UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D. C. 20549
 
 FORM
10-KSB/A
 (Amendment
No. 2)
 
 (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: None
 
 Common
Stock, par value $0.001
 (Title
of class)
 
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
  Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [  ]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [  ] No [X]
  State the
issuer's revenue for its most recent fiscal year (ending August 31, 2007): $
114,706
 
 State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of December
21, 2007: $1,195,088 (19,918,130 shares times $0.06).
 
 State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the most practicable date:
 
 As of
December 21, 2007, there were 30,777,772 shares of Common Stock, $0.001 par
value, outstanding.
 
 Transitional
Small Business Disclosure Format (Check one): Yes [  ]  No
[X]
 
 
 EXPLANATORY
NOTE:
 
 This
Amendment No. 2 to the Annual Report on Form 10-KSB/A of Aztec Oil & Gas,
Inc. (the “Company”) for the fiscal year ended  August 31, 2007, is
being filed for the purpose of:
 
 ·
              amending
      and restating Item 6, Management’s Discussion and Analysis, giving more
      disclosure as to the underlying reasons for the significant increase in
      revenues,
 ·
              Correctly
      stating inception-to-date financial statements,
  and
 ·
              Concluding
      as to the findings of the Chief Executive Officer and Chief Financial
      Officer regarding disclosure controls and procedures designed to ensure
      that material information relating to us is recorded, processed,
      summarized, and reported in a timely
manner.
 
 The
remainder of the 10-KSB/A is unchanged and is not reproduced in this Amendment
No. 2.
 
  
  
 TABLE
OF CONTENTS
 
 PAGEPART
      IItem
      1. Description of Business
              3Item
      2. Description of Property
              8Item
      3. Legal Proceedings
              8Item
      4. Submission of Matters to a Vote of Security Holders
              8PART
      II
              8Item
      5. Market for Common Equity and Related Stockholder Matters and Small
      Business Issuer Purchases of Equity Securities
              9Item
      6. Management's Discussion and Analysis or Plan of
    Operation
              9Item
      7. Financial Statements
              11Item
      8. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
              23Item
      8A. Controls and Procedures
              23PART
      IIIItem
      9. Directors, Executive Officers, Promoters and Control Persons;
      Compliance with Section 16(a) of the Exchange Act
              23Item
      10. Executive Compensation.
              26Item
      11. Security Ownership of Certain Beneficial Owners and
      Management
              29Item
      12. Certain Relationships and Related Transactions, and Director
      Independence
              30Item
      13. Exhibits
              30Item
      14. Principal Accountant Fees and Services.
              31SIGNATURES
              32
 
 
 
 PART I
 
 ITEM
1. DESCRIPTION OF BUSINESS.
 
 As used
in this Form 10-KSB, references to “Aztec,” “Company,” the “Registrant,” “we,”
“our” or “us” refer to Aztec Oil & Gas, Inc., including its subsidiaries,
unless the context otherwise indicates.
 
 Forward-Looking
Statements
 
 This
Annual Report on Form 10-KSB (this “Report”) contains forward-looking
statements.  For this purpose, any statements contained in this Report
that are not statements of historical fact may be deemed to be forward-looking
statements.  Forward-looking information includes statements relating
to future actions, prospective products, future performance or results of
current or anticipated products, sales and marketing efforts, costs and
expenses, interest rates, outcome of contingencies, financial condition, results
of operations, liquidity, business strategies, cost savings, objectives of
management, and other matters.  You can identify forward-looking
statements by those that are not historical in nature, particularly those that
use terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“contemplates,” “estimates,”  “believes,” "plans,” “projected,”
“predicts,” “potential,” or “continue” or the negative of these similar
terms.  The Private Securities Litigation Reform Act of 1995 provides
a “safe harbor” for forward-looking information to encourage companies to
provide prospective information about themselves without fear of litigation so
long as that information is identified as forward-looking and is accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in the
information.
 
 These
forward-looking statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that we cannot predict. In evaluating these
forward-looking statements, you should consider various factors, including the
following: (a) those risks and uncertainties related to general economic
conditions, (b) whether we are able to manage our planned growth efficiently and
operate profitable operations, (c) whether we are able to generate sufficient
revenues or obtain financing to sustain and grow our operations, (d) whether we
are able to successfully fulfill our primary requirements for cash, which are
explained below under “Liquidity and Capital Resources”.  We assume no
obligation to update forward-looking statements, except as otherwise required
under the applicable federal securities laws.
 
 (a)
BUSINESS DEVELOPMENT
 
 Business
Development, Organization and Acquisition Activities
 
 The
Company was originally organized under the name Aztec Communications Group as a
Utah corporation (“Aztec Communications”).  Aztec Communication’s
original principal business objective involved its participation in the
broadcast and television business through its then wholly-owned subsidiaries,
Lloyd Communications, Inc., an Illinois corporation (“Lloyd”), and Golden Circle
Broadcasting Inc., a Tennessee corporation (“Golden Circle”).  As a
result of adverse business circumstances, in 1990, the Company sold Lloyd and
Golden Circle and ceased its business operations in the broadcast and television
business.  No material business operations were conducted by the
Company from 1990 until 2004.  In 2004, the Company changed its name
from Aztec Communications Group, Inc. to Aztec Oil & Gas, Inc. and
reorganized under the laws of the State of Nevada.  Since 2004,
Aztec's business plan has been to purchase, manage and participate in oil
and gas interests utilizing strategies that seek to manage and reduce the
risks associated with traditional exploration and production
operations.
 
 On August
13, 2004, the Registrant effectuated a 3-for-1 forward stock split.
 
 Aztec is
a Houston-based, development stage oil and gas exploration and production
company focusing on numerous areas in the U.S.
 
 BUSINESS
OF ISSUER
 
 Principal Products, Services and
Principal Markets.
 
 Phase one
of Aztec's business plan calls for purchasing working 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. The Company expects that implementation of this
strategy should allow a reduction in the financial risks for Aztec in drilling
new wells, while Aztec would still be receiving income from present field
production in addition to income from any successful new drilling.
 
 Phase two
of Aztec's business plan calls for investing in various drilling prospects with
industry professionals. Aztec has participated in ten drilling projects in
Texas, Oklahoma, and Louisiana. Four of the wells have been completed, three are
awaiting evaluation and completion, and three have been plugged and abandoned.
Aztec is also participating as a working interest owner in a forty-three well
project in Pennsylvania.  Of the 43 wells drilled, 19 are currently in
production as of August 31, 2007, 4 wells were turned on line in late September
2007 and 5 wells are waiting for pipeline tap installation.
 
 Phase
three of Aztec’s business plan calls for originating, developing and managing
balanced, low risk, highly focused developmental drilling projects with
investors in areas with low drilling costs and high success rates where the
process can be repeated in a relatively consistent manner.  This stage
further balances Aztec’s approach to profitable energy asset development through
low-risk, highly focused, predominantly “development” drilling projects in which
Aztec seeks participation from multiple individual and entity
investors.
 
 Aztec has
a limited 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 and problems
frequently encountered by all companies in the early stages of development, and
particularly by such companies entering new areas of business. Aztec’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, particularly companies involved in the highly competitive oil and
gas industry. Such risks include, without limitation, the ability of the Company
to manage its operations, including the amount and timing of capital
expenditures and other costs relating to the expansion of 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.
  Aztec 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, Aztec had an accumulated deficit of $(4,967,409) and expects that its
operating expenses will increase as it defines its new business strategy,
especially in the areas of acquisitions.
 
 Thus,
Aztec 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 Aztec 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.
 
 Aztec
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 participated 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) was “spudded” in
April 2005 and cost approximately $3.5 million (gross) to drill to a vertical
depth of approximately 14,300 feet. The second well (Deep Lake Well
No. 1) was drilled to an approximate vertical depth of 13,600 feet. Both
wells were completed into target zones and are now flowing commercial
quantities of natural gas and condensate.  Both wells have untapped
upper zones which are estimated to contain substantial additional
reserves.
 
 Early in
May 2005 Aztec announced its participation in a minority interest in one well,
the McCoy #2, in the Barnett Shale play area of Texas.  The well was
completed in 2006  and initially produced primarily oil with limited
gas; however gas flows have increased over time.  The well is
currently producing but has experienced mechanical issues that have caused
production to vary significantly.  The Operator continues to address
these issues while attempting to produce the well.
 
 On
October 26, 2005, Aztec purchased 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, 19 are currently in
production as of August 31, 2007, 4 wells were turned on line in late September
2007, and 5 wells are waiting for the pipeline tap installation.
 
 During
December 2006, Aztec Oil & Gas, Inc. completed the funding of its first new
drilling partnership, the Aztec 2006A Oil & Gas Limited Partnership, with 22
outside investors. The new multi-well drilling program based in the Doddridge
County area of West Virginia commenced drilling in February 2007. Four wells
have been completed as of the date of this report. The wells are connected to
the gas pipeline and producing both gas and oil.  Aztec raised
$1,132,384, net of related fees and fair value of warrants associated with the
private placement, from outside investors toward funding the
partnership.
 
 In this
new Partnership, Aztec, through its wholly-owned subsidiary, Aztec Energy, LLC,
will retain thirty percent ownership and will act as the Managing General
Partner. Another Aztec subsidiary, Aztec Drilling & Operating, LLC, serves
as the Partnership’s drilling company and operator.
 
 As of the
date of this report, Aztec has raised $888,724, net of related fees and fair
value of warrants associated with the private placement, from outside investors
toward funding another partnership
 
 As
indicated by the previously discussed partnerships, Aztec is currently in its
third stage of development. In this stage, Aztec focuses 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.
 
 Developing New Business
Strategies
 
 Aztec
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 Aztec 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
 
 Aztec's
current business is subject to all of the risks normally incident to the
exploration for and production of oil and gas, including
blow-outs, cratering, pollution, fires, and theft of equipment. Each of
these incidents could result in damage to or destruction of oil and gas
wells or formations or production facilities or injury to persons, or
damage to or loss of property. As is common in the oil and gas industry,
Aztec is not fully insured against these risks either because insurance is
not available or because Aztc 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 Aztec. Wells may have to be shut-in because they have become
uneconomical to operate due to changes in the price of oil, depletion of
reserves, or deterioration of equipment. Changes in the price of imported oil,
the discovery of new oil and gas fields and the development of alternative
energy sources have had and will continue to have a dramatic effect on the
Company's business.
 
 Risks
Associated with Acquisitions
 
 If
appropriate opportunities present themselves, Aztec would acquire businesses,
technologies, services or product(s) that the Company believes are
strategic.
 
 Aztec
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 Aztec 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 Aztec to
obtain additional equity or debt financing, which might not be available on
terms favorable to Aztec, or at all, and such financing, if available,
might be dilutive.
 
 Because
the Oil and Gas industry is cyclical, the Company's operating results may
fluctuate.
 
