---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

COMMISSION FILE NUMBER 000-50459

EXPLORATION DRILLING INTERNATIONAL
INC.(Exact name of registrant as specified in its
charter)

|NEVADA                                                               | 98-0396733                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|Mendelstrasse 11, Technologiehof                                     |                                     
|D-48149, Muenster, Germany                                           |                                     
|(Address of principal executive offices)                             | (Zip Code)                          

49-251-980-2030(Registrant's telephone
number, including area code)

Not Applicable(Former name, former
address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer [   ]                                                     | Accelerated
      filer                    
       [   ]
|--------------------------------------------------------------------------------- | --------------------------------------------------------
|Non-accelerated filer   [   ] (Do not
      check if a smaller reporting company) | Smaller reporting company [X]                           

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [  
]   No [X]

Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date:
As of May 15, 2008, the registrant had 115,952,011 shares of common
stockoutstanding.

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PART I - FINANCIAL INFORMATION

ITEM
1.              
FINANCIAL STATEMENTS.

The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and Rule
8-03 of Regulation S-X, and, therefore, do not include all information and
footnotes necessary for a complete presentation of financial position, results
of operations, cash flows, and stockholders' equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. Operating results for the three months ended March 31, 2008
are not necessarily indicative of the results that can be expected for the year
ending December 31, 2008.

As used in this Quarterly Report, the terms we, us, our,
EDI USA, and the Company mean Exploration Drilling International Inc. and
its subsidiaries, unless otherwise indicated. All dollar amounts in this
Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

2

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EXPLORATION DRILLING INTERNATIONAL INC.

(A Development Stage Company)





CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)



March 31, 2008 
  (Unaudited)

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EXPLORATION DRILLING INTERNATIONAL INC.(A Development Stage Company)CONSOLIDATED BALANCE SHEETS(Expressed in U.S. Dollars)

|                                                                                    |   | March 31,   |   |   | December 31, |  
|----------------------------------------------------------------------------------- | - | ----------- | - | - | ------------ | -
|                                                                                    |   | 2008        |   |   | 2007         |  
|                                                                                    |   | (unaudited) |   |   | (audited)    |  
|                                                                                    |   |             |   |   |              |  
|                                                                                    |   |             |   |   |              |  
|ASSETS                                                                              |   |             |   |   |              |  
|                                                                                    |   |             |   |   |              |  
|Current Assets                                                                      |   |             |   |   |              |  
|Other receivables                                                                   | $ | 25,077      |   | $ | 20,674       |  
|Loans receivable -related
      parties (Note 6)                                    |   | 8,781       |   |   | 9,610        |  
|Prepaids                                                                            |   | 11,405      |   |   | 24,942       |  
|Deferred tax asset, less valuation allowance
      of $3,807,779 (2007 -$2,515,492) |   | -           |   |   | -            |  
|Total Current Assets                                                                |   | 45,263      |   |   | 55,226       |  
|                                                                                    |   |             |   |   |              |  
|Equipment (Note 4)                                                                  |   | 204,926     |   |   | 210,587      |  
|Patents (Note 4)                                                                    |   | 218,942     |   |   | 204,770      |  
|                                                                                    |   |             |   |   |              |  
|Total Assets                                                                        | $ | 469,131     |   | $ | 470,583      |  
|                                                                                    |   |             |   |   |              |  
|LIABILITIES AND STOCKHOLDERS DEFICIENCY                                            |   |             |   |   |              |  
|                                                                                    |   |             |   |   |              |  
|Current Liabilities                                                                 |   |             |   |   |              |  
|Bank indebtedness                                                                   | $ | 36,377      |   | $ | 53,182       |  
|Accounts payable and accrued
      liabilities                                      |   | 550,853     |   |   | 463,879      |  
|Accounts payable and accrued liabilities
      related parties (Note 6)            |   | 162,335     |   |   | 117,501      |  
|Loans payable -current (Notes 5 and
      6)                                        |   | 1,574,846   |   |   | 1,377,931    |  
|Total Current Liabilities                                                           |   | 2,324,411   |   |   | 2,012,493    |  
|                                                                                    |   |             |   |   |              |  
|Loans
      payable (Notes 5)                                                       |   | 141,396     |   |   | 129,920      |  
|                                                                                    |   |             |   |   |              |  
|Total Liabilities                                                                   |   | 2,465,807   |   |   | 2,142,413    |  
|                                                                                    |   |             |   |   |              |  
|Commitments (Note 10)                                                               |   |             |   |   |              |  
|                                                                                    |   |             |   |   |              |  
|Stockholders Deficiency                                                            |   |             |   |   |              |  
|Common stock (Note 7)                                                               |   |             |   |   |              |  
|Authorized                                                                          |   |             |   |   |              |  
|1,000,000,000 common shares, par value $0.001                                       |   |             |   |   |              |  
|Issued and outstanding                                                              |   |             |   |   |              |  
|March 31, 2008 -116,202,011                                                         |   |             |   |   |              |  
|December
      31, 2007 -112,567,396                                                |   | 116,202     |   |   | 112,567      |  
|Additional paid-in capital                                                          |   | 9,372,427   |   |   | 8,438,228    |  
|Accumulated other comprehensive loss:                                               |   |             |   |   |              |  
|Foreign
      currency translation adjustment                                       |   | (285,954    | ) |   | (162,044     | )
|Deficit
      accumulated during the development stage                              |   | (11,199,351 | ) |   | (10,060,581  | )
|Total Stockholders Deficiency                                                      |   | (1,996,676  | ) |   | (1,671,830   | )
|                                                                                    |   |             |   |   |              |  
|Total Liabilities and Stockholders Deficiency                                      | $ | 469,131     |   | $ | 470,583      |  

The accompanying notes are an integral part of these consolidated
  financial statements

F-2

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EXPLORATION DRILLING INTERNATIONAL INC.(A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Expressed in U.S. Dollars) (Unaudited)

|                                                               |   | Cumulative         |   |   |             |   |   |             |  
|-------------------------------------------------------------- | - | ------------------ | - | - | ----------- | - | - | ----------- | -
|                                                               |   | Amounts            |   |   | Three       |   |   | Three       |  
|                                                               |   | From Inception     |   |   | Months      |   |   | Months      |  
|                                                               |   | (December 7, 2004) |   |   | Ended       |   |   | Ended       |  
|                                                               |   | to March 31,       |   |   | March 31,   |   |   | March 31,   |  
|                                                               |   | 2008               |   |   | 2008        |   |   | 2007        |  
|                                                               |   |                    |   |   |             |   |   |             |  
|                                                               |   |                    |   |   |             |   |   |             |  
|EXPENSES                                                       |   |                    |   |   |             |   |   |             |  
|                                                               |   |                    |   |   |             |   |   |             |  
|Amortization                                                   | $ | 166,120            |   | $ | 20,586      |   | $ | 15,375      |  
|Management fees                                                |   | 1,109,099          |   |   | 54,624      |   |   | 81,595      |  
|Professional fees                                              |   | 2,922,975          |   |   | 954,586     |   |   | 49,216      |  
|Selling, general and administrative                            |   | 2,793,436          |   |   | 89,244      |   |   | 299,834     |  
|Stock compensation expense                                     |   | 3,681,244          |   |   | -           |   |   | -           |  
|Foreign currency (gain) loss                                   |   | 10,017             |   |   | (462        | ) |   | 488         |  
|                                                               |   |                    |   |   |             |   |   |             |  
|LOSS BEFORE OTHER ITEMS AND INCOME TAXES                       |   | 10,682,891         |   |   | 1,118,578   |   |   | 446,508     |  
|                                                               |   |                    |   |   |             |   |   |             |  
|OTHER ITEMS                                                    |   |                    |   |   |             |   |   |             |  
|                                                               |   |                    |   |   |             |   |   |             |  
|Interest income                                                |   | (22,280            | ) |   | (459        | ) |   | (2,769      | )
|Interest expense                                               |   | 192,722            |   |   | 21,519      |   |   | 29,829      |  
|Miscellaneous income                                           |   | (868               | ) |   | (868        | ) |   | -           |  
|Loss on disposal of capital
      assets                       |   | 5,377              |   |   | -           |   |   | 2,963       |  
|Write down of patents                                          |   | 237,953            |   |   | -           |   |   | -           |  
|Write down of loans receivable related parties
      (Note 6) |   | 103,556            |   |   | -           |   |   | -           |  
|                                                               |   |                    |   |   |             |   |   |             |  
|LOSS BEFORE INCOME TAXES                                       |   | 11,199,351         |   |   | 1,138,770   |   |   | 476,531     |  
|                                                               |   |                    |   |   |             |   |   |             |  
|Provision for income taxes                                     |   | -                  |   |   | -           |   |   | -           |  
|                                                               |   |                    |   |   |             |   |   |             |  
|NET LOSS                                                       |   | 11,199,351         |   |   | 1,138,770   |   |   | 476,531     |  
|                                                               |   |                    |   |   |             |   |   |             |  
|OTHER COMPREHENSIVE (INCOME) LOSS                              |   |                    |   |   |             |   |   |             |  
|                                                               |   |                    |   |   |             |   |   |             |  
|Foreign currency translation adjustment                        |   | 285,954            |   |   | 123,910     |   |   | (24,870     | )
|                                                               |   |                    |   |   |             |   |   |             |  
|COMPREHENSIVE LOSS                                             | $ | 11,485,305         |   | $ | 1,262,680   |   | $ | 451,661     |  
|                                                               |   |                    |   |   |             |   |   |             |  
|BASIC AND DILUTED NET LOSS PER SHARE                           |   |                    |   | $ | (0.01       | ) | $ | (0.00       | )
|                                                               |   |                    |   |   |             |   |   |             |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING           |   |                    |   |   | 112,879,145 |   |   | 102,706,285 |  

The accompanying notes are an integral part of these consolidated
  financial statements.

F-3

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EXPLORATION DRILLING INTERNATIONAL INC.(A Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in U.S. Dollars) (Unaudited)

|                                                                              |   | Cumulative         |   |   |            |   |   |           |  
|----------------------------------------------------------------------------- | - | ------------------ | - | - | ---------- | - | - | --------- | -
|                                                                              |   | Amounts            |   |   | Three      |   |   | Three     |  
|                                                                              |   | From Inception     |   |   | Months     |   |   | Months    |  
|                                                                              |   | (December 7, 2004) |   |   | Ended      |   |   | Ended     |  
|                                                                              |   | to March 31,       |   |   | March 31,  |   |   | March 31, |  
|                                                                              |   | 2008               |   |   | 2008       |   |   | 2007      |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                          |   |                    |   |   |            |   |   |           |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|Net loss for the period                                                       | $ | (11,199,351        | ) | $ | (1,138,770 | ) | $ | (476,531  | )
|Adjustments to reconcile net loss to cash used in operating
      activities: |   |                    |   |   |            |   |   |           |  
|Amortization                                                                  |   | 166,120            |   |   | 20,586     |   |   | 15,375    |  
|Stock compensation expense                                                    |   | 3,681,244          |   |   | -          |   |   | -         |  
|Loss on disposal of capital
      asset                                       |   | 5,377              |   |   | -          |   |   | 2,963     |  
|Write down of patents                                                         |   | 237,953            |   |   | -          |   |   | -         |  
|Write down of loans receivable
      related parties                         |   | 103,556            |   |   | -          |   |   | -         |  
|Issuance of capital stock for services                                        |   | 1,580,000          |   |   | 860,000    |   |   | -         |  
|Change in operating assets and liabilities:                                   |   |                    |   |   |            |   |   |           |  
|Decrease (increase) in other receivables                                      |   | 44,405             |   |   | (2,746     | ) |   | 30,023    |  
|Increase in accrued interest
      receivable                                 |   | (20,671            | ) |   | (33        | ) |   | (2,769    | )
|Decrease (increase) in prepaid expenses                                       |   | (6,834             | ) |   | 14,547     |   |   | 1,552     |  
|Increase in accounts payable
      and accrued liabilities                    |   | 418,580            |   |   | 56,539     |   |   | 60,113    |  
|Increase in accounts payable and accrued
      liabilities related parties   |   | 141,627            |   |   | 34,456     |   |   | -         |  
|Increase in accrued interest payable                                          |   | 141,320            |   |   | 21,519     |   |   | 29,561    |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|Net cash used in operating activities                                         |   | (4,706,674         | ) |   | (133,902   | ) |   | (339,713  | )
|                                                                              |   |                    |   |   |            |   |   |           |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                          |   |                    |   |   |            |   |   |           |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|Loans receivable                                                              |   | (164,614           | ) |   | 1,481      |   |   | -         |  
|Acquisition of equipment, net of disposal
      proceeds                      |   | (318,783           | ) |   | -          |   |   | 5,504     |  
|Acquisition of patents                                                        |   | (384,337           | ) |   | -          |   |   | (4,847    | )
|                                                                              |   |                    |   |   |            |   |   |           |  
|Net cash provided by (used) in investing
      activities                     |   | (867,734           | ) |   | 1,481      |   |   | 657       |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                          |   |                    |   |   |            |   |   |           |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|Bank indebtedness                                                             |   | 36,377             |   |   | (16,805    | ) |   | -         |  
|Cash acquired from Invision Capital, Inc.                                     |   | 81,587             |   |   | -          |   |   | -         |  
|Issuance of capital stock
      for cash, net of issuance costs               |   | 2,719,165          |   |   | 77,833     |   |   | -         |  
|Contributed capital                                                           |   | 1,475,540          |   |   | -          |   |   | -         |  
|Loans payable                                                                 |   | 1,345,101          |   |   | 81,975     |   |   | 330,700   |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|Net cash provided by financing activities                                     |   | 5,657,770          |   |   | 143,003    |   |   | 330,700   |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|EFFECT OF FOREIGN CURRENCY TRANSLATION ON                                     |   |                    |   |   |            |   |   |           |  
|CASH DURING THE
      PERIOD                                                  |   | (83,362            | ) |   | (10,582    | ) |   | (2,092    | )
|                                                                              |   |                    |   |   |            |   |   |           |  
|NET DECREASE IN CASH                                                          |   | -                  |   |   | -          |   |   | (10,448   | )
|                                                                              |   |                    |   |   |            |   |   |           |  
|CASH, BEGINNING
      OF PERIOD                                               |   | -                  |   |   | -          |   |   | 23,877    |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|CASH, END OF PERIOD                                                           | $ | -                  |   | $ | -          |   | $ | 13,429    |  
|                                                                              |   |                    |   |   |            |   |   |           |  
|Supplemental Disclosure with Respect to Cash Flows (Note
      11)            |   |                    |   |   |            |   |   |           |  

