UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


FORM
        10-KSB/A


(Amendment
        No. 1)





(Mark
      One)


x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934


For
      the
      fiscal year ended June 30, 2006


OR





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934


For
      the
      transition period from ____________ to ____________





Commission
      file number 000-50929





Ignis
                Petroleum Group, Inc.(Name
                of small business issuer in its charter)





Nevada
            
            16-1728419(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification No.)




100
                Crescent Court 7thFloor Dallas, TX
            
            75201(Address
                of principal executive offices)
            
            (Zip
                Code)




214-459-8188(Issuer's
                telephone number)





Securities
      registered under Section 12(b) of the Exchange Act:


None





Securities
      registered under Section 12(g) of the Exchange Act:


Common
      Stock, $0.001 par value





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o .





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB o .





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





State
      issuer’s revenues for its most recent fiscal year: $519,535.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days: $19,594,796 as of June 30,
      2006.





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of October 10, 2006 the registrant had
      issued and outstanding 50,288,589 shares of common stock.





DOCUMENTS
      INCORPORATED BY REFERENCE





None





Transitional
      Small Business Disclosure Format (check one): Yes o No x














**EXPLANATORY
          NOTE:**
 
 Ignis
          Petroleum Group, Inc. (the “Company”) is filing this Amendment No. 1 on Form
          10-KSB/A (this “Amendment”) to amend the Company’s Annual Report on Form 10-KSB
          for the fiscal year ended June 30, 2006, as filed with the Securities and
          Exchange Commission on October 16, 2006 (the “Original 10-K”). The purpose of
          this Amendment is to correct a typographical error in the Company’s Consolidated
          Statement of Cash Flows. Specifically, the amount of “Loss from valuation
          adjustment of oil and gas properties” was reported as “1,000,00” but should have
          been reported as “2,000,000.” Pursuant to Rule 12b-15 of the Securities Exchange
          Act of 1934, as amended, this Form 10-KSB/A contains the complete text
          of our
          Consolidated Financial Statements, as amended, delivered in response to
          Item 7 of Form 10-KSB, as well as certain currently dated
          certifications. Unaffected items have not been repeated in this Amendment
          No.
          1.
  2


**REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors of


Ignis
      Petroleum Group, Inc.





We
      have
      audited the accompanying consolidated balance sheet of Ignis Petroleum Group,
      Inc. and subsidiaries (the “Company”) as of June 30, 2006, and the related
      consolidated statements of operations, changes in shareholders’ equity and cash
      flows for the year ended June 30, 2006 and the period December 9, 2004
      (Inception) to June 30, 2005. These consolidated financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audit.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. We were not engaged to perform
      an
      audit of the Company’s internal control over financial reporting. Our audit
      includes consideration of internal control over financial reporting as a basis
      for designing audit procedures that are appropriate in the circumstances, but
      not for the purpose of expressing an opinion on the effectiveness of the
      Company’s internal control over financial reporting. Accordingly, we express no
      such opinion. An audit also includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements, assessing
      the accounting principles used and significant estimates made by management,
      and
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company as of June 30, 2006
      and
      the results of their operations and their cash flows for the year ended June
      30,
      2006 and for the period December 9, 2004 (Inception) to June 30, 2005, in
      conformity with US generally accepted accounting principles.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the consolidated
      financial statements, the Company’s dependence on outside financing, lack of
      sufficient working capital, and recurring losses from operations raise
      substantial doubt about the Company’s ability to continue as a going concern.
      The financial statements do not include any adjustments that might result from
      the outcome of these uncertainties.








/s/De
      Meo, Young McGrath




Fort
      Lauderdale, Florida


October
      13, 2006




F-1




Ignis
                Petroleum Group, Inc. and SubsidiaryConsolidated
                Balance SheetJune
                30, 2006ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            872,572Accounts
                receivable
            
            
            55,782Prepaid
                expenses and other current assets
            
            
            188,500Total
                current assets
            
            
            1,116,854Property
                and equipment:Oil
                and gas properties, successful efforts method
            
            
            2,521,869Other
                assets
            
            
            669,760Total
                assets
            
            $
            4,308,483LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            1,089,396Note
                payable
            
            
            100,000Total
                current liabilities
            
            
            1,189,396Convertible
                notes
            
            
            1,931,886Derivative
                liability
            
            
            2,604,813Warrant
                liability
            
            
            3,694,2938,230,992Commitments
                and contingencies
            
            
            -Stockholders'
                equity (deficit):Preferred
                stock, $0.001 par value, 5,000,000 shares authorized none issued
                and
                outstanding
            
            
            -Common
                stock, $0.001 par value, 300,000,000 shares authorized 50,026,464
                issued
                and outstanding
            
            
            50,026Additional
                paid-in capital
            
            
            7,554,137Accumulated
                deficit
            
            
            (12,716,068
            )Total
                stockholders' equity (deficit)
            
            
            (4,111,905
            )Total
                liabilities and stockholders' equity (deficit)
            
            $
            4,308,483


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


F-2





Ignis
                Petroleum Group, Inc. and SubsidiaryConsolidated
                Statement of OperationsFor
                the
              Year
                Ended
              June
                30, 2006
            
            For
                the
              Period
              December
                9, 2004 (Inception) to
              June
                30, 2005Revenues
                from oil and gas product sales
            
            $
            519,535
            
            $
            -Operating
                expenses:Depreciation
                and depletion
            
            
            494,493
            
            
            -Exploration
                expenses, including dry holes
            
            
            4,813,268
            
            
            -General
                and administrative expenses
            
            
            4,233,971
            
            
            253,555Total
                operating expenses
            
            
            9,541,732
            
            
            253,555Other
                income (expense)Loss
                from valuation of derivative liability
            
            
            (1,299,201
            )
            
            -Interest
                expense
            
            
            (2,102,681
            )
            
            (22,685
            )(3,401,882
            )
            
            (22,685
            )Net
                loss
            
            $
            (12,424,079
            )
            $
            (276,240
            )Basic
                and diluted loss per common share
            
            $
            (0.26
            )
            $
            (0.01
            )Weighted
                average number of common shares outstanding and proforma
            
            
            47,674,470
            
            
            40,829,557





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





F-3





Ignis
                Petroleum Group, Inc. and SubsidiaryConsolidated
                Statement of Stockholders' EquityFor
                the Period December 9, 2004 (reverse merger) to June 30, 2005 and
                the Year
                Ended June 30, 2006AdditionalCommon
                Stock
            
            Paid-in
            
            AccumulatedShares
            
            Par
                value
            
            Capital
            
            Deficit
            
            TotalIssuance
                of common stock
            
            
            31,200,000
            
            $
            31,200
            
            $
            -
            
            $
            20,800
            
            $
            52,000Donated
                services for rent
            
            
            -
            
            
            -
            
            
            -
            
            
            3,000
            
            
            3,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (39,549
            )
            
            (39,549
            )Balance
                December 9, 2004 (reverse merger)
            
            
            31,200,000
            
            
            31,200
            
            
            -
            
            
            (15,749
            )
            
            15,451Issuance
                of common stock
            
            
            10,000,000
            
            
            10,000
            
            
            340,000
            
            
            -
            
            
            350,000Donated
                services for rent
            
            
            -
            
            
            -
            
            
            13,500
            
            
            -
            
            
            13,500Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (276,240
            )
            
            (276,240
            )Balance
                June 30, 2005
            
            
            41,200,000
            
            
            41,200
            
            
            353,500
            
            
            (291,989
            )
            