 Aztec's
operating results may fluctuate significantly in the future as a result of
a variety of factors, many of which are outside Aztecs control.  As a
strategic response to changes in the competitive environment, Aztec 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 Aztec’s business, results of operations and financial
condition.
 
 Oil and
natural gas 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.  Aztec 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
Aztec’s business, results of operations and financial condition. There can be no
assurance that Aztec 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 Aztecs operating results to fall below the
expectations.
 
 Competition
 
 The
search for viable oil and gas prospects and leases is intensely
competitive.  The Company will compete with other business entities,
many of which will have a competitive edge over the Company by virtue of their
stronger financial resources and prior experience in the
business.  There is no assurance that the Company will be successful
in identifying and executing suitable business opportunities.
 
 There are
many companies and individuals engaged in the oil and gas
business.  Some are very large and well established with substantial
capabilities and extensive earnings records.  The Company is at a
competitive disadvantage as compared with some other firms and individuals in
acquiring and developing oil and gas properties since our competitors may have
greater financial resources and larger technical staffs than the
Company.  In addition, in recent years a number of small companies
have been formed which have objectives similar to those of the Company and which
present substantial competition to the Company.
 
 A number
of factors, beyond the Company’s control and the effect of which cannot be
accurately predicted, affect the production and marketing of oil and natural
gas.  These factors include crude oil imports, actions by foreign oil
producing nations, the availability of adequate pipeline and other
transportation facilities, the marketing of competitive fuels and other matters
affecting the availability of a ready market, such as fluctuating supply and
demand.
 
 Government
Regulation
 
 In
general, our oil and gas production activities are, and any drilling operations
of the Company would be, subject to extensive regulation by numerous federal,
state and local governmental authorities, including state conservation agencies,
the Department of Energy and the Department of the Interior (including the
Bureau of Indian Affairs and Bureau of Land Management).  Regulation
of the Company’s production, transportation and sale of oil or gas has a
significant effect on the Company and its operating results.
 
 The
current production operations of the Company are, and any drilling operations of
the Company would be, subject to regulation by state conservation commissions
which have authority to issue permits prior to the commencement of drilling
activities, establish allowable rates of production, control spacing of wells,
prevent waste and protect correlative rights, and aid in the concentration of
natural gas and oil.  Typical state regulations require permits to
drill and produce oil, protection of fresh water horizons, and confirmation that
wells have been properly plugged and abandoned.
 
 In
addition, various federal and state authorities have the authority to regulate
the exploration and development of oil and gas and mineral properties with
respect to environmental matters.  Such laws and regulations,
presently in effect or as hereafter promulgated, may significantly affect the
cost of our current oil and gas production and any exploration and development
activities undertaken by the Company and could result in loss or liability to
the Company in the event that any such operations are subsequently deemed
inadequate for purposes of any such law or regulation.
 
 Patents,
Trademarks, Licenses, Franchises, Concessions, Royalty Agreements, or Labor
Contracts
 
 With
regards to the Company’s future oil and gas production, the Company does not
hold any patents, trademarks, licenses, etc., with respect to, nor are patents
significant in regard to, the Company’s oil and gas production
activities.  The Company plans to enter into confidentiality
agreements with its future employees, future suppliers and future consultants
and in connection with its license agreements with third parties and generally
seeks to control access to and distribution of its technology, documentation and
other proprietary information.  Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use the Company’s
proprietary information without authorization or to develop similar technology
independently.
 
 Employees
 
 The
Company currently has one President who is also the Chief Executive Officer, one
Chief Financial Officer, one Senior Economist, one Corporate Secretary and a
separate Director.  The President is also an employee and other than
hiring a secretary/administrative assistant,  the Company has no
present intention of adding any more full time employees until it substantially
increases its income.  The Company plans to retain consultants with
respect to current and proposed properties and operations.  The
Company, from time to time, may retain independent engineering and geological
consultants and the services of lease brokers and geophysicists in connection
with its operations.
 
 Risk
Factors
 
 
 Risk
Factors Relating to Our Business
 
  The
drilling of natural gas and oil wells is highly speculative and risky and may
result in unprofitable wells.Natural gas and oil
drilling is a highly speculative activity. The wells drilled may not be
productive. Even completed wells may not produce enough natural gas or oil to
show a profit. Delays and added expenses may also be caused by poor weather
conditions affecting, among other things, the ability to lay
pipelines.
  Prices
for natural gas and oil have been quite unstable; a decline could cause the
Company to be unprofitable.Global economic
conditions, political conditions, and energy conservation have created unstable
prices. Revenues of each well are directly related to natural gas and oil prices
which the Company cannot predict. A decline in gas and oil prices would result
in lower revenues for the Company. Prices for natural gas and oil are likely to
remain extremely unstable.
  Rapid
growth of production in the Appalachia regions may result in lower prices and
production restrictions until new pipeline facilities are put in
service.The Appalachian Region,
including areas of the Company's West Virginia prospects, has sometimes in the
past experienced lower prices and occasional curtailments resulting from a local
oversupply situation for natural gas. This situation has abated; however, if
excess production exceeds the additional pipeline capacity, or if producers
continue to successfully develop new supplies in the area and if additional
pipeline facilities or markets are not developed to utilize or transport the new
supplies, a local surplus could continue or reoccur, resulting in lower prices
and/or production curtailment.
  Environmental
hazards involved in drilling gas and oil wells may result in substantial
liabilities for the Company.There are numerous
natural hazards involved in the drilling of wells, including unexpected or
unusual formations, pressures, blowouts, etc. involving possible damages to
property and third parties, surface damages, bodily injuries, damage to and loss
of equipment, reservoir damage and loss of reserves. Uninsured liabilities may
result in the loss of Company properties. The Company may be subject to
liability for pollution, abuses of the environment and other similar damages.
Insurance coverage may be insufficient to protect the Company. In that event,
Company assets would pay personal injury and property damage claims and the
costs of controlling blowouts or replacing destroyed equipment rather than for
drilling activities. These payments would cause the Company to be less
profitable.
  Increases
in drilling costs would reduce the Company's profitability.The oil and gas
industry historically has experienced periods of rapid cost increases. Increases
in the cost of exploration and development would affect the ability of the
Company to acquire additional leases, gas and oil equipment, and supplies. The
foregoing would increase costs and may lead, depending on the price which the
Company receives for its oil or gas, to lower profits of the
Company.
  Reduced
availability of drilling rigs, due in part to intense competition in drilling,
may delay the drilling of wells.A large number of
companies and individuals engage in drilling for natural gas and oil; and there
is competition for the most desirable leases as well as materials and equipment
to drill and complete wells. Increased drilling operations in some areas of the
United States have resulted in the decreased availability of drilling rigs and
gas/oil field tubular goods. Also, international developments and the possible
improved economics of domestic oil and gas exploration may influence others to
increase their domestic oil and gas exploration. These factors may reduce the
availability of rigs, equipment and services to the Company resulting in delays
in drilling activities. The reduced availability of rigs, equipment and services
could delay the Company in drilling wells on a timely basis and delay the
production of natural gas or oil.
  Local
delays in Company gas or oil production could reduce the Company's
profitability.Wells drilled for the
Company may have access to only one potential market. Local conditions including
but not limited to closing businesses, conservation, shifting population,
pipeline maximum operating pressure constraints and develop­ment of local
oversupply or deliverability problems could halt or reduce sales from Company
wells. A delay in the production and sale of the Company's gas and oil could
reduce the Company's profitability.
 
 
 Risks
Relating to Our Common Shares
 
 We
may, in the future, issue additional common shares, which would reduce
investors’ percent of ownership and may dilute our share value.
 
 Our
Articles of Incorporation authorize the issuance of 100,000,000 shares of common
stock and 100,000 shares of preferred stock.  The future issuance of
common stock may result in substantial dilution in the percentage of our common
stock held by our then existing shareholders.  We may value any common
stock issued in the future on an arbitrary basis.  The issuance of
common stock for future services or acquisitions or other corporate actions may
have the effect of diluting the value of the shares held by our investors, and
might have an adverse effect on any trading market for our common
stock.
 
 Our
common shares are subject to the “Penny Stock” Rules of the SEC and the trading
market in our securities is limited, which makes transactions in our stock
cumbersome and may reduce the value of an investment in our stock.
 
 The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a “penny stock”, for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain
exceptions.  For any transaction involving a penny stock, unless
exempt, the rules requires: (a) that a broker or dealer approve a person’s
account for transactions in penny stocks; and (b) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased.
 
 In order
to approve a person’s account for transactions in penny stocks, the broker or
dealer must: (a) obtain financial information and investment experience
objectives of the person; and (b) make a reasonable determination that the
transactions in penny stocks are suitable for that person and the person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
 
 The
broker or dealer must also deliver, prior to any transaction in penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form: (a) sets forth the basis on which the broker
or dealer made the suitability determination; and (b) that the broker or dealer
received a signed, written agreement from the investor prior to the
transaction.  Generally, brokers may be less willing to execute
transactions in securities subject to the “penny stock” rules.  This
may make it more difficult for investors to dispose of our Common shares and
cause a decline in the market value of our stock.
 
 Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions.  Finally, monthly statements have
to be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
 
 Because
we do not intend to pay any cash dividends on our common stock, our stockholders
will not be able to receive a return on their shares unless they sell
them.
 
 We intend
to retain any future earnings to finance the development and expansion of our
business.  We do not anticipate paying any cash dividends on our
common stock in the foreseeable future.  Unless we pay dividends, our
stockholders will not be able to receive a return on their shares unless they
sell them.  There is no assurance that stockholders will be able to
sell shares when desired.
 
 We
may issue shares of preferred stock in the future that may adversely impact the
rights of the holders of our common stock.
 
 Our
articles of incorporation authorize us to issue up to 100,000 shares of “blank
check” preferred stock.  Accordingly, our board of directors will have
the authority to fix and determine the relative rights and preferences of
preferred shares, as well as the authority to issue such shares, without further
stockholder approval. As a result, our board of directors could authorize the
issuance of a series of preferred stock that would grant the holders preferred
rights to ours assets upon liquidation, the right to receive dividends before
dividends are declared to holders of our common stock, and the right to the
redemption of such preferred shares, together with a premium, prior to the
redemption of the common stock.  To the extent that we do issue such
additional shares of preferred stock, the rights of the holders of our common
stock could be impaired thereby, including, without limitation, dilution of
their ownership interests in us.  In addition, shares of preferred
stock could be issued with terms calculated to delay or prevent a change in
control or make removal of management more difficult, which may not be in the
interest of holders of common stock.
 
 ITEM
2. DESCRIPTION OF PROPERTY.
 
 The
Company's corporate headquarters are located at One Riverway, Suite 1700,
Houston, Texas 77056. Our telephone number is (713) 840-6444.
 
