UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington
D.C., 20549
 
 FORM
10-KSB/A
 (Amendment
No. 2)
 
 [] ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the
fiscal year ended December 31, 2007
 
 [  ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the
transition period
from         to
 
 Commission
File No. 000-51656
 
 ECCO
ENERGY CORP.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                    
                    87-0469497(State
      of other jurisdiction of incorporation)
                    
                    (I.R.S.
      Employer Identification No.)3315
      Marquart STSuite
      206Houston,
      TX
                    
                    77027(Address
      of Principal Executive Office)
                    
                    (Zip
      Code)
 
 
 Registrant’s
telephone number, including area code: (713) 771-5500
 
 Securities
registered pursuant to Section 12 (b) of the Act:
 
 NONE
 
 Securities
registered pursuant to Section 12 (g) of the Act:
 
 Common
Stock $0.001 par value
 
 Check
whether the issuer (1) 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
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirement for the past 90 days. Yes [
] No
[    ]
 
 Check if
there is no disclosures of delinquent filers in response to Item 405 of
Regulations S-B not contained in this form, and no disclosure will be contained,
to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB[ ]
 
 Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes [    ]  No [ ]
 
 The
issuer’s total revenues for the year ended December 31, 2007 were $434,245.
 
 Applicable
Only to Corporate Registrants
 State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:'
 Class                                                                           Outstanding
as of April 21, 2008
 Common
Stock, $0.001 par
value                                                                                                                     9,374,753
 
 Transitional
Small Business Disclosure Format (check one): Yes [  ] No
[X]
  
  INDEX
 
 Amendment
No. 2 to Annual Report on Form 10-KSB
 
 ITEM 1.
DESCRIPTION OF BUSINESS
 
 ITEM 2.
DESCRIPTION OF PROPERTY
 
 ITEM 3.
LEGAL PROCEEDINGS
 
 ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
 ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 ITEM 7.
FINANCIAL STATEMENTS
 
 CONSOLIDATED
BALANCE SHEETS
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
 ITEM 8A.
CONTROL AND PROCEDURES
 
 ITEM 8B.
OTHER INFORMATION
 
 ITEM
9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
 
 ITEM
9A.  CONTROLS AND PROCEDURES - STATEMENT OF REGISTERED PUBLIC
ACCOUNTANT
 
 ITEM 10.
EXECUTIVE COMPENSATION
 
 ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STGOCKHOLDER MATTERS
 
 ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
 
 ITEM 13.
EXHIBITS
 
 ITEM 13a.
CONTROLS AND PROCEDURES – ADDITIONAL INFORMATION
 
 ITEM
14.PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 SIGNATURES
 
 
 
 FORWARD
LOOKING STATEMENTS
 
 The
statements included or incorporated by reference in this Annual Report, other
than statements of historical fact, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Act of 1934, as amended. In some cases, you can identify
forward-looking statements by the words “anticipate,” “estimate,” “expect,”
“objective,” “projection,” “forecast,” “goal,” and similar expressions. Such
forward-looking statements include, without limitation, the statements herein
and therein regarding the timing of future events regarding the operations of
the Company and its subsidiaries. Although the Company believes that the
expectations reflected in these forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
The Company’s actual results could differ materially from those anticipated in
these forward-looking statements as a result of many factors including without
limitation the following risk factors:
 
 -
                the
      cyclical nature of the natural gas and oil
  industries
 
 -
                our
      ability to obtain additional
financing
 
 -
                our
      ability to successfully and profitably find, produce and market oil and
      natural gas
 
 -
                uncertainties
      associated with the United States and worldwide
  economies
 
 -
                substantial
      competition from larger companies
 
 -
                the
      loss of key personnel
 
 -
                operating
      interruptions (including leaks, explosions and lack of rig
      availability)
 
 as well
as other such risk factors set forth below.
 
 Available
Information
 
 ECCO
Energy Corp. files annual, quarterly, current reports, proxy statements, and
other information with the Securities and Exchange Commission (the
“Commission”). You may read and copy documents referred to in this Annual Report
on Form 10-KSB that have been filed with the Commission at the Commission’s
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.  You
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission
filings by going to the Commission’s website at http://www.sec.gov.
 
 ITEM
1.  DESCRIPTION OF BUSINESS
 
 BUSINESS
DEVELOPMENT
 
 ECCO
Energy Corp.
 
 We were
incorporated under the laws of the State of Utah in 1989 under the name
“Bluefield Enterprises Inc.” During July 1992, we merged with Optical Express
Inc. wherein our name as changed to “Optical Express Inc.” During August 1993,
we then merged with The AppleTree Companies, Inc., whereby we were
reincorporated as a Delaware corporation and the operating subsidiary of The
AppleTree Company, Inc. and our name was changed to J R Bassett Optical Inc.
During April 1997, The AppleTree Companies, Inc. filed chapter 11 Bankruptcy in
the U.S. Bankruptcy Court for the Eastern District of Virginia. The U.S.
Bankruptcy Court subsequently approved the sale of 28,367,500 shares of J R
Bassett Optical Inc. owned by record by The AppleTree Companies, Inc. to Robert
E. Williams.
 
 On
October 19, 2005, Robert E. Williams sold to Samuel Skipper approximately
28,800,000 shares of common stock of J R Bassett Optical Inc. and our name was
subsequently changed to Samurai Energy Corp. On June 30, 2006, Samurai Energy
Corp. (“Samurai”), ECCO Energy Corp. (“ECCO”) and SEI Acquisition Corp., the
wholly owned subsidiary of Samurai (“SEI”), entered into an agreement and plan
of merger (the “Merger Agreement”). In accordance with the terms and provisions
of the Merger Agreement and Nevada law: (i) each three shares of ECCO were
exchanged for one fully paid non-assessable share of the common stock of
Samurai, pursuant to which Samurai issued an aggregate of 1,415,999 shares of
its common stock to the shareholders of ECCO.; (ii) the separate corporate
existence of SEI ceased; and (iii) ECCO was the surviving entity. After
completion of the transactions contemplated by the Merger Agreement, ECCO became
a wholly-owned subsidiary of Samurai and Samurai merged with and into ECCO for
the purpose of reincorporating under the laws of Nevada. On August 28, 2006, the
reincorporation became effective resulting in Samurai continuing its corporate
existence in the State of Nevada under the name ECCO Energy Corp.
(“ECCE”).
 
 The
acquisition has been accounted for as a business combination between entities
under common control similar to a pooling of interest. Prior to the Merger
Agreement, Samurai and ECCO were controlled by the same management group and had
certain common ownership interests in their respective common stock. Therefore,
ECCE recorded the acquisition of ECCO at the carrying value of the assets
acquired with no adjustment for the fair value of the assets
acquired.
 
 We are
currently an independent oil and gas company actively engaged in oil and gas
development, exploration and production with properties and operational focus in
the Gulf Coast Region. Our strategy is to grow our asset base by purchasing
producing assets at a discount to reserve value, increasing the production rate
of reserves, and converting proved developed non-producing reserves to proved
developed producing reserves. Acquisitions to date have provided producing
assets. Our principal assets are oil and gas properties, including a 100%
working interest in the Wilson properties.
 
 On March
14, 2007, our shares of common stock commenced trading on the Over-the-Counter
Bulletin Board under the symbol: ECCE.OB.  Please note that throughout
this Annual Report, and unless otherwise noted, the words “we,” “our,” “us,” the
“Company” or “ECCE” refers to ECCO Energy Corp.
 
 ECCO
Biofuels, Inc.
 
 ECCO
Biofuels, Inc. was our wholly-owned subsidiary and was formed to offer plant
operators the option of financing 100% of the construction of biodiesel
plants.  On June 27, 2007, we entered into that certain letter of
intent with Saber Energy Corp., a privately held Texas corporation, pursuant to
which we would sell the entire total issued and outstanding shares of ECCO
Biofuels. After completion of satisfactory due diligence and conditions
precedent, we entered into a stock purchase agreement dated June 29, 2007, sold
all of the total issued and outstanding shares of ECCO Biofuels; and (ii) in
payment, Saber Energy issued us of 250,000 shares of restricted common stock of
Saber Energy and to assume all of the liabilities of ECCO Biofuels. As of the
date of this Annual Report, we hold of record the 250,000 shares of common stock
of Saber Energy.
 
 Our Board
of Directors, by unanimous written consent, approved the consummation of the
Stock Purchase Agreement. The Board of Directors engaged in a thorough analysis
of the sale of its wholly-owned subsidiary, ECCO Biofuels including, but not
limited to: (i) maximization of shareholder value relating to the stock Purchase
Agreement in comparison with potential shareholder value relating to alternative
business strategies retaining ECCO Biofuels; (ii) the process conducted in
seeking potential buyers and analysis pertaining to reasonableness of providing
equal or greater value to us; and (iii) review of our financial condition,
results of operations and business and earning prospects.  Even though
the alternative fuel industry is increasing, our Board’s evaluation concluded
that we would be required to spend significant employee resources and money to
grow the business operations of ECCO Biofuels, therefore, our Board determined
that it was in the best interests of the company and its shareholders to
concentrate on its core business on the exploration and development of oil and
gas properties.
 
 Transfer
Agent
 
 Our
transfer agent is Atlas Stock Transfer, Salt Lake City, UT.
 
 CURRENT
BUSINESS OPERATIONS
 
 Oil
and Gas
 
 We are an
oil and gas exploration and development company engaged in the exploration and
development of properties in the United States. Our strategy is to acquire oil
and gas properties that are thought to contain economic quantities of oil and
gas and have undergone some degree of exploration but have not yet been drilled.
To date, we have acquired interests in 330 gross acres of located in the State
of Texas. These properties are producing.   We have also acquired
non producing properties, specifically Louisiana State Lease Number 17742 in
Block 4, covering 600 acres in East Cameron Area in Cameron Parish
Louisiana.  This property was acquired from Louisiana Shelf Partners,
LLP.  We also acquired oil, gas and mineral lease no. 1337 located in
the State of Louisiana (the “Bateman Lake Field”), from VTEX Energy,
Corp.  We are working to bring both properties online during
2008.
 
 We plan
to target additional exploration and developmental properties for acquisition.
Our ability to complete any acquisitions will be subject to our obtaining
sufficient financing and our being able to conclude agreements with the property
owners on terms that are acceptable to us. These potential acquisition
properties have not yet been specifically identified. We plan to conduct
exploration and developmental programs on these properties with the objective of
ascertaining whether any of these properties contain economic reserves of oil
and gas that are prospective for drilling. There is no assurance that
commercially viable oil and gas reserves exist on any of these future
properties, and a great deal of further exploration and development may be
required before a final evaluation as to the economic and legal feasibility for
our future exploration is determined.
 
 OIL
AND GAS PROPERTIES
 
 Wilson
Properties Lease – Nueces County, Texas
 
 On July
12, 2006, as part of the merger described above, ECCE acquired through the
merger of ECCO an additional 32% working interest in oil and gas producing
properties located in Nueces County, Texas.
 A
description of the lease and properties is as follows:
 
 (1)
                Oil,
      Gas and Mineral Lease dated January 13, 1934 from Ellen C. Wilson to S. F.
      Hurlbut recorded in Volume 15, Page 608 of the Oil & Gas Lease Records
      of Nueces County, Texas insofar and only insofar as to 250 acres, more or
      less, being the eastern 250 acres of the northern 250 acres of the 434.59
      acre tract set aside to Leonora Bernard and more fully described in that
      certain Partition Decree of the Estate of W. W. Wright, Deceased, recorded
      in Book “H”, Page 313 of the Minutes of District Court of Nueces County,
      Texas.
 
 (2)
                Oil,
      Gas and Mineral Lease dated December 9, 1950 from the State of Texas to F.
      William Carr recorded in Volume 116, Page 100 of the Oil & Gas Leases
      Records of Nueces County, Texas insofar and only insofar as to 5 acres,
      more or less, being out of Tract 5 of the Nueces River containing 80
      acres, said 5 acre tract being more fully described in that certain Gas
      Unit Pooling Agreement dated November 28, 1966 for the Wilson-State Gas
      Unit recorded in Volume 263, Page 126 of the Oil & Gas Lease Records
      of Nueces County, Texas, including all producing, non-producing and
      shut-in oil and gas wells (hereinafter called “Wells”) located on and/or
      associated with said Leases, together with all mineral leasehold estates
      and working interests created by such Leases, together with any interests
      in contracts, agreements, pipelines, pipeline right-of-ways or easements
      affecting or relating to said Leases and all material, fixtures, personal
      property and equipment associated with such
  Wells.
 
 We
completed the workovers during December 2005 and, as of the date of this Annual
Report, continue to allow the Wells to to produce at their current production
levels.
 
 Wild
Tree Enterprises – Wilson Properties
 On August
1, 2007, we entered into a mutual release with Dr. Harold Crook and Wild Tree
Enterprises (collectively, “Wild Tree”). In accordance with the terms and
provisions of the Release: (i) Wild Tree agreed to allow us to retain our 11%
net working interest in the E.C. Wilson and Wilson State Tract Leases located in
Nueces County, Texas from February 1, 2006 to June 30, 2007; (ii) Wild Tree
agreed to allow us to retain the proceeds received by us from our 11% net
working interest in the approximate amount of $91,346; (iii) we agreed to issue
to Wild Tree an aggregate of 110,000 shares of our restricted Common Stock; and
(iv) we and Wild Tree agreed to mutually release one another from any and all
past claims, demands, obligations, actions, cause of action, rights, damages of
any nature
 
 Ron
Reece Revocable Trust – Wilson Properties
 On August
1, 2007, we purchased a 20% working interest in the E.C. Wilson and Wilson State
Tract Leases located in Nueces County, Texas from Ronald E. Reece M.D. Revocable
Trust of 2000 as outlined in the Assignment, Conveyance and Bill of Sale (the
Agreement) dated August 1, 2007 with an effective date of February 1, 2006 for
the issuance of 141,750 shares of our restricted common stock valued at $36,855
based on a share price of $.26 and a promissory note in the principal amount of
$205,548 payable in one lump sum payment on or before July 31, 2008 and interest
at the rate of seven (7%) per annum payable in monthly installments on the last
day of each month with the first installment due on August 31, 2007. See “Part
II. Item 5. Market for Common Equity, Related Stockholder Matters and Recent
Sales of Unregistered Securities.”
 
 Samurai
Corporation – Wilson Properties
 
 On
December 31, 2007, ECCO acquired an 11% interest from Samurai Energy,
LLC.  The Samurai Corp. Assets were purchased by us on December 31,
2007 with a promissory note in the principal amount of $100,000 payable in one
lump sum payment on or before December 31, 2008 with interest at the rate of 10%
per annum.  Prior to the transaction, we owned 89% of working interest
of the same property. The principal owner of Samurai Corporation is Sam Skipper,
the CEO of ECCO Energy.
 
 As of the
date of this Annual Report, our total working interest in the Wilson properties
is now 100%.
 
 Louisiana
Shelf Partners LP, Louisiana
 
 On
September 28, 2007 we executed an agreement pursuant to which we acquired all of
the assets of Louisiana Shelf Partners LP, a Delaware limited partnership, for
$5,000,000 by issuing to the General Partner and limited partners of Louisiana
Shelf Partners, 1,000,000 of Convertible Preferred Series B stock, convertible
into our restricted common stock at 1 common share per share of Convertible
Preferred Series B Stock. Louisiana Shelf Partners owned Louisiana State Lease
Number 17742 in Block 4, covering 600 acres in East Cameron Area in Cameron
Parish Louisiana.  The property consists of two wells:  the
#1 well, proved developed non-producing (PDNP), and the #2 well, which is a
proved undeveloped location (PUD).  The #1 well is not connected to
any platform or other pipeline and is currently not in production.  We
are currently in negotiations to complete the platform.  See “Part II.
Item 5 Market for Common Equity, Related Stockholder Matters and Recent Sale of
Unregistered Securities – Recent Sales of Unregistered Securities.”
 
 Bateman
Lake, St. Mary Parish, Louisiana
 
 On
approximately December 1, 2007, we entered into a share exchange agreement with
Old Jersey Oil Ventures LLC, a New Jersey limited liability company and Eugene
A. Noser, Jr.,who holds of record 100% of the total issued and outstanding
interests in Old Jersey, regarding our acquisition of Old Jersey. In accordance
with the terms and provisions of the Share Exchange Agreement, we shall acquire
from Noser all of his right, title and interest in and to the Membership
Interest in exchange for the issuance of 660,000 shares of our Series C
Preferred Stock and 303,936 shares of the Company’s Series D Preferred
Stock.
 