            102,711Conversion
                of convertible notes
            
            
            3,100,000
            
            
            3,100
            
            
            1,547,202
            
            
            -
            
            
            1,550,302Issuance
                of common stock for services
            
            
            1,856,313
            
            
            1,856
            
            
            2,569,625
            
            
            -
            
            
            2,571,481Sale
                of common stock
            
            
            3,395,151
            
            
            3,395
            
            
            1,996,605
            
            
            -
            
            
            2,000,000Issuance
                of common stock for Newton extension fee
            
            
            400,000
            
            
            400
            
            
            1,027,600
            
            
            -
            
            
            1,028,000Issuance
                of common stock for debt fees
            
            
            75,000
            
            
            75
            
            
            59,605
            
            
            -
            
            
            59,680Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,424,079
            )
            
            (11,424,079
            )Balance
                June 30, 2006
            
            
            50,026,464
            
            $
            50,026
            
            $
            7,554,137
            
            $
            (12,716,068
            )
            $
            (4,111,905
            )





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





F-4





Ignis
                  Petroleum Group, Inc. and SubsidiaryConsolidated
                  Statement of Cash FlowsFor
                  the
                Year
                  Ended
                June
                  30, 2006
              
              For
                  the
                Period
                  ended
                December
                  9, 2004
                (Inception)
                  to
                June
                  30, 2005Cash
                  flow from operating activitiesNet
                  loss
              
              $
              (12,424,079
              )
              $
              (276,240
              )Adjustments
                  to net loss not affecting cash:Donated
                  capital
              
              
              -
              
              
              13,500Reverse
                  merger adjustments
              
              
              -
              
              
              15,451Depletion
                  and amortization
              
              
              494,493
              
              
              -Amortization
                  of debt cost
              
              
              133,280Loss
                  from valuation adjustment of oil and gas properties
              
              
              2,000,000Stock
                  issued for compensation and services
              
              
              2,631,161
              
              
              -Amortization
                  of discount of debentures
              
              
              1,931,790
              
              
              -Loss
                  from valuation of derivatives
              
              
              1,299,201
              
              
              -Increase
                  / decrease in current assets and liabilitiesIncrease
                  in accounts receivable
              
              
              (55,781
              )
              
              -Increase
                  in repaid expenses and other current assets
              
              
              (168,434
              )
              
              (20,066
              )Increase
                  in other assets
              
              
              (740,000
              )
              
              (3,360
              )Increase
                  in accounts payable and accrued expenses
              
              
              1,044,206
              
              
              45,189Cash
                  used in operating activities
              
              
              (3,854,163
              )
              
              (225,526
              )Cash
                  flow from investing activitiesPurchase
                  of oil and gas properties
              
              
              (1,757,739
              )
              
              (1,500,000
              )Cash
                  used for investing activities
              
              
              (1,757,739
              )
              
              (1,500,000
              )Cash
                  flow from financing activitiesIssuance
                  of common stock and warrants
              
              
              2,000,000
              
              
              350,000Proceeds
                  from note payable
              
              
              100,000
              
              
              -Proceeds
                  from convertible notes
              
              
              4,260,000
              
              
              1,500,000Advance
                  from related party
              
              
              (20,590
              )
              
              20,590Cash
                  provided by financing activities
              
              
              6,339,410
              
              
              1,870,590Net
                  increase in cash
              
              
              727,508
              
              
              145,064Cash
                  at beginning of period
              
              
              145,064
              
              
              -Cash
                  at end of period
              
              $
              872,572
              
              $
              145,064Supplemental
                  disclosure of cash flow information:Cash
                  paid during the period for:Interest
              
              $
              -
              
              $
              -Income
                  taxes
              
              $
              -
              
              $
              -Supplemental
                  non-cash financing transactions:Conversion
                  of notes payable and interest into equity
              
              $
              -
              
              $
              -Issuance
                  of common stock for oil and gas property
              
              $
              1,028,000
              
              $
              -




F-5





Ignis
      Petroleum Group, Inc. and Subsidiary


Notes
      to
      the Financial Statements


June
      30,
      2006




Note
      1


Nature
      of
      Operations





Our
      History





Ignis
      Petroleum Corporation was incorporated in the State of Nevada on December 9,
      2004.





On
      May
      11, 2005, the stockholders of Ignis Petroleum Corporation entered into a stock
      exchange agreement with Sheer Ventures, Inc. pursuant to which Sheer Ventures,
      Inc. issued 9,600,000 shares of common stock in exchange for all of the issued
      and outstanding shares of common stock of Ignis Petroleum Corporation. As a
      result of this stock exchange, Ignis Petroleum Corporation became a wholly
      owned
      subsidiary of Sheer Ventures, Inc. The stock exchange was accounted for as
      a
      reverse acquisition in which Ignis Petroleum Corporation acquired Sheer
      Ventures, Inc. in accordance with Statement of Financial Accounting Standards
      No. 141, “Business Combinations”. Also on May 11, 2005, and in connection with
      the stock exchange, D.B. Management Ltd., a corporation owned and controlled
      by
      Doug Berry, who was then the President, Chief Executive Officer, Secretary,
      Treasurer and sole director of Sheer Ventures, Inc., agreed to sell an aggregate
      of 11,640,000 shares of Sheer Ventures, Inc.’s common stock to six individuals,
      including Philipp Buschmann, the President, Secretary, Treasurer and sole
      director of Ignis Petroleum Corporation, for $0.0167 per share for a total
      purchase price of $194,000. The stock exchange and the stock purchase were
      both
      consummated on May 16, 2005.





On
      July
      11, 2005, Sheer Ventures, Inc. changed its name to Ignis Petroleum Group, Inc.





Our
      Operations





We
      are
      engaged in the exploration, development, and production of crude oil and natural
      gas properties in the United States. We plan to explore for and develop crude
      oil and natural gas primarily in the onshore areas of the United States Gulf
      Coast. Our strategy is to build an energy portfolio that benefits from:





·
            the
                maturing of new petroleum technologies, such as seismic
                interpretation;


·
            the
                expected increase of oil and gas prices; and


·
            the
                availability of short “outsteps” in the same play as previously-discovered
                hydrocarbons.





We
      have
      acquired several prospects that benefit from state-of-the-art 3-D seismic data
      interpretation. In addition, we are actively seeking to acquire other prospects,
      although we currently do not have any contracts or commitments for other
      prospects. We employ and leverage industry technology, engineering, and
      operating talent. We may, from time to time, participate in high-value or
      fast-payback plays for short-term strategic reasons. We outsource lower value
      activities so that we can focus our efforts on the earliest part of the value
      chain while leveraging outstanding talent and strategic partnerships to execute
      our strategy. We believe this approach will allow us to grow our business
      through rapid identification, evaluation and acquisition of high-value
      prospects, while enabling us to use specialized industry talent and keep
      overhead costs to a minimum. We believe this strategy will result in significant
      growth in our reserves, production and financial strength.





Our
      Properties





We
      own or
      have the right to acquire working interests in several oil and gas prospects
      in
      the United States onshore Gulf Coast region.





