UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K

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(Mark One)

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008



 ̈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

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AVENUE GROUP, INC.

(Name of small business issuer in its charter)

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|DELAWARE                                                       | 98-0200077                          
|(State or other jurisdiction of
incorporation or organization) | (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

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ̈ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  ̈  No þ

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No  ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. þ

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

Large accelerated filer  ̈     Accelerated filer  ̈

Non-accelerated filer  ̈     Smaller reporting company þ

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

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 April 14, 2009, was $3,075,000.

As of April 14, 2009, the issuer had 256,990,986 outstanding shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

None













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TABLE OF CONTENTS



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PART I
Item 1.Business
1
Item 1A.Risk Factors
4
Item 1B.Unresolved Staff Comments
11
Item 2.Properties
12
Item 3.Legal Proceedings
13
Item 4.Submission Of Matters To A Vote Of Security Holders
13
PART II
Item 5.        Market For Registrants Common Equity, Related Stockholder Matters And Issuer 
Purchases Of Equity Securities
14
Item 6.Selected Financial Data
15
Item 7.Management's Discussion & Analysis Of Financial Condition And Results Of Operations
15
.Item 7A.Quantitative And Qualitative Disclosures About Market Risk
20
Item 8.Financial Statements And Supplementary Data
20
Item 9.Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
20
Item 9A.Controls And Procedures
20
Item 9B.     Other Information.
21
PART III
Item 10.Directors, Executive Officers, Promoters And Corporate Governance
22
Item 11.Executive Compensation
23
Item 12.Security Ownership Of Certain Beneficial Owners And Management And Related 
Stockholders Matters
26
Item 13.Certain Relationships And Related Transactions And Director Independance
27
Item 14.Principal Accountant Fees And Services
27
Item 15.Exhibits
28
Signatures
31
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION



Certain statements in this annual report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to raise sufficient capital to fund our ongoing operations and satisfy our obligations as they become due, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this annual report in its entirety, including the risks described in Part I. Item 1A. Risk Factors. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this annual report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.



OTHER PERTINENT INFORMATION

When used in this annual report, the terms "Avenue," "we," "our," and "us" refers to Avenue Group, Inc., a Delaware corporation, and our subsidiaries.







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PART I

ITEM 1.

BUSINESS

Overview

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 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. 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").

We were incorporated in Delaware on February 2, 1999 under the name I.T. Technology Inc. In January 2003, we changed our name to Avenue Group, Inc. 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 KIT Digital, Inc. (OTCBB:KDGL) (KIT) 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 U.S. and the acquisition of entry-level high impact oil and gas reserves abroad.

Our business activities during 2008 were principally devoted to our oil and gas operations in Israel and to the pursuit to acquire oil and gas exploration and production property in the US and abroad.

Our principal executive offices are located at 405 Lexington Avenue 26th Floor New York, NY 10174 and our telephone number is 888-612-4188 (facsimile 347-952-3683). Our website is located at www.avenuegroup.com.

During the year ended December 31, 2008 the Company emerged from Development Stage status. Prior to 2008 the Company was a Development Stage Company as defined in FASB Statement 7 (FAS 7) and followed the reporting and disclosure requirements of FAS 7. Beginning with its fourth quarter ending December 31, 2008, the Company began generating significantrevenues from operations and ceased being a development stage Company.

Recent Developments

Heletz License Pooling Agreement

On March 3, 2009, our subsidiary AEI entered into a Join Operating Agreement (JOA) with Lapidoth-Heletz LP (L-H) to pool their interests in the Heletz-Kokhav and Iris licenses covering the Heletz Field in southern Israel. Under the agreement, AEI has contributed its 100% interest in the Heletz-Kokhav license and its 50% interest in the Iris License and L-H contributed its 50% interest in the Iris License into a pooling arrangement whereby AEI will retain a 75% interest and L-H a 25% interest in the combined licenses.

Additional terms of the agreement call for:

·

AEI to act as operator,

·

AEI to cover 100% of the costs associated with the Government Approved Work Program ("GAWP"),

·

AEI to pay the first $1.3 Million of associated capital expenditures of the licenses following the fulfillment of the license requirements as delineated in the GAWP,

·

AEI is to retain 100% of the production from the Heletz 1, Heletz 25, Heletz 37, Kokhav 24, Kokhav 27 and Kokhav 29 wells

·

L-H to retain 100% of the production from the Heletz 40 well,

·

Lapidoth to be designated as the preferred contractor under the terms and provisions of the JOA.



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Business Operations

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

Heletz Oil Field

In September, 2007, the Petroleum Commissioner of Israel (the IPC) 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.

The Heletz-Kokhav license and the Iris license equaling approximately 68,000 acres, are comprised of 3 oil fields  Heletz, Brur and Kokhav  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 significant oil field discovered onshore Israel.

The first well (Heletz-1) was drilled to a depth of 4,800 feet (1,515 Meters) and recognized as a producing well on October 12, 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 occurred between 1959-1967 when daily production was between 2,500 and 4,000 barrels of oil per day ("BOPD").

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 $4,000,000.

On June 12, 2008, oil production was restarted from the Heletz-Kokhav license in the Heletz field. As of December 31 2008, three wells were producing around 51 bopd ("Barrels of Oil Per Day") in aggregate.

TomCo Agreement

On January 16, 2008, Avenue entered into a Letter of Intent (the LOI) with TomCo Energy Plc (TomCo) pursuant to which TomCo agreed to acquire a 50% interest in the Heletz-Kokhav License and a 25% interest in the Iris License (the Licenses) which were awarded to AEI by the Israel Petroleum Commission. Upon execution of the LOI, TomCo paid the Company a non refundable security deposit in the amount of $75,000. This security deposit was to be credited towards other amounts to which TomCo is obligated under the terms of the LOI.

On March 17, 2008, the Company borrowed $250,000 from TomCo. The loan is payable upon demand and accrued interest at a rate of 2% per annum. The loan is also offset against TomCos commitments as part of the agreement.

On April 1, 2008, the Company completed the agreement. The closing of the transaction was subject to the satisfaction of certain conditions, including without limitation, obtaining any necessary consents or approvals from the IPC and/or any other Israeli governmental authority, and the payment of certain milestone payments by TomCo to the Company.

Upon closing, TomCo was to earn a 50% net working interest (after deduction of certain expenses and royalties), by assuming 100% of the costs associated with implementing the 3 year work program up to $4.5 million. In addition, TomCo paid the Company a transaction fee of $1 million in cash and $500,000 of restricted shares of TomCo. The agreement also sets forth certain payments to be made by TomCo which are contingent upon the successful conversion by the Company of the License into a production lease and recoverable reserves being certified at 10 million barrels or more as verified by an independent geologist.

Further terms of this Agreement call for TomCo to spend at least $3,500,000 or such sum as necessary to fulfill the minimum obligations of the Heletz and Iris License subject to a cap of $4,500,000 to earn a full fifty percent (50%) interest in the Heletz License and a full twenty five percent (25%) interest in the Iris License but that if TomCo has expended at least $2,000,000 within the required terms of the License and in accordance with cash calls made by the



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Operator it will earn at least a minimum twenty five percent (25%) interest in the Heletz License and a minimum twelve and a half percent (12.5%) interest in the Iris License. If TomCo should spend in excess of $2,750,000 but not the full $3,500,000, it shall earn 37.5% and 18.75% respectively. If TomCo shall have expended anything less than $2,000,000 and has indicated that it will not expend anything further or otherwise cured this breach within 45 days of notice by the Operator, then TomCo shall earn no interest whatsoever in the Licenses.

As of December 31, 2008 TomCo had advanced the Company a total of $2,702,121 of cash (including the $75,000 security deposit and the $1,000,000 transaction fee) and $500,000 of common stock (equivalent to 12,618,615 common stocks). As of December 31, 2008, the Company recorded a valuation allowance of $500,000 associated with the TomCo stock received.

On January 1, 2009 TomCo failed to meet the Companys cash call. Despite repeated attempts by the Company notifying TomCo of its obligations, to date, TomCo has not advanced any further cash towards fulfilling their commitment. On February 11, 2009, TomCo announced that it had suspended its securities from trading on the AIM market pending clarification of its financial position. On February 24, 2009, the Company served TomCo notice that they were in breach of the agreement. On April 12, 2009, the Company served TomCo notice that the agreement has been terminated and that as according to the terms of the agreement, TomCo does not retain any interest in the Companys licenses or in AEI.

Heletz License Pooling Agreement

On March 3, 2009 The Company announced that Avenue Energy Israel (AEI'') entered into a JOA with Lapidoth-Heletz LP (L-H'') to pool their interests in the Heletz-Kokhav and Iris licenses covering the Heletz Field in southern Israel (Heletz'').

