**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):
        $
        99,616.
 
 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 November
        30, 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 November 30, 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]
  
  
 **TABLE
        OF CONTENTS**
 
 PART
                  I
              PAGEItem
                  1. Description of Business
              1Item
                  2. Description of Property
              5Item
                  3. Legal Proceedings
              5Item
                  4. Submission of Matters to a Vote of Security Holders
              5PART
                  II
              5Item
                  5. Market for Common Equity and Related Stockholder Matters and
                  Small
                  Business Issuer Purchases of Equity Securities
              5Item
                  6. Management's Discussion and Analysis or Plan of
                  Operation
              6Item
                  7. Financial Statements
              8Item
                  8. Changes in and Disagreements with Accountants on Accounting
                  and
                  Financial Disclosure
              17Item
                  8A. Controls and Procedures
              17PART
                  IIIItem
                  9. Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act
              18Item
                  10. Executive Compensation.
              20Item
                  11. Security Ownership of Certain Beneficial Owners and
                  Management
              23Item
                  12. Certain Relationships and Related Transactions, and Director
                  Independence
              23Item
                  13. Exhibits
              24Item
                  14. Principal Accountant Fees and Services.
              25SIGNATURES
              26
 
  
  **PART
        I**
 
 **ITEM
        1. DESCRIPTION OF BUSINESS.**
 
 As
        used in this Form 10-KSB, references to “Aztec,” the “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
        discussed 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.
 
 **Business
        Development and Organization**
 
 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. to Aztec
        Oil &
Gas, Inc.
 
 Aztec
        is a Houston-based oil and gas exploration and production (E&P) company
        focusing on numerous areas in the U.S. Since its formation under the laws
        of the State of Nevada in 2004, Aztec's business plan has been to purchase,
        organize, manage, and participate in oil and gas interests utilizing
        strategies that seek to manage and reduce the risks associated with
        traditional exploration and production operations. We are a development stage
        company. We have two wholly owned subsidiaries, Aztec Energy, LLC ,[ a Nevada
        LLC organized on August 15, 2006] and Aztec Drilling & Operating, LLC [a
        Nevada LLC organized on August 15, 2006.],
 
 On
        August 13, 2004, the Registrant effected a 3-for-1 forward stock
        split.
 
 **Aztec’s********Business**.
 
 Aztec’s
        business plan is divided into three phases:
 
 Phase
        one of Aztec's business plan called for purchasing interests 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 assume part or all of the costs associated
        with
        the drilling of additional wells in exchange for a part of the revenues derived
        from the wells they finance. Once the well hard costs are repaid to those
        participation investors, the Company expects that any working interest revenues
        would be split approximately 50-50 between those participation investors
        and
        Aztec and other lease interest holders. 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 called for investing in various drilling prospects
        with industry professionals. During this phase, Aztec has participated in
        ten
        drilling projects in Texas, Oklahoma, and Louisiana. To date, four of the
        wells
        have been completed, three are awaiting evaluation and completion, and three
        have been plugged and abandoned. Aztec is also participating in a forty-three
        well project in Pennsylvania.  Of the 43 wells drilled, 19 are
        currently in production, 4 wells were turned online in late September 2007
        and 5
        wells are waiting for the PPL 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-risks, highly focused, predominantly “development” drilling
        projects.
 
 Through
        its subsidiaries, Aztec recently drilled four (4) successful wells in Doddridge
        County, West Virginia under its first sponsored “outside investor” drilling
        partnership (Aztec 2006A Oil & Gas Limited Partnership).  All four
        wells are presently producing and selling both natural gas and oil.
 
 Aztec
        is currently in its third stage of development. In this stage, Aztec will
        focus
        on drilling in basins, such as in the Appalachian regions of the United States,
        which are near 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.
 
 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 gas pipeline and are producing
        both gas and oil.   Aztec raised $1,132,384 net or 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, will
        serve as the Partnership’s drilling company and operator.
 