 ITEM 3. LEGAL
PROCEEDINGS.
 
 There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company.  The Company’s property is not the subject of
any pending legal proceedings.
 
 ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
 The
Company did not submit any matters to a vote of security holders during the
fiscal year ended August 31, 2007.
 
 PART
II
 
 ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
 Market
Information
 
 The
Company's common stock was cleared for trading on the OTC Bulletin
Board system. Our stock symbol is AZGS. For the year ended August 31, 2007,
the prices of the common stock in the over-the-counter market, as reported
and summarized by the OTC Bulletin Board were $0.19 high bid, and $0.03 low
asked. Such prices are based on inter-dealer bid and asked prices, without
markup, markdown, commissions, or adjustments and may not represent actual
transactions.
 
 The table
below sets forth the high and low bid prices of our common stock for each
quarter shown, as provided by the NASD Trading and Market Services
Research Unit. Quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual
transactions.
 
 CALENDAR
      QUARTER
                  
                  HIGH
                  
                  LOWFISCAL
      2005Quarter
      ended November 30, 2004
                  
                  $2.90
                  
                  $0.10Quarter
      ended February 28, 2005
                  
                  $1.78
                  
                  $0.81Quarter
      ended May 31, 2005
                  
                  $2.49
                  
                  $0.67Quarter
      ended August 31, 2005
                  
                  $0.70
                  
                  $0.47FISCAL
      2006Quarter
      ended November 30, 2005
                  
                  $0.51
                  
                  $0.28Quarter
      ended February 28, 2006
                  
                  $0.32
                  
                  $0.15Quarter
      ended May 31, 2006
                  
                  $0.26
                  
                  $0.13Quarter
      ended August 31, 2006
                  
                  $0.22
                  
                  $0.10FISCAL
      2007Quarter
      ended November 30, 2006
                  
                  $0.10
                  
                  $0.03Quarter
      ended February 28, 2007
                  
                  $0.13
                  
                  $0.07Quarter
      ended May 31, 2007
                  
                  $0.18
                  
                  $0.11Quarter
      ended August 31, 2007
                  
                  $0.19
                  
                  $0.03
 
 Holders
 
 The
approximate number of holders of record of common stock as of November 30, 2007
was 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.
 
 (i)
General
 
 This
Management’s Discussion and Analysis or Plan of Operations (“MD&A”) section
of this Report discusses our results of operations, liquidity and financial
condition, and certain factors that may affect our future results. You should
read this MD&A in conjunction with our financial statements and accompanying
notes included in this Report.
 
 PLAN OF
OPERATION
 
 The
Company is a developmental stage company whose principal business objective
is to purchase, initiate and/or participate in oil and gas interests utilizing
strategies that seek to manage and reduce the risk associated with traditional
exploration and production operations.
 
 The
Company believes it has sufficient funding to sustain itself for the next twelve
months. However, there can be no assurances to that effect, as the Company has
little revenue. In the event the Company requires additional funds, the Company
will have to seek loans or equity placements to cover such cash needs. There is
no assurance additional capital will be available to the Company on acceptable
terms.
 
 Management
is in the process of seeking other businesses or properties to acquire so that
it can expand its operations. The analysis of new businesses and property
acquisition opportunities and evaluating new business strategies will be
undertaken by or under the supervision of the Company's directors. In
analyzing prospective business opportunities, management will consider, to
the extent applicable, the available technical, financial and managerial
resources of any given business venture. Management will also consider the
nature of present and expected competition; potential advances in research
and development or exploration; the potential for growth and expansion; the
likelihood of sustaining a profit within given time frames; the perceived
public recognition or acceptance of products, services, trade or service
marks; name identification; and other relevant factors. The Company
anticipates that the results of operations of a specific business venture
may not necessarily be indicative of the potential for future earnings,
which may be impacted by a change in marketing strategies, business
expansion, changing or substantially augmenting management, and other
factors.
 
 Management
will analyze all relevant factors and make a determination based on a composite
of available information, without reliance on any single factor. The period
within which the Company will decide to participate in a given business venture
cannot be predicted and will depend on certain factors, including the time
involved in identifying businesses, the time required for the Company to
complete its analysis of such businesses, the time required to prepare
appropriate documentation and other circumstances.
 
 RESULTS
OF OPERATIONS
 
 Fiscal
Year Ended August 31, 2007 Compared to Fiscal Year Ended August 31,
2006.
 
 For the
twelve months ended August 31, 2007, the Company recognized
partnership income of $0 and interest income of $485 as compared to
partnership income of $213,660 and interest income of $30,316 for the same
period last year.  The decrease is attributable to the profitable sale
of the Company’s interest in Z2, LLC in February 2006.  For the twelve
months ended August 31, 2007, the Company had oil and gas revenue of $114,706 as
compared to $6,049 for the same period last year. Oil and Gas Expenses were
$30,079 for the twelve month period, which resulted in a net Oil and Gas
Gain of $84,627. Total operating expenses for the twelve months ended
August 31, 2007 were $2,333,755 as compared to $1,001,751 for the
same period last year.  The reason for the increase in oil &
gas revenue and expense is due to the 4-well drilling program (Aztec 2006A Oil
& Gas Limited Partnership “Aztec 2006A”) in West Virginia, which commenced
drilling in February 2007.  The drilling of all four wells was
completed in March 2007.  Perforating, completion and equipment
setting was completed on all four wells during March and April 2007
and  Aztec 2006A came on line and started producing May 2007 with a
contract in place for both oil and gas sales.  Aztec 2006A’s share of
gas volume produced has averaged 1,803msf’s per month with a small amount of oil
production as well.  Although we were originally expecting to complete
production for each well in one zone, we were able to completed one well in four
zones and three wells in three zones.
 
 As of
August 31, 2007, we had $4,771 in available cash and a working capital deficit
of $(294,417)  During December 2006, Aztec Oil & Gas, Inc.
completed the funding of its first new drilling partnership, the Aztec Oil &
Gas 2006A Oil & Gas Limited Partnership, with 22 outside investors. The new
multi-well drilling program based in the Doddridge County area of West Virginia
commenced in February 2007. Four wells have been drilled and connected to the
pipeline as of the date of this report.
 
 As of the
date of this report Aztec has raised $888,724 net of related fees and fair value
of warrants associated with the private placement from outside investors toward
funding another partnership.
 
 In these
new Partnerships, Aztec, through its wholly-owned subsidiary, Aztec Energy, LLC,
will retain thirty percent ownership and will act as the Managing General
Partner. Another Aztec subsidiary, Aztec Drilling & Operating, LLC, serves
as the Partnership’s drilling company and operator.
 
 
 The
Company has limited financial resources available, which has had an
adverse impact on the Company's liquidity, activities and operations. These
limitations have adversely affected the Company's ability to obtain certain
projects and pursue additional business. We may have to borrow money from
shareholders or issue debt or equity or enter into a strategic arrangement with
a third party. There can be no assurance that additional funds will be available
to us.
 
 The
Company has an agreement with CSI Energy, LP (“CSI”) wherein CSI has agreed to
provide the Company with funds as needed to permit the Company to meet its
monthly operating expenses and other obligations as they become due over the
twelve month period following August 31, 2007. Other than the CSI agreement, the
Company does not have any preliminary agreements or understandings between the
Company and its officers and directors with respect to loans or financing to
operate the Company.   As of the date of this report, the balance
due to CSI is $205,560.
 
 On May
31, 2007 the company signed a line of credit agreement with Amegy
Bank.  The line of credit was for $100,000.  On August 15,
2007 the line of credit was increased to $200,000.  As of November 30,
2007 the company has drawn $185,000 against the line of credit.
 
 Off
Balance Sheet Arrangements
 
 We have
no off-balance sheet arrangements.
 
 ITEM
7. FINANCIAL STATEMENTS.
 
 TABLE OF
CONTENTS
 
 PAGEReport
      of Independent Registered Public Accounting Firm
              12Balance
      Sheet
              13Statements
      of Operations
              14Statement
      of Stockholders' Deficit
              15Statements
      of Cash Flows
              16Notes
      to Financial Statements
              17-22
  
  
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Stockholders
 Aztec Oil
& Gas, Inc.
 (A
Development Stage Company)
 Houston,
Texas
 
 We
have audited the accompanying consolidated balance sheet of Aztec Oil & Gas,
Inc. as of August 31, 2007, and the related consolidated statements of
operations, stockholders' deficit and cash flows for each of the two years
then ended. These financial statements are the responsibility of Aztec's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
 We
conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform each audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Aztec as of August 31, 2007 and the
results of its operations and its cash flows for each of the periods described
above in conformity with accounting principles generally accepted in the United
States of America.
 
 As
discussed in Note 9 to the financial statements, errors resulting in an
understatement of revenue and an understatement of general and administrative
expenses were discovered by management in 2007.  Accordingly,
adjustments have been made as of August 31, 2007 to correct the
error.
 
 /s/ Malone & Bailey,
PC
 Malone
& Bailey, PC
 www.malone-bailey.com
 Houston,
Texas
 
 December
14, 2007
 
 
  - 12 -
  AZTEC OIL & GAS, INC.
 (A Development Stage Company)
 BALANCE SHEET
 August
31, 2007
 
  Current Assets
              (Restated)Cash
              $  
      4,771Accounts Receivable
              54,374Prepaid
      Oil & Gas Costs
              13,989Total Current Assets
              73,134Oil and natural gas properties,successful efforts method of accountingUnproved properties - not currently amortized, net of impairment and dry hole costs of
      $198, 953
              1,326,097Non-current AssetsRestricted
      Funds
              740,000TOTAL ASSETS
              $
      2,139,231LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent LiabilitiesAccounts
      payable
              63,977Accounts
      payable – Related-party
              16,097Salary
      Payable
              7,781Notes payable
              120,000Common stock payable
              159,696Total current liabilities
              367,551Long
      Term LiabilitiesNotes
      payable to related parties
              545,560Total
      long term liabilities
              545,560Total
      Liabilities
              913,111Minority
      Interest
              2,082,880Stockholders’ EquityPreferred stock, Series A, $.001 par value, 100,000 shares 
      Authorized, issued and outstanding respectively
              100Common stock, $.001 par value, 100,000,000 shares
      authorized, 30,477,772
      issued and outstanding
              30,477Additional paid-in capital
              4,080,072Deficit accumulated during the development stage
              (4,967,409)Total Stockholders’ Deficit
              (856,760)TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
              $
      2,139,231
 
 See
accompanying Notes to Financial Statements
   
  - 13 -
  AZTEC
OIL & GAS, INC.
 (A
Development Stage Company)
 STATEMENTS
OF OPERATIONS
    Years Ended
      August 31,
                  
