UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB





(Mark
      One)


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





For
      the
      fiscal year ended June 30, 2007





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.)





7160
                Dallas Parkway, Suite 350 Plano, TX
            
            75024(Address
                of principal executive offices)
            
            (Zip
                Code)





972-526-5250(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 is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. Yes oNo x.


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 xNo 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 oNo x.





The
      issuer’s revenues for its most recent fiscal year were $1,410,448.





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant computed by reference to average bid and asked
      price of such common equity as of June 30, 2007 was $3,538,804.  (For
      purposes of determination of the aggregate market value, only directors,
      executive officers and 10% or greater stockholders have been deemed
      affiliates).





As
      of
      September 25, 2007, the registrant had issued and outstanding 56,794,519 shares
      of common stock.





DOCUMENTS
      INCORPORATED BY REFERENCE





None.





Transitional
      Small Business Disclosure Format (check one): Yes oNo x





2





**TABLE
      OF CONTENTS**





Item
            
            Page**Part
                1**1
                and 2
            Description
                of Business and Property
            43
            Legal
                Proceedings
            194
            Submission
                of Matters to a Vote of Security
                Holders
            19**Part
                II**5
            Market
                for Registrant’s Common Equity and Related
                Stockholder Matters and Small Business Issuer Purchases of Equity
                Securities
            196
            Management’s
                Discussion and Analysis or Plan of
                Operations
            217
            Financial
                Statements
            288
            Changes
                In and Disagreements with Accountants on
                Accounting and Financial Disclosure
            288A
            Controls
                and Procedures
            288B
            Other
                Information
            29**Part
                III**9
            Directors
                and Executive Officers of the
                Registrant
            2910
            Executive
                Compensation
            3211
            Security
                Ownership of Certain Owners and Management and
                Related Stockholder Matters
            3412
            Certain
                Relationships and Related
                Transactions
            3713
            Exhibits
            3814
            Principal
                Accountant Fees and Services
            42SIGNATURES
            
            42





3
 ***Table
            and Contents***





**FORWARD-LOOKING
      STATEMENTS**





This
      annual report contains forward-looking statements, as defined in Section 27A
      of
      the Securities Act of 1933, or the Securities Act, and Section 21E of the
      Securities Exchange Act of 1934, or the Exchange Act. These forward-looking
      statements relate to, among other things, the following:





·
            our
                future financial and operating performance and
                results;





·
            our
                business strategy;





·
            market
                prices;





·
            our
                future use of
                derivative financial instruments;
                and





·
            our
                plans and
                forecasts.





We
      have
      based these forward-looking statements on our current assumptions, expectations
      and projections about future events.





We
      use
      the words “may,” “expect,” “anticipate,” “estimate,” “believe,” “continue,”
“intend,” “plan,” “budget” and other similar words to identify forward-looking
      statements. You should read statements that contain these words carefully
      because they discuss future expectations, contain projections of results of
      operations or of our financial condition and/or state other “forward-looking”
information. We do not undertake any obligation to update or revise publicly
      any
      forward-looking statements, except as required by law. These statements also
      involve risks and uncertainties that could cause our actual results or financial
      condition to materially differ from our expectations in this annual report,
      including, but not limited to the risk factors identified in Item 1
      below.





We
      believe that it is important to communicate our expectations of future
      performance to our investors. However, events may occur in the future that
      we
      are unable to accurately predict, or over which we have no control. You are
      cautioned not to place undue reliance on a forward-looking statement. When
      considering our forward-looking statements, you should keep in mind the risk
      factors and other cautionary statements in this annual report. The risk factors
      noted in this annual report and other factors noted throughout this annual
      report provide examples of risks, uncertainties and events that may cause our
      actual results to differ materially from those contained in any forward-looking
      statement.





Our
      revenues, operating results, financial condition and ability to borrow funds
      or
      obtain additional capital depend substantially on prevailing prices for oil
      and
      natural gas. Declines in oil or natural gas prices may materially adversely
      affect our financial condition, liquidity, ability to obtain financing and
      operating results. Lower oil or natural gas prices may also reduce the amount
      of
      oil or natural gas that we can produce economically. A decline in oil and/or
      natural gas prices could have a material adverse effect on the estimated value
      and estimated quantities of our oil and natural gas reserves, our ability to
      fund our operations and our financial condition, cash flow, results of
      operations and access to capital. Historically, oil and natural gas prices
      and
      markets have been volatile, with prices fluctuating widely, and they are likely
      to continue to be volatile.








PART
      I





Items
                1 and
                2.
            DESCRIPTION
                OF BUSINESS AND PROPERTY





**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, then 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.





4
 ***Table
            and Contents***





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 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 it 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.





**Competitors**





Oil
      and
      gas exploration and acquisition of undeveloped properties is a highly
      competitive and speculative business. We compete with a number of other
      companies, including major oil companies and other independent operators which
      are more experienced and which have greater financial resources. Such companies
      may be able to pay more for prospective oil and gas properties. Additionally,
      such companies may be able to evaluate, bid for and purchase a greater number
      of
      properties and prospects than our financial and human resources permit. We
      do
      not hold a significant competitive position in the oil and gas
      industry.





**Governmental
      Regulations**





Our
      operations are subject to various types of regulation at the federal, state
      and
      local levels. Such regulation includes requiring permits for the drilling of
      wells; maintaining bonding requirements in order to drill or operate wells;
      implementing spill prevention plans; submitting notification and receiving
      permits relating to the presence, use and release of certain materials
      incidental to oil and gas operations; and regulating the location of wells,
      the
      method of drilling and casing wells, the use, transportation, storage and
      disposal of fluids and materials used in connection with drilling and production
      activities, surface usage and the restoration of properties upon which wells
      have been drilled, the plugging and abandoning of wells and the transporting
      of
      production. Our operations are also subject to various conservation matters,
      including the regulation of the size of drilling and spacing units or proration
      units, the number of wells which may be drilled in a unit, and the unitization
      or pooling of oil and gas properties. In this regard, some states allow the
      forced pooling or integration of tracts to facilitate exploration while other
      states rely on voluntary pooling of lands and leases, which may make it more
      difficult to develop oil and gas properties. In addition, state conservation
      laws establish maximum rates of production from oil and gas wells, generally
      limit the venting or flaring of gas, and impose certain requirements regarding
      the ratable purchase of production. The effect of these regulations is to limit
      the amounts of oil and gas we may be able to produce from our wells and to
      limit
      the number of wells or the locations at which we may be able to
      drill.





5
 ***Table
            and Contents***





Our
      business is affected by numerous laws and regulations, including energy,
      environmental, conservation, tax and other laws and regulations relating to
      the
      oil and gas industry. We plan to develop internal procedures and policies to
      ensure that our operations are conducted in full and substantial environmental
      regulatory compliance.





Failure
      to comply with any laws and regulations may result in the assessment of
      administrative, civil and criminal penalties, the imposition of injunctive
      relief or both. Moreover, changes in any of these laws and regulations could
      have a material adverse effect on business. In view of the many uncertainties
      with respect to current and future laws and regulations, including their
      applicability to us, we cannot predict the overall effect of such laws and
      regulations on our future operations.





We
      believe that our operations comply in all material respects with applicable
      laws
      and regulations and that the existence and enforcement of such laws and
      regulations have no more restrictive an effect on our operations than on other
      similar companies in the energy industry. We do not anticipate any material
      capital expenditures to comply with federal and state environmental
      requirements.





**Environmental**





Operations
      on properties in which we have an interest are subject to extensive federal,
      state and local environmental laws that regulate the discharge or disposal
      of
      materials or substances into the environment and otherwise are intended to
      protect the environment. Numerous governmental agencies issue rules and
      regulations to implement and enforce such laws, which are often difficult and
      costly to comply with and which carry substantial administrative, civil and
      criminal penalties and in some cases injunctive relief for failure to
      comply.





Some
      laws, rules and regulations relating to the protection of the environment may,
      in certain circumstances, impose “strict liability” for environmental
      contamination. These laws render a person or company liable for environmental
      and natural resource damages, cleanup costs and, in the case of oil spills
      in
      certain states, consequential damages without regard to negligence or fault.
      Other laws, rules and regulations may require the rate of oil and gas production
      to be below the economically optimal rate or may even prohibit exploration
      or
      production activities in environmentally sensitive areas. In addition, state
      laws often require some form of remedial action, such as closure of inactive
      pits and plugging of abandoned wells, to prevent pollution from former or
      suspended operations.





Legislation
      has been proposed in the past and continues to be evaluated in Congress from
      time to time that would reclassify certain oil and gas exploration and
      production wastes as “hazardous wastes.” This reclassification would make these
      wastes subject to much more stringent storage, treatment, disposal and clean-up
      requirements, which could have a significant adverse impact on operating costs.
      Initiatives to further regulate the disposal of oil and gas wastes are also
      proposed in certain states from time to time and may include initiatives at
      the
      county and municipal government levels. These various initiatives could have
      a
      similar adverse impact on operating costs.





The
      regulatory burden of environmental laws and regulations increases our cost
      and
      risk of doing business and consequently affects our profitability. The federal
      Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
      also known as the “Superfund” law, imposes liability, without regard to fault,
      on certain classes of persons with respect to the release of a “hazardous
      substance” into the environment. These persons include the current or prior
      owner or operator of the disposal site or sites where the release occurred
      and
      companies that transported, disposed or arranged for the transport or disposal
      of the hazardous substances found at the site. Persons who are or were
      responsible for releases of hazardous substances under CERCLA may be subject
      to
      joint and several liability for the costs of cleaning up the hazardous
      substances that have been released into the environment and for damages to
      natural resources, and it is not uncommon for the federal or state government
      to
      pursue such claims.





6
 ***Table
            and Contents***





It
      is
      also not uncommon for neighboring landowners and other third parties to file
      claims for personal injury or property or natural resource damages allegedly
      caused by the hazardous substances released into the environment. Under CERCLA,
      certain oil and gas materials and products are, by definition, excluded from
      the
      term “hazardous substances.” At least two federal courts have held that certain
      wastes associated with the production of crude oil may be classified as
      hazardous substances under CERCLA. Similarly, under the federal Resource,
      Conservation and Recovery Act, or RCRA, which governs the generation, treatment,
      storage and disposal of “solid wastes” and “hazardous wastes,” certain oil and
      gas materials and wastes are exempt from the definition of “hazardous wastes.”
This exemption continues to be subject to judicial interpretation and
      increasingly stringent state interpretation. During the normal course of
      operations on properties in which we have an interest, exempt and non-exempt
      wastes, including hazardous wastes, that are subject to RCRA and comparable
      state statutes and implementing regulations are generated or have been generated
      in the past. The federal Environmental Protection Agency and various state
      agencies continue to promulgate regulations that limit the disposal and
      permitting options for certain hazardous and non-hazardous wastes.





We
      believe that the operators of the properties in which we have an interest are
      in
      substantial compliance with applicable laws, rules and regulations relating
      to
      the control of air emissions at all facilities on those properties. Although
      we
      maintain insurance against some, but not all, of the risks described above,
      including insuring the costs of clean-up operations, public liability and
      physical damage, our insurance may not be adequate to cover all such costs,
      that
      the insurance will continue to be available in the future or that the insurance
      will be available at premium levels that justify our purchase. The occurrence
      of
      a significant event not fully insured or indemnified against could have a
      material adverse effect on our financial condition and operations. Compliance
      with environmental requirements, including financial assurance requirements
      and
      the costs associated with the cleanup of any spill, could have a material
      adverse effect on our capital expenditures, earnings or competitive position.
      We
      do believe, however, that our operators are in substantial compliance with
      current applicable environmental laws and regulations. Nevertheless, changes
      in
      environmental laws have the potential to adversely affect operations. At this
      time, we have no plans to make any material capital expenditures for
      environmental control facilities.





**Employees**





As
      of
      June 30, 2007, we had three full time employees, including our President, Chief
      Executive Officer and Treasurer, our Chief Financial Officer and Secretary
      and
      our Vice President of External Relations. The employment of our Sr. Vice
      President of Exploration terminated on June 6, 2007 and the employment of our
      Sr. Vice President of Development and Operations terminated June 12,
      2007.  The employment of our Vice President of External Relations
      terminated on August 21, 2007.  We consider our relations with our
      employees to be good.





**Our
      Properties**





As
      of
      June 30, 2007, we owned or had the right to acquire working interests in the
      following oil and gas prospects in the United States onshore Gulf Coast
      region.





7
 ***Table
            and Contents***





*Acom
      A-6 Prospect*





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 currently holds proved reserves and is producing oil and gas.





*Crimson
      Bayou Prospect*





We
      had
      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 L, L.P. was the operator of the prospect and would have held the
      remainder of the working interest.  Drilling of the first test well on
      the prospect was expected to commence in 2007. We have decided not to pursue
      this prospect and we were refunded our investment of $115,724.





*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 were drilled and were
      non-commercial.  The leases expired and we recorded abandonment
      expense of $348,200 during the fiscal year ending June 30, 2007.  We
      also recorded a write down of the underlying value of the producing well to
      zero
      as the reserve value was substantially lower than the asset net book value
      of
      $201,332.





*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 were finished in September 2006.
      Multiple gas zones were detected. The commercial viability of the gas zones
      were
      tested in October 2006. The Sherburne Prospect is currently unproved. We do
      not
      believe the operator will develop this prospect due to the lack of commercial
      viability of the gas zones and we recorded a write down of the asset to zero
      totalling $172,740.





*Ignis
      Barnett Shale Joint Venture*





On
      November 15, 2006, we entered into a joint venture with affiliates of Silver
      Point Capital, L.P. through a limited liability company named Ignis Barnett
      Shale, LLC. The joint venture acquired 45% of the interests in the acreage,
      oil
      and natural gas producing properties and natural gas gathering and treating
      system located in the St. Jo Ridge Field in the North Texas Fort Worth Basin
      then held by W.B. Osborn Oil & Gas Operations, Ltd. and St. Jo Pipeline,
      Limited. The purchase price for the acquisition was $17,600,000, subject to
      certain adjustments, plus $850,000 payable by Ignis Barnett Shale in thirty-six
      monthly installments of $23,611, beginning one month after closing. In addition,
      Ignis Barnett Shale agreed to fund additional lease acquisitions up to a total
      of $5,000,000 for a period of two years.





Under
      the
      terms of Ignis Barnett Shale’s operating agreement, we agreed to manage the
      day-to-day operations of Ignis Barnett Shale and the Silver Point affiliates
      agreed to fund 100% of the purchase price of the transaction and 100% of future
      acreage acquisitions and development costs of Ignis Barnett Shale to the extent
      approved by Silver Point. Ignis Barnett Shale’s budget, its operating plan,
      financial and hedging arrangements, if any, and generally all other material
      decisions affecting Ignis Barnett Shale are subject to the approval of Silver
      Point. We assigned our intellectual property directly related to the Ignis
      Barnet Shale all of our intellectual property related to the joint venture
      and
      its activities. Distributions from Ignis Barnett Shale will be made when and
      if
      declared by Silver Point as follows:





8
 ***Table
            and Contents***




(i)
            To
                the Silver Point affiliates pro rata until the Silver Point affiliates
                have received an amount equal to their aggregate capital contributions;
                then





(ii)
            100%
                to the Silver Point affiliates pro rata until they have received
                an amount
                representing a rate of return equal to 12%, compounded annually,
                on their
                aggregate capital contributions;
                then





(iii)
            100%
                to us until the amount distributed to us under this clause (iii)
                equals
                12.5% of all amounts distributed pursuant to clauses (ii) and (iii);
                then




(iv)
              87.5%
                  to the Silver Point affiliates pro rata and 12.5% to us until the
                  amount
                  distributed to the Silver Point affiliates represents a return
                  equal to
                  20%, compounded annually, on their aggregate capital contributions;
                  then
 
 (v)
              100%
                  to us until the amount distributed to us under clauses (iii), (iv),
                  and
                  (v) equals 20% of all amounts distributed pursuant to clauses (ii),
                  (iii),
                  (iv), and (v); then
 
 (vi)
              80%
                  to the Silver Point affiliates pro rata and 20% to us until the
                  amount
                  distributed to the Silver Point affiliates represents a return
                  equal to
                  30%, compounded annually, on their aggregate capital contributions;
                  then
 
 (vii)
              100%
                  to us until the amount distributed to us under clauses (iii), (iv),
                  (v),
                  (vi), and (vii) equals 25% of all amounts distributed pursuant
                  to clauses
                  (ii), (iii), (iv), (v), (vi), and (vii);
                  then
 
 (viii)
              75%
                  to the Silver Point affiliates pro rata and 25% to us until the
                  amount
                  distributed to the Silver Point affiliates represents a return
                  equal to
                  60%, compounded annually, on their aggregate capital contributions;
                  then
 
 (ix)
              50%
                  to the Silver Point affiliates pro rata and 50% to
                  us.
 
 Ignis
        Barnett Shale’s operating agreement also provides that Silver Point may remove
        us as a member and our interest in the joint venture will be forfeited if
        we
        provide them with “cause” or if we enter bankruptcy. Generally, Silver Point
        will have “cause” to remove us from the joint venture if:
 
 **•**
              we
                  or any of our officers or significant employees or consultants:
                  (i)
                  commits a felony or crime of moral turpitude; (ii) commits fraud,
                  bad
                  faith or gross negligence in performance of their duties to the
                  joint
                  venture; or (iii) commits a material breach of the joint venture
                  agreement;
 
 **•**
              we
                  attempt to transfer out interest in the joint venture in violation
                  of the
                  operating agreement; or
 
 **•**
              if
                  we fire or terminate our consulting relationships with
                  Michael Piazza, Fred Stein or
                  Eric Hanlon.
 
 If
        we
        lose the services of Mr. Piazza, Mr. Stein or Mr. Hanlon because they have
        quit,
        died or become disabled, and we are unable to find a replacement to Silver
        Point’s reasonable satisfaction, then our distributions from the joint venture
        will be reduced as follows:
 
 **Years
                  of service prior to termination****Name**
              
              **<
                  1**
              
              **1-2**
              
              **2-3**
              
              **>
                  3**Mike
                  Piazza
              
              25%
              
              20%
              
              15%
              
              5%Eric
                  Hanlon
              
              20%
              
              15%
              
              10%
              
              5%Fred
                  Stein
              
              30%
              
              25%
              
              20%
              
              5%
 
 The
        operating agreement provides that Silver Point will have a right of first
        offer
        on any debt or equity financing we undertake prior to November 15, 2008,
        subject
        to similar rights we previously granted to Cornell Capital.
 
 We
        also
        agreed not to make any additional investments in parts of three North Texas
        counties, the area of mutual interest that Ignis Barnett Shale established
        with
        W.B. Osborn Oil & Gas Operations, until the joint venture has satisfied its
        obligation to W.B. Osborn Oil & Gas Operations to purchase an additional $5
        million of acreage. Thereafter, the joint venture will have a right of first
        offer on any future investment opportunity we desire to make in the area
        of
        mutual interest. If the joint venture does not exercise its right of first
        offer, we can pursue the opportunity, subject to some limitations during
        the
        first 18 months after the joint venture completes the $5 million additional
        investment with W.B. Osborn Oil & Gas Operations. If the joint venture
        exercises its right to pursue an opportunity, we will have the opportunity
        to
        co-invest up to 50% of such investment up to $10 million.


