**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**




(Mark
      One)





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





For
      the
      fiscal year ended  December
      31, 2006





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





For
      the
      transition period from ___________ to
      ___________




Commission
      File Number  0-52100




TEKOIL
      & GAS CORPORATION


(Name
      of
      small business issuer in its charter)





Delaware
            34-2035350(State
                of other jurisdiction of incorporation or
                organization)
            (I.R.S.
                Employer Identification
                No.)25050
                I-45 North, Suite 528, The Woodlands,
                Texas
            77380(Address
                of principal executive
                offices)
            (Zip
                Code)





Issuer’s
      telephone number (281)
      304-6950





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





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





Common
      Stock, $0.000001
      par value


(Title
      of
      class)





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





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o  No
x





Issuer’s
      revenues for the fiscal year ended December 31, 2006: $-0-





The
      aggregate market value of the voting and non-voting common equity of the
      registrant held by non-affiliates (for this purpose, persons and entities other
      than executive officers, directors, and 5% or more shareholders) of the
      registrant, as of March 15, 2007, was $7,449,344.





Number
      of
      shares of Common Stock, $0.000001 par value, outstanding as of March 15, 2007: 23,694,175





Documents
      incorporated by reference: None





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










**TABLE
      OF CONTENTS**


Page**FORWARD
                  LOOKING STATEMENTS**
              3**PART
                  I**
              5ITEM
                  1. DESCRIPTION OF BUSINESS
              5Business
                  Development
              5Business
                  of Issuer
              6Risk
                  Factors
              14ITEM
                  2. DESCRIPTION OF PROPERTY
              23Oil
                  and Gas Leases
              23Other
              24ITEM
                  3. LEGAL PROCEEDINGS
              24ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              24**PART
                  II**
              25ITEM
                  5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS
              25ITEM
                  6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATION
              26Critical
                  Accounting Policies
              26Plan
                  of Operation
              26Liquidity
                  and Capital Resources
              29ITEM
                  7. FINANCIAL STATEMENTS
              31ITEM
                  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISLOSURE MATTERS
              32ITEM
                  8A. CONTROLS AND PROCEDURES
              32ITEM
                  8B. OTHER INFORMATION
              32**PART
                  III**
              33ITEM
                    9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
                    AND CORPORATE
                    GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
                    ACT
              33Corporate
                  Governance
              35Section
                  16(a) Compliance
              35ITEM
                  10. EXECUTIVE COMPENSATION
              36ITEM
                    11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                    AND
                    RELATED STOCKHOLDER MATTERS
              38ITEM
                    12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                    INDEPENDENCE
              41ITEM
                  13. EXHIBITS
              42ITEM
                  14. PRINCIPAL ACCOUNTING FEES AND SERVICES
              45**SIGNATURES**
              46**EXHIBIT
                  INDEX**
              47
    -2-




**FORWARD-LOOKING
      STATEMENTS**





This
      annual report and the documents we incorporate by reference include
“forward-looking statements.” All statements, other than statements of
      historical fact, included or incorporated by reference in this annual report
      which address activities, events or developments that we expect or anticipate
      will or may occur in the future are forward-looking statements. The words
“believe,” “intend,” “expect,” “anticipate,” “project,” “estimate,” “predict”
and similar expressions are also intended to identify forward-looking
      statements.





These
      forward-looking statements include, among others, things such as:





·
            plans
                and objectives of our management for future operations relating to
                our
                products and services;





·
            plans
                and objectives of our management for our future economic
                performance;





·
            amounts
                and nature of future capital
                expenditures;





·
            wells
                to be drilled or reworked;





·
            oil
                and gas prices and demand;





·
            exploitation
                and exploration prospects;





·
            estimates
                of proved oil and gas reserves;





·
            reserve
                potential;





·
            development
                and infill drilling potential;





·
            expansion
                and other development trends of the oil and gas
                industry;





·
            business
                strategy;





·
            production
                of oil and gas reserves;





·
            planned
                asset sales or dispositions; and





·
            expansion
                and growth of our business and
                operations.





These
      statements are based on certain assumptions and analyses made by us in light
      of
      our experience and our perception of historical trends, current conditions
      and
      expected future developments, as well as other factors we believe are
      appropriate in the circumstances. However, whether actual results and
      developments will conform to our expectations and predictions is subject to
      a
      number of risks and uncertainties which could cause actual results to differ
      materially from our expectations, including, but not limited to, the
      following:




-3-




·
            risk
                factors discussed in this report;





·
            oil
                and gas prices;





·
            exploitation
                and exploration successes;





·
            continued
                availability of capital and
                financing;





·
            general
                economic, market or business
                conditions;





·
            acquisitions
                and other business opportunities (or lack thereof) that may be presented
                to and pursued by us;





·
            changes
                in laws or regulations; and





·
            other
                factors, most of which are beyond our
                control.





Consequently,
      all of the forward-looking statements made in this annual report and in the
      documents we incorporate by reference are qualified by these cautionary
      statements and there can be no assurance that the actual results or developments
      anticipated by us will be realized or, even if substantially realized, that
      they
      will have the expected consequences to or effects on us or our business or
      operations. In light of the significant uncertainties inherent in such
      forward-looking statements, their inclusion should not be regarded as a
      representation by us or any other person that our objectives or plans will
      be
      achieved. Unless required by applicable law, we assume no obligation to update
      publicly any such forward-looking statements, whether as a result of new
      information, future events or otherwise.




-4-


**PART
      I**




**Item
      1.**  **Description of Business.**





Business
      Development





Tekoil
      & Gas Corporation (“TKGN,” “we” or the “Company”) was incorporated in
      Delaware on January 2, 2002, under the name “Trailridge Holdings, Inc.” On April
      6, 2004, the Company changed its name to “Glow Bench Systems International,
      Inc.”; and on December 14, 2004, it changed its name to “Pexcon,
      Inc.”





On
      May
      25, 2005, Pexcon, Inc., entered into an Acquisition Agreement with Tekoil &
Gas Corporation, a Florida corporation (“Tekoil-FL”), the shareholders of
      Tekoil-FL and Gerald M. Dunne, in which the shareholders of Tekoil-FL received
      694,980,000 shares of the common stock, $0.00000001 par value, of Pexcon, Inc.,
      in exchange for the outstanding shares of common stock of Tekoil-FL held by
      them. Immediately following the closing of the Acquisition Agreement on June
      27,
      2005, Pexcon, Inc., had a total of 772,200,000 shares of common stock
      outstanding. In connection with the Acquisition Agreement, Pexcon, Inc.,
      acquired the assets and assumed the liabilities of Tekoil-FL, which became
      a
      wholly-owned subsidiary of Pexcon, Inc. For accounting purposes only, the share
      exchange transaction was treated as a recapitalization of Tekoil-FL as the
      acquirer. In connection with the transaction, the Board of Directors of Pexcon,
      Inc., resigned, the Board of Directors of Tekoil-FL became the Board of
      Directors of the Company, and the Company’s name was formally changed from
      Pexcon, Inc., to Tekoil & Gas Corporation.





On
      October 14, 2005, the Company effected a 1 for 100 reverse split of its common
      stock. As of that date and as a result of the reverse stock split, 7,722,000
      shares of common stock were outstanding. In connection with the reverse stock
      split, the Company changed the par value of the common stock from $0.00000001
      per share to $0.000001 per share, and it reduced the number of authorized shares
      of common stock from 800,000,000 shares to 200,000,000 shares.





The
      Company currently operates its business directly, and not through its Tekoil-FL
      subsidiary, which continues to exist but has no assets or operations. For the
      purpose of pursuing its business strategy in the Province of Newfoundland,
      Canada, as described in greater detail below, on March 29, 2006, the Company
      formed a wholly-owned subsidiary, Tekoil Rig and Development Corporation, a
      Newfoundland corporation, and on April 19, 2006, the Company qualified to do
      business in Newfoundland. On January 17, 2007, the Company formed another
      wholly-owned subsidiary, Masters Acquisition Co., LLC, a Delaware limited
      liability company, and changed its name to Tekoil and Gas Gulf Coast, LLC,
      on
      January 26, 2007.





The
      Company is authorized to issue up to 20,000,000 shares of preferred stock,
      par
      value $0.00000001 per share. The Company has designated 3,000,000 of those
      authorized shares of preferred stock as Series A Convertible Preferred Stock,
      the terms of which are set forth in the Certificate of the Powers, Designations,
      Preferences and Rights of the Series A Convertible Preferred Stock, filed with
      the Secretary of State of Delaware on August 2, 2005, as amended on February
      22,
      2006 and June 12, 2006.





-5-


As
      of
      March 15, 2007, the Company had outstanding 23,694,175 shares of common stock,
      par value $0.000001 per share (the “Common Stock”), and 2,692,000 shares of
      Series A Convertible Preferred Stock, par value $0.00000001 per share (the
      “Series A Preferred Stock”).





Business
      of Issuer





The
      Company is an exploration stage oil and gas enterprise focused on the
      acquisition, stimulation, rehabilitation and asset improvement of small to
      medium sized manageable oil and gas fields throughout North
      America.





*Business
      Strategy*




Our
      overall goal is to maximize our value through profitable growth by acquiring
      oil
      and gas reserves and production, with a firm philosophy of utilizing the latest,
      state of the art oil and gas technology in our drilling operations. Our current
      and ongoing strategy is to (a) acquire producing oil and gas properties with
      significant upside potential at favorable prices, (b) focus on exploration
      and
      development activities to maximize production and ultimate reserve recovery
      on
      existing properties, (c) explore undeveloped properties, (d) maintain a low
      cost
      structure, and (e) maintain financial flexibility. Key elements of our strategy
      include the following:





Acquisitions
      of Producing Properties .
      We have
      an experienced management and technical team, some of whom are consultants,
      which makes us more financially flexible. We focus on the acquisition of
      owner-operated producing properties that meet our selection criteria, which
      include (a) significant potential for increasing reserves and production through
      development and further exploration, (b) favorable purchase price, and (c)
      opportunities for improved operating efficiency. We are continually identifying
      and evaluating acquisition opportunities. To date, we have not been successful
      in this regard and there can be no assurance that any such acquisitions will
      be
      successfully consummated in the future.





Development .
      We have
      researched several projects that did not meet our criteria and/or did not pass
      our due diligence process. We continue to use our network of contacts in the
      industry to explore such opportunities, and with the use of the internet we
      conduct much of our due diligence before doing in situ evaluations.





Exploration .
      Our
      exploration activities for 2005 and 2006 have been restricted geographically
      to
      North America and Canada. The main thrust of this initiative, however, was
      predominantly in Eastern Canada. We have identified a potentially exciting
      opportunity in an area where exploration and risk capital of in excess of $100
      million has been previously expended from the 1990’s to 2005. However, another
      company holds the lease to this area, so we have no rights to pursue this
      opportunity unless the current lease is terminated. Our independent consulting
      engineers, Fekete Associates and Dick Boyce of dB, LLC, have advised us that
      this area was a failure due to previous operators’ not understanding the
      complexity of the structures, and the unavailability of modern-day 3D seismic
      technology. Over the life of the one drilled well in this area, when operating
      by various operators, the well produced an average of 2,500 barrels of oil
      per
      day. We have access to all the previous data and history of these prospects,
      including mapping information, 2D seismic interpretation, minimal 3D seismic
      interpretation and extensive drilling information.





-6-


Low
      Cost Structure .
      We have
      only six employees, and we hire subcontractors to provide technical engineering,
      accounting and legal expertise. We intend to maintain a low cost structure
      by
      keeping a small workforce. We have the capabilities of being an efficient
      operator and can capitalize on our low cost structure in evaluating acquisition
      opportunities. Our goal is to achieve substantial reductions in labor and other
      field-level costs from those expended by the previous operators. Our lower
      cost
      structure could substantially improve cash flows of targeted
      companies.





Financial
      Flexibility .
      We are
      committed to maintaining financial flexibility, which we believe is important
      for the successful execution of our acquisition, exploration and development
      strategy. Since October of 2005, we have completed private placements of our
      Common Stock and Series A Preferred Stock, which have provided us with aggregate
      net proceeds of approximately $4,022,000.




*Western
      Newfoundland Prospect Development*





Progress
      from November 2005 to December 2006 .
      After
      assembling the technical team in August 2005 and confirming the significant
      hydrocarbon potential that exists in the area of the Port au Port Peninsula
      of
      Western Newfoundland, we had the following objectives for the November 2005
      to
      December 2006 time period:





·
            Prepare
                a technically sound exploration and development
                plan.





·
            Lease
                the mineral rights over the prospective acreage at reasonable terms
                for
                the Company.





·
            Establish
                our presence in Newfoundland by forming a Newfoundland subsidiary,
                qualifying to do business in Newfoundland and opening an office there;
                familiarize ourselves with the applicable regulatory regime(s) for
                oil and
                gas activity in the province; and establish good working relations
                with
                the regulators, government officials and the local communities in
                which we
                will be operating.





·
            Obtain
                the approvals required to conduct an intense 3D seismic survey over
                the
                area’s onshore prospects. The necessity of conducting the seismic survey
                prior to conducting further drilling had been identified early in
                the
                technical evaluations.





In
      establishing these objectives, we recognized that they would not all be
      completely achieved by December 2006. Nonetheless, we have achieved the
      following objectives:





·
            The
                exploration and development plan is
                complete.





-7-


·
            We
                have developed a significant network of contacts in Newfoundland
                and have
                established a Newfoundland subsidiary and an office in St. John’s,
                Newfoundland, staffed by two employees, one of whom previously worked
                for
                the Newfoundland Department of Natural Resources for eight
                years.





·
            We
                have met with relevant government agencies, such as the Department
                of
                Natural Resources, the Canada-Newfoundland and Labrador Offshore
                Petroleum
                Board, the Department of Environment and Conservation, Environment
                Canada,
                the Department of Fisheries and Oceans, as well as the Fish, Food
                and
                Allied Workers Union.





·
            We
                have made significant progress towards obtaining environmental approvals
                for an exploration license to conduct the 3D seismic survey over
                the
                onshore prospects. On May 2, 2006, the Department of Environment
                and
                Conservation issued a letter regarding our Port au Port Peninsula
                3D
                seismic survey, along with a summary of comments received from various
                reviewing agencies during the review period. The letter released
                our
                proposed 3D seismic survey from further environmental assessment
                by the
                Department, subject to the approval of an Environmental Protection
                Plan
                prior to the commencement of the
                survey.





*Onshore
      Rig Construction*





Background .
      High
      market demand has made it very difficult to contract drill rigs from oil
      producing centers to undertake drilling in frontier areas. Larger oil companies
      are executing long-term exclusive-use contracts in established areas, making
      rigs unavailable on a well-by-well basis. High demand has simultaneously created
      12-18 month wait times to purchase a new rig. Rigs in the 600 to 1000 HP and
      1500 to 2000 HP range are particularly in short supply. Industry analysts,
      such
      as *Rigzone.com* (August
      24, 2006) and *WorldOil.com* (October
      2005), report that high market demand for rigs is expected to continue for
      the
      next few years, and other industry publications, such as *Drilling
      Contractor* ,
      appear
      to concur in that expectation. However, there can be no assurance that market
      demand will continue to be high.





To
      ensure
      access to a 2000 HP drilling rig for our Newfoundland exploration activities,
      we
      have investigated purchasing one or more, older, unused units, and refurbishing
      them to present-day standards. The option is technically viable because the
      structural components of the rig have a service life in the order of 60 years.
      Refurbishment involves complete rebuilding/replacement of the mechanical,
      electrical and instrumentation systems.





The
      economics of purchasing an older unit and then refurbishing it in Newfoundland
      are attractive. Order of magnitude costs to secure a 2000 HP unit are as
      follows:





·
            Two-year,
                long-term contract - $32 million, with an expected
                mobilization/demobilization charge of $10 million, according to an
                estimate by Nabors International. Factors affecting the estimate
                were
                limited land market in Newfoundland, higher labor costs in Canada,
                the
                fact that there is no rig in the area and the necessity of
                winterization.





-8-


·
            Purchase
                new - $27 million, with 12 to 18 month delivery, according to an
                estimate
                from National Oilwell Varco. Prices for new rigs have been steadily
                increasing in response to demand.





·
            Refurbish
                older unit - $10 million with 6 months delivery through our own turnkey
                operation, as outlined below.





According
      to our consultant, given current market conditions and the expectation that
      high
      market demand will continue, the resale value of a refurbished unit one year
      from now would likely be in the range of $18 million to $25 million. That would
      provide an $8 million to $15 million margin. Because of this significant margin,
      we could have an opportunity to generate healthy profits from ongoing rig
      refurbishments, through development of an extended work experience program
      with
      a Newfoundland technical college. A typical capital cost profile for a
      refurbished 2000+ HP rig is as follows:





**ITEM
                DESCRIPTION**
            
            **ESTIMATED
                PURCHASE PRICE**
            
            ****ESTIMATED
                COST TO REFURBISH**
            
            **TRANSPORT.**
              **COSTS**
            
            **TOTAL****$US**
            
            **$US**
            
            **$US**
            
            **$US**Substructure
                25' clear working heightMast
                152' x 1,300,000 lbs capacityNational
                1320 UE Drawwork c/w electric brakeNational
                P275 rotary tableOilwell
                P500 swivelTraveling
                block / hook B660GA500Items
                above to be purchased as part of the original four rig package.
            
            
            1,500,000.00
            
            
            600,000.00
            
            
            200,000.00
            
            
            2,300,000.00Engines
                / generators - Caterpillar or Detroit (3)
            
            
            600,000.00
            
            
            100,000.00
            
            
            60,000.00
            
            
            760,000.00SCR
                system and building
            
            
            650,000.00
            
            
            
            
            
            30,000.00
            
            
            680,000.00*
                3
                tank mud system 1800 bbls total volume
            
            
            750,000.00
            
            
            
            
            
            20,000.00
            
            
            770,000.001600
                hp mud pumps (two pumps)
            
            
            650,000.00
            
            
            100,000.00
            
            
            40,000.00
            
            
            790,000.00*
                Water tank and pumping system
            
            
            150,000.00
            
            
            
            
            
            7,000.00
            
            
            157,000.00*
                Dog house and windwall on off drillers side
            
            
            150,000.00
            
            
            
            
            
            5,000.00
            
            
            155,000.00Blow
                out preventer 13 5/8" x 5000
            
            
            200,000.00
            
            
            
            
            
            15,000
            
            
            215,000.006
                station closing unit
            
            
            80,000.00
            
            
            
            
            
            10,000.00
            
            
            90,000.00Choke
                manifold and poorboy degasser
            
            
            120,000.00
            
            
            
            
            
            10,000.00
            
            
            130,000.00Hydraulic
                catwalk
            
            
            530,000.00
            
            
            
            
            
            25,000.00
            
            
            555,000.00*
                Pipe tubs( 7units )
            
            
            150,000.00
            
            
            
            
            
            5,000.00
            
            
            155,000.00Handling
                tools (tongs, slips, elevators)
              Pipe
                spinner to suit tubulars
            
            
            200,000.00
            
            
            
            
            
            5,000.00
            
            
            205,000.00Tuggers,
                air winch and wire line unit
            
            
            60,000.00
            
            
            10,000.00
            
            
            5,000.00
            
            
            75,000.00Cold
                start and air compressors
            
            
            110,000.00
            
            
            15,000.00
            
            
            5,000.00
            
            
            130,000.00Instrumentation
            
            
            75,000.00
            
            
            15,000.00
            
            
            1,000.00
            
            
            91,000.00Wire
                rope & bridle line
            
            
            55,000.00
            
            
            
            
            
            5,000.00
            
            
            60,000.00*
                Suitcases & grasshopper/rig stairs
            
            
            70,000.00
            
            
            
            
            
            5,000.00
            
            
            75,000.00




-9-




15,000'
                of 5" Grade S-135 (19.5 lbs/ft.)
            
