SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




(Mark
one)




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




For the
quarterly period ended:June 30,
2008




OR





|_|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934




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)










Indicate
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, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):




Large
accelerated filer  [   
]                                                                                                Accelerated
filer  [    ]




Non-accelerated
filer    [   
]                                                                                
Smaller reporting company   [ X ]


(Do not
check if smaller reporting company)




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




The
number of shares of the registrant's Common Stock, $0.001 par value per share,
outstanding as of August 12, 2008 was 71,495,434.





1


Table
      of ContentsPart
      I –
              Financial
      InformationItem
      1. Financial Statements (unaudited)
              3Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              22Item
      3. Quantitative and Qualitative Disclosures about Market
    Risk
              29Item
      4T. Controls and Procedures
              30Part
      II –
              Other
      Information
              31Item
      1. Legal Proceedings
              31Item
      1A. Risk Factors
              31Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              31Item
      3. Defaults upon Senior Securities
              32Item
      4. Submission of Matters to a Vote of Security Holders
              32Item
      5. Other Information
              32Item
      6. Exhibits
              32Signatures
              
              33Exhibit
      IndexRule
      13a-14(a) Certification executed by Lyndon WestRule
      13a-14(a) Certification executed by Andrew BoetiusSection
      1350 Certification


2


PART
I


FINANCIAL
INFORMATION





Item
1. Financial Statements:





INDEX
OIL AND GAS INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS






June
      30, 2008
              
              
              March
      31, 2008(unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              2,074,802
              
              
              $
              2,537,302Accounts
      receivable
              
              
              915,712
              
              
              
              970,794Other
      receivables (Note 2)
              
              
              4,661
              
              
              
              5,402Other
      current assets (Note 2)
              
              
              31,919
              
              
              
              43,460Total
      current assets
              
              
              3,027,093
              
              
              
              3,556,958Oil
      and natural gas properties, full cost method, net of accumulated depletion
      (Notes 2, 3, 6 and 10)
              
              
              12,163,178
              
              
              
              12,595,091Property
      and equipment, net of accumulated depreciation (Note 3)
              
              
              28,173
              
              
              
              26,031Total
      oil and natural gas properties and property and equipment,
    net
              
              
              12,191,351
              
              
              
              12,621,122Total
      assets
              
              $
              15,218,444
              
              
              $
              16,178,080Liabilities
      and Stockholders' EquityCurrent
      liabilities:Accounts
      payable
              
              $
              305,764
              
              
              $
              667,133Accrued
      liabilities
              
              
              98,666
              
              
              
              358,761Total
      current liabilities
              
              
              404,430
              
              
              
              1,025,894Long-term
      liabilities:Asset
      retirement obligation (Note 5)
              
              
              88,209
              
              
              
              88,209Total
      liabilities
              
              
              492,639
              
              
              
              1,114,103Commitments
      and contingencies (Note 6)
              
              
              -
              
              
              
              -Stockholders'
      equity: (Notes 4, 6, 7, 8 and 9)Common
      stock, $0.001 par value; authorized 150 million shares; issued 71,473,994
      shares and
                71,369,880
      shares at June 30, 2008 and March 31, 2008, respectively (see Note
      7)
              
              
              71,474
              
              
              
              71,370Additional
      paid-in capital
              
              
              21,818,529
              
              
              
              21,738,764Other
      comprehensive (loss) income (Note 4)
              
              
              (3,729
              )
              
              
              1,510Accumulated
      deficit
              
              
              (7,160,470
              )
              
              
              (6,747,667
              )Total
      stockholders' equity
              
              
              14,725,804
              
              
              
              15,063,977Total
      liabilities and stockholders' equity
              
              $
              15,218,444
              
              
              $
              16,178,080





See
accompanying notes to unaudited condensed consolidated financial
statements


3




INDEX
OIL AND GAS INC.


CONDENSED
CONSOLIDATED STATEMENT OF LOSSES


(unaudited)




Three
      Months Ended
                June
      30,2008
              
              
              2007Revenues:Natural
      gas sales
              
              $
              1,071,543
              
              
              $
              63,951Oil
      sales
              
              
              357,534
              
              
              
              87,421Total
      revenues (Note 10)
              
              
              1,429,077
              
              
              
              151,373Operating
      Costs and Expenses:Lease
      operating expense
              
              
              190,340
              
              
              
              22,279Depreciation,
      depletion, and amortization
              
              
              766,183
              
              
              
              73,401Production
      taxes
              
              
              99,185
              
              
              
              11,970General
      and administrative costs
              
              
              792,096
              
              
              
              569,876Total
      operating costs and expenses
              
              
              1,847,805
              
              
              
              677,526Operating
      loss
              
              
              (418,728
              )
              
              
              (526,153
              )Other
      (income)Interest
      income
              
              
              (5,926
              )
              
              
              (89,316
              )Total
      other expense
              
              
              (5,926
              )
              
              
              (89,316
              )Loss
      before income taxes
              
              
              (412,803
              )
              
              
              (436,837
              )Income
      taxes benefit
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (412,803
              )
              
              $
              (436,837
              )Earnings
      per share:Basic
      and diluted
              
              $
              (0.01
              )
              
              $
              (0.01
              )Weighted
      average shares outstanding:Basic
      and diluted
              
              
              71,401,170
              
              
              
              65,739,234




See
accompanying notes to unaudited condensed consolidated financial
statements


4





INDEX
OIL AND GAS INC.


CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS


(unaudited)





Three
      Months Ended
                June
      30,2008
              
              
              2007Cash
      flows from operating activitiesNet
      loss
              
              $
              (412,803
              )
              
              $
              (436,837
              )Adjustments
      to reconcile net loss to net cash from operating
activitiesDepreciation,
      depletion and amortization
              
              
              766,183
              
              
              
              73,400Stock
      compensation expense
              
              
              79,869
              
              
              
              96,823Change
      in operating assets and liabilities:Decrease
      in receivables and other current assets
              
              
              67,302
              
              
              
              993(Decrease)
      increase in accounts payable and accrued expenses
              
              
              (620,309
              )
              
              
              25,322Net
      cash (used in) operating activities
              
              
              (119,758
              )
              
              
              (240,299
              )Cash
      flows from investing activitiesAcquisition
      of oil and gas properties and property and equipment
              
              
              (336,411
              )
              
              
              (1,316,932
              )Net
      cash (used in) investing activities
              
              
              (336,411
              )
              
              
              (1,316,932
              )Cash
      flows from financing activitiesProceeds
      from issuances of common stock
              
              
              -
              
              
              
              9,333Net
      cash provided by financing activities
              
              
              -
              
              
              
              9,333Effect
      of exchange rate changes on cash and cash equivalents
              
              
              (6,330
              )
              
              
              (3,934
              )Net
      (decrease) in cash and cash equivalents
              
              
              (462,499
              )
              
              
              (1,551,832
              )Cash
      and cash equivalents, beginning of period
              
              
              2,537,301
              
              
              
              10,141,125Cash
      and cash equivalents, end of period
              
              $
              2,074,802
              
              
              $
              8,589,293Supplemental
      non-cash disclosures:Cash
      paid during the period for taxes
              
              $
              -
              
              
              $
              -Cash
      (received) during the perod for interest
              
              $
              (5,926
              )
              
              $
              (89,316
              )Non-cash
      financing and investing transactions:Non-cash
      stock based compensation cost
              
              $
              79,869
              
              
              $
              96,823


See
accompanying notes to unaudited condensed consolidated financial
statements





5




INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
1 - ORGANIZATION AND OPERATIONS OF THE COMPANY





Organization





We are an
independent oil and natural gas company engaged in the acquisition, exploration,
development production and sale of oil and natural gas properties in North
America.  We have interests in properties in Kansas, Louisiana and
Texas.





Index Oil
and Gas Inc. (“Index”, “Index Inc.”, “the Company” or “we”, “us”, or “our”)
was incorporated in March 2004 under the laws of the State of Nevada and is
the parent company with four group subsidiaries: Index Oil & Gas Limited
(“Index Ltd”), 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.





These
interim financial statements have not been audited.  However, in the
opinion of management, all adjustments, consisting of only normal recurring
adjustments necessary for a fair presentation of the financial statements have
been included.  Results of operations for interim periods are not
necessarily indicative of the results of operations that may be expected for the
entire year.  In addition, these financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all disclosures required for financial statements prepared in conformity
with accounting principles generally accepted in the United States of
America.  These financial statements and notes should be read in
conjunction with the Company’s audited Consolidated/Combined Financial
Statements and the notes thereto included in the Company’s Annual Report on Form
10-K for the year ended March 31, 2008.





Overview





Production
rose approximately 530% from 16.9 MMcfe for the three months ended June 30,
2007 to 106.7 MMcfe for the three months ended June 30,
2008.  Correspondingly, revenues increased approximately 844% from
$0.2 million for the three months ended June 30, 2007 to $1.4 million for the
three months ended June 30, 2008.  The average price for natural gas
rose from $7.27 per Mcf to $12.09 per Mcf or 66%.  The average price
for oil rose 84% from $64.55 per Bbl to $118.90 per Bbl.  Overall, the
average price per Mcfe rose 50% from $8.94 per Mcfe to $13.39 per
Mcfe.





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.  Our
working interest (“WI”) in the Kansas Area of Mutual Interest ("AMI") 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 approximately
4.155% or 2.64%, respectively. The Company has committed to a current program of
14 wells for low-risk prospects in Stafford and Barton Counties. To-date, in
this program, the Company has participated in eight wells, of which in June
2008, four are now on production (including one Stafford County well which was
drilled under farm in arrangements and in which Index has a 2.5% WI), one is
completed and three have been plugged and abandoned. The two most recent wells
with a 3.25% working interest and a 2.64% net revenue interest are the Salem
#1-8 well which was completed in April 2008 and the Miller-McReynolds Unit 1-17
which was spudded in April 2008, completed
and produced 0.4 MMcfe in June 2008.  Further activity is expected at
approximately two wells per month dependent on commodity pricing and evaluation
of the program to date.  Total net production for the three months
ended June 30, 2008 for all Kansas wells was 4.4 MMcfe (thousand Mcf of natural
gas equivalent).


6


INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
1 - ORGANIZATION AND OPERATIONS OF THE COMPANY (continued)








The
Company’s onshore drilling program in Louisiana includes its interest in
the Walker 1 discovery well (WI 12.5%, approximate NRI 9.36%) which was recently
recompleted. The Walker 1 well produced 0.1MMcfe for the three months ended June
30, 2008.  In April 2007, the Company signed agreements to participate
in the Shadyside prospect, located in St. Mary Parish, Louisiana. Index had an
initial 15% WI in the prospect, reducing to 13.5% after prospect payout. The
Shadyside 1 well was drilled to a total depth of approximately 16,294 feet and
due to non-participation by the former operator, Index now has a 30% working
interest in the well.  The well has been hooked up and began flowing
to sales in January 2008 and net production was approximately 35.3 MMcfe for the
three months ended June 30, 2008.  Although the Company is considering
the potential of both deeper and shallower prospects on current leases,
Shadyside is considered to be a single well project.





The
Company’s onshore drilling program in Texas includes its interest in Vieman 1
(19.5% WI, approximate NRI 14.56%) in Brazoria County Texas which began
production in February 2007 and has been recompleted.   The Vieman
well had net production of 1.8 MMcfe for the three months ended June 30, 2008
and further plans are being evaluated.  The Hawkins 1 well (WI 12.5%,
approximate NRI 10.01%), also in Texas, in Matagorda County, began production
into the local pipeline grid in January 2008 and had net production of 6.0 MMcfe
for the three months ended June 30, 2008.  The Friedrich Gas Unit 1 (WI
37.5%, approximate NRI 28.125%), in Victoria County, had net production of
approximately 8.6 MMcfe for the three months ended June 30, 2008, while the
Schroeder Gas Unit 1 (WI 37.5%, approximate NRI 28.125%), in Goliad County, had
net production of  0.9 MMcfe during the same period. The operator is
preparing to remediate the Schroeder Gas Unit 1 in order to restore production
levels.