 As
        of the date of this report, Aztec has raised another $888,724, net of related
        fees and fair value of warrants associated with the private placement from
        outside investors toward funding its second partnership
 
 The
        Company has an operating 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,
        uncertainties and difficulties frequently encountered by companies in the
        early
        stages of development, and particularly by such companies entering a new
        phase
        of its business plan. 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 the company’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.
  The
        Company has 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, the Company had an accumulated deficit of
        $(3,733,258).  The Company expects that its operating expenses will
        increase as it defines and executes new phases of its business strategy,
        especially in the areas of acquisitions.
 
 Thus,
        the Company will 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 that the Company is 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.
 
 **Competition**
 
 The
        search for viable oil and gas prospects and leases is intensely
        competitive.  The Company  competes with other business
        entities, many of which 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 business.  Some
        are very large and well established with substantial capabilities and extensive
        earnings records.  The Company is at a competitive disadvantage with
        some other firms and individuals in acquiring and disposing of oil properties
        since they 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.  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 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 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**
 
 With
        regards to the Company’s future oil 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 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 Company has no intention of adding full time
        employees until it can become a profitable entity.  Notwithstanding,
        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 leas
        brokers and geophysicists in connection with its operations.
 
 **Risk
        Factors**
 
 **Risk
        Factors Relating to Our Business**
 
 **Limited
        Operating History**
 
 The
        Company's prospects 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.
 
 The
        Company’s ability to manage its operations, including the amount and timing of
        capital expenditures and other costs relating to the expansion of the Company's
        operations, the introduction and development of different or more extensive
        techniques by direct and indirect competitors of the Company, including those
        with greater financial, technical and marketing resources, has allowed the
        Company to attract, retain and motivate qualified personnel in general economic
        conditions.
 
 **Anticipated
        Losses for the Foreseeable Future**
 
 The
        Company has not achieved profitability to date, and the Company anticipates
        that
        it will continue to incur net losses for the foreseeable future. As of August
        31, 2007, the Company had an accumulated deficit of $(3,733,258) dollars.
        Management expects its expenses will increase as the Company further executes
        its business plan. 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.
 
 **Developing
        New Business Strategies**
 
 Until
        the Company acquired Z2, LLC, on September 15, 2004 (which was subsequently
        sold
        in February 2006), the Company had been inactive. With the acquisition of
        Z2,
        LLC, the Company developed a business strategy to team-up with outside
        participation investors who will assume the costs associated with the drilling
        of additional wells in exchange for a part of the revenues derived from the
        wells they finance.
 
 The
        Company 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.
 
 **Uncertainties
        Related to the Oil and Gas Business in General**
 
 The
        Company'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,
        the Company is not fully insured against these risks either because
        insurance is not available or because the Company has 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 of the Company. 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.
 
 **Selection
        of a Business Opportunity**
 
 Should
        the Company pursue other potential business opportunities, it
        anticipates they will be referred from various sources, including its
        officers and directors, professional advisors, and its shareholders, who
        may present unsolicited proposals. The Company does not plan to engage in
        any general solicitation or advertising for a business opportunity, and
        would rely upon the personal contacts of its officers, as well as indirect
        associations with other business and professional people. Management's
        reliance on "word of mouth" may limit the number of potential business
        opportunities identified. While it is not presently anticipated that the
        Company will engage unaffiliated professional firms specializing in
        business acquisitions or reorganizations, such firms may be retained if
        management deems it in the best interest of the Company.
 
 The
        Company will not restrict its search to any particular business,
        industry, or geographical location. Management reserves the right to
        evaluate and enter into any type of business in any location. In seeking a
        business venture, the decision of management will not be controlled by an
        attempt to take advantage of any anticipated or perceived appeal of a
        specific industry, management group, product, or industry, but will be
        based on the business objective of seeking long-term capital appreciation.
        The Company may participate in a newly organized business venture or in a
        more established business. Participation in a new business venture entails
        greater risks since, in many instances, management of such a venture may
        not have a proven track record; the eventual market for such venture's
        product or services will likely not be established; and the profitability
        of the venture will be untested and impossible to accurately forecast.
        Should the Company participate in a more established venture that
        is experiencing financial difficulty, risks may stem from the Company's
        inability to generate sufficient funds to manage or reverse the
        circumstances causing such financial problems.
 