The accompanying notes are an integral part of these consolidated
  financial statements

F-4

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|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|1. | HISTORY AND ORGANIZATION OF THE COMPANY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Exploration Drilling International Inc. (the Company)
        was incorporated on January 24, 2003, under the Laws of the State of Nevada
        and was in the business of acquiring, exploring and developing mineral
        properties. Effective April 26, 2006, the Company acquired 100% of the
        issued and outstanding shares of EDI Exploration Drilling International
        GmbH (EDI), a company engaged in the distribution and maintenance
        of water exploration machinery and equipment and the provision of related
        services. The Company has abandoned its mineral property acquisition and
        exploration activities in order to focus its resources on the development
        and marketing of EDIs proprietary technology. The Company is considered
        to be a development stage company, as it has not generated revenues from
        operations.                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Effective April 26, 2006, the Company acquired 100%
        of the issued and outstanding shares of EDI from EDI Exploration International
        Drilling Holding GmbH (EDI Holding) in exchange for an aggregate
        of 50,000,000 shares of the Companys common stock. In addition,
        Frank Rigney, a shareholder of the Company, transferred 20,000,000 shares
        of the Companys common stock already issued and outstanding prior
        to the transaction to EDI Holding in exchange for $10,000. Completion
        of the acquisition resulted in the former sole shareholder of EDI holding
        the majority of the Companys issued and outstanding common stock.
        As a result, the transaction was accounted for as a recapitalization of
        EDI.                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The unaudited consolidated financial statements of the
        Company prior to April 26, 2006 are those of EDI. The Companys date
        of incorporation is considered to be December 7, 2004, the date of inception
        of EDI. All significant inter-company balances have been eliminated on
        consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Effective October 16, 2006, the Company changed its
        name from Invision Capital, Inc. to Exploration Drilling International
        Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These unaudited consolidated financial statements have
        been prepared in conformity with generally accepted accounting principles
        in the United States of America for interim financial information. The
        accompanying unaudited consolidated financial statements do not include
        all information and footnote disclosures required for an annual set of
        financial statements prepared under United States of America generally
        accepted accounting principles. In the opinion of management, all adjustments
        (consisting solely of normal recurring accruals) considered necessary
        for a fair presentation of financial position, results of operations and
        cash flows as at March 31, 2008 and for all periods presented, have been
        included. Interim results for the period ended March 31, 2008 are not
        necessarily indicative of the results that may be expected for the fiscal
        year as a whole.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These unaudited consolidated financial statements have
        been prepared with the on-going assumption that the Company will be able
        to realize its assets and discharge its liabilities in the normal course
        of business. However, certain conditions noted below raise substantial
        doubt about the Companys ability to continue as a going concern.
        These financial statements do not include any adjustments to the amounts
        and classifications of assets and liabilities that might be necessary
        should the Company be unable to continue as a going concern.                                                                                                                                                                                                                                                                                                                                                                               

F-5

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|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|2. | GOING CONCERN (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The operations of the Company have primarily
        been funded by the sale of common stock and loans received. Continued
        operations of the Company are dependent on the Companys ability
        to complete equity financings or generate profitable operations in the
        future. Managements plan in this regard is to secure additional
        funds through future equity financings. Such financings may not be available
        or may not be available on reasonable terms to the Company.                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The unaudited consolidated financial statements
        of the Company have been prepared in conformity with generally accepted
        accounting principles in the United States of America and are stated in
        U.S. dollars. The significant accounting policies adopted by the Company
        are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The preparation of financial statements in
        conformity with generally accepted accounting principles in the United
        States of America requires management to make estimates and assumptions
        that affect the reported amount of assets and liabilities and the disclosure
        of contingent assets and liabilities at the date of the financial statements
        and the reported amount of revenues and expenses during the reporting
        period. Actual results could differ from these estimates.                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The functional currency of the Company is
        the U.S. dollar. The Companys subsidiary, EDI, uses the Euro as
        its functional currency. Accordingly, monetary assets and liabilities
        denominated in a foreign currency are translated at the exchange rate
        in effect at the balance sheet date while non-monetary assets and liabilities
        are translated at historical rates. Revenue and expense items denominated
        in a foreign currency are translated at exchange rates prevailing when
        such items are recognized in the statement of operations. Exchange gains
        and losses arising on translation of foreign currency items are included
        in the statement of operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company follows the current rate method
        of translation with respect to its subsidiary, EDI. Accordingly, assets
        and liabilities are translated into U.S. dollars at the period-end exchange
        rates while revenue and expenses are translated at the average exchange
        rates during the period. Related exchange gains and losses are included
        in a separate component of stockholders equity as accumulated other
        comprehensive income (loss).                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company considers cash held at banks and
        all highly liquid investments with original maturities of three months
        or less to be cash and cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-6

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|3. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | (d)                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | Prepaid expenses consist primarily of prepaid
        vehicle lease and travel expenses,                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | (e)                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | Other receivables consist primarily of Value
        Added Tax in Germany.                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | (f)                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | Equipment is recorded at cost and consists
        of a well system, technical equipment and machinery and office and other
        equipment. Depreciation is calculated using the straight-line method over
        the useful lives of the assets. Maintenance and repairs are expensed as
        incurred while betterments or renewals are capitalized.
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | The Company provides for depreciation over
        the estimated life of each asset on a straight-line basis over the following
        periods:                                                                                                                                                                                                             

Well system
      20 yearsTechnical equipment and machinery
      3-8 yearsOffice and other equipment
      3-10 yearsSoftware
      20 years


(g)       
  Patents and trademarks

Patents and trademarks are recorded at
  cost. Capitalized amounts relate solely to legal and advisory costs incurred
  in registration of the patents and trademarks. Depreciation is calculated using
  the straight-line method over the useful lives of the patents granted ranging
  from 8-20 years. No depreciation is provided for patents that have not yet been
  awarded and/or begun to generate revenues. No depreciation is provided for trademarks
  as they have indefinite lives.

h)         Goodwill and intangible
  assets

The Company has adopted Statement of
  Financial Accounting Standards (SFAS) 142, Goodwill and
  Intangible Assets, which requires that costs of internally developing,
  maintaining or restoring intangible assets that are not specifically identifiable,
  that have indeterminate lives, or that are inherent in a continuing business
  and related to an entity as a whole, be recognized as an expense when incurred.
  Intangible assets acquired for fair value having definite lives are amortized
  over their useful life.

F-7

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|3. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company reviews all long-lived
        assets for impairment whenever events or changes in circumstances indicate
        that the carrying amount of an asset may not be recoverable. Recoverability
        of assets to be held and used is measured by a comparison of the carrying
        amount of an asset to future net cash flows expected to be generated by
        the asset. If such assets are considered to be impaired, the impairment
        recognized is measured by the amount by which the carrying amount of the
        assets exceeds the fair value of the assets. Assets to be disposed of
        are reported at the lower of the carrying amount or fair value less costs
        to sell.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (j)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | A deferred tax asset or liability is recorded
        for all temporary differences between financial and tax reporting and
        net operating loss carryforwards. Deferred tax expenses (benefits) result
        from the net change during the period of deferred tax assets and liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Deferred tax assets are reduced by a valuation
        allowance when, in the opinion of management, it is more likely than not
        that some portion or all of the deferred tax assets will not be realized.
        Deferred tax assets and liabilities are adjusted for the effects of changes
        in tax laws and rates on the date of enactment.                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (k)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company's financial instruments consist
        of loans receivable related parties, other receivables, bank indebtedness,
        accounts payable and accrued liabilities, accounts payable and accrued
        liabilities related parties loans payable current and loans
        payable. Unless otherwise noted, it is management's opinion that the Company
        is not exposed to significant interest, currency or credit risks arising
        from these financial instruments. The fair value of these financial instruments
        approximates their carrying values, unless otherwise noted.                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | (l)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company accounts for stock-based compensation
        issued to employees under the fair value method in accordance with the
        provisions of SFAS 123R, Share-Based Payment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company accounts for stock-based compensation
        issued to non-employees in accordance with the provisions of SFAS 123,
        Accounting for Stock-Based Compensation,and the consensus
        in Emerging Issues Task Force (EITF) No. 96-18, Accounting
        for Equity Instruments that are Issued to Other Than Employees for Acquiring
        or in Conjunction with Selling, Goods or Services.                                                                                                                                                                                                                                                                                                  

F-8

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|3. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (m)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Basic net loss per share is computed by dividing
        the net loss for the period by the weighted average number of shares of
        common stock outstanding during the period. Diluted earnings per share
        takes into consideration shares of common stock outstanding (computed
        under basic earnings per share) and potentially dilutive shares of common
        stock. As of March 31, 2008 and 2007, the Companys potentially dilutive
        securities, stock options and warrants, have been excluded from the weighted
        average number of shares outstanding as they were anti-dilutive.                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company has adopted SFAS 130, Reporting
        of Comprehensive Income,which establishes guidelines for the
        reporting and display of comprehensive income (loss) and its components
        in financial statements. Comprehensive income (loss) includes foreign
        currency translation adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (o)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company is a development stage company
        as defined in SFAS 7, Accounting and Reporting by Development
        Stage Enterprises,as it is devoting substantially all of its
        efforts to establish a new business and planned principal operations have
        not yet commenced.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (p)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Cash is the only financial instrument that
        potentially subjects the Company to concentration of credit risk. The
        Company maintains cash in bank accounts that, at times, may exceed federally
        insured limits. The Company has not experienced any losses in such accounts
        and believes it is not exposed to any significant risks on its cash in
        bank accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | (q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In September 2006, the Financial Accounting
        Standards Board (FASB) issued SFAS 157, Fair Value
        Measurements. SFAS 157 establishes a framework for measuring
        the fair value of assets and liabilities. This framework is intended to
        provide increased consistency in how fair value determinations are made
        under various existing accounting standards which permit, or in some cases
        require, estimates of fair market value. SFAS 157 is effective for fiscal
        years beginning after November 15, 2007, and interim periods within those
        fiscal years. Earlier application is encouraged, provided that the reporting
        entity has not yet issued financial statements for that fiscal year, including
        any financial statements for an interim period within that fiscal year.

F-9

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|3. | SIGNIFICANT ACCOUNTING POLICIES (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (q)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | FASB Staff Position (FSP) 157-2
        delayed the effective date of SFAS 157 until fiscal years beginning after
        November 15, 2008, and interim periods within those fiscal years, for
        all nonfinancial assets and nonfinancial liabilities, except for items
        that are recognized or disclosed at fair value in the financial statements
        on a recurring basis (at least annually). The Company adopted SFAS 157
        on January 1, 2008, and utilized the one year deferral for nonfinancial
        assets and nonfinancial liabilities that was granted by FSP 157-2. The
        adoption of SFAS 157 did not have a material impact on the Companys
        consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In February, 2007, the FASB issued SFAS 159,
        The Fair Value Option for Financial Assets and Financial Liabilities.
        SFAS 159 permits entities to choose to measure many financial assets and
        financial liabilities at fair value. Unrealized gains and losses on items
        for which the fair value option has been elected are reported in earnings.
        SFAS 159 is effective for fiscal years beginning after November 15, 2007.
        The adoption of SFAS 159 did not have a material impact on the Companys
        consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In March 2008, the FASB issued SFAS 161, Disclosures
        about Derivative Instruments and Hedging Activities. SFAS 161
        changes the disclosure requirements for derivative instruments and hedging
        activities by requiring enhanced disclosures about how and why an entity
        uses derivative instruments, how derivative instruments and related hedged
        items are accounted for under SFAS 133, and how derivative instruments
        and related hedged items affect an entitys operating results, financial
        position, and cash flows. SFAS 161 is effective for fiscal years beginning
        after November 15, 2008. Earlier adoption is permitted. The Company is
        currently reviewing the provisions of SFAS 161 and has not yet adopted
        the statement. However, as the provisions of SFAS 161 are only related
        to disclosure of derivative and hedging activities, the Company does not
        believe the adoption of SFAS 161 will have a material impact on its consolidated
        operating results, financial position, or cash flows.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (r)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Certain amounts reported in the prior periods
        have been reclassified to conform to the current periods presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-10

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|4. | EQUIPMENT AND PATENTS
      Equipment
|-- | -------------------------------------

| |                                   |   | March
      31, |   |   | December 31, |  
| | --------------------------------- | - | --------------- | - | - | ------------ | -
| |                                   |   | 2008            |   |   | 2007         |  
| |                                   |   |                 |   |   |              |  
| | Well system                       | $ | 2,192           |   | $ | 2,105        |  
| | Technical equipment and machinery |   | 315,280         |   |   | 302,900      |  
| | Office and other equipment        |   | 30,246          |   |   | 29,058       |  
| | Software                          |   | 14,670          |   |   | 14,094       |  
| |                                   |   | 362,388         |   |   | 348,157      |  
| | Accumulated amortization          |   | (157,462        | ) |   | (137,570     | )
| |                                   |   |                 |   |   |              |  
| | Net book value                    | $ | 204,926         |   | $ | 210,587      |  

Patents and trademarks

| |                          |   | March
      31, |   |   | December 31, |  
| | ------------------------ | - | --------------- | - | - | ------------ | -
| |                          |   | 2008            |   |   | 2007         |  
| |                          |   |                 |   |   |              |  
| | Trademarks               | $ | 99,581          |   | $ | 92,898       |  
| | Patents                  |   | 121,968         |   |   | 113,783      |  
| |                          |   | 221,549         |   |   | 206,681      |  
| | Accumulated amortization |   | (2,607          | ) |   | (1,911       | )
| |                          |   |                 |   |   |              |  
| | Net book value           | $ | 218,942         |   | $ | 204,770      |  

During the year ended December 31, 2007,
  the Company wrote down patents totaling $237,953 as the recoverability of the
  carrying amount of the assets was uncertain. During the three months ended March
  31, 2008 and 2007, the Company did not amortize $190,022 and $363,498 of its
  patents and trademarks as the patents have not yet been awarded and/or they
  have not begun to generate revenues and the trademarks have indefinite lives.
  Capitalized amounts relate solely to legal and advisory costs incurred in registration
  of the patents and trademarks.

