UNITED
      STATES


SECURITIES
        AND EXCHANGE
        COMMISSION
 Washington,
        D. C. 20549
 
 FORM
        10-KSB
 
 (Mark
        One)
 [X]
        ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934
 
 For
        the fiscal year ended August 31, 2007
 
 [
        ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF
        1934
 
 For
        the transition period from ___________ to ___________
 
 Commission
        File Number: 000-32015
 
 Aztec
        Oil & Gas,
        Inc.
 (Name
        of small business issuer in its charter)
  Nevada
                
                90-0251902(State
                    or other jurisdiction of Identification No.)
                
                (IRS
                    Employer incorporation or
                    organization)
 One
        Riverway, Suite 1700,
        Houston, Texas 77056
 (Address
        of principal executive offices) (zip code)
 
 Issuers
        telephone number: (713) 840-6444
 Fax
        number: (713) 622-1937
 
 Securities
        registered under Section 12(b) of the Exchange Act: None
 
 Securities
        registered under Section 12(g) of the Exchange Act:
 
 Common
        Stock, par value $0.001
 (Title
        of class)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days. Yes [X] No
        [  ]
  Check
        if there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this Form, and no disclosure will be contained,
        to
        the best of Registrant's knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB. [  ]
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes [  ] No [X]
  State
        the issuer's revenue for its most recent fiscal year (ending August 31, 2007):
        $
        114,706
  State
          the aggregate market value of the
          voting and non-voting common equity held by non-affiliates computed by
          reference
          to the price at which the common equity was sold, or the average bid and
          asked
          prices of such common equity, as of December 21, 2007: $1,195,088 (19,918,130
          shares times $0.06).
 
 State
          the number of shares outstanding
          of each of the issuer's classes of common equity, as of the most practicable
          date: As
          of December 21, 2007, there were
          30,777,772 shares of Common Stock, $0.001 par value,
          outstanding.
  Transitional
          Small Business Disclosure Format (Check one): Yes [  ] No
          [X]
  1
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            to Table of Contents
  
 TABLE
        OF
        CONTENTS
 
 PART
                      I
                  PAGEItem
                      1. Description of
                      Business
                  3Item
                      2. Description of
                      Property
                  8Item
                      3. Legal
                      Proceedings
                  8Item
                      4. Submission of Matters to a
                      Vote of Security Holders
                  8PART
                      II
                  8Item
                      5. Market
                      for Common Equity and Related Stockholder Matters and Small
                      Business
                      Issuer Purchases of Equity Securities
                  9Item
                      6. Management's Discussion
                      and Analysis or Plan of Operation
                  9Item
                      7. Financial
                      Statements
                  11Item
                      8. Changes in and
                      Disagreements with Accountants on Accounting and Financial
                      Disclosure
                  23Item
                      8A. Controls and
                      Procedures
                  23PART
                      IIIItem
                      9.
                      Directors, Executive Officers, Promoters and Control Persons;
                      Compliance
                      with Section 16(a) of the Exchange Act
                  23Item
                      10. Executive
                      Compensation.
                  26Item
                      11. Security Ownership of
                      Certain Beneficial Owners and Management
                  29Item
                      12. Certain Relationships and
                      Related Transactions, and Director Independence
                  30Item
                      13.
                      Exhibits
                  30Item
                      14. Principal Accountant Fees
                      and Services.
                  31SIGNATURES
                  32
 
  2
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            to Table of Contents
 PART
          I
 
 ITEM
          1. DESCRIPTION OF
          BUSINESS.
 
 As
          used
          in this Form 10-KSB, references to “Aztec,” “Company,” the “Registrant,” “we,”
“our” or “us” refer to Aztec Oil & Gas, Inc., including its subsidiaries,
          unless the context otherwise indicates.
 
 Forward-Looking
          Statements
 
 This
          Annual Report on Form 10-KSB (this “Report”) contains forward-looking
          statements.  For this purpose, any statements contained in this Report
          that are not statements of historical fact may be deemed to be forward-looking
          statements.  Forward-looking information includes statements relating
          to future actions, prospective products, future performance or results
          of
          current or anticipated products, sales and marketing efforts, costs and
          expenses, interest rates, outcome of contingencies, financial condition,
          results
          of operations, liquidity, business strategies, cost savings, objectives
          of
          management, and other matters.  You can identify forward-looking
          statements by those that are not historical in nature, particularly those
          that
          use terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“contemplates,” “estimates,”  “believes,” "plans,” “projected,”
“predicts,” “potential,” or “continue” or the negative of these similar
          terms.  The Private Securities Litigation Reform Act of 1995 provides
          a “safe harbor” for forward-looking information to encourage companies to
          provide prospective information about themselves without fear of litigation
          so
          long as that information is identified as forward-looking and is accompanied
          by
          meaningful cautionary statements identifying important factors that could
          cause
          actual results to differ materially from those projected in the
          information.
 
 These
          forward-looking statements are not guarantees of future performance and
          involve
          risks, uncertainties and assumptions that we cannot predict. In evaluating
          these
          forward-looking statements, you should consider various factors, including
          the
          following: (a) those risks and uncertainties related to general economic
          conditions, (b) whether we are able to manage our planned growth efficiently
          and
          operate profitable operations, (c) whether we are able to generate sufficient
          revenues or obtain financing to sustain and grow our operations, (d) whether
          we
          are able to successfully fulfill our primary requirements for cash, which
          are
          explained below under “Liquidity and Capital Resources”.  We assume no
          obligation to update forward-looking statements, except as otherwise required
          under the applicable federal securities laws.
 
 (a)
          BUSINESS
          DEVELOPMENT
 
 Business
          Development, Organization and
          Acquisition Activities
 
 The
          Company was originally organized
          under the name Aztec Communications Group as a Utah corporation (“Aztec
          Communications”).  Aztec Communication’s original principal business
          objective involved its participation in the broadcast and television business
          through its then wholly-owned subsidiaries, Lloyd Communications, Inc.,
          an
          Illinois corporation (“Lloyd”), and Golden Circle Broadcasting Inc., a Tennessee
          corporation (“Golden Circle”).  As a result of adverse business
          circumstances, in 1990, the Company sold Lloyd and Golden Circle and ceased
          its
          business operations in the broadcast and television business.  No
          material business operations were conducted by the Company from 1990 until
          2004.  In 2004, the Company changed its name from Aztec Communications
          Group, Inc. toAztec Oil
& Gas, Inc.and
          reorganized under the laws of the State of Nevada.  Since 2004,Aztec's business
          plan has
          been to purchase, manage
          and participate inoil
          and gas interests utilizing strategies that seek to manage and reduce the
          risks associated with traditional exploration and production
          operations.
 
 On
          August 13, 2004, the Registrant
          effectuated a 3-for-1 forward stock split.
 
 Aztec
          is a Houston-based, development
          stage oil and gas exploration and production company focusing on numerous
          areas
          in the U.S.
 
 BUSINESS
          OF ISSUER
 
 Principal
          Products,
          Services and Principal Markets.
 
 Phase
          one ofAztec's business
          plan calls for
          purchasingworkinginterests
          in producing oil & gas
          properties with undrilled reserves.Aztec's
          growth strategy is partially
          based on participation, as it intends to team up with outside participation
          investors who will assumepart or all ofthe
          costs associated with the drilling
          of additional wells in exchange for a part of the revenues derived from
          the
          wells they finance. The Company expects that implementation of this strategy
          should allow a reduction in the financial risks for Aztec in drilling new
          wells,
          while Aztec would still be receiving income from present field production
          in
          addition to income from any successful new drilling.
 
 Phase
          two of Aztec's business plan calls
          for investing in various drilling prospects with industry professionals.
          Aztec
          has participated in ten drilling projects in Texas, Oklahoma, and Louisiana.
          Four of the wells have been completed, three are awaiting evaluation and
          completion, and three have been plugged and abandoned. Aztec is also
          participatingas a working
          interest ownerin a
          forty-threewell
          project in Pennsylvania.Of the 43 wells drilled,
          19
          are currently in production as of August 31, 2007, 4 wells were turned
          on line
          in late September 2007 and 5 wells are waiting for pipeline tap
          installation.
 
 Phase
          three of Aztec’s business plan
          calls for originating, developing and managing balanced, low risk, highly
          focused developmental drilling projects with investors in areas with low
          drilling costs and high success rates where the process can be repeated
          in a
          relatively consistent manner.  This stage further balances Aztec’s
          approach to profitable energy asset development through low-risk, highly
          focused, predominantly “development” drilling projects in which Aztec seeks
          participation from multiple individual and entity investors.
 
 Aztechas
          alimitedoperating
          history since 2004 with oil
          and gas properties upon which an evaluation of the Company, its current
          business
          and its prospects can be based, each of which must be considered in light
          of the
          risks, expenses and problems frequently encountered by all companies in
          the
          early stages of development, and particularly by such companies entering
          new
          areas of business.Aztec’sprospects
          must be considered in light of
          the risks, uncertainties, expenses and difficulties frequently encountered
          by
          companies in their early stages of a new business plan, particularly companies
          involved in the highly competitive oil and gas industry. Such risks include,
          without limitation, the ability of the Company to manage its operations,
          including the amount and timing of capital expenditures and other costs
          relating
          to the expansion of theCompany’s
          operations, direct and indirect
          competitors of the Company, including those with greater financial, technical
          and marketing resources, the inability of the Company to attract, retain
          and
          motivate qualified personnel and general economic
          conditions.
  Aztechas
          not demonstrated a successful
          business plan or profitability to date and anticipates that it will continue
          to
          incur net losses for the foreseeable future. The extent of these losses
          will
          depend, in part, on the amount of expenditures the Company incurs in executing
          its business strategy. As of August 31, 2007,Aztechad
          an accumulated deficitof $(4,967,409)andexpects
          that its operating expenses will
          increase as it defines its new business strategy, especially in the areas
          of
          acquisitions.
 
 Thus,Aztecwill
          need to generate revenues to
          achieve profitability. To the extent that increases in its operating expenses
          precede or are not subsequently followed by commensurate increases in revenues,
          or thatAztecis
          unable to adjust operating expense
          levels accordingly, the Company’s business, results of operations and financial
          condition would be materially and adversely affected. There can be no assurances
          that the Company can achieve or sustain profitability or that the Company’s
          operating losses will not increase in the future.
 
 Aztecparticipated
          in a minority participation
          interest in a two-well drilling program in the Deep Lake Field in Cameron
          Parish, Louisiana (State Lease 2038). Under the terms of the participation
          agreement Aztecparticipatedas
          a minority interest holder in
          drilling and completion of two wells in excess of 13,500 feet each. The
          first well (Deep Lake Well No. 2)was ”spudded” in April 2005 andcost approximately
          $3.5
          million(gross)to
          drill to a vertical
          depth of approximately 14,300 feet. The second well (Deep Lake Well
          No. 1) was drilled to an approximate vertical depth of 13,600 feet. Both
          wellswerecompleted into
          target
          zonesand are now flowing
          commercial quantities of natural gas and condensate.  Both wells have
          untapped upper zones which are estimated to contain substantial additional
          reserves.
 
 Early
          in May 2005 Aztecannounced its participation
          in a
          minority interest in one well, the McCoy #2, in the Barnett Shale play
          area of
          Texas.  The well was completed in 2006  and initially
          produced primarily oil with limited gas; however gas flows have increased
          over
          time.  The well is currently producing but has experienced mechanical
          issues that have caused production to vary significantly.  The
          Operator continues to address these issues while attempting to produce
          the
          well.
 
 On
          October 26, 2005, Aztecpurchaseda
          minority working interest in a program
          to drill up to 40 natural gas wells located in Cambria, Clearfield and
          Potter
          counties in Pennsylvania.Of
          the 43 wells drilled to
          date, 19 are currently in production as of August 31, 2007, 4 wells were
          turned
          on line in late September 2007, and 5 wells are waiting for the pipeline
          tap
          installation.
 
 During
          December 2006, Aztec Oil & Gas, Inc. completed the funding of its first new
          drilling partnership, the Aztec 2006A Oil & Gas Limited Partnership, with 22
          outside investors. The new multi-well drilling program based in the Doddridge
          County area of West Virginia commenced drilling in February 2007. Four
          wells
          have been completed as of the date of this report. The wells are connected
          to
          the gas pipeline and producing both gas and oil.  Aztec raised
          $1,132,384, net of related fees and fair value of warrants associated with
          the
          private placement, from outside investors toward funding the
          partnership.
 
 In
          this
          new Partnership, Aztec, through its wholly-owned subsidiary, Aztec Energy,
          LLC,
          will retain thirty percent ownership and will act as the Managing General
          Partner. Another Aztec subsidiary, Aztec Drilling & Operating, LLC, serves
          as the Partnership’s drilling company and operator.
 
 As
          of the
          date of this report, Aztec has raised $888,724, net of related fees and
          fair
          value of warrants associated with the private placement, from outside investors
          toward funding another partnership
 
 As
          indicated  by the
          previously discussed partnerships,Aztec is currently
          in its third stage of
          development. In this stage, Aztecfocuseson
          drilling in basins, such as in the
          Appalachian regions of the United States, which arenear
          the high energy usage “northeastern
          corridor” of the United States. We intend to participate in such regions with a
          select number of local, highly experienced operators who have access to
          leases
          located in geological trends that have demonstrated substantial historical
          production, plus potential remaining reserves which have the potential
          to be
          exploited in a low-risk, systematic fashion. Such local operators have
          been, and
          will in the future be selected by Aztec on the basis of their demonstrated
          track
          records for exploiting known oil and natural gas reserves in a timely and
          cost-effective manner.
 
 In
          order to execute our business plan,
          we have entered into consulting agreements with several of our officers
          and
          directors to provide financial services to the Company.  The Company
          plans to retain consultants with respect to current and proposed properties and
          operations.  The Company, from time to time, may retain independent
          engineering and geological consultants and the services of lease brokers
          and
          geophysicists in connection with its operations.
 
