explore for gold mineralization hosted in a mesothermal quartz vein system.  Quaterra signed an option agreement with Grande Portage Resources Ltd. on June 17, 2010.

Total acquisition costs incurred to June 30, 2010 for both Duke Island and Herbert Glacier properties were $276,325 and exploration expenditures were $2,415,741 for a total of $2,692,066.  Acquisition costs incurred to December 31, 2009 were $275,707 and exploration expenditures were $2,410,713 for a total of $2,686,420.

Uranium Project – Arizona, Utah and Wyoming

Quaterra’s Arizona Strip uranium project includes some of the most prospective uranium properties in the northern district. Now totaling approximately 38 square miles with more than 200 VTEM geophysical anomalies, the Company’s land position controls much of the future production potential of the northern district.  Quaterra’s assets include 3 mineralized breccia pipes; one (A-20) which could be among the larger identified in the district, 4 drill-defined pipe structures that remain untested in the favorable horizon for uranium mineralization, and 5 possible structures that have been defined by shallow drilling or have collapse structures clearly visible at the surface.

Exploration on federal lands in the Arizona Strip is presently restricted by a segregation order that is in force until July of 2010 when the Secretary of the Dept. of the Interior will decide if and what specific areas are to be withdrawn from mineral entry. Quaterra’s activities have strong local and state support and the Company is optimistic that efforts to withdraw federal lands will not be successful. The uranium of this prolific district represents an enormous domestic supply of clean energy and many jobs at a time when both are critical to the needs of the country.

Although the segregation restricts exploration on federal lands, the regulations do not affect exploration activity or access to conduct exploration on Arizona State lands in the district where 16 high and moderate priority geophysical anomalies have been identified by the Company’s airborne VTEM survey.  The Company’s land position now includes 9 square miles of Arizona State Mineral Exploration Permits within the heart of the uranium district. In contrast to the segregated area, exploration on state mineral properties is encouraged and permitting is relatively easy.

Some of the most recent and insightful summaries of the issues regarding the Arizona Strip district were given as testimonies by Dr. Madan Singh, Director of the Arizona Department of Mines and Mineral Resources, and Dr. Michael Berry, a noted economist and expert in national natural resource strategy for the April 8, 2010 Congressional Subcommittee hearing in Flagstaff, Arizona.  Copies of Dr. Singh’s and Dr. Berry’s testimonies are available at:  http://www.acertgroup.com

Page 7 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Acquisition costs incurred to June 30, 2010 were $4,001,857 and exploration expenditures were $7,471,097 for a total of $11,472,954.  Acquisition costs incurred to December 31, 2009 were $3,951,141 and exploration expenditures were $7,391,365 for a total of $11,342,506.

Nieves Property – Mexico

The Company and 50% joint-venture partner Blackberry Ventures 1, LLC, completed a successful 29 hole, 6,118.7 meter in-fill drilling program during the fourth quarter of 2009 and the first quarter of 2010. All holes were drilled within the La Quinta stockwork veinlet silver deposit, a series of veins and veinlets located along the Concordia-Gregorio Vein. The purpose of the program was to in-fill the core area of the known La Quinta deposit for 200 meters along strike and up to 200 vertical meters below surface. Holes were drilled on 25-meter centers between existing holes drilled on 50-meter centers.

Almost all of the holes intersected relatively shallow zones of continuous silver mineralization ranging between 30 and 70 meters in thickness and between one and three ounces in grade, often including narrower intervals of higher grade silver mineralization ranging between 15 and 38 meters in thickness and 3.2 to 9.5 ounces in grade. La Quinta stockwork mineralization has now been traced by drilling for almost 1,000 meters along strike and has been tested by close-spaced drilling for over 200 meters of this distance. The shallow and uniform nature of mineralization makes it possible for open pit mining.

The extensive and consistent silver values have provided impetus to expedite metallurgical testing, an induced polarization survey and updated NI43-101 resource estimate by Caracle Creek International Consulting Inc., all aimed at evaluating the possibility of open pit mining.

The La Quinta stockwork deposit remains open along strike and at depth. The Concordia vein is only one of several veins on the Company’s claim group known to contain high grade silver. In addition, several untested geophysical anomalies may represent additional sites of mineralization. Specific work plans will be developed following completion of the work described above.