 Old
Jersey, together with the Moffat Group, was the holder of approximately
$5,900,000 in notes payable by VTEX Energy, Inc., a Nevada corporation, relating
to that certain oil, gas and mineral lease no. 1337 located in the State of
Louisiana (the “Bateman Lake Field”). Therefore, on December 1, 2007, we entered
into an assignment of oil, gas and mineral lease with VTEX pursuant to which
VTEX assigned to us all of its right, title and interest in and to lease no.
1337 on the Bateman Lake Field in exchange for $1,000. Thus, we held 100% of the
right, title and interest in and to lease no. 1337 on the Bateman Lake
Field.  We also acquired the debt payable by VTEX to Old
Jersey
 
 Simultaneously,
we entered into a farmout agreement dated January 11, 2008 with an independent
oil & gas corporation (IOG), concerning the right, title and interest of the
Company in lease no. 1337 on the Bateman Lake Field. In accordance with the
terms and provisions of the farmout agreement, IOG has the exclusive right, but
not the obligation, to re-enter the Bateman Lake Field for the purpose of
sidetracking, deepening, working over or recompleting any of the wells situated
on the Bateman Lake Field. In accordance with the further terms and provisions
of the Farmout Agreement: (i) with regards to well nos. 4, 11, 21 and 26, we
shall receive a 5% carried interest to the tanks until 120% of payout, at which
time such carried interest shall convert to a 25% net profit interest and we
shall receive a 25% working interest; (ii) with regards to well nos. 9 and 19
formerly operated by VTEX (the “Partnership Retained Wells”), we shall retain
ownership in the Partnership Retained Wells and rights to any proceeds received
for the sale of oil and/or gas to which IOG shall have no rights; (iii) with
regards to other workover wells, we shall be carried to the tanks to the extent
of a 5% working interest in workover operations until 125% of payout and upon
125% of payout, we may elect to continue to receive the 5% carried working
interest or convert the 5% carried working interest to a 25% working interest;
(iv) with regards to other sidetrack wells, we shall be carried to the tanks to
the extent of a 5% working interest in sidetrack operations until 150% of payout
and upon 150% of payout, we may elect to continue to receive the 5% carried
working interest or convert the 5% carried working interest to a 25% working
interest; and (v) we shall receive a 25% working interest upon reaching 150% of
payout of all costs related to the first three new drill wells.
 
 Upon
consummation of the farmout agreement: (i) IOG agrees to pay an aggregate
$750,000 relating to the Debt to us; (ii) we caused the cancellation of the Debt
and any other liens on lease no. 1337; and (iii) we entered into an assignment
dated January 11, 2008 with IOG pursuant to which we assigned to IOG all of our
right, title and interest in and to lease no. 1337 on the Bateman Lake Field. It
is our intent that the Series C and D Preferred Stock shall be redeemed out of
future earnings generated from lease no. 1337 on the Bateman Lake
Field.  See “Part II. Item 5 Market for Common Equity, Related
Stockholder Matters and Recent Sale of Unregistered Securities – Recent Sales of
Unregistered Securities.”
 
 There are
currently no producing wells on this concession.
 
 OIL
AND GAS EXPLORATION REGULATION
 
 Our oil
and gas exploration and development activities are, or will be, subject to
extensive laws and regulations governing prospecting, development, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
and remediation of the environment, protection of endangered and protected
species, drilling safety, toxic substances and other matters. Oil and gas
exploration is also subject to risks and liabilities associated with pollution
of the environment and disposal of waste products occurring as a result of
exploration, development and production. Compliance with these laws and
regulations may impose substantial costs on us and could subject us to
significant potential liabilities. Changes in these regulations could require us
to expend significant resources to comply with new laws or regulations or
changes to current requirements and could have a material adverse effect on our
business operations.
 
 Exploration,
development and production activities are subject to certain environmental
regulations which may prevent or delay the commencement or continuance of our
operations. In general, our exploration, development and production activities
are subject to certain federal, state and local laws and regulations relating to
environmental quality and pollution control. Such laws and regulations increase
the costs of these activities and may prevent or delay the commencement or
continuance of a given operation. Compliance with these laws and regulations has
not had a material effect on our operations or financial condition to date. We
may be subject to legislation regarding emissions into the environment, water
discharges and storage and disposition of hazardous wastes. In addition,
legislation has been enacted which requires well and facility sites to be
abandoned and reclaimed to the satisfaction of state authorities. However, such
laws and regulations are frequently changed and we are unable to predict the
ultimate cost of compliance. Generally, environmental requirements do not appear
to affect us any differently or to any greater or lesser extent than other
companies in the industry and our current operations have not expanded to a
point where either compliance or cost of compliance with environmental
regulation is a significant issue for us. Costs may increase with the increasing
scale and scope of exploration, development and production
operations.
 
 Oil and
gas exploration and development operations are subject to comprehensive
regulation which may cause substantial delays or require capital outlays in
excess of those anticipated causing an adverse effect on our business
operations. Oil and gas exploration and development operations are subject to
federal, state, and local laws relating to the protection of the environment,
including laws regulating removal of natural resources from the ground and the
discharge of materials into the environment. Oil and gas exploration and
development operations are also subject to federal, state, and local laws and
regulations which seek to maintain health and safety standards by regulating the
design and use of drilling methods and equipment. Various permits from
government bodies are required for drilling operations to be conducted; no
assurance can be given that such permits will be received. Environmental
standards imposed by federal, state, or local authorities may be changed and any
such changes may have material adverse effects on our activities. Moreover,
compliance with such laws may cause substantial delays or require capital
outlays in excess of those anticipated, thus causing an adverse effect on us.
Additionally, we may be subject to liability for pollution or other
environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. As of the date of this Annual
Report, other than with respect to the posting of a performance bond, we have
not been required to spend material amounts on compliance with environmental
regulations. However, we may be required to do so in future and this may affect
our ability to expand or maintain our operations. Environmental regulation is
discussed in further detail in the following section.
 
 ENVIRONMENTAL
REGULATION
 
 Our
activities will be subject to existing federal, state and local laws and
regulations governing environmental quality and pollution control. Our
operations will be subject to stringent environmental regulation by state and
federal authorities including the Environmental Protection Agency .Such
regulation can increase the cost of such activities. In most instances, the
regulatory requirements relate to water and air pollution control
measures.
 
 Waste
Disposal
 
 The
Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes,
affect minerals exploration and production activities by imposing regulations on
the generation, transportation, treatment, storage, disposal and cleanup of
“hazardous wastes” and on the disposal of non-hazardous wastes. Under the
auspices of the EPA, the individual states administer some or all of the
provisions of RCRA, sometimes in conjunction with their own, more stringent
requirements.
 
 Comprehensive
Environmental Response, Compensation and Liability
 
 The
federal Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”) imposes joint and several liabilities for costs of investigation and
remediation and for natural resource damages, without regard to fault or the
legality of the original conduct, on certain classes of persons with respect to
the release into the environment of substances designated under CERCLA as
hazardous substances (“Hazardous Substances”). These classes of persons or
potentially responsible parties include the current and certain past owners and
operators of a facility or property where there is or has been a release or
threat of release of a Hazardous Substance and persons who disposed of or
arranged for the disposal of the Hazardous Substances found at such a facility.
CERCLA also authorizes the EPA and, in some cases, third parties to take actions
in response to threats to the public health or the environment and to seek to
recover the costs of such action. We may also in the future become an owner of
facilities on which Hazardous Substances have been released by previous owners
or operators. We may in the future be responsible under CERCLA for all or part
of the costs to clean up facilities or property at which such substances have
been released and for natural resource damages.
 
 Air
Emissions
 
 Our
operations are subject to local, state and federal regulations for the control
of emissions of air pollution. Major sources of air pollutants are subject to
more stringent, federally imposed permitting requirements. Administrative
enforcement actions for failure to comply strictly with air pollution
regulations or permits are generally resolved by payment of monetary fines and
correction of any identified deficiencies. Alternatively, regulatory agencies
could require us to forego construction, modification or operation of certain
air emission sources.
 
 Clean
Water Act
 
 The Clean
Water Act (“CWA”) imposes restrictions and strict controls regarding the
discharge of wastes, including mineral processing wastes, into waters of the
United States, a term broadly defined. Permits must be obtained to discharge
pollutants into federal waters. The CWA provides for civil, criminal and
administrative penalties for unauthorized discharges of hazardous substances and
other pollutants. It imposes substantial potential liability for the costs of
removal or remediation associated with discharges of oil or hazardous
substances. State laws governing discharges to water also provide varying civil,
criminal and administrative penalties and impose liabilities in the case of a
discharge of petroleum or it derivatives, or other hazardous substances, into
state waters. In addition, the EPA has promulgated regulations that may require
us to obtain permits to discharge storm water runoff. In the event of an
unauthorized discharge of wastes, we may be liable for penalties and costs.
Management believes that we are in substantial compliance with current
applicable environmental laws and regulations.
 
 MATERIAL
AGREEMENTS
 
 We are
not party to any material agreements other than those described
above.
 
 EMPLOYEES
 
 Samuel
Skipper is our President and Chief Executive Officer and N. Wilson Thomas is our
Chief Financial Officer. These individuals are primarily responsible for all our
day-to-day operations. Other services may be provided by outsourcing and
consultants and special purpose contracts. We currently employ four persons on a
full time basis and contract with approximately two individuals for ongoing
services provided to us.
 
 RISK
FACTORS
 
 An
investment in our common stock involves a number of very significant risks. You
should carefully consider the following risks and uncertainties in addition to
other information in evaluating our company and its business before purchasing
shares of our common stock. Our business, operating results and financial
condition could be seriously harmed due to any of the following risks. The risks
described below are all of the material risks that we are currently aware of
that are facing our company. Additional risks not presently known to us may also
impair our business operations. You could lose all or part of your investment
due to any of these risks.
 
 Risks
Related to the Oil and Gas Industry
 
 We
will need to obtain additional financing to complete further
exploration.
 
 We will
require significant additional financing in order to continue our exploration,
development and production activities and our assessment of the commercial
viability of our properties. Furthermore, if the costs of our planned
exploration, development and production programs are greater than anticipated,
we may have to seek additional funds through public or private share offerings
or arrangements with corporate partners. There can be no assurance that we will
be successful in our efforts to raise these required funds, or on terms
satisfactory to us. The continued exploration of properties and the development
of our business will depend upon our ability to establish the commercial
viability of our oil and gas properties and to ultimately develop cash flow from
operations and reach profitable operations. Although we have generated revenue
from operations, we are experiencing a negative cash flow. Accordingly, the only
other sources of funds presently available to us may be through the sale of
equity or through debt financing. It is possible that debt financing may not be
an alternative to us. Alternatively, we may finance our business by offering an
interest in prospective oil and gas properties to be earned by another party or
parties carrying out further exploration and development thereof or to obtain
project or operating financing from financial institutions. If we are unable to
obtain this additional financing, we will not be able to continue our business
activities and our assessment of the commercial viability of our properties.
Further, if we are able to establish that development of our properties is
commercially viable, our inability to raise additional financing at this stage
would result in our inability to place our properties into production and
recover our investment.
 
 Although
certain of our oil and gas properties contain known reserves, we may not
discover commercially exploitable quantities of oil or gas on other potential
oil and gas properties that would enable us to enter into commercial production,
achieve revenues and recover the money we spend on exploration.
  There is
no assurance that any prospective oil and gas exploration and development
programs will result in establishment of reserves. Although our current oil and
gas properties are in the production stage, future prospective properties may be
only in the development stage and have no known body of reserves. Unproved or
proved reserves on these properties may never be determined to be economical. We
plan to conduct further exploration and development activities on properties,
which may include the completion of feasibility studies necessary to evaluate
whether a commercial reserve exists on any of the properties. There is a
substantial risk that these exploration activities will not result in
discoveries of commercially recoverable reserves of oil and gas. Any
determination that properties contain commercially recoverable quantities of oil
and gas may not be reached until such time that final comprehensive feasibility
studies have been concluded that establish that a reserve is likely to be
economic. There is a substantial risk that any preliminary or final feasibility
studies carried out by us will not result in a positive determination that such
properties can be commercially developed.
 
 Exploration
activities on oil and gas properties may not be commercially successful, which
could lead us to abandon our plans to develop the property and our investments
in exploration.
 Our
long-term success depends on our ability to establish commercially recoverable
quantities of oil and gas on our properties that can then be developed into
commercially viable drilling operations. Oil and gas exploration is highly
speculative in nature, involves many risks and is frequently non-productive.
These risks include unusual or unexpected geologic formations, and the inability
to obtain suitable or adequate machinery, equipment or labor. The success of oil
and gas exploration is determined in part by the following
factors:
 ·  identification
of potential reserves based on superficial analysis;
 ·  availability
of government-granted exploration permits;
 ·  the
quality of management and geological and technical
expertise; and
 ·  the
capital available for exploration and development.
 Substantial
expenditures are required to establish proven and probable reserves through
drilling and analysis, and to develop the drilling and processing facilities and
infrastructure at any site chosen. Whether a property will be commercially
viable depends on a number of factors, which include, without limitation, the
particular attributes of the property, such as size, grade and proximity to
infrastructure; oil and gas prices, which fluctuate widely; and government
regulations, including, without limitation, regulations relating to prices,
taxes, royalties, land tenure, land use, importing and exporting of oil and gas
and environmental protection. We may invest significant capital and resources in
exploration activities and abandon such investments if we are unable to identify
commercially exploitable oil and gas reserves. The decision to abandon a project
may reduce the future trading price of our common stock and impair our ability
to raise financing. We cannot provide any assurance to investors that we will
discover or acquire any oil and gas reserves in sufficient quantities on any
properties to justify commercial operations. Further, we will not be able to
recover the funds that we may spend on exploration if we are not able to
establish commercially recoverable quantities of oil and gas.
 
 We
will require additional funding in the future.
 
 Based
upon our historical losses from operations, we will require additional funding
in the future. If we cannot obtain capital through financings or otherwise, our
ability to execute our oil and gas programs and/or alternative resource programs
will be greatly limited. Our current plans require us to make capital
expenditures for the development of our oil and gas properties. Historically, we
have funded our operations through the issuance of equity and short-term debt
financing arrangements. We may not be able to obtain additional financing on
favorable terms, if at all. Our future cash flows and the availability of
financing will be subject to a number of variables, including potential
production and the market prices of oil and gas, and our potential success in
the alternative fuel industry. Additional financing could lead to a diversion of
cash flow to satisfy debt-servicing obligations and create restrictions on
business operations. If we are unable to raise additional funds, it would have a
material adverse effect upon our operations.
 
 As part of our growth strategy, we
intend to acquire additional oil and gas properties.
 
 As part
of our growth strategy, we intend to acquire additional oil and gas production
properties. Current and subsequent acquisitions may pose substantial risks to
our business, financial condition, and results of operations. In pursuing
acquisitions, we will compete with other companies, many of which have greater
financial and other resources to acquire attractive properties. Even if we are
successful in acquiring additional properties, some of the properties may not
produce positive results of exploration, or we may not complete exploration of
such prospects within specified time periods that may cause the forfeiture of
the lease in that prospect. There can be no assurance that we will be able to
successfully integrate acquired properties, which could result in substantial
costs and delays or other operational, technical, or financial problems.
Further, acquisitions could disrupt ongoing business operations. If any of these
events occur, it would have a material adverse effect upon our operations and
results from operations.
 
 We
are a new entrant into the oil and gas exploration and development industry
without a profitable operating history.
 
 Our
recent activities have been limited to organizational efforts, obtaining working
capital and acquiring and developing a very limited number of properties. As a
result, there is limited information regarding production or revenue generation.
Further, our future revenues may be limited.
 
 The
business of oil and gas exploration and development is subject to many risks and
if oil and gas is found in economic production quantities, the potential
profitability of future possible oil and gas ventures depends upon factors
beyond our control. The potential profitability of oil and gas properties if
economic quantities of oil and gas are found is dependent upon many factors and
risks beyond our control, including, but not limited to: (i) unanticipated
ground conditions; (ii) geological problems; (iii) drilling and other processing
problems; (iv) the occurrence of unusual weather or operating conditions and
other force majeure events; (v) lower than expected reserve quantities; (vi)
accidents; (vii) delays in the receipt of or failure to receive necessary
government permits; (viii) delays in transportation; (ix) labor disputes; (x)
government permit restrictions and regulation restrictions; (xi) unavailability
of materials and equipment; and (xii) the failure of equipment or drilling to
operate in accordance with specifications or expectations.
 
 Our
drilling operations may not be successful.
 
