UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-KSB/A

(Mark One)



T

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007



 ̈TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________



COMMISSION FILE NUMBER:  000-30543



AVENUE GROUP, INC.

(Name of small business issuer in its charter)



|                                                                        |                                                
|----------------------------------------------------------------------- | -----------------------------------------------
|DELAWARE
(State or other jurisdiction of incorporation or organization) | 98-0200077
(I.R.S. Employer Identification No.)



405 Lexington Avenue, 26th Floor, New York, N.Y. 10174

(Address of principal executive offices) (Zip Code)



Issuers telephone Number: (888) 612-4188



Securities registered under Section 12(b) of the Exchange Act: None.



Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.0002 par value



Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.   ̈



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  ̈    No T



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



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



State issuer’s revenues for its most recent fiscal year.  $21,682



The aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the average bid and asked price of such common equity as of May11, 2008, was $2,800,000



As of May 20, 2008, the issuer had 252,190,986outstanding shares of Common Stock.



DOCUMENTS INCORPORATED BY REFERENCE: NONE



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







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Explanatory Note:

This amended 10-KSB/A is being filed to amend our annual report of Form 10-KSB for the fiscal year ended December 31, 2007 to include Exhibits 21 and 10.26 which were inadvertently omitted from our annual report on Form 10-KSB for the fiscal year ended December 31, 2007.



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TABLE OF CONTENTS



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|                                                                                                                                 | Page
|PART I                                                                                                                          
|Item 1.       Description of Business.
Item 1A.    Risk Factors... | 3
6 
|Item 2.       Description of Property.                                                              | 11  
|Item 3.       Legal Proceedings..                                                                 | 12  
|Item 4.       Submission of Matters to a Vote of Security Holders...                                            | 12  
|                                                                                                                                 |     
|PART II                                                                                                                         
|Item 5.       Market for Common Equity and Related Stockholder Matters.                                            | 13  
|Item 6.       Managements Discussion and Analysis of Financial Condition and Results of Operations                              | 14  
|Item 7.       Financial Statements..                                                               | 17  
|Item 8.       Changes In and Disagreements with Accountants on Accounting and Financial Disclosure...                          | 18  
|Item 8A.    Controls and Procedures                                                                                              | 18  
|Item 8B.    Other Information..                                                                   | 19  
|                                                                                                                                 |     
|PART III                                                                                                                        
|Item 9.       Directors, Executive Officers, Promoters and Control Persons;                                                      |     
|Compliance With Section 16(a) of the Exchange Act                                                                                | 20  
|Item 10.     Executive Compensation                                                                                              | 21  
|Item 11.     Security Ownership of Certain Beneficial Owners and Management                                                      |     
|and Related Stockholders Matters..                                                                      | 24  
|Item 12.     Certain Relationships and Related Transactions.                                                  | 25  
|Item 13.     Exhibits..                                                                       | 25  
|Item 14.     Principal Accountant Fees and Services                                                                              | 28  
|                                                                                                                                 |     
|SIGNATURES                                                                                                                       | 29  









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PART I



Except as expressly indicated to the contrary, references to "we," "us," or "our" contained in this Annual Report include Avenue Group, Inc. and/or our wholly owned subsidiaries.



ITEM 1. DESCRIPTION OF BUSINESS



Overview



We were incorporated in Delaware on February 2, 1999 under the name I.T. Technology Inc. In January 2003, we changed our corporate name to Avenue Group, Inc. We are engaged in oil and gas exploration and development through our wholly-owned operating subsidiary, Avenue Energy, Inc. and our wholly-owned Israel subsidiary, Avenue Energy Israel LTD. (AEI). Avenue Energy Inc owns 100% of Avenue Appalachia, Inc. ("AAI") which has a 10% of General Partner Interest and a 31.8% Limited Partner interest in Avenue Appalachia 2006 LP ("2006 LP"). Avenue Energy Israel LTD owns 100% of the Heletz-Kokhav license and 50% of the Iris License in Israel, 2 petroleum exploration licenses in the State of  Israel.



From inception until November 2002, our primary business was in the technology sector via our investments in VideoDome Inc and Stampville.com Inc. VideoDome has since been sold to ROO Group Inc. (OTCBB:RGRP) (ROO) and Stampville.com Inc.s operations are inactive.



During 2002, we determined to broaden our strategic focus and pursue a broader range of potential growth and investment strategies. As part of our shift to a broader strategic focus, in November 2002 we began to pursue acquisitions of and investments in oil and gas exploration and production property.



Our strategy is to acquire a portfolio of oil and gas assets. This includes the generation and acquisition of low risk drilling opportunities in the US and to acquire entry-level high impact oil and gas reserves abroad.



Our business activities during 2007 were principally devoted to our oil and gas operations in Israel and in the West Virginia area of the Appalachian Basin. In 2007, we refocused our efforts seeking lower risk oil and gas exploration and production opportunities in the U.S. and Israel.



The principal executive offices of the Company are located at 405 Lexington Avenue 26th Floor New York, NY 10174 and the telephone number is 888-612-4188 (facsimile 347-952-3683).



The Company's web site is located at www.avenuegroupinc.com.



As of May 10, 2008, the Company employed 2 full-time employees and 2 part-time employees/consultants.



Recent Developments

On April 3, 2008, the Company and its wholly owned Israel subsidiary Avenue Energy Israel LTD. ("AEI"), completed an agreement with TomCo Energy Plc ("TomCo"), a London-based, AIM-listed Oil & Gas Company and its wholly owned Israeli subsidiary Luton-Kennedy LTD ("LKL"), to farm-out 50% of AEIs interest in the Heletz-Kokhav and 25% interest in the Iris Licenses, which were awarded to the company by the Israel Petroleum Commission.

On March 23, 2008, the board of directors adopted resolutions providing for the designation of the Companys series A preferred stock, $0.001 par value.  Holders of the Series A Preferred Stock are entitled, among other things, to (i) ten (10) votes for each share of Series A preferred Stock owned on the record date for the determination of shareholders entitled to vote, on all matters submitted to the Companys shareholders, (ii) convert shares of Series A Preferred Stock into fully paid and non-assessable shares of the Companys common stock, at their option at any time and from time to time beginning from the date of issuance, in an amount equal to two (2) shares of common stock for each one (1) share of Series A Preferred Stock surrendered, and (iii) a preferential payment in cash of $0.0025 per share of Series A Preferred Stock owned, out of assets of the Company legally available therefore upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Company to the holders of (a) any other class or series of capital stock of the Company, the terms of which expressly provide that the holders of Series A Preferred Stock should receive preferential payment with respect to such distribution (to the extent of such preference), and (b) the Companys common stock.





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On March 23, 2008, the Company and Ledger Holdings Pty Ltd., executed a directorship and consulting agreement, pursuant to which Levi Mochkin, the managing director and beneficial owner of all of the equity interests in Ledger, will continue to serve as the chairman of the Companys board of directors and its chief executive officer.



Pursuant to the agreement with Ledger, Levi Mochkin will also serve as the Companys chief executive officer for a two year term, commencing March 23, 2008.  As compensation for his services he will receive $30,000 per month.  In addition, 2,400,000 shares of the Companys common stock and 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to Ledger.



On March 23, 2008, the Company and MEM Energy Partners, LLC, a limited liability company formed under the laws of Delaware (MEM), executed a directorship and consulting agreement (the Mendel Agreement), pursuant to which Mendel Mochkin, the managing director and registered owner of all of the equity interests in MEM, was appointed to serve as a member of the Companys board of directors and an oil and gas and general business consultant to the Company.



Pursuant to the agreement, MEM will make available Mendels services as an oil and gas and general business consultant to the Company for a term of one year, commencing March 23, 2008.  As compensation for his service as a consultant, the MEM Agreement provides that Mendel Mochkin will be paid $10,500 per month.  As a signing bonus, 2,400,000 shares of the Companys common stock and an option, to purchase 2,400,000 shares of the Companys common stock at an exercise price of $0.005 per share, will be granted to MEM.  The option will vest in monthly tranches of 200,000 shares, commencing March 23, 2008, and each 200,000 share tranche will expire on the fifth anniversary of its vesting.  In addition, 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to MEM.



Business Operations



We are engaged in oil and gas exploration and development in the US and abroad. Following is a discussion of our principal operations:



Heletz Oil Field



The Heletz Field (Heletz) is comprised of 3 areas  Heletz, Brur and Kochav - across approximately 4000 acres. Located approximately 55 km south of Tel Aviv, Heletz was the first oil field discovered in the eastern Mediterranean and remains the most productive oil field discovered onshore Israel.



The first well (Heletz 1) was drilled to a depth of 4800 feet (1515 Meters) and recognized as a producing well on October 12, 1955.  Initial production was approximately 400 barrels per day; oil quality was rated 29 API. A total of 88 wells have been drilled on the Heletz field to depths ranging from 4,000 to 6,500 feet, of which 59 were producing wells with the other 29 having oil shows.   Peak production occurred between 1959 and 1967 when daily production peaked at 4,000 barrels of oil per day (BOPD). Geological studies commissioned by the previous license holder,  Lapidoth Oil and Gas Prospectors (Lapidoth) and the Israeli Government have estimated oil reserves from the shallow sands only at 50 Million Barrels of Oil and recoverable reserves of 19.1 million barrels, of which 17.2 million barrels of oil have been produced.  Recovery estimates do not include secondary, tertiary recovery methods that may have the potential to raise the amount of recoverable reserves and production rates; these methods have not yet been applied to the field.



Oil production in the Heletz field continued until recently by Lapidoth, at a reported rate of approximately 85 BOPD from 7 producing wells.



In September, 2007 the Petroleum Commissioner of Israel formally issued to AEI 100% of the Heletz-Kokhav license covering a large part of the Heletz Field. In February, 2008, the Petroleum Commissioner of Israel issued to AEI 50% of the Iris license covering the remaining part of the Heletz Field. Lapidoth-Heletz LP, a Limited Partnership listed on the Tel Aviv stock exchange, was issued the other 50% of the Iris License. According to the terms of the Licenses, Avenue agreed to a work program over the next 3 years that will consist of field studies, well workovers, shooting seismic and the drilling of a new well. Failure by Avenue in implementing the work program may cause Avenue to lose its interest in the licenses. Avenue may request the conversion of the License to a 30 year production Lease in the event of a substantial increase in daily production that occurs as a result of the work program. Avenue estimates the work program expenditures at approximately $4,500,000.



There are 53 idle wells which Avenue believes can be excellent workover candidates. There is significant infill drilling potential on the acreage as well. The field is currently developed on 60-80 acre spacing or greater, providing additional increased density drilling opportunity.





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Management believes that the good quality Heletz sandstone makes Heletz a good candidate for water injection and/or a waterflood program, as other fields with similar characteristics have had success in increasing recoverable oil reserves through such processes. Additionally, a number of significant undrilled, deeper exploration prospects in the productive Jurassic Limestone formation have also been identified.

Appalachian Basin

The Appalachian Basin is one of the country's oldest natural gas producing regions with historical production in excess of 46 tcf of gas from over 400,000 wells. In 2003, the National Petroleum Council estimated the basin still contained another 9 tcf of proved gas reserves and an additional 68 tcf (Trillion Cubic Feet) of unproven gas reserves.

In  October  2006,  Avenue  Energy  entered  into  an  agreement  with  Drilling Appalachian Corporation, ("DAC") to participate in the drilling of  natural gas wells in West Virginia. According to the terms of the DAC agreement, Avenue was to participate in a 10 well drilling program in West Virginia.

In order to meet its financial obligations under the agreement, Avenue formed a Limited Partnership called Avenue Appalachia 2006 LP ("2006 LP"), with Avenue's wholly owned subsidiary, Avenue Appalachia Inc. ("AAI") acting as the General Partner ("GP"). Avenue assigned the DAC agreement to the 2006 LP.  In consideration of its assignment of the DAC contract and its services as GP, AAI received a 10% carried partnership interest in the 2006 LP, with its interest rising to 20% after payout of capital invested.

The limited partners of the 2006 LP are an un-affiliated private family trust holding a 68.2% limited partner interest, with AAI holding the remaining 31.8% limited partner interest.

The first two wells of the program were drilled and completed in November and December, 2006. For the year ending December 31 2007, the wells produced a total of approximately 8,861 mcf for an average of 30 mcf per day in the aggregate.

Due to the performance of the first two wells of the program, we have revised the terms of the program with DAC, where the obligations of the 2006 LP will go forward on a well by well basis. In October 2007, the Limited Partner of the 2006 LP decided to drill a well on a sole risk basis. AAI did not participate in this well and will not be sharing in the revenues of this well.

Other Oil and Gas

We continuously evaluate opportunities to apply or acquire oil and gas assets in the U.S. and abroad.  Going forward, our strategy is to acquire a portfolio of oil and gas assets that include low risk oil and gas reserves internationally and the generation of low risk drilling opportunities in Appalachia and similar basins in the US.

As part of our focus on opportunities in the Appalachian basin, we leased approximately 600 acres in the oil and gas production fairway of Western Pennsylvania. During 2008 we will evaluate the acreage acquired and depending on the results of our evaluation, determine whether or not to drill them.

Other Investments

On April 30, 2002, we acquired a 25% equity interest in ROO Group, Inc. In November 2003, ROO Group merged with the publicly traded Virilitec Industries, Inc. As a result, we owned approximately 25% of common stock in the newly merged entity. For the year ended December 31, 2007, we sold our remaining shares of ROO Group for gross proceeds of $109,817. We currently do not own any more shares in ROO Group.

Competition

Competition in the oil and gas industry is intense, particularly with respect to the acquisition of producing properties and undeveloped acreage. Major and independent oil and gas companies, as well as individuals and drilling programs, actively bid for desirable oil and gas properties, as well as for the equipment and labor required to operate and develop such properties. Many competitors have financial resources, staffs, facilities and exploration and development budgets that are substantially greater than Avenue Energys, which may adversely affect Avenue Energys ability to compete successfully. Given Avenue Energys lack of resources and staff relative to most of its competitors, Avenue is at a competitive disadvantage in being able to locate and evaluate oil and gas prospects and negotiate transactions for prospects that it considers favorable. In addition, many of Avenue Energys larger competitors may be better able to respond to factors that affect the demand for oil and natural gas production such as changes in worldwide oil and natural gas prices and levels of production, the cost and availability of alternative fuels, the level of consumer demand, the extent of domestic production of oil and gas, the extent of imports of foreign oil and gas, the cost of and proximity to pipelines and other transportation facilities, regulations by state and federal authorities and the cost of complying with applicable environmental regulations.



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Environmental Matters

Our operations are subject to various laws and regulations relating to the environment, especially related to our oil and gas operations, which have become increasingly stringent. These laws and regulations may require us to remediate or otherwise redress the effects on the environment of prior disposal or release of chemicals or petroleum substances by us or other parties. We expect to make provisions for environmental restoration and remediation at the time we determine that a clean-up is probable and the amount of such clean-up is reasonably determinable. The costs of future restoration and remediation are inherently difficult to estimate, could be significant, and may be material to the results of our operations in the period in which they are recognized and may have a material impact on our financial position or liquidity. Our operations are also subject to environmental and common law claims for personal injury and property damage caused by the release of chemicals or petroleum substances by us or others.

ITEM 1A: RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors before deciding to invest in our company. If any of the following risks actually occur, our business, financial condition, results of operations and prospects for growth would likely suffer. As a result, you may lose all or part of your investment in our company.

WE HAVE A HISTORY OF LOSSES WHICH MAY CONTINUE AND WHICH MAY NEGATIVELY IMPACT OUR ABILITY TO ACHIEVE OUR BUSINESS OBJECTIVES.

We have incurred losses since our inception. For the years ended December 31, 2007 and 2006, we generated revenues of $21,682 and $61,368, respectively, and incurred net losses of $1,464,843 and $471,947, respectively. At December 31, 2007, we had working capital deficit of $555,397 and an accumulated deficit of $34,241,122. Our auditors, in their report dated May 23, 2008, have expressed substantial doubt about our ability to continue as going concern. There can be no assurance that future operations will be profitable. We may not be able to generate significant revenues in the future and expect our operating expenses to increase substantially over the next 12 months as we continue to pursue our oil and gas exploration activities. As a result, we expect to continue to experience negative cash flow for the foreseeable future and cannot predict when, if ever, we might become profitable. We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we cannot raise funds on acceptable terms, we may not be able to execute on our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations.

We have a limited operating history upon which to evaluate our business prospects.

Until September of 2006, only one of our oil and gas properties, the Karakilise-1 well, had generated any oil production revenue and that revenue had been utilized entirely to cover part of the cost of operating the well and infra-structure improvements at the Karakilise well. In September of 2006 we relinquished ownership of our interest in the Karakilise well to the operator in Turkey. We commenced U.S. oil and gas operations in 2006 and started generating revenues in January of 2007. We have limited revenues and have never operated profitably and we do not expect to operate profitably in the foreseeable future.

Our ability to generate operating profits will be contingent on the successful exploration and drilling of wells in which we have an interest.

We intend to concentrate most of our financial resources for the foreseeable future in the acquisition of rights and interests in oil and gas exploration and production, as well as the ongoing working capital requirements of our businesses and operations. We cannot assure that our oil and gas property will result in any successful wells being drilled and, if successful, the actual amount and timing of revenue we will receive from the production. We will need significant additional capital in the near future to fund the further exploration activities and the further development of our oil and gas leases in Israel and in Appalachia, our limited partner interest in the 2006 LP. Our failure to acquire this capital may also cause the loss of some or all of our interest in our licenses in Israel and the loss of some or all of our limited partner interest in the 2006 LP, as well as the curtailment of our corporate activities which would have a material adverse effect on our business, operations and prospects.



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We require additional financing to fully implement our plan of operations.

We have limited resources and we are dependent on debt or equity financing to finance our operations and for the acquisition of additional oil and gas properties. There can be no assurance that such funds may not be available on commercially acceptable terms, if at all. If we cannot raise funds on acceptable terms, we may not be able to execute on our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations. In addition, in connection with any financings, we may issue preferred stock or common stock with rights, preferences and privileges senior to those of our common stockholders. Further, if we issue additional equity securities or convertible debt securities, our existing stockholders may experience significant dilution.

We do not have "independent directors" that can provide meaningful oversight of our business.

Our Board of Directors consists of two members, one of whom is a member of management and the other of whom is a consultant to our company. We do not have an audit committee to oversee our financial reports and controls. In the existing corporate and regulatory environment, it has become increasingly difficult for small public companies such as ours to attract qualified independent outside directors. Consequently, we cannot state when, if ever, we will be able to add additional qualified outside directors to our Board of Directors.

The loss of the services of Levi Mochkin, our CEO, would harm our business.

Our business is directed by Levi Mochkin, our CEO. We would be seriously affected if Levi Mochkin was unable or unavailable to perform for any reason. We do not have key man or other insurance to protect against the death or disability of Levi Mochkin.

Our Proposed Operations Will Require Significant Capital Expenditures for Which We May Not Have Sufficient Funding and If We Do Obtain Additional Financing Our Then Existing.

We intend to continue acquiring oil and gas leases in our development area in the ordinary course of our business. If we are successful in these acquisitions, our capital needs may increase substantially. If we fail to obtain the funding that we need when it is required, we may have to forego or delay potentially valuable opportunities to acquire new oil and gas properties or default on existing funding commitments to third parties and forfeit or dilute our rights in existing oil and gas properties. In addition, any additional equity financing may involve substantial dilution to our then existing shareholders.

Our Future Performance Is Dependent Upon Our Ability To Identify, Acquire And Develop Oil And Gas Properties, the Failure of Which Could Result in Under Use of Capital and Losses.

Our future performance depends upon our ability to identify, acquire and develop oil and gas reserves that are economically recoverable. Our success will depend upon our ability to acquire working and revenue interests in properties upon which oil and gas reserves are ultimately discovered in commercial quantities, and our ability to develop prospects that contain proven oil and gas reserves to the point of production. Without successful acquisition and exploration activities, we will not be able to develop oil and gas reserves or generate revenues. We cannot provide you with any assurance that we will be able to identify and acquire oil and gas reserves on acceptable terms, or that oil and gas deposits will be discovered in sufficient quantities to enable us to recover our exploration and development costs or sustain our business.

The successful acquisition and development of oil and gas properties requires an assessment of recoverable reserves, future oil and gas prices and operating costs, potential environmental and other liabilities, and other factors. Such assessments are necessarily inexact and their accuracy inherently uncertain. In addition, no assurance can be given that our exploitation and development activities will result in the discovery of any reserves. Our operations may be curtailed, delayed or canceled as a result of lack of adequate capital and other factors, such as lack of availability of rigs and other equipment, title problems, weather, compliance with governmental regulations or price controls, mechanical difficulties, or unusual or unexpected formations, pressures and or work interruptions. In addition, the costs of exploitation and development may materially exceed our initial estimates.

Future Growth Could Strain Our Personnel And Infrastructure Resources, and If We Are Unable To Implement Appropriate Controls And Procedures To Manage Our Growth, We May Not Be Able To Successfully Implement Our Business Plan.

We expect to experience rapid growth in our operations, which will place a significant strain on our management, administrative, operational and financial infrastructure. Our future success will depend in part upon the ability of our executive officers to manage growth effectively. This may require us to hire and train additional personnel to manage our expanding operations. In addition, we must continue to improve our operational, financial and management controls and our reporting systems and procedures. If we fail to successfully manage our growth, we may be unable to execute upon our business plan.



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The Oil And Gas Exploration And Production Industry Historically Is A Cyclical Industry And Market Fluctuations In The Prices Of Oil And Gas Could Adversely Affect Our Business.