9
 ***Table
            and Contents***




We
      charge
      a management fee to the partnership to handle day-to-day operations. For the
      year ended June 30, 2007, we recorded $142,500 in fees. Until such date the
      Company earns an equity interest in the Ignis Barnett Shale Partnership, we
      will
      not consolidate or record any transactions with regard to this partnership.
      Therefore no financial impact effects our financial statements as of June 30,
      2007.





**Production**





The
      table
      below sets forth oil and natural gas production from our net interest in
      producing properties for each of its last two years.





Oil
                (bbl)
            
            
            Gas
                (mcf)
            
            
            Oil
                (bbl)
            
            
            Gas
                (mcf)Production
                by State
            
            2007
            
            
            2007
            
            
            2006
            
            
            2006Texas
            
            14,846
            
            
            44,248
            
            
            5,348
            
            
            19,540








Our
      oil
      and natural gas production is sold on the spot market and we do not have any
      production that is subject to firm commitment contracts.  For the year
      ended June 30, 2007, purchases by Denbury Onshore, LLC represented 97% of our
      revenues.  We believe that we would be able to locate an alternate
      customer in the event of the loss of this customer.








**Productive
      Wells**





The
      table
      below sets forth certain information regarding our ownership, as of June 30,
      2007, of productive wells in the area indicated.





Productive
                WellsOil
            
            
            GasState
            
            Gross
            
            
            Net
            
            
            Gross
            
            
            NetTexas
            
            
            1
            
            
            
            .25
            
            
            
            1
            
            
            
            .13








**Drilling
      Activity**





We
      did
      not commence drilling activities during the fiscal year ended June 30,
      2007.





**Reserves**





Please
      refer to unaudited Note 9 in the accompanying audited financial statements
      for a summary of our reserves at June 30, 2007 and 2006.





**Acreage**





The
      following table sets forth the gross and net acres of developed and undeveloped
      oil and natural gas leases in which we had a working interest as of June 30,
      2007.





10
 ***Table
            and Contents***




Developed
            
            
            UndevelopedState
            
            Gross
            
            
            Net
            
            
            Gross
            
            
            NetTexas
            
            
            500
            
            
            
            120
            
            
            
            -
            
            
            
            -Louisiana
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
            
            
            500
            
            
            
            120
            
            
            
            -
            
            
            
            -








**Office
      Lease**





We
      maintain our principal executive office at 7160 Dallas Parkway, Suite 380,
      Plano, Texas 75024. Our telephone number at that office is (972) 526-5250 and
      our facsimile number is (972) 526-5251. We entered into a 60 month lease
      effective May 1, 2007. Our current office space consists of approximately 5,200
      square feet. Our lease payment is $10,404 per month for the first 25 months,
      $10,729.13 per month for months 26 through 49, and $10,054 per month for the
      remaining months. Utilities are expected to be $1,070 per month unless there
      is
      a rate adjustment. We paid a security deposit of $8,500 which is refundable
      upon
      expiration of the lease. We believe that our current office space and facilities
      are sufficient to meet our present needs and do not anticipate any difficulty
      securing alternative or additional space, as needed, on terms acceptable to
      us.





**Risk
      Factors**





**Risks
      Relating to Our Business****:**





**We
      Have a History Of Losses Which May Continue, Which May Negatively Impact Our
      Ability to Achieve Our Business Objectives.**





We
      incurred a net income of $344,151 for our fiscal year ending June 30, 2007,
      and
      a net loss of $10,642,553 for the fiscal year ended June 30, 2006. We may not
      be
      able to achieve or sustain profitability on a quarterly or annual basis in
      the
      future. Our operations are subject to the risks and competition inherent in
      the
      establishment of a business enterprise. Our future operations may not be
      profitable. Revenues and profits, if any, will depend upon various factors,
      including whether we will be able to continue expansion of our revenue. We
      may
      not achieve our business objectives and the failure to achieve such goals would
      have an adverse impact on us.





**Our
      Independent Auditors Have Expressed Substantial Doubt About Our Ability to
      Continue As a Going Concern, Which May Hinder Our Ability to Obtain Future
      Financing.**





In
      their
      report dated October 12, 2007, our independent auditors stated that our
      financial statements for the fiscal year ended June 30, 2007 were prepared
      assuming that we would continue as a going concern. Our ability to continue
      as a
      going concern is an issue raised as a result of recurring losses from
      operations, lack of sufficient working capital and our dependence on outside
      financing. We continue to experience net operating losses. Our ability to
      continue as a going concern is subject to our ability to generate a profit
      and/or obtain necessary funding from outside sources, including obtaining
      additional funding from the sale of our securities, increasing sales or
      obtaining loans and grants from various financial institutions where possible.
      Our continued net operating losses increase the difficulty in meeting such
      goals
      and such methods may not prove successful.





**We
      Have a Limited Operating History and if We are not Successful in Continuing
      to
      Grow Our Business, Then We may have to Scale Back or Even Cease Our Ongoing
      Business Operations.**





We
      have a
      limited history of revenues from operations and have limited tangible assets.
      We
      have yet to generate positive earnings and we may never operate profitably.
      We
      have a limited operating history and just recently emerged from the exploration
      stage and began producing oil and/or gas. Our success is significantly dependent
      on a successful acquisition, drilling, completion and production program. Our
      operations will be subject to all the risks inherent in the establishment of
      a
      new enterprise and the uncertainties arising from the absence of a significant
      operating history. We may be unable to locate recoverable reserves or operate
      on
      a profitable basis. We are not an established company and potential investors
      should be aware of the difficulties normally encountered by enterprises in
      the
      early stages of their development. If our business plan is not successful,
      and
      we are not able to operate profitably, investors may lose some or all of their
      investment in our company.





11
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            and Contents***





**Because
      We Are Small and Do Not Have Much Capital, We May Have to Limit our Exploration
      and Development Activity Which May Result in a Loss of Your
      Investment.**





Because
      we are small and do not have much capital, we must limit our exploration and
      development activity. As such we may not be able to complete an exploration
      and
      development program that is as thorough as we would like. In that event,
      existing reserves may go undiscovered. Without finding reserves, we cannot
      generate revenues and you will lose your investment.





**If
      We Are Unable to Successfully Recruit Qualified Managerial and Field Personnel
      Having Experience in Oil and Gas Exploration, We May Not Be Able to Continue
      Our
      Operations.**





In
      order
      to successfully implement and manage our business plan, we will be dependent
      upon, among other things, successfully recruiting qualified managerial and
      field
      personnel having experience in the oil and gas exploration business. Our current
      management team does not have a lot of technical experience in the oil and
      gas
      field. Competition for qualified individuals is intense. We may not be able
      to
      find, attract and retain existing employees and we may not be able to find,
      attract and retain qualified personnel on acceptable terms. If we are unable
      to
      find, attract and retain qualified personnel with technical expertise, our
      business operations could be harmed.





**We
      Are Currently Dependent on Other Oil and Gas Operators for Operations on Our
      Prospects.**





All
      of
      our current operations are prospects in which we own a minority interest. As
      a
      result, the drilling and operations are conducted by other operators, upon
      which
      we are reliant for successful drilling and revenues. In addition, as a result
      of
      our dependence on others for operations on our properties, we do not have any
      control over the timing, cost or rate of development on such properties. As
      a
      result, drilling operations may not occur in a timely manner or take more time
      than we anticipate as well as resulting in higher expenses, The inability of
      these operators to adequately staff or conduct operations on these prospects
      could have a material adverse effect on our revenues and operating
      results.





**The
      Potential Profitability of Oil and Gas Ventures Depends Upon Factors Beyond
      Our
      Control.**





The
      potential profitability of oil and gas properties is dependent upon many factors
      beyond our control. For instance, world prices and markets for oil and gas
      are
      unpredictable, highly volatile, potentially subject to governmental fixing,
      pegging, controls, or any combination of these and other factors, and respond
      to
      changes in domestic, international, political, social, and economic
      environments. Additionally, due to worldwide economic uncertainty, the
      availability and cost of funds for production and other expenses have become
      increasingly difficult, if not impossible, to project. These changes and events
      may materially affect our financial performance.





Adverse
      weather conditions can also hinder drilling operations. A productive well may
      become uneconomic in the event water or other deleterious substances are
      encountered which impair or prevent the production of oil and/or gas from the
      well. In addition, production from any well may be unmarketable if it is
      impregnated with water or other deleterious substances. The marketability of
      oil
      and gas which may be acquired or discovered will be affected by numerous factors
      beyond our control. These factors include the proximity and capacity of oil
      and
      gas pipelines and processing equipment, market fluctuations of prices, taxes,
      royalties, land tenure, allowable production and environmental protection.
      These
      factors cannot be accurately predicted and the combination of these factors
      may
      result in us not receiving an adequate return on invested capital.





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**The
      Oil And Gas Industry Is Highly Competitive And There Is No Assurance That We
      Will Be Successful In Acquiring Leases.**





The
      oil
      and gas industry is intensely competitive. We compete with numerous individuals
      and companies, including many major oil and gas companies, which have
      substantially greater technical, financial and operational resources and staffs.
      Accordingly, there is a high degree of competition for desirable oil and gas
      leases, suitable properties for drilling operations and necessary drilling
      equipment, as well as for access to funds. We cannot predict if the necessary
      funds can be raised or that any projected work will be completed.





**The
      Marketability of Natural Resources Will be Affected by Numerous Factors Beyond
      Our Control Which May Result in Us not Receiving an Adequate Return on Invested
      Capital to be Profitable or Viable.**





The
      marketability of natural resources which may be acquired or discovered by us
      will be affected by numerous factors beyond our control. These factors include
      market fluctuations in oil and gas pricing and demand, the proximity and
      capacity of natural resource markets and processing equipment, governmental
      regulations, land tenure, land use, regulations concerning the importing and
      exporting of oil and gas and environmental protection regulations. The exact
      effect of these factors cannot be accurately predicted, but the combination
      of
      these factors may result in us not receiving an adequate return on invested
      capital to be profitable or viable.





**Oil
      and Gas Operations are Subject to Comprehensive Regulation Which May Cause
      Substantial Delays or Require Capital Outlays in Excess of Those Anticipated
      Causing an Adverse Effect on Our Company.**





Oil
      and
      gas operations are subject to federal, state, and local laws relating to the
      protection of the environment, including laws regulating removal of natural
      resources from the ground and the discharge of materials into the environment.
      Oil and gas operations are also subject to federal, state, and local laws and
      regulations which seek to maintain health and safety standards by regulating
      the
      design and use of drilling methods and equipment. Various permits from
      government bodies are required for drilling operations to be conducted; no
      assurance can be given that such permits will be received. Environmental
      standards imposed by federal or local authorities may be changed and any such
      changes may have material adverse effects on our activities. Moreover,
      compliance with such laws may cause substantial delays or require capital
      outlays in excess of those anticipated, thus causing an adverse effect on us.
      Additionally, we may be subject to liability for pollution or other
      environmental damages which we may elect not to insure against due to
      prohibitive premium costs and other reasons. To date we have not been required
      to spend any material amount on compliance with environmental regulations.
      However, we may be required to do so in future and this may affect our ability
      to expand or maintain our operations.





**Exploration
      and Production Activities are Subject to Environmental Regulations Which May
      Prevent or Delay the Commencement or Continuance of Our
      Operations.**





In
      general, our exploration and production activities are subject to federal,
      state
      and local laws and regulations relating to environmental quality and pollution
      control. Such laws and regulations increase the costs of these activities and
      may prevent or delay the commencement or continuance of a given operation.
      Compliance with these laws and regulations has not had a material effect on
      our
      operations or financial condition to date. Specifically, we are subject to
      legislation regarding emissions into the environment, water discharges and
      storage and disposition of hazardous wastes. In addition, legislation has been
      enacted which requires well and facility sites to be abandoned and reclaimed
      to
      the satisfaction of state authorities. However, such laws and regulations are
      frequently changed and we are unable to predict the ultimate cost of compliance.
      Generally, environmental requirements do not appear to affect us any differently
      or to any greater or lesser extent than other companies in the
      industry.  We believe that our operations comply, in all material
      respects, with all applicable environmental regulations. Our operating partners
      maintain insurance coverage customary to the industry; however, we are not
      fully
      insured against all possible environmental risks.





13
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**Exploratory
      Drilling Involves Many Risks and We May Become Liable for Pollution or Other
      Liabilities Which May Have an Adverse Effect on Our Financial
      Position.**





Drilling
      operations generally involve a high degree of risk. Hazards such as unusual
      or
      unexpected geological formations, power outages, labor disruptions, blow-outs,
      sour gas leakage, fire, inability to obtain suitable or adequate machinery,
      equipment or labor, and other risks are involved. We may become subject to
      liability for pollution or hazards against which we cannot adequately insure
      or
      which we may elect not to insure. Incurring any such liability may have a
      material adverse effect on our financial position and operations.





**Any
      Change to Government Regulation/Administrative Practices May Have a Negative
      Impact on Our Ability to Operate and Our Profitability.**





The
      laws,
      regulations, policies or current administrative practices of any government
      body, organization or regulatory agency in the United States or any other
      jurisdiction, may be changed, applied or interpreted in a manner which will
      fundamentally alter our ability to carry on our business.





The
      actions, policies or regulations, or changes thereto, of any government body
      or
      regulatory agency, or other special interest groups, may have a detrimental
      effect on us. Any or all of these situations may have a negative impact on
      our
      ability to operate and/or our profitably.





**Risk
      relating to our financial statements for material weakness in
      controls**




Our
      Chief
      Executive Officer and Chief Financial Officer evaluated the effectiveness of
      our
      disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange
      Act as of the end of the period covered by this report.  Based on that
      evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that our disclosure controls and procedures (as defined in Rule
      13a-15(e) under the Exchange Act) were not effective as of June 30,
      2007.




Our
      management has identified a material weakness in our internal control over
      financial reporting, as defined in the standards by the Public Company
      Accounting Oversight Board.  The area of material weakness identified
      in our internal control over financial reporting is the lack of an adequate
      complement of staff to address technical accounting issues.  We intend
      to hire additional qualified staff to address this weakness. Inability to
      correct the material weakness may have a material adverse effect on our
      compliance with financial reporting.




14
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**Risks
      Relating to Our Current Financing
      Arrangement****:**





**The
      Continuously Adjustable Conversion Price Feature of Our Secured Convertible
      Debentures Could Require Us to Issue a Substantially Greater Number of Shares,
      Which Will Cause Dilution to Our Existing Stockholders.**





Our
      obligation to issue shares upon conversion of our secured convertible debentures
      is essentially limitless.  The number of shares of common stock
      issuable upon conversion of our secured convertible debentures will increase
      if
      the market price of our stock declines, which will cause dilution to our
      existing stockholders.





**The
      Continuously Adjustable Conversion Price Feature of Our Secured Convertible
      Debentures May Encourage Investors to Make Short Sales in Our Common Stock,
      Which Could Have a Depressive Effect on the Price of Our Common
      Stock.**





The
      secured convertible debentures are convertible into shares of our common stock
      at a 6% discount to the trading price of the common stock prior to the
      conversion. The downward pressure on the price of the common stock as the
      selling stockholder converts and sells material amounts of common stock could
      encourage short sales by investors. Short sales by investors could place further
      downward pressure on the price of the common stock. The selling stockholder
      could sell common stock into the market in anticipation of covering the short
      sale by converting their securities, which could cause the further downward
      pressure on the stock price. In addition, not only the sale of shares issued
      upon conversion of secured convertible debentures, but also the mere perception
      that these sales could occur, may adversely affect the market price of the
      common stock.





**The
      Issuance of Shares Upon Conversion of the Secured Convertible Debentures and
      Exercise of Outstanding Warrants May Cause Immediate and Substantial Dilution
      to
      Our Existing Stockholders.**





The
      issuance of shares upon conversion of the secured convertible debentures and
      exercise of warrants may result in substantial dilution to the interests of
      other stockholders since the selling stockholder may ultimately convert and
      sell
      the full amount issuable on conversion. Although the holder of our secured
      convertible debentures and related warrants, Cornell Capital Partners, LP,
      may
      not convert their secured convertible debentures if such conversion would cause
      them to own more than 4.99% of our outstanding common stock, this restriction
      does not prevent Cornell Capital Partners, LP from converting and/or exercising
      some of their holdings and then converting the rest of their holdings. In this
      way, Cornell Capital Partners, LP could sell more than their limit while never
      holding more than this limit. There is no upper limit on the number of shares
      that may be issued upon conversion of the secured convertible debentures which
      will have the effect of further diluting the proportionate equity interest
      and
      voting power of holders of our common stock.





**If
      we are Required for any Reason to Repay Our Outstanding Secured Convertible
      Debentures, We Would be Required to Deplete Our Working Capital, if Available,
      or Raise Additional Funds. Our Failure to Repay the Convertible Debentures,
      if
      Required, Could Result in Legal Action Against us, Which Could Require the
      Sale
      of Substantial Assets.**





In
      January 2006, we entered into a securities purchase agreement, as amended and
      restated, for the sale of $5,000,000 principal amount of secured convertible
      debentures. The secured convertible debentures are due and payable, with 7%
      interest, three years from the date of issuance, unless sooner converted into
      shares of our common stock. Any event of default such as our failure to repay
      the principal or interest when due, our failure to issue shares of common stock
      upon conversion by the holder, our failure to timely file a registration
      statement or have such registration statement declared effective, breach of
      any
      covenant, representation or warranty in the securities purchase agreement,
      as
      amended and restated, or related secured convertible debentures, the assignment
      or appointment of a receiver to control a substantial part of our property
      or
      business, the filing of a money judgment, writ or similar process against us
      in
      excess of $50,000, the commencement of a bankruptcy, insolvency, reorganization
      or liquidation proceeding against us and the delisting of our common stock
      could
      require the early repayment of the secured convertible debentures, including
      default interest rate on the outstanding principal balance of the secured
      convertible debentures if the default is not cured with the specified grace
      period. We anticipate that the full amount of the secured convertible debentures
      will be converted into shares of our common stock, in accordance with the terms
      of the secured convertible debentures. If we were required to repay the secured
      convertible debentures, we would be required to use our limited working capital
      and raise additional funds. If we were unable to repay the secured convertible
      debentures when required, the debenture holders could commence legal action
      against us and foreclose on all of our assets to recover the amounts due. Any
      such action would require us to curtail or cease operations.





15
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            and Contents***





**If
      an Event of Default Occurs under the Second Amended and Restated Securities
      Purchase Agreement, Secured Convertible Debentures or Security Agreements,
      the
      Investor Could Take Possession of all Our Goods, Inventory, Contractual Rights
      and General Intangibles, Receivables, Documents, Instruments, Chattel Paper,
      and
      Intellectual Property.**





In
      connection with the securities purchase agreement, as amended and restated,
      we
      executed a security agreement in favor of the investor granting it 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 securities purchase agreement, as amended and restated, secured
      convertible debentures or security agreement, the investor has the right to
      take
      possession of the collateral, to operate our business using the collateral,
      and
      has 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.





