**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**




**WASHINGTON,
      D.C. 20549**




**FORM
      10-Q**





(Mark
      one)




**|X|
      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




For
      the
      quarterly period ended**:****June 30,
      2007**




**|_|
      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
      ACT**




For
      the
      transition period from _________ to ___________




Commission
      file number 000-51430





**INDEX
      OIL AND GAS, INC.**


(Exact
      name of registrant as specified in its charter)




**Nevada**
              (State
                or other jurisdiction of incorporation or organization)
            **20-0815369**
              (I.R.S.
                Employer Identification No.)




**10000
                Memorial Drive, Suite 440**
              **Houston,
                Texas 77024**
              (Address
                of principal executive offices)





**(713)
      683-0800**


(Registrant’s
      telephone number, including area code)




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





Indicate
      by check mark whether the
      registrant is a large accelerated filer, an accelerated filer or a
      non-accelerated filer.  See definition of “accelerated filer and large
      accelerated filer” in Rule 12b-2 of the Securities Exchange Act of
      1934.  Large accelerated filer ̈Accelerated filer ̈Non-Accelerated filerx





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




As
      of
      August 9, 2006, there were outstanding 65,803,698 shares of Common Stock.






1







**TABLE
      OF CONTENTS**





PART
                I. FINANCIAL
                INFORMATION**Page
                #**ITEM
                1.
            Condensed
                Consolidated financial statements (unaudited)Condensed
                Consolidated balance sheets at June 30, 2007 and March 31,
                2007
            3Condensed
                Consolidated statements of losses for the three months ended June
                30, 2007
                and 2006
            4Condensed
                Consolidated statement of cash flows for the three months ended June
                30,
                2007 and 2006
            5Notes
                to Condensed Consolidated financial statements
            6ITEM
                2
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            19ITEM
                3
            Quantitative
                and Qualitative Disclosures About Market Risk
            27ITEM
                4
            Controls
                and Procedures
            27PART
                II. OTHER INFORMATIONITEM
                1
            Legal
                Proceedings
            27ITEM
                1A.
            Risk
                Factors
            28ITEM
                2.
            Unregistered
                Sales of Equity Securities and Use Of Proceeds
            28ITEM
                3.
            Defaults
                Upon Senior Securities
            28ITEM
                4.
            Submission
                Of Matters to a Vote of Security Holders.
            28ITEM
                5.
            Other
                Information
            28ITEM
                6
            Exhibits
            28Signatures
            29











2


**Item
      1. Financial Statements:**





**INDEX
      OIL AND GAS, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**





**June
                30,****2007**
              **(unaudited)**
            
            
            **March
                31,****2007****ASSETS**Current
                Assets:Cash
                and cash equivalents  (Note 2)
            
            $
            8,589,293
            
            
            $
            10,141,125Trade
                receivables (Note 2)
            
            
            100,652
            
            
            
            80,342Other
                receivables
            
            
            10,202
            
            
            
            6,688Other
                current assets
            
            
            48,290
            
            
            
            72,936Total
                Current Assets
            
            
            8,748,437
            
            
            
            10,301,091Oil
                & Gas Properties, full cost, net of accumulated depletion (Notes 2,
                3,
                6, 12 and 13)
            
            
            6,110,334
            
            
            
            4,866,050Property
                and Equipment, net of accumulated depreciation (Notes 2 and
                3)
            
            
            11,740
            
            
            
            12,493Total
                Oil & Properties and Property and Equipment
            
            
            6,122,074
            
            
            
            4,878,543Total
                Assets
            
            **$**
            **14,870,511**
            
            
            **$**
            **15,179,634****LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                Liabilities:Accounts
                payable and accrued expenses
            
            $
            840,129
            
            
            $
            814,449Bank
                loan (Notes 5 and 11)
            
            
            -
            
            
            
            -Other
                current liability (Note 11)
            
            
            -
            
            
            
            -Total
                Current Liabilities
            
            
            840,129
            
            
            
            814,449Long-Term
                Liabilities:Asset
                Retirement Obligation (Notes 2 and 6)
            
            
            41,552
            
            
            
            41,552Total
                Liabilities
            
            
            881,681
            
            
            
            856,001Commitments
                and Contingencies (Note 7)
            
            
            -
            
            
            
            -Stockholders
                Equity: (Notes 5, 7, 8, and 9)Common
                stock, par value $0.001, 500 million shares authorized , 65,803,698
                and
                65,737,036 issued and outstanding at June 30, 2007 and March 31,
                2007,
                respectively (see Note 8)
            
            
            65,804
            
            
            
            65,737Additional
                paid in capital
            
            
            19,149,824
            
            
            
            19,043,734Accumulated
                deficit
            
            
            (5,238,075
            )
            
            
            (4,801,237
            )Other
                comprehensive income (Notes 2 and 4)
            
            
            11,278
            
            
            
            15,399Total
                Stockholders' Equity
            
            
            13,988,831
            
            
            
            14,323,633Total
                Liabilities and Stockholders' Equity
            
            **$**
            **14,870,511**
            
            
            **$**
            **15,179,634**





See
      accompanying notes to unaudited condensed consolidated financial
      statements







3








**INDEX
      OIL AND GAS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENT OF LOSSES**


**(unaudited)**





**For
                the Three Months Ended****June
                30,****2007**
            
            
            **June
                30,****2006**Revenue:
                (Note 12)Oil
                sales
            
            $
            151,373
            
            
            $
            70,457Operating
                Expenses:Operating
                costs
            
            
            34,249
            
            
            
            23,916Depreciation
                and amortization (Notes 2 and 3)
            
            
            73,401
            
            
            
            21,548General
                and administrative expenses (Note 2)
            
            
            569,876
            
            
            
            387,999Total
                Operating Expenses
            
            
            677,526
            
            
            
            433,463Loss
                from Operations
            
            
            (526,153
            )
            
            
            (363,006
            )Other
                Income (Expense):Interest
                income
            
            
            89,316
            
            
            
            43,605Total
                Other Income (Expense)
            
            
            89,316
            
            
            
            43,605Loss
                before Income Taxes
            
            
            (436,837
            )
            
            
            (319,401
            )Income
                Taxes Benefit
            
            
            -
            
            
            
            -Net
                Loss
            
            $
            (436,837
            )
            
            $
            (319,401
            )Loss
                per share (Note 10):Basic
                and assuming dilution
            
            $
            (0.01
            )
            
            $
            (0.01
            )Weighted
                average shares outstanding (Note 10):Basic
                and assuming dilution
            
            
            65,739,234
            
            
            
            54,544,345








See
      accompanying notes to unaudited condensed consolidated financial
      statements








4





**INDEX
      OIL AND GAS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENT OF CASH FLOWS**


**(unaudited)**





**For
                the Three Months Ended****June
                30,****2007**
            
            
            **June
                30,****2006**Cash
                Flows From Operating Activities:Net
                loss
            
            $
            (436,837
            )
            
            $
            (319,401
            )Adjustments
                to reconcile net loss to net cash (Used In) operating
                activities:Non
                cash stock based compensation cost
            
            
            96,823
            
            
            
            170,331Depreciation
                and amortization
            
            
            73,400
            
            
            
            21,548(Increase)
                decrease in receivables
            
            
            993
            
            
            
            (27,160
            )Increase
                (decrease) in accounts payable and accrued expenses
            
            
            25,322
            
            
            
            (254,083
            )Net
                Cash (Used In) Operating Activities
            
            
            (240,299
            )
            
            
            (408,765
            )Cash
                Flows From Investing Activities:Payments
                for oil and gas properties and property and equipment
            
            
            (1,316,932
            )
            
            
            (170,155
            )Net
                Cash (Used In) Investing Activities
            
            
            (1,316,932
            )
            
            
            (170,155
            )Cash
                Flows From Financing Activities:Proceeds
                from exercise of warrants
            
            
            9,333
            
            
            
            -Repayment
                of bank term debt
            
            
            -
            
            
            
            (51,797
            )Net
                Cash Provided by (Used In) Financing Activities
            
            
            9,333
            
            
            
            (51,797
            )Effect of exchange rate
                changes on cash and cash equivalents
            
            
            (3,934
            )
            
            
            8,539Net
                (Decrease) in Cash and Cash Equivalents
            
            
            (1,551,832
            )
            
            
            (622,178
            )Cash
                and cash equivalents at beginning of period
            
            $
            10,141,125
            
            
            $
            5,536,006Cash
                and cash equivalents at the end of period
            
            $
            8,589,293
            
            
            $
            4,913,828Supplemental
                Disclosures of Cash Flow Information:Cash
                (received) during the period for interest
            
            $
            (89,316
            )
            
            $
            (43,605
            )Cash
                paid during the period for taxes
            
            $
            -
            
            
            $
            -Non-cash
                Financing and Investing Transactions:Non
                cash stock based compensation cost
            
            $
            96,823
            
            
            $
            170,331








See
      accompanying notes to unaudited condensed consolidated financial
      statements








5





**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      1 - ORGANIZATION AND OPERATIONS OF THE COMPANY**





Organization





Index
      Oil
      and Gas, Inc. (“Index Inc.”, “the Company”) is the parent company with four
      group subsidiaries: Index Oil & Gas Ltd. comprises a United Kingdom holding
      company, which provides management services to the Company, and United States
      operating subsidiaries; Index Oil & Gas (USA) LLC (“Index USA”), an
      operating company; Index Investments North America Inc. (“Index Investments”);
      and Index Offshore LLC (“Index Offshore”), a wholly owned subsidiary of Index
      Investments and also an operating company. Index Inc., through its subsidiaries,
      is engaged in exploration, appraisal, development, production and sale of oil
      and natural gas. The Company does not currently operate any of its properties
      and sells its oil and gas production to domestic purchasers.





Operations





The
      Company’s initial exploration project is located in Kansas, and is a very low
      risk, low cost, low working interest, and limited upside project and which
      is
      not expected to be a significant contributor to future
      growth.   Seven wells were drilled in Kansas during the fiscal
      year 2007.  Five wells were successful and became oil
      producers.   They are Witt 1-14 (carry-in from Fiscal Year 2006),
      Rogers Unit 1-1, Schartz 1-18, Hay Witt Unit 1-11, and Hayden
      1-14.   Two wells were unsuccessful.  They are Pan-John
      Unit 1-11 and Hull-Witt Unit 1-11. Our working interest (“(WI”) in the Kansas
      wells is either 5% for wells drilled in Stafford County or 3.25% for wells
      drilled in Barton County and the net revenue interest (“NRI”) is either 4.155%
      or 2.64%, respectively.