            
            960,000.00
            
            
            
            
            
            100,000.00
            
            
            1,060,000.00Drill
                collars 30 ea x 6 1⁄2", 6 ea. X 8"; 3 ea. 9 1/2" drill collars
            
            
            230,000.00
            
            
            
            
            
            40,000.00
            
            
            270,000.00HWDP
                5" x 50 joints
            
            
            235,000.00
            
            
            
            
            
            30,000.00
            
            
            265,000.00*
                Double walled fuel tank c/w pump
            
            
            75,000.00
            
            
            
            
            
            1,000.00
            
            
            76,000.00EZ-Torque
                hydraulic system
            
            
            30,000.00
            
            
            2,000.00
            
            
            1,000.00
            
            
            33,000.00Rig
                hydraulic pump, tank and hook up
            
            
            85,000.00
            
            
            20,000.00
            
            
            2,000.00
            
            
            107,000.00*
                Sandblasting & paint
            
            
            78,000.00
            
            
            
            
            
            1,000.00
            
            
            79,000.00Kelly
                hose, shock hoses & fire proof hoses
            
            
            62,000.00
            
            
            
            
            
            5,000.00
            
            
            67,000.00Miscellaneous
                equipment
            
            
            100,000.00
            
            
            
            
            
            5,000.00
            
            
            105,000.00*
                Complete electrical
            
            
            225,000.00
            
            
            
            
            
            
            
            
            225,000.00Rig
                and mechanic tools
            
            
            15,000.00
            
            
            
            
            
            
            
            
            15,000.00Rig
                up costs (cranes, trucks)
            
            
            150,000.00
            
            
            
            
            
            
            
            
            150,000.00*
                Labor
            
            
            630,000.00
            
            
            
            
            
            
            
            
            630,000.00**Total**
            
            
            8,975,000.00
            
            
            **
                862,000.00
            
            
            638,000.00
            
            
            10,475,000.00Optional
                Equipment
            
            
            
            
            
            
            
            
            
            
            
            Cost
                plus 15
            %a
                650 Ton Top Drive
            
            
            
            
            
            
            
            
            
            
            
            Cost
                plus 15
            %b
                Rig Matting
            
            
            
            
            
            
            
            
            
            
            
            Cost
                plus 15
            %c
                Convert rig to AC power
            
            
            
            
            
            
            
            
            
            
            
            Cost
                plus 15
            %d
                Purchase 125 hp boiler and winterizerig
            
            
            
            
            
            
            
            
            
            
            
            Cost
                plus 15
            %





*
      35% of
      total is for materials and 65% is for labor. Materials - $629,300.00; Labor
      -
      $1,168,700.00.




**
      60% of
      total is for materials and 40% is for labor. Materials - $517,200.00; Labor
      -
      $344,800.00.





Total
      cost for labor - $2,143,500.00





Contract
      Drilling .
      The
      cost and difficulty of procuring a rig is a common problem for all oil companies
      operating in Atlantic Canada. With a rig in the area, we could contract to
      drill
      on non-competitive lands at a cost effective rate relative to drilling
      contractors located in Western Canada, the US or international locations. In
      addition to our own use, we are already aware of at least two potential uses
      for
      a rig in Atlantic Canada: (i) drilling stratigraphic test holes for the province
      of Newfoundland, and (ii) drilling two commercial wells, preferably commencing
      the summer of 2007, for Petroworth Resources Inc., onshore Prince Edward Island
      to a depth of approximately 3,500 meters. Elsewhere, demand for rigs of this
      size is growing, and we have already established a number of leads.





An
      existing port with direct access to/from the college fabrication facilities
      enables freighter transport of rigs. Ready transportation access to/from
      Newfoundland to oil producing regions around the globe could, in combination
      with the aforementioned labor cost advantages, enable development of an ongoing
      commercial operation that supports government development initiatives for the
      region.





-10-


Status
      of Rig Refurbishing Plans .
      The
      initial assessment of a rig purchase encouraged further investigation through
      February and March, 2006. During this time period, the purchase concept has
      evolved and expanded to one of purchasing old, inactive rig(s) and refurbishing
      them in Stephenville, Newfoundland, as a stand-alone business because market
      demand has taken up all available manufacturing capability and is creating
      excessive queue times for new rigs. Given current market conditions, our best
      option to secure a rig for our internal 2008 drilling program is to rebuild
      one.
      However, an ongoing rig refurbishing business could generate cash flow in 2007
      and could be used to collateralize and finance our current and future
      exploration efforts. A refurbishing business is technically viable because
      the
      service life on structural components is on the order of 60 years.





The
      capital cost estimate to acquire and refurbish an older rig is approximately
      $10.5 million. To control material and shipping costs, we have contracted with
      Jim Howdle of Full Circle International Oilfield Products Inc., who has over
      25
      years experience in refurbishing rigs. The contractor has confirmed the tight
      market situation, the suitability of Port Harmon for freighter transport and
      the
      capability of the industrial trades in the Stephenville, Newfoundland, area
      to
      refurbish rigs. Mr. Howdle has also located inactive drilling rigs for potential
      purchase, including four rigs offered by Sun Machinery Corp. at a price of
      $1.9
      million each.





We
      are
      currently pursuing the rig refurbishing business opportunity on several levels
      as follows:





·
            Scouting
                for suitable rigs and rig components to ship to Newfoundland. Refinement
                of material lists and cost estimates to procure, ship and refurbish
                selected rigs.





·
            Negotiation
                with interested oil companies for the pre-purchase of the initial
                batch of
                rigs.





·
            Establishment
                of a wholly-owned subsidiary in Newfoundland, to handle the refurbishment
                business.





·
            Securing
                key personnel under long-term
                contracts.





·
            A
                site tour to inventory the college facilities and identify any additional
                equipment that will need to be
                purchased.





·
            Ongoing
                negotiations with the technical college to better define the training
                program and the business relationship with the
                college.





*Recent
      Developments*





On
      November 13, 2006, we executed a Purchase and Sale Agreement with Masters
      Resources, LLC, and Masters Oil and Gas, LLC, to acquire four properties,
      consisting of interests in Trinity Bay, Redfish Reef, Fishers Reef, and North
      Point Bolivar Fields, located in Galveston and Chambers Counties in the
      Galveston Bay, Texas. Total consideration payable by Tekoil will exceed $50
      million and may be as much as $80 million under the terms of the Purchase and
      Sale Agreement. The Purchase and Sale Agreement required the Company to pay
      a
      non-refundable sum of $1 million to Masters Resources and Masters Oil and Gas
      within five business days of executing the Purchase and Sale Agreement. The
      agreement further provided for a closing to occur in January 2007, which was
      subject to a number of conditions, including completion of due diligence and
      arrangement of financing by the Company. On November 22, 2006, the Company
      paid
      the $1 million deposit required by the Purchase and Sale Agreement.





-11-


On
      December 29, 2006, the Company and Masters Resources and Masters Oil and Gas
      agreed to a First Amendment to Purchase and Sale Agreement (the “First
      Amendment”), which amended the Purchase and Sale Agreement. The First Amendment
      extended the date for a closing to February 9, 2007, and set the purchase price
      for the transaction at $47,500,000 plus 500,000 shares of the Company’s Common
      Stock and the preservation by Masters Resources and Masters Oil and Gas of
      a
      specified overriding royalty interest as detailed in the Amendment. On February
      8, 2007, the Company assigned the Purchase and Sale Agreement to its wholly
      owned subsidiary, Tekoil and Gas Gulf Coast, LLC. On February 14, 2007, a Second
      Amendment to the Purchase and Sales Agreement extended the closing to March
      2,
      2007. A Third Amendment dated March 1, 2007, extended the closing until March
      16, 2007; and a Fourth Amendment dated March 22, 2007, extended the closing
      until April 12, 2007.





On
      December 29, 2006, the Company authorized a leading New York-based financial
      institution, on a 60-day exclusive basis, to proceed with an accelerated due
      diligence investigation and to seek internal lender credit approval for a
      contemplated $50,000,000 multiple advance, senior secured four year credit
      facility, with initial availability of $25,000,000 in support of the Masters
      acquisition. The Company also announced that the terms for the credit facility,
      while based upon existing market conditions and subject to change, were
      anticipated to include among other terms, conditions and other provisions,
      the
      Company’s agreement to issue at Closing warrants to purchase 900,000 shares of
      Common Stock at a price of $0.50 per share exercisable for 5 years. The
      authorization required the Company to advance $50,000 against Lender’s expenses
      and certain other customary terms. The Term Sheet also contemplates that the
      credit facility will be conditioned upon the Company completing a minimum
      $20,000,000 equity financing, with standard covenants and conditions, including
      satisfactory due diligence reviews and regulatory approval, and other
      conditions, which the potential Lender may deem appropriate.





On
      November 21, 2006, the Company announced that its application for a geographic
      expansion of its original 3D seismic survey program around the Port au Port
      Peninsula and Port au Port Bay in western Newfoundland, had been increased
      from
      approximately 240 sq km to approximately 500 sq km and released from further
      environmental assessment by the Newfoundland and Labrador Department of
      Environment and Conservation. The Company is in the final stages with the
      Canada-Newfoundland and Labrador Offshore Petroleum Board to complete its
      approvals for the offshore component of the program, and it is focused on its
      Galveston, Texas, acquisition and on establishing its rig fabrication center
      in
      Stephenville, Newfoundland, with the anticipation of work beginning as early
      as
      the second quarter of 2007.





On
      January 3, 2007, the Company and Ptarmigan Resources Limited, a company based
      in
      Newfoundland & Labrador, Canada, executed a Farmout Agreement with respect
      to Ptarmigan’s offshore exploration license EL-1069. The License covers
      approximately 140,000 hectares, or 346,500 acres, of offshore surface area,
      in
      the shallow waters of the Gulf of St. Lawrence north of the Port au Port
      peninsula in western Newfoundland.





-12-


Pursuant
      to the Farmout Agreement, the Company, as the Farmee, has paid $214,000
      ($250,000 Canadian) to Ptarmigan, which was used as a drilling deposit to secure
      a one-year extension of the License from the Canada - Newfoundland and Labrador
      Offshore Petroleum Board. The Company is required to drill an
      onshore-to-offshore test well during 2007, which will test an offshore structure
      and, as the validation well, will extend the lease until January 2011 (Phase
      1).
      The Company will earn a one-third interest (33.3%) in the License for the
      completion of Phase 1. The Company may then conduct an offshore 3D seismic
      program by late 2008, to map in more detail four offshore features already
      identified by Ptarmigan using 2D seismic data, which will earn the Company
      a
      further 26.7% of the License, for a total ownership of 60% (Phase
      2).





The
      Farmout Agreement further provides that the Company and Ptarmigan will then
      drill an offshore exploration well and will share the drilling costs; 60% by
      the
      Company and 40% by Ptarmigan. Should the Company carry 100% of the cost of
      drilling, it will earn an additional 20% interest in the License, for a total
      of
      up to 80%, subject to government royalties (Phase 3). The Company estimates
      the
      total cost of Phases 1, 2, and 3 to be approximately $6,000,000 in 2007,
      $10,000,000 in 2008 and $25,000,000 in 2009.





*Research
      and Development Expenses*





We
      do not
      presently budget or isolate all of our research and development costs. These
      costs are generally included in overhead, as they are attributed principally
      to
      salary and other expenses associated with maintaining personnel who spend
      varying amounts of time dedicated to both research and development and to
      ongoing studies on our current projects.





*Costs
      and Effects of Compliance with Environmental Laws*





We
      do not
      currently budget or isolate all of our compliance costs relating to the
      environment. These costs are included in our consultant engineer
      fees.





*Employees*





As
      of
      March 15, 2007, we had six employees, of which five were full time employees.
      We
      have never had a work stoppage, and no employees are represented under
      collective bargaining agreements. We consider our relations with our employees
      to be good. We believe that our future success will depend in part on our
      continued ability to attract, integrate, retain and motivate highly qualified
      technical and managerial personnel, and upon the continued service of our senior
      management and key technical personnel. Competition for qualified personnel
      in
      our industry and geographical location is intense, and there can be no assurance
      that we will be successful in attracting, integrating, retaining and motivating
      a sufficient number of qualified personnel to conduct our business in the
      future.





-13-


Risk
      Factors





An
      investment in our Common Stock involves a high degree of risk. You should
      carefully consider the following risk factors and other information contained
      in
      or incorporated by reference into this report and any other Company reports
      and
      filings before deciding to purchase any shares of our Common Stock.





*Tekoil's
      independent accountants have expressed substantial doubts about Tekoil's ability
      to continue as a going concern.*





The
      report of Tekoil's independent accountants contains an explanatory paragraph
      expressing substantial doubts about Tekoil's ability to continue as a going
      concern due to the fact that Tekoil has incurred losses since inception. There
      can be no assurance that Tekoil will ever achieve significant revenues or
      profitable operations.





*Tekoil
      is a development stage company and has no operating history on which to base
      an
      evaluation of its current business and future prospects.*





Tekoil
      is
      a development stage company. As a result, it has no operating history upon
      which
      to base an evaluation of its current business and future prospects. We have
      not
      generated substantial revenues. Moreover, we do not currently have any contracts
      in place that will provide any significant revenue. Because of our lack of
      an
      operating history, management has limited insight into trends that may emerge
      and could materially adversely affect our business. Prospective investors should
      consider the risks and difficulties our Company may encounter, especially given
      our lack of operating history. These risks include our ability to:





·
            successfully
                execute our business strategy;





·
            generate
                revenues;





·
            compete
                favorably in a highly competitive
                market;





·
            access
                sufficient capital to support growth;
                and





·
            recruit
                and retain qualified employees.





*We
      have a history of operating losses and an accumulated deficit and we expect
      to
      continue to incur losses for the foreseeable future.*





Since
      inception through December 31, 2006, we have incurred cumulative losses of
      $5,618,566 and have never generated enough funds through our operations to
      support our business. We expect to continue to incur substantial operating
      losses at least through March 31, 2007. Our losses to date have resulted
      principally from legal and accounting fees in connection with securities
      filings, engineering and consulting expenses related to the 3D seismic survey
      in
      western Newfoundland and salaries and related travel expenses. We expect to
      become profitable should the Masters acquisition be consummated early in the
      second quarter of 2007.




-14-


We
      are
      currently unprofitable and may never become profitable. Since inception, we
      have
      funded our business activities primarily from private placements of equity
      and
      debt securities and short term loans from Mark S. Western, our President and
      Chief Executive Officer. As a result of our substantial expenditures and absence
      of revenues, we have incurred substantial net losses. There can be no assurance
      that Tekoil will ever achieve profitable operations.




*The
      conversion of share of our Series A Convertible Preferred Stock may adversely
      affect the market price of the Company’s Common Stock.*





As
      of
      March 15, 2007, the Company had outstanding 2,692,000 shares of Series A
      Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock
      is convertible at the option of the holder, or automatically upon the occurrence
      of certain material corporate events, into three shares of Common Stock. The
      conversion of the Series A Convertible Preferred Stock and the sale in the
      public market of the shares of Common Stock received upon such conversion will
      be dilutive to existing stockholders and could adversely affect the market
      price
      of the Company’s Common Stock.





*Our
      shareholders may suffer significant dilution as a result of contemplated capital
      raising activities and the failure to raise substantial additional capital
      to
      fund operations could force the Company to delay, reduce or eliminate its
      products and services.*





In
      order
      to implement our business plan, we will require at least $60 million in
      additional capital financing and we will not be able to continue our operations
      without fresh injection of capital within the next nine months. There can be
      no
      assurance that the Company will be able to raise additional capital on terms
      acceptable to it or at all. Failure to obtain necessary financing could delay
      or
      force the Company to scale back or discontinue its products and services, which
      could have a material negative impact on its results of operations. To the
      extent Tekoil is able to raise additional funds by issuing equity securities,
      such issuance will be dilutive to existing stockholders and could adversely
      affect the market price of our Common Stock.





*Exploration
      of oil and gas is highly speculative and involves a great deal of risk.*





Companies
      engaged in oil and gas exploration are often required to perform expensive
      geological and/or seismic surveys with respect to their properties. Even if
      the
      results of such surveys are favorable, only subsequent drilling at substantial
      cost can determine whether the commercial development of properties is feasible.
      Oil and gas drilling is frequently marked by unprofitable efforts, not only
      from
      unproductive prospects, but also from productive prospects that do not produce
      sufficient amounts to return a profit on the investment. There can be no
      assurance that Tekoil will be able to discover, develop or produce sufficient
      reserves to recover the expenses incurred in connection with the exploration
      of
      its properties and achieve profitability.





*We
      will have to expend significant amounts in connection with our evaluation of
      potential oil reserves and there can be no assurance that these efforts will
      result the identification of viable resources.*





-15-


We
      expect
      3D seismic surveys to cost approximately $20.5 million. We have expended $1.2
      million in risk capital for the evaluation of these areas, including the costs
      for the studies for the projected costs of 3D seismic work and environmental
      impact studies. However, there can be no assurance that these surveys will
      successfully identify viable oil reserves or whether these reserves, if
      identified, can be successfully developed by the Company.





*We
      do
      not currently own the leases to the Newfoundland properties in which we have
      an
      interest in exploring.*





Canadian
      Imperial Venture Corp. was issued a lease for the area in which we are
      interested, and that lease was due to expire on August 13, 2006. A lease confers
      to the lessee the exclusive right to develop and produce a petroleum pool in
      the
      lease area. A lease has an initial term of 10 years, subject to five (5) year
      renewals for those areas still in production or necessary for production. On
      June 28, 2006, Canadian Imperial issued a press release announcing that the
      Government of Newfoundland and Labrador had extended the onshore lease for
      an
      additional year. We are not aware of the conditions placed upon the lease
      extension by the Government of Newfoundland and Labrador, but Canadian Imperial
      announced on August 15, 2006, that it had met certain financial commitments
      for
      the lease extension, specifically referencing work plans and work deposits
      submitted to the Department of Natural Resources.





Based
      upon our discussions with government officials, we believe that the Government
      of Newfoundland and Labrador is imposing stricter requirements on leaseholders
      regarding investment in leased areas and progress toward production, as
      suggested by the speech delivered at the Atlantic Canada Oil and Gas Summit
      on
      May 30, 2005, by Premier Danny Williams. However, we do not know whether or
      not
      Canadian Imperial will be able to continue to meet government requirements
      for
      its lease extension, so there is a substantial risk that we may not receive
      approval for application for an exploration license. It is possible that
      Canadian Imperial will meet all government requirements for continued extension
      of the lease, preventing us from having access to this specific area. In
      addition, even if Canadian Imperial’s lease were terminated, there is no
      guarantee that, if we receive approval of our exploration license for the 3D
      seismic survey, we will automatically be approved as the new holder/owner of
      the
      lease. Failure
      to obtain the licenses and/or leasehold interests discussed above could have
      a
      negative impact on our operations.





*Our
      oil and gas activities are subject to various risks which are beyond our
      control.*





Our
      operations are subject to many risks and hazards incident to exploring and
      drilling for, producing, transporting, marketing and selling oil and gas.
      Although we may take precautionary measures, many of these risks and hazards
      are
      beyond our control and unavoidable under the circumstances. Many of these risks
      or hazards could materially and adversely affect our revenues and expenses,
      the
      ability of certain of our wells to produce oil and gas in commercial quantities,
      the rate of production and the economics of the development of, and our
      investment in the prospects in which we have or will acquire an interest. Any
      of
      these risks and hazards could materially and adversely affect our financial
      condition, results of operations and cash flows. Such risks and hazards
      include:





-16-


·
            human
                error, accidents, labor force and other factors beyond our control that
                may cause personal injuries or death to persons and destruction or
                damage
                to equipment and facilities;





·
            blowouts,
                fires, hurricanes, pollution and equipment failures that may result
                in
                damage to or destruction of wells, producing formations, production
                facilities and equipment;





·
            unavailability
                of materials and equipment;





·
            engineering
                and construction delays;





·
            unanticipated
                transportation costs and delays;





·
            unfavorable
                weather conditions;





·
            hazards
                resulting from unusual or unexpected geological or environmental
                conditions;





·
            environmental
                regulations and requirements;





·
            accidental
                leakage of toxic or hazardous materials, such as petroleum liquids
                or
                drilling fluids, into the
                environment;





·
            changes
                in laws and regulations, including laws and regulations applicable
                to oil
                and gas activities or markets for the oil and gas
                produced;





·
            fluctuations
                in supply and demand for oil and gas causing variations of the prices
                we
                receive for our oil and gas production;
                and





·
            the
                internal and political decisions of OPEC and oil and natural gas
                producing
                nations and their impact upon oil and gas
                prices.





*The
      unavailability or high cost of drilling rigs, equipment, supplies, personnel
      and
      oil field services could adversely affect our ability to execute our exploration
      and development plans on a timely basis and within our budget.*





Our
      industry is cyclical and, from time to time, there is a shortage of drilling
      rigs, equipment, supplies or qualified personnel. During these periods, the
      costs and delivery times of rigs, equipment and supplies are substantially
      greater. In addition, the demand for, and wage rates of, qualified drilling
      rig
      crews rise as the number of active rigs in service increases. As a result of
      increasing levels of exploration and production in response to strong prices
      of
      oil and natural gas, the demand for oilfield services has risen, and the costs
      of these services are increasing, while the quality of these services may
      suffer.