 Developing
          New Business Strategies
 
 Aztecwill
          analyze all relevant factors and
          make a determination based on a composite of available information, without
          reliance on any single factor. The period within whichAztecwill
          decide to participate in a given
          business venture cannot be predicted and will depend on certain factors,
          including the time involved in identifying businesses, the time required
          for the Company to complete its analysis of such businesses, the time
          required to prepare appropriate documentation and other
          circumstances.
 
 Uncertainties
          Related to the Oil and Gas
          Business in General
 
 Aztec's
          current business is subject to all of
          the risks normally incident to the exploration for and production of oil
          and gas, including blow-outs, cratering, pollution, fires, and theft of
          equipment. Each of these incidents could result in damage to or destruction
          of oil and gas wells or formations or production facilities or injury to
          persons, or damage to or loss of property. As is common in the oil and gas
          industry,Aztecis
          not fully insured against these
          risks either because insurance is not available or becauseAztchas elected
          not to insure due to
          prohibitive premium costs.
 
 The
          oil and gas business is further
          subject to many other contingencies which are beyond the control ofAztec.
          Wells may have to be shut-in because
          they have become uneconomical to operate due to changes in the price of
          oil,
          depletion of reserves, or deterioration of equipment. Changes in the price
          of
          imported oil, the discovery of new oil and gas fields and the development
          of
          alternative energy sources have had and will continue to have a dramatic
          effect
          on the Company's business.
 
 Risks
          Associated with
          Acquisitions
 
 If
          appropriate opportunities present
          themselves,Aztecwould
          acquire businesses, technologies,
          services or product(s) that the Company believes are
          strategic.
 
 Azteccurrently
          has no understandings,
          commitments or agreements with respect to any other material acquisition
          and no other material acquisition is currently being pursued. There can be
          no assurance thatAztecwill
          be able to identify, negotiate
          or finance future acquisitions successfully, or to integrate such
          acquisitions with its current business. The process of integrating an
          acquired business, technology, service or product(s) into the Company may
          result in unforeseen operating difficulties and expenditures and may absorb
          significant management attention that would otherwise be available
          for ongoing development of the Company's business. Moreover, there can be
          no assurance that the anticipated benefits of any acquisition will be
          realized. Future acquisitions could result in potentially dilutive
          issuances of equity securities, the incurrence of debt, contingent
          liabilities and/or impairment or amortization expenses related to goodwill
          and other intangible assets, which could materially adversely affect the
          Company's business, results of operations and financial condition. Any
          future acquisitions of other businesses, technologies, services or
          product(s) might requireAztecto
          obtain additional equity or debt
          financing, which might not be available on terms favorable toAztec,
          or at all, and such financing, if
          available, might be dilutive.
 
 Because
          the Oil and Gas industry is
          cyclical, the Company's operating results may fluctuate.
 
 Aztec's
          operating results may fluctuate
          significantly in the future as a result of a variety of factors, many of
          which are outsideAztecs
          control.As
          a strategic response to changes in
          the competitive environment,Aztecmay
          from time to time have to make
          certain pricing, marketing decisions or acquisitions that could have a
          material short-term or long-term adverse effect onAztec’s
          business, results of operations
          and financial condition.
 
 Oiland
          natural gasprices have been
          and are expected to
          remain volatile. This volatility causes oil and gas companies and drilling
          contractors to change their strategies and expenditure levels.Aztecmay
          experience in the future,
          significant fluctuations in operating results based on these
          changes.
  There
          can be no assurance that such
          patterns will not have a material adverse effect onAztec’s
          business, results of operations and
          financial condition. There can be no assurance thatAztecwill
          receive any material amount of
          revenue as it pursues new business strategies in the future. The foregoing
          factors, in some future quarters, may leadAztecs
          operating results to fall below the
          expectations.
  Competition
 
 The
          search for viable oil and gas
          prospects and leases is intensely competitive.  The Company will
          compete with other business entities, many of which will have a competitive
          edge
          over the Company by virtue of their stronger financial resources and prior
          experience in the business.  There is no assurance that the Company
          will be successful in identifying and executing suitable business
          opportunities.
 
 There
          are many companies and individuals
          engaged in the oil and gas business.  Some are very large and well
          established with substantial capabilities and extensive earnings
          records.  The Company is at a competitive disadvantage as compared
          with some other firms and individuals in acquiring and developing oil and
          gas
          properties since our competitors may have greater financial resources and
          larger
          technical staffs than the Company.  In addition, in recent years a
          number of small companies have been formed which have objectives similar
          to
          those of the Company and which present substantial competition to the
          Company.
 
 A
          number of factors, beyond the
          Company’s control and the effect of which cannot be accurately predicted, affect
          the production and marketing of oil and natural gas.  These factors
          include crude oil imports, actions by foreign oil producing nations, the
          availability of adequate pipeline and other transportation facilities,
          the
          marketing of competitive fuels and other matters affecting the availability
          of a
          ready market, such as fluctuating supply and demand.
 
 Government
          Regulation
 
 In
          general, our oil and gas production
          activities are, and any drilling operations of the Company would be, subject
          to
          extensive regulation by numerous federal, state and local governmental
          authorities, including state conservation agencies, the Department of Energy
          and
          the Department of the Interior (including the Bureau of Indian Affairs
          and
          Bureau of Land Management).  Regulation of the Company’s production,
          transportation and sale of oil or gas has a significant effect on the Company
          and its operating results.
 
 The
          current production operations of the
          Company are, and any drilling operations of the Company would be, subject
          to
          regulation by state conservation commissions which have authority to issue
          permits prior to the commencement of drilling activities, establish allowable
          rates of production, control spacing of wells, prevent waste and protect
          correlative rights, and aid in the concentration of natural gas and
          oil.  Typical state regulations require permits to drill and produce
          oil, protection of fresh water horizons, and confirmation that wells have
          been
          properly plugged and abandoned.
 
 In
          addition, various federal and state
          authorities have the authority to regulate the exploration and development
          of
          oil and gas and mineral properties with respect to environmental
          matters.  Such laws and regulations, presently in effect or as
          hereafter promulgated, may significantly affect the cost of our current
          oil and
          gas production and any exploration and development activities undertaken
          by the
          Company and could result in loss or liability to the Company in the event
          that
          any such operations are subsequently deemed inadequate for purposes of
          any such
          law or regulation.
 
 Patents,
          Trademarks, Licenses,
          Franchises, Concessions, Royalty Agreements, or Labor
          Contracts
 
 Withregards
          to the Company’s future oil and
          gas production, the Company does not hold any patents, trademarks, licenses,
          etc., with respect to, nor are patents significant in regard to, the Company’s
          oil and gas production activities.  The Company plans to enter into
          confidentiality agreements with its future employees, future suppliers
          and
          future consultants and in connection with its license agreements with third
          parties and generally seeks to control access to and distribution of its
          technology, documentation and other proprietary information.  Despite
          these precautions, it may be possible for a third party to copy or otherwise
          obtain and use the Company’s proprietary information without authorization or to
          develop similar technology independently.
 
 Employees
 
 The
          Company currently has one President
          who is also the Chief Executive Officer, one Chief Financial Officer, one
          Senior
          Economist, one Corporate Secretary and a separate Director.  The
          President is also an employee and other than hiring a secretary/administrative
          assistant,  the Company has no present intention of adding any more
          full time employees until it substantially increases its income.  The
          Company plans to retain consultants with respect to current and proposed
          properties and operations.  The Company, from time to time, may retain
          independent engineering and geological consultants and the services of
          lease
          brokers and geophysicists in connection with its operations.
  Risk
          Factors
 
 Risk
          Factors Relating to Our
          Business
 
  The
          drilling of natural gas and oil wells is highly speculative and risky and
          may
          result in unprofitable wells.Natural
          gas and oil
          drilling is a highly speculative activity. The wells drilled may not be
          productive. Even completed wells may not produce enough natural gas or
          oil to
          show a profit. Delays and added expenses may also be caused by poor weather
          conditions affecting, among other things, the ability to lay
          pipelines.
  Prices
          for natural gas and oil have been quite unstable; a decline could cause
          the
          Company to be unprofitable.Global
          economic
          conditions, political conditions, and energy conservation have created
          unstable
          prices. Revenues of each well are directly related to natural gas and oil
          prices
          which the Company cannot predict. A decline in gas and oil prices would
          result
          in lower revenues for the Company. Prices for natural gas and oil are likely
          to
          remain extremely unstable.
  Rapid
          growth of production in the Appalachia regions may result in lower prices
          and
          production restrictions until new pipeline facilities are put in
          service.The Appalachian
          Region,
          including areas of the Company's West Virginia prospects, has sometimes
          in the
          past experienced lower prices and occasional curtailments resulting from
          a local
          oversupply situation for natural gas. This situation has abated; however,
          if
          excess production exceeds the additional pipeline capacity, or if producers
          continue to successfully develop new supplies in the area and if additional
          pipeline facilities or markets are not developed to utilize or transport
          the new
          supplies, a local surplus could continue or reoccur, resulting in lower
          prices
          and/or production curtailment.
  Environmental
          hazards involved in drilling gas and oil wells may result in substantial
          liabilities for the Company.There
          are numerous
          natural hazards involved in the drilling of wells, including unexpected
          or
          unusual formations, pressures, blowouts, etc. involving possible damages
          to
          property and third parties, surface damages, bodily injuries, damage to
          and loss
          of equipment, reservoir damage and loss of reserves. Uninsured liabilities
          may
          result in the loss of Company properties. The Company may be subject to
          liability for pollution, abuses of the environment and other similar damages.
          Insurance coverage may be insufficient to protect the Company. In that
          event,
          Company assets would pay personal injury and property damage claims and
          the
          costs of controlling blowouts or replacing destroyed equipment rather than
          for
          drilling activities. These payments would cause the Company to be less
          profitable.
  Increases
          in drilling costs would reduce the Company's profitability.The oil
          and gas
          industry historically has experienced periods of rapid cost increases.
          Increases
          in the cost of exploration and development would affect the ability of
          the
          Company to acquire additional leases, gas and oil equipment, and supplies.
          The
          foregoing would increase costs and may lead, depending on the price which
          the
          Company receives for its oil or gas, to lower profits of the
          Company.
  Reduced
          availability of drilling rigs, due in part to intense competition in drilling,
          may delay the drilling of wells.A large
          number of
          companies and individuals engage in drilling for natural gas and oil; and
          there
          is competition for the most desirable leases as well as materials and equipment
          to drill and complete wells. Increased drilling operations in some areas
          of the
          United States have resulted in the decreased availability of drilling rigs
          and
          gas/oil field tubular goods. Also, international developments and the possible
          improved economics of domestic oil and gas exploration may influence others
          to
          increase their domestic oil and gas exploration. These factors may reduce
          the
          availability of rigs, equipment and services to the Company resulting in
          delays
          in drilling activities. The reduced availability of rigs, equipment and
          services
          could delay the Company in drilling wells on a timely basis and delay the
          production of natural gas or oil.
  Local
          delays in Company gas or oil production could reduce the Company's
          profitability.Wells
          drilled for the
          Company may have access to only one potential market. Local conditions
          including
          but not limited to closing businesses, conservation, shifting population,
          pipeline maximum operating pressure constraints and develop­ment of local
          oversupply or deliverability problems could halt or reduce sales from Company
          wells. A delay in the production and sale of the Company's gas and oil
          could
          reduce the Company's profitability.
 
 
 Risks
          Relating to Our Common
          Shares
 
 We
          may, in the future, issue additional
          common shares, which would reduce investors’ percent of ownership and may dilute
          our share value.
 
 Our
          Articles of Incorporation authorize
          the issuance of 100,000,000 shares of common stock and 100,000 shares of
          preferred stock.  The future issuance of common stock may result in
          substantial dilution in the percentage of our common stock held by our
          then
          existing shareholders.  We may value any common stock issued in the
          future on an arbitrary basis.  The issuance of common stock for future
          services or acquisitions or other corporate actions may have the effect
          of
          diluting the value of the shares held by our investors, and might have
          an
          adverse effect on any trading market for our common stock.
 
 Our
          common shares are subject to the
“Penny Stock” Rules of the SEC and the trading market in our securities is
          limited, which makes transactions in our stock cumbersome and may reduce
          the
          value of an investment in our stock.
 
 The
          Securities and Exchange Commission
          has adopted Rule 15g-9 which establishes the definition of a “penny stock”, for
          the purposes relevant to us, as any equity security that has a market price
          of
          less than $5.00 per share or with an exercise price of less than $5.00
          per
          share, subject to certain exceptions.  For any transaction involving a
          penny stock, unless exempt, the rules requires: (a) that a broker or dealer
          approve a person’s account for transactions in penny stocks; and (b) the broker
          or dealer receive from the investor a written agreement to the transaction,
          setting forth the identity and quantity of the penny stock to be
          purchased.
 
 In
          order to approve a person’s account
          for transactions in penny stocks, the broker or dealer must: (a) obtain
          financial information and investment experience objectives of the person;
          and
          (b) make a reasonable determination that the transactions in penny stocks
          are
          suitable for that person and the person has sufficient knowledge and experience
          in financial matters to be capable of evaluating the risks of transactions
          in
          penny stocks.
 
 The
          broker or dealer must also deliver,
          prior to any transaction in penny stock, a disclosure schedule prescribed
          by the
          Commission relating to the penny stock market, which, in highlight form:
          (a)
          sets forth the basis on which the broker or dealer made the suitability
          determination; and (b) that the broker or dealer received a signed, written
          agreement from the investor prior to the transaction.  Generally,
          brokers may be less willing to execute transactions in securities subject
          to the
“penny stock” rules.  This may make it more difficult for investors to
          dispose of our Common shares and cause a decline in the market value of
          our
          stock.
 
 Disclosure
          also has to be made about the
          risks of investing in penny stocks in both public offerings and in secondary
          trading and about the commissions payable to both the broker-dealer and
          the
          registered representative, current quotations for the securities and the
          rights
          and remedies available to an investor in cases of fraud in penny stock
          transactions.  Finally, monthly statements have to be sent disclosing
          recent price information for the penny stock held in the account and information
          on the limited market in penny stocks.
 
 Because
          we do not intend to pay any cash
          dividends on our common stock, our stockholders will not be able to receive
          a
          return on their shares unless they sell them.
 