 In the
event we acquire additional oil and gas properties, we intend to test certain
zones in wellbores already drilled on the properties and if results are positive
and capital is available, drill additional wells and begin production operations
from existing and new wells. There can be no assurance that such well
re-completion activities or future drilling activities will be successful, and
we cannot be sure that our overall drilling success rate or our production
operations within a particular area will ever come to fruition and, if it does,
will not decline over time. We may not recover all or any portion of our capital
investment in the wells or the underlying leaseholds. Unsuccessful drilling
activities would have a material adverse effect upon our results of operations
and financial condition. The cost of drilling, completing, and operating wells
is often uncertain, and a number of factors can delay or prevent drilling
operations including: (i) unexpected drilling conditions; (ii) pressure or
irregularities in geological formations; (iii) equipment failures or accidents;
(iv) adverse weather conditions; and (iv) shortages or delays in availability of
drilling rigs and delivery of equipment.
 
 Prospects
that we decide to drill may not yield natural gas or oil in commercially viable
quantities.
 
 We
describe some of our current prospects in this Annual Report. Our prospects are
in various stages of preliminary evaluation and assessment and we have not
reached the point where we will decide to drill at all on the subject prospects.
However, the use of seismic data, historical drilling logs, offsetting well
information, and other technologies and the study of producing fields in the
same area will not enable us to know conclusively prior to drilling and testing
whether natural gas or oil will be present or, if present, whether natural gas
or oil will be present in sufficient quantities or quality to recover drilling
or completion costs or to be economically viable. In sum, the cost of drilling,
completing and operating any wells is often uncertain and new wells may not be
productive.
 
 We
may be unable to identify liabilities associated with the properties or obtain
protection from sellers against them.
 
 One of
our growth strategies is to capitalize on opportunistic acquisitions of oil and
natural gas reserves. However, our reviews of acquired properties are inherently
incomplete because it generally is not feasible to review in depth every
individual property involved in each acquisition. A detailed review of records
and properties may not necessarily reveal existing or potential problems, nor
will it permit a buyer to become sufficiently familiar with the properties to
assess fully their deficiencies and potential. Further, environmental problems,
such as ground water contamination, are not necessarily observable even when an
inspection is undertaken. We may not be able to obtain indemnification or other
protections from the sellers against such potential liabilities, which would
have a material adverse effect upon our results of operations.
 
 The
potential profitability of oil and gas ventures depends upon global political
and market related factors beyond our control.
 
 World
prices and markets for oil and gas are unpredictable, highly volatile,
potentially subject to governmental fixing, pegging, controls, or any
combination of these and other factors, and respond to changes in domestic,
international, political, social, and economic environments. Additionally, due
to worldwide economic uncertainty, the availability and cost of funds for
production and other expenses have become increasingly difficult, if not
impossible, to project. These and other changes and events may materially affect
our financial performance. The potential profitability of oil and gas properties
is dependent on these and other factors beyond our control.
 
 Production
or oil and gas resources if found are dependent on numerous operational
uncertainties specific to the area of the resource that affects its
profitability.
 
 Production
area specifics affect profitability. Adverse weather conditions can hinder
drilling operations and ongoing production work. A productive well may become
uneconomic in the event water or other deleterious substances are encountered
which impair or prevent the production of oil and/or gas from the well.
Production and treatments on other wells in the area can have either a positive
or negative effect on our production and wells. In addition, production from any
well may be unmarketable if it is impregnated with water or other deleterious
substances. The content of hydrocarbons is subject to change over the life of
producing wells. The marketability of oil and gas from any specific reserve
which may be acquired or discovered will be affected by numerous factors beyond
our control. These factors include, but are not limited to, the proximity and
capacity of oil and gas pipelines, availability of room in the pipelines to
accommodate additional production, processing and production equipment operating
costs and equipment efficiency, market fluctuations of prices and oil and gas
marketing relationships, local and state taxes, mineral owner and other
royalties, land tenure, lease bonus costs and lease damage costs, allowable
production, and environmental protection. These factors cannot be accurately
predicted and the combination of these factors may result in us not receiving an
adequate return on our invested capital.
 
 We
are dependent upon transportation and storage services provided by third
parties.
 
 We are
dependent on the transportation and storage services offered by various
interstate and intrastate pipeline companies for the delivery and sale of our
oil and gas supplies.  Both the performance of transportation and
storage services by interstate pipelines and the rates charged for such services
are subject to the jurisdiction of the Federal Energy Regulatory Commission or
state regulatory agencies. An inability to obtain transportation and/or storage
services at competitive rates could hinder our processing and marketing
operations and/or affect our sales margins.
 
 Our
results of operations are dependent upon market prices for oil and gas, which
fluctuate widely and are beyond our control.
 
 If and
when production from oil and gas properties is reached, our revenue,
profitability, and cash flow depend upon the prices and demand for oil and
natural gas. The markets for these commodities are very volatile and even
relatively modest drops in prices can significantly affect our financial results
and impede our growth. Prices received also will affect the amount of future
cash flow available for capital expenditures and may affect our ability to raise
additional capital. Lower prices may also affect the amount of natural gas and
oil that can be economically produced from reserves either discovered or
acquired. Factors that can cause price fluctuations include: (i) the level of
consumer product demand; (ii) domestic and foreign governmental regulations;
(iii) the price and availability of alternative fuels; (iv) technical advances
affecting energy consumption; (v) proximity and capacity of oil and gas
pipelines and other transportation facilities; (vi) political conditions in
natural gas and oil producing regions; (vii) the domestic and foreign supply of
natural gas and oil; (viii) the ability of members of Organization of Petroleum
Exporting Countries to agree to and maintain oil price and production controls;
(ix) the price of foreign imports; and (x) overall domestic and global economic
conditions.
 
 The
availability of a ready market for our oil and gas depends upon numerous factors
beyond our control, including the extent of domestic production and importation
of oil and gas, the relative status of the domestic and international economies,
the proximity of our properties to gas gathering systems, the capacity of those
systems, the marketing of other competitive fuels, fluctuations in seasonal
demand and governmental regulation of production, refining, transportation and
pricing of oil, natural gas and other fuels.
 
 The
oil and gas industry in which we operate involved many industry related
operating and implementation risks that can cause substantial losses, including,
but not limited to, unproductive wells, natural disasters, facility and
equipment problems and environmental hazards.
 
 Our
drilling activities are subject to many risks, including the risk that we will
not discover commercially productive reservoirs. Drilling for oil and natural
gas can be unprofitable, not only from dry holes, but from productive wells that
do not produce sufficient revenues to return a profit. In addition, our drilling
and producing operations may be curtailed, delayed or canceled as a result of
other drilling and production, weather and natural disaster, equipment and
service failure, environmental and regulatory, and site specific related
factors, including but not limited to: (i) fires; (ii) explosions; (iii)
blow-outs and surface fractures; (iv) uncontrollable flows of underground
natural gas, oil, or formation water; (v) natural disasters; (vi) facility and
equipment failures; (vii) title problems; (viii) shortages or delivery delays of
equipment and services; (ix) abnormal pressure formations; and (x) environmental
hazards such as natural gas leaks, oil spills, pipeline ruptures and discharges
of toxic gases. 1(xi) weather related events such as hurricanes can cause
disruption of deliveries or destruction of producing facilities, either on or
off shore.  Such damage may be to our facilities or to facilities
operated by other companies needed for the delivery of our
production.
 
 If any of
these events occur, we could incur substantial losses as a result of: (i) injury
or loss of life; (ii) severe damage to and destruction of property, natural
resources or equipment; (iii) pollution and other environmental damage; (iv)
clean-up responsibilities; (v) regulatory investigation and penalties; (vi)
suspension of our operations; or (vii) repairs necessary to resume
operations.
 
 If we
were to experience any of these problems, it could affect well bores, gathering
systems and processing facilities, any one of which could adversely affect our
ability to conduct operations. We may be affected by any of these events more
than larger companies, since we have limited working capital.
 
 The
oil and gas industry is highly competitive and there is no assurance that we
will be successful in acquiring leases.
 
 The oil
and natural gas industry is intensely competitive, and we compete with other
companies that have greater resources. Many of these companies not only explore
for and produce oil and natural gas, but also carry on refining operations and
market petroleum and other products on a regional, national or worldwide basis.
These companies may be able to pay more for productive oil and natural gas
properties and exploratory prospects or define, evaluate, bid for and purchase a
greater number of properties and prospects than our financial or human resources
permit. In addition, these companies may have a greater ability to continue
exploration activities during periods of low oil and natural gas market prices.
Our larger competitors may be able to absorb the burden of present and future
federal, state, local and other laws and regulations more easily than we can,
which would adversely affect our competitive position. Our ability to acquire
additional properties and to discover reserves in the future will be dependent
upon our ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment. In addition, because we have
fewer financial and human resources than many companies in our industry, we may
be at a disadvantage in bidding for exploratory prospects and producing oil and
natural gas properties.
 
 The
marketability of natural resources will be affected by numerous factors beyond
our control, which may result in us not receiving an adequate return on invested
capital to be profitable or viable.
 
 The
marketability of natural resources which may be acquired or discovered by us
will be affected by numerous factors beyond our control. These factors include
market fluctuations in oil and gas pricing and demand, the proximity and
capacity of natural resource markets and processing equipment, governmental
regulations, land tenure, land use, regulation concerning the importing and
exporting of oil and gas and environmental protection regulations. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in us not receiving an adequate return on invested
capital to be profitable or viable.
 
 Oil
and gas operations are subject to comprehensive regulation which may cause
substantial delays or require capital outlays in excess of those anticipated
causing an adverse effect on our business operations.
 
 Oil and
gas operations are subject to federal, state, and local laws relating to the
protection of the environment, including laws regulating removal of natural
resources from the ground and the discharge of materials into the environment.
Oil and gas operations are also subject to federal, state, and local laws and
regulations which seek to maintain health and safety standards by regulating the
design and use of drilling methods and equipment. Various permits from
government bodies are required for drilling operations to be conducted; no
assurance can be given that such permits will be received. Environmental
standards imposed by federal, provincial, or local authorities may be changed
and any such changes may have material adverse effects on our activities.
Moreover, compliance with such laws may cause substantial delays or require
capital outlays in excess of those anticipated, thus causing an adverse effect
on us. Additionally, we may be subject to liability for pollution or other
environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. To date we have not been required
to spend material amounts on compliance with environmental regulations. However,
we may be required to do so in future and this may affect our ability to expand
or maintain our operations.
 
 In
general, our exploration and production activities are subject to certain
federal, state and local laws and regulations relating to environmental quality
and pollution control. Such laws and regulations increase the costs of these
activities and may prevent or delay the commencement or continuance of a given
operation. Compliance with these laws and regulations has not had a material
effect on our operations or financial condition to date. Specifically, we are
subject to legislation regarding emissions into the environment, water
discharges and storage and disposition of hazardous wastes. In addition,
legislation has been enacted which requires well and facility sites to be
abandoned and reclaimed to the satisfaction of state authorities. However, such
laws and regulations are frequently changed and we are unable to predict the
ultimate cost of compliance. Generally, environmental requirements do not appear
to affect us any differently or to any greater or lesser extent than other
companies in the industry.
 
 We
believe that our operations comply, in all material respects, with all
applicable environmental regulations. We need insurance to protect our self
against risks associated with the leases obtained. The leases allow for entry
onto the properties for the purposes of oil and gas exploration. The insurance
we require relates solely to developments on the properties for the purposes of
oil and gas exploration.
 
 When and
if we are convinced that our current leases or those subsequently acquired are
capable of hydrocarbon production and sales, and we plan to drill more than one
well, we intend to maintain a $2,000,000 per year limit policy on bodily injury
and general liability with regard to risks incurred for the drilling of up to 25
wells. This will allow for our growth to contain non contract labor that would
require us to carry such additional insurance for risks pertaining to oil and
gas exploration conducted directly by us. Such a policy would include coverage
for numerous locations for pollution, environmental damage, chemical spills and
commercial general liability, fire, and personal injury. Such a policy will not
be required until such time and date as we believe that we will begin a
sustained drilling and operating program, and that at least one well has been
drilled and is producing to justify and warrant further drilling and a sustained
drilling and operating program.
 We
currently maintain commercial general liability and related types of insurance
coverage on the recently acquired Louisiana Shelf well.
 
 Any
change to government regulation/administrative practices may have a negative
impact on our ability to operate and our profitability.
 
 The laws,
regulations, policies or current administrative practices of any government
body, organization or regulatory agency in the United States or any other
jurisdiction, may be changed, applied or interpreted in a manner which will
fundamentally alter our ability to carry on business. The actions, policies or
regulations, or changes thereto, of any government body or regulatory agency, or
other special interest groups, may have a detrimental effect on us. Any or all
of these situations may have a negative impact on our ability to operate and/or
our profitably.
 
 We
may be unable to retain key employees or consultants or recruit additional
qualified personnel.
 
 Our
extremely limited personnel means that we would be required to spend significant
sums of money to locate and train new employees in the event any of our
employees resign or terminate their employment with us for any reason. Due to
our limited operating history and financial resources, we are entirely dependent
on the continued service of Samuel Skipper, our Chief Executive Officer, and N.
Wilson Thomas, our Chief Financial Officer. Further, we do not have key man life
insurance on either of these individuals. We may not have the financial
resources to hire a replacement if one or both of our officers were to die. The
loss of service of either of these employees could therefore significantly and
adversely affect our operations.
 
 Nevada
law and our articles of incorporation may protect our directors from certain
types of lawsuits.
 
 Nevada
law provides that our officers and directors will not be liable to us or our
stockholders for monetary damages for all but certain types of conduct as
officers and directors. Our Bylaws permit us broad indemnification powers to all
persons against all damages incurred in connection with our business to the
fullest extent provided or allowed by law. The exculpation provisions may have
the effect of preventing stockholders from recovering damages against our
officers and directors caused by their negligence, poor judgment or other
circumstances. The indemnification provisions may require us to use our limited
assets to defend our officers and directors against claims, including claims
arising out of their negligence, poor judgment, or other
circumstances.
  Risks
Related to Our Common and Preferred Stock
 
 Sales
of a substantial number of shares of our common stock into the public market by
stockholders may result in significant downward pressure on the price of our
common stock and could affect your ability to realize the current trading price
of our common stock.
 
 Sales of
a substantial number of shares of our common stock in the public market by
stockholders could cause a reduction in the market price of our common
stock.  As of the date of this Annual Report, we have 9,374,753 shares
of common stock issued and outstanding, 100,000 of our Series A Convertible
Preferred stock issued and outstanding , 1,000,000 or our Series B Convertible
Preferred stock issued and outstanding, 660,000 of our Series C Convertible
Preferred stock issued and outstanding, and 303,936 of our Series D Convertible
Preferred stock. As of the date of this Annual Report, there are 6,144,183
outstanding shares of our common stock and 2,063,936 outstanding shares of our
Convertible Preferred stock that are restricted securities as that term is
defined in Rule 144 under the Securities Act of 1933, as amended (the
“Securities Act”). Although the Securities Act and Rule 144 place certain
prohibitions on the sale of restricted securities, restricted securities may be
sold into the public market under certain conditions.  In the event
that any of the Convertible Preferred shares of stock are converted into shares
of common stock, such shares may be available for immediate resale which could
have an adverse effect on the price of our common stock.
 
 Any
significant downward pressure on the price of our common stock as stockholders
sell their shares of our common stock could encourage short sales by others. Any
such short sales could place further downward pressure on the price of our
common stock.
 
 The
trading price of our common stock on the OTC Bulletin Board will fluctuate
significantly and stockholders may have difficulty reselling their
shares.
 
 Effective
March 14, 2007, our shares of common stock commenced trading on the
Over-the-County Bulletin Board. There is a volatility associated with Bulletin
Board securities in general and the value of your investment could decline due
to the impact of any of the following factors upon the market price of our
common stock: (i) disappointing results from our discovery or development
efforts; (ii) failure to meet our revenue or profit goals or operating budget;
(iii) decline in demand for our common stock; (iv) downward revisions in
securities analysts' estimates or changes in general market conditions; (v)
technological innovations by competitors or in competing technologies; (vi) lack
of funding generated for operations; (vii) investor perception of our industry
or our prospects; and (viii) general economic trends.
 
 In
addition, stock markets have experienced price and volume fluctuations and the
market prices of securities have been highly volatile. These fluctuations are
often unrelated to operating performance and may adversely affect the market
price of our common stock. As a result, investors may be unable to sell their
shares at a fair price and you may lose all or part of your
investment.
 