Under the agreement, AEI is contributed its 100% interest in the Heletz-Kokhav license and its 50% interest in the Iris License and L-H contributed its 50% interest in the Iris License into a pooling arrangement whereby AEI will retain a 75% interest and L-H a 25% interest in the combined licenses.

Additional terms of the agreement call for:

·

AEI to act as operator,

·

AEI to cover 100% of the costs associated with the Government Approved Work Program ("GAWP"),

·

AEI shall pay the first $1.3 million of associated capital expenditures of the licenses following the fulfillment of the license requirements as delineated in the GAWP,

·

AEI to retain 100% of the production from the Heletz 1, Heletz 25, Heletz 37, Kokhav 24, Kokhav 27 and Kokhav 29 wells

·

L-H to retain 100% of the production from the Heletz 40 well,

·

Lapidoth to be designated as the preferred contractor under the terms and provisions of the JOA.

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, 2008, the wells produced a total of 14,757 mcf for an average of 18 mcf per day in the aggregate.



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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. As of December 31, 2008, The Company does not contemplate drilling any further wells with DAC.

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 the U.S.

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 2009, we will evaluate the acreage acquired and depending on the results of our evaluation, determine whether or not to drill them.

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 us, which may adversely affect our ability to compete successfully. Given our lack of resources and staff relative to most of our competitors, we are 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.

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.

Employees

As of April 13, 2009, the Company employed 2 full-time employees and 3 part-time employees/consultants. We consider our relations with our employees to be good.

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.



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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, 2008 and 2007, we generated revenues of $111,624 and $21,682, respectively, and incurred net losses of $3,569,855 and $1,464,843, respectively. At December 31, 2008, we had working capital deficit of $3,343,749 and an accumulated deficit of $37,810,977. Our auditors, in their report dated April 14, 2009, 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 commenced Israel oil and gas operations in September of 2007 and started generating revenues in December of 2008. 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.

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.



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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 Capital Needs May Increase Substantially.

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.

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:



·

weather conditions in the United States and elsewhere;

·

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;

·

political instability in the Middle East and other major oil and gas producing regions;

·

governmental regulations, both domestic and foreign;

·

domestic and foreign tax policy;

·

the pace adopted by foreign governments for the exploration, development, and production of their national reserves;

·

the price of foreign imports of oil and gas;

·

the cost of exploring for, producing and delivering oil and gas; the discovery rate of new oil and gas reserves;

·

the rate of decline of existing and new oil and gas reserves;

·

available pipeline and other oil and gas transportation capacity;

·

the ability of oil and gas companies to raise capital;

·

the overall supply and demand for oil and gas; and

·

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

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

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

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

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

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

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

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter our ability to carry on our business.The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.



8



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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.



9



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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.

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 April 13, 2009, approximately 140,000,000, or approximately 54%, of our 256,990,986 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 9,580,000 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 in 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.





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

·

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

·

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





| |  | 
| |  | 
| |  | 

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

·

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

·

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

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

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 1B.

UNRESOLVED STAFF COMMENTS

None



11



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ITEM 2.

PROPERTIES

The net-well and net-acreage disclosures below at December 31, 2008, 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. 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.

|                                 |       |  |                    |  |        |  |        |  |      |  |      |  |      |  |      |  |      |  |      |  |      |  |     
|-------------------------------- | ----- |  | ------------------ |  | ------ |  | ------ |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ----
|                                 | Total |  | U.S.
West Virginia |  | Israel |  | Turkey
|                                 | 2008  |  | 2007               |  | 2006   |  | 2008   |  | 2007 |  | 2006 |  | 2008 |  | 2007 |  | 2006 |  | 2008 |  | 2007 |  | 2006
|Net productive exploratory wells | 1.6   |  | 1.6                |  | .11    |  | 1.6    |  | 1.6  |  |     |  |     |  |     |  |     |  |     |  |     |  | .11 
|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, 2008:



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



|                 |  |        |  |    
|---------------- |  | ------ |  | ---
|Productive Wells |  | Israel
|                 |  | Gross  |  | Net
|Oil              |  | 3      |  | 3  
|Gas              |  | 0      |  | 0  
|Developed acres  |  | 240    |  | 240



Undeveloped Acreage

As of December 31, 2008, 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, 2008, the Company held leases for undeveloped acreage located in the State of Israel:



|                          |  |             
|------------------------- |  | ------------
|Gross undeveloped acreage |  | 68,000 acres
|Net undeveloped acreage   |  | 64,000 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.



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The following table shows oil and gas production information in 2008, 2007, and 2006 by geographic area:

|                                                  |          |  |                    |  |        |  |        |  |       |  |      |  |          |  |      |  |      |  |      |  |      |  |       
|------------------------------------------------- | -------- |  | ------------------ |  | ------ |  | ------ |  | ----- |  | ---- |  | -------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ------
|                                                  | Total    |  | U.S.
West Virginia |  | Israel |  | Turkey
|                                                  | 2008     |  | 2007               |  | 2006   |  | 2008   |  | 2007  |  | 2006 |  | 2008     |  | 2007 |  | 2006 |  | 2008 |  | 2007 |  | 2006  
|Oil (barrels)                                     | 9,056    |  |                  |  | 410    |  |      |  |     |  |    |  | 9,056    |  |    |  |    |  |    |  |    |  | 410   
|Gas (mcf)                                         | 14,757   |  | 8,861              |  |      |  | 14,757 |  | 8,861 |  |    |  |        |  |    |  |    |  |    |  |    |  |     
|Oil Sales (in thousands)*                         | $79      |  |                  |  | $61    |  |      |  |     |  |    |  | $79      |  |    |  |    |  |    |  |    |  | $61   
|Gas Sales (in thousands)*                         | $32      |  | $23                |  |      |  | $32    |  | $23   |  |    |  |        |  |    |  |    |  |    |  |    |  |     
|Less: production expense and tax (in thousands)   | $(1,179) |  | $(29)              |  | $(105) |  |      |  | $(29) |  |    |  | $(1,179) |  |    |  |    |  |    |  |    |  | $(105)
|Gross profit (in thousands)                       |        |  |                  |  |      |  |      |  |     |  |    |  |        |  |    |  |    |  |    |  |    |  |     
|Depletion expense (in thousands)                  |        |  |                  |  |      |  |      |  |     |  |    |  |        |  |    |  |    |  |    |  |    |  |     
|General and administrative expense(in thousands)  | $479     |  | $720               |  | $1,280 |  |      |  | $720  |  |    |  | $479     |  |    |  |    |  |    |  |    |  | $1,280
|Unit data (per barrel)
Average sales price of oil | $27.61   |  |                  |  | $57.03 |  |      |  |     |  |    |  | $27.61   |  |    |  |    |  |    |  |    |  | $57.03
|Unit data (per mcf)
Average sales price of gas    | $9.86    |  | $7.13              |  |      |  | $9.86  |  | $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 REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted through the NASDAQ Bulletin Board under the symbol "AVNU.OB" 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       |  | $0.035      |  | $0.0199     |  | $0.019      |  | $   0.01 |  | $0.055  |  | $0.021 
|September 30  |  | $0.092      |  | $  0.021    |  | $0.025      |  | $0.008   |  | $  0.04 |  | $0.025 
|December 31   |  | $0.065      |  | $  0.011    |  | $  0.03     |  | $0.015   |  | $  0.03 |  | $0.017 



Shareholders

As of April 13, 2009 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

None



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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, 2008.

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 December 31, 2008.

ITEM 6.

SELECTED FINANCIAL DATA

N/A

ITEM 7.

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. We own 100% of Avenue Energy Israel LTD (AEI) which in turn owns 100% of the Heletz-Kokhav license and 50% of the Iris License in Israel, two petroleum exploration licenses in the State of Israel. Our wholly-owned operating subsidiary, Avenue Energy, Inc, owns 100% of Avenue Appalachia, Inc., a Delaware company, which has a 10% General Partner interest and a 31.8% Limited Partner interest in Avenue Appalachia 2006 LP, a partnership formed in 2006.

Our strategy is to acquire and develop 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.

During the year ended December 31, 2008, our activities were principally devoted to our oil and gas operations in Israel and to the pursuit to acquire oil and gas exploration and production property in the US and abroad.

We continue to focus our activities on re-developing the Heletz field. This includes 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, 2008 compared to year ended December 31, 2007

During 2008, 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 and to the pursuit of acquiring oil and gas exploration and production properties in the US and abroad.

We generated $111,624 in revenue in the year ended December 31, 2008, as compared to $21,682 in the year ended December 31, 2007. The increase in revenue is primarily due to the oil production from the Heletz Field Licenses.