 We
          intend to retain any future earnings
          to finance the development and expansion of our business.  We do not
          anticipate paying any cash dividends on our common stock in the foreseeable
          future.  Unless we pay dividends, our stockholders will not be able to
          receive a return on their shares unless they sell them.  There is no
          assurance that stockholders will be able to sell shares when
          desired.
 
 We
          may issue shares of preferred stock
          in the future that may adversely impact the rights of the holders
          of our common
          stock.
 
 Our
          articles of incorporation authorize
          us to issue up to 100,000 shares of “blank check” preferred
          stock.  Accordingly, our board of directors will have the authority to
          fix and determine the relative rights and preferences of preferred shares,
          as
          well as the authority to issue such shares, without further stockholder
          approval. As a result, our board of directors could authorize the issuance
          of a
          series of preferred stock that would grant the holders preferred rights
          to ours
          assets upon liquidation, the right to receive dividends before dividends
          are
          declared to holders of our common stock, and the right to the redemption
          of such
          preferred shares, together with a premium, prior to the redemption of the
          common
          stock.  To the extent that we do issue such additional shares of
          preferred stock, the rights of the holders of our common stock could be
          impaired
          thereby, including, without limitation, dilution of their ownership interests
          in
          us.  In addition, shares of preferred stock could be issued with terms
          calculated to delay or prevent a change in control or make removal of management
          more difficult, which may not be in the interest of holders of common
          stock.
 
 ITEM
          2. DESCRIPTION OF
          PROPERTY.
 
 The
          Company's corporate headquarters are
          located at One Riverway, Suite 1700, Houston, Texas 77056. Our telephone
          number
          is (713) 840-6444.
 
 ITEM
          3. LEGAL
          PROCEEDINGS.
 
 There
          are
          no pending legal proceedings to which the Company is a party or in which
          any
          director, officer or affiliate of the Company, any owner of record or
          beneficially of more than 5% of any class of voting securities of the Company,
          or security holder is a party adverse to the Company or has a material
          interest
          adverse to the Company.  The Company’s property is not the subject of
          any pending legal proceedings.
  ITEM
          4. SUBMISSION OF MATTERS TO A VOTE
          OF SECURITY HOLDERS.
 
 The
          Company did not submit any matters
          to a vote of security holders during the fiscal year ended August 31,
          2007.
 
 PART
          II
 
 ITEM
          5. MARKET FOR COMMON EQUITY AND
          RELATED STOCKHOLDER MATTERS.
 
 Market
          Information
 
 The
          Company's common stock was cleared
          for trading on the OTC Bulletin Board system. Our stock symbol is AZGS. For
          the year ended August 31, 2007, the prices of the common stock in the
          over-the-counter market, as reported and summarized by the OTC Bulletin
          Board
          were $0.19
          high bid, and $0.03
          low asked. Such prices are based
          on inter-dealer bid and asked prices, without markup, markdown, commissions,
          or
          adjustments and may not represent actual transactions.
 
 The
          table below sets forth the high and
          low bid prices of our common stock for each quarter shown, as provided by
          the NASD Trading and Market Services Research Unit. Quotations reflect
          inter-dealer prices, without retail mark-up, mark-down or commission and
          may not represent actual transactions.
 CALENDAR
                    QUARTER
                
                HIGH
                
                LOWFISCAL
                    2005Quarter
                    ended November 30, 2004
                
                $2.90
                
                $0.10Quarter
                    ended February 28, 2005
                
                $1.78
                
                $0.81Quarter
                    ended May 31, 2005
                
                $2.49
                
                $0.67Quarter
                    ended August 31, 2005
                
                $0.70
                
                $0.47FISCAL
                    2006Quarter
                    ended November 30, 2005
                
                $0.51
                
                $0.28Quarter
                    ended February 28, 2006
                
                $0.32
                
                $0.15Quarter
                    ended May 31, 2006
                
                $0.26
                
                $0.13Quarter
                    ended August 31, 2006
                
                $0.22
                
                $0.10FISCAL
                    2007Quarter
                    ended November 30, 2006
                
                $0.10
                
                $0.03Quarter
                    ended February 28, 2007
                
                $0.13
                
                $0.07Quarter
                    ended May 31, 2007
                
                $0.18
                
                $0.11Quarter
                    ended August 31, 2007
                
                $0.19
                
                $0.03
 
 Holders
 
 The
          approximate number of holders of
          record of common stock as of November 30, 2007 was approximatelyone hundred twenty
          (120).
 
 Dividends
 
 The
          Company has never paid or declared
          any dividend on its Common Stock and does not anticipate paying cash
          dividends in the foreseeable future. Holders of common stock are entitled
          to receive such dividends as the board of directors may from time to time
          declare out of funds legally available for the payment of dividends. The
          Company does not anticipate paying any dividends on its common stock in the
          foreseeable future.
 
 Stock
          Repurchase
 
 The
          Company did not repurchase any of
          its shares during the fiscal year covered by this report.
 
 Recent
            Sales of Unregistered Securities; Use of Proceeds from Registered
            Securities
 
 As
            of the
            date of this report, Aztec has raised $888,724 net of related fees and
            fair
            value of warrants associated with the private placement from outside
            investors
            toward funding another partnership.
 
 ITEM
          6. MANAGEMENT'S DISCUSSION AND
          ANALYSIS OR PLAN OF OPERATION.
 
 (i)
          General
 
 This
          Management’s Discussion and Analysis or Plan of Operations (“MD&A”) section
          of this Report discusses our results of operations, liquidity and financial
          condition, and certain factors that may affect our future results. You
          should
          read this MD&A in conjunction with our financial statements and accompanying
          notes included in this Report.
 
 PLAN
          OF OPERATION
 
 The
          Company is a developmental stage
          company whose principal business objective is to purchase, initiate and/or
          participate in oil and gas interests utilizing strategies that seek to
          manage
          and reduce the risk associated with traditional exploration and production
          operations.
 
 The
          Company believes it has sufficient
          funding to sustain itself for the next twelve months. However, there can
          be no
          assurances to that effect, as the Company has little revenue. In the event
          the
          Company requires additional funds, the Company will have to seek loans
          or equity
          placements to cover such cash needs. There is no assurance additional capital
          will be available to the Company on acceptable terms.
 
 Management
          is in the process ofseeking other
          businessesor
          propertiesto
          acquireso that it can
          expand its operations. The analysis of new businesses and property acquisition
          opportunities and evaluating new business strategies will be undertaken by
          or under the supervision of the Company's directors. In analyzing
          prospective business opportunities, management will consider, to the extent
          applicable, the available technical, financial and managerial resources of
          any given business venture. Management will also consider the nature of
          present and expected competition; potential advances in research and
          development or exploration; the potential for growth and expansion; the
          likelihood of sustaining a profit within given time frames; the perceived
          public recognition or acceptance of products, services, trade or service
          marks; name identification; and other relevant factors. The Company
          anticipates that the results of operations of a specific business venture
          may not necessarily be indicative of the potential for future earnings,
          which may be impacted by a change in marketing strategies, business
          expansion, changing or substantially augmenting management, and other
          factors.
 
 Management
          will analyze all relevant
          factors and make a determination based on a composite of available information,
          without reliance on any single factor. The period within which the Company
          will
          decide to participate in a given business venture cannot be predicted and
          will
          depend on certain factors, including the time involved in identifying
          businesses, the time required for the Company to complete its analysis
          of such
          businesses, the time required to prepare appropriate documentation and
          other
          circumstances.
 
 RESULTS
          OF
          OPERATIONS
 
 Fiscal
          Year Ended August 31, 2007 Compared to Fiscal Year Ended August 31,
          2006.
 
 For
          the twelve months ended August 31,
          2007, the Company recognized partnership income of $0 and interest income
          of $485 as compared to partnership income of $213,660 and interest income
          of $30,316 for the same period last year.  The decrease is
          attributable to the profitable sale of the Company’s interest in Z2, LLC in
          February 2006.  For the twelve months ended August 31, 2007, the
          Company had oil and gas revenueof $114,706as
          compared to $6,049 for the same
          period last year. Oil and Gas Expenses were $30,079for
          the twelve month period, which
          resulted in a net Oil and Gas Gain of $84,627.
          Total operating expenses for the
          twelve months ended August 31, 2007 were $2,333,755as
          compared to $1,001,751 for the
          same period last
          year.
 
 As
          of
          August 31, 2007, we had $4,771 in available cash and a working capital
          deficit
          of $(294,417)  During December 2006, Aztec Oil & Gas, Inc.
          completed the funding of its first new drilling partnership, the Aztec
          Oil &
Gas 2006A Oil & Gas Limited Partnership, with 22 outside investors. The new
          multi-well drilling program based in the Doddridge County area of West
          Virginia
          commenced in February 2007. Four wells have been drilled and connected
          to the
          pipeline as of the date of this report.
 
 As
          of the
          date of this report Aztec has raised $888,724 net of related fees and fair
          value
          of warrants associated with the private placement from outside investors
          toward
          funding another partnership.
 
 In
          these
          new Partnerships, Aztec, through its wholly-owned subsidiary, Aztec Energy,
          LLC,
          will retain thirty percent ownership and will act as the Managing General
          Partner. Another Aztec subsidiary, Aztec Drilling & Operating, LLC, serves
          as the Partnership’s drilling company and operator.
 
 
 The
          Company has limited financial
          resources available, which has had an adverse impact on the Company's
          liquidity, activities and operations. These limitations have adversely
          affected the Company's ability to obtain certain projects and pursue
          additional business.We may have to borrow money from shareholders or
          issue debt or equity or enter into a strategic arrangement with a third
          party.
          There can be no assurance that additional funds will be available to
          us.
 
 The
          Company has an agreement with CSI
          Energy, LP (“CSI”) wherein CSI has agreed to provide the Company with funds as
          needed to permit the Company to meet its monthly operating expenses and
          other
          obligations as they become due over the twelve month period following August
          31,
          2007. Other than the CSI agreement, the Company does not have any preliminary
          agreements or understandings between the Company and its officers and directors
          with respect to loans or financing to operate the Company.   As
          of the date of this report, the balance due to CSI is
          $205,560.
 
 On
          May
          31, 2007 the company signed a line of credit agreement with Amegy
          Bank.  The line of credit was for $100,000.  On August 15,
          2007 the line of credit was increased to $200,000.  As of November 30,
          2007 the company has drawn $185,000 against the line of credit.
 
 Off
          Balance Sheet Arrangements
 
 We
          have
          no off-balance sheet arrangements.
 
 ITEM
          7. FINANCIAL
          STATEMENTS.
 TABLE
        OF CONTENTS
 
 PAGEReport
                of Independent Registered
                Public Accounting Firm
              12Balance
                  Sheet
              13Statements
                  of Operations
              14Statement
                  of Stockholders' Deficit
              15Statements
                  of Cash Flows
              16Notes
                  to Financial Statements
              17-22
  11
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            to Table of Contents
 REPORT
          OF INDEPENDENT REGISTERED PUBLIC
          ACCOUNTING FIRM
 
 
 To
          the Board of Directors and
          Stockholders
 Aztec
          Oil & Gas,
          Inc.
 (A
          Development Stage
          Company)
 Houston,
          Texas
 
 We
          have audited the accompanying
          consolidated balance sheet of Aztec Oil & Gas, Inc. as ofAugust 31, 2007,
          and the related consolidated
          statements of operations, stockholders' deficit and cash flows for the year
          then ended and for the period from January 24, 1986 (inception) throughAugust 31, 2007.
          These financial statements are
          the responsibility of Aztec's management. Our responsibility is to express
          an opinion on these financial statements based on our audits. We did not
          audit
          the financial statements for the period January 24, 1986 (Inception)
          through August 31, 2003. Those statements were audited by other auditors
          whose
          report has been furnished to us, and our opinion on the statements of
          operations, stockholders' equity, and cash flows for the period
          January 24, 1986 (Inception) through August 31, 2003, insofar as it
          relates to the amounts for prior periods through August 31, 2003, is based
          solely on the report of the other auditors.
 
 We
          conducted our audits in accordance
          with standards of the Public Company Accounting Oversight Board (United
          States). Those standards require that we plan and perform each audit to
          obtain reasonable assurance about whether the financial statements are free
          of material misstatement. An audit includes examining, on a test basis,
          evidence supporting the amounts and disclosures in the financial
          statements. An audit also includes assessing the accounting principles used
          and significant estimates made by management, as well as evaluating the
          overall financial statement presentation. We believe that our audits
          provide a reasonable basis for our opinion.
 
 In
          our opinion, the financial statements
          referred to above present fairly, in all material respects, the financial
          position of Aztec as of August 31, 2007 and the results of its operations
          and
          its cash flows for each of the periods described above in conformity with
          accounting principles generally accepted in the United States of
          America.
 
 As
          discussed in Note 9 to the financial
          statements, errors resulting in an understatement of revenue and an
          understatement of general and administrative expenses were discovered by
          management in 2007.  Accordingly, adjustments have been made as of
          August 31, 2007 to correct the error.
 