In June
2008, an agreement was reached between the operator and the non-operators of the
Ilse 1 well which encompassed (among others) full, mutual releases of all claims
against all parties, except one, including any claims of the operator against
non-operators for monies allegedly owed under the joint interest billing, and
the assignment of non-operators’ interest in the well to the
operator.  No monies were paid in the settlement and a total of $0.3
million in costs accrued at March 31, 2008 were discharged and reversed out of
capital costs.





The
George Cason 1 well, the Cason 2 well and the Cason 3 well, drilled on the Fern
Lake prospect in Nacogdoches County, Texas had net production of approximately
1.6 MMcfe, 3.7 MMcfe and 1.4 MMcfe, respectively for the three months ended June
30, 2008. Index currently has a 25.0% WI and an approximate 18.7% NRI in all
three Cason wells. The Company is currently participating, with other partners,
in geological analyses on other formations encountered in the
wells.  The Cason wells are proving to be challenging in terms of
volumes and maintaining production. The operator is currently conducting a
series of workover procedures in the wells in an effort to increase production
levels.


7




INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





The
Company is participating in an exploration agreement at 20% WI in
the Supple Jack Creek lease area. The first well, HNH Gas Unit 1, targeted
gas in the Edwards Limestone in Lavaca County, Texas. The well reached a total
depth of approximately 15,000 feet, was sidetracked laterally to approximately
16,000 feet and is currently suspended pending further evaluation of potential
logged pay intervals. Subject to results, the Company will evaluate additional
drilling, particularly in a success case. The gas unit designated for the well
covers 566.59 acres. However, the contract AMI for the overall prospect extends
over a much larger area, of which approximately 5,000 gross and net acres are
currently under lease.





The
Ducroz 1 (WI 7.5%, approximate NRI 5.25%), which targets gas in stacked Miocene
objectives, produced 15.1 MMcfe for the three months ended June 30,
2008.  Ducroz 1 is considered by the Company to be a single well
project.





The
Outlar 1 (approximate NRI 8.2% before payout, 7.0% after payout) produced of
27.8 MMcfe net for the three months ended June 30, 2008.  The Company
views the West Wharton project as potentially significant for the Company as it
has existing leases on up to five well-defined prospects. The second well in
this prospect, Stewart 1 was spudded in May 2008 and reached total depth at
11,922 feet in June 2008.  The targeted reservoir section was
penetrated and contained gas-bearing intervals which were deemed to be
sub-commercial.  A shallower sand is now being tested and has the
potential to be productive.  The Company has also participated in
additional leasing opportunities with the operator.





In July
2007, the Company announced that it has signed a Purchase and Sale Agreement to
acquire a 5.0% WI and approximate 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,
Armour-Runnells 1, was spudded in April 2008, is currently being drilled and
targets gas in the deep, high pressure, high temperature Wilcox
formation.  The Company anticipates this well to have the highest
potential impact and to be the highest risk well in its portfolio.










8





INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





The
Company has provided a discussion of significant accounting policies, estimates
and judgments in its Annual Report on Form 10-K for the year ended March 31,
2008.





Principles of
Consolidation/Basis of Presentation





The
unaudited condensed consolidated financial statements as of June 30, 2008 and
March 31, 2008 and for the three months ended June 30, 2008 and 2007 include the
accounts of the Company and its wholly owned subsidiaries, Index USA, Index
Investments, Index Offshore, Index Inc. and Index Ltd, after eliminating all
significant intercompany accounts and transactions.





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 (“SFAS 157”). Prior to
thisSFAS 157, there were
different definitions of fair value and limited guidance for applying those
definitions in GAAP. SFAS 157 provides the definition to increase consistency
and comparability in fair value measurements and for expanded disclosures about
fair value measurements. SFAS 157 emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. SFAS 157 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. SFAS 157 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. SFAS 157 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. In November 2007, the FASB deferred the implementation of SFAS 157 for
non-financial assets and liabilities until October 2008.  The Company
partially adopted this standard on April 1, 2008, as to financial assets and
liabilities and has chosen to defer the implementation of nonfinancial assets
and liabilities in accordance with the FASB deferral in Staff Position FAS
157-2. The adoption of this standard did not have an impact on
its consolidated financial position results of operations or cash flows as
the Company has not engaged in any financial activities to which this
standard would apply.





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” (“SFAS 159”), 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. SFAS 159 applies to all entities, including not-for profit
organizations. Most of the provisions of SFAS 159 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 
also elected to adopt this standard on April 1, 2008, but has not elected
to present assets and liabilities at fair value that  were not 
required to be measured at fair value prior to adoption of SFAS
159.





Accounting for Bad Debts and
Allowances





Bad debts
and allowances are provided based on historical experience and management's
evaluation of outstanding accounts receivable. The management periodically
evaluates past due or delinquency of accounts receivable in evaluating its
allowance for doubtful accounts. There was no allowance for doubtful accounts at
June 30, 2008 and March 31, 2008.


9




INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Other Current
Assets





Other
receivables at June 30, 2008 and March 31, 2008, of $4,661 and $5,402,
respectively, consist primarily of value added tax recoverable in the United
Kingdom by the Company. Other current assets of $31,919 and $43,460 at June 30,
2008 and March 31, 2008, respectively, consist of prepaid expenses.





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 loss in the equity
section of the Consolidated Balance Sheet and totaled $(3,729) and $11,278
as of June 30, 2008 and June 30, 2007, respectively, and foreign currency
transaction (losses)/gains are included in the Consolidated Statement of
Operations.





10


INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





New Accounting
Pronouncements Not Yet Adopted





Disclosures about Derivative
Instruments and Hedging Activities.  In May 2008, the FASB
issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging
Activities-an Amendment to FASB Statement No. 133” (“SFAS
161”).  Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, establishes, among other things, the
disclosure requirements for derivative instruments and for hedging activities
(“Statement 131”). SFAS 161 amends and expands the disclosure requirements of
Statement 133 with the intent to provide users of financial statements with an
enhanced understanding of:





a.
            How
      and why an entity uses derivative instrumentsb.
            How
      derivative instruments and related hedged items are accounted for under
      Statement 133 and its related interpretationsc.
            How
      derivative instruments and related hedged items affect an entity’s
      financial position, financial performance, and cash
  flows.