The
      Company has made progress with its onshore drilling program in Texas and
      Louisiana with the Walker 1 discovery well (WI 12.5%, NRI 9.36%) drilled in
      Louisiana in Fiscal Year 2006 and which began producing in August 2006 and
      its
      interest in Vieman 1 (19.5% WI, 14.56%) in Brazoria County Texas which began
      production in February 2007.  The Hawkins 1 well (WI 12.5%, NRI
      10.01%), also in Texas, but in Matagorda County, is now estimated to begin
      production into the local pipeline grid during the third quarter of calendar
      year 2007.  The Ruse and Dark wells, also in Matagorda County, were
      dry holes.




The
      Company also drilled two successful wells in south Texas. The Serrano well,
      renamed Friedrich Gas Unit 1 (WI 37.5%, NRI 28.125%) , in Victoria County,
      found
      13 feet of net gas pay and produced with average gross daily production in
      May
      and June 2007 of approximately 280 MCF (47 BOE). The Habanero well, renamed
      Schroeder Gas Unit 1 (WI 37.5%, NRI 28.125%), in Goliad County, found 10 feet
      of
      net gas pay with initial daily production expected at 197 MCF of gas (33 BOE)
      per day.  The Schroeder Gas Unit 1 is awaiting hook-up to the local
      pipeline grid, currently estimated for third quarter of calendar year
      2007.





The
      Ilse
      1 well (WI 10% Before Project Payout and WI 8% After Project Payout, NRI 6%),
      the first well to be drilled in the New Taiton Project in Wharton County, Texas,
      has been drilled to total depth of approximately 17,000 feet and logged.
      Analysis of the logs revealed two zones of interest in the Wilcox C and Wilcox
      A, respectively. The lowest zone, the Wilcox C, has been perforated and
      stimulated by a “frac” process. Gas flow from the formation to surface has not
      been achieved. The preliminary decision is that this interval will not be
      productive and will not have any proved reserves.  The well is
      currently suspended, while a decision making process is currently underway
      within the joint venture as to whether to perform work to attempt to achieve
      gas
      flows from the upper zone of interest, the Wilcox A.  As part of this
      decision making process, joint venture participants are awaiting a formal
      analysis and recommendation from the operator.  Since July 26, 2007,
      the Company, as a joint interest owner, has been served with two Texas Property
      Code Notices of Intent to File Lien Against Property with regard to
      materials/equipment sold and/or leased and amounts owed to third parties by
      the
      operator of the Ilse property.  The gross amount of the claims is
      $92,930, with our 10% working interest share being $9,293.   The
      Company, along with other joint interest participants, is in the data gathering
      stage and is assessing the implications and magnitude of these Notices and
      the
      potential financial impact to the Company.  The Company was billed for
      these services by the operator on their June 2007 operating statement and these
      costs have been accrued in our condensed consolidated financial statements
      as
      costs related to the Ilse well.  It is the Company’s position that no
      other contingency accrual is currently required.





Capital
      costs associated with the Ilse 1 well have been held outside the full cost
      pool,
      because a determination as to whether the well has found proved reserves has
      not
      been completed. At the future point when a determination is made, the costs
      associated with Ilse 1 will be included in the full cost pool. To the extent
      that Ilse 1 does not find any proved reserves, ignoring all other unrelated
      factors, this will lead to higher unit depletion charges in future periods
      and
      makes it highly likely Index will suffer a ceiling test impairment charge.
      Index
      is carrying approximately $1.2mm of costs at June 30, 2007 related to the Ilse
      1
      well.





The
      George Cason 1 well (18% WI, NRI 13.77%), drilled on the Fern Lake prospect
      in
      Nacogdoches County, Texas, spudded on June 22, 2007 and reached a total depth
      of
      11,147 feet on July 14, 2007. Following logging operations to obtain down hole
      data, a decision was made to complete and test two intervals.  The
      first flow test is planned to occur in August 2007.  This is the first
      well resulting from the agreements executed with Advanced Drilling Concepts
      Petroleum, L.P to reprocess seismic data and develop prospects to drill in
      up to
      four areas in Texas, Mississippi, and Alabama.





In
      December 2006, the Company announced that it has signed an exploration agreement
      to participate at 15% WI, subsequently increased to 20%, in
      the  Supple Jack Creek lease area (formerly described as West). The
      first well, as yet unnamed, will target gas in the Edwards Limestone in Lavaca
      County, Texas. The proposed total depth of the first well is approximately
      14,700 feet. The company announced in January 23, 2007 that it had increased
      its
      WI in the first well to 20% (NRI 14.71%). The well is planned to spud during
      the
      second half of calendar year 2007.




In
      April
      2007, the Company signed agreements to participate in the Shadyside prospect,
      located in St. Mary Parish, Louisiana. Index has an initial 15% WI in the
      prospect, which will reduce to 13.5% after prospect payout.  The
      Shadyside 1 well (NRI 9.52%)  has a planned total depth of
      approximately 16,500 feet and commenced drilling in July 2007.





In
      June
      2007, the Company announced that it had entered into Participation and Joint
      Operating Agreements for the drilling of the Cow Trap project ("Cow Trap")
      to be
      located in Brazoria County, Texas. The Cow Trap well, named Ducroz 1 (WI 7.5%,
      NRI 5.25%), targets gas in stacked Miocene objectives at depths ranging from
      4,900 feet to 6,400 feet. The well has a planned total depth of approximately
      6,800 feet. Ducroz 1 is to be drilled into a gas-bearing four-way dip structure
      defined by 2D seismic and offset well data. Two down-dip wells drilled into
      the
      same structure have produced 24.4 BCF of gas from stacked Miocene reservoirs
      (13.1 BCF and 11.3 BCF, respectively). This equates to approximately 4.1 million
      barrels of oil equivalent gross. The Cow Trap structure has Proved Undeveloped
      Reserves ("PUDs") estimated by a third party at 4.1 BCF gross, equating to
      0.213
      BCF at Index's NRI. Ducroz 1 is expected to be spudded during the second half
      of
      2007.





The
      Company announced in April 2007 that it has signed a Participation Agreement
      to
      explore for gas in the West Wharton prospect. This project could consist of
      up
      to four exploration wells within the area of mutual interest in Wharton County,
      Texas. Index has a 12.5% working interest in the project that will reduce to
      9.38% after prospect payout. The first well, Outlar 1 (NRI 6.99%), is planned
      to
      spud during the third calendar quarter of 2007 and has a planned total depth
      of
      around 12,000 feet.





In
      July
      2007 the Company announced that it has signed a Purchase and Sale Agreement
      to
      acquire a 5% WI and 3.5% NRI in the Alligator Bayou exploration prospect located
      beneath onshore portions of Brazoria and Matagorda Counties, Texas. The prospect
      covers up to several thousand acres. The first well is planned to spud in late
      calendar year 2007 or early 2008.






6





**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





*Principles
      of Consolidation/Basis of Presentation*





The
      unaudited condensed consolidated financial statements as of June 30, 2007 and
      March 31, 2007 and for the three months ended June 30, 2007 and 2006 include
      the
      accounts of the Company and its wholly owned subsidiaries, Index USA, Index
      Investments, Index Offshore, Index Inc. and Index Limited, after eliminating
      all
      significant intercompany accounts and transactions. Results of operations are
      included from the date of incorporation. For the reverse merger between the
      Company and Index Ltd. at January 20, 2006 the stockholder’s equity section and
      earnings per share in the Condensed Consolidated balance sheet at June 30,
      2006
      were restated to reflect the exchange of shares using a conversion ratio of
      approximately 2.857 shares of the Company to 1 share of Index
      Ltd.  Certain reclassifications of prior year balances have been made
      to conform such amounts to corresponding 2007 classifications.  These
      reclassifications have no impact on net income.





*Use
      of Estimates*





The
      preparation of financial statements in conformity with generally accepted
      accounting principles generally accepted in the United States 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. Certain accounting policies involve
      judgments and uncertainties to such an extent that there is reasonable
      likelihood that materially different amounts could have been reported under
      different conditions, or if different assumptions had been used. We evaluate
      our
      estimates and assumptions on a regular basis. We base our estimates on
      historical experience 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 values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates and assumptions used in preparation of our financial statements.
      The
      most significant estimates with regard to these financial statements relate
      to
      the provision for income taxes, dismantlement and abandonment costs, estimates
      to certain oil and gas revenues and expenses and estimates of proved oil and
      natural gas reserve quantities used to calculate depletion, depreciation and
      impairment of proved oil and natural gas properties and equipment.








7


**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**





*Interim
      Financial Statements*





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared without audit, pursuant to the rules and regulations of the Securities
      and Exchange Commission (“SEC”). Certain information and footnote disclosures
      normally included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America (“GAAP”) have been
      condensed or omitted, although we believe that the disclosures contained herein
      are adequate to make the information presented not misleading. In the opinion
      of
      management, all adjustments (consisting of normal recurring accruals) considered
      necessary for a fair presentation have been included. Operating results for
      interim periods are not necessarily indicative of the results that may be
      expected for the entire year. These unaudited condensed consolidated financial
      statements included herein should be read in conjunction with the Financial
      Statements and Notes included in the Company’s Annual Report on Form 10-KSB for
      the year ended March 31, 2007.





*Cash
      and Cash Equivalents, and Concentrations of Credit Risk*





Cash
      and
      cash equivalents represent cash in banks. The Company considers any highly
      liquid debt instruments purchased with a maturity date of three months or less
      to be cash equivalents. The Company’s accounts receivable are concentrated among
      entities engaged in the energy industry, within the United States. Financial
      instruments and related items, which potentially subject the Company to
      concentrations of credit risk, consist primarily of cash, cash equivalents
      and
      related party receivables. The Company places its cash and temporary cash
      investments with credit quality institutions. At times, such investments may
      be
      in excess of the FDIC insurance limit. Allowance for doubtful accounts was
      $0 at
      June 30, 2007 and March 31, 2007.