                  Inception
      Through August 31,2007
                  
                  2006
                  
                  2007
                    (Unaudited)Oil and Gas Income
                  
                  $
                  114,706
                  
                  $
                  6,049
                  
                  $
                  121,056General & Administrative
                  
                  
                  2,211,918
                  
                  
                  808,905
                  
                  
                  3,933,187Oil and Gas Expenses
                  
                  
                  30,079
                  
                  
                  11,068
                  
                  
                  41,170Dry Hole Costs
                  
                  
                  (450
                  )
                  
                  181,778
                  
                  
                  198,503Amortization
                  
                  
                  -
                  
                  
                  -
                  
                  
                  94,795DD&A
                  
                  
                  9,005
                  
                  
                  -
                  
                  
                  9,005Impairment
                  
                  
                  83,203
                  
                  
                  -
                  
                  
                  2,042,840Total Operating
      Expenses
                  
                  
                  (2,333,755
                  )
                  
                  (1,001,751
                  )
                  
                  (6,319,500
                  )Partnership Income (Loss)
                  
                  
                  -
                  
                  
                  213,660
                  
                  
                  (505,340
                  )Interest
      Expense
                  
                  
                  (15,327
                  )
                  
                  (107,235
                  )
                  
                  (381,999
                  )Gain on Sale of Assets
                  
                  
                  312
                  
                  
                  1,341,744
                  
                  
                  1,342,056Extinguishment
      of Debt
                  
                  
                  -
                  
                  
                  271,289
                  
                  
                  271,289Discount
      on Payoff of Notes
                  
                  
                  -
                  
                  
                  396,928
                  
                  
                  396,928Discount on Note Receivable
                  
                  
                  -
                  
                  
                  (78,046
                  )
                  
                  (78,046
                  )Interest Income
                  
                  
                  485
                  
                  
                  30,316
                  
                  
                  196,344Total Non-operatingIncome (Loss)
                  
                  
                  (14,530
                  )
                  
                  2,068,656
                  
                  
                  1,241,232NET INCOME
      (LOSS)
                  
                  
                  (2,233,579
                  )
                  
                  1,072,954
                  
                  
                  (4,957,212
                  )Net
      Income (Loss) Attributable to Minority Interest
                  
                  
                  (10,196
                  )
                  
                  -
                  
                  
                  (10,196
                  )NET
      LOSS TO ATTRIBUTABLE TO COMMON SHAREHOLDERS
                  
                  $
                  (2,243,775
                  )
                  $
                  1,072,954
                  
                  $
                  (4,967,408
                  )Basic Earnings(Loss) per Share
                  
                  $
                  (0.04
                  )
                  $
                  0.04Weighted AverageShares Outstanding
                  
                  
                  28,438,383
                  
                  
                  27,884,829Diluted Earnings
      (Loss) per Share
                  
                  $
                  (0.04
                  )
                  $
                  0.04Diluted Weighted AverageShares Outstanding
                  
                  
                  28,438,383
                  
                  
                  27,920,694
 
 
 See
accompanying Notes to Financial Statements
 
  -
14 -
  AZTEC
OIL & GAS, INC.
 (Formerly
Aztec Communications Group, Inc.)
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIT
 Year
Ended August 31, 2007
 (Restated)
 Preferred
      Stock
              
              Common
      Stock
              
              Additional
      Paid In Capital
              
              Accumulated
      During the Development Stage
              
              TotalsBalances,
      August 31, 2003
              
              $
              -
              
              $
              22,107
              
              $
              1,937,430
              
              $
              (1,964,637
              )
              $
              (5,100
              )Stock
      Issued for Services
              
              
              50
              
              
              2,400
              
              
              84,550
              
              
              -
              
              
              87,000Stock
      Issued for Cash
              
              
              50
              
              
              
              
              
              14,950
              
              
              -
              
              
              15,000Net
      Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (166,303
              )
              
              (166,303
              )Balances,
      August 31, 2004
              
              
              100
              
              
              24,507
              
              
              2,036,930
              
              
              (2,130,940
              )
              
              (69,403
              )Stock
      Issued for Services
              
              
              
              -
              
              2,775
              
              
              357,741
              
              
              -
              
              
              360,516Net
      Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,665,648
              )
              
              (1,665,648
              )Balances,
      August 31, 2005
              
              
              100
              
              
              27,282
              
              
              2,394,671
              
              
              (3,796,588
              )
              
              (1,374,535
              )Stock
      Issued for Services
              
              
              -
              
              
              1,773
              
              
              310,728
              
              
              -
              
              
              312,501FAS
      123R Compensation expense
              
              
              -
              
              
              -
              
              
              50,723
              
              
              -
              
              
              50,723Net
      Income
              
              
              -
              
              
              -
              
              
              -
              
              
              1,072,954
              
              
              1,072,954Balances,
      August 31, 2006
              
              
              100
              
              
              29,055
              
              
              2,756,122
              
              
              (2,723,634
              )
              
              61,643Stock
      Issued for Services
              
              
              
              
              
              1,422
              
              
              156,507
              
              
              
              
              
              157,929SFAS
      123R compensation expense
              
              
              
              
              
              
              
              
              1,409,571
              
              
              
              
              
              1,409,571Syndication
      Costs
              
              
              
              
              
              
              
              
              (242,128
              )
              
              
              
              
              (242,128
              )Net
      Income
              
              
              
              
              
              
              
              
              
              
              
              (2,243,775
              )
              
              (2,243,775
              )Balances,
      August 31, 2007
              
              
              100
              
              $
              30,477
              
              $
              4,080,072
              
              $
              (4,967,409
              )
              $
              (856,760
              )
  Preferred 
      Shares
              
              
              Common
      SharesBalances,
      August 31, 2006
              100,000
              
              
              29,055,549Stock
      issued for Services
              
              
              
              1,422,223Balances,
      August 31, 2007
              100,000
              
              
              30,477,772
  See
accompanying notes to financial statements.
  -
15 -
  AZTEC OIL & GAS, INC.
 (A Development Stage Company)
 STATEMENTS OF CASH FLOWS
 Twelve
      Months Ended August 31,
                  Inception
      Through
                    August
      31,2007
                  
                  2006
                  
                  2007
      (Unaudited)Cash
      Flows Used in Operating ActivitiesNet
      Income (Loss)
                  $           (2,243,775
                  )
                  $         1,072,955
                  
                  $         (4,967,408
                  )Adjustments
      to Reconcile Net Income to Net Cash Used in Operating
      Activities:Partnership
      (Income) Loss
                  -
                  
                  (213,660
                  )
                  505,340Share
      Based Compensation
                  1,644,863
                  
                  299,203
                  
                  2,507,540Loss
      on Minority Interest
                  (10,196
                  )
                  -
                  
                  (10,196
                  )Amortization
                  -
                  
                  50,723
                  
                  150,723Gain
      on Sale of Assets
                  -
                  
                  (1,341,744
                  )
                  (1,341,744
                  )Gain
      on Settlement
                  -
                  
                  (349,381
                  )
                  (349,381
                  )Depletion
                  9,005
                  
                  -
                  
                  9,005Dry
      Hole Costs
                  (450
                  )
                  181,778
                  
                  198,503Discount
      on Note Receivable
                  -
                  
                  78,046
                  
                  78,046Impairment
                  83,203
                  
                  -
                  
                  2,042,840Changes
      in:Accounts
      Receivable
                  (54,260
                  )
                  (114
                  )
                  (66,960
                  )Prepaid
      Expenses
                  15,981
                  
                  (16,269
                  )
                  (27,568
                  )Accounts
      Payable
                  177,965
                  
                  122,635
                  
                  444,160Accounts
      Payable – Related Party
                  16,097
                  
                  -
                  
                  16,097Accrued
      Expenses
                  7,781
                  
                  (310,082
                  )
                  (258,506
                  )Net
      Cash Used in Operating Activities
                  (353,786
                  )
                  (425,910
                  )
                  (1,069,509
                  )Cash
      Flows Used in Investing ActivitiesLoan
      to Z3, LLC
                  -
                  
                  -
                  
                  (1,850,000
                  )Investment
      in Restricted Funds
                  (740,000
                  )
                  -
                  
                  (740,000
                  )Repayment
      of Loan to Z3, LLC
                  -
                  
                  143,708
                  
                  1,862,586Payment
      of Loan Payable Costs
                  -
                  
                  -
                  
                  (100,000
                  )Proceeds
      for Sale of Assets
                  -
                  
                  1,477,358
                  
                  1,477,358Acquisition
      of Oil and Gas Properties
                  (1,111,509
                  )
                  (102,644
                  )
                  (1,446,436
                  )Prepaid
      Well Costs
                  -
                  
                  -
                  
                  (81,601
                  )Net
      Cash Provided by (Used in) Investing Activities
                  (1,851,509
                  )
                  1,518,422
                  
                  (878,093)Cash
      Flows Provided by Financing ActivitiesNote
      Payable
                  -
                  
                  -
                  
                  1,950,000Repayment
      of Notes Payable
                  (118,500
                  )
                  (1,224,862
                  )
                  (2,934,179
                  )Proceeds
      from Notes Payable
                  473,500
                  
                  72,000
                  
                  1,066,667Proceeds
      from Sales of  Preferred Stock
                  -
                  
                  -
                  
                  15,000Proceeds
      from Limited Partnership
                  1,854,885
                  
                  -
                  
                  1,854,885Net
      Cash Provided by (Used in)Financing
      Activities
                  2,209,885
                  
                  (1,152,862
                  )
                  1,952,373Net
      Increase (Decrease) in Cash
                  4,590
                  
                  (60,350
                  )
                  4,771Cash
      at Beginning of Period
                  181
                  
                  60,531
                  
                  -Cash
      at End of Period
                  $                     4,771
                  
                  $                  181
                  
                  $
      4,771Cash
      paid during the year for:Interest
                  $                   15,326
                  
                  $           236,990Tax
                  $                             -
                  
                  $                      -
 See
accompanying Notes to Financial Statements
 
 
  -
16 -
  AZTEC
OIL & GAS, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE 1 -
NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
 
 Nature of
Business.  Aztec Oil & Gas, Inc. was initially known as
Aztec Communications Group, Inc. was organized in Utah on January 24, 1986, and
did not have any activity from 1990 until 2004.  In mid-2003, there
was a change in control and new management elected to pursue oil and gas
exploration and development. In November 2003, Aztec reincorporated in Nevada.
Aztec changed its name to Aztec Oil & Gas, Inc. on August 13, 2004. Also on
August 13, 2004, Aztec affected a 3-for-1 forward stock split.
 
 Basis of
Presentation.  The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of American requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses, as well as certain financial statement disclosures. While
management believes that the estimates and assumptions used in the
preparation of the financial statements are appropriate, actual results
could differ from these estimates.
 
 Aztec is
a development stage enterprise, as defined in Statement of Financial Accounting
Standard No. 7.  Accordingly, the statement of expenses, statement of
cash flows and statement of shareholders equity include activity since the date
of inception.  See “Nature of Business” above for activities of the
development stage enterprise.
  Certain
prior year amounts have been reclassified to conform with the 2007
presentation.
 