F-11

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|5. | LOANS PAYABLE -CURRENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During the three months ended March 31, 2008, a loan
        was granted from a third party company for Euro 13,000 (US $20,527). The
        loan bears interest at 3% per annum and was due April 25, 2008. On April
        25, 2008, the loan was extended to May 14, 2008 and on May 14, 2008, the
        loan was extended to June 30, 2008.                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During the year ended December 31, 2007, two loans were
        granted from a third party individual for Euro 33,000 (US $52,108) and
        Euro 50,000 (US $78,952). The loans bear interest at 6% per annum and
        were due February 19, 2008 and March 14, 2008, respectively. On February
        19, 2008 and March 10, 2008, the loans were extended to July 31, 2008
        and August 14, 2008, respectively.                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During the year ended December 31 2006, several loans
        were granted from a third party individual totaling Euro 400,000 (US $631,612).
        The loans earned interest at 6% per annum. During the year ended December
        31, 2007, the total loans of Euro 400,000 (US $631,612) and interest of
        Euro 10,000 (US $15,790) was repaid. At March 31, 2008, Euro 31,273 (US
        $49,381) of interest was still outstanding.                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During the year ended December 31, 2006, a loan was
        granted from a third party individual for Euro 23,000 (US $36,318). The
        loan bears interest at 7% per annum and was due July 7, 2007. On July
        3, 2007, the loan was extended to June 30, 2008. The Company has the option
        of repaying the principal and interest by issuing 12,305 shares of the
        Companys common stock if the lender is notified in writing one month
        before the due date.                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During the year ended December 31, 2006, several loans
        were granted from a third party individual totaling Euro 53,000 (US $83,689).
        During the year ended December 31, 2007, Euro 6,600 (US $10,422) of the
        first loan granted was repaid. During the three months ended March 31,
        2008, an additional Euro 500 (US $790) of the first loan granted was repaid.
        The loans bear interest at 5% per annum and were due December 31, 2006.
        During the year ended December 31, 2007, the loans were extended. The
        loans are due as follows.

Principal
      Due DateEuro 12,900 (US $20,369)
      July 31, 2008Euro 15,000 (US $23,685)
      July 31, 2008Euro 18,000 (US $28,423)
      July 31, 2008


During the year ended December 31, 2007,
  two loans were granted from a third party company for Euro 40,000 (US $63,161)
  and Euro 15,000 (US $23,685). The first loan bears interest at 5% per annum
  and was due September 28, 2007. The second loan bears interest at 6% per annum
  and was due December 31, 2007. During the year ended December 31, 2007, both
  loans were extended to April 30, 2008. On April 29, 2008, both loans were extended
  to August 31, 2008.

During the year ended December 31, 2006,
  two loans were granted from a third party company for Euro 30,000 (US $47,371)
  and Euro 25,000 (US $39,476). The loans bear interest at 5% per annum and were
  due November 2, 2007 and November 23, 2007, respectively. During the year ended
  December 31, 2007, both loans were extended to April 30, 2008. On April 29,
  2008, both loans were extended to August 31, 2008.

F-12

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|5. | LOANS PAYABLE CURRENT (continued)                                                                                                                                                                                                                                                                                                                                                     
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                        
|   | During the year ended December 31, 2007, two loans were
        granted from a third party company for $20,000 and $25,000. The loans
        bear interest at 8% per annum, compounded annually and are due on demand.                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                        
|   | During the year ended December 31, 2006, a loan was
        granted from a third party company for $100,000. During the year ended
        December 31, 2007, $16,700 was repaid. The loan bears interest at 8% per
        annum, compounded annually, and was due March 20, 2008. On March 20, 2008,
        the loan was verbally extended with the same terms and is due on demand.
|   |                                                                                                                                                                                                                                                                                                                                                                                        
|6. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                             

Loans Receivable

During the year ended December 31, 2006,
  a loan was granted to a former shareholder of EDI totaling Euro 990 (US $1,563).
  The loan bears interest at 3% per annum and was due January 5, 2008. On December
  28, 2007, the loan was extended to July 31, 2008. During the three months ended
  March 31, 2008, the loan of Euro 990 (US $1,563) and interest of Euro 69 (US
  $108) was repaid.

During the year ended December 31, 2006,
  a loan was granted to an individual related to a officer and director of the
  Company for Euro 15,400 (US $22,667). At the time of the grant, the officer
  and director of the Company was also a managing director of EDI. On December
  31, 2007, Euro 641 (US $944) of accounts payable was offset against the principal
  of the loan receivable. The loan bears interest at 3% per annum and was due
  January 5, 2008. On April 17, 2007, the Company made an immediate demand for
  repayment and the loan was in default. On December 31, 2007, the Company wrote
  down the loan and interest receivable totaling Euro 15,702 (US $23,111) to the
  statement of operations.

During the year ended December 31, 2005,
  a loan was granted to a former shareholder of EDI for Euro 10,000 (US $15,790).
  On December 31, 2007, Euro 5,772 (US $9,114) of accounts payable was offset
  against the principal of the loan receivable. The loan bears interest at 6%
  per annum and was due on December 31, 2006. During the year ended December 31,
  2006, the loan was extended to June 30, 2007. During the year ended December
  31, 2007, the loan was extended to August 31, 2008.

During the year ended December 31, 2005,
  a loan was granted to an individual related to an officer and director of the
  Company and a managing director of EDI, for Euro 115,000 (US $169,267). During
  the year ended December 31, 2007, Euro 72,000 (US $105,976) was repaid. The
  loan bears interest at 6% per annum and was due on December 31, 2006. On December
  28, 2006, the loan was extended to June 30, 2007. On April 17, 2007, the Company
  made an immediate demand for repayment and the balance of the loan was in default.
  On December 31, 2007, the Company wrote down the remaining balance of loan and
  interest receivable totaling Euro 54,654 (US $80,445) to the statement of operations.

F-13

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|6. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                             
|   | Loans Payable Current                                                                                                                                                                                      
|   |                                                                                                                                                                                                             
|   | During the three months ended March 31, 2008, several
        loans were granted from EDI Holding totaling Euro 36,019 (US $56,876).
        The loans bear interest at 5% per annum and are due as follows:

Principal
      Due DateEuro 5,000 (US $7,895)
      December 31, 2008Euro 25,000 (US $39,476)
      December 31, 2008Euro 6,019 (US $9,505)
      December 31, 2008


During the year ended December 31, 2007,
  several loans were granted from EDI Holding totaling Euro 290,744 (US $459,093).
  The loans bear interest at 5% per annum. During the three months ended March
  31, 2008, the first three loans were extended. The loans are due as follows:

Principal
      Due DateEuro 21,000 (US $33,160)
      December 31, 2008Euro 39,160 (US $61,835)
      December 31, 2008Euro 1,800 (US $2,842)
      December 31, 2008Euro 40,000 (US $63,161)
      August 10, 2008Euro 10,000 (US $15,790)
      August 14, 2008Euro 15,000 (US $23,685)
      August 22, 2008Euro 35,000 (US $55,266)
      August 31, 2008Euro 33,000 (US $52,108)
      September 13, 2008Euro 24,000 (US $37,897)
      September 21, 2008Euro 12,000 (US $18,949)
      September 28, 2008Euro 9,400 (US $14,843)
      December 31, 2008Euro 15,000 (US $23,685)
      December 31, 2008Euro 6,000 (US $9,474)
      December 31, 2008Euro 29,384 (US
        $46,398)
      December 31, 2008


During the year ended December 31, 2006,
  several loans were granted from EDI Holding totaling Euro 26,400 (US $41,686).
  During the year ended December 31, 2007, Euro 4,856 (US $7,667) of the first
  loan granted was repaid. During the year ended December 31, 2007, all of the
  loans were extended. The loans bear interest and are due as follows:

Principal
      Interest
      Due DateEuro 15,144 (US $23,913)
      5%
      July 31, 2008Euro 3,400 (US $5,369)
      6%
      June 30, 2008Euro 2,000 (US $3,158)
      5%
      July 31, 2008Euro 1,000 (US
        $1,579)
      6%
      July
        31, 2008


F-14

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|6. | RELATED PARTY TRANSACTIONS (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Loans Payable Current (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | During the year ended December 31, 2005, a loan was
        granted from an officer and director of the Company and a managing director
        of EDI, for Euro 36,000 (US $56,845). During the year ended December 31,
        2006, an additional loan for Euro 50,000 (US $78,952) was granted. On
        December 31, 2006, two loans receivable, including principal and interest,
        totaling Euro 29,446 (US $46,496) were posted as a payment against the
        second loan payable. The first loan bears interest at 6% per annum and
        was due December 31, 2007. During the year ended December 31, 2007, the
        loan was extended to July 31, 2008. The second loan bears interest at
        6% and is due May 4, 2008. On May 2, 2008, the loan was extended to December
        31, 2008.                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | During the year ended December 31, 2007, a loan was
        granted from a company with a shareholder related to an officer and director
        of the Company for Euro 57,500 (US $90,794). At the time of the grant,
        the officer and director of the Company was also a managing director of
        EDI. The loan bears interest at 5% per annum and was due February 5, 2008.
        On January 22, 2008, the loan was extended to January 28, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | During the year ended December 31, 2006, two loans were
        granted from a company with a shareholder related to an officer and director
        of the Company for Euro 90,000 (US $142,113) and Euro 11,600 (US $18,317).
        At the time of the grants, the officer and director of the Company was
        also a managing director of EDI. On October 4, 2006 and during the year
        ended December 31, 2007, Euro 30,000 (US $47,371) and Euro 36,247 (US
        $57,235) of the first loan granted, respectively, were repaid. During
        the three months ened March 31, 2008, an additional Euro 235 (US $372)
        of the first loan granted was repaid. The first loan bears interest at
        6% and was due March 31, 2007. During the year ended December 31, 2007,
        the first loan was extended to March 31, 2008. The second loan bears interest
        at 5% per annum and was due November 30, 2007. During the year ended December
        31, 2007, the second loan was extended to November 30, 2008.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | During the three months ended March 31, 2008, a loan
        was granted from an individual related to an officer and director of the
        Company and a managing director of EDI for Euro 6,500 (US $10,264). The
        loan bears interest at 6% per annum and is due December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | During the year ended December 31, 2007, several loans
        were granted from an individual related to an officer and director of
        the Company and a managing director of EDI, totaling Euro 27,000 (US $42,634).
        The loans bear interest at 6%. The loans have been extended are due as
        follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Principal
      Due DateEuro 10,000 (US $15,790)
      July 31, 2008Euro 12,000 (US $18,949)
      December 31, 2008Euro 5,000 (US $7,895)
      December 31, 2008


F-15

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|6. | RELATED PARTY TRANSACTIONS (continued)
      Loans Payable Current (continued)
|-- | -------------------------------------------------------------------------------

During the year ended December 31, 2006,
  a loan was granted from an individual related to an officer and director of
  the Company and a managing director of EDI for Euro 12,000 (US $18,948). The
  loan bears interest at 6% per annum and was due December 31, 2006. During the
  year ended December 31, 2006, the loan was extended to December 31, 2007. During
  the year ended December 31, 2007, the loan was extended to July 31, 2008.

During the year ended December 31, 2005,
  a loan was granted from an individual related to an officer and director of
  the Company and a managing director of EDI, for Euro 5,000 (US $7,895). During
  the year ended December 31, 2007, Euro 3,000 (US $4,737) of the loan was repaid.
  The loan bears interest at 6% per annum. During the year ended December 31,
  2006, the loan was extended to March 22, 2007. During the year ended December
  31, 2007, the loan was extended to December 31, 2008.

Loans Payable

During the year ended December 31, 2006,
  a loan was granted from EDI Holding for Euro 75,000 (US $118,427). The loan
  bears interest at 5% per annum and is due on December 21, 2009.

During the year ended December 31, 2004,
  a loan was granted from an individual related to an officer and director of
  the Company and a managing director of EDI, for Euro 8,000 (US $12,632). The
  loan bears interest at 6% per annum and is due on December 31, 2009.

Other

At March 31, 2008 and December 31, 2007,
  included in accounts payable and accrued liabilities related parties is
  Euro 89,025 (US $140,573) and Euro 69,741 (US $102,651), respectively, owed
  to current and former managing directors of EDI for management fees and reimbursement
  of expenses. Amounts due to officers and directors are unsecured, non-interest
  bearing and due on demand.

At March 31, 2008 and December 31, 2007,
  included in accounts payable and accrued liabilities related parties is
  Euro 12,882 (US $20,341) and Euro 10,089 (US $14,850, respectively, owed to
  a managing director of EDI for the company use of his private vehicle and reimbursement
  of expenses. Amounts due to officers and directors are unsecured, non-interest
  bearing and due on demand.

At March 31, 2008, included in accounts
  payable and accrued liabilities related parties is $1,422 owed to an officer
  of the Company for consulting fees and reimbursement of expenses. Amounts due
  to officers and directors are unsecured, non-interest-bearing and due on demand.

Consulting fees paid to an officer of
  the Company for the three months ended March 31, 2008 and 2007 totaled $3,000
  and $3,000, respectively. Management fees paid to the managing directors of
  EDI for the three months ended March 31, 2008 and 2007 totaled Euro 34,500 (US
  $54,624) and Euro 60,000 (US $78,595), respectively.