To meet
those objectives, SFAS 161 requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of and gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements.  
SFAS 161 shall be effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. Early application is
encouraged.  SFAS 161 encourages but does not require disclosures for
earlier periods presented for comparative purposes at initial adoption. In years
after initial adoption, this Statement requires comparative disclosures only for
periods subsequent to initial adoption.  The adoption of SFAS 161 is
not expected to have an impact on the Company’s consolidated financial position,
results of operations or cash flows as the Company has not engaged in any
derivative instruments or hedging activities.





The Hierarchy of Generally Accepted
Accounting Principles.  In May 2008, the FASB issued SFAS No.
162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”).   SFAS 162 identifies the sources of accounting principles and
the framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the United States (the GAAP
hierarchy).  SFAS 162 shall be effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board (PCAOB) amendments to
AU Section 411, The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting
Principles.  An entity that has and continues to follow an
accounting treatment in category (c) or category (d) as of March 15, 1992, need
not change to an accounting treatment in a higher category ((b) or (c)) if its
effective date was before March 15, 1992.  For pronouncements whose
effective date is after March 15, 1992, and for entities initially applying an
accounting principle after March 15, 1992 (except for EITF consensus positions
issued before March 16, 1992, which become effective in the hierarchy for
initial application of an accounting principle after March 15, 1993), an entity
shall follow this Statement.  Any effect of applying the provisions of
SFAS 162 shall be reported as a change in accounting principle in accordance
with FASB Statement No. 154, Accounting Changes and Error
Corrections (“SFAS 154”). An entity shall follow the disclosure
requirements of SFAS 154, and additionally, disclose the accounting principles
that were used before and after the application of the provisions of SFAS 154
and the reason why applying SFAS 154 resulted in a change in accounting
principle. The Company does not expect the adoption of SFAS 162 to have a
material impact on its consolidated financial position, results of
operations or cash flows.


11





INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Business
Combinations.  In December 2007, the FASB issued SFAS No.
141(R), "Business Combinations" ("SFAS 141(R)"), which replaces SFAS No. 141.
SFAS No. 141(R) establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree and the goodwill acquired. SFAS 141(R) also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS 141(R) is effective for fiscal years
beginning after December 15, 2008. The adoption of SFAS 141(R) will have an
impact on accounting for business combinations once adopted, but the
effect will be dependent upon acquisitions after that
time.





Noncontrolling
Interests.  In December 2007, the FASB issued SFAS No. 160,
"Noncontrolling Interests in Consolidated Financial Statements - an amendment of
Accounting Research Bulletin No. 51" ("SFAS 160"), which establishes accounting
and reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent's ownership
interest and the valuation of retained non-controlling equity investments when a
subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the non-controlling
owners. SFAS 160 is effective for fiscal years beginning after December 15,
2008. The Company does not currently have any noncontrolling interests in
subsidiaries , but once adopted, the effects will be dependent upon acquisitions
after that time.


12


INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





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, 2008 and March 31, 2008 consist of the following:




June
      30,
                2008
              
              
              March
      31,
                2008Proved
      properties
              
              $
              10,840,090
              
              
              $
              11,181,430Unevaluated
      and unproved properties
              
              
              3,494,952
              
              
              
              2,821,271Total
      oil and natural gas properties-onshore
              
              
              14,335,042
              
              
              
              14,002,701Less:
      Accumulated depletion
              
              
              (2,171,864
              )
              
              
              (1,407,610
              )Net
      oil and natural gas properties-onshore
              
              $
              12,163,178
              
              
              $
              12,595,091


Included
in the Company's oil and gas properties are asset retirement obligations
of  $88,209 as of June 30, 2008 and March 31, 2008,
respectively.





Depletion
expense was $764,254 and $72,648 or $42.98 and $25.75 per barrel of production
for the three months ended June 30, 2008 and 2007, respectively.





At June
30, 2008 and March 31, 2008, the Company excluded the following capitalized
costs from depletion, depreciation and amortization:


June
      30,
                2008
              
              
              March
      31,
                2008Not
      subject to depletion-onshore:Exploration
      costs
              
              $
              2,577,010
              
              
              $
              1,960,886Cost
      of undeveloped acreage
              
              
              917,942
              
              
              
              860,385Total
      not subject to depletion
              
              $
              3,494,952
              
              
              $
              2,821,271
  It is
anticipated that the cost of undeveloped acreage of $0.9 million and exploration
costs of $2.6 million will be included in depreciation, depletion and
amortization when the related projects are planned and drilled and completed, as
appropriate. Included in exploration costs and undeveloped acreage are costs of
approximately $1.7 million related to exploration costs for the HNH Gas Unit 1,
approximately $0.4 million in undeveloped acreage for the Supple Jack Creek
prospect, approximately $0.1 million in undeveloped acreage for the West Wharton
prospect, approximately $0.4 million related to exploration costs for the
Stewart 1, exploration costs and undeveloped acreage of approximately $0.5
million and $0.1 million, respectively, for the Armour-Runnells 1 and
approximately $0.3 million in undeveloped acreage for the Alligator Bayou
prospect.


13





INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





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





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, 2008 and March 31, 2008 were as
follows:




June
      30,
                2008
              
              
              March
      31,
                2008Computer
      costs and furniture and fixtures, including foreign translation
      adjustment
              
              $
              46,066
              
              
              $
              42,069Less:
      accumulated depreciation
              
              
              (17,894
              )
              
              
              (16,038
              )Total
      property and equipment, net
              
              $
              28,172
              
              
              $
              26,031




Depreciation
expenses from continuing operations amounted to $1,929 and $753 for the three
months ended June 30, 2008 and 2007, respectively. There was no interest
capitalized in property, plant and equipment at June 30, 2008 and
2007.





