##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 AMENDMENT NO. 1
TO
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
file number 000-50929
 Ignis Petroleum Group, Inc.
   
   
   
   
  þ o
 o þ
   o þ




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##### Table of Contents



EXPLANATORY NOTE
   
    
    Part I - Item 1  Financial Statements;
    
    Part I - Item 2  Managements Discussion and Analysis or Plan
of Operation;
    
    Part II - Item 3  Controls and Procedures.
  i




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##### 



Page No.PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheet at September 30, 2006 (unaudited)
    
    
    3Condensed Consolidated Statement of Operations for the Three Months Ended
September 30, 2006 and 2005 (unaudited)
    
    
    4Condensed Consolidated Statement of Cash Flows for the Three Months ended
September 30, 2006 and 2005 (unaudited)
    
    
    6Selected Notes to the Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    16Item 3. Controls and Procedures
    
    
    27PART II  OTHER INFORMATION
    
    
    28Item 2. Unregistered sale of equity securities and use of proceeds
    
    
    28Item 6. Exhibits.
    
    
    28SIGNATURES
    
    
    29Rule 13a-14(a) Certification of Chief Executive OfficerRule 13a-14(a) Certification of Chief Financial OfficerSection 1350 Certification of Chief Executive OfficerSection 1350 Certification of Chief Financial Officer
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RestatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    993,697Accounts receivable
    
    
    229,747Prepaid expenses and other current assets
    
    
    320,944Total current assets
    
    
    1,544,388Property and equipment:Oil and gas
properties net, successful efforts method
    
    
    1,748,192Other assets
    
    
    794,270Total assets
    
    $
    4,086,850LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,167,234Notes payable
    
    
    600,000Current portion of long term debt
    
    
    5,000,000Less current portion of debt discount
    
    
    (4,999,994
    )Current portion of derivative liability
    
    
    877,564Current portion of warrant liability
    
    
    3,134,451Total current liabilities
    
    
    5,779,255Stockholders deficit:Preferred stock, $0.001 par value, 5,000,000 shares authorized
none issued and outstanding
    
    
    Common stock, $0.001 par value, 300,000,000 shares authorized
50,288,589 issued and outstanding
    
    
    50,289Additional paid-in capital
    
    
    7,835,711Accumulated deficit
    
    
    (9,578,405
    )Total stockholders deficit
    
    
    (1,692,405
    )Total liabilities and stockholders deficit
    
    $
    4,086,850
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For the
    
    
    For theThree Months Ended
    
    
    Three Months EndedSeptember 30, 2006
    
    
    September 30, 2005RestatedRevenues from oil and natural gas product sales
    
    $
    487,121
    
    
    $
    Operating expenses:Lease operating expense
    
    
    4,579
    
    
    
    Production and ad valorem taxes
    
    
    27,170
    
    
    
    Depreciation, depletion and amortization
    
    
    372,783
    
    
    
    Exploration expenses, including dry holes
    
    
    219
    
    
    
    General and administrative expenses
    
    
    483,015
    
    
    
    1,050,858Total operating expenses
    
    
    887,766
    
    
    
    1,050,858Loss from operations
    
    
    (400,645
    )
    
    
    (1,050,858
    )Other income (expense)Gain from valuation of derivative liability
    
    
    2,111,426
    
    
    
    Interest expense
    
    
    (259,866
    )
    
    
    (27,617
    )1,851,560
    
    
    
    (27,617
    )Net income
    
    $
    1,450,915
    
    
    $
    (1,078,475
    )Basic income (loss) per common share
    
    $
    0.03
    
    
    $
    (0.02
    )Weighted average number of common shares outstanding
    
    
    49,537,232
    
    
    
    43,373,125Diluted income (loss) per common share
    
    $
    0.03
    
    
    $
    (0.02
    )Diluted weighted average number of common shares outstanding
    
    
    57,566,136
    
    
    
    43,373,125
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AdditionalCommon Stock
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Par value
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance June 30, 2006
    
    
    50,020,464
    
    
    $
    50,020
    
    
    $
    7,742,498
    
    
    $
    (11,029,320
    )
    
    $
    (3,236,802
    )Issuance of common stock to directors
    
    
    50,000
    
    
    
    50
    
    
    
    21,450
    
    
    
    
    
    
    
    21,500Issuance of common stock for services
    
    
    218,125
    
    
    
    219
    
    
    
    71,763
    
    
    
    
    
    
    
    71,982Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,450,915
    
    
    
    1,450,915Balance at September 30, 2006
    
    
    50,288,589
    
    
    