F-16

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|7. | COMMON STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Companys articles of incorporation allow it
        to issue up to 1,000,000,000 shares of common stock, par value $0.001.
        Effective March 9, 2006, the Company effected a stock split of its common
        stock by issuing five new shares for every one old share. Except as otherwise
        stated to the contrary in these financial statements, all references to
        shares and prices per shares have been adjusted to give retroactive effect
        to the stock split.                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On April 26, 2006, the Company acquired all the issued
        and outstanding stock of EDI, which was accounted for as a recapitalization
        of the Company (Note 1) in exchange for 50,000,000 shares of common stock.
        The issued number of shares of common stock is that of the Company with
        adjustments made for differences in par value between the Company and
        EDI. The pro-rata portion of the 50,000,000 shares has been calculated
        and applied to the equity contributions to EDI prior to the reverse merger
        to retroactively restate the exchange ratio.                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On September 28, 2006, the Company issued 714,285 units
        at a price of $0.70 per unit in a private placement transaction. Each
        unit consists of one share of the Companys common stock and one
        share purchase warrant for total proceeds of $500,000. Each warrant entitled
        the holder to purchase an additional share of the Companys common
        stock at a price of $0.70 per share for a period of one year from the
        date of closing (expired).                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On April 2, 2007, the Company issued 1,736,111 units
        at a price of Euro 0.288 (US $0.383) per unit, for total proceeds of Euro
        500,000 ($667,468) in a private placement transaction. Each unit consists
        of one share of the Companys common stock and one share purchase
        warrant. Each share purchase warrant entitled the holder to purchase one
        additional share of the Companys common stock at a price of Euro
        0.288 (US $0.383) per share for a period of one year from the date of
        closing (subsequently expired). A finders fee of 10% of the proceeds
        in cash was paid on closing of the private placement.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On May 4, 2007, the Company issued 1,875,000 units at
        a price of $0.32 per unit, for total proceeds of $600,000 in a private
        placement transaction. Each unit consists of one share of the Companys
        common stock and one share purchase warrant. Each share purchase warrant
        entitled the holder to purchase one additional share of the Companys
        common stock at a price of US $0.32 per share for a period of one year
        from the date of closing (subsequently expired). A finders fee of
        10% of the proceeds in cash was paid on closing of the private placement.                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On June 28, 2007, the Company issued 3,000,000 units
        at a price of $0.24 per unit, for consulting services with an aggregate
        value totaling $720,000. Each unit consists of one share of the Companys
        common stock and one share purchase warrant. Each share purchase warrant
        entitles the holder to purchase one additional share of the Companys
        common stock at a price of US $0.30 per share for a period of one year
        from the date of closing.                                                                                                                                                                                 

F-17

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|7. | COMMON STOCK (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On November 12, 2007, the Company issued 3,250,000 units
        at a price of Euro 0.20 (US $0.29) per unit, for total proceeds of Euro
        650,000 (US $953,778) in a private placement transaction. Each unit consists
        of one share of the Companys common stock and one share purchase
        warrant. Each share purchase warrant entitles the holder to purchase one
        additional share of the Companys common stock at a price of US $0.35
        per share for a period of two years from the date of closing.    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On February 27, 2008, the Company issued 3,000,000 units
        at a price of $0.27 per unit, for consulting services with an aggregate
        value totaling $810,000. Each unit consists of one share of the Companys
        common stock and one share purchase warrant. Each share purchase warrant
        entitles the holder to purchase one additional share of the Companys
        common stock at a price of US $0.34 per share for a period of one year
        from the date of closing.                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On February 27, 2008, the Company issued 250,000 units
        at a price of $0.20 per unit, for consulting services with an aggregate
        value totaling $50,000. Each unit consists of one share of the Companys
        common stock and one share purchase warrant. Each share purchase warrant
        entitles the holder to purchase one additional share of the Companys
        common stock at a price of US $0.25 per share for a period of one year
        from the date of closing.                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On March 14, 2008, the Company issued 384,615 units
        at a price of Euro 0.13 (US $0.20) per unit, for total proceeds of Euro
        50,000 (US $77,833) in a private placement transaction. Each unit consists
        of one share of the Companys common stock and one share purchase
        warrant. Each share purchase warrant entitles the holder to purchase one
        additional share of the Companys common stock at a price of Euro
        0.17 (US $0.27) per share for a period of one year from the date of closing.

F-18

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|8. | STOCK OPTIONS AND WARRANTS
      Stock Options
|-- | ----------------------------------------------

On May 5, 2006, the Company adopted a
  stock incentive plan (the 2006 Stock Option Plan) to provide incentives
  to employees, directors and consultants. The Stock Plan provides for the issuance
  of up to 11,000,000 options with a maximum term of five years. The maximum aggregate
  number of shares that may be optioned and sold under the 2006 Stock Option Plan
  will be increased effective the first day of each of the Companys fiscal
  quarters, beginning with the fiscal quarter commencing May 1, 2006, by an amount
  equal to the lesser of 10% of the total increase in the number of outstanding
  shares during the previous fiscal quarter and a lesser number of shares as may
  be determined by the Board of Directors of the Company. Vesting periods are
  determined at the discretion of the Board of Directors.

| |                                           |  |            |  |   | Weighted       | 
| | ----------------------------------------- |  | ---------- |  | - | -------------- | 
| |                                           |  | Number     |  |   | Average        | 
| |                                           |  |            |  |   | Exercise Price | 
| |                                           |  |            |  |   |                | 
| | Options outstanding, December 31, 2007    |  | 10,300,000 |  | $ | 0.94           | 
| | Granted                                   |  | -          |  |   | -              | 
| | Exercised                                 |  | -          |  |   | -              | 
| | Expired                                   |  | -          |  |   | -              | 
| | Options outstanding, March 31, 2008       |  | 10,300,000 |  | $ | 0.94           | 
| | Options exercisable,
      March 31, 2008 |  | 4,310,000  |  | $ | 1.00           | 

On May 5, 2006, the Company granted stock
  options to officers, directors and consultants under the 2006 Stock Option Plan,
  to acquire a total of 11,000,000 shares of common stock exercisable at a price
  of $1.00 per share for a term expiring on the date that is five years after
  the date such options become vested and exercisable.

On September 11, 2007, the Company granted
  stock options to an employee and a consultant under the 2006 Stock Option Plan,
  to acquire a total of 1,250,000 shares of common stock exercisable at a price
  of $0.45 per share for a term expiring on the date that is five years after
  the date such options become vested and exercisable.

On September 12, 2007, the Company granted
  stock options to an employee under the 2006 Stock Option Plan, to acquire a
  total of 50,000 shares of common stock exercisable at a price of $0.45 per share
  for a term expiring on the date that is five years after the date such options
  become vested and exercisable.

F-19

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|8. | STOCK OPTIONS AND WARRANTS (continued)
      Stock Options (continued)         
|-- | -------------------------------------------------------------------------------
|   |                                                                                
|   | A summary of stock options outstanding at March 31,
        2008 is as follows:

Outstanding
        Options
      
      
      Exercisable
        OptionsWeighted
      
      
      
      
      
      
      
      
      WeightedAverage
      
      
      Weighted
      
      
      
      
      
      Average
      
      
      WeightedRemaining
      
      
      Average
      
      
      
      
      
      Remaining
      
      
      AverageExercise
      
      
      
      
      
      Contractual
      
      
      Exercise
      
      
      
      
      
      Contractual
      
      
      ExercisePrice
      
      
      Number
      
      
      Life
      
      
      Price
      
      
      Number
      
      
      Life
      
      
      Price$
      1.00
      
      
      200,000
      
      
      8.08
      
      $
      1.00
      
      
      100,000
      
      
      8.08
      
      $
      1.00$
      1.00
      
      
      6,390,000
      
      
      7.08
      
      $
      1.00
      
      
      2,560,000
      
      
      7.08
      
      $
      1.00$
      1.00
      
      
      1,380,000
      
      
      6.08
      
      $
      1.00
      
      
      620,000
      
      
      6.08
      
      $
      1.00$
      1.00
      
      
      1,030,000
      
      
      4.08
      
      $
      1.00
      
      
      1,030,000
      
      
      4.08
      
      $
      1.00$
      0.45
      
      
      1,000,000
      
      
      6.00
      
      $
      0.45
      
      
      -
      
      
      -
      
      $
      0.00$
      0.45
      
      
      250,000
      
      
      7.00
      
      $
      0.45
      
      
      -
      
      
      -
      
      $
      0.00$
      0.45
      
      
      50,000
      
      
      7.00
      
      $
      0.45
      
      
      -
      
      
      -
      
      $
      0.00


The aggregate intrinsic value for options
  vested and unvested as of March 31, 2008 and December 31, 2007 is $Nil.

On May 5, 2006, the Company used the
  Black-Scholes option pricing model to compute estimated fair value, based on
  the following assumptions:

Risk-free interest rate
      5.03%Dividend yield rate
      0.00%Price volatility
      89.35%Weighted average expected life of options
      5 years


On September 11, 2007, the Company used
  the Black-Scholes option pricing model to compute estimated fair value, based
  on the following assumptions:

Risk-free interest rate
      4.07%Dividend yield rate
      0.00%Price volatility
      155.55%Weighted average expected life of options
      5 years


F-20

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|8. | STOCK OPTIONS AND WARRANTS (continued)                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                    
|   | Stock Options (continued)                                                                                                                                          
|   |                                                                                                                                                                    
|   | On September 12, 2007, the Company used the Black-Scholes
        option pricing model to compute estimated fair value, based on the following
        assumptions:

Risk-free interest rate
      4.11%Dividend yield rate
      0.00%Price volatility
      155.59%Weighted average expected life of options
      5 years


There remain a total of $3,378,676 compensation
  costs for unvested options which will be expensed in future periods.

Warrants

| |                                            |  |            |  |   | Weighted       | 
| | ------------------------------------------ |  | ---------- |  | - | -------------- | 
| |                                            |  |            |  |   | Average        | 
| |                                            |  | Number     |  |   | Exercise Price | 
| |                                            |  |            |  |   |                | 
| | Warrants outstanding, December 31, 2007    |  | 9,861,111  |  | $ | 0.34           | 
| | Granted                                    |  | 3,634,615  |  |   | 0.33           | 
| | Exercised                                  |  | -          |  |   | -              | 
| | Expired                                    |  | -          |  |   | -              | 
| | Warrants outstanding, March 31, 2008       |  | 13,495,726 |  | $ | 0.34           | 
| | Warrants exercisable,
      March 31, 2008 |  | 13,495,726 |  | $ | 0.34           | 

A summary of warrants outstanding at
  March 31, 2008, is as follows:

Date
      
      Issued
      
      Outstanding
      
      Exercise Price
      
      Expiry DateApril 2, 2007
      
      1,736,111
      
      1,736,111
      
      Euro 0.288 (US $0.383)
      
      April 2, 2008(subsequently expired)May 4, 2007
      
      1,875,000
      
      1,875,000
      
      $ 0.32
      
      May 4, 2008(subsequently expired)June 28, 2007
      
      3,000,000
      
      3,000,000
      
      $ 0.30
      
      June 28, 2008November 12, 2007
      
      3,250,000
      
      3,250,000
      
      $ 0.35
      
      November 12, 2008February 27, 2008
      
      3,000,000
      
      3,000,000
      
      $ 0.34
      
      February 27, 2009February 27, 2008
      
      250,000
      
      250,000
      
      $ 0.25
      
      February 27, 2009March 14, 2008
      
      384,615
      
      384,615
      
      Euro 0.17 (US $0.27)
      
      March 14, 2009


F-21

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|9.  | SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Companys operations following the acquisition
        of EDI are conducted in one reportable segment, being the distribution
        and maintenance of water exploration machinery and equipment and the provision
        of related services in Germany. All the Companys equipment, patents
        and trademarks are in Germany.                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10. | COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On October 1, 2007, EDI entered into a lease agreement
        for office space that requires monthly lease payments of Euro 862 (US
        $1,260).                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On August 1, 2007, EDI entered into a managing service
        contract with a managing director of EDI effective August 1, 2007 to pay
        monthly management fees of Euro 10,000 (US $15,790). The contract may
        be terminated by giving written notice of twelve months and ends without
        notice at the end of the month in which the managing director turns 65
        years of age.                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On August 1, 2006, EDI entered into a lease agreement
        for office space on a month-to-month basis that requires monthly lease
        payments of Euro 1,260 (US $1,990). The lease agreement was cancelled
        effective November 1, 2007.                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On July 1, 2005, EDI entered into a consulting agreement
        with an individual effective July 1, 2005 to pay monthly consulting fees
        at Euro 100 (US $158) per hour. The contract terminated on December 31,
        2007.                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On July 1, 2005, EDI entered into a consulting agreement
        with an individual effective July 1, 2005 to pay monthly consulting fees
        at Euro 100 (US $158) per hour. The contract terminated on December 31,
        2007.                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On July 1, 2005, EDI entered into a lease agreement
        for tenancy of office space that may be terminated with written notice
        of three months. The lease agreement requires monthly lease payments of
        Euro 600 (US $947) plus taxes. The lease agreement was cancelled in August
        2007 and the written notice of three months was waived.                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On July 1, 2005, EDI entered into a freelance agreement
        with an individual effective July 1, 2005, to pay monthly consulting fees
        of Euro 8,000 (US $12,632). The contract may be terminated at the end
        of each calendar quarter by giving written notice of six months. The agreement
        has been terminated by a settlement agreement dated July 2, 2007. EDI
        is required to pay a total of Euro 6,000 (US $9,474) per month under the
        terms of two settlement agreements for a period of two years beginning
        August 1, 2007.