 During
        2005 Aztec retained the services of Doherty & Company, LLC., a
        firm specializing in acquisitions, specifically for the purpose of
        identifying acquisition targets. Aztec's business model is based on
        purchasing interests in proven, producing oil & gas properties with
        underexploited drilling sites rather than taking on the very large expenses
        and high risks associated with traditional drilling and exploration. With
        its retention of Doherty & Company, LLC.,  Aztec began looking at other
        potential oil & gas properties and/or drilling prospects in which it
        may have the potential to acquire working interests in an effort to boost
        its oil & gas properties portfolio and thus further increase
        its overall oil production capabilities. On February 15, 2006, the
        relationship with Doherty & Co. was terminated.
 
 **Risks
        Associated with Acquisitions**
 
 If
        appropriate opportunities present themselves, the Company would acquire
        businesses, technologies, services or product(s) that the Company believes
        are
        strategic.
 
 The
        Company currently 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 that the
        Company will 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 require the Company
        to obtain additional equity or debt financing, which might not be available
        on terms favorable to the Company, or at all, and such financing, if
        available, might be dilutive.
 
 **Risks
        Associated With New Business Strategies, Features and
        Functions**
 
 As
        the Company develops its new business strategies, there can be no
        assurance that the Company would be able to expand its operations in a
        cost-effective or timely manner or that any such efforts would maintain or
        increase overall market acceptance. Furthermore, any new business launched
        by the Company that is not favorably received by consumers could damage the
        Company's reputation. Expansion of the Company's operations in this manner
        would also require significant additional expenses and development,
        Company's management, financial and operational resources. The lack of
        market acceptance of the Company's services would result in the Company's
        inability to generate satisfactory revenues and its inability to offset
        their costs could have a material adverse effect on the Company's business,
        results of operations and financial condition.
 
 **Because
        the Oil and Gas industry is cyclical, the Company's operating results may
        fluctuate.**
 
 The
        Company's operating results may fluctuate significantly in the future as
        a result of a variety of factors, many of which are outside the Company's
        control. See "Limited Operating History." As a strategic response to
        changes in the competitive environment, the Company may 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 on the
        Company's business, results of operations and financial
        condition.
 
 Oil
        prices 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. The Company may 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
        on the Company's business, results of operations and financial condition.
        There
        can be no assurance that the Company will receive any material amount of
        revenue
        as it pursues new business strategies in the future. The foregoing factors,
        in
        some future quarters, may lead the Company's operating results to fall below
        the
        expectations.
 
 **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.
 
 **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.
 
 The
        Company participated 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 Aztec is participating as 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), which cost approximately $3.5 million to drill to a
        vertical depth of approximately 14,300 feet, had a spud (start) date of
        April 15, 2005. The second well (Deep Lake Well No. 1) was drilled to an
        approximate vertical depth of 13,600 feet. According to the program's
        operator and several consulting geologists, both well sites targeted
        formations that are considered to contain natural gas plus some condensate.
        Both wells have been drilled and completed into target
        zones.  They were connected during the second quarter of 2006 and are
        now flowing commercial quantities of natural gas. Both wells have untapped
        upper
        zones which are estimated to contain substantial additional
        reserves.
 
 Aztec
        has a minority interest in two gas wells in McIntosh County, Oklahoma that
        have
        been drilled, completed and are awaiting immediate pipeline
        hookup.  One is a conventional well, and the second is a horizontal,
        Coal Bed Methane (CBM) well.  Two additional wells have currently been
        drilled and are awaiting evaluation.
 
 Early
        in May 2005 Aztec announced its participation in a minority interest in one
        well, McCoy #2 in the Barnett Shale play area.  The well was completed
        and the Operator reported good gas and oil shows.  The well 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, Aztec announced that it has taken a 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 in the
        Bradley 2005 Program, 19 are currently in production, 4 wells were turned
        on
        line in late September and 5 wells are waiting for the PPL tap installation.
        It
        owns a minority interest in a productive 43-well oil and natural gas program
        in
        Clearfield, Cambria and Potter counties in Pennsylvania.  Aztec also
        owns a minority interest in two Deep Lake wells in Cameron Parish, Louisiana
        range from 13,600 to 14,300 feet in depth, both of which are
        productive.  Aztec additionally participated in one well in Wharton
        County, Texas that is currently producing and one well in the Barnett Shale
        play
        area of Texas that had good initial oil and gas shows, but is experiencing
        mechanical problems.
 