F-6





*North
      Wright Field Prospect*





We
      have
      the right to earn 75% of the working interest, which is equal to a 52.5% net
      revenue interest, in oil and gas leases and proposed operations covering the
      North Wright Field Prospect, which is located in Acadia Parish, Louisiana.
      We
      will carry 100% of the costs to drill and test each well drilled on the
      prospect. Bayou City Exploration, Inc. will be the operator of the prospect.
      The
      remaining 25% of the working interest in the prospect will be held by Argyle
      Energy, Inc., who will hold 12.5% of the working interest, and three other
      parties, who collectively will hold 12.5% of the working interest in the
      prospect. We are required to commence drilling operations on the prospect on
      or
      before December 31, 2006, or our interests in the prospect will revert to
      Argyle. We have decided not to pursue the prospect and have taken a $2,000,000
      write down of the property as of June 30, 2006. The North Wright Field Prospect
      is currently unproved.





*Acom
      A-6 Property*





We
      have
      25% of the working interest, which is equal to an 18.75% net revenue interest,
      in the Acom A-6 Prospect, which is located in Chambers County, Texas. Kerr-McGee
      Oil & Gas Onshore LP, d/b/a KMOG Onshore LP is the operator of the prospect
      and holds the remainder of the working interest. Drilling of this prospect
      commenced production in August 2005 and was completed in October 2005. The
      Acom
      A-6 Prospect currently holds proved reserves and is producing oil and gas with
      revenues being earned by us. We have estimated proved reserves of 13,652 bbls
      of
      oil and 69,542 mcf of gas. We have realized a total of 5,602 bbls of oil at
      an
      average price of $58.54 and 19,540 mcf of gas at an average price of $7.94
      through June 30, 2006 as follows:




F-7





*Crimson
      Bayou Prospect*





We
      have
      the right to earn 25% of the working interest, which is
      equal to a 17.88% net revenue interest, in the
      test well before payout and 20% of the working interest, which
      is
      equal to a 14.3% net revenue interest, after
      payout in the Crimson Bayou Prospect, which is located in Iberville Parish,
      Louisiana. Range
      Production I, L.P. is the operator of the prospect and will hold the remainder
      of the working interest. Drilling
      of the first test well on the prospect is expected to commence in 2007. The
      Crimson Bayou Prospect is currently unproved.




*Barnett
      Shale Property*





We
      hold
      12.5% of the working interest, which is equal to a 9.38% net revenue interest
      before payout and 10% of the working interest, which is equal to a 7.5% net
      revenue interest after payout, in three wells located in the Barnett Shale
      trend
      in Greater Fort Worth Basin, Texas. Rife Energy Operating, Inc. is the operator
      of the prospect and holds a majority of the remaining working interest. All
      three wells have been drilled. One well has been completed and is producing
      oil
      and gas.  The
      other
      two wells have been partially completed to test the geological
      formations and have some revenue production.  During the [third
      calendar quarter of 2006], we anticipate that we will finish the completion
      of these two wells, which will bring them up to their full production
      potential. The Barnett Shale Prospect currently holds proved reserves and is
      producing oil and gas. We
      have
      estimated proved reserves of 2,072 bbl’s of oil and 13,085 mcf’s of gas. Between
      April 6, 2006 and June 30, 2006 the Barnett Shale wells produced 272 barrels
      of
      oil and .978 million cubic feet of gas, net to Ignis Petroleum Group,
      Inc.





*Sherburne
      Prospect*





On
      May 5,
      2006 we entered into a participation agreement to drill the Sherburne Field
      Development prospect, located in Pointe Coupee Parish, Louisiana. Under the
      terms of the agreement, we will pay 15% of the drilling, testing and completion
      costs. Upon completion, we will earn a 15% working interest in the well before
      payout and an 11.25% working interest in the well after payout. Drilling
      operations commenced in August 2006 and was finished in September 2006. Multiple
      gas zones were detected. The commercial viability of the gas zones will be
      tested in October 2006. The Sherburne Prospect is currently
      unproved.




Oil
 
 **Month**
              
              **Revenue
                  ($)**
              
              **Production
                  (barrels)**
              
              **Average
                  Price per Barrel ($)**October
                  2005
              
              $
              14,357
              
              
              246.97
              
              $
              58.13November
                  2005
              
              
              69,375
              
              
              1,245.56
              
              
              55.70December
                  2005
              
              
              66,568
              
              
              1,199.51
              
              
              55.50January
                  2006
              
              
              52,368
              
              
              855.51
              
              
              61.21February
                  2006
              
              
              38,964
              
              
              668.97
              
              
              58.24March
                  2006
              
              
              37,106
              
              
              635.14
              
              
              58.42April
                  2006
              
              
              19,405
              
              
              299.24
              
              
              64.85May
                  2006
              
              
              6,475
              
              
              98.73
              
              
              65.58June
                  2006
              
              
              41,286
              
              
              624.30
              
              
              66.13**Total**
              
              **$**
              **345,904**
              
              
              **5,873.93**
              
              **$**
              **58.88**
 
 Natural
        Gas
 
 **Month**
              
              **Revenue
                  ($)**
              
              **Production
                  (million cubic feet)**
              
              **Average
                  Price per million cubic feet ($)**October
                  2005
              
              $
              8,522
              
              
              805
              
              $
              10.58November
                  2005
              
              
              33,109
              
              
              4,339
              
              
              7.63December
                  2005
              
              
              24,074
              
              
              2,937
              
              
              8.19January
                  2006
              
              
              29,113
              
              
              3,299
              
              
              8.82February
                  2006
              
              
              19,778
              
              
              2,695
              
              
              7.33March
                  2006
              
              
              24,355
              
              
              3,290
              
              
              7.40April
                  2006
              
              
              8,012
              
              
              1,031
              
              
              7.77May
                  2006
              
              
              2,092
              
              
              287
              
              
              7.28June
                  2006
              
              
              12,487
              
              
              1,835
              
              
              7.00**Total**
              
              **$**
              **161,902**
              
              
              **20,518**
              
              **$**
              **7,89**


These
      financial statements have been prepared on a going concern basis. We have
      incurred losses since inception resulting in an accumulated deficit of
      $12,716,068 since inception and further losses are anticipated in the
      development of its business raising substantial doubt about our ability to
      continue as a going concern. Our ability to continue as a going concern is
      dependent upon our ability to generate profitable operations in the future
      and/or to obtain the necessary financing to meet our obligations and repay
      our
      liabilities arising from normal business operations when they come
      due.






Note
      2


Summary
      of Significant Accounting Policies





Basis
      of
      Presentation


Our
      financial statements have been prepared in accordance with generally accepted
      accounting principles in the United States of America and are expressed in
      U.S.
      dollars. Our fiscal year end is June 30.




F-8





Principles
      of Consolidation


The
      consolidated financial statements include the accounts of Ignis Petroleum Group,
      Inc. and its wholly owned subsidiary, Ignis Petroleum Corporation. All
      significant intercompany balances and transactions have been eliminated in
      consolidation.





Use
      of
      Estimates and Assumptions


The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts 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.





Income
      Taxes


We
      adopted SFAS No. 109 as of our inception. Pursuant to SFAS No. 109 we are
      required to compute tax asset benefits for net operating losses carried forward.
      Potential benefits of income tax losses are not recognized in the accounts
      until
      realization is more likely than not. The potential benefit of net operating
      losses has not been recognized in these financial statements because we cannot
      be assured it is more likely than not we will utilize the net operating losses
      carried forward in future years.





Cash
      and
      Cash Equivalents


We
      consider all highly liquid instruments with maturity of three months or less
      at
      the time of issuance to be cash equivalents.





Concentration
      of Credit Risk


Financial
      instruments that potentially subject us to credit risk consist principally
      of
      cash. Cash was deposited with a high quality credit institution. At
      times, such deposits may be in excess of the FDIC insurance limit.