F-22

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|10. | COMMITMENTS (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | On January 1, 2005, EDI entered into a managing service
        contract with a managing director of EDI effective July 1, 2005, to pay
        monthly management fees of Euro 10,000 (US $15,903) and a management bonus
        of 5% of the annual net income of EDI under German law, due one month
        following the approval of the annual financial statements by a meeting
        of the shareholders. The contract may be terminated at the end of each
        calendar quarter by giving written notice of six months and ends without
        notice at the end of the month in which the managing director turns 65
        years of age. On March 20, 2006, the contract was amended to increase
        the monthly management fee to Euro 19,000 (US $30,002) for the months,
        April 2006 to September 2006. Effective October 1, 2006, the managing
        director agreed to decrease the monthly management fee back to Euro 10,000
        (US $15,903) per month. Effective January 1, 2007, the managing director
        agreed to decrease the monthly management fee to Euro 1,500 (2,369).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | On January 1, 2005, EDI entered into a managing service
        contract with a managing director of EDI effective July 1, 2005, to pay
        monthly management fees of Euro 10,000 (US $15,903) and a management bonus
        of 5% of the annual net income of EDI under German law, due one month
        following the approval of the annual financial statements by a meeting
        of the shareholders. The contract may be terminated at the end of each
        calendar quarter by giving written notice of six months and ends without
        notice at the end of the month in which the managing director turns 65
        years of age. On March 20, 2006, the contract was amended to increase
        the monthly management fee to Euro 16,000 (US $25,264) for the months,
        April 2006 to September 2006. Effective October 1, 2006, the managing
        director agreed to decrease the monthly management fee back to Euro 10,000
        (US $15,903) per month. Effective January 1, 2008 the contract was terminated
        effective immediately.                                         

F-23

---

|EXPLORATION DRILLING INTERNATIONAL INC.       
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in U.S. Dollars)                   
|March 31, 2008                                
|(Unaudited)                                   
|                                              
|                                              

|11. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
|--- | --------------------------------------------------

| |                |   | Cumulative         |  |   |           |  |   |           | 
| | -------------- | - | ------------------ |  | - | --------- |  | - | --------- | 
| |                |   | Amounts from       |  |   | Three     |  |   | Three     | 
| |                |   | Inception          |  |   | Months    |  |   | Months    | 
| |                |   | (December 7, 2004) |  |   | Ended     |  |   | Ended     | 
| |                |   | to March 31,       |  |   | March 31, |  |   | March 31, | 
| |                |   | 2008               |  |   | 2008      |  |   | 2007      | 
| |                |   |                    |  |   |           |  |   |           | 
| | Cash paid for: |   |                    |  |   |           |  |   |           | 
| | Interest       | $ | 51,198             |  | $ | -         |  | $ | -         | 
| | Income taxes   | $ | -                  |  | $ | -         |  | $ | -         | 
| |                |   |                    |  |   |           |  |   |           | 

Non-cash Transactions

Investing and financing activities that
  do not have an impact on current cash flows are excluded from the statement
  of cash flows.

During the period from inception (December
  7, 2004) March 31, 2008, the Company issued 50,000,000 common shares for the
  acquisition of EDI.

During the three months ended March 31,
  2008, 3,000,000 units were issued for consulting services with an aggregate
  value totaling $810,000. Each unit consists of one share of the Companys
  common stock and one share purchase warrant. Each share purchase warrant entitles
  the holder to purchase one additional share of the Companys common stock
  at a price of US $0.34 per share for a period of one year from the date of closing.

During the three months ended March 31,
  2008, 250,000 units were issued for consulting services with an aggregate value
  totaling $50,000. Each unit consists of one share of the Companys common
  stock and one share purchase warrant. Each share purchase warrant entitles the
  holder to purchase one additional share of the Companys common stock at
  a price of US $0.25 per share for a period of one year from the date of closing.

F-24

---

ITEM
2.              
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form
10-Q constitute "forward-looking statements. These statements, identified by
words such as plan, "anticipate, "believe, "estimate, "should, "expect"
and similar expressions include our expectations and objectives regarding our
future financial position, operating results and business strategy. These
statements reflect the current views of management with respect to future events
and are subject to risks, uncertainties and other factors that may cause our
actual results, performance or achievements, or industry results, to be
materially different from those described in the forward-looking statements.
Such risks and uncertainties include those set forth under the caption "Part II,
Item 1A. Risk Factors and elsewhere in this Quarterly Report. We advise you to
carefully review the reports and documents we file from time to time with the
United States Securities and Exchange Commission (the SEC), particularly our
periodic reports filed with the SEC pursuant to the Securities Exchange Act of
1934 (the Exchange Act).

INTRODUCTION

The following summarizes our plan of operation for our 2008
fiscal year and our results of operation for the three months ended March 31,
2008. The discussion provided in this Quarterly Report should be read in
conjunction with our Annual Report on Form 10-K for the year ended December 31,
2007.

RECENT CORPORATE DEVELOPMENTS

The following significant corporate developments have occurred
since the end of our December 31, 2007 fiscal year:

|1. | On February 13, 2008, we entered into a consulting
      agreement with Mr. Jesko Beck whereby Mr. Beck agreed to provide us with
      investor relations services for a one year period, ending on February 28,
      2009. In consideration for the services to be provided by Mr. Beck, we
      issued 250,000 shares of our common stock and share purchase warrants
      entitling Mr. Beck to purchase an additional 250,000 shares of our common
      stock at a price of $0.25 per share, expiring on February 26, 2009. Mr.
      Beck represented that he was not a U.S. person as defined in Regulation S
      of the United States Securities Act of 1933 (the Securities Act), and
      provided representations indicating that he was acquiring our securities
      for investment purposes only and not with a view towards
    distribution.                                                                                                                                         
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | On February 27, 2008, we issued 3,000,000 units at a
      price of $0.27 per unit to R.V. Investment Group & Holding Inc. (R.V.
      Investment) in consideration for services provided by R.V. Investment
      relating to the development of potential business opportunities in Turkey.
      Each unit is comprised of one share of our common stock and one share
      purchase warrant. Each share purchase warrant entitles the holder to
      purchase one additional share of our common stock at a price of $0.34 per
      share for a period ending February 26, 2009. This private placement was
      completed pursuant to the provisions of Regulation S promulgated under the
      Securities Act. R.V. Investment represented that it was not a U.S. person
      as defined in Regulation S of the Securities Act, and provided
      representations indicating that it was acquiring our securities for
      investment purposes only and not with a view towards
  distribution.

3

---

|3. | On March 14, 2008, we completed a private placement to
      one investor of 384,615 units at a price of EUR 0.13 per unit for total
      proceeds of EUR 50,000. Each unit is comprised of one share of our common
      stock and one share purchase warrant. Each share purchase warrant entitles
      the holder to purchase one additional share of our common stock at a price
      of EUR 0.17 per share for a period ending March 11, 2009. This private
      placement was completed pursuant to the provisions of Regulation S
      promulgated under the Securities Act. The investor represented that he was
      not a U.S. person as defined in Regulation S of the Securities Act, and
      has provided representations indicating that he was acquiring our
      securities for investment purposes only and not with a view towards
      distribution.                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | In March, 2008, our wholly-owned subsidiary, EDI Exploration
        Drilling International GmbH (“EDI Germany”) established a
        joint venture company in Turkey called EDI Sondaj Insaat Makine Sanayi
        Ticaret Anonim Sirketi (“EDI Turkey”). EDI Germany owns a
        25% interest in EDI Turkey. Dirk Beisemann, a consultant to EDI Germany,
        will also own a 25% interest in EDI Turkey, with Turkish nationals Mehmet
        Kurtbay, Serdar Kaya and Omer Faruk each owning 25%, 13% and 12%, respectively.
        Mr. Kurtbay will act as CEO of EDI Turkey. EDI Turkey will be utilized
        by the parties to seek out business opportunities in Turkey for EDI’s
        proprietary technologies.                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | On March 28, 2008, EDI Germany entered into a Technology
      License Agreement (the EDI Turkey License Agreement) with EDI Turkey
      whereby EDI Germany granted a license to EDI Turkey for the exclusive use
      of its proprietary technologies, known as the EDI Fluid Finder, EDI Medium
      Changer, EDI Water Save and EDI Suspension, in Turkey for a period of two
      years. In consideration of this license grant, EDI Turkey agreed to pay
      EDI Germany $50,000 within two years of entering into the EDI Turkey
      License Agreement, with minimum installment payments of $2,000 per month.
      The EDI Turkey License Agreement calls for additional payments equal to
      10% of net profits, if any, from any drilling projects undertaken by EDI
      Turkey. If EDI Turkey fails to secure any drilling projects utilizing EDI
      Germanys technologies within one year after the date the agreement was
      executed, its license rights will become non-
exclusive.

PLAN OF OPERATION

During our 2008 fiscal year, we will continue to seek to gain
market penetration for our products and processes within the drilling industry.
In order to do so, we will seek to use our business contacts and will obtain the
assistance of business consultants with local and international connections.
Over the next year, we will focus on developing relationships and contacts in
Germany, the Middle East and Southeastern Europe, Asia and Southern Africa.

|(a) | Germany: The water supply market, and the
      corresponding market for well drilling projects, is fragmented by nature
      and will require us to establish contacts with a number of regional water
      suppliers, and, in certain cases, with private utility companies. Through
      the business contacts of our management, we have begun to establish open
      dialogues with private and public water supply companies in an effort to
      promote our products. We are currently participating in two public
      invitations to submit tender offers for water supply contracts. We will
      also continue our attempts to develop a market for technologies for use in
      geothermal energy projects. If necessary, we may seek to enter into
      cooperation agreements with academic institutions to adapt and develop our
      technologies to geothermal energy processes.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | In March 2008, we conducted a geothermal drilling project
        for a planned construction project in Southern Germany. No significant
        adaptations were required to our existing technologies for this project.
        Following the completion of this project, EDI Germany received numerous
        inquiries regarding the use of our drilling technologies to exploit near
        surface geothermal resources. Although no contracts have been signed,
        we now intend to offer one-stop services for the planning and execution
        of near-surface geothermal projects. This would include identification
        of thermal energy requirements, installation planning, measuring geothermal
        gradients of the subsoil, and the possible exploitation of groundwater
        and thermal water resources.                                                             

4

---

|(b) | The Middle East: The Middle East contains some
        of the most arid environments in the world. For example, 97% of Egypt
        is covered by desert. As a result, there is a distinct market for groundwater
        pumping and irrigation projects. Within these markets, we will attempt
        to offer our services as a general contractor and sub-contractor for well
        drilling projects. We have formed relationships with drilling companies
        in Saudi Arabia and Bahrain and will seek to parlay these contacts into
        well drilling contracts within those countries. We are also seeking to
        gain access to well drilling projects in the United Arab Emirates, Egypt,
        Tunisia, Algeria and Morocco.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(c) | Southeast Europe: We are seeking to enter into
        negotiations with government authorities in Southeastern Europe. With
        the help of these government authorities, we hope to explore licensing
        opportunities with local industry representatives and consultants within
        the market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(d) | Africa: The West African Country of Namibia has
        one of the most arid climates in the world. 83% of the rainfall experienced
        in Namibia evaporates soon after it falls. In Namibia, there are currently
        150,000 water wells in operation; however, 75% of these do not pump drinking
        quality water. Supplying drinking water for household consumption has
        become an important goal for the Government of Namibia. As a result of
        the drilling project we completed in February, 2007, the Namibian Ministry
        of Agriculture, Water and Forestry commissioned us and a local drilling
        company to work together on three additional drilling projects. These
        projects involved exploratory boreholes, drilled for the purpose of geological
        analysis. Drilling on these projects was commenced at the end of February,
        2007 and completed in May, 2007. As a result of the successful completion
        of these projects, we secured an additional six drilling projects in Namibia.
        After the completion of four drilling projects, our management reassigned
        our drilling team to the Coca Cola Pakistan project. We may send our drilling
        team back to Namibia in 2008; however, there are no assurances that we
        will do so.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(e) | Southern Asia: India is one of the most populous
        countries in the world and is an emerging industrial giant. With the increase
        in development, Indias demands for water supplies continue to grow.
        In 2006, we conducted two sample drilling operations in India. These drilling
        operations were conducted as demonstrations of our technologies and methods
        and were completed by us at no charge. We have not yet secured any drilling
        contracts in India; however, we are continuing to explore business opportunities
        in that country.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | We have secured a drilling contract from Coca-Cola Pakistan
        to drill a total of four water exploration holes. The purpose of the drilling
        project is to obtain and analyze water samples from two locations around
        Karachi that will be used to assist Coca-Cola Pakistan in deciding where
        to locate a large-scale bottling facility. Drilling was originally scheduled
        to begin in the Fall of 2007, but was delayed by Coca Cola Pakistan due
        to their ongoing negotiations with third parties regarding land ownership
        issues. The first drilling project is now scheduled to begin in May, 2008,
        and is expected to consist of surveying existing ground water sources
        and evaluating their quality, quantity and sustainability for beverage
        production. Four test boreholes will be drilled in two different locations
        and analyzed locally. The project will be centrally controlled and coordinated
        by Coca-Cola International, based in Istanbul, Turkey. However, due to
        the current political instability in Pakistan, these projects could be
        again delayed, or be abandoned altogether if the political environment
        worsens.                                                                                    

5

---

|(f) | Turkey: In Turkey’s largest city, the water
        supply infrastructure is currently inadequate to sustain the growth of
        its population. In March, 2008, EDI Germany formed EDI Turkey, a joint
        venture company, with influential members of Turkey’s drilling and
        water supply industries. EDI Germany owns a 25% interest in EDI Turkey.
        EDI Turkey will seek out business opportunities in Turkey for EDI’s
        proprietary technologies.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, we will also explore opportunities for our
products and services in other international markets, focusing primarily on
countries where there is an established need for water well drilling
technologies and services.

We anticipate that we will require approximately EUR 1,000,000
  (approximately $1,579,030) to complete our plan of operation over the next twelve
  months. The majority of this amount will be spent on financing our business
  operations, marketing presentations, product demonstrations, and legal and other
  consulting fees associated with establishing our presence in international markets.
  In addition, we anticipate that we will require an additional $50,000 for general
  administrative purposes and to pay for the legal and accounting fees we expect
  to incur in meeting ongoing reporting obligations under United States securities
  laws.