*We
      could be adversely affected by fluctuations in oil and gas
      prices.*




-17-


Even
      if
      our drilling activities achieve commercial quantities of economically attractive
      reserves and production revenue, our revenue, profitability and future growth
      will depend substantially on prevailing oil and gas prices. Prices of oil,
      natural gas and natural gas liquids are subject to wide fluctuations in response
      to relatively minor changes in circumstances, and there can be no assurance
      that
      future prolonged decreases in such prices will not occur. There is no guarantee
      that price levels, which have recently decreased, will continue to be sustained,
      and there could be a further sharp drop in market prices from factors such
      as
      increased supply, reduced demand, new alternative energy sources, major new
      exploration successes, political instability, armed conflict or terrorist
      attacks, whether or not in oil and gas producing regions, labor unrest in oil
      and gas producing regions, weather conditions and world economic conditions.
      Any
      significant decline in oil and gas prices would have a material adverse effect
      on our liquidity, operations, financial condition and ability to raise
      additional necessary capital. Lower oil and gas prices may also reduce the
      amount of oil and gas, if any, that can be produced economically from the
      Company’s properties.





*We
      could be adversely affected by increased costs of service providers that we
      utilize.*





In
      accordance with customary industry practice, we rely on independent third-party
      service providers to provide most of the services necessary to drill new wells,
      including drilling rigs and related equipment and services, horizontal drilling
      equipment and services, trucking services, tubulars, fracing and completion
      services and production equipment. The industry has experienced significant
      price increases for these services during the last year, and this trend is
      expected to continue into the future. These cost increases could, in the future,
      significantly increase our development costs and decrease the return possible
      from drilling and development activities, and possibly render the development
      of
      certain proved undeveloped reserves uneconomical.





*We
      have no experience in the rig building/refurbishment business and are relying
      on
      the expertise of third parties.*





Since
      the
      Company has no experience in the rig building/refurbishment business, we are
      forced to rely on the expertise of third parties. There can be no guarantee
      that
      these third parties will continue to advise the Company with respect to this
      business and the failure to maintain these relationships could materially impair
      the Company’s ability to run, maintain and expand this line of
      business.





*We
      could have difficulty locating candidate rigs for the rig building/refurbishment
      business or market conditions could change thus rendering our business model
      unprofitable.*





While
      we
      have located some candidate rigs and we believe that such rigs will be available
      for our rig building/refurbishment business, there can be no assurance that
      we
      will be able to obtain used rigs on acceptable terms. In addition, market
      conditions could change, preventing us from acquiring suitable old, inactive
      rigs, or cheaper alternatives to refurbished rigs could become available thus
      rendering our product unattractive to potential consumers. The inability to
      build/refurbish rigs in a cost-effective manner could have a material adverse
      effect on our operations and a negative impact on the price of our
      stock.




*We
      anticipate that we will utilize horizontal drilling techniques, which could
      result in greater mechanical risks and impair our ability to maximize
      production.*





-18-


Horizontal
      drilling will allow us to drill with an onshore rig into offshore bottom-hole
      locations much less expensively. The rig we plan to use is an onshore 2,000
      horsepower triple, which has the ability to drill to a total depth of 20,000
      feet with two miles of deviation. Horizontal drilling will also allow us to
      maximize production efficiency with less wells being drilled. Horizontal
      drilling activities involve a greater risk of mechanical problems than
      conventional vertical drilling methods and there can be no assurance that we
      will achieve expected results from the use of horizontal drilling, or that
      we
      will not experience more mechanical problems and other difficulties than we
      otherwise might experience. If we encounter mechanical risks as a result of
      our
      horizontal drilling strategy, this may impair our ability maximize production
      and could adversely affect our results of operations.





*Our
      insurance policies may not adequately protect us against certain unforeseen
      risks.*





There
      are
      currently many known hazards associated with the exploration, discovery and
      delivery of gas and oil. To protect against possible liability, Tekoil maintains
      liability insurance with coverage that it believes is consistent with industry
      practice and appropriate in light of the risks attendant to its business.
      However, if Tekoil is unable to maintain insurance in the future at acceptable
      cost or at all, or if its insurance does not fully cover it and a successful
      claim is made against Tekoil, Tekoil could be exposed to significant liability.
      Any claim made against Tekoil that is not fully covered by insurance could
      be
      costly to defend, result in substantial damage award against Tekoil and divert
      the attention of management from Tekoil’s operations, all of which could have a
      material adverse effect on the Company’s financial performance.





*Our
      activities are subject to extensive governmental regulation.*





The
      oil
      and gas industry is subject to extensive federal, state, provincial and local
      laws and regulations governing the production, transportation and sale of
      hydrocarbons as well as the taxation of income resulting there from. Such
      regulations may be changed from time to time in response to economic or
      political conditions. From time to time, regulatory agencies have imposed price
      controls and limitations on production in order to conserve supplies of oil
      and
      gas. Numerous federal, state and provincial departments and agencies have their
      own rules and regulations applicable to the oil and gas industry. In general,
      these rules and regulations regulate, among other things, the extent to which
      acreage may be acquired or relinquished, spacing of wells, measures required
      for
      preventing waste of oil and gas resources and, in some cases, rates of
      production. The heavy and increasing regulatory burdens on the oil and gas
      industry increase the costs of doing business and, consequently, affect
      profitability.





In
      addition, the production, handling, storage, transportation and disposal of
      oil
      and gas, by-products thereof and other substances and materials produced or
      used
      in connection with oil and gas operations are subject to regulation under
      federal, state, provincial and local laws and regulations primarily relating
      to
      protection of human health and the environment. To date, expenditures related
      to
      complying with these laws and for remediation of existing environmental
      contamination have not been significant in relation to the results of our
      operations. There can be no assurance that the trend of more expansive and
      stricter environmental legislation and regulations will not continue and that
      any such expansion will not materially increase our cost of doing business.





-19-


*We
      are subject to various environmental risks, and governmental regulation relating
      to environmental matters.*





We
      are
      subject to a variety of federal, state, provincial and local governmental laws
      and regulations related environmental protection, particularly the storage,
      use,
      discharge and disposal of toxic, volatile or otherwise hazardous materials.
      These laws and regulations govern, among other things, the amounts and types
      of
      substances and materials that may be released into the environment, the issuance
      of permits in connection with exploration, drilling and production activities,
      the release of emissions into the atmosphere, the discharge and disposition
      of
      generated waste materials, the reclamation and abandonment of wells and facility
      sites and the remediation of contaminated sites. These laws and regulations
      subject us to increased operating costs, and they may impose substantial
      liability in the event that we fail to comply with them or for any contamination
      resulting from operations. Although these laws and regulations have not had
      a
      material adverse effect on our business, there can be no assurance that we
      will
      not be required to make material expenditures in the future that will adversely
      affect our financial condition or results of operations. Moreover, we anticipate
      that such laws and regulations will become increasingly stringent in the future,
      which could lead to material costs for environmental compliance and remediation
      by the Company. Any failure by us to obtain required permits for, control the
      use of, or adequately restrict the discharge of hazardous substances under
      present or future regulations could subject us to substantial liability or
      could
      cause our operations to be suspended. Such liability or suspension of operations
      could have a material adverse effect on our business, financial condition and
      results of operations.





*We
      are subject to intense competition.*





We
      operate in a highly competitive market and compete with major and independent
      oil and gas companies for the acquisition of desirable oil and gas properties,
      as well as for the equipment and labor required to develop and operate such
      properties. Many of these competitors have longer operating histories, greater
      name recognition, substantial track records and financial, technological and
      technical resources substantially greater than ours. This may allow these
      competitors to devote greater resources to the development and promotion of
      their oil and gas exploration and production projects. Many of these competitors
      offer a wider range of oil and gas opportunities not available to Tekoil and
      may
      attract business partners consequently resulting in a decrease of Tekoil’s
      business opportunities. These competitors may also engage in more extensive
      research and development, adopt more aggressive strategies and make more
      attractive offers to existing and potential purchasers, and partners.
      Furthermore, competitors may develop technology and oil and gas exploration
      strategies that are equal or superior to Tekoil’s and achieve greater market
      recognition. In addition, current and potential competitors have established
      or
      may establish cooperative relationships among themselves or with third parties
      to better address the needs of our target market. As a result, it is possible
      that new competitors may emerge and rapidly acquire significant market share.
      There can be no assurance that Tekoil will be able to compete successfully
      against its current or future competitors or that competition will not have
      a
      material adverse effect on Tekoil’s business, results of operations and
      financial condition.





-20-


*We
      currently depend on our Chief Executive Officer and may have difficulty
      attracting qualified personnel as our business grows.*





We
      are
      dependent on the experience, abilities and continued services of our current
      Chief Executive Officer and President, Mark S. Western. Mr. Western has played
      a
      significant role in our development and management. The loss or reduction of
      services of Mr. Western could have a material adverse effect on the
      Company.





Our
      future success will also depend in large part upon the continued services and
      performance of other key personnel. If we lose the services of any member of
      our
      senior management team, our overall operations could be materially and adversely
      affected. In addition, our future success will depend on our ability to
      identify, attract, hire, train, retain and motivate other highly skilled
      technical, managerial, marketing, purchasing and customer service personnel
      when
      they are needed. Competition for these individuals is intense. We cannot ensure
      that we will be able to successfully attract, integrate or retain sufficiently
      qualified personnel when the need arises. Any failure to attract and retain
      the
      necessary technical, managerial, marketing, purchasing and customer service
      personnel could have a negative effect on our financial condition and results
      of
      operations.





*Our
      stock trades in a limited public market and is subject to price
      volatility.*





Our
      Common Stock is traded on the “Pink Sheets.” Stocks that trade on Pink Sheets
      tend to be less liquid and trade with larger spreads between the bid and ask
      price than stocks on larger exchanges or automated quotation systems.
      Information with respect to Pink Sheets quotations reflects inter-dealer prices
      without retail markup, markdown or commission and may not represent actual
      transactions, and quotations on the Pink Sheets are sporadic. This means that
      shares of our Common Stock are less liquid than shares of companies traded
      on
      larger exchanges or automated quotation systems and, as a result, holders of
      our
      Common Stock may have some difficulty selling their shares in the open market.
      The trading price of the Common Stock is volatile and could be subject to
      significant fluctuations in response to variations in quarterly operating
      results or even mild expressions of interest on a given day.





*Certain
      restricted shares of the Company will be eligible for sale in the future which
      could affect the prevailing market price of our Common Stock.*





Certain
      of the outstanding shares of our Common Stock are “restricted securities” under
      Rule 144 of the Securities Act, and (except for shares purchased by “affiliates”
of the Company’s as such term is defined in Rule 144) would be eligible for sale
      as the applicable holding periods expire. In the future, these shares may be
      sold only pursuant to a registration statement under the Securities Act or
      an
      applicable exemption, including pursuant to Rule 144. Under Rule 144, a person
      who has owned Common Stock for at least one year may, under certain
      circumstances, sell within any three-month period a number of shares of Common
      Stock that does not exceed the greater of 1% of the then outstanding shares
      of
      Common Stock or the average weekly trading volume during the four calendar
      weeks
      prior to such sale. A person who is not deemed to have been an affiliate of
      the
      Company at any time during the three months preceding a sale, and who has
      beneficially owned the restricted securities for the last two years is entitled
      to sell all such shares without regard to the volume limitations, current public
      information requirements, manner of sale provisions and notice requirements.
      Sale or the expectation of sales of a substantial number of shares of Common
      Stock in the public market by selling shareholders could adversely affect the
      prevailing market price of the Common Stock, possibly having a depressive effect
      on any trading market for the Common Stock, and may impair our ability to raise
      capital at that time through additional sale of our equity
      securities.





-21-


*We
      do
      not expect to declare or pay any dividends in the foreseeable
      future.*





We
      have
      not declared or paid any dividends on our Common Stock. We currently intend
      to
      retain future earnings to fund the development and growth of our businesses,
      to
      repay indebtedness and for general corporate purposes and, therefore, we do
      not
      anticipate paying any cash dividends on our Common Stock in the foreseeable
      future. If the Company does not pay dividends, its stock may be less valuable
      because a return on your investment will only occur if the stock price
      appreciates.





*Our
      Common Stock may be subject to secondary trading restrictions related to penny
      stocks.*





Our
      stock
      is subject to what are known as the "penny stock" rules. The "penny stock"
      rules
      place additional requirements on broker-dealers who sell or make a market in
      such securities. Consequently, the ability or willingness of broker-dealers
      to
      sell or make a market in our Common Stock could be impacted and your ability
      to
      resell your shares, and the price at which you could sell your shares, could
      be
      adversely affected.





*Our
      directors and executive officers own a substantial amount of Common Stock,
      which
      permits them to exercise significant control over material corporate
      decisions.*





Mark
      S.
      Western beneficially owns approximately 32.40% of the combined voting securities
      of the Company. Together with Mr. Western, the executive officers and directors
      of the Company control approximately 53.27% of the combined voting securities
      of
      the Company. As a result, Mr. Western and the other directors and executive
      officers are able to control the outcome of shareholder votes, including votes
      concerning the election of directors, the adoption or amendment of provisions
      in
      our certificate of incorporation and bylaws and the approval of mergers and
      other significant corporate transactions. This concentrated ownership makes
      it
      unlikely that any other holder or group of holders of the Company’s voting
      securities will be able to affect the way the Company is managed or the
      direction of our business. These factors may also precipitate, delay or prevent
      a change in management.





*We
      cannot be certain that previous equity offerings by the Company were in
      compliance with securities laws and regulations.*





Prior
      to
      the Acquisition Agreement pursuant to which our current controlling shareholders
      took control of the Company, the Company engaged in capital raising efforts
      through the issuance of common stock. Such restricted securities were
      purportedly issued pursuant to valid exemptions from U.S. and state securities
      laws, and the previous controlling shareholder of the Company made
      representations in the Acquisition Agreement that all shares of common stock
      theretofore issued by the Company were issued in compliance with all federal
      and
      state securities laws and all other applicable laws. In the event that such
      representations were incorrect, and the Company issued securities in violation
      of federal or sate securities laws, then the Company could be subject to
      criminal and civil penalties, which could materially adversely affect its
      operations, its ability to raise additional capital and its stock
      price.





-22-





**Item
      2.**  **Description of Property.**





We
      lease
      an office at 25050 I-45 North, Suite 525, The Woodlands, Texas 77380, at the
      current rental rate of approximately $200 per month. The office is leased on
      a
      month-to-month basis. Currently, the facility is adequate for our operations,
      but management expects that additional facilities will be needed in the
      future.





In
      September 2006, we acquired the 6,000 square foot premises located at 25
      Mountbatten Drive, St. John’s, Newfoundland A1A 3Y1, which has been serving as
      the Company’s Canadian headquarters since April 2006. The purchase price was
      approximately $360,000 and there is a mortgage on the property in the amount
      of
      approximately $264,000. In the opinion of management, this property is
      adequately covered by insurance. We are presently using the entire premises
      for
      our Canadian operations and do not lease any portion of the premises to third
      parties.





Oil
      and Gas Leases





Apart
      from the Farmin Agreement in Ptarmigan Resources’ Block EL-1069, offshore
      western Newfoundland, and the terms (outlined on page 31) thereof, we do not
      currently own or control any percentage of the other  leases
      to
      the Newfoundland properties that we have an interest in exploring, nor are
      we
      certain of the terms of such leases. Canadian Imperial Venture Corp. was issued
      a lease for the area in which we are interested, and that lease was due to
      expire on August 13, 2006. On June 28, 2006, Canadian Imperial issued a press
      release announcing that the Government of Newfoundland and Labrador had extended
      the onshore lease for an additional year. We are not aware of the conditions
      placed upon the lease extension by the Government of Newfoundland and Labrador,
      but Canadian Imperial announced on August 15, 2006, that it had met certain
      financial conditions for the lease extension, specifically referencing work
      plans and work deposits submitted to the Department of Natural
      Resources.





Based
      upon our discussions with government officials, we believe that the Government
      of Newfoundland and Labrador is imposing stricter requirements on leaseholders
      regarding investment in leased areas and progress toward production, as
      suggested by the speech delivered at the Atlantic Canada Oil and Gas Summit
      on
      May 30, 2005, by Premier Danny Williams. However, we do not know whether or
      not
      Canadian Imperial will be able to continue to meet government requirements
      for
      its lease extension, so there is a substantial risk that we may not receive
      approval for application for an exploration license. It is possible that
      Canadian Imperial will meet all government requirements for continued extension
      of the lease, preventing us from having access to this specific area. In
      addition, even if Canadian Imperial’s lease were terminated, there is no
      guarantee that if we receive approval of our exploration license for the 3D
      seismic survey we will automatically be approved as the new holder/owner of
      the
      lease





-23-


Other





We
      own or
      lease various computer equipment, telecommunications equipment, furniture and
      office machinery at our office locations.





**Item
      3. Legal Proceedings.**





None





**Item
      4. Submission of Matters to a Vote of Security Holders.**





No
      matters were submitted to a vote of the Company’s shareholders during the fourth
      quarter of 2006.




-24-




**PART
      II**








**Item
      5.**  **Market for Common Equity and Related Stockholder Matters.**





The
      Company’s Common Stock has been quoted on the Pink Sheets since May 7, 2004,
      initially under the symbol, PXCN. The Company’s trading symbol was changed to
      TKGC on July 29, 2005 and to TKGN on October 14, 2005.





The
      following sets forth the range of the closing bid prices for the Company's
      Common Stock for the period starting May 7, 2004 through March 15, 2007. The
      quotations below, provided by Pink Sheets, LLC, reflect inter-dealer prices
      without retail markup, mark down or commission, and may not represent actual
      transactions. The quotations prior to October 14, 2005, have not been adjusted
      for the 100-to-1 reverse stock split that occurred on that
      date.


2004High
              
              Low4th
                  Quarter
              
              
              0.035
              
              
              0.0012005High
              
              Low1st
                  Quarter
              
              
              0.064
              
              
              0.0182nd
                  Quarter
              
              
              0.05
              
              
              0.0013rd
                  Quarter
              
              
              0.0095
              
              
              0.003October
                  3 through October 13
              
              
              0.008
              
              
              0.005





*DATE
      OF 100-to-1 REVERSE SPLIT - OCTOBER 14, 2005*


October
                  14 through December 30
              
              
              0.64
              
              
              0.01


2006High
              
              Low1st
                  Quarter
              
              
              0.45
              
              
              0.252nd
                  Quarter
              
              
              0.75
              
              
              0.203rd
                  Quarter
              
              
              0.50
              
              
              0.254th
                  Quarter
              
              
              1.25
              
              
              0.402007High
              
              LowJanuary
                  1 throughMarch
                  15, 2007
              
              
              1.10
              
              
              0.55


As
      of
      March 15, 2007, the Company had approximately 53 shareholders of record of
      its
      Common Stock.




-25-


The
      Company has not previously paid cash dividends on its Common Stock. The payment
      of cash dividends from current earnings is not prohibited by any agreements
      to
      which the Company is a party, but is subject to the discretion of the Board
      of
      Directors and will be dependent upon many factors, including the Company’s
      earnings, its capital needs and its general financial condition. The Company
      currently does not intend to pursue a policy of payment of dividends, but rather
      to utilize any excess proceeds to finance the development and expansion of
      its
      business.





**Item
      6. Management’s Discussion and Analysis or Plan of
      Operation.**





Critical
      Accounting Policies





Our
      discussion and analysis of our financial condition and plan of operation are
      based upon the Company’s financial statements, which have been prepared with
      accounting principles generally accepted in the United States of America. The
      preparation of the financial statements requires the Company to make estimates
      and judgments that affect the reported amounts of assets, liabilities, expenses,
      and related disclosure of contingent assets and liabilities. On an on-going
      basis, the Company evaluates its estimates, including those related to
      intangible assets, income taxes and contingencies and litigation. The Company
      bases its estimates on historical expenses and various other assumptions that
      are believed to be reasonable under the circumstances, the results of which
      form
      the basis for making judgments about the carrying value of assets and
      liabilities that are not readily apparent from other sources. Actual results
      may
      differ from these estimates under different assumptions and
      conditions.





*Stock-Based
      Compensation.* The
      Company issues shares of its common and preferred stock to employees and
      non-employees as stock-based compensation. The Company accounts for the services
      using the fair market value of the consideration issued.





*Intangible
      Assets.* The
      valuation of intangible assets will be determined by management after
      considering a number of factors. On an annual basis, the Company will test
      for
      impairment. If the carrying value of the intangible assets exceeds the present
      value of estimated future cash flows, the intangible assets would be adjusted
      to
      their fair value and an impairment loss would be charged to operations in the
      period identified. Should the impairment loss be significant, the charge to
      operations could have a material effect on the Company’s results of operations
      and financial condition.