 /s/
          Malone
& Bailey, PC
 Malone
&
Bailey,
          PC
 www.malone-bailey.com
 Houston,
          Texas
 
 December
          14, 2007
 12
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            to Table of Contents
  AZTEC OIL & GAS, INC.
 (A Development Stage Company)
 BALANCE SHEET
 August
              31, 2007
 Current
                            Assets
                        (Restated)Cash
                        $   4,771Accounts
                            Receivable
                        54,374Prepaid
                            Oil & Gas Costs
                        13,989Total
                            Current Assets
                        73,134Oil
                            and natural gas
                            properties, successful efforts method of accountingUnproved
                            properties  not currently amortized, net of impairment and dry
                            hole costs of $198, 953
                        1,326,097Non-current
                            AssetsRestricted
                            Funds
                        740,000TOTAL
                            ASSETS
                        $
                            2,139,231LIABILITIES
                            AND STOCKHOLDERS’
                            EQUITYCurrent
                            LiabilitiesAccounts
                            payable
                        63,977Accounts
                            payable –
                            Related-party
                        16,097Salary
                            Payable
                        7,781Notes
                            payable
                        120,000Common
                            stock
                            payable
                        159,696Total
                            current liabilities
                        367,551Long
                            Term LiabilitiesNotes
                            payable to
                            related parties
                        545,560Total
                            long term liabilities
                        545,560Total
                            Liabilities
                        913,111Minority
                            Interest
                        2,082,880Stockholders’
EquityPreferred
                            stock,
                            Series A, $.001 par value, 100,000 shares authorized,
                            issued and
                            outstanding respectively
                        100Common
                            stock, $.001 par value, 100,000,000 sharesauthorized,
                            30,477,772 issued and
                            outstanding
                        30,477Additional
                            paid-in
                            capital
                        4,080,072Deficit
                            accumulated
                            during the development stage
                        (4,967,409
                        )Total
                            Stockholders’ Deficit
                        (856,760
                        )TOTAL
                            LIABILITIES AND
                            STOCKHOLDERS’ EQUITY
                        $
                            2,139,231
 
 See
            accompanying Notes to Financial
            Statements
 
  13
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                to Table of Contents
  AZTECOIL&
GAS,
            INC.
 (A
            Development Stage
            Company)
 STATEMENTSOF
            OPERATIONS
  Years
                        Ended August
                        31,
                    
                    Through  Inception
                      August
                        31,2007
                    
                    2006
                    
                    2007Oil
                        and Gas
                        Income
                    $
                    114,706
                    
                    
                    $
                    6,049
                    
                    
                    $
                    121,056General
&
                        Administrative
                    
                    2,211,918
                    
                    
                    
                    808,905
                    
                    
                    
                    3,933,187Oil
                        and Gas
                        Expenses
                    
                    30,079
                    
                    
                    
                    11,068
                    
                    
                    
                    41,170Dry
                        Hole
                        Costs
                    
                    (450
                    )
                    
                    
                    181,778
                    
                    
                    
                    198,503Amortization
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    94,795DD&A
                    
                    9,005
                    
                    
                    
                    -
                    
                    
                    
                    9,005Impairment
                    
                    83,203
                    
                    
                    
                    -
                    
                    
                    
                    2,042,840Total
                        Operating
                        Expenses
                    
                    (2,333,755
                    )
                    
                    
                    (1,001,751
                    )
                    
                    
                    (6,319,500
                    )Partnership
                        Income
                        (Loss)
                    
                    -
                    
                    
                    
                    213,660
                    
                    
                    
                    (505,340
                    )Interest
                        Expense
                    
                    (15,327
                    )
                    
                    
                    (107,235
                    )
                    
                    
                    (381,999
                    )Gain
                        on Sale of
                        Assets
                    
                    312
                    
                    
                    
                    1,341,744
                    
                    
                    
                    1,342,056Extinguishment
                        of
                        Debt
                    
                    -
                    
                    
                    
                    271,289
                    
                    
                    
                    271,289Discount
                        on Payoff of
                        Notes
                    
                    -
                    
                    
                    
                    396,928
                    
                    
                    
                    396,928Discount
                        on Note
                        Receivable
                    
                    -
                    
                    
                    
                    (78,046
                    )
                    
                    
                    (78,046
                    )Interest
                        Income
                    
                    485
                    
                    
                    
                    30,316
                    
                    
                    
                    196,344Total
                        Non-operatingIncome
                        (Loss)
                    
                    (14,530
                    )
                    
                    
                    2,068,656
                    
                    
                    
                    1,241,232NET
                        INCOME
                        (LOSS)
                    
                    (2,233,579
                    )
                    
                    
                    1,072,954
                    
                    
                    
                    (4,957,212
                    )NetIncome(Loss)Attributable
                        toMinorityInterest
                    
                    (10,196
                    )
                    
                    
                    -
                    
                    
                    
                    (10,196
                    )NET
                        LOSS TO ATTRIBUTABLE TO COMMON
                        SHAREHOLDERS
                    $
                    (2,243,775
                    )
                    
                    $
                    1,072,954
                    
                    
                    $
                    (4,967,408
                    )Basic
                        Earnings(Loss)
                        per
                        Share
                    $
                    (0.04
                    )
                    
                    $
                    0.04Weighted
                        AverageShares
                        Outstanding
                    
                    28,438,383
                    
                    
                    
                    27,884,829Diluted
                        Earnings (Loss) per
                        Share
                    $
                    (0.04
                    )
                    
                    $
                    0.04Diluted
                        Weighted
                        AverageShares
                        Outstanding
                    
                    28,438,383
                    
                    
                    
                    27,920,694
 
 
 See
            accompanying Notes to Financial
            Statements
  14
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                to Table of Contents
  AZTEC
            OIL & GAS,
            INC.
 (Formerly
            Aztec Communications Group,
            Inc.)
 (A
            Development Stage
            Company)
 CONSOLIDATEDSTATEMENT
            OF STOCKHOLDERS’
DEFICIT
 Year
            Ended August 31,
            2007
 (Restated)
 Preferred
                            Stock
                        
                        Common
                            Stock
                        
                        Additional
                            Paid In
                            Capital
                        
                        Accumulated
                            During the Development
                            Stage
                        
                        TotalsBalances,
                            August 31,
                            2003
                        $
                        -
                        
                        $
                        22,107
                        
                        $
                        1,937,430
                        
                        
                        
                        $
                        (1,964,637
                        )
                        
                        $
                        (5,100
                        )Stock
                            Issued for
                            Services
                        
                        50
                        
                        
                        2,400
                        
                        
                        84,550
                        
                        
                        
                        
                        -
                        
                        
                        
                        87,000Stock
                            Issued for
                            Cash
                        
                        50
                        
                        
                        
                        
                        
                        14,950
                        
                        
                        
                        
                        -
                        
                        
                        
                        15,000Net
                            Loss
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        
                        
                        (166,303
                        )
                        
                        
                        (166,303
                        )Balances,
                            August 31,
                            2004
                        
                        100
                        
                        
                        24,507
                        
                        
                        2,036,930
                        
                        
                        
                        
                        (2,130,940
                        )
                        
                        
                        (69,403
                        )Stock
                            Issued for
                            Services
                        
                        -
                        
                        
                        2,775
                        
                        
                        357,741
                        
                        
                        
                        
                        -
                        
                        
                        
                        360,516Net
                            Loss
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        
                        
                        (1,665,648
                        )
                        
                        
                        (1,665,648
                        )Balances,
                            August 31,
                            2005
                        
                        100
                        
                        
                        27,282
                        
                        
                        2,394,671
                        
                        
                        
                        
                        (3,796,588
                        )
                        
                        
                        (1,374,535
                        )Stock
                            Issued for
                            Services
                        
                        -
                        
                        
                        1,773
                        
                        
                        310,728
                        
                        
                        
                        
                        -
                        
                        
                        
                        312,501FAS
                            123R Compensation
                            expense
                        
                        -
                        
                        
                        -
                        
                        
                        50,723
                        
                        
                        
                        
                        -
                        
                        
                        
                        50,723Net
                            Income
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        
                        
                        1,072,954
                        
                        
                        
                        1,072,954Balances,
                            August 31,
                            2006
                        
                        100
                        
                        
                        29,055
                        
                        
                        2,756,122
                        
                        
                        
                        
                        (2,723,634
                        )
                        
                        
                        61,643Stock
                            Issued for
                            Services
                        
                        
                        
                        
                        1,422
                        
                        
                        156,507
                        
                        
                        
                        
                        
                        
                        
                        
                        157,929SFAS
                            123R compensation
                            expense
                        
                        
                        
                        
                        
                        
                        
                        1,409,571
                        
                        
                        
                        
                        
                        
                        
                        
                        1,409,571Syndication
                            Costs
                        
                        
                        
                        
                        
                        
                        
                        (242,128
                        )
                        
                        
                        
                        
                        
                        
                        
                        (242,128
                        )Net
                            Income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (2,243,775
                        )
                        
                        
                        (2,243,775
                        )Balances,
                            August 31,
                            2007
                        
                        100
                        
                        $
                        30,477
                        
                        $
                        4,080,072
                        
                        
                        
                        $
                        (4,967,409
                        )
                        
                        $
                        (856,760
                        )
  Preferred 
                      Shares
                  
                  
                  Common
                      SharesBalances,
                      August 31,
                      2006
                  100,000
                  
                  
                  29,055,549Stock
                      issued for
                      Services
                  
                  
                  
                  1,422,223Balances,
                      August 31,
                      2007
                  100,000
                  
                  
                  30,477,772
  See
            accompanying notes to financial
            statements.
    15
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                to Table of Contents
 
 AZTEC OIL & GAS, INC.
 (A Development Stage Company)
 STATEMENTS OF CASH FLOWS
 
 Twelve
                                Months Ended August
                                31,
                            
                            Inception
                                Through
                              August
                                31,2007
                            
                            
                            2006
                            
                            
                            2007Cash
                                Flows Used in Operating
                                ActivitiesNet
                                Income (Loss)
                            $           (2,243,775
                            )
                            
                            $         1,072,955
                            
                            
                            $
                            (4,967,408
                            )Adjustments
                                to Reconcile Net
                                Incometo
                                Net Cash Used in Operating
                                Activities:Partnership
                                (Income) Loss
                            -
                            
                            
                            (213,660
                            )
                            
                            
                            505,340Share
                                Based Compensation
                            1,644,863
                            
                            
                            299,203
                            
                            
                            
                            2,507,540Loss
                                on Minority Interest
                            (10,196
                            )
                            
                            -
                            
                            
                            
                            (10,196
                            )Amortization
                            -
                            
                            
                            50,723
                            
                            
                            
                            150,723Gain
                                on Sale of Assets
                            -
                            
                            
                            (1,341,744
                            )
                            
                            
                            (1,341,744
                            )Gain
                                on Settlement
                            -
                            
                            
                            (349,381
                            )
                            
                            
                            (349,381
                            )Depletion
                            9,005
                            
                            
                            -
                            
                            
                            
                            9,005Dry
                                Hole Costs
                            (450
                            )
                            
                            181,778
                            
                            
                            
                            198,503Discount
                                on Note Receivable
                            -
                            
                            
                            78,046
                            
                            
                            
                            78,046Impairment
                            83,203
                            
                            
                            -
                            
                            
                            
                            2,042,840Changes
                                in:Accounts
                                Receivable
                            (54,260
                            )
                            
                            (114
                            )
                            
                            
                            (66,960
                            )Prepaid
                                Expenses
                            15,981
                            
                            
                            (16,269
                            )
                            
                            
                            (27,568
                            )Accounts
                                Payable
                            177,965
                            
                            
                            122,635
                            
                            
                            
                            444,160Accounts
                                Payable – Related
                                Party
                            16,097
                            
                            
                            -
                            
                            
                            
                            16,097Accrued
                                Expenses
                            7,781
                            
                            
                            (310,082
                            )
                            
                            
                            (258,506
                            )Net
                                Cash Used in Operating
                                Activities
                            (353,786
                            )
                            
                            (425,910
                            )
                            
                            
                            (1,069,509
                            )Cash
                                Flows Used in Investing
                                ActivitiesLoan
                                to Z3, LLC
                            -
                            
                            
                            -
                            
                            
                            
                            (1,850,000
                            )Investment
                                in Restricted
                                Funds
                            (740,000
                            )
                            
                            -
                            
                            
                            
                            (740,000
                            )Repayment
                                of Loan to Z3,
                                LLC
                            -
                            
                            
                            143,708
                            
                            
                            
                            1,862,586Payment
                                of Loan Payable
                                Costs
                            -
                            
                            
                            -
                            
                            
                            
                            (100,000
                            )Proceeds
                                for Sale of Assets
                            -
                            
                            
                            1,477,358
                            
                            
                            
                            1,477,358Acquisition
                                of Oil and Gas
                                Properties
                            (1,111,509
                            )
                            
                            (102,644
                            )
                            
                            
                            (1,446,436
                            )Prepaid
                                Well Costs
                            -
                            
                            
                            -
                            
                            
                            
                            (81,601
                            )Net
                                Cash Provided by (Used
                                in)Investing
                                Activities
                            (1,851,509
                            )
                            
                            1,518,422
                            
                            
                            
                            (878,093
                            )Cash
                                Flows Provided by Financing
                                ActivitiesNote
                                Payable
                            -
                            
                            
                            -
                            
                            
                            
                            1,950,000Repayment
                                of Notes Payable
                            (118,500
                            )
                            
                            (1,224,862)
                            
                            
                            
                            (2,934,179
                            )Proceeds
                                from Notes Payable
                            473,500
                            
                            
                            72,000
                            
                            
                            
                            1,066,667Proceeds
                                from Sales
                                of  Preferred Stock
                            -
                            
                            
                            -
                            
                            
                            
                            15,000Proceeds
                                from Limited
                                Partnership
                            1,854,885
                            
                            
                            -
                            
                            
                            
                            1,854,885Net
                                Cash Provided by (Used
                                in)Financing
                                Activities
                            2,209,885
                            
                            
                            (1,152,862
                            )
                            
                            
                            1,952,373Net
                                Increase (Decrease) in
                                Cash
                            4,590
                            
                            
                            (60,350
                            )
                            
                            
                            4,771Cash
                                at Beginning of Period
                            181
                            
                            
                            60,531
                            
                            
                            
                            -Cash
                                at End of Period
                            $                     4,771
                            
                            
                            $                  181
                            
                            
                            $
                            4,771Cash
                                paid during the year
                                for:Interest
                            $15,326
                            
                            
                            $236,990Tax
                            $
                            
                            
                            $
                                -
 See
            accompanying Notes to Financial
            Statements
 
 
  16
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                to Table of Contents
  AZTEC
            OIL & GAS,
            INC.
 (A
            DEVELOPMENT STAGE
            COMPANY)
 NOTES
            TO FINANCIAL
            STATEMENTS
 
 NOTE
            1 - NATURE OF OPERATIONS AND
            SUMMARY OF ACCOUNTING POLICIES
 
 Nature
            of
            Business.Aztec
            Oil & Gas, Inc. was initially known as Aztec Communications Group, Inc. was
            organized in Utah on January 24, 1986, and did not have any activity
            from 1990
            until 2004.  In mid-2003, there was a change in control and new
            management elected to pursue oil and gas exploration and development.
            In
            November 2003, Aztec reincorporated in Nevada. Aztec changed its name
            to Aztec
            Oil & Gas, Inc. on August 13, 2004. Also on August 13, 2004, Aztec affected
            a 3-for-1 forward stock split.
 