RESULTS OF OPERATIONS

|First Quarter Summary       |                    |                    |                      
|--------------------------- | ------------------ | ------------------ | ---------------------
|                            | Three Months Ended | Three Months Ended | Percentage           
|                            | March 31, 2008     | March 31, 2007     | Increase / (Decrease)
|Revenue                     | $ --               | $ --               | n/a                  
|Expenses                    | (1,118,578)        | (446,508)          | (150.5)%             
|Net Loss Before Other Items | $(1,118,578)       | $(446,508)         | (150.5)%             

Revenue

We did not earn any revenues during the three months ended
March 31, 2008. We are scheduled to begin working on drilling projects in
Pakistan, and hope to earn revenue from the work performed on those projects.
However, our objectives in performing these contracts are demonstrating the
efficacy of our technologies and processes and obtaining market penetration. As
a result, there is a substantial possibility that these projects will be
operated at a loss.

As we are still in the process of establishing ourselves in the
  marketplace, even if we are successful in earning revenues, those revenues are
  likely to be subject to significant fluctuations and will be difficult to reliably
  predict.

6

---

Expenses

Our major components of our expenses for the three months ended
March 31, 2008 and 2007 consisted of the following:

|                                    | Three
      Months Ended | Three
      Months Ended | Percentage           
|----------------------------------- | ------------------------ | ------------------------ | ---------------------
|                                    | March 31, 2008           | March 31, 2007           | Increase / (Decrease)
|Amortization                        | $20,586                  | $15,375                  | 33.9%                
|Management Fees                     | 54,624                   | 81,595                   | (33.1)%              
|Professional Fees                   | 954,586                  | 49,216                   | 1,839.6%             
|Selling, General and Administrative | 89,244                   | 299,834                  | (70.2)%              
|Foreign currency loss               | (462)                    | 488                      | (194.7)%             
|Total Expenses                      | $1,118,578               | $446,508                 | 150.5%               

Management Fees

Management fees paid during the period are comprised of amounts
  paid or earned by our officers and directors and the executive officers of EDI
  Germany during the three months ended March 31, 2008 and 2007. Management fees
  paid during the three months ended March 31, 2008 decreased from amounts paid
  during the comparable period in 2007. This is primarily due to the fact that
  Rainer Rotthaeuser, our Chief Executive Officer and a member of our Board of
  Directors, resigned as a managing director of EDI Germany, and no longer collects
  a management fee, and to the fact that Guenter Thiemann, our Chief Financial
  Officer and also a member of our Board of Directors, agreed to reduce his management
  fee to EUR 1,500 per month commencing on January 1, 2008.

Professional Fees

Professional fees for the three months ended March 31, 2008 and
2007 consisted of the following:

|                        | Three
      Months Ended | Three
      Months Ended | Percentage           
|----------------------- | ------------------------ | ------------------------ | ---------------------
|                        | March 31, 2008           | March 31, 2007           | Increase / (Decrease)
|Accounting and Tax Fees | $27,953                  | $20,063                  | 39.3%                
|Consulting Fees         | 874,460                  | 20,350                   | 4,197.1%             
|Legal Fees              | 52,173                   | 8,803                    | 4,926.7%             
|Total                   | $954,586                 | $49,216                  | 1,839.6%             

Accounting and tax fees are comprised of amounts paid to
independent auditors, accountants and tax consultants for the preparation and
audit of our financial statements and for general tax advice.

Consulting fees include amounts paid to outside consultants for
services provided in connection with preparing marketing and promotional
materials, developing international business contacts and business opportunities
and improving our technologies. During the three months ended March 31, 2008, we
recorded consulting fees of $50,000 for investor relations services to be
provided by Mr. Jesko Beck and $810,000 for certain business development
services provided by R.V. Investment Group & Holding Inc. See Recent
Corporate Developments.

Legal fees include amounts paid in connection with meeting our
reporting obligations under the Exchange Act and for general legal services
related to the operation of our business. The legal fees we incurred during the
three months ended March 31, 2008 were significantly more than the legal fees

7

---

we incurred during the same period in 2007. Additional legal
fees incurred during 2008 were primarily related to general legal services
provided in connection with our business development activities.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three
months ended March 31, 2008 and 2007 consisted of the following major
components:

|                        | Three
      Months Ended | Three
      Months Ended | Percentage           
|----------------------- | ------------------------ | ------------------------ | ---------------------
|                        | March 31, 2008           | March 31, 2007           | Increase / (Decrease)
|Marketing and Promotion | $1,768                   | $32,240                  | (94.5)%              
|Travel                  | 37,501                   | 25,959                   | 44.5%                
|Wages and Benefits      | 24,352                   | 127,995                  | (81.0)%              
|Miscellaneous           | 25,623                   | 113,640                  | (77.5)%              
|Total                   | $89,244                  | $299,834                 | (70.2)%              

Miscellaneous expenses decreased significantly from the three
month period ended March 31, 2007 as we closed our office in Austria. Wages and
benefits decreased primarily as a result of the termination of two employees
associated with the closing of our office in Austria.

Other Items

|                            | Three
      Months Ended | Three
      Months Ended | Percentage           
|--------------------------- | ------------------------ | ------------------------ | ---------------------
|                            | March 31, 2008           | March 31, 2007           | Increase / (Decrease)
|Interest Income             | $(459)                   | $(2,769)                 | (83.4)%              
|Interest Expense            | 21,519                   | 29,829                   | (27.9)%              
|Loss on Disposal of Capital | (868)                    | -                        | n/a                  
|Asset                       |                          |                          |                      
|                            | $20,192                  | $27,060                  | (25.4)%              

Interest income during the three months ended March 31, 2008
and 2007 is primarily made up of interest accrued from loans made by EDI Germany
to certain of its former shareholders, to certain of its officers and directors,
and to persons related to officers and directors of EDI Germany prior to our
acquisition of that company.

LIQUIDITY AND CAPITAL RESOURCES

|Working Capital           |                         |                            |                      
|------------------------- | ----------------------- | -------------------------- | ---------------------
|                          |                         |                            | Percentage           
|                          | At
      March 31, 2008 | At
      December 31, 2007 | Increase / (Decrease)
|Current Assets            | $45,263                 | $55,226                    | (18.0)%              
|Current Liabilities       | (2,324,411)             | (2,012,493)                | 15.5%                
|Working Capital (Deficit) | $(2,279,148)            | $(1,957,267)               | 16.4%                

8

---

|Cash Flows                                     |                    |                   
|---------------------------------------------- | ------------------ | ------------------
|                                               | Three Months Ended | Three Months Ended
|                                               | March 31, 2008     | March 31, 2007    
|Cash Flows used in Operating Activities        | $(133,902)         | $(339,713)        
|Cash Flows from (used in) Investing Activities | 1,481              | 657               
|Cash Flows from Financing Activities           | 143,003            | 330,700           
|Effects of Foreign Currency Translations       | (10,582)           | (2,092)           
|Net Decrease in Cash During Period             | $-                 | $(10,448)         

The increase in our working capital deficit is primarily a
result of the fact that we had no sources of revenue and limited sources of
financing during the three months ended March 31, 2008.

Financing during the period was provided by private placements
of our equity securities and from related party and third party loans.

Private Placement Financings

During the three months ended March 31, 2008, we completed a
private placement for 384,615 units at a price of EUR 0.13 per unit for total
proceeds of EUR 50,000. Each unit consists of one share of our common stock and
one share purchase warrant. Each share purchase warrant will entitle the holder
to purchase an additional share of our common stock at a price of EUR 0.17 per
share for a period ending March 11, 2009.

In addition, during the three months ended March 31, 2008, we
issued a number of securities in exchange for consulting services previously
provided and consulting services to be provided. See Recent Corporate
Developments.

Loan Financings

During the three months ended March 31, 2008, we received EUR
42,519 (approximately $67,140) in loans from the following related parties:

| | (a) | Loans totaling EUR 36,019 (approximately $56,876) from
      EDI Exploration Drilling International Holding GmbH, our majority
      stockholder:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

Principal
    Interest
    Grant
      Date
    Due
      DateRateEUR 5,000 ($7,895)
    5%
    February 8, 2008
    December 31, 2008EUR 25,000 ($39,476)
    5%
    February 8, 2008
    December 31, 2008EUR 6,019 ($9,505)
    5%
    March 30, 2008
    December 31, 2008


| | (b) | During the three months ended March 31, 2008, we received
      a loan of EUR 6,500 (approximately $10,264) from Dieter Thiemann due on
      December 31, 2008, with interest payable at a rate of 6% per annum. Dieter
      Thiemann is the brother of Guenter Thiemann, our Chief Financial Officer
      and a member of our Board of Directors.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the three months ended March 31, 2008, we also received
a loan of EUR 13,000 ($20,527) from a third party company due on April 25, 2008,
with interest payable at a rate of 3% per annum. Subsequent to the three months
ended March 31, 2008, the loan was extended to May 14, 2008 and was subsequently
extended to June 30, 2008.

9

---

Financing Requirements

Currently, we do not have sufficient financial resources to
complete our plan of operation for the next twelve months or to pay our current
debt obligations when they come due. We have not earned any revenues to date,
and there are no assurances that we will be able to generate revenues in the
future. As such, our ability to complete our plan of operation and to meet our
short-term debt obligations is expected to be dependent upon our ability to
obtain substantial financing in the near term.

Although we have, from time to time, obtained short-term loans
in order to meet our short-term capital needs, we do not expect to be able to
satisfy our long-term capital needs through debt financing. In addition, there
are no assurances that we will be able to obtain additional short-term debt
financing when needed. Continuing to rely on short-term debt financing may
decrease our ability to obtain additional financing in the future. Any long-term
financing that we obtain is expected to come from sales of our equity
securities. There is no assurance that we will be able to obtain equity
financing in amounts sufficient to meet our short-term or long-term capital
needs. In addition, because of our limited financial resources, we have, on
occasion used the issuance of our equity securities to pay for services provided
to us, and we may do so again in the future. If we are successful in completing
any equity financings, of which there is no assurance, or if we issue equity
securities in payment for the goods or services provided to us, our existing
shareholders will experience a dilution of their interest in our company.

If we are not successful in raising sufficient financing, we
will not be able to complete our current plan of operation and we may not be
able to continue as a going concern. We do not have any specific alternatives to
our current plan of operation and have not planned for any such contingency. If
we are not able to raise sufficient financing, our business may fail and our
shareholders may lose all or part of their investment.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with
United States generally accepted accounting principles requires our management
to make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.

Our significant accounting policies are disclosed in the notes
to our audited consolidated financial statements for the year ended December 31,
2007 included in our Annual Report on Form 10-K filed with the SEC on April 15,
2008.

ITEM
3.              
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

10

---

ITEM
4T.            CONTROLS
AND PROCEDURES.

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of March 31, 2008 (the Evaluation Date). This evaluation was
carried out under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not effective as of the Evaluation Date
as a result of the material weaknesses in internal control over financial
reporting discussed below.

Disclosure controls and procedures are those controls and
procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.

Notwithstanding the assessment that our internal control over
financial reporting was not effective and that there were material weaknesses as
identified in this report, we believe that our financial statements contained in
our Quarterly Report on Form 10-Q for the fiscal ended March 31, 2008 fairly
present our financial condition, results of operations and cash flows in all
material respects.

Material Weaknesses

Management assessed the effectiveness of the Companys internal
control over financial reporting as of Evaluation Date and identified the
following material weaknesses:

Insufficient Resources:We have an inadequate number of
personnel with requisite expertise in the key functional areas of finance and
accounting.

Inadequate Segregation of Duties: We have an inadequate
number of personnel to properly implement control procedures.

Insufficient Written Policies & Procedures:We have
insufficient written policies and procedures for accounting and financial
reporting.

Inadequate Financial Statement Closing Process:We have
an inadequate financial statement closing process.

Lack of Audit Committee & Outside Directors on the
Companys Board of Directors:We do not have a functioning audit committee
and outside directors on the Companys Board of Directors, resulting in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures.

Changes in internal control over financial reporting

As of the Evaluation Date, there were no changes in our
internal control over financial reporting that occurred during the fiscal
quarter ended March 31, 2008 that have materially affected, or that are
reasonably likely to materially affect, our internal control over financial
reporting.

11

---

PART II - OTHER INFORMATION

ITEM
1.              
LEGAL PROCEEDINGS.

None.

ITEM
1A.            RISK
FACTORS.

The following are some of the important factors that could
affect our financial performance or could cause actual results to differ
materially from estimates contained in our forward-looking statements. We may
encounter risks in addition to those described below. Additional risks and
uncertainties not currently known to us, or that we currently deem to be
immaterial, may also impair or adversely affect our business, financial
condition or results of operation.

Need For Financing

We do not currently have the financial resources to complete
  our plan of operation for the next twelve months. We anticipate that we will
  require financing in the amount of EUR 1,000,000 (approximately $1,579,030)
  in order to fund our plan of operation over the next twelve months. We presently
  do not have any financing arrangements in place and there is no assurance that
  we will be able to obtain sufficient financing on terms acceptable to us or
  at all. If further financing is not available or obtainable, our ability to
  meet our financial obligations and pursue our plan of operation will be substantially
  limited and investors may lose a substantial portion or all of their investment.

Limited Operating History, Risks Of A New Business
Venture

EDI Germany was formed on December 7, 2004 and, as such, has a
very short operating history upon which future performance may be assessed. EDI
Germany has not earned any revenues to date.

Potential investors should be aware of the difficulties
normally encountered by a new enterprise and the high rate of failure of such
enterprises. The potential for future success must be considered in light of the
problems, expenses, difficulties, complications and delays encountered in
connection with the development of a business in the area in which we intend to
operate and in connection with the formation and commencement of operations of a
new business in general. These include, but are not limited to, unanticipated
problems relating to research and development programs, marketing, approvals by
government agencies, competition and additional costs and expenses that may
exceed current estimates. There is no history upon which to base any assumption
as to the likelihood that our business will prove successful, and there can be
no assurance that we will generate any operating revenues or ever achieve
profitable operations.