 Additional
issuance of equity securities may result in dilution to our existing
stockholders.
 
 Our
Articles of Incorporation authorize the issuance of 75,000,000 shares of common
stock. Common stock is our only authorized class of stock. The board of
directors has the authority to issue additional shares of our capital stock to
provide additional financing in the future and the issuance of any such shares
may result in a reduction of the book value or market price of the outstanding
shares of our common stock. If we do issue any such additional shares, such
issuance also will cause a reduction in the proportionate ownership and voting
power of all other stockholders. As a result of such dilution, your
proportionate ownership interest and voting power will be decreased accordingly.
Further, any such issuance could result in a change of control.
 
 Our
common stock is classified as a “penny stock” under SEC rules which limits the
market for our common stock.
 
 The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in "penny stocks." Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also
provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules;
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for stock that becomes
subject to those penny stock rules. If a trading market for our common stock
develops, our common stock will probably become subject to the penny stock
rules, and shareholders may have difficulty in selling their
shares.
 
 ITEM
2. DESCRIPTION OF PROPERTY
 
 We lease
our principal office space located at 3315 Marquart St, Ste. 206, Houston, Texas
77027 on a month to month basis, which lease is cancelable with a thirty day
notice. We also leased office space in Corpus Christi on a month to month basis
through September, 2007.  During fiscal year ended December 31, 2007,
aggregate rent expense was $26,871.68. The office space cost in Houston is
$1,988 per month.  The building at Marquart Street is partially owned
by our CEO, Sam Skipper.
 
 ITEM
3. LEGAL PROCEEDINGS
 
 Management
is not aware of any legal proceedings contemplated by any governmental authority
or any other party involving us or our properties. As of the date of this Annual
Report, no director, officer or affiliate is (i) a party adverse to us in any
legal proceeding, or (ii) has an adverse interest to us in any legal
proceedings. Management is not aware of any other legal proceedings pending or
that have been threatened against us or our properties.
 
 ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 During
fiscal year ended December 31, 2007, there were no matters submitted to a vote
by our security holders.
 
  
  
 PART
II
 
 ITEM
      5.
                MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES
 
 Subsequent
to consummation of the Merger Agreement, our shares of common stock traded on
the Pink Sheets under the symbol: ECCE.PK”. Effective March 14, 2007, our shares
of common stock commenced trading on the Over-the-Counter Bulletin Board under
the symbol: ECCE.OB”. The market for our common stock is and will be limited and
can be volatile. The following table sets forth the high and low bid prices
relating to our common stock on a quarterly basis for the periods indicated as
compiled by Pink Sheets LLC. These quotations reflect inter-dealer prices
without retail mark-up, mark-down, or commissions, and may not reflect actual
transactions.
   Quarter
      Ended
                    High
      Bid
                    Low
      BidDecember
      31, 2007
                    $1.58
                    $0.30September
      30, 2007
                    $  .45
                    $.26June
      30, 2007
                    $
      .59
                    $.15March
      31, 2007
                    $1.04
                    $.15December
      31, 2006
                    $1.04
                    $.10September
      30, 2006
                    $2.50
                    $1.04
   
 As of
March 1, 2008, we had 233 shareholders of record.
 
 DIVIDEND
POLICY
 
 No
dividends have ever been declared by the Board of Directors on our common stock.
Our losses do not currently indicate the ability to pay any cash dividends, and
we do not indicate the intention of paying cash dividends either on our common
stock in the foreseeable future. We intend to apply our earnings, if any, in
expanding our operations and related activities. The payment of cash dividends
in the future will be at the discretion of the Board of Directors, our financial
condition and other facts deemed relevant by our Board of Directors. In
addition, our ability to pay dividends may be limited under future loan
agreements, which restrict or prohibit the payment of dividends.
 
 SECURITIES
AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS
 
 As of the
date of this Annual Report, we have one equity compensation plan titled the 2005
Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Awards
Plan (the “Plan”).  On December 14, 2005, our Board of Directors
approved and adopted the Plan. The Plan provides for the issuance of 100,000
shares of common stock, warrants, options, preferred stock or any combination
thereof. The shares subject to the Plan shall consist of authorized but unissued
shares of common stock and such number of shares shall be and reserved for sale
for such purpose.
 
 The
purpose of the Plan is to maintain our ability to attract and retain highly
qualified and experienced directors, employees and consultants and give to such
directors, employees and consultants a continued proprietary interest in our
success.
 
 The Plan
will be administered by our Board of Directors who shall have sole and absolute
discretion authorizing, determining and designating those persons who are to
receive common stock, warrants, options, preferred stock or any combination
thereof.
 
 As of the
date of this Quarterly Report, we have not granted any options under the
Plan.
 
 RECENT
SALES OF UNREGISTERED SECURITIES
 
 As of the
date of this Annual Report and during fiscal year ended December 31, 2006, to
provide capital, we sold stock in private placement offerings, issued stock in
exchange for our debts or pursuant to contractual agreements as set forth
below.
 
 Common
Stock
 
 During
third quarter 2007, we issued an additional 141,750 shares and 110,000 shares to
Ronald E. Reece M.D. in connection with the purchase of the 20% working interest
in the E.C. Wilson and Wilson State Tract Leases located in Nueces County, Texas
from Ronald E. Reece M.D. Revocable Trust of 2000 as outlined in the Agreement.
The securities were issued in reliance on Section 4(2) of the Securities Act.
The securities issued have not been registered under the Securities Act or under
any state securities laws and may not be offered or sold without registration
with the United States Securities and Exchange Commission or an applicable
exemption from the registration requirements.
 
 During
fourth quarter of 2007, we offered and issued 75,000 shares of our restricted
common stock to an investor for aggregate proceeds of $30,000. The offering was
completed in reliance on Regulation D of the Securities Act. Sales were made to
only one U.S. resident. The shares were not registered under the Securities Act
or under any state securities laws and may not be offered or sold without
registration with the Securities and Exchange Commission or an applicable
exemption from the registration requirements. The per share price of the
offering was arbitrarily determined by our Board of Directors based upon
analysis of certain factors including, but not limited to, stage of development,
industry status, investment climate, perceived investment risks, our assets and
net estimated worth.
 
 Preferred
Stock
 
 Convertible
Series B Preferred Stock
 
 On
September 28, 2007 we executed an agreement pursuant to which we acquired all of
the assets of Louisiana Shelf Partners for $5,000,000 by issuing to the General
Partner and limited partners of Louisiana Shelf Partners, 1,000,000 of
Convertible Preferred Series B stock, convertible into our restricted common
stock at 1 common share per share of Convertible Preferred Series B Stock.On approximately September
30, 2007, we filed with the Nevada Secretary of State a First Amended
Certificate of Designation of Series B Convertible Preferred Stock designating
1,000,000 shares of the 10,000,000 shares of authorized preferred stock as
Series B Preferred Stock, with an initial value of $5.00 (the “Initial Value”).
The Series B Preferred Stock had been authorized by our Board of Directors as a
new series of preferred stock, which ranks senior and is not subordinated in any
respects to the Series A Preferred Stock. So long as any Series B Preferred
Stock is outstanding, we are prohibited from issuing any series of stock having
rights senior to or ranking on parity with the Series B Preferred Stock without
the approval of the holders of 2/3’s of the outstanding Series B Preferred
Stock. The holders of the outstanding shares of Series B Preferred Stock shall
be entitled to receive in preference to the holders of any other shares of
capital stock of the Corporation, cumulative dividends when and as if they may
be declared by the Board of Directors at a per share equal to 8% per annum of
the Initial Value. Additionally, upon occurrence of our liquidation, dissolution
or winding up, the holder of shares of Series B Preferred Stock will be entitled
to receive, before any distribution of assets is made to holders of our common
stock or any other stock ranking junior to the Series B Preferred Stock
Preferred Stock as to dividends or liquidations rights, but only after all
distributions to holders of Series B Preferred Stock have been made in an amount
per share of Series B Preferred Stock equal to 100% of the Initial Value plus
the amount of any accrued but unpaid dividends due for each share of Series B
Preferred Stock (the “Liquidation Amount”). Lastly, in addition to the rights
discussed above of the holders of the Series B Preferred Stock, at any time
after June 15, 2008 and provided a triggering event has occurred, each holder of
Series B Preferred Stock shall have the right at such holder’s option to require
us to redeem for cash all or a portion of such holder’s shares of Series B
Preferred Stock at a price per share equal to the Liquidation Amount. A
“triggering event” shall mean that the wells owned or operated by the Limited
Partnership have generated an aggregate of 1,500,000,000 cubic feet of natural
gas.
 
 Convertible
Series C and D Preferred Stock
 
 On
approximately December 1, 2007, we entered into the Share Exchange Agreement
with Old Jersey and Noser, who holds of record 100% of the total issued and
outstanding interests in Old Jersey (the “Membership Interest”), regarding our
acquisition of Old Jersey. In accordance with the terms and provisions of the
Share Exchange Agreement, we shall acquire from Noser all of his right, title
and interest in and to the Membership Interest in exchange for the issuance of
660,000 shares of our Series C Preferred Stock and 303,936 shares of the
Company’s Series D Preferred Stock.
 
 On approximately March 27, 2008, we
filed with the Nevada Secretary of State a First Amended Certificate of
Designation of Series C Convertible Preferred Stock designating 660,000 shares
of the 10,000,000 shares of authorized preferred stock as Series C Preferred
Stock, with an initial value of $5.00 (the “Initial Value”). The Series C
Preferred Stock had been authorized by our Board of Directors as a new series of
preferred stock, which ranks senior and is not subordinated in any respects to
the Series A or B Preferred Stocks. So long as any Series C Preferred Stock is
outstanding, we are prohibited from issuing any series of stock having rights
senior to or ranking on parity with the Series C Preferred Stock without the
approval of the holders of 2/3’s of the outstanding Series C Preferred Stock.
The holders of the outstanding shares of Series C Preferred Stock shall be
entitled to receive in preference to the holders of any other shares of capital
stock of the Corporation, cumulative dividends when and as if they may be
declared by the Board of Directors at a per share equal to 8% per annum of the
Initial Value. Additionally, upon occurrence of our liquidation, dissolution or
winding up, the holder of shares of Series B Preferred Stock will be entitled to
receive, before any distribution of assets is made to holders of our common
stock or any other stock ranking junior to the Series C Preferred Stock
Preferred Stock as to dividends or liquidations rights, but only after all
distributions to holders of Series B Preferred Stock have been made in an amount
per share of Series B Preferred Stock equal to 100% of the Initial Value plus
the amount of any accrued but unpaid dividends due for each share of Series C
Preferred Stock (the “Liquidation Amount).  See exhibit 3.13
for full disclosure information pertaining to Series D Convertible Preferred
Stock.
 
 On approximately March 27, 2008, we
filed with the Nevada Secretary of State a First Amended Certificate of
Designation of Series D Convertible Preferred Stock designating 303,396 shares
of the 10,000,000 shares of authorized preferred stock as Series D Preferred
Stock, with an initial value of $5.00 (the “Initial Value”). The Series C
Preferred Stock had been authorized by our Board of Directors as a new series of
preferred stock, which ranks senior and is not subordinated in any respects to
the Series A or B or C Preferred Stocks. So long as any Series D Preferred Stock
is outstanding, we are prohibited from issuing any series of stock having rights
senior to or ranking on parity with the Series C Preferred Stock without the
approval of the holders of 2/3’s of the outstanding Series D Preferred Stock.
The holders of the outstanding shares of Series D Preferred Stock shall be
entitled to receive in preference to the holders of any other shares of capital
stock of the Corporation, cumulative dividends when and as if they may be
declared by the Board of Directors at a per share equal to 8% per annum of the
Initial Value. Additionally, upon occurrence of our liquidation, dissolution or
winding up, the holder of shares of Series B or C Preferred Stock will be
entitled to receive, before any distribution of assets is made to holders of our
common stock or any other stock ranking junior to the Series D Preferred Stock
Preferred Stock as to dividends or liquidations rights, but only after all
distributions to holders of Series B or C Preferred Stock have been made in an
amount per share of Series B or C Preferred Stock equal to 100% of the Initial
Value plus the amount of any accrued but unpaid dividends due for each share of
Series D Preferred Stock (the “Liquidation Amount).  See
exhibit 3.14 for full disclosure information pertaining to Series D Convertible
Preferred Stock.
 
 ITEM
6.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
 
 The
summarized financial data set forth below is derived from and should be read in
conjunction with our audited consolidated financial statements for fiscal years
ended December 31, 2007 and 2006, including the notes to those financial
statements which are included in this Annual Report. The following discussion
should be read in conjunction with our audited financial statements and the
related notes that appear elsewhere in this Annual Report. The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in
the forward looking statements. Factors that could cause or contribute to such
differences include, but are not limited to those discussed below and elsewhere
in this Annual Report, particularly in the section entitled "Risk Factors". Our
audited financial statements are stated in United States Dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
 
 RESULTS
OF OPERATION
  We have
incurred recurring losses to date. Over the next twelve months our strategy is
to grow our asset base by acquiring producing properties and investing in
working interest in non-operated properties. In addition, we plan to use
innovative and sound engineering principles to enhance existing production. We
will acquire operated as well as non-operated properties that meet or exceed our
rate of return criteria. For acquisitions of properties with additional
development, exploitation and exploration potential, our focus has been on
acquiring operated properties so that we can better control the timing and
implementation of capital spending. We will sell properties when management is
of the opinion that the sale price realized will provide an above average rate
of return for the property or when the property no longer matches the profile of
properties we desire to own.
 
 The
execution of our growth strategy is dependent on a number of factors including
oil and gas prices, the availability of oil and gas properties that meet our
economic criteria and the availability of funds on terms that are acceptable to
us, if at all. There is no assurance that these factors will occur. We expect we
will require additional capital to meet our long term operating requirements. We
expect to raise additional capital through, among other things, the sale of
equity or debt securities.
 
 Fiscal
Year Ended December 31, 2007 Compared to Fiscal Year Ended December 31,
2006
 
 Our net
loss applicable to common stockholders for 2007 was ($341,155) compared to a net
loss of ($234,923) during ended 2006 (a decrease of $106,232). During 2007, we
generated revenue of $468,831 compared to revenue of $485,685 generated during
2006 (a decrease of $16,854). The decrease in revenues during 2007 compared to
2006 was attributable to a decline in gas and oil sales resulting from depletion
of the Wilson State Track 5-2.   The net loss before the
inclusion of Dividend on Preferred Stock, was ($241,155), or ($0.03) per
share.  The Dividend on Preferred Stock was $100,000.
 
 During
2007, we incurred operating expenses of $652,992 compared to $682,296 incurred
during 2006 (a decrease of $29,304). These operating expenses incurred during
fiscal year ended December 31, 2007 consisted of: (i) salaries and compensation
expense of $218,703 (2006: $260,983); (ii) professional and consulting fees of
$115,247 (2006: $170,917); (iii) depreciation and depletion of $83,064 (2006:
$96,154); (iv) general and administrative expenses of $103,619 (2006: $85,304);
and (v) lease operating expenses of $132,359 (2006: $68,938). Interest expense
of $15,652 (2006: $38,312) decreased during 2007 due to decreased short term
borrowing during the first portion of the year.
 
 Salaries
and compensation expenses, professional and consulting fees, and general and
administrative expenses incurred during 2007 increased, respectively, primarily
due to the increase in operating costs associated with the increased development
of our oil and gas properties, related infrastructure and overall corporate
activity. Accounting and audit fees of $63,423 were paid. General and
administrative expenses generally include corporate overhead, financial and
administrative contracted services, marketing, and consulting
costs.
 
 Depreciation
and depletion of oil and gas properties decreased during 2007 primarily due to
the decline in gas (23,133 mcf) and oil (1,132 bbl) production from. Interest
expense also increased resulting from the long-term debt incurred in 2005 and
2007 for the purchase of our Wilson properties, as well as other debt
items.
 
 Our lease
operating expenses increased, however, during fiscal year ended December 31,
2007 primarily attributable to higher compressor fees, pumping expenses,
insurance and similar costs related to the production of oil and
gas.
 
 Of the
$652,992 incurred as operating expenses, $128,850 of those expenses entailed
compensation to our executive officers or directors. See “Item 10. Executive
Compensation.”
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 Fiscal
Year Ended December 31, 2007
 
 At
December 31, 2007, our current assets were $115,360 and our current liabilities
were $913,087, which resulted in a working capital deficiency of ($797,727). At
December 31, 2007, current assets were comprised of: cash $80,355 and
receivables of $35,005.  At December 31, 2007, current liabilities
were comprised of: (i) $62,770 in accounts payable-trade; (ii) $705,548 in
current maturities of debt; (iii) $19,886 in accounts payable – related parties,
and (iv) $124,883 in accrued expenses, including $100,000 of Dividends Payable
on Preferred Stock.
 