Property,
      and Equipment. - Oil and Gas Properties


Depreciation,
      depletion and amortization, based on cost less estimated salvage value of the
      asset are primarily determined under the unit-of-production method and the
      straight-line method, which is based on estimated asset service life taking
      obsolescence into consideration. Maintenance and repairs, including planned
      major maintenance, are expensed as incurred. Major renewals and improvements
      are
      capitalized and the assets replaced are retired.




The
      accounting for our business is subject to special accounting rules that are
      unique to the oil and gas industry. There are two allowable methods of
      accounting for oil and gas business activities: the successful-efforts method
      and the full-cost method. There are several significant differences between
      these methods. Under the successful-efforts method, costs such as geological
      and
      geophysical (G&G), exploratory dry holes and delay rentals are expensed as
      incurred, where under the full-cost method these types of charges would be
      capitalized to their respective full-cost pool.





We
      use
      the “successful efforts” method to account for our exploration and production
      activities. Under this method, costs are accumulated on a field-by-field basis
      with exploratory dry holes being expensed as incurred. To date, we have incurred
      $4,813,268 in dry hole costs and impairment charges that have been expensed
      as
      such. Costs of productive wells and development dry holes are capitalized and
      amortized on the unit-of-production method for each field.





Acquisition
      costs of proved properties are amortized using a unit-of-production method,
      computed on the basis of total proved oil and gas reserves. Significant unproved
      properties are assessed for impairment individually and valuation allowances
      against the capitalized costs are recorded based on the estimated economic
      chance of success and the length of time that we expect to hold the properties.
      The valuation allowances are reviewed at least annually. Other exploratory
      expenditures, including geological, geophysical and 3-D seismic survey costs
      are
      expensed as incurred.




Production
        costs are expensed as incurred.




F-9




In
      the
      absence of a determination as to whether the reserves that have been found
      can
      be classified as proved we will not carry the costs of drilling such an
      exploratory well as an asset for more than one year following completion of
      drilling. If after that year has passed a determination that proved reserves
      have been found cannot be made we will assume the well is impaired and charge
      its costs to expense.





Proved
      oil and gas properties held and used by us are reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amounts may not
      be
      recoverable.





We
      accrue
      for contingencies in accordance with Statement of Accounting Standards ("SFAS")
      No. 5, "Accounting for Contingencies," when it is probable that a liability
      or
      loss has been incurred and the amount can be reasonably estimated. Contingencies
      by their nature relate to uncertainties that require our exercise of judgment
      both in assessing whether or not a liability or loss has been incurred and
      estimating the amount of probable loss. To date we have not had any significant
      contingency accruals.





In
      June
      2001, the FASB issued SFAS No.143 “Accounting for Asset Retirement Obligations.”
SFAS No. 143 requires that an asset retirement obligation associated with the
      retirement of a tangible long-lived asset be recognized as a liability in the
      period in which a legal obligation is incurred and becomes determinable, with
      an
      offsetting increase in the carrying amount of the associated asset. The cost
      of
      the tangible asset, including the initially recognized asset retirement
      obligation, is depleted such that the cost of the asset retirement obligation
      is
      recognized over the life of the asset.





Environmental
      Costs.


Liabilities
      for environmental costs are recorded when it is probable that obligations have
      been incurred and the amounts can be reasonably estimated. These liabilities
      are
      not reduced by possible recoveries from third parties, and projected cash
      expenditures are not discounted. There is no contingent liability.





Comprehensive
      Loss


SFAS
      No.
      130, “Reporting Comprehensive Income,” establishes standards for the reporting
      and display of comprehensive loss and its components in the financial
      statements. As of June 30, 2006, we had no items that represent a comprehensive
      loss and, therefore, no schedule of comprehensive loss is presented in the
      financial statements.





Advertising


Advertising
      costs are expensed as incurred. Advertising expense was $224,380 in 2006, and
      $6,502 in 2005.





Basic
      and
      Diluted Net Loss per Share


We
      compute net income (loss) per share in accordance with SFAS No. 128, "Earnings
      per Share". SFAS No. 128 requires presentation of both basic and diluted
      earnings per share (EPS) on the face of the income statement. Basic EPS is
      computed by dividing net income (loss) available to common shareholders
      (numerator) by the weighted average number of shares outstanding (denominator)
      during the period. Diluted EPS gives effect to all dilutive potential common
      shares outstanding during the period using the treasury stock method and
      convertible notes using the if-converted method. In computing Diluted EPS,
      the
      average stock price for the period is used in determining the number of shares
      assumed to be purchased from the exercise of stock options or warrants. Diluted
      EPS excludes all dilutive potential shares if their effect is anti
      dilutive.





Stock-based
      Compensation


In
      December 2002, the Financial Accounting Standards Board issued Financial
      Accounting Standard No. 148, “Accounting for Stock-Based Compensation -
      Transition and Disclosure” (“SFAS No. 148”), an amendment of Financial
      Accounting Standard No. 123 “Accounting for Stock-Based Compensation” (“SFAS No.
      123”). The purpose of SFAS No. 148 is to: (1) provide alternative methods of
      transition for an entity that voluntarily changes to the fair value based method
      of accounting for stock-based employee compensation, (2) amend the disclosure
      provisions to require prominent disclosure about the effects on reported net
      income of an entity’s accounting policy decisions with respect to stock-based
      employee compensation, and (3) to require disclosure of those effects in interim
      financial information.





F-10





In
      November 2005, the FASB issued FSP FAS 123(R)-3, “Transition Election
      Related to Accounting for the Tax Effects of Share-Based Payment Awards” (“FSP
      123R-3”). FSP 123R-3 provides a simplified alternative method to calculate the
      beginning pool of excess tax benefits against which excess future deferred
      tax
      assets (that result when the compensation cost recognized for an award exceeds
      the ultimate tax deduction) could be written off under Statement 123R. The
      guidance in FSP 123R-3 was effective on November 10, 2005. We do not
      believe the adoption of this FSP 123R-3 will have a material impact on our
      financial position, results of operations or cash flows.





We
      have
      elected to account for stock-based employee compensation arrangements in
      accordance with the provisions of Accounting Principles Board Opinion No. 25,
      “Accounting for Stock Issued to Employees”, (“APB No. 25”) and comply with the
      disclosure provisions of SFAS No. 123 as amended by SFAS No. 148 as described
      above. Under APB No. 25, compensation expense for employees is recognized based
      on the difference, if any, on the date of grant between the estimated fair
      value
      of the our stock and the amount an employee must pay to acquire the stock.





Compensation
      expense is recognized immediately for past services and pro-rata for future
      services over the option-vesting period. As of June 30, 2006, we have not
      granted any stock options.





We
      account for equity instruments issued in exchange for the receipt of goods
      or
      services from other than employees in accordance with SFAS No. 123 and the
      conclusions reached by the Emerging Issues Task Force in Issue No. 96-18. Costs
      are measured at the estimated fair market value of the consideration received
      or
      the estimated fair value of the equity instruments issued, whichever is more
      reliably measurable. The value of equity instruments issued for consideration
      other than employee services is determined on the earliest of a performance
      commitment or completion of performance by the provider of goods or services
      as
      defined by EITF 96-18.