 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 gas pipeline and producing
        both gas and oil.
 
 **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 approximately one 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.**
 
 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 and risk factors included in this Report.
 
 **Plan
        of Operation**
 
 As
        described above, the Company is a developmental stage company whose principal
        business objective is to purchase oil and gas interests utilizing
        strategies that seek to manage and reduce the risks associated with traditional
        exploration and production operations.
 
 Management
        is in the process of seeking other businesses to acquire so that it can
        expand its operations. The analysis of new businesses 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,
        modifying product emphasis, 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. For the twelve months ended August 31, 2007, the Company
        had oil and gas income of $99,616 as compared to $6,049 for the same period
        last
        year. Oil and Gas Expenses were $26,561 and $11, 068, for the twelve month
        period ended August 31, 2007 and 2006, respectively. Total operating expenses
        for the twelve months ended August 31, 2007 were $1,094,711 as compared to
        $1,108,986 for the same period last year.
 
 As
        of August 31, 2007, we had a working capital deficit of $(3,733,258) . For
        the
        fiscal year ended August 31, 2007, the Company had a net loss of $1,009,624
        compared with a $1,072,954 net gain for the prior fiscal year.
 
 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,
        will serve as the Partnership’s drilling company and operator.
 
 **Liquidity
        and Capital Resources**
 
 As
        of August 31, 2007, the Company had $4,771 in cash. Over the next twelve
        months,
        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.
 
 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 and the Company's need for capital may change dramatically
        if it
        acquires an interest in a business opportunity during that period. 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. In the event
        the
        Company is able to complete a business combination during this period, lack
        of
        its existing capital may be a sufficient impediment to prevent it from
        accomplishing the goal of completing a business combination. There is no
        assurance, however, that without funds it will ultimately allow the Company
        to
        complete a business combination. Once a business combination is completed,
        the
        Company's needs for additional financing are likely to increase
        substantially.
 
 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 had drawn $185,000 against the line of credit. The interest
        rate on the line of credit is 8.75% and matures on May 29, 2008.]
 
 **Going
        Concern Consideration**
 
 **Off
        Balance Sheet Arrangements**
 
 We
        have no off-balance sheet arrangements.
  
 **ITEM
        7. FINANCIAL STATEMENTS.**
 
 TABLE
        OF CONTENTS
 
 PAGEBalance
                  Sheet
              F-13Statements
                  of Operations
              F-14Statement
                  of Stockholders' Deficit
              F-15Statements
                  of Cash Flows
              F-16Notes
                  to Financial Statements
              F-17-27
  
  
 
 **AZTEC OIL & GAS, INC.**
 (A Development Stage Company)
 **BALANCE SHEET**
 **August
        31, 2007**
   Current AssetsCash
              $  
                  4,771Accounts Receivable
              41,875Prepaid
                  Oil & Gas Costs
              13,989Total Current Assets
              60,635Oil and natural gas properties,successful efforts method of accountingUnproved properties - not currently amortized,net of impairment and dry hole costs of
                  $198, 953
              1,326,899Non-current AssetsRestricted
                  Funds
              740,000TOTAL ASSETS
              $
                  2,127,534LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent LiabilitiesAccounts
                  payable
              79,967Salary
                  Payable
              7,780Notes payable
              120,000Common stock payable
              149,196Total current liabilities
              356,943Long
                  Term LiabilitiesNotes
                  payable to related parties
              545,560Total
                  long term liabilities
              545,560Total
                  Liabilities
              902,503Minority
                  Interest
              2,072,683Stockholders’ Equity  Preferred stock, Series A, $.001 par value, 100,000 sharesAuthorized, issued and outstanding respectively
              100Common stock, $.001 par value, 100,000,000 sharesauthorized, 30,677,772
                  issued andoutstanding
              30,677Additional paid-in capital
              2,854,829Deficit accumulated during the development stage
              (3,733,258Total Stockholders’ Equity
              (847,652)TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
              $
                  2,127,534
 