Plan
      of Operation





***Forecasted
      Activities December 2006 to December 2007***





We
      have
      identified the following objectives for the 12-month period ending December
      31,
      2007:





·
            Drill
                an onshore-to-offshore well in Block EL-1069, to a bottom-hole location
                which has the potential to produce commercial
                hydrocarbons.






-26-




·
            Lease
                the mineral rights over the prospective acreage at reasonable terms
                for
                the Company. The area in which we are interested consists of the
                Garden
                Hill area encompassing 270 square kilometers located onshore and
                offshore,
                and the Shoal Point area encompassing 400 square kilometers located
                offshore in Port au Port Bay. Both areas are in Newfoundland,
                Canada.





·
            Obtain
                the exploration license required to conduct an intense 3D seismic
                survey
                over the area’s onshore and offshore
                prospects.





·
            Further
                establish our general presence and enhance our company profile in
                Newfoundland.





·
            Establish
                an apprenticeship training program for the rig refurbishment business
                with
                the provincial technical college.





·
            Secure
                and purchase two used drilling rigs for
                refurbishment.





Three
      instruments govern onshore petroleum activities in Newfoundland:





·
            An*exploration
                permit*,
                issued as a result of a Request for Bids, confers the exclusive right
                to
                drill and test for petroleum on designated lands. It is valid for
                a
                primary term of five (5) years and can be extended for a further
                secondary
                term of two (2) years if certain conditions are
                met.





·
            An*exploration
                license*does not confer any petroleum rights, but confers the non-exclusive
                right
                to conduct an exploration survey (*e.g.*,
                seismic program) described in the license. An exploration license
                is valid
                for 180 days. We have applied for an exploration license with respect
                to
                our 3D seismic survey.





·
            A*lease*,
                issued as a result of a discovery on an exploration permit, confers
                to the
                lessee the exclusive right to develop and produce a petroleum pool
                in the
                lease area. A lease has an initial term of 10 years, subject to five
                (5)
                year renewals for those areas still in production or necessary for
                production.





Offshore
      petroleum activities are subject to three different documents:





·
            An*exploration
                license*,
                issued as a result of a Request for Bids, confers the right to explore
                for, and the exclusive right to drill and test for petroleum on designated
                lands, as well as the exclusive right to develop those portions of
                the
                offshore area in order to produce petroleum and the exclusive right,
                subject to compliance with other requirements, to obtain a production
                license. An exploration license is valid for a primary term of nine
                (9)
                years, consisting of two consecutive periods of five (5) years and
                four
                (4) years, with certain milestones that must be completed in the
                first
                five years for the license holder to continue to have rights in the
                latter
                four years. At the end of nine years, all rights to an area terminate
                unless the area becomes subject to a significant discovery license
                or a
                production license.






-27-




·
            A*significant
                discovery license*may be granted with respect to an area as a result of an application
                for a
                declaration of significant discovery. It grants the same rights as
                an
                exploration license, and effectively extends rights to an area for
                so long
                as the relevant declaration of significant discovery is in force,
                or until
                a production license is issued for the relevant lands. The government
                retains significant authority over drilling orders and development
                orders.





·
            A*production
                license*is
                issued where a commercial discovery is declared, which is a discovery
                of
                petroleum that has been demonstrated to contain reserves that justify
                the
                investment of capital and effort to bring the discovery to production.
                A
                production license confers the following: the right to explore for,
                and
                the exclusive right to drill and test for, petroleum; the exclusive
                right
                to develop those portions of the offshore area in order to produce
                petroleum; the exclusive right to produce petroleum from those portions
                of
                the offshore area; and title to the petroleum so produced. A production
                license is effective from the date it is issued for a term of twenty-five
                (25) years or for such period thereafter during which commercial
                production continues. The government retains significant authority over
                drilling orders and development
                orders.





Canadian
      Imperial Venture Corp. was issued a lease for the onshore area in which we
      are
      interested, and that lease was due to expire on August 13, 2006. On June 28,
      2006, Canadian Imperial issued a press release announcing that the Government
      of
      Newfoundland and Labrador had extended the onshore lease for an additional
      year.
      We are not aware of the conditions placed upon the lease extension by the
      Government of Newfoundland and Labrador, but Canadian Imperial announced on
      August 15, 2006, that it had met certain financial commitments for the lease
      extension, specifically referencing work plans and work deposits submitted
      to
      the Department of Natural Resources. Based upon our discussions with government
      officials, we believe that the Government of Newfoundland and Labrador is
      imposing stricter requirements on leaseholders regarding investment in leased
      areas and progress toward production, as suggested by the speech delivered
      at
      the Atlantic Canada Oil and Gas Summit on May 30, 2005, by Premier Danny
      Williams. In the event that Canadian Imperial’s lease is terminated, re-bidding
      for the lease would likely then commence. Similarly, licenses covering the
      offshore prospective acreage expired on January 15, 2007, and re-bidding could
      commence as early as the fall of 2007.





We
      are
      currently in the process of confirming the environmental approval amendment
      procedures for the applications submitted to date to expand and include
      prospective offshore acreage surrounding the Port au Port peninsula. We have
      made significant progress towards obtaining environmental approvals for an
      exploration license to conduct the 3D seismic survey over the onshore prospects.
      On May 2, 2006, the Department of Environment and Conservation issued a letter
      regarding our Port au Port Peninsula 3D seismic survey, along with a summary
      of
      comments received from various reviewing agencies during the review period.
      The
      letter released our proposed 3D seismic survey from further environmental
      assessment by the Department, subject to the approval of an Environmental
      Protection Plan prior to the commencement of the survey. On November 21, 2006,
      the Company announced that its application for expansion of its original 3D
      seismic program had been increased from approximately 240 sq km to approximately
      500 sq km and released from further environment assessment by the Newfoundland
      and Labrador Department of Environmental Conservation. The Company is in the
      final stages with the Canada-Newfoundland and Labrador Offshore Petroleum Board
      to complete its approvals for the offshore component of the program.





-28-


To
      further cement our presence in Newfoundland, we have recently established a
      wholly-owned Canadian subsidiary, Tekoil Rig Development Corporation, opened
      our
      Canadian headquarters in St. John’s and appointed Donna Parsons as
      Vice-President, Corporate Relations. We are talking to a number of companies
      and
      institutions concerning the long term financing for the Company’s operations,
      and we will continue to do so. We are engaged in ongoing discussions with the
      provincial technical college to create training programs for the rig
      refurbishment business.





Mr.
      Howdle, our contracted rig refurbishment expert, continues to monitor the
      availability of used, inactive rigs, and he is confident that once we have
      secured funding for this program, he will be able to act expeditiously to obtain
      such a rig.





On
      November 13, 2006, the Company executed a Purchase and Sale Agreement with
      Masters Resources, LLC, and Masters Oil and Gas, LLC, to acquire four
      properties, consisting of interests in Trinity Bay, Redfish Reef, Fishers Reef
      and North Point Bolivar Fields, located in Galveston and Chambers Counties
      in
      the Galveston Bay, Texas. The Company is in its final due diligence for
      completing the acquisition, with the closing extended to April 12,
      2007.





In
      January 2007, the Company executed a Farmout Agreement with Ptarmigan Resources
      Limited with respect to Ptarmigan’s offshore exploration license EL-1069. The
      license covers approximately 140,000 hectares, or 346,500 acres of offshore
      surface area, in the shallow waters of the Gulf of St. Lawrence north of the
      Port au Port peninsula in western Newfoundland. The Company is required to
      drill
      an onshore-to-offshore test well during 2007, which will test an offshore
      structure and, as the validation well, will extend the lease until January
      2011.





Liquidity
      and Capital Resources





Our
      operating and capital requirements have exceeded our cash flow from operations
      as we have been building our business. Since inception through December 31,
      2006, we have expended approximately $4.1 million for operating and investing
      activities, which has been funded by investments of approximately $4.0 million
      from our shareholders and $0.5 million from borrowings.





Our
      cash
      balance as of December 31, 2006, was $294,071, which increased from $167,524
      as
      of December 31, 2005. The increase to our cash balance was attributable to
      approximately $2.3 million raised by the Company through private placements
      of
      Series A Convertible Preferred Stock in 2006, $1.0 million through a private
      placement of Common Stock and $0.3 million in borrowings offset by increased
      operating expenses during the year ended December 31, 2006. Subsequent to
      December 31, 2006, the Company raised an additional $397,000 through private
      placements. Management believes the Company needs to raise additional funds
      to
      meet its current operations for the next twelve months.




-29-
 
  The
        Company is in its final due diligence of
        completing its acquisition of Masters Resources, LLC and Masters Oil and
        Gas,
        LLC. Total consideration to be paid by Tekoil at closing has been agreed
        at
        $47.5 million. The Company authorized a leading New York-based financial
        institution to proceed with an accelerated due diligence investigation and
        to
        seek internal credit approval for a contemplated $50,000,000 multiple advance,
        senior secured four year credit facility, with limited availability of
        $25,000,000 in support of the Masters acquisition. The term sheet contemplates
        that the credit facility will be conditioned upon the Company completing
        a
        minimum $20,000,000 equity financing, with standard covenants and conditions
        including satisfactory due diligence reviews and regulatory approval, and
        other
        conditions, which the potential lender may deem appropriate.


In
      January 2007, the Company executed a Farmout Agreement with Ptarmigan Resources
      Limited with respect to Ptarmigan’s offshore exploration license EL-1069. The
      Company paid Ptarmigan $214,000 USD ($250,000 Canadian), which was used as
      a
      drilling deposit to secure a one-year extension of the License from the Canada
      -
      Newfoundland and Labrador Offshore Petroleum Board. The Company is also required
      to drill an onshore-to-offshore test well during 2007, which will test an
      offshore structure and, as the validation well, will extend the lease until
      January 2011 (Phase 1). The Company will earn a one-third interest (33.3%)
      in
      the License for the completion of Phase 1. The Company may then conduct an
      offshore 3D seismic program by late 2008, to map in more detail four offshore
      features already identified by Ptarmigan using 2D seismic data, which will
      earn
      the Company a further 26.7% of the License, for a total ownership of 60% (Phase
      2).





The
      Farmout Agreement further provides that the Company and Ptarmigan will then
      drill an offshore exploration well and will share the drilling costs; 60% by
      the
      Company and 40% by Ptarmigan. Should the Company carry 100% of the cost of
      drilling, it will earn an additional 20% interest in the License, for a total
      of
      up to 80%, subject to government royalties (Phase 3). The Company estimates
      the
      total cost of Phases 1, 2, and 3 to be approximately $6,000,000 in 2007,
      $10,000,000 in 2008 and $25,000,000 in 2009.





We
      will
      need to raise additional capital of approximately $35 million to proceed with
      the 3D seismic program and the drilling of two wells. We will also need to
      raise
      an additional $25 million to proceed with our drilling rig refurbishment
      program. To date, the Company has generated no revenues. We are currently in
      negotiations with various investors, primarily for debt financing, but there
      can
      be no assurance that such funds will be available to us or that adequate funds
      from debt or equity financing will be available when needed or on terms
      satisfactory to us. We will continue to sell shares of our Series A Preferred
      Stock or Common Stock from time to time. Our failure to obtain adequate
      additional financing may require us to delay or curtail some or all of our
      business efforts. Additional equity financing may involve substantial dilution
      to our existing shareholders.





During
      the past three years, we have sold unregistered shares of our Series A
      Convertible Preferred Stock at the offering price of $1.00 per share and we
      continue to offer and sell unregistered shares of our Series A Preferred Stock,
      from time to time, at such price.





-30-


On
      December 15, 2005, we issued an unsecured promissory note, bearing interest
      at
      the rate of prime plus one percent (1%) per annum (8.25% at December 31, 2005)
      to Wiener, Goodman & Company, P.C. Profit Sharing Plan FBO Gerald Goodman
      (the Company's chief financial officer, treasurer and director) in the principal
      amount of $50,000, with principal and interest due at maturity on June 15,
      2006.
      The maturity date has since been extended until June 30, 2007. At any time
      prior
      to maturity, the lender may, at its option, convert the promissory note into
      50,000 shares of Series A Preferred Stock. There is no other formal arrangement
      to advance or loan funds to the Company or repay any such advances or
      loans.





On
      September 15, 2006, the Company entered into a mortgage agreement with CIBC
      Mortgages Inc. The Company borrowed $264,373 to purchase a building in St.
      John's, Newfoundland. The mortgage bears interest equal to the CIBC Prime Rate
      plus 0.667% (6.667% at December 31, 2006). The mortgage matures on September
      15,
      2011. The mortgage is collateralized by the building in Newfoundland and a
      personal guarantee by the Company's Chief Financial Officer.





**Item
      7. Financial Statements**





See
      the
      consolidated financial statements listed in the accompanying Index to
      Consolidated Financial Statements for the information required by this
      Item.




-31-




TEKOIL
        & GAS CORPORATION AND SUBSIDIARIES
 (AN
        EXPLORATION STAGE COMPANY)
 
 INDEX
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 
 PageReport
                  of Independent Registered Public Accounting Firm
              F-1Financial
                  StatementsConsolidated
                  Balance Sheets as of December 31, 2006 and 2005
              F-2Consolidated
                  Statements of Operations for the year ended December 31,
                  2006and
                  2005 and for the period November 29, 2004 (Date of Formation)
                  throughDecember
                  31, 2006
              F-3Consolidated
                  Statements of Stockholders’ Equity (Deficiency) for the periodNovember
                  29, 2004 (Date of Formation) through December 31, 2006
              F-4Consolidated
                  Statements of Cash Flows for the year ended December 31, 2006and
                  2005 and for the period November 29, 2004 (Date of Formation)
                  throughDecember
                  31, 2006
              F-5Notes
                  to Consolidated Financial Statements
              F-6
                  - F-17
   
  
 **MADSEN
                  & ASSOCIATES, CPA’s Inc.**
              684
                  East Vine St, Suite 3**Certified
                  Public Accountants and Business Consultants**
              Murray,
                  Utah 84107Telephone
                  801 268-2632Fax
                  801-262-3978
 
 Board
        of
        Directors
 Tekoil
        & Gas Corporation and Subsidiaries
 Orlando,
        Florida
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 We
        have
        audited the accompanying consolidated balance sheets of Tekoil & Gas
        Corporation and Subsidiaries (an exploration stage company) at December 31,
        2006
        and 2005, and the
        related consolidated statements of operations, stockholders' equity, and
        cash
        flows for the years ended December 31, 2006 and 2005 the period November
        29,
        2004 (date of formation) to December 31, 2006. These financial statements
        are
        the responsibility of the Company's management. Our responsibility is to
        express
        an opinion on these financial statements based on our audit.
 
 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. 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
        balance sheet presentation. We believe that our audit provides a reasonable
        basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Tekoil & Gas Corporation and
        Subsidiaries at December 31, 2006 and 2005, and the related statements of
        operations, stockholders' equity, and cash flows for the years ended December
        31, 2006 and 2005 and the period November 29, 2004 to December 31, 2006,
        in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. The Company will need additional working
        capital for its planned activity and to service its debt, which raises
        substantial doubt about its ability to continue as a going concern. Management's
        plans in regard to these matters are described in the notes to the financial
        statements. These financial statements do not include any adjustments that
        might
        result from the outcome of this uncertainty.
 
 Murray,
                    UtahMarch
                    16, 2007
                /s/
                    Madsen & Associates, CPA’s Inc.
  F-1
 TEKOIL
          & GAS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
          BALANCE SHEET
 (An
          Exploration Stage Company)
  December
                    31,2006
                
                2005ASSETSCurrent
                    Assets:Cash
                
                $
                294,021
                
                $
                167,524Prepaid
                    expenses
                
                
                53,475
                
                $
                -Total
                    Current Assets
                
                
                347,496
                
                
                167,524Property
                    and Equipment - net
                
                
                458,871
                
                
                7,411Other
                    assets
                
                
                1,004,394
                
                
                10,000TOTAL
                    ASSETS
                
                $
                1,810,761
                
                $
                184,935LIABILITIES
                    AND STOCKHOLDERS' EQUITYCurrent
                    Liabilities:Accrued
                    expenses
                
                $
                362,147
                
                $
                23,520Note
                    payable - related party
                
                
                50,000
                
                
                50,000Current
                    portion of long-term debt
                
                
                4,261
                
                
                -Total
                    Current Liabilities
                
                
                416,408
                
                
                73,520Long-term
                    debt
                
                
                255,032
                
                
                -Total
                    Liabilities
                
                
                671,440
                
                
                73,520Commitments
                    and Contingencies:Stockholders'
                    Equity:Preferred
                    Stock, $.00000001 par value, authorized20,000,000
                    sharesSeries
                    A Convertible Preferred Stock, 2,985,000 and667,000
                    shares issued and outstanding atDecember
                    31, 2006 and 2005, respectively
                
                
                -
                
                
                -Common
                    stock,par value $.000001 per shareauthorized
                    200,000,000 shares;21,624,175
                    and 7,092,354 shares issued and outstandingat
                    December 31, 2006 and 2005, respectively
                
                
                22
                
                
                17Additional
                    paid-in capital
                
                
                6,758,637
                
                
                2,763,438Cummulative
                    other comprehensive expense
                
                
                (772
                )
                
                -Deficit
                    accumulated during thedevelopment
                    stage
                
                
                (5,618,566
                )
                
                (2,652,040
                )Total
                    Stockholders' Equity
                
                
                1,139,321
                
                
                111,415TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                1,810,761
                
                $
                184,935
  See
        notes
        to consolidated financial statements.
  F-2
  TEKOIL
          & GAS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
          STATEMENT OF OPERATIONS
 (An
          Exploration Stage Company)
  PeriodNovember
                    29, 2004Year
                    Ended
                
                Year
                    Ended
                
                (Date
                    of formation)December
                    31,
                
                December
                    31,
                
                through2006
                
                2005
                
                December
                    31, 2006Revenues
                
                $
                -
                
                $
                -
                
                $
                -Cost
                    and expenses:General
                    and administrative expenses
                
                
                2,526,296
                
                
                672,574
                
                
                3,209,736Compensatory
                    element of commonstock
                    issurance
                
                
                420,750
                
                
                1,950,000
                
                
                2,375,850(2,947,046
                )
                
                (2,622,574
                )
                
                (5,585,586
                )Loss
                    from operations
                
                
                (2,947,046
                )
                
                (2,622,574
                )
                
                (5,585,586
                )Loss
                    on investment
                
                
                (10,000
                )
                
                -
                
                
                (10,000
                )Interest
                    expense
                
                
                (9,480
                )
                
                (13,500
                )
                
                (22,980
                )Loss
                    before provision for income taxes
                
                
                (2,966,526
                )
                
                (2,636,074
                )
                
                (5,618,566
                )Provision
                    for income taxes
                
                
                -
                
                
                -
                
                
                -Net
                    loss
                
                $
                (2,966,526
                )
                $
                (2,636,074
                )
                $
                (5,618,566
                )Loss
                    per share - basic and diluted
                
                $
                (0.16
                )
                $
                (0.28
                )Weighted
                    average number of common sharesoutstanding
                    - basic and diluted
                
                
                18,276,098
                
                
                9,433,126
  See
        notes
        to consolidated financial statements.
  F-3
 
 TEKOIL
        & GAS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
        STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
 (AN
        EXPLORATION STAGE COMPANY)
 Common
                        Stock
                    
                    Series
                        A Preferred Stock
                    
                    Additional
                        Paid
                    
                    Cummulative
                        Other
                    
                    Deficit
                        Accumulated DuringTotal
                    
                    Comprehensive
                        (Loss)
                    
                    No
                        of shares
                    
                    Amount
                    
                    No
                        of shares
                    
                    Amount
                    
                    In
                      Capital
                    
                    Comprehensive
                        Expense
                    
                    Development
                      StageBalance,
                        November 29, 2004
                    
                    $
                    (30,611
                    )
                    
                    
                    
                    
                    772,200
                    
                    $
                    -
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    (30,611
                    )
                    $
                    -
                    
                    $
                    -Issuance
                        of common stock for services(valued
                        at $.001 per share)
                    
                    
                    5,100
                    
                    
                    
                    
                    
                    5,997,044
                    
                    
                    7
                    
                    
                    -
                    
                    
                    -
                    
                    
                    5,093
                    
                    
                    -
                    
                    
                    -Sale
                        of common stock
                    
                    
                    11,000
                    
                    
                    
                    
                    
                    323,110
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    11,000
                    
                    
                    -
                    
                    
                    -Net
                        loss
                    
                    
                    (15,966
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    (15,966
                    )Balance,
                        December 31, 2004
                    
                    
                    (30,477
                    )
                    
                    
                    
                    
                    7,092,354
                    
                    
                    7
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (14,518
                    )
                    