*Oil
      and Gas Properties*





The
      Company follows the full cost method of accounting for oil and gas properties.
      Accordingly, all costs associated with acquisition, exploration, and development
      of properties within a relatively large geopolitical cost center are capitalized
      when incurred and are amortized as mineral reserves in the cost center are
      produced, subject to a limitation that the capitalized costs not exceed the
      value of those reserves. In some cases, however, certain significant costs,
      such
      as those associated with offshore U.S. operations, are deferred separately
      without amortization until the specific property to which they relate is found
      to be either productive or nonproductive, at which time those deferred costs
      and
      any reserves attributable to the property are included in the computation of
      amortization in the cost center. All costs incurred in oil and gas producing
      activities are regarded as integral to the acquisition, discovery, and
      development of whatever reserves ultimately result from the efforts as a whole,
      and are thus associated with the Company’s reserves. The Company capitalizes
      internal costs directly identified with performing or managing acquisition,
      exploration and development activities. The Company has not capitalized any
      internal costs or interest at June 30, 2007 and 2006. Unevaluated costs are
      excluded from the full cost pool and are periodically evaluated for impairment
      rather than amortized. Upon evaluation, costs associated with productive
      properties are transferred to the full cost pool and amortized. Gains or losses
      on the sale of oil and natural gas properties are generally included in the
      full
      cost pool unless the entire pool is sold.





Capitalized
      costs and estimated future development costs are amortized on a
      unit-of-production method based on proved reserves associated with the
      applicable cost center. The Company has assessed the impairment for oil and
      natural gas properties for the full cost pool at June 30, 2007 and will assess
      quarterly thereafter using a ceiling test to determine if impairment is
      necessary. Specifically, the net unamortized costs for each full cost pool
      less
      related deferred income taxes should not exceed the following: (a) the present
      value, discounted at 10%, of future net cash flows from estimated production
      of
      proved oil and gas reserves plus (b) all costs being excluded from the
      amortization base plus (c) the lower of cost or estimated fair value of unproved
      properties included in the amortization base less (d) the income tax effects
      related to differences between the book and tax basis of the properties
      involved. The present value of future net revenues should be based on current
      prices, with consideration of price changes only to the extent provided by
      contractual arrangements, as of the latest balance sheet presented. The full
      cost ceiling test must take into account the prices of qualifying cash flow
      hedges in calculating the current price of the quantities of the future
      production of oil and gas reserves covered by the hedges as of the balance
      sheet
      date. In addition, the use of the hedge-adjusted price should be consistently
      applied in all reporting periods and the effects of using cash flow hedges
      in
      calculating the ceiling test, the portion of future oil and gas production
      being
      hedged, and the dollar amount that would have been charged to income had the
      effects of the cash flow hedges not been considered in calculating the ceiling
      limitation should be disclosed. Any excess is charged to expense during the
      period that the excess occurs. The Company did not have any hedging activities
      during the three months ended June 30, 2007 and 2006. Application of the ceiling
      test is required for quarterly reporting purposes, and any write-downs cannot
      be
      reinstated even if the cost ceiling subsequently increases by year-end. No
      ceiling test write-down was recorded for the three months ended June 30, 2007
      and 2006. Sales of proved and unproved properties are accounted for as
      adjustments of capitalized costs with no gain or loss recognized, unless such
      adjustments would significantly alter the relationship between capitalized
      costs
      and proved reserves of oil and gas, in which case the gain or loss is recognized
      in income.****Abandonment of properties is accounted for as
      adjustments of capitalized costs with no loss recognized.





*Other
      Property, Plant and Equipment*





Other
      property, plant and equipment primarily includes computer equipment, which
      is
      recorded at cost and depreciated on a straight-line basis over useful lives
      of
      five years. Repair and maintenance costs are charged to expense as incurred
      while acquisitions are capitalized as additions to the related assets in the
      period incurred. Gains or losses from the disposal of property,











8


**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**





plant
      and
      equipment are recorded in the period incurred. The net book value of the
      property, plant and equipment that is retired or sold is charged to accumulated
      depreciation and amortization, and the difference is recognized as a gain or
      loss in the results of operations in the period the retirement or sale
      transpires.





*Segment
      Information*





The
      Company has one reportable segment, oil and natural gas exploration and
      production, as determined in accordance with SFAS No. 131, “Disclosure
      About Segments of an Enterprise and Related Information”.





*Foreign
      Currency Translation*





The
      Company translates the foreign currency financial statements in accordance
      with
      the requirements of Statement of Financial Accounting Standards No. 52, “Foreign
      Currency Translation.” Assets and liabilities of non-U.S. subsidiaries whose
      functional currency is not the U.S. dollar are translated into U.S. dollars
      at
      fiscal year-end exchange rates. Revenue and expense items are translated at
      average exchange rates prevailing during the fiscal year. Translation
      adjustments are included in Accumulated other comprehensive gain /(loss) in
      the
      equity section of the balance sheet, with a total of $11,278 and $15,399 at
      June
      30, and March 31, 2007, respectively, and foreign currency transaction
      gains/(losses) are included in the statement of operations





*Stock
      Based Compensation*





On
      January 1, 2006, the Company adopted SFAS No. 123 (revised 2004)
“Share-Based Payments” (“SFAS-123R”). This statement applies to all awards
      granted, modified, repurchased or cancelled after January 1, 2006 and to
      the unvested portion of all awards granted prior to that date. The Company
      adopted this statement using the modified version of the prospective application
      (modified prospective application). Under the modified prospective application,
      compensation cost for the portion of awards for which the employee’s requisite
      service has not been rendered that are outstanding as of January 1, 2006
      must be recognized as the requisite service is rendered on or after that date.
      The compensation cost for that portion of awards shall be based on the original
      fair market value of those awards on the date of grant as calculated for
      recognition under SFAS 123. The compensation cost for these earlier awards
      shall
      be attributed to periods beginning on or after January 1, 2006 using the
      attribution method that was used under SFAS 123. The impact of adoption of
      SFAS-123R decreased income from operations and income before income taxes and
      net income by $170,331 for the three months ended June 30, 2006 and there was
      no
      impact on the Condensed Consolidated Statement of Cash Flows. The effect on
      net
      income per share for basic and diluted is $0.01. See Note 9 of the notes to
      the
      Condensed Consolidated Financial Statements for additional
      disclosure.





*Correction
      of Errors*





The
      Company adopted SFAS 154, “Accounting Changes and Error Corrections—a
      replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS 154”)” in
      April 1, 2007, in which it changed the requirements for the accounting for
      and
      the reporting of a change in accounting principle. The Company requires that
      a
      new accounting principle be applied to the balances of assets and liabilities
      as
      of the beginning of the earliest period for which retrospective application
      is
      practicable and that a corresponding adjustment is made to the opening balance
      of retained earnings (or other appropriate components of equity or net assets
      in
      the balance sheet) for that period rather than being reported in the statement
      of operations. When it is impracticable to determine the cumulative effect
      of
      applying a change in accounting principle to all prior periods, The Company
      applies the new accounting principle as if it were adopted prospectively from
      the earliest date practicable. The Company will also revise previously issued
      financial statements to reflect the correction of an error, should one occur,
      and limit the application to the direct effects of the change. Indirect effects
      of a change in accounting principle will be recognized in the period of the
      accounting change. The Company will continue to account for a change in
      accounting estimate in accordance with APB 20. The adoption of this
      pronouncement had no impact to the Company’s consolidated financial position or
      results of operations.








9


**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**





*Certain
      Hybrid Instruments*. On February 16, 2006 the FASB issued SFAS 155,
“Accounting for Certain Hybrid Instruments,” which amends SFAS 133, “Accounting
      for Derivative Instruments and Hedging Activities,” and SFAS 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities.” SFAS 155 allows financial instruments that have embedded
      derivatives to be accounted for as a whole (eliminating the need to bifurcate
      the derivative from its host) if the holder elects to account for the whole
      instrument on a fair value basis. SFAS 155 also clarifies and amends certain
      other provisions of SFAS 133 and SFAS 140. This statement is effective for
      all
      financial instruments acquired or issued in fiscal years beginning after
      September 15, 2006. The Company adopted this new standard, effective April
      1, 2007, with no impact on its financial position, results of operations or
      cash
      flows as it currently does not have any hybrid instruments outstanding at June
      30, 2007 and March 31, 2007, respectively.





*Accounting
      for Servicing of Financial Assets*. In March 2006, the FASB issued SFAS No.
      156, “*Accounting for Servicing of Financial Assets—an amendment of FASB
      Statement No. 140”(“*SFAS No. 156”), which amends FASB Statement No. 140,
*Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities,* with respect to the accounting for
      separately recognized servicing assets and servicing liabilities. This Statement
      requires that all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value, if practicable. The Board
      concluded that fair value is the most relevant measurement attribute for the
      initial recognition of all servicing assets and servicing liabilities, because
      it represents the best measure of future cash flows. This Statement permits,
      but
      does not require, the subsequent measurement of servicing assets and servicing
      liabilities at fair value. An entity that uses derivative instruments to
      mitigate the risks inherent in servicing assets and servicing liabilities is
      required to account for those derivative instruments at fair value. Under this
      Statement, an entity can elect subsequent fair value measurement of its
      servicing assets and servicing liabilities by class, thus simplifying its
      accounting and providing for income statement recognition of the potential
      offsetting changes in fair value of the servicing assets, servicing liabilities,
      and related derivative instruments. An entity that elects to subsequently
      measure servicing assets and servicing liabilities at fair value is expected
      to
      recognize declines in fair value of the servicing assets and servicing
      liabilities more consistently than by reporting other-than-temporary
      impairments.  The Company adopted this new standard effective April 1,
      2007, with no impact the Company’s Condensed Consolidated financial position or
      results of operations As the Company does not have an derivative or hedging
      instruments.





*Income
      Taxes.*In June 2006, the FASB issued FASB Interpretation No 48 (“FIN 48”),
“Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement
      No. 109”, which clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB 109.
      The Interpretation prescribes a recognition threshold and measurement attribute
      for the financial statement recognition and measurement of a tax position taken
      or expected to be taken in a tax return. The Interpretation also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. The Company adopted the new standard
      effective April 1, 2007 with no material impact on the Company’s consolidated
      financial position or results of operations.





In
      December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
      Payment Arrangements ("FSP 00-19-2") which addresses accounting for registration
      payment arrangements. FSP 00-19-2 specifies that the contingent obligation
      to
      make future payments or otherwise transfer consideration under a registration
      payment arrangement, whether issued as a separate agreement or included as
      a
      provision of a financial instrument or other agreement, should be separately
      recognized and measured in accordance with FASB Statement No. 5, Accounting
      for
      Contingencies. FSP 00-19-2 further clarifies that a financial instrument subject
      to a registration payment arrangement should be accounted for in accordance
      with
      other applicable generally accepted accounting principles without regard to
      the
      contingent obligation to transfer consideration pursuant to the registration
      payment arrangement. For registration payment arrangements and financial
      instruments subject to those arrangements that were entered into prior to the
      issuance of EITF 00-19-2, this guidance shall be effective for financial
      statements issued for fiscal years beginning after December 15, 2006 and interim
      periods within those fiscal years. The Company adopted the new pronouncement
      effective April 1, 2007 with no impact Company’s consolidated financial position
      or results of operations.