 Basis
            of
            Presentation.The preparation
            of financial
            statements in conformity with accounting principles generally accepted in
            the United States of American requires management to make estimates and
            assumptions that affect the reported amounts of assets, liabilities,
            revenues and expenses, as well as certain financial statement disclosures.
            While management believes that the estimates and assumptions used in the
            preparation of the financial statements are appropriate, actual results
            could differ from these estimates.
 
 Aztec
            is a development stage enterprise,
            as defined in Statement of Financial Accounting Standard No.
            7.  Accordingly, the statement of expenses, statement of cash flows
            and statement of shareholders equity include activity since the date
            of
            inception.  See “Nature of Business” above for activities of the
            development stage enterprise.
  Certain
            prior year amounts have been
            reclassified to conform with the2007
            presentation.
 
 Note
            9 contains details of the
            restatement of fiscal year 2007’s results.
 
 Summary
            of Accounting
            Policies
 
 Principles
            of consolidation.The
            consolidated
            financial statements include the accounts ofAztecandallits
            subsidiariesand partnerships,
            includingthe
            partnerships
            discussed in Note 8 below, in which Aztec has a controlling interest.Intercompany
            transactions are eliminated.
 
 Cash
            and Cash
            Equivalents.For
            purposes of the statement of cash flows, Aztec considers all highly liquid
            investments with original maturities of three months or less are considered
            cash
            equivalents.
 
 Oil
            and gas
            properties.Aztec uses the
            successful efforts method of accounting for oil and gas producing
            activities. Costs to acquire mineral interests in oil and gas properties,
            to drill and equip exploratory wells that find proved reserves, and to
            drill and equip development wells are capitalized. Costs to drill
            exploratory wells that do not find proved reserves, geological
            and geophysical costs, and costs of carrying and retaining unproved
            properties will be expensed.
 
 Unproved
            oil and gas properties
            that are individually significant will be periodically assessed for
            impairment of value, and a loss will be recognized at the time of
            impairment by providing an impairment allowance. Other unproved properties
            will be amortized based on Aztec's experience of successful
            drilling properties, after considering estimated abandonment costs and
            estimated salvage values, are depreciated and depleted by the
            unit-of-production method. Support equipment and other property and
            equipment are depreciated over their estimated useful
            lives.
 
 On
            the sale or retirement of a
            complete unit of a proved property, the cost and related accumulated
            depreciation, depletion and amortization are eliminated from the property
            accounts and the resultant gain or loss will be recognized. On the
            retirement or sale of a partial unit of proved property, the cost
            is charged to accumulated depreciation, depletion, and amortization with
            a resulting gain or loss recognized in income.
 
 On
            the sale of an entire interest in an
            unproved property for cash or cash equivalent, gain or loss on the sale
            will be recognized, taking into consideration the amount of any recorded
            impairment if the property had been assessed individually. If a partial
            interest in an unproved property is sold, the amount received will be
            treated as a reduction of the cost of the
            interest retained.
 
 Interest
            will be capitalized on
            expenditures for significant exploration and development projects while
            activities are in progress to bring the assets to their intended
            use.
 
 Asset
            Retirement
            Obligations.Aztec follows
            the provisions of Financial Accounting Standards Board Statement No.
            143,
“Accounting for Asset Retirement Obligations”. This accounting standard requires
            entities to record the fair value of a liability for an asset retirement
            obligation in the period in which it is incurred. When the liability
            is
            initially recorded, the entity capitalizes a cost by increasing the carrying
            amount of the related long-lived asset. Over time, the liability is accreted
            to
            its present value each period, and the capitalized cost is depreciated
            over the
            useful life of the related asset. Upon settlement of the liability, an
            entity
            either settles the obligation for its recorded amount or incurs a gain
            or loss
            upon settlement.
 
 Revenue
            recognition.Aztec
            recognizes oil and natural gas revenue for its interest in producing
            wells as
            oil and natural gas is produced and sold from those wells. Oil and natural
            gas
            sold by us is not significantly different from our share of
            production.
 
 Income
            Taxes.U.S. income tax
            expense is based on reported earnings before income taxes. Deferred income
            taxes reflect the impact of temporary differences between assets and
            liabilities recognized for financial reporting purposes and such amounts
            recognized for tax purposes, and are measured by applying enacted tax rates
            in effect in years in which the differences are expected to
            reverse.
 
 Share
            Based
            Compensation.In December
            2004, the FASB issued SFAS No. 123R, “Share-Based Payments” (“FAS 123R”). Aztec
            adopted the disclosure requirements of FAS 123R as of January 1, 2006
            using the
            modified prospective transition method approach as allowed under FAS
            123R. FAS
            123R establishes standards for the accounting for transactions in which
            an
            entity exchanges its equity instruments for goods or services. FAS 123R
            focuses
            primarily on accounting for transactions in which an entity obtains employee
            services in share-based payment transactions. FAS 123R requires that
            the fair
            value of such equity instruments be recognized as expense in the historical
            financial statements as services are performed. Prior to FAS 123R, only
            certain
            pro forma disclosures of fair value were required.
 
 Minority
            Interest.Aztec has a controlling
            interest in theAztec 2006A
            Oil & Gas Limited Partnershipand theAztec
            2006B Oil & Gas Limited
            Partnership.  Therefore, the
            partnerships’ financial statements are consolidated with those of the company
            and the other partner’s equity is recorded as minority interest.  At
            August 31, 2007, minority interest was $2,082,880.  Minority interest
            expense was $10,196 for the fiscal year ended August 31,
            2007.
 
 Basic
            and Diluted Net
            Earnings (Loss) Per Share.The basic net earnings
            (loss) per common share is computed by dividing the net earnings (loss)
            by the weighted average number of common shares outstanding. Diluted
            earnings (loss) per common share is computed by dividing the net earnings
            (loss) adjusted on an “as if converted” basis, by the weighted average number of
            common shares outstanding plus potential dilutive
            securities.
 
 Recently
            Issued Accounting
            Pronouncements.
 
 Aztecdoes
            not expect the adoption of recently
            issued accounting pronouncements to have a significant impact onitsresults
            of operations, financial
            position or cash flow.
 
 NOTE
            2 – LIQUIDITY
 
 CSI
            Energy, LP, a company controlled by
            our chief executive officer, has committed to funding any operating deficits
            for
            the current year.
 
 NOTE
            3 – INVESTMENT IN Z2,
            LLC
 
 In
            September 2004, Aztec purchased a 31.283% membership unit interest in
            Z2, LLC, a
            Florida limited liability company, for
 $250,000
            cash, 400,000 shares of Aztec common stock valued at $204,000, and the
            assumption of $265,000 in debt. Z2, LLC owned a 100% working interest
            (60% net
            revenue interest) in the Big Foot oil field in Texas.
 
 In
            February 2006, the Company sold its interest in Z2, LLC for $1,555,404.
            The
            sales agreement provided for $25,000 to be paid
 at
            time
            of signing, and a note receivable. The note is for $1,561,000 and interest
            on
            the note was imputed at 8% per annum. In April 2006, the note was fully
            paid.  The discount for early payment was $78,046.
 
 Aztec's
            investment in the partnership Z2 LLC constitutes a significant portion
            of its
            assets during 2006. Selected information for the twelve months ended
            August 31,
            2006, is as follows:
 
 Gross
                            Sales
                        $    1,731,338Loss
                            on Hedging Activity
                        (1,338,813)Net
                            Sales
                        3,070,151Gross
                            Profit
                        2,165,694Net
                            Income
                        1,522,371
 
 During
              the twelve month's ended August 31, 2006, Aztec's share of income from
              Z2 LLC
              was used first to offset unrecognized losses from prior periods of
              approximately
              $261,600. Income in excess of the unrecognized losses was reported
              as income and
              increased Aztec’s basis in Z2 LLC.
 
 NOTE
              4 - OIL AND GAS
              PROPERTIES
 
 All
              oil and gas interests currently
              owned directly by Aztec fell into the unproved, exploratory category.
              While some
              wells have been completed and are producing or preparing to deliver
              oil or gas,
              there is insufficient data to re-categorize the wells from exploratory
              to proved
              and make a determination of the proved reserves.
 
 NOTE
              5 - INCOME
              TAXES
 
 Income
              taxes are not due since Aztec has
              a net loss in retained earnings whereby the net income generated in
              2005 is
              offset by the net losses from inception. Aztec has net operating losses
              of
              $1,253,000 which will expire in fiscal years starting in
              2025.
 
 The
              components of deferred taxes are as
              follows:


Deferred
                    tax
                    assetsNet
                    operating loss carry
                    forwards
                $354,000Less:
                    valuation
                    allowance
                (354,000
                )Current
                    net deferred tax
                    assets
                0
 
 NOTE
          6- EQUITY
 
 Series
          A Preferred stock was established
          on August 26, 2004andall
          100,000authorized
          shares were immediately
          issuedfor cash and
          services.  This
          stock is notconvertible
          or redeemable, but at all
          times may vote 70% of the total votes ofall
          common shares
          outstanding.  It has no liquidation or stated
          value.
 
 During
          2007, Aztec issued 1,422,223
          shares valued at $157,929 to various consultants and directors for
          services.
 
 In
          accordance with SFAS 123R, Aztec
          recognized amortization of options during 2007 of $790,877.
 
 During
          2007 800,000 options were issued
          to the president. The fair value of each option grant is estimated on the
          date
          of grant using the Black-Scholes option pricing model with the following
          assumptions. A risk free interest rates used of 3.9%, expected volatility
          of
          161% and a dividend rate of zero.
 
 In
          June 2007, 6,000,000 options were
          issued to the new ChiefExecutive
          Officer and Chairman of the
          Board(see Note 5
          below).  Theoptions
          vest immediately,havean
          exercise price of $0.11 per
          shareand a fair value
          at
          date of grant of $589,672.The fair valuewasestimated
          using the Black-Scholes option
          pricing modeland a risk
          free interest rate of 5.10%, an expected volatility of 210% and a dividend
          rate
          of zero.  Because the options vest immediately and there is no service
          or market performance condition, all of the fair value was expensed at
          date of
          grant.
 
 A
          summary of the options issued by us
          for the year endedAugust
          31, 2007 is as
          follows:
 
 Options
                    
                    Weighted-
                      Average
                        Exercise
                      Price
                        per
                        Share
                    
                    Weighted-Average
                      Remaining
                      Contractual
                        Term
                      (in
                        years)
                    
                    Aggregate
                      Intrinsic
                      ValueOutstanding
                          on August 31,
                          2006
                    
                    800,000
                    
                    $
                    .75
                    
                    3.0
                    
                    -Granted
                    
                    7,000,000
                    
                    $
                    .20
                    
                    9.0
                    
                    -Exercised
                    
                    -
                    
                    $
                    —
                    
                    —
                    
                    -Surrendered/Canceled
                    
                    -
                    
                    $
                    —
                    
                    —
                    
                    -Outstanding
                        on August 31,
                        2007
                    
                    7,800,000
                    
                    $
                    .95
                    
                    8.4
                    
                    -Exercisable
                        on August 31,
                        2007
                    
                    7,800,000
                    
                    $
                    .95
                    
                    8.4
                    
                    -
 
 The
          weighted-average grant-date fair
          value for the years ended August 31,2007 was $0.74/share,respectively.
          No options were exercised
          during the year. The unrecognized share based compensation cost related
          to stock
          option expense at August 31, 2007 is $0.
 
 During
          August 2006, 6,000,000 warrants
          issued during 2004 were revised  in accordance with
          a  pre-existing, written formula agreement with International Fluid
          Dynamics, Inc. (IFD), a company owned and controlled by our current Chief
          Executive Officer and Chairman of the Board  (see Note 7). The fair
          value on the grant date as determined using the Black Scholes warrant pricing
          model was$618,696.
          Estimatesused in the model
          include a risk-free interest rates used of 4.8%, and expected volatility
          of
          145%. The warrants were to be expensed over the remaining life of the consulting
          agreement which is approximately 8 years; however, in June 2007, when the
          principal owner of IFD was elected Chief Executive Officer and Chairman
          of the
          Board, Aztec expensed the entire remaining unamortized value of the warrant
          grant and recognized $615,461 of compensation expense during fiscal year
          2007.
 
 A
          summary of the warrants issued by us
          for the year endedAugust
          31, 2007 is as
          follows:
 
 Warrants
                  
                  Weighted-
                    Average
                      Exercise
                    Price
                      per
                      Share
                  
                  Weighted-Average
                    Remaining
                    Contractual
                      Term
                    (in
                      years)
                  
                  Aggregate
                    Intrinsic
                    ValueOutstanding
                        on August 31,
                        2006
                  
                  20,000,000
                  
                  $
                  1.15
                  
                  2.3
                  
                  -Granted
                  
                  245,142
                  
                  $
                  .55
                  
                  1.3
                  
                  -Exercised
                  
                  -
                  
                  $
                  —
                  
                  —
                  
                  -Surrendered/Canceled
                  
                  -
                  
                  $
                  —
                  
                  —
                  
                  -Outstanding
                      on August 31,
                      2007
                  
                  20,245,142
                  
                  $
                  1.14
                  
                  1.9
                  
                  
                  -Exercisable
                      on August 31,
                      2007
                  
                  20,245,142
                  
                  $
                  1.14
                  
                  1.9
                  
                  
                  -
  
 The
          weighted-average grant-date fair
          value for the years endedAugust 31, 2007 was
          $0.74./share, respectively.
          No options were exercised during the year. The unrecognized share based
          compensation cost related to stock option expense at August 31, 2007 is
          $0.
 
 During
          November and December 2006,
          245,145 warrants were issued in conjunction with the Aztec 2006A Drilling
          Partnership.
 