**Risks
      Relating to Our Common Stock****:**





**There
      Are a Large Number of Shares Underlying Our Outstanding Convertible Securities
      and Warrants That May be Available for Future Sale and the Sale of These Shares
      May Depress the Market Price of Our Common Stock.**





As
      of
      June 30, 2007, we had 53,255,338, net of 18,250,000 shares held in escrow
      related to our loan agreement with Cornell Capital Partners, L.P., shares
      of common stock issued and outstanding, secured convertible debentures issued
      and outstanding that may be converted into 65,026,596 shares of common stock
      based on the market price of our common stock on September 25, 2007, and
      outstanding warrants to purchase 15,613,333 shares of common stock. All of
      the
      shares that we are registering hereunder that are issued to the selling
      stockholders or issuable to the selling stockholders upon conversion of the
      secured convertible debentures or upon exercise of its warrants may be sold
      without restriction upon the effectiveness of this registration statement.
      The
      sale of these shares may adversely affect the market price of our common
      stock.





**If
      We Fail to Remain Current in Our Reporting Requirements, We Could be Removed
      From the OTC Bulletin Board Which Would Limit the Ability of Broker-Dealers
      to
      Sell Our Securities and the Ability of Stockholders to Sell Their Securities
      in
      the Secondary Market.**





Companies
      trading on the OTC Bulletin Board, such as us, must be reporting issuers under
      Section 12 of the Securities Exchange Act of 1934, as amended, and must be
      current in their reports under Section 13 or 15(d), in order to maintain price
      quotation privileges on the OTC Bulletin Board. If we fail to remain current
      on
      our reporting requirements, we could be removed from the OTC Bulletin Board.
      As
      a result, the market liquidity for our securities could be severely adversely
      affected by limiting the ability of broker-dealers to sell our securities and
      the ability of stockholders to sell their securities in the secondary
      market.





**Our
      Common Stock is Subject to the “Penny Stock” Rules of the SEC and the Trading
      Market in Our Securities is Limited, Which Makes Transactions in Our Stock
      Cumbersome and May Reduce the Value of an Investment in Our
      Stock.**





The
      Securities and Exchange Commission has adopted Rule 15g-9 which establishes
      the
      definition of a “penny stock,” for the purposes relevant to us, as any equity
      security that has a market price of less than $5.00 per share or with an
      exercise price of less than $5.00 per share, subject to certain exceptions.
      For
      any transaction involving a penny stock, unless exempt, the rules
      require:





16
 ***Table
            and Contents***





**•**
            that
                a broker or dealer approve a person’s account for transactions in penny
                stocks; and


**•**
            the
                broker or dealer receive from the investor a written agreement to
                the
                transaction, setting  forth the identity and quantity of the
                penny stock to be purchased.





In
      order
      to approve a person’s account for transactions in penny stocks, the broker or
      dealer must:





**•**
            obtain
                financial information and investment experience objectives of the
                person;
                and


**•**
            make
                a reasonable determination that the transactions in penny stocks
                are
                suitable for that person and the person has sufficient knowledge
                and
                experience in financial matters to be capable of evaluating the risks
                of
                transactions in penny stocks.





The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prescribed by the Commission relating to the penny stock
      market, which, in highlight form:





**•**
            sets
                forth the basis on which the broker or dealer made the suitability
                determination; and


**•**
            that
                the broker or dealer received a signed, written agreement from the
                investor prior to the transaction.





Generally,
      brokers may be less willing to execute transactions in securities subject to
      the
“penny stock” rules. This may make it more difficult for investors to dispose of
      our common stock and cause a decline in the market value of our
      stock.





**Glossary
      Of
      Selected Oil and Natural Gas Terms**





“3D”
or
      “3D SEISMIC.” An exploration method of sending energy waves or sound waves into
      the earth and recording the wave reflections to indicate the type, size, shape,
      and depth of subsurface rock formations. 3D seismic provides three-dimensional
      pictures.





“Bbl.”
      One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in
      reference to crude oil or other liquid hydrocarbons.





“BOE.”
      Barrels of oil equivalent. BTU equivalent of six thousand cubic feet (Mcf)
      of
      natural gas which is equal to the BTU equivalent of one barrel of
      oil.





“BTU.”
      British Thermal Unit.





“DEVELOPMENT
      WELL” A well drilled within the proved boundaries of an oil or natural gas
      reservoir with the intention of completing the stratigraphic horizon known
      to be
      productive.





“DISCOUNTED
      PRESENT VALUE.” The present value of proved reserves is an estimate of the
      discounted future net cash flows from each property at the specified date,
      or as
      otherwise indicated. Net cash flow is defined as net revenues, after deducting
      production and ad valorem taxes, less future capital costs and operating
      expenses, but before deducting federal income taxes. The future net cash flows
      have been discounted at an annual rate of 10% to determine their “present
      value.” The present value is shown to indicate the effect of time on the value
      of the revenue stream and should not be construed as being the fair market
      value
      of the properties. In accordance with Securities and Exchange Commission rules,
      estimates have been made using constant oil and natural gas prices and operating
      costs at the specified date, or as otherwise indicated.





“DRY
      HOLE.” A development or exploratory well found to be incapable of producing
      either oil or natural gas in sufficient quantities to justify completion as
      an
      oil or natural gas well.





17
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“EXPLORATORY
      WELL” A well drilled to find and produce oil or natural gas in an unproved area,
      to find a new reservoir in a field previously found to be productive of oil
      or
      natural gas in another reservoir, or to extend a known reservoir.





“GROSS
      ACRES” or “GROSS WELLS.” The total number of acres or wells, as the case may be,
      in which a working or any type of royalty interest is owned.





“Mcf.”
      One thousand cubic feet of natural gas.





“NET
      ACRES.” or “NET WELLS.” The sum of the fractional working or any type of royalty
      interests owned in gross acres or gross wells, as applicable.





“PRODUCING
      WELL” or “PRODUCTIVE WELL.”A well that is capable of producing oil or natural
      gas in economic quantities.





“PROVED
      DEVELOPED RESERVES.” The oil and natural gas reserves that can be expected to be
      recovered through existing wells with existing equipment and operating methods.
      Additional oil and natural gas expected to be obtained through the application
      of fluid injection or other improved recovery techniques for supplementing
      the
      natural forces and mechanisms of primary recovery should be included as “proved
      developed reserves” only after testing by a pilot project or after the operation
      of an installed program has confirmed through production response that increased
      recovery will be achieved.





“PROVED
      RESERVES.” The estimated quantities of crude oil, natural gas and natural gas
      liquids that geological and engineering data demonstrate with reasonable
      certainty to be recoverable in future years from known reservoirs under existing
      economic and operating conditions.





“PROVED
      UNDEVELOPED RESERVES.” The oil and natural gas reserves that are expected to be
      recovered from new wells on undrilled acreage or from existing wells where
      a
      relatively major expenditure is required for recompletion. Reserves on undrilled
      acreage are limited to those drilling units offsetting productive units that
      are
      reasonably certain of production when drilled. Proved reserves for other
      undrilled units can be claimed only where it can be demonstrated with certainty
      that there is continuity of production from the existing productive formation.
      Under no circumstances should estimates for proved undeveloped reserves be
      attributable to any acreage for which an application of fluid injection or
      other
      improved recovery techniques is contemplated, unless such techniques have been
      proved effective by actual tests in the area and in the same
      reservoir.





“STANDARDIZED
      MEASURE.” Under the Standardized Measure, future cash flows are estimated by
      applying year-end prices, adjusted for fixed and determinable changes, to the
      estimated future production of year-end proved reserves. Future cash inflows
      are
      reduced by estimated future production and development costs based on period-end
      costs to determine pretax cash inflows. Future income taxes are computed by
      applying the statutory tax rate to the excess inflows over a company’s tax basis
      in the associated properties.





Tax
      credits, net operating loss carryforwards and permanent differences also are
      considered in the future tax calculation. Future net cash inflows after income
      taxes are discounted using a 10% annual discount rate to arrive at the
      Standardized Measure.





“WORKING
      INTEREST.” The operating interest (not necessarily as operator) that gives the
      owner the right to drill, produce and conduct operating activities on the
      property and a share of production, subject to all royalties, overriding
      royalties and other burdens, and to all exploration, development and operational
      costs including all risks in connection therewith.





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ITEM
                3.
            LEGAL
                PROCEEDINGS





From
      time
      to time, we may become involved in various lawsuits and legal proceedings which
      arise in the ordinary course of business. However, litigation is subject to
      inherent uncertainties, and an adverse result in these or other matters may
      arise from time to time that may harm our business. We are currently not aware
      of any such legal proceedings or claims that we believe will have, individually
      or in the aggregate, a material adverse affect on our business, financial
      condition or operating results.





ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OFSECURITY
                HOLDERS





There
      were no matters submitted to a
      vote of our security holders during the fourth quarter of our fiscal year ended
      June 30, 2007.





PART
      II





ITEM
                5.
            MARKET
                FOR COMMON EQUITYANDRELATED STOCKHOLDER
                MATTERS





MARKET
      INFORMATION





Our
      common stock trades on the National Association of Securities Dealers'
      Over-The-Counter Bulletin Board under the symbol IGPG". The following table
      sets
      forth the quarterly high and low bid information for our common stock as
      reported by the National Association of Securities Dealers' Over-The-Counter
      Bulletin Board for the periods indicated below. The over-the-counter quotations
      reflect inter-dealer prices, without retail mark-up, mark-down or commission
      and
      may not represent actual transactions.





**Fiscal
                Year 2007**
            
            
            **Fiscal
                Year 2006****High**
            
            
            **Low**
            
            
            **High**
            
            
            **Low**First
                Quarter
            
            $
            0.34
            
            
            $
            0.23
            
            
            $
            2.88
            
            
            $
            0.98Second
                Quarter
            
            $
            0.15
            
            
            $
            0.12
            
            
            $
            2.73
            
            
            $
            0.65Third
                Quarter
            
            $
            0.18
            
            
            $
            0.17
            
            
            $
            1.63
            
            
            $
            0.65Fourth
                Quarter
            
            $
            0.10
            
            
            $
            0.09
            
            
            $
            1.24
            
            
            $
            0.37





HOLDERS




As
      of
      September 25, 2007, we had approximately 52 holders of our common stock. The
      number of record holders was determined from the records of our transfer agent
      and does not include beneficial owners of common stock whose shares are held
      in
      the names of various security brokers, dealers, and registered clearing
      agencies. The transfer agent of our common stock is Empire Stock Transfer,
      Inc.,
      2470 St. Rose Parkway, Suite 304, Henderson, Nevada 89074.





DIVIDENDS




We
      have
      not paid cash dividends on our stock and we do not anticipate paying any cash
      dividends thereon in the foreseeable future.




By
      the
      terms of our agreements with Cornell Capital Partners, LP, we are required
      to
      obtain the prior written consent of Cornell Capital Partners, LP prior to paying
      dividends or redeeming shares of our stock while the secured convertible
      debentures owed to Cornell Capital Partners, LP are outstanding. Any future
      determination to pay cash dividends will be at the discretion of our Board
      of
      Directors and will be dependent upon our financial condition, results of
      operations, capital requirements, and such other factors as our Board of
      Directors deems relevant.





19
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RECENT
      SALES OF UNREGISTERED SECURITIES





During
      our fiscal year ending June 30, 2007, we issued the following equity securities
      in transactions exempt from the registration requirements under the Securities
      Act of 1933, as amended, that were not disclosed previously in Current Reports
      on Form 8-K or Quarterly Reports on Form 10-QSB.





On
      January 19, 2007, we issued 60,000 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
      $15,600 or $0.26 per share, the fair market value of the common stock at April
      30, 2006, the date the shares were issuable.





On
      January 29, 2007, we issued 75,000 shares of common stock to Patty Dickerson
      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 $16,500 or $0.22 per share, the fair market value
      of
      the common stock at the date of grant.





On
      January 29, 2007, we issued 25,000 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 $5,500 or $0.22 per share, the fair market value
      of
      the common stock at the date of grant.





On
      January 29, 2007, we issued 25,000 shares of common stock to Roger 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 $5,500 or $0.22 per share, the fair market value
      of
      the common stock at the date of grant.





On
      February 6, 2007, we issued 153,125 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 $33,688 or $0.22 per share, the fair market value of
      the
      common stock at the date of grant.





On
      February 6, 2007, we issued 30,000 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
      $6,600 or $0.22 per share, the fair market value of the common stock at April
      30, 2006, the date the shares were issuable.





On
      March
      5, 2007, we issued 30,000 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 $5,400
      or
      $0.18 per share, the fair market value of the common stock at April 30, 2006,
      the date the shares were issuable.





On
      April
      3, 2007, we issued 30,000 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 $5,100
      or
      $0.17 per share, the fair market value of the common stock at April 30, 2006,
      the date the shares were issuable.





On
      April
      3, 2007, we issued 170,000 shares of common stock to Mike Glynn 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 $28,900 or $0.17 per share, the fair market value of the common stock
      at the date of grant.





On
      May
      14, 2007 we issued 500,000 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 $75,000 or $0.15 per share, the fair market value of the common stock
      at the date the shares were issuable.





20
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On
      May 21
      2007, we issued 170,000 shares of common stock to Shawn Clift 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 $25,500 or $0.15 per share, the fair market value of the common stock
      at the date of grant.





On
      May
      29, 2007, we issued 30,000 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 $3,900
      or
      $0.13 per share, the fair market value of the common stock at April 30, 2006,
      the date the shares were issuable.





On
      June
      12, 2007, we issued 354,610 shares of common stock to Cornell Capital Partners,
      LP upon conversion of a portion of their Convertible Debenture
      Agreement.  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 $35,000 or $0.0987 per share, the fair market value of
      the
      common stock at the date of conversion.





On
      June
      18, 2007, we issued 75,000 shares of common stock to Patty Dickerson 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 $7,500 or $0.10 per share, the fair market value
      of
      the common stock at the date of grant.





On
      June 27, 2007, we issued 30,000
      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 $2,700 or $0.09 per share, the
      fair
      market value of the common stock at April 30, 2006, the date the shares were
      issuable.





ITEM
                6.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION





*The
      following discussion should be read in conjunction with our Financial
      Statements, and respective notes thereto, included elsewhere
      herein.  The information below should not be construed to imply that
      the results discussed herein will necessarily continue into the future or that
      any conclusion reached herein will necessarily be indicative of actual operating
      results in the future.  You should read the following discussion and
      analysis of our financial condition and results of operations together with
      our
      financial statements and related notes appearing elsewhere in this annual
      report. This discussion and analysis contains forward−looking statements that
      involve risks, uncertainties and assumptions. Our actual results may differ
      materially from those anticipated in these forward−looking statements as a
      result of many factors. The information below should not be construed to imply
      that the results discussed in this report will necessarily continue into the
      future or that any conclusion reached in this report will necessarily be
      indicative of actual operating results in the future. Such discussion represents
      only the best present assessment of our management.*





·
            Management
                of portfolio risk;
                and


·
            Direction
                of critical reservoir
                management and production operations
                activities.





RESULTS
      OF OPERATIONS





Total
      revenue recorded in this period is $1,410,448. Revenue increased $857,182 of
      which $1,267,948 was from oil and natural gas sales compared to the prior year
      of $553,266. In addition we recorded management fees totaling $142,500 under
      the
      Ignis Barnett Shale, LLC services agreement.  The increase in oil and
      natural gas sales was partially attributed to greater production and higher
      product prices.  The production increase of 13.2 BOE from 9.0 BOE
      to 22.2 BOE was primarily due to twelve months of production versus nine months
      of production compared to the prior year for the Acom A-6 well in Chambers
      County, Texas and the three months of production for the Inglish Sisters #3
      well
      in Cooke County, Texas.  Oil prices increased from an average of
      $61.70 to $63.08 or 179% and gas prices fell slightly from $8.18 to $7.49 or
      $0.69.





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Twelve
                Months Ended
            
            
            Twelve
                Months Ended6/30/2007
            
            
            6/30/2006Operating
                revenues
            
            $
            1,267,948
            
            
            $
            553,266SalesCondensate
                (Mbbls)
            
            
            14.8
            
            
            
            5.6Natural
                Gas (MMcf)
            
            
            44.2
            
            
            
            20.5Total
                (MBOE)
            
            
            22.2
            
            
            
            9.0Average
                priceCondensate
                ($/Bbl)
            
            $
            63.08
            
            
            $
            61.70Natural
                Gas ($/Mcf)
            
            $
            7.49
            
            
            $
            8.18





Production
      expenses increased
      approximately 213% to $89,041 compared to $28,466 in the prior
      year.  The increase is partially due to twelve months of lease
      operating expense in the current year versus nine months of operating expense
      for the Acom A-6 well in Chambers County, Texas and three months of operating
      expense for the Inglish Sisters #3 well in Cooke County, Texas compared to
      the
      prior year.  The increase in operating expense partially increased
      from remedial repairs and maintenance of the wells. The Acom A-6 well averaged
      approximately $2,000 per month and the Ingish Sisters #3 averaged approximately
      $500 per month to operate during this fiscal year ended June 30,
      2007.





We
      incurred exploration expense of $825,737 compared to $5,087,350 in the
      comparative year as a result of two dry holes in the prior year. We wrote down
      the Barnett Shale non-producing wells by $348,200, the Ingish Sisters
      #3 well by $201,332, and the Sherburne prospect by $172,740. The write down
      of
      the Barnett Shale prospect was a result of two non-commercial wells drilled
      and
      the leases expired in this period. The write down of the Inglish Sisters #3
      well
      was due to the underlying value of the asset on the books was below the reserve
      value.  We wrote down the Sherburne prospect as we believe this
      prospect will not be further developed due to the lack of commercial viability
      of the gas zones.





Depletion
      expense increased from
      $546,146 to $835,879 or $289,733 for the comparative periods primarily a result
      of twelve months of depletion expense in the current year compared to nine
      months of depletion expense for the Acom A-6 well and three months of depletion
      for the Inglish Sister #3 well.  Also the estimated life for the
      Inglish Sisters #3 well was reduced from approximately 12 years to approximately
      1.3 years resulting in higher depletion expense for the year ended June 30,
      2007.





General
      and administrative expenses decreased from $4,103,850 to $2,706,428 or 34%
      primarily resulting from stock issued to management and advisors in the prior
      year totaling $1,953,591. Other areas of a decrease in expense are advertising,
      investor relations, and legal expense.  We accrued expense of $161,528
      for expenses incurred by our Board members related to financing opportunities.
      Total non-cash expense in the current year is $617,890 for common stock issued
      to management and advisors.