 See
        accompanying Notes to Financial Statements
 
  
  
 
  **AZTEC
        OIL & GAS, INC.**
 **(A
        Development Stage Company)**
 **STATEMENTS
        OF OPERATIONS**
  Years Ended
                    August 31,
                
                Through
                     Inception2007
                
                2006
                
                August 31,2007Oil and Gas Income
                $
                99,616
                
                $
                6,049
                
                $
                105,966General & Administrative
                
                976,393
                
                
                808,905
                
                
                2,697,663Oil and Gas Expenses
                
                26,561
                
                
                11,068
                
                
                37,779Dry Hole Costs
                
                (450
                )
                
                181,778
                
                
                198,503Amortization
                
                -
                
                
                -
                
                
                94,795DD&A
                
                9,004
                
                
                
                
                
                9,004Impairment
                
                83,203
                
                
                -
                
                
                2,042,840,Total Operating
                    Expenses
                
                (1,094,711
                )
                
                (1,,001,751
                )
                
                (5,080,584
                )Partnership Income (Loss)
                
                -
                
                
                213,660
                
                
                (505,340
                )Interest
                    Expense
                
                (15,326)
                
                
                (107,235
                )
                
                (381,998
                )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)
                
                (14,529
                )
                
                2,068.656
                
                
                1,241,233NET INCOME (LOSS)
                $
                (1,009,624
                )
                $
                1,072,954
                
                $
                (3,733,258
                )Basic Income(Loss) per Share
                $
                (0.04
                )
                $
                0.04Weighted AverageShares Outstanding
                
                
                
                
                27,884,829Diluted Income per share
                $
                (0.003)
                
                $
                0.04Diluted Weighted AverageShares Outstanding
                
                
                
                
                27,920,694
 See
        accompanying Notes to Financial Statements
 
  
  
 AZTEC
        OIL & GAS, INC.
 (Formerly
        Aztec Communications Group, Inc.)
 (A
        Development Stage Company)
 STATEMENT
        OF STOCKHOLDERS’ DEFICIT
 Years
        Ended August 31, 2007, 2006, 2005, and 2004
  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
                  Income (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
              
              
              
              
              
              312,501SFAS
                  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
              
              
              
              
              1,622
              
              
              276,806
              
              
              
              
              
              278,428SFAS
                  123R compensation expenseSyndication
                  Costs
              
              
              
              
              
              
              
              (178,099)
              
              
              
              
              
              (178,099
              )Net
                  Income
              
              
              
              
              
              
              
              
              
              
              (1,009,624,
              )
              
              (1,009,624
              )Balances,
                  August 31, 2007
              
              100
              
              $
              30,677
              
              $
              2,854,829
              
              $
              (3,733,258
              )
              $
              (847,652
              )
  Preferred 
                  Shares
              
              
              Common
                  SharesBalances,
                  August 31, 2003
              -
              
              
              22,107,150Stock
                  Issued for Services
              50,000
              
              
              2,400,000Stock
                  Issued for Cash
              50,000
              
              
              -Balances,
                  August 31, 2004
              100,000
              
              
              24,507,150Stock
                  Issued for Services
              -
              
              
              2,775,201Balances,
                  August 31, 2005
              100,000
              
              
              27,282,351Stock
                  Issued for Services
              -
              
              
              1,773,198Balances,
                  August 31, 2006
              100,000
              
              
              29,055,549Stock
                  issued for Services
              
              
              
              1,622,223Balances,
                  August 31, 2007
              100,000
              
              
              30,677,772
  See
        accompanying notes to financial statements.
  