                    -
                    
                    
                    (15,966
                    )Sale
                        of common stock
                    
                    
                    38,090
                    
                    
                    
                    
                    
                    412,776
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    
                    38,090
                    
                    
                    -Sale
                        of preferred stock
                    
                    
                    655,000
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    655,000
                    
                    
                    -
                    
                    
                    655,000
                    
                    
                    -
                    
                    
                    -Issuance
                        of preferred stock for debt
                    
                    
                    27,876
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    5,000
                    
                    
                    -
                    
                    
                    27,876
                    
                    
                    -
                    
                    
                    -Issuance
                        of preferred stock for services (valued at $1.00 per
                        share)
                    
                    
                    7,000
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    7,000
                    
                    
                    -
                    
                    
                    7,000
                    
                    
                    -
                    
                    
                    -Issuance
                        of common stock for debt
                    
                    
                    100,000
                    
                    
                    
                    
                    
                    216,875
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    100,000
                    
                    
                    -
                    
                    
                    -Compensatory
                        element of common stock issuance (valued at $.20 per
                        share)
                    
                    
                    1,950,000
                    
                    
                    
                    
                    
                    9,750,000
                    
                    
                    10
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,949,990
                    
                    
                    -
                    
                    
                    -Net
                        loss
                    
                    
                    (2,636,074
                    )
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (2,636,074
                    )Balance,
                        December 31, 2005
                    
                    
                    111,415
                    
                    
                    
                    
                    
                    17,472,005
                    
                    
                    17
                    
                    
                    667,000
                    
                    
                    -
                    
                    
                    2,763,438
                    
                    
                    -
                    
                    
                    (2,652,040
                    )Sale
                        of common stock
                    
                    
                    1,050,000
                    
                    
                    
                    
                    
                    2,205,000
                    
                    
                    3
                    
                    
                    
                    
                    
                    
                    
                    
                    1,049,997
                    
                    
                    -Sale
                        of preferred stock
                    
                    
                    2,268,000
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    2,268,000
                    
                    
                    -
                    
                    
                    2,268,000
                    
                    
                    -
                    
                    
                    -Issuance
                        of preferred stock for services (valued at $1.00 per
                        share)
                    
                    
                    50,000
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    50,000
                    
                    
                    -
                    
                    
                    50,000
                    
                    
                    -
                    
                    
                    -Issuance
                        of common stock for services
                    
                    
                    627,204
                    
                    
                    
                    
                    
                    1,947,170
                    
                    
                    2
                    
                    
                    -
                    
                    
                    -
                    
                    
                    627,202
                    
                    
                    -
                    
                    
                    -Net
                        loss
                    
                    
                    (2,966,526
                    )
                    $
                    (2,966,526
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (2,966,526
                    )Currency
                        translation adjustment - net of taxes
                    
                    
                    (772
                    )
                    
                    (772
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (772
                    )
                    
                    -Comprehensive
                        (loss)
                    
                    
                    
                    
                    $
                    (2,967,298
                    )Balance,
                        December 31, 2006
                    
                    $
                    1,139,321
                    
                    
                    
                    
                    
                    21,624,175
                    
                    $
                    22
                    
                    
                    2,985,000
                    
                    $
                    -
                    
                    $
                    6,758,637
                    
                    $
                    (772
                    )
                    $
                    (5,618,566
                    )
 See
            notes
            to consolidated financial statements.
  F-4
  TEKOIL
          & GAS CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
          STATEMENT OF CASH FLOWS
 (A
          Exploration Stage Company)
  PeriodNovember
                    29, 2004Year
                    Ended
                
                Year
                    Ended
                
                (Date
                    of formation)December
                    31,
                
                December
                    31,
                
                through2006
                
                2005
                
                December
                    31, 2006Cash
                    flows from operating activities:Net
                    loss
                
                $
                (2,966,526
                )
                $
                (2,636,074
                )
                $
                (5,618,566
                )Adjustments
                    to reconcile net lossto
                    net cash used in operating activities:Depreciation
                    and amortization
                
                
                24,086
                
                
                823
                
                
                24,909Non
                    cash fair value of stock
                
                
                677,204
                
                
                1,957,000
                
                
                2,639,304Bad
                    debt
                
                
                
                
                
                -
                
                
                30,611Changes
                    in operating assetsand
                    liabilities:
                
                
                -
                
                
                -
                
                
                -Increase
                    in current assets
                
                
                (53,475
                )
                
                
                
                
                (53,475
                )Increase
                    (decrease) in other assets
                
                
                5,606
                
                
                (10,000
                )
                
                (4,394
                )Increase
                    in accrued expenses and accounts payable
                
                
                338,627
                
                
                23,520
                
                
                362,147Net
                    Cash Used in Operating Activities
                
                
                (1,974,478
                )
                
                (664,731
                )
                
                (2,619,464
                )Cash
                    flows from investing activities:Purchase
                    of property, plant andequipment
                
                
                (475,546
                )
                
                (8,234
                )
                
                (483,780
                )Payment
                    on investment
                
                
                (1,000,000
                )
                
                -
                
                
                (1,000,000
                )Advance
                    to affiliate
                
                
                -
                
                
                -
                
                
                (30,611
                )Net
                    Cash Flows Used in Investing Activities
                
                
                (1,475,546
                )
                
                (8,234
                )
                
                (1,514,391
                )Cash
                    flows from financing activities:Proceeds
                    from issuance of commonstock
                
                
                1,050,000
                
                
                38,090
                
                
                1,099,090Proceeds
                    from borrowings
                
                
                260,318
                
                
                100,000
                
                
                360,318Proceeds
                    from issuance of preferredstock
                
                
                2,268,000
                
                
                655,000
                
                
                2,923,000Repayment
                    of debt
                
                
                (1,025
                )
                
                (2,735
                )
                
                (3,760
                )Proceeds
                    from related party
                
                
                -
                
                
                50,000
                
                
                50,000Net
                    Cash Flows Provided by Financing Activities
                
                
                3,577,293
                
                
                840,355
                
                
                4,428,648Effect
                    of exchange rate changes on cash
                
                
                (772
                )
                
                -
                
                
                (772
                )Net
                    Increase in cash
                
                
                1,126,497
                
                
                167,390
                
                
                294,021Cash
                    - beginning of period
                
                
                167,524
                
                
                134
                
                
                -Cash
                    - end of period
                
                $
                1,294,021
                
                $
                167,524
                
                $
                294,021Supplementary
                    information:Cash
                    paid during the year for:Interest
                
                $
                5,517
                
                $
                13,500
                
                $
                19,017Income
                    taxes
                
                $
                -
                
                $
                -
                
                $
                -Non-cash
                    financings activities:Issuance
                    of preferred stock for services
                
                $
                50,000
                
                $
                7,000
                
                $
                57,000Issuance
                    of preferred stock for debt
                
                $
                -
                
                $
                27,876
                
                $
                27,876Issuance
                    of common stock for services
                
                $
                627,204
                
                $
                1,950,000
                
                $
                2,577,204Issuance
                    of common stock for debt
                
                $
                -
                
                $
                100,000
                
                $
                127,876
  See
          notes
          to consolidated financial statements.
  F-5
  TEKOIL
        & GAS CORPORATION AND SUBSIDIARIES
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 (AN
        EXPLORATION STAGE COMPANY)
 
 1.
              DESCRIPTION
                  OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
                  POLICIES
 
 *Organization*
 
 Tekoil
        & Gas Corporation (the "Company" or "Tekoil") was incorporated in Delaware.
        The Company is focused on the acquisition, stimulation, rehabilitation and
        asset
        improvement of small to medium sized manageable oil and gas fields throughout
        North America.
 
 The
        Company currently operates its business directly, and not through its Tekoil
        & Gas Corporation Florida subsidiary, which continues to exist but has no
        assets or operations. For the purpose of pursuing its business strategy in
        the
        Province of Newfoundland, Canada, on March 29, 2006, the Company formed Tekoil
        Rig Development Corporation, a wholly-owned Newfoundland Corporation, and
        on
        April 19, 2006, the Company qualified to do business in
        Newfoundland.
 
 The
        Company is considered an exploration stage enterprise as defined in Financial
        Accounting Standards Board ("FASB") Statement No. 19, "Financial Accounting
        and
        Reporting by Oil and Gas Producing Companies". The Company has no revenue
        to
        date and there is no assurance the exploration, geological, typographical
        and
        geophysical studies by the Company will determine whether a well has proven
        reserves or that the Company will achieve a profitable level of
        operations.
 
 *Basis
        of Presentation*
 
 On
        June
        27, 2005, Pexcon, Inc. ("Pexcon") entered into a share exchange agreement
        with
        Tekoil. In connection with the share exchange, Pexcon acquired the assets
        and
        assumed the liabilities of Tekoil. For accounting purposes, the share exchange
        agreement has been treated as a recapitalization of Tekoil (subsidiary) as
        the
        acquirer. The financial statements prior to June 27, 2005 are those of Tekoil
        and reflect the assets and liabilities of Tekoil at historical carrying amounts.
 
 As
        provided for in the share acquisition agreement, the stockholders of Tekoil
        received 6,949,800 of Pexcon common stock, representing 90% of the outstanding
        stock after the acquisition, in exchange for the outstanding shares of Tekoil
        common stock they held, which was accounted for as a recapitalization.
        Immediately following the share acquisition exchange, Pexcon had a total
        of
        7,722,000 common shares issued and outstanding. The financial statements
        show a
        retroactive restatement of Tekoil’s historical stockholders’ equity to reflect
        the equivalent number of shares of common stock issued in the acquisition.
 
 In
        addition, the resignation of the former officers and directors of Pexcon
        took
        effect upon the close of the share acquisition exchange. The Tekoil Board
        of
        Directors became the Board of Directors of Pexcon and Mark Western became
        President and Chief Executive Officer.
 
 F-6
  Going
        Concern
 
 The
        Company’s financial statements have been prepared on the basis that the Company
        is a going concern. Subsequent to the balance sheet date, the Company has
        raised
        funds to continue its exploration stage. No adjustments to the financial
        statements have been made.
 
 Use
        of
        Estimates
 
 The
        preparation of the financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
 
 Foreign
        Currency Translation
 
 The
        functional currency for foreign operations is the local currency. Assets
        and
        liabilities of foreign operations are translated at balance sheet date rates
        of
        exchange and income, expense and cash flow items are translated at the average
        exchange rate for the period. Translation adjustments are recorded in Cumulative
        Other Comprehensive Income.
 
 Concentration
        of Credit Risk
 
 Financial
        instruments which potentially subject the Company to concentrations of credit
        risk consist principally of cash and accrued expenses.
 
 The
        Company's cash and cash equivalents are concentrated primarily in one bank
        in
        the United States. At times, such deposits could be in excess of insured
        limits.
        Management believes that the financial institution that holds the Company
        financial instrument is financially sound and, accordingly, minimal credit
        risk
        is believed to exist with respect to these financial instruments.
 
 Earnings
        Per Share
 
 Basic
        loss per common share is computed by dividing net loss by the weighted average
        number of common shares outstanding during the specified period. Diluted
        loss
        per common share is computed by dividing net loss by the weighed average
        number
        of common shares and potential common shares during the specified period.
        All
        potentially dilutive securities, which include preferred stock convertible
        into
        8,995,000 and 2,001,000 common shares at December 31, 2006 and December 31,
        2005, respectively, have been excluded from the computation, as their effect
        is
        antidilutive.
 
 Evaluation
        of long-lived Assets
 
 The
        Company reviews property and equipment for impairment whenever events or
        changes
        in circumstances indicate the carrying indicate the carrying value may not
        be
        recoverable in accordance with guidance in SFAS No. 144 “Accounting for the
        Impairment or Disposal of Long-Lived Assets.” If the carrying value of the
        long-lived asset exceeds the estimated future undiscounted cash flows to
        be
        generated by such asset, the asset would be adjusted to its fair value and
        an
        impairment loss would be charged to operations in the period
        identified.
  Depreciation
 
 Property
        and equipment are stated at cost. Depreciation is provided for by the
        straight-line method over the estimated useful lives of the related
        assets.
  F-7
 
 Stock
        Based Compensation
 
 The
        Company issues shares of common stock and preferred stock to employees and
        non-employees as stock-based compensation. The Company accounts for the services
        using the fair market value of the consideration issued. For the year ended
        December 31, 2005, the Company issued 9,750,000 shares of its common stock
        and
        recorded compensation expense of $1,950,000 in connection with the issuance
        of
        these shares, all of which were to related parties. The Company also issued
        7,000 shares of its preferred stock and recorded compensation expense of
        $7,000
        in connection with the issuance of these shares.
 
 For
        the
        year ended December 31, 2006, the Company issued 1,947,170 shares of its
        common
        stock and recorded consulting expense of $627,204 in connection with the
        issuance of these shares of which 1,275,000 shares ($420,750) were to related
        parties. The Company also issued 50,000 shares of its preferred stock and
        recorded consulting expense of $50,000 in connection with the issuance of
        these
        shares.
 
 For
        the
        period November 29, 2004 (Date of Formation of the subsidiary) through December
        31, 2006, the Company issued 11,697,170 shares of its common stock and recorded
        compensation expense of $2,636,204 in connection with the issuance of these
        shares.
 
 Income
        Taxes
 
 The
        Company accounts for income taxes using an asset and liability approach under
        which deferred income taxes are recognized by applying enacted tax rates
        applicable to future years to the differences between the financial statement
        carrying amounts and the tax bases of reported assets and
        liabilities.
 
 The
        principal items giving rise to deferred taxes are certain expenses which
        have
        been deducted for financial reporting purposes which are not currently
        deductible for income tax purposes and the future tax benefits of certain
        net
        operating loss carryforward.
 
 Fair
        Value of Financial Instruments
 
 For
        financial instruments including cash and accrued expenses, it was assumed
        that
        the carrying amount approximated fair value because of the short maturities
        of
        such instruments.
 
 F-8
  New
        Financial Accounting Standards
 
 In
        September 2006, the Financial Accounting Standards Board (“FASB”) issued
        Statement on Financial Accounting Standards (“SFAS”) SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Post Retirement Plans”, an
        amendment of FASB Statements No. 87, 88, 106 and 132(R). SAFS 158 requires
        employers to recognize their defined benefit plans’ overfunded or underfunded
        status in their balance sheets, requires employers to measure plan assets
        and
        plan obligations as of the balance sheet date, immediately recognize any
        remaining transition obligation currently being deferred, and recognize
        actuarial gains and losses through other comprehensive income. The statement
        is
        effective for fiscal years ending after December 15, 2006. The adoption of
        SFAS
        No. 158 did not have a material impact on the Company’s consolidated balance
        sheet and statement of operations.
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
        enhances existing guidance for measuring assets and liabilities using fair
        value. This Standard provides a single definition of fair value, together
        with a
        framework for measuring it, and requires additional disclosure about the
        use of
        fair value to measure assets and liabilities. SFAS No. 157 is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. The Company does not believe
        that
        SFAS No. 157 will have a material impact on its financial
        statements.
  In
        September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
        Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year
        Misstatements when Quantifying Misstatements in Current Year Financial
        Statements” (“SAB No. 108”). SAB No. 108 provides guidance on the consideration
        of effects of the prior year misstatements in quantifying current year
        misstatements for the purpose of a materiality assessment. We adopted SAB
        No.
        108 in the fourth quarter of 2006 and adoption of SAB No. 108 did not impact
        our
        consolidated financial results.
  In
        July
        2006, the FASB issued Interpretation No. 48 “Accounting for Uncertainty in
        Income Taxes" ("FIN 48"). The interpretation requires a two step approach
        for
        recognizing and measuring tax benefits based on a recognition threshold of
“more
        likely than not”. The FASB also requires explicit disclosures about
        uncertainties in tax positions including a detailed rollforward of tax benefits
        that do not qualify for financial statement recognition. The adoption of
        FIN 48
        is effective for fiscal years beginning after December 15, 2006. While the
        Company’s analysis of the impact of this Interpretation is not yet complete, the
        Company does not anticipate it will have a material impact on the consolidated
        financial statements.
  In
        December 2004, FASB issued SFAS No. 123(R), "Share-Based Payment", that requires
        compensation costs related to stock-based payment transactions to be recognized
        in the financial statements. With limited exceptions, the amount of compensation
        cost is measured based on the grant-date fair value of the equity or liability
        instruments issued. In addition, liability awards are to be remeasured each
        reporting period. Compensation cost will be recognized over the period that
        an
        employee provides service in exchange for the reward. SFAS No. 123(R) is
        effective as to the Company as of the beginning of the Company's 2006 fiscal
        year. The Company accounted for the stock-based compensation costs using
        the
        modified prospective method at the time of adoption. The adoption of SFAS
        123(R)
        did not have a material effect on the consolidated balance sheet as of December
        31, 2006 or the consolidated statement of cash flows for the year ended December
        31, 2006.
 
 F-9
  In
        February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) “The Fair Value Option
        for Financial Assets and Financial Liabilities”, providing companies with an
        option to report selected financial assets and liabilities at fair value.
        The
        Standard’s objective is to reduce both complexity in accounting for financial
        instruments and the volatility in earnings caused by measuring related assets
        and liabilities differently. It also requires entities to display the fair
        value
        of those assets and liabilities for which the Company has chosen to use fair
        value on the face of the balance sheet. SFAS 159 is effective for fiscal
        years
        beginning after November 15, 2007. The Company is currently evaluating the
        impact of the adoption of this Statement on its financial statements.
 
 F-10
  2.
                OTHER
                    ASSETS
  December
                    31,2006
                
                2005Deposit
                    on investment
                
                $
                1,000,000
                
                $
                -Deposits
                    - other
                
                
                4,396
                
                
                10,000$
                1,004,396
                
                $
                10,000
  a)
            On
                November 13, 2006, the Company executed a Purchase and Sales Agreement
                with Masters Resources, LLC, and Masters Oil and Gas, LLC, to acquire
                four
                properties, consisting of interests in Trinity Bay, Redfish Reef,
                Fishers
                Reef and North Point Bolivar Fields, located in Galveston and Chambers
                Counties in the Galveston Bay, Texas. Total consideration payable
                by the
                Company will exceed $50 million and may be as much as $80 million
                under
                the terms of the Purchase and Sale Agreement. The Purchase and Sale
                Agreement provides that the Company must pay a non-refundable sum
                of $1
                million to Masters Resources and Masters Oil and Gas. The agreement
                further provides for a closing to occur, as amended, in March 2007,
                which
                is subject to a number of conditions, including completion of due
                diligence and arrangement of financing by the Company. On November
                27,
                2006, the Company paid the $1 million deposit required by the Purchase
                and
                Sale Agreement. 
 b)
            Tekoil
                and Gas Corporation had an exclusive option on the acquisition for
                a
                mining concession with Calcita Dominicana, a Dominican Republic based
                company from the date of signing through September 30, 2006. An additional
                deposit of $90,000 per the agreement was due December 1,
                2005. 
 In
        June
        2006, the Company terminated its agreement with Calcita Dominicana and wrote
        off
        its investment of $10,000, which is included in the Company’s consolidated
        statement of operations for the nine months ended September 30,
        2006.
 c)
              In
                    May 2006, the Company forwarded $4,462 to a real estate agency
                    as a
                    deposit on property in St. John’s, Newfoundland. The transaction was not
                    consummated and the deposit is due from the real estate
                    agency.
 3.
                PROPERTY
                    AND EQUIPMENT
  December
                    31,2006
                
                2005Equipment
                
                $
                21,229
                
                $
                8,234Building
                
                
                352,522
                
                
                -Furniture
                    and fixtures
                
                
                69,233
                
                
                -Transportation
                    equipment
                
                
                35,286
                
                
                -Leasehold
                    improvements
                
                
                5,510
                
                
                -483,780
                
                
                8,234Less:
                    Accumulated Depreciation
                
                
                24,909
                
                
                823$
                458,871
                
                $
                7,411
 Depreciation
        expense for the year ended December 31, 2006 and 2005 and the period November
        29, 2004 (Date of Formation) through December 31, 2006, amounted to $24,086,
        $823 and $24,909, respectively.
 
 F-11
  4.
              NOTE
                  PAYABLE - RELATED PARTY
 
 On
        December 15, 2005 the Company issued an unsecured promissory note at prime
        plus
        1% (8.25%
        at
        December 31, 2006) to a related party in the amount of $50,000, with principal
        and interest due at maturity on June 15, 2006, this note was extended to
        June
        30, 2007. At the option of the lender, any time prior to maturity the lender
        can
        convert the loan into 50,000 shares of Tekoil and Gas Corporation convertible
        preferred stock.
 