The net loss for the year ended December 31, 2008 was $3,569,855 compared to a net loss of $1,464,843 for the year ended December 31, 2007. During the 2008 period, Sales, general and administrative expense increased by $1,762,164, primarily due an increase in Director fees compensation in cash and stocks and consulting fees. Total operating expense for the year ended December 31, 2008 increased by $2,499,835 from $1,161,783 in the previous year to $3,661,618. This is predominantly a result of a increase in share based compensation of approximately $1,332,073, a decrease in impairment losses of approximately $412,012 and a increase in oil lease operating expenses of  $1,149,683 from costs  primarily associated with our Heletz Field Operations.

The net loss for the year ended December 31, 2008 was $3,569,855 compared to a net loss of $1,464,843 for the year ended December 31, 2007. During the 2008 period, sales, general and administrative expense increased by $1,762,164, primarily due an increase in Director fees compensation in cash and stocks and consulting fees. Total operating expense for the year ended December 31, 2008 increased by $2,499,835 from $1,161,783 in the previous year to $3,661,618. This is predominantly a result of a increase in share based compensation of approximately $1,332,073, a decrease in impairment losses of approximately $412,012 and a increase in oil lease operating expenses of $1,149,683 from costs primarily associated with our Heletz Field Operations.

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 $3,569,855 and $1,464,873 and a negative cash flow from operations of $2,253,758 and $461,817 for the year ended December 31, 2008 and 2007, respectively. We have an accumulated deficit of $37,810,977 and $34,241,122 as of December 31, 2008 and 2007, 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, 2008, we had cash of $85,085 and a working capital deficit of $3,343,749 as compared to $9,918 in cash and working capital of $555,397 as of December 31, 2007. Much of our working capital during 2008 to date has been generated through advances from TomCo Energy Corporation.



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Our cash and cash equivalents increased by $75,167 from $9,918 as of December 31, 2007 to $85,085 as of December 31, 2008. The increase in cash and cash equivalents was due to our advances from TomCo Energy Corporation.

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 from advances and note payables from TomCo.

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 2009, 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

Critical Accounting Policies and Estimates

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.

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 the Federal Deposit Insurance Corporation (FDIC) insurable limits.

The carrying value of financial instruments including cash, performance bond, and marketable securities, accounts payable and accrued expense, advances, and notes payable, approximates their fair values at December 31, 2008 and 2007, due to the relatively short-term nature of these instruments.

Marketable Securities

We report marketable securities at fair value (quoted market price) at the balance sheet date. 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.



17



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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 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.

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.

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 collectability of the sales.

Foreign Currency Translation

We translate assets and liabilities of our Australian and Israeli subsidiaries at the exchange rate prevailing at December 31, 2008 and 2007, and related revenue and expense at average exchange rates in effect during the period. We record resulting translation adjustments as a component of accumulated other comprehensive income (loss) in stockholders' deficit.

Recent Accounting Pronouncements

On January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. In February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position, "FSP FAS 157-2--Effective Date of FASB Statement No. 157" ("FSP 157-2"), which delays the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Excluded from the scope of SFAS 157 are certain leasing transactions accounted for under SFAS No. 13, "Accounting for Leases." The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of SFAS 157. The Company does not expect that the adoption of the provisions of FSP 157-2 will have a material impact on its financial position, cash flows or results of operations.



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In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). This statement requires companies to provide enhanced disclosures about (a) how and why they use derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a company's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company will adopt the new disclosure requirements on or before the required effective date and thus will provide additional disclosures in its financial statements when adopted.

In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) was issued. This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company does not expect that the adoption of this provision will have a material impact on its financial position, cash flows or results of operations.

In May 2008, the FASB issued FAS No. 162, The Hierarchy of Generally Accepted Accounting Principles" which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This statement is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". The Company does not expect that the adoption of this pronouncement will have a significant impact on its financial condition, results of operations and cash flows.

In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60".  SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company's financial position, statements of operations, or cash flows at this time.

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share." FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have a material effect on our financial position and results of operations if adopted.

In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. The document increases disclosure requirements for public companies and is effective for reporting periods (interim and annual) that end after December 15, 2008. This FSP amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financial assets. It also amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. The Company does not expect that the adoption of this pronouncement will have a significant impact on its financial condition, results of operations and cash flows.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.



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ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

N/A

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of September 30, 2008. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses described below, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose 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, and that such information is not accumulated nor communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

a)

We did not have sufficient personnel in our accounting and financial reporting functions. Currently, our Chief Executive Officer also serves as our Chief Financial Officer. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate reviewing of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis; and

b)

We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements. This control deficiency is pervasive in nature, results in a reasonable possibility that material misstatements of the consolidated financial statements including disclosures will not be prevented or detected on a timely basis as a result.

We are committed to improving our financial organization. As part of this commitment, we will create a segregation of duties consistent with control objectives and will look to increase our personnel resources and technical accounting expertise within the accounting function by the end of fiscal 2010 to resolve non-routine or complex accounting matters. In addition, when funds are available to us, which we expect to occur by the end of fiscal 2010, we will take the following action to enhance our internal controls: Hiring additional knowledgeable personnel with technical accounting expertise to further support our current accounting personnel, which management estimates will cost approximately $100,000 per annum. The Company currently engages an outside accountant to provide preparation and review of the financial statements and will continue to engage consultants in the future as necessary in order to ensure proper treatment.

Management believes that hiring additional knowledgeable personnel with technical accounting expertise will remedy the following material weaknesses: (A) lack of sufficient personnel in our accounting and financial reporting functions to achieve adequate segregation of duties; and (B) insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements.



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Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Due to the fact that our accounting staff consists of a contract accountant, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turn over issues within the department occur. We believe this will greatly decrease any control and procedure issues we may encounter in the future.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in internal control over financial reporting.

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal control over financial reporting during our fourth fiscal quarter that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

ITEM 9B.

OTHER INFORMATION.

Heletz License Pooling Agreement

On March 3, 2009 The Company announced that Avenue Energy Israel (AEI'') entered into a joint operating agreement (JOA) with Lapidoth-Heletz LP (L-H'') to pool their interests in the Heletz-Kokhav and Iris licenses covering the Heletz Field in southern Israel . Under the agreement, AEI is contributed its 100% interest in the Heletz-Kokhav license and its 50% interest in the Iris License and L-H contributed its 50% interest in the Iris License into a pooling arrangement whereby AEI will retain a 75% interest and L-H a 25% interest in the combined licenses.

Additional terms of the agreement call for:

·

AEI to act as operator.

·

AEI to cover 100% of the costs associated with the Government Approved Work Program ("GAWP").

·

AEI is to retain 100% of the production from the Heletz 1, Heletz 25, Heletz 37, Kokhav 24, Kokhav 27 and Kokhav 29 wells

·

L-H to retain 100% of the production from Heletz 40, well

·

Lapidoth shall be designated as the preferred contractor under the terms and provisions of the JOA.

·

AEI shall pay the first $1.3 million of associated capital expenditures of the licenses following the fulfillment of the license requirements as delineated in the GAWP.

The Israel Petroleum Commission (IPC) required the Company to post a plugging bond in the amount of $100,000 to ensure that the open wells on our licenses are properly plugged and abandoned when their useful lives are determined to be concluded. Such bond is an addition to the cost of the Companys projects. The Company is currently in talks with the IPC to renew the bond until such time that the wells are properly plugged and abandoned.



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PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE

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   |  | 46  |  | President, Chief Executive Officer and Director
|Uri Bar Ner    |  | 73  |  | Director                                       
|Mendel Mochkin |  | 35  |  | 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 2008, 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-K 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 11.