We
      adopted Statement of Financial Accounting Standards No. 133, "Accounting for
      Derivative Instruments and Hedging Activities" ("SFAS 133") which establishes
      accounting and reporting standards for derivative instruments and for hedging
      activities. SFAS 133 requires that an entity recognize derivatives as either
      assets or liabilities on the balance sheet and measure those instruments at
      fair
      value. The accounting for changes in the fair value of a derivative depends
      on
      the intended use of the derivative and the resulting designation.





In
      February 2006, the FASB issued FASB Statement No. 155 (SFAS 155), “Accounting
      for Certain Hybrid Financial Instruments: an amendment of FAS 133 and 140.” FAS
      155 nullifies the guidance from the FASB’s Derivatives Implementation Group
      (DIG) in Issue D1, Application of Statement 133 to Beneficial Interests in
      Securitized Financial Assets, which deferred the application of the bifurcation
      requirements of SFAS 133 for certain beneficial interests. FAS 155 provides
      a
      fair value measurement option for certain hybrid financial instruments that
      contain an embedded derivative that would otherwise require bifurcation and
      requires that beneficial interests in securitized financial assets be analyzed
      to determine whether they are freestanding derivatives or whether they are
      hybrid instruments that contain embedded derivatives requiring bifurcation.
      FAS
      155 also provides clarification on specific points related to derivative
      accounting. FAS 155 is effective for fiscal years beginning after September
      15,
      2006.





Note
      3


Acquisition





On
      May
      11, 2005, the stockholders of Ignis Petroleum Corporation entered into a stock
      exchange agreement with Sheer Ventures, Inc. pursuant to which Sheer Ventures,
      Inc. issued 9,600,000 shares of common stock in exchange for all of the issued
      and outstanding shares of common stock of Ignis Petroleum Corporation. As a
      result of this stock exchange, Ignis Petroleum Corporation became a wholly
      owned
      subsidiary of Sheer Ventures, Inc. The stock exchange was accounted for as
      a
      reverse acquisition in which Ignis Petroleum Corporation acquired Sheer
      Ventures, Inc. in accordance with Statement of Financial Accounting Standards
      No. 141, “Business Combinations”. Also on May 11, 2005, and in connection with
      the stock exchange, D.B. Management Ltd., a corporation owned and controlled
      by
      Doug Berry, who was then the President, Chief Executive Officer, Secretary,
      Treasurer and sole director of Sheer Ventures, Inc., agreed to sell an aggregate
      of 11,640,000 shares of Sheer Ventures, Inc.’s common stock to six individuals,
      including Philipp Buschmann, the President, Secretary, Treasurer and sole
      director of Ignis Petroleum Corporation, for $0.0167 per share for a total
      purchase price of $194,000. The stock exchange and the stock purchase were
      both
      consummated on May 16, 2005. The
      capital structure of the consolidated enterprise is now different due to the
      reverse acquisition accounting.





F-11





Note
      4


Property
      and equipment





Oil
      and
      gas properties consisted of the following at June 30, 2006:





Oil
                and gas properties:Proved
            
            $
            2,409,055Unproved
            
            
            607,3073,016,362Less
                depletion allowance
            
            
            494,493$
            2,521,869




In
      June
      2001, the FASB issued SFAS No.143 “Accounting for Asset Retirement Obligations.”
SFAS No. 143 requires that an asset retirement obligation associated with the
      retirement of a tangible long-lived asset be recognized as a liability in the
      period in which a legal obligation is incurred and becomes determinable, with
      an
      offsetting increase in the carrying amount of the associated asset. The cost
      of
      the tangible asset, including the initially recognized asset retirement
      obligation, is depleted such that the cost of the asset retirement obligation
      is
      recognized over the life of the asset.






Note
      5


Income
      Taxes





Potential
      benefits of income tax losses are not recognized in the accounts until
      realization is more likely than not. We have incurred net operating losses
      of
      approximately $12,400,000 for the year ended June 30, 2006. Pursuant to SFAS
      No.
      109 we are required to compute tax asset benefits for net operating losses
      carried forward. Potential benefit of net operating losses have not been
      recognized in these financial statements because we cannot be assured it is
      more
      likely than not we will utilize the net operating losses carried forward in
      future years.





The
      components of the net deferred tax asset at June 30, 2006, and the effective
      tax
      rate and the elected amount of the valuation allowance are indicated below:




Net
                operating tax loss
            
            $
            12,400,000Effective
                tax rate
            
            
            34
            %Deferred
                tax asset
            
            $
            4,216,000Valuation
                allowance
            
            $
            (4,216,000
            )Net
                deferred tax asset
            
            $
            -






Note
      6


Convertible
      Notes





To
      obtain
      funding for our ongoing operations, we entered into a securities purchase
      agreement with Cornell Capital Partners, LP, an accredited investor, on January
      5, 2006 and amended and restated on February 9, 2006 and April 28, 2006, for
      the
      sale of $5,000,000 in secured convertible debentures and 12,000,000
      warrants. Cornell Capital provided us with an aggregate of $5,000,000 as
      follows:




F-12





$2,500,000
      was disbursed on January 5, 2006;




$1,500,000
      was disbursed on February 9, 2006; and




$1,000,000
      was disbursed on April 28, 2006




Out
      of
      the $5 million in gross proceeds that we received from Cornell Capital upon
      issuance of all the secured convertible debentures, the following fees payable
      in cash were deducted or paid in connection with the transaction:





·
            $400,000
                fee payable to Yorkville Advisors LLC, the general partner of Cornell
                Capital;


·
            $15,000
                structuring fee payable to Yorkville Advisors LLC, the general partner
                of
                Cornell Capital;


·
            $5,000
                due diligence fee payable to Cornell Capital;
                and


·
            $250,000
                placement agent fee payable to Stonegate Securities,
                Inc.


·
            $65,000
                other professional fees paid at closing





Thus,
      we
      received total net proceeds of $4,260,000 from the issuance of secured
      convertible debentures to Cornell Capital. In connection with the issuance
      of
      secured convertible debentures to Cornell Capital, we were required under our
      placement agency agreement with Stonegate Securities, Inc. to issue to
      affiliates of Stonegate 75,000 shares of our common stock and 5-year warrants
      to
      purchase 400,000 shares of our common stock at an exercise price of $1.25.





The
      secured convertible debentures bear interest at 7%, mature three years from
      the
      date of issuance, and are convertible into our common stock, at the selling
      stockholder’s option, at the lower of (i) $0.93 or (ii) 94% of the lowest volume
      weighted average prices of our common stock, as quoted by Bloomberg, LP, during
      the 30 trading days immediately preceding the date of conversion. Accordingly,
      there is no limit on the number of shares into which the secured convertible
      debentures may be converted. As of July 19, 2006, the lowest intraday trading
      price for our common stock during the preceding 30 trading days as quoted by
      Bloomberg, LP was $0.37 and, therefore, the conversion price for the secured
      convertible debentures was $0.3478. Based on this conversion price, the
      $5,000,000 in secured convertible debentures, excluding interest, were
      convertible into 14,376,079 shares of our common stock. The conversion price
      of
      the secured convertible debentures will be adjusted in the following
      circumstances:





If
      we pay
      a stock dividend, engage in a stock split, reclassify our shares of common
      stock
      or engage in a similar transaction, the conversion price of the secured
      convertible debentures will be adjusted proportionately;


If
      we
      issue rights, options or warrants to all holders of our common stock (and not
      to
      Cornell Capital) entitling them to subscribe for or purchase shares of common
      stock at a price per share less than $0.93 per share, other than issuances
      specifically permitted by the securities purchase agreement, as amended and
      restated, then the conversion price of the secured convertible debentures will
      be adjusted on a weighted-average basis;