*New
      Accounting Pronouncements Not Yet Adopted*





*Fair
      Value Measurements.*In September 2006, the FASB issued SFAS 157, “Fair
      Value Measurements”, which defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles (“GAAP”), and
      expands disclosures about fair value measurements. Prior to this Statement,
      there were different definitions of fair value and limited guidance for applying
      those definitions in GAAP. This Statement provides the definition to increase
      consistency and comparability in fair value measurements and for expanded
      disclosures about fair value measurements. The Statement emphasizes that fair
      value is a market-based measurement, not an entity-specific measurement. The
      Statement clarifies that market participant assumptions include assumptions
      about risk, i.e. the risk inherent in a particular valuation technique used
      to
      measure fair value and/or the risk inherent in the inputs to the valuation
      technique. The Statement expands disclosures about the use of fair vale to
      measure assets and liabilities in interim and annual periods subsequent to
      initial recognition. The disclosures focus on the inputs used to measure fair
      value and for recurring fair value measurements using significant unobservable
      inputs, the effect of the measurements on earnings for the period. The Statement
      is effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. Earlier
      application is encouraged, provided that the reporting entity has not yet issued
      financial statements for that fiscal year, including the financial statements
      for an interim period within that fiscal year. The Company does not expect
      adoption of this standard will have a material impact on its financial position,
      operations or cash flows.





*The
      Fair Value Option for Financial Assets and Financial Liabilities.*In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities—including an amendment of FASB Statement No.
      115”, permitting entities to choose to measure many financial instruments and
      certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reported earnings caused by measuring related assets and liabilities differently
      without having to apply complex hedge accounting measurement. The statement
      applies to all entities, including not-for profit organizations. Most of the
      provisions of this Statement apply only to entities that elect the fair value
      option. However, the amendment to FASB Statement No. 115, “Accounting for
      Certain Investments in Debt and Equity Securities”, applies to all entities with
      available-for-sale and trading securities. The Company does not expect adoption
      of this standard will have a material impact on its financial position,
      operations or cash flows




**NOTE
      3 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS AND
      CAPITALIZED INTEREST**





*Oil
      and Gas Properties*





Major
      classes of oil and gas properties under the full cost method of accounting
      at
      June 30, 2007 and March 31, 2007 consist of the following:




**June
                30, 2007**
            
            
            **March
                31, 2007**Proved
                properties
            
            $
            3,781,782
            
            
            $
            3,254,211Unevaluated
                and unproved properties
            
            
            2,717,136
            
            
            
            1,927,776Gross
                oil and gas properties-onshore
            
            
            6,498,918
            
            
            
            5,181,987Less:  accumulated
                depletion
            
            
            (388,584
            )
            
            
            (315,937
            )Net
                oil and gas properties-onshore
            
            $
            6,110,334
            
            
            $
            4,866,050





Included
      in the Company's oil and gas properties are asset retirement obligations of
      $41,552 as of June 30, 2007 and March 31, 2007, respectively.





Depletion
      expense was $72,684 and $21,385 or $25.75 and $19.04 per barrel of production
      for the three months ended June 30, 2007 and 2006, respectively.





At
      June
      30, 2007 and March 31, 2007, the Company excluded the following capitalized
      costs from depletion, depreciation and amortization:





**June
                30, 2007**
            
            
            **March
                31, 2007**Not
                subject to depletion-onshore:Exploration
                costs
            
            $
            2,150,683
            
            
            $
            1,669,478Cost
                of undeveloped acreage
            
            
            566,452
            
            
            
            258,298Total
                not subject to depletion
            
            $
            2,717,136
            
            
            $
            1,927,776





It
      is
      anticipated that the cost of undeveloped acreage of $0.6 million and exploration
      costs of $2.2 million will be included in depreciation, depletion and
      amortization when the related projects are planned and drilled and completed.
      Included in exploration cost and undeveloped acreage costs at June 30, 2007
      are
      approximately: $1.2 million related to the Ilse 1 well that has been drilled,
      but not tested or completed (see Note 1), $0.3 million related to undeveloped
      leasehold for the Supple Jack Creek project area, $0.3 million related to the
      ADC exploration agreements, $0.4 million related to the George Cason well,
      $1.0
      million related to the West Wharton prospect and $0.2 million related to the
      Shadyside well.





10


**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      3 - PROPERTY, PLANT AND EQUIPMENT, PROPERTY ACQUISITIONS AND DISPOSITIONS AND
      CAPITALIZED INTEREST (continued)**





*Acquisitions
      and Dispositions*





In
      the 3
      months to June 30, 2007 the Company acquired the following oil and gas property
      interests, under agreements to participate in:





The
      Shadyside prospect, located in St. Mary Parish, Louisiana. Index has an initial
      15% WI in the prospect, which will reduce to 13.5% after prospect
      payout.  The Shadyside 1 well (NRI 9.52%) has a planned total depth of
      approximately 16,500 feet and commenced drilling in July 2007.





The
      Cow
      Trap project ("Cow Trap") to be located in Brazoria County, Texas. The Cow
      Trap
      well, named Ducroz 1 (WI 7.5%, NRI 5.25%), targets gas in stacked Miocene
      objectives at depths ranging from 4,900 feet to 6,400 feet. The well has a
      planned total depth of approximately 6,800 feet. Ducroz 1 is to be drilled
      into
      a gas-bearing four-way dip structure defined by 2D seismic and offset well
      data.
      Two down-dip wells drilled into the same structure have produced 24.4 BCF of
      gas
      from stacked Miocene reservoirs (13.1 BCF and 11.3 BCF, respectively). This
      equates to approximately 4.1 million barrels of oil equivalent gross. The Cow
      Trap structure has Proved Undeveloped Reserves ("PUDs") estimated by a third
      party at 4.1 BCF gross, equating to 0.213 BCF at Index's NRI. Ducroz 1 is
      expected to be spudded during the second half of 2007.





The
      West
      Wharton prospect. This project could consist of up to four exploration wells
      within the area of mutual interest in Wharton County, Texas. Index has a 12.5%
      working interest in the project that will reduce to 9.38% after prospect payout.
      The first well, Outlar 1 (NRI 6.99%), is planned to spud during the third
      calendar quarter of 2007 and has a planned total depth of around 12,000
      feet.




Subsequent
      to June 30, 2007, the Company announced that it has signed a Purchase and Sale
      Agreement to acquire a 5% working interest and 3.5% Net Revenue Interest ("NRI")
      in the Alligator Bayou exploration prospect located beneath onshore portions
      of
      Brazoria and Matagorda Counties, Texas ("Alligator Bayou").  Alligator
      Bayou is the largest prospect the Company has signed to date and covers up
      to
      several thousand acres. The first well is planned to spud in approximately
      six
      to nine months.




*Other
      Property and Equipment*





Property
      and equipment are stated at cost. When retired or otherwise disposed, the
      related carrying value and accumulated depreciation are removed from the
      respective accounts and the net difference less any amount realized from
      disposition, is reflected in earnings. For financial statement purposes,
      property and equipment are depreciated using the straight-line method over
      their
      estimated useful lives of the assets. Maintenance, repairs, and minor renewals
      are charged against earnings when incurred. Additions and major renewals are
      capitalized. Major assets at June 30, 2007 and March 31, 2007 were as
      follows:





**June
                30, 2007**
            
            
            **March
                31, 2007**Computer
                costs, including foreign translation adjustment
            
            $
            24,060
            
            
            $
            23,858Less:
                accumulated depreciation
            
            
            (12,320
            )
            
            
            (11,365
            )Total
                other property and equipment
            
            $
            11,740
            
            
            $
            12,493





Depreciation
      expenses from continuing operations amounted to $753 and $163 for the three
      months ended June 30, 2007 and 2006, respectively. There was no interest
      capitalized in property, plant and equipment at June 30, 2007 and
      2006.





**NOTE
      4 - COMPREHESIVE LOSS**





For
      the
      three months ended June 30, 2007 and 2006, comprehensive income (loss) consisted
      of the amounts listed below.






**For
                the Three Months
                Ended June 30,****2007**
            
            
            **2006**Net
                loss
            
            $
            (436,837
            )
            
            $
            (319,401
            )Foreign
                currency translation gain / (loss)
            
            
            (4,121
            )
            
            
            1,876Comprehensive
                Loss
            
            $
            (440,958
            )
            
            $
            (317,525
            )













11


**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      5 - NOTES PAYABLE**





Index
      Ltd. had incurred debt and raised capital through a series of rounds of
      fundraising from inception through June 30, 2006. The entire Index Ltd.
      convertible debt stockholder funding has been converted to common stock at
      par
      and additional paid in capital. After all conversion of stock, notes payable
      at
      June 30, 2007 and March 31, 2007 were $0.There was no debt issue cost incurred
      during the three months ended June 30, 2007 and 2006 and no debt issue
      amortization expense in the three months ended June 30, 2007 and
      2006.  There was no unamortized debt issue cost at June 30, 2007 and
      March 31, 2007. There were no outstanding bank loans at June 30, 2007 and March
      31, 2007. A bank loan was repaid during the three months ended June 30,
      2006.





**NOTE
      6 - ASSET RETIREMENT OBLIGATION**





Activity
      related to the Company’s Asset Retirement Obligation (“ARO”) during the three
      months ended June 30, 2007 is as follows:





**For
                the Three Months Ended June 30, 2007**ARO
                as of beginning of period
            
            $
            41,552Liabilities
                incurred during period
            
            
            -Liabilities
                settled during period
            
            
            -Accretion
                expense
            
            
            -Balance
                of ARO as of end of period
            
            $
            41,552





Of
      the
      total ARO, $41,552 is classified as a long-term liability at June 30, 2007.
      For
      each of the three months ended June 30, 2007 and 2006, the Company recognized
      no
      accretion expense related to its ARO, due to the assumption of a full offset
      of
      salvage values.








12






**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      7 - COMMITMENTS AND CONTINGENCIES**





The
      Company has various commitments to oil and gas exploration and production
      capital expenditures with ongoing expenditures on the Kansas properties, and
      expenditures and commitments relating to wells in Texas and Louisiana arising
      out of the normal course of business.