EXECUTIVE COMPENSATION

The following tables set forth certain information regarding our CEO and each of our most highly-compensated executive officers whose total annual salary and bonus for the fiscal years ending December 31, 2008, 2007 and 2006 exceeded $100,000:

|                           |  |      |  |             |         |  |            |  |    |                   |  |   |                    |     |  |                             |        |        |            |  |    |  |  |   |         | 
|-------------------------- |  | ---- |  | ----------- | ------- |  | ---------- |  | -- | ----------------- |  | - | ------------------ | --- |  | --------------------------- | ------ | ------ | ---------- |  | -- |  |  | - | ------- | 
|Name & 
Principal Position |  | Year |  | Salary
($ ) |         |  | Bonus
($ ) |  |    | Stock
Awards
($ ) |  |   | Option
Awards
($ ) |     |  | All Other
Compensation
($ ) |        |        | Total
($ ) | 
|Levi Mochkin (1)           |  | 2008 |  | $           | 306,000 |  |            |  |  |                   |  | $ | 630,200            | (7) |  | $                           | 3,258  |        |            |  |  |  |  | $ | 777,458 | 
|Chief Executive Officer    |  | 2007 |  | $           | 144,000 |  |            |  |  |                   |  |   |                  |     |  |                             |      |        |            |  |  |  |  | $ | 144,000 | 
|President                  |  | 2006 |  | $           | 144,000 |  |            |  |  |                   |  |   |                  |     |  |                             |      |        |            |  |  |  |  | $ | 144,000 | 
|Mendel Mochkin (2)         |  | 2008 |  | $           | 120,500 |  |            |  |  |                   |  | $ | 630,200            | (7) |  | $                           | 68,415 |        |            |  |  |  |  | $ | 802,612 | 
|Vice President             |  | 2007 |  | $           | 108,000 |  |            |  |  |                   |  |   |                  |     |  |                             | 44,000 | (3, 4) |            |  |  |  |  | $ | 152,000 | 
|                           |  | 2006 |  | $           | 108,000 |  |            |  |  |                   |  |   |                  |     |  |                             | 61,000 | (3,4)  |            |  |  |  |  | $ | 169,000 | 
|Norman Singer (5)          |  | 2008 |  | $           |       |  |            |  |  |                   |  |   |                  |     |  |                             |      |        |            |  |  |  |  | $ | 0       | 
|                           |  | 2007 |  | $           | 52,000  |  |            |  |  |                   |  |   |                  |     |  |                             |      |        |            |  |  |  |  | $ | 52,000  | 
|                           |  | 2006 |  | $           | 158,000 |  |            |  |  |                   |  | $ | 62,000             | (6) |  |                             | 11,000 | (6)    |            |  |  |  |  | $ | 231,000 | 



*

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 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 1,000,000 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 $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.

(7)

Represents 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 MEM and Levi Mochkin valued at $55,200 and $575,000, respectively.



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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 (1) |  |                                                                     | 4,590,000 |                                                                       |  | 4,590,000                                                                                      |  |                         |  |                        | .05 |                                                             | 06/01/2011 |                                                                   |  |                                                                                                       |  |                                                                                                                         |  |  |  |  |  |  |  | 
|Mendel Mochkin (1)              |  |                                                                     | 4,590,000 |                                                                       |  | 4,590,000                                                                                      |  |                         |  |                        | .05 |                                                             | 06/01/2011 |                                                                   |  |                                                                                                       |  |                                                                                                                         |  |  |  |  |  |  |  | 
|Dov Amir (2)                    |  |                                                                     | 400,000   |                                                                       |  | 400,000                                                                                        |  |                         |  |                        | .02 |                                                             | 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 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. In addition options to purchase 2,400,000 shares of the Companys common stock at an exercise price of $0.005 per share, were granted to during year ended December 31, 2008. 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. Compensation expense for these options were valued using the Black-Scholes method of calculating fair value and was calculated to be $65,158

(2)

Represents options to purchase On February 7, 2007, Dov Amir received options for 400,000 shares with an exercise price of $.02 per share



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Director Compensation

The following table sets forth certain information regarding the compensation paid to our directors during the fiscal year ended December 31, 2008.

|             |  |                                     |         |     |                      |  |   |                       |  |  |                                                |  |  |                                                                             |   |  |                                |  |   |               |  |  |   |  |  |   |         | 
|------------ |  | ----------------------------------- | ------- | --- | -------------------- |  | - | --------------------- |  |  | ---------------------------------------------- |  |  | --------------------------------------------------------------------------- | - |  | ------------------------------ |  | - | ------------- |  |  | - |  |  | - | ------- | 
|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  | 
|Levi Mochkin |  | $                                   | 306,000 |     |                      |  | 0 |                       |  |  | 0                                              |  |  |                                                                             | 0 |  |                                |  | 0 |               |  |  | 0 |  |  | $ | 306,000 | 



(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.

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 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 Ledger 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.



25



---

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 MEM 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.

ITEM 12.

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 April 14, 2009 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 April 14, 2009, we had outstanding 256,990,986 shares 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, 26 th 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 Investments Pty 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.



26



---

(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 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDANCE

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, 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 Ledger 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, Ledger 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 MEM 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 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-K and for the reviews of the financial statements included in our quarterly reports on Form 10-Q were $40,385 and $40,500 for the years ended December 31, 2008 and December 31, 2007, respectively.

Tax Fees

There were no tax fees billed during the year ended December 31, 2008.



27



---

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, 2008 and December 31, 2007.

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. The audit fees paid to the auditors with respect to fiscal year 2008 were approved by the Board of Directors.

ITEM 15.

EXHIBITS

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|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).                                                                                                                                                                                                                                                                                                
|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).





28



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                            
|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).                                                                                                                                                                                                    
|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).                                                                                                                                                                            





29



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|            |  |                                                                                                                                                                                                                                                                                                   
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                       
|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. (incorporated by reference to 10.26 of the Registrants amended annual report on Form 10-K/A filed with the SEC on May 28, 2008)
|10.27       |  | Heletz Licenses Pool Agreement Dated as of March 2, 2009*                                                                                                                                                                                                                                         
|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



30



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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 14th day of April 2009.



| |                    |                                                                                                                                
| | ------------------ | -------------------------------------------------------------------------------------------------------------------------------
| |                    |                                                                                                                                
| | AVENUE GROUP, INC.
| |                    |                                                                                                                                
| |                    |                                                                                                                                
| | By:                | /s/ LEVI MOCHKIN                                                                                                               
| |                    | Levi Mochkin
Chairman of the Board, President and Chief Executive 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,     | April 14, 2009
|Levi Mochkin       | Chief Executive Officer and Director |                                      
|                   | (Principal Executive and Principal   |                                      
|                   | Financial Officer)                   |                                      
|                   |                                      |                                      
|/s/ Uri Bar-Ner    |                                      | Director                              | April 14, 2009
|Uri Bar-Ner        |                                      |                                      
|                   |                                      |                                      
|/s/ Mendel Mochkin |                                      | Executive Vice President and Director | April 14, 2009
|Mendel Mochkin     |                                      |                                      





31



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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 at December 31, 2008 and 2007     | F-3        
|                                                              |            
|Consolidated Statements of Operations -                       |            
|For the Years Ended December 31, 2008 and 2007                | F-4        
|                                                              |            
|Consolidated Statements of Changes in Stockholders' Deficit - |            
|For the Years Ended December 31, 2008 and 2007                | F-5        
|                                                              |            
|Consolidated Statements of Cash Flows -                       |            
|For the Years Ended December 31, 2008 and 2007                | F-6        
|                                                              |            
|Notes to Consolidated Financial Statements                    | F-7 to F-20



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 as of December 31, 2008 and 2007, and the related consolidated operations statements, changes in stockholders' deficit and cash flows 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 consolidated 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, 2008 and 2007, and the results of its operations and its 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

April 14, 2009





F- 2



---

Avenue Group, Inc. and Subsidiaries

Consolidated Balance Sheets



|                                                                                                                                |  |              |             |   |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                |  | December 31, |            
|                                                                                                                                |  | 2008         |             |   | 2007 |  
|ASSETS:                                                                                                                         |  |              |             |   |      |  
|CURRENT ASSETS:                                                                                                                 |  |              |             |   |      |  
|Cash                                                                                                                            |  | $            | 85,085      |   |      | $ | 9,918       |  
|Accounts receivable                                                                                                             |  |              | 106,484     |   |      |   |           |  
|Performance bond                                                                                                                |  |              | 101,297     |   |      |   |           |  
|Inventory                                                                                                                       |  |              | 170,910     |   |      |   |           |  
|Other current assets                                                                                                            |  |              | 49,114      |   |      |   | 26,520      |  
|TOTAL CURRENT ASSETS                                                                                                            |  |              | 512,890     |   |      |   | 36,438      |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|Marketable securities - restricted, net of valuation allowance of $500,000                                                      |  |              |           |   |      |   |           |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|OIL AND GAS PROPERTY (Successful efforts method), at cost                                                                       |  |              |             |   |      |   |             |  
|Unproved undeveloped oil and gas property                                                                                       |  |              | 12,820      |   |      |   | 12,820      |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|EQUIPMENT, net of depreciation                                                                                                  |  |              | 30,493      |   |      |   | 423         |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|TOTAL ASSETS                                                                                                                    |  | $            | 556,203     |   |      | $ | 49,681      |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|LIABILITIES AND STOCKHOLDERS' DECICIT:                                                                                          |  |              |             |   |      |   |             |  
|CURRENT LIABILITIES:                                                                                                            |  |              |             |   |      |   |             |  
|Accounts payable and accrued expenses                                                                                           |  | $            | 851,618     |   |      |   | 470,835     |  
|Advances                                                                                                                        |  |              | 2,702,121   |   |      |   |           |  
|Notes payable - officer                                                                                                         |  |              |           |   |      |   | 68,100      |  
|Note payable - related party                                                                                                    |  |              | 52,900      |   |      |   | 52,900      |  
|Note payable                                                                                                                    |  |              | 250,000     |   |      |   |           |  
|TOTAL CURRENT LIABILITIES                                                                                                       |  |              | 3,856,639   |   |      |   | 591,835     |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|ASSET RETIREMENT OBLIGATION                                                                                                     |  |              | 12,746      |   |      |   | 12,746      |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|MINORITY INTEREST                                                                                                               |  |              | 375,000     |   |      |   | 375,000     |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|STOCKHOLDERS' DEFICIT:                                                                                                          |  |              |             |   |      |   |             |  
|Preferred stock, $.001 par value, 25,000,000 shares authorized, none issued, and outstanding                                    |  |              |           |   |      |   |           |  
|Preferred stock Series A, $.001 par value, 25,000,000 shares authorized, issued, and outstanding                                |  |              | 25,000      |   |      |   |           |  
|Common stock, $.0002 par value, 500,000,000 shares authorized, 256,990,986 and 252,190,986 issued and outstanding, respectively |  |              | 51,398      |   |      |   | 50,438      |  
|Additional Paid - In Capital                                                                                                    |  |              | 34,560,944  |   |      |   | 33,254,831  |  
|Accumulated other comprehensive (loss)  income                                                                                  |  |              | (514,547    | ) |      |   | 5,953       |  
|Accumulated deficit                                                                                                             |  |              | (37,810,977 | ) |      |   | (34,241,122 | )
|                                                                                                                                |  |              |             |   |      |   |             |  
|TOTAL STOCKHOLDERS' DEFICIT                                                                                                     |  |              | (3,688,182  | ) |      |   | (929,900    | )
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                     |  | $            | 556,203     |   |      | $ | 49,681      |  