  
 
 **AZTEC OIL & GAS, INC.**
 **(A Development Stage Company)**
 **STATEMENTS OF CASH FLOW**
  Twelve
                      Months Ended August 31,
                  
                  Inception
                      Through2007
                  2006
                  
                  August
                      31, 2007Cash
                      Flows Used in Operating ActivitiesNet
                      Income (Loss)
                  $(1,009,624)
                  $1,072,955
                  
                  $(3,733,258)Adjustments
                      to Reconcile Net Incometo
                      Net Cash Used in Operating Activities:Partnership
                      (Income) Loss
                  
                  (213,660
                  )
                  505,340Share
                      Based Compensation
                  196,725
                  299,203
                  
                  1,059,401Amortization
                  
                  50,723
                  
                  150,723Gain
                      on Sale of Assets
                  
                  (1,341,744
                  )
                  (1,341,744)Gain
                      on Settlement
                  
                  (349,381
                  )
                  (349,381)Deletion
                  9,004
                  
                  
                  9,004Dry
                      Hole Costs
                  
                  181,778
                  
                  198,953Discount
                      on Note Receivable
                  
                  78,046
                  
                  78,046Impairment
                  82,753
                  -
                  
                  2,042,390Changes
                      in:Accounts
                      Receivable
                  (41,761)
                  (114
                  )
                  (54,461)Prepaid
                      Expenses
                  27,175
                  (16,269
                  )
                  (16,374)Accounts
                      Payable
                  (135,536)
                  122,635
                  
                  130,659Accrued
                      Expenses
                  7,780
                  (310,082
                  )
                  (258,507)Net
                      Cash Used in Operating Activities
                  (863,484)
                  (425,910
                  )
                  (1,579,207)Cash
                      Flows Used in Investing ActivitiesLoan
                      to Z3, LLC
                  
                  -
                  
                  (1,850,000)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
                  (1,113,975)
                  (102,644
                  )
                  (1,448,902)Prepaid
                      Well Costs
                  (11,194)
                  -
                  
                  (92,795)Net
                      Cash Provided by (Used in)Investing
                      Activities
                  (1,125,169)
                  1,518,422
                  
                  (151,753)Cash
                      Flows Provided by Financing ActivitiesNote
                      Payable
                  660,560
                  
                  
                  2,610,560Repayment
                      of Note Payable to Bank
                  
                  (1,224,862)
                  
                  (2,815,679)Proceeds
                      from Notes Payable
                  
                  72,000
                  
                  593,167Proceeds
                      from Sales of  Preferred Stock
                  
                  
                  
                  15,000Proceeds
                      from Limited Partnership
                  2,072,684
                  
                  
                  2,072,684Net
                      Cash Provided by (Used in)Financing
                      Activities
                  2,733,244
                  (1,152,862
                  )
                  2,475,732Net
                      Increase (Decrease) in Cash
                  
                  (60,350
                  )
                  744,772Cash
                      at Beginning of Period
                  181
                  60,531
                  
                  -Cash
                      at End of Period
                  744,772$
                  $
                      181
                  
                  $
                      744,772Cash
                      paid during the year for:Interest
                  $15,326
                  $236,990Tax
                  $
                  $
                      -
 See
        accompanying Notes to Financial Statements


AZTEC
        OIL & GAS, INC.
 (A
        DEVELOPMENT STAGE COMPANY)
 NOTES
        TO FINANCIAL STATEMENTS
 
 NOTE
        1 - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
 
 Aztec
        Oil & Gas, Inc. (the “Company” or “Aztec”) 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.
 
 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.
 
 Certain
        prior year amounts have been reclassified to conform with the 2007
        presentation.
 
 **Cash
        Equivalents.** 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.**The Company follows the provisions of Financial
        Accounting Standards Board Statement No. 143, “Accounting for Asset Retirement
        Obligations” (SFAS No. 143). 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.** The Company 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”). The Company 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.
 
 **Earnings
        Per Share.** Basic earnings per share equals net earnings divided
        by weighted average shares outstanding during the year. Diluted earnings
        per share include the impact of common stock equivalents using the treasury
        stock method when the effect is dilutive.
 