The Company and 50% joint-venture partner Blackberry Ventures 1, LLC, announced on August 5, 2010, the completion by Caracle Creek International Consulting Inc. of Toronto, Canada of an updated NI43-101 compliant independent resource estimate for its Nieves silver property in northern Zacatecas, Mexico.

Concordia and San Gregorio vein systems, Nieves Property

Estimated mineral resources1

Vein	Zone	Classification	Tonnes (t)	Au (g/t)	Ag (g/t)	Au (oz) 2	Ag (oz) 2
Concordia	La Quinta	Indicated	4,589,800	0.104	103.446	15,347	15,265,294
Concordia	La Quinta	Inferred	10,516,387	0.079	85.527	26,711	28,917,951
San Gregorio	North	Inferred	4,005,417	0.15	79.41	19,446	10,226,479

Page 8 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

1) Prepared by Michelle Stone, P.Geo., Caracle Creek International Consulting Inc., an independent Qualified Person within the meaning of NI 43-101, using a reporting cut-off grade of 45 g/t Ag.

2) 1 troy ounce = 31.103 grams.

Nieves’ indicated resource of 4.5 million tonnes averaging 103.4 g/t silver (3.02 oz/ton) contains 15.26 million ounces of silver. The inferred resources at La Quinta and North total 14.5 million tonnes averaging 83.8 g/t silver (2.45 oz/ton) containing an additional 39.1 million ounces of silver

The Caracle Creek report concludes that the resource displays strong continuity along strike and down dip and that mineralization continues beyond the extent of current drilling. The report recommends additional drilling to the west and east along both the Concordia and San Gregorio veins.

Since inception to June 30, 2010, the Company had incurred $1,462,292 for acquisition costs and $2,310,456 for exploration expenditures giving a total of $3,772,748 for its 50% interest in Nieves.  The Company’s joint venture partner, Blackberry had spent, including the Company’s administration fee, US$3,889,263 for its 50% interest in Nieves.

Other Mexico Properties – Goldcorp IFA

The IFA currently includes 12 properties covering over 950 square miles with exploration focused on discovering large Peñasquito-style gold-silver deposits. Work is in progress on the following properties:

· Mirasol. Eight core holes (3,339 meters) have been completed with one additional hole planned. Drilling at the Aguila prospect targeting epithermal gold mineralization has failed to find the feeder zone. Testing of several induced polarization anomalies has intersected weak sedex copper mineralization in an isolated black shale basin with assays pending.

· Americas. Nine lines of IP have defined an anomalous IP zone that has a strike length of 2500 meters (strongest part is 1500 meters), a near vertical dip and a width of about 500 meters. Quaterra discovery drill hole AMD-3, which intersected 12 meters averaging 59g/tonne silver, appears to have just cut the very top part of the anomalous body. Drilling will begin in August.

· Sierra Sabino. Goldcorp has designated this property as an Advanced Project under the terms of the IFA. A 1,500-meter core drilling program will began in July to test at least four separate targets identified by mapping, geochemistry and IP.

· Santo Domingo. Mapping is about 90% complete on this large copper- gold target.

Other Properties – United States

See Note 5 in the consolidated financial statements for the six months ended June 30, 2010 for discussion on other properties being explored by the Company.

Mineral Property Expenditure

During the six months ended June 30, 2010, the Company incurred $5,180,602 on mineral property expenditures. The total mineral properties expenditure was allocated as follows: 42% on MacArthur, 38.26% on Mexico properties except Nieves, 6.6% on Nieves, 4.5% on Yerington, 2.52% on Uranium properties, 0.11% on the Alaska properties, and 6.01% on other properties, in the United States.

Page 9 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Information on all mineral property expenses by property can be found in Note 5 of the consolidated financial statements dated June 30, 2010.