 At
December 31, 2007, our total assets were $11,078,518 comprised of: (i) $115,360
in current assets; (ii) $11,205,572 in oil and gas properties and equipment,
less accumulated depletion and depreciation of ($242,414). The increase in total
assets during fiscal year ended December 31, 2007 from fiscal year ended
December 31, 2006 was primarily due to the acquisition of oil and gas
properties.
 
 At
December 31, 2007, our total liabilities were $976,021 comprised of: (i)
$913,087 in current liabilities; and (ii) $62,934 in asset retirement
obligation. The increase in liabilities during fiscal year ended December 31,
2007 from fiscal year ended December 31, 2006 was primarily due to the increase
in current liabilities in accounts payable – trade $43,873 and accrued expenses
and short term debt $739,044.
 
 Stockholders’
equity increased from $494,651 for fiscal year ended December 31, 2006 to
$10,102,497 for fiscal year ended December 31, 2007 due to the acquisition of
properties and the issuance of preferred stock.
 
 Cash
Flows from Operating Activities
 
 During
2007, net cash increased by $78,843 consisting of ($12,061) used in operations
and ($257,709) used in investing activities, which was offset by $348,613 which
was the net provided by financing activities.
 
 For 2007,
net cash flows used in operating activities was ($12,061) consisting primarily
of a net loss of ($241,155). Net cash flows used in operating activities was
adjusted by: (i) $83,064 for the non-cash expense of depreciation, depletion and
accretion; (ii) $64,374 for the increase in accounts payable-trade and ($132,609
for accounts payable – related party; (iii) $12,764 from the disposal of
inventory and (iv) $34,019 increase in accounts receivable.
 
 For 2007,
net cash flow from oil and gas revenue decreased by $16,854, primarily from
depletion relating to the Wilson property.
 
 Cash
Flows from Investing Activities
 
 For 2007,
net cash flows used in investing activities was ($257,709) consisting of the
purchase of additional oil and gas properties in the Wilson lease.
 
 Cash
Flows from Financing Activities
 
 We have
financed some of our operations and all of our acquisitions from the issuance of
equity and debt instruments. For 2007, net cash flows provided by financing
activities was $348,613, compared to net cash flows used in financing activities
of ($29,791) for 2006.  This amount consists of proceeds from common
stock sales, $30,000, and debt issuance of $400,000. We paid off a debt of
$81,387 which was outstanding at December 31, 2006.
 
 We expect
that working capital requirements will continue to be funded through a
combination of our future revenues, existing funds and further issuances of
securities and debt. Our working capital requirements are expected to increase
in line with the growth of our business.
 
 PENDING
ACQUISITIONS AND FUNDING
 
 On
February 14, 2008, ECCO Energy purchased an additional 25% of the working
interest in Louisiana Shelf East Cameron Block 4, bringing the total working
interest owned by ECCO to 100%.  The purchase was approved in December
by the trustee, and received final approval in February by the court, whereupon
the interest was purchased  from the Trustee of the United States
Bankruptcy Court.
 
 ECCO
Energy entered into a farmout agreement dated January 11, 2008 (the “Farmout
Agreement”) with an independent oil & gas corporation (IOG), concerning the
right, title and interest of the Company in lease no. 1337 on the Bateman Lake
Field. In accordance with the terms and provisions of the Farmout Agreement, IOG
has the exclusive right, but not the obligation, to re-enter the Bateman Lake
Field for the purpose of sidetracking, deepening, working over or recompleting
any of the wells situated on the Bateman Lake Field. In accordance with the
further terms and provisions of the Farmout Agreement: (i) with regards to well
nos. 4, 11, 21 and 26 (the “Partnership Wells”), the Company shall receive a 5%
carried interest to the tanks until 120% of payout, at which time such carried
interest shall convert to a 25% net profit interest and the Company shall
receive a 25% working interest; (ii) with regards to well nos. 9 and 19 formerly
operated by VTEX (the “Partnership Retained Wells”), the Company shall retain
ownership in the Partnership Retained Wells and rights to any proceeds received
for the sale of oil and/or gas to which IOG shall have no rights; (iii) with
regards to other workover wells, the Company shall be carried to the tanks to
the extent of a 5% working interest in workover operations until 125% of payout
and upon 125% of payout, the Company may elect to continue to receive the 5%
carried working interest or convert the 5% carried working interest to a 25%
working interest; (iv) with regards to other sidetrack wells, the Company shall
be carried to the tanks to the extent of a 5% working interest in sidetrack
operations until 150% of payout and upon 150% of payout, the Company may elect
to continue to receive the 5% carried working interest or convert the 5% carried
working interest to a 25% working interest; and (v) the Company shall receive a
25% working interest upon reaching 150% of payout of all costs related to the
first three new drill wells.
 
 Upon
consummation of the Farmout Agreement: (i) IOG will pay an aggregate $750,000
relating to the Debt to the Company; (ii) the Company caused the cancellation of
the Debt and any other liens on lease no. 1337; and (iii) the Company entered
into an assignment dated January 11, 2008 (the “Company Assignment”) with IOG
pursuant to which the Company assigned to IOG all of its right, title and
interest in and to lease no. 1337 on the Bateman Lake Field. It is the Company’s
intent that the Series C and D Preferred Stock shall be redeem out of future
earnings generated from lease no. 1337 on the Bateman Lake Field.
 
 Existing
working capital, future revenues, further advances and debt instruments, and
anticipated cash flow are expected to be adequate to fund our operations over
the next twelve months. Generally, we have financed operations to date through
generation of revenues from operations and with proceeds from the private
placement of equity and debt instruments and funding from related parties.
Management anticipates additional increases in operating expenses and capital
expenditures relating to: (i) oil and gas operating properties; (ii) possible
drilling initiatives on current properties and future properties; and (iii)
future property acquisitions. We intend to fund these expenses with further
issuances of securities, and debt issuances. Thereafter, we expect we will need
to raise additional capital and generate revenues to meet long-term operating
requirements. Additional issuances of equity or convertible debt securities will
result in dilution to our current shareholders. Further, such securities might
have rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business
operations.
 
 MATERIAL
COMMITMENTS
 
 As noted
in the December 31, 2006 Annual Report, we had a material commitment for 2007,
which consists of a promissory note payable to a related party of
$155,000.  The terms of the note required us to make monthly payments
of $7,150, including principal and interest at 10% per annum. The unsecured note
was paid in full before December 7, 2007.
 
 As noted
in the December 31, 2006 Annual Report, we have a promissory note payable to the
Reece Revocable Trust in the principal amount of $205,548 payable in one lump
sum payment on or before July 31, 2008 with interest accruing at the rate of 7%
per annum payable in monthly installments on the last day of each month, with
the first payment made on August 31, 2007.
 
 During
fiscal year 2008, we have certain short-term unsecured debt aggregating
approximately $500,000 payable to certain creditors. In general, the terms
include interest at the rate of 10% per annum with monthly payments of principal
and interest.
 
 PURCHASE
OF SIGNIFICANT EQUIPMENT
 
 We do not
intend to purchase any significant equipment during the next twelve
months.
 
 OFF-BALANCE
SHEET ARRANGEMENTS
 
 As of the
date of this Annual Report, we do not have any off balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
 
 RECENT
ACCOUNTING PRONOUNCEMENTS
 
 In
December 2004, the FASB issued SFAS No.123R, "Accounting for Stock-Based
Compensation".  SFAS No.123R establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions.  SFAS No.123R requires that the fair value of such
equity instruments be recognized as expense in the historical financial
statements as services are performed. Prior to SFAS No.123R, only certain pro
forma disclosures of fair value were required. ECCE adopted SFAS No. 123R as of
January 1, 2006.  As of December 31, 2006, we have not issued any
options or warrants.
 
 ITEM
7.  FINANCIAL STATEMENTS
 
 
 Index
      to Financial StatementsPageReport
      of Independent Registered Public Accounting Firm
                  F-1Consolidated
      Balance Sheets at December 31, 2007 and 2006
                  F-2Consolidated
      Statements of Operations for the years ended December 31, 2007 and
      2006
                  F-3Consolidated
      Statements of Changes in Shareholders’ Equity for the years
      ended
                    December
      31, 2007 and 2006
                  F-4Consolidated
      Statements of Cash Flows for the year ended December 31, 2007 and
      2006
                  F-5Notes
      to Consolidated Financial Statements
                  F-6
      to 12
 
 
 
 
 
  
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors
 ECCO
Energy Corp.
 Houston,
Texas
 
 We have
audited the accompanying consolidated balance sheets of ECCO Energy Corp. as of
December 31, 2007 and 2006, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of ECCO Energy Corp.’s management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of ECCO Energy Corp., as of
December 31, 2007 and 2006, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has negative working capital and
suffered recurring losses from operations, which raises substantial doubt about
its ability to continue as a going concern. Management’s plans regarding those
matters are described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 
 /s/
MALONE & BAILEY, PC
 
 www.malone-bailey.com
 Houston,
Texas
 
 April 22,
2008
 
 
  
  
 ECCO
      ENERGY CORP.CONSOLIDATED
      BALANCE SHEETSDecember
      31,2007
                  
                  2006ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                  
                  $          80,355
                  
                  $      1,512Accounts
      Receivable
                  
                  35,005
                  
                  -Total
      current assets
                  
                  115,360
                  
                  1,512PROPERTY
      and EQUIPMENTOil
      and gas properties, using full cost accounting
                  
                  11,177,355
                  
                  945,152Equipment
                  
                  28,217
                  
                  8,039Less
      accumulated depreciation and depletion
                  
                  (242,414)
                  
                  (164,252)Total
      property and equipment
                  
                  10,963,158
                  
                  788,939OTHER
      ASSETSDeposits
                  
                  -
                  
                  2,340TOTAL
      ASSETS
                  
                  $           11,078,518
                  
                  $             792,791LIABILITIES
      AND SHAREHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable-trade
                  
                  $          62,770
                  
                  $       18,897Accounts
      payable-related parties
                  
                  19,886
                  
                  146,456Accrued
      expenses
                  
                  124,883
                  
                  10,000Current
      maturities of long-term debt – third parties
                  
                  555,548
                  
                  -Current
      maturities of long-term debt - affiliates
                  
                  150,000
                  
                  81,387Total
      current liabilities
                  
                  913,087
                  
                  256,740LONG-TERM
      LIABILITIESAsset
      retirement obligation
                  
                  62,934
                  
                  41,400TOTAL
      LIABILITIES
                  
                  976,021
                  
                  298,140SHAREHOLDERS’
      EQUITYPreferred
      stock, 10,000,000 shares authorized:Series
      A, $.001 par value; 100,000 and no shares issued and
      outstanding
                  
                  100
                  
                  100Series
      B, $.001 par value; 1,000,000 and no shares issued and
      outstanding
                  
                  1,000
                  
                  -Series
      C, $.001 par value; 660,000 and no shares issued and
      outstanding
                  
                  660
                  
                  -Series
      D, $.001 par value; 303,936 and no shares issued and
      outstanding
                  
                  304
                  
                  -Common
      stock, $.001 par value; 75,000,000 shares authorized;9,374,753
      and 9,048,003 shares issued and outstanding
                  
                  9,375
                  
                  9,048Additional
      paid-in-capital
                  
                  10,820,933
                  
                  874,223Retained
      deficit
                  
                  (729,875)
                  
                  (388,720)Total
      shareholders’ equity
                  
                  10,102,497
                  
                  494,651TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
                  $      11,078,518
                  
                  $     792,791
 
 See
summary of significant accounting policies and notes to consolidated financial
statements.
  
  
 ECCO
      ENERGY CORP.CONSOLIDATED
      STATEMENTS OF OPERATIONSYears
      EndedDecember
      31,2007
                    
                    2006REVENUE
                    
                    $      468,831
                    
                    $        485,685OPERATING
      EXPENSESSalaries
      and compensation expense
                    
                    218,703
                    
                    260,983Professional
      and consulting fees
                    
                    115,247
                    
                    170,917Depreciation,
      depletion and accretion
                    
                    83,064
                    
                    96,154General
      and administrative expenses
                    
                    103,619
                    
                    85,304Lease
      operating expenses
                    
                    132,359
                    
                    68,938Total
      operating expenses
                    
                    652,992
                    
                    682,296Net
      operating loss
                    
                    (184,161)
                    
                    (196,611)OTHER
      INCOME (EXPENSEOther
      Expenses
                    
                    (41,342)
                    
                    -Interest
      expense
                    
                    (15,652)
                    
                    (38,312)Net
      loss
                    
                    (241,155)
                    
                    (234,923)Dividend
      applicable to preferred stock
                    
                    (100,000)
                    
                    -Net
      loss applicable to common stockholders
                    
                    $    (341,155)
                    
                    $     (234,923)Basic
      and diluted net loss per share
                    
                    $  (0.04)
                    
                    $   (0.03)Weighted
      average shares outstanding
                    
                    9,165,575
                    
                    9,013,175
 
 See
summary of significant accounting policies and notes to consolidated financial
statements.
  
  ECCO
ENERGY CORP.
 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
 Years
Ended December 31, 2007, and 2006
 
 Preferred
      Shares
                  
                  Preferred
      Stock Amount
                  
                  Common
      Shares
                  
                  Common
      Stock Amount
                  
                  Additional
      Paid in Capital
                  
                  Retained
      Deficit
                  
                  TotalBalances,
      December 31, 2005
                  -
                  
                  $             -
                  
                  7,460,003
                  
                  $      7,460
                  
                  $    785,911
                  
                  $(153,797)
                  
                  $  639,574Stock
      issued for:Cash
                  -
                  
                  -
                  
                  1,350,000
                  
                  1,350
                  
                  88,650
                  
                  -
                  
                  90,000Services
                  -
                  
                  -
                  
                  300,000
                  
                  300
                  
                  9,700
                  
                  -
                  
                  10,000Purchase
      and cancellation ofcommon
      stock
                  -
                  
                  -
                  
                  (62,000)
                  
                  (62)
                  
                  (36,938)
                  
                  -
                  
                  (37,000)Preferred
      stock issued as compensation
                  100,000
                  
                  100
                  
                  -
                  
                  -
                  
                  26,900
                  
                  -
                  
                  27,000Net
      loss
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  (234,923)
                  
                  (234,923)Balances,
      December 31, 2006
                  100,000
                  
                  100
                  
                  9,048,003
                  
                  9,048
                  
                  874,223
                  
                  (388,720)
                  
                  494,651Capital
      from sale of subsidiary
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  19,271
                  
                  -
                  
                  19,271Common
      shares issued -R.
      Reece 20% interest
                  -
                  
                  -
                  
                  141,750
                  
                  142
                  
                  36,713
                  
                  -
                  
                  36,855Common
      shares issued -R.
      Reece 11% interest
                  -
                  
                  -
                  
                  110,000
                  
                  110
                  
                  91,236
                  
                  -
                  
                  91,346Series
      B preferred - LouisianaShelf
      acquisition
                  1,000,000
                  
                  1,000
                  
                  -
                  
                  -
                  
                  4,999,000
                  
                  -
                  
                  5,000,000Series
      C Preferred - BatemanLake
      acquisition
                  660,000
                  
                  660
                  
                  -
                  
                  -
                  
                  3,299,340
                  
                  -
                  
                  3,300,000Series
      D Preferred - BatemanLake
      acquisition
                  303,936
                  
                  304
                  
                  -
                  
                  -
                  
                  1,519,376
                  
                  -
                  
                  1,519,680Common
      shares issued for cash
                  -
                  
                  -
                  
                  75,000
                  
                  75
                  
                  29,925
                  
                  -
                  
                  30,000Adjustment
      from R. Reece -Wilson
      acquisition
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  (48,151)
                  
                  -
                  
                  (48,151)Preferred
      stock dividends
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  (100,000)
                  
                  (100,000)Net
      Loss
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  -
                  
                  (241,155)
                  
                  (241,155)Balances,
      Dec. 31, 2007
                  2,063,936
                  
                  $    2,064
                  
                  9,374,753
                  
                  $   9,375
                  
                  $10,820,933
                  
                  $(729,875)
                  
                  $10,102,497
 
 
 See
summary of significant accounting policies and notes to consolidated financial
statements.
  