Prices for oil and gas tend to fluctuate significantly in response to factors beyond our control. These factors include, but are not limited to:

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| |  | weather conditions in the United States and elsewhere;                                                              
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| |  | economic conditions, including demand for petroleum-based products, in the United States and elsewhere;             
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| |  | actions by OPEC, the Organization of Petroleum Exporting Countries;                                                 
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| |  | political instability in the Middle East and other major oil and gas producing regions;                             
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| |  | governmental regulations, both domestic and foreign;                                                                
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| |  | domestic and foreign tax policy;                                                                                    
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| |  | the pace adopted by foreign governments for the exploration, development, and production of their national reserves;
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| |  | the price of foreign imports of oil and gas;                                                                        
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| |  | the cost of exploring for, producing and delivering oil and gas; the discovery rate of new oil and gas reserves;    
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| |  | the rate of decline of existing and new oil and gas reserves;                                                       
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| |  | available pipeline and other oil and gas transportation capacity;                                                   
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| |  | the ability of oil and gas companies to raise capital;                                                              
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| |  | the overall supply and demand for oil and gas; and                                                                  
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| |  | the availability of alternate fuel sources.                                                                         

Changes in commodity prices may significantly affect our capital resources, liquidity and expected operating results. Price changes will directly affect revenues and can indirectly impact expected production by changing the amount of funds available to reinvest in exploration and development activities. Reductions in oil and gas prices not only reduce revenues and profits, but could also reduce the quantities of reserves that are commercially recoverable. Significant declines in prices could result in non-cash charges to earnings due to impairment. We do not currently engage in any hedging program to mitigate our exposure to fluctuations in oil and gas prices.

Changes in commodity prices may also significantly affect our ability to estimate the value of producing properties for acquisition and divestiture and often cause disruption in the market for oil and gas producing properties, as buyers and sellers have difficulty agreeing on the value of the properties. Price volatility also makes it difficult to budget for and project the return on acquisitions and the development and exploitation of projects. We expect that commodity prices will continue to fluctuate significantly in the future.

The Oil And Gas Industry Is Highly Competitive, and We May Not Have Sufficient Resources to Compete Effectively.

The oil and gas industry is highly competitive. We compete with oil and natural gas companies and other individual producers and operators, many of which have longer operating histories and substantially greater financial and other resources than we do, as well as companies in other industries supplying energy, fuel and other needs to consumers. Our larger competitors, by reason of their size and relative financial strength, can more easily access capital markets than we can and may enjoy a competitive advantage in the recruitment of qualified personnel. They may be able to absorb the burden of any changes in laws and regulation in the jurisdictions in which we do business and handle longer periods of reduced prices for oil and gas more easily than we can. Our competitors may be able to pay more for oil and gas leases and properties and may be able to define, evaluate, bid for and purchase a greater number of leases and properties than we can. Further, these companies may enjoy technological advantages and may be able to implement new technologies more rapidly than we can. Our ability to acquire additional properties in the future will depend upon our ability to conduct efficient operations, evaluate and select suitable properties, implement advanced technologies and consummate transactions in a highly competitive environment.



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Industry, economic facts and market forces may adversely affect our oil and gas exploration and development, operations and earnings.

The development, operations and earnings of our oil and gas exploration and development activities may be adversely affected by local, regional and global events or conditions that affect supply and demand for oil and gas products. These events or conditions are generally not predictable and include, among other things, general economic growth rates and the occurrence of economic recessions; the development of new supply sources; adherence by countries to OPEC quotas; supply disruptions; weather, including seasonal patterns that affect energy demand and severe weather events that can disrupt operations; technological advances, including advances in exploration, production, refining and petrochemical manufacturing technology and advances in technology relating to energy usage; changes in demographics, including population growth rates and consumer preferences; and the competitiveness of alternative energy sources or product substitutes. In the past, crude, natural gas, petroleum product and chemical prices have fluctuated widely in response to changing market forces.

We have not established any proved reserves.

We have not yet discovered or acquired any proved oil and gas reserves. At such time, if ever, that we discover or acquire proved reserves, we cannot assure that we will realize the amounts estimated to be obtainable. Likewise, until such time, if ever, that we acquire additional leases we are unable to estimate any future revenue attributable to any reserves associated with the property subject to such licenses or leases. As a result, our actual revenue, if any, may be substantially different from any future estimates that we use in calculating reserve values. Many other factors over which we have little or no control might lower or preclude recovery from any property which is subject to a lease or an interest in a lease owned by us. These factors include acts of God, income tax laws, oil, gas and mineral prices, and the development of alternative energy sources. In addition, we cannot assure that we will be successful in finding new reserves or, if found, that production in quantities large enough to make the operation profitable will be possible.

Our oil and gas exploration and development operations and earnings depend on discovery or acquisition of economically recoverable oil and gas reserves.

Our success will in the near term depend on our ability to discover or acquire oil and gas reserves that are economically recoverable. We cannot assure that our wells will ever generate sufficient revenue to provide us with cash for our other activities or that the other wells which we may develop in Appalachia or elsewhere will result in the discovery of oil and gas at such locations or, if found, that the extraction of oil and gas from these locations will be commercially feasible. No proven reserves have been determined at any of the oil and gas licenses or leases where we hold interests. Unless we successfully explore, develop or acquire properties containing economically extractable reserves, our economic viability will be adversely affected.

None of our officers has technical training or expertise in petroleum engineering or geology.

Petroleum engineering and geology are fundamental tools in exploring for and developing oil and gas property. Numerous petroleum engineers and geologists provide consultation to the industry, and we utilize the services of such consultants as we deem appropriate. Nevertheless, by not having such expertise in our management, we are at risk of failing to recognize the need for such consultation until after we have made one or more costly erroneous decisions as a result of not having such expertise. We are also at risk of failing to adequately evaluate the expertise of consultants whom we do engage, and thus making costly erroneous decisions based on advice from inappropriate consultants. The errors described above could have an impact so large as to jeopardize our ability to continue as a going concern.

Operating hazards and uninsured risks with respect to the oil and gas rights or  interests may have material adverse effects on our operations.

Acquisitions of oil and gas rights or properties are subject to all of the risks normally incident to the exploration for and the development and production of oil and gas, including blowouts, cratering, uncontrollable flows of oil, gas or well fluids, fires, pollution and other environmental and operating risks. These hazards could result in substantial losses due to injury or loss of life, severe damage to or destruction of property and equipment, pollution and other environmental damage and suspension of operations. In addition, offshore operations are subject to a variety of operating risks peculiar to the marine environment, such as hurricanes or other adverse weather conditions, more extensive governmental regulation and interruption or termination of operations by governmental authorities based on environmental or other considerations. Neither we nor the owners of the oil and gas properties in which we have an interest is insured against these risks. The occurrence of a significant event against any of the oil and gas properties where we have an interest could have a material adverse affect on the owner/operator of the properties and could materially affect the continued operation of the affected owner/operator and could expose Avenue Energy and/or us to liability, as well.



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The market price of our common stock may be affected by limited trading volume and may fluctuate significantly.

As of May 20, 2008, approximately 140,000,000, or approximately 55%, of our 252,190,986 outstanding shares of common stock are freely tradable in the public marketplace. We may file a registration statement for the sale of additional shares, or the resale of restricted shares by purchasers in our private placements, without the assistance of an underwriter. We cannot assure you that there will be a market for these additional shares. In addition, the immediate availability of a significant number of additional shares in the public marketplace through a public offering of our shares or the influx of Rule 144 shares from various parties who have acquired our shares in private placements may seriously and adversely affect the trading price and liquidity of our shares. The influx of additional shares of our common stock into the marketplace could also adversely affect your ability to sell shares in short time periods, or possibly at all. The common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of the common stock without regard to our operating performance. In addition, we believe that factors such as fluctuations in our financial results or prospects and changes in the overall economy, the oil and gas exploration, drilling and production segment of the market or the condition of the financial markets could cause the price of the common stock to fluctuate substantially.

The sale of a significant number of shares of our common stock could cause a decline in the market price of our common stock.

As of May 20, 2008, approximately 140,000,000, or approximately 55%, of our 252,190,986 outstanding shares of common stock are freely tradable in the public marketplace. In addition, there are outstanding options and other vested commitments to issue in excess of an additional 12,950,000 shares of common stock. Given the limited market for our common stock, there is no guarantee that a public market will exist for all or even a significant portion of our outstanding restricted shares and the shares issuable upon the exercise of options or other commitments and the market price of the common stock could drop dramatically due to the sales of any significant amount of these shares or the perception that such sales could occur.

The public float as a percentage of the outstanding shares remains small, which may affect price and liquidity in the common stock for the foreseeable future. These factors could also make it more difficult to raise funds through future offerings of common stock and may seriously impact the market price for the 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 required to file reports under Section 15(d) of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, 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:

| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.
|
|



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| |  | 
| |  | 

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.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.



Our certificate of Incorporation, by-laws and Delaware law contain provisions that could delay or prevent a change in control of our company and thereby limit the market price of our common stock.



Our Certificate of Incorporation and bylaws contain provisions that could delay or prevent a change in control. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.



Our stockholders may not be able to recover monetary damages from directors for certain actions.



Our Certificate of Incorporation contains a provision that eliminates personal liability of our directors for monetary damages which would be paid to us and our shareholders for certain breaches of fiduciary duties. As a result, our stockholders may be unable to recover monetary damages against our directors for their actions that constitute breaches of fiduciary duties, negligence or gross negligence.



ITEM 2. DESCRIPTION OF PROPERTY



The net-well and net-acreage disclosures below at December 31, 2007, are consolidated with and report 100% of 2006 LP's interest. Avenue Appalachia, Inc. owns a 31.8% limited partner interest; an independent party owns a 68.2% limited partner interest. The limited partners own 90% of the interest in the partnership until payout of invested capital. Avenue Appalachia, Inc. owns the other 10% interest in the partnership as the general partner. The 10% general partner interest increases to 20% at payout of invested capital.



|                                 |            |                    |            |            |          |          |          |            |           
|-------------------------------- | ---------- | ------------------ | ---------- | ---------- | -------- | -------- | -------- | ---------- | ----------
|                                 | Total      | U.S.
West Virginia | Turkey    
|Net productive exploratory wells | 2007


1.6 | 2006


.11         | 2005


.15 | 2007


1.6 | 2006


 | 2005


 | 2007


 | 2006


.11 | 2005


.15
|Net dry exploratory wells        |           |                   |           |           |         |         |         |           |          
|Net dry development wells        |           |                   |           |           |         |         |         |           |          



Productive wells and acreage



The Company has the following productive wells and acreage as of December 31, 2007:



|                 |                  |    
|---------------- | ---------------- | ---
|Productive Wells | US
West Virginia
|                 | Gross            | Net
|Oil              |                 |   
|Gas              | 2                | 1.6
|Developed acres  | 144              | 115



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| |  | 
| |  | 

Undeveloped Acreage

As of December 31, 2007, the Company held leases for undeveloped acreage located in the Appalachian Basin, West Virginia:

Gross undeveloped acreage

600  acres

Net undeveloped acreage

600  acres

As of December 31, 2007, the Company held leases for undeveloped acreage located in the State of Israel:

Gross undeveloped acreage

60,000  acres

Net undeveloped acreage

60,000  acres

Production

During 2005 and 2006 we owned working interests in oil and gas property in Turkey. Prior to 2005 we drilled two wells in Turkey which did not have proved reserves. We had limited production from one of the wells. As of December 31, 2006, we no longer retain interest in any properties in Turkey and transferred to the operator or allowed to expire all of our interest in oil in gas property in Turkey.

The following table shows oil and gas production information in 2007, 2006, and 2005 by geographic area:

|                                                  |       |                  |        |       |      |      |      |        |       
|------------------------------------------------- | ----- | ---------------- | ------ | ----- | ---- | ---- | ---- | ------ | ------
|                                                  | Total | US
West Virginia | Turkey
|2007                                              | 2006  | 2005             | 2007   | 2006  | 2005 | 2007 | 2006 | 2005  
|Oil (barrels)                                     | -     | 410              | 653    | -     | -    | -    | -    | 410    | 653   
|Gas (mcf)                                         | 8,861 | -                | -      | 8,861 | -    | -    | -    |        |       
|Oil Sales (in thousands)*                         | -     | 61               | 25     | -     | -    | -    | -    | 61     | 25    
|Gas Sales (in thousands)*                         | $23   | -                | -      | $22   | -    | -    | -    | -      | -     
|Less: production expense and tax (in thousands)   | $(29) | $(105)           | $(119) | $(29) | -    | -    | -    | $(105) | $(119)
|Gross profit (in thousands)                       | -     | -                | -      | -     | -    | -    | -    | -      |       
|Depletion expense (in thousands)                  | -     | -                | -      | -     | -    | -    | -    | -      | -     
|General and administrative expense(in thousands)  | $720  | $1,280           | $4,055 | $720  | -    | -    | -    | $1,280 | $4,055
|Unit data (per barrel)
Average sales price of oil | -     | $57.03           | $39.00 | -     | -    | -    | -    | $57.03 | $39.00
|Unit data (per mcf)
Average sales price of gas    | $7.13 | -                | -      | $7.13 | -    | -    | -    | -      | -     



We maintain office space at 752 Pacific St, Brooklyn, NY, provided to us at no charge by a former member of our Board of Directors, Mr. Shaya Boymelgreen. Our mailing address is 405 Lexington Avenue, 26th Floor, New York, NY 10174. We pay $175 per month for the mailing address.

ITEM 3. LEGAL PROCEEDINGS

We are currently not a party to any legal proceedings. There are no known proceedings instituted by governmental authorities, pending or known to be contemplated against us under any international, United States federal, state or local environmental laws. We are not aware of any events of noncompliance in our operations in connection with any environmental laws or regulations and we are not aware of any potentially material contingencies related to environmental issues. However, we cannot predict whether any new or amended environmental laws or regulations introduced in the future will have a material adverse effect on the future business of Avenue Group, Inc.

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

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this annual report.



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PART II



ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



Our common stock is quoted through the NASDAQ Bulletin Board under the symbol "AVNUE." To date, due in part to the small size of the public float on our shares, there has been a limited public market for the common stock and there can be no assurance that an active trading market for the common stock will develop. As a result thereof, the price of the common stock is subject to wide fluctuations and the current market price of the common stock may not be an accurate reflection of our value.



On October 4, 2002 our common stock began trading on the third market segment of the Frankfurt Stock Exchange under the symbol ITQ and the German Cusip number (WKN) 722 861.



The following tables set forth, for the period indicated, the high and low sales prices per share for our common stock as reported on Quotemedia.com. These quotations reflect inter-dealer prices without retail markup, markdown or commission and may not necessarily represent actual transactions.



|              |             |             |             |        |        |       
|------------- | ----------- | ----------- | ----------- | ------ | ------ | ------
|              | Fiscal 2008 | Fiscal 2007 | Fiscal 2006
|Quarter Ended | High        | Low         | High        | Low    | High   | Low   
|March 31      | $0.03       | $0.015      | $0.02       | $0.01  | $0.055 | $0.03 
|June 30       | $0.02(1)    | $0.015(1)   | $0.019      | $0.01  | $0.055 | $0.021
|September 30  | n/a         | n/a         | $0.025      | $0.008 | $0.04  | $0.025
|December 31   | n/a         | n/a         | $0.03       | $0.015 | $0.03  | $0.017



(1)

Through May 16, 2008



Shareholders



As of May 10, 2008 we had 87 shareholders of record.



Dividend Policy



It is the present policy of the Board of Directors to retain earnings for use in our business. We have not declared any cash dividends to our shareholders and we do not anticipate paying dividends in the foreseeable future.



Transfer Agent



The Transfer Agent and Registrar for our common stock is Transfer Online, Inc. Its address is 317 SW Alder Street, 2nd Floor Portland, Oregon 97204 and its telephone number at that location is 503-227-2950; Fax 503-227-6874.



Unregistered Sale of Equity Securities



We sold the following equity securities during the fiscal year ended December 31, 2007 that were not registered under the Securities Act of 1933, as amended (the "Securities Act").





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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS



The following table shows information with respect to each equity compensation plan under which the Company's common stock is authorized for issuance as of the fiscal year ended December 31, 2007.



EQUITY COMPENSATION PLAN INFORMATION



|                                                           |                                                                                             |                                                                             |                                                                                                                                           
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------
|Plan category                                              | 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)
|                                                           | (a)                                                                                         | (b)                                                                         | (c)                                                                                                                                       
|Equity compensation plans approved by security holders     | 0                                                                                           | n/a                                                                         | 15,000,000                                                                                                                                
|                                                           |                                                                                             |                                                                             |                                                                                                                                           
|Equity compensation plans not approved by security holders | -------                                                                                     | -------                                                                     | ---------                                                                                                                                 
|                                                           |                                                                                             |                                                                             |                                                                                                                                           
|Total                                                      | -------                                                                                     | -------                                                                     | 15,000,000                                                                                                                                



Description of 2000 Amended and Restated Stock Option Plan



In April 2000, our Board of Directors authorized the issuance of up to 8,250,000 shares of common stock in connection with Avenue Group's 2000 Stock Option Plan. The 2000 Stock Option Plan became effective on February 14, 2001 in connection with Avenue Group's effective registration statement on Form SB-2. On December 24, 2002, shareholders approved an amendment to the 2000 Stock Option Plan, enabling the Board as it is currently configured without non-employee directors to grant options under the plan and to increase the number of shares authorized for grant from 8,250,000 to 15,000,000. Avenue Group intends to grant options under the Stock Option Plan to officers, directors, employees and consultants of Avenue Group and its subsidiaries. No options have been granted under the 2000 Stock Option Plan as of May 10, 2008.



ITEM 6. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes included in this report. This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The statements contained in this report that are not historic in nature, particularly those that utilize terminology such as "may," "will," "should," "expects," "anticipates," "estimates," "believes," or "plans" or comparable terminology are forward-looking statements based on current expectations and assumptions.



Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section "Risk Factors" set forth in this report.



The forward-looking events discussed in this annual report, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. For these statements, we claim the protection of the "bespeaks caution" doctrine. All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.





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Overview



We were incorporated in Delaware on February 2, 1999 under the name I.T. Technology Inc. In January 2003, we changed our corporate name to Avenue Group, Inc. We are engaged in oil and gas exploration and development through our wholly-owned operating subsidiary, Avenue Energy, Inc. and our wholly-owned Israel subsidiary, Avenue Energy Israel LTD. (AEI). Avenue Energy Inc owns 100% of Avenue Appalachia, Inc. ("AAI") which has a 10% General Partner Interest and a 31.8% Limited Partner interest in Avenue Appalachia 2006 LP ("2006 LP"). Avenue Energy Israel LTD owns 100% of the Heletz-Kokhav license and 50% of the Iris License in Israel, 2 petroleum exploration licenses in Israel.



From inception until November 2002, our primary business was in the technology sector via our investments in VideoDome Inc and Stampville.com Inc. VideoDome has since been sold to ROO Group Inc. (OTCBB:RGRP) (ROO) and Stampville.com Inc.s operations are inactive.



During 2002, we determined to broaden our strategic focus and pursue a broader range of potential growth and investment strategies. As part of our shift to a broader strategic focus, in November 2002 we began to pursue acquisitions of and investments in oil and gas exploration and production property.



Our strategy is to acquire a portfolio of oil and gas assets. This includes the generation and acquisition of low risk drilling opportunities in the US and to acquire entry-level high impact oil and gas reserves abroad.



Our business activities during 2007 were principally devoted to our oil and gas operations in Israel and in the West Virginia area of the Appalachian Basin. In 2007 we refocused our efforts seeking lower risk oil and Gas exploration and production opportunities in the US and Israel.



In 2008, Management intends to focus our activities on re-developing the Heletz field. This includes restarting the 6 wells that were shut in by Lapidoth as of May, 2007, reviewing plugged wells that are candidates for workovers and collecting and reviewing field and production data for additional upside opportunities.



Results of Operations



Year ended December 31, 2007 compared to year ended December 31, 2006



During 2007, our activity was principally devoted to oil and gas activities in the  State of Israel arising out of the granting of the Heletz Field Licenses by the  Israel Petroleum Commission.



We generated $21,682 in revenue in the year ended December 31, 2007, as compared to $61,368 in the year ended December 31, 2006. The decrease in revenue is primarily due to the receipt of $37,986 from JKK's production from the Karakilise lease.



The net loss for the year ended December 31, 2007 was $1,464,843 compared to a net loss of $471,947 for the year ended December 31, 2006. During the 2007 period, selling, general and administrative expense decreased by $560,065, primarily due to a reduction in stock based compensation and consulting fees. Total operating expense for the year ended December 31, 2007 decreased by $254,124 from $1,415,907 in the previous year to $1,161,783. This is predominantly a result of a decrease in share based compensation of approximately $46,500, a increase in impairment losses of approximately $381,412 and a reduction in oil lease operating expenses of loss on sale of oil lease of $75,471.



Liquidity and Capital Resources



We have generated losses from inception and anticipate that we will continue to incur significant losses until, at the earliest, we can generate sufficient revenue to offset the substantial up-front capital expenditures and operating cost associated with establishing, attracting and retaining a significant business base. We have a net loss of $1,464,843 and $471,497 and a negative cash flow from operations of $461,814 and $979,675 for the year ended December 31, 2007 and 2006, respectively. We have an accumulated deficit of $34,241,122 and $32,776,279 as of December 31, 2007 and 2006, respectively. We cannot offer any assurance that we will be able to generate significant revenue or achieve profitable operations.