The deferred mineral property costs as at June 30, 2010 were as follows:

All Mineral Properties	Balance December 31,		Additions				Change during		Balance June 30,
	2009			Q1		Q2	the period		2010
Summary by Expenditures
Total acquisition	$	11,336,930	$	924,020	$	402,942	$	1,326,962	$	12,663,892
Total exploration		24,754,753		1,932,931		1,920,709		3,853,640		28,608,393
Total	$	36,091,683	$	2,856,951	$	2,323,651	$	5,180,602	$	41,272,285
Summary by Property
Nieves, net of cost recovery	$	3,430,646	$	254,337	$	87,765	$	342,102	$	3,772,748
Other properties, Mexico		4,317,754		1,062,627		919,508		1,982,135		6,299,889
MacArthur copper		9,369,779		1,295,164		880,217		2,175,381		11,545,160
Yerington copper		2,399,160		64,813		168,568		233,381		2,632,541
Alaskan properties		2,686,420		1,690		3,956		5,646		2,692,066
Uranium properties		11,342,506		57,298		73,150		130,448		11,472,954
Other properties, US		2,545,418		121,022		190,487		311,509		2,856,927
Total	$	36,091,683	$	2,856,951	$	2,323,651	$	5,180,602	$	41,272,285

Review of Financial Results

For the six months ended June 30, 2010 (“2010”), the Company reported a net loss of $2,215,392 compared to a net loss of $2,452,700 in the same period previous year (“2009”).  The decrease of $237,308 in loss in 2010 was mainly attributable to the decrease in stock-based compensation expense and interest costs for the convertible notes in 2009 which were converted to common shares in November 2009. A comparison of general administration expenses for the six months ended June 30, 2010 and 2009 is provided in the table below:

General Administrative Expenses

General administrative expenses include overheads associated with administering and financing the Company’s exploration activities.

Page 10 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

	Six Months Ended June 30,						Increase
	2010			2009			(decrease)
General and administrative expenses
Administration and office expenses	$	288,176		$	368,713		$	(80,537	)
Consulting		171,713			183,701			(11,988	)
Directors' fees		57,250			48,750			8,500
Investor relations and communications		169,940			87,264			82,676
Professional fees		239,850			216,224			23,626
Salaries and benefits		384,820			235,269			149,551
Transfer agent and regulatory		143,395			76,666			66,729
Travel & promotion		72,006			19,753			52,253
		1,527,150			1,236,340			290,810
Other expenses (income) and non-cash items:
General exploration		310,677			162,123			148,554
Interest income		(5,413	)		(353	)		5,060
Foreign exchange gain		(7,474	)		(183,215	)		(175,741	)
Administration fees		(56,048	)		(7,366	)		48,682
Interest and financing costs		7,918			335,060			(327,142	)
Stock-based compensation		409,960			790,263			(380,303	)
Fair value of warrant re-pricing		-			84,115			(84,115	)
Amortization		28,622			35,733			(7,111	)
		688,242			1,216,360			(772,116	)
Total	$	2,215,392		$	2,452,700		$	(481,306	)

General administrative expenses were increased by $290,810, or 24%, (excluding non-cash items), reflecting the Company’s increased activities in the current period.

A summary of the changes is outlined below:

a) Administration and office general expenses decreased by $80,537 from $368,713 in 2009 to $288,176 in 2010 due to the decrease in the related party administration fees.

b) Consulting fees decreased by $11,988 from $183,701 in 2009 to $171,713 in 2010 reflecting the amended financial and advisory service agreement with Roman Friedrich & Company in September 2009 for a reduced fee of $7,500 instead of $15,000 per month. The decrease was partially offset by additional consulting fees related to Arizona Uranium property in 2010.

c) Investor relations and communications increased by $82,676 from $87,264 in 2009 to $169,940 in 2010 resulting from resumed promotional activities and conferences.

d) Professional fees increased by $23,262 from $216,224 in 2009 to $239,850 in 2010 resulting primarily from the increased legal fees related to the Goldcorp transaction.

e) Salaries and benefits increased by $149,551 from $235,269 in 2009 to $384,820 in 2010 resulting from the voluntary 2009 salary reduction from the executive officers including CEO, CFO and VP Exploration of the Company. In 2010, the salaries are back to the original amounts.

f) Transfer agent and regulatory fees increased by $66,729 from $76,666 in 2009 to $143,395 in 2010 due to the regulatory fees in Mexico and fees related to the annual general meeting.