 **Recently
        Issued Accounting Pronouncements.**In May 2005, the Financial Accounting
        Standards Board (“FASB”) issued SFAS Statement No. 154 (“SFAS 154”), Accounting
        Changes and Error Corrections.  SFAS 154 requires that, when a company
        changes its accounting policies, the change must be applied retrospectively
        to
        all prior periods presented instead of a cumulative effect adjustment in
        the
        period of the change.  SFAS 154 may also apply when the FASB issues new
        rules requiring changes in accounting.  If the new rule allows cumulative
        effect treatment, it will take precedence over SFAS 154.  This statement is
        effective for fiscal years beginning after December 15, 2005.  The adoption
        of SFAS 154 is not expected to have a significant impact on the Company’s
        financial position or its results of operations.
 
 In
        June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
        Interpretation No. 48, Accounting for Uncertainty in Income taxes (“FIN 48”).
        FIN 48, which is an interpretation of SFAS No. 109, “Accounting for Income
        Taxes,” provides guidance on the manner in which tax positions taken or to be
        taken on tax returns should be reflected in an entity’s financial statements
        prior to their resolution with taxing authorities. The Company is required
        to
        adopt FIN 48 during the first quarter of fiscal 2008. The Company is currently
        evaluating the requirements of FIN 48 and has not yet determined the impact,
        if
        any; this interpretation may have on its consolidated financial
        statements.
 
 
 NOTE
        2 - INCOME TAX
 
 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 $1,040,474 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
        3- EQUITY
 
 During
        2006, Aztec issued 1,622,223 shares valued at $347,362 to various consultants
        and directors for services.
 
 In
        accordance with SFAS 123R, Aztec recognized amortization of options issued
        in
        2006 beginning March 1, 2006 of $47,488. Had SFAS 123R been in effect as
        of
        September 1, 2005, additional expense of $42,842 would have been
        recognized. This change would not have any effect on the earnings per share
        or
        fully diluted earnings per share.
 
 During
        2006 800,000 options were issued to the president and CEO. 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%, and expected volatility of 161%.
 
 A
        summary of the options issued by us for the year ended August 31, 2007 is
        as
        follows:
  
 **Options**
                
                **Weighted
                    -****Average**
                  **Exercise****Price
                    per
                    Share**
                
                **Weighted
                    -
                    Average****Remaining**
                  **Contractual
                    Term****(in
                    years)**
                
                **Aggregate**
                  **Intrinsic****Value**Outstanding
                      on August 31, 2006
                
                22,600,000
                
                $ .74
                
                3.0
                
                —Granted
                
                5,495,142
                
                $ .74
                
                3.0
                
                —Exercised
                
                
                
                $ —
                
                —
                
                —Surrendered/Canceled
                
                -
                
                $ —
                
                —
                
                —Outstanding
                    on August 31, 2007
                
                28,095,142
                
                $ .74
                
                3.0
                
                —Exercisable
                    on August 31, 2007
                
                28,095,142
                
                $ .74
                
                3.0
                
                —
  
 
  The
        weighted-average grant-date fair value for the year ended August 31, 2007
        was
        $0.74/share. No options were exercised during the year. The unrecognized
        share
        based compensation cost related to stock option expense at August 31, 2007
        is
        $192,531 and will be recognized over a weighted average of 4.0
        years.
 
 During
        August 2007, 6,000,000 warrants issued during 2005 were cancelled and re-issued
        in accordance with a consulting agreement. The fair value on the grant date
        as
        determined using the Black Scholes warrant pricing model was $618,696. Estimates
        used in the model include a risk-free interest rates used of 4.8%, and expected
        volatility of 145%. The warrants are expensed over the remaining life of
        the
        consulting agreement which is approximately 8 years. As of 2007, $3,235 was
        amortized.
 
 
 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 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 - RELATED PARTY TRANSACTION
 
 At
        August 31, 2007 the Company has common stock payable of $137,800 to Kirk
        N.
        Blackim. Mr. Blackim serves as Director and President of the Company.
        As of the date of this report this stock has been paid in full.
 
 At
        August 31, 2007 the Company  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.
 
 
 **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 are effective
        to
        ensure that material information relating to us is recorded, processed,
        summarized, and reported in a timely manner. There were no significant changes
        in our internal controls or in other factors that could significantly affect
        these controls subsequent to the last day they were evaluated by our Chief
        Executive Officer and Chief Financial Officer.
 