  ECCO
ENERGY CORP.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For
      the Years EndedDecember
      31,2007
                  
                  2006Cash
      flows from operating activities:Net
      loss
                  
                  $          (241,155)
                  
                  $           (234,923)Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation,
      depletion and accretion
                  
                  83,064
                  
                  96,154Stock
      issued for compensation
                  
                  -
                  
                  27,000Stock
      issued for services
                  
                  -
                  
                  10,000Changes
      in assets and liabilitiesAccounts
      receivable
                  
                  (34,019)
                  
                  -Inventory
                  
                  (12,764)
                  
                  -Prepaid
      expenses
                  
                  -
                  
                  8,544Other
      assets
                  
                  2,340
                  
                  (390)Accounts
      payable – Trade
                  
                  61,374
                  
                  139,014Accounts
      payable – Related parties
                  
                  132,609
                  
                  -Accrued
      liabilities
                  
                  (3,510)
                  
                  (5,000)Net
      cash provided by (used in) operating activities
                  
                  (12,061)
                  
                  40,399Cash
      flows from investing activities:Acquisitions
      of oil and gas properties
                  
                  (17,500)
                  
                  -Additions
      to oil and gas properties
                  
                  (221,647)
                  
                  (12,619)Purchase
      of equipment
                  
                  (18,562)
                  
                  -Net
      cash used in investing activities
                  
                  (257,709)
                  
                  (12,619)Cash
      flows from financing activities:Proceeds
      from sale of common stock
                  
                  30,000
                  
                  90,000Purchase
      and cancellation of common stock
                  
                  -
                  
                  (37,000)Proceeds
      from issuance of debt
                  
                  400,000
                  
                  -Payments
      made on long term debt
                  
                  (81,387)
                  
                  (79,974)Payments
      made on capital lease obligation
                  
                  -
                  
                  (2,817)Net
      cash provided by (used in) financing activities
                  
                  348,613
                  
                  (29,791)Net
      change in cash and cash equivalents
                  
                  78,843
                  
                  (2,011)Cash
      and cash equivalents, at beginning of year
                  
                  1,512
                  
                  3,523Cash
      and cash equivalents, at end of year
                  
                  $            80,355
                  
                  $                1,512Supplemental
      cash flow information:Interest
      paid
                  
                  $              9,613
                  
                  $              38,312Non
      cash investing and financial activities:Contributed
      capital from sale of subsidiary
                  
                  $            19,271
                  
                  $                       -Equipment
      purchased on account
                  
                  18,393
                  
                  -Related
      party payable relieved for oil and gas properties
                  
                  257,430
                  
                  -Asset
      retirement obligations assumed for oil and gas properties
                  
                  19,122
                  
                  -Debt
      issued for oil and gas properties
                  
                  355,548
                  
                  -Preferred
      stock issued for oil and gas properties
                  
                  9,819,680
                  
                  -Common
      stock issued for oil and gas properties
                  
                  128,201
                  
                  -Purchase
      price adjustment for oil and gas acquisition
                  
                  48,151
                  
                  -Preferred
      stock dividends
                  
                  100,000
                  
                  -
 
 See
summary of significant accounting policies and notes to consolidated financial
statements
  
  
 ECCO
ENERGY CORP.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 1.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization
 
 ECCO
Energy Corp. (“ECCE”) is an independent oil and gas company organized in Nevada
actively engaged in oil and gas development, exploration and production with
properties and operational focus in the Texas Gulf Coast Region. ECCE’s strategy
is to grow its asset base by purchasing producing assets at a discount to
reserve value, increasing the production rate of reserves, and converting proved
developed non-producing reserves to proved developed producing reserves.
Acquisitions to date have provided producing assets.
 
 On July
12, 2006 Samurai Energy Corp., a Delaware corporation, ECCO Energy Corp., a
Nevada corporation (“ECCO”), and SEI Acquisition Corp., a Nevada corporation and
a wholly owned subsidiary of Samurai (“Samurai Sub”) completed the transactions
contemplated by the Agreement and Plan of Merger (“Agreement”), dated June 30,
2006. Samurai Sub merged with and into ECCO. As a result of the Merger, each
three shares of ECCO common stock issued and outstanding converted into the
right to receive one Samurai common share, the separate corporate existence of
Samurai Sub ceased, and ECCO was the surviving corporation in the Merger.
Samurai issued 1,415,999 shares to ECCO shareholders.  After
completion of the transaction, ECCO became a wholly-owned subsidiary of Samurai
and Samurai merged with and into ECCO, for the sole purpose of reincorporating
into Nevada. On August 28, 2006, the reincorporation became effective resulting
in Samurai continuing its corporate existence in Nevada under the name ECCO
Energy Corp.
 
 The
acquisition has been accounted for as a business combination between entities
under common control similar to a pooling of interests. Prior to the merger,
Samurai and ECCO were controlled by the same management group and had certain
common ownership interests in their respective common stock. Therefore, ECCE
recorded the acquisition of ECCO at the carrying value of the assets acquired
with no adjustment for the fair value of the assets acquired.  After
the merger on July 12, 2006, ECCE had a 69% working interest in the E.C. Wilson
and Wilson State Tract Leases.  In August, 2007 ECCO increased its
working interest in the Wilson Lease to 89%, and in December, 2007, the working
interest was increased to 100%.
 
 Use of Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
that affect the reported amounts of revenues and expenses during the reporting
period.
 
 Cash and Cash Equivalents
 
 ECCE
considers all highly liquid investments with original maturities of three months
or less at the date of purchase to be cash equivalents.
 
 Oil and Gas Properties
 
 The
Company accounts for its oil and natural gas producing activities using the full
cost method of accounting as prescribed by the United States Securities and
Exchange Commission (SEC). Accordingly, all costs incurred in the acquisition,
exploration, and development of proved oil and natural gas properties, including
the costs of abandoned properties, dry holes, geophysical costs, and annual
lease rentals are capitalized. All general and administrative corporate costs
unrelated to drilling activities are expensed as incurred. Sales or other
dispositions of oil and natural gas properties are accounted for as adjustments
to capitalized costs, with no gain or loss recorded unless the ratio of cost to
proved reserves would significantly change. Depletion of evaluated oil and
natural gas properties is computed on the units of production method based on
proved reserves. The net capitalized costs of proved oil and natural gas
properties are subject to a full cost ceiling limitation in which the costs are
not allowed to exceed their related estimated future net revenues discounted at
10%, net of tax considerations. In accordance with Staff Accounting Bulletin
Topic 12.D.3.c., the Company utilizes the prices in effect on a date subsequent
to the end of a reporting period in which the full cost ceiling limitation was
exceeded at the end of a reporting period.
 Costs
associated with unevaluated properties are excluded from the full cost pool
until the Company has made a determination as to the existence of proved
reserves. The Company reviews its unevaluated properties at the end of each
quarter to determine whether the costs incurred should be transferred to the
full cost pool and thereby subject to amortization.
 
 Revenue and Cost
Recognition
 
 ECCE uses
the sales method of accounting for natural gas and oil revenues. Under this
method, revenues are recognized based on the actual volumes of gas and oil sold
to purchasers. The volume sold may differ from the volumes to which ECCE is
entitled based on our interest in the properties. Costs associated with
production are expensed in the period incurred.
 
 Concentrations
 
 Trade
accounts receivables are generated from companies with significant oil and gas
marketing activities, which would be impacted by conditions or occurrences
affecting that industry. In 2006, approximately 89% of oil and gas revenues were
attributable to one customer. ECCE performs ongoing credit evaluations of its
customers and, generally, requires no collateral. ECCE is not aware of any
significant credit risk relating to its customers and has not experienced any
credit loss associated with such receivables. Substantially all receivables were
collected shortly after December 31, 2007. Receivables from Samurai Operating
Company LLC at December 31, 2007 and 2006 are reflected as a component of
Accounts Payable-related party.
 
 Income Taxes
 
 ECCE
recognizes deferred tax assets and liabilities based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be in effect when the differences are
expected to be recovered. The Company provides a valuation allowance for
deferred tax assets for which it does not consider realization of such assets to
more likely than not.
 
 Loss per Share
 
 Basic and
diluted net loss per share calculations are presented in accordance with
Financial Accounting Standards Statement 128, and are calculated on the basis of
the weighted average number of common shares outstanding during the year. They
include the dilutive effect of common stock equivalents in years with net
income.
 
 New
Accounting Standards
 
 We
do not expect the adoption of recently issued accounting pronouncements to have
a significant impact on our results of operations, financial position or cash
flow.
 
 2.                      
GOING
CONCERN
 
 As shown
in the accompanying financial statements, we incurred net losses applicable to
common shareholders of $341,155 and $234,923 for 2007 and 2006, respectively. In
addition, we had an accumulated deficit of $729,875 and a working capital
deficit of $797,727 as of December 31, 2007. These conditions raise substantial
doubt as to our ability to continue as a going concern. Management is working to
raise additional capital through the farmout of oil and gas properties. The
financial statements do not include any adjustments that might be necessary if
we are unable to continue as a going concern.
 
 3.           
INCOME TAXES
 
 As of
December 31, 2007 and 2006 the Company had substantial net operating
losses.  Net operating losses and book and tax differences are
required by generally accepted accounting standards to be
recorded.  Book and tax differences are not required to be recorded
when the consequences of these differences might not be realized.  The
substantial net operating losses will expire over the next 5 to 15
years.  The net operating losses may or may not be realized which will
be dependent on future earnings, which are currently uncertain. All deferred tax
assets are fully reserved.
 
 4.           LONG
AND SHORT TERM DEBT
 
 A-RELATED PARTY
 
 Note
Payable 1 is from Samurai Energy LLC, a company controlled by ECCE’s President,
and consisted of the following at December 31, 2007 and 2006:
 
 2007
                      
                      2006Promissory
      note to a related party- payable in monthly payments of $7,150 including
      principal and interest at 10% due December 7, 2007;
    unsecured
                      
                      $                -
                      
                      $        81,387
 
 Note Payable 1 was paid in full in
December, 2007.
 
 Note
Payable 2 is also from Samurai Energy LLC; a company controlled by ECCE’s
President, and consisted of the following at December 31, 2007 and
2006
 
 2007
                  
                  2006Promissory
      note to a related party- payable in lump sum including principal and
      interest at 10% due November 30, 2008; unsecured
                  
                  $     100,000
                  
                  $                     -
 
 Note
Payable 3 is from Rick Bobigan, a significant investor in ECCO
Energy:
 
 2007
                    
                    2006Promissory
      note to a related party- Payable in lump sum including principal and
      interest at 10% due May 13, 2008; unsecured
                    
                    $      50,000
                    
                    $                  -
 
 B- NON RELATED PARTIES
 
 Note
Payable 4 is from Ray Nesbitt, and includes the issue of 30,000 warrants,
convertible to purchase ECCO common stock at $1.00 per share for 24
months.  ECCO, at its option, may extend the note for 180 day by
issuing the lender 5,000 additional negotiable warrants convertible at $1.00 for
24 months.  The fair value of the warrants is immaterial.
 
 2007
                  
                  2006Promissory
      note to a non-related party- Payable in total plus accrued interest of 12%
      due February 16, 2008; secured by Oil and Gas Mineral lease Wilson
      Field.  See Wilson Field for detail.
                  
                  $     300,000
                  
                  $                   -
 
 Note
Payable 5 is from Bamco Gas, LLC; and relates to the purchase of Louisiana Shelf
LLC.
 
 2007
                  
                  2006Promissory
      note to a non-related party- Payable in total plus accrued interest of 6%
      due June 26, 2008; not secured.
                  $       25,000
                  
                  $                   -
 
 Note
Payable 6 is from Louisiana X Investors, LLC; and relates to the purchase of
Louisiana Shelf LLC.
 
 2007
                  
                  2006Promissory
      note to a non-related party- Payable in total plus accrued interest of 6%
      due June 26, 2008; not secured.
                  
                  $       25,000
                  
                  $                   -
 
 Note
payable 7 is form Ronald E. Reece Revocable Trust of 2000 with an interest rate
of 7% per annum and payable each month and with the principle balance due July
31, 2008.  The notes balance was $205,548 at December 31, 2007 and
none at December 31, 2006.
 
 5.           ASSET
RETIREMENT OBLIGATION
 
 In August
2001, the FASB issued SFAS No. 143,Accounting for Asset Retirement
Obligations (SFAS 143). The Company adopted this new standard beginning
January 1, 2003. SFAS 143 requires that the fair value of an asset retirement
cost, and corresponding liability, should be recorded as part of the cost of the
related long-lived asset and subsequently allocated to expense using a
systematic and rational method. Upon adoption, the Company recorded an asset
retirement obligation to reflect the Company’s legal obligations related to
future plugging and abandonment of its oil and natural gas wells. The Company
estimated the expected cash flow associated with the obligation and discounted
the amount using a credit-adjusted, risk-free interest rate. At least annually,
the Company reassesses the obligation to determine whether a change in the
estimated obligation is necessary. The Company evaluates whether there are
indicators that suggest the estimated cash flows underlying the obligation have
materially changed. Should those indicators suggest the estimated obligation may
have materially changed on an interim basis (quarterly), the Company will
accordingly update its assessment. Additional retirement obligations increase
the liability associated with new oil and natural gas wells as these obligations
are incurred.
   2007
                    2006ARO
      Liability December 31,
                    $41,400
                    $22,200Wilson
      Property Purchase
                    12,337Wilson
      Property Purchase
                    6,785
                    17,900ARO
      Accretion Expense
                    2,412
                    1,300ARO
      December 31, 2007
                    $62,934
                    $41,400
  
 6.           PREFERRED
STOCK
 
 Convertible
Preferred A:     100,000   shares
outstanding
 Convertible
Preferred B:  1,000,000   shares
outstanding
 Convertible
Preferred C:     660,000   shares
outstanding
 Convertible
Preferred D:     303,936   shares
outstanding
 
 On July
17, 2006, in connection with the merger, ECCE issued 100,000 shares of preferred
stock to Samuel M. Skipper, a preferred shareholder of ECCO and Chief Executive
Officer of ECCE.  The preferred stock of ECCO was valued at $27,000
and recorded as compensation expense.  The preferred stock is entitled
to the number of votes equal to all votes of other security holders plus one
vote. As a result, Mr. Skipper has voting control of ECCO.
 
 On
September 30, 2007, we designated 1,000,000 shares of the 10,000,000 shares of
authorized preferred stock as Series B Preferred Stock, with an initial value of
$5.00. The Series B Preferred Stock is a new series of preferred stock, which
ranks senior and is not subordinated in any respects to the Series A Preferred
Stock. So long as any Series B Preferred Stock is outstanding, we are prohibited
from issuing any series of stock having rights senior to or ranking on parity
with the Series B Preferred Stock without the approval of the holders of 2/3’s
of the outstanding Series B Preferred Stock. The holders of the outstanding
shares of Series B Preferred Stock shall be entitled to receive in preference to
the holders of any other shares of capital stock of the Corporation, cumulative
dividends when and as if they may be declared by the Board of Directors at a per
share equal to 8% per annum of the Initial Value. Additionally, upon occurrence
of our liquidation, dissolution or winding up, the holder of shares of Series B
Preferred Stock will be entitled to receive, before any distribution of assets
is made to holders of our common stock or any other stock ranking junior to the
Series B Preferred Stock Preferred Stock as to dividends or liquidations rights,
but only after all distributions to holders of Series B Preferred Stock have
been made in an amount per share of Series B Preferred Stock equal to 100% of
the Initial Value plus the amount of any accrued but unpaid dividends due for
each share of Series B Preferred Stock .  Lastly, in addition to the
rights discussed above of the holders of the Series B Preferred Stock, at any
time after June 15, 2008 and provided a triggering event has occurred, each
holder of Series B Preferred Stock shall have the right at such holder’s option
to require us to redeem for cash all or a portion of such holder’s shares of
Series B Preferred Stock at a price per share equal to the Liquidation Amount. A
“triggering event” shall mean that the wells owned or operated by the Limited
Partnership have generated an aggregate of 1,500,000,000 cubic feet of natural
gas.
 