Page 11 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Other and Non-Cash Expenses (Income)

a) General exploration costs: These costs represent expenditures to undertake and support exploration activities on the Company’s properties. If the expenditures are deemed not to be specifically related to individual properties or not recoverable, they are expensed as incurred. Exploration costs increased by $148,554 due to the increased exploration activates for the current period.

b) Foreign exchange: The Company recognized a foreign exchange gain of $7,474 in 2010 compared to $183,215 in 2009 due to the fluctuation of Canadian dollar. Volatility in the foreign exchange rate could continue to result in foreign exchange gains or losses. The Company does not actively hedge its exposure to changes in the value of the Canadian dollar.

c) Stock-based compensation decreased by $380,303 from $790,263 in 2009 to $409,960 in 2010. The values of stock-based compensation were determined by Black-Scholes option pricing model.

d) Higher interest and financing costs in 2009 are the result of the effective interest cost and finders’ fees on the convertible notes. All notes were converted in November 2009.

e) The Company charges 10% administration fee on its Nieves joint venture partner’s shared exploration costs and 5% on its central Mexico properties under Goldcorp agreement.

Quarterly Information Trends

The following quarterly information is derived from the Company’s consolidated financial statements:

	June 30, 2010			March 31, 2010			December 31, 2009			September 30, 2009
General administrative expenses	$	(848,023	)	$	(707,749	)	$	(427,667	)		(627,501	)
Interest earned		929			4,484			2,375			522
Joint venture admin		30,614			25,434			23,033			3,604
Foreign exchange		187,015			(179,541	)		(86,918	)		505,089
General exploration		(251,264	)		(59,413	)		(95,890	)		(165,668	)
Loss		(880,729	)		(916,785	)	$	(585,067	)		(283,954	)
Financing and interest costs		(3,019	)		(4,899	)		(108,636	)		(150,128	)
Stock-based compensation		(201,598	)		(208,362	)		(2,437,134	)		(192,378	)
Share purcahse warrants modified		-			-			(11,137	)		-
Write-offs of mineral property		-		$	-			(767,280	)		-
Net loss		(1,085,346	)		(1,130,046	)		(3,909,254	)		(626,460	)
Unrealized gain (loss) on investment		1,334			(9,667	)		(12,866	)		-
Basic loss per share	$	(0.01	)	$	(0.01	)	$	(0.04	)	$	(0.01	)

Page 12 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

	June 30, 2009			March 31, 2009			December 31, 2008			September 30, 2008
General administrative expenses	$	(540,287	)	$	(731,784	)	$	(1,045,336	)	$	(847,581	)
Interest earned		71			282			2,386			17,572
Joint venture admin		2,621			4,745			9,755			33,570
Foreign exchange		409,851			(226,638	)		13,600			432,199
General exploration		(38,899	)		(123,224	)		(178,467	)		(267,439	)
Loss		(166,643	)		(1,076,619	)		(1,198,062	)		(631,679	)
Financing and interest costs		(163,173	)		(171,887	)		(33,752	)		-
Stock-based compensation		(382,776	)		(407,487	)		(530,283	)		(305,942	)
Share purcahse warrants modified		(84,115	)		-			-			-
Net loss		(796,707	)		(1,655,993	)		(1,762,097	)		(937,621	)
Basic loss per share	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.01	)

The Company has had no revenue from mining operations since its inception. Major variations in costs are summarized below:

· Mineral property expenditures can vary widely from quarter to quarter depending on the timing of option payments and the stages and priorities of the exploration program.

· The Company receives management fees on the Blackberry joint venture and other Mexico properties under Goldcorp IFA agreement, the amount of which varies dependent on the level of project expenditures.

· Foreign exchange gains and losses arise because the Company conducts certain of its activities and holds financial assets in the US and Mexico in US dollars and Mexican Pesos, but reports its financial results in Canadian dollars.

· Stock based compensation amounts can vary widely from quarter to quarter based on the timing, amount and tenure of stock option awards.

· Interest earned and financing costs vary based on the timing, type and amount of debt and equity placements and resultant fluctuations in cash.