We
      incurred interest expense of $1,757,336 for the year ended June 30, 2007
      compared to the prior year ended June 30, 2006 of $276,035 resulting primarily
      from accrued liquidated damages under the Cornell Capital Partners, LP
      Convertible Debenture Agreement for non-registration of the transaction as
      of
      June 30, 2007 in the amount of $1,000,000.  Interest expense on the
      loan fees and note payable in the current year was $557,673 and interest expense
      recorded for the ratable portion of debt discount for debt conversion in the
      amount of $110,000.  We recorded a gain on the valuation of
      derivatives of $5,127,252 compared to $1,123,537 or $4,003,715 increase compared
      to the prior year.  We recorded a larger gain in the fiscal year ended
      2007 compared to the fiscal year ended 2006 based on the marked-to-market of
      our
      derivatives.  Due to the decrease in our common stock price and the
      decrease in the remaining term our liability decreased.  We use the
      Black-Scholes method to account for the mark-to-market valuation except for
      the
      convertible debenture that requires we pay cash in lieu of shares for the
      portion  greater than 4.99% is valued using the cash premium
      method.





22
 ***Table
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Net
      income increased from a net loss in the prior year of $10,642,553 to net income
      of $344,151in this fiscal year.  The increase is attributable to an
      increase in revenues of $857,182 and a decrease in operating expense of
      $5,389,984.  The decrease in operating expense is largely due to the
      decrease in exploration expense of $4,261,613. Other income increased due
      to the gain recorded on derivatives offset by an increase in interest
      expense. Income per share moved from a loss of $0.22 to positive $0.01
      based on the average number of common shares outstanding in the respective
      periods.





LIQUIDITY
      AND CAPITAL RESOURCES





For
      the
      year ended June 30, 2007, we generated a net cash flow deficit from operating
      activities of $1,456,637. Cash used in investing activities was zero. Cash
      provided by financing activities totaled $900,000 which resulted from a
      promissory note we amended with Petrofinanz.





We
      expect
      continued capital expenditures through the end of calendar year 2007, contingent
      upon raising capital. These anticipated expenditures are for seismic data
      acquisitions, land and drilling rights acquisitions, drilling programs, overhead
      and working capital purposes.  If current market conditions and
      production levels of our existing oil and natural gas continues we have
      sufficient funds to conduct our operations for a limited amount of time which
      includes no significant capital expenditures, We anticipate that we will need
      external funding to continue our planned operations for the next 12 months.
      Additional financing may not be available in amounts or on terms acceptable
      to
      us, if at all. If we are unable to secure additional capital, we will be forced
      to either slow or cease operations.





We
      presently do not have any available credit, bank financing or other external
      sources of liquidity. Due to our brief history and historical operating losses,
      our operations have not been a sufficient source of liquidity. We will need
      to
      obtain additional capital in order to expand operations and become profitable.
      In order to obtain capital, we may need to sell additional shares of our common
      stock or borrow funds from private lenders. We may not be successful in
      obtaining additional funding.





We
      will
      still need additional investments in order to continue operations to achieve
      cash flow break-even. Additional investments are being sought, but we cannot
      guarantee that we will be able to obtain such investments. Financing
      transactions may include the issuance of equity or debt securities, obtaining
      credit facilities, or other financing mechanisms. However, the trading price
      of
      our common stock could make it more difficult to obtain financing through the
      issuance of equity or debt securities. Even if we are able to raise the funds
      required, it is possible that we could incur unexpected costs and expenses
      or
      experience unexpected cash requirements that would force us to seek alternative
      financing. Further, if we issue additional equity or debt securities,
      stockholders may experience additional dilution or the new equity securities
      may
      have rights, preferences or privileges senior to those of existing holders
      of
      our common stock. If additional financing is not available or is not available
      on acceptable terms, we will have to curtail or cease our
      operations.





In
      their
      report dated October 12, 2007, our independent auditors stated that our
      financial statements for the fiscal year ended June 30, 2007 were prepared
      assuming that we would continue as a going concern. Our ability to continue
      as a
      going concern is an issue raised as a result of recurring losses from
      operations, lack of sufficient working capital and our dependence on outside
      financing. We continue to experience net operating losses. Our ability to
      continue as a going concern is subject to our ability to generate a profit
      and/or obtain necessary funding from outside sources, including obtaining
      additional funding from the sale of our securities, increasing sales or
      obtaining loans and grants from various financial institutions where possible.
      Our continued net operating losses increase the difficulty in meeting such
      goals
      and such methods may not prove successful.





23
 ***Table
            and Contents***





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:





$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 $4,265,000 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 June 30, 2007, the lowest intraday trading
      price for our common stock during the preceding 30 trading days as quoted by
      Bloomberg, LP was $0.09 and, therefore, the conversion price for the secured
      convertible debentures was $0.846. Based on this conversion price, the
      $5,000,000 in secured convertible debentures, excluding interest and excluding
      principal amounts previously converted, were convertible into 57,801,418
      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;





24
 ***Table
            and Contents***





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;





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. Because we
      defaulted on our obligation under the registration rights agreement to have
      the
      registration statement 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.





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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.





We
      amended and restated our loan agreement with Petrofinanz, GBMH twice to borrow
      an aggregate of an additional $900,000 during our fiscal year ending June 30,
      2007.    We borrowed $500,000 from Petrofinanz on August 28,
      2006, and we borrowed $400,000 from Petrofinanz on March 6, 2007, in each case
      for working capital purposes.  The aggregate principal amount of our
      Second Amended and Restated Loan Agreement as of June 30, 2007 is $1,000,000
      and
      the repayment date is June 30, 2009.  Interest accrues under the
      Petrofinanz loan agreement at the rate of 10% per annum and is payable upon
      the
      loan’s maturity date.




**Critical
      Accounting Policies and Estimates**





Our
      accounting policies are fully described in Note 1 of the notes accompanying
      our
      financial statements. As discussed in Note 1, the preparation of financial
      statements in conformity with accounting principles generally accepted in the
      United States requires management to make estimates and assumptions about future
      events that affect the amounts reported in the financial statements and
      accompanying notes. Future events and their effects cannot be determined with
      absolute certainty. Therefore, the determination of estimates requires the
      exercise of judgment. Actual results inevitably will differ from those
      estimates, and such difference may be material to our financial statements.
      We
      believe that the following discussion addresses our Critical Accounting
      Policies.





**Successful
      Efforts Method of Accounting**





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 account for our
      exploration and development activities utilizing the successful efforts method
      of accounting.





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The
      application of the successful efforts method of accounting requires managerial
      judgment to determine the proper classification of wells designated as
      development or exploratory which will ultimately determine the proper accounting
      treatment of the costs incurred.   The results from drilling
      operations can take considerable time to analyze, and the determination that
      commercial reserves have been discovered requires both judgment and industry
      experience.  Wells may be completed that were assumed to be
      productive, but may actually deliver oil and natural gas in quantities
      insufficient to be economic. Such results may result in the abandonment of
      the
      wells at a later date. The evaluation of oil and natural gas leasehold
      acquisition costs requires managerial judgment to estimate the fair value of
      these costs without reference to drilling activity in a given area.





The
      successful efforts method of accounting can have a significant impact on the
      operations results reported when we enter a new exploratory area in hopes of
      finding an oil and natural gas field that will be the focus of future
      developmental drilling activity.  The initial exploratory wells may be
      unsuccessful and will expensed.  Seismic costs can be substantial
      which will result in additional exploration expenses when incurred.





**Reserve
      Estimates**





Estimates
      of oil and natural gas
      reserves, by necessity, are projections based on geologic and engineering data,
      and there are uncertainties inherent in the interpretation of such data as
      well
      as the projection of future rates of production and the timing of development
      expenditures.  Reserve engineeringis a subjective process
      of estimating underground accumulations of oil and natural gas that are
      difficult to measure.  The accuracy of any reserve estimate is a
      function of the quality of available data, engineering and geological
      interpretation and judgment.  Estimates of economically recoverable
      oil and natural gas reserves and future net cash flows necessarily depend upon
      a
      number of variable factors and assumptions, such as historical production from
      the area compared with production from other producing areas, the assumed
      effects of regulations by governmental agencies and assumptions governing future
      oil and natural gas prices, future operating costs, severance taxes, development
      costs and workover costs, all of which may in fact vary considerably from actual
      results.  The future drilling costs associated with reserves assigned
      to proved undeveloped locations may ultimately increase to an extent that these
      reserves may be later determined to be uneconomic.   For these
      reasons, estimates of the economically recoverable quantities of oil and natural
      gas attributable to any particular group of properties, classifications of
      such
      reserves based on risk of recovery, and estimates of the future net cash flows
      expected from there may vary substantially.  Any significant variance
      in the assumptions could materially affect the estimated quantity and value
      of
      the reserves, which could affect the carrying value of our oil and natural
      gas
      properties and/or the rate of depletion of the oil and natural gas
      properties.  Actual production, revenues and expenditures with respect
      to our reserves will likely vary from estimates, and such variances may be
      material.  We engaged a third party engineering company to prepare our
      annual reserve report as of July 1, 2007.





**Commitments
      and Contingencies**





On
      July
      12, 2007, we entered into a retention bonus agreement (the “Agreement”) with
      Michael P. Piazza, our President and Chief Executive Officer, Shawn L. Clift,
      our Chief Financial Officer and Patty Dickerson, our VP External Relations
      and
      Secretary (each an “Executive”). Under the terms of the Agreement, we will pay
      to the Executives beginning June 1, 2007 (the “Effective Date”), a retention
      bonus (the “Retention Bonus”) equal to the Executive’s monthly base salary in
      effect as of the Effective Date during the period we investigate restructuring
      options. On July 26, 2007, we entered into a retention bonus agreement with
      Lifestyles Integration, Inc., the company through which we receive the
      consulting services of Eric Hanlon.  Under the terms of the agreement,
      we will pay Lifestyles, effective June 1, 2007, a monthly retention bonus equal
      to Lifestyles’ monthly consulting fee of $12,500 during the period in which we
      consider restructuring alternatives.  Under the agreement if the
      officer and/or contractor terminate employment within six months of the
      effective date he or she forfeits 75% of their retention bonus. Effective August
      21, 2007, Patty Dickerson terminated employment with us and she therefore
      forfeited her 75% of her retention bonus.  The total commitment as of
      August 31, 2007 is $180,000.  In accordance with the agreement we
      accrued $15,000 of the total commitment as of June 30, 2007





27
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**Reporting
      Requirements**





Because
      our common stock is publicly
      traded, we are subject to certain rules and regulations of federal, state and
      financial market exchange entities charges with the protection of investors
      and
      the oversight of companies whose securities are publicly
      traded.  These entities, including the SEC, have recently issued new
      requirements and regulations and are currently developing additional regulations
      and requirements in response to recent laws, most notably the Sarbanes-Oxley
      Act
      2002. Our compliance with current and proposed rules such as Section 404 of
      the
      Sarbanes-Oxley Act of 2002, is likely to require the commitment of significant
      managerial resources.   We are currently reviewing our internal
      control systems, processes and procedures to ensure compliance with the
      requirements of Section 404.





**Off-Balance
      Sheet Arrangements.**




None.




ITEM
                7.
            FINANCIAL
                STATEMENTS





The
      financial statements required in this Form 10-KSB are set forth beginning on
      page F-1.





ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                AND FINANCIAL
                DISCLOSURE





None.





ITEM
                8A.
            CONTROLS
                AND PROCEDURES


Our
          management, with the participation of our chief executive officer and chief
          financial officer, evaluated the effectiveness of our disclosure controls
          and
          procedures as of June 30, 2007. The term “disclosure controls and procedures,”
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
          Act of
          1934, as amended, or the Exchange Act, means controls and other procedures
          of a
          company that are designed to ensure that information required to be disclosed
          by
          a company in the reports that it files or submits under the Exchange Act
          is
          recorded, processed, summarized and reported, within the time periods specified
          in the SEC’s rules and forms. Disclosure controls and procedures include
          controls and procedures designed to ensure that information required to
          be
          disclosed by a company in the reports that it files or submits under the
          Exchange Act is accumulated and communicated to the company’s management,
          including its principal executive and principal financial officers, as
          appropriate to allow timely decisions regarding required
          disclosure.
 
 Disclosure
          controls and procedures are controls and other procedures that are designed
          to
          ensure that the information required to be disclosed by a company in the
          reports
          that it files or submits under the Exchange Act is recorded, processed,
          summarized and reported, within the time periods specified in the Securities
          and
          Exchange Commissions’ rules and forms. Disclosures controls and procedures
          include, without limitation, controls and procedures designed to ensure
          that
          information required to be disclosed in the reports that a company files
          or
          submits under the Exchange Act is accumulated and communicated to the Company’s
          management, including its Principal Executive Officer and Principal Financial
          Officer as appropriate to allow timely decisions regarding required
          disclosure.
 
 Our
          Chief
          Executive Officer and Chief Financial Officer evaluated the effectiveness
          of our
          disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange
          Act as of the end of the period covered by this report. Based on that
          evaluation, our Chief Executive Officer and Chief Financial Officer have
          concluded that our disclosure controls and procedures (as defined in Rule
          13a-15(e) under the Exchange Act) were not effective as of June 30,
          2007.


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Our
        management has identified a material weakness in our internal control over
        financial reporting, as defined in the standards by the Public Company
        Accounting Oversight Board. The area of material weakness identified in our
        internal control over financial reporting is the lack of an adequate complement
        of staff to address technical accounting issues and adequate controls
        surrounding recording of journal entries. We intend to hire additional qualified
        staff to address this weakness.
 
 Except
        for the material weakness described above, there have been no significant
        changes in our internal controls or in the other factors since the date of
        the
        Chief Executive Officer’s and Chief Financial Officer’s evaluation that could
        significantly affect these internal controls, including any corrective actions
        with regard to significant deficiencies and material
        weaknesses.




**Changes
      in Internal Controls over Financial Reporting**


There
        has
        been no change in our internal control over financial reporting during the
        quarter ended June 30, 2007 that has materially affected, or is reasonably
        likely to materially affect our internal control over financial
        reporting.


ITEM
                8B.
            OTHER
                INFORMATION




On
      September 18, 2007, we entered into a consulting agreement with Lifestyles
      Integration, Inc. pursuant to which we will receive consulting services from
      Eric Hanlon until December 1, 2007 and thereafter until the agreement is
      terminated by either party.  Under the agreement, Lifestyles is to
      receive monthly compensation of $12,500 and 30,000 shares of our common
      stock.  If we terminate the agreement without cause, Lifestyles will
      continue to be compensated through December 1, 2007.  The consulting
      agreement is in addition to any amounts payable to Lifestyles under its
      Retention Bonus Agreement.




PART
      III





ITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                COMPLIANCE WITH
                SECTION 16(a) OF THE EXCHANGE
                ACT





**DIRECTORS
      AND EXECUTIVE OFFICERS**





**Names:**
            **Ages**
            **Titles:**
            **Board
                of Directors**Michael
                P. Piazza
            50
            President,
                Chief Executive Officer and Treasurer
            DirectorShawn
                Clift
            51
            Chief
                Financial Officer and SecretaryGeoffrey
                Evett
            67
            
            DirectorRoger
                Leopard
            64
            
            Director




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Directors
      are elected to serve until the next annual meeting of stockholders and until
      their successors are elected and qualified. Currently there are four seats
      on our board of directors.





**Michael
      P. Piazza** joined our board of directors effective June 5, 2005. Since
      May 25, 2005, Mr. Piazza has been our President, Chief Executive Officer and
      Treasurer. From May 25, 2005 until October 5, 2005, Mr. Piazza was also our
      Chief Financial Officer. From March 2005 to April 2005, Mr. Piazza was
      unemployed. From August 2003 to February 2005 Mr. Piazza was Senior Vice
      President and Chief Financial Officer of Ranger Enterprises, Inc., a petroleum
      corporation located in Rockford, Illinois. From May 2001 to July 2003, Mr.
      Piazza was a principal with Elan Capital, LLC, a management and financial
      consulting firm located in Houston, Texas. From February 1996 to April 2001,
      Mr.
      Piazza was a senior manager with McKinsey & Company, Inc., a management
      consulting firm located in Houston, Texas. Mr. Piazza received a Bachelor of
      Science degree in engineering from the Massachusetts Institute of Technology;
      a
      Master of Science degree in engineering from the University of California at
      Berkeley; and a Master of Business Administration degree from the Stern School
      at New York University. Mr. Piazza also is a Certified Management
      Accountant.





**Shawn
      Clift** was appointed as Chief Financial Officer on November 17, 2006.
      From August 2005 to September 2006, Ms. Clift served as Vice-President of
      Finance of CDX Gas, LLC, an independent coalbed methane extraction company,
      where she directed financing activities and managed private equity acquisitions.
      From 2001 to July 2005, Ms. Clift served as Director of Finance for Olympus
      America Inc. - Diagnostic Systems Group, an international company specializing
      in medical equipment and consumer products. From 1998 to 2001, Ms. Clift served
      as Senior Coordinator of International Controls in the New York office of
      Amerada Hess Corporation, an integrated international oil and gas company with
      annual sales of $12 billion.  Ms Clift was a controller for two oil
      and gas companies for 15 years. Ms. Clift holds a Bachelor of Science degree
      in
      Accounting from Regis University.





**Geoffrey
      Evett** joined our board of directors on August 30, 2005. Mr. Evett is a
      former banker with 33 years of experience. During the past five years, Mr.
      Evett
      has acted as a finance consultant to a major property development in the Czech
      Republic. He has also been involved with the development of a mixed commercial
      development in Prague. Mr. Evett serves as Chairman of Themis MN Fund Limited,
      a
      hedge fund listed on the Dublin Stock Exchange and serves as a partner in
      Capital Management Solution, a fund management company. He is also an agent
      for
      Banque SCS Alliance, a Swiss bank based in Geneva.





**Roger
      Leopard** joined our board of directors on January 24, 2006. Mr. Leopard
      has been the President and Chief Executive Officer of Calcitech Ltd., a
      Switzerland-based manufacturer of synthetic calcium carbonate since February
      2000 and a director since June 2001. Mr. Leopard has, among other positions,
      worked as an accountant for Deloitte Touche, Assistant Treasurer for The Great
      Universal Stores and Vice President of Finance of the CIG Group, a computer
      leasing and related product marketing and service operation with diversified
      European operations. Mr. Leopard is a Chartered Accountant.





In
      addition, we have an advisory board that provides consulting services to us.
      Typically, our advisors work up to five days a month, depending on our activity,
      except for Eric Hanlon who provides consulting services to us approximately
      3
      days per week. Members of our advisory board are:





**Joseph
      Gittelman** is the Exploration Advisor on our advisory board. Mr.
      Gittelman is an industry professional with over 35 years of international
      experience in oil and gas exploration, development and operations. Mr. Gittelman
      enjoyed a 27-year career with Shell Oil Company, serving in a variety of senior
      technical, operational and management capacities. His leadership positions
      within the Shell organization included: General Manager of Geophysics, General
      Manager of Exploration and General Manager of Exploration Research. Mr.
      Gittelman also served as General Manager of Shell Western Exploration &
Production from 1988 to 1994, where he was responsible for managing Shell's
      domestic lower 48 onshore and Alaska exploration programs. Since 1995, Mr.
      Gittelman has served as President of U.S.-based Danlier, Inc., a specialized
      consulting firm which provides services to exploration companies and
      institutional investors, including screening of exploration projects for
      technical quality, risk and hydrocarbon potential. Mr. Gittelman holds a B.S.
      degree in Engineering from the University of Pennsylvania, an M.S. degree in
      Engineering from New York University and a Ph.D. in Engineering from the
      University of Michigan. Mr. Gittelman receives a monthly retainer of $1,500
      and
      is paid for his advisory services at a prorated rate of $750 per day. In
      addition, Mr. Gittelman received 43,750 shares of common stock upon joining
      the
      advisory board and will receive the same number of shares approximately every
      six months thereafter. Additionally, Mr. Gittelman is entitled to receive 7,500
      stock options at an exercise price of $1.00 for every one million dollars we
      raise in which Mr. Gittelman assisted in the financing, subject to certain
      conditions.