The capital requirements relating to implementation of our business plan will be significant. As of December 31, 2007, we had cash of $9,918  and a working capital deficit  of $555,397 as compared  to $76,187 in cash and working capital of $229,795 as of December 31, 2006. Much of our working capital during 2007 to date has been generated through the sale of shares of  ROO and Langley Park.



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Our cash and cash equivalents decreased by $66,269 from $76,187 as of December 31, 2006 to $9,918 as of December 31, 2007. The decrease in cash and cash equivalents was due to the loss in operations offset by proceeds from the sale of shares of ROO and Langley Park.



During the next twelve months, our business plan contemplates that we further develop our oil and gas activities. To date we have been dependent on the proceeds of private placements of our debt and equity securities and other financings in order to implement our operations.



Management plans to rely on the proceeds from farm-outs, new debt or equity financing to finance its ongoing operations. We anticipate requiring significant additional capital in order to fund Avenue Energy's anticipated oil and gas related activities in the State of Israel and in Appalachia, the acquisition and exploration of oil and gas leases and licenses located elsewhere and to fund corporate overhead expenditures. During 2008, we intend to continue to seek additional capital in order to meet our cash flow and working capital requirements. There is no assurance that we will be successful in achieving any such financing or raise sufficient capital to fund our operations and further development. There can be no assurance that any such financing will be available to us on commercially reasonable terms, if at all. If we are not successful in sourcing significant additional capital in the near future, we will be required to significantly curtail or cease ongoing operations and consider alternatives that would have a material adverse affect on our business, results of operations and financial condition. In such event we may need to relinquish most, if not all of our ongoing oil and gas rights and licenses.



We review the status of our oil and gas property periodically to determine if an impairment of our property is necessary. We follow the guidance in paragraphs 28 and 31 of FASB Statement 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, requiring periodic assessments for impairment of unproved properties and exploratory well cost when reserves are not found. In the impairment test we compare the expected undiscounted future net revenue on a field-by-field basis with the related net capitalized cost at the end of each period. Should the net capitalized cost exceed the undiscounted future net revenue of a property, we write down the cost of the property to fair value, which we determine using estimates of discounted future net revenue. We provide an impairment allowance on a property-by-property basis when we determine that unproved property will not be developed.



Critical Accounting Policies and Estimates

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expense during the reporting periods. We make critical estimation judgments in the below areas. Actual results could differ materially from the estimates in the following areas:



The carrying amount of our oil and gas property and impairment losses related to the property.



Estimates related to the above items are critical because the items are substantial assets or expense and their measurement requires complex, subjective reasoning. Should future events occur in different ways than the assumptions about those events we used in developing the estimates, we will have to modify our estimates to conform to such future information. Such modifications could be material.



We utilized the following material assumptions in making the above estimates:



In 2005, we recorded an impairment loss of $1,563,343 as a result of our review of our remaining property in Turkey. In 2004, we had recorded an impairment losses of $2,128,126 in connection with licenses that had either lapsed or been relinquished. Based on production and other data available at December 31, 2004, we had concluded that the December 31, 2004, carrying amount of our oil property, after the impairment losses, was properly stated. However, with the production and other data obtained during 2005, we concluded in 2005 that we needed to record an additional impairment loss.



The above estimates involve the following uncertainties:



The remaining carrying value of the oil and gas property has uncertainty in that it is dependent on the results of our future exploration and development of the property. The variability in potential future earnings and cash flow of the property is quite wide and cannot be predicted.



The facts and circumstances underlying our critical estimates of do not compare to those associated with past estimates because we had taken impairment charges on our Turkish oil and gas property prior to the 2005 charges. The charges prior to 2005 were made based on significantly different facts and circumstances than the 2005 charge.





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We have changed assumptions and estimates in the past when facts and circumstances have called for such changes such as the recording of the 2005 and 2004 impairment charges on our Turkish oil and gas property discussed above. During 2005 prior to recording the charge the facts and circumstances had caused us to conclude that we had no impairment. At the time we recorded the charge the facts and circumstances had changed as reported above, such that we recorded the charge as reported above. Additional details of the 2005 impairment charge are discussed in Results of Operations, above, and in financial statement Note 4.



Recent Accounting Pronouncements



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.



In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, Fair Value Measurements. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51.  This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require; the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parents ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.  SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary.  SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entitys derivative instruments and hedging activities and their effects on the entitys financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



ITEM 7.  FINANCIAL STATEMENTS

All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.





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



None.



ITEM 8A.  CONTROLS AND PROCEDURES



Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.



Evaluation of disclosure and controls and procedures.



As of the end of the period covered by this Annual report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our Chief Executive Officer and Treasurer, the sole officers and directors of the company, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.



Changes in internal controls over financial reporting.



There was no change in our internal controls, which are included within disclosure controls and procedures, during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls.



Managements Annual Report on Internal Control Over Financial Reporting



Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a - 15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework - Guidance for Smaller Public Companies (the COSO criteria). Based on our assessment we believe that, as of December 31, 2007, our internal control over financial reporting is effective based on those criteria.



Attestation Report of our Registered Public Accounting Firm



This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our management's report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.





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ITEM 8B.   OTHER INFORMATION.

On April 3, 2008, the Company and its wholly owned Israel subsidiary Avenue Energy Israel LTD. ("AEI"), completed an agreement with TomCo Energy Plc ("TomCo"), a London-based, AIM-listed Oil & Gas Company and its wholly owned Israeli subsidiary Luton-Kennedy LTD ("LKL"), to farm-out a 50% interest in the Heletz-Kokhav Licence and a 25% interest in the Iris License (the "Licenses"), which include the original Heletz-Brur-Kokhav oilfields ("Heletz").Pursuant to the terms of the agreement, TomCo has:

·

paid the Company USD$1million in cash;

·

issued to the Company 12,618,615 million ordinary shares of 0.5 pence each in the Company ("Ordinary Shares") valued at approximately US$500,000 at a price of 2p per share with a one year sale restriction;

·

paid  a consideration of  USD$107,000 which represent 50 percent of costs incurred to date in relation to the License;

·

agreed to assume 100 percent of the costs associated with implementing the three year work program covering the Phase 1 period of the License, up to a maximum of US$4.5 million;

·

agreed to pay a further USD$1.5 million to us upon the successful conversion of the License into a production lease;

·

agreed to pay a further US$5 million to AGI upon recoverable reserves being certified at 10 million barrels or more by an independent reservoir engineering firm.



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PART III



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



The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each.



|               |     |                                                
|-------------- | --- | -----------------------------------------------
|Name           | Age | Position                                       
|               |     |                                                
|Levi Mochkin   | 45  | President, Chief Executive Officer and Director
|               |     |                                                
|Uri Bar Ner    | 72  | Director                                       
|               |     |                                                
|Mendel Mochkin | 34  | Executive Vice President and Director          



LEVI MOCHKIN serves as our Chief Executive Officer, President and Chairman of the Board of Directors. Mr. Mochkin founded Avenue Group in 1999 and served as CEO of Avenue Group until 2001 and CEO of Avenue Energy before returning as CEO of Avenue Group in October 2003. For over 22 years, Mr. Mochkin has been an executive director of the Ledger Holdings Group, a private company located in Melbourne, Australia. Until 1999, Mr. Mochkin was one of Australia's leading Investment Bankers raising in excess of AUS$700 Million for mining companies. Mr. Mochkin also serves as CEO of WCP Resources (ASX:WCP) a leading junior mining company listed on the Australian Stock Exchange. Mr. Mochkin is the brother of Mendel Mochkin.



URI BAR NER Ambassador Bar-Ner's long and distinguished career in Israel's foreign service culminated in his posting as Ambassador of Israel to Turkey from 1998-2001. He has held senior diplomatic positions in the United States, Europe and Asia and is a former Deputy General Director of the Israel Ministry of Foreign Affairs. Ambassador Bar-Ner currently acts as Vice Chairman of the American-Israel Friendship League, an organization that arranges missions of US dignitaries to Israel. Ambassador Bar-Ner holds a masters degree in political science from Emory University in Atlanta, Georgia and a bachelor degree from Hebrew University in Jerusalem.



MENDEL MOCHKIN prior to joining Avenue Group, Mr. Mochkin worked as an independent consultant providing investor relations and capital formation advisory services for companies in the energy and technology sectors and was a Founder and Managing Director of a digital media firm based in New York. Mr. Mochkin is the brother of Levi Mochkin.



Board Composition



All directors hold office until the next annual meeting of stockholders or the election and qualification of their successors, or their earlier death, resignation or removal. Vacancies in the existing board are filled by a majority of the remaining directors. All officers hold office until their respective successors are elected and qualified, or until their earlier death, resignation or removal.



Board Committees



Our Board of Directors does not have an audit committee or any other committee. We do not have an "audit committee financial expert" on our Board.



Compliance with Section 16(a) of the Exchange Act



Section 16 of the Exchange Act requires the Company's directors and executive officers and persons who own more than 10% of a registered class of the Company's equity securities to file various reports with the Securities and Exchange Commission concerning their holdings of, and transactions in, securities of the Company. Copies of these filings must be furnished to the Company.



Based on a review of the copies of the Section 16(a) forms furnished to the Company, and written representations from the Company's executive officers and directors, the Company believes that during 2007, all officers, directors and greater than 10% stockholders complied with all applicable Section 16(a) filing requirements.





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Code of Ethics



We have adopted a corporate code of ethics. A copy of the code of ethics was previously filed as an exhibit to the Companys Form 10-KSB for the year ended December 31, 2003. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provides full, fair, accurate, timely and understandable disclosure in public reports; complies with applicable laws; ensures prompt internal reporting of code violations; and provides accountability for adherence to the code.



ITEM 10. EXECUTIVE COMPENSATION



The following summary compensation table sets forth the compensation we paid to our chief executive officer and each other executive officer who received compensation in excess of $100,000 for services rendered in all capacities during the calendar year 2007.



|                          |  |      |      |             |   |            |  |                   |  |                    |        |                             |  |            |        |  |  |  |  |   |        
|------------------------- |  | ---- | ---- | ----------- | - | ---------- |  | ----------------- |  | ------------------ | ------ | --------------------------- |  | ---------- | ------ |  |  |  |  | - | -------
|Name & Principal Position |  | Year |      | Salary
($ ) |   | Bonus
($ ) |  | Stock
Awards
($ ) |  | Option
Awards
($ ) |        | All Other
Compensation
($ ) |  | Total ($ )
|Levi Mochkin (1)          |  |      | 2007 |             | $ | 144,000    |  |                   |  |                    |        |                             |  |            |        |  |  |  |  | $ | 144,000
|Chief Executive Officer   |  |      | 2006 |             | $ | 144,000    |  |                   |  |                    |        |                             |  |            |        |  |  |  |  | $ | 144,000
|President                 |  |      | 2005 |             | $ | 144,000    |  |                   |  |                    |        |                             |  |            |        |  |  |  |  | $ | 144,000
|                          |  |      |      |             |   |            |  |                   |  |                    |        |                             |  |            |        |  |  |  |  |   |        
|Mendel Mochkin (2)        |  |      | 2007 |             | $ | 108,000    |  |                   |  |                    |        |                             |  | 44,000     | (3, 4) |  |  |  |  | $ | 152,000
|Vice President            |  |      | 2006 |             | $ | 108,000    |  |                   |  |                    |        |                             |  | 61,000     | (3, 4) |  |  |  |  | $ | 169,000
|                          |  |      | 2005 |             | $ | 56,500     |  |                   |  |                    |        |                             |  | 3,000      | (4)    |  |  |  |  | $ | 59,500 
|                          |  |      |      |             |   |            |  |                   |  |                    |        |                             |  |            |        |  |  |  |  |   |        
|Norman Singer (5)         |  |      | 2007 |             | $ | 52,000     |  |                   |  |                    |        |                             |  |            |        |  |  |  |  | $ | 52,000 
|                          |  |      | 2006 |             | $ | 158,000    |  |                   |  | $                  | 62,000 |                             |  | 11,000     | (6)    |  |  |  |  | $ | 231,000
|                          |  |      | 2005 |             | $ | 137,500    |  |                   |  |                    |        |                             |  | 11,000     | (6)    |  |  |  |  | $ | 148,500



* Norman Singer resigned as a Director and Officer of the Company on January 17, 2007.



(1) Amounts shown were paid or earned pursuant to Levi Mochkin's employment agreement.



(2) Amounts shown were paid or earned pursuant to Mendel Mochkin's employment agreement



(3) Represents options to purchase 2,400,000 shares of common stock at an exercise price of $0.10 per share granted to Mendel Mochkin pursuant to his employment agreement. The options vest at the rate of 200,000 per month and are exercisable for a term of five years. Options for 1,400,000 were vested in 2006 and 1,000,000 vested in 2007. The fair market value of the these options has been determined to be $44,000 in 2007 and $61,000 in 2006, using the Black-Scholes method of calculating fair value.



(4) Represents options to purchase 2,400,000 shares of common stock at an exercise price of $0.05 per share granted to Mendel Mochkin pursuant to his employment agreement The options vest at the rate of 200,000 per month and are exercisable for a term of five years. Options for 1,400,000 vested in 2005, and 1,000,000 vested in 2006. The fair market value of the options has been determined to be $3,000 for the options vested in 2005, using the intrinsic method of calculating fair value, and $33,000 for options that vested in 2006, using the Black-Scholes method of valuing fair value.



(5) Represents consulting fees earned under his Directorship and Consulting Agreement.



(6) Represents options to purchase 2,400,000 shares of common stock at an exercise price of $0.025 to $0.07 per share granted to Norman Singer pursuant to his Directorship and Consulting Agreement. The options vest at the rate of 100,000 per month and are exercisable for a term of five years. The fair market value of the options has been determined to be $17,000 for the options vested in 2005, using the intrinsic method of calculating fair value, and $11,000 for options that vested in 2006, using the Black-Scholes method of valuing fair value. Please see notes to the financial statements for the assumptions underlying the application of the black scholes model. In addition, Mr. Singer earned the issuance of 2,200,000 shares which was valued at $62,000.









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Outstanding Equity Awards at Fiscal Year-End Table.

|                            |                                                                     |                                                                       |                                                                                                |                           |                        |                                                             |                                                                   |                                                                                                         |                                                                                                                        
|--------------------------- | ------------------------------------------------------------------- | --------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------- | ---------------------- | ----------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------
|Option Awards               | Stock Awards                                                       
|Name                        | Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable | Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable | Equity
Incentive
Plan
Awards:
Number
of
Securities Underlying
Unexercised
Unearned
Options
(#) | Option
Exercise
Price
($) | Option
Expiration
Date | Number
of Shares
or Units
of Stock
That Have
Not
Vested
(#) | Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
($) | Equity
Incentive
Plan Awards:
Number
of
Unearned
Shares,
Units or
Other Rights
That Have
Not
Vested
(#) | Equity Incentive
Plan Awards:
Market or Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)
|Levi Mochkin
CEO, President | -                                                                   | -                                                                     | -                                                                                              | -                         | -                      | -                                                           | -                                                                 | -                                                                                                       | -                                                                                                                      
|Mendel Mochkin (1)          | 4,8000,000                                                          | 4,8000,000                                                            |                                                                                                | .05                       | 06/01/2011             |                                                             |                                                                   |                                                                                                         |                                                                                                                        
|                            |                                                                     |                                                                       |                                                                                                |                           |                        |                                                             |                                                                   |                                                                                                         |                                                                                                                        





(1)Represents options to purchase 2,400,000 shares of common stock at an exercise price of $0.10 per share and 2,400,000 shares of common stock at an exercise price of $0.05 per share, granted to Mendel Mochkin in 2006 and 2005 pursuant to his employment agreement. The options vest at the rate of 200,000 per month and are exercisable for a term of five years. As of December 31, 2007, 2,400,000 options were vested. The fair market value of the vested options granted in 2006 has been determined to be $28,000, using the Black-Scholes method of calculating fair value, and the fair market value of the options granted in 2005 which vested in 2005 has been determined to be $3,000, using the intrinsic method of calculating fair value, and those vested in 2006 has been determined to be $33,000 using the Black-Scholes method of calculating fair value.

Director Compensation

The following table sets forth certain information regarding the compensation paid to our directors during the fiscal year ended December 31, 2007.



|              |                                     |                      |                       |                                                |                                                                             |                                |              
|------------- | ----------------------------------- | -------------------- | --------------------- | ---------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------ | -------------
|Name
(a)      | Fees Earned or Paid in Cash
($)
(b) | Stock Awards
($)
(c) | Option
Awards ($)
(d) | Non-Equity Incentive Plan Compensation ($)
(e) | Change in Pension Value and Nonqualified Deferred Compensation Earnings
(f) | All Other Compensation
($)
(g) | Total
($)
(h)
|Uri Bar-Ner   | $60,000(1)                          | 0                    | 0                     | 0                                              | 0                                                                           | 0                              | $60,000      
|Norman Singer | 0*                                  | 0                    | 0                     | 0                                              | 0                                                                           | 0                              | 0            
|Levi Mochkin  | $144,000                            | 0                    | 0                     | 0                                              | 0                                                                           | 0                              | $144,000     



* Norman Singer resigned as a Director and Officer of the Company on January 17, 2007.







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(1) Represents the $5,000 per month fee earned by Development For Israel, pursuant to the Directorship and Consulting Agreement dated February 7, 2005 (the "DFI Agreement") under which Mr. Bar-Ner serves as a Director. All of the shares issued were at the quoted price on the day that the stock was earned.



In connection with the appointment of Mr. Bar-Ner to our Board, we entered into a Directorship and Consulting Agreement dated February 7, 2005 (the "DFI Agreement") with Development for Israel, LLC, a New York limited liability company ("DFI"), pursuant to which DFI agreed to make available to us the services of DFI's founder, Mr. Bar-Ner, to serve as one of our directors. As compensation for the services of Mr. Bar-Ner as a director, DFI receives $2,500 per month, payable quarterly in advance, plus 100,000 shares of our common stock per month for each month Mr. Bar-Ner serves as a director during his first year of service as a director. We issued 400,000 of the shares in June 2005 and the remaining 800,000 shares in March 2006. From February 1 up to May 31, 2006 Mr. Bar-Ner continued to consult for us, with his contract extending on a month-to-month basis.



Effective June 1 2006, we and Mr. Bar-Ner revised the terms of the agreement In further recognition of Mr. Bar Ner's services, we granted a one time incentive payment of $20,000 and a one time stock grant of 800,000 shares. Mr. Bar-Ner received $5,000 per month and stock grants of 1,600,000 shares of common stock for the time period commencing June 1, 2006 and continuing through January 31, 2007. From February 1, 2007, Mr. Bar-Ner continues to receive compensation at a rate of $5,000 per month and no stock grants.



It is our policy to reimburse Directors for reasonable out-of-pocket expenses relating to their activities for us, including travel and lodging expenses incurred.



Employment Agreements



Effective as of January 1, 2003 we engaged the services of Ledger Holdings Pty Ltd (Ledger), of which our current President and Chief Executive Officer Levi Mochkin is a Director, on a month to month basis as a consultant to Avenue Group Inc. pursuant to which Mr. Mochkin serves Avenue Group, Inc. as President and Chief Executive Officer. Ledger is compensated at a rate of $10,000 per month in fees, plus $2,000 per month in the form a discretionary expense allowance. Ledger is also reimbursed for various travel and other related expenses conducted on our behalf.



On March 23, 2008, the Company and Ledger Holdings Pty Ltd., executed a directorship and consulting agreement, pursuant to which Levi Mochkin, the managing director and beneficial owner of all of the equity interests in Ledger, will continue to serve as the chairman of the Companys board of directors and its chief executive officer.



Pursuant to the agreement with Ledger, Levi Mochkin will also serve as the Companys chief executive officer for a two year term, commencing March 23, 2008.  As compensation for his services he will receive $30,000 per month.  In addition, 2,400,000 shares of the Companys common stock and 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to Ledger.



On June 1, 2005, we entered into an employment agreement with Mendel Mochkin to serve as Vice President and Secretary. , The agreement provided for an annual base salary of $104,000 and provided for the grant to Mendel Mochkin (i) upon the commencement of his employment of an option to purchase 2,400,000 shares of common stock at $0.05 per share, and (ii) on the first anniversary of the commencement of his employment of an option to purchase an additional 2,400,000 shares at $0.10 per share. The options vest at the rate of 200,000 shares per month and may be exercised for a term of five years from the date of vesting. The agreement expired on May 1, 2007. From May 1, 2007, Mendel continued to be paid on a month by month basis and did not continue to receive stock based compensation.



On March 23, 2008, the Company and MEM Energy Partners, LLC, a limited liability company formed under the laws of Delaware (MEM), executed a directorship and consulting agreement (the Mendel Agreement), pursuant to which Mendel Mochkin, the managing director and registered owner of all of the equity interests in MEM, was appointed to serve as a member of the Companys board of directors and an oil and gas and general business consultant to the Company.



Pursuant to the agreement, MEM will make available Mendels services as an oil and gas and general business consultant to the Company for a term of one year, commencing March 23, 2008.  As compensation for his service as a consultant, the MEM Agreement provides that Mendel Mochkin will be paid $10,500 per month.  As a signing bonus, 2,400,000 shares of the Companys common stock and an option, to purchase 2,400,000 shares of the Companys common stock at an exercise price of $0.005 per share, will be granted to MEM.  The option will vest in monthly tranches of 200,000 shares, commencing March 23, 2008, and each 200,000 share tranche will expire on the fifth anniversary of its vesting.  In addition, 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to MEM.