Related Party Information

Manex Resource Group (“Manex”), a private company controlled by a director of the Company provided comprehensive management, administration, equipped office space, investor relations and corporate secretarial services to the Company. These services were provided in the normal course of operations for consideration established and accepted by the Company and Manex, which management believes was reasonable and cost-effective under the circumstances.  Please see consolidated financial statements Note 8 for more detailed information.

The Company is party to an agreement dated March 27, 2006 with Atherton Enterprises Ltd. (“Atherton”), which was amended in July 2008 and December 2008, to retain the services of Mr. Scott Hean as Chief Financial Officer at an annual fee of $175,000.

Page 13 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Financial Conditions, Liquidity and Capital Resources

The Company has limited financial resources and finances its operations by raising capital in the equity markets.  As at August 9, 2010, the Company has cash and cash equivalents of $6.4 million, with the excess cash being invested in short-term bankers’ acceptances.

The Company will need to rely on the sale of equity and/or the optioning of its mineral property interests via joint venture agreements with third parties to provide working capital and to finance its mineral property acquisition and exploration activities.  Since the Company does not generate any revenue from operations, its long-term profitability will be directly related to the success of its mineral property acquisition and exploration activities.

As at June 30, 2010, the Company had a working capital of $8,305,040 compared to a working capital of $4,431,663 as at December 31, 2009. During the six months ended June 30, 2010, the Company received gross proceeds of US$4 million from a private placement, $5,879,696 from the exercise of warrants, $451,100 from the exercise of stock options, and US$508,664 from Blackberry Joint Venture Partner.

In six months ended June 30, 2010, the Company incurred expenditures of $2,353,664 (2009 - $124,380) in operations and $4,250,923 (2009 - $2,018,083) in mineral properties.

Commitments and Contingencies

As at August 9, 2010, the Company has the following contractual and optional obligations:

	Total		2010			2011 - 2013		2014 - 2015	2016 after
Mineral properties (a)	$	10,285,100	$	944,300	$	6,109,739	$	2,911,681	$	319,380
Office Lease (b)		300,000		75,000	$	225,000		-		-
Total	$	10,585,100	$	1,019,300	$	6,334,739	$	2,911,681	$	319,380

a) The Company is required to make option payments and other expenditure commitments to maintain the properties and earn its interest.

b) During 2007, the Company entered into a service agreement with Manex Resource Group (“Manex”) for its Vancouver office space, administration, and corporate development. The agreement can be cancelled upon one year notice. The current expiry date is June 30, 2012. The Company also had two office leases in Kanab, Utah and Yerington, Nevada United States.

Outstanding Shares, Stock Options and Share Purchase Warrants

As at August 9, 2010, 122,924,551 common shares were issued and outstanding, 15,512,623 warrants were outstanding at a weighted average exercise price of $0.61 and 8,941,000 stock options were outstanding and exercisable at a weighted average exercise price of $1.60.

Page 14 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Off Balance Sheet Arrangements

None

Disclosure Controls and Internal Control over Financial Reporting

Management has evaluated the effectiveness of our disclosure controls and procedures and has concluded based on our evaluation that they are effective to provide reasonable assurance that material information relating to the Company is made known to management and disclosed in accordance with applicable securities regulations.

Internal control over financial reporting has been designed, based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP.

Management, under the supervision of the CEO and CFO, has evaluated the effectiveness of our internal control over financial reporting using the framework designed as described above and based on this evaluation, the CEO and CFO have concluded that internal control over financial reporting was effective as of June 30, 2010 and there have been no significant changes to internal control over financial reporting in the three months ended June 30, 2010.

Because of inherent limitations, internal control over financial reporting and disclosure controls can provide only reasonable assurances and may not prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to future years are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Audit Committee of the Company has reviewed this MD&A, and the consolidated financial statements for the six months ended June 30, 2010, and the Board of Directors approved these documents prior to their release.