NOTE
4 - COMPREHESIVE LOSS





For the
three months ended June 30, 2008 and 2007, comprehensive income consisted of the
amounts listed below.




Three
      Months Ended June 30,2008
              
              
              2007Accumulated
      other comprehensive (loss) income beginning of period
              
              
              $
              1,510
              
              
              
              
              
              $
              15,399Net
      income
              
              $
              (412,803
              )
              
              
              
              
              
              $
              (436,837
              )Foreign
      currency translation
              
              
              (5,239
              )
              
              
              
              
              
              
              (4,121
              )Total
      other comprehensive income (loss)
              
              
              (5,239
              )
              
              
              (5,239
              )
              
              
              (4,121
              )
              
              
              (4,121
              )Comprehensive
      income
              
              $
              (418,041
              )
              
              
              
              
              
              $
              (440,958
              )Accumulated
      other comprehensive (loss) income
              
              
              
              
              
              $
              (3,729
              )
              
              
              
              
              
              $
              11,278


14





INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
5 - ASSET RETIREMENT OBLIGATION





Activity
related to the Company’s ARO during the three months ended June 30, 2008 is as
follows:




Three
      Months Ended June 30, 2008ARO
      as of March 31, 2008
              
              $
              88,209Revision
      of previous estimates
              
              
              -Liabilities
      incurred during period
              
              
              -Accretion
      expense
              
              
              -ARO
      as of June 30, 2008
              
              $
              88,209




Of the
total ARO, $88,209 is classified as a long-term liability at June 30, 2008. For
each of the three months ended June 30, 2008 and 2007, the Company recognized no
accretion expense related to its ARO, due to the assumption of a full offset of
salvage values.




15


INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
6 - 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 month-to-month lease related to
corporate housing in Houston 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 the
consultant terminates such engagement by written notice.





Stockholder
Matters





There
were no stockholder matters during the quarter ended June 30, 2008.





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.




16




INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
7 - CAPITAL STOCK





During
the quarter ended June 30, 2008:




Three
      Months Ended June 30, 2008Balance
      as of March 31, 2008
              
              
              71,369,880Issuance
      of common stock upon vesting
              
              
              104,114Balance
      as of June 30, 2008
              
              
              71,473,994





In June
2008, a total of 85,714 shares of restricted stock became fully vested and were
issuable to two consulting firms.  In addition, on June 1, 2008, the
Company revised its agreement with one of the consulting firms,  whereby
the contractor will receive 715 shares of restricted stock for the first ten
equivalent work days per month and 1,250 shares of restricted stock for each
equivalent work day exceeding 10 during the same month.  The market
price per share will be calculated on the close of market price on the last
working day of the month for June 2008 and thereafter,  at three monthly
intervals on the closing work day of that period.  The contractor was
granted 18,400 shares of vested restricted stock in June 2008 at a market price
of $0.55 per share.




NOTE
8 - 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. allowed for the issuance of options to purchase 4,577,526
shares of Common Stock at $0.35 per share to newly appointed directors and
officers of Index Inc. that had held options to purchase ordinary shares of
Index Ltd. prior to the completion of the acquisition.  These options
to purchase shares are fully vested and therefore, no compensation expense was
recorded for these options during the three months ended June 30,
2008.





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 January 20, 2006; (2) 25% on January 20, 2007; and (3) 25% on January 20,
2008. The options granted are exercisable at $0.35 per share. 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 ofoffice 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.




17







INDEX
OIL AND GAS INC.




NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
8 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION (continued)





The
remaining compensation expense associated with total unvested awards as of June
30, 2008 was $39,772 and will be recognized during this fiscal
year.   Total compensation expense for the three months ended
June 30, 2008 and 2007 was $79,869 and $96,823 respectively.





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, stockholders and others at June 30, 2008:




Number
      of Shares
                
                
                Weighted
      Average Exercise Price Per ShareOutstanding
      at March 31, 2008
                
                
                5,202,526
                
                
                $
                0.42Granted
                
                
                -
                
                
                
                -Exercised
                
                
                -
                
                
                
                -Canceled
      or expired
                
                
                -
                
                
                
                -Outstanding
      at June 30, 2008
                
                
                5,202,526
                
                
                $
                0.42




The
Company has assumed an annual forfeiture rate of 5 % for the awards granted
in 2008 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
      ExercisableExercise
      Price
              
              
              Number
                Outstanding
              
              
              Weighted
      Average Remaining Contractual Life (Years)
              
              
              Weighted
      Average Exercise Price
              
              Number
                  Exercisable
              
              
              Weighted
      Average Exercise Price$
              0.35
              
              
              
              4,577,526
              
              
              
              2.56
              
              
              $
              0.35
              
              
              
              4,577,526
              
              
              $
              0.35$
              1.42
              
              
              
              250,000
              
              
              
              0.08
              
              
              $
              1.42
              
              
              
              250,000
              
              
              $
              1.42$
              0.83
              
              
              
              125,000
              
              
              
              4.22
              
              
              $
              0.83
              
              
              
              62,500
              
              
              $
              0.83$
              0.60
              
              
              
              100,000
              
              
              
              4.51
              
              
              $
              0.60
              
              
              
              50,000
              
              
              $
              0.60$
              0.51
              
              
              
              150,000
              
              
              
              4.57
              
              
              $
              0.51
              
              
              
              75,000
              
              
              $
              0.51$
              0.41
              
              
              
              5,202,526
              
              
              
              2.57
              
              
              $
              0.41
              
              
              
              5,015,026
              
              
              $
              0.41


18




INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE
8 - OPTIONS AND WARRANTS AND STOCK-BASED COMPENSATION (continued)





Warrants





The
following tables summarize the changes in warrants outstanding and exercised,
excluding 5,541,182 contingent warrants potentially issuable in the
$2.77 million private placement in February 2008, 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 ShareOutstanding
      and exercisable at March 31, 2008
            
            
            901,421
            
            
            $
            0.13Granted
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Canceled
      or expired
            
            
            -
            
            
            