 NOTE
          7 - RELATED PARTY
          TRANSACTION
 
 AtAugust
          31, 2007 Aztec has common
          stock payable of
          $148,300 to Kirk N. Blackim. Mr. Blackim serves as Director and President
          of
          Aztec. As of the date of this report this stock has been paid in
          full.
 
 At
          August 31, 2007 Aztec has common
          stock payable of $11,396 to Larry A. Hornbrook.  Mr. Hornbrook serves
          as Chief Financial Officer of the Company and compensation is deferred
          until
          following year of services in compliance to consulting agreement between
          Mr.
          Hornbrook and Company.
 
 On
          June 15, 2007, Aztec entered into an
          employment agreement with Franklin C. Fisher, who assumed the role of Chief
          Executive Officer and Chairman of the Board.  Fisher is also a major
          shareholder in Aztec.  Prior to Fisher assuming the role of Chief
          Executive Officer and Chairman of the Board, Aztec entered into a consulting
          agreement with International Fluid Dynamics, Inc. (IFD), a company owned
          and
          controlled by Fisher.  The agreement, entered into on June 22, 2004,
          engaged IFD to provide, among other things, advice and consulting regarding
          Aztec’s business, acquisition and marketing strategies.  The
          agreement’s term begins January 1, 2005 through December 31, 2014.  As
          compensation, IFD received 6,000,000 warrants at various exercise prices
          and
          which vested immediately.  No compensation was recorded in connection
          with this warrant grant as the exercise prices were extremely “out of the money”
and the fair value was nominal.  The IFD agreement also provides for
          monthly
          retainers to be paid to IFD as
          follows:  $10,000 per month beginning January 1, 2005 through December
          31, 2007, $12, 500 per month beginning January 1, 2007 through December
          31, 2010
          and $15,000 per month beginning January 1, 2011 through December 31,
          2014.  At IFD’s election, payment can be made in common stock with a
          value equivalent to the monthly consulting fee due.  For valuation
          purposes, any monthly fee paid in stock will be valued at 75% of the average
          closing price for the five trading days preceding the date at which the
          fee is
          due.  To date, none of the retainers have been paid in Aztec
          stock.  In January 2005, 99% of the proceeds payable to IFD were
          assigned to Fisher.  On August 1, 2006, the 6,000,000 warrants wererevisedwithlower
          exerciseprices and
          extended exercise dates  in accordance with a prior, written , formula
          based agreement between IFD and the Company.   Therevisedwarrants had a fair value of
          $618,696.
 
 NOTE
          8 – 2006 DRILLING
          PROGRAM
 
 During
          December 2006, Aztec completed
          the funding of its first drilling limited partnership, the Aztec 2006A
          Oil &
Gas Limited Partnership (LP 2006A), and raised total gross proceeds of
          $1,361,915 from 24 outside investors.  Aztec Energy, LLC, a wholly
          owned subsidiary of Aztec, is the Managing General Partner of LP
          2006A.
 
 For
          each $50,000 invested in the
          partnership,
          each investor received 9,000
          warrants to purchase common stock in Aztec.  A total of245,145warrants
          were issued in connection with
          LP 2006A. The warrants are immediately exercisable and 1/3 expire on December
          31, 2007 with an exercise price of $0.35 per share, 1/3 expire on December
          31,
          2008 with an exercise price of $0.65 per share, and 1/3 expire on December
          31,
          2008 with an exercise price of $0.95 per share.  The warrants had a
          fair market value of $4,902 at date of issuance based upon the Black-Scholes
          option pricing model utilizing discount rates ranging from 4.52% to 5.03%,
          a
          volatility factor ranging from 118% to 132%, an expected life of one to
          two
          years and a dividend rate of zero.
 
 Investors
          in LP 2006A will receive
          70%-85% of the cash profits, defined as revenue in excess of expenses,
          from
          successful wells drilled within the partnership, with the percentage dependent
          on the rate of return to LP 2006A investors during the first five years
          of the
          partnership.  The Managing General Partner will receive the
          difference.  After three years from the date of the first
          distribution, investors in LP 2006A may request that the Managing General
          Partner, subject to financial ability, repurchase their units at a price
          equal
          to three times cash flow for the preceding twelve months.
 
 Aztec
          has begun raising funds for a
          second limited partnership, the Aztec 2006B Oil & Gas Limited
          Partnershipand raised
          $740,000 through August 31, 2007, which is shown as restricted cash in
          Aztec’s
          balance sheet.  Subsequent to August 31, 2007, the program was
          concluded raising total gross proceeds before expenses of
          $1,012,267.
 
 NOTE
          9– RESTATED
          RESULTS FOR AUGUST31, 2007
 
 Aztec
          has determined that it is
          necessary to restate the previously filed financial statements for the
          year
          ended August 31, 2007.  The determination to restate the financial
          statements is based upon a reassessment of the following
          transactions:
 
 ·
                Pursuant
                    to SFAS 123R, if an
                    employee’s share-based payment award does not contain market performance
                    or service conditions, then the entire amount of compensation
                    cost is
                    recognized when the award is granted.  The 6,000,000 options
                    granted to the Chief Executive Officer and Chairman of the Board
                    do not
                    contain any service or market performance condition and therefore,
                    should
                    be expensed at the date of
                    issuance.
 ·
                The
                    addition of our Chief
                    Executive Officer and Chairman of the Board in June 2007 was
                    determined to
                    obviate the service conditions under the previously existing
                    IFD
                    agreement.  Because there were no further service conditions,
                    the remaining unamortized compensation expense should be expensed
                    as of
                    the date of the change in employment
                    status.
 ·
                The
                    Company determined that it had
                    not properly accrued production revenue for
                    August.
 ·
                The
                    Company determined that it had
                    not properly reflected minority interest in the income of LP
                    2006A
 
 The
          accompanying financial statements
          for the twelve month period ended August 31, 2007, have been restated to
          effect
          the changes described above.  The impact of those adjustments is
          summarized as follows:
 
 For
          the year ended August 31,
          2007
 As
                        originally
                        Reported
                    
                    Adjustments
                    
                    As
                        RestatedOil
                        and Gas
                        Income
                    
                    $
                    99,616
                    
                    $
                    15,090
                    (1)
                    $
                    114,706General
&
                        Administrative
                    
                    
                    976,393
                    
                    
                    1,235,525
                    (2)
                    
                    2,211,918Oil
                        and Gas
                        Expenses
                    
                    
                    26,561
                    
                    
                    3,518
                    (3)
                    
                    30,079Dry
                        Hole
                        Costs
                    
                    
                    (450
                    )
                    
                    -
                    
                    
                    (450
                    )Amortization
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -DD&A
                    
                    
                    9,005
                    
                    
                    -
                    
                    
                    9,005Impairment
                    
                    
                    83,203
                    
                    
                    -
                    
                    
                    83,203Total
                        Operating
                        Expenses
                    
                    
                    (1,094,712
                    )
                    
                    (1,239,043
                    )
                    
                    (2,333,755
                    )Partnership
                        Income
                        (Loss)
                    
                    
                    -Interest
                        Expense
                    
                    
                    (15,327
                    )
                    
                    -
                    
                    
                    (15,327
                    )Gain
                        on Sale of
                        Assets
                    
                    
                    312
                    
                    
                    -
                    
                    
                    312Extinguishment
                        of
                        Debt
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Discount
                        on Payoff of
                        Notes
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Discount
                        on Note
                        Receivable
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Interest
                        Income
                    
                    
                    485
                    
                    
                    -
                    
                    
                    485Total
                        Non-operatingIncome
                        (Loss)
                    
                    
                    (14,530
                    )
                    
                    -
                    
                    
                    (14,30
                    )NET
                        LOSS
                    
                    
                    (1,009,626
                    )
                    
                    (1,223,953
                    )
                    
                    (2,233,579
                    )Net
                        Income(Loss)Attributable
                        to Minority
                        Interest
                    
                    
                    -
                    
                    
                    (10,196
                    )(4)
                    
                    (10,196
                    )NET
                        LOSS TO ATTRIBUTABLE TO COMMON
                        SHAREHOLDERS
                    
                    $
                    (1,009,626
                    )
                    $
                    (1,234,149
                    )
                    $
                    (2,243,775
                    )Basic
                        and Diluted Net
                        Lossper
                        Share
                    
                    $
                    (0.04
                    )
                    $
                    (0.04
                    )
                    
                    (0.08
                    )Weighted
                        AverageShares
                        Outstanding – Basic
                        and Diluted
                    
                    
                    28,438,383
                    
                    
                    28,438,383
                    
                    
                    28,438,383
 
 
 (1)To
            record revenue accrual
            for August oil and gas production
 
 (2)To
            recognize previously
            deferred expense for stock based compensation related to the IFD contract
            and
            the change in status ofFisher
            and to recognize the fair market
            value of options awarded to the Chief Executive Officer and Chairman
            of the
            Board in June 2007.  Also, to correct
            previously
            deferred expense for stock based compensation related to
            President.
 
 (3)To
            recognize additional oil
            and gas expense for 2007
 
 (4)To
            show net income
            attributable to minority interestin LP
            2006A
 
 As
          of August 31,
          2007:
 As
                          originally
                          Reported
                      
                      
                      Adjustments
                      
                      
                      As
                          RestatedCurrent
                          AssetsCash
                      $   4,771
                      
                      
                      $            -
                      
                      
                      $   4,771Accounts
                          Receivable
                      41,875
                      
                      
                      12,499
                      (1)
                      
                      54,374Prepaid
                          Oil & Gas
                          Costs
                      13,989
                      
                      
                      -
                      
                      
                      13,989Total
                          Current
                          Assets
                      60,635
                      
                      
                      12,499
                      
                      
                      73,134Oil
                          and natural gas
                          properties,successful
                          efforts method of
                          accountingUnproved
                          properties - not
                          currently amortized,net
                          of impairment and dry hole
                          costs of $198, 953
                      1,326,899
                      
                      
                      (802
                      )
                      
                      1,326,097Non-current
                          AssetsRestricted
                          Funds
                      740,000
                      
                      
                      -
                      
                      
                      740,000TOTAL
                          ASSETS
                      $
                          2,127,534
                      
                      
                      11,697
                      
                      
                      2,139,231LIABILITIES
                          AND STOCKHOLDERS’
                          EQUITYCurrent
                          LiabilitiesAccounts
                          payable
                      79,967
                      
                      
                      (15,990
                      )(2)
                      
                      63,977Accounts
                          payable –
                          Related-party
                      -
                      
                      
                      16,097
                      (2)
                      
                      16,097Salary
                          Payable
                      7,780
                      
                      
                      1
                      
                      
                      7,781Notes
                          payable
                      120,000
                      
                      
                      -
                      
                      
                      120,000Common
                          stock
                          payable
                      149,196
                      
                      
                      10,500
                      (3)
                      
                      159,696Total
                          current
                          liabilities
                      356,943
                      
                      
                      10,608
                      
                      
                      367,551Long
                          Term
                          LiabilitiesNotes
                          payable to related
                          parties
                      545,560
                      
                      
                      -
                      
                      
                      545,560Total
                          long term
                          liabilities
                      545,560
                      
                      
                      
                      
                      
                      545,560Total
                          Liabilities
                      902,503
                      
                      
                      10,608
                      
                      
                      913,111Minority
                          Interest
                      2,072,683
                      
                      
                      10,197
                      (4)
                      
                      2,082,880Stockholders’
                          EquityPreferred
                          stock, Series A, $.001
                          par value, 100,000 sharesAuthorized,
                          issued and outstanding
                          respectively
                      100
                      
                      
                      -
                      
                      
                      100Common
                          stock, $.001 par value,
                          100,000,000 sharesauthorized,
                          30,477,772 issued and
                          outstanding
                      30,677
                      
                      
                      (200
                      )
                      
                      30,477Additional
                          paid-in
                          capital
                      2,854,829
                      
                      
                      1,225,243
                      
                      
                      4,080,072Deficit
                          accumulated during the
                          development stage
                      (3,733,258)
                      
                      
                      (1,234,151
                      )(5)
                      
                      (4,967,409)Total
                          Stockholders’
                          Equity
                      (847,652)
                      
                      
                      (9,108
                      )
                      
                      (856,760)TOTAL
                          LIABILITIES AND
                          STOCKHOLDERS’ EQUITY
                      $
                          2,127,534
                      
                      
                      11,697
                      
                      
                      2,139,231
 
 (1)To
              record oil and gas accrual for August
              production
 
 (2)To
              separately show payable to related
              party on the balance sheet.
 
 (3)To
              recordaccrual for noncash
              compensation.
 
 (4)To
              record the minority interest
              attributable to LP 2006A
 
 (5)To
              record the valuation of the options
              issued to the Chief Executive Officer and Chairman of the Board in
              June and the
              additional value related to (3) above.
 
 ITEM
          8. CHANGES IN AND DISAGREEMENTS
          WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
 None.
 
 Item
          8A.  CONTROLS AND PROCEDURES.
 
 Disclosure
          Controls and Procedures
 
 Our
          disclosure controls and procedures are designed to ensure that information
          required to be disclosed in reports that we file or submit under the Securities
          Exchange Act of 1934 is recorded, processed, summarized and reported within
          the
          time periods specified in the rules and forms of the SEC. Our Chief Executive
          Officer and Chief Financial Officer have reviewed the effectiveness of
          our
“disclosure controls and procedures” (as defined in the Securities Exchange Act
          of 1934 Rules 13a-14(c) and 15d-14(c)) during the period covered by this
          report
          and have concluded that the disclosure controls and procedures need to
          be
          improved to ensure that material information relating to us is recorded,
          processed, summarized, and reported in a timely manner.
 
 Internal
          Controls Over Financial Reporting
 
 There
          have not been any changes in our internal controls over financial reporting
          (as
          such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
          Act)
          during our most recent fiscal year that have materially affected, or are
          reasonably likely to materially affect, our internal controls over financial
          reporting.
 
 Item
          8B.  Other Information
 
 On   September
          10, 2007 the Company filed a Current Report on Form 8-K disclosing the
          resignation of Kirk N. Blackim as President and Director of the Company
          on
          September 5, 2007.  Effective as of the same date, Franklin C. Fisher,
          Jr., who had been serving as Chief Executive Officer and Chairman, also
          assumed
          the title of President.
 