 On March
27, 2008, we designated 660,000 shares of authorized preferred stock as Series C
Preferred Stock, with an initial value of $5.00. The Series C Preferred Stock is
a new series of preferred stock, which ranks on parity with the Series B
Preferred Stock. So long as any Series C Preferred Stock is outstanding, the
Company is prohibited from issuing any series of stock having rights senior to
or ranking on parity with the Series C Preferred Stock without the approval of
the holders of 2/3’s of the outstanding Series C Preferred Stock. The holders of
the outstanding shares of Series C Preferred Stock shall be entitled to receive
in preference to the holders of any other shares of capital stock of the
Corporation, cumulative dividends when and as if they may be declared by the
Board of Directors at a per share equal to 8% per annum of the Initial Value.
Additionally, upon occurrence of a liquidation, dissolution or winding up of the
Company, the holder of shares of Series C Preferred Stock will be entitled to
receive, before any distribution of assets is made to holders of common stock or
any other stock of the Company ranking junior to the Series C Preferred Stock as
to dividends or liquidations rights, but only after all distributions to holders
of Series C Preferred Stock have been made in an amount per share of Series C
Preferred Stock equal to 100% of the Initial Value plus the amount of any
accrued but unpaid dividends due for each share of Series C Preferred Stock
..  Lastly, upon occurrence of a triggering event (defined as the date
when the cumulative market value of production from the property sold or
utilized off the premises (after deducting severance, ad valorem and production
taxes paid by the Company, plus any royalties, overriding royalties, production
payments and similar lease burdens) shall equal the Company’s actual cost of
drilling, testing and completing the wells located on the property (including
the actual cost of any reworking, deepening or plugging back), plus 100% of the
actual cost of operating the well during the payout period), the Company shall
have the obligation to redeem on a pro-rata basis for cash in an amount equal to
50.0% of the net proceeds received by the Company from production of the
property, all or a portion of the holder’s shares of Series C Preferred Stock at
a price per share equal to the liquidation amount. Liquidation amount is
generally defined as that amount equal to 100% of the Initial Value plus accrued
but unpaid dividends.
 
 On March
27, 2008, the Company we designated 303,936 shares of authorized preferred stock
as Series D Preferred Stock, with an initial value of $5.00. The Series D
Preferred Stock had been authorized by the Board of Directors of the Corporation
as a new series of preferred stock, which ranks on parity with the Series B and
Series C Preferred Stock. So long as any Series B or Series C Preferred Stock is
outstanding, the Company is prohibited from issuing any series of stock having
rights senior to or ranking on parity with the Series D Preferred Stock without
the approval of the holders of 2/3’s of the outstanding Series D Preferred
Stock. The holders of the outstanding shares of Series D Preferred Stock shall
be entitled to receive in preference to the holders of any other shares of
capital stock of the Corporation, cumulative dividends when and as if they may
be declared by the Board of Directors at a per share equal to 8% per annum of
the Initial Value. Additionally, upon occurrence of a liquidation, dissolution
or winding up of the Company, the holder of shares of Series D Preferred Stock
will be entitled to receive, before any distribution of assets is made to
holders of common stock or any other stock of the Company ranking junior to the
Series B or Series C Preferred Stock as to dividends or liquidations rights, but
only after all distributions to holders of Series B or Series C Preferred Stock
have been made in an amount per share of Series B or Series C Preferred Stock
equal to 100% of the Initial Value plus the amount of any accrued but unpaid
dividends due for each share of Series B or Series C Preferred Stock. Lastly,
upon occurrence of a triggering event (defined as the date on which the Company
first received proceeds), the Company shall have the obligation to redeem on a
pro-rata basis for cash in an amount equal to 29.70% of all proceeds received by
the Company under the provisions of the Farmout Agreement, all or a portion of
the holder’s shares of Series D Preferred Stock at a price per share equal to
the liquidation amount. Liquidation amount is generally defined as that amount
equal to 100% of the Initial Value plus accrued but unpaid
dividends.
 
 7.           COMMON
STOCK -
 
 During
third quarter 2007, we issued an additional 141,750 shares to Ronald E. Reece
M.D. in connection with the purchase of the 20% working interest in the E.C.
Wilson and Wilson State Tract Leases.   We issued another 110,000
shares to Ronald E. Reece, M.D., in connection with the purchase of the 11%
interest in the same property.  See Note 8A.
 
 During
fourth quarter of 2007, we sold 75,000 common shares to an investor for of
$30,000.
 
 8.           ACQUISITIONS
AND DISPOSITIONS DURING THE YEAR
 
 The
following acquisitions were made during the year.
 
 A.
                Acquisition
      of 20% Interest in Wilson
Properties.
 
 On August
1, 2007, ECCE purchased a 20% working interest in the E.C. Wilson and Wilson
State Tract Leases located in Nueces County, Texas from Ronald E. Reece M.D.
Revocable Trust of 2000 with an effective date of February 1, 2006 in exchange
for the issuance of 141,750 common shares valued at $36,855 based on a share
price of $.26 and a note in the for $205,548 with interest at 7% per annum and
payable in monthly installments on the last day of each month beginning on
August 31, 2007.
 
 The
results of the acquisition are included in the consolidated financial statements
from the date of the acquisition.  Unaudited pro forma operating
results for the Wilson Property acquired by ECCO are as follows:
 
 Year
      ended December 31,2007
                      2006Revenue
                      545,397
                      637,454Net
      Loss
                      (297,965)
                      (141,758)Net
      Loss per common share
                      .03
                      .01
 
 The
preliminary purchase price allocation of the assets acquired on August 1, 2007
is as follows:
 
 AssetsOil
      and gas properties
                  
                  $
                  106,156Liabilities
      and equityAsset
      retirement obligation
                  
                  $
                  (12,337
                  )
 
 B.
                Acquisition
      of 11% Interest in Wilson Properties, December
  2007.
 ECCE
purchased the remaining 11% of the Wilson tract working interest, giving it 100%
of the working interest,  for $100,000 owed Samurai Corp, due on
December 1, 2008 with annual interest of 10%. The principal owner of Samurai
Corporation is Sam Skipper, the CEO of ECCE. The transaction is accounted for at
historical book value as the transaction is between entities under common
control.
 As this
transaction was at the end of 2007, the following pro forma operating results
are assuming the acquisition occurred at January 1, 2007:
 
 Years
      ended December 31,2007
                  2006Revenue
                  536,240
                  569,158Net
      Loss
                  (306,182)
                  (182,106)Net
      loss per common share
                  .03
                  .01
 
 The
purchase price allocation of the assets acquired from Samurai Corporation in
December 2007 is as follows:
 
 AssetsOil
      and gas properties
                  $
      56,785Liabilities
      and equityAsset
      Retirement Obligation
                  (56,785)
 
 C.
                Acquisition
      of Louisiana Shelf Properties,
Louisiana
 
 In
October 2007, ECCE purchased Shelf Partners, L.P.; a Delaware limited
partnership, for 1,000,000 shares of Series B Convertible Preferred Stock. The
shares of the Series B Preferred Stock will be convertible at the Sellers’
option into 1,000,000 shares of ECCE’s common stock.  The transaction
was valued at $5,000,000 based on the fair value of the properties
acquired
 
 There is
no current production on the lease.
 
 The
preliminary purchase price allocation of the assets acquired on September 27,
2007 is as follows:
 
 AssetsOil
      and gas property
                  $5,000,000Liabilities
      and equityShareholders’
      equity
                  ($5,000,000)
 
 D.
                Acquisition
      of Bateman Lake, St. Mary Parish, Louisiana, December
  2007.
 
 On
approximately December 1, 2007, ECCE purchased Old Jersey Oil Ventures LLC, a
New Jersey limited liability company from Eugene A. Noser, Jr. for 600,000
shares of Series C Preferred Stock and 303,936 shares of Series D Preferred
Stock. See “Section 5. Corporate Governance and Management. Item 5.03 Amendments
to Articles of Incorporation or Bylaws; Changes in Fiscal Year.”
 
 Old
Jersey together with the Moffat Group is the holder of approximately $5,900,000
in notes payable by VTEX Energy, Inc., a Nevada corporation, relating to the
oil, gas and mineral lease no. 1337 located in Louisiana known as the Bateman
Lake Field. On January 11, 2008, ECCE purchased this lease from VTEX for $1,000
plus assumption of the notes, which was paid off by issuance of Series C and D
preferred stock as mentioned in the above paragraph.
 
 The
substance of the transaction is to acquire oil and gas properties by issuance of
series C and D preferred stock. The following oil and gas properties valuation
is based on the fair value of the properties acquired.
 
 See Note
11 for the January farmout agreement discussion.
 
 The
preliminary purchase price allocation of the assets acquired on December 1, 2007
is as follows:
 AssetsOil
      and gas property
                  $4,819,680Liabilities
      and equityShareholders’
      equity
                  ($4,819,680)
 
 E.  Sale of ECCO Biofuels,
Inc.
 
 ECCO
Biofuels, Inc. was our wholly-owned subsidiary and was formed to offer plant
operators the option of financing 100% of the construction of biodiesel
plants.  On June 27, 2007, we entered into that certain letter of
intent with Saber Energy Corp., a privately held Texas corporation, pursuant to
which we would sell the entire total issued and outstanding shares of ECCO
Biofuels. After completion of satisfactory due diligence and conditions
precedent, we entered into a stock purchase agreement dated June 29, 2007, sold
all of the total issued and outstanding shares of ECCO Biofuels; and (ii) in
payment, Saber Energy issued us of 250,000 shares of restricted common stock of
Saber Energy and to assume all of the liabilities of ECCO
Biofuels.  The loss from the discontinued operations is immaterial and
is included in other expenses on the Income Statement.
 
 Our Board
of Directors, by unanimous written consent, approved the consummation of the
Stock Purchase Agreement. The Board of Directors engaged in a thorough analysis
of the sale of its wholly-owned subsidiary, ECCO Biofuels including, but not
limited to: (i) maximization of shareholder value relating to the stock Purchase
Agreement in comparison with potential shareholder value relating to alternative
business strategies retaining ECCO Biofuels; (ii) the process conducted in
seeking potential buyers and analysis pertaining to reasonableness of providing
equal or greater value to us; and (iii) review of our financial condition,
results of operations and business and earning prospects.  Even though
the alternative fuel industry is increasing, our Board’s evaluation concluded
that we would be required to spend significant employee resources and money to
grow the business operations of ECCO Biofuels, therefore, our Board determined
that it was in the best interests of the company and its shareholders to
concentrate on its core business on the exploration and development of oil and
gas properties.
 
 9.           COMMITMENTS
AND CONTINGENCIES
 
 Legal Proceedings
 
 ECCE is
not a party to any litigation at December 31, 2007.
 
 Operating Leases
 
 During
2007 ECCE leased office space in Houston and Corpus Christi, Texas on a month to
month operating lease; cancelable with thirty days written notice. Rent expense
was $27,608 and $27,635 for 2007 and 2006, respectively.  The Corpus
Christi lease was cancelled in September, 2007.  ECCE moved to its new
location 3315 Marquart St., Ste 206, Houston, TX  77027 during
2007.
 
 Environmental
Matters
 
 ECCE’s
operations and properties are subject to extensive federal, state, and local
laws and regulations relating to the generation, storage, handling, emission,
transportation, and discharge of materials into the environment. Permits are
required for several of ECCE’s operations and these permits are subject to
revocation, modification, and renewal by issuing authorities. ECCE’s also is
subject to federal, state, and local laws and regulations that impose liability
for the cleanup or remediation of property which has been contaminated by the
discharge or release of hazardous materials or wastes into the environment.
Governmental authorities have the power to enforce compliance with their
regulations, and violations are subject to fines or injunctions, or both.
Certain aspects of ECCE’s operations may not be in compliance with applicable
environmental laws and regulations, and such noncompliance may give rise to
compliance costs and administrative penalties. It is not anticipated that ECCE
will be required in the near future to expend amounts that are material to the
financial condition or operations, but because such laws and regulations are
frequently changed and, as a result, may impose increasingly strict
requirements, ECCE is unable to predict the ultimate cost of complying with such
laws and regulations.
 
 10.           RELATED
PARTY TRANSACTIONS
 
 Samurai
Operating Company L.L.C., a related party, is the operator of the properties and
provides production, engineering and maintenance services and charged an
operating fee for its services of $28,800 and $16,560 in 2007 and 2006,
respectively.
 
 11.           SUBSEQUENT
EVENT
 
 The
Company entered into a farmout agreement dated January 11, 2008 with an
independent oil & gas corporation (IOG), concerning our lease no. 1337 on
the Bateman Lake Field. Under the agreement, IOG has the exclusive right, but
not the obligation, to re-enter the Bateman Lake Field for the purpose of
sidetracking, deepening, working over or recompleting any of the wells,
including (i) with regards to well nos. 4, 11, 21 and 26 (the “Partnership
Wells”), the Company shall receive a 5% carried interest to the tanks until 120%
of payout, at which time such carried interest shall convert to a 25% net profit
interest and the Company shall receive a 25% working interest; (ii) with regards
to well nos. 9 and 19 formerly operated by VTEX (the “Partnership Retained
Wells”), the Company shall retain ownership in the Partnership Retained Wells
and rights to any proceeds received for the sale of oil and/or gas to which IOG
shall have no rights; (iii) with regards to other workover wells, the Company
shall be carried to the tanks to the extent of a 5% working interest in workover
operations until 125% of payout and upon 125% of payout, the Company may elect
to continue to receive the 5% carried working interest or convert the 5% carried
working interest to a 25% working interest; (iv) with regards to other sidetrack
wells, the Company shall be carried to the tanks to the extent of a 5% working
interest in sidetrack operations until 150% of payout and upon 150% of payout,
the Company may elect to continue to receive the 5% carried working interest or
convert the 5% carried working interest to a 25% working interest; and (v) the
Company shall receive a 25% working interest upon reaching 150% of payout of all
costs related to the first three new drill wells.
 
 Concerning
the above, (i) IOG paid $750,000 toward VTEX debt related to this lease; (ii)
ECCE paid off all other debt and liens on the lease; and (iii) ECCE assigned the
lease to IOG.
 
 12.           SUPPLEMENTAL OIL AND GAS
INFORMATION-(Unaudited)
 
 Proved
oil and gas reserve quantities are based on estimates prepared internally by
ECCE’s engineer in accordance with guidelines established by the Securities
Exchange Commission (SEC).
 
 There are
numerous uncertainties inherent in estimating quantities of proved reserves and
projecting future rates of production. The following reserve data related to the
properties represents estimates only and should not be construed as being exact.
The reliability of these estimates at any point in time depends on both the
quality and quantity of the technical and economic data, the performance of the
reservoirs, as well as extensive engineering judgment. Consequently, reserve
estimates are subject to revision as additional data becomes available during
the producing life of a reservoir. The evolution of technology may also result
in the application of improved recovery techniques, such as supplemental or
enhanced recovery projects, which have the potential to increase reserves beyond
those currently envisioned.
 
 Estimates
of proved reserves are derived from quantities of crude oil and natural gas that
geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing operating and
economic conditions and rely upon a production plan and strategy.
 
 Statement
of Financial Accounting Standards No. 69, Disclosures About Oil and Gas
Producing Activities (“FAS 69”), requires calculation of future net cash flows
using a 10% annual discount factor and year-end prices, costs and statutory tax
rates, except for known future changes such as contracted prices and legislated
tax rates. The price used was the NYMEX price at December 31, 2007 of
approximately $96.01 per barrel of oil and $7.46 per Mcf of natural gas, less
differentials.  Reserves and pricing were calculated by both
independent engineers and qualified internal engineers.
 
 Gas
                    
                    Oil(MMcf)
                    
                    (MBbls)Total
      Proved Reserves:Balance,
      December 31, 2006
                    687.444
                    
                    3.057Acquisition
      of oil and gas properties
                    1,7560.969
                    
                    262.739Production
                    (38.414)
                    
                    (.313)Disposal
      of oil and gas properties
                    (0)
                    
                    (0)Balance,
      December 31, 2007
                    1,820.998
                    
                    265.483
 
 Capitalized
Costs of Oil and Gas Producing Activities
 
 The
following table sets forth the aggregate amounts of capitalized costs relating
to the ECCE's oil and gas producing activities and the related accumulated
depletion as of December 31, 2007:
 2007
                  
                  2006Asset
      retirement obligations
                  
                  $              60,252
                  
                  41,400Proved
      properties being depleted
                  
                  10,982,349
                  
                  903,752Less
      accumulated depletion
                  
                  (229,244)
                  
                  (164,252)Net
      capitalized costs
                  
                  $        10,813,357
                  
                  $        780,900
 
 Costs Incurred in Oil and
Gas Producing Activities
 
 The
following table reflects the costs incurred in oil and gas property acquisition,
exploration and development activities during the years ended December 31, 2007
and 2006:
 
 2007
                    
                    2006Acquisition
      costs
                    $          10,078,597
                    
                    $                      -Development
      costs
                    125,981
                    
                    12,169$         10,204,578
                    
                    $            12,169
 
 The
following disclosures concerning the standardized measure of future cash flows
from proved oil and gas reserves are presented in accordance with FAS 69. As
prescribed by FAS 69, the amounts shown are based on prices and costs at the end
of each period and a 10 percent annual discount factor.
 