    50,289
    
    
    $
    7,835,711
    
    
    $
    (9,578,405
    )
    
    $
    (1,692,405
    )
  5




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For the
    
    
    For theThree Months Ended
    
    
    Three Months EndedSeptember 30, 2006
    
    
    September 30, 2005RestatedCash flow from operating activitiesNet income
(loss)
    
    $
    1,450,915
    
    
    $
    (1,078,475
    )Adjustments to net loss not affecting cash:Depreciation and depletion
    
    
    372,783
    
    
    
    Amortization of debt cost
    
    
    67,099
    
    
    
    Stock issued for compensation and services
    
    
    93,481
    
    
    
    768,000Amortization of discount of debentures
    
    
    4
    
    
    
    Gain from valuation of derivatives
    
    
    (2,111,426
    )
    
    
    Change in current assets and liabilitiesAccounts receivable
    
    
    (156,482
    )
    
    
    Prepaid expenses and other current assets
    
    
    (132,444
    )
    
    
    19,000Accounts payable and accrued expenses
    
    
    74,471
    
    
    
    (1,069,719
    )Cash used in operating activities
    
    
    (341,599
    )
    
    
    (1,361,194
    )Cash flow from investing activitiesPurchase of oil and gas properties
    
    
    (37,276
    )
    
    
    (54,993
    )Cash used for investing activities
    
    
    (37,276
    )
    
    
    (54,993
    )Cash flow from financing activitiesIssuance of common stock and warrants
    
    
    
    
    
    
    1,450,000Proceeds from note payable
    
    
    500,000
    
    
    
    Advance from related party
    
    
    
    
    
    
    8,131Cash provided by financing activities
    
    
    500,000
    
    
    
    1,458,131Net increase in cash
    
    
    121,125
    
    
    
    41,944Cash at beginning of period
    
    
    872,572
    
    
    
    145,064Cash at end of period
    
    $
    993,697
    
    
    $
    187,008
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September 30, 2006As Previously
    
    
    
    
    
    September 30 2006Reported
    
    Adjustments
    
    As RestatedAccounts receivable
    
    
    224,150
    
    
    
    5,597
    
    
    
    229,747Prepaid expenses and other current assets
    
    
    317,584
    
    
    
    3,360
    
    
    
    320,944Property and equipment
    
    
    2,762,061
    
    
    
    (146,966
    )
    
    
    2,615,095Accumulated depletion
    
    
    (866,474
    )
    
    
    (430
    )
    
    
    (866,904
    )Other assets
    
    
    603,120
    
    
    
    191,150
    
    
    
    794,270Accounts payable and accrued expenses
    
    
    1,158,627
    
    
    
    8,607
    
    
    
    1,167,234Current portion of long term debt
    
    
    
    
    
    
    5,000,000
    
    
    
    5,000,000Less current portion of debt discount
    
    
    
    
    
    
    (4,999,994
    )
    
    
    (4,999,994
    )Current portion of derivative liability
    
    
    
    
    
    
    877,564
    
    
    
    877,564Current portion of warrant liability
    
    
    
    
    
    
    3,134,451
    
    
    
    3,134,451Long term debt
    
    
    2,622,377
    
    
    
    (2,622,377
    )
    
    
    Derivative liability
    
    
    5,319,149
    
    
    
    (5,319,149
    )
    
    
    Warrant liability
    
    
    3,694,293
    
    
    
    (3,694,293
    )
    
    
    Additional paid-in capital
    
    
    7,647,356
    
    
    
    188,355
    
    
    
    7,835,711Accumulated deficit
    
    
    (17,057,952
    )
    
    
    7,479,547
    
    
    
    (9,578,405
    )Oil and natural gas sales
    
    
    471,214
    
    
    
    15,907
    
    
    
    487,121Lease operating expense
    
    
    
    
    
    
    4,579
    
    
    
    4,579Production and ad valorem taxes
    
    
    
    
    
    
    27,170
    
    
    
    27,170Depreciation, depletion and amortization
    
    
    403,193
    
    
    
    (30,410
    )
    
    
    372,783Exploration expenses, including dry holes
    
    
    199,302
    
    
    
    (199,082
    )
    
    
    220General and administrative expenses
    
    
    549,655
    
    
    
    (66,640
    )
    
    
    483,015Gain (loss) from valuation of derivative liability
    
    
    (2,714,336
    )
    
    
    4,825,762
    
    
    
    2,111,426Interest expense
    
    
    (883,255
    )
    
    
    623,389
    
    
    
    (259,866
    )Net income
(loss)
    