            -Outstanding
      at June 30, 2008
            
            
            901,421
            
            
            $
            0.13




Options
      Outstanding
                
                Options
      ExercisableNumber
                
                
                Weighted
      Average
                  Remaining
      Contractual
                
                
                Weighted
      Average
                
                
                Number
                
                
                Weighted
      AverageExercise
      Price
                
                
                Outstanding
                
                
                Life
    (Years)
                
                
                Exercise
      Price
                
                
                Exercisable
                
                
                Exercise
      Price$
                0.07
                
                
                
                138,655
                
                
                
                2.25
                
                
                $
                0.07
                
                
                
                138,655
                
                
                $
                0.07$
                0.14
                
                
                
                143,037
                
                
                
                2.25
                
                
                $
                0.14
                
                
                
                143,037
                
                
                $
                0.14$
                0.14
                
                
                
                253,961
                
                
                
                2.25
                
                
                $
                0.14
                
                
                
                253,961
                
                
                $
                0.14$
                0.14
                
                
                
                339,033
                
                
                
                2.25
                
                
                $
                0.14
                
                
                
                339,033
                
                
                $
                0.14$
                0.14
                
                
                
                26,735
                
                
                
                2.25
                
                
                $
                0.14
                
                
                
                26,735
                
                
                $
                0.14$
                0.13
                
                
                
                901,421
                
                
                
                2.25
                
                
                $
                0.13
                
                
                
                901,421
                
                
                $
                0.13






19


INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008





NOTE 9 - 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 three months ended June 30, 2008 and 2007, excluded
from diluted earnings per share are 5,628,947 and 5,503,947, respectively of
warrants and/or options to acquire common stock and which excluded 475,000 of
out of the money options at June 30, 2008.





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


Three
      Months Ended
                June
      30,2008
              
              
              2007Basic
      weighted average number of shares outstanding
              
              
              71,401,170
              
              
              
              65,739,234Dilution
      effect of stock option and awards at the end of the period
              
              
              -
              
              
              
              -Diluted
      weighted average number of shares outstanding
              
              
              71,401,170
              
              
              
              65,739,234Anti-dilutive
      stock awards and shares
              
              
              5,628,947
              
              
              
              5,503,947




NOTE
10 - 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, 2008 and as of June 30, 2008, the Company owned
oil and natural gas interests in three main geographic areas in the United
States. Geographic revenue and property, plant and equipment information below
is based on physical location of the assets at the end of each
period.




June
      30, 2008Total
      Oil and Gas Revenue
              
              
              Total
      Oil and Gas Assets (1)Kansas
              
              $
              77,032
              
              
              $
              875,628Louisiana
              
              
              509,180
              
              
              
              2,943,195Texas
              
              
              842,865
              
              
              
              10,603,767$
              1,429,077
              
              
              $
              14,422,590


(1)
            Total
      assets at June 30, 2008 are reported gross. Under the full cost method of
      accounting for oil and gas properties, depreciation, depletion and
      amortization is not allocated to
properties.


20





INDEX
OIL AND GAS INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


JUNE
30, 2008




NOTE
11 - SUBSEQUENT EVENTS




For the
month of June 2008 and for the first 18 days of July 2008, Eaglwing, L.P.
purchased substantially all of the crude oil production of certain properties in
Barton and Stafford Counties, KS, in which Index has a working
interest.   Our operator then ceased selling crude oil production
to said entity.  As publicly reported, on July 22, 2008, SemCrude, L.P.
("SemCrude") and certain of its affiliates, including Eaglwing, L.P.
("Eaglwing"), voluntarily filed for bankruptcy in the United States Bankruptcy
Court for the District of Delaware.  Index has not received payment for
such sales. Recovery on such accounts receivable will depend on, among other
things, the bankruptcy process governing SemCrude and Eaglwing.




By
demand for Reclamation of Goods dated July 25, 2008, our operator demanded the
return of all such oil received by Eaglwing for the period from June 7, 2008
through July 21, 2008.  The demand was made by our operator for itself and
as agent for all interest owners, including Index USA, on whose behalf our
operator sold oil to Eaglwing.  Subsequently, Index executed a Letter of
Authorization to our operator to act as its agent and attorney-in-fact to take
certain measures on Index’s behalf in, and in connection with, the Bankruptcy
Proceedings.




The
Company has not made a provision against these sales, pending more information
on the recovery / reclamation process and as the amount is deemed
immaterial.











21


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 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;




22




•
            
            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.


23




Overview





Organization





We are an
independent oil and natural gas company engaged in the acquisition, exploration,
development production and sale of oil and natural gas properties in North
America.  We have interests in properties in Kansas, Louisiana and
Texas.





Index Oil
and Gas Inc. (“Index”, Index Inc.”, “the Company” or “we”, “us”, or “our”)
was incorporated in March 2004 under the laws of the State of Nevada and is
the parent company with four group subsidiaries: Index Oil & Gas Limited
(“Index Ltd”), 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.





Overview





Production
rose approximately 530% from 16.9 MMcfe for the three months ended June 30,
2007 to 106.7 MMcfe for the three months ended June 30,
2008.  Correspondingly, revenues increased approximately 844% from
$0.2 million for the three months ended June 30, 2007 to $1.4 million for the
three months ended June 30, 2008.  The average price for natural gas
rose from $7.27 per Mcf to $12.09 per Mcf or 66%.  The average price
for oil rose 84% from $64.55 per Bbl to $118.90 per Bbl.  Overall, the
average price per Mcfe rose 50% from $8.94 per Mcfe to $13.39 per
Mcfe.





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.




24




RESULTS
OF OPERATIONS




Three
Months Ended June 30, 2008 Compared to Three Months Ended June 30,
2007





We had a
net loss of $412,803 for the three months ended June 30, 2008 compared to a net
loss of $436,837 for the three months ended June 30, 2007.  Revenue
increased by $1.3 million, but was offset by general and administrative costs of
$0.8 million, which increased by $0.2 million, increased
depletion of $0.7 million to $0.8 million and lower interest
income on capital previously raised and used in our operations.  The
following table summarizes key items of revenue and their related increase
(decrease) for the fiscal three months ended June 30, 2008 and
2007.