Lease
      Commitments





The
      Company does not have any capital lease commitments. The Company rents its
      main
      operating office in Houston on a month-to-month basis for which payments began
      in November 2005. The Company also has a nine month lease, committed to in
      April
      2007, related to corporate housing for UK based officers while periodically
      working at the corporate office.





Consulting
      Agreements





The
      Company has held consulting agreements with outside contractors, certain of
      whom
      are also Company stockholders. The Agreements are generally for a fixed term
      from inception and renewable from time to time unless either the Company or
      Consultant terminates such engagement by written notice.





Stockholder
      Matters





There
      were no stockholder matters during the quarter ended June 30, 2007.





Litigation





The
      Company is subject to various legal proceedings and claims, which arise in
      the
      ordinary course of its business. Although occasional adverse decisions or
      settlements may occur, the Company believes that the final disposition of such
      matters will not have material adverse effect on its financial position, results
      of operations or liquidity. Consequently, the Company has not recorded any
      reserve for legal matters.





Since
      July 26, 2007, the Company, as a joint interest owner, has been served with
      two
      Texas Property Code Notices of Intent to File Lien Against Property with regard
      to materials/equipment sold and/or leased and amounts owed to third parties
      by
      the operator of the Ilse 1 property.  The gross amount of the claims
      is $92,930 with our 10% working interest share before project payout being
      $9,293.  The Company, along with other joint interest participants, is
      in the data gathering stage and is assessing the implications and magnitude
      of
      these Notices and the potential financial impact to the Company.  The
      Company was billed for these services by the operator on their June 2007
      operating statement and these costs have been accrued in our condensed
      consolidated financial statements as costs related to the Ilse
      well.  It is the Company’s position that no other contingency accrual
      is currently required.





13






**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**








**NOTE
      8 - CAPITAL STOCK**





During
      the quarter ended June 30, 2007:





Balance
                at March 31, 2007
            
            
            65,737,036Issuance
                of stock upon exercise of warrants
            
            
            66,662Total
            
            
            65,803,698





In
      June
      2007, a total of 66,662 warrants were exercised at a price of $0.14 for a total
      of $9,333 and a total of 66,662 shares of common stock, $0.001 par value, were
      issued to a director.








**NOTE
      9 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION**





The
      Board
      of Directors of Index Inc. agreed to the adoption of the 2006 Incentive Stock
      Option Plan (the “Stock Option Plan”) and approved it on March 14, 2006,
      effective as of January 20, 2006, providing for the issuance of up to 5,225,000
      shares of Common Stock of Index Inc. to officers, directors, employees and
      consultants of Index Inc. and/or its subsidiaries. Pursuant to the Stock Option
      Plan, Index Inc. has allowed for the issuance of options to purchase 5,077,526
      shares of Common Stock. Total compensation expense recorded for the issuance
      of
      these options in the first quarter of fiscal 2008 was $96,823.





The
      principal terms and conditions of the share options granted under the Stock
      Option Plan are that vesting of the options granted occurs in three stages:
      (1)
      50% on grant; (2) 25% one year after grant; and (3) 25% two years after grant.
      Furthermore, the share options granted under the Share Option Plan are generally
      non-transferable other than to a legal or beneficial holder of the options
      upon
      the option holder’s death. The rights to vested but unexercised options cease to
      be effective: (1) 18 months after death of the stock options holder; (2) 6
      months after Change of Control of Index Inc.; (3) 12 months after loss
      of****office due to health related incapacity or redundancy;
      or (4) 12 months after the retirement of the options holder from a position
      with
      Index Inc. All options have a 5 year expiring term.







14




**INDEX
      OIL AND GAS, INC.**




**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      9 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
      (continued)**





The
      remaining compensation expense associated with total unvested awards as of
      June
      30, 2007 was approximately $253,000, and will be recognized over the remaining
      weighted average vesting period. $96,823 and $170,331 was recorded as
      compensation expense for the three months ended June 30, 2007 and 2006,
      respectively.





Effective
      January 1, 2006, the Company began accounting for stock-based compensation
      under SFAS-123R, whereby the Company records compensation expense based on
      the
      fair value of awards described below. The Company did not issue any stock
      options during the three months ended June 30, 2007 and 2006 and therefore
      had
      no compensation expense for these periods for new option issuances.





Stock
      Options





The
      following tables summarize the changes in options outstanding and exercised
      and
      the related exercise prices for the shares of the Company's common stock issued
      to certain directors and stockholders at June 30, 2007:





**Number
                of Shares**
            
            
            **Weighted
                Average Exercise Price Per Share**Outstanding
                at March 31, 2007
            
            
            5,077,526
            
            
            $
            0.46GrantedExercised
            
            
            -
            
            
            
            -Canceled
                or expired
            
            
            -
            
            
            
            -Outstanding
                at June 30, 2007
            
            
            5,077,526
            
            
            $
            0.46





The
      Company has assumed an annual forfeiture rate of 0 % for the awards granted
      based on the Company’s history for this type of award to various employee
      groups. Compensation expense is recognized ratably over the requisite service
      period and immediately for retirement-eligible employees.








**Options
                Outstanding**
            
            **Options
                Exercisable****Exercise
                Price**
            
            **Number**
              **Outstanding**
            
            **Weighted
                Average Remaining Contractual Life (Years)**
            
            **Weighted
                Average Exercise Price**
            
            **Number**
              **Exercisable**
            
            **Weighted
                Average Exercise Price**$
                0.35
            
            4,577,526
            
            3.56
            
            $
                0.35
            
            3,433,145
            
            $0.35$1.42
            
            500,000
            
            4.72
            
            $1.42
            
            250,000
            
            $1.425,077,526
            
            
            
            $0.46
            
            3,683,145
            
            $0.42

















15






**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\**


**JUNE
      30, 2007**


**unaudited)**





**NOTE
      9 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION
      (continued)**





Warrants





The
      following tables summarize the changes in warrants outstanding and exercised
      and
      the related exercise prices for the shares of the Company's common stock issued
      as follows:





**Number
                of Shares**
            
            
            **Weighted
                Average Exercise Price Per Share**Outstanding
                and Exercisable March 31, 2007
            
            
            968,083
            
            
            $
            0.13Granted
            
            
            -
            
            
            
            -Exchanged
            
            
            -
            
            
            
            -Exercised
            
            
            (66,662
            )
            
            
            (0.14
            )-Canceled
                or expired
            
            
            -
            
            
            
            -Outstanding
                and Exercisable at June 30, 2007
            
            
            901,421
            
            
            $
            0.13









**Warrants
                Outstanding**
            
            
            **Warrants
                Exercisable**Exercise
                Prices
            
            
            Number
                Outstanding
            
            
            Weighted
                Average Remaining
                Contractual Life (Years)
            
            
            Weighted
                Average Exercise
                Price
            
            
            Number
                Exercisable
            
            
            Weighted
                Average Exercise
                Price$
            0.07
            
            
            
            138,655
            
            
            
            3.25
            
            
            $
            0.07
            
            
            
            138,655
            
            
            $
            0.07$
            0.14
            
            
            
            143,037
            
            
            
            3.25
            
            
            $
            0.14
            
            
            
            143,037
            
            
            $
            0.14$
            0.14
            
            
            
            253,961
            
            
            
            3.25
            
            
            $
            0.14
            
            
            
            253,961
            
            
            $
            0.14$
            0.14
            
            
            
            339,033
            
            
            
            3.25
            
            
            $
            0.14
            
            
            
            339,033
            
            
            $
            0.14$
            0.14
            
            
            
            26,735
            
            
            
            3.25
            
            
            $
            0.14
            
            
            
            26,735
            
            
            $
            0.14901,421
            
            
            
            3.25
            
            
            $
            0.13
            
            
            
            901,421
            
            
            $
            0.13





In
      June
      2007, a total of 66,662 warrants were exercised at a price of $0.14 for a total
      of $9,333 and a total of 66,662 shares of common stock, $0.001 par value, were
      issued to a director.





16


**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**





**NOTE
      10 - EARNINGS PER SHARE**





Basic
      earnings per share is computed by dividing income available to common
      stockholders by the weighted average number of shares outstanding for the
      period. Diluted EPS reflects the potential dilution that could occur if
      contracts to issue common stock and related stock options were exercised at
      the
      end of the period. For the periods ended June 30, 2007 and 2006, excluded from
      diluted earnings per share are 901,421 and 1,092,676, respectively of warrants
      to acquire common stock. As of both June 30, 2007 and 2006, there are 4,577,526
      of options to acquire the Company’s common stock that were excluded from the
      computation of diluted earnings per share, and which excluded 500,000 of out
      of
      the money options at June 30, 2007. As of March 31, 2007, 25,000 shares yet
      to
      vest under a performance bonus award have been excluded from the computation
      of
      diluted earnings per share.





The
      following is a calculation of basic and diluted weighted average shares and/or
      options and warrants outstanding:





**For
                The Three Months Ended June 30,****2007**
            
            
            **2006**Shares—basic
            
            
            65,739,234
            
            
            
            54,544,345Dilution
                effect of stock option and awards at end of period
            
            
            -
            
            
            
            -Shares—diluted
            
            
            65,739,234
            
            
            
            54,544,345Stock
                awards and shares excluded from diluted earnings per share due to
                anti-dilutive effect
            
            
            5,503,947
            
            
            
            5,670,202








**NOTE
      11 - RELATED PARTY TRANSACTIONS**





During
      the three months ended June 30, 2006, the Company repaid various directors
      $1,007 for the refund of payroll taxes.





During
      the three months ended June 30, 2006, the Company repaid a bank loan Lyndon
      West
      and Michael Scrutton, jointly and severally, guaranteed this bank
      loan.





**NOTE
      12 - OPERATING SEGMENTS**





The
      Company has one reportable segment, oil and natural gas exploration and
      production, as determined in accordance with SFAS No. 131, “Disclosure
      About Segments of an Enterprise and Related Information.” See below for
      information by geographic location.





*Geographic
      Area Information*





During
      the three months ended June 30,
      2007 and as of June 30, 2007, the Company owned oil and natural gas interests
      in
      three main geographic areas in the United States. Geographic revenue and oil
      and
      gas property information below is based on physical location of the assets
      at
      the end of each period.