Future Changes in Accounting Standards

Transition to International Financial Reporting Standards (“IFRS”)

In February 2008, the CICA Accounting Standards Board (“AcSB”) confirmed that Canadian GAAP for publicly accountable enterprises will be converged with IFRS effective for fiscal years beginning on or after January 1, 2011. The Company’s transition date is January 1, 2011 and will require the restatement for comparative purposes of amounts reported beginning on January 1, 2010.   The Company has developed a conversion implementation plan in the first quarter of 2009 and commenced the transition process from Canadian GAAP to IFRS. The process includes three phases:

1. Scoping and diagnostic – this phase included completion of a high-level impact assessment to identify key areas that may be affected by the conversion. Based on the results of this assessment, a detailed implementation plan was developed. The Company completed this phase in the first quarter of 2009.

Page 15 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

2. Detailed Evaluation – in this phase, further evaluation of the financial statement areas impacted by IFRS is conducted. The evaluation includes detailed analysis of the IFRS–Canadian GAAP differences, and the selection of accounting policy choices under IFRS. This phase also includes a review of the impact on information technology and data systems, internal control over financial reporting, disclosure controls and procedures, financial reporting expertise and training requirements, and business activities (including compensation program and other contractual arrangements). Based on the analysis performed to date, the Company is not expecting its information technology and data system or its business activities to be significantly impacted. Phase 2 began in the second quarter of 2009 and is completed in the first quarter of 2010.

3. Implementation and Review – this phase includes implementation of the required changes necessary for IFRS compliance. The various accounting policy choices available are being assessed and those determined to be most appropriate for the Company will be implemented. IFRS 1, “First-Time Adoption of International Financial Reporting Standards”, provides entities adopting IFRSs for the first time with a number of optional exemptions and mandatory exceptions to facilitate the preparation of the opening balance sheet. The Company will monitor changes in IFRS leading up to the January 1, 2011 adoption date, and update its conversion efforts as required. Phase 3 began in the fourth quarter of 2009 and continues through 2010.

Based on the review undertaken under Phase 1 and Phase 2, the relevant IFRS-GAAP differences and possible impact that management expects IFRS will have on the Company’s financial position are summarized in the following table. IFRS will also have more extensive disclosure and analysis of balances and transactions in the notes to the financial statements.

Key areas	Canadian GAAP	IFRS	Preliminary analysis
Capital assets	Capital assets are recorded at cost.	Under IFRS 1, capital assets can be recorded at historical cost or at fair value. The carrying value must be assessed annually or when events or circumstances occur which could impair the carrying value.	The Company will continue to record the capital assets at cost due to the complexity and the resources required to reassess fair value on a regular basis.
	Each capital asset’s cost, less residual value, if any, is depreciated over its estimated useful life.	Depreciation is based on the estimated useful life of each major component of each asset.	Definition of components of major assets could impact deprecation charges.
Mineral properties and deferred exploration costs	Exploration, evaluation and development costs can be either capitalized or expensed when incurred.	IFRS provides only limited guidance on this topic and currently allows the Company to continue its current treatment.	The existing policy of capitalizing exploration costs will be maintained.

Page 16 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Impairment of long-lived assets	Mineral properties, capital assets and deferred exploration costs are tested for impairment on an annual basis or when there are indicators of impairment.	Same as Canadian GAAP.	The use of discounted future cash flows as an indicator of impairment may increase the likelihood of write downs in the future.
	The impairment test is a two-step process whereby an asset’s carrying value is compared against undiscounted future cash flows. If the latter is less than the carrying value, the asset is written down to the amount of its discounted future cash flows.	Impairment test is a one-step process whereby the asset’s carrying value is compared to its discounted future cash flows. The asset is written down to its future estimated discounted cash flows. Unlike Canadian GAAP, asset write downs can be reversed if indicators of impairment cease to exist.	The use of discounted cash flow models for the Company, a junior mining exploration company with no revenues, is not deemed the appropriate method to determine impairment in all circumstances. Management will continue to consider alternative impairment tests.
Foreign currencies	The Company has determined that the Canadian dollar is its functional currency. Functional currency is determined by the reference to the following: The Currency used in day-to-day operations; and The Currency used for labor, materials and other costs of the product or service.	IFRS provides more guidance in determining functional currency. Functional currency is defined as the currency of the primary economic environment in which the entity operates. IFRS provides additional factors to consider in determining functional currency including: The currency in which funds from financing activities are generated; and The currency in which receipts from operating activities are usually retained.	The Company is in the process of analyzing its functional currency under IFRS. It is likely that the Company’s functional currency will remain the Canadian dollar.
Stock-based compensation	Stock-based compensation is determined using the Black Scholes option pricing model. Allows use of the straight-line method or accelerated method to account for graded-vesting features.	Stock-based compensation is determined using the Black Scholes option pricing model. For graded-vesting features, each installment or vesting period is treated as a separate share option grant, and hence the fair value of each vesting period will differ.	The recognition of the value of stock-based compensation will be higher in early vesting periods and will decrease as options approach the final vesting period.