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**Frederick
      Stein** is the Operations Advisor on our advisory board. Mr. Stein is an
      accomplished petroleum engineer and operations manager with over 35 years
      experience in senior level management within Shell Oil Company and
      Pennzoil/Devon Energy. He developed and ran oil and gas fields both onshore
      and
      offshore in both domestic and international arenas. Over a 25 year career with
      Shell, his responsibilities ranged from production, reservoir, drilling and
      petro-physical engineering to direct management of drilling and field
      operations. During a 10 year tenure with Pennzoil/Devon Energy, Mr. Stein had
      both technical and operations management responsibilities over a variety of
      international projects in over a dozen countries with the largest being the
      Chirag/Azeri field in Azerbaijan. Mr. Stein's diverse areas of expertise include
      drilling and production operations management, oil and gas transportation design
      and negotiations. In addition, his experience encompasses reserves evaluation,
      reservoir performance management, well planning, facility design, and safety.
      Mr. Stein graduated with honors with an engineering degree from the University
      of Wisconsin. Mr. Stein receives a monthly retainer of $1,500 and is paid for
      his advisory services at a prorated rate of $750 per day. In addition, Mr.
      Stein
      received 25,000 shares of common stock upon joining the advisory board and
      will
      receive the same number of shares approximately every six months thereafter.
      Additionally, Mr. Stein is entitled to receive 3,000 stock options at an
      exercise price of $1.00 for every one million dollars we raise in which Mr.
      Stein assisted in the financing, subject to certain conditions.





**Alexander
      A. Kulpecz** was the initial member of our advisory board. Mr. Kulpecz is
      highly respected in the energy sector and has over 30 years experience gained
      at
      the highest levels within some of the world's major companies. Mr. Kulpecz
      began
      his career during the drilling boom of the 1970's with Shell Oil in their
      Onshore Production Division where he selected and drilled wells in the Texas,
      Louisiana, Mississippi, and Alabama Gulf Coast areas finding significant
      quantities of oil and gas. Mr. Kulpecz held the position of Executive VP and
      Director of Shell International Gas, Power and Coal, and he led the
      reorganization of the company's global E&P business. As a member of the
      Shell International Gas & Power Executive Committee, he was responsible for
      almost half of Shell's global gas and power business, actively negotiating
      multi-billion dollar projects (LNG, corporate acquisition, pipelines) at the
      Presidential, PM and Energy Ministerial levels. From 1998 to early 2000, Mr.
      Kulpecz held the position of President of Azurix International and Executive
      Director of Azurix Corporation. He is currently President of the Omega Group,
      a
      consultancy group of senior executives providing advisory and managerial support
      to private equity, banking and energy clients in the oil and gas industries.
      Mr.
      Kulpecz receives a monthly retainer of $1,500 and is paid for his advisory
      services at a prorated rate of $750 per day. In addition, Mr. Kulpecz received
      59,375 shares of common stock upon joining the advisory board and will receive
      the same number of shares approximately every six months thereafter.
      Additionally, Mr. Kulpecz is entitled to receive 15,000 stock options at an
      exercise price of $1.00 for every one million dollars we raise in which Mr.
      Kulpecz assisted in the financing, subject to certain conditions.





**Eric
      Hanlon** is the mergers and acquisitions Advisor on our advisory board.
      He has over 15 years energy experience gained in various capacities as an
      executive and consultant to Fortune 100 companies. Mr. Hanlon was recently
      Vice
      President and General Manager of Strategy and Markets Analysis for Royal Dutch
      Shell in London. Prior to that, Mr. Hanlon served as a Principal with McKinsey
      & Company, Inc. where he led senior executives, in various sectors of the
      energy industry, on issues critical to their businesses. During his career
      Mr.
      Hanlon has led organizations on the understanding of their key markets and
      development of integrated corporate strategies. He has advised major oil
      companies on M&A activity including an assessment of the value of large
      integrated oil companies for the purpose of acquisition. He has also worked
      with
      private equity companies to evaluate acquisitions of and investments in energy
      companies and programs. Mr. Hanlon served for five years in the United States
      Navy as a Lieutenant aboard a nuclear-powered submarine. He holds a BA in
      Physics from the University of California, Berkeley and an MBA from the
      University of Texas at Austin where he graduated at the top of his class. Mr.
      Hanlon receives monthly compensation of $10,000. In addition, Mr. Hanlon
      received 120,000 shares of common stock in April 2006.





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SECTION
      16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE





Compliance
      with Section 16(a) of the Securities Exchange Act of 1934 Act, as amended,
      requires our officers and directors, and persons who own more than ten percent
      of our common stock to file reports of ownership and changes in ownership with
      the Securities and Exchange Commission, or SEC. Officers, directors and greater
      than ten percent stockholders are required by SEC regulations to furnish us
      with
      copies of all Section 16(a) forms they file. Based solely on a review of the
      copies of such forms furnished to us during, and with respect to, the fiscal
      year ending June 30, 20072007, we believe that during such fiscal year all
      Section 16(a) filing requirements applicable to our officers, directors and
      greater than ten percent beneficial owners were in compliance with Section
      16(a), except that,





·
            Robert
                Stancil, a former officer,
                was late to file a Form 3 and a Form 4;
                and


·
            Shawn
                Clift was late to file a
                Form 4.




CODE
      OF
      ETHICS




We
      have
      not yet adopted a code of ethics that applies to our principal executive
      officers, principal financial officer, principal accounting officer or
      controller, or persons performing similar functions, since we have been focusing
      our efforts on obtaining financing for the company.





ITEM
                10.
            EXECUTIVE
                COMPENSATION





The
      following table set forth certain information regarding our CEO and each of
      our
      most highly-compensated executive officers for the fiscal years ending June
      30,
      2007, 2006 and 2005:




**SUMMARY
                    COMPENSATION TABLE**Name
                    and Principal Position
                Fiscal
                    Year
                Salary
                  ($)
                Stock
                    Awards
                  ($)
                TOTAL($)Michael
                    P. Piazza, President , Chief Executive Officer and Treasurer
                    (1)
                2007
                172,500
                0
                172,5002006
                126,666
                0
                126,666Shawn
                    Clift, Chief Financial Officer and Secretary (2)
                2007
                92,700
                25,500
                118,2002006
                0
                0
                0


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(1)We
      entered into a
      written employment agreement on April 21, 2005, with Mr. Piazza which provided
      for an annual base salary of $120,000 per year, which salary was increased
      to
      $180,000 on October 11, 2006, and the issuance of up to 1,000,000 shares of
      our
      common stock per year for four (4) years, for an aggregate of up to 4,000,000
      shares. The shares issuable to Mr. Piazza under the agreement are subject to
      vesting based upon the following schedule:





•
            150,000
                shares vested and were
                issued after three (3) months of
                service;


•
            350,000
                shares vested and were
                issued after six (6) months of
                service;


•
            500,000
                shares vested and were issued after twelve (12) months of
                service;


•
            500,000
                shares vested and were issued after eighteen (18) months of
                service;


•
            500,000
                shares vested and were issued after twenty four (24) months of service;
                and


•
            500,000
                shares will vest every six (6) months thereafter until the forty-eighth
                (48th) month of service.





(2)We
      entered into an
      employment agreement with Shawn L. Clift on November 20, 2006,to serve as our
      Chief Financial Officer through November  20, 2009, unless earlier
      terminated by either party.  Under the agreement, Ms. Clift is to
      receive an annual base salary of $150,000, subject to adjustments based upon
      our
      and Ms. Clift’s annual performance.  In addition, Ms. Clift is to
      receive 170,000 shares of our common stock, granted in equal six-month
      increments over three years beginning May 21, 2007.  We may also grant
      to Ms. Clift up to 260,000 shares of our common stock each year over the next
      three years as an annual bonus, subject to adjustments based upon our and Ms.
      Clift’s individual performance and the approval of the compensation committee of
      our board of directors.





The
      amount shown as the value of Ms. Clift’s restricted stock award in the table
      above is based upon the fair value of 170,000 shares of our common stock awarded
      on November 20, 2006 determined in accordance with FAS 123R and excludes the
      unvested portion of the shares of our common stock issuablue under her
      employment agreement.  If we declare any dividends on our common
      stock, Ms. Clift would only be entitled to receive dividends on the vested
      portion of the restricted common stock described above.





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END





The
      following table shows outstanding equity awards to the executive officers named
      in the Summary Compensation Table above as of June 30, 2007.




Stock
                  AwardsName
              Number
                  of Shares or Units of Stock That Have Not Vested (#)
              Market
                  Value of Shares or Units of Stock That Have Not Vested ($)
                  (3)Michael P. Piazza
                  (1)
              2,000,000
              $180,000Shawn Clift
                  (2)
              850,000
              $76,500


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(1)
      See
      footnote (1) to Summary Compensation Table above.


(2)
      See
      footnote (2) to Summary Compensation Table above.


(3)
      The
      amount shown as the market value of stock awards in the table above is based
      upon the closing market price of our common stock of $0.09 on June 30,
      2007.





**Director
      Compensation**





DIRECTOR
      COMPENSATION





Name
            Fees
                Earned or Paid in Cash
              ($)
            Total
              ($)Geoff Evett
                (1)
            18,000
            18,000Roger Leopard
                (1)
            18,000
            18,000








(1)           We
      have entered into agreements with Geoff Evett and Roger A. Leopard in which
      we
      agreed to pay each of the directors $1,500 per month and to issue 180,000 shares
      of our common stock to each of them over a three year period beginning January
      20, 2006. As of June 30, 2007, 80,000 of the 180,000 shares of our common stock
      have vested and been delivered to each of Mr. Evett and Mr. Leopard. The
      remaining 100,000 shares will vest and be delivered to each of them, subject
      in
      each case to their continued service as a director, according to the following
      schedule: 25,000 shares on July 20, 2007 and 25,000 shares each six months
      thereafter.





See
      also
      the related party transactions with directors disclosed in Item 12
      below.





ITEM
                11.
            SECURITY
                OWNERSHIPOF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS





EQUITY
      COMPENSATION PLANS





**Plan
                Category**
            **Column
                (a)**
            **Column
                (b)**
            **Column
                (c)****Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in**
              **Column
                (a)**Equity
                compensation plans approved by stockholders (1)
            0
            N/A
            5,000,000Equity
                compensation plans not approved by stockholders (2)
            0
            N/A
            4,393,125TOTAL
            0
            N/A
            9,393,125


(1)
      See
      description of 2006 Incentive Stock Plan below.


(2)
      Includes individual compensation agreements pursuant to which we may issue
      up
      to: (i) 3,630,000 shares of our common stock to our officers, (ii) 150,000
      shares of our common stock to our directors, and (iii) 613,125 shares of our
      common stock to our advisors.  Compensation agreements with our
      officers and derictors are described in Item 10 above.  Compensation
      agreements with our advisors are described below.





34
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*2006
      Incentive Stock Plan*





On
      January 30, 2006, our board of directors and holders of a majority of our
      outstanding shares of common stock approved our 2006 Incentive Stock Plan and
      authorized 5,000,000 shares of Common Stock for issuance of stock awards and
      stock options thereunder. The plan has been adopted by our board of directors
      who initially reserved 5,000,000 shares of our common stock for issuance under
      the plan. Under the plan, options may be granted which are intended to qualify
      as Incentive Stock Options under Section 422 of the Internal Revenue Code of
      1986 or which are not intended to qualify as Incentive Stock Options thereunder.
      The primary purpose of the plan is to attract and retain the best available
      personnel for us by granting stock awards and stock options in order to promote
      the success of our business and to facilitate the ownership of our stock by
      our
      employees. Under the plan, stock awards and options may be granted to our key
      employees, officers, directors or consultants. To date, no awards have been
      granted under the plan.





*Agreements
      with Advisors*





We
      have
      entered into consulting agreements with each of the members of our board of
      advisors pursuant to which such advisors may earn shares of our common stock
      upon the vesting schedule set forth below. Such agreements were not approved
      by
      our stockholders.




**Name
                  of Advisor**
              **Maximum
                  Number of Shares**
              **Vesting
                  Schedule**Alexander
                  Kulpecz
              475,000
              59,375
                  shares vested upon
                  execution of consulting agreement;
                29,688
                  shares vested upon our
                  successful private placement of $5 million;
                29,687
                  shares will vest upon our
                  successful private placement of an additional $5 million;
                  and
                59,375
                  shares have vested or will
                  vest every six months beginning February 9, 2006 and ending August
                  9,
                  2008.Frederick
                  C. Stein
              200,000
              25,000
                  shares vested upon
                  execution of consulting agreement;
                12,500
                  shares vested upon our
                  successful private placement of $5 million;
                12,500
                  shares will vest upon our
                  successful private placement of an additional $5 million;
                  and
                25,000
                  shares have vested or will
                  vest every six months beginning February 9, 2006 and ending August
                  9,
                  2008.Joseph
                  Gittelman
              350,000
              43,750
                  shares vested upon
                  execution of consulting agreement;
                21,875
                  shares vested upon our
                  successful private placement of $5 million;
                21,875
                  shares will vest upon our
                  successful private placement of an additional $5 million;
                  and
                43,750
                  shares have vested or will
                  vest every six months beginning February 9, 2006 and ending August
                  9,
                  2008.Eric
                  Hanlon
              690,000
                  *
              90,000
                  shares vested on April 30,
                  2006; and
                30,000
                  shares vest each month
                  until December 1, 2007 and continuing thereafter until terminated
                  by
                  either party.TOTAL





*
      Pursuant to a consulting agreement dated September 18, 2007, Mr. Hanlon earns
      shares of our common stock as compensation for services at a rate of 30,000
      shares of our common stock per month until December 1, 2007 and continuing
      thereafter until terminated by either party.  The 690,000 shares shown
      above includes shares earned or earnable by Mr. Hanlon under this agreement
      through December 1, 2007 and under his prior agreement with the
      Company.





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Members
      of our board of advisors will be entitled to receive options to purchase up
      to
      425,000 shares of our common stock at an exercise price of $1.00 if they
      successfully assist us in raising additional capital as set forth in the table
      below. To date, none of the members of our board of advisors have earned any
      such options.





**Name
                of Advisor**
            **Maximum
                Number of Shares underlying Options**
            **Vesting
                Schedule**Alexander
                Kulpecz
            250,000
                shares
            15,000
                shares for each $1,000,000 raisedFrederick
                C. Stein
            50,000
                shares
            3,000
                shares for each $1,000,000 raisedJoseph
                Gittelman
            125,000
                shares
            7,500
                shares for each $1,000,000 raisedTOTAL
            425,000
                shares








SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The
      following table sets forth certain information regarding beneficial ownership
      of
      our common stock as of September 25, 2007.





·
            by
                each person who is known by us
                to beneficially own more than 5% of our common
                stock;


·
            by
                each of our officers and
                directors; and


·
            by
                all of our officers and directors as a
                group.





The
      number of shares beneficially owned by each director or executive officer is
      determined under rules of the SEC, and the information is not necessarily
      indicative of beneficial ownership for any other purpose. Under the SEC rules,
      beneficial ownership includes any shares as to which the individual has the
      sole
      or shared voting power or investment power. In addition, beneficial ownership
      includes any shares that the individual has the right to acquire within 60
      days.
      Unless otherwise indicated, each person listed below has sole investment and
      voting power (or shares such powers with his or her spouse). In certain
      instances, the number of shares listed includes (in addition to shares owned
      directly), shares held by the spouse or children of the person, or by a trust
      or
      estate of which the person is a trustee or an executor or in which the person
      may have a beneficial interest.








**Name
                and Address of Owner**
            **Title
                of Class**
            **Number
                of Shares Owned (1)**
            **Percent
                of Class (2)**Michael
                P. Piazza
              7160
                Dallas Parkway, Suite 380
              Plano,
                Texas 75024
            Common
                Stock
            2,500,000
                (3)
            4.4%Shawn
                Clift
              7160
                Dallas Parkway, Suite 380
              Plano,
                Texas 75024
            Common
                Stock
            340,000 (4)
            *Geoffrey
                Evett
              7160
                Dallas Parkway, Suite 380
              Plano,
                Texas 75024
            Common
                Stock
            105,000
            *Roger
                A. Leopard
              7160
                Dallas Parkway, Suite 380
              Plano,
                Texas 75024
            Common
                Stock
            105,000
            *All
                Officers and Directors as a Group (4 persons)
            Common
                Stock
            3,050,000
                (3)(4)
            5.3%Newton
                Properties, Inc. (5)
              Trust
                Company Complex
              Ajeltake
                Road, Ajeltake Island
              Majuro,
                Marshall Islands MH96960
            Common
                Stock
            3,500,000
            6.2%Petrofinanz
                GMBH (5)
              Trust
                Company Complex
              Ajeltake
                Road, Ajeltake Island
              Majuro,
                Marshall Islands MH96960
            Common
                Stock
            7,008,484
                (6)
            11.7%Philipp
                Buschmann
              46
                Willow Road
              London,
                England NW31TS
            Common
              Stock
            2,003,000
            3.5%




36
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*
      Less
      than 1%.





(1)
      Beneficial Ownership is determined in accordance with the rules of the
      Securities and Exchange Commission and generally includes voting or investment
      power with respect to securities. Shares of common stock subject to options
      or
      warrants currently exercisable or convertible, or exercisable or convertible
      within 60 days of September 25, 2007 are deemed outstanding for computing the
      percentage of the person holding such option or warrant but are not deemed
      outstanding for computing the percentage of any other person.





(2)
      Based
      upon 56,794,519 shares issued and outstanding on September 25,
      2007.





(3)
      Includes 500,000 shares of common stock scheduled to vest and become issuable
      to
      Mr. Piazza on November 9, 2007, under the terms of his employment
      agreement.




(4)
      Includes 170,000 shares of common stock scheduled to vest and become
      issuable to Ms. Clift on November 20, 2007, under the terms of her employment
      agreement.




(5)
      Voting authority for the shares of common stock owned is vested in the entity’s
      board of directors.





(6)
      Includes 3,213,333 shares of common stock issuable upon exercise of warrants
      held by Petrofinanz GmbH.




(7)
      Mr.
      Buschmann resigned as a director of ours on March 1, 2007. Mr. Buschmann's
      share
      ownership is reported as of October 15, 2007.




ITEM
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS.