 After
        the
        principal of this Note becomes due, interest shall be payable on demand and
        shall accrue at a rate of 12% per annum. As additional consideration for
        the
        loan, Tekoil issued to the lender 25,000 shares of the Company’s common stock,
        valued at $8,250 the fair value of the time of issuance. Interest expense
        for
        the years ended December 31, 2006 and 2005 and for the period November 27,
        2004
        (Date of Formation of the subsidiary) through December 31, 2006 amounted
        to
        $3,963, $-0- and $3,963, respectively, and was accrued as at December 31,
        2006.
 
 5.
              LONG-TERM
                  DEBT
 
 On
        September 15, 2006, the Company entered into a mortgage agreement with CIBC
        Mortgages Inc. The Company borrowed $260,318 to purchase a building in St.
        John’s, Newfoundland. The mortgage bears interest equal to the CIBC Prime Rate
        plus 0.667% (6.667% at December 31, 2006). The mortgage matures September
        15,
        2011. The mortgage is collateralized by the building in Newfoundland and
        a
        personal guarantee by the Company’s chief financial officer. The current portion
        of the mortgage payable of $4,261 is included in current liabilities on the
        Company’s consolidated balance sheet as of December 31, 2006.
 
 The
        payments now required under the long-term obligations listed above during
        the
        years following January 1, 2006 are set below:
 2007
                
                $
                4,2612008
                
                
                4,5532009
                
                
                4,8672010
                
                
                5,201Thereafter
                
                
                240,411$
                259,293
 
 6.
              INCOME
                  TAXES
 
 At
        December 31, 2006, the Company has a net operating loss carry-forward of
        approximately $5,618,600 which expires in various years through 2020. Deferred
        income taxes reflect the impact of the net operating carryforwards. In
        recognition of the uncertainty regarding the ultimate amount of tax benefits
        to
        be derived from the Company’s net operating loss carryforward, the Company has
        recorded a valuation allowance for the entire amount of the deferred asset.
 
 F-12
  7.
              ACCRUED
                  EXPENSES
 
 Accrued
        expenses consisted of the following:
 December
                    31,2006
                
                2005Professional
                    fees
                
                $
                311,660
                
                $
                20,000Payroll
                
                
                37,421
                
                $
                -Interest
                    expense
                
                
                3,963
                
                $
                -Other
                
                
                9,103
                
                
                3,520$
                362,147
                
                $
                23,520
 
 8.
              SETTLEMENT
                  OF DEBT
 
 In
        September 2005, the Company issued 5,000 shares of Series A Preferred Stock
        and
        paid $2,735 to settle a debt of $30,611 to a former noteholder of Pexcon.
 
 9.
              STOCKHOLDERS'
                  EQUITY
 
 *Common
        Stock*
 
 a)
            The
                Company is authorized to issue 200,000,000 shares of .000001 par
                value
                common stock. All the outstanding common stock is fully paid and
                non-assessable. 
 b)
            On
                October 14, 2005, the Company effected a 1 for 100 reverse stock
                split. As
                of that date, there were 7,722,000 common shares outstanding. All
                capital
                stock transactions in the financial statements have been retroactively
                restated to effect the reverse stock
                split. 
 c)
            During
                the year ended December 31, 2005, the Company sold 3,550 private
                placement
                shares of pre-merger common stock and received net proceeds of
                $38,090. 
 d)
            During
                the year ended December 31, 2005, the Company borrowed $100,000 from
                a
                third party. In June 2005, the Company issued the third party 1,850
                private placement shares of its pre-merger common stock in exchange
                for
                this debt. The Company paid the third party $ 13,500 of interest
                on the
                debt and the amount is included in the Company's statement of operations
                for the year ended December 31, 2005. 
 e)
            During
                the period November 29, 2004 (Date of Formation) of the subsidiary
                through
                December 31, 2004, the Company sold 2,750 private placement shares
                of
                pre-merger common stock and received net proceeds of
                $11,000. 
 F-13
  f)
            On
                November 20, 2006, the Company sold 2,205,000 shares of its common
                stock
                at a purchase price of approximately $0.4762 per share, for an aggregate
                purchase price of $1,050,000. The Subscription Agreement for this
                offering
                provides for each subscriber has the irrevocable right and option
                to
                require the Company to purchase from such subscriber up to 95.24%
                of the
                shares of common stock issued to such subscriber pursuant to the
                Subscription Agreement, at the price per share equal to $0.55 per
                share.
                The put option is exercisable by each subscriber at any time ninety
                (90)
                days subsequent to the date on which the Company accepted such
                subscriber’s subscription, but no later than one hundred twenty (120) days
                subsequent to such acceptance date.  *Preferred
        Stock*
 
 The
        Company is authorized to issue 20,000,000 shares of .00000001 par value
        preferred stock. The Company has designated 3,000,000 of these authorized
        shares
        of Preferred Stock as Series A Convertible Preferred Stock. The Board of
        Directors has the authority, without action by the stockholders, to designate
        and issue the shares of preferred stock in one or more series and to designate
        the rights, preferences and each series, any or all of which may be greater
        than
        the rights of the Company's common stock. During the years ended December
        31,
        2006 and December 31, 2005, the Company sold 2,268,000 and 655,000 shares
        of
        Series A Preferred Stock and received net proceeds of $2,268,000 and $655,000
        respectively. As of December 31, 2006, there were 2,985,000 shares of Series
        A
        Preferred Stock outstanding which may be converted into 8,955,000 shares
        of the
        Company's common stock.
 
 The
        following is a summary of the pertinent rights and privileges of each class
        outstanding:
 
 ·
            The
                holders of Common Stock are entitled to one vote for each share held
                of
                record on all matters to be voted on by stockholders. Each outstanding
                share of Series A Preferred Stock entitles the holder thereof to
                vote on
                all matters on which holders of Common Stock are entitled to vote,
                and the
                holders of Series A Preferred Stock and of Common Stock vote together
                as a
                single class. With respect to any such vote, each share of Series
                A
                Preferred Stock entitles the holder to cast the number of votes per
                share
                as is equal to the number of votes that such holder would be entitled
                to
                cast had such holder converted its shares of Series A Preferred Stock
                into
                Share of Common Stock, such conversion rate being three (3) share
                of
                Common Stock for each share of Series A Preferred Stock. There is
                no
                cumulative voting with the result that the holders of more than 50%
                if the
                shares voting for the election of directors can elect all of the
                directors. 
 ·
            The
                holders of Common Stock and the holders of Series A Preferred Stock
                are
                entitled to receive dividends when, as and if declared by the Board
                of
                Directors for each such class of stock out of the funds legally available
                therefore. In the event of the liquidation, dissolution or winding
                up of
                the Company, the holders of Common Stock and the holders of Series
                A
                Preferred Stock are entitled to share ratably, after conversion of
                each
                share of Series A Preferred Stock into three (3) shares of Common
                Stock,
                in all assets remaining available for distribution after payment
                of
                liabilities and after provision has been made for each class of stock,
                if
                any, having preference over the Common Stock and the Series A Preferred
                Stock.  F-14
  ·
            Holders
                of shares of Common Stock, as such, have no conversion, preemptive
                or
                other subscription rights, and there are no redemption provisions
                applicable to the Common Stock. Each holder of shares of Series A
                Preferred Stock has the right, at its option and without further
                payment,
                to convert any or all of its shares of Series A Preferred Stock into
                fully
                paid and non-assessable shares of Common Stock at the rate of three
                (3)
                shares of Common Stock for each share of Series A Preferred Stock.
                Each
                share of Series A Preferred Stock will automatically convert into
                three
                (3) shares of Common Stock (i) immediately prior to a liquidation
                of the
                Company; (ii) immediately prior to an initial public offering by
                the
                Company,; (iii) at any time after July 29, 2006, at the sole discretion
                of
                the Company’s Board of Directors. The number of type of securities to be
                received upon conversion of the Series A Preferred Stock are subject
                to
                certain antidilution adjustments. 
 
 10.
              BUSINESS
                  SEGMENT INFORMATION
 
 The
        Company operates in one industry and has two reportable segments. The segments
        are geographic and include the United States and Canada. The primary criteria
        by
        which financial performance is evaluated and resources are allocated are
        revenues and operating income (loss). The following is a summary of key
        financial data:
 2006
                  
                  2005Revenue
                      from unrelated entityand
                      country of Company'sdomicile:United
                      States
                  
                  $
                  -
                  
                  $
                  -Canada
                  
                  
                  -
                  
                  
                  -$
                  -
                  
                  $
                  -Total
                      Revenues:United
                      States
                  
                  $
                  -
                  
                  $
                  -Canada
                  
                  
                  -
                  
                  
                  -$
                  -
                  
                  $
                  -Income
                      (loss) from Operations:United
                      States
                  
                  $
                  (2,718,565
                  )
                  $
                  (2,622,574
                  )Canada
                  
                  
                  (228,481
                  )
                  
                  -$
                  (2,947,046
                  )
                  $
                  (2,622,574
                  )Identifiable
                      Assets:United
                      States
                  
                  $
                  1,369,554
                  
                  $
                  184,935Canada
                  
                  
                  441,207
                  
                  
                  -$
                  1,810,761
                  
                  $
                  184,935Capital
                      Expenditures:United
                      States
                  
                  $
                  27,974
                  
                  $
                  8,234Canada
                  
                  
                  447,572
                  
                  
                  -$
                  475,546
                  
                  $
                  8,234Depreciation
                      and Amortization:United
                      States
                  
                  $
                  6,903
                  
                  $
                  823Canada
                  
                  
                  17,183
                  
                  
                  -$
                  24,086
                  
                  $
                  823
 F-15
  11.
              LEGAL
                  PROCEEDINGS
 
 On
        or
        about August 15, 2006, a complaint was filed against the Company by Gerald
        M.
        Dunne in the Circuit Court of the 17 th Judicial
        Circuit in and for Broward County, Florida (Case No. 0612299). In the complaint,
        Mr. Dunne alleged that the Company breached a May 25, 2005 Acquisition Agreement
        pursuant to which the Company acquired certain shares of Tekoil & Gas
        Corporation, a Florida corporation, owned by Mr. Dunne in exchange for shares
        of
        our common stock. Mr. Dunne alleged that the Company failed to issue shares
        of
        our common stock in an amount equal to seven percent (7%) of the Company’s
        outstanding shares of common stock in breach of the Acquisition
        Agreement.
 
 The
        complaint sought the following relief: (i) a temporary injunction preventing
        the
        Company from filing an application for a listing on the OTC Bulletin Board,
        or
        from selling, assigning or otherwise encumbering the Company’s shares until it
        has fulfilled its contractual obligations to Mr. Dunne; (ii) a judgment against
        the Company for breach of contract; (iii) a judgment ordering the Company
        to
        specifically perform the Acquisition Agreement and deliver the shares to
        Mr.
        Dunne; (iv) as an alternative to the claims for breach of contract and specific
        performance, a judgment for damages against the Company based upon an allegation
        of conversion of the shares; and (v) as an alternative to the claims for
        breach
        of contract and specific performance, a judgment for damages against the
        Company
        based upon an allegation of promissory estoppel.
 
 Contemporaneously
        with the filing of the complaint, Mr. Dunne filed a verified emergency motion
        for temporary injunction and incorporated memorandum of law with respect
        to his
        request for a temporary injunction in the Complaint.
 
 On
        December 6, 2006, the Company and Mr. Dunne entered into a Settlement Agreement
        and Mutual Release that provided that the Company would pay Mr. Dunne $12,500.00
        for his attorney’s fees and issue to him 504,000 shares of the Company’s
        unregistered common stock, which would be released to him by an escrow agent
        over a 12-month period. A stock certificate representing 64,000 shares of
        common
        stock has been delivered to Mr. Dunne, and certificates representing 40,000
        shares each are to be released to Mr. Dunne at the beginning of each month
        through November 1, 2007. The certificates are dated June 27, 2005 (the date
        of
        the closing of the Acquisition Agreement) and bear a restrictive legend.
        The
        Company expensed the value of the 504,000 shares ($166,320) issued to Mr.
        Dunne
        and is included in the consolidated statement of operations for the year
        ended
        December 31, 2006.
 
 12.
              SUBSEQUENT
                  EVENT
 
 On
        January 4, 2007, the Company executed a Farmout Agreement (“Agreement”) with
        Newfoundland and Labrador-based Ptarmigan Resources (“Ptarmigan”), in their
        offshore exploration license EL-1069 (“License”) just north of the Port au Port
        Peninsula in western Newfoundland.
 
 The
        Agreement required the Company to pay approximately $214,000 ($250,000 Canadian)
        to Ptarmigan which was used as a drilling deposit to secure a one year extension
        granted by the Canada - Newfoundland and Labrador Offshore Petroleum Board
        (“C-NCOPB”). The Agreement also requires the Company to drill an
        onshore-to-offshore exploration test-well in 2007 (“Phase 1”), which will test
        an offshore structure, and as the validation well, will extend the lease
        until
        January 2011. The Company will earn a one-third interest (33.3%) in the license
        for the completion of Phase 1. The Company will then conduct an offshore
        3-D
        seismic program (“Phase 2”) by late 2008, to map in more detail four offshore
        features already identified by Ptarmigan using 2-D seismic data, which will
        earn
        the Company a further 26.7% of the License, for a total ownership of
        60%.
  F-16
  The
        Company and Ptarmigan then plan to drill an offshore exploration well (“Phase
        3”) and will share the drilling costs; 60% the Company and 40% Ptarmigan. Should
        the Company carry 100% of the Phase 3 drilling expenses, the Company will
        earn
        an additional 20% interest in the License, for a total up to 80%, subject
        to
        government royalties. The Company estimates the total cost of Phase 1, 2
        and 3
        to approximate $6,000,000 in 2007, $10,000,000 in 2008 and $25,000,000 in
        2009.
 
 F-17




**Item
      8. Changes In and Disagreements With Accountants on Accounting and Financial
      Disclosure.**





On
      December 15, 2005, the Company engaged Madsen & Associates, CPA’s
      Inc. as its independent auditors. Prior to that date, the Company, as Pexcon,
      Inc., had engaged the services of Harris F. Rattray, C.P.A., as its independent
      auditor. The Company dismissed Harris F. Rattray, C.P.A. on December 15, 2005.
      The former principal accountant’s report on the financial statements for neither
      of the last two years contained an adverse opinion or disclaimer of opinion,
      or
      was modified as to uncertainty, audit scope or accounting principles. The
      decision to change accountants was approved by the Board of Directors. To
      management’s knowledge, there were no disagreements with the former accountant
      on any matter of accounting principles or practices, financial statement
      disclosure, or auditing scope or procedure, which, if not resolved to the former
      accountant’s satisfaction, would have caused it to make reference to the subject
      matter of the disagreement in connection with its report.





**Item
      8A. Controls and Procedures.**





Disclosure
      controls and procedures :
      As of
      the end of the Company’s most recently completed fiscal quarter covered by this
      report, the Company carried out an evaluation, with the participation of the
      Company’s management, including the Company’s chief executive officer and chief
      financial officer, of the effectiveness of the Company’s disclosure controls and
      procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934,
      as
      amended (the “Exchange Act”). Based upon that evaluation, the Company’s chief
      executive officer and chief financial officer concluded that the Company’s
      disclosure controls and procedures are effective, at the reasonable assurance
      level, in ensuring that information required to be disclosed by the Company
      in
      the reports that it files or submits under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      Securities and Exchange Commission’s rules and forms, and is accumulated and
      communicated to our management, including our chief executive officer and our
      chief financial officer, as appropriate to allow timely decisions regarding
      required disclosure. In designing and evaluating the disclosure controls and
      procedures, our 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, and our management is required to
      apply its judgment in evaluating the cost-benefit relationship of possible
      controls and procedures.





Changes
      in internal controls over financial reporting :
      There
      have been no changes in the Company’s internal control over financial reporting
      that occurred during the Company’s last fiscal quarter to which this report
      relates that have materially affected, or are reasonable likely to materially
      affect, the Company’s internal controls over financial
      reporting.





**Item
      8B. Other Information.**





None




-32-


**PART
      III**





**Item
      9. Directors, Executive Officers, Promoters, Control Persons and Corporate
      Governance; Compliance With Section 16(a) of the Exchange
      Act.**





Directors
      are elected each year at the Company’s Annual Meeting of Stockholders and, once
      elected, serve until their successors are elected and qualified. The following
      lists the directors, executive officers and significant employees of the Company
      as of March 15, 2007:


Name
              
              Age
              
              Position
              
              Director
                  SinceMark
                  S. Western
              
              44
              
              President
              
              2005Chief
                  Executive OfficerChairman
                  of the Board (Director)Francis
                  G. Clear
              
              52
              
              Chief
                  Operating Officer
              
              2005DirectorGerald
                  Goodman
              
              59
              
              Chief
                  Financial Officer
              
              2005TreasurerDirectorRichard
                  Creitzman
              
              35
              
              Director
              
              2005Eric
                  Ottens
              
              57
              
              Executive
                  Vice President
              
              n/aDonna
                  Parsons
              
              39
              
              Vice
                  President Corporate Relations
              
              n/a





Mark
      S. Western .  Mr.
      Western has been Chief Executive Officer, a director and Chairman of the Board
      of the Company since May 31, 2005. He was also President of the Company from
      May
      31, 2005 until June 20, 2005, and from August 17, 2005 until the present. Prior
      to the Acquisition Agreement with Pexcon, Inc., Mr. Western was the President
      and Chief Executive Officer of Tekoil-FL since its incorporation in 2004. From
      August 1984 until he formed Tekoil-FL in 2004, Mr. Western worked as an engineer
      in oil and gas exploration, initially for Exploration & Production Services
      in the United Kingdom and Holland, and as a consultant to the industry through
      his consulting company, Completion and Production Services, Ltd. He later
      pursued an alternative path in the energy sector, becoming President of Artistic
      Lighting Systems, a Las Vegas based LED lighting firm, in 1997. In February
      1998, Mr. Western formed UNERGI, Inc., an LED lighting company, which he merged
      in August 1999 with New Millennium Media International. Mr. Western was born
      and
      educated in England and graduated with a Mechanical & Production Engineering
      HNC from Norwich University.





Francis
      G. Clear . Mr.
      Clear has been the Chief Operating Officer and a director of the Company since
      June 20, 2005 and served as President of the Company from June 20, 2005 until
      August 17, 2005. In 1984, following 14 years in commercial banking, corporate
      finance and international banking, Mr. Clear co-founded Oemtek, a personal
      computer manufacturing/ assembly plant. The business was sold in 1990. He has
      since been involved as a consultant in several start-up companies in diverse
      industries, ranging from golf products, gearing technologies and internet
      technologies. Mr. Clear has experience in dealing with the World Bank, the
      Corporate Council of Africa, the U.S. Agency for International Development
      and
      rapid prototyping technologies with the University of Central Florida. He has
      associations with contacts in several oil producing countries in
      Africa.





-33-


Gerald
      Goodman .  Mr.
      Goodman has been the Treasurer, the Chief Financial Officer and a director
      of
      the Company since June 20, 2005. He is also the chairman of the Company’s audit
      committee. Mr. Goodman has been a partner in the Certified Public Accounting
      firm of Wiener, Goodman & Company, P.C., since 1984. Mr. Goodman has
      extensive experience in public accounting, providing audit, tax and management
      advisory services to clients, and he is the partner-in-charge of his firm’s SEC
      Practice Section. Mr. Goodman received a Bachelor of Science degree in
      accounting from The Pennsylvania State University in 1970, and he is a member
      of
      the American Institute of Certified Public Accountants.





Richard
      Creitzman .  Mr.
      Creitzman has been a director of the Company since July 13, 2005. Mr. Creitzman
      has spent the past 12 years working in Russia and other parts of the former
      Soviet Union for trading companies and banks in various trade and commodity
      finance positions in both the metal and the oil and gas industries. From 2001
      until 2004, Mr. Creitzman served as Head of Corporate Finance of the Russian
      oil
      company, Sibneft. In addition, from July 2003 until August 2004, Mr. Creitzman
      served as a director of Chelsea Limited in London, as well as a director of
      Chelsea Limited-owned Chelsea Football Club. Mr. Creitzman was born in England
      and graduated from Surrey University in 1993 with Bachelor of Science degrees
      in
      Business and Geography, in the fields of Economics, Law, Accounting and
      Statistics.