**June
                30,
                2007****Total Oil & Gas**
              **Revenue**
            
            
            **Total Oil
                and Gas
                Assets (****1****)**Kansas
            
            $
            40,974
            
            
            $
            787,431Louisiana
            
            
            66,727
            
            
            
            452,313Texas
            
            
            43,672
            
            
            
            5,346,722Total
            
            $
            151,373
            
            
            $
            6,586,466





(1)
            Total
                oil and gas property assets at June 30, 2007 are reported gross.
                Under the
                full cost method of accounting for oil and gas properties, depreciation,
                depletion and amortization and
                impairment isnot allocated to
                properties.







17


**INDEX
      OIL AND GAS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007**


**(unaudited)**




**NOTE
      13 - SUBSEQUENT EVENTS**





In
      July
      2007, the Company announced that it has signed a Purchase and Sale Agreement
      to
      acquire a 5% working interest and 3.5% Net Revenue Interest ("NRI") in the
      Alligator Bayou exploration prospect. located beneath onshore portions of
      Brazoria and Matagorda Counties, Texas.





The
      Shadyside 1 well commenced drilling in July 2007.





Since
      July 26, 2007, the Company, as a joint interest owner, has been served with
      two
      Texas Property Code Notices of Intent to File Lien Against Property with regard
      to materials/equipment sold and/or leased and amounts owed to third parties
      by
      the operator of our Ilse 1 property. See Notes 1 and 7 for more
      information.




On
        August
        13, 2007, Mr. John G. Williams informed the Company that he was resigning
        from
        his position as Executive Vice President Exploration and Production effective
        as
        of November 1, 2007, and that he was also resigning from his position as
        a
        member of the board of directors of the Company effective immediately. Pursuant
        to the terms of Mr. Williams’ Employment Agreement entered into with the
        Company, dated August 29, 2006 (the “Agreement”), which was filed as Exhibit
        10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September
        9, 2006, Mr. Williams complied with the terms of the Agreement by giving
        the
        Company proper notice of his resignation. Mr. Williams will continue to serve
        as
        Executive Vice President Exploration and Production until November 1,
        2007. The Company’s Board of Directors has no immediate plans to appoint a
        replacement director to fill the vacancy created.








18








**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





CAUTIONARY
      NOTE REGARDING FORWARD LOOKING STATEMENTS





Some
      of
      the statements contained in this Quarterly Report on Form 10-Q (“Form 10-Q”)
      that are not historical facts are "forward-looking statements" which can be
      identified by the use of terminology such as "estimates," "projects," "plans,"
      "believes," "expects," "anticipates," "intends," or the negative or other
      variations, or by discussions of strategy that involve risks and uncertainties.
      We urge you to be cautious of the forward-looking statements, that such
      statements, which are contained in this Form 10-Q, reflect our current beliefs
      with respect to future events and involve known and unknown risks, uncertainties
      and other factors affecting our operations, market growth, services, products
      and licenses. No assurances can be given regarding the achievement of future
      results, as actual results may differ materially as a result of the risks we
      face, and actual events may differ from the assumptions underlying the
      statements that have been made regarding anticipated events. Factors that may
      cause actual results, our performance or achievements, or industry results,
      to
      differ materially from those contemplated by such forward-looking statements
      include without limitation:





**•**
            
            our
                ability to attract and retain management;**•**
            
            our
                growth strategies;**•**
            
            anticipated
                trends in our business;**•**
            
            our
                future results of operations;**•**
            
            our
                ability to make or integrate acquisitions;**•**
            
            our
                liquidity and ability to finance our exploration, acquisition and
                development activities;**•**
            
            our
                ability to successfully and economically explore for and develop
                oil and
                gas resources;**•**
            
            market
                conditions in the oil and gas industry;**•**
            
            the
                timing, cost and procedure for proposed acquisitions;**•**
            
            the
                impact of government regulation;**•**
            
            estimates
                regarding future net revenues from oil and natural gas reserves and
                the
                present value thereof;**•**
            
            planned
                capital expenditures (including the amount and nature
                thereof);**•**
            
            increases
                in oil and gas production;**•**
            
            the
                number of wells we anticipate drilling in the future;**•**
            
            estimates,
                plans and projections relating to acquired properties;**•**
            
            the
                number of potential drilling locations;**•**
            
            our
                financial position, business strategy and other plans and objectives
                for
                future operations;








19







**•**
            
            the
                possibility that our acquisitions may involve unexpected
                costs;**•**
            
            the
                volatility in commodity prices for oil and gas;**•**
            
            the
                accuracy of internally estimated proved reserves;**•**
            
            the
                presence or recoverability of estimated oil and gas
                reserves;**•**
            
            the
                ability to replace oil and gas reserves;**•**
            
            the
                availability and costs of drilling rigs and other oilfield
                services;**•**
            
            environmental
                risks;**•**
            
            exploration
                and development risks;**•**
            
            competition;**•**
            
            the
                inability to realize expected value from acquisitions;**•**
            
            the
                ability of our management team to execute its plans to meet its
                goals;**•**
            
            general
                economic conditions, whether internationally, nationally or in the
                regional and local market areas in which we are doing business, that
                may
                be less favorable than expected; and**•**
            
            other
                economic, competitive, governmental, legislative, regulatory, geopolitical
                and technological factors that may negatively impact our businesses,
                operations and pricing.





All
      written and oral forward-looking statements made in connection with this Form
      10-Q that are attributable to us or persons acting on our behalf are expressly
      qualified in their entirety by these cautionary statements. Given the
      uncertainties that surround such statements, you are cautioned not to place
      undue reliance on such forward-looking statements.





**RISK
      FACTORS**




**Please
      see the risk factors applicable to our company and our business set forth in
      our
      Annual Report filed on Form 10-KSB for the year ended June 30, 2007 filed with
      the SEC on June 22, 2007, which are hereby incorporated by
      reference.**





**Overview**





Index
      Oil
& Gas, Inc. (“Index” or the “Company”) is an independent oil and gas company
      engaged in the acquisition, exploration, appraisal, development and production
      of oil and gas properties located in North America. The Company includes a
      United Kingdom company, which provides management services and United States
      operating subsidiaries, which are engaged in oil and gas activities, primarily
      in Kansas and the Gulf Coast of Texas and Louisiana. The Company has increased
      our proved reserves and production principally through property acquisitions
      in
      conjunction with an active drilling program. The Company does not currently
      operate any of its properties and sells its current oil production to domestic
      crude oil purchasers.






20





The
      following are key elements of our strategy:





·
      we intend to focus
      our short and medium term efforts on known petroleum basins within the U.S.
      and
      initially which are proximal to our current ongoing projects in the onshore
      part
      of the Gulf of Mexico basin;




·
      our short to mid
      term objective is to develop our oil and gas reserves to a point where the
      cash
      flow will contribute not only to our overhead and later, to contribute to its
      capital requirements for investing in new and additional projects. We believe
      we
      can achieve this objective by utilizing a risk managed approach of investing
      in
      a portfolio of drilling opportunities. By combining a number of key metrics,
      our
      management is able to select and invest in the very best prospects on offer.
      We
      have adjusted our business strategy to include more high-impact wells that
      can
      deliver, if successful, much higher value, volume, and follow-on drilling that
      has the potential to deliver exponential growth. Index also protects itself
      and
      its investors by limiting any single prospect investment to a small percentage
      of the overall funding that the company has at its disposal.





Index’s
      current focus is directed towards:





•
            Efficiently
                influencing the management of ongoing projects;•
            Identifying,
                characterizing, and capturing appropriate gas and oil opportunities;
                and•
            Efficiently
                using its business assets to raise additional capital as
                needed.





This
      current stage of the development of the Company includes new alliances.
      Furthermore, the Company has built a strong portfolio of prospects during 2007
      fiscal year for drilling in 2008 fiscal year, which include potential high
      impact wells. In summary, the Company’s strategy is to increase shareholder
      value by profitably increasing its reserves, production, cash flow and earnings
      through a risk and equity balanced program of exploration and production
      drilling. The Company will also consider acquisitions provided they can meet
      the
      Company’s metrics and they can augment its growth strategy and
      objectives.





At
      March
      31, 2007, our estimated total proved oil and gas reserves were approximately
      114.578 Mboe, consisting of 24.333 thousand barrels of oil (MBbls) and 541.470
      million cubic feet (MMcf) of natural gas. Approximately 99% of our proved
      reserves were classified as proved developed and proved behind pipe. We focus
      on
      maintaining a portfolio of long-lived, lower risk reserves along with shorter
      lived, higher margin reserves. We believe that this balanced reserve mix can
      provide a diversified cash flow foundation to fund our development and
      exploration drilling program.





Our
      financial results depend upon many factors, particularly the price of oil and
      gas and our ability to market our production. Commodity prices are affected
      by
      changes in market demands, which are impacted by overall economic activity,
      weather, pipeline capacity constraints, inventory storage levels, basis
      differentials and other factors. As a result, we cannot accurately predict
      future oil and gas prices, and therefore, we cannot determine what effect
      increases or decreases will have on our capital program, production volumes
      and
      future revenues. In addition to production volumes and commodity prices, finding
      and developing sufficient amounts of oil and gas reserves at economical costs
      are critical to our long-term success.





Like
      all
      oil and natural gas exploration and production companies, we face the challenge
      of natural production declines. As initial reservoir pressures are depleted,
      oil
      and natural gas production from a given well naturally decreases. Thus, an
      oil
      and natural gas exploration and production company depletes part of its asset
      base with each unit of oil or natural gas it produces. We attempt to overcome
      this natural decline by drilling and acquiring more reserves than we produce.
      Our future growth will depend on our ability to continue to add reserves in
      excess of production. We will maintain our focus on costs to add reserves
      through drilling and acquisitions as well as the costs necessary to produce
      our
      reserves. Our ability to add reserves through drilling is dependent on our
      capital resources and can be limited by many factors, including the ability
      to
      timely obtain drilling permits and regulatory approvals.






21




**RESULTS
      OF OPERATIONS**




***Three
      Months Ended June 30, 2007 Compared to Three Months Ended June 30,
      2006***





We
      had a
      net loss of $436,837 for the three months ended June 30, 2007 compared to a
      net
      loss of $319,401 for the three months ended June 30, 2006, primarily resulting
      from an increase in depletion costs related to increased production and
      increased other general and administrative costs and other operating expenses
      arising from increased public company costs, including salaries and benefits,
      advisory costs and rent expense. This increased cost was offset by a decrease
      in
      stock compensation costs for historic grants, as a result of the passing of
      further vesting points, and an increase in interest income related to investment
      of funds from historic fund raisings. The following table summarizes key items
      of comparison and their related increase (decrease) for the three months
      ended June 30, 2007 and 2006.