 Note 9
contains details of the restatement of fiscal year 2007’s results.
 
 Summary
of Accounting Policies
 
 Principles of
consolidation.
The consolidated financial
statements include the accounts ofAztecandallits subsidiariesand partnerships,
includingthe partnerships discussed in Note 8
below, in which Aztec has a controlling interest.Intercompany transactions are
eliminated.
 
 Cash and Cash
Equivalents.  For purposes of the statement of cash flows,
Aztec considers all highly liquid investments with original maturities of three
months or less are considered cash equivalents.
 
 Oil and gas properties. Aztec
uses the successful efforts method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties,
to drill and equip exploratory wells that find proved reserves, and to
drill and equip development wells are capitalized. Costs to drill
exploratory wells that do not find proved reserves, geological
and geophysical costs, and costs of carrying and retaining unproved
properties will be expensed.
 
 Unproved
oil and gas properties that are individually significant will
be periodically assessed for impairment of value, and a loss will be
recognized at the time of impairment by providing an impairment allowance.
Other unproved properties will be amortized based on Aztec's experience of
successful drilling properties, after considering estimated abandonment
costs and estimated salvage values, are depreciated and depleted by the
unit-of-production method. Support equipment and other property and
equipment are depreciated over their estimated useful lives.
 
 On
the sale or retirement of a complete unit of a proved property, the cost
and related accumulated depreciation, depletion and amortization are
eliminated from the property accounts and the resultant gain or loss will
be recognized. On the retirement or sale of a partial unit of proved
property, the cost is charged to accumulated depreciation, depletion, and
amortization with a resulting gain or loss recognized in
income.
 
 On the
sale of an entire interest in an unproved property for cash or
cash equivalent, gain or loss on the sale will be recognized, taking
into consideration the amount of any recorded impairment if the property
had been assessed individually. If a partial interest in an unproved
property is sold, the amount received will be treated as a reduction of the
cost of the interest retained.
 
 Interest
will be capitalized on expenditures for significant exploration and development
projects while activities are in progress to bring the assets to their intended
use.
 
 Asset Retirement Obligations.Aztec follows the provisions of Financial Accounting Standards Board
Statement No. 143, “Accounting for Asset Retirement Obligations”. This
accounting standard requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred. When
the liability is initially recorded, the entity capitalizes a cost by increasing
the carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement.
 
 Revenue
recognition. Aztec recognizes oil and natural gas revenue for its
interest in producing wells as oil and natural gas is produced and sold from
those wells. Oil and natural gas sold by us is not significantly different from
our share of production.
 
 Income Taxes. U.S. income tax
expense is based on reported earnings before income taxes. Deferred income
taxes reflect the impact of temporary differences between assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes, and are measured by applying enacted tax rates
in effect in years in which the differences are expected to
reverse.
 
 Share Based Compensation.In
December 2004, the FASB issued SFAS No. 123R, “Share-Based Payments” (“FAS
123R”). Aztec adopted the disclosure requirements of FAS 123R as of January 1,
2006 using the modified prospective transition method approach as allowed under
FAS 123R. FAS 123R establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods or services. FAS 123R
focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. FAS 123R requires that
the fair value of such equity instruments be recognized as expense in the
historical financial statements as services are performed. Prior to FAS 123R,
only certain pro forma disclosures of fair value were required.
 
 Minority Interest.Aztec has a
controlling interest in the Aztec 2006A Oil & Gas Limited Partnership and
the Aztec 2006B Oil & Gas Limited Partnership.  Therefore, the
partnerships’ financial statements are consolidated with those of the company
and the other partner’s equity is recorded as minority interest.  At
August 31, 2007, minority interest was $2,082,880.  Minority interest
expense was $10,196 for the fiscal year ended August 31, 2007.
 
 Basic and Diluted Net Earnings (Loss)
Per Share.  The basic net earnings (loss) per common share is
computed by dividing the net earnings (loss) by the weighted average number
of common shares outstanding. Diluted earnings (loss) per common share is
computed by dividing the net earnings (loss) adjusted on an “as if converted”
basis, by the weighted average number of common shares outstanding plus
potential dilutive securities.
 
 Recently
Issued Accounting Pronouncements.
 
 Aztec
does not expect the adoption of recently issued accounting pronouncements to
have a significant impact on its results of operations, financial position or
cash flow.
 
 NOTE 2 –
LIQUIDITY
 
 CSI
Energy, LP, a company controlled by our chief executive officer, has committed
to funding any operating deficits for the current year.
 
 NOTE 3 –
INVESTMENT IN Z2, LLC
 
 In
September 2004, Aztec purchased a 31.283% membership unit interest in Z2, LLC, a
Florida limited liability company, for
 $250,000
cash, 400,000 shares of Aztec common stock valued at $204,000, and the
assumption of $265,000 in debt. Z2, LLC owned a 100% working interest (60% net
revenue interest) in the Big Foot oil field in Texas.
 
 In
February 2006, the Company sold its interest in Z2, LLC for $1,555,404. The
sales agreement provided for $25,000 to be paid
 at time
of signing, and a note receivable. The note is for $1,561,000 and interest on
the note was imputed at 8% per annum. In April 2006, the note was fully
paid.  The discount for early payment was $78,046.
 
 Aztec's
investment in the partnership Z2 LLC constitutes a significant portion of its
assets during 2006. Selected information for the twelve months ended August 31,
2006, is as follows:
 
 Gross
      Sales
                    $
                    1,731,338Loss
      on Hedging Activity
                    
                    (1,338,813)Net
      Sales
                    
                    3,070,151Gross
      Profit
                    
                    2,165,694Net
      Income
                    
                    1,522,371
 
 During
the twelve month's ended August 31, 2006, Aztec's share of income from Z2 LLC
was used first to offset unrecognized losses from prior periods of approximately
$261,600. Income in excess of the unrecognized losses was reported as income and
increased Aztec’s basis in Z2 LLC..
 
 NOTE 4 -
OIL AND GAS PROPERTIES
 
 All oil
and gas interests currently owned directly by Aztec fell into the unproved,
exploratory category. While some wells have been completed and are producing
or preparing to deliver oil or gas, there is insufficient data to
re-categorize the wells from exploratory to proved and make a determination
of the proved reserves.
 
 NOTE 5 -
INCOME TAXES
 
 Income
taxes are not due since Aztec has a net loss in retained earnings whereby the
net income generated in 2005 is offset by the net losses from inception. Aztec
has net operating losses of $1,253,000 which will expire in fiscal years
starting in 2025.
 
 The
components of deferred taxes are as follows:
 
 Deferred
      tax assetsNet
      operating loss carry forwards
              $  
      354,000Less:
      valuation allowance
              (354,000
              )Current
      net deferred tax assets
              0
  NOTE 6-
EQUITY
 
 Series A
Preferred stock was established on August 26, 2004 and all
100,000 authorized shares were immediately issued for cash and
services.  This stock is not convertible or redeemable, but at
all times may vote 70% of the total votes of all common shares
outstanding.  It has no liquidation or stated value.
 
 During
2007, Aztec issued 1,422,223 shares valued at $157,929 to various consultants
and directors for services.
 
 In
accordance with SFAS 123R, Aztec recognized amortization of options during 2007
of $790,877.
 
 During
2007 800,000 options were issued to the president. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions. A risk free interest rates used of 3.9%,
expected volatility of 161% and a dividend rate of zero.
 
 In June
2007, 6,000,000 options were issued to the new Chief Executive Officer and
Chairman of the Board (see Note 5 below).  The options vest
immediately, have an exercise price of $0.11 per share and a fair value at date
of grant of $589,672.  The fair value was estimated using the
Black-Scholes option pricing model and a risk free interest rate of 5.10%, an
expected volatility of 210% and a dividend rate of zero.  Because the
options vest immediately and there is no service or market performance
condition, all of the fair value was expensed at date of grant.
 
 A summary
of the options issued by us for the year ended August 31, 2007 is as
follows:
 
  Options
                  
                  Weighted-
      Average Exercise Price per Share
                  
                  Weighted-Average
                    Remaining
                    Contractual
      Term
                    (in
      years)
                  
                  Aggregate
                    Intrinsic
                    ValueOutstanding
      on August 31, 2006
                  
                  800,000
                  
                  $   .75
                  
                  3.0
                  
                  -Granted
                  
                  7,000,000
                  
                  $   .20
                  
                  9.0
                  
                  -Exercised
                  
                  -
                  
                  —
                  
                  —
                  
                  -Surrendered/Canceled
                  
                  -
                  
                  —
                  
                  —
                  
                  -Outstanding
      on August 31, 2007
                  
                  7,800,000
                  
                  $   .95
                  
                  8.4
                  
                  -Exercisable
      on August 31, 2007
                  
                  7,800,000
                  
                  $   .95
                  
                  8.4
                  
                  -
  The
weighted-average grant-date fair value for the years ended August 31, 2007 was
$0.74./share, respectively. No options were exercised during the year. The
unrecognized share based compensation cost related to stock option expense at
August 31, 2007 is $0.
 
 During
August 2006, 6,000,000 warrants issued during 2004 were revised  in
accordance with a  pre-existing, written formula agreement with
International Fluid Dynamics, Inc. (IFD), a company owned and controlled by our
current Chief Executive Officer and Chairman of the Board  (see Note
7). The fair value on the grant date as determined using the Black Scholes
warrant pricing model was $618,696. Estimates used in the model include a
risk-free interest rates used of 4.8%, and expected volatility of 145%. The
warrants were to be expensed over the remaining life of the consulting agreement
which is approximately 8 years; however, in June 2007, when the principal owner
of IFD was elected Chief Executive Officer and Chairman of the Board, Aztec
expensed the entire remaining unamortized value of the warrant grant and
recognized $615,461 of compensation expense during fiscal year
2007.
 
 A summary
of the warrants issued by us for the year ended August 31, 2007 is as
follows:
 
 Options
                
                Weighted-
      Average Exercise Price per Share
                
                Weighted-Average
                  Remaining
                  Contractual
      Term
                  (in
      years)
                
                Aggregate
                  Intrinsic
                  ValueOutstanding
      on August 31, 2006
                
                20,000,000
                
                $
      1.15
                
                2.3
                
                -Granted
                
                245,142
                
                $   .55
                
                1.3
                
                -Exercised
                
                -
                
                —
                
                —
                
                -Surrendered/Canceled
                
                -
                
                —
                
                —
                
                -Outstanding
      on August 31, 2007
                
                20,245,142
                
                $
      1.14
                
                1.9
                
                -Exercisable
      on August 31, 2007
                
                20,245,142
                
                $
      1.14
                
                1.9
                
                -
  The
weighted-average grant-date fair value for the years ended August 31, 2007 was
$0.74./share, respectively. No options were exercised during the year. The
unrecognized share based compensation cost related to stock option expense at
August 31, 2007 is $0.
 