 **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. He was appointed President
        upon the resignation of Mr. Kirk Blackim in September 2007.
 
 Mr.
        Fisher, in 1964, joined a small, nearly bankrupt steel fabrication firm in
        Houston, TX as executive trainer.  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 ended August 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.  who had been serving as our CEO and Director
        assumed the position of President following the resignation of Kirk
        Blackim.  Mr. Fisher receives an annual salary of $24,000 and was
        granted
 
 (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.
 
 **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-
              $10,104
              -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-
              $33,333
              -0-
              -0-Director
              2006
              -0-
              -0-
              -0-
              -0-2005
              -0-
              -0-
              -0-
              -0-Kathryn
                  Parks
              2007
              -0-
              -0-
              -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**
 
 **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.
        Blackim, Mr. Hornbrook and Mr. Lehrer held an aggregate of 28,895,142
        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**
 
 As
        of August 31, 2007 the Company had one employment agreements with its officers.
        On June 15, 2007, the Company entered into an employment agreement 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 officersas
                  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.
 
 **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 On
        June 15, 2007, the Company entered into an Executive Employment Agreement
        with
        Franklin C. Fisher, Jr. pursuant to which Mr. Fisher became our President
        and
        Chairman. In connection with the agreement, Mr. Fisher was issued 6,000,000
        common stock purchase options. The option agreement provides that Mr. Fisher
        is
        entitled to exercise each option at $0.11 per share. The option expires 10
        years
        from the date of the agreement.
 
 At
        August 31, 2007 the Company has common stock payable of $137,800 to Kirk
        N.
        Blackim. Mr. Blackim serves as Director and President of the Company.
        As of the date of this report this stock has been paid in full. As of the
        date
        of this report, these stocks have been paid in full.
 
 At
        August 31, 2007 the Company  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.
 
 Other
        than those disclosed herein, 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.
 
 **ITEM
        13. EXHIBITS.**
 
 (a)
        EXHIBITS
 
 Number                                Description
 
 3.1                      Articles
        of Incorporation
 
 3.2                      Bylaws
 
 10.1                      Executive
        Employment Agreement between the Company and Franklin C. Fisher, Jr. dated
        June
        15,2007.
 
 31.1                      Certifications
        of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act
        of2002.
 
 31.2                      Certifications
        of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act
        of2002.
 
 32.1                      Certifications
        of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
        Section1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
        of
        2002.
 
 **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
        Aztec's 2007 and 2006 fiscal years, Malone & Bailey, PC, billed Aztec
        $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
 
 The  aggregate
        fees billed for assurance and related services by the principal accountant
        that
        are reasonably related to the performance of the audit or review of the
        Company's financial statements for the fiscal years ended August 31, 2007
        and
        2006 were $0 and $0, respectively.
 
 TAX
        FEES
 
 The
        aggregate fees billed by the Company's auditors for professional services
        for
        tax compliance, tax advice, and tax planning were $0 and $0 for fiscal 2007
        and
        2006, respectively.
 
 ALL
        OTHER FEES
 
 During
        Aztec's 2007 and 2006 fiscal years, the Company’s auditors billed Aztec $0 in
        fees for all other non-audit services rendered to Aztec, which amount includes
        tax related services of $0, foreign statutory audits of $0.
 
 The
        Aztec Board of Directors believes that the provision of the services described
        under "All Other Fees" was compatible with maintaining Malone & Bailey, PC's
        independence from Aztec.
 
 **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%.


**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:
                    December 14, 2007
                
                By: /s/Franklin
                    C. Fisher,
                    Jr.Name:
                    Franklin C. Fisher, Jr.Title:    President,
                    Chief Executive Officer and Chairman
                  (Principal
                    Executive
                    Officer)Dated:
                    December 14, 2007
                
                By: /s/  Larry
                    A. HornbrookName:   Larry
                    A. HornbrookTitle:     Vice
                    President and Chief Financial Officer
                  (Principal
                    Financial and Accounting Officer)