Page 17 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Financial and other Instruments

The Company’s activities expose it to a variety of risks arising from financial instruments. Please refer to Note 11 in the consolidated financial statements June 30, 2010 for detailed discussions.

The Company’s investment as at June 30, 2010 was carried at fair value. In the six months ended June 30, 2010, the Company reported an unrecognized loss of $8,333 from mark-to-market adjustments on the investment.

Risks and Uncertainties

The principal business of the Company is the exploration and development of mineral properties. Given the nature of the mining business, the limited extent of the Company's assets and the present stage of development, the following risk factors, among others, should be considered.

The Company does not generate any revenues from production. The Company’s success will depend largely upon management’s ability to discover and develop commercially productive mineral reserves. Mineral exploration is highly speculative in nature, involves many risks and frequently is non-productive. There is no assurance that our exploration efforts will be successful. Success in establishing reserves is a result of a number of factors, including the quality of management, the level of geological and technical expertise, the quality of land available for exploration as well as various other factors.

Once mineralization is discovered, it may take several years in the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to extract the metals from the ore and, in the case of new properties, to obtain required permits and construct mining and processing facilities. Because of these uncertainties, no assurance can be given that the exploration programs will result in the establishment or expansion of resources or reserves or the ultimate development of mining operations.

Since the Company does not generate any revenues, it may not have sufficient financial resources to undertake by itself all of its planned mineral property acquisition and exploration activities.  Operations will continue to be financed primarily through the sale of securities such as common shares. The Company will need to continue its reliance on the sale of such securities for future financing, which may result in dilution to existing shareholders.  Furthermore, the amount of additional funds required may not be available under favorable terms, if at all, and will depend largely on the acquisition and exploration activities pursued.

Page 18 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

The ability to attract capital to the Company is dependent on a number of factors including commodity prices. Commodity prices fluctuate on a daily basis and they are affected by a number of factors beyond the control of the Company. If, because of a sustained decline in prices, financing were not available to meet cash operating costs, the feasibility of continuing operations would be evaluated and if warranted, would be discontinued.

The resource industry is intensively competitive in all of its phases, and the Company competes with many other companies possessing much greater financial and technical resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped properties.  The principal competitive factors in the acquisition of prospective properties include the staff and data necessary to identify and investigate such properties, and the financial resources necessary to acquire and develop the projects.  Competition could adversely affect the Company’s ability to acquire suitable prospects for exploration.

Licenses and Permits

The operations of the Company require licenses and permits from various government authorities. The Company believes that it holds all necessary licenses and permits under applicable laws and regulations for work in progress and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations that economically justify the cost.

Forward-Looking Statements

Some of the statements contained in this MD&A are forward-looking statements, such as estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur.

Forward-looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”.  Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results relating to, among other things, results of exploration, reclamation, capital costs,  and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this MD&A.

Page 19 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements.  These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements.  Further information regarding these and other factors, which may cause results to differ materially from those projected in forward-looking statements, are included in the filings by the Company with securities regulatory authorities. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.