If
      we
      issue shares, other than issuances specifically permitted by the securities
      purchase agreement, as amended and restated, of our common stock or rights,
      warrants, options or other securities or debt that are convertible into or
      exchangeable for shares of our common stock, at a price per share less than
      $0.93 per share, then the conversion price will be adjusted to such lower price
      on a full-ratchet basis;


If
      we
      distribute to all holders of our common stock (and not to Cornell Capital)
      evidences of indebtedness or assets or rights or warrants to subscribe for
      or
      purchase any security, then the conversion price of the secured convertible
      debenture will be adjusted based upon the value of the distribution as a
      percentage of the market value of our common stock on the record date for such
      distribution;





F-13





If
      we
      reclassify our common stock or engage in a compulsory share exchange pursuant
      to
      which our common stock is converted into other securities, cash or property,
      Cornell Capital will have the option to either (i) convert the secured
      convertible debentures into the shares of stock and other securities, cash
      and
      property receivable by holders of our common stock following such transaction,
      or (ii) demand that we prepay the secured convertible debentures;
      and


If
      we
      engage in a merger, consolidation or sale of more than one-half of our assets,
      then Cornell Capital will have the right to (i) demand that we prepay the
      secured convertible debentures, (ii) convert the secured convertible debentures
      into the shares of stock and other securities, cash and property receivable
      by
      holders of our common stock following such transaction, or (iii) in the case
      of
      a merger or consolidation, require the surviving entity to issue to a
      convertible debenture with similar terms.





In
      connection with the securities purchase agreement, as amended and restated,
      we
      issued Cornell Capital warrants to purchase 6,000,000 shares of our common
      stock
      exercisable for a period of five years at an exercise price of $0.81 and
      warrants to purchase 6,000,000 shares of our common stock, exercisable for
      a
      period of five years at an exercise price of $0.93. We have the option to force
      the holder to exercise the warrants, as long as the shares underlying the
      warrants are registered pursuant to an effective registration statement, if
      our
      closing bid price trades above certain levels. If the closing bid price of
      our
      common stock is greater than or equal to $1.10 for a period of 15 consecutive
      trading days prior to the forced conversion, we can force the warrant holder
      to
      exercise the warrants exercisable at a price of $0.81. If the closing bid price
      of our common stock is greater than or equal to $1.23 for a period of 15
      consecutive trading days prior to the forced conversion, we can force the
      warrant holder to exercise the warrants exercisable at a price of $0.93.





In
      connection with the exercise of any of the warrants issued to Cornell Capital,
      we are required under our placement agency agreement with Stonegate Securities,
      Inc. to pay a fee to Stonegate equal to five percent (5%) of the gross proceeds
      of any such exercise.





Cornell
      Capital has agreed to restrict its ability to convert the secured convertible
      debentures or exercise the warrants and receive shares of our common stock
      such
      that the number of shares of common stock held by it and its affiliates after
      such conversion does not exceed 4.99% of the then issued and outstanding shares
      of common stock. **** If
      the
      conversion price is less than $0.93, Cornell Capital may not convert more than
      $425,000 of secured convertible debentures in any month, unless we waive such
      restriction. In the event that the conversion price is equal to or greater
      than
      $0.93, there is no restriction on the amount Cornell Capital can convert in
      any
      month.





We
      have
      the right, at our option, with three business days advance written notice,
      to
      redeem a portion or all amounts outstanding under the secured convertible
      debentures prior to the maturity date if the closing bid price of our common
      stock, is less than $0.93 at the time of the redemption. In the event of a
      redemption, we are obligated to pay an amount equal to the principal amount
      being redeemed plus a 15% redemption premium, and accrued interest.





In
      connection with the second amended and restated securities purchase agreement,
      we also entered into a second amended and restated registration rights agreement
      providing for the filing, within five days of April 28, 2006, of a registration
      statement with the Securities and Exchange Commission registering the common
      stock issuable upon conversion of the secured convertible debentures and
      warrants. We are obligated to use our best efforts to cause the registration
      statement to be declared effective no later than 130 days after filing and
      to
      insure that the registration statement remains in effect until the earlier
      of
      (i) all of the shares of common stock issuable upon conversion of the secured
      convertible debentures have been sold or (ii) January 5, 2008. In the event
      of a
      default of our obligations under the registration rights agreement, including
      our agreement to file the registration statement no later than May 3, 2006,
      or
      if the registration statement is not declared effective by September 5, 2006,
      we
      are required pay to Cornell Capital, as liquidated damages, for each month
      that
      the registration statement has not been filed or declared effective, as the
      case
      may be, either a cash amount or shares of our common stock equal to 2% of the
      liquidated value of the secured convertible debentures.





F-14





In
      connection with the securities purchase agreement, we executed a security
      agreement in favor of the investor granting them a first priority security
      interest in all of our goods, inventory, contractual rights and general
      intangibles, receivables, documents, instruments, chattel paper, and
      intellectual property. The security agreement states that if an event of default
      occurs under the secured convertible debentures or security agreements, the
      investor has the right to take possession of the collateral, to operate our
      business using the collateral, and have the right to assign, sell, lease or
      otherwise dispose of and deliver all or any part of the collateral, at public
      or
      private sale or otherwise to satisfy our obligations under these
      agreements.





We
      also
      pledged 18,750,000 shares of common stock to secure the obligations incurred
      pursuant to the securities purchase agreement, as amended and restated.





In
      accordance with Statement of Financial Accounting Standards No. 133,
‘Accounting for Derivative Instruments and Hedging Activities’,
      (“FASB 133”), we determined that the conversion feature of the secured
      convertible debentures met the criteria of an embedded derivative and therefore
      the conversion feature of the debt needed to be bifurcated and accounted for
      as
      a derivative. Due to the reset provisions of the secured convertible debentures,
      the debt does not meet the definition of “conventional convertible debt” because
      the number of shares which may be issued upon the conversion of the debt is
      not
      fixed. Therefore, the conversion feature fails to qualify for equity
      classification under EITF 00-19, and must be accounted for as a derivative
      liability.





The
      $5,000,000 face amount of the secured convertible debentures outstanding as
      of
      June 30, 2006 was stripped of its conversion feature due to the accounting
      for
      the conversion feature as a derivative, which was recorded using the residual
      proceeds method, whereby any remaining proceeds after allocating the proceeds
      to
      the warrants and conversion option would be attributed to the debt. The
      beneficial conversion feature (an embedded derivative) included in these secured
      convertible debentures resulted in an initial debt discount of $1,305,661.
      At
      June 30, 2006, we revalued this derivative liability, For the year ended June
      30, 2006, after adjustment, we recorded a loss on valuation of derivative
      liability of $1,299,201. The associated warrants are exercisable for 12,000,000
      shares of common stock at exercise prices between $0.93 and $0.81 per share.
      The
      warrants, which expire five years after issuance, were assigned a value of
      $3,694,293, estimated using the Black-Scholes valuation model. The following
      assumptions were used to determine the fair value of the warrants using the
      Black-Scholes valuation model: a term of five years, risk-free rate of 5.00%,
      volatility of 53%, and dividend yield of zero. In accordance with EITF No.
      00-19, EITF No. 00-27, *Application
      of Issue No. 98-5 to Certain Convertible Instruments* ,
      the
      values assigned to both the debenture, conversion feature and the warrants
      were
      allocated based on their fair values. The amount allocated as a discount on
      the
      secured convertible debentures for the value of the warrants and conversion
      option will be amortized to interest expense, using the effective interest
      method, over the term of the secured convertible debentures. The holders of
      the
      secured convertible debentures and warrants have registration rights that
      required us to file a registration statement with the Securities and Exchange
      Commission to register the resale of the common stock issuable upon conversion
      of the debenture or the exercise of the warrants. Under EITF No. 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock* ,
      the
      ability to register stock was deemed to be outside of our control. Accordingly,
      the initial aggregate fair value of the derivatives (embedded and free-standing)
      of $1,305,661 was recorded as a derivative liability in the consolidated balance
      sheet, and is marked to market at the end of each reporting period. At June
      30,
      2006, this derivative liability was $2,604,813. During the year ended June
      30,
      2006, the recording of this derivative liability associated with this debt
      financing resulted in a non-cash loss of $1,299,201 which was reflected in
      the
      consolidated statement of operations for the year ended June 30, 2006.
      Additionally, the initial aggregate fair value of the warrants of $3,694,339
      was
      recorded as an accrued warrant liability in the consolidated balance sheet.
      For
      the year ended June 30, 2006, amortization of the discount on debenture amounted
      to $1,931,886 which is included in interest expense.