See accompanying notes to consolidated financial statements



F- 3



---

Avenue Group, Inc. and Subsidiaries

Consolidated Operations Statements



|                                                       |  |                                 |             |   |      |   |             |  
|------------------------------------------------------ |  | ------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                       |  | For the Year Ended December 31, |            
|                                                       |  | 2008                            |             |   | 2007 |  
|Revenue:                                               |  |                                 |             |   |      |  
|Oil and Gas sales                                      |  | $                               | 111,624     |   |      | $ | 21,682      |  
|                                                       |  |                                 | 111,624     |   |      |   | 21,682      |  
|                                                       |  |                                 |             |   |      |   |             |  
|Expense:                                               |  |                                 |             |   |      |   |             |  
|Oil lease operating expense                            |  |                                 | 1,179,127   |   |      |   | 29,444      |  
|Impairment loss on developed oil property              |  |                                 |           |   |      |   | 412,012     |  
|Sales, general and administrative                      |  |                                 | 2,482,491   |   |      |   | 720,327     |  
|                                                       |  |                                 |             |   |      |   |             |  
|                                                       |  |                                 |             |   |      |   |             |  
|Total operating expenses                               |  |                                 | 3,661,618   |   |      |   | 1,161,783   |  
|                                                       |  |                                 |             |   |      |   |             |  
|Loss from operations                                   |  |                                 | (3,549,994  | ) |      |   | (1,140,101  | )
|                                                       |  |                                 |             |   |      |   |             |  
|Other income (expense):                                |  |                                 |             |   |      |   |             |  
|Loss on sale of marketable securities                  |  |                                 |           |   |      |   | (314,078    | )
|Interest income                                        |  |                                 | 1,374       |   |      |   | 16,753      |  
|Interest expense                                       |  |                                 | (21,235     | ) |      |   | (27,417     | )
|Total other income (expense)                           |  |                                 | (19,861     | ) |      |   | (324,742    | )
|                                                       |  |                                 |             |   |      |   |             |  
|Net loss                                               |  | $                               | (3,569,855  | ) |      | $ | (1,464,843  | )
|                                                       |  |                                 |             |   |      |   |             |  
|                                                       |  |                                 |             |   |      |   |             |  
|Basic and Diluted income (loss) per common share       |  | $                               | (0.01       | ) |      | $ | (0.01       | )
|                                                       |  |                                 |             |   |      |   |             |  
|Weighted average number of common shares outstanding - | 
|Basic  and Diluted                                     |  |                                 | 255,794,274 |   |      |   | 250,136,739 |  





See accompanying notes to consolidated financial statements



F- 4



---



Avenue Group, Inc. and Subsidiaries

Consolidated  Statement of Changes in Stockholders Deficit



|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|-------------------------------------------------------------------------- |  | ------------ | -- |  | --------------- | ------ | -- | ------------------ |  | ---------- | -------------------------------------- |  |  | ----------- | ------ |  | ------------------- | ------ | --------- | ------- | -------- | -------- | ------- | ----------- | -- | ---------- | ---------- | ------- | ---------- | --------- | ------ | 
|                                                                           |  | Common Stock |    |  | Preferred stock |        |    | Additional
Paid-In |  |            | Accumulated
Other
Comprehensive
Income |  |  | Accumulated |        |  | Total
stockholder's |       
|                                                                           |  | Shares       |    |  | Amount          |        |    | Shares             |  |            | Amount                                 |  |  | Capital     |        |  | (Loss)              |        |           | Deficit |          |          | deficit |            
|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   | )      
|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|Issuance of options                                                        |  |              |  |  |                 |        |  |                    |  |            |                                      |  |  |             |      |  |                     | 71,673 |           |         |          |        |         |             |    |          |            |         |            | 71,673    |       
|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|Issuance of preferred stock to officers                                    |  |              |  |  |                 |        |  |                    |  |            | 25,000,000                             |  |  |             | 25,000 |  |                     |        | 1,125,000 |         |          |          |       |             |    |            |          |         |            | 1,150,000 |       
|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|Issuance of common stock to officers                                       |  | 4,800,000    |    |  |                 | 960    |    |                    |  |          |                                        |  |  |           |        |  | 109,440             |        |           |         |        |          |         |             |  |            |            | 110,400 |           
|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|Unrealized loss on marketable securities                                   |  |              |  |  |                 |        |  |                    |  |            |                                      |  |  |             |      |  |                     |        |         |         |          | (500,000 | )       |             |    |          |            |         | (500,000   | )        
|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|Reduction in comprehensive income due to foreign exchange rate translation |  |              |  |  |                 |        |  |                    |  |            |                                      |  |  |             |      |  |                     |        |         |         |          |          | (20,500 | )           |    |            |          |         |            | (20,500   | )     
|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|Loss for 2008                                                              |  |              |  |  |                 |        |  |                    |  |            |                                      |  |  |             |      |  |                     |        |         |         |          |          |       |             |    | (3,569,855 | )          |         | (3,569,855 | )        
|                                                                           |  |              |    |  |                 |        |    |                    |  |            |                                        |  |  |             |        |  |                     |        |           |         |          |          |         |             |    |            |            |         |            |           |        | 
|Balance at December 31, 2008                                               |  | 256,990,986  |    |  |                 | 51,398 |    |                    |  | 25,000,000 |                                        |  |  | 25,000      |        |  | 34,560,944          |        |           |         | (514,547 | )        |         | (37,810,977 | )  |            | (3,688,182 | )      