Our Operations May Be Subject To Extensive Government
Regulations

Well drilling is an inherently dangerous activity. As such, we
expect that any well projects that we participate in will be subject to a number
of government safety and environmental regulations. Obtaining any necessary
permits and/or governmental approvals may be a lengthy and costly process. As we
currently do not have any drilling contracts in place and are seeking to market
our products and services in a number of countries, the full extent of these
regulations is not yet fully known. There are no assurances that we will be able
to obtain the necessary government approvals or that the costs associated with
obtaining those approvals will be affordable to us.

12

---

Competition Is Intense And We May Be Unable To Achieve
Market Acceptance

EDI Germany competes directly with traditional well drilling
contractors. The market for well drilling contractors and equipment providers is
mature and well established. As such, the business environment in which we
intend to operate is highly competitive. Currently, there exist a number of
established methods, products and technologies used in the well drilling process
and we expect to experience competition from a number of established companies
involved this industry. Many of our potential competitors will have greater
technical, financial, marketing, sales and other resources than we will.

Our ability to compete within this industry is dependent upon
our ability to differentiate our processes, products and technologies from those
already existing in the marketplace and our ability to create public awareness
of the advantages those processes, products and technologies present. Although
our management has experience in the well drilling industry, as an entity, we
are new entrants to that industry and our technologies have not yet gained
marketplace acceptance. We are unable to provide assurances that our target
customers and markets will accept our technologies or will purchase our products
and services in sufficient quantities to achieve profitability. If a significant
market fails to develop or develops more slowly than we anticipate, we may be
unable to meet our operational expenses. Acceptance of our products will depend
upon a number of factors, including the cost competitiveness of our products,
customer reluctance to try new products or services, regulatory requirements or
the emergence of more competitive or effective products.

Rapid Technological Changes In Our Industry Could Make Our
Products Obsolete

If new technologies, products and industry standards develop at
a rapid pace, they could make our products obsolete. Our future success will
depend upon our ability to develop and introduce product enhancements to address
the needs of customers. Material delays in introducing product enhancements may
cause customers to forego purchases of our product and purchase those of
competitors.

Asserting And Defending Intellectual Property Rights May
Impact Results Of Operations

The success of our business may depend on our ability to
protect our proprietary processes and technology from competitors. A number of
international patent applications have been filed with respect to our
technologies. We were granted patents or similar rights with respect to our EDI
Medium Changer, EDI Water Save and EDI Suspension technologies in some of the
jurisdictions in which we filed applications, while applications in other
jurisdictions were still pending. In early 2008, in order to focus our business
resources, our management decided to abandon our patents and/or patent
applications for the EDI Medium Changer and EDI Water Save technologies. As a
result, interested competitors could copy those technologies. Our management has
not yet made a determination with respect to the patents and/or patent
applications filed for our EDI Suspension technology; however, our management
could decide to abandon those patents and/or applications as well.

Patent applications have been filed with respect to our EDI
Fluid Finder Technology. However, if we are not able to obtain patents for this
technology, we will only be able to protect our products and technological
processes by maintaining the secrecy of those products and processes.

Even if we are able to obtain patents for our technologies, we
may be required to defend our intellectual property rights through litigation.
The financial cost of such litigation could have a material impact on our
financial condition even if we are successful in developing and marketing
products and in defending any of our intellectual property rights, of which
there is no assurance. Furthermore, an adverse outcome in any litigation or
interference proceeding could subject us to significant liabilities to third
parties and require us to cease using the technology that is at issue or to
license the technology

13

---

from third parties. In addition, a finding that any of our
intellectual property rights are invalid could allow competitors to more easily
and cost-effectively compete. Thus, an unfavorable outcome in any patent
litigation or interference proceeding could have a material adverse effect on
our business, financial condition and results of operations.

Dependence On Key Personnel

Our success will largely depend on the performance of our
directors and officers and the managers of EDI Germany. Our success will also
depend on our ability to attract and retain highly skilled technical, research,
management, regulatory compliance, sales and marketing personnel. Competition
for such personnel is intense. The loss of the services of such personnel or the
inability to attract and retain other key personnel could impair the development
of our business, operating results and financial condition.

Dependence On Key Suppliers

The majority of our drilling equipment is machined by a single
supplier located in Dorsten, Germany, close to our offices in Muenster, Germany.
This supplier assists us in machining our drilling equipment and installations
and works closely with our own experts to make improvements to our technologies.
The loss of this supplier could be damaging to our business. Although we believe
that we would be able to use the services of other machining companies,
switching machining companies could cause delays as we would be required to
educate the new supplier on our needs and requirements. In addition a new
supplier may be less conveniently located than our current supplier, which could
increase travel time and shipping costs.

Political Instability

We are seeking to develop a market for our drilling products
and processes in a number of developing countries in the Middle East, Africa and
Southern Asia. The political environment in many of these countries is unstable.
This instability could cause delays to our drilling projects and could make the
development of our business more difficult. In particular, our drilling projects
scheduled for Pakistan could be significantly delayed because of the current
political instability in that country. Furthermore, if political situation in
Pakistan worsens, those projects could be abandoned altogether.

ITEM
2.              
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM
3.              
DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM
4.              
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM
5.              
OTHER INFORMATION.

None.

14

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ITEM
6.              
EXHIBITS.

|Exhibit |  |                                                                                                                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                       
|3.1     |  | Articles of
      Incorporation.(1)                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                       
|3.2     |  | Certificate of
      Change to Authorized Capital.(3)                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                       
|3.3     |  | Certificate of Amendment to Articles of Incorporation 
      name change to Exploration Drilling International Inc.(9)                                                                                                                               
|        |  |                                                                                                                                                                                                                                                       
|3.4     |  | Amended and Restated Bylaws.(8)                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                       
|4.1     |  | Specimen Common Stock Certificate.(1)                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                       
|10.1    |  | Option Purchase and Royalty Agreement.(1)                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                       
|10.2    |  | Amendment to Option Purchase and Royalty
      Agreement.(2)                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                       
|10.3    |  | Share Purchase Agreement among the Company, EDI
      Exploration Drilling International Holding GmbH (EDI Holding), EDI
      Exploration Drilling International GmbH (EDI Germany) and Frank Rigney,
      dated for reference April 5, 2006.(4)
|        |  |                                                                                                                                                                                                                                                       
|10.4    |  | Agreement and Deed of Transfer between EDI Holding and
      the Company dated for reference as of April 26, 2006.(5)                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                       
|10.5    |  | 2006 Stock Option Plan.(6)                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                       
|10.6    |  | Joint Operating Agreement Between A. Abuynayyan Trading
      Corporation and EDI Germany.(7)                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                       
|10.7    |  | Managing Director Contract between EDI Germany and Rainer
      Rotthaeuser dated effective as of January 1, 2005 (translated from German
      to English).(10)                                                                                      
|        |  |                                                                                                                                                                                                                                                       
|10.8    |  | Managing Director Contract between EDI Germany and
      Guenter Thiemann dated effective as of January 1, 2005 (translated from
      German to English).(10)                                                                                        
|        |  |                                                                                                                                                                                                                                                       
|10.9    |  | Loan Agreement for EUR 25,000 with interest at 6% per
      annum between EDI Germany (as lender) and Guenter Thiemann (as borrower)
      dated December 23, 2005 (translated from German to
      English).(10)                                     
|        |  |                                                                                                                                                                                                                                                       
|10.10   |  | Loan Agreement for EUR 115,000 with interest at 6% per
      annum between EDI Germany (as lender) and Magdalena Rotthaeuser (as
      borrower) dated December 23, 2005 (translated from German to
      English).(10)                               
|        |  |                                                                                                                                                                                                                                                       
|10.11   |  | Addendum to Loan Agreement dated December 23, 2005
      between EDI Germany (as lender) and Magdalena Rotthaeuser (as borrower),
      extending due date to December 31, 2006, dated June 25, 2006 (translated
      from German to English).(10)   
|        |  |                                                                                                                                                                                                                                                       
|10.12   |  | Addendum to Loan Agreement dated December 23, 2005
      between EDI Germany (as lender) and Magdalena Rotthaeuser (as borrower),
      extending due date to June 30, 2007, dated December 28, 2006 (translated
      from German to English).(10)   
|        |  |                                                                                                                                                                                                                                                       
|10.13   |  | Loan Agreement for EUR 15,400 with interest at 3% per
      annum between EDI Germany (as lender) and Magdalena Rotthaeuser (as
      borrower) dated January 3, 2006 (translated from German to
      English).(10)                                  
|        |  |                                                                                                                                                                                                                                                       
|10.14   |  | Loan Agreement for EUR 20,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      July 15, 2006 (translated from German to English).(10)                                                    
|        |  |                                                                                                                                                                                                                                                       
|10.15   |  | Loan Agreement for EUR 3,400 with interest at 6% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      October 28, 2006 (translated from German to English).(10)                                                  
|        |  |                                                                                                                                                                                                                                                       
|10.16   |  | Loan Agreement for EUR 75,000 with interest at 5% per
      annum between EDI Holding                                                                                                                                                                 

15

---

|Exhibit |  |                                                                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                           
|        |  | (as lender) and EDI Germany (as borrower) dated December
      19, 2006 (translated from German to English).(10)                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                  
|10.17   |  | Loan Agreement for EUR 2,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      December 29, 2006 (translated from German to English).(10)                                                            
|        |  |                                                                                                                                                                                                                                                                  
|10.18   |  | Loan Agreement for EUR 1,000 with interest at a rate of
      6% per annum between EDI Holding (as lender) and EDI Germany (as borrower)
      dated December 29, 2006 (translated from German to
      English).(10)                                            
|        |  |                                                                                                                                                                                                                                                                  
|10.19   |  | Loan Agreement for EUR 36,000 without interest between
      Guenter Thiemann (as lender) and EDI Germany (as borrower) dated June 8,
      2005 (translated from German to English).(10)                                                                        
|        |  |                                                                                                                                                                                                                                                                  
|10.20   |  | Addendum to Loan Agreement dated June 8, 2005 between
      Guenter Thiemann (as lender) and EDI Germany (as borrower), providing for
      interest at a rate of 6% per annum, dated July 1, 2006 (translated from
      German to English).(10)                
|        |  |                                                                                                                                                                                                                                                                  
|10.21   |  | Addendum to Loan Agreement dated June 8, 2005 between
      Guenter Thiemann (as lender) and EDI Germany (as borrower), extending due
      date to December 31, 2007, dated April 22, 2007 (translated from German to
      English).(10)                       
|        |  |                                                                                                                                                                                                                                                                  
|10.22   |  | Loan Agreement for EUR 50,000 without interest between
      Guenter Thiemann (as lender) and EDI Germany (as borrower) dated May 4,
      2006 (translated from German to English).(10)                                                                         
|        |  |                                                                                                                                                                                                                                                                  
|10.23   |  | Addendum to Loan Agreement dated May 4, 2006 between
      Guenter Thiemann (as lender) and EDI Germany (as borrower) dated July 1,
      2006 (translated from German to English).(10)                                                                          
|        |  |                                                                                                                                                                                                                                                                  
|10.24   |  | Loan Agreement for EUR 8,000 with interest at 7% per
      annum between Dieter Thiemann (as lender) and EDI Germany (as borrower),
      providing for interest at a rate of 6% per annum dated December 13, 2004
      (translated from German to English).(10)
|        |  |                                                                                                                                                                                                                                                                  
|10.25   |  | Loan Agreement for EUR 5,000 with interest at 6% per
      annum between Dieter Thiemann (as lender) and EDI Germany (as borrower)
      dated May 30, 2005 (translated from German to English).(10)                                                             
|        |  |                                                                                                                                                                                                                                                                  
|10.26   |  | Addendum to Loan Agreement dated May 30, 2005 between
      Dieter Thiemann (as lender) and EDI Germany (as borrower), extending due
      date to December 31, 2007, dated December 26, 2006 (translated from German
      to English).(10)                     
|        |  |                                                                                                                                                                                                                                                                  
|10.27   |  | Loan Agreement for EUR 12,000 with interest at 5% per
      annum between Dieter Thiemann (as lender) and EDI Germany (as borrower)
      dated September 20, 2006 (translated from German to
      English).(10)                                                
|        |  |                                                                                                                                                                                                                                                                  
|10.28   |  | Addendum to Loan Agreement dated September 20, 2006
      between Dieter Thiemann (as lender) and EDI Germany (as borrower),
      extending due date to March 22, 2007, dated December 18, 2006 (translated
      from German to English).(10)                  
|        |  |                                                                                                                                                                                                                                                                  
|10.29   |  | Loan Agreement for EUR 90,000 with interest at 6% per
      annum between DTB Patente GmbH (as lender) and EDI Germany (as borrower)
      dated March 2, 2006 (translated from German to English).(10)                                                          
|        |  |                                                                                                                                                                                                                                                                  
|10.30   |  | Addendum to Loan Agreement Dated March 2, 2006 between
      DTB Patente GmbH (as lender) and EDI Germany (as borrower), extending the
      due date to September 30, 2007, dated January 4, 2007 (translated from
      German to English).(10)                
|        |  |                                                                                                                                                                                                                                                                  
|10.31   |  | Loan Agreement for EUR 11,600 with interest at 5% per
      annum between DTB Patente GmbH (as lender) and EDI Germany (as borrower)
      dated October 28, 2006 (translated                                                                                    