F-15




The
        convertible debenture liability is as follows at June 30, 2006:


Convertible
                debentures payable
            
            $
            5,000,000Less:
                unamortized discount on debentures
            
            
            (3,068,114
            )Convertible
                debentures, net
            
            $
            1,931,886






Note
      7


Leases





In
      January 2005 we entered into a one year operating lease for our office space.
      The lease requires monthly payments of $9,516 plus the cost of office services
      provided by the landlord. The additional services average $500 per month. A
      total of $63,935 was charged to rent expense for the year ended June 30,
      2006.






Note
      8


Stockholders’
      Equity





On
      April
      22, 2005, we acquired a working interest in two oil, gas and mineral leases
      in
      Louisiana and Alabama, respectively, for an aggregate of $1,550,302. We financed
      the acquisitions with one year 8% convertible promissory notes. These notes
      were
      convertible into our common stock at a price of $.50 per share. The notes could
      have been converted into our common stock in whole or part anytime after August
      15, 2005. On September 22, 2005, all principal and accrued interest on such
      notes were converted into 3,100,000 shares of our common stock. The shares
      were
      issued without registration under the Securities Act of 1933, as amended, in
      reliance on the exemption provided by Regulation S as an offer and sale that
      occurred outside the United States and/or Rule 506 and/or Section 4(2) of the
      Securities Act as a transaction by an issuer not involving a public offering.
      No
      underwriters were used. In the event we did not commence actual drilling
      operations on or before September 30, 2005 we were to deliver assignments of
      the
      acquired interest back to the seller with no further force or effect on either
      party. This deadline was extended until March 31, 2006 in exchange for 400,000
      shares of our common stock. The shares were issued without registration under
      the Securities Act of 1933, as amended, in reliance on the exemption provided
      by
      Regulation S as an offer and sale that occurred outside the United States and/or
      Rule 506 and/or Section 4(2) of the Securities Act as a transaction by an issuer
      not involving a public offering. No underwriters were used. This common stock
      issuance was valued at $1,028,000 or $2.57 per share, which was the market
      value
      of our common stock on September 30, 2005.





On
      July
      26, 2005, we sold 3,000,000 units to Petrofinanz GMBH, a private investment
      group in the Marshall Islands, for $0.50 per unit for an aggregate purchase
      price of $1,500,000. Each unit consisted of one share of our common stock and
      one warrant to purchase one share of our common stock for $1.50 per share until
      July 2006. The units were sold in a private sale without registration under
      the
      Securities Act of 1933, as amended, in reliance on the exception provided by
      Regulation S as an offer and sale that occurred outside the United States and/or
      Rule 506 and/or Section 4(2) of the Securities Act as a transaction by an issuer
      not involving a public offering..





On
      August
      15, 2005, we issued 240,000 shares of common stock to Douglas Berry as
      compensation for his services as one of our directors. The shares were issued
      without registration under the Securities Act of 1933, as amended, in reliance
      on the exemption provided by Rule 506 and/or Section 4(2) of the Securities
      Act
      as a transaction by an issuer not involving a public offering. No underwriters
      were used. These shares were valued at $372,000 or $1.55 per share, the fair
      market value of the common stock at the date of grant.





In
      August
      2005, we issued 50,000 shares of common stock to an advisor as compensation
      for
      their services as an advisor. The shares were issued without registration under
      the Securities Act of 1933, as amended, in reliance on the exemption provided
      by
      Rule 506 and/or Section 4(2) of the Securities Act as a transaction by an issuer
      not involving a public offering. No underwriters were used. These shares were
      valued at $79,000 or $1.58 per share, the fair market value of the common stock
      at the date of grant.





In
      August
      2005, we issued 128,500 shares of common stock to our advisors as compensation
      for their services as advisors. The shares were issued without registration
      under the Securities Act of 1933, as amended, in reliance on the exemption
      provided by Rule 506 and/or Section 4(2) of the Securities Act as a transaction
      by an issuer not involving a public offering. No underwriters were used. These
      shares were valued at $189,000 or $1.47 per share, the fair market value of
      the
      common stock at the date of grant.





F-16





On
      August
      25, 2005, we issued 150,000 shares of common stock to our chief executive
      officer Michael Piazza
      for compensation as provided in his employment agreement. The shares were issued
      without registration under the Securities Act in reliance on the exemption
      provided by Rule 506 and/or Section 4(2) of the Securities Act of 1933, as
      amended, as a transaction by an issuer not involving a public offering. No
      underwriters were used. These shares were valued at $207,000 or $1.38 per share,
      the fair market value of the common stock at the date such shares were earned
      under the terms of Mr. Piazza’s employment agreement.





On
      October 21, 2005, we entered into a Placement Agency Agreement with Stonegate
      Securities, Inc. . On
      November 29, 2005, pursuant to this agreement, we issued 50,000 shares of our
      common stock to affiliates of Stonegate in exchange for Stonegate’s service as
      our placement agent. These shares were valued at $56,000 which was the then
      market value of the shares . The
      shares were issued without registration under the Securities Act of 1933, as
      amended, in reliance on the exemption provided by Rule 506 and/or Section 4(2)
      of the Securities Act as a transaction by an issuer not involving a public
      offering. No underwriters were used.





On
      October 18, 2005, we entered into a Subscription Agreement with Petrofinanz
      GmbH
      pursuant to which Petrofinanz agreed to purchase 133,333 units, at a price
      of
      $1.50 per unit, with each unit consisting of one share of our common stock
      and
      one 2-year warrant to purchase one share of our common stock at an exercise
      price of $2.00 per share. The units were sold in a private sale without
      registration under the Securities Act of 1933, as amended, in reliance on the
      exception provided by Regulation S as an offer and sale that occurred outside
      the United States and/or Rule 506 and/or Section 4(2) of the Securities Act
      as a
      transaction by an issuer not involving a public offering.





On
      October 28, 2005, we entered into a Subscription Agreement with Petrofinanz
      GmbH
      pursuant to which Petrofinanz agreed to purchase 80,000 units, at a price of
      $1.25 per unit, with each unit consisting of one share of our common stock
      and
      one 2-year warrant to purchase one share of our common stock at an exercise
      price of $2.00 per share. The units were sold in a private sale without
      registration under the Securities Act of 1933, as amended, in reliance on the
      exception provided by Regulation S as an offer and sale that occurred outside
      the United States and/or Rule 506 and/or Section 4(2) of the Securities Act
      as a
      transaction by an issuer not involving a public offering.