See accompanying notes to consolidated financial statements



F- 5



---



Avenue Group, Inc. and Subsidiaries

Consolidated Cash Flows Statements

|                                                                            |  |                                 |            |   |      |   |            |  
|--------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                            |  | For the Year Ended December 31, |           
|                                                                            |  | 2008                            |            |   | 2007 |  
|Cash Flow From Operating Activities:                                        |  |                                 |            |   |      |  
|Net income (loss)                                                           |  | $                               | (3,569,855 | ) |      | $ | (1,464,843 | )
|Adjustments to reconcile net loss to net cash used in operating activities: | 
|Depreciation and depletion                                                  |  |                                 | 4,526      |   |      |   | 1,954      |  
|Impairment loss on developed oil property                                   |  |                                 |          |   |      |   | 412,012    |  
|Increase in accretion of oil asset retirement obligation                    |  |                                 |          |   |      |   | 35,444     |  
|Gain on sale of Langley stock                                               |  |                                 |          |   |      |   | (3,105     | )
|Loss on sale of Roo Group securities                                        |  |                                 |          |   |      |   | 317,183    |  
|Decrease in unrealized loss on investments                                  |  |                                 |          |   |      |   | 42,566     |  
|Share-based compensation                                                    |  |                                 | 1,332,073  |   |      |   | 52,000     |  
|Interest income on performance bond                                         |  |                                 | (1,297     | ) |      |   |          |  
|Changes in operating assets and liabilities:                                |  |                                 |            |   |      |   |            |  
|Performance bond                                                            |  |                                 | (100,000   | ) |      |   |          |  
|Accounts receivable                                                         |  |                                 | (106,484   | ) |      |   |          |  
|Inventory                                                                   |  |                                 | (170,910   | ) |      |   |          |  
|Other assets                                                                |  |                                 | (22,594    | ) |      |   | (11,715    | )
|Accounts payable and accrued expenses                                       |  |                                 | 380,783    |   |      |   | 156,687    |  
|Net Cash Used in Operating Activities                                       |  |                                 | (2,253,758 | ) |      |   | (461,817   | )
|                                                                            |  |                                 |            |   |      |   |            |  
|Cash Flow From Investing Activities:                                        |  |                                 |            |   |      |   |            |  
|Investment in oil and gas property                                          |  |                                 |          |   |      |   | (3,620     | )
|Purchases of fixed assets                                                   |  |                                 | (34,596    | ) |      |   |          |  
|Proceeds from sale of  marketable securities                                |  |                                 |          |   |      |   | 1,504      |  
|Proceeds from sale of Langley Park securities                               |  |                                 |          |   |      |   | 213,660    |  
|Proceeds from sale of ROO Group Inc. securities                             |  |                                 |          |   |      |   | 109,817    |  
|Net Cash (Used in) Provided by  Investing Activities                        |  |                                 | (34,596    | ) |      |   | 321,361    |  
|                                                                            |  |                                 |            |   |      |   |            |  
|Cash Flow From Financing Activities:                                        |  |                                 |            |   |      |   |            |  
|Payment of notes payable                                                    |  |                                 |          |   |      |   | 2,900      |  
|(Repayments) / proceeds of  notes payable officer                           |  |                                 | (68,100    | ) |      |   | 68,100     |  
|Proceeds from advances                                                      |  |                                 | 2,202,121  |   |      |   |          |  
|Proceeds from notes payable                                                 |  |                                 | 250,000    |   |      |   |          |  
|Net Cash Provided by Financing Activities                                   |  |                                 | 2,384,021  |   |      |   | 71,000     |  
|                                                                            |  |                                 |            |   |      |   |            |  
|Effect of foreign currency translation on cash                              |  |                                 | (20,500    | ) |      |   | 3,187      |  
|Net increase (decrease)  in cash                                            |  |                                 | 75,167     |   |      |   | (66,269    | )
|Cash at beginning of period                                                 |  |                                 | 9,918      |   |      |   | 76,187     |  
|Cash at end of period                                                       |  | $                               | 85,085     |   |      | $ | 9,918      |  
|                                                                            |  |                                 |            |   |      |   |            |  
|                                                                            |  |                                 |            |   |      |   |            |  
|Supplemental cash flow information:                                         |  |                                 |            |   |      |   |            |  
|Cash paid for interest                                                      |  | $                               |          |   |      | $ |          |  
|Cash paid for taxes                                                         |  | $                               |          |   |      | $ |          |  
|Common Stock issued for accrued expenses                                    |  | $                               |          |   |      | $ | 127,800    |  
|Receipt of Tomco stock                                                      |  | $                               | 500,000    |   |      | $ |          |  





See accompanying notes to consolidated financial statements



F- 6



---

AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008

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. Avenue owns 100% of Avenue Energy Israel LTD (AEI) which in turn owns 75% of the Heletz-Kokhav license and 75% of the Iris License in Israel, 2 petroleum exploration licenses in the State of Israel. Our wholly-owned operating subsidiary, Avenue Energy, Inc, owns 100% of Avenue Appalachia, Inc. In 2006, we started Avenue Appalachia, Inc. (AAI), a Delaware 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).

Our business activities during the years ended 2008 and 2007 were principally devoted to our oil and gas operations in Israel and the pursuit to acquire oil and gas exploration and production properties in the US and abroad.

Basis of Presentation

During the year ended December 31, 2008 the Company emerged from Development Stage status. Prior to 2008 the Company was a Development Stage Company as defined in FASB Statement 7 (FAS 7) and followed the reporting and disclosure requirements of FAS 7. Beginning with its fourth quarter ending December 31, 2008, the Company began generating significantrevenues from operations and ceased being a development stage Company.

Note 2     Summary of Significant Accounting Policies

A. Principles of Consolidation

The accompanying consolidated financial statements 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. Reclassification of prior year amounts

Certain prior year amounts have been reclassified to reflect current years presentation.

D. 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 the Federal Deposit Insurance Corporation (FDIC) insurable limits.





F- 7



---

AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



The carrying value of financial instruments including cash, performance bond, and marketable securities, accounts payable and accrued expense, advances, and notes payable, approximates their fair values at December 31, 2008 and 2007, due to the relatively short-term nature of these instruments.

E. Marketable Securities

We report marketable securities at fair value (quoted market price) at the balance sheet date. 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.

F. 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, 2008. As of December 31, 2008 we have drilled and completed two wells in West Virginia.

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, 2008, 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.

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 J 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- 8



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



G. Accounts receivable

At December 31, 2008 accounts receivable consists of amounts due from sale of oil. The Company deems all accounts receivable collectible at December 31, 2008. Management has determined that an allowance for doubtful accounts is not necessary at December 31, 2008.

H. 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.

I. Inventory

Inventory at December 31, 2008 consists of oil in tanks. The Company values inventory at the lower of cost or market. At December 31, 2008 the Company valued its inventory at fair market value.

J. 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 2008 and 2007 we recorded impairment losses of $0 and $412,012, respectively, on our oil and gas property (see Note 4). We had no impairment losses during the year ended December 31, 2008.

K. 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 collectability of the sales.

L. Foreign Currency Translation

We translate assets and liabilities of our Australian and Israeli subsidiaries at the exchange rate prevailing at December 31, 2008 and 2007, and related revenue and expense at average exchange rates in effect during the period. We record resulting translation adjustments as a component of accumulated other comprehensive income (loss) in stockholders' deficit.

M. 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- 9



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



At December 31, 2008, we had federal net operating loss carryforwards amounting to approximately $22,000,000, which expire through 2028. We have recorded a full valuation allowance against deferred tax assets (approximately $8,580,000 using a tax rate of 39%) 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 Companys deferred tax asset does not include the losses of its foreign subsidiary, Avenue Energy Israel of $1,269,000 at December 31, 2008.

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

|                                    |              |            |   |      |   |           |  
|----------------------------------- | ------------ | ---------- | - | ---- | - | --------- | -
|                                    | December 31, |           
|                                    | 2008         |            |   | 2007 |  
|Expected income tax (benefit)       | $            | (1,213,000 | ) |      | $ | ( 498,000 | )
|State taxes, net of federal benefit |              | (178,500   | ) |      |   | (73,000   | )
|Loss on foreign subsidiary          |              | 495,000    |   |      |   |         |  
|Increase in valuation allowance     |              | 896,500    |   |      |   | 571,000   |  
|Deferred tax asset                  | $            |          |   |      | $ |         |  



N. 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, 2008 and 2007 on the date of grant, using the Black-Scholes pricing model with the following assumptions:

|                                                      |  |          |  |         
|----------------------------------------------------- |  | -------- |  | --------
|                                                      |  | 2008     |  | 2007    
|Weighted average of expected risk-free interest rates |  | 2.00%    |  | 5.00%   
|(Approximate 6 month Treasury Bill rate)              |  |          |  |         
|Expected years from vest date to exercise date        |  | 2        |  | 5       
|Expected stock volatility                             |  | 101-109% |  | 137-182%
|Expected dividend yield                               |  | 0%       |  | 0%      



The Company recorded $71,673 and $52,000 of compensation expense, net of related tax effects, relative to stock options for the years ended December 31, 2008 and 2007, respectively in accordance with SFAS 123R. Net loss per share basic and diluted for this expense is $0.

O. 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 9,580,000 and 64,350,000 as of December 31, 2008 and 2007, respectively.



F- 10



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



P. Recent Accounting Pronouncements

On January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. In February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position, "FSP FAS 157-2--Effective Date of FASB Statement No. 157" ("FSP 157-2"), which delays the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Excluded from the scope of SFAS 157 are certain leasing transactions accounted for under SFAS No. 13, "Accounting for Leases." The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of SFAS 157. The Company does not expect that the adoption of the provisions of FSP 157-2 will have a material impact on its financial position, cash flows or results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). This statement requires companies to provide enhanced disclosures about (a) how and why they use derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a company's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company will adopt the new disclosure requirements on or before the required effective date and thus will provide additional disclosures in its financial statements when adopted.

In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) was issued. This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company does not expect that the adoption of this provision will have a material impact on its financial position, cash flows or results of operations.

In May 2008, the FASB issued FAS No. 162, The Hierarchy of Generally Accepted Accounting Principles which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This statement is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning ofPresent Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect that the adoption of this pronouncement will have a significant impact on its financial condition, results of operations and cash flows.