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ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS



The following table sets forth to the best of our knowledge the number of shares beneficially owned as of May 10, 2008 by (i) our executive officers and directors; (ii) each person (including any "group" as that term is defined in Section 13(d)(3) of the Exchange Act) who beneficially owns more than 5% of our common stock, and (iii) all of our directors and officers as a group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each of the persons listed is deemed to have the sole voting right and right to dispose of the shares held by them. As of May 20, 2008, we had outstanding 252,190,986shares of common stock.



Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them. Furthermore, unless otherwise indicated, the address of the beneficial is c/o Avenue Group, Inc.  405 Lexington Avenue, 26th Floor, New York, New York 10174.





|                                                             |                    |                 
|------------------------------------------------------------ | ------------------ | ----------------
|Name and Address of Beneficial Owner                         | Common Stock Owned | Percent of Class
|Instanz Nominees Pty Ltd                                     | 18,500,000(1)      | 7.3%            
|Lettered Management Pty LTD                                  | 24,229,075 (2)     | 9.6%            
|Avik Investments Pty LTD                                     | 24,229,074 (3)     | 9.6%            
|Shaya Boymelgreen                                            | 22,516,667 (4)     | 8.9%            
|Levi Mochkin                                                 | 70,892,053(5)(6)   | 28.1%           
|                                                             |                    |                 
|Uri Bar Ner                                                  | 3,600,000 (7)      | 1.4%            
|                                                             |                    |                 
|Mendel Mochkin                                               | 6,366,667 (8)      | 2.5%            
|                                                             |                    |                 
|All directors and  executive officers as a group (2 persons) | 81,857,450(9)      | 32.46%          





(1) Helen Abeles, a former director of Avenue Group, Inc. is an affiliate of Instanz.



(2)  J. Broh is the controlling shareholder of Lettered Management Pty Ltd.



(3) A. Kimelman is the controlling shareholder of Avik InvestmentsPty Ltd



(4) All of these shares are held by Mr. Boymelgreen as Trustee for the Shaya Boymelgreen Trust. Mr. Boymelgreen's beneficial ownership has been derived from the Schedule 13D and Form 3(amended) and Form 4 which he filed with the Securities and Exchange Commission on April 23, 2003, September 15, 2003 and September 19, 2003, respectively.



(5) Includes (i) 54,783,356 shares held by Ledger Technologies Pty Ltd ("Ledger"); (ii) 9,000,000 shares held by Sunswipe Australasia Pty Ltd ("Sunswipe"); (iii) 6,704,521 shares held by Daccar Pty Ltd ("Daccar") and (iv) 314,176 shares held by Nasdaq Australia Pty Ltd. ("NAPL"). Mr. Mochkin, the President and Chief Executive Officer of Avenue Group, Inc., is an affiliate of Ledger, Sunswipe, Daccar and NAPL and may be deemed be a beneficial owner of the 70,802,053 shares held by such entities.





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(6) Lisa Mochkin, spouse of Levi Mochkin, the President and Chief Executive Officer of Avenue Group, Inc, is a director of Ledger and Sunswipe.



(7) Includes 3,600,000 shares of restricted shares of common stock issued to Development for Israel, LLC.



(8) Includes 4,200,000 shares issuable to Mr. Mochkin upon the exercise of stock options (2,400,000 at an exercise price of $0.06 per share and 1,800,000 at an exercise price of $0.10 per share) and 2,166,667 shares of restricted common stock.



(9) Includes shares that currently may be deemed to be beneficially owned by Messrs. Levi and Mendel Mochkin, and Bar Ner.



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



On August 1, 2000, we borrowed $150,000 from Instanz Nominees Pty. Ltd. ("Instanz"), a related party at that time. The loan bears interest at the rate of ten percent (10%) per annum. In November 2002, we repaid $100,000 of this note from the proceeds of a private placement, leaving a balance payable of principal and interest of $145,970 and $132,700 at December 31, 2007 and 2006, respectively. Upon mutual agreement of the parties, we will repay this loan and accrued interest payable, only after we have received additional financing and at that time upon the mutual agreement of Instanz and the Company.



On November 6, 2007 an officer of the Company loaned the Company $68,100.  The loan is payable upon demand and accrues interest at a rate of 10% per annum. As of May 21, 2008, this loan has been repaid in full.



On March 23, 2008, the Company and Ledger Holdings Pty Ltd., executed a directorship and  consulting agreement, pursuant to which Levi Mochkin, the managing director and beneficial  owner of all of the equity interests in Ledger, will continue to serve as the chairman of  the Companys board of directors and its chief executive officer.



Pursuant to the Levi Agreement, Levi Mochkin will also serve as the Companys chief executive  officer for a two year term, commencing March 23, 2008.  As compensation for his service he will receive $30,000 per month.  In addition, 2,400,000 shares of the Companys common stock  and 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to Ledger.



On March 23, 2008, the Company and MEM Energy Partners, LLC, a limited liability company formed  under the laws of Delaware (MEM), executed a directorship and consulting agreement (the Mendel Agreement), pursuant to which Mendel Mochkin, the managing director and registered owner of all  of the equity interests in MEM, was appointed to serve as a member of the Companys board of directors  and an oil and gas and general business consultant to the Company.



Pursuant to the agreement, MEM will make available Mendels services as an oil and gas and general business consultant to the Company for a term of one year, commencing March 23, 2008.  As compensation for his service as a consultant, the MEM Agreement provides that Mendel Mochkin will be paid $10,500 per month.  As a signing bonus, 2,400,000 shares of the Companys common stock and an option, to purchase 2,400,000 shares of the Companys common stock at an exercise price of $0.005 per share, will be granted to MEM.  The option will vest in monthly tranches of 200,000 shares, commencing March 23, 2008, and each 200,000 share tranche will expire on the fifth anniversary of its vesting.  In addition, 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to MEM. Mendel Mochkin is the brother of Levi Mochkin.



ITEM 13.  EXHIBITS



3.1 Certificate of Incorporation of I.T. Technology, Inc., incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form SB-2 (File No. 333-30364) dated February 14, 2000.



3.2 By-laws of the Registrant., incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form SB-2 (File No. 333-30364) dated February 14, 2000.



3.3 Amendment to Certificate of Incorporation, incorporated by reference to Exhibit 1 to the Registrant's Form 8-K, dated December 27, 2000.



3.4 Amendment to the Registrant's By-laws adopted November 6, 2000, incorporated by reference to Exhibit 3.4 of the Registrant's Form 10-KSB for the year ended December 31, 2000.





25





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3.5 Amendment to the Registrant's By-laws adopted November 8, 2001 incorporated by reference to Exhibit 3.5 of the Registrant's Form 10-QSB for fiscal quarter ended September 30, 2001.



3.6 Amendment to the Registrant's bylaws dated June 25, 2002, incorporated by reference to Exhibit 3.6 to the Registrant's Form 10-QSB for the fiscal quarter ended June 30, 2002.



4.1 Certificate of Designation, Powers, Preferences and Rights of Series A Preferred Stock filed with the Secretary of State of Delaware on April 15, 2008, incorporated by reference to the Registrants Form 8-K filed with the SEC on April 16, 2008.



10.1 2000 Stock Option Plan, incorporated by reference to Exhibit 10.6a of the Registrant's Form 10-KSB for the year ended December 31, 2000.



10.2 Partial Loan Satisfaction notice dated November 2002 by and between Instanz Nominees Pty Ltd and I.T. Technology, Inc., incorporated by reference to Exhibit 10.10(a) to the Registrant's Form 10-KSB for the year ended December 31, 2002.



10.3 Option Agreement dated April, 2002, incorporated by reference to Exhibit 10.11 to the Registrant's Form 10-KSB for the year ended December 31, 2002.



10.4 Asset Purchase Agreement dated January 14, 2002, incorporated by reference to Exhibit 10.21 of the Registrant's Form 10-KSB for the year ended December 31, 2001.



10.5 Agreement dated April 30, 2002 by and between the Registrant, Bickham's Media, Robert Petty, ROO Media and Petty Consulting, incorporated by reference to Exhibit 10.22 of the Registrant's Form 8-K dated May 2, 2002.



10.6 Farmin Participation Agreement dated November 14, 2002, incorporated by reference to Exhibit 10.27 of the Registrant's Form 8-K dated November 25, 2002.



10.7 Agreement Amending Farmin & Participation Agreement dated November 14, 2002 by and between Avenue Energy, Inc., Aladdin Middle East Ltd., Ersan Petrol Sanayii A.S., Tranmediterranean Oil Company Ltd., and Guney Yildizi Petrol Uretim Sondaj Muteahhitlik ve Ticaret A.S., collectively referred to as the Sayer Group Consortium and Middle East Petroleum Services Limited, incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K dated January 6, 2003.



10.8 Joint Operating Agreement dated December 20, 2002, by and between Avenue Energy, Inc., Aladdin Middle East Ltd., Ersan Petrol Sanayii A.S  License AR/AME - EPS 3462 GAZIANTEP, S.E. ANATOLIA, Republic of Turkey, incorporated by reference to Exhibit 10.2 of the Registrant's Form 8-K dated January 6, 2003.



10.9 Memorandum of Understanding between Aladdin Middle East, Ltd. and Avenue Energy, Inc. dated May 22, 2003, incorporated by reference to Exhibit 10.1(a) of the Registrant's Form 10-QSB for the fiscal quarter ended June 30, 2003.



10.10 Employment Agreement by and between Avenue Group, Inc. and Steven Gordon dated March 8, 2004, incorporated by reference to Exhibit 10.33 of the Registrant's Form 10-KSB for the year ended December 31, 2003.



10.11 Option Agreement by and between Avenue Group, Inc. and Steven Gordon dated March 8, 2004, incorporated by reference to Exhibit 10.33(a) of the Registrant's Form 10-KSB for the year ended December 31, 2003.



10.12 Option Agreement by and between Avenue Group, Inc. and Steven Gordon dated March 8, 2004, incorporated by reference to Exhibit 10.33(b) of the Registrant's Form 10-KSB for the year ended December 31, 2003.



10.13 Form of Joint Operating Agreement Between Aladdin Middle East Ltd., Ersan Petrol Sanayii A.S. and Avenue Energy, Inc. incorporated by reference to Exhibit 99.2 of the Registrant's Form 8-K dated January 2, 2004.



10.14 Participation Agreement Between The Sayer Group Consortium and Avenue Energy, Inc. and Middle East Petroleum Services Limited dated January 22, 2004 (supercedes and corrects the Participation Agreement filed as Exhibit 99.3 to the Registrant's Form 8-K dated January 2, 2004), incorporated by reference to Exhibit 10.36 of the Registrant's Form 10-KSB for the year ended December 31,

2003.



10.15 Separation Agreement dated as of February 1, 2005 by and among the Registrant and Jonathan Herzog, incorporated by reference to Exhibit 99.1 of the Registrant's Form 8-K dated February 11, 2005.





26





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10.16 Directorship and Consulting Agreement dated February 7, 2005 by and among the Registrant and Norman J. Singer, incorporated by reference to Exhibit 99.2 of the Registrant's Form 8-K dated February 11, 2005.

10.17 Directorship and Consulting Agreement dated February 7, 2005 by and among the Registrant and Development for Israel, LLC, incorporated by reference to Exhibit 99.3 of the Registrant's Form 8-K dated February 11, 2005.

10.18 Employment Agreement by and between the Registrant and Mendel Mochkin dated as of June 1, 2005, incorporated by reference to Exhibit 10.1 of the Registrant's Form 10-QSB for the fiscal quarter ended March 31, 2006.

10.19 Consulting Agreement dated as of January 1, 2005 by and among the Registrant, Reuadnal Limited and David Landauer, incorporated by reference to Exhibit 10.41 of the Registrant's Form 10-KSB for the year ended December 31, 2004.

10.20 Participation Agreement Between The Sayer Group Consortium and JKX Turkey LTD and Avenue Energy, Inc. and Middle East Petroleum Services Limited dated May, 2005, incorporated by reference to Exhibit 10.4 of the Registrant's Form 10-QSB for the fiscal quarter ended March 31, 2005.

10.21 Indemnification and Release Agreement, dated September 21, 2006, between Avenue Energy, Inc. and Aladdin Middle East Ltd., incorporated by reference to Exhibit 99.1 of the Registrant's Form 8-K filed October 13, 2007.

10.22 Revised Compensation Letter, dated August 7, 2006 between the Registrant and Ambassador Uri Bar-Ner, incorporated by reference to Exhibit 10.2 of the Registrant's Form 10-QSB for the fiscal quarter ended June 30, 2006.

10.23 Revised Compensation Letter, dated August 7, 2006 between the Registrant and Norman J. Singer, incorporated by reference to Exhibit 10.3 of the Registrant's Form 10-QSB for the fiscal quarter ended June 30, 2006.

10.24 Directorship and Consulting Agreement entered into March 23, 2008 between the Registrant and Ledger Holdings Pty Ltd., incorporated by reference to Exhibit 10.24 of the Registrants Form 8-K filed with the SEC on April 16, 2008.

10.25 Directorship and Consulting Agreement entered into March 23, 2008 between the Registrant and MEM Energy Partners, LLC, incorporated by reference to Exhibit 10.25 of the Registrants Form 8-K filed with the SEC on April 16, 2008.

10.26 Farmout Agreement - Heletz-Kokhav License dated April 1, 2008 by and among Avenue Group, Inc., Avenue Energy Israel Ltd., TomCo Energy PLC and Luton-Kennedy Ltd. *

14. Code of Ethics For Principal Executive Officers And Senior Financial Officers, incorporated by reference to Exhibit 14 of the Registrant's Form 10-KSB for the year ended December 31, 2003.

21. List of Subsidiaries *

31.1 Certification of Levi Mochkin, Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of The Exchange Act.*

31.2 Certification of Levi Mochkin, Principal Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of The Exchange Act.*

32.1 Certification of Levi Mochkin, Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of The Exchange Act and Section 1350 of chapter 63 of Title 18 of The United States Code.*

32.2 Certification of Levi Mochkin, Principal Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of The Exchange Act and Section 1350 of chapter 63 of Title 18 of The United States Code.*

*Filed herewith



27





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ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of our financial statements included in our annual report on Form 10-KSB and for the reviews of the financial statements included in our quarterly reports on Form 10-QSB were $40,500 and $69,500 for the years ended December 31, 2007 and December 31, 2006, respectively.

Tax Fees

There were no tax fees billed during the year ended December 31, 2007

All other Fees

We did not incur any fees for other professional services rendered by our independent registered public accounting firm during the years ended December 31, 2007 and December 31, 2006.

The Board has considered whether the services provided by Sherb & Co. LLP are compatible with maintaining the independence of Sherb & Co. LLP and has concluded that the independence of Sherb & Co. LLP and is maintained and is not compromised by the services provided. 100% of the services were approved by the Board.







28





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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized this 28th day of May 2008.





| |                    |                                                                                                                               
| | ------------------ | ------------------------------------------------------------------------------------------------------------------------------
| | AVENUE GROUP, INC.
| |                    |                                                                                                                               
| |                    |                                                                                                                               
| | By:                | /s/ Levi Mochkin                                                                                                              
| |                    | Levi Mochkin
Chairman of the Board, President and ChiefExecutive Officer (Principal Executive and Principal Financial Officer)





Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons in the capacities and on the

dates indicated.





|                   |                                      |                                       |              |      | 
|------------------ | ------------------------------------ | ------------------------------------- | ------------ | ---- | 
|SIGNATURE          |                                      | TITLE                                 |              | DATE | 
|                   |                                      |                                      
|/s/ Levi Mochkin   |                                      | Chairman of the Board, President,     | May 28, 2008
|Levi Mochkin       | Chief Executive Officer and Director |                                      
|                   | (Principal Executive and Principal   |                                      
|                   | Financial Officer)                   |                                      
|                   |                                      |                                      
|/s/ Uri Bar-Ner    |                                      | Director                              | May 28, 2008
|Uri Bar-Ner        |                                      |                                      
|                   |                                      |                                      
|/s/ Mendel Mochkin |                                      | Executive Vice President and Director | May 28, 2008
|Mendel Mochkin     |                                      |                                      





29





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|                                                                                       |             
|-------------------------------------------------------------------------------------- | ------------
|AVENUE GROUP, INC AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS |             
|                                                                                       |             
|Report of Independent Registered Public Accounting Firm                                | F-2         
|                                                                                       |             
|Financial Statements:                                                                  |             
|                                                                                       |             
|Consolidated Balance Sheets                                                            | F-3         
|                                                                                       |             
|Consolidated Operations Statements                                                     | F-4         
|                                                                                       |             
|Consolidated Cash Flows Statements                                                     | F-5         
|                                                                                       |             
|Consolidated Comprehensive Income (Loss) Statements                                    | F-7         
|                                                                                       |             
|Consolidated Stockholders Equity (Deficiency) Statements                              | F-8         
|                                                                                       |             
|Notes to Consolidated Financial Statements                                             | F-10 to F-26





F-1





---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and Board of Directors

Avenue Group, Inc. and Subsidiaries



We have audited the accompanying consolidated balance sheets of Avenue Group, Inc. and Subsidiaries (a Development Stage Company) as of December 31, 2007 and 2006, and the related consolidated operations statements, cash flows statements, comprehensive income (loss) statements, and stockholders' equity (deficiency) statements for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audit 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses as more fully described in Note 2. These issues raise 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 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



| |  |                             
| |  | ----------------------------
| |  | /s/ Sherb & Co., LLP        
| |  | Certified Public Accountants



|                    |  | 
|------------------- |  | 
|Boca Raton, Florida |  | 
|May 23, 2008        |  | 



F-2





---

Avenue Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(A Development Stage Company)



|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|--------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------------------------------------- | ------- | ------------ | ---------- | --------- | ------------ | ------------ | ------- |  | ----
|                                                          |                                                                 |                                                                  |         |              |            |           |              | December 31,
|                                                          |                                                                 |                                                                  |         |              |            |           |              | 2007         |         |  | 2006
|ASSETS:                                                   |                                                                 |                                                                  |         |              |            |           |              |              |        
|CURRENT ASSETS:                                           |                                                                 |                                                                  |         |              |            |           |              |             
|                                                          | Cash                                                            |                                                                  | $       | 9,918        |            | $         | 76,187      
|                                                          | Marketable securities                                           |                                                                  |         |              |            | -         |              |              | 1,504  
|                                                          | Investment in Langley Park                                      |                                                                  |         |              | -          |           |              | 210,555     
|                                                          | Investment in ROO Group, Inc.                                   |                                                                  |         |              | -          |           |              | 427,000     
|                                                          | Other current assets                                            |                                                                  |         |              |            | 26,520    |              |              | 6,697  
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|                                                          |                                                                 | TOTAL CURRENT ASSETS                                             |         |              | 36,438     |           |              | 721,943     
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|OIL AND GAS PROPERTY (Successful efforts method), at cost |                                                                 |                                                                  |         |              |           
|                                                          | Unproved developed oil and gas property                         |                                                                  |         | -            |            |           | 447,456     
|                                                          | Unproved undeveloped oil and gas property                       |                                                                  |         | 12,820       |            |           | 9,200       
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|                                                          |                                                                 | TOTAL OIL AND GAS PROPERTY                                       |         |              |            | 12,820    |              |              | 456,656
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|EQUIPMENT, net                                            |                                                                 |                                                                  |         |              | 423        |           |              | 1,887       
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|OTHER ASSETS                                              |                                                                 |                                                                  |         |              | -          |           |              | 8,108       
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|TOTAL ASSETS                                              |                                                                 | $                                                                | 49,681  |              | $          | 1,188,594
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY):        |                                                                 |                                                                  |         |              |            |          
|                                                          | CURRENT LIABILITIES:                                            |                                                                  |         |              |            |           |              |             
|                                                          | Accounts payable and accrued expenses                           |                                                                  | $       | 470,835      |            | $         | 442,148     
|                                                          | Notes payable - Officer                                         |                                                                  |         |              |            | 68,100    |              |              | -      
|                                                          | Notes payable - Related Party                                   |                                                                  |         | 52,900       |            |           | 50,000      
|                                                          |                                                                 |                                                                  |         |              |            |          
|TOTAL CURRENT LIABILITIES                                 |                                                                 |                                                                  | 591,835 |              |            | 492,148  
|                                                          |                                                                 |                                                                  |         |              |            |          
|ASSET RETIREMENT OBLIGATION                               |                                                                 |                                                                  |         | 12,746       |            |           | 12,256      
|MINORITY INTEREST                                         |                                                                 |                                                                  |         |              | 375,000    |           |              | 375,000     
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|STOCKHOLDERS' EQUITY (DEFICIENCY):                        |                                                                 |                                                                  |         |              |            |           |              |             
|                                                          | Preferred stock, $.001 par value, 25,000,000 shares authorized, |                                                                  |         |              |            |          
|                                                          |                                                                 | none issued, and outstanding                                     |         |              |            | -         |              |              | -      
|                                                          | Common stock, $.0002 par value, 500,000,000 shares authorized,  |                                                                  |         |              |            |          
|                                                          |                                                                 | 252,190,986 and 247,590,986 issued and outstanding, respectively |         | 50,438       |            |           | 49,518      
|                                                          | Additional Paid - In Capital                                    |                                                                  |         |              | 33,254,831 |           |              | 33,075,751  
|                                                          | Accumulated other comprehensive income / (loss)                 |                                                                  |         | 5,953        |            |           | (39,800)    
|                                                          | Deficit accumulated prior to development stage                  |                                                                  |         | (7,934,508)  |            |           | (7,934,508) 
|                                                          | Deficit accumulated during the development stage                |                                                                  |         | (26,306,614) |            |           | (24,841,771)
|                                                          |                                                                 |                                                                  |         |              |            |           |              |              |         |  |     
|TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)                   |                                                                 | (929,900)                                                        |         |              | 309,190   
|                                                          |                                                                 |                                                                  |         |              |            |          
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)   | $                                                               | 49,681                                                           |         | $            | 1,188,594 