Other
      than as disclosed below, there have been no transactions, or proposed
      transactions, which have materially affected or will materially affect us in
      which any director, executive officer or beneficial holder of more than 5%
      of
      our outstanding common stock, or any of their respective relatives, spouses,
      associates or affiliates, has had or will have any direct or indirect material
      interest. We have no policy regarding entering into transactions with affiliated
      parties.





Mr.
      Timothy Hart, our former Chief Financial Officer, provided accounting and
      financial advisory services to us through his certified public accounting firm,
      Ullman & Hart CPAs, from February 2005 through December 31, 2006. For the
      year ended June 30, 2007, we paid fees totaling approximately $58,277 to Mr.
      Hart’s firm and issued 10,000 shares of our common stock to Mr. Hart for
      services provided by Mr. Hart and his firm.





37
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On
      December 22, 2005 we borrowed $100,000 from a shareholder, Petrofinanz GmbH.
      The
      loan accrued interest at 12% annually and originally was due on June 20, 2006.
      On August 28, 2006 we entered into an amended and restated agreement extending
      the maturity date and increasing our debt by $500,000.  On March 6,
      2007 we entered into the second amended and restated agreement increasing our
      debt $400,000.  As of June 30, 2007, the total principal amount is
      $1,000,000.  The loan accrues interest at 10% annually and the
      maturity date was extended to June 30 2009.





*Transactions
      involving Directors*





For
      the period ended June 30, 2007 we
      accrued expenses on behalf of our Directors for pursuing financing opportunities
      for us.  As of June 30, 2007, we had accrued $161,528.





We
      believe that the related transactions describe above were on terms that we
      would
      have received had we entered into such transactions with unaffiliated third
      parties.





*Director
      Independence*





We
      have
      determined that Roger Leopard and Geoff Evett, our non-employee directors,
      are
      independent as defined by the listing requirements of the American Stock
      Exchange for "independence" of directors.








ITEM
                13.
            EXHIBITS





(a)
            EXHIBITS





The
      following are exhibits to this report:





Exhibit
                No.
            Description3.1
            Articles
                of Incorporation and first amendment thereto, filed as an exhibit
                to the
                annual report on Form 10-KSB filed with the Securities and Exchange
                Commission on October 13, 2005 and incorporated herein by
                reference.3.2
            Certificate
                of Amendment to Articles of Incorporation, filed with the Nevada
                Secretary
                of State on April 5, 2006, filed as an exhibit to the registration
                statement on Form SB-2 filed with the Securities and Exchange Commission
                on May 3, 2006 and incorporated herein by reference.3.3
            Bylaws
                of the Company and amendment thereto, filed as an exhibit to the
                annual
                report on Form 10-KSB filed with the Securities and Exchange Commission
                on
                October 13, 2005 and incorporated herein by reference.4.1
            Amended
                and Restated Securities Purchase Agreement, dated April 28, 2006,
                by and
                between Ignis Petroleum Group, Inc. and Cornell Capital Partners,
                LP,
                filed as an exhibit to the current report on Form 8-K, filed with
                the
                Securities and Exchange Commission on May 1, 2006 and incorporated
                herein
                by reference.4.2
            Secured
                Convertible Debenture issued to Cornell Capital Partners, LP by Ignis
                Petroleum Group, Inc., dated January 5, 2006, filed as an exhibit
                to the
                current report on Form 8-K filed with the Securities and Exchange
                Commission on January 10, 2006 and incorporated herein by
                reference.





38
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4.3
            Warrant
                to purchase 3,086,420 shares of Common Stock, dated January 5, 2006,
                issued to Cornell Capital Partners, LP, filed as an exhibit to the
                current
                report on Form 8-K filed with the Securities and Exchange Commission
                on
                January 10, 2006 and incorporated herein by reference.4.4
            Warrant
                to purchase 2,688,172 shares of Common Stock, dated January 5, 2006,
                issued to Cornell Capital Partners, LP, filed as an exhibit to the
                current
                report on Form 8-K filed with the Securities and Exchange Commission
                on
                January 10, 2006 and incorporated herein by reference.4.5
            Amended
                and Restated Registration Rights Agreement, dated April 28, 2006,
                by and
                between Ignis Petroleum Group, Inc. and Cornell Capital Partners,
                LP,
                filed as an exhibit to the current report on Form 8-K, filed with
                the
                Securities and Exchange Commission on May 1, 2006 and incorporated
                herein
                by reference.4.6
            Amended
                and Restated Security Agreement, dated February 9, 2006, by and between
                Ignis Petroleum Group, Inc. and Cornell Capital Partners, LP, filed
                as an
                exhibit to the registration statement on Form SB-2, file number
                333-131774, filed with the Securities and Exchange Commission on
                February
                10, 2006 and incorporated herein by reference.4.7
            Insider
                Pledge and Escrow Agreement, dated January 5, 2006, by and among
                Ignis
                Petroleum Group, Inc., Cornell Capital Partners, LP, Philipp Buschmann,
                Michael Piazza and David Gonzalez, Esq. as escrow agent, filed as
                an
                exhibit to the current report on Form 8-K filed with the Securities
                and
                Exchange Commission on January 10, 2006 and incorporated herein by
                reference.4.8
            Pledge
                and Escrow Agreement, dated January 5, 2006, by and among Ignis Petroleum
                Group, Inc., Cornell Capital Partners, LP and David Gonzalez, Esq.
                as
                escrow agent, filed as an exhibit to the current report on Form 8-K
                filed
                with the Securities and Exchange Commission on January 10, 2006 and
                incorporated herein by reference.4.9
            Escrow
                Termination Agreement, dated February 9, 2006, by and among Ignis
                Petroleum Group, Inc., Cornell Capital Partners, LP and David Gonzalez,
                Esq., filed as an exhibit to the registration statement on Form SB-2,
                file
                number 333-131774, filed with the Securities and Exchange Commission
                on
                February 10, 2006 and incorporated herein by reference.4.10
            Secured
                Convertible Debenture issued to Cornell Capital Partners, LP by Ignis
                Petroleum Group, Inc., dated February 9, 2006, filed as an exhibit
                to the
                registration statement on Form SB-2, file number 333-131774, filed
                with
                the Securities and Exchange Commission on February 10, 2006 and
                incorporated herein by reference.4.11
            Irrevocable
                Transfer Agent Instructions, dated January 5, 2006, by and among
                Ignis
                Petroleum Group, Inc. and David Gonzalez, Esq. filed as an exhibit
                to the
                amended registration statement on Form SB-2/A, file number 333-131774,
                filed with the Securities and Exchange Commission on April 14, 2006
                and
                incorporated herein by reference.4.12
            Secured
                Convertible Debenture issued to Cornell Capital Partners, LP by Ignis
                Petroleum Group, Inc., dated April 28, 2006, filed as an exhibit
                to the
                current report on Form 8-K, filed with the Securities and Exchange
                Commission on May 1, 2006 and incorporated herein by
                reference.4.13
            Warrant
                to purchase 3,086,420 shares of Common Stock, dated April 28, 2006,
                issued
                to Cornell Capital Partners, LP, filed as an exhibit to the current
                report
                on Form 8-K, filed with the Securities and Exchange Commission on
                May 1,
                2006 and incorporated herein by
                reference.





39
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4.14
            Warrant
                to purchase 2,688,172 shares of Common Stock, dated April 28, 2006,
                issued
                to Cornell Capital Partners, LP, filed as an exhibit to the current
                report
                on Form 8-K, filed with the Securities and Exchange Commission on
                May 1,
                2006 and incorporated herein by reference.4.15
            Form
                of warrants issued to Petrofinanz GmbH, filed as an exhibit to the
                registration statement on Form SB-2 filed with the Securities and
                Exchange
                Commission on May 3, 2006 and incorporated herein by
                reference.4.16
            Form
                of warrants to be issued to Robert R. Blakely, Scott R. Griffith
                and
                Robert R. Blakely, filed as an exhibit to the registration statement
                on
                Form SB-2 filed with the Securities and Exchange Commission on May
                3, 2006
                and incorporated herein by reference.10.1
            Farmout
                Agreement, dated August 23, 2004, by and between Dragon Energy Corporation
                and Argyle Energy, Inc. regarding Barnett Crossroads Prospect, filed
                as an
                exhibit to the current report on Form 8-K filed with the Securities
                and
                Exchange Commission on March 14, 2006 and incorporated herein by
                reference.10.2
            Farmout
                Agreement, dated August 23, 2004, by and between Dragon Energy Corporation
                and Argyle Energy, Inc. regarding Barnett Crossroads Prospect, filed
                as an
                exhibit to the current report on Form 8-K filed with the Securities
                and
                Exchange Commission on March 14, 2006 and incorporated herein by
                reference.10.3
            First
                Amendment of Farmout Agreement dated September 30, 2005, by and between
                Dragon Energy Corporation and Argyle Energy, Inc. regarding Barnett
                Crossroads Prospect, filed as an exhibit to the current report on
                Form 8-K
                filed with the Securities and Exchange Commission on March 14, 2006
                and
                incorporated herein by reference.10.4
            Side
                Letter to First Amendment of Farmout Agreement dated March 14, 2006,
                by
                and among Dragon Energy Corporation and Argyle Energy, Inc. regarding
                Barnett Crossroads Prospect, filed as an exhibit to the current report
                on
                Form 8-K filed with the Securities and Exchange Commission on March
                14,
                2006 and incorporated herein by reference.10.5
            Letter
                Agreement, dated September 22, 2005, by and among Ignis Petroleum
                Group,
                Inc., Ignis Petroleum Corporation and Michael P. Piazza, filed as
                an
                exhibit to the current report on Form 8-K filed with the Securities
                and
                Exchange Commission on October 11, 2005 and incorporated herein by
                reference.10.6
            Subscription
                Purchase Agreement, dated January 9, 2006, by and between Ignis Petroleum
                Corporation and Provident Oil and Gas Partners #1 regarding Barnett
                Shale
                Prospect, filed as an exhibit to the registration statement on Form
                SB-2,
                file number 333-133768, filed with the Securities and Exchange Commission
                on June 20, 2006 and incorporated herein by reference.10.7
            Letter
                Agreement, dated June 14, 2005, by and between Ignis Petroleum Corporation
                and Alexander A. Kulpecz, filed as an exhibit to the current report
                on
                Form 8-K filed with the Securities and Exchange Commission on October
                11,
                2005 and incorporated herein by
                reference.





40
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10.8
            Letter
                Agreement, dated January 9, 2006, by and between Ignis Petroleum
                Corporation and Frederick C. Stein, filed as an exhibit to the current
                report on Form 8-KK filed with the Securities and Exchange Commission
                on
                2005June 20, 2006 and incorporated herein by reference.10.9
            Letter
                Agreement, dated August 17, 2005, by and between Ignis Petroleum
                Group,
                Inc. and Joseph Gittelman, filed as an exhibit to the current report
                on
                Form 8-K filed with the Securities and Exchange Commission on 2005June20,
                2006 and incorporated herein by reference.10.10
            Letter
                agreement, dated January 20, 2006, by and between Ignis Petroleum
                Group,
                Inc. and Geoff Evett filed as an exhibit to the current report on
                Form 8-K
                filed with the Securities and Exchange Commission on January 26,
                2006 and
                incorporated herein by reference.10.11
            Subscription
                Agreement, dated April 19, 2006, by and between Ignis Petroleum Group,
                Inc. and Petrofinanz GmbH, filed as an exhibit to the registration
                statement on Form SB-2, file number 333-133768, filed with the Securities
                and Exchange Commission on June 20, 2006 and incorporated herein
                by
                reference.*10.12
            Consulting
                Agreement, dated September 18, 2007, by and between Ignis Petroleum
                Group,
                Inc. and Lifestyles Integration, Inc. pursuant to which the Ignis
                receives
                services from Eric Hanlon.10.13
            Second
                Amended and Restated Loan Agreement, dated March 6, 2007, by and
                between
                Ignis Petroleum Group, Inc. and Petrofinanz GmbH, filed as an exhibit
                to
                the current report on Form 8-K filed with the Securities and Exchange
                Commission on April 20, 2007 and incorporated herein by
                reference.10.14
            Form
                of Indemnification Agreement, filed as an exhibit to the current
                report on
                Form 8-K filed with the Securities and Exchange Commission on September
                7,
                2006 and incorporated herein by reference.10.15
            Purchase
                and Sale Agreement dated September 27, 2006, by and among W.B. Osborn
                Oil
                & Gas Operations., Ltd., St. Jo Pipeline, Limited and Ignis Barnett
                Shale, LLC, filed as an exhibit to the current report on Form 8-K
                filed
                with the Securities and Exchange Commission on October 3, 2006 and
                incorporated herein by reference.10.16
            Amended
                and Restated Limited Liability Company Agreement of Ignis Barnett
                Shale,
                LLC dated November 15, 2006, filed as an exhibit to the current report
                on
                Form 8-K filed with the Securities and Exchange Commission on November
                21,
                2006 and incorporated herein by reference.10.17
            Employment
                agreement, dated December 20, 2006, by and between Ignis Petroleum
                Group,
                Inc., Ignis Petroleum Corporation and Shawn L. Clift, filed as an
                exhibit
                to the current report on Form 8-K filed with the Securities and Exchange
                Commission on January 29, 2007 and incorporated herein by
                reference.10.18
            Form
                of Retention Bonus Agreements with Michael Piazza, Shawn Clift and
                Eric
                Hanlon, filed as an exhibit to the current report on Form 8-K filed
                with
                the Securities and Exchange Commission on July 18, 2007 and incorporated
                herein by reference.*21.1
            List
                of subsidiaries.*23.1
            Consent
              of Hass Petroleum Engineering Services, Inc.*31.1
            Rule
                13a-14(a) Certification of Chief Executive
                Officer





41
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*31.2
            Rule
                13a-14(a) Certification of Chief Financial Officer*32.1
            Section
                1350 Certification of Chief Executive Officer*32.2
            Section
                1350 Certification of Chief Financial
                Officer





*
      Filed herewith.





ITEM
                14.
            PRINCIPAL
ACCOUNTANT
                FEES AND
                SERVICES





AUDIT
      FEES





For
      the
      years ended June 30, 2007 and 2006, our principal accountant billed
      approximately $100,000 and $15,000, respectively for the audit of our annual
      financial statements. The increase compared to the first year relates to the
      re-audit and restatement of June 30, 2006 financial statements. For the year
      ended June 30, 2007, our principal accountant billed $52,174 for the review
      of
      financial statements included in our Form 10-QSB filings and other SEC filings.
      For the year ended June 30, 2006, our former principal accountant billed $6,033
      for the review of financial statements included in our Form 10-QSB
      filings.





AUDIT-RELATED
      FEES





There
      were no fees billed for services related to the performance of the audit or
      review of our financial statements outside of those fees disclosed above under
      “Audit Fees” for the years ended June 30, 2007 and 2006.





TAX
      FEES





For
      the
      fiscal years ended June 30, 2007, our principal accountant billed services
      for
      the preparation of the 2004 and 2005 US Corporation Income Tax returns in the
      amount of $7,052. For the year ended June 30, 2006 no fees were rendered for
      tax
      compliance, tax advice, and tax planning work.





ALL
      OTHER
      FEES





There
      were no other fees billed by our principal accountants other than those
      disclosed above for the years ended June 30, 2007 and 2006.





PRE-APPROVAL
      POLICIES AND PROCEDURES





Prior
      to
      engaging our accountants to perform a particular service, our board of directors
      obtains an estimate for the service to be performed. All of the services
      described above were approved by the board of directors in accordance with
      its
      procedures.





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
                15, 2007
            
            Ignis
                Petroleum Group, Inc.By:
                /s/ Michael PiazzaMichael
                Piazza,President,
                Chief Executive Officer and Treasurer




42
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            and Contents***





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





Signature
            
            Title
            
            Date/s/
              Michael
              P. PiazzaMichael
                P. Piazza
            
            President,
                Chief Executive Officer, Treasurer and Director
            
            October
                15, 2007/s/
              Geoffrey
              EvettGeoffrey
                Evett
            
            Director
            
            October
                15, 2007Roger
                Leopard
            
            Director
            
            October
                15, 2007




43
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            and Contents***








**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








To
      the
      Board of Directors


Ignis
      Petroleum Group, Inc.


Plano,
      Texas





We
      have
      audited the accompanying consolidated balance sheet of Ignis Petroleum Group,
      Inc. and subsidiary (the “Company”) as of June 30, 2007, and the related
      consolidated statements of operations, stockholders’ deficit and cash flows for
      the years ended June 30, 2007 and 2006.  These financial statements
      are the responsibility of the Company's management.  Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





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.  An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements.  An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall financial statement
      presentation.  We believe that our audits provide a reasonable basis
      for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Ignis Petroleum Group, Inc. and
      subsidiary as of June 30, 2007, and the results of their operations and their
      cash flows for the two years ended June 30, 2007 and 2006, in conformity with
      U.S. 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 3 to the
      financial statements, the Company has suffered recurring losses from operations
      and its total liabilities exceeds its total assets.  This raises
      substantial doubt about the Company's ability to continue as a going
      concern.  Management's plans in regard to these matters are also
      described in Note 3.  The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.