 
 
 PART
          III
 
 ITEM
          9. DIRECTORS, EXECUTIVE OFFICERS,
          PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
          ACT.
 
 Each
          director of our Company serves for a term of one year or until the successor
          is
          elected at the Company's annual shareholders' meeting and is qualified,
          subject
          to removal by the Company's shareholders.  Each officer serves, at the
          pleasure of the board of directors, for a term of one year and until the
          successor is elected at the annual meeting of the board of directors and
          is
          qualified.
 
 Set
          forth
          below is the name, age and present principal occupation or employment,
          and
          material occupations, positions, offices or employments for the past five
          years
          of our current directors and executive officers.


Name
              Age
              Position
              Director
                  SinceFranklin
                  C. Fisher, Jr.
              67
              President,
                  CEO and Chairman
              September
                  10, 2007Larry
                  Hornbrook
              59
              VP
                  and CFO
              August
                  25, 2006Kenneth
                  E. Lehrer
              61
              VP,
                  Sr. Economist and Director
              August
                  8, 2005Mark
                  Vance
              53
              Director
              October
                  25, 2005Kathryn
                  E. Parks
              24
              VP
                  and Secretary
              June
                  12, 2006
  Franklin
          C.
          Fisher, Jr.-
          President, CEO and Chairman upon the
          resignation of Mr. Kirk Blackim on September 5, 2007.
 
 Mr.
          Fisher, in 1964, joined a
          small, nearly bankrupt steel fabrication firm in Houston, TX as executive
          trainee.  After two years he bought out the owner in a leveraged
          buy-out.  The business was moved to new facilities within the
          following year and diversification of the firm’s activities was
          started.  Six years later, Mr. Fisher formed a holding company for his
          various enterprises which included:  construction (domestic and
          foreign), petrochemical plant rework, steel fabrication, design and erection,
          hydraulic motors (development and manufacturing), engineering/design, products
          distribution (domestic and foreign), oil and gas investment and production
          (domestic), real estate investment (domestic),  foreign investment
          (mine clearing firm in Egypt) and chemicals.
 Mr.
          Fisher sold the firms, except those
          involved in trading and investments, to concentrate on personal investments,
          plus financial, legal, negotiation, and strategy consulting.  In 1975,
          Mr. Fisher became Chairman and a major shareholder of Ashford Bank (subsequently
          MBank Memorial).  It was highly successful and was sold to Mercantile
          Bank in 1983 and Mr. Fisher remained as Chairman until mid-1985 and on
          the Board
          of Directors until 1986 when he resigned.  Since 1983, he has
          concentrated on his oil and gas activities and on managing his own investments
          and companies in which he owns interests.  Additionally, he maintains
          a wide array of consulting projects involving strategy formulation and
          implementation, negotiation, legal strategy, financials restructuring,
          mergers,
          takeovers, workouts, public stock issues, investment analysis, and operational
          management.  He is active in the investment field plus oil and gas
          exploration and development, and involved in the mediation of litigation
          and
          other disputes.  Mr. Fisher received his B.A. from Texas A & M
          University which he attended on a football scholarship and received his
          Juris
          Doctorate degree from University of Texas.  He was admitted to
          practice law in Texas in 1964.  He was appointed to U.S. District
          Export Council by U.S. Secretary of Commerce in 1976 and for several subsequent
          terms.
  
 Larry
          Hornbrook, VP and
          CFO
 
 Larry
          A. Hornbrook, CPA, has practiced
          public accounting since 1990 as a sole practitioner or under the company
          name of
          Crawford & Hornbrook, PLLC. His clientele are in a variety of industries
          including oil and gas, real estate, construction, and services. The firm
          performs tax research and planning, tax return preparation, financial statement
          preparation and corporate restructurings.
 
 Mr.
          Hornbrook was Tax Manager for Golden
          Corral Corporation, an owner of national and regional restaurant chains,
          from
          1987 to 1989.
 
 He
          served as Tax Manager for
          Transcontinental Energy Corporation from 1983 to 1986. Transcontinental
          Energy
          Corporation was an independent oil and gas producer and contract driller,
          which
          offered public limited partnerships.  His responsibilities included
          preparation of federal and state income and franchise taxes for corporate
          entities, preparation of federal and state income tax returns for over
          30
          partnership involving more than 10,000 partners.
 
 He
          served as Tax Manager for Mitchell
          Energy & Development Corp. from 1978 to 1983. Mitchell was one of the
          largest independent energy firms headquartered  in Texas and owned and
          operated oil and gas wells, contract drilling rigs,  pipelines,
          compressors and liquid extraction plants.
 
 Mr.
          Hornbrook was Tax Senior for Arthur
          Andersen & Co from 1975 to 1978.
 
 Mr.
          Hornbrook has been a Texas Certified
          Public Accountant since 1978. He received his B.S. (Management) Cum Laude
          from
          the University of South Dakota.  He served in the United States Marine
          Corps from 1969 to 1972 attaining the rank of Sergeant and receiving a
          Meritorious Mast for excellent performance of duties. He also received
          a
          Meritorious Unit Commendation, Good Conduct Medal, National Defense Medal,
          and
          Vietnam Service Medal with two stars.
 
 Kenneth
          E.
          Lehrer, VP, Sr. Economist
          and Director
 
 Dr.
          Lehrer formed an organization in
          1982, engaged in the areas of - Economics, Finance, Economic Damage Analysis
          (including Business and Technology Losses), Banking, Business, ESOP and
          Non
          Public Business Valuations, Securities, Healthcare, Fairness and Advisory
          Opinions, Intellectual Property Valuations, Real Estate and Corporate Finance.
          His company both prepares institutional economic / finance reports, feasibility
          analysis, corporate business plans and provides litigation support (having
          been
          qualified in both State and Federal Courts) in the areas of - economics,
          real
          estate, banking, corporate and IP valuations, class actions and finance.
          Dr.
          Lehrer served for approximately twenty (20) years (1984 - 2002) as an Adjunct
          Professor of Finance at the University of Houston, Graduate School of Business
          Administration and is presently an Adjunct Professor of Finance and Economics
          at
          the University of Phoenix (Houston Division).
 
 Dr.
          Lehrer has served with the Federal
          Home Loan Bank of Dallas as agent for the Federal Savings and Loan Insurance
          Corporation of - Acadia Savings and Loan Association, French Market Homestead
          Savings, Twin City Savings, First Savings of Louisiana and is a member
          of the
          National Association of Corporate Directors.
 
 Dr.
          Lehrer commenced his career in 1970
          at Bankers Trust Company (New York),  and then became a Manager for
          the Greek Shipper, Costas Lemos [dec'd]. Here, he assisted on projects
          in New
          York, Houston, Denver, Guam and in Europe.  Dr. Lehrer relocated to
          Houston in 1977.
 
 Dr.
          Lehrer holds four (4) degrees from
          New York University: Bachelor of Science (Finance), Master of Business
          Administration (Banking), Master of Arts (Economics) and a Doctorate in
          Urban
          Economics. Dr. Lehrer is registered with the Securities and Exchange Commission
          as an Investment Advisor under the Investment Advisors Act of 1940 and
          has held
          the Full Registration/General Securities (Series 7) and Texas Securities
          (Series
          63) Licenses.
 
 Mark
          Vance,
          Director
 
 From
          2002 to mid-2005, Mr. Vance was the
          senior executive in charge of strategic alliances with Worksafe, Inc. (Dallas,
          TX) and YCO Services (Houston, TX). Most recently, he developed Worksafe's
          strategic plan and led the mezzanine fund raise with private equity groups
          in
          the U.S. At YCO Services, he created an alliance partnership with Compaq/Hewlett
          Packard for the distribution of professional services.
 
 From
          1998 to 2001, Mr. Vance was vice
          president of business development and chief financial officer for Control
          Network System Inc. in Los Angeles. This $17 million privately held, fully
          integrated company developed international voice over data networks between
          the
          U.S. and Asia and was acquired by Total Axcess Inc. in December 2001. As
          a
          company founder, he developed strategic relationships in adding to managing
          all
          financial affairs, cash management and investor relations.
 
 Mr.
          Vance was a founder and served as
          senior vice president and chief financial officer for Telescape International
          Inc. (Houston, TX) from 1996 to 1997. He developed the business plan and
          investor presentation and succeeded in raising first rounds of private
          equity
          funding, positioning the company for an IPO.
 
 Prior,
          he was a founder and developed
          the strategic plan for a $10 million private equity raise with Alex Brown
          that
          led to the merger of Matrix Telecom and DNS Communications (Dallas, TX)
          creating
          a formidable competitor in the industry. He served as chief operating officer
          and chief financial officer-- including management of the finance, legal,
          accounting, human resources, information services and insurance
          departments--from 1993 to 1995.
 
 He
          served as director of finance (and
          chief financial officer of a subsidiary) at Wiltel Corporation (Houston,
          TX)
          from 1992 to 1993. While there he developed and instituted a Latin American
          distributorship program for the company, including strategic marketing,
          pricing
          and sales policies.
 
 Mr.
          Vance served as a financial analyst,
          controller and tax manager with various companies within the energy industry
          in
          Houston from 1976 to 1991 including Mitchell Energy, Quintana Petroleum,
          and
          Texaco.
 
 He
          received his MBA in Accounting from
          the University of Houston in 1979, and a bachelor of science degree in
          finance
          from LSU in 1976.
 
 Kate
          Parks, VP and
          Secretary
 
 Ms.
          Parks currently works for Sonfield
& Sonfield, Attorneys at Law.  She also acts as a filing agent for
          EDGAR submitting information to the US Securities and Exchange Commission.
          From
          2001 to 2006 Ms. Parks worked as a Registered Certified Pharmacy
          Technician.
 
 Directors
          are elected in accordance with
          our bylaws to serve until the next annual stockholders meeting. Aztec does
          not
          currently pay compensation to directors for services in that
          capacity.
 
 None
          of
          our directors or officers is a director in any other reporting
          companies.  None of our directors or officers has been affiliated with
          any company that has filed for bankruptcy within the last five years.There are no family
          relationships among our directors or officers.  We are not aware of
          any proceedings to which any of our officers or directors, or any associate
          of
          any such officer or director, is a party adverse to our Company or any
          of our
          subsidiaries or has a material interest adverse to it or any of its
          subsidiaries.
 
 Code
          of
          Ethics.
  The
          Company has not yet adopted a Code of Ethics because it has only three
          directors.
  Audit
          Committee Financial
          Expert.
 
 The
          Board
          of Directors has not established an audit committee and does not have an
          audit
          committee financial expert.  The Board is of the opinion that an audit
          committee is not necessary since the Company has only three directors and
          to
          date, such directors have been performing the functions of an audit
          committee.
 
 Committees
          and
          Procedures
 
 (1)
          The registrant has no standing
          audit, nominating and compensation committees of the Board of Directors,
          or
          committees performing similar functions. The Board acts itself in lieu
          of
          committees due to its small size.
 
 (2)
          The view of the board of directors
          is that it is appropriate for the registrant not to have such a committee
          because its directors participate in the consideration of director nominees
          and
          the board and the Company are so small.
 
 (3)
          The members of the Board who acts as
          the nominating committee are not independent, pursuant to the definition
          of
          independence of a national securities exchange registered pursuant to Section
          6(a) of the Act (15 U.S.C. 78f(a).
 
 (4)
          The nominating committee has no
          policy with regard to the consideration of any director candidates recommended
          by security holders, but the committee will consider director candidates
          recommended by security holders.
 
 (5)
          The basis for the view of the board
          of directors that it is appropriate for the registrant not to have such
          a policy
          is that there is no need to adopt a policy for a small
          company.
 
 (6)
          The nominating committee will
          consider candidates recommended by security holders, and by security holders
          in
          submitting such recommendations.
 
 (7)
          There are no specific, minimum
          qualifications that the nominating committee believes must be met by a
          nominee
          recommended by security holders except to find anyone willing to serve
          with a
          clean background.
 
 (8)
          The nominating committee's process
          for identifying and evaluation of nominees for director, including nominees
          recommended by security holders, is to find qualified persons willing to
          serve
          with a clean backgrounds. There are no differences in the manner in which
          the
          nominating committee evaluates nominees for director based on whether the
          nominee is recommended by a security holder, or found by the
          board.
 
 SECTION
          16(A) BENEFICIAL OWNERSHIP
          REPORTING COMPLIANCE
 
 Section
          16(a) of the Securities Exchange
          Act of 1934 requires our directors and executive officers, and persons
          who
          beneficially own more than ten percent of a registered class of our equity
          securities (referred to as "reporting persons"), to file with the Securities
          and
          Exchange Commission initial reports of ownership and reports of changes
          in
          ownership of common stock and other Aztec Oil & Gas, Inc. equity securities.
          Reporting persons are required by Commission regulations to furnish us
          with
          copies of all Section 16(a) forms they file.We believe, based solely on
          our review of the copies of such forms and other written representations
          to us,
          that during the fiscal year ended August 31, 2007, all reporting persons
          have
          complied with all applicable Section 16(a)
 filing
          requirements. [Confirm].
 
 ITEM
          10. EXECUTIVE
          COMPENSATION.
 
 As
          a result of the Company's current
          limited available cash, no officer or director received compensation during
          the
          fiscal year endedAugust
          31, 2007. Aztec intends
          to
          pay salaries when cash flow permits.
 