    
    (4,278,527
    )
    
    
    5,729,442
    
    
    
    1,450,915Basic and
diluted income (loss) per common share
    
    
    (0.09
    )
    
    
    0.12
    
    
    
    0.03
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
    
    the maturing of new petroleum technologies, such as seismic interpretation;
    
    the expected increase of oil and gas prices; and
    
    the availability of short outsteps in the same play as previously-discovered hydrocarbons.
    North Wright Field Prospect
  10




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Acom A-6 Property
   Crimson Bayou Prospect
  Barnett Shale Property
  Sherburne Prospect
  Ignis Barnett Shale Joint Venture
  11




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Oil and gas properties:Proved
    
    $
    1,794,202Unproved
    
    
    820,8932,615,095Less depreciation and depletion
    
    
    (866,903
    )$
    1,748,192
 
   Net Operating Tax Loss
    
    $
    9,578,000Effective Tax Rate
    
    
    34
    %Deferred tax asset
    
    $
    3,256,520Valuation allowance
    
    $
    (3,256,520
    )Net Deferred Tax Asset
    
    $
    
 
  
    
    $2,500,000 was disbursed on January 5, 2006;
    
    $1,500,000 was disbursed on February 9, 2006; and
    
    $1,000,000 was disbursed on April 28, 2006
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
    
    $400,000 fee payable to Yorkville Advisors LLC, the general partner of Cornell Capital;
    
    $15,000 structuring fee payable to Yorkville Advisors LLC, the general partner of
Cornell Capital;
    
    $5,000 due diligence fee payable to Cornell Capital; and
    
    $250,000 placement agent fee payable to Stonegate Securities, Inc.
    
    $65,000 other professional fees paid at closing
   
    
    If we pay a stock dividend, engage in a stock split, reclassify
our shares of common stock or engage in a similar transaction, the
conversion price of the secured convertible debentures will be
adjusted proportionately;
    
    If we issue rights, options or warrants to all holders of our
common stock (and not to Cornell Capital) entitling them to
subscribe for or purchase shares of common stock at a price per
share less than $0.93 per share, other than issuances specifically
permitted by the securities purchase agreement, as amended and
restated, then the conversion price of the secured convertible
debentures will be adjusted on a weighted-average basis;
    
    If we issue shares, other than issuances specifically permitted by
the securities purchase agreement, as amended and restated, of our
common stock or rights, warrants, options or other securities or
debt that are convertible into or exchangeable for shares of our
common stock, at a price per share less than $0.93 per share, then
the conversion price will be adjusted to such lower price on a
full-ratchet basis;
    
    If we distribute to all holders of our common stock (and not to
Cornell Capital) evidences of indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then the
conversion price of the secured convertible debenture will be
adjusted based upon the value of the distribution as a percentage
of the market value of our common stock on the record date for
such distribution;
    
    If we reclassify our common stock or engage in a compulsory share
exchange pursuant to which our common stock is converted into
other securities, cash or property, Cornell Capital will have the
option to either (i) convert the secured convertible debentures
into the shares of stock and other securities, cash and property
receivable by holders of our common stock following such
transaction, or (ii) demand that we prepay the secured convertible
debentures; and
    
    If we engage in a merger, consolidation or sale of more than
one-half of our assets, then Cornell Capital will have the right
to (i) demand that we prepay the secured convertible debentures,
(ii) convert the secured convertible debentures into the shares of
stock and other securities, cash and property receivable by
holders of our common stock following such transaction, or (iii)
in the case of a merger or consolidation, require the surviving
entity to issue to a convertible debenture with similar terms.
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Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock Application of
Issue No. 98-5 to Certain Convertible Instruments
  Convertible debentures payable
    
    $
    5,000,000Less: unamortized discount on debentures
    
    
    (4,999,994
    )Convertible debentures, net
    
    $
    6
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
    
    Focused geography;
    
    Experienced team;
    
    Prospects with attractive risk to reward balance;
    
    Control over value-added activities; and
    
    Conservative financial and cost structure.
 Focused Geography
  Experienced team
  Prospects with attractive risk to reward balance
  Control over value-added activities
  
    
    Identification, evaluation and acquisition of prospects;
    
    Creation of development plans and design of drill sites;
    
    Management of portfolio risk; and
    
    Direction of critical reservoir management and production operations activities.
  18




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Conservative financial and cost structure
  Planned Projects
  Expected Date to ReachCasing Point for Test Wellon Prospect or CompleteProspect
    
    Activity planned through June 30, 2007
    
    and Begin ProductionBarnett Shale
    
    Finish completion of two wells and continue production on one well.
    