In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Companys financial position, statements of operations, or cash flows at this time.

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (FSP EITF 03-6-1). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, Earnings per Share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have a material effect on our financial positionand results of operations if adopted.



F- 11



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. The document increases disclosure requirements for public companies and is effective for reporting periods (interim and annual) that end after December 15, 2008. This FSP amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financial assets. It also amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities.

The Company does not expect that the adoption of this pronouncement will have a significant impact on its financial condition, results of operations and cash flows.

All new accounting pronouncements issued but not yet effective have been deemed to not be applicable, hence the adoption of these new standards is not expected to have a material impact on the consolidated financial statements.

Q. Concentration Of Credit Risk

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

During the year ended December 31, 2008, we did not have balances in excess of the $250,000 limit insured by the Federal Deposit Insurance Corporation of $250,000.

One Customer accounts for 71% of sales and 74% of accounts receivable at December 31, 2008.

R. 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. Management's 2009 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     Performance Bond

The Israel Petroleum Commission (IPC) required the company to post a plugging bond in the amount of $100,000 to ensure that the open wells on our licenses are properly plugged and abandoned when their useful lives are determined to be concluded. Such bond is an addition to the cost of the Companys projects. The Company is currently in talks with the IPC to renew the bond until such time that the wells are properly plugged and abandoned.

Note 4     Oil and Gas Operations

Heletz Field Licenses

In September, 2007, the Petroleum Commissioner of Israel (the IPC) 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.



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



The Heletz-Kokhav license and the Iris license equaling approximately 68,000 acres, are comprised of 3 oil fields  Heletz, Brur and Kochav  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 significant oil field discovered onshore Israel.

The first well (Heletz-1) was drilled to a depth of 4,800 feet (1,515 Meters) and recognized as a producing well on October 12, 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 occurred between 1959-1967 when daily production was between 2,500 and 4,000 barrels of oil per day ("BOPD").

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 $4,000,000.

On June 12, 2008, oil production was restarted from the Heletz-Kokhav license in the Heletz field. As of December 31 2008, three wells were producing around 51 bopd ("Barrels of Oil Per Day") in aggregate.

TomCo Agreement

On January 16, 2008, Avenue entered into a non-binding Letter of Intent (the LOI) with TomCo Energy Plc (TomCo) pursuant to which TomCo agreed to acquire a 50% interest in the Heletz-Kokhav License and a 25% interest in the Iris License (the Licenses) which were awarded to AEI by the Israel Petroleum Commission.

Upon execution of the LOI, TomCo paid the Company a non refundable security deposit in the amount of $75,000. This security deposit is to be credited towards other amounts to which TomCo is obligated under the terms of the LOI.

On March 17, 2008, the Company borrowed $250,000 from TomCo. The loan is payable upon demand and accrued interest at a rate of 2% per annum. The loan is also offset against TomCos commitment as part of the agreement.

On April 1, 2008, the Company completed the agreement. The closing of the transaction contemplated by the agreement was subject to the satisfaction of certain conditions, including without limitation, obtaining any necessary consents or approvals from the IPC and/or any other Israeli governmental authority, and the payment of certain milestone payments by TomCo to the Company.

Upon closing, TomCo earns a 50% net working interest (after deduction of certain expenses and royalties), by assuming 100% of the costs associated with implementing the 3 year work program up to $4 million. In addition, TomCo paid the Company a transaction fee of $1 million in cash and $500,000 of restricted shares of TomCo. The agreement also sets forth certain payments to be made by TomCo which are contingent upon the successful conversion by the Company of the License into a production lease and recoverable reserves being certified at 10 million barrels or more as verified by an independent geologist. Further terms of this Agreement call for TomCo to spend at least $3,500,000 or such sum as necessary to fulfill the minimum obligations of the Heletz and Iris License subject to a cap of $4,500,000 to earn a full fifty percent (50%) interest in the Heletz License and a full twenty five percent (25%) interest in the Iris License but that if TomCo has expended at least $2,000,000 within the required terms of the License and in accordance with cash calls made by the Operator it will earn at least a minimum twenty five percent (25%) interest in the Heletz License and a minimum twelve and a half percent (12.5%) interest in the Iris License. If TomCo should spend in excess of $2,750,000 but not the full $3,500,000, it shall earn 37.5% and 18.75% , respectively. If TomCo shall have expended anything less than $2,000,000 and has indicated that it will not expend anything further or otherwise cured this breach within 45 days of notice by the Operator, then TomCo shall earn no interest whatsoever in the Licenses.

As of December 31, 2008 TomCo had advanced the Company a total of $2,702,121 of cash (including the $75,000 security deposit and the $1,000,000 transaction fee) and $500,000 of common stock (equivalent to 12,618,615 common stocks). As of December 31, 2008, the Company recorded a valuation allowance of $500,000 associated with the TomCo stock received.



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



On January 1, 2009 TomCo failed to meet the Companys cash call. Despite repeated attempts by the Company notifying TomCo of its obligations. To date, TomCo has not advanced any further cash towards fulfilling their commitment. On February 11, 2009, TomCo announced that it had suspended its securities from trading on the AIM market pending clarification of its financial position. On February 24, 2009, the Company served TomCo notice that they were in breach of the agreement. On April 12, 2009, the Company served TomCo notice that the agreement has been terminated and that as according to the terms of the agreement, TomCo does not retain any interest in the Companys licenses or in AEI.

Heletz License Pooling Agreement

On March 3, 2009 The Company announced that Avenue Energy Israel (AEI'') entered into a Joint Operating Agreement (JOA) with Lapidoth-Heletz LP (L-H'') to pool their interests in the Heletz-Kokhav and Iris licenses covering the Heletz Field in southern Israel . Under the agreement, AEI is contributed its 100% interest in the Heletz-Kokhav license and its 50% interest in the Iris License and L-H contributed its 50% interest in the Iris License into a pooling arrangement whereby AEI will retain a 75% interest and L-H a 25% interest in the combined licenses.

Additional terms of the agreement call for:

·

AEI to act as operator.

·

AEI to cover 100% of the costs associated with the Government  Approved Work Program ("GAWP").

·

AEI is to retain 100% of the production from the Heletz 1, Heletz 25, Heletz 37, Kokhav 24, Kokhav 27 and Kokhav 29 wells and L-H  retaining 100% of the production from the Heletz 40 well.

·

Lapidoth shall be designated as the preferred contractor under the terms and provisions of the JOA.

·

AEI shall pay the first $1.3 million of associated capital expenditures of the licenses following the fulfillment of the license requirements as delineated in the GAWP.

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, 2008, the wells produced a total of 14,757 mcf for an average of 18 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.



F- 14



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



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 years ended December 31, 2008 and 2007.

|                                      |  |                   |        |  |                   |   |        | 
|------------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | 
|                                      |  | December 31,
2008 |        |  | December 31,
2007 |  
|Beginning asset retirement obligation |  | $                 | 12,746 |  |                   | $ | 12,256 | 
|Accretion                             |  |                   |        |  |                   |   | 490    | 
|Ending asset retirement obligation    |  | $                 | 12,746 |  |                   | $ | 12,746 | 



Note 5     Inventory

Inventory at December 31, 2008 consists of oil in tanks. The Company values inventory at the lower of cost of market. At December 31, 2008 the Company valued its inventory at fair market value.

Note 6     Equipment

Equipment at December 31, 2008 and 2007 included:



|                               |  |                   |         |   |                   |   |         |  
|------------------------------ |  | ----------------- | ------- | - | ----------------- | - | ------- | -
|                               |  | December 31,
2008 |         |   | December 31,
2007 |  
|Office and computer equipment  |  | $                 | 56,414  |   |                   | $ | 21,818  |  
|Less: accumulated depreciation |  |                   | (25,921 | ) |                   |   | (21,395 | )
|Equipment, net                 |  | $                 | 30,493  |   |                   | $ | 423     |  



Depreciation expense for the year ended December 31, 2008, and 2007, was $4,526 and $1,464, respectively.

Note 7     Advances

Upon execution of the Letter of Intent (LOI), TomCo paid the Company a non-refundable security deposit in the amount of $75,000. This security deposit is to be credited towards other amounts to which TomCo is obligated under the terms of the LOI.

The closing of the transaction contemplated by the agreement is subject to the satisfaction of certain conditions, including without limitation, obtaining any necessary consents or approvals from the IPC and/or any other Israeli governmental authority, and the payment of the security deposit by TomCo to the Company.