Eric
      Ottens .  Mr.
      Ottens has been the Executive Vice President of the Company since June 20,
      2005.
      He is also responsible for overseeing the Company’s South American expansion
      plans. From 1980 until 1987, Mr. Ottens served as Finance Manager for a division
      of Baker Hughes International in Rio de Janeiro, Brazil, and for two years
      thereafter as Controller for Teknoil Corporation, a local oil and gas consulting
      company in Rio de Janeiro, Brazil. From 1987 until 1992, Mr. Ottens was the
      Regional Controller for Marriott Corporation in San Juan, Puerto Rico, and
      from
      1993 until 2000, he was the Managing Director for Global Telecom Network. From
      January 2001 until May 2005, Mr. Ottens was self-employed as an independent
      contractor/consultant, providing consulting services for South American and
      European companies operating in the U.S. Mr. Ottens graduated in 1978 from
      the
      University of Maryland with a degree in Finance and Accounting.





Donna
      Parsons .  Ms.
      Parsons, who is not an executive officer but is a significant employee, was
      appointed to the position of Vice President of Corporate Relations on June
      1,
      2006, and she serves as a Director of the Company’s wholly-owned subsidiary,
      Tekoil Rig and Development Corporation, a Newfoundland corporation. She also
      serves as a member of the certifying board with the Association of Engineering
      Technicians and Technologists of Newfoundland and Labrador. Ms. Parsons was
      born
      and educated in the Province of Newfoundland and Labrador, and brings a wealth
      of government related oil & gas experience to the Company. She initially
      began her career within the Newfoundland government as a Petroleum Engineering
      Technologist for the Department of Natural Resources in 1998, and more recently
      as an Industrial Development Officer in their Industrial Benefits Division
      through May 31, 2006. Both roles involved extensive public relations activities
      relating to the petroleum industry within the Province. As a result, Ms. Parsons
      has developed numerous key relationships with strong political and commercial
      ties in the oil & gas sector.





-34-


There
      are
      no family relationships among the directors and executive officers. Further,
      to
      the knowledge of management, during the past five years, no director, person
      nominated to become a director, executive officer, promoter or control person
      of
      the Company (i) has been involved in any legal proceedings that are material
      to
      an evaluation of the ability or integrity of such director, person nominated
      to
      become a director, executive officer, promoter or control person of the Company;
      (ii) has had a bankruptcy petition filed by or against any business of which
      such person was a general partner or executive officer either at the time of
      such bankruptcy, if any, or within two years prior to that time; (iii) has
      been
      convicted in a criminal proceeding or is subject to a pending criminal
      proceeding (excluding traffic violations or other minor offenses); (iv) has
      been
      subject to any order, judgment, or decree, not subsequently reversed, suspended,
      or vacated, of any court of competent jurisdiction, permanently or temporarily
      enjoining borrowing, or otherwise limiting his or her involvement in any type
      of
      business, securities or banking activities; or (v) has been found by a court
      of
      competent jurisdiction (in a civil action), the Securities and Exchange
      Commission or the Commodity Futures Trading Commission to have violated a
      federal or state securities or commodities law.





Corporate
      Governance





The
      Company has not yet adopted a code of ethics because its activities to date
      have
      been focused on capital raising and launching its plan of operation. The Company
      intends to adopt a code of ethics applicable to its chief executive officer
      and
      chief financial officer at the annual meeting of its Board of Directors, after
      which it will file a copy of the code of ethics with the Securities and Exchange
      Commission or post the code of ethics on its Internet website at
      www.tekoil.com.





The
      Company’s Board of Directors has determined that Gerald Goodman is an audit
      committee financial expert serving on its audit committee. Mr.
      Goodman is not “independent,” as defined in the NASDAQ Marketplace
      Rules.





Section
      16(a) Compliance





Francis
      G. Clear, Richard Creitzman, Gerald Goodman, Eric Ottens and Mark S. Western
      each filed a Form 3 reporting his holdings of Common Stock ten days following
      the effective date of the Company’s first registration statement under Section
      12 of the Exchange Act. Gerald Goodman timely filed a Form 5 in which he
      reported one transaction not previously reported on a timely basis via a Form
      4.





-35-





**Item
      10. Executive Compensation**





The
      following table sets forth the compensation paid during the last three fiscal
      years to the Company’s principal executive officer serving during the last
      completed fiscal year and to the Company’s two most highly compensated officers
      other than the principal executive officer who were serving as executive
      officers at the end of the last completed fiscal year. Due to the change of
      control of the Company that occurred on June 27, 2005, the information provided
      below with respect to the principal executive officer reflects compensation
      paid
      during the past three fiscal years to the principal executive officer of
      Tekoil-FL, who has served as the principal executive officer of the Company
      since said change of control. All of the current executive officers of the
      Company have served since June 20, 2005, or later.





SUMMARY
      COMPENSATION TABLE





**Name
                and principal position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Stock**
              **Awards**
              **($)**
            
            **Total**
              **($)**Mark
                S. Western, CEO
              (principal
                executive officer)and
                director
            
            
            2006
              2005
            
            $
            240,000
              111,127
            
            $
            -0-
              1,000,000
            (1)
            $
            240,000
              1,111,127Gerald
                Goodman, CFO
              and
                director
            
            
            2006
              2005
            
            $
            54,000
              -0-
            
            $
            338,250
              400,000
            (3)(4)
              (2)
            $
            392,250
              400,000Francis
                G. Clear, COO
              and
                director
            
            
            2006
              2005
            
            $
            120,000
              64,250
            
            $
            -0-
              300,000
            (5)
            $
            120,000
              364,250





(1)
            As
                of December 31, 2005, Mr. Western had received restricted stock awards
                totaling 5,000,000 shares of Common Stock, valued at $1,000,000 as
                of
                October 21, 2005, the date of grant (1,000,000 of such shares are
                for
                service as a director). Such valuation is also reflected in the “Stock
                Based Compensation” section of Note 1 to the Company’s 2006 consolidated
                financial statements. The shares are subject to the Company’s right to
                repurchase them under certain circumstances, and the number of such
                shares
                to which the Company’s repurchase right applies is reduced by
                1/36thfor each full month of service as an employee or a director, as the
                case
                may be. The Company does not intend to pay dividends on these shares,
                nor
                on any shares of its Common Stock.





(2)
            As
                of December 31, 2005, Mr. Goodman had received restricted stock awards
                totaling 2,000,000 shares of Common Stock, valued at $400,000 as
                of
                October 21, 2005, the date of grant (1,000,000 of such shares are
                for
                service as a director). Such valuation is also reflected in the “Stock
                Based Compensation” section of Note 1 to the Company’s 2006 consolidated
                financial statements. The shares are subject to the Company’s right to
                repurchase them under certain circumstances, and the number of such
                shares
                to which the Company’s repurchase right applies is reduced by
                1/36thfor each full month of service as an employee or a director, as the
                case
                may be. The Company does not intend to pay dividends on these shares,
                nor
                on any shares of its Common Stock.





(3)
            On
                November 8, 2006, the Company issued 1,000,000 shares of Common Stock,
                valued at $330,000, to Gerald Goodman, the Company’s Chief Financial
                Officer, in exchange for Mr. Goodman’s personal guarantee of the following
                obligations of the Company: (i) credit card debts of the Company
                and/or
                its subsidiaries and related entities in the amount of Fifty Thousand
                Dollars ($50,000), (ii) a mortgage and promissory note related to
                property
                owned by the Company and/or its subsidiaries and related entities
                in
                Newfoundland, Canada, in the amount of Two Hundred Sixty-Four Thousand
                ($264,000), and (iii) a credit line of the Company and its subsidiaries
                and related entities in the amount of Fifty Thousand Dollars ($50,000).





-36-


(4)
            On
                December 15, 2005, the Company issued an unsecured promissory note,
                bearing interest at the rate of prime plus one percent (1%) per annum
                (8.25% at December 31, 2005) to Wiener Goodman & Company, PC Profit
                Sharing Plan FBO Gerald Goodman in the principal amount of $50,000,
                with
                principal and interest due at maturity on June 15, 2006. As further
                consideration for the loan and pursuant to the terms of the promissory
                note, the Company issued 25,000 shares of Common Stock, valued at
                $8,250,
                to Mr. Goodman on November 8, 2006. The maturity date has since been
                extended until June 20, 2007. At any time prior to maturity, the
                lender
                may, at its option, convert the promissory note into 50,000 shares
                of
                Series A Preferred Stock.





(5)
            As
                of December 31, 2005, Mr. Clear had received restricted stock awards
                totaling 1,500,000 shares of Common Stock, valued at $300,000 as
                of
                October 21, 2005, the date of grant (1,000,000 of such shares are
                for
                service as a director). Such valuation is also reflected in the “Stock
                Based Compensation” section of Note 1 to the Company’s 2006 consolidated
                financial statements. The shares are subject to the Company’s right to
                repurchase them under certain circumstances, and the number of such
                shares
                to which the Company’s repurchase right applies is reduced by
                1/36thfor each full month of service as an employee or a director, as the
                case
                may be. The Company does not intend to pay dividends on these shares,
                nor
                on any shares of its Common Stock.





Employment
      Contracts





The
      Company has entered into a three-year employment agreement with Mark S. Western,
      its Chief Executive Officer, which commenced as of October 21, 2005. The
      agreement provides for base salary at a monthly rate of $20,000, bonuses at
      the
      discretion of the Board of Directors, reasonable and customary reimbursement
      of
      business expenses and vacation as set by the Board of Directors. The Company
      has
      also entered into a three-year director service agreement with Mr. Western,
      dated as of October 21, 2005. Mr. Western was granted 4,000,000 shares of Common
      Stock pursuant to the employment agreement and 1,000,000 shares of Common Stock
      pursuant to the director service agreement. The Company maintains, and is the
      beneficiary of, a key person life insurance policy on Mr. Western in the amount
      of $2 million.





The
      Company has entered into a three-year employment agreement with Gerald Goodman,
      its Chief Financial Officer, which commenced as of October 21, 2005. The
      agreement provides for base salary at a monthly rate of $6,000, bonuses at
      the
      discretion of the Board of Directors, reasonable and customary reimbursement
      of
      business expenses and vacation as set by the Board of Directors. The Company
      has
      also entered into a three-year director service agreement with Mr. Goodman,
      dated as of October 21, 2005. Mr. Goodman was granted 1,000,000 shares of Common
      Stock pursuant to the employment agreement and 1,000,000 shares of Common Stock
      pursuant to the director service agreement.





The
      Company has entered into a three-year employment agreement with Francis G.
      Clear, its Chief Operating Officer, which commenced as of October 21, 2005.
      The
      agreement provides for base salary at a monthly rate of $10,000, bonuses at
      the
      discretion of the Board of Directors, reasonable and customary reimbursement
      of
      business expenses and vacation as set by the Board of Directors. The Company
      has
      also entered into a three-year director service agreement with Mr. Clear, dated
      as of October 21, 2005. Mr. Clear was granted 500,000 shares of Common Stock
      pursuant to the employment agreement and 1,000,000 shares of Common Stock
      pursuant to the director service agreement.





-37-


The
      Company has entered into a three-year employment agreement with Eric Ottens,
      its
      Executive Vice President, which commenced as of October 21, 2005. The agreement
      provides for base salary at a monthly rate of $2,500, bonuses at the discretion
      of the Board of Directors, reasonable and customary reimbursement of business
      expenses and vacation as set by the Board of Directors. Mr. Ottens was granted
      150,000 shares of Common Stock in connection with his execution of the
      employment agreement.





The
      Company has entered into a three-year Director Service Agreement with Richard
      Creitzman, dated as of October 21, 2005 pursuant to which Mr. Creitzman was
      granted 1,000,000 shares of Common Stock.





Shares
      of
      Common Stock granted pursuant to the employment and director service agreements
      discussed above are subject to the Company’s right to repurchase them at a price
      of $0.01 per share if the recipient resigns as employee without “good reason”
(as defined in the employment agreement) or if he is terminated, as an employee
      or as a director, for “cause” (as defined in both of the agreements). The number
      of such shares to which the Company’s repurchase right applies is reduced by
      1/36 th for each
      full month of service as an employee or a director, as the case may be.





**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following individuals hold more than five percent (5%) of a class of the
      outstanding voting stock of the Company. No other individual or any group is
      known to the Company to be the beneficial owner of more than five percent (5%)
      of any class of the Company’s outstanding voting securities.




**Title
                of Class**
            
            **Name
                and Address of**
              **Beneficial
                Owner**
            
            **Amount
                and nature of**
              **Beneficial
                Ownership (1)**
            
            **Percent
                of**
              **Class
                (2)**Common
                Stock,
              $0.000001
                par value
            
            Mark
                S. Western
              5209
                Patricia Drive
              Orlando,
                FL 32819
            
            10,294,404
            
            43.45%
                of Common Stock
              32.40%
                of combinedCommon
                Stock,
              $0.000001
                par value
            
            Richard
                Creitzman
              Flat
                7, 22 Elm Park Gardens
              London
                SW10 9NY
              United
                Kingdom
            
            1,000,000
            
            4.22%
                of Common Stock
              3.14%
                of combined




-38-




Common
                Stock,
              $0.000001
                par value
            
            Francis
                G. Clear
              5036
                Dr. Phillips Blvd.,#292
              Orlando,
                FL 32819
            
            2,084,470
            
            8.80%
                of Common Stock
              6.56%
                of combinedCommon
                Stock,
              $0.000001
                par value
            
            Gerald
                Goodman
              7
                Briarwood Road
              Rumson,
                NJ 07760
            
            3,143,170
            
            13.27%
                of Common Stock
              9.89%
                of combinedSeries
                A Preferred Stock, $0.00000001 par value
            
            Thomas
                K. Connellan Jr.
              807
                Bay Hill Blvd.
              Orlando,
                FL 32819
            
            200,000
            
            7.43%
                of Series A
              Preferred
                Stock
              1.89%
                of combinedSeries
                A Preferred Stock, $0.00000001 par value
            
            Kirti
                Kalidas
              6651
                Vineland Rd. #150
              Orlando,
                FL 32819
            
            200,000
            
            7.43%
                of Series A
              Preferred
                Stock
              1.89%
                of combined (3)





(1)
            Unless
                otherwise indicated, each person has sole voting power and sole investment
                power with respect to all Common Stock set forth opposite such person’s
                name, subject to applicable community property and similar
                laws.





(2)
            The
                “Percent of Class” information includes the percentage of each class of
                voting securities held by each beneficial owner, as well as the percentage
                of total shares of Common Stock held by each beneficial owner assuming
                conversion of all shares of Series A Preferred Stock. Each outstanding
                share of Series A Preferred Stock entitles the holder thereof to
                vote on
                all matters on which holders of Common Stock are entitled to vote,
                and the
                holders of Series A Preferred Stock and of Common Stock vote together
                as a
                single class. With respect to any such vote, each share of Series
                A
                Preferred Stock entitles the holder to cast the number of votes per
                share
                as is equal to the number of votes that such holder would be entitled
                to
                cast had such holder converted its shares of Series A Preferred Stock
                into
                shares of Common Stock, such conversion rate being three (3) shares
                of
                Common Stock for each share of Series A Preferred Stock. The shares
                of
                Series A Preferred Stock may be converted at any time by the holders
                into
                the Company’s Common Stock and are automatically converted into Common
                Stock upon the occurrence of certain material
                events.





(3)
            Kirti
                Kalidas also owns 846,875 shares of Common Stock, which are included
                in
                the calculation of the percent of the combined outstanding shares
                of
                Common Stock and Series A Preferred
                Stock.





The
      following table includes beneficial ownership information for all current
      executive officers and directors, and all who served as directors or executive
      officers in the fiscal year ended December 31, 2006.




**Title
                of Class**
            
            **Name
                and Address of**
              **Beneficial
                Owner**
            
            **Amount
                and nature of Beneficial Ownership (1)**
            
            **Percent
                of**
              **Class
                (2)**Common
                Stock,
              $0.000001
                par value
            
            Mark
                S. Western
              5209
                Patricia Drive
              Orlando,
                FL 32819
            
            10,294,404
            
            43.45%
                of Common Stock
              32.40%
                of combined




-39-




Common
                Stock,
              $0.000001
                par value
            
            Richard
                Creitzman
              Flat
                7, 22 Elm Park Gardens
              London
                SW10 9NY
              United
                Kingdom
            
            1,000,000
            
            4.22%
                of Common Stock
              3.14%
                of combinedCommon
                Stock,
              $0.000001
                par value
            
            Francis
                G. Clear
              5036
                Dr. Phillips Blvd.,#292
              Orlando,
                FL 32819
            
            2,084,470
            
            8.80%
                of Common Stock
              6.56%
                of combinedCommon
                Stock,
              $0.000001
                par value
            
            Gerald
                Goodman
              7
                Briarwood Road
              Rumson,
                NJ 07760
            
            3,143,170
            
            13.27%
                of Common Stock
              9.89%
                of combinedCommon
                Stock,
              $0.000001
                par value
            
            Donna
                Parsons
              25
                Mountbatten Drive
              St.
                John’s, NL A1A 3Y1
              Canada
            
            250,000
            
            1.06%
                of Common Stock
              0.79%
                of combinedCommon
                Stock,
              $0.000001
                par value
            
            Eric
                Ottens
              25050
                I-95 North, Suite 525
              The
                Woodlands, TX 77380
            
            150,000
            
            0.63%
                of Common Stock
              0.47%
                of combinedCommon
                Stock,
              $0.000001
                par value
            
            All
                Directors and Executive Officers as a Group
            
            16,922,044
            
            71.42%
                of Common Stock
              53.27%
                of combined


(1)
                Unless
                    otherwise indicated, each person has sole voting power and sole
                    investment
                    power with respect to all Common Stock set forth opposite such
                    person’s
                    name, subject to applicable community property and similar
                    laws.


(2)
            The
                “Percent of Class” information includes the percentage of each class of
                voting securities held by each beneficial owner, as well as the percentage
                of total shares of Common Stock held by each beneficial owner assuming
                conversion of all shares of Series A Preferred Stock. Each outstanding
                share of Series A Preferred Stock entitles the holder thereof to
                vote on
                all matters on which holders of Common Stock are entitled to vote,
                and the
                holders of Series A Preferred Stock and of Common Stock vote together
                as a
                single class. With respect to any such vote, each share of Series
                A
                Preferred Stock entitles the holder to cast the number of votes per
                share
                as is equal to the number of votes that such holder would be entitled
                to
                cast had such holder converted its shares of Series A Preferred Stock
                into
                shares of Common Stock, such conversion rate being three (3) shares
                of
                Common Stock for each share of Series A Preferred Stock. The shares
                of
                Series A Preferred Stock may be converted at any time by the holders
                into
                the Company’s Common Stock and are automatically converted into Common
                Stock upon the occurrence of certain material events.





-40-





**Item
      12. Certain Relationships and Related Transactions, and Director
      Independence.**





Transactions
      with Related Persons, Promoters and Certain Control Persons





On
      November 8, 2006, the Company issued 1,000,000 shares of Common Stock to Gerald
      Goodman, the Company’s Chief Financial Officer, in exchange for Mr. Goodman’s
      personal guarantee of the following obligations of the Company: (i) credit
      card
      debts of the Company and/or its subsidiaries and related entities in the amount
      of Fifty Thousand Dollars ($50,000), (ii) a mortgage and promissory note related
      to property owned by the Company and/or its subsidiaries and related entities
      in
      Newfoundland, Canada, in the amount of Two Hundred Sixty-Four Thousand
      ($264,000), and (iii) a credit line of the Company and its subsidiaries and
      related entities in the amount of Fifty Thousand Dollars ($50,000).





On
      May 1,
      2006, the Company entered into a Stock Issuance Agreement with Donna Parsons,
      an
      employee of the Company’s wholly-owned Canadian subsidiary. Pursuant to that
      Stock Issuance Agreement, the Company issued to Ms. Parsons 250,000 unregistered
      shares of Common Stock as an incentive to her in the performance of her duties
      to the subsidiary company.





On
      December 15, 2005, the Company issued an unsecured promissory note, bearing
      interest at the rate of prime plus one percent (1%) per annum (8.25% at December
      31, 2005) to Wiener Goodman & Company, PC Profit Sharing Plan FBO Gerald
      Goodman in the principal amount of $50,000, with principal and interest due
      at
      maturity on June 15, 2006. As further consideration for the loan and pursuant
      to
      the terms of the promissory note, the Company issued 25,000 shares of Common
      Stock to Mr. Goodman on November 8, 2006. The maturity date has since been
      extended until June 20, 2007. At any time prior to maturity, the lender may,
      at
      its option, convert the promissory note into 50,000 shares of Series A Preferred
      Stock.





On
      October 21, 2005, the Company issued 9,650,000 shares of Common Stock to certain
      of its officers and directors for services provided, and it recorded
      compensation expense in the amount of $1,930,000 in connection with the issuance
      of these shares. Such shares of Common Stock are subject to the Company’s right
      to repurchase them at a price of $0.01 per share if the recipient resigns as
      employee without “good reason” (as defined in the relevant employment agreement)
      or if he is terminated, as an employee or as a director, for “cause” (as defined
      in both of the agreements). The number of such shares to which the Company’s
      repurchase right applies is reduced by 1/36 th for each
      full month of service as an employee or a director, as the case may
      be.