Hein
      & Associates LLP


Dallas,
      Texas


October
      12, 2007





44
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Ignis
      Petroleum Group, Inc. and Subsidiary


Consolidated
      Balance Sheet


June
      30,
      2007




**ASSETS**
            
            June
                30, 2007Current
                assets:Cash
                and cash equivalents
            
            $
            315,935Accounts
                receivable
            
            
            222,311Prepaid
                expenses and other current assets
            
            
            68,701Total
                current assets
            
            
            606,947Property
                and equipment:Oil
                and Gas Properties (successful efforts method)
            
            
            315,928Other
                assets
            
            
            652,908Total
                assets
            
            $
            1,575,783**LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            260,501Accrued
                interest
            
            
            1,557,673Current
                portion of long-term debt
            
            
            4,890,000Current
                portion of debt discount
            
            
            (4,889,454
            )Current
              portion of derivative liability
            
            
            366,568Current
              portion of warrant liability
            
            
            627,387Total
                current liabilities
            
            
            2,812,675Long-term
                liabilities:Long-term
                debt
            
            
            1,000,000Asset
                retirement obligation
            
            
            48,598Total
                long-term liabilities
            
            
            1,048,598Stockholders'
                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  53,255,338 issued and outstanding, net of 18,250,000
                shares held in escrow
            
            
            53,254Additional
                paid-in capital
            
            
            8,346,425Accumulated
                deficit
            
            
            (10,685,169
            )Total
                stockholders' deficit
            
            
            (2,285,490
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT**
            
            $
            1,575,783








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





45
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Ignis
      Petroleum Group, Inc. and Subsidiary


Consolidated
      Statement of Operations




For
                the
              Year EndedRestated2007
            
            
            2006Oil
                and gas product sales
            
            $
            1,267,948
            
            
            $
            553,266Management
                fees
            
            
            142,500
            
            
            
            -Total
                revenue
            
            
            1,410,448
            
            
            
            553,266Operating
                expenses:Lease
                operating expense
            
            
            30,771
            
            
            
            5,647Production
                an ad valorem taxes
            
            
            89,041
            
            
            
            28,466Depreciation,
                depletion and amortization
            
            
            835,879
            
            
            
            546,146Accretion
                of asset retirement obligation
            
            
            16,585
            
            
            
            -Exploration
                expenses, including dry holes
            
            
            825,737
            
            
            
            5,087,350General
                and administrative expenses
            
            
            2,583,463
            
            
            
            4,103,850Total
                operating expenses
            
            
            4,381,475
            
            
            
            9,771,459Loss
                from operations
            
            
            (2,971,028
            )
            
            
            (9,218,193
            )Other
                income (expense)Gain from
                valuation of derivative liability
            
            
            5,127,252
            
            
            
            (1,123,537
            )Interest
                expense
            
            
            (1,812,073
            )
            
            
            (300,823
            )3,315,179
            
            
            
            (1,424,360
            )Net
                income/(loss)
            
            $
            344,151
            
            
            $
            (10,642,553
            )Basic
                income (loss) per common share
            
            $
            0.01
            
            
            $
            (0.22
            )Weighted
                average number of common  shares outstanding
            
            
            50,809,288
            
            
            
            47,824,812Diluted
              income (loss) per common share
            
            $
            -
            
            
            
            -Diluted
              weighted average number of common shares outstanding
            
            
            58,838,192
            
            
            
            -








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





46
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            and Contents***





Ignis
      Petroleum Group, Inc. and Subsidiary


Consolidated
      Statement of Stockholder’s Deficit


For
      the
      years ended June 30, 2007 and 2006





AdditionalCommon
                Stock
            
            
            Paid-in
            
            
            AccumulatedShares
            
            
            Par
                value
            
            
            Capital
            
            
            Deficit
            
            
            TotalBalance
                June 30, 2005
            
            
            41,200,000
            
            
            
            41,200
            
            
            
            353,500
            
            
            
            (386,766
            )
            
            
            7,934Conversion
                of convertible notes
            
            
            3,100,000
            
            
            
            3,100
            
            
            
            1,547,202
            
            
            
            
            
            
            
            1,550,302Issuance
                of common stock for services
            
            
            1,860,313
            
            
            
            1,860
            
            
            
            2,569,621
            
            
            
            
            
            
            
            2,571,481Sale
                of common stock
            
            
            3,385,151
            
            
            
            3,385
            
            
            
            1,996,615
            
            
            
            
            
            
            
            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
            
            
            
            247,960
            
            
            
            
            
            
            
            248,035Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (10,642,554
            )
            
            
            (10,642,554
            )Balance
                June 30, 2006
            
            
            50,020,464
            
            
            $
            50,020
            
            
            $
            7,742,498
            
            
            $
            (11,029,320
            )
            
            $
            (3,236,800
            )Issuance
                of common stock for services
            
            
            2,290,937
            
            
            
            2,291
            
            
            
            475,523
            
            
            
            -
            
            
            
            477,814Conversion
                of convertible notes
            
            
            942,937
            
            
            
            943
            
            
            
            109,057
            
            
            
            -
            
            
            
            110,001Loss
                on conversion of debt into common stock
            
            
            -
            
            
            
            -
            
            
            
            2,234
            
            
            
            -
            
            
            
            2,234Employee
                resticted stock plan exposure
            
            
            -
            
            
            
            -
            
            
            
            17,112
            
            
            
            -
            
            
            
            17,112Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            344,151
            
            
            
            344,151Balance
                June 30, 2007
            
            
            53,254,338
            
            
            
            53,254
            
            
            
            8,346,425
            
            
            
            (10,685,169
            )
            
            
            (2,285,490
            )








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





47
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Ignis
      Petroleum Group, Inc. and Subsidiary


Consolidated
      Statement of Cash Flows





For
                the
            
            
            For
                theTwelve Months
                Ended
            
            
            Twelve Months
                EndedRestated2007
            
            
            2006Cash
                flow from operating activitiesNet
                income/(loss)
            
            $
            344,151
            
            
            $
            (10,642,554
            )Adjustments
                to reconcile net income(loss) to net cash used  in operating
                activitiesDepreciation
                and depletion
            
            
            835,879
            
            
            
            546,146Amortization
                of debt cost
            
            
            312,617
            
            
            
            130,026Loss
                from valuation adjustment of oil and gas properties
            
            
            825,517
            
            
            
            5,087,350Stock
                issued for  interest expense
            
            
            -
            
            
            
            50,302Stock
                issued for compensation and services
            
            
            617,890
            
            
            
            2,571,491Amortization
                of discount of debentures
            
            
            544
            
            
            
            2Accretion
                of asset retirement obligation expense
            
            
            16,585
            
            
            
            -Loss
                of derivative financial instrument
            
            
            (5,127,252
            )
            
            
            1,123,442Change
                in current assets and liabilitiesAccounts
                receivable
            
            
            (149,047
            )
            
            
            (73,264
            )Prepaid
                expenses and other current assets
            
            
            164,693
            
            
            
            (173,434
            )Accounts
                payable and accrued expenses
            
            
            725,412
            
            
            
            (77,174
            )Cash
                used in operating activities
            
            
            (1,433,010
            )
            
            
            (1,457,667
            )Cash
                flow from investing activitiesPurchase
                of oil and gas properties
            
            
            (23,626
            )
            
            
            (4,159,235
            )Cash
                used in investing activities
            
            
            (23,626
            )
            
            
            (4,159,235
            )Cash
                flow from financing activitiesIssuance
                of common stock and warrants
            
            
            -
            
            
            
            2,000,000Proceeds
                from note payable
            
            
            900,000
            
            
            
            100,000Proceeds
                from convertible notes
            
            
            -
            
            
            
            4,265,000Advance
                from related party
            
            
            -
            
            
            
            (20,590
            )Cash
                provided by financing activities
            
            
            900,000
            
            
            
            6,344,410Net
                increase(decrease) in cash
            
            
            (556,637
            )
            
            
            727,508Cash
                at beginning of period
            
            
            872,572
            
            
            
            145,064Cash
                at end of period
            
            $
            315,935
            
            
            $
            872,572Supplemental
                non-cash financing transactions:Issuance
                of common stock for oil and gas property
            
            $
            -
            
            
            $
            1,028,000Conversion
                of notes payable and interest into equity
            
            $
            -
            
            
            $
            1,550,302Conversion
                of debenture into equity
            
            $
            110,000
            
            
            $
            -Non-cash
                debt costs
            
            $
            -
            
            
            $
            983,035








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





48
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            and Contents***





Ignis
      Petroleum Group, Inc. and Subsidiary


Notes
      to
      the Financial Statements


June
      30,
      2007





Note
      1


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.





*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*


The
      accompanying financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States of America
      ("GAAP"). In preparing the accompanying financial statements, management
      has made certain estimates and assumptions that affect reported amounts in
      the
      financial statements and disclosures of contingencies. Actual results may differ
      from those estimates. Significant assumptions are required in the valuation
      of
      proved oil and natural gas reserves, which may affect the amount at which oil
      and natural gas properties are recorded. It is at least reasonably possible
      these estimates could be revised in the near term, and these revisions could
      be
      material.





The
      term
      proved reserves is defined by the Securities and Exchange Commission in Rule
      4-10(a) of Regulation S-X adopted under the Securities Act of 1933, as amended.
      In general, proved reserves are the estimated quantities of oil, gas and liquids
      that geological or engineering data demonstrate with reasonable certainty to
      be
      recoverable in future years from known reservoirs under existing economic and
      operating conditions, i.e., prices and costs as of the date the estimate is
      made. Prices include consideration of changes in existing prices provided only
      by contractual arrangements, but not on escalations based on future
      conditions.





Our
      estimates of proved reserves materially impact depletion expense. If proved
      reserves decline, then the rate at which we record depletion expense increases,
      reducing net income. A decline in estimates of proved reserves may result from
      lower prices, evaluation of additional operating history, mechanical problems
      on
      our wells and catastrophic events such as explosions, hurricanes and floods.
      Lower prices also may make it uneconomical to drill wells or produce from fields
      with high operating costs. In addition, a decline in proved reserves may impact
      our assessment of our oil and natural gas properties for
      impairment.





Our
      proved reserve estimates are a function of many assumptions, all of which could
      deviate materially from actual results. As such, reserve estimates may vary
      materially from the ultimate quantities of oil and natural gas actually
      produced.




*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. Our accumulated net operating loss for income
      tax purposes as  June 30, 2007 is $10,685,169.





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*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.





*Accounts
      Receivable*


Accounts
      receivable principally consists of crude oil and natural gas sales proceeds
      receivable and are typically due within 30 and 60 days of their respective
      production. We require no collateral for such receivable, nor do we charge
      interest on past due balances.  We periodically review accounts
      receivable for collectability and reduce the carrying amount of the accounts
      by
      an allowance. No such allowance was indicated at June 30, 2007.





*Revenue
      Recognition and Concentration of Credit Risks*


We
      recognize revenue when crude oil and natural gas quantities are delivered to
      or
      collected by the respective purchaser.  Title to the produced
      quantities transfers to the purchaser at the time the purchaser receives or
      collects the quantities.  Prices for such production are defined in
      sales contracts and are readily determinable based on certain publicly available
      indices.  The purchasers of such production have historically made
      payment for crude oil and natural gas purchases within thirty days of the end
      of
      each production month.  We periodically review the difference between
      the dates of production and the dates we collect
      payment for such product to ensure that accounts receivable from those
      purchasers are collectible.  For the years ended June 30, 2007 and
      2006, one purchaser represented 97% of our revenues.  We believe that
      we would be able to locate an alternate customer in the event of the loss of
      this customer.





*Property
      and Equipment - Oil and Gas Properties*





We
      follow
      the successful efforts method of accounting, capitalizing costs of successful
      exploratory wells and expensing costs of unsuccessful exploratory
      wells.  All developmental costs are capitalized.  The
      property costs reflected in the accompanying consolidated balance sheet resulted
      from drilling on developed acreage.





Depreciation,
      depletion and amortization, based on cost less estimated salvage value of the
      asset are primarily determined under the unit-of-production 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.





Our
      units-of-production amortization rates are revised on a quarterly
      basis.   Our development costs and lease and wellhead equipment
      are depleted based on proved developed reserves. Our leasehold costs are
      depleted based on total proved 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.





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.





Impairment
      of Developed Oil and Natural Gas Properties


We
      review
      our oil and natural gas properties for impairment whenever events and
      circumstances indicate a decline in the recoverability of their carrying
      value.   We estimate the expected future cash flows of our oil
      and natural gas properties and compare such future cash flows to the carrying
      amount of our oil and natural gas properties to determine if the carrying amount
      is recoverable.  If the carrying amount exceeds undiscounted future
      cash flows, we will adjust the carrying amount of the oil and natural gas
      properties to its fair value.  The factors used to determine fair
      value include, but are not limited to, estimates of proved reserves, commodity
      pricing, future production estimates, anticipated capital expenditures, and
      a
      discount rate commensurate with the risk associated with realizing the expected
      cash flows projected.  For the twelve months ended June 30, 2007 we
      recorded an impairment in the amount of $149,187 on the Inglish Sisters #3
      well
      in Cooke County, Texas.





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*Asset
      Retirement Obligation*


Our
      financial statements reflect the fair value for any asset retirement obligation
      that can be reasonably estimated.  The retirement obligation is
      recorded as a liability at its estimated present value at the asset’s inception,
      with an offsetting increase to producing properties on the consolidated balance
      sheets.  Periodic accretion of the discount of the estimated liability
      is recorded as an expense in the consolidated statements of
      operations.  As of June 30, 2007 we recorded expense of $16,585 and
      our asset retirement obligation at June 30, 2007 is $48,598.




We
        apply
        SFAS No.143 “Accounting for Asset Retirement Obligations which 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.
 
 2007Asset
                  retirement obligation at June 30, 2006
              
              
              -Liabilities
                  incurredLiabilities
                  assumed
              
              
              32,013Accretion
                  expense
              
              
              16,585Asset
                  retirement obligation at June 30, 2007
              
              
              48,598




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.





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, 2007, 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 $160,582 in 2007 and
      $224,380 in 2006.





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.





51
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As
          of
          June 30, 2007, the senior convertible debentures diluted earnings per share
          to
          $0.00. The net income attributed to common stock was reduced by $127,106
          represented by interest expense, debt discount amortization and changes
          in the
          derivative liability. The weighted average shares was increased by approximately
          8,000,000 share assuming conversion of the senior convertible
          debentures.
 
 Any
          of
          our warrants which were outstanding in the periods presented were also
          excluded
          from the calculation of diluted earnings per share as their effect would
          have
          been antidilutive. Since we incurred net losses attributed to common stock
          for
          2006, no dilution of the net losses per share would have resulted from
          the
          assumed conversion of the senior convertible debentures, discussed
          above.
  Stock-based
        Compensation


We
      adopted SFAS 123(R), Share Based Payments, on July 1, 2006, under
      which compensation expense is recognized immediately for past services and
      pro-rata for future services over the option-vesting period. As of June 30,
      2007, 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.




New
      Pronouncements


We
      apply
      Derivative Instruments 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.




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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
      2


Joint
      Venture




For
      the
      years ended June 30, 2007 and June 30, 2006, we did not engage in an
      acquisition.  However, on November 15, 2006, we entered into a joint
      venture with affiliates of Silver Point Capital, L.P. through a limited
      liability company named Ignis Barnett Shale, LLC.  The joint venture
      acquired 45% of the interests in the acreage, oil and natural gas producing
      properties and natural gas gathering and treating system located in the St.
      Jo
      Ridge Field in the North Texas Fort Worth Basin then held by W.B. Osborn Oil
      & Gas Operations, Ltd. and St. Jo Pipeline, Limited.  The purchase
      price for the acquisition was $17,600,000, subject to certain adjustments,
      plus
      $850,000 payable by Ignis Barnett Shale in thirty-six monthly installments
      of
      $23,611, beginning one month after closing.  In addition, Ignis
      Barnett Shale agreed to fund additional lease acquisitions up to a total of
      $5,000,000 for a period of two years.





Under
      the
      terms of Ignis Barnett Shale’s operating agreement, we agreed to manage the
      day-to-day operations of Ignis Barnett Shale and the Silver Point affiliates
      agreed to fund 100% of the purchase price of the transaction and 100% of future
      acreage acquisitions and development costs of Ignis Barnett Shale to the extent
      approved by Silver Point.  Ignis Barnett Shale’s budget, its operating
      plan, financial and hedging arrangements, if any, and generally all other
      material decisions affecting Ignis Barnett Shale are subject to the approval
      of
      Silver Point.  We assigned our intellectual property directly related
      to the Ignis Barnet Shale all of our intellectual property related to the joint
      venture and its activities.  Distributions from Ignis Barnett Shale
      will be made when and if declared by Silver Point as follows:





(i)
            To
                the Silver Point affiliates pro rata until the Silver Point affiliates
                have received an amount equal to their aggregate capital contributions;
                then





(ii)
            100%
                to the Silver Point affiliates pro rata until they have received
                an amount
                representing a rate of return equal to 12%, compounded annually,
                on their
                aggregate capital contributions;
                then





(iii)
            100%
                to us until the amount distributed to us under this clause (iii)
                equals
                12.5% of all amounts distributed pursuant to clauses (ii) and (iii);
                then





(iv)
            87.5%
                to the Silver Point affiliates pro rata and 12.5% to us until the
                amount
                distributed to the Silver Point affiliates represents a return equal
                to
                20%, compounded annually, on their aggregate capital contributions;
                then





(v)
            100%
                to us until the amount distributed to us under clauses (iii), (iv),
                and
                (v) equals 20% of all amounts distributed pursuant to clauses (ii),
                (iii),
                (iv), and (v); then





(vi)
            80%
                to the Silver Point affiliates pro rata and 20% to us until the amount
                distributed to the Silver Point affiliates represents a return equal
                to
                30%, compounded annually, on their aggregate capital contributions;
                then





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(vii)
            100%
                to us until the amount distributed to us under clauses (iii), (iv),
                (v),
                (vi), and (vii) equals 25% of all amounts distributed pursuant to
                clauses
                (ii), (iii), (iv), (v), (vi), and (vii);
                then





(viii)
            75%
                to the Silver Point affiliates pro rata and 25% to us until the amount
                distributed to the Silver Point affiliates represents a return equal
                to
                60%, compounded annually, on their aggregate capital contributions;
                then





(ix)
            50%
                to the Silver Point affiliates pro rata and 50% to
                us.





Ignis
      Barnett Shale’s operating agreement also provides that Silver Point may remove
      us as a member and our interest in the joint venture will be forfeited if we
      provide them with “cause” or if we enter bankruptcy.  Generally,
      Silver Point will have “cause” to remove us from the joint venture
      if:





·
            we
                or any of our officers or significant employees or consultants: (i)
                commits a felony or crime of moral turpitude; (ii) commits fraud,
                bad
                faith or gross negligence in performance of their duties to the joint
                venture; or (iii) commits a material breach of the joint venture
                agreement;


·
            we
                attempt to transfer out interest in the joint venture in violation
                of the
                operating agreement; or


·
            if
                we fire or terminate our consulting relationships with Michael Piazza,
                Fred Stein or Eric Hanlon.





If
      we
      lose the services of Mr. Piazza, Mr. Stein or Mr. Hanlon because they have
      quit,
      died or become disabled, and we are unable to find a replacement to Silver
      Point’s reasonable satisfaction, then our distributions from the joint venture
      will be reduced as follows:




Name
              Years
                  of service prior to termination<
                  1
              1-2
              2-3
              >
                  3Mike
                  Piazza
              25%
              20%
              15%
              5%Eric
                  Hanlon
              20%
              15%
              10%
              5%Fred
                  Stein
              30%
              25%
              20%
              5%





The
      operating agreement provides that Silver Point will have a right of first offer
      on any debt or equity financing we undertake prior to November 15, 2008, subject
      to similar rights we previously granted to Cornell Capital.





We
      also
      agreed not to make any additional investments in parts of three North Texas
      counties, the area of mutual interest that Ignis Barnett Shale established
      with
      W.B. Osborn Oil & Gas Operations, until the joint venture has satisfied its
      obligation to W.B. Osborn Oil & Gas Operations to purchase an additional $5
      million of acreage.  Thereafter, the joint venture will have a right
      of first offer on any future investment opportunity we desire to make in the
      area of mutual interest.  If the joint venture does not exercise its
      right of first offer, we can pursue the opportunity, subject to some limitations
      during the first 18 months after the joint venture completes the $5 million
      additional investment with W.B. Osborn Oil & Gas Operations.  If
      the joint venture exercises its right to pursue an opportunity, we will have
      the
      opportunity to co-invest up to 50% of such investment up to $10
      million.




Under
        the
        partnership agreement we are paid a management fee to handle day-to-day
        operations. For the year ended June 30, 2007 we recorded $142,5000 in revenue
        for management fees. Until we earn our equity share in the Ignis Barnett
        Shale,
        LLC entity we do not consolidate or record the financial impact of the
        partnership in our records. As of June 30, 2007, there was no financial impact
        on our financial statements.
  Note
        3


Going
      Concern





The
      financial statements of the Company have been prepared on the basis of
      accounting principles applicable to a going concern, which contemplates the
      realization of assets and the satisfaction of liabilities in the normal course
      of business.