Three
      Months Ended
                June
      30,2008
              
              
              2007
              
              
              %
      Change
                Increase/
                (Decrease)Total
      revenues
              
              $
              1,429,077
              
              
              $
              151,373
              
              
              
              844
              %Production:Gas
      (Mcf)
              
              
              88,650
              
              
              
              8,800
              
              
              
              907
              %Oil
      (MBbls)
              
              
              3,007
              
              
              
              1,354
              
              
              
              122
              %Total
      Equivalents (Boe)
              
              
              17.783
              
              
              
              2.821
              
              
              
              530
              %Total
      Equivalents (Mcfe)
              
              
              106.690
              
              
              
              16.924
              
              
              
              530
              %$
      per unit:Avg.
      Gas Price per Mcf
              
              $
              12.09
              
              
              $
              7.27
              
              
              
              66
              %Avg.
      Oil Price per Bbl
              
              
              118.90
              
              
              
              64.55
              
              
              
              84
              %Avg.
      Price per Boe
              
              
              80.36
              
              
              
              53.66
              
              
              
              50
              %Avg.
      Price per Mcfe
              
              
              13.39
              
              
              
              8.94
              
              
              
              50
              %


For the
three months ended June 30, 2008, oil and natural gas sales increased $1.3
million, from the same period in 2007, to $1.4 million. The increase for the
quarter was primarily due to the increase in production volumes of 89.8 MMcfe
from 16.9 MMcfe to 106.7 MMcfe or approximately $1.2 million of the $1.3 million
increase. The increase in volumes of 89.8 MMcfe was primarily due to new
volumes from Outlar of 27.8 MMcfe, Ducroz of 15.1 MMcfe, Shadyside of 35.3
MMcfe, Friedrich of 3.8 MMcfe and Schroeder of 0.9 MMcfe and our Kansas wells
which increased, in total, by 0.4 MMcfe, offset by Walker which decreased 6.1
MMcfe. The Cason wells also contributed 6.7 MMcfe along with Hawkins which
contributed 6.0 MMcfe.  Total oil production was 3.0 MBbls and total
natural gas production was 88.7 MMcf.





Additionally,
our revenue variance related to year on year price changes was an  increase
with our average price per MMcfe increasing by $4.45, or 50.0%, in fiscal 2008
to $13.39 per Mcfe from $8.94 per Mcfe in fiscal 2007 and also reflecting an
increased proportion of natural gas volumes which had a lower energy equivalent
value. This is based on weighted average gas volumes at an increase in price of
$4.82 per Mcf and weighted average oil volumes at an increase in price per
barrel of $54.33. We benefited from increased product prices in the quarter
ended June 30, 2008, both for oil and natural gas.  However, our
production and sales mix has switched to become predominantly natural gas
comprised and the year on year price increase on a Boe basis is less significant
than the absolute price changes for each product, due to natural gas realizing a
lower energy equivalent price compared to crude oil.




25


Three
      Months Ended
                June
      30,2008
              
              
              2007
              
              
              %
      Change
                Increase/
                (Decrease)Lease
      operating expense
              
              $
              190,340
              
              
              $
              22,279
              
              
              
              754
              %Production
      taxes
              
              
              99,185
              
              
              
              11,970
              
              
              
              729
              %Depreciation,
      depletion and amortization
              
              
              766,183
              
              
              
              73,400
              
              
              
              944
              %General
      and administrative costs:General
      and administrative costs
              
              
              712,227
              
              
              
              473,053
              
              
              
              51
              %Stock-based
      compensation
              
              
              79,869
              
              
              
              96,823
              
              
              
              (18
              %)$
      per unit:Avg.
      lease operating expense per Mcfe
              
              $
              1.78
              
              
              $
              1.32
              
              
              
              35
              %Avg.
      production taxes per Mcfe
              
              
              0.93
              
              
              
              0.71
              
              
              
              31
              %Avg.
      DD&A per Mcfe
              
              
              7.18
              
              
              
              4.34
              
              
              
              65
              %Avg.
      G&A per McfeAvg.
      G&A per Mcfe
              
              
              6.68
              
              
              
              27.95
              
              
              
              (76
              %)Avg.
      Stock-based compensation per Mcfe
              
              
              0.75
              
              
              
              5.72
              
              
              
              (87
              %)


Lease
operating expenses increased $0.2 million for the three months ended June 30,
2008 as compared to the same period in 2007. The increase was primarily due to
production from new wells that came on production after the first quarter of
2007 or the Cason wells, Ducroz, Shadyside, Hawkins, Outlar 1, Friedrich and
Schroeder wells, together with new wells that came on production in our Kansas
properties.   On a per unit basis, lease operating expenses
increased 35% from $1.32 per Mcfe in 2007 to $1.78 per Mcfe in 2007, despite an
increase in production volumes.





Taxes
other than income increased $0.1 million for the three months ended June 30,
2008 as compared to the same period in 2007 due to higher oil and gas revenues
and on a per unit basis increased $0.22 per Mcfe to $0.93 per
Mcfe.  The primary increase is attributable to the increase in
production for new wells located in Texas in the three months ended June 30,
2008.  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, 2008 increased 51% or $0.2 million to $0.7 million
compared to the same period in 2007, although on a per unit basis, decreased
$21.27 per Mcfe to $6.68 per Mcfe.  The primary reason for the
increase was consulting fees and public company costs which increased by
approximately $0.3 million with the implementation of Sarbanes Oxley 404
compliance efforts, continued SEC filing fees, investor relations costs and
other professional fees as the Company pursues growth strategies.





Stock-based
compensation expense was relatively flat or approximately $80,000 for the three
months ended June 30, 2008, compared to approximately $97,000 for stock-based
compensation in the same period of 2007. This is primarily due to the timing of
vesting on larger stock-based awards granted in previous years to officers and
directors, including those at the effective date of the reverse merger with
Index Ltd., offset by a smaller awards of stock to officers and consultants in
fiscal year 2007 and 2008.  During the three months ended June 30,
2008 and 2007, the Company did not grant any stock options and
warrants.  On a per unit basis, stock-based compensation decreased
$4.97 per Mcfe to $0.75 per Mcfe.