 During
November and December 2006, 245,145 warrants were issued in conjunction with the
Aztec 2006A Drilling Partnership.
 
 NOTE 7 -
RELATED PARTY TRANSACTION
 
 At August
31, 2007 Aztec has common stock payable of $148,300 to Kirk N. Blackim. Mr.
Blackim serves as Director and President of Aztec. As of the date of
this report this stock has been paid in full.
 
 At August
31, 2007 Aztec has common stock payable of $11,396 to Larry A.
Hornbrook.  Mr. Hornbrook serves as Chief Financial Officer of the
Company and compensation is deferred until following year of services in
compliance to consulting agreement between Mr. Hornbrook and
Company.
 
 On June
15, 2007, Aztec entered into an employment agreement with Franklin C. Fisher,
who assumed the role of Chief Executive Officer and Chairman of the
Board.  Fisher is also a major shareholder in Aztec.  Prior
to Fisher assuming the role of Chief Executive Officer and Chairman of the
Board, Aztec entered into a consulting agreement with International Fluid
Dynamics, Inc. (IFD), a company owned and controlled by Fisher.  The
agreement, entered into on June 22, 2004, engaged IFD to provide, among other
things, advice and consulting regarding Aztec’s business, acquisition and
marketing strategies.  The agreement’s term begins January 1, 2005
through December 31, 2014.  As compensation, IFD received 6,000,000
warrants at various exercise prices and which vested immediately.  No
compensation was recorded in connection with this warrant grant as the exercise
prices were extremely “out of the money” and the fair value was
nominal.  The IFD agreement also provides for monthly retainers to be
paid to IFD as follows:  $10,000 per month beginning January 1, 2005
through December 31, 2007, $12, 500 per month beginning January 1, 2007 through
December 31, 2010 and $15,000 per month beginning January 1, 2011 through
December 31, 2014.  At IFD’s election, payment can be made in common
stock with a value equivalent to the monthly consulting fee due.  For
valuation purposes, any monthly fee paid in stock will be valued at 75% of the
average closing price for the five trading days preceding the date at which the
fee is due.  To date, none of the retainers have been paid in Aztec
stock.  In January 2005, 99% of the proceeds payable to IFD were
assigned to Fisher.  On August 1, 2006, the 6,000,000 warrants were
revised with lower exercise prices and extended exercise
dates  in accordance with a prior, written , formula based agreement
between IFD and the Company.  The revised warrants had a fair
value of $618,696.
 
 NOTE 8 –
2006 DRILLING PROGRAM
 
 During
December 2006, Aztec completed the funding of its first drilling limited
partnership, the Aztec 2006A Oil & Gas Limited Partnership (LP 2006A), and
raised total gross proceeds of $1,361,915 from 24 outside
investors.  Aztec Energy, LLC, a wholly owned subsidiary of Aztec, is
the Managing General Partner of LP 2006A.
 
 For each
$50,000 invested in the partnership, each investor received 9,000 warrants to
purchase common stock in Aztec.  A total of 245,145 warrants were
issued in connection with LP 2006A. The warrants are immediately exercisable and
1/3 expire on December 31, 2007 with an exercise price of $0.35 per share, 1/3
expire on December 31, 2008 with an exercise price of $0.65 per share, and 1/3
expire on December 31, 2008 with an exercise price of $0.95 per
share.  The warrants had a fair market value of $4,902 at date of
issuance based upon the Black-Scholes option pricing model utilizing discount
rates ranging from 4.52% to 5.03%, a volatility factor ranging from 118% to
132%, an expected life of one to two years and a dividend rate of
zero.
 
 Investors
in LP 2006A will receive 70%-85% of the cash profits, defined as revenue in
excess of expenses, from successful wells drilled within the partnership, with
the percentage dependent on the rate of return to LP 2006A investors during the
first five years of the partnership.  The Managing General Partner
will receive the difference.  After three years from the date of the
first distribution, investors in LP 2006A may request that the Managing General
Partner, subject to financial ability, repurchase their units at a price equal
to three times cash flow for the preceding twelve months.
 
 Aztec has
begun raising funds for a second limited partnership, the Aztec 2006B Oil &
Gas Limited Partnership and raised $740,000 through August 31, 2007, which is
shown as restricted cash in Aztec’s balance sheet.  Subsequent to
August 31, 2007, the program was concluded raising total gross proceeds before
expenses of $1,012,267.
 
 NOTE 9–
RESTATED RESULTS FOR AUGUST 31, 2007
 
 Aztec has
determined that it is necessary to restate the previously filed financial
statements for the year ended August 31, 2007.  The determination to
restate the financial statements is based upon a reassessment of the following
transactions:
 
 ·
              Pursuant
      to SFAS 123R, if an employee’s share-based payment award does not contain
      market performance or service conditions, then the entire amount of
      compensation cost is recognized when the award is granted.  The
      6,000,000 options granted to the Chief Executive Officer and Chairman of
      the Board do not contain any service or market performance condition and
      therefore, should be expensed at the date of
  issuance.
 ·
              The
      addition of our Chief Executive Officer and Chairman of the Board in June
      2007 was determined to obviate the service conditions under the previously
      existing IFD agreement.  Because there were no further service
      conditions, the remaining unamortized compensation expense should be
      expensed as of the date of the change in employment
  status.
 ·
              The
      Company determined that it had not properly accrued production revenue for
      August.
 ·
              The
      Company determined that it had not properly reflected minority interest in
      the income of LP 2006A
 
 The
accompanying financial statements for the twelve month period ended August 31,
2007, have been restated to effect the changes described above.  The
impact of those adjustments is summarized as follows:
 
 For the
year ended August 31, 2007
 As
      originally Reported
              
              Adjustments
              
              As
      RestatedOil and Gas Income
              
              $
              99,616
              
              $
              15,090
              1)
              $
              114,706General & Administrative
              
              
              976,393
              
              
              1,235,525
              2)
              
              2,211,918Oil and Gas Expenses
              
              
              26,561
              
              
              3,518
              3)
              
              30,079Dry Hole Costs
              
              
              (450
              )
              
              -
              
              
              (450
              )Amortization
              
              
              -
              
              
              -
              
              
              -DD&A
              
              
              9,005
              
              
              -
              
              
              9,005Impairment
              
              
              83,203
              
              
              -
              
              
              83,203Total Operating
      Expenses
              
              
              (1,094,712
              )
              
              (1,239,043
              )
              
              (2,333,755
              )Partnership Income (Loss)
              
              
              -Interest
      Expense
              
              
              (15,327
              )
              
              -
              
              
              (15,327
              )Gain on Sale of Assets
              
              
              312
              
              
              -
              
              
              312Extinguishment
      of Debt
              
              
              -
              
              
              -
              
              
              -Discount
      on Payoff of Notes
              
              
              -
              
              
              -
              
              
              -Discount on Note Receivable
              
              
              -
              
              
              -
              
              
              -Interest Income
              
              
              485
              
              
              -
              
              
              485Total Non-operatingIncome (Loss)
              
              
              (14,530
              )
              
              -
              
              
              (14,530
              )NET LOSS
              
              
              (1,009,626
              )
              
              (1,223,953
              )
              
              (2,233,579
              )Net
      Income (Loss) Attributable to Minority Interest
              
              
              -
              
              
              (10,196
              )  4)
              
              (10,196
              )NET LOSS
      TO ATTRIBUTABLE TO COMMON SHAREHOLDERS
              
              $
              (1,009,626
              )
              $
              (1,234,149
              )
              $
              (2,243,775
              )Basic and
      Diluted Net Lossper Share
              
              $
              (0.04
              )
              $
              (0.04
              )
              
              (0.08
              )Weighted AverageShares Outstanding
      – Basic and Diluted
              
              
              28,438,383
              
              
              28,438,383
              
              
              28,438,383
 
 1)  To
record revenue accrual for August oil and gas production
 
 2)  To
recognize previously deferred expense for stock based compensation related to
the IFD contract and the change in status of  Fisher and to recognize the
fair market value of options awarded to the Chief Executive Officer and Chairman
of the Board in June 2007.  Also, to correct previously deferred
expense for stock based compensation related to President.
 
 3)  To
recognize additional oil and gas expense for 2007
 
 4)  To
show net income attributable to minority interest in LP 2006A
 
 As of
August 31, 2007:
 As
      originally Reported
                
                
                Adjustments
                
                
                As
      RestatedCurrent AssetsCash
                $   4,771
                
                
                $            -
                
                
                $   4,771Accounts Receivable
                41,875
                
                
                12,499
                
                1)
                54,374Prepaid
      Oil & Gas Costs
                13,989
                
                
                -
                
                
                13,989Total Current Assets
                60,635
                
                
                12,499
                
                
                73,134Oil and natural gas properties,successful efforts method of accountingUnproved properties - not currently amortized,net of impairment and dry hole costs of
      $198, 953
                1,326,899
                
                
                (802
                )
                
                1,326,097Non-current AssetsRestricted
      Funds
                740,000
                
                
                -
                
                
                740,000TOTAL ASSETS
                $
      2,127,534
                
                
                11,697
                
                
                2,139,231LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent LiabilitiesAccounts
      payable
                79,967
                
                
                (15,990
                )
                2)
                63,977Accounts
      payable – Related-party
                -
                
                
                16,097
                
                2)
                16,097Salary
      Payable
                7,780
                
                
                1
                
                
                7,781Notes payable
                120,000
                
                
                -
                
                
                120,000Common stock payable
                149,196
                
                
                10,500
                
                3)
                159,696Total current liabilities
                356,943
                
                
                10,608
                
                
                367,551Long
      Term LiabilitiesNotes
      payable to related parties
                545,560
                
                
                -
                
                
                545,560Total
      long term liabilities
                545,560
                
                
                
                
                
                545,560Total
      Liabilities
                902,503
                
                
                10,608
                
                
                913,111Minority
      Interest
                2,072,683
                
                
                10,197
                
                4)
                2,082,880Stockholders’ EquityPreferred stock, Series A, $.001 par value, 100,000 sharesAuthorized, issued and outstanding respectively
                100
                
                
                -
                
                
                100Common stock, $.001 par value, 100,000,000 shares 
      authorized, 30,477,772 issued and outstanding
                30,677
                
                
                (200
                )
                
                30,477Additional paid-in capital
                2,854,829
                
                
                1,225,243
                
                5)
                4,080,072Deficit accumulated during the development stage
                (3,733,258)
                
                
                (1,234,151
                )
                
                (4,967,409
                )Total Stockholders’ Equity
                (847,652)
                
                
                (9,108
                )
                
                (856,760
                )TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
                $
      2,127,534
                
                
                11,697
                
                
                2,139,231
 
 1)  To
record oil and gas accrual for August production
 
 2)  To
separately show payable to related party on the balance sheet.
 