 SUMMARY
          COMPENSATION
          TABLES
 Annual
                      CompensationOther
                      AnnualName
                      and Principal
                      Position
                  Year
                  Salary
                      ($)
                  Bonus
                      ($)
                  Compensation
                      ($)Kirk
                      N. Blackim
                      (1)
                  2007
                  -0-
                  22,300
                  62,700President/Director
                  2006
                  -0-
                  -0-
                  75,9002005
                  -0-
                  -0-
                  -0-Franklin
                      C. Fisher, Jr.(2)
                  2007
                  7,000
                  -0-
                  -0-Chief
                      Executive Officer,
                      Chairman/DirectorKenneth
                      E. Lehrer
                      (3)
                  2007
                  -0-
                  -0-
                  66,000VP,
                      Sr.
                      Economist/Director
                  2006
                  -0-
                  -0-
                  56,0002005
                  12,000
                  -0-
                  24,000Larry
                      Hornbrook (4)
                      (6)
                  2007
                  -0-
                  -0-
                  20,258VP,
                      CFO,
                      Director
                  2006
                  -0-
                  -0-
                  -0-2005
                  -0-
                  -0-
                  -0-Mark
                      Vance
                  2007
                  -0-
                  -0-
                  37,500Director
                  2006
                  -0-
                  -0-
                  33,3332005
                  -0-
                  -0-
                  -0-Kathryn
                      E. Parks
                      (5)
                  2007
                  -0-
                  -0-
                  1,950VP
                      and
                      Secretary
                  2006
                  -0-
                  -0-
                  1,2002005
                  -0-
                  -0-
                  -0-
 
 (1)
          In September 2005, the company
          retained the services of Kirk Blackim as President of the Company. Mr.
          Blackim
          was paid $6,600 in stock monthly for services. The number of shares is
          determined using the average value of the shares traded during the month.
          Additionally warrants were issued to Kirk Blackim for services for 800,000
          shares at exercise prices ranging from $1.00 per share to $2.00 per
          share.  Mr. Blackim resigned as officer and director effective
          September 5, 2007.
 
 (2)
          Mr. Franklin Fisher,
          Jr.  became CEO, President and Director following the resignation of
          Kirk Blackim.  Mr. Fisher receives an annual salary of
          $24,000.
 
 (3)
          On August 25, 2006, Dr. Kenneth
          Lehrer vacated the position of CFO and accepted the newly created position
          of
          Sr. Economist.
 
 (4)
          In August 2006, the company retained
          the services of Mr. Larry Hornbrook as CFO and Vice President.  Mr.
          Hornbrook will be paid an hourly rate for his services.  One third of
          the amount will be paid in cash and two thirds will be paid in
          stock.  The number of shares is determined using the average value of
          the shares traded during the month.  Additionally warrants were issued
          to Larry Hornbrook for services for 200,000 shares at exercise prices ranging
          from $0.50 to $1.00 per share.
 
 (5)
          On June 12, 2006, Ms. Danyel Owens
          resigned as Secretary of Aztec and the position was filled by Ms. Kathryn
          Parks.
 
 (6)
          Larry A. Hornbrook received $227.88
          in expense reimbursement.
  Back
              to Table of Contents
  
 
 LONG
          TERM COMPENSATION
          TABLE
 
 Long
                      Term
                      CompensationAwards
                  
                  PayoutsName
                      and
                      Principal
                    Position
                  Year
                  Restricted
                      Award(s)($)
                  Stock
                      Securities Underlying
                      Options/ SARs(#)
                  LTIP
                      Payouts
                    ($)
                  All
                      Other Compensation
                      ($)Kirk
                      N.
                      Blackim
                  2007
                  -0-
                  $85,000
                  -0-
                  -0-President/
                      Director
                  2006
                  -0-
                  $75,900
                  -0-
                  -0-2005
                  -0-
                  -0-
                  -0-
                  -0-Franklin
                      C. Fisher,
                      Jr.
                  2007
                  -0-
                  -0-
                  -0-
                  -0-Chief
                      Executive Officer and
                      ChairmanLarry
                      Hornbrook
                  2007
                  -0-
                  $20,258
                  -0-
                  -0-VP,
                      CFO
                  2006
                  -0-
                  -0-
                  -0-
                  -0-2005
                  -0-
                  -0-
                  -0-
                  -0-Kenneth
                      Lehrer
                      (1)
                  2007
                  -0-
                  $66,000
                  -0-
                  -0-VP,
                      Sr.
                      Economist,
                  2006
                  -0-
                  $56,000
                  -0-
                  -0-Director
                  2005
                  $57,421
                  $54,000
                  -0-
                  -0-Mark
                      Vance
                  2007
                  -0-
                  $37,500
                  -0-
                  -0-Director
                  2006
                  -0-
                  $33,333
                  -0-
                  -0-2005
                  -0-
                  -0-
                  -0-
                  -0-Kathryn
                      Parks
                  2007
                  -0-
                  $
                      1,950
                  -0-
                  -0-VP
                      and
                      Secretary
                  2006
                  -0-
                  $
                      1,200
                  -0-
                  -0-2005
                  -0-
                  -0-
                  -0-
                  -0-
 (1)
          Kenneth E. Lehrer received an
          additional 2,006 common shares in October, 2005.
 
 The
          Company currently has one employment
          agreement which is with Mr. Fisher.
 
 Grants
          of Stock Options and Stock Appreciation Rights
 
 During
          the current fiscal year 6,000,000 in stock options were granted to Mr.
          Franklin
          Fisher, president, as part of his employment contract with the
          Company.
 
 Option/
          SAR Exercises
 
 None
          of
          our directors or executive officers exercised any stock options or stock
          appreciation rights during the fiscal year ended August 31, 2007.  Mr.
          Fisher, Mr. Hornbrook and Mr. Lehrer all hold unexercised stock options
          held as
          of such date.
 
 Long
          Term Incentive Plan Awards
 
 The
          Company has no long-term incentive plans.
 
 Compensation
          of Directors
 
 Our
          directors do not receive compensation for their services as
          directors.
 
 Employment
          Contracts
 
 The
          Company currently has one employment
          agreement which is with Mr. Fisher.
 
 
 
 
 ITEM
          11. SECURITY OWNERSHIP OF CERTAIN
          BENEFICIAL OWNERS AND MANAGEMENT
 
 A. The
          following table
          lists, as of August 31, 2007, the number of shares of common stock of our
          Company that are beneficially owned by (i) each person or entity known
          to our
          Company to be the beneficial owner of more than 5% of the outstanding common
          stock; (ii) each officer and director of our Company; and (iii) all officers
          and
          directors as a group. Information relating to beneficial ownership of common
          stock by our principal shareholders and management is based upon information
          furnished by each person using “beneficial ownership” concepts under the rules
          of the Securities and Exchange Commission. Under these rules, a person
          is deemed
          to be a beneficial owner of a security if that person has or shares voting
          power, which includes the power to vote or direct the voting of the security,
          or
          investment power, which includes the power to vote or direct the voting
          of the
          security. The person is also deemed to be a beneficial owner of any security
          of
          which that person has a right to acquire beneficial ownership within 60
          days.
          Under the Securities and Exchange Commission rules, more than one person
          may be
          deemed to be a beneficial owner of the same securities, and a person may
          be
          deemed to be a beneficial owner of securities as to which he or she may
          not have
          any pecuniary beneficial interest. Except as noted below, each person has
          sole
          voting and investment power.
 
 The
          percentages below are calculated based on 30,677,772 shares of our common
          stock
          issued and outstanding as of August 31, 2007.  Unless otherwise
          indicated, the address of each person listed is c/o Aztec Oil & Gas, Inc.,
One Riverway, Suite 1700,
          Houston,
          Texas 77056.
 
 TITLE
                      OF
                      CLASS
                  NAME,
                      ADDRESS OF BENEFICIAL OWNER
                      AND POSITION(1)
                  SHARES
                      OF
                    COMMON
                      STOCK
                  PERCENT
                    OF
                      CLASS(2)Common
                  Franklin
                      C. Fisher,
                      Jr.
                  9,990,975
                  33.77%President,
                      CEO,
                      DirectorCommon
                  Larry
                      Hornbrook
                  156,182
                  0.53%VP,
                      CFOCommon
                  Ken
                      Lehrer
                  408,839
                  1.38%VP,
                      Sr. Economist,
                      DirectorCommon
                  Mark
                      Vance
                  193,628
                  0.63%Secretary,
                      DirectorCommon
                  Kathryn
                      E.
                      Parks
                  10,000
                  0.03%VP
&
                      SecretaryAll
                      directors and officers as a
                      group (4 persons)
                  
                  10,759,624
                  38.56%%
 
 (1)
          Unless otherwise indicated, each
          person named in the above-described table has the sole voting and investment
          power with respect to his shares of the Common Stock beneficially
          owned.
 
 (2)
          Unless otherwise provided, the
          calculation of percentage ownership is based on 30,677,772 shares of the
          Common
          Stock outstanding as of August 31,2007,
          any shares of the Common Stock which
          are not outstanding as of such date but are subject to options, warrants,
          or
          rights of conversion exercisable within 60 days of November 30, 2007 shall
          be
          deemed to be outstanding for the purpose of computing percentage ownership
          of
          outstanding shares of the Common Stock by such person but shall not be
          deemed to
          be outstanding for the purpose of computing the percentage ownership of
          any
          other person.
 
 B.
          Persons Sharing Ownership of Control
          of Shares
 
 C.
          Non-voting Securities and Principal
          Holders Thereof
 
 The
          Company has not issued any
          non-voting securities.
 
 D.
          Options, Warrants and
          Rights
 
 Aztec
          issued International Fluid
          Dynamics warrants for 6,000,000 shares at exercise prices ranging from
          $0.75 per
          share to $1.65 per share. No compensation was recorded in connection with
          these
          warrants because their fair value was nominal and the exercise prices were
          extremely "out of the money".
 
 E.
          Preferred Stock
 
 On
          June 11, 2004, the Board of Directors
          approved Articles of Designation of Series A Preferred Stock. Series A
          Preferred
          stock was established on August 26, 2004. All 100,000 authorized shares
          were
          immediately issued with 50,000 shares for $15,000 cash and 50,000 shares
          for
          services valued at $15,000. The shares of outstanding Series A Preferred
          Stock
          shall have the number of votes equal to seventy percent (70%) of votes
          of all
          outstanding shares of capital stock such that all the outstanding shares
          of
          Preferred Stock shall always constitute 70% of the voting rights of the
          Corporation, but the holders are not obliged or bound to vote said stock
          or to
          vote together and the shares are owned by separate entities. Such Series
          A
          Preferred stock has no other extraordinary preferences.
 
 
 ITEM
          12. CERTAIN RELATIONSHIPS AND
          RELATED TRANSACTIONS
 
 There
          are no transactions since the
          beginning of the fiscal year, or any proposed transaction in which any
          related
          person had or will have a direct or indirect material
          interest.
 
 The
          officers and directors of the
          Company are involved in other business activities and may, in the future,
          become
          involved in other business opportunities. If a specific business opportunity
          becomes available, such persons may face a conflict in selecting between
          the
          Company and their other business interests. The Company has not formulated
          a
          policy for the resolution of such conflicts.
 
 Parents
          of Issuer
 
 The
          Company has no
          parents.
 
 ITEM
          13. EXHIBITS.
 
 (a)
          EXHIBITS
 Number
                  Description3.1
                  Articles
                      of
                      Incorporation3.2
                  Bylaws31.1
                  Certifications
                      of the Chief
                      Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                      Act of
                      2002.31.2
                  Certifications
                      of the Chief
                      Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                      Act of
                      2002.32.1
                  Certifications
                      of Chief Executive
                      Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
                      1350 as
                      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                      2002.
 
 (b)
          REPORTS ON FORM
          8-K
 
 The
          Company filed an amended Current
          Report on December 18, 2006, pursuant to Item 4.02 ("Non-Reliance on Previously
          Issued Financial Statements or a Related Audit Report or Completed Interim
          Review").
 
 The
          Company filed a Current Report on
          January 9, 2007, pursuant to Item 8.01 ("Other Events") and Item 3.02
          ("Unregistered Sales of Equity Securities").
 
 The
          Company filed a Current Report on
          June 15, 2007, pursuant to Item 5.02 ("Departure of Directors or Principal
          Officers; Election of Directors; Appointment of Principal Officers") and
          Item
          9.01 ("Financial Statements and Exhibits").
 
 
 Subsequent
          Reports on Form 8-K
 
 On  September
          10, 2007. the
          Company filed a Current Report on Form 8-K disclosing the resignation of
          Kirk N.
          Blackim as President and Director of the Company on September 5, 2007.
          Effective
          as of the same date, Franklin C. Fisher, Jr., who had been serving as Chief
          Executive Officer and Chairman, also assumed the title of
          President.
 
 ITEM
          14. PRINCIPAL ACCOUNTANT FEES AND
          SERVICES
 
 Malone
          & Bailey, PC are our independent auditors.   We have no
          disagreement with our independent auditors on any matter of accounting
          principle
          or practice, financial statement disclosure or auditing scope or
          procedure.
 
 AUDIT
          FEES
 
 During
          the audits of Aztec's 2007 and
          2006 fiscal years, Aztec incurred fees from Malone & Bailey, PC, of $63,074
          and $54,343, respectively, in fees for the audit of the Company's annual
          financial statements and the review of those financial statements included
          in
          the Company's quarterly reports on Form 10-QSB.
 
 AUDIT-RELATED
          FEES
 
 None
 
 TAX
          FEES
 
 None
 
 ALL
          OTHER FEES
 
 None
 
 Policy
          on pre-approval of audit and permissible non-audit services
 
 Our
          Board
          of Directors unanimously approved 100% of the fees paid to the principal
          accountant for audit-related, tax and other fees.  Our Board of
          Directors pre-approves all non-audit services to be performed by the
          auditor.  The percentage of hours expended on the
          principal  accountant's engagement to audit our
          financial  statements for the most recent fiscal year that were
          attributed to work performed by persons other than the principal accountant's
          full-time, permanent employees was 0%.
 
  Back
              to Table of
              Contents


SIGNATURES
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Act of 1934,
        the
        registrant has duly caused this report to be signed on its behalf by the
        undersigned, thereunto duly authorized.
   (Registrant)
                
                Aztec
                    Oil & Gas,
                    Inc.Dated:
                    January 2, 2008
                
                By: /s/Franklin
                    C. Fisher,
                    Jr.Name:
                    Franklin C. Fisher, Jr.Title:    President,
                    Chief Executive Officer and Chairman
                  (Principal
                    Executive
                    Officer)Dated:
                    January 2, 2008
                
                By: /s/  Larry
                    A. HornbrookName:   Larry
                    A. HornbrookTitle:     Vice
                    President and Chief Financial Officer
                  (Principal
                    Financial and Accounting Officer)