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Should
      the Company be unable to achieve profitable operations or raise additional
      capital to bring on new projects, it may not be able to continue operations.
      These factors raise substantial doubt concerning the ability of the Company
      to
      continue as a going concern. The accompanying financial statements do not
      purport to reflect or provide for the consequences of discontinuing operations.
      In particular, such financial statements do not purport to show (a) as to
      assets, their realizable value on a liquidation basis or their availability
      to
      satisfy liabilities; (b) as to liabilities, the amount that may be allowed
      for
      claims and contingencies, or the status and priority thereof; (c) as to
      shareholder accounts, the effect of any changes that may be made in the
      capitalization of the Company; and (d) as to operations, the effect of any
      changes that may be made in its business.





We
      expect
      continued capital expenditures through the end of calendar year 2007, contingent
      upon raising capital. These anticipated expenditures are for seismic data
      acquisitions, land and drilling rights acquisitions, drilling programs, overhead
      and working capital purposes.  If current market conditions and
      production levels of our existing oil and natural gas continues we have
      sufficient funds to conduct our operations for a limited amount of time which
      includes no significant capital expenditures, We anticipate that we will need
      external funding to continue our planned operations for the next 12 months.
      Additional financing may not be available in amounts or on terms acceptable
      to
      us, if at all. If we are unable to secure additional capital, we will be forced
      to either slow or cease operations.





We
      presently do not have any available credit, bank financing or other external
      sources of liquidity. Due to our brief history and historical operating losses,
      our operations have not been a sufficient source of liquidity. We will need
      to
      obtain additional capital in order to expand operations and become profitable.
      In order to obtain capital, we may need to sell additional shares of our common
      stock or borrow funds from private lenders. We may not be successful in
      obtaining additional funding.





We
      will
      still need additional investments in order to continue operations to achieve
      cash flow break-even. Additional investments are being sought, but we cannot
      guarantee that we will be able to obtain such investments. Financing
      transactions may include the issuance of equity or debt securities, obtaining
      credit facilities, or other financing mechanisms. However, the trading price
      of
      our common stock could make it more difficult to obtain financing through the
      issuance of equity or debt securities. Even if we are able to raise the funds
      required, it is possible that we could incur unexpected costs and expenses
      or
      experience unexpected cash requirements that would force us to seek alternative
      financing. Further, if we issue additional equity or debt securities,
      stockholders may experience additional dilution or the new equity securities
      may
      have rights, preferences or privileges senior to those of existing holders
      of
      our common stock. If additional financing is not available or is not available
      on acceptable terms, we will have to curtail or cease our
      operations.





Note
      4


Property
      and equipment





Oil
      and
      gas properties consisted of the following at June 30, 2007:





Oil
                and gas properties:Proved
            
            $
            1,608,710Unproved
            
            
            -1,608,710Less
                accumulated depletion and depreciation
            
            
            (1,292,782
            )$
            315,928




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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
      for
      income taxes of approximately $10,600,000 as of  June 30, 2007.
      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, 2007, and the effective
      tax
      rate and the elected amount of the valuation allowance are indicated
      below:





Net
                operating tax loss
            
            $
            10,600,000Effective
                tax rate
            
            
            34
            %Deferred
                tax asset
            
            $
            3,604,000Valuation
                allowance
            
            $
            (3,604,000
            )Net
                deferred tax asset
            
            $
            -








Note
      6


Long
      term
      debt





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:





$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 $4,265,000 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.





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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. except under   Section 3(b)(i)
      limits the number of shares issuable to Cornell Capital Partners, LP upon
      conversion to 4.99% of the outstanding stock at time of conversion. Under
      section 39(a)(ii) of the same agreement, we are required to pay cash in lieu
      of
      shares for the portion greater than 4.99%.  The amount of cash is
      determined by the number of shares issuable upon conversion and the current
      market price of our stock.  Since the number of shares issuable is
      calculated using 94% of the market price, the cash conversion results in
      approximately a 6% premium paid on conversion. 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;





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.





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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 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”), *Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in, a Company’s Own Stock*, and must be accounted for as
      a derivative liability.





Under
      the Secured Convertible Debenture, Section 3(b)(i) limits the number of shares
      issuable to Cornell Capital Partners, LP upon conversion to 4.99% of the
      outstanding stock at time of conversion. Under section 39(a)(ii) of the same
      agreement, we are required to pay cash in lieu of shares for the portion greater
      than 4.99%.  The amount of cash is determined by the number of shares
      issuable upon conversion and the current market price of our
      stock.  Since the number of shares issuable is calculated using 94% of
      the market price, the cash conversion results in approximately a 6% premium
      paid
      on conversion.  As a result, the value of the derivative liability
      related to the conversion in excess of 4.99% will be based on the Cash Premium
      Method rather than using the Black-Scholes model. The conversion option is
      assumed to be converted via a cash payment since the January 5, 2006 derivative
      would use the entire 4.99% cap upon conversion any such additional conversions
      would be subsequent using the Black-Scholes method to mark-to-market. As of
      June
      30, 2007 and 2006 we recorded a liability of $366,568 and $1,149,135,
      respectively.





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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 warrants were recorded as a derivative liability
      in
      the consolidated balance sheet, and is marked to market at the end of each
      reporting period. Utilizing the Black-Scholes method we marked-to-market the
      warrants on a quarterly basis which resulted in a liability at June 30, 2007
      and
      2006 of $627,387 and $4,974,037, respectively.  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 fair market value of the warrants and conversion option
      at issuance exceeded the principal balance of the secured convertible debentures
      by $4,933,880.  The excess value was expensed to interest expense at
      issuance. 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. For the years ended June 30, 2007 and 2006
      the
      balance of convertible debt less debt discount was $546 and $2, respectively.
      We
      accrue interest on the Convertible Debentures at the rate of 7% per
      annum.  For the years ended June 30, 2007 and 2006 accrued interest
      was $484,912 and $137,027, respectively.





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. As of June 30, 2007
      the
      registration statement has not been declared effective, therefore we accrued
      liquidated damages in the amount of $1,000,000 for the 2007 fiscal year. Due
      to
      the failure of the registration statement to be declared effective we are
      considered in default and have recorded the debt as a current
      liability in these financial statements.








The
      convertible debenture liability is as follows at June 30, 2007:





Convertible
                debentures payable
            
            $
            4,890,000Less:
                unamortized discount on debentures
            
            
            (4,889,454
            )Convertible
                debentures, net
            
            $
            546








We
      entered into a Loan Agreement on December 22, 2005 for an amount of $100,000
      from a current investor, Petrofinanz GmbH. The loan accrues interest at 12%
      annually and matures June 20, 2006. We entered into an Amended and Restated
      Loan
      Agreement on August 28, 2006 for an additional amount of $500,000 resulting
      in a
      total amount of $600,000. The repayment date was changed to February 28, 2008
      and interest accrues at the fixed rate of 10% per annum. We entered into a
      Second Amended and Restated Loan Agreement on March 6, 2007 for an additional
      amount of $400,000 resulting in a total amount of $1,000,000 at June 30,
      2007.  The repayment date was extended to June 30, 2009 and interest
      continues to accrue at 10% per annum.  For the year ended June 30,
      2007 and 2006 accrued interest was $72,762 and $6,246,
      respectively.





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Note
      7


Leases





Effective
      May 1, 2007, we entered into a five year operating lease for our office space.
      The lease requires monthly payments of $10,404 plus the cost of monthly
      utilities in the amount of $1,070.  A total of $148,075 was charged to
      rent expense for the year ended June 30, 2007.





Note
      8


Stockholders’
      Deficit





On
      July
      1, 2006, we issued 50,000 unregistered shares of common stock to our
      non-employee Board Members for services to us as directors. These shares were
      valued at $10,750 or $0.22 per share, the fair market value of the common stock
      at the date of grant.





On
      September 21, 2006, we issued 218,125 unregistered shares of common stock to
      our
      advisors for services to us as advisors.. These shares were valued at $71,981
      or
      $0.33 per share, the fair market value of the common stock at the date of
      grant.





On
      November 30, 2006 we issued 500,000 unregistered shares of common stock to
      Michael Piazza for services to us as a CEO.. These shares were valued at
      $120,000 or $0.24 per share, the fair market value of the common stock at the
      date the shares were issuable.





On
      November 30, 2006, we issued 90,000 unregistered shares of common stock to
      Eric
      Hanlon for services to us as a consultant. These shares were valued at $21,600
      or $0.24 per share, the fair market value of the common stock at April 30,
      2006,
      the date the shares were issuable.





On
      December 28, 2006, we issued 29,687 unregistered shares of common stock to
      one
      of our advisors for services to us as an advisor.. These shares were valued
      at
      $5,344 or $0.18 per share, the fair market value of the common stock at the
      date
      of grant.





On
      January 19, 2007, we issued 60,000 unregistered shares of common stock to Eric
      Hanlon for services to us as a consultant. These shares were valued at $15,600
      or $0.26 per share, the fair market value of the common stock at April 30,
      2006,
      the date the shares were issuable.





On
      January 19, 2007, we issued 422,654 unregistered shares of common stock to
      Cornell Capital Partners, LP upon conversion of a portion of of their
      Convertible Debenture Agreement.  These shares were valued at $50,000
      or $0.1183 per share, the fair market value of the common stock at the date
      the
      share were issuable.





On
      January 29, 2007, we issued 75,000 unregistered shares of common stock to Patty
      Dickerson for services to us as an officer. These shares were valued at $16,500
      or $0.22 per share, the fair market value of the common stock at the date of
      grant.





On
      January 29, 2007, we issued 25,000 unregistered shares of common stock to Geoff
      Evett for services to us as a director.. These shares were valued at $5,500
      or
      $0.22 per share, the fair market value of the common stock at the date of
      grant.





On
      January 29, 2007, we issued 25,000 unregistered shares of common stock to Roger
      Leopard for services to us as a director.. These shares were valued at $5,500
      or
      $0.22 per share, the fair market value of the common stock at the date of
      grant.





60
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On
      February 6, 2007, we issued 153,125 unregistered shares of common stock to
      our
      advisors for services to us as advisors.. These shares were valued at $33,688
      or
      $0.22 per share, the fair market value of the common stock at the date of
      grant.





On
      February 6, 2007, we issued 30,000 unregistered shares of common stock to Eric
      Hanlon for services to us as a consultant. These shares were valued at $6,600
      or
      $0.22 per share, the fair market value of the common stock at April 30, 2006,
      the date the shares were issuable.





On
      March
      5, 2007, we issued 30,000 unregistered shares of common stock to Eric Hanlon
      for
      services to us as a consultant. These shares were valued at $5,400 or $0.18
      per
      share, the fair market value of the common stock at April 30, 2006, the date
      the
      shares were issuable.





On
      March
      30, 2007, we issued 165,673 unregistered shares of common stock to Cornell
      Capital Partners, LP upon conversion of a portion of their Convertible Debenture
      Agreement.  These shares were valued at $25,000 or $0.1509 per share,
      the fair market value of the common stock at the date of the shares were
      issuable.





On
      April
      3, 2007, we issued 30,000 unregistered shares of common stock to Eric Hanlon
      for
      services to us as a consultant.. These shares were valued at $5,100 or $0.17
      per
      share, the fair market value of the common stock at April 30, 2006, the date
      the
      shares were issuable.





On
      April
      3, 2007, we issued 170,000 unregistered shares of common stock to Mike Glynn
      for
      services to us as an officer. These shares were valued at $28,900 or $0.17
      per
      share, the fair market value of the common stock at the date of
      grant.





On
      May
      14, 2007 we issued 500,000 unregistered shares of common stock to Michael Piazza
      for services to us as a CEO. These shares were valued at $75,000 or $0.15 per
      share, the fair market value of the common stock at the date the shares were
      issuable.





On
      May 21
      2007, we issued 170,000 unregistered shares of common stock to Shawn Clift
      for
      services to us as an officer. These shares were valued at $25,500 or $0.15
      per
      share, the fair market value of the common stock at the date of
      grant.





On
      May
      29, 2007, we issued 30,000 unregistered shares of common stock to Eric Hanlon
      for services to us as a consultant. These shares were valued at $3,900 or $0.13
      per share, the fair market value of the common stock at April 30, 2006, the
      date
      the shares were issuable.





On
      June
      12, 2007, we issued 354,610 unregistered shares of common stock to Cornell
      Capital Partners, LP upon conversion of a portion of their Convertible Debenture
      Agreement.  These shares were valued at $35,000 or $0.0987 per share,
      the fair market value of the common stock at the date the shares were
      issuable.





On
      June
      18, 2007, we issued 75,000 unregistered shares of common stock to Patty
      Dickerson for services to us as an officer. These shares were valued at $7,500
      or $0.10 per share, the fair market value of the common stock at the date of
      grant.





On
      June
      27, 2007, we issued 30,000 unregistered shares of common stock to Eric Hanlon
      for services to us as a consultant. These shares were valued at $2,700 or $0.09
      per share, the fair market value of the common stock at April 30, 2006, the
      date
      the shares were issuable.








Note
      9


Supplemental
      Information For Oil and Gas Producing Activities (Unaudited)





Capitalized
      costs relating to oil and gas producing activities for the years ended June
      30,
      2007 and 2006:





61
 ***Table
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Oil
                and gas properties:
            
            2007
            
            
            2006Proved
            
            
            1,608,710
            
            
            
            1,905,373Unproved
            
            
            -
            
            
            
            672,447Total
                capitalized costs
            
            
            1,608,710
            
            
            
            2,577,820Less
                accumulated depletion & depreciation
            
            
            (1,292,782
            )
            
            
            (494,121
            )Net
                capitalized costs
            
            $
            315,928
            
            
            $
            2,083,699





Costs
      incurred in oil and gas producing activities for the years ended June 30, 2007
      and 2006:





Oil
                and gas properties:
            
            2007
            
            
            2006Acquisition
                of proved properties
            
            
            -
            
            
            $
            174,752Acquisition
                of unproved properties
            
            $
            23,626
            
            
            $
            2,253,862Development
                cost
            
            
            -
            
            
            $
            1,730,621





Results
      of operations from oil and gas producing activities for the years ended June
      30,
      2007 and 2006:





Twelve
                Months Ended June 30,
            
            
            Increase
                (Decrease)2007
            
            
            2006RestatedResults
                of oil and
                gas  producing operations
            
            $
            (387,565
            )
            
            
            (5,114,343
            )
            
            
            4,726,778General
                & administrative expense
            
            $
            2,583,463
            
            
            
            4,103,850
            
            
            
            (1,520,387
            )Gain/(loss)  from
                valuation  of derivative liaility
            
            $
            5,127,252
            
            
            
            (1,123,537
            )
            
            
            6,250,789Interest
                expense
            
            
            (1,812,073
            )
            
            
            (300,823
            )
            
            
            (1,511,250
            )Net
                income/ (loss)
            
            $
            344,151
            
            
            
            (10,642,553
            )
            
            
            10,961,916








The
      reserve quantity information for the year ended June 30, 2007 is as
      follows:





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 our natural gas and crude oil reserves
      or the costs that would be incurred to obtain equivalent reserves.





62
 ***Table
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The
      following table sets forth our net proved reserves, including the changes
      therein, and proved developed reserves:








Crude
                Oil (Bbls)
            
            
            Natural
                Gas (Mcf)PROVED-DEVELOPED
                AND UNDEVELOPED RESERVES:June
                30, 2005
            
            
            19,000
            
            
            
            89,082Extensions,
                discoveries, and other additions
            
            
            2,344
            
            
            
            14,063Production
            
            
            (5,620
            )
            
            
            (20,518
            )June
                30, 2006
            
            
            15,724
            
            
            
            82,627Revisions
                of previous estimates
            
            
            16,232
            
            
            
            (9,809
            )Production
            
            
            (14,846
            )
            
            
            (44,248
            )June
                30, 2007
            
            
            17,110
            
            
            
            28,570PROVED
                DEVELOPED RESERVESJune
                30, 2006
            
            
            15,724
            
            
            
            82,627June
                30, 2007
            
            
            11,490
            
            
            
            15,270





The
      Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
      Relating to Proved Oil and Natural Gas Reserves (“Standardized Measure”) does
      not purport to present the fair market value of ourour natural gas and crude
      oil
      properties. An estimate of such value should consider, among other factors,
      anticipated future prices of natural gas and crude oil, the probability of
      recoveries in excess of existing proved reserves, the value of probable reserves
      and acreage prospects, and perhaps different discount rates. It should be noted
      that estimates of reserve quantities, especially from new discoveries, are
      inherently imprecise and subject to substantial revision.





Under
      the
      Standardized Measure, future cash inflows were estimated by applying year-end
      prices, adjusted for contracts with price floors but excluding hedges, to the
      estimated future production of the year-end reserves.





Future
      cash inflows were reduced by estimated future production and development costs
      based on year-end costs to determine pre-tax cash inflows. Future income taxes
      were computed by applying the statutory tax rate to the excess of pre-tax cash
      inflows over our tax basis in the associated proved natural gas and crude oil
      properties. Tax credits and net operating loss carry forwards were also
      considered in the future income tax calculation. Future net cash inflows after
      income taxes were discounted using a 10% annual discount rate to arrive at
      the
      Standardized Measure.





The
      standardized measure of discounted net cash flows relating to proved oil and
      natural gas reserves is as follows (in thousands):





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 ***Table
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As
                of June 30,2007
            
            
            2006Future
                cash inflows
            
            $
            1,370
            
            
            $
            1,578Future
                production costs
            
            
            (209
            )
            
            
            (24
            )Future
                development costs
            
            
            (25
            )
            
            
            (24
            )Future
                income tax expense
            
            
            -
            
            
            
            -Future
                net cash flows
            
            
            1,136
            
            
            
            1,53010%
                annual discount for estimated timing of cash flows
            
            
            (215
            )
            
            
            (141
            )Standardized
                measure of discounted future net cash flows related to proved
                reserves
            
            $
            921
            
            
            $
            1,389








A
      summary
      of the changes in the standardized measure of discounted future net cash flows
      applicable to proved oil and natural gas reserves is as follows (in
      thousands):





Years
                Ended June 30,2007
            
            
            2006Balance,
                beginning of period
            
            
            1,389
            
            
            
            1,030Sales
                of oil and gas, net
            
            
            (1,244
            )
            
            
            (553
            )Net
                change in prices and production costs
            
            
            9
            
            
            
            (54
            )Net
                change in future development costs
            
            
            (1
            )
            
            
            (1200
            )Extensions
                and discoveries
            
            
            -
            
            
            
            223Revisions
                of previous quantity estimates
            
            
            628
            
            
            
            -Previously
                estimated development costs incurred
            
            
            -
            
            
            
            1,905Accretion
                of discount
            
            
            133
            
            
            
            103Other
            
            
            7
            
            
            
            (65
            )Balance,
                end of period
            
            $
            921
            
            
            $
            1,389






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