See accompanying notes to consolidated financial statements



F-3





---

Avenue Group, Inc. and Subsidiaries

Consolidated Operations Statements

(A Development Stage Company)





|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|------------------------------------------------------ | ---------------------------------------------- | ------------------------------- | --------- | ----------- | ----------------------- | --------- | ------------------------------------------------------------------------ | ------------ | ------------ | ------------ | ------------
|                                                       |                                                |                                 |           |             | Year Ended December 31, |           | Cumulative during
development stage
January 1, 2003
To December 31,
2007
|                                                       |                                                |                                 |           |             | 2007                    |           |                                                                          | 2006         |              |              | (Unaudited) 
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|Revenue:                                               |                                                |                                 |           |             |                         |           |                                                                          |              |              |             
|                                                       | Oil and Gas sales                              |                                 | $         | 21,682      |                         | $         | 61,368                                                                   |              | $            | 333,065     
|                                                       | E-commerce sales                               |                                 |           | -           |                         |           | -                                                                        |              |              | 60,072      
|                                                       |                                                |                                 |           |             | 21,682                  |           |                                                                          | 61,368       |              |              | 393,137     
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|Expense:                                               |                                                |                                 |           |             |                         |           |                                                                          |              |              |             
|                                                       | Cost of e-commerce sales                       |                                 |           | -           |                         |           | -                                                                        |              |              | 16,348      
|                                                       | Oil lease operating expense                    |                                 |           | 29,444      |                         |           | 104,915                                                                  |              |              | 264,418     
|                                                       | Impairment loss, developed oil property        |                                 | 412,012   |             |                         | 30,600    |                                                                          |              | 5,320,360   
|                                                       | Impairment loss, undeveloped oil property      |                                 | -         |             |                         | -         |                                                                          |              | 267,018     
|                                                       | Expired oil leases                             |                                 |           | -           |                         |           | -                                                                        |              |              | 175,198     
|                                                       | Loss on sale of oil lease                      |                                 |           | -           |                         |           | -                                                                        |              |              | 721,046     
|                                                       | Sales, general and administrative              |                                 | 720,327   |             |                         | 1,280,392 |                                                                          |              | 10,651,655  
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|                                                       |                                                | Total operating expenses        |           |             | 1,161,783               |           |                                                                          | 1,415,907    |              |              | 17,416,043  
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|                                                       |                                                | (Loss) from operations          |           |             | (1,140,101)             |           |                                                                          | (1,354,539)  |              |              | (17,022,906)
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|Other income (expense):                                |                                                |                                 |           |             |                         |           |                                                                          |              |             
|                                                       | Gain on settlement of oil lease                |                                 |           | -           |                         |           | 166,996                                                                  |              |              | 166,996     
|                                                       | (Loss) / Gain on sale of marketable securities |                                 | (314,078) |             |                         | 947,070   |                                                                          |              | 1,144,454   
|                                                       | Loss on change in market value of              |                                 |           |             |                         |           |                                                                          |              |             
|                                                       |                                                | Langley Park escrow contingency |           | -           |                         |           | (221,416)                                                                |              |              | (122,647)   
|                                                       | Interest income                                |                                 |           | 16,753      |                         |           | 13,249                                                                   |              |              | 30,002      
|                                                       | Interest expense                               |                                 |           | (27,417)    |                         |           | (23,307)                                                                 |              |              | (1,405,494) 
|                                                       | Other income                                   |                                 |           | -           |                         |           | -                                                                        |              |              | 53,516      
|                                                       | Impairment loss on Langley Park                |                                 | -         |             |                         | -         |                                                                          |              | (10,003,318)
|                                                       |                                                | Total other income (expense)    |           | (324,742)   |                         |           | 882,592                                                                  |              |              | (10,136,491)
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|Net income (loss) from continuing operations           | $                                              | (1,464,843)                     |           | $           | (471,947)               |           |                                                                          | (27,159,397)
|                                                       | Gain on sale of discontinued operations        |                                 | -         |             |                         | -         |                                                                          |              | 724,874     
|                                                       | Income from discontinued operations            |                                 | -         |             |                         | -         |                                                                          |              | 127,909     
|                                                       | Total income from discontinued operations      |                                 | -         |             |                         | -         |                                                                          |              | 852,783     
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|                                                       | Net loss                                       |                                 | $         | (1,464,843) |                         | $         | (471,947)                                                                |              | $            | (26,306,614)
|                                                       |                                                |                                 |           |             |                         |           |                                                                          |              |              |              |             
|Basic and Diluted income (loss) per common share       | $                                              | (0.01)                          |           | $           | (0.00)                  |           | $                                                                        | (0.12)      
|Weighted average number of common shares outstanding - |                                                |                                 |           |             |                         |           |                                                                          |             
|                                                       | Basic  and Diluted                             |                                 |           | 250,136,739 |                         |           | 247,472,219                                                              |              |              | 225,351,637 



See accompanying notes to consolidated financial statements



F-4





---



Avenue Group, Inc. and Subsidiaries

Consolidated Cash Flows Statements

( A Development Stage Company)



|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |             |                                                                          | 
|------------------------------------------------------------------------------------ | -------------------------------------------------------- | ------------------------------------------------- | ------- | ------------------------------- | --------- | --------- | ------- | ------------ | ----------- | ------------------------------------------------------------------------ | 
|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |             | Cumulative during
development
Stage
January 1, 2003 to
December 31, 2007
|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |            
|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |            
|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |            
|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |            
|                                                                                     |                                                          |                                                   |         | For the Year Ended December 31, |          
|                                                                                     |                                                          |                                                   |         | 2007                            |           | 2006      |        
|Cash Flow From Operating Activities:                                                 |                                                          |                                                   |         |                                 |           |           |         | (Unaudited) 
|Net income (loss)                                                                    | $                                                        | (1,464,843)                                       |         | $                               | (471,947) |           |         | (26,306,614)
|                                                                                     | Income from discontinued operations                      |                                                   | -       |                                 |           | -         |         |              | (127,909)  
|                                                                                     | Gain on sale of discontinued operations                  |                                                   | -       |                                 |           | -         |         |              | (724,874)  
|(Loss) income from continuing operations                                             |                                                          | (1,464,843)                                       |         |                                 | (471,947) |           |         | (27,159,397)
|Adjustments to reconcile net (loss) income to net cash used in operating activities: |                                                          |                                                   |         |                                 |           |           |         |             
|                                                                                     | Depreciation and depletion                               |                                                   | 1,954   |                                 |           | 1,212     |         |              | 47,703     
|                                                                                     | Impairment loss on investment in Langley Park securities |                                                   |         |                                 |           | -         |         |              | 10,003,318 
|                                                                                     | Impairment loss on developed oil property                |                                                   | 412,012 |                                 |           | 30,600    |         |              | 5,587,378  
|                                                                                     | Increase in accretion of oil asset retirement obligation |                                                   | 35,444  |                                 |           | 17,416    |         |              | 59,740     
|                                                                                     | Gain on settlement of oil leases                         |                                                   |         |                                 |           | (166,996) |         |              | (166,996)  
|                                                                                     | Expired oil leases                                       |                                                   | -       |                                 |           | -         |         |              | 175,198    
|                                                                                     | Loss on sale of oil lease                                |                                                   |         |                                 |           | -         |         |              | 721,046    
|                                                                                     | Gain on sale of Langley stock                            |                                                   | -       |                                 |           | 221,416   |         |              | 122,647    
|                                                                                     | Gain on sale of Australian securities                    |                                                   | -       |                                 |           | -         |         |              | (38,885)   
|                                                                                     | Loss (Gain) on sale of Langley Park securities           |                                                   | (3,105) |                                 |           | -         |         |              | (37,826)   
|                                                                                     | Loss on sale of ROO Group securities                     |                                                   | 317,183 |                                 |           | (947,070) |         |              | (1,067,743)
|                                                                                     | Decrease in unrealized loss on investments               |                                                   | 42,566  |                                 |           | -         |         |              | 42,566     
|                                                                                     | Interest related to convertible debentures               |                                                   | -       |                                 |           |           |         |              | 1,300,000  
|                                                                                     | Share-based compensation                                 |                                                   | 52,000  |                                 |           | 98,500    |         |              | 3,983,500  
|                                                                                     | Amortization of deferred compensation                    |                                                   | -       |                                 |           | 1,000     |         |              | 152,100    
|                                                                                     | Changes in operating assets and liabilities:             |                                                   |         |                                 |           |           |         |              |            
|                                                                                     |                                                          | Decrease in accounts receivable                   |         | -                               |           |           | -       |              |             | 61,920                                                                  
|                                                                                     |                                                          | (Increase) in prepaid expenses                    |         | -                               |           |           | -       |              |             | (4,906)                                                                 
|                                                                                     |                                                          | (Increase) decrease in other current assets       |         | (19,823)                        |           |           | 54,485  |              |             | (20,413)                                                                
|                                                                                     |                                                          | Decrease in other assets                          |         | 8,108                           |           |           | -       |              |             | 4,225                                                                   
|                                                                                     |                                                          | Increase in accounts payable and accrued expenses |         | 156,687                         |           |           | 181,709 |              |             | 701,556                                                                 
|                                                                                     |                                                          | Net assets of discontinued operations             |         | -                               |           |           | -       |              |             | (28,659)                                                                
|Net Cash Used in Operating Activities:                                               |                                                          | (461,817)                                         |         |                                 | (979,675) |           |         | (5,561,928) 
|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |             |                                                                          | 
|Cash Flow From Investing Activities:                                                 |                                                          |                                                   |         |                                 |           |           |         |             
|Investment in oil and gas property                                                   |                                                          | (3,620)                                           |         |                                 | (456,656) |           |         | (4,551,878) 
|Investment in Roo Group, Inc.                                                        |                                                          | -                                                 |         |                                 | -         |           |         | (208,500)   
|Proceeds from investor in joint venture                                              |                                                          | -                                                 |         |                                 | 375,000   |           |         | 375,000     
|Purchases of fixed assets                                                            |                                                          | -                                                 |         |                                 | -         |           |         | (35,093)    
|Settlement on oil leases                                                             |                                                          | -                                                 |         |                                 | (50,000)  |           |         | (50,000)    
|Proceeds from sale of  marketable securities                                         |                                                          | 1,504                                             |         |                                 | 9,802     |           |         | 11,306      
|Proceeds from sale of Langley Park securities                                        |                                                          | 213,660                                           |         |                                 | 57,286    |           |         | 925,921     
|Proceeds from sale of ROO Group Inc. securities                                      |                                                          | 109,817                                           |         |                                 | 1,057,370 |           |         | 1,657,993   
|Proceeds from sale of Australian marketable securities                               |                                                          | -                                                 |         |                                 | -         |           |         | 130,505     
|Net Cash Provided by (Used in) Investing Activities:                                 |                                                          | 321,361                                           |         |                                 | 992,802   |           |         | (1,744,746) 
|                                                                                     |                                                          |                                                   |         |                                 |           |           |         |              |             |                                                                          | 



See accompanying notes to consolidated financial statements



F-5





---

Avenue Group, Inc. and Subsidiaries

Consolidated Cash Flows Statement (Continued)

( A Development Stage Company)





|                                                                              |                         |          |   |   |           |   |   |             |            |  | 
|----------------------------------------------------------------------------- | ----------------------- | -------- | - | - | --------- | - | - | ----------- | ---------- |  | 
|Cash Flow From Financing Activities:                                          |                         |          |   |   |           |   |   |            
|Proceeds of notes receivable                                                  |                         | -        |   |   | -         |   |   | 485,975    
|Payment of notes payable                                                      |                         | 2,900    |   |   | (200,000) |   |   | (697,100)  
|Proceeds from notes payable officer                                           |                         | 68,100   |   |   | -         |   |   | 68,100     
|Proceeds from issuance of convertible debt                                    |                         | -        |   |   | -         |   |   | 1,300,000  
|Proceeds from stock to be issued                                              |                         | -        |   |   | -         |   |   | 486,000    
|Proceeds from issuance of stock options                                       |                         | -        |   |   | -         |   |   | 100,000    
|Purchases of treasury stock                                                   |                         | -        |   |   | -         |   |   | (125,000)  
|Proceeds received from issuance of common stock, net                          |                         | -        |   |   | -         |   |   | 3,501,524  
|Net Cash Provided by (Used in) Financing Activities:                          |                         | 71,000   |   |   | (200,000) |   |   | 5,119,499  
|                                                                              |                         |          |   |   |           |   |   |             |            |  | 
|Effect of foreign currency translation on cash                                |                         | 3,187    |   |   | 1,342     |   |   | 49,318     
|                                                                              |                         |          |   |   |           |   |   |             |            |  | 
|Net (decrease)  in cash                                                       |                         | (66,269) |   |   | (185,531) |   |   | (2,137,857)
|Cash at beginning of year                                                     |                         | 76,187   |   |   | 261,718   |   |   | 2,147,775  
|                                                                              |                         |          |   |   |           |   |   |             |            |  | 
|Cash at end of year                                                           | $                       | 9,918    |   | $ | 76,187    |   | $ | 9,918      
|                                                                              |                         |          |   |   |           |   |   |             |            |  | 
|Supplemental cash flow information                                            |                         |          |   |   |           |   |   |            
|Cash paid for interest                                                        | $                       | -        |   | $ | 33,535    |   | $ | 33,535     
|Cash paid for taxes                                                           | $                       | -        |   | $ | -         |   | $ | -          
|                                                                              |                         |          |   |   |           |   |   |             |            |  | 
|Issuance of 48,458,149 shares of common stock for investment in               |                         |          |   |   |           |   |   |            
|                                                                              | Langley Park securities | $        | - |   | $         | - |   | $           | 11,000,000
|Additional paid in capital for value of termination of registration agreement | $                       | -        |   | $ | -         |   | $ | 210,000    
|Sale of Bickhams Media ( a formerly wholly owned subsidiary)                  | $                       | -        |   | $ | -         |   | $ | 588,000    
|Common Stock issued for accrued expenses                                      | $                       | 127,080  |   | $ | -         |   | $ | 127,080    



See accompanying notes to consolidated financial statements



F-6





---

Avenue Group, Inc. and Subsidiaries

Consolidated Comprehensive Income (Loss) Statements

( A Development Stage Company)





|                                   |                              |             |             |   |                         |           |   |                   |              |  |                
|---------------------------------- | ---------------------------- | ----------- | ----------- | - | ----------------------- | --------- | - | ----------------- | ------------ |  | ---------------
|                                   |                              |             |             |   |                         |           |   |                   |              |  | Cumulative     
|                                   |                              |             |             |   |                         |           |   |                   |              |  | during         
|                                   |                              |             |             |   |                         |           |   |                   |              |  | development    
|                                   |                              |             |             |   |                         |           |   |                   |              |  | stage          
|                                   |                              |             |             |   |                         |           |   |                   |              |  | January 1, 2003
|                                   |                              |             |             |   |                         |           |   |                   |              |  | to             
|                                   |                              |             |             |   | Year Ended December 31, |           |   | December 31, 2007
|                                   |                              |             |             |   | 2007                    |           |   | 2006              |              |  | (Unaudited)    
|                                   |                              |             |             |   |                         |           |   |                   |              |  |                
|Net (Loss)                         |                              | $           | (1,464,843) |   | $                       | (471,947) |   | $                 | (22,252,105)
|Other comprehensive income (loss), |                              |             |             |   |                         |           |   |                  
|                                   | net of tax related effects:  |             |             |   |                         |           |   |                   |             
|Unrealized gain (loss) on:         |                              |             |             |   |                         |           |   |                  
|                                   | marketable securities        |             | -           |   |                         | 1,209,717 |   |                   | 2,421,711   
|                                   | foreign currency translation |             | -           |   |                         | (62,708)  |   |                   | (118,109)   
|Other comprehensive gain (loss)    |                              | -           |             |   | 1,147,009               |           |   | 2,303,602        
|                                   |                              |             |             |   |                         |           |   |                   |              |  |                
|Comprehensive Income (loss)        | $                            | (1,464,843) |             | $ | 675,062                 |           | $ | (19,948,503)     
|                                   |                              |             |             |   |                         |           |   |                   |              |  |                



See accompanying notes to consolidated financial statements



F-7





---

Avenue Group, Inc. and Subsidiaries

Consolidated Stockholders Equity (Deficiency) Statements

(A Development Stage Company)



|                                                                                                                       |              |  |                           |        |        |             |        |   |                            |  |                                               |            |                       |   |                     |  |                            |             |  |   |              |  |   |             
|---------------------------------------------------------------------------------------------------------------------- | ------------ |  | ------------------------- | ------ | ------ | ----------- | ------ | - | -------------------------- |  | --------------------------------------------- | ---------- | --------------------- | - | ------------------- |  | -------------------------- | ----------- |  | - | ------------ |  | - | ------------
|                                                                                                                       | Common Stock |  | Common Stock
to be Issued |        |        |             |        |   |                            |  |                                               |            |                       |   |                     |  |                            |            
|                                                                                                                       | Shares       |  | Amount                    |        | Shares |             | Amount |   | Additional
Paid-In
Capital |  | Accumulated
Other
Comprehensive
Income (Loss) |            | Deferred
Compensation |   | Accumulated
Deficit |  | Total
Stockholders
Equity
|Balance at December 31, 2002                                                                                           | 176,242,503  |  | $                         | 35,249 |        | 650,000     |        | $ | 258750                     |  | $                                             | 11,552,147 |                       | $ | (49,384)            |  | $                          | (295,000)   |  | $ | (7,934,508)  |  | $ | 3,567,254   
|Issuance of shares in private placement for cash                                                                       | 17,617,001   |  |                           | 3,523  |        | -           |        |   | -                          |  |                                               | 3,198,000  |                       |   | 0                   |  |                            | 0           |  |   | 0            |  |   | 3,201,523   
|Shares issued to placement agent previously shares to be issued                                                        | 250,000      |  |                           | 50     |        | (250,000)   |        |   | (158,750)                  |  |                                               | 158,700    |                       |   | 0                   |  |                            | 0           |  |   | 0            |  |   | 0           
|Beneficial conversion feature on convertible debt                                                                      | -            |  |                           | 0      |        | -           |        |   | -                          |  |                                               | 1,300,000  |                       |   | 0                   |  |                            | 0           |  |   | 0            |  |   | 1,300,000   
|Issuance of shares in exchange for convertible debt                                                                    | 8,666,667    |  |                           | 1,733  |        | -           |        |   | -                          |  |                                               | 1,298,267  |                       |   | 0                   |  |                            | 0           |  |   | 0            |  |   | 1,300,000   
|Issuance of shares from the exercise of stock options                                                                  | 1,000,000    |  |                           | 200    |        | -           |        |   | -                          |  |                                               | 99,800     |                       |   | 0                   |  |                            | 0           |  |   | 0            |  |   | 100,000     
|Issuance of shares for services                                                                                        | 200,000      |  |                           | 40     |        | -           |        |   | -                          |  |                                               | 109,561    |                       |   | 0                   |  |                            | 0           |  |   | 0            |  |   | 109,601     
|Shares to be issued                                                                                                    | -            |  |                           | 0      |        | 3506666     |        |   | 486000                     |  |                                               | 0          |                       |   | 0                   |  |                            | 0           |  |   | 0            |  |   | 486,000     
|Amortization of deferred compensation for previously granted options and common stock for consulting                   | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | 0          |                       |   | 0                   |  |                            | 295,000     |  |   | 0            |  |   | 295,000     
|Granting of 150,000 stock options for services                                                                         | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | 21,000     |                       |   | 0                   |  |                            | (16,800)    |  |   | 0            |  |   | 4,200       
|Comrehensive Loss                                                                                                      | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | -           |  |   | -            |  |   | $0          
|Net Loss                                                                                                               | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | -           |  |   | (4,691,177)  |  |   | (4,691,177) 
|Foreign currency translation                                                                                           | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | 18,357              |  |                            | -           |  |   | -            |  |   | 18,357      
|Unrealized gain on Australian marketible securities                                                                    | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | 57,227              |  |                            | -           |  |   | -            |  |   | 57,227      
|Comrehensive Loss                                                                                                      |              |  |                           |        |        |             |        |   |                            |  |                                               |            |                       |   |                     |  |                            |             |  |   |              |  |   | (4,615,593) 
|Balance at December 31, 2003                                                                                           | 203,976,171  |  | $                         | 40,795 |        | 3,906,666   |        | $ | 586,000                    |  |                                               | 17,737,475 |                       |   | 26,200              |  | $                          | (16,800)    |  |   | (12,625,685) |  |   | 5,747,985   
|Issued 2,000,000 shares to K & K Plastics                                                                              | 2,000,000    |  |                           | 400    |        | (2,000,000) |        |   | (300,000)                  |  |                                               | 299,600    |                       |   | -                   |  |                            | -           |  |   | -            |  |   | -           
|Issued 1,906,666 shares to Alore, LTD-(Kashet Ltd.)                                                                    | 1,906,666    |  |                           | 380    |        | (1,906,666) |        |   | (286,000)                  |  |                                               | 285,620    |                       |   | -                   |  |                            | -           |  |   | -            |  |   | -           
|Granted 6,750,000 options to Steve Gordon                                                                              | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | 1,012,500  |                       |   | -                   |  |                            | (1,012,500) |  |   | -            |  |   | -           
|375,000 options vest to Steve Gordon                                                                                   | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | 56,250      |  |   | -            |  |   | 56,250      
|Options vest to Steve Gordon                                                                                           | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | 843,750     |  |   | -            |  |   | 843,750     
|Options vest to Daniel Aharonoff for services                                                                          | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | 12,600      |  |   | -            |  |   | 12,600      
|Issued 48,458,149 shares to Langley Park Investment Trust                                                              | 48,458,149   |  |                           | 9,692  |        | -           |        |   | -                          |  |                                               | 10,990,308 |                       |   | -                   |  |                            | -           |  |   | -            |  |   | 11,000,000  
|Granted 300,000 options to MacReport.net                                                                               | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | (18,000)    |  |   | -            |  |   | (18,000)    
|Issued 150,000 shares to MacReport.net                                                                                 | 150,000      |  |                           | 30     |        | -           |        |   | -                          |  |                                               | 17,970     |                       |   | -                   |  |                            | -           |  |   | -            |  |   | 18,000      
|Options vest to MacReport.net                                                                                          | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | 600         |  |   | -            |  |   | 600         
|Value of  the registration rights of  3,000,000 shares of ROO Group received for termination of registration agreement | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | 210,000    |                       |   | -                   |  |                            | -           |  |   | -            |  |   | 210,000     
|Net loss for 2004                                                                                                      | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | -                   |  |                            | -           |  |   | (13,653,417) |  |   | (13,653,417)
|Foreign currency translation gain                                                                                      | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | 15,119              |  |                            | -           |  |   | -            |  |   | 15,119      
|Unrealized gain on marketable securities                                                                               | -            |  |                           | -      |        | -           |        |   | -                          |  |                                               | -          |                       |   | 2,121,074           |  |                            | -           |  |   | -            |  |   | 2,121,074   
|Balance at December 31, 2004                                                                                           | 256,490,986  |  |                           | 51,297 |        | -           |        |   | -                          |  |                                               | 30,553,473 |                       |   | 2,162,393           |  |                            | (134,100)   |  |   | (26,279,102) |  |   | 6,353,961   