 3)  To
record accrual for noncash compensation.
 
 4)  To
record the minority interest attributable to LP 2006A
 
 5)  To
record the valuation of the options issued to the Chief Executive Officer and
Chairman of the Board in June and the additional value related to 3)
above.
 
 
 ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
 
 None.
 
 Item
8A.  CONTROLS AND PROCEDURES.
 
 Disclosure
Controls and Procedures
 
 Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC. Our Chief Executive
Officer and Chief Financial Officer have reviewed the effectiveness of our
“disclosure controls and procedures” (as defined in the Securities Exchange Act
of 1934 Rules 13a-14(c) and 15d-14(c)) during the period covered by this report
and have concluded that the disclosure controls and procedures were not
effective in ensuring that material information relating to us is recorded,
processed, summarized, and reported in a timely manner due to the following
material weaknesses:
 ·
              Insufficient
      personnel and technical accounting expertise within the accounting
      function to resolve non-routine or complex accounting
    matters;
 ·
              Ineffective
      controls over period end financial close and reporting processes and the
      preparation and review of the annual financial statements, resulting in
      numerous post-closing journal entries and audit adjustments and incomplete
      disclosures in the notes to the financial
  statements.
 
 These
material weaknesses were identified as part of our procedures for completing our
financial statements for the fiscal year ended August 31, 2007.  We
are in the process of implementing remedial actions, which include engaging
additional resources to assist in the preparation and review of our financial
statements and to assist in the resolution of non-routine accounting
matters.  We are also reviewing our closing procedures and
implementing additional controls to address the material weakness identified in
this area.
 
 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
      08, 2005Mark
      Vance
              53
              Director
              October
      25, 2005Kathryn
      E. Parks
              24
              VP
      and Secretary
              June
      12, 2006
  Franklin C. Fisher,
Jr. - President, CEO and Chairman upon the resignation of Mr. Kirk
Blackim on September 5, 2007.
  Mr.
Fisher, in 1964, joined a small, nearly bankrupt steel fabrication firm in
Houston, TX as executive trainee.  After two years he bought out the
owner in a leveraged buy-out.  The business was moved to new
facilities within the following year and diversification of the firm’s
activities was started.  Six years later, Mr. Fisher formed a holding
company for his various enterprises which included:  construction
(domestic and foreign), petrochemical plant rework, steel fabrication, design
and erection, hydraulic motors (development and manufacturing),
engineering/design, products distribution (domestic and foreign), oil and gas
investment and production (domestic), real estate investment
(domestic),  foreign investment (mine clearing firm in Egypt) and
chemicals.
 
 Mr.
Fisher sold the firms, except those involved in trading and investments, to
concentrate on personal investments, plus financial, legal, negotiation, and
strategy consulting.  In 1975, Mr. Fisher became Chairman and a major
shareholder of Ashford Bank (subsequently MBank Memorial).  It was
highly successful and was sold to Mercantile Bank in 1983 and Mr. Fisher
remained as Chairman until mid-1985 and on the Board of Directors until 1986
when he resigned.  Since 1983, he has concentrated on his oil and gas
activities and on managing his own investments and companies in which he owns
interests.  Additionally, he maintains a wide array of consulting
projects involving strategy formulation and implementation, negotiation, legal
strategy, financials restructuring, mergers, takeovers, workouts, public stock
issues, investment analysis, and operational management.  He is active
in the investment field plus oil and gas exploration and development, and
involved in the mediation of litigation and other disputes.  Mr.
Fisher received his B.A. from Texas A & M University which he attended on a
football scholarship and received his Juris Doctorate degree from University of
Texas.  He was admitted to practice law in Texas in
1964.  He was appointed to U.S. District Export Council by U.S.
Secretary of Commerce in 1976 and for several subsequent terms.
 
 Larry Hornbrook, VP
and CFO
 
 Larry A.
Hornbrook, CPA, has practiced public accounting since 1990 as a sole
practitioner or under the company name of Crawford & Hornbrook, PLLC. His
clientele are in a variety of industries including oil and gas, real estate,
construction, and services. The firm performs tax research and planning,
tax return preparation, financial statement preparation and corporate
restructurings.
 
 Mr.
Hornbrook was Tax Manager for Golden Corral Corporation, an owner of national
and regional restaurant chains, from 1987 to 1989.
 
 He served
as Tax Manager for Transcontinental Energy Corporation from 1983 to 1986.
Transcontinental Energy Corporation was an independent oil and gas producer
and contract driller, which offered public limited partnerships.  His
responsibilities included preparation of federal and state income
and franchise taxes for corporate entities, preparation of federal and
state income tax returns for over 30 partnership involving more than 10,000
partners.
 
 He served
as Tax Manager for Mitchell Energy & Development Corp. from 1978 to 1983.
Mitchell was one of the largest independent energy firms headquartered  in
Texas and owned and operated oil and gas wells, contract drilling rigs,
 pipelines, compressors and liquid extraction plants.
 
 Mr.
Hornbrook was Tax Senior for Arthur Andersen & Co from 1975 to
1978.
 
 Mr.
Hornbrook has been a Texas Certified Public Accountant since 1978.
He received his B.S. (Management) Cum Laude from the University of South
Dakota.  He served in the United States Marine Corps from 1969 to 1972
attaining the rank of Sergeant and receiving a Meritorious Mast for excellent
performance of duties. He also received a Meritorious Unit Commendation, Good
Conduct Medal, National Defense Medal, and Vietnam Service Medal with two
stars.
 
 Kenneth E. Lehrer,
VP, Sr. Economist and Director
 
 Dr.
Lehrer formed an organization in 1982, engaged in the areas of -
Economics, Finance, Economic Damage Analysis (including Business and
Technology Losses), Banking, Business, ESOP and Non Public Business
Valuations, Securities, Healthcare, Fairness and Advisory Opinions,
Intellectual Property Valuations, Real Estate and Corporate Finance. His
company both prepares institutional economic / finance reports, feasibility
analysis, corporate business plans and provides litigation support (having
been qualified in both State and Federal Courts) in the areas of -
economics, real estate, banking, corporate and IP valuations, class actions
and finance. Dr. Lehrer served for approximately twenty (20) years (1984 -
2002) as an Adjunct Professor of Finance at the University of Houston,
Graduate School of Business Administration and is presently an Adjunct
Professor of Finance and Economics at the University of Phoenix (Houston
Division).
 
 Dr.
Lehrer has served with the Federal Home Loan Bank of Dallas as agent for
the Federal Savings and Loan Insurance Corporation of - Acadia Savings and
Loan Association, French Market Homestead Savings, Twin City Savings, First
Savings of Louisiana and is a member of the National Association of
Corporate Directors.
 
 Dr.
Lehrer commenced his career in 1970 at Bankers Trust Company (New York),
 and then became a Manager for the Greek Shipper, Costas Lemos [dec'd].
Here, he assisted on projects in New York, Houston, Denver, Guam and in Europe.
 Dr. Lehrer relocated to Houston in 1977.
 
 Dr.
Lehrer holds four (4) degrees from New York University: Bachelor of
Science (Finance), Master of Business Administration (Banking), Master of
Arts (Economics) and a Doctorate in Urban Economics. Dr. Lehrer is
registered with the Securities and Exchange Commission as an Investment
Advisor under the Investment Advisors Act of 1940 and has held the Full
Registration/General Securities (Series 7) and Texas Securities (Series 63)
Licenses.
 
 Mark Vance,
Director
 
 From 2002
to mid-2005, Mr. Vance was the senior executive in charge of
strategic alliances with Worksafe, Inc. (Dallas, TX) and YCO Services
(Houston, TX). Most recently, he developed Worksafe's strategic plan and
led the mezzanine fund raise with private equity groups in the U.S. At YCO
Services, he created an alliance partnership with Compaq/Hewlett Packard
for the distribution of professional services.
 
 From 1998
to 2001, Mr. Vance was vice president of business development and chief
financial officer for Control Network System Inc. in Los Angeles. This
$17 million privately held, fully integrated company developed
international voice over data networks between the U.S. and Asia and was
acquired by Total Axcess Inc. in December 2001. As a company founder, he
developed strategic relationships in adding to managing all financial
affairs, cash management and investor relations.
 
 Mr. Vance
was a founder and served as senior vice president and chief
financial officer for Telescape International Inc. (Houston, TX) from 1996
to 1997. He developed the business plan and investor presentation and
succeeded in raising first rounds of private equity funding, positioning
the company for an IPO.
 
 Prior, he
was a founder and developed the strategic plan for a $10 million private
equity raise with Alex Brown that led to the merger of Matrix Telecom and
DNS Communications (Dallas, TX) creating a formidable competitor in
the industry. He served as chief operating officer and chief financial
officer-- including management of the finance, legal, accounting, human
resources, information services and insurance departments--from 1993 to
1995.
 
 He served
as director of finance (and chief financial officer of a subsidiary) at
Wiltel Corporation (Houston, TX) from 1992 to 1993. While there he
developed and instituted a Latin American distributorship program for the
company, including strategic marketing, pricing and sales
policies.
 
 Mr. Vance
served as a financial analyst, controller and tax manager with
various companies within the energy industry in Houston from 1976 to 1991
including Mitchell Energy, Quintana Petroleum, and Texaco.
 
 He
received his MBA in Accounting from the University of Houston in 1979, and a
bachelor of science degree in finance from LSU in 1976.
 
 Kate Parks, VP and
Secretary
 
 Ms. Parks
currently works for Sonfield & Sonfield, Attorneys at Law.  She also
acts as a filing agent for EDGAR submitting information to the US Securities and
Exchange Commission. From 2001 to 2006 Ms. Parks worked as a Registered
Certified Pharmacy Technician.
 
 Directors
are elected in accordance with our bylaws to serve until the next annual
stockholders meeting. Aztec does not currently pay compensation to directors for
services in that capacity.
 
 None of
our directors or officers is a director in any other reporting
companies.  None of our directors or officers has been affiliated with
any company that has filed for bankruptcy within the last five
years.  There are no family relationships among our directors or
officers.  We are not aware of any proceedings to which any of our
officers or directors, or any associate of any such officer or director, is a
party adverse to our Company or any of our subsidiaries or has a material
interest adverse to it or any of its subsidiaries.
 
 Code of
Ethics.
 
 The
Company has not yet adopted a Code of Ethics because it has only three
directors.
 
 Audit Committee Financial
Expert.
 
 The Board
of Directors has not established an audit committee and does not have an audit
committee financial expert.  The Board is of the opinion that an audit
committee is not necessary since the Company has only three directors and to
date, such directors have been performing the functions of an audit
committee.
 
 Committees
and Procedures
 
 (1) The
registrant has no standing audit, nominating and compensation committees of
the Board of Directors, or committees performing similar functions. The
Board acts itself in lieu of committees due to its small size.
 