**Three
                Months Ended June 30,**
            
            
            **Increase/****2007**
            
            
            **2006**
            
            
            **(Decrease)**Oil
                sales
            
            $
            151,373
            
            
            $
            70,457
            
            
            $
            80,916Production
                expenses:Lease
                operating
            
            
            22,279
            
            
            
            21,236
            
            
            
            1,043Taxes
                other than income
            
            
            11,970
            
            
            
            2,680
            
            
            
            9,290General
                and administrative:General
                and administrative
            
            
            473,053
            
            
            
            217,668
            
            
            
            255,385Stock-based
                compensation
            
            
            96,823
            
            
            
            170,331
            
            
            
            (73,508
            )Depletion
                — Full cost
            
            
            72,648
            
            
            
            21,385
            
            
            
            51,263Depreciation
                — Other
            
            
            753
            
            
            
            163
            
            
            
            590Impairment
            
            
            -
            
            
            
            -
            
            
            
            -Interest
                expense (income) and other
            
            
            (89,316
            )
            
            
            (43,605
            )
            
            
            (45,711
            )Income
                tax benefit (provision)
            
            
            -
            
            
            
            -
            
            
            
            -Net
                (loss) income
            
            $
            (436,837
            )
            
            $
            (319,401
            )
            
            $
            (117,436
            )Production:Natural
                Gas — Mcf
            
            
            8,800
            
            
            
            -
            
            
            
            8,800Crude
                Oil — Mbbl
            
            
            1,354
            
            
            
            1.123
            
            
            
            0.231Equivalent
                — Mboe
            
            
            2.821
            
            
            
            1.123
            
            
            
            1.698Average
                price per unit :Gas
                price per Mcf
            
            $
            7.27
            
            
            $
            -
            
            
            $
            7.27Oil
                price per Bbl
            
            $
            64.55
            
            
            $
            62.74
            
            
            $
            1.81Equivalent
                per Boe
            
            $
            53.66
            
            
            $
            62.74
            
            
            $
            (9.08
            )Average
                cost per Boe:Production
                expenses:Lease
                operating
            
            $
            7.90
            
            
            $
            18.91
            
            
            $
            (11.01
            )Taxes
                other than income
            
            $
            4.24
            
            
            $
            2.39
            
            
            $
            1.85General
                and administrative expense:General
                and administrative
            
            $
            167.69
            
            
            $
            193.83
            
            
            $
            (26.14
            )Stock-based
                compensation
            
            $
            34.32
            
            
            $
            151.67
            
            
            $
            (117.35
            )Depletion
                expense
            
            $
            25.75
            
            
            $
            19.04
            
            
            $
            6.71








22




For
      the
      three months ended June 30, 2007, oil and gas sales increased $80,916, from
      the
      same period in 2006, to $151,373. The increase for the three months ended June
      30, 2007 was primarily due to the increase in volumes of 1.7 MBoe from 1.1
      MBoe
      to 2.8 MBoe or approximately $91,000. The increase in volumes of 1.7 MBoe is
      primarily due to increased volumes from Walker of 1.0 MBoe and Vieman of 0.3
      MBoe and the Friedrich of 0.8 MBOE offset by lower Kansas well production.
      The
      Walker, Vieman and Friedrich wells produced natural gas volumes of 2.232 MMcf,
      1.810 MMcf and 4.757 MMcf, respectively. The Walker well also produced 0.7
      Mbbl
      with the remaining oil production primarily from the Kansas Seward County wells
      and a small amount from Vieman.  Additionally, revenue decreased
      approximately $10,000 due to a dip in commodity prices as our average price
      per
      barrel decreased $9.08, or 14.0%, in 2007 to $53.66 per Bbl from $62.74 per
      Bbl
      in 2006. This is due to a higher proportion of gas in the production volume
      mix.





Lease
      operating expenses increased $1,043 for the three months ended June 30, 2007
      as
      compared to the same period in 2006. The increase was primarily due to
      production from the Walker, Vieman and Friedrich wells that have come on
      production, together with four recent new wells that came on production in
      our
      Kansas properties. On a per unit basis, lease operating expenses decreased
      almost 60% from $18.91 per Boe in 2006 to $7.90 per Bbl in 2007 due to an
      increase in production volumes.





Taxes
      other than income increased $9,290 for the three months ended June 30, 2007
      as
      compared to the same period in 2006 due to higher oil and gas revenues and
      a
      change in the mix and location of production and on a per unit basis increased
      $1.85 per Boe to $4.24 per Boe. Production taxes are generally assessed as
      a
      percentage of gross oil and/or natural gas sales.





General
      and administrative expense, excluding stock-based compensation for the three
      months ended June 30, 2007 increased $255,386 to $473,053 compared to the same
      period in 2006 primarily due to increased management costs from the growth
      in
      operations of the Company. In addition there were increased costs of being
      a
      public company. Salaries, benefits and business expenses for employees/directors
      increased approximately $141,000. SEC filing fees, investor relations costs
      and
      other professional fees increased approximately $90,000. Rent expense increased
      approximately $20,000, which included costs for corporate housing.





Stock-based
      compensation expense was approximately $97,000 for the three months ended June
      30, 2007, compared to approximately $170,000 for stock-based compensation in
      the
      same period of 2006. This is primarily due to a larger stock-based award in
      2006
      granted to all officers and directors, at the effective date of the reverse
      merger with Index Ltd., which is now 75% vested, offset by a smaller award
      of
      stock to a new officer which also vested at 50% in 2007.  During the
      three months ended June 30, 2007 and 2006, the Company did not grant any stock
      options and warrants.





Depletion
      expense increased $51,263 from the same period in 2006 to $72,648 for the three
      months ended June 30, 2007. This increase is primarily due to production from
      the Walker, Vieman and Friedrich wells, together with four recent new wells
      on
      our Kansas properties that came on production in fiscal 2007. Depletion for
      oil
      and gas properties is calculated using the unit of production method, which
      essentially depletes the capitalized costs associated with the proved properties
      based on the ratio of production volume for the current period to total
      remaining proved reserve volumes for the evaluated properties. On a per unit
      basis, depletion expense increased from $19.04 to $25.75 per Bbl.






23






Interest
      income and other increased $45,711 for the three months ended June 30, 2007
      compared to the same period 2006. This increase is due to interest income earned
      on historic equity fund raisings.





There
      was
      no provision for income taxes for the fiscal three months ended 2007 and 2006
      due to a 100% valuation allowance recorded for the three months ended June
      30,
      2007 and 2006, respectively on the total tax provision as the Company believed
      that it is more likely than not that the asset will not be utilized during
      the
      next year.





**LIQUIDITY
      AND CAPITAL RESOURCES**





In
      the
      three months ended June 30, 2007 and 2006 we used cash for operating purposes
      and invested in oil and gas properties. In 2006 we repaid a bank loan. Operating
      revenue fluctuations were substantially driven by commodity prices and changes
      in our production volumes. Prices for oil and gas have historically been subject
      to seasonal influences characterized by peak demand and higher prices in the
      winter heating season for natural gas and summer travel for oil; however, the
      impact of other risks and uncertainties have influenced prices throughout the
      recent years. Working capital was substantially influenced by these variables.
      Fluctuation in cash flow may result in an increase or decrease in our capital
      and exploration expenditures. See Results of Operations for a review of the
      impact of prices and volumes on sales. See below for additional discussion
      and
      analysis of cash flow.





**Three
                Months Ended June 30,****2007**
            
            
            **2006**Cash
                flows (used in) provided by operating activities
            
            $
            (240,299
            )
            
            $
            (408,765
            )Cash
                flows used in investing activities
            
            
            (1,316,932
            )
            
            
            (170,155
            )Cash
                flows provided by (used in) financing activities
            
            
            9,333
            
            
            
            (51,797
            )Effect
                of exchange rate changes
            
            
            (3,934
            )
            
            
            8,539Net
                increase (decrease) in cash and cash equivalents
            
            $
            (1,551,832
            )
            
            $
            (622,178
            )





**Operating
      Activities**





Net
      cash
      outflow from operating activities during the three months ended June 30, 2007
      was $(240,299) which was a decrease of $168,466 from $(408,765) net cash outflow
      during the three months ended June 30, 2006. This decrease was primarily due
      to
      phasing impacts in working capital items, offset by higher operating expenses
      and taxes on our properties, as well as significantly higher general and
      administrative expenses, related to public company expense with increased costs
      of SEC filing fees, investor relations costs and other professional fees, as
      well as, an increase in salaries, benefits and business expenses for
      employees/directors. Revenues were higher due to increased production and sales
      volumes, offset by lower average commodity prices, due to an increased
      proportion of gas volumes. Average equivalent prices decreased $9.08 from $62.74
      per Boe in the three months ended June 30, 2006 to $53.66 per Boe in the three
      months ended June 30, 2007. Production volumes increased 1.698 Mboe from 1.123
      Mboe in the three months ended June 30, 2006 to 2.821 Mboe in the three months
      ended June 30, 2007. We expect the remainder fiscal year 2008 production to
      increase, but we are unable to predict the future.





**Investing
      Activities**





The
      primary driver of cash used in investing activities was capital
      spending.





Cash
      used
      in investing activities during the three months ended June 30, 2007 was
      $1,316,932, which was an increase of $1,146,777 from $170,155 of cash used
      in
      investing activities during the fiscal year ended June 30, 2006. This increase
      was due to increased exploration and development activity. The main approximate
      expenditures in the three months to June 30, 2007 were on drilling operations
      on
      the George Cason well ($0.3m) and initial expenditures on the Shadyside and
      Alligator Bayou projects ($0.5m combined). Aggregate expenditures on all other
      projects and wells were approximately $0.5m.






24





**Financing
      Activities**





Net
      cash
      used by financing activities increased $61,130 during the three months ended
      June 30, 2007 to $9,333 as compared to $(51,797) during the three months ended
      June 30, 2006. During the three months ended June 30, 2006, the Company repaid
      its bank loan and has had no debt outstanding since at June 30, 2006. During
      the
      three months ended June 30, 2007, a director exercised a total of 66,662
      warrants at a price of $0.14 for a total of $9,333 and a total of 66,662 shares
      of common stock, $0.001 par value, were issued.





Management
      believes that we may have the ability to finance through new debt or equity
      offerings, if necessary, our capital requirements, including
      acquisitions.