F-8





---



| |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 

Avenue Group, Inc. and Subsidiaries

Consolidated Stockholders Equity (Deficiency) Statements

(A Development Stage Company)





|                                                                           |              |  |                           |         |        |   |        |   |                            |  |                                               |            |                       |       |                     |   |                            |          |  |              |              |   |           |            
|-------------------------------------------------------------------------- | ------------ |  | ------------------------- | ------- | ------ | - | ------ | - | -------------------------- |  | --------------------------------------------- | ---------- | --------------------- | ----- | ------------------- | - | -------------------------- | -------- |  | ------------ | ------------ | - | --------- | -----------
|                                                                           | Common Stock |  | Common Stock
to be Issued |         |        |   |        |   |                            |  |                                               |            |                       |       |                     |   |                            |         
|                                                                           | Shares       |  | Amount                    |         | Shares |   | Amount |   | Additional
Paid-In
Capital |  | Accumulated
Other
Comprehensive
Income (Loss) |            | Deferred
Compensation |       | Accumulated
Deficit |   | Total
Stockholders
Equity
|Retirement of treasury stock                                               | (10,000,000) |  |                           | (2,000) |        | - |        |   | -                          |  |                                               | (123,000)  |                       |       | -                   |   |                            | -        |  |              | -            |   |           | (125,000)  
|Issuance of options                                                        |              |  |                           |         |        |   |        |   |                            |  |                                               |            |                       |       |                     |   |                            |          |  |              |              |   |           |            
|Deferred compensation                                                      | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | 18,000     |                       |       | -                   |   |                            | (18,000) |  |              | -            |   |           | -          
|Non-deferred compensation                                                  | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | 3,000      |                       |       | -                   |   |                            | -        |  |              | -            |   |           | 3,000      
|Amortization of options                                                    | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | -                   |   |                            | 151,100  |  |              | -            |   |           | 151,100    
|Issuance of stock for services                                             | 400,000      |  |                           | 81      |        | - |        |   | -                          |  |                                               | 25,918     |                       |       | -                   |   |                            | -        |  |              | -            |   |           | 25,999     
|Equity based compensation                                                  | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | 2,500,000  |                       |       | -                   |   |                            | -        |  |              | -            |   |           | 2,500,000  
|Reduction in unrealized component of marketable securities                 |              |  |                           |         |        |   |        |   |                            |  |                                               |            |                       |       |                     |   |                            |          |  |              |              |   |           |            
|Investment in ROO                                                          | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | (858,087)           |   |                            | -        |  |              | -            |   |           | (858,087)  
|Investment in Langley                                                      | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | (108,220)           |   |                            | -        |  |              | -            |   |           | (108,220)  
|Australian securities                                                      | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | (47,416)            |   |                            | -        |  |              | -            |   |           | (47,416)   
|Reduction in comprehensive income due to foreign exchange rate translation | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | (41,461)            |   |                            | -        |  |              | -            |   |           | (41,461)   
|Loss for 2005                                                              | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | -                   |   |                            | -        |  |              | (6,025,230)  |   |           | (6,025,230)
|Balance at December 31, 2005                                               | 246,890,986  |  |                           | 49,378  |        | - |        |   | -                          |  |                                               | 32,977,391 |                       |       | 1,107,209           |   |                            | (1,000)  |  |              | (32,304,332) |   |           | 1,828,646  
|                                                                           |              |  |                           |         |        |   |        |   |                            |  |                                               |            |                       |       |                     |   |                            |          |  |              |              |   |           |            
|Issuance of options                                                        | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | 71,000     |                       |       | -                   |   |                            | -        |  |              | -            |   |           | 71,000     
|Amortization of options                                                    | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | -                   |   |                            | 1,000    |  |              | -            |   |           | 1,000      
|Issuance of stock for compensation                                         | 700,000      |  |                           | 140     |        | - |        |   | -                          |  |                                               | 27,360     |                       |       | -                   |   |                            | -        |  |              | -            |   |           | 27,500     
|Reduction in unrealized component of marketable securities                 | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | (1,209,717)         |   |                            | -        |  |              | -            |   |           | (1,209,717)
|Reduction in comprehensive income due to foreign exchange rate translation | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | 62,708              |   |                            | -        |  |              | -            |   |           | 62,708     
|Loss for 2006                                                              | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | -                   |   |                            | -        |  |              | (471,947)    |   |           | (471,947)  
|Balance at December 31, 2006                                               | 247,590,986  |  | $                         | 49,518  |        | - |        | $ | -                          |  | $                                             | 33,075,751 |                       | $     | (39,800)            |   | $                          | -        |  |              | (32,776,279) |   |           | 309,190    
|                                                                           |              |  |                           |         |        |   |        |   |                            |  |                                               |            |                       |       |                     |   |                            |          |  |              |              |   |           |            
|Issuance of options                                                        | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | 52,000     |                       |       | -                   |   |                            | -        |  |              | -            |   |           | 52,000     
|Reduction in unrealized component of marketable securities                 | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | 42,566              |   |                            | -        |  |              | -            |   |           | 42,566     
|Reduction in comprehensive income due to foreign exchange rate translation | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | 3,187               |   |                            | -        |  |              | -            |   |           | 3,187      
|Issuance of stock for accrued expenses                                     | 4,600,000    |  |                           | 920     |        | - |        |   | -                          |  |                                               | 127,080    |                       |       | -                   |   |                            | -        |  |              | -            |   |           | 128,000    
|Loss for 2007                                                              | -            |  |                           | -       |        | - |        |   | -                          |  |                                               | -          |                       |       | -                   |   |                            | -        |  |              | (1,464,843)  |   |           | (1,464,843)
|Balance at December 31, 2007                                               | 252,190,986  |  | $                         | 50,438  |        | - |        | $ | -                          |  | $                                             | 33,254,831 | $                     | 5,953 |                     | $ | -                          |          |  | (34,241,122) |              | $ | (929,900)



See accompanying notes to consolidated financial statements



F-9





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AVENUE GROUP INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



December 31, 2007 and 2006





Note 1.  Company Background and Business Plan



Avenue Group, Inc. (`Avenue' or the `Company') was incorporated in Delaware on February 2, 1999. We are engaged in oil and gas exploration and development through our wholly-owned operating subsidiaries, Avenue Energy, Inc. Avenue Energy owns 100% of Avenue Appalachia, Inc. In 2006, we started Avenue Appalachia, Inc. (`AAI'), a Deleware company. AAI has a 10% General Partner Interest and a 31.8% Limited Partner interest in Avenue Appalachia 2006 LP ("2006 LP"), a partnership formed in 2006. (see Note 4). We also own as of December 31, 2006, and 50.1% of the common stock of Stampville.com, Inc.("Stampville"), an inactive business. We have a wholly-owned subsidiary, I.T. Technology Pty. Ltd. (`IT Tech'). Avenue Energy Israel LTD owns 100% of the Heletz-Kokhav license and 50% of the Iris License in Israel, 2 petroleum exploration licenses in the State of Israel.



Our business activities during 2007 were principally devoted to our oil and gas operations in Israel and in the West Virginia area of the Appalachian Basin. In 2007 we refocused our efforts seeking lower risk oil and Gas exploration and production opportunities in the US and Israel.



In our oil and gas exploration and production activity, we commenced U.S. operations in November 2006. In July 2006 we relinquished our Turkish property to the property operator (See Note 4).



Note 2.  Summary of Significant Accounting Policies



A.  Principles of Consolidation



Our financial statements are consolidated to include the accounts of Avenue Group, its wholly-owned subsidiaries Avenue Energy, Inc., Stampville, I.T. Technology Pty. Ltd, and the accounts of 2006 LP (see Note 4). As the losses allocated to the minority stockholders of Stampville exceeded the remaining minority interest, we have allocated the excess to Avenue Group. We eliminate all material inter-company accounts and transactions. We consolidate the accounts of 2006 LP because as the General Partner we control the partnership. This consolidation is required by the standards of Accounting Research Bulletin 51, Consolidated Financial Statements, Statement 94 of the Financial Accounting Standards Board (FASB), Consolidation of All Majority-Owned Subsidiaries, FASB Interpretation 46(R) Consolidation of Variable Interest Entities, Issue 04-05 of the Emerging Issues Task Force of the FASB, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, and FASB Staff Position SOP 78-9-1, Interaction of AICPA Statement of Position (SOP) 78-9 and EITF Issue 04-05.



B.  Estimates



Our preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense. Actual results could differ from those estimates.



C. Cash and Cash Equivalents and Fair Value of Financial Instruments



The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents include investments in money market funds and are stated at cost, which approximates market value. Cash at times may exceed FDIC insurable limits.





The carrying value of financial instruments including cash and marketable securities, accounts payable and accrued expense, and notes payable, approximates their fair values at December 31, 2007 and 2006, due to the relatively short-term nature of these instruments.







F-10





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D.  Marketable Securities

We report marketable securities at fair value (quoted market price) at the balance sheet date. We have designated the investment in ROO Group, Inc. as available for sale. We include net unrealized gains and losses on securities available for sale in equity as other comprehensive gain (loss), as provided by Statement 115 of the Financial Accounting Standards Board (FASB), Accounting for Certain Investments in Debt and Equity Securities.

In 2006, we sold our escrowed investment in Langley Park Investment Trust, when it was released from escrow per the agreement dated July 19, 2004. Initially, the investment had two components: shares which were freely tradable and shares which were escrowed. We describe the escrow in Note 8B, Capitalization and Equity, Common Stock. We classified the freely tradable shares as available-for-sale.

Accounting for the escrowed Langley Park shares - We recorded the escrowed shares as a restricted asset. Statement 115 provides that securities which may be sold within one year be designated as available for sale should be accounted for as such. As of December 31, 2005, the Langley Park escrow shares would settle in less than one year, therefore, at that date the escrowed shares were available for sale. (However, see below regarding accounting for the escrow obligation).

The contingency arrangement under which we were required to relinquish Langley Park shares held in escrow was a derivative instrument which we accounted for at fair value as a contra to the escrowed shares, with changes in fair value recorded in our operations statement, in accordance with the guidance of paragraphs 17 and 18(a) in FASB Statement 133, Accounting for Derivative Instruments and Hedging Activities. The value of the contra was $538,194 at December 31, 2005, computed as the value of the portion of the escrowed shares, which would have to be returned to Langley if the price of our common stock on the valuation date were the price at the end of the two-year escrow period.

Net unrealized gain for 2007 and 2006 were $0 and $1,209,717, respectively. We review all of our investments for any unrealized losses deemed to be other than temporary. We recognize unrealized losses that are other than temporary in earnings. We determine realized gains and losses on investments using the specific lots identification method.

See Notes 3, 8B and 9B.

E.  Oil and Gas Property

We follow the successful-efforts method of accounting for oil and gas property. Under this method of accounting, we capitalize all property acquisition cost and cost of exploratory and development wells when incurred, pending determination of whether the well has found proved reserves. We charge all geological and geophysical cost, cost of carrying and retaining undeveloped property and dry hole and bottom hole contributions to expense when incurred. If an exploratory well does not find proved reserves, we charge to expense the cost of drilling and equipping the well, as well as cost of service wells drilled in connection with the development. We include exploratory dry hole cost in cash flow from investing activity within the cash flow statement. If determination of proved reserves is not made within a year of completing the well, we charge cost of the well to expense.

We had no exploratory well cost that had been suspended for one year or more as of December 31, 2007 or 2006. As of December 31, 2007 we have drilled and completed two wells in West Virginia. The first well began producing in January 2007. The second well awaits a pipeline connection. As of December 31, 2005 we had drilled one well, the Karakilise 1 well, in Turkey. We sold that well in 2006.

We provide depletion, depreciation and amortization (DD&A) of capitalized cost of proved oil and gas property on a field-by-field basis using the units-of-production method based upon proved reserves. In computing DD&A we will take into consideration restoration, dismantlement and abandonment cost and the anticipated proceeds from equipment salvage. We account for cost of operating and maintaining of the proved property as part of the cost of oil and gas produced. We capitalize cost of support equipment and facilities and allocate their depreciation and operating costs between exploration, development, and production activities based on equipment function to the extent it is used in the activity. As of December 31, 2006, we had no proved reserves. Until such time as we discover or acquire proved reserves, we follow the guidance in paragraphs 28 and 31 of FASB Statement 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, requiring periodic assessments for impairment of unproved property and exploratory well cost when reserves are not found.

We apply the provisions of FASB Statement 143, Accounting for Asset Retirement Obligations, which provides guidance on accounting for dismantlement and abandonment cost. We have not established any proved reserves on our property. Accordingly, we have no basis for computing DD&A. Alternatively, we follow the guidance in paragraphs 28 and 31 of FASB statement 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, requiring periodic assessments for impairment of unproved property and exploratory well cost when reserves are not found.



F-11





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We review our long-lived assets for impairment when events or changes in circumstances indicate that impairment may have occurred. In the impairment test we compare the expected undiscounted future net revenue on a field-by-field basis with the related net capitalized cost at the end of each period. We will calculate expected future cash flow on all proved reserves using a 10% discount rate and escalated prices. Should the net capitalized cost exceed the undiscounted future net revenue of a property, we will write down the cost of the property to fair value, which we determine using discounted future net revenue. We provide an impairment allowance on a property-by-property basis when we determine that unproved property will not be developed. See section G of this Note.

Sales of Producing and Nonproducing Property. We will account for the sale of a partial interest in a proved property as normal retirement. We will recognize no gain or loss as long as this treatment does not significantly affect the unit-of-production depletion rate. We recognize a gain or loss for all other sales of producing properties and include the gain or loss in the results of operations.

We account for the sale of a partial interest in an unproved property as a recovery of cost when substantial uncertainty exists as to recovery of the cost applicable to the interest retained. We recognize a gain on the sale to the extent that the sales price exceeds the carrying amount of the unproved property. We recognize a gain or loss for all other sales of nonproducing properties and include the gain or loss in the results of operations.

F.  Equipment

We record equipment at cost. We provide for depreciation using the straight-line method of accounting over the estimated useful lives ranging from 3 to 7 years.

G. Impairment of Long-Lived Assets

We account for impairment and disposal of long-lived assets in accordance with FASB Statement 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires impairment losses to be recorded on assets to be held and used by us when indicators of impairment are present and the undiscounted cash flow estimated to be generated by those assets are less than the carrying amount of the assets. When an impairment loss is required for assets we will hold and use, we adjust the related assets to their estimated fair value. Fair value represents the amount at which an asset could be bought or sold in a current transaction between willing parties, that is, other than a forced or liquidation sale.

The estimation process involved in determining if assets have been impaired and in the determination of fair value is inherently uncertain because it requires estimates of current market yields as well as future events and conditions. Such future events and conditions include economic and market conditions, as well as availability of suitable financing to fund acquisition and development activity. Our realization of our revenue producing assets is dependent upon future uncertain events and conditions, and accordingly, the actual timing and amounts we realize may be materially different from their estimated value.

In 2007 and 2006 we recorded impairment losses of $412,012 and $30,600, respectively, on our oil and gas property (See Note 4).

H.  Revenue Recognition

We recognize oil and gas sales when our purchaser accepts delivery at the transfer point. At that time, title passes to the purchaser, the purchaser assumes the risks and rewards of ownership and we are able to determine the collectibility of the sales.

I.  Foreign Currency Translation

We translate assets and liabilities of our Australian subsidiary at the exchange rate prevailing at December 31,2007 and 2006, and related revenue and expense at average exchange rates in effect during the period. We record resulting translation adjustments as a component of accumulated comprehensive income (loss) in stockholders' equity.

J.  Income Taxes

We record deferred income tax using enacted tax laws and rates for the years in which we expect the tax to be paid. We provide deferred income tax when there is a temporary difference in recording such items for financial reporting and income tax reporting. The temporary differences that may give rise to deferred tax assets primarily are depletion, depreciation and accrual-to-cash adjustments, impairments and unrealized gains and losses on marketable securities, which we reduced by a like amount because we are uncertain as to whether we will realize the deferred tax assets.



F-12





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At December 31, 2007, we had federal net operating loss carryforwards amounting to approximately $19,442,000, which expire from 2021 through 2025. We have recorded a full valuation allowance against deferred tax assets (approximately $6,265,000 using a Federal tax rate of 34%) resulting from the net operating loss carryforwards, because we do not consider the realization of such deferred tax assets to be more likely than not.

The difference between the recorded income tax benefit and the computed tax  benefit using a 34% Federal tax rate is:



|                                |              |           |      |   |          
|------------------------------- | ------------ | --------- | ---- | - | ---------
|                                | December 31,
|                                | 2007         |           | 2006
|Expected income tax (benefit)   | $            | (615,000) |      | $ | (160,500)
|Permanent difference            |              | 188,000   |      |   | 34,000   
|Increase in valuation allowance |              | 427,000   |      |   | 126,500  
|Deferred tax asset              | $            | -         |      | $ | -        



K.  Loss Per Common Share



We base net loss per common share (basic and diluted) on the net loss divided by the weighted average number of common shares outstanding during each year. We exclude common stock equivalents in the computation of diluted net loss per common share because the effect would be antidilutive. Had common stock equivalents not been antidilutive, the equivalents we would have added to weighted average shares outstanding in computing the loss per share would have been 64,350,000 for 2007 and 62,900,000 for 2006.



L.  Share-Based Payments



Beginning January 1, 2006, we record share-based payments at fair value and record compensation expense for all share-based awards granted, modified, repurchased or cancelled after the effective date, in accord with FASB Statement 123(R), Share-Based Payments. We record compensation expense for outstanding awards for which the requisite service had not been rendered as of the effective date over the remaining service period. For share-based payments that had not been charged against income prior to January 1, 2006, we record compensation expense for portions of such payments vesting in 2006 or later. We adopted Statement 123(R) using a modified prospective application.)



We estimated the fair value of options granted during the years ended December 31, 2007 and 2006 on the date of grant, using the Black-Scholes pricing model with the following assumptions:



|                                                      |          |  |         
|----------------------------------------------------- | -------- |  | --------
|                                                      | 2007     |  | 2006    
|Weighted average of expected risk-free interest rates | 5.00%    |  | 5.00%   
|(Approximate 6 month Treasury Bill rate)              |          |  |         
|Expected years from vest date to exercise date        | 5        |  | 5       
|Expected stock volatility                             | 137-182% |  | 137-182%
|Expected dividend yield                               | 0%       |  | 0%      



The Company recorded $ 52,000 of compensation expense, net of related tax effects, relative to stock options for the year ended December 31, 2007, in accordance with SFAS 123R. Net loss per share basic and diluted for this expense is $0.



M.  Recent Accounting Pronouncements



Recent Accounting Pronouncements



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.





F-13





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In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, Fair Value Measurements. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51.  This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require; the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parents ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.  SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary.  SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entitys derivative instruments and hedging activities and their effects on the entitys financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



N.  Concentration Of Credit Risk



Financial instruments, which potentially subject us to concentration of credit risk, consist principally of cash described below.



During 2006, we had cash balances with a bank in excess of the $100,000 limit insured by the Federal Deposit Insurance Corporation of $100,000. Based on credit worthiness of the financial institutions with which we do business, we believe we are not exposed to any significant risk.



O.  Development Stage Company



From January 1, 2003, through the present we have been a development stage company. We devote most of our effort to raising capital and exploring and developing oil and natural gas property. Our financial statements present financial position, results of operations, cash flow and stockholders' equity in conformity with the generally accepted accounting principals that apply to established operating enterprises with additional information required by Statement 7, Accounting and Reporting By Development-Stage Enterprises. This additional information is presented on our balance sheet as "Deficit accumulated during development stage", on our operations and cash flow statements under "Cumulative during development stage from January 1, 2003; and on our stockholders' equity statement by showing all years from 2003 forward.