    April 2006 completed first well that is in production and two additional wells expected to be finished drilling by December 2006Crimson Bayou
    
    Complete drilling one test well, analyze log and consider completing the well and beginning production.
    
    
    2007Sherburne Prospect
    
    Complete drilling one test well, analyze log and consider completing the well and beginning production.
    
    December 2006
  
    
    the estimated amount of costs we have incurred to date for specific oil
and gas projects, including the costs to acquire our interests in the
prospects, if any;
    
    the estimated cash outlays that are expected to be incurred by us to drill
test wells to casing point and determine whether or not to complete such
test wells;
    
    the estimated cash outlays that are expected to be incurred by us to
complete the test wells and begin production, if we deem it advisable to
do so;
    
    the total costs expected to be incurred by us on each of the prospects; and
    
    the percentage of the total costs for each prospect expected to be
incurred by us through December 31, 2006.
  19




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Estimated Costs
    
    
    
    
    
    
    Estimated Costs to
    
    
    
    
    
    
    EstimatedIncurred To Date,
    
    
    Estimated
    
    
    Complete Test
    
    
    Estimated Total
    
    
    Percentage ofIncluding
    
    
    Remaining Costs
    
    
    Well and Begin
    
    
    Cost of Proposed
    
    
    Total Costs to beAcquisition and
    
    
    to Drill Test Well
    
    
    Production, if
    
    
    Drilling on
    
    
    Incurred throughProspect
    
    Drilling Costs
    
    
    to Casing Point
    
    
    Deemed Advisable
    
    
    Prospect
    
    
    December 31, 2006Acom A-6
    
    $
    1,700,000
    
    
    
    -0-
    
    
    
    -0-
    
    
    $
    1,700,000
    
    
    
    100
    %Barnett Shale
    
    $
    550,000
    
    
    
    -0-
    
    
    
    -0-
    
    
    $
    550,000
    
    
    
    100
    %Crimson Bayou
    
    $
    100,000
    
    
    $
    600,000
    
    
    $
    500,000
    
    
    $
    1,200,000
    
    
    
    10
    %Sherburne Prospect
    
    $
    500,000
    
    
    
    -0-
    
    
    
    -0-
    
    
    $
    500,000
    
    
    
    100
    %TOTAL:
    
    $
    2,850,000
    
    
    $
    600,000
    
    
    $
    500,000
    
    
    $
    3,950,000
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
    
    $2,500,000 was disbursed on January 5, 2006;
    
    $1,500,000 was disbursed on February 9, 2006; and
    
    $1,000,000 was disbursed on April 28, 2006.
  
    
    $400,000 fee payable to Yorkville Advisors LLC, the general partner of Cornell Capital;
    
    $15,000 structuring fee payable to Yorkville Advisors LLC, the general partner of Cornell Capital;
    
    $5,000 due diligence fee payable to Cornell Capital;
    
    $250,000 placement agent fee payable to Stonegate Securities, Inc.; and
    
    $65,000 other professional fees paid at closing
   
    
    If we pay a stock dividend, engage in a stock split, reclassify
our shares of common stock or engage in a similar transaction, the
conversion price of the secured convertible debentures will be
adjusted proportionately;
    
    If we issue rights, options or warrants to all holders of our
common stock (and not to Cornell Capital) entitling them to
subscribe for or purchase shares of common stock at a price per
share less than $0.93 per share, other than issuances specifically
permitted be the securities purchase agreement, as amended and
restated, then the conversion price of the secured convertible
debentures will be adjusted on a weighted-average basis;
 21




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
    
    If we issue shares, other than issuances specifically permitted be
the securities purchase agreement, as amended and restated, of our
common stock or rights, warrants, options or other securities or
debt that are convertible into or exchangeable for shares of our
common stock, at a price per share less than $0.93 per share, then
the conversion price will be adjusted to such lower price on a
full-ratchet basis;
    
    If we distribute to all holders of our common stock (and not to
Cornell Capital) evidences of indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then the
conversion price of the secured convertible debenture will be
adjusted based upon the value of the distribution as a percentage
of the market value of our common stock on the record date for
such distribution;
    
    If we reclassify our common stock or engage in a compulsory share
exchange pursuant to which our common stock is converted into
other securities, cash or property, Cornell Capital will have the
option to either (i) convert the secured convertible debentures
into the shares of stock and other securities, cash and property
receivable by holders of our common stock following such
transaction, or (ii) demand that we prepay the secured convertible
debentures; and
    