As
      of
      June 30, 2007 and 2006, our common stock is the only class of stock outstanding
      and we have no outstanding long-term debt financing.





Based
      on
      our current cash resources and other current assets, management believes we
      have
      sufficient liquidity to fund operations for the next twelve months. We are
      contemplating additional debt and/or equity financing transactions that, if
      successful, could fund expenditures for potential acquisitions and other
      discretionary expansions of our business. We do not currently have any
      commitments for such financing and there is no assurance that we will be
      successful in obtaining such funds. If we cannot obtain additional financing,
      we
      will have to significantly curtail our acquisition plans and possibly our
      operations.





**Contractual
      Obligations**





We
      have
      no material long-term commitments associated with our capital expenditure plans
      or operating agreements. Consequently, we believe we have a significant degree
      of flexibility to adjust the level of such expenditures as circumstances
      warrant. Our level of capital expenditures will vary in future periods depending
      on the success we experience in our acquisition, developmental and exploration
      activities, oil and gas price conditions and other related economic factors
      and
      on success in future fundraising efforts. Currently no sources of liquidity
      or
      financing are provided by off-balance sheet arrangements or transactions with
      unconsolidated, limited-purpose entities.





**Off-Balance
      Sheet Arrangements**




As
      of
      June 30, 2007, we did not have any off-balance sheet arrangements.





**Plan
      of Operation for 2008**





On
      an
      annual basis, we generally fund most of our capital and exploration activities,
      including oil and gas property acquisitions, with cash generated from operations
      and from equity financings. We have budgeted for capital expenditures relating
      to the work program described in Note 1 of the Condensed Consolidated Financial
      Statements.





**Inflation**





In
      the
      opinion of management, inflation has not had a material effect on the operations
      of the Company.





**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk.**






25





**Oil
      and gas prices fluctuate widely, and low prices for an extended period of time
      are likely to have a material adverse impact on our
      business.**





Our
      operating revenues, operating results, financial condition and ability to borrow
      funds or obtain additional capital depend substantially on prevailing prices
      for
      gas and oil. Declines in oil and gas prices may materially adversely affect
      our
      financial condition, liquidity, ability to obtain financing and operating
      results. Lower oil and gas prices may also reduce the amount of oil and gas
      that
      we can produce economically. Historically, oil and gas prices and markets have
      been volatile, with prices fluctuating widely and they are likely to continue
      to
      be volatile.





Prices
      for oil and gas are subject to wide fluctuations in response to relatively
      minor
      changes in the supply of and demand for oil and gas, market uncertainty and
      a
      variety of additional factors that are beyond our control. These factors
      include:





**•**
            
            The
                domestic and foreign supply of oil and gas;**•**
            
            The
                level of consumer product demand;**•**
            
            Weather
                conditions;**•**
            
            Political
                conditions in oil producing regions, including the Middle
                East;**•**
            
            The
                ability of the members of the Organization of Petroleum Exporting
                Countries to agree to and maintain oil price and production
                controls;**•**
            
            The
                price of foreign imports;**•**
            
            Actions
                of governmental authorities;**•**
            
            Domestic
                and foreign governmental regulations;**•**
            
            The
                price, availability and acceptance of alternative fuels;
                and**•**
            
            Overall
                economic conditions.





These
      factors make it impossible to predict with any certainty the future prices
      of
      oil and gas.





We
      do not
      use hedges at this time to reduce price volatility, help ensure that we have
      adequate cash flow to fund our capital programs and manage price risks and
      returns on some of our acquisitions and drilling programs. This policy could
      change in the future.****





**Fair
      Market Value of Financial Instruments**





The
      estimated fair values for financial instruments under FASB Statement
      No. 107,*Disclosures about Fair Value of Financial Instruments*,
      are determined at discrete points in time based on relevant market information.
      These estimates involve uncertainties and cannot be determined with precision.
      The estimated fair value of cash, cash equivalents, accounts receivable and
      accounts payable approximates their carrying value due to their short-term
      nature.





**Interest
      Sensitivity**





Since
      we
      do not have any long-term debt subject to variable interest rates, we are not
      exposed to interest rate sensitivity at June 30, 2007.






26





**Item
      4. Controls and Procedures.**





*(a)
      Management’s Evaluation of Disclosure Controls and Procedures*





In
      accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an
      evaluation, under the supervision and with the participation of management,
      including our Chief Executive Officer and our Chief Financial Officer, of the
      effectiveness of our disclosure controls and procedures as of the end of the
      period covered by this report. Based on that evaluation, our Chief Executive
      Officer and Chief Financial Officer concluded that our disclosure controls
      and
      procedures were effective as of June 30, 2007 to provide reasonable assurance
      that information required to be disclosed in our reports filed or submitted
      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.





*Limitations
      on the Effective of Controls*





Our
      management does not expect that our disclosure controls or our internal controls
      over financial reporting will prevent all error and fraud. A control system,
      no
      matter how well conceived and operated, can provide only reasonable, but no
      absolute, assurance that the objectives of a control system are met.
 Further, any control system reflects limitations on resources, and the
      benefits of a control system must be considered relative to its costs.
 These limitations also include the realities that judgments in
      decision-making can be faulty and that breakdowns can occur because of simple
      error or mistake. Additionally, controls can be circumvented by the individual
      acts of some persons, by collusion of two or more people or by management
      override of a control. A design of a control system is also based upon certain
      assumptions about potential future conditions; over time, controls may become
      inadequate because of changes in conditions, or the degree of compliance with
      the policies or procedures may deteriorate.  Because of the inherent
      limitations in a cost-effective control system, misstatements due to error
      or
      fraud may occur and may not be detected.




(b)
      Changes in Internal Controls





There
      was
      no change in our internal controls or in other factors that could affect these
      controls during our last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting that occurred during the our fiscal quarter ended June 30,
      2007.





**PART
      II**





**Item
      1. Legal Proceedings.**





From
      time
      to time we may be a defendant and plaintiff in various legal proceedings arising
      in the normal course of our business. We are currently not a party to any
      material pending legal proceedings or government actions, including any
      bankruptcy, receivership, or similar proceedings. In addition, management is
      not
      aware of any known litigation or liabilities involving the operators of our
      properties that could affect our operations. Should any liabilities be incurred
      in the future, they will be accrued based on management’s best estimate of the
      potential loss. As such, there is no adverse effect on our consolidated
      financial position, results of operations or cash flow at this time.
      Furthermore, management of the Company does not believe that there are any
      proceedings to which any director, officer, or affiliate of the Company, any
      owner of record of the beneficially owned more than five percent of the common
      stock of the Company, or any associate of any such director, officer, affiliate
      of the Company, or security holder is a party adverse to the Company or has
      a
      material interest adverse to the Company.






27





**Item
      1A. Risk Factors.**





There
      have been no material changes in our risk factors from those disclosed in Item 1A of our Annual Report on Form 10-KSB
      for the year ended March 31, 2007.





**Item 2.
      Unregistered Sales of Equity Securities and Use of
      Proceeds.**





*Issuance
      of Unregistered Securities*





The
      following unregistered securities have been issued by us during the three months
      ended June 30, 2007 and have not been previously disclosed in our Current
      Reports on Form 8-K:




None.





*Purchases
      of Equity Securities by the Issuer and Affiliated Purchasers.*





None.





**Item
      3. Defaults Upon Senior Securities.**





None.





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





**None.**





**Item 5.
      Other Information**





On
        August
        13, 2007, Mr. John G. Williams informed the Company that he was resigning
        from
        his position as Executive Vice President Exploration and Production effective
        as
        of November 1, 2007, and that he was also resigning from his position as
        a
        member of the board of directors of the Company effective immediately. Pursuant
        to the terms of Mr. Williams’ Employment Agreement entered into with the
        Company, dated August 29, 2006 (the “Agreement”), which was filed as Exhibit
        10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September
        9, 2006, Mr. Williams complied with the terms of the Agreement by giving
        the
        Company proper notice of his resignation. Mr. Williams will continue to serve
        as
        Executive Vice President Exploration and Production until November 1,
        2007. The Company’s Board of Directors has no immediate plans to appoint a
        replacement director to fill the vacancy created.





**Item 6.
      Exhibits**





**Exhibit**
              **Number**
            
            **Description**3(i)1
            
            Articles
                of Incorporation of Index Oil & Gas, Inc. (2)3(i)(2)
            
            Certificate
                of Amendment to the Articles of Incorporation of Index Oil and Gas
                Inc.
                (the "Company"), filed with the Secretary of the State of Nevada
                on
                November 28, 2005, changing the name of the Company from Thai One
                On Inc.
                to Index Oil & Gas, Inc., and increasing the number of authorized
                shares from 25,000,000 to 75,000,000. (1)3(i)(2)
            
            Certificate
                of Amendment to the Articles of Incorporation of Index Oil and Gas
                Inc.
                (the "Company"), filed with the Secretary of the State of Nevada
                on
                September 21, 2006, increasing the number of authorized shares from
                75,000,000 to 500,000,000, and creating a class of preferred stock,
                authorizing the issuance of 10,000,000 shares, $0.001 par value per
                share,
                of preferred stock. (3)3(ii)
            
            By-laws
                of Index Oil and Gas Inc. (2)31.1
            
            Certification
                of Lyndon West in satisfaction of Section 302 of the Sarbanes-Oxley
                Act of
                2002. *31.2
            
            Certification
                of Andrew Boetius in satisfaction of
                Section 302 of the
                Sarbanes-Oxley Act of 2002. *32.1
            
            Certification
                of the Chief Executive Officer pursuant to U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                *32.2
            
            Certification
                of the Chief Financial Officer pursuant to U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                *





*
      Filed
      herewith.


(1)
                Incorporated by reference to the Company’s Amended Current Report filed on
                Form 8-K/A with the SEC on March 15, 2006.(2)
                Incorporated by reference to the Company’s Registration Statement filed on
                Form SB-2 with the SEC on May 24, 2004.(3)
                Incorporated by reference to the Company’s Current Report filed on Form
                8-K with the SEC on September 28,
                2006.






28








**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.






**INDEXOIL
                AND GAS,
                INC.**Date: August
                14, 2007
            By:
            /s/ Lyndon
                WestLyndon
                WestChief
                Executive Officer





Date: August
                14, 2007
            By:
            /s/ Andrew
                BoetiusAndrew
                BoetiusChief
                Financial Officer (and acting Principal Accounting
                Officer)























29