P. Going concern



The accompanying consolidated financial statements have been prepared assuming the Company is a going concern, which assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has suffered a loss from operations, and the Company lacks sufficient liquidity to continue its operations.



F-14





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Management's 2008 forecast indicates positive trends from revenues, but it may not result in an increase in operating income, net income, among others and positive cash flows.



These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable to continue in existence.



Continuation of the Company as a going concern is dependent upon achieving profitable operations. Management's plans to achieve profitability include developing new areas of oil and gas exploration and implementing certain cost reduction initiatives as necessary. There can be no assurance that the Company will generate enough cash from such revenues, or that cost reduction initiatives will be successful to meet anticipated cash requirements.



Note 3  Investments in Marketable Securities



During the year ended December 31, 2007 we sold all of our holdings in Langley Park securities, 728,635 shares, for $109,817, with a $3,105 gain, included in Gain on sale of marketable securities.



Summary of 2006 Investments Activity



At December 31, 2004 we owned Australian securities with a market value of US$84,116. We sold all of those securities in 2005. The details of our ownership of other securities are below.



|                                 |             |  |      |           |       |             |           |          |       |         |  |   |          
|-------------------------------- | ----------- |  | ---- | --------- | ----- | ----------- | --------- | -------- | ----- | ------- |  | - | ---------
|Langley Park-tradable            |             |  |      |           |       | Unrealized  |           |          |       |         |  |  
|                                 |             |  |      |           |       | Gain (loss) |           | Realized |       | Market 
|                                 | Shares      |  | Cost |           | - net |             | Gain      |          | Value
|December 31, 2005                | 728,635     |  | $    | 196,495   |       | $           | (30,362)  |          |       |         |  | $ | 166,133  
|Sold in 2006                     | -           |  |      | -         |       |             | -         |          | $     | -       |  |   |          
|December 31, 2006                | 728,635     |  | $    | 196,495   |       | $           | 14,060    |          |       |         |  | $ | 210,555  
|                                 |             |  |      |           |       |             |           |          |       |         |  |   |          
|Langley Park-restricted (escrow) |             |  |      |           |       | Unrealized  |           |          |       |         |  |  
|                                 |             |  |      |           |       | Gain (loss) |           | Realized |       | Market 
|                                 | Shares      |  | Cost |           | - net |             | Gain      |          | Value
|December 31, 2005                | 3,028,634   |  | $    | 816,896   |       | $           | (128,518) |          |       |         |  | $ | 688,378  
|Sold to Langley                  | (3,028,634) |  |      | (816,896) |       |             | -         |          |       | 221,416 |  |   |          
|December 31, 2006                | -           |  | $    | -         |       | $           | -         |          |       |         |  | $ | -        
|                                 |             |  |      |           |       |             |           |          |       |         |  |   |          
|Total Langley Park               |             |  |      |           |       | Unrealized  |           |          |       |         |  |  
|                                 |             |  |      |           |       | Gain (loss) |           | Realized |       | Market 
|                                 | Shares      |  | Cost |           | - net |             | Gain      |          | Value
|December 31, 2005                | 3,757,269   |  | $    | 1,013,391 |       | $           | (158,880) |          |       |         |  | $ | 854,511  
|Sold in 2006                     | (3,028,634) |  |      | (816,896) |       |             | -         |          | $     | -       |  |   |          
|December 31, 2006                | 728,635     |  | $    | 196,495   |       | $           | $14,060   |          |       |         |  | $ | 210,555  
|                                 |             |  |      |           |       |             |           |          |       |         |  |   |          
|ROO Group                        |             |  |      |           |       | Unrealized  |           |          |       |         |  |  
|                                 |             |  |      |           |       | Gain (loss) |           | Realized |       | Market 
|                                 | Shares      |  | Cost |           | - net |             | Gain      |          | Value
|December 31, 2005                | 563,210     |  | $    | 600,300   |       | $           | 1,258,293 |          |       |         |  | $ | 1,858,593
|Sold in 2006                     | (423,210)   |  |      | (110,300) |       |             | -         |          | $     | 947,071 |  |   |          
|December 31, 2006                | 140,000     |  | $    | 490,000   |       | $           | (63,000)  |          |       |         |  | $ | 427,000  







F-15





---

2007 Investments Activity



|                           |           |  |      |           |       |             |          |          |       |           |  |   |          
|-------------------------- | --------- |  | ---- | --------- | ----- | ----------- | -------- | -------- | ----- | --------- |  | - | ---------
|Langley Park-              |           |  |      |           |       | Unrealized  |          |          |       |           |  |  
|                           |           |  |      |           |       | Gain (loss) |          | Realized |       | Market   
|                           | Shares    |  | Cost |           | - net |             | Gain     |          | Value
|Balance, December 31, 2006 | 728,635   |  | $    | 196,495   |       | $           | 14,060   |          |       |           |  | $ | 210,555  
|Sold                       | (728,635) |  |      | (196,495) |       |             | (14,060) |          |       | 3,105     |  |   | (210,555)
|Balance, December 31 2007  | -         |  | $    | -         |       | $           | -        |          |       |           |  | $ | -        
|                           |           |  |      |           |       |             |          |          |       |           |  |   |          
|ROO Group                  |           |  |      |           |       |             |          |          |       |           |  |   |          
|                           |           |  |      |           |       | Unrealized  |          |          |       |           |  |  
|                           |           |  |      |           |       | Gain (loss) |          | Realized |       | Market   
|                           | Shares    |  | Cost |           | - net |             | Gain     |          | Value
|Balance, December 31, 2006 | 140,000   |  | $    | 490,000   |       | $           | (63,000) |          |       | -         |  | $ | 427,000  
|Sold                       | (140,000) |  |      | (490,000) |       |             | 63,000   |          |       | (317,183) |  |   | (427,000)
|Balance, December 31, 2007 | -         |  | $    | -         |       | $           | -        |          |       |           |  | $ | -        



Note 4 - Oil and Gas Operations



Turkish Operations



In 2002 we entered into a Farmin and Participation Agreement with Sayer Group Consortium and Middle East Petroleum Services Limited, that allowed us to earn up to a 50% working interest in up to 31 exploration licenses and 2 production leases held by the members of the Sayer Group in Turkey.



Since initiating our activity in Turkey in 2002, three exploratory wells were drilled with only one, the Karakilise Nr 1, resulting in an initial production rate of approximately 400 BOPD, which after an ex-tended production test, declined to approximately 25 BOPD.



As drilling commitments on the licenses came due, we could elect to participate in the drilling commitments thereby enabling us to maintain our interest in the licenses, or we could elect to not participate in the drilling obligation, thereby losing our interest in the license.



After evaluation of the geophysical and geological data associated with the licenses listed below, Avenue elected not to participate in any attempt to extend its interest in the licenses or drill an initial well on any of the licenses and surrendered its interest:



Gercus

Avenue and AME held a 50% interest in the Gercus license. In the quarter ended June 30, 2005 we paid $25,000 to extend the Gercus license to June 30, 2006. As of June 30, 2006, we surrendered our interest to the operator.



North Rubai

Avenue and AME held a 50% interest in the North Rubai License. By the terms of the leases, an initial well had to be drilled by May 30, 2006. As of May 30, 2006, we surrendered our interest to the operator.



Killis

Avenue and AME held a 50% working interest in the Killis prospect. By the terms of the leases, an initial well had to be drilled by July 2005. As of July, 2006, we surrendered our interest to the operator.



Arpetete

Avenue and AME held a 50% working interest in the Arpetete prospect. By the terms of the leases, an initial well had to be drilled by November 30, 2005. As of November 30, 2006, we surrendered our interest to the operator.



Following the expiration of the licenses mentioned above and various revisions to the farmin and participation agreement, Avenue's remaining interest in Turkey was a 10.5% interest in the Karakilise licenses.





F-16





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Karakilise



Drilled and completed in 2003, the Karakilise Nr 1, resulted in an initial production rate of approximately 400 BOPD, which after an extended production test, declined to approximately 25 BOPD. In May 2005, We and the Sayer Group completed a transaction with JKX Oil and Gas, an LSE listed British independent, to drill and complete the Karakilise-2 well. By this arrangement, we sold to JKX, 30% of our 15% interest in the Karakilise-2 well, or 4.5%, leaving us with a 10.5% interest in this well. In exchange, JKX reimbursed us for 4.5% of the drilling cost to the completion point of this well. The participating percentages of each party became AME and affiliates 59.5%, JKX 30% and Avenue 10.5%. As a result of this transaction during the year ended December 31, 2005 we recorded a loss on the sale of our interest in the Karakilise-2 well of $721,046 and an impairment of our oil and gas property of $319,757. After extensive testing, Karakilise Nr 2 was determined to be non-commercial and was abandoned.



In September 2006, we resolved to conclude and cease our oil exploration activities in southeast Turkey. As a result, Avenue Energy, Inc. and AME entered into a termination and indemnification agreement. As part of the terms of the agreement and in satisfaction of all of Avenue's outstanding obligations, Avenue paid $50,000 to AME and surrendered all of its interest in the Karakilise Licenses. The termination and indemnification agreement did not affect Avenue's right, pursuant to the terms of a previous farm-out agreement entered into by AME and Avenue with JKX Oil and Gas, to receive approximately $380,000 out of JKX's future production revenue from the Karakilise Licenses. As of December 31, 2006 $37,986 was paid by JKX to the Company, leaving a balance of $342,013. During the year ended December 31, 2007 the Company had not collected any additional amounts.



West Virginia



In October 2006, Avenue Energy entered into an agreement with Drilling Appalachian Corporation, ("DAC") to participate in the drilling Natural Gas wells in West Virginia.



In order to meet its financial obligations under the agreement, Avenue formed a Limited Partnership called Avenue Appalachia 2006 LP ("2006 LP"), with Avenue's wholly owned subsidiary, Avenue Appalachia Inc. ("AAI") acting as the General Partner ("GP"). Avenue assigned the DAC agreement to the 2006 LP. In consideration of its assignment of the DAC contract and its services as GP, AAI received a 10% carried partnership interest in the 2006 LP, with its interest rising to 20% after payout of capital invested.



The limited partners of the 2006 LP are an unaffiliated private family trust  holding a 68.2% limited partner interest with AAI holding the remaining 31.8%  limited partner interest.



The first two wells of the program were drilled and completed in November and December, 2006. For the year ended December 31, 2007, the wells produced a Total of 8,861 mcf for an average of 30 mcf per day in the aggregate.



Due to the performance of the first two wells of the program, we have revised the terms of the program with DAC, where the obligations of the 2006 LP will go forward on a well by well basis. In October 2007, the Limited Partner of the 2006 LP decided to drill a well on a sole risk basis. AAI did not participate in this well and will not be sharing in the revenues of this well.



Heletz-Kokhav License



On September 25, 2007, Avenue Group, Inc. announced that the Petroleum Commissioner of Israel had issued a license for the Heletz-Kokhav Field to its wholly owned Israel subsidiary Avenue Energy Israel LTD. (AEI).



The Heletz-Kokhav license is comprised of 3 oil fields  Heletz, Brur and Kochav  equaling 229,600 dunam (approximately 60,000 acres), and is located approximately 55 km south of Tel Aviv and 12 km east of the Mediterranean Sea.  Heletz was the first oil field discovered in the eastern Mediterranean and remains the most prolific oil field discovered onshore Israel.



The first well (Heletz 1) was drilled to a depth of 4800 feet (1515 Meters) and recognized as a producing well on 12 October 1955.  Initial production was approximately 400 barrels per day; oil was 29o  API.



A total of 88 wells have been drilled on the Heletz field to depths ranging from 4,000 to 6,500 feet., of which 59 were producing wells with the other 29 having oil shows.  Peak production reached 4,000 barrels of oil per day (BOPD)in the 1960s.





F-17





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Total reserves from the shallow sands have been estimated by Avenues geologists and by geological studies commissioned by the Israeli Government at 19.1 million barrels, of which 17.2 million barrels of oil has been recovered.  Reserve estimates do not include secondary, tertiary recovery methods that may have the potential to raise production; these methods have not yet been applied to the field.



Oil production in the Heletz field continued until recently by Lapidoth Ltd., which acted as a contractor for the State of Israel. Recent production has been approximately 85 BOPD from 7 producing wells.



According to the terms of the License, AEI agreed to a work program over the next 3 years that will consist of field studies, well workovers, initiating 3D seismic and the drilling of a new well. Failure by AEI in implementing the work program may cause AEI to lose the license. AEI may request the conversion of the License to a 30 year production Lease. In the event of a substantial increase in daily production that occurs as a result of the work program.



There are 53 idle wells which AEI believes can be excellent workover candidates. There is significant infill drilling potential on the acreage as well. The field is currently developed on 80 acre spacing or greater, providing additional increased density drilling opportunity.



The Heletz sandstone together with production from an active waterdrive, makes Heletz-Kokhav an excellent candidate for a waterflood program, as other fields with similar characteristics have had success in increasing recoverable oil reserves through such processes.



Capitalized Cost



As of December 31, 2007 and 2006, we had following capitalized cost related to unproved oil and gas property, in thousands:



|                                                                                       |      |    |      |   |    
|-------------------------------------------------------------------------------------- | ---- | -- | ---- | - | ---
|                                                                                       | 2007 |    | 2006
|Mineral Interests in Property                                                          | $    | -  |      | $ | 9  
|Wells and Related Equipment and Facilities, including support Equipment and Facilities |      | 13 |      |   | 447
|Total Capitalized cost                                                                 | $    | 13 |      | $ | 456



As of December 31, 2007, 2006, 2005, and 2004 we had no proved oil and gas property.



Cost Incurred in Oil and Gas Property Acquisition, Exploration, and Development Activity for the years ended December 31, 2007, 2006, 2005, and 2004, in thousands:



|                                 |       |               |         |          |      |        |      |      |      |      |         |          
|-------------------------------- | ----- | ------------- | ------- | -------- | ---- | ------ | ---- | ---- | ---- | ---- | ------- | ---------
|                                 | Total | United States | Turkey 
|Total                            | 2007  | 2006          | 2005    | 2004     | 2007 | 2006   | 2005 | 2004 | 2007 | 2006 | 2005    | 2004     
|                                 |       |               |         |          |      |        |      |      |      |      |         |          
|Acquisition of unproved property | $   - | $    9        | $    25 | $   1137 | -    | $    9 | -    | -    | -    | -    | $    25 | $    1137
|Exploration cost                 | -     | 429           | -       | 113      | -    |        | -    | -    | -    | -    | -       | 113      
|Development cost                 | -     | -             | -       | -        | -    | -      | -    | -    | -    | -    | -       | -        





F-18





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Results of Operations for Producing Activity for the Years Ended December 31, 2007, 2006, 2005, and 2004, in thousands



|                         |       |      |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|------------------------ | ----- | ---- | ------------- | ------ | ---- |  | - | ------- |  | - | ------- |  | ---- |  | - | ---- |  | - | ---- |  | - | ---- | ---- |  | - | ---- |  | - | ------- |  | - | -------
|Total                    | Total |      | United States | Turkey
|                         |       | 2007 |               |        | 2006 |  |   | 2005    |  |   | 2004    |  | 2007 |  |   | 2006 |  |   | 2005 |  |   | 2004 | 2007 |  |   | 2006 |  |   | 2005    |  |   | 2004   
|Sales                    | $     | 22   |               | $      | 61   |  | $ | 25      |  | $ | 66      |  | 22   |  | $ | -    |  | $ | -    |  | $ | -    | -    |  | $ | 61   |  | $ | 25      |  | $ | 66     
|Production expense       |       | 29   |               |        | 105  |  |   | 119     |  |   | 11      |  | 29   |  |   | -    |  |   | -    |  |   | -    | -    |  |   | 105  |  |   | 119     |  |   | 11     
|Exploration expense      |       | -    |               |        | -    |  |   | -       |  |   | -       |  | -    |  |   | -    |  |   | -    |  |   | -    | -    |  |   | -    |  |   | -       |  |   | -      
|Depreciation, depletion, |       |      |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|and valuation charges    |       | -    |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|Income tax               |       | -    |               |        | -    |  |   | -       |  |   | -       |  | -    |  |   | -    |  |   | -    |  |   | -    | -    |  |   | -    |  |   | -       |  |   | -      
|                         |       |      |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|Results of operations    |       |      |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|from producing           |       |      |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|activity (excluding      |       |      |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|corporate overhead       |       |      |               |        |      |  |   |         |  |   |         |  |      |  |   |      |  |   |      |  |   |      |      |  |   |      |  |   |         |  |   |        
|and interest)            | $     | 7    |               | $      | (75) |  | $ | (1,657) |  | $ | (2,073) |  | 7    |  | $ | -    |  | $ | -    |  | $ | -    | -    |  | $ | (75) |  | $ | (1,657) |  | $ | (2,073)



Asset Retirement Obligation



We record an asset retirement obligation in accordance with FAS 143. We measure the liability to plug our oil and gas wells at the end of their economic lives and to restore the land in compliance with all applicable regulations at its fair value at the balance sheet date. We consult with specialists operating our oil and gas property and other professionals in the industry to determine estimated cost in current dollars for the asset retirement obligation. We record accretion expense as the change in present value of discounted cash flow needed to satisfy our future asset retirement obligation. We review our fair value estimates annually and record results of the change in the estimates of the fair value as a change in the capitalized cost of the asset and as a change in the asset retirement obligation. We revise our annual accretion expense schedule accordingly. We use US Department of Labor annual Producer Price Index for the oil and gas machinery and equipment to calculate future cash flow for our asset retirement obligation. We use our cost of capital to calculate the present value of the future cash flow. Below is a schedule of the changes in the obligation over the two years ended December 31, 2007 and 2006.



|                                      |            |        |            |   |         
|------------------------------------- | ---------- | ------ | ---------- | - | --------
|                                      | Year Ended |        | Year Ended
|                                      | December   |        | December  
|                                      | 31, 2007   |        | 31, 2006  
|Beginning asset retirement obligation | $          | 12,256 |            | $ | 62,937  
|Additions related to new property     |            | -      |            |   | 12,256  
|Liabilities settled                   |            |        |            |   | (68,097)
|Accretion                             |            | 490    |            |   | 5,160   
|Ending asset retirement obligation    | $          | 12,746 |            | $ | 12,256  



Note 5  Equipment

Equipment at December 31, 2007 and 2006 included:

|                               |              |          |      |   |         
|------------------------------ | ------------ | -------- | ---- | - | --------
|                               | December 31,
|                               | 2007         |          | 2006
|Office and computer equipment  | $            | 21,818   |      | $ | 21,818  
|Less: accumulated depreciation |              | (21,395) |      |   | (19,931)
|Equipment, net                 | $            | 423      |      | $ | 1,887   



Depreciation expense for the years ended December 31, 2007, and 2006, was $1,464 and $1,464 respectively.



F-19





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Note 6  Notes And Loans Payable - Related Party

On August 1, 2000, we borrowed $150,000 from Instanz Nominees Pty. Ltd. ("Instanz"), a related party at that time. The loan bears interest at the rate of ten percent (10%) per annum. In November 2002, we repaid $100,000 of this note from the proceeds of a private placement, leaving a balance payable of principal and interest of $145,970 and $132,700 at December 31, 2007 and 2006, respectively. Upon mutual agreement of the parties, we will repay this loan and accrued interest payable, only after we have received additional financing and at that time upon the mutual agreement of Instanz and the Company.

Note 7   Notes Payable Officer



During the year ended December 31, 2007 an Officer of the Company  loaned the Company  $68,100. The loan is payable upon demand and accrues interest at a rate of 10% per annum.



Note 8.  Capitalization and Equity



A.  Preferred Stock



We have authorized the issuance of 25,000,000 shares of preferred stock, par value $.001 per share. Our board of directors has the right to create one or more series of preferred stock and to determine the rights, preferences and privileges of any such series. No shares of preferred stock are currently outstanding.



B.  Common Stock



See Note 9B.



Langley Park Investment Trust



In July 2004, we entered into an agreement with a newly formed London-based investment trust, Langley Park Investment Trust ("Langley") for the sale in a private placement of 48,458,149 shares of our common stock in exchange for 6,057,269 ordinary shares of Langley valued at 1.00 British pound ("GBP") per share or $11 million, based on arms-length negotiation. The purpose and the underlying economics of the transaction were to acquire a liquid asset which we would be able to sell as needed as a source of cash. Upon our acquisition of the Langley shares Langley was still privately-held. The fair value of the Langley shares we acquired was determined by arms-length negotiation between us and Langley. As consideration for acquiring the shares we issued 48,458,149 shares of our common stock. The price quoted for our stock on the Over-the Counter Bulletin Board, $0.227 per share at the time of closing, was a key factor in the negotiations. There was no relationship between us and Langley other than as arms-length parties to the transaction.



Prior to December 31, 2006, we sold all of our non-escrowed Langley shares. The Langley shares are listed on the London Stock Exchange with the symbol LPI. We could freely trade the Langley shares we owned, subject to the escrow described below. As part of the transaction, Langley entered into a "lock-up" agreement with us by which it agreed not to trade our shares that it received as a result of this transaction for a period of two years from the closing date of the sale. Fifty percent of the shares issued by Langley to us were held in escrow for two years following the closing. The return to Langley of the Langley escrow shares was determined and valued this way:



The acquisition of the Langley stock closed on October 8, 2004. For the escrow return, we computed the Avenue common stock Market Value as the average of the ten closing bid prices on the ten trading days immediately preceding the two year anniversary of the Langley acquisition close. We calculated the percentage decrease of Avenue Group, Inc.'s Market Value from the Avenue Group, Inc.'s closing price determined at the Langley acquisition close. We multiplied the percentage decrease by the total number of shares of Langley stock originally acquired. Because this calculation exceeded the 3,028,634 shares in the Langley escrow, we sold all of the escrow shares back to Langley at a price of one pence per share, a total of 30,286.34 British Pounds, or US$57,286. The above calculation was determined by the agreement for the acquisition of the Langley stock.