Depletion
expense increased $0.7 million from the same period in 2007 to $0.8 million for
the three months ended June 30, 2008. The increase was primarily due to
production from new wells that came on production after the first quarter of
2007 or the Cason wells, Ducroz, Shadyside, Hawkins, Outlar 1, Friedrich and
Schroeder wells, together with new wells that came on production in our Kansas
properties.   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 reserve volume for the
evaluated properties.  On a per unit basis, depletion expense
increased from $4.34 per Mcfe to $7.18 per Mcfe.





Interest
income and other decreased $0.1 million for the three months ended June 30, 2008
compared to the same period 2007. This decrease is due to interest income earned
on an equity fund raising in prior fiscal years.





There was
no provision for income taxes for the fiscal three months ended 2008 and 2007
due to a 100% valuation allowance recorded for the three months ended June 30,
2008 and 2007, 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.


26


LIQUIDITY
AND CAPITAL RESOURCES





Operating
cash flow 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. Cash flows continued to be used in
operating activities, inclusive of working capital movements, and did not
contribute to funding exploration and development expenditures. See below for
additional discussion and analysis of cash flow.




Three
      Months Ended June 30,2008
              
              
              2007Cash
      flows provided by operating activities
              
              $
              (119,758
              )
              
              $
              (240,299
              )Cash
      flows used in investing activities
              
              
              (336,411
              )
              
              
              (1,316,932
              )Cash
      flows provided by financing activities
              
              
              -
              
              
              
              9,333Effect
      of exchange rate changes
              
              
              (6,330
              )
              
              
              (3,934
              )Net
      increase (decrease) in cash and cash equivalents
              
              $
              (462,499
              )
              
              $
              (1,551,832
              )


Operating
Activities





Net cash
outflow from operating activities during the three months ended June 30, 2008
was $0.1 million which was a decrease in use of cash of $0.1 million from $0.2
million net cash outflow during the three months ended June 30, 2007. The
quarter ended June 30, 2008 generated positive cash flow from operating
activities prior to the impact of negative working capital movements, which
netted a small net cash outflow at the operating level.





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, 2008 was $0.3
million, which was a decrease of $1.0 million from $1.3 million of cash used in
investing activities during the three months ended June 30, 2007. This decrease
was primarily due to decreased exploration and development activity in the three
months ended June 30, 2008 versus June 30, 2007.  Current period
capital spending was primarily on the Alligator Bayou prospect of approximately
$0.3 million and the Armour-Runnells 1 well of $0.3 million, offset by the
reversal of costs on the Ilse 1 well of approximately $0.3
million.  The activity included in prior year capital spending was
primarily for drilling operations on the Cason 1 well of $0.3 million, initial
combined expenditures on the Shadyside and Alligator Bayou prospects of $0.5
million and an aggregate of spending on other projects and wells of $0.5
million.





Financing
Activities





There was
no cash used or provided by financing activities during the three months ended
June 30, 2008 as no proceeds were received for capital transactions and no
financing or debt transactions occurred.   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.




27





As of
June 30, 2008 and 2007, 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, are expected to sufficiently 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.
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, 2008, we did not have any off-balance sheet arrangements.





Plan
of Operation for Fiscal Year 2009





On an annual basis, we generally expect
to 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 continuing
work programs on certain of our oil and gas properties described in the Results
of Operations.





Inflation





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


28


Item
3. Quantitative and Qualitative Disclosures About Market Risk.





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.


29





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, the Company
is not exposed to interest rate sensitivity at June 30, 2008.





Item
4T. Controls and Procedures.





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, 2008 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.





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.





30




PART
II


OTHER
INFORMATION





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.




For the
month of June 2008 and for the first 18 days of July 2008, Eaglwing, L.P.
purchased substantially all of the crude oil production of certain properties in
Barton and Stafford Counties, Kansas, in which Index has a working
interest.   Our operator then ceased selling crude oil production
to said entity.  As publicly reported, on July 22, 2008, SemCrude, L.P.
("SemCrude") and certain of its affiliates, including Eaglwing, L.P.
("Eaglwing"), voluntarily filed for bankruptcy in the United States Bankruptcy
Court for the District of Delaware.  Index has not received payment for
such sales. Recovery on such accounts receivable will depend on, among other
things, the bankruptcy process governing SemCrude and Eaglwing.




By demand
for Reclamation of Goods dated July 25, 2008, our operator demanded the return
of all such oil received by Eaglwing for the period from June 7, 2008 through
July 21, 2008.  The demand was made by our operator for itself and as agent
for all interest owners, including Index USA, on whose behalf our operator sold
oil to Eaglwing.  Subsequently, Index executed a Letter of Authorization to
our operator to act as its agent and attorney-in-fact to take certain measures
on Index’s behalf in, and in connection with, the Bankruptcy
Proceedings.




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-K for
the year ended March 31, 2008.





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





Issuance
of Unregistered Securities





None.





Purchases
of Equity Securities by the Issuer and Affiliated Purchasers.





None.





31


Item
3. Defaults Upon Senior Securities.





None.





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





None.





Item 5.
Other Information.





None.





Item 6.
Exhibits.





31.1
            
            Certification
      of Periodic Financial Reports by Lyndon West in satisfaction of Section
      302 of the Sarbanes-Oxley Act of 200231.2
            
            Certification
      of Periodic
      Financial Reports by Andrew Boetius in satisfaction of Section 302 of the
      Sarbanes-Oxley Act of 200232.1
            
            Certification
      of Periodic Financial Reports by Lyndon West in satisfaction of Section
      906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section
      135032.2
            
            Certification
      of Periodic Financial Reports by Andrew Boetius in satisfaction of Section
      906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section
      1350


32





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, 2008
              By:
              /s/ Lyndon
      WestLyndon
      WestChief
      Executive Officer




Date: August
      14, 2008
              By:
              /s/ Andrew
      BoetiusAndrew
      BoetiusChief
      Financial Officer





















33