16

---

|Exhibit |  |                                                                                                                                                                                                                                                 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                          
|        |  | from German to English).(10)                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                 
|10.32   |  | Loan Agreement for EUR 21,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      January 19, 2007 (translated from German to English).(10)                                           
|        |  |                                                                                                                                                                                                                                                 
|10.33   |  | Loan Agreement for EUR 39,160 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      February 23, 2007 (translated from German to English).(10)                                          
|        |  |                                                                                                                                                                                                                                                 
|10.34   |  | Loan Agreement for EUR 1,800 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      February 23, 2007 (translated from German to English).(10)                                           
|        |  |                                                                                                                                                                                                                                                 
|10.35   |  | Loan Agreement for EUR 57,500 with interest at 5% per
      annum between DTB Patente GmbH (as lender) and EDI Germany (as borrower)
      dated January 28, 2007 (translated from German to English).(10)                                      
|        |  |                                                                                                                                                                                                                                                 
|10.36   |  | Loan Agreement for EUR 10,000, with interest at 6% per
      annum between Dieter Thiemann (as lender) and EDI Germany (as borrower)
      dated February 2, 2007 (translated from German to English).(10)                                      
|        |  |                                                                                                                                                                                                                                                 
|10.37   |  | Loan Agreement for EUR 23,000 with interest at 7% per
      annum between Albert and Margareta Meyer (as lenders) and EDI Germany (as
      borrower) dated July 6, 2006 (translated from German to
      English).(10)                         
|        |  |                                                                                                                                                                                                                                                 
|10.38   |  | Addendum to Loan Agreement dated September 20, 2006
      between Dieter Thiemann (as lender) and EDI Germany (as borrower),
      extending due date to December 31, 2007, dated June 26, 2007 (translated
      from German to English).(11)  
|        |  |                                                                                                                                                                                                                                                 
|10.39   |  | Addendum to Loan Agreement dated February 2, 2007 between
      Dieter Thiemann (as lender) and EDI Germany (as borrower), extending the
      due date to December 31, 2007, dated June 28, 2007 (translated from German
      to English).(11)
|        |  |                                                                                                                                                                                                                                                 
|10.40   |  | Addendum to Loan Agreement dated July 15, 2006 between
      EDI Holding (as lender) and EDI Germany (as borrower) extending the due
      date to December 31, 2007, dated July 15, 2007 (translated from German to
      English).(11)        
|        |  |                                                                                                                                                                                                                                                 
|10.41   |  | Loan Agreement for EUR 12,000 with interest at 6% per
      annum between Dieter Thiemann (as lender) and EDI Germany (as borrower)
      dated July 16, 2007 (translated from German to English).(11)                                          
|        |  |                                                                                                                                                                                                                                                 
|10.42   |  | Loan Agreement for EUR 5,000 with interest at 6% per
      annum between Dieter Thiemann (as lender) and EDI Germany (as borrower)
      dated August 5, 2007 (translated from German to English).(11)                                          
|        |  |                                                                                                                                                                                                                                                 
|10.43   |  | Loan Agreement for EUR 40,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      August 9, 2007 (translated from German to English).(14)                                             
|        |  |                                                                                                                                                                                                                                                 
|10.44   |  | Loan Agreement for EUR 10,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      August 12, 2007 (translated from German to English).(12)                                            
|        |  |                                                                                                                                                                                                                                                 
|10.45   |  | Loan Agreement for EUR 15,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      August 20, 2007 (translated from German to English).(12)                                            
|        |  |                                                                                                                                                                                                                                                 
|10.46   |  | Loan Agreement for EUR 35,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      August 30, 2007 (translated from German to English).(12)                                            

17

---

|Exhibit |  |                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                    
|10.47   |  | Addendum to Loan Agreement dated October 28, 2006 between
      EDI Holding (as lender) and EDI Germany (as borrower) extending the due
      date to June 30, 2008, dated September 1, 2007 (translated from German to
      English).(12)        
|        |  |                                                                                                                                                                                                                                                    
|10.48   |  | Loan Agreement for EUR 33,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      September 11, 2007 (translated from German to English).(12)                                            
|        |  |                                                                                                                                                                                                                                                    
|10.49   |  | Loan Agreement for EUR 24,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      September 19, 2007 (translated from German to English).(12)                                            
|        |  |                                                                                                                                                                                                                                                    
|10.50   |  | Addendum to Loan Agreement dated March 2, 2006 between
      DTB Patente GmbH (as lender) and EDI Germany (as borrower) extending the
      due date to March 31, 2008, dated September 25, 2007 (translated from
      German to English).(12)    
|        |  |                                                                                                                                                                                                                                                    
|10.51   |  | Loan Agreement for EUR 12,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      September 26, 2007 (translated from German to English).(12)                                            
|        |  |                                                                                                                                                                                                                                                    
|10.52   |  | Consulting Agreement dated February 13, 2008 between the
      Company and Jesko Beck.(13)                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                    
|10.53   |  | Loan Agreement for EUR 9,400 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      October 12, 2007 (translated from German to English).(14)                                               
|        |  |                                                                                                                                                                                                                                                    
|10.54   |  | Addendum to Loan Agreement dated October 28, 2006 between
      DTB Patente GmbH (as lender) and EDI Germany (as borrower) extending the
      due date to November 30, 2008, dated November 1, 2007 (translated from
      German to English).(14)
|        |  |                                                                                                                                                                                                                                                    
|10.55   |  | Loan Agreement for EUR 15,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      November 16, 2007 (translated from German to English).(14)                                             
|        |  |                                                                                                                                                                                                                                                    
|10.56   |  | Loan Agreement for EUR 6,000 with interest at 5% per
      annum between EDI Holding (as lender) and EDI Germany (as borrower) dated
      November 23, 2007 (translated from German to English).(14)                                              
|        |  |                                                                                                                                                                                                                                                    
|10.57   |  | Addendum to Loan Agreement dated June 8, 2005 between
      Guenter Thiemann (as lender) and EDI Germany (as borrower) extending the
      due date to July 31, 2008, dated December 25, 2007 (translated from German
      to English).(14)       
|        |  |                                                                                                                                                                                                                                                    
|10.58   |  | Addendum to Loan Agreement dated May 30, 2005 between
      Dieter Thiemann (as lender) and EDI Germany (as borrower) extending the
      due date to December 31, 2008, dated December 26, 2007 (translated from
      German to English).(14)    
|        |  |                                                                                                                                                                                                                                                    
|10.59   |  | Addendum to Loan Agreement dated September 20, 2006
      between Dieter Thiemann (as lender) and EDI Germany (as borrower)
      extending the due date to July 31, 2008, dated December 26, 2007
      (translated from German to English).(14)  
|        |  |                                                                                                                                                                                                                                                    
|10.60   |  | Addendum to Loan Agreement dated February 2, 2007 between
      Dieter Thiemann (as lender) and EDI Germany (as borrower) extending the
      due date to July 31, 2008, dated December 28, 2007 (translated from German
      to English).(14)    
|        |  |                                                                                                                                                                                                                                                    
|10.61   |  | Addendum to Loan Agreement dated December 29, 2006
      between EDI Holding (as lender) and EDI Germany (as borrower) extending
      the due date to July 31, 2008, dated December 28, 2007 (translated from
      German to English).(14)       
|        |  |                                                                                                                                                                                                                                                    
|10.62   |  | Addendum to Loan Agreement dated July 15, 2007 between
      EDI Holding (as lender) and EDI Germany (as borrower) extending the due
      date to July 31, 2008, dated                                                                            

18

---

|Exhibit |  |                                                                                                                                                                                                                                                         
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                  
|        |  | December 28,
        2007 (translated from German to English).(14)                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                         
|10.63   |  | Addendum to
        Loan Agreement dated December 29, 2006 between EDI Holding (as lender)
        and EDI Germany (as borrower) extending the due date to July 31, 2008,
        dated December 28, 2007 (translated from German to English).(14)      
|        |  |                                                                                                                                                                                                                                                         
|10.64   |  | Loan Agreement
        for EUR 29,383 with interest at 5% per annum between EDI Holding (as lender)
        and EDI Germany (as borrower) dated December 30, 2007 (translated from
        German to English).(14)                                      
|        |  |                                                                                                                                                                                                                                                         
|10.65   |  | Loan Agreement
        for EUR 6,500 with interest at 6% per annum between Dieter Thiemann (as
        lender) and EDI Germany (as borrower) dated January 18, 2008 (translated
        from German to English).(14)                                    
|        |  |                                                                                                                                                                                                                                                         
|10.66   |  | Addendum to
        Loan Agreement dated January 19, 2007 between EDI Holding (as lender)
        and EDI Germany (as borrower) extending the due date to December 31, 2008,
        dated January 20, 2008 (translated from German to English).(14)    
|        |  |                                                                                                                                                                                                                                                         
|10.67   |  | Addendum to
        Loan Agreement dated January 28, 2007 between DTB Patente GmbH (as lender)
        and EDI Germany (as borrower) extending the due date to January 28, 2009,
        dated January 22, 2008 (translated from German to English).(14)
|        |  |                                                                                                                                                                                                                                                         
|10.68   |  | Addendum to
        Loan Agreement dated February 23, 2007 between EDI Holding (as lender)
        and EDI Germany (as borrower) extending the due date to December 31, 2008,
        dated February 20, 2008 (translated from German to English).(14)  
|        |  |                                                                                                                                                                                                                                                         
|10.69   |  | Addendum to
        Loan Agreement dated February 23, 2007 between EDI Holding (as lender)
        and EDI Germany (as borrower) extending the due date to December 31, 2008,
        dated February 23, 2008 (translated from German to English).(14)  
|        |  |                                                                                                                                                                                                                                                         
|10.70   |  | Technology License
        Agreement between EDI Germany and EDI Turkey, dated effective as of March
        28, 2008.(14)                                                                                                                              
|        |  |                                                                                                                                                                                                                                                         
|10.71   |  | Loan
        Agreement for EUR 6,500 with interest at 6% per annum between Dieter Thiemann
        (as lender) and EDI Germany (as borrower) dated January 18, 2008 (translated
        from German to English).                                        
|        |  |                                                                                                                                                                                                                                                         
|10.72   |  | Loan
        Agreement for EUR 25,000 with interest at 5% per annum between EDI Holding
        (as lender) and EDI Germany (as borrower) dated February 8, 2008 (translated
        from German to English).                                           
|        |  |                                                                                                                                                                                                                                                         
|10.73   |  | Loan
        Agreement for EUR 5,000 with interest at 5% per annum between EDI Holding
        (as lender) and EDI Germany (as borrower) dated February 8, 2008 (translated
        from German to English).                                            
|        |  |                                                                                                                                                                                                                                                         
|10.74   |  | Loan
        Agreement for EUR 6,019.41 with interest at 5% per annum between EDI Holding
        (as lender) and EDI Germany (as borrower) dated March 30, 2008 (translated
        from German to English).                                           
|        |  |                                                                                                                                                                                                                                                         
|10.75   |  | Addendum
        to Loan Agreement dated May 4, 2006 between Guenter Thiemann (as lender)
        and EDI Germany (as borrower) extending the due date to December 31, 2008,
        dated May 2, 2008 (translated from German to English).             
|        |  |                                                                                                                                                                                                                                                         
|21.1    |  | List of Subsidiaries.(14)                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                         
|31.1    |  | Certification
        of Principal Executive Officer pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002.                                                                                                                                
|        |  |                                                                                                                                                                                                                                                         
|31.2    |  | Certification
        of Principal Financial Officer pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002.                                                                                                                                
|        |  |                                                                                                                                                                                                                                                         
|32.1    |  | Certification
        of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                  

19

---

ExhibitNumber
      
      Description of Exhibit32.2
      
      Certification
        of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


|**Notes:** |                                                                                                                         
|---------- | ------------------------------------------------------------------------------------------------------------------------
|(1)        | Filed as an exhibit to our Registration Statement on Form
      10-SB originally filed with the SEC on November 5, 2003.
|(2)        | Filed as an exhibit to our Quarterly Report on Form
      10-QSB filed with the SEC on March 17, 2006.                  
|(3)        | Filed as an exhibit to our Current Report on Form 8-K
      filed with the SEC on March 27, 2006.                       
|(4)        | Filed as an exhibit to our Current Report on Form 8-K
      filed with the SEC on April 27, 2006.                       
|(5)        | Filed as an exhibit to our Current Report on Form 8-K
      filed with the SEC on May 2, 2006.                          
|(6)        | Filed as an exhibit to our Current Report on Form 8-K
      filed with the SEC on May 11, 2006.                         
|(7)        | Filed as an exhibit to our Current Report on Form 8-K
      filed with the SEC on June 28, 2006.                        
|(8)        | Filed as an exhibit to our Current Report on Form 8-K
      filed with the SEC on August 28, 2006.                      
|(9)        | Filed as an exhibit to our Quarterly Report on Form
      10-QSB filed with the SEC on November 14, 2006.               
|(10)       | Filed as an exhibit to our Annual Report on Form 10-KSB
      filed with the SEC on May 16, 2007.                       
|(11)       | Filed as an exhibit to our Quarterly Report on Form
      10-QSB filed with the SEC on August 20, 2007.                 
|(12)       | Filed as an exhibit to our Quarterly Report on Form
      10-QSB filed with the SEC on November 19, 2007.               
|(13)       | Filed as an exhibit to our Current Report on Form 8-K
      filed with the SEC on February 20, 2008.                    
|(14)       | Filed as an exhibit to our Annual Report on Form 10-K
      filed with the SEC on April 15, 2008.                       

20

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

|                   |     | EXPLORATION DRILLING INTERNATIONAL INC.
|------------------ | --- | ---------------------------------------
|                   |     |                                        
|                   |     |                                        
|                   |     |                                        
|Date: May 20, 2008 | By: | /s/
      Rainer Rotthaeuser           
|                   |     | RAINER ROTTHAEUSER                     
|                   |     | Chief Executive Officer and President  
|                   |     | (Principal Executive Officer )         
|                   |     |                                        
|                   |     |                                        
|                   |     |                                        
|                   |     |                                        
|Date: May 20, 2008 | By: | /s/
      Guenter Thiemann             
|                   |     | GUENTER THIEMANN                       
|                   |     | Chief Financial Officer and Treasurer  
|                   |     | (Principal Accounting Officer)         
|                   |     |                                        
|                   |     |                                        
|                   |     |                                        
|                   |     |                                        
|Date: May 20, 2008 | By: | /s/
      John Boschert                
|                   |     | JOHN BOSCHERT                          
|                   |     | Secretary                              

---