After the Langley shares began trading, we began valuing the investment at its quoted price. Because the December 31, 2004, Langley market price valuation was sharply below our recorded valuation at acquisition, we recorded an impairment loss of $10,003,318 on December 31, 2004.



Langley's assets consist almost entirely of micro cap securities of companies including ours and companies similar to us. We could not assure that any of these companies would be successful. Much of our working capital during 2005 was generated through the sale of Langley shares. Under the terms of our agreement, we have no guarantees as to the price of the Langley Investment shares and no right to receive additional shares based on the decline in the value of the investment.



F-20





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In 2006 and 2005, we sold 3,028,634 and 2,300,000 shares of Langley held by us for proceeds of $57,286 and $654,975, respectively. We used the proceeds from the sale of these shares to fund our working capital requirements.



In January, 2007, we sold our remaining interest in Langley 728,635 shares for approximately $199,600.



Also see Note 2D and Note 3.



Note 9.  Stock Options And Other Agreements



A.  Stock Options



In April 2000, our Board of Directors authorized the issuance of up to 8,250,000 shares of common stock in connection with our Stock Option Plan (the "Plan"). The Plan became effective on February 14, 2001, in connection with our effective registration statement on Form SB-2. On December 24, 2002, stockholders approved an amendment to the Plan, enabling the Board as currently configured without non-employee directors to grant options under the Plan and to increase the number of shares authorized for grant from 8,250,000 to 15,000,000. We grant options under the Plan to our officers, directors, employees and consultants.



Beginning January 1, 2006, our stock option plan is subject to the provisions of Statement No 123(R), Share-Based Payments. Under the provisions of this standard, employee and director stock-based compensation expense is measured using fair value. In 2005 and earlier our stock option plan was subject to the provisions of Statement No 123, Accounting for Stock-Based compensation. Under the provisions of the old standard, employee and director stock-based compensation expense were measured using either the intrinsic-value method as prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, or the fair value method described in Statement 123. In 2005 and earlier we had elected to account for our employee and director stock-based awards under the provisions of APB Opinion No. 25. Under APB Opinion No. 25, compensation cost for stock options was measured as the excess, if any, of the fair value of the underlying common stock on the date of grant over the exercise price of the stock option.



In 2006 and 2005 we had option activity in the following transactions:



In March 2004, we entered into a three year part-time, non-exclusive consulting Agreement with an individual pursuant to which the individual agreed to provide us with financial, capital markets, strategic planning, public relations, investor relations, general business management and corporate financial services in Canada. Compensation for the services under this agreement is from the grant of stock options to the individual in March 2004 to purchase 6,750,000 shares of common stock at $0.15 per share. Of the total options granted, 2,250,000 were granted pursuant to our 2000 Stock Option Plan and are not deemed vested until the filing of a registration statement in connection with the Plan, which was filed on April 26, 2004. The remaining 4,500,000 options were granted outside of the Plan and vested monthly over twelve months from the date of grant. As of December 31, 2004, 3,750,000 of the options granted outside of the Plan were fully vested. All of the options granted outside of the Plan were fully vested as of February 8, 2005. In connection with the grant, we expensed the vested intrinsic value of $900,000 in 2004. The unamortized balance of $112,500 was included in the balance sheet as deferred compensation at December 31, 2004 and expensed in 2005.



In April 2005 we extended for three years to April 30, 2008, the expiration date of the option granted to Fawdon Investments, Ltd. to purchase 50,000,000 shares of common stock at a $0.04 exercise price. We accounted for the extension as the issuance of a new option to a non-employee in accordance with the provisions of Statement 123 and the consensus of the Emerging Issues Task Force of the FASB in Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services. That accounting resulted in a charge to operations of $2,500,000 in connection with this extension. The options expire April 30, 2008.



On February 7, 2007, Avenue Group, Inc. entered in to a consulting agreement with Dov Amir in connection with its oil and gas activities. Pursuant to this agreement Mr. Amir received $5,000 as a bonus, and will be compensated at the rate of $5,000 per month. In addition, he will receive an option, with immediate vesting, at $.02 the beginning of each month to purchase 50,000 shares of the Company's stock at the prevailing market rate. For the year ended December 31 2007, he received an option for 400,000 shares with an exercise price of $.02 per share. Compensation expense for these options were valued using the Black-Scholes method and was calculated to be $8,000 and is included in the Statement of

Operations for the year ended December 31, 2007.



See also Note 8B.





F-21





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The following table is a summary of stock option transactions for 2007 and 2006:



|                             |            |  |   |                          
|---------------------------- | ---------- |  | - | -------------------------
|                             | Number     |  |   | Weighted
average exercise
|                             | of Shares  |  |   | price per share          
|                             |            |  |   |                          
|Balance at December 31, 2005 | 61,550,000 |  | $ | 0.05                     
|Granted                      | 2,400,000  |  | $ | 0.10                     
|Exercised                    | -          |  |   | -                        
|Expired                      | -          |  |   | -                        
|Balance at December 31, 2006 | 63,950,000 |  | $ | 0.05                     
|                             |            |  |   |                          
|Granted                      | 400,000    |  | $ | 0.10                     
|Exercised                    | -          |  |   | -                        
|Expired                      | -          |  |   | -                        
|Balance at December 31, 2007 | 64,350,000 |  | $ | 0.05                     



Information, at date of issuance, for stock option grants during 2006 and 2007:







|                                    |           |  |                   |       |                   |  |      
|----------------------------------- | --------- |  | ----------------- | ----- | ----------------- |  | -----
|                                    |           |  | Weighted-
Average |       | Weighted-
Average
|                                    |           |  | Exercise          |       | Fair             
|                                    | Shares    |  | Price             |       | Value            
|2006:                               |           |  |                   |       |                   |  |      
|Exercise price exceeds market price | 2,400,000 |  |                   | $0.10 |                   |  | $0.03
|Exercise price equals market price  | 100,000   |  |                   | $0.06 |                   |  | $0.06
|Exercise price below market price   | none      |  |                   | -     |                   |  | -    
|                                    |           |  |                   |       |                   |  |      
|2007:                               |           |  |                   |       |                   |  |      
|Exercise price exceeds market price | none      |  |                   |       |                   |  |      
|Exercise price equals market price  | 0         |  |                   | -     |                   |  | -    
|Exercise price below market price   | 400,000   |  |                   | $0.02 |                   |  | $0.02



At December 31, 2007, we had outstanding options to purchase 64,350,000 shares, of which 64,350,000_were fully vested and exercisable. The following table summarizes information about outstanding stock options at December 31, 2007:





|                |                     |              |                     |           |  |              |  |              |  |          
|--------------- | ------------------- | ------------ | ------------------- | --------- |  | ------------ |  | ------------ |  | ---------
|                | Outstanding Options |              | Options Exercisable
|                |                     |              |                     | Weighted  |  | Weighted     |  |              |  | Weighted 
|                |                     | Outstanding  |                     | average   |  | average      |  | Exercisable  |  | average  
|                |                     | as of        |                     | exercise  |  | remaining    |  | as of        |  | exercise 
|Range of        |                     | December 31, |                     | price per |  | contractual  |  | December 31, |  | price per
|Exercise Prices |                     | 2007         |                     | option    |  | life (years) |  | 2007         |  | option   
|                |                     |              |                     |           |  |              |  |              |  |          
|$0.025 -$0.25   |                     | 64,350,000   |                     | $0.05     |  | 4            |  | 64,350,000   |  | $0.05    





In 2006, options to purchase 2,400,000 shares were granted at prices ranging from $.06 to $.10. Such shares were valued using the Black-Scholes method at an average price of $.03 for a total valuation of $72,000 , which was included in the statement of operations as sales, general and administrative expense. Total compensation cost recognized as an expense for stock-based employee-director compensation awards, which includes stock issued as compensation, in 2007 and 2006 was $52,000 and $97,500 respectively.





F-22





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As of December 31, 2007, the total future compensation expense related to non-vested options not yet recognized in the consolidated statement of operations is $0.

For the year ended December 31, 2005, the Company accounted for option grants to employees and employee consultants using the intrinsic method of Accounting in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under the intrinsic value method of accounting, no compensation expense was recognized in the Company's consolidated statements of operations when the exercise price of the company's employee stock option grant equaled the market price of the underlying common stock on the date of grant and the measurement date of the option grant is certain. Accordingly, for the year ended December 31, 2005, the Company disclosed the proforma amounts of compensation expense, and its effect on net loss per share for the year then ended, if the Company accounted for its employee stock options under the fair value recognition provision of FAS 123.

For the Year ended December 31, 2007, under SFAS 123R, the company remeasures the intrinsic value of the options at the end of each reporting period until the options are exercised, cancelled or expire unexercised. As of December 31, 2007, a total of 400,000 options with a weighted average exercise price of $0.02 and a weighted average remaining life of 5 years.

B.  Other Agreements

Separation Agreement

On February 7, 2005, Jonathan Herzog, our former Executive Vice President and member of our Board of Directors, resigned from all positions he held with us.

In connection with his resignation, we entered into a Separation Agreement and General Release with Mr. Herzog pursuant to which we agreed to pay Herzog $92,250 in cash to cover certain deferred compensation owed to Herzog and to satisfy the parties' respective obligations under his employment agreement with us. In other elements of the Agreement, we repurchased 10,000,000 shares of our common stock from Eurolink International Pty. Ltd. ("Eurolink"), a company affiliated with Mr. Herzog's family, for which we paid Eurolink $125,000, the then fair value of such shares purchased. We also sold Mr. Herzog 250,000 shares of the common stock of ROO which we owned, for which Mr. Herzog paid us $125,000, the then fair value of such shares sold. The purpose of this exchange was to divest Mr. Herzog directly and indirectly of all of his interest in our common stock, as part of a mutual desire for Mr. Herzog's total separation from us, and to provide Mr. Herzog shares of stock in ROO in lieu thereof, in an amount that was approximately equal to the market value of Eurolink's 10,000,000 shares of our common stock.

Consulting Agreements

Effective January 1, 2005, we entered into a consulting agreement with David Landauer and Reuadnal Limited of London, England. Pursuant to that agreement, Reuadnal agreed to provide business and financial services to us, including, but not limited to, assistance with our strategic plan and the introduction of potential investors. Mr. Landauer is an employee of Reuadnal. As consideration for these services, we agreed to pay Reuadnal a consulting fee of $80,000, of which $35,000 was paid upon the effective date of the agreement and the balance of $45,000 was paid at the rate of $5,000 per month over the nine-month term of the agreement. The agreement expired on September 30, 2005.

Agreements with Directors and Officers

Effective as of January 1, 2003 we engaged the services of Ledger Holdings Pty Ltd, of which our current President and Chief Executive Officer Levi Mochkin is a Director, on a month to month basis as a consultant to Avenue Group Inc. pursuant to which Mr. Mochkin serves Avenue Group, Inc. as President and Chief Executive Officer. Ledger is compensated at a rate of $10,000 per month in fees, plus $2,000 per month in the form a discretionary expense allowance. Ledger is also reimbursed for various travel and other related expenses conducted on our behalf.

In connection with the appointment of Mr. Singer to our Board, we entered into a Directorship and Consulting Agreement dated February 7, 2005 (the "Singer Agreement") with Mr. Singer, pursuant to which Mr. Singer agreed to serve as one of our directors. As compensation for his services as a director, Mr. Singer received from us $2,500 per month, plus an option to purchase up to 1,200,000 shares of our common stock at $0.06 per share. In addition, pursuant to the Singer Agreement, Mr. Singer agreed to provide consulting services to us on a full-time basis in connection with the promotion and development of our oil and gas exploration operations. As compensation for his consulting services to us, Mr. Singer received $10,000 per month and received options to purchase up to 600,000 shares of our common stock at $0.06 per share. These options vested in July 2005 and are for a term of five years commencing as of that date. Effective August 1, 2005, we extended Mr. Singer's consulting arrangement to January 31, 2006. During this period, Mr. Singer received an additional option to purchase 600,000 shares of common stock at the rate of 100,000 shares per month at the asking price for the stock as reported by Nasdaq Bulletin Board on the first day of each month during this period.



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In 2005 we recorded stock-based compensation expense of $17,000 for Mr. Singer.

On June 21, 2006, the terms of Mr. Singer's compensation were modified. Effective June 1, 2006, all further options ceased, and Mr. Singer received stock grants that vested at the rate of 100,000 share per month as a Director and 100,000 shares per month for each month as a consultant. In addition, Mr. Singer received a one time stock grant of 800,000 shares. Pursuant to this new arrangement, Mr. Singer earned 200,000 grant shares per month for the period June 1, 2006 through December 31, 2006 (seven months) for a total of 1,400,000 shares. Together with the one time grant of 800,000 shares, Mr. Singer has earned 2,200,000 grant shares. The Company record a liability of $62,000 for the value of these shares if common stock at December 31, 2006. In June 2007 the Company issued the 2,200,000 shares of common stock to Mr. Singer.

In 2006 we recorded stock-based compensation expense of $11,000 for Mr. Singer, using the quoted market price for the company's stock. Mr. Singer resigned as an officer and director on January 16, 2007. He continues as a consultant and to be paid cash consulting fees as described above

In connection with the appointment of Mr. Bar-Ner to our Board, we entered into a Directorship and Consulting Agreement dated February 7, 2005 (the "DFI Agreement") with Development for Israel, LLC, a New York limited liability company ("DFI"), pursuant to which DFI agreed to make available to us the services of DFI's founder, Mr. Bar-Ner, to serve as one of our directors. As compensation for the services of Mr. Bar-Ner as a director, DFI receives $5,000 per month, payable quarterly in advance, plus 100,000 shares of our common stock per month for each month Mr. Bar-Ner serves as a director during his first year of service as a director. We issued 400,000 of the shares in June 2005 and an additional 700,000 shares in March 2006, valued at $27,500. Mr. Bar-Ner continues to serve as a director.

On June 21, 2006, the terms of Mr. Bar-Ner compensation were modified. Effective June 1, 2006, all further options ceased, and Mr. Bar-Ner received stock grants that vested at the rate of 200,000 share per month as a Director. In addition, Mr. Bar-Ner received a one time stock grant of 800,000 shares. Pursuant to this new arrangement, Mr. Bar-Ner earned 200,000 grant shares per month for the period June 1, 2006 through January 31, 2007 (eight months) for a total of 1,600,000 shares. Together with the one time grant of 800,000 shares, Mr. Bar-Ner has earned 2,200,000 grant shares. The Company record a liability of $62,000 for the value of these shares if common stock at December 31, 2006. In June 2007 the Company issued a total of 2,400,000 shares of common stock to Mr. Singer.

On June 1, 2005, we entered into an employment agreement with Mendel Mochkin to serve as Vice President and Secretary. The initial term of the agreement expires on May 1, 2007, but renews automatically for an additional 12 months unless either we or Mendel Mochkin give written notice to the other of its or his election not to renew the agreement at least 120 days prior to the end of the initial or any renewal term. The agreement provides for an annual base salary of $104,000, but only requires that Mendel Mochkin devote 100 hours per month to our business, and permits him to perform services for others not engaged in a business which is in competition with us. It also provides for the grant to Mendel Mochkin (i) upon the commencement of his employment of an option to purchase 2,400,000 shares of common stock at $0.05 per share, and (ii) on the first anniversary of the commencement of his employment of an option to purchase an additional 2,400,000 shares at $0.10 per share. The options vest at the rate of 200,000 shares per month and may be exercised for a term of five years from the date of vesting. If we terminate his employment "without cause" or he resigns for "good reason", he is entitled to severance pay in an amount equal his base salary for the remainder of the initial or renewal term, as the case may be.

Note 10 Segments

In for the year ended December 31, 2007 and 2006, we operated only in the oil and gas business. As such we have only one segment and all of our operations as shown in the financial statements relate to that business.

Note 11 Subsequent events

On January 16, 2008, the Company entered into a Letter of Intent  with TomCo Energy Plc (TomCo) and on April 1, Avenue and Tomco completed an agreement whereby TomCo would acquired a 50% effective economic interest in Avenue's rights to the Heletz-Kokhav License and the Iris License which were awarded to the Company by the Israel Petroleum Commission (the IPC).

Pursuant to the terms of the agreement, TomCo has:

- paid the Company $1,000,000;

- issued to AGI 12,618,615 million ordinary shares of 0.5 pence each in the Company ("Ordinary Shares") valued at approximately US$500,000 at a price of 2p per share with a one year sale restriction;

- paid to the Company $107,000 which represent 50 percent of costs incurred to date in relation to the Licenses;



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- agreed to assume 100 percent of the costs associated with implementing the three year work program covering the Phase 1 period of the Licenses, up to a maximum of US$4.5 million;

- agreed to pay a further $1,500,000 to the Company upon the successful conversion of the Licenses into a production lease;

- agreed to pay a further $5,000,000 to the Company upon recoverable reserves being certified at 10 million barrels or more by an independent reservoir engineering firm.

In February, 2008 the Petroleum Commissioner of Israel issued the Company 50% of the Iris License covering the remaining part of the Heltz Field. Lapidoth-HEletz LP, a Limited Partnership listed on the Tel Aviv Stock Exchange, was issued the other 50% of the Iris License.

According to the terms of the Licenses, Avenue agreed to a work program over the next 3 years that will consist of field studies, well workovers, shooting seismic and the drilling of a new well. Failure by the Company in implementing the work program may cause the Company to lose its interest in the licenses. The Company may request the conversion of the License to a 30 year production Lease. In the event of a substantial increase in daily production that occurs as a result of the work program. The Company estimates the work program expenditures at approximately $4,500,000.

There are currently 53 idle wells which the Company believes can be excellent workover candidates.

On March 17, 2008, the Company borrowed $250,000 from TomCo. The loan is payable upon demand and accrued interest at a rate if 2% per annum.

On March 23, 2008, the board of directors adopted resolutions providing for the designation of the Companys series A preferred stock, $0.001 par value.  Holders of the Series A Preferred Stock are entitled, among other things, to (i) ten (10) votes for each share of Series A Preferred Stock owned on the record date for the determination of shareholders entitled to vote, on all matters submitted to the Companys shareholders, (ii) convert shares of Series A Preferred Stock into fully paid and non-assessable shares of the Companys common stock, at their option at any time and from time to time beginning from the date of issuance, in an amount equal to two (2) shares of common stock for each one (1) share of Series A Preferred Stock surrendered, and (iii) a preferential payment in cash of $0.0025 per share of Series A Preferred Stock owned, out of assets of the Company legally available therefore upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Company to the holders of (a) any other class or series of capital stock of the Company, the terms of which expressly provide that the holders of Series A Preferred Stock should receive preferential payment with respect to such distribution (to the extent of such preference), and (b) the Companys common stock.

On March 23, 2008, the Company and Ledger Holdings Pty Ltd., executed a directorship and consulting agreement, pursuant to which Levi Mochkin, the managing director and beneficial owner of all of the equity interests in Ledger, will continue to serve as the chairman of the Companys board of directors and its chief executive officer.

As compensation for his service as chairman of the Companys board of directors, the Levi Agreement provides that Levi Mochkin will be paid $5,000 per month.  In addition, an option to purchase 120,000 shares of the Companys common stock at an exercise price of $0.005 per share will be granted to Ledger.  The option will vest in monthly tranches of 10,000 shares, commencing March 23, 2008, and each 10,000 share tranche will expire on the fifth anniversary of its vesting.

Pursuant to the Levi Agreement, Levi Mochkin will also serve as the Companys chief executive officer for a two year term, commencing March 23, 2008.  As compensation for his service he will receive $25,000 per month.  In addition, 2,400,000 shares of the Companys common stock and 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to Ledger.

On March 23, 2008, the Company and MEM Energy Partners, LLC, a limited liability company formed under the laws of Delaware (MEM), executed a directorship and consulting agreement (the Mendel Agreement), pursuant to which Mendel Mochkin, the managing director and registered owner of all of the equity interests in MEM, was appointed to serve as a member of the Companys board of directors and an oil and gas and general business consultant to the Company. Mendel Mochkin, who is 34 years, has served as the Companys vice-president since June 2005.

As compensation for his service he will be paid $2,500 per month.  In addition, an option to purchase 120,000 shares of the Companys common stock at an exercise price of $0.005 per share will be granted to MEM.  The option will vest in monthly tranches of 10,000 shares, commencing March 23, 2008, and each 10,000 share tranche will expire on the fifth anniversary of its vesting.



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Pursuant to the agreement he will also serve as an oil and gas and general business consultant to the Company for a term of one year, commencing March 23, 2008.  As compensation for his service as a consultant, the Mendel Agreement provides that Mendel Mochkin will be paid per month.  As a signing bonus, 2,400,000 shares of the Companys common stock and an option, to purchase 2,400,000 shares of the Companys common stock at an exercise price of $0.005 per share, will be granted to MEM.  The option will vest in monthly tranches of 200,000 shares, commencing March 23, 2008, and each 200,000 share tranche will expire on the fifth anniversary of its vesting.  In addition, 12,500,000 of the Companys newly designated Series A Preferred Stock will be issued to MEM.





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