    If we engage in a merger, consolidation or sale of more than
one-half of our assets, then Cornell Capital will have the right
to (i) demand that we prepay the secured convertible debentures,
(ii) convert the secured convertible debentures into the shares of
stock and other securities, cash and property receivable by
holders of our common stock following such transaction, or (iii)
in the case of a merger or consolidation, require the surviving
entity to issue to a convertible debenture with similar terms.
      22




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September 30, 2006As Previously
    
    
    
    
    
    September 30, 2006Reported
    
    Adjustments
    
    As RestatedAccounts receivable
    
    
    224,150
    
    
    
    5,597
    
    
    
    229,747Prepaid expenses and other current assets
    
    
    317,584
    
    
    
    3,360
    
    
    
    320,944Property and equipment
    
    
    2,762,061
    
    
    
    (146,966
    )
    
    
    2,615,095Accumulated depletion
    
    
    (866,474
    )
    
    
    (430
    )
    
    
    (866,904
    )Other assets
    
    
    603,120
    
    
    
    191,150
    
    
    
    794,270Accounts payable and accrued expenses
    
    
    1,158,627
    
    
    
    8,607
    
    
    
    1,167,234Current portion of long term debt
    
    
    
    
    
    
    5,000,000
    
    
    
    5,000,000Less current portion of debt discount
    
    
    
    
    
    
    (4,999,994
    )
    
    
    (4,999,994
    )Current portion of derivative liability
    
    
    
    
    
    
    877,564
    
    
    
    877,564Current portion of warrant liability
    
    
    
    
    
    
    3,134,451
    
    
    
    3,134,451Long term debt
    
    
    2,622,377
    
    
    
    (2,622,377
    )
    
    
    Derivative liability
    
    
    5,319,149
    
    
    
    (5,319,149
    )
    
    
    Warrant liability
    
    
    3,694,293
    
    
    
    (3,694,293
    )
    
    
    Additional paid-in capital
    
    
    7,647,356
    
    
    
    188,355
    
    
    
    7,835,711Accumulated deficit
    
    
    (17,057,952
    )
    
    
    7,479,547
    
    
    
    (9,578,405
    )Oil and natural gas sales
    
    
    471,214
    
    
    
    15,907
    
    
    
    487,121Lease operating expense
    
    
    
    
    
    
    4,579
    
    
    
    4,579Production and ad valorem taxes
    
    
    
    
    
    
    27,170
    
    
    
    27,170Depreciation, depletion and amortization
    
    
    403,193
    
    
    
    (30,410
    )
    
    
    372,783Exploration expenses, including dry holes
    
    
    199,302
    
    
    
    (199,082
    )
    
    
    220General and administrative expenses
    
    
    549,655
    
    
    
    (66,640
    )
    
    
    483,015Gain (loss) from valuation of derivative liability
    
    
    (2,714,336
    )
    
    
    4,825,762
    
    
    
    2,111,426Interest expense
    
    
    (883,255
    )
    
    
    623,389
    
    
    
    (259,866
    )Net income
(loss)
    
    
    (4,278,527
    )
    
    
    5,729,442
    
    
    
    1,450,915Basic and
diluted income (loss) per common share
    
    
    (0.09
    )
    
    
    0.12
    
    
    
    0.03
     25




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*
 
   Exhibit No.
    
    Description10.1
    
    Amended and Restated Loan Agreement, dated August 28, 2006, by
and between Ignis Petroleum Group, Inc. and Petrofinanz GmbH,
filed as an exhibit to the current report on Form 8-K filed
with the Securities and Exchange Commission on September 7,
2006 and incorporated herein by reference.10.2
    
    Form of Indemnification Agreement, filed as an exhibit to the
current report on Form 8-K filed with the Securities and
Exchange Commission on September 7, 2006 and incorporated
herein by reference.10.3
    
    Purchase and Sale Agreement dated September 27, 2006, by and
among W.B. Osborn Oil & Gas Operations., Ltd., St. Jo
Pipeline, Limited and Ignis Barnett Shale, LLC, filed as an
exhibit to the current report on Form 8-K filed with the
Securities and Exchange Commission on October 3, 2006 and
incorporated herein by reference*31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer*31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer*32.1
    
    Section 1350 Certification of Chief Executive Officer*32.2
    
    Section 1350 Certification of Chief Financial Officer
 
 *
    
    Filed herewith 28




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Ignis Petroleum Group, Inc. (Registrant)Date:
November 14 , 2007
    
    
    
    By:
    
    /s/ Michael PiazzaMichael Piazza,President, Chief Executive Officer and Treasurer
 29