Page 20 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

For ease of reference, the following information is provided:

Canadian Dollars per U.S. Dollar
	June 30, 2010		December 31, 2009
Rate at end of period		1.0646		1.0510
Average rate for period		1.0342		1.1420
High for period		1.0745		1.2991
Low for period		0.9988		1.0259
www.bankofcanada.com

Conversion Table
Imperial			Metric
1 Acre	=	0.404686	Hectares
1 Foot	=	0.304800	Metres
1 Mile	=	1.609344	Kilometres
1 Ton	=	0.907185	Tonnes
1 Ounce (troy)/ton	=	34.285700	Grams/Tonne

Precious metal units and conversion factors
ppb	- Part per billion	1	ppb	=	0.0010	ppm	=	0.000030	oz/t
ppm	- Part per million	100	ppb	=	0.1000	ppm	=	0.002920	oz/t
oz	- Ounce (troy)	10,000	ppb	=	10.0000	ppm	=	0.291670	oz/t
oz/t	- Ounce per ton (avdp.)	1	ppm	=	1.0000	ug/g	=	1.000000	g/tonne
g	- Gram
g/tonne	- gram per metric ton	1	oz/t	=	34.2857	ppm
mg	- milligram	1	Carat	=	41.6660	mg/g
kg	- kilogram	1	ton (avdp.)	=	907.1848	kg
ug	- microgram	1	oz (troy)	=	31.1035	g

Page 21 of 22

Quaterra Resources Inc.

Management’s Discussion and Analysis

For the Six Months Ended June 30, 2010

Glossary of Abbreviations

Ag:	Silver
Ag gm/t:	Silver grade measured in grams per metric tonne
	Converts to ounces per ton by dividing by 34.286
AMR:	Advance minimum royalty payments
Au:	Gold
Au gm/t:	Gold grade measured in grams per metric tonne
	Converts to ounces per ton by dividing by 34.286
Ba:	Barium
CAD:	Canadian dollars
Co:	Cobalt
CSAMT:	Controlled source audio-frequency magneto telluric geophysical survey
Cu:	Copper
EIS:	Environmental Impact Statement
Fe:	Iron
43-101:	Canadian National Instrument 43-101
gpm:	gallons per minute
gpt:	grams per tonne
g/t:	grams per tonne
IP:	Induced Polarization geophysical survey
m.y:	Million years
Ni:	Nickel
NSR:	Net smelter return royalty
Oz:	Troy ounce
oz/t or opt:	Ounces per ton.
Pb:	Lead
Pd:	Palladium
PGE:	Platinum Group Element
PGM:	Platinum group minerals
PPB:	Parts per billion
PPM:	Parts per million
Pt:	Platinum
S:	Sulphur
TD:	Total depth of a drill hole.
tpd:	Tonnes per day
TSX-V	Toronto Stock Exchange - Venture Exchange
US$:	U.S. dollars
U3O8:	Uranium oxide known as “yellow cake”.
VLF:	Very low frequency electromagnetic geophysical survey
VMS:	Volcanogenic massive sulphide

Page 22 of 22

EX-99.3

Exhibit 99.3

Form 52-109F2 Certification of Interim Filings

Full Certificate

I, Scott B Hean, Chief Financial Officer of Quaterra Resources Inc., certify the following:

1. Review: I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of Quaterra Resources Inc. (the “issuer”) for the interim period ended June 30, 2010;

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings;

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings;

4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer;

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislations is recorded, processed, summarized and reported within the time periods specified in securities legislations; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is the COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework.

5.2 ICFR – material weakens relating to design: N/A

5.3 Limitation on scope f design: N/A

6. Reporting changes in ICFR: the issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2010 and ended on June 30, 2010 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Dated: August 11, 2010

/s/ “Scott B. Hean”

_______________________

Scott B Hean

Chief Financial Officer

EX-99.4

Exhibit 99.4

Form 52-109F2 Certification of Interim Filings

Full Certificate

I, Thomas C. Patton, Chief Executive Officer of Quaterra Resources Inc., certify the following:

1. Review: I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of Quaterra Resources Inc. (the “issuer”) for the interim period ended June 30, 2010;

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings;

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings;

4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer;

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislations is recorded, processed, summarized and reported within the time periods specified in securities legislations; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is the COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework.

5.2 ICFR – material weakens relating to design: N/A

5.3 Limitation on scope f design: N/A

6. Reporting changes in ICFR: the issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2010 and ended on June 30, 2010 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Dated: August 11, 2010

/s/ “Thomas C. Patton”

_______________________

Thomas C. Patton

Chief Executive Officer