 Future
cash flows are computed by applying fiscal year-end prices of natural gas and
oil to year-end quantities of proved natural gas and oil reserves. Future
operating expenses and development costs are computed primarily by ECCE’s
petroleum engineer by estimating the expenditures to be incurred in developing
and producing ECCE’s proved natural gas and oil reserves at the end of the year,
based on year end costs and assuming continuation of existing economic
conditions. Future income taxes are based on currently enacted statutory
rates.
 
 The
standardized measure of discounted future net cash flows is not intended to
represent the replacement costs or fair value of ECCE’s natural gas and oil
properties. An estimate of fair value would take into account, among other
things, anticipated future changes in prices and costs, and a discount factor
more representative of the time value of money and the risks inherent in reserve
estimates of natural gas and oil producing operation.
 
 Reserve
estimates were prepared by both external and internal sources.
 
 Standardized
Measure of Discounted Future Net Cash Flow
 2007
                  
                  2006Future
      cash inflows at December 31,
                  $     152,559,239
                  
                  $     4,907,137Future
      costs-Operating
                  (31,003,304)
                  
                  (862,035)Development
      and abandonment
                  (12,272,052)
                  
                  (602,370)Future
      net cash flows before income taxes
                  109,283,883
                  
                  3,442,732Future
      income taxes
                  (37,156,520)
                  
                  (1,204,956)Future
      net cash flows before income taxes
                  72,127,363
                  
                  2,237,776Discount
      at 10% annual rate
                  (20,094,735)
                  
                  (754,438)Standardized
      measure of discounted future net cash flows
                  $52,032,628
                  
                  $     1,483,338
 
 The
following reconciles the change in the standardized measure of discounted net
cash flow for the year ended December 31, 2007 and 2006
 2007
                  
                  2006Beginning
      of the year
                  $        1,355,086
                  
                  $      2,989,500Acquisition
      of oil and gas properties
                  50,708,487
                  
                  0Sales,
      net of production costs
                  (468,831)
                  
                  (485,694)Net
      change in prices and production costs
                  437,886
                  
                  (1,301,289)Change
      in future development costs
                  0
                  
                  12,464Revision
      of quantity estimates
                  0
                  
                  268,357Disposal
      of oil and gas properties
                  (0)
                  
                  (128,252)Ending
      of year
                  $52,032,628
                  
                  $1,355,086
 
 ITEM
8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
 
 None
 
 ITEM
8A(T).  CONTROLS AND PROCEDURES.
 
 Disclosure
Controls and Procedures
 
 We
maintain "disclosure controls and procedures," as such term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that
are designed to ensure that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms, and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. We
conducted an evaluation (the "Evaluation"), under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer of the
effectiveness of the design and operation of our disclosure controls and
procedures ("Disclosure Controls") as of the end of the period covered by this
report pursuant to Rule 13a-15 of the Exchange Act. The evaluation of our
disclosure controls and procedures included a review of the disclosure controls’
and procedures’ objectives, design, implementation and the effect of the
controls and procedures on the information generated for use in this report. In
the course of our evaluation, we sought to identify data errors, control
problems or acts of fraud and to confirm the appropriate corrective actions, if
any, including process improvements, were being undertaken. Our Chief Executive
Officer and our Chief Financial Officer concluded that, as of the end of the
period covered by this report, our disclosure controls and procedures were
effective and were operating at the reasonable assurance level.
 
 Internal
Control Over Financial Reporting
 
 The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended). Management conducted an
evaluation of the effectiveness of the Company’s internal control over financial
reporting based on the criteria set forth in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management has concluded that the
Company’s internal control over financial reporting was not effective as of
December 31, 2007.  There were no changes in the Company's internal
controls over financial reporting, known to the chief executive officer or the
chief financial officer that occurred during the period covered by this report
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
 
 This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permits the company to provide only
management’s report in this annual report.
 
 ITEM
8B. OTHER INFORMATION
 
 Not
applicable.
  
  
 PART
III
 
 ITEM
9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
 
 IDENTIFICATION
OF DIRECTORS AND EXECUTIVE OFFICERS
 
 All of
our directors hold office until the next annual general meeting of the
shareholders or until their successors are elected and qualified. Our officers
are appointed by our board of directors and hold office until their earlier
death, retirement, resignation or removal.
 
 Our
directors and executive officers, their ages, positions held are as
follows:
 
 Name
                        
                        Age
                        
                        Position
      with the CompanySamuel
      Skipper
                        
                        48
                        
                        President,
      Chief Executive Officer and a DirectorN.
      Wilson Thomas
                        
                        53
                        
                        Chief
      Financial
Officer
 
 Business
Experience
 
 The
following is a brief account of the education and business experience of each
director, executive officer and key employee during at least the past five
years, indicating each person's principal occupation during the period, and the
name and principal business of the organization by which he or she was employed,
and including other directorships held in reporting companies.
 
 Samuel M. Skipperis our
President/Chief Executive Officer and a director. For the past sixteen years,
Mr. Skipper has assisted in the consolidation of private and public companies
and the entry of such companies into the public markets. From 1998 to 2003, Mr.
Skipper was the founder, chairman of the board and the chief executive officer
of VTEX Energy, Inc., a public oil and gas company with over $100 million in
assets. From 1990 to 1993, Mr. Skipper was the founder of and served as the
president and chief executive officer of ImageTrust, Inc. a public company in
the health care industry. Under his leadership, ImageTrust Inc. assembled over
$25 million in assets for owned and operated MRI diagnostic clinics in South
Carolina and Texas. In 1993 Mr. Skipper sold ImageTrust, Inc. for seven figures.
In 1990, Mr. Skipper served as the founder and the vice president of corporate
development of Diagnostic Health Corporation (DHC), where he assisted DHC in the
identification and closing of over $100 million of assets until DHC’s
acquisition by HealthSouth Corporation in 1994.
 
 N. Wilson
Thomas was appointed C.F.O of ECCO Energy Corp., a public oil and gas company
trading under the symbol (ECCE.OB) in late November 2007.  Mr. Thomas
is a CPA and received a BBA from the University of Texas, Austin in
1976.  Since 2006, Mr. Thomas has worked as a CPA specializing in
working with emerging companies.  Prior to 2006, he spent twenty years
in the distribution industry, with sixteen of those years working for SYSCO
Corporation as a CFO of a SYSCO subsidiary.  As CFO he was involved in
the rapid growth of a major subsidiary, with annual sales approaching $350
million.
 
 FAMILY
RELATIONSHIPS
 
 There are
no family relationships among our directors or officers.
 
 INVOLVEMENT
IN CERTAIN LEGAL PROCEEDINGS
 
 During
the past five years, none of our directors, executive officers or persons that
may be deemed promoters is or have been involved in any legal proceeding
concerning: (i) any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time; (ii) any conviction in
a criminal proceeding or being subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); (iii) being subject to
any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction permanently or temporarily enjoining,
barring, suspending or otherwise limiting involvement in any type of business,
securities or banking activity; or (iv) being found by a court, the Securities
and Exchange Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law (and the judgment has
not been reversed, suspended or vacated).
 
 AUDIT
COMMITTEE
 
 As of the
date of this Annual Report, we have not appointed members to an audit committee
and, therefore, the respective role of an audit committee has been conducted by
our Board of Directors. When established, the audit committee's primary function
will be to provide advice with respect to our financial matters and to assist
our Board of Directors in fulfilling its oversight responsibilities regarding
finance, accounting, tax and legal compliance. The audit committee's primary
duties and responsibilities will be to: (i) serve as an independent and
objective party to monitor our financial reporting process and internal control
system; (ii) review and appraise the audit efforts of our independent
accountants; (iii) evaluate our quarterly financial performance as well as our
compliance with laws and regulations; (iv) oversee management's establishment
and enforcement of financial policies and business practices; and (v) provide an
open avenue of communication among the independent accountants, management and
our Board of Directors.
 
 The Board
of Directors has considered whether the regulatory provision of non-audit
services is compatible with maintaining the principal independent accountant's
independence.
 
 COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
 
 Section
16(a) of the Exchange Act requires our directors and officers, and the persons
who beneficially own more than ten percent of our common stock, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Copies of all filed reports are required to be furnished to us
pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on the
reports received by us and on the representations of the reporting persons, we
believe that these persons have complied with all applicable filing requirements
during the fiscal year ended December 31, 2007.
 
 ITEM
10.  EXECUTIVE COMPENSATION
 
 The
following table sets forth the compensation paid to our Chief Executive Officer
and those executive officers that earned in excess of $100,000 during fiscal
year ended December 31, 2007 (collectively, the “Named Executive
Officers”):
  SUMMARY
COMPENSATION TABLE
  Stock
                  Option
                  Non-Equity
      Incentive Plan
                  Non-Qualified
      Deferred Compensation
                  All
      OtherName
      and Principal Position
                  Year
                  Salary
                  Bonus
                  Awards
                  Awards
                  Compensation
                  Earnings
                  Compensation
                  Total($)
                  ($)
                  ($)
                  ($)
                  ($)
                  ($)
                  ($)
                  ($)Samuel
      Skipper,President/CEO
                  2007
                  $60,000
                  $            -
                  $   0
                  $            -
                  $              -
                  $            -
                  $           -
                  $
      60,000John
      Vise,CFO
                  2007
                  $68,850
                  $            -
                  $            -
                  $            -
                  $            -
                  $            -
                  $            -
                  $
      68,850
  
  (1)This
      amount represents fees paid by us to the Named Executive Officer during
      the past year pursuant to services provided in connection with their
      respective position as Chief Executive Officer and Chief Financial
      Officer.
  
 DIRECTOR
COMPENSATION TABLE
 
 During
fiscal year ended December 31, 2007, we did not pay any compensation to our
directors for their respective position on the Board of Directors.
 
 ITEM
11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
 
 As of the
date of this Annual Report, the following table sets forth certain information
with respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current directors and executive officers. Each person has sole
voting and investment power with respect to the shares of common stock, except
as otherwise indicated. Beneficial ownership consists of a direct interest in
the shares of common stock, except as otherwise indicated. As of the date of
this Annual Report, there are 9,374,753 shares of common stock issued and
outstanding.
  
 Name
      and Address
                  Amount
      and nature of
                  
                  Percentage
      ofof Beneficial Owner(1)
                  Beneficial Ownership(1)
                  
                  Beneficial
      OwnershipDirectors
      and Officers:Samuel
      Skipper3315
      Marquart St,  Ste. 206Houston,
      TX 77027
                  5,120,499
                  (2)
                  56.59%John
      Vise14231
      KellywoodHouston,
      TX 77079
                  90,000
                  
                  *All
      executive officers and directors as a group (2 persons)
                  5,210,499
                  
                  57.58%Major
      Shareholders:Richard
      A. Bobigian15907
      Chilton CircleSpring,
      TX 77379
                  1,180,998
                  (3)
                  13.05%
  
  *Less
than one percent.
  
  (1)
                Under
      Rule 13d-3, a beneficial owner of a security includes any person who,
      directly or indirectly, through any contract, arrangement, understanding,
      relationship, or otherwise has or shares: (i) voting power, which includes
      the power to vote, or to direct the voting of shares; and (ii) investment
      power, which includes the power to dispose or direct the disposition of
      shares. Certain shares may be deemed to be beneficially owned by more than
      one person (if, for example, persons share the power to vote or the power
      to dispose of the shares). In addition, shares are deemed to be
      beneficially owned by a person if the person has the right to acquire the
      shares (for example, upon exercise of an option) within 60 days of the
      date as of which the information is provided. In computing the percentage
      ownership of any person, the amount of shares outstanding is deemed to
      include the amount of shares beneficially owned by such person (and only
      such person) by reason of these acquisition rights. As a result, the
      percentage of outstanding shares of any person as shown in this table does
      not necessarily reflect the person’s actual ownership or voting power with
      respect to the number of shares of common stock actually outstanding as of
      the date of this Annual Report. As of the date of this Annual Report,
      there are 9,374,753 shares issued and
  outstanding.
  (2)
                This
      figure includes: (i) 2,406,000 shares of common stock held of record by
      Mr. Skipper; (ii) 2,611,500 shares of common stock held of record by
      Samurai Corp., of which Mr. Skipper is the sole director and president and
      has sole dispositive and voting power over the 2,611,500 shares; and (iii)
      102,999 shares of common stock held of record by Samurai Energy LLC, of
      which Mr. Skipper is the sole manager and has sole dispositive and voting
      power over the 102,999 shares.
  (3)
                This
      figure includes: (i) 125,000 shares of common stock held of record by Mr.
      Bobigian; and (ii) 1,080,999 shares of common stock held of record by RAB
      Ventures, Inc., of which Mr. Bobigian is the sole director and president
      and has sole dispositive and voting power over the 1,080,999
      shares.
  
  CHANGES
IN CONTROL
 
 We are
unaware of any contract, or other arrangement or provision, the operation of
which may at a subsequent date result in a change of control of our
company.
 
 ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
 
 Except
for the transactions described below, none of our directors, officers or
principal stockholders, nor any associate or affiliate of the foregoing, have
any interest, direct or indirect, in any transaction or in any proposed
transactions, which has materially affected or will materially affect us during
fiscal years ended December 31, 2007 and 2006.
 
 SAMURAI
OPERATING COMPANY LLC
 
 Samurai
Operating Company L.L.C., a related party, is the operator of the properties and
provides production, engineering and maintenance services. Accordingly, Samurai
Operating Company L.L.C. charged an operating fee for its services of $28,800
and $16,560 in 2007 and 2006, respectively.
 
 ITEM
13. EXHIBITS
 
 The
following exhibits are filed with this Annual Report on Form
10-KSB:
  Exhibit
      Number
                    Description
      of Exhibit3.1
                    Articles
      of Incorporation, as amended(1)3.1.1
                    Certificate
      of Amendment to Articles of Incorporation(2)3.1.2
                    First
      Amended Certificate of Designation of Convertible Series B Preferred Stock
      (4)3.1.3
                    First
      Amended Certificate of Designation of Convertible Series C Preferred Stock
      (5)3.1.4
                    First
      Amended Certificate of Designation of Convertible Series D Preferred Stock
      (5)3.2
                    Bylaws(1)4.1
                    Form of Common Stock Certificate(1)4.2
                    Agreement
      and Plan of Merger among Samurai Energy Corp. and ECCO Energy Corp. dated
      June 26, 2000. (2)4.4
                    Assignment,
      Conveyance and Bill of Sale with respect to 37% working interest in the
      Wilson Wells (3)10.1
                    2005
      Directors, Officers and Consultants Stock Option, Stock Warrants and Stock
      Awards Plan.(4)31.1
                    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
                    Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
                    Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.
  (1)  Incorporated
      by reference to our Registration Statement on Form 8-A filed with the
      Securities and Exchange Commission on December 7,
  2005.
 (2)  Incorporated
      by reference to our Report on Form 8-K filed with the Securities and
      Exchange Commission on June 30,
2006..
 (3)  Incorporated
      by reference to our Annual Report on Form 10-KSB filed with the Securities
      and Exchange Commission on March 20,
2006.
 (4)  Incorporated
      by reference to our Registration Statement on Form S-8 filed with the
      Securities and Exchange Commission on June 26,
  2006.
 (5)  Incorporated
      by reference to our Current Report on Form 8-K filed with the Securities
      and Exchange Commission on October 5,
2007.
 (6)  Incorporated
      by reference to our Current Report on Form 8-K filed with the Securities
      and Exchange Commission on April 11,
2008.
  
 ITEM
14.  PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 During
fiscal year ended December 31, 2007, we incurred approximately $55,300 in fees
to our principal independent accountant for professional services rendered in
connection with the audit of our financial statements for the fiscal year ended
December 31, 2007 and for the review of our financial statements for the
quarters ended March 31, 2007, June 30, 2007 and September 30,
2007.
 
 During
fiscal year ended December 31, 2007, we did not incur any other fees for
professional services rendered by our principal independent accountant for all
other non-audit services which may include, but is not limited to, tax-related
services, actuarial services or valuation services.


SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 ECCO
      ENERGY CORP.Date:
      December 19, 2008
                By:  /s/ Samuel M.
      SkipperName:
      Samuel M. SkipperTitle:
      President and CEODate:
      December 19, 2008
                By: /s/ N. Wilson
      ThomasName:
      N. Wilson ThomasTitle:
      CFO