On
      November 29, 2004, prior to the Acquisition Agreement, Tekoil-FL granted
      5,100,000 shares of its Common Stock to its promoters and founders for their
      services in connection with the formation of that company. Such shares were
      exchanged for shares of our Common Stock in connection with the Acquisition
      Agreement as of June 27, 2005. Following are the names of the promoters or
      founders and the number of shares of Common Stock resulting from the November
      29, 2004, share issuance and the June 27, 2005 share exchange (taking into
      account the 100:1 reverse stock split):





-41-


Name
              
              Number
                  of SharesFrancis
                  G. Clear
              
              
              584,470
                  sharesGerald
                  Goodman
              
              
              118,170
                  sharesMark
                  S. Western
              
              
              5,294,404
                  sharesTOTAL
              
              
              5,997,044
                  shares




Director
      Independence





Richard
      Creitzman is the Company’s only “independent” director, using the definition of
“independence” set forth in the NASDAQ Marketplace Rules, which are not
      currently applicable to the Company. Francis G. Clear, Gerald Goodman and Mark
      S. Western are not “independent,” as defined in the NASDAQ Marketplace
      Rules.





**Item
      13. Exhibits.**





**Exhibit**
              **Number**
            
            **Description****3.1**
            -
            Certificate
                of Incorporation of the Company and all Amendments thereto*(filed
                as Exhibit 2.1 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****3.2**
            -
            Bylaws
                of the Company*(filed
                as Exhibit 2.2 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****4.1**
            -
            Article
                Fourth of the Certificate of Incorporation of the Company, as amended*(filed
                as part of Exhibit 2.1 to the Company’s Form 10-SB, filed with the SEC on
                July 5, 2006)****4.2**
            -
            Articles
                II, III, VIII and XI of the Bylaws of the Company*(filed
                as part of Exhibit 2.2 to the Company’s Form 10-SB, filed with the SEC on
                July 5, 2006)****4.3**
            -
            Certificate
                of the Powers, Designations, Preferences and Rights of the Series
                A
                Convertible Preferred Stock*(filed
                as Exhibit 3.3 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****4.4**
            -
            Amendment
                to Certificate of the Powers, Designations, Preferences and Rights
                of the
                Series A Convertible Preferred Stock*(filed
                as Exhibit 3.4 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****4.5**
            -
            Second
                Amendment to Certificate of the Powers, Designations, Preferences
                and
                Rights of the Series A Convertible Preferred Stock*(filed
                as Exhibit 3.5 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****10.1**
            -
            Acquisition
                Agreement dated May 25, 2005, among Pexcon, Inc., Tekoil-FL, the
                shareholders of Tekoil-FL and Gerald M. Dunne*(filed
                as Exhibit 99.6.1 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.2**
            -
            Unsecured
                Promissory Note dated December 15, 2005, from the Company to Wiener
                Goodman & Company PC Profit Sharing Plan FBO Gerald Goodman*(filed
                as Exhibit 99.6.2 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)**




-42-




**10.3**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Mark
                S.
                Western*(filed
                as Exhibit 99.6.3 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.4**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Gerald
                Goodman*(filed
                as Exhibit 99.6.4 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.5**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Francis
                G.
                Clear*(filed
                as Exhibit 99.6.5 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.6**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Eric
                Ottens*(filed
                as Exhibit 99.6.6 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.7**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Mark S. Western*(filed
                as Exhibit 99.6.7 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.8**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Gerald Goodman*(filed
                as Exhibit 99.6.8 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.9**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Francis G. Clear*(filed
                as Exhibit 99.6.9 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.10**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Richard Creitzman*(filed
                as Exhibit 99.6.10 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.11**
            -
            Employment
                Agreement dated as of June 1, 2006, between Tekoil Rig Development
                Corporation and Donna Parsons*(filed
                as Exhibit 99.6.11 to the Company’s Form 10-SB/A (Amendment No. 2), filed
                with the SEC on November 13, 2006)****10.12**
            -
            Stock
                Grant and Repurchase Agreement dated as of June 1, 2006, between
                the
                Company and Donna Parsons*(filed
                as Exhibit 99.6.12 to the Company’s Form 10-SB/A (Amendment No. 2), filed
                with the SEC on November 13, 2006)****10.13**
            -
            Form
                of Tender dated August 14, 2006, and Indenture dated August 31, 2006,
                for
                the purchase of Newfoundland facility*(filed
                as Exhibit 99.6.13 to the Company’s Form 10-SB/A (Amendment No. 2), filed
                with the SEC on November 13, 2006)****10.14**
            -
            Mortgage
                dated September 12, 2006, between the Company and CIBC Mortgage Inc.*(filed
                as Exhibit 99.6.14 to the Company's Form 10-SB/A (Amendment No. 2)
                filed
                with the SEC on November 13, 2006)****10.15**
            -
            Settlement
                Agreement and Mutual Release dated December 6, 2006, between the
                Company
                and Gerald M. Dunne*(filed
                as Exhibit 10.15 to the Company's Form 8-K dated December 6, 2006,
                and
                filed with the SEC on December 11, 2006)****10.16**
            -
            Stock
                Issuance Agreement dated May 1, 2006, between the Company and Don
                Parsons*(filed
                as Exhibit 10.16 to the Company's Form 8-K dated December 6, 2006,
                and
                filed with the SEC on December 11, 2006)****10.17**
            -
            Form
                of Securities Purchase Agreement for the purchase of the Company’s Series
                A Convertible Preferred Stock*(filed
                as Exhibit 10.17 to the Company's Form 8-K dated December 6, 2006,
                and
                filed with the SEC on December 11,
                2006)**




-43-




**10.18**
            -
            Purchase
                and Sale Agreement dated November 13, 2006, between the Company and
                Masters Resources, LLC, and Masters Oil & Gas, LLC*(filed
                as Exhibit 10.18 to the Company's Form 8-K dated December 11, 2006,
                and
                filed with the SEC on December 14, 2006)****10.19**
            -
            Form
                of Subscription Agreement (with Put Option) dated November 20, 2006,
                between the Company and the subscribers thereto*(filed
                as Exhibit 10.19 to the Company's Form 8-K dated December 11, 2006,
                and
                filed with the SEC on December 14, 2006)****10.20**
            -
            First
                Amendment to Purchase and Sale Agreement executed on December 29,
                2006,
                between the Company and Masters Resources, LLC, and Masters Oil & Gas,
                LLC*(filed
                as Exhibit 10.20 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)****10.21**
            -
            Subscription
                Agreement dated December 29, 2006, between the Company and Masters
                Resources, LLC, and Masters Oil & Gas, LLC*(filed
                as Exhibit 10.21 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)****10.22**
            -
            Registration
                Rights Agreement dated December 29, 2006, between the Company and
                Masters
                Resources, LLC, and Masters Oil & Gas, LLC, Rich Holdings, LLC, and
                John W. Barton*(filed
                as Exhibit 10.22 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)****10.23**
            -
            Farmout
                Agreement executed on January 3, 2007, and dated as of December 19,
                2006,
                between the Company and Ptarmigan Resources Limited*(filed
                as Exhibit 10.23 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)****10.24**
            -
            Second
                Amendment to Purchase and Sale Agreement dated effective February
                8, 2007,
                between the Company and Masters Resources, LLC, and Masters Oil & Gas,
                LLC*(filed
                as Exhibit 10.24 to the Company's Form 8-K dated February 8, 2007,
                and
                filed with the SEC on February 15, 2007)****10.25**
            -
            Third
                Amendment to Purchase and Sale Agreement dated effective March 1,
                2007,
                between Tekoil and Gas Gulf Coast, LLC, and Masters Resources, LLC,
                and
                Masters Oil & Gas, LLC*(filed
                as Exhibit 10.1 to the Company's Form 8-K dated March 22, 2007, and
                filed
                with the SEC on March 26, 2007)****10.26**
            -
            Fourth
                Amendment to Purchase and Sale Agreement dated effective March 22,
                2007,
                between Tekoil and Gas Gulf Coast, LLC, and Masters Resources, LLC,
                and
                Masters Oil & Gas, LLC*(filed
                as Exhibit 10.2 to the Company's Form 8-K dated March 22, 2007, and
                filed
                with the SEC on March 26, 2007)****11.1**
            -
            Statement
                regarding the computation of earnings per share is omitted because
                such
                computation can be clearly determined from the material contained
                in this
                Report on Form 10-KSB.**21.1**
            -
            Subsidiaries
                of the small business issuer*(filed
                herewith)***31.1**
            -
            Certifications
                of Chief Executive Officer pursuant to Rule 13a-14(a)*(filed
                herewith)***31.2**
            -
            Certifications
                of Chief Financial Officer pursuant to Rule 13a-14(a)*(filed
                herewith)***32.1**
            -
            Certifications
                of Chief Executive Officer pursuant to Section 1350*(furnished
                herewith)***32.2**
            -
            Certifications
                of Chief Executive Officer pursuant to Section 1350*(furnished
                herewith)*







*  Incorporated
      herein by reference. SEC File No. 0-52100





-44-





**Item
      14. Principal Accounting Fees and Services.**





In
      accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the
      Audit
      Committee’s charter, all audit-related work and all non-audit work performed by
      our independent accounts Madsen & Associates, CPA’s Inc. is approved in
      advance by the Audit Committee, including the proposed fees for such work.
      The
      Audit Committee is informed of each service actually rendered.





*Audit
      Fees.* Audit
      Fees expected to be billed to us by Madsen & Associates, CPA’s Inc. for the
      audit of financial statements included in our Annual Reports on Form 10-KSB,
      and
      reviews of the financial statements included in our Quarterly Reports on Form
      10-QSB, for the years ended December 31, 2006 and 2005 are approximately $7,000
      and $5,000, respectively.





*Audit
      Related Fees* .
      We have
      been billed $-0- and $-0- by Madsen & Associates, CPA’s Inc. for the fiscal
      years ended December 31, 2006 and 2005, respectively, for the assurance and
      related services that are reasonably related to the performance of the audit
      or
      review of our financial statements and are not reported under the caption “Audit
      Fees” above.





*Tax
      Fees.* We have
      been billed an aggregate of $-0- and $-0- by Madsen & Associates, CPA’s Inc.
      for the fiscal years ended December 31, 2006 and 2005, respectively, for tax
      services.





*All
      Other Fees.* We
      have
      been billed an aggregate of $-0- and $-0- by Madsen & Associates, CPA’s Inc.
      for the fiscal years ended December 31, 2006 and 2005, respectively, for
      permitted non-audit services.





*Other
      Matters.* The
      Audit Committee of the Board of Directors had considered whether the provision
      of the Audit-Related Fees, Tax Fees and All Other Fees are compatible with
      maintaining the independence of our principal accountant.





Applicable
      law and regulations provide an exemption that permits certain services to be
      provided by our outside auditors even if they are not pre-approved. We have
      not
      relied on this exemption at any time since the Sarbanes-Oxley Act was
      enacted.





The
      Audit
      Committee approved 100% of the services to be rendered by Madsen &
Associates, CPA’s Inc. for the audit of financial statements included in our
      Annual Reports on Form 10-KSB and reviews of the financial statements included
      in our Quarterly Reports on Form 10-QSB, for the years ended December 31, 2006
      and 2005.





To
      our
      knowledge there have been no persons, other than Madsen & Associates, CPA’s
      Inc. full time, permanent employees, who have worked on the audit or review
      of
      our financial statements.





-45-


**SIGNATURES**





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




**TEKOIL
              & GAS CORPORATION**By:
            /s/ Mark S. WesternMark
              S. WesternPresident
              and
              Chief Executive Officer




Date:
        March 27, 2007





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





**Signature**
            
            **Title**
            
            **Date**By:/s/
                Mark S. Western
              
              Mark
                S. Western
            
            President
              Chief
                Executive Officer
              Chairman
                of the Board
            
            March
                27, 2007By:/s/
                Francis G. Clear
              
              Francis
                G. Clear
            
            Vice
                President
              Chief
                Operating Officer
              Director
            
            March
                27, 2007By:/s/
                Gerald Goodman
              
              Gerald
                Goodman
            
            Treasurer
              Chief
                Financial Officer
              Director
            
            March
                27, 2007By:/s/
                Richard Creitzman
              
              Richard
                Creitzman
            
            Director
            
            March
                27, 2007




-46-


**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            
            **Description****3.1**
            -
            Certificate
                of Incorporation of the Company and all Amendments thereto*(filed
                as Exhibit 2.1 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****3.2**
            -
            Bylaws
                of the Company*(filed
                as Exhibit 2.2 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****4.1**
            -
            Article
                Fourth of the Certificate of Incorporation of the Company, as amended*(filed
                as part of Exhibit 2.1 to the Company’s Form 10-SB, filed with the SEC on
                July 5, 2006)****4.2**
            -
            Articles
                II, III, VIII and XI of the Bylaws of the Company*(filed
                as part of Exhibit 2.2 to the Company’s Form 10-SB, filed with the SEC on
                July 5, 2006)****4.3**
            -
            Certificate
                of the Powers, Designations, Preferences and Rights of the Series
                A
                Convertible Preferred Stock*(filed
                as Exhibit 3.3 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****4.4**
            -
            Amendment
                to Certificate of the Powers, Designations, Preferences and Rights
                of the
                Series A Convertible Preferred Stock*(filed
                as Exhibit 3.4 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****4.5**
            -
            Second
                Amendment to Certificate of the Powers, Designations, Preferences
                and
                Rights of the Series A Convertible Preferred Stock*(filed
                as Exhibit 3.5 to the Company’s Form 10-SB, filed with the SEC on July 5,
                2006)****10.1**
            -
            Acquisition
                Agreement dated May 25, 2005, among Pexcon, Inc., Tekoil-FL, the
                shareholders of Tekoil-FL and Gerald M. Dunne*(filed
                as Exhibit 99.6.1 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.2**
            -
            Unsecured
                Promissory Note dated December 15, 2005, from the Company to Wiener
                Goodman & Company PC Profit Sharing Plan FBO Gerald Goodman*(filed
                as Exhibit 99.6.2 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.3**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Mark
                S.
                Western*(filed
                as Exhibit 99.6.3 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.4**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Gerald
                Goodman*(filed
                as Exhibit 99.6.4 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.5**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Francis
                G.
                Clear*(filed
                as Exhibit 99.6.5 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.6**
            -
            Employment
                Agreement dated as of October 21, 2005, between the Company and Eric
                Ottens*(filed
                as Exhibit 99.6.6 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.7**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Mark S. Western*(filed
                as Exhibit 99.6.7 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)**




-47-




**10.8**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Gerald Goodman*(filed
                as Exhibit 99.6.8 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.9**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Francis G. Clear*(filed
                as Exhibit 99.6.9 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.10**
            -
            Director
                Service Agreement dated as of October 21, 2005, between the Company
                and
                Richard Creitzman*(filed
                as Exhibit 99.6.10 to the Company’s Form 10-SB, filed with the SEC on July
                5, 2006)****10.11**
            -
            Employment
                Agreement dated as of June 1, 2006, between Tekoil Rig Development
                Corporation and Donna Parsons*(filed
                as Exhibit 99.6.11 to the Company’s Form 10-SB/A (Amendment No. 2), filed
                with the SEC on November 13, 2006)****10.12**
            -
            Stock
                Grant and Repurchase Agreement dated as of June 1, 2006, between
                the
                Company and Donna Parsons*(filed
                as Exhibit 99.6.12 to the Company’s Form 10-SB/A (Amendment No. 2), filed
                with the SEC on November 13, 2006)****10.13**
            -
            Form
                of Tender dated August 14, 2006, and Indenture dated August 31, 2006,
                for
                the purchase of Newfoundland facility*(filed
                as Exhibit 99.6.13 to the Company’s Form 10-SB/A (Amendment No. 2), filed
                with the SEC on November 13, 2006)****10.14**
            -
            Mortgage
                dated September 12, 2006, between the Company and CIBC Mortgage Inc.*(filed
                as Exhibit 99.6.14 to the Company's Form 10-SB/A (Amendment No. 2)
                filed
                with the SEC on November 13, 2006)****10.15**
            -
            Settlement
                Agreement and Mutual Release dated December 6, 2006, between the
                Company
                and Gerald M. Dunne*(filed
                as Exhibit 10.15 to the Company's Form 8-K dated December 6, 2006,
                and
                filed with the SEC on December 11, 2006)****10.16**
            -
            Stock
                Issuance Agreement dated May 1, 2006, between the Company and Don
                Parsons*(filed
                as Exhibit 10.16 to the Company's Form 8-K dated December 6, 2006,
                and
                filed with the SEC on December 11, 2006)****10.17**
            -
            Form
                of Securities Purchase Agreement for the purchase of the Company’s Series
                A Convertible Preferred Stock*(filed
                as Exhibit 10.17 to the Company's Form 8-K dated December 6, 2006,
                and
                filed with the SEC on December 11, 2006)****10.18**
            -
            Purchase
                and Sale Agreement dated November 13, 2006, between the Company and
                Masters Resources, LLC, and Masters Oil & Gas, LLC*(filed
                as Exhibit 10.18 to the Company's Form 8-K dated December 11, 2006,
                and
                filed with the SEC on December 14, 2006)****10.19**
            -
            Form
                of Subscription Agreement (with Put Option) dated November 20, 2006,
                between the Company and the subscribers thereto*(filed
                as Exhibit 10.19 to the Company's Form 8-K dated December 11, 2006,
                and
                filed with the SEC on December 14, 2006)****10.20**
            -
            First
                Amendment to Purchase and Sale Agreement executed on December 29,
                2006,
                between the Company and Masters Resources, LLC, and Masters Oil & Gas,
                LLC*(filed
                as Exhibit 10.20 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)****10.21**
            -
            Subscription
                Agreement dated December 29, 2006, between the Company and Masters
                Resources, LLC, and Masters Oil & Gas, LLC*(filed
                as Exhibit 10.21 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)**




-48-




**10.22**
            -
            Registration
                Rights Agreement dated December 29, 2006, between the Company and
                Masters
                Resources, LLC, and Masters Oil & Gas, LLC, Rich Holdings, LLC, and
                John W. Barton*(filed
                as Exhibit 10.22 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)****10.23**
            -
            Farmout
                Agreement executed on January 3, 2007, and dated as of December 19,
                2006,
                between the Company and Ptarmigan Resources Limited*(filed
                as Exhibit 10.23 to the Company's Form 8-K dated December 29, 2006,
                and
                filed with the SEC on January 8, 2007)****10.24**
            -
            Second
                Amendment to Purchase and Sale Agreement dated effective February
                8, 2007,
                between the Company and Masters Resources, LLC, and Masters Oil & Gas,
                LLC*(filed
                as Exhibit 10.24 to the Company's Form 8-K dated February 8, 2007,
                and
                filed with the SEC on February 15, 2007)****10.25**
            -
            Third
                Amendment to Purchase and Sale Agreement dated effective March 1,
                2007,
                between Tekoil and Gas Gulf Coast, LLC, and Masters Resources, LLC,
                and
                Masters Oil & Gas, LLC*(filed
                as Exhibit 10.1 to the Company's Form 8-K dated March 22, 2007, and
                filed
                with the SEC on March 26, 2007)****10.26**
            -
            Fourth
                Amendment to Purchase and Sale Agreement dated effective March 22,
                2007,
                between Tekoil and Gas Gulf Coast, LLC, and Masters Resources, LLC,
                and
                Masters Oil & Gas, LLC*(filed
                as Exhibit 10.2 to the Company's Form 8-K dated March 22, 2007, and
                filed
                with the SEC on March 26, 2007)****11.1**
            -
            Statement
                regarding the computation of earnings per share is omitted because
                such
                computation can be clearly determined from the material contained
                in this
                Report on Form 10-KSB.**21.1**
            -
            Subsidiaries
                of the small business issuer*(filed
                herewith)***31.1**
            -
            Certifications
                of Chief Executive Officer pursuant to Rule 13a-14(a)*(filed
                herewith)***31.2**
            -
            Certifications
                of Chief Financial Officer pursuant to Rule 13a-14(a)*(filed
                herewith)***32.1**
            -
            Certifications
                of Chief Executive Officer pursuant to Section 1350*(furnished
                herewith)***32.2**
            -
            Certifications
                of Chief Executive Officer pursuant to Section 1350*(furnished
                herewith)*







*  Incorporated
      herein by reference. SEC File No. 0-52100





-49-