 (2) The
view of the board of directors is that it is appropriate for the registrant
not to have such a committee because its directors participate in the
consideration of director nominees and the board and the Company are so
small.
 
 (3) The
members of the Board who acts as the nominating committee are
not independent, pursuant to the definition of independence of a
national securities exchange registered pursuant to Section 6(a) of the Act
(15 U.S.C. 78f(a).
 
 (4) The
nominating committee has no policy with regard to the consideration of any
director candidates recommended by security holders, but the committee will
consider director candidates recommended by security holders.
 
 (5) The
basis for the view of the board of directors that it is appropriate for the
registrant not to have such a policy is that there is no need to adopt a policy
for a small company.
 
 (6) The
nominating committee will consider candidates recommended by security holders,
and by security holders in submitting such recommendations.
 
 (7) There
are no specific, minimum qualifications that the nominating committee
believes must be met by a nominee recommended by security holders except to
find anyone willing to serve with a clean background.
 
 (8) The
nominating committee's process for identifying and evaluation of nominees
for director, including nominees recommended by security holders, is to
find qualified persons willing to serve with a clean backgrounds. There are
no differences in the manner in which the nominating committee evaluates
nominees for director based on whether the nominee is recommended by a
security holder, or found by the board.
 
 SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
 Section
16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who beneficially own more than ten
percent of a registered class of our equity securities (referred to as
"reporting persons"), to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common
stock and other Aztec Oil & Gas, Inc. equity securities. Reporting
persons are required by Commission regulations to furnish us with copies of
all Section 16(a) forms they file. We believe, based solely on our review of the
copies of such forms and other written representations to us, that during the
fiscal year ended August 31, 2007, all reporting persons have complied with all
applicable Section 16(a) filing requirements. [Confirm].
 
 ITEM
10. EXECUTIVE COMPENSATION.
 
 As a
result of the Company's current limited available cash, no officer or director
received compensation during the fiscal year 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.  became CEO, President and Director following the
resignation of Kirk Blackim.  Mr. Fisher receives an annual salary of
$24,000.
 
 (3) On
August 25, 2006, Dr. Kenneth Lehrer vacated the position of CFO and accepted the
newly created position of Sr. Economist.
 
 (4) In
August 2006, the company retained the services of Mr. Larry Hornbrook as CFO and
Vice President.  Mr. Hornbrook will be paid an hourly rate for his
services.  One third of the amount will be paid in cash and two thirds
will be paid in stock.  The number of shares is determined using the
average value of the shares traded during the month.  Additionally
warrants were issued to Larry Hornbrook for services for 200,000 shares at
exercise prices ranging from $0.50 to $1.00 per share.
 
 (5) On
June 12, 2006, Ms. Danyel Owens resigned as Secretary of Aztec and the position
was filled by Ms. Kathryn Parks.
 
 (6) Larry
A. Hornbrook received $227.88 in expense reimbursement.
  
  
 
 LONG
TERM COMPENSATION TABLE
 
 Long
      Term CompensationAwards
              
              PayoutsName
      and PrincipalPosition
              Year
              Restricted
      Award(s)($)
              Stock
      Securities
                Underlying
      Options/ SARs(#)
              LTIP
      Payouts
                ($)
              All
      Other Compensation ($)Kirk
      N. Blackim
              2007
              -0-
              $85,000
              -0-
              -0-President/
      Director
              2006
              -0-
              $75,900
              -0-
              -0-2005
              -0-
              -0-
              -0-
              -0-Franklin
      C. Fisher, Jr.
              2007
              -0-
              -0-
              -0-
              -0-Chief
      Executive Officer and ChairmanLarry
      Hornbrook
              2007
              -0-
              $20,258
              -0-
              -0-VP,
      CFO
              2006
              -0-
              -0-
              -0-
              -0-2005
              -0-
              -0-
              -0-
              -0-Kenneth
      Lehrer (1)
              2007
              -0-
              $66,000
              -0-
              -0-VP,
      Sr. Economist,
              2006
              -0-
              $56,000
              -0-
              -0-Director
              2005
              $57,421
              $54,000
              -0-
              -0-Mark
      Vance
              2007
              -0-
              $37,500
              -0-
              -0-Director
              2006
              -0-
              $33,333
              -0-
              -0-2005
              -0-
              -0-
              -0-
              -0-Kathryn
      Parks
              2007
              -0-
              $
      1,950
              -0-
              -0-VP
      and Secretary
              2006
              -0-
              $
      1,200
              -0-
              -0-2005
              -0-
              -0-
              -0-
              -0-
 (1)
Kenneth E. Lehrer received an additional 2,006 common shares in October,
2005.
 
 The
Company currently has one employment agreement which is with Mr.
Fisher.
 
 Grants
of Stock Options and Stock Appreciation Rights
 
 During
the current fiscal year 6,000,000 in stock options were granted to Mr. Franklin
Fisher, president, as part of his employment contract with the
Company.
 
 Option/
SAR Exercises
 
 None of
our directors or executive officers exercised any stock options or stock
appreciation rights during the fiscal year ended August 31, 2007.  Mr.
Fisher, Mr. Hornbrook and Mr. Lehrer all hold unexercised stock options held as
of such date.
 
 Long
Term Incentive Plan Awards
 
 The
Company has no long-term incentive plans.
 
 Compensation
of Directors
 
 Our
directors do not receive compensation for their services as
directors.
 
 Employment
Contracts
 
 The
Company currently has one employment agreement which is with Mr.
Fisher.
 
 ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
 A.            The
following table lists, as of August 31, 2007, the number of shares of common
stock of our Company that are beneficially owned by (i) each person or entity
known to our Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each officer and director of our Company; and
(iii) all officers and directors as a group. Information relating to beneficial
ownership of common stock by our principal shareholders and management is based
upon information furnished by each person using “beneficial ownership” concepts
under the rules of the Securities and Exchange Commission. Under these rules, a
person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of
the security, or investment power, which includes the power to vote or direct
the voting of the security. The person is also deemed to be a beneficial owner
of any security of which that person has a right to acquire beneficial ownership
within 60 days. Under the Securities and Exchange Commission rules, more than
one person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he or
she may not have any pecuniary beneficial interest. Except as noted below, each
person has sole voting and investment power.
 
 The
percentages below are calculated based on 30,677,772 shares of our common stock
issued and outstanding as of August 31, 2007.  Unless otherwise
indicated, the address of each person listed is c/o Aztec Oil & Gas, Inc.,
One Riverway, Suite 1700, Houston, Texas 77056.
 
 TITLE
      OF CLASS
              NAME AND 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.
 
 B.
Persons Sharing Ownership of Control of Shares
 
 C.
Non-voting Securities and Principal Holders Thereof
 
 The
Company has not issued any non-voting securities.
 
 D.
Options, Warrants and Rights
 
 Aztec
issued International Fluid Dynamics warrants for 6,000,000 shares
at exercise prices ranging from $0.75 per share to $1.65 per share. No
compensation was recorded in connection with these warrants because their
fair value was nominal and the exercise prices were extremely "out of the
money".
 
 E.
Preferred Stock
 
 On June
11, 2004, the Board of Directors approved Articles of Designation of Series A
Preferred Stock. Series A Preferred stock was established on August 26, 2004.
All 100,000 authorized shares were immediately issued with 50,000 shares for
$15,000 cash and 50,000 shares for services valued at $15,000. The shares of
outstanding Series A Preferred Stock shall have the number of votes equal to
seventy percent (70%) of votes of all outstanding shares of capital stock such
that all the outstanding shares of Preferred Stock shall always constitute 70%
of the voting rights of the Corporation, but the holders are not obliged or
bound to vote said stock or to vote together and the shares are owned by
separate entities. Such Series A Preferred stock has no other extraordinary
preferences.
 
 
 ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
 There are
no transactions since the beginning of the fiscal year, or any proposed
transaction in which any related person had or will have a direct or indirect
material interest.
 
 The
officers and directors of the Company are involved in other business activities
and may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such
conflicts.
 
 Parents
of Issuer
 
 The
Company has no parents.
 
 ITEM
13. EXHIBITS.
 
 (a)
EXHIBITS
 
 Number
              
              Description3.1
              
              Articles
      of Incorporation3.2
              
              Bylaws31.1
              
              Certifications
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              
              Certifications
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              
              Certifications
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
 
 
 (b)
REPORTS ON FORM 8-K
 
 The
Company filed an amended Current Report on December 18, 2006, pursuant to Item
4.02 ("Non-Reliance on Previously Issued Financial Statements or a Related Audit
Report or Completed Interim Review").
 
 The
Company filed a Current Report on January 9, 2007, pursuant to Item 8.01 ("Other
Events") and Item 3.02 ("Unregistered Sales of Equity Securities").
 
 The
Company filed a Current Report on June 15, 2007, pursuant to Item 5.02
("Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers") and Item 9.01 ("Financial Statements and
Exhibits").
 
 
 Subsequent Reports on Form
8-K
 
 On
September 10, 2007 the Company filed a Current Report on Form 8-K disclosing the
resignation of Kirk N. Blackim as President and Director of the Company on
September 5, 2007. Effective as of the same date, Franklin C. Fisher, Jr., who
had been serving as Chief Executive Officer and Chairman, also assumed the title
of President.
 
 ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Malone
& Bailey, PC are our independent auditors.   We have no
disagreement with our independent auditors on any matter of accounting principle
or practice, financial statement disclosure or auditing scope or
procedure.
 
 AUDIT
FEES
 
 During
the audits of Aztec's 2007 and 2006 fiscal years, Aztec incurred fees from
Malone & Bailey, PC, of $63,074 and $54,343, respectively, in fees for the
audit of the Company's annual financial statements and the review of those
financial statements included in the Company's quarterly reports on Form
10-QSB.
 
 AUDIT-RELATED
FEES
 
 None
 
 TAX
FEES
 
 None
 
 ALL OTHER
FEES
 
 None
 
 Policy
on pre-approval of audit and permissible non-audit services
 
 Our Board
of Directors unanimously approved 100% of the fees paid to the principal
accountant for audit-related, tax and other fees.  Our Board of
Directors pre-approves all non-audit services to be performed by the
auditor.  The percentage of hours expended on the
principal  accountant's engagement to audit our
financial  statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal accountant's
full-time, permanent employees was 0%.
 
  
  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:
      March 26, 2008
              
              By: /s/ Franklin C. Fisher,
      Jr.Name:
      Franklin C. Fisher, Jr.Title:    President,
      Chief Executive Officer and Director
                (Principal Executive Officer)Dated:
      March 26, 2008
              
              By: /s/  Larry A.
      HornbrookName:   Larry
      A. HornbrookTitle:     Vice
      President and Chief Financial Officer
                (Principal Financial and Accounting
  Officer)