Upon closing, TomCo earns a 50% net working interest (after deduction of certain expenses and royalties), by assuming 100% of the costs associated with implementing the 3 year work program up to $4 million. In addition, TomCo paid the Company a transaction fee of $1 million in cash and $500,000 of restricted shares of TomCo. The agreement also sets forth certain payments to be made by TomCo which are contingent upon the successful conversion by the Company of the License into a production lease and recoverable reserves being certified at 10 million barrels or more as verified by an independent geologist. As of December 31, 2008 TomCo had advanced the Company a total of $2,702,121 of cash (including the $75,000 security deposit) and $500,000 of common stock (equivalent to 12,618,615 common stocks). As of December 31, 2008, the Company recorded a valuation allowance of $500,000 associated with the TomCo stock received.



F- 15



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



Note 8     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 $160,235 and $145,970 at December 31, 2008 and 2007, 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 9     Notes Payable Officer

An Officer of the Company loaned the Company a total of $68,100. The loan is payable upon demand and accrues interest at a rate of 10% per annum. As of December 31, 2008 the officer was repaid a total of $68,100. Accrued interest at December 31 30, 2008 was $3,749.

Note 10     Notes Payable

On March 17, 2008, the Company borrowed $250,000 from TomCo. The loan is payable upon demand and accrued interest at a rate of 2% per annum. Accrued interest at December 31, 2008 amounted to $4,027.

Note 11     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.

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 stock.

B. Common Stock

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.

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.



F- 16



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



Note 12     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 expired 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.

Under SFAS 123R, The Company re measures 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, 2008, a total of 9,580,000 options with a weighted average exercise price of $.02 and a weighted remaining life of 5 years are outstanding.



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



The following table is a summary of stock option transactions for 2008 and 2007:

|                             |  |                  |             |   |                                           |   |        |  
|---------------------------- |  | ---------------- | ----------- | - | ----------------------------------------- | - | ------ | -
|                             |  | Number
of Shares |             |   | Weighted
average
exercise
price per share |  
|Balance at December 31, 2006 |  |                  | 63,950,000  |   |                                           | $ | 0.054  |  
|Granted                      |  |                  | 400,000     |   |                                           | $ | 0.098  |  
|Exercised                    |  |                  |           |   |                                           | $ |      |  
|Expired                      |  |                  |           |   |                                           | $ |      |  
|Balance at December 31, 2007 |  |                  | 64,350,000  |   |                                           | $ | 0.054  |  
|Granted                      |  |                  | 1,980,000   |   |                                           |   | 0.005  |  
|Exercised                    |  |                  |           |   |                                           | $ |      |  
|Expired                      |  |                  | (56,750,000 | ) |                                           |   | (0.053 | )
|Balance at December 31, 2008 |  |                  | 9,580,000   |   |                                           |   | 0.006  |  

Information, at date of issuance, for stock option grants during 2008 and 2007:

|                                    |  |           |  |           |       |           |   |      
|----------------------------------- |  | --------- |  | --------- | ----- | --------- | - | -----
|                                    |  |           |  | Weighted- |       | Weighted-
|                                    |  |           |  | Average   |       | Average  
|                                    |  |           |  | Exercise  |       | Fair     
|                                    |  | Shares    |  | Price     |       | Value    
|2007:                               |  |           |  |           |       |          
|Exercise price exceeds market price |  |         |  | $         |     |           | $ |    
|Exercise price equals market price  |  |         |  | $         |     |           | $ |    
|Exercise price below market price   |  |         |  | $         |     |           | $ |    
|2008:                               |  |           |  |           |       |           |   |      
|Exercise price exceeds market price |  |         |  | $         |     |           | $ |    
|Exercise price equals market price  |  |         |  | $         |     |           | $ |    
|Exercise price below market price   |  | 1,980,000 |  | $         | 0.005 |           | $ | 0.041



At December 31, 2008, we had outstanding options to purchase 9,580,000 shares, of which 9,580,000 were fully vested and exercisable. The following table summarizes information about outstanding stock options at December 31, 2008:

|                         |  |                                     |  |                                            |  |                                                     |  |                                     |  |                                           
|------------------------ |  | ----------------------------------- |  | ------------------------------------------ |  | --------------------------------------------------- |  | ----------------------------------- |  | ------------------------------------------
|                         |  | Outstanding Options                 |  |                                            |  | Options Exercisable                                
|Range of
Exercise Prices |  | Outstanding
as of
December 31,
2008 |  | Weighted
average
exercise
price per
option |  | Weighted
average
remaining
contractual life (years) |  | Exercisable
as of
December 31,
2007 |  | Weighted
average
exercise
price per
option
|$0.005 -$0.25            |  | 9,580,000                           |  | $0.006                                     |  | 4.0                                                 |  | 64,350,000                          |  | $0.05                                     



B. Other Agreements

Agreements with Directors and Officers

On March 23, 2008, the Company and Ledger Holdings Pty Ltd., executed a directorship and consulting agreement, effective April 1, 2008 pursuant to which Levi Mochkin 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 Ledger 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 April 1, 2008, and each 10,000 share tranche will expire on the fifth anniversary of its vesting. Compensation expense for these options were valued using the Black-Scholes method and was calculated to be $3,258 and is included in the Statement of Operations for year ended December 31, 2008.



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



Pursuant to the Ledger Agreement, Levi Mochkin will also serve as the Companys Chief Executive Officer for a two year term, commencing April 1, 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 valued at $55,200 and $575,000, respectively and included in the Statement of Operations for the year ended December 31, 2008.

On January 15th 2008, the Company entered into a Directorship and Consulting Agreement (the "DFI Agreement") with Development for Israel, LLC, a New York limited liability company ("DFI"), pursuant to which DFI agreed to continue to make available to the Company the services of DFI's founder, Mr. Uri 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.

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 MEM 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 will act as an oil and gas and general business consultant to the Company. Mendel Mochkin has served as the Companys vice-president since June 2005.

Pursuant to the terms of the agreement, the company shall compensate MEM for Mendel Mochkins services as a Director at a rate of $2,500 per month and 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, effective April 1, 2008, and each 10,000 share tranche will expire on the fifth anniversary of its vesting. Compensation expense for these options were valued using the Black-Scholes method and was calculated to be $3,258 and is included in the Statement of Operations for the year ended Decembe 31, 2008. Pursuant to the agreement Mendel Mochkin will also serve as an oil and gas and general business consultant to the Company for a term of one year, effective April 1, 2008. As compensation, MEM will be paid $8,000 per month, a signing bonus of 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 MEM valued at $55,200 and $575,000, respectively. In addition options 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 and included in the Statement of Operations for the year ended December 31, 2008. 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. Compensation expense for these options were valued using the Black-Scholes method and was calculated to be $65,158 and is included in the Statement of Operations for the year ended December 31, 2008.

Note 13     Segments

For the year ended December 31, 2008 and 2007, 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 consolidated financial statements relate to that business.

Note 14     Subsequent Events

On January 1, 2009 TomCo failed to meet the Companys cash call. Despite repeated attempts by the Company notifying TomCo of its obligations. To date, TomCo has not advanced any more cash towards fulfilling their commitment. On February 11, 2009, TomCo announced that it had suspended its securities from trading on the AIM market pending clarification of its financial position. On February 24, 2009, the Company served TomCo notice that they were in breach of the agreement. On April 12, 2009, the Company served TomCo notice that the agreement has been terminated and that as according to the terms of the agreement, TomCo does not retain any interest in The Companys licenses.



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AVENUE GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008



Heletz License Pooling Agreement

On March 3, 2009 The Company announced that Avenue Energy Israel (AEI'') entered into a Joint Operating Agreement (JOA) with Lapidoth-Heletz LP (L-H'') to pool their interests in the Heletz-Kokhav and Iris licenses covering the Heletz Field in southern Israel . Under the agreement, AEI is contributed its 100% interest in the Heletz-Kokhav license and its 50% interest in the Iris License and L-H contributed its 50% interest in the Iris License into a pooling arrangement whereby AEI will retain a 75% interest and L-H a 25% interest in the combined licenses.

Additional terms of the agreement call for:

·

AEI to act as operator.

·

AEI to cover 100% of the costs associated with the Government Approved Work Program ("GAWP").

·

AEI is to retain 100% of the production from the Heletz 1, Heletz 25, Heletz 37, Kokhav 24, Kokhav 27 and Kokhav 29 wells and L-H  retaining 100% of the production from the Heletz 40 well.

·

Lapidoth shall be designated as the preferred contractor under the terms and provisions of the JOA.

·

AEI shall pay the first $1.3 million of associated capital expenditures of the licenses following the fulfillment of the license requirements as delineated in the GAWP.

The Israel Petroleum Commission (IPC) required the Company to post a plugging bond in the amount of $100,000 to ensure that the open wells on our licenses are properly plugged and abandoned when their useful lives are determined to be concluded. Such bond is an addition to the cost of the Companys projects. The Company is currently in talks with the IPC to renew the bond until such time that the wells are properly plugged and abandoned.



F- 20