On
      October 31, 2005 we issued 350,000 shares of common stock to Michael Piazza
      for
      services to us as a CEO. This issuance is considered exempt pursuant to Rule
      506
      and/or Section 4(2) of the Securities Act. No underwriters were used. These
      shares were valued at $644,000 or $1.84 per share, the fair market value of
      the
      common stock at the date the shares were issuable.





On
      January 5, 2006, we issued 75,000 shares to three affiliates of Stonegate
      Securities, Inc., for compensation relating to Stonegate acting as our placement
      agent. The shares were issued in reliance on the exemption provided by Rule
      506
      and/or Section 4(2) of the Securities Act. (See note 6). No underwriters
      were used. These shares were valued at $57,000 or $0.76 per share, the fair
      market value of the common stock at the date of grant.





On
      January 20, 2006, we issued 30,000 shares of common stock to Roger A. Leopard
      for services to us as a director. This issuance is considered exempt pursuant
      to
      Rule 506 and/or Section 4(2) of the Securities Act. No underwriters were used.
      These shares were valued at $31,500 or $1.05 per share, the fair market value
      of
      the common stock at the date of grant.





On
      January 20, 2006, we issued 30,000 shares of common stock to Geoff Evett for
      services to us as a director. This issuance is considered exempt pursuant to
      Rule 506 and/or Section 4(2) of the Securities Act. No underwriters were used.
      These shares were valued at $31,500 or $1.05 per share, the fair market value
      of
      the common stock at the date of grant.





F-17





On
      February 9, 2006, we issued 10,000 shares of common stock to Timothy Hart for
      services to us as an officer. This issuance is considered exempt pursuant to
      Rule 506 and/or Section 4(2) of the Securities Act. No underwriters were used.
      These shares were valued at $15,000 or $1.50 per share, the fair market value
      of
      the common stock at the date of grant.





On
      February 9, 2006, we issued 192,188 shares of common stock to our advisors
      for
      services to us as advisors. This issuance is considered exempt pursuant to
      Rule
      506 and/or Section 4(2) of the Securities Act. No underwriters were used. These
      shares were valued at $288,282 or $1.50 per share, the fair market value of
      the
      common stock at the date of grant.





On
      May
      30, 2006, we issued 181,818 shares of common stock to Petrofinanz GmbH, at
      a
      price of $1.10 per share for a total of $200,000. The shares and warrants were
      issued in reliance on the exemption provided by Regulation S as an offer and
      sale that occurred outside the United States and/or Rule 506 and/or Section
      4(2)
      of the Securities Act.





On
      May 30
      2006, we issued 500,000 shares of common stock to Michael Piazza for services
      to
      us as an officer. This issuance is considered exempt pursuant to Rule 506 and/or
      Section 4(2) of the Securities Act. These shares were valued at $525,000 or
      $1.05 per share, the fair market value of the common stock at April 21, 2006,
      the date the shares were issuable.





On
      May 30
      2006, we issued 120,000 shares of common stock to Eric Hanlon for services
      to us
      as a consultant. This issuance is considered exempt pursuant to Rule 506 and/or
      Section 4(2) of the Securities Act. These shares were valued at $133,200 or
      $1.11 per share, the fair market value of the common stock at April 30, 2006,
      the date the shares were issuable.






Note
      9


Subsequent
      Events





We
      have
      agreed to acquire 45% of the acreage, producing properties and natural gas
      gathering and treating system currently held by W. B. Osborn Oil & Gas
      Operations, Ltd. ("WBO") and St. Jo Pipeline Limited within the St. Jo Ridge
      (Barnett Shale) Field, located in Montague and Cooke Counties, Texas. WBO will
      remain the operator.


Terms
      of
      the purchase were:





·
            Purchase
                price of $18,450,000 before closing adjustments, to be paid in cash.
                The
                adjustments will be determined from time to time as production flows
                and
                drilling investments are accounted for by the
                parties.





·
            As
                part of the transaction, Ignis will commit to invest capital into
                an
                ongoing continuous drilling program as well as invest up to $5,000,000
                in
                future property acquisitions within an Area of Mutual
                Interest.





The
      consummation of the agreement is subject to standard closing conditions. The
      transaction is scheduled to close on or before October 31, 2006, with a 15
      day
      extention if required. We are currently negotiating financing for the
      transaction.





We
      will
      be acquiring forty-five percent (45%) of WBO's interests in 7,890 gross acres
      (6,864 net acres), 13 producing wells, and an estimated total net proved
      reserves of 1.4 million barrels of oil equivalent (Mboe) of which 0.5 Mboe
      are
      proved developed producing as of June 1, 2006. Approximately fifty percent
      (50%)
      of the proved reserves are oil and fifty percent (50%) are a combination of
      gas
      and gas liquids. The gathering and treating system consists of a 100% interest
      in approximately 24 miles of gathering lines, which accumulates and treats
      natural gas at a central plant. WBO has identified 36 initial drilling locations
      on the acreage before beginning the infill drilling program, which could yield
      more than 100 additional drilling sites.




F-18




Note
        10.
 Supplemental
        Information (Unaudited)
  Proved
        oil and gas reserves estimates were prepared by a petroleum engineer. The
        reserve reports were prepared in accordance with guidelines established by
        the
        Securities and Exchange Commission and, accordingly, were based on existing
        economic and operating conditions.
  There
        are
        numerous uncertainties inherent in estimating quantities of proved reserves
        and
        in projecting the future rates of production and timing of development
        expenditures. The following reserve data represents estimates only and should
        not be construed as being exact. Moreover, the present values should not
        be
        construed as the current market value of the Company’s natural gas and crude oil
        reserves or the costs that would be incurred to obtain equivalent reserves.
  The
        changes in proved reserves is as follows
 
 Natural
                  gas
              
              Crude
                  oilmcf
              
              bblsDecember
                  9, 2004
              
              
              -
              
              
              -Revisions
              
              
              -
              
              
              -Discoveries
              
              
              -
              
              
              -Production
              
              
              -
              
              
              -June
                  30, 2005
              
              
              -
              
              
              -RevisionsDiscoveries:Acom
                  - 6
              
              
              89,082
              
              
              19,000Barnett
                  Shale
              
              
              14,063
              
              
              2,344Production:Acom
                  - 6
              
              
              (19,540
              )
              
              (5,348
              )Barnett
                  Shale
              
              
              (978
              )
              
              (272
              )June
                  30, 2006
              
              
              82,627
              
              
              15,724
  The
        capitalized cost relating to oil and gas properties is as follows:
 
 Property
        and equipment consisted of the following at June 30, 2005:
 
 Oil
                  and gas properties- unproved
              
              $
              2,624,529
 
 Oil
        and
        gas properties consisted of the following at June 30, 2006:
 
 Oil
                  and gas properties:Proved
              
              $
              2,409,055Unproved
              
              
              607,3073,016,362Less
                  depletion allowance
              
              
              494,493$
              2,521,869
  F-19


SIGNATURES





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.








October
                  25,
                  2006
              
              Ignis
                  Petroleum Group, Inc.By:
                  /s/ Michael PiazzaMichael
                  Piazza,President,
                  Chief Executive Officer and Treasurer