**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


**FORM
      10-QSB**





(Mark
      One)


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





For
      the
      quarterly period ended March 31, 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.**(Exact
                name of small business issuer as specified in its charter)





Nevada(State
                or other jurisdiction of incorporation or organization)





16-1728419(IRS
                Employer Identification No.)





100
                Crescent Court 7thFloor Dallas, Texas 75201(Address
                of principal executive offices)





214-459-8188(Issuer's
                telephone number)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.





Yes x No o





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





Yes o No x





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date. As of April 28, 2006, the registrant had
      issued and outstanding 48,690,521 shares of common stock.





Transitional
      Small Business Disclosure Format (check one);





Yes o No x







1





Page
                No.PARTI
                - FINANCIAL INFORMATIONItem
                1. Financial StatementsCondensed
                Consolidated Balance Sheet at March 31, 2006
                (unaudited)
            3Condensed
                Consolidated Statement of Operations for the Nine and
                Three Months Ended March 31, 2006 and the Three Months Ended March
                31,
                2005 (unaudited)
            4Condensed
                Consolidated Statement of Cash Flows for the Nine
                Months ended March 31, 2006 (unaudited)
            5Selected
                Notes to the Condensed Consolidated Financial
                Statements (unaudited)
            6Item
                2. Management's Discussion and Analysis or Plan of
                Operation
            14Item
                3. Controls and Procedures
            21PART
                II - OTHER INFORMATIONItem
                2. Unregistered sale of equity securities and use of
                proceeds
            22Item
                4. Submission of Matters to a Vote of Security
                Holders
            23Item
                6. Exhibits.
            23SIGNATURES
            25


2
 *Table
            of Contents*


Ignis
        Petroleum Group, Inc. and Subsidiary
 Condensed
          Consolidated Balance Sheet
 March
            31,
            2006


ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            977,338Accounts
                receivable
            
            
            74,884Prepaid
                expenses and other current assets
            
            
            274,004Total
                current assets
            
            
            1,326,226Property
                and equipment:Oil
                and gas properties, successful efforts method
            
            
            6,875,352Other
                assets
            
            
            618,040618,040Total
                assets
            
            $
            8,819,618LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            1,057,266Note
                payable
            
            
            100,000Total
                current liabilities
            
            
            1,157,266Convertible
                notes
            
            
            2,198,000Derivative
                liability
            
            
            1,573,800Warrant
                liability
            
            
            966,0004,737,800Commitments
                and contingencies
            
            
            -Stockholders'
                equity: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 48,690,521
                issued
                and outstanding
            
            
            48,691Additional
                paid-in capital
            
            
            5,785,273Accumulated
                deficit
            
            
            (2,909,412
            )Total
                stockholders' equity
            
            
            2,924,552Total
                liabilities and stockholders' equity
            
            $
            8,819,618





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




3
 *Table
            of Contents*


Ignis
        Petroleum Group, Inc. and Subsidiary
 Condensed
          Consolidated Statement of Operations




For
                the Nine
              Months
                Endeed
              March
                31, 2006
            
            For
                the Three
              Months
                Ended
              March
                31, 2006
            
            For
                the Three
              Months
                Ended
              March
                31, 2005Revenues
                from oil and gas product sales
            
            $
            427,337
            
            $
            203,404
            
            $
            -Operating
                expenses:Depreciation
                and depletion
            
            
            161,331
            
            
            132,431
            
            
            -General
                and administrative expenses
            
            
            2,058,075
            
            
            753,733
            
            
            99,204Total
                operating expenses
            
            
            2,219,406
            
            
            886,164
            
            
            99,204Other
                income (expense)Loss
                from valuation of derivative liability
            
            
            (574,000
            )
            
            (574,000
            )
            
            -Interest
                expense
            
            
            (251,354
            )
            
            (221,937
            )
            
            -(825,354
            )
            
            (795,937
            )
            
            -Net
                loss
            
            $
            (2,617,422
            )
            $
            (1,478,696
            )
            $
            (99,204
            )Basic
                and diluted loss per common share
            
            $
            (0.07
            )
            $
            (0.03
            )Weighted
                average number of common shares outstanding and proforma
            
            
            38,349,599
            
            
            48,043,234




The
      accompanying notes are an integral part of these
      condensed consolidated financial statements.




4
 *Table
            of Contents*


Ignis
          Petroleum Group, Inc. and Subsidiary
 Condensed
          Consolidated Statement of Cash Flows
 
 For
                    the Nine
                  Months
                    Ended
                  March
                    31, 2006Cash
                    flow from operating activitiesNet
                    loss
                
                $
                (2,617,422
                )Adjustments
                    to net loss not affecting cash:Depletion
                    and amortization
                
                
                211,331Stock
                    issued for compensation and services
                
                
                795,282Amortization
                    of discount of debentures
                
                
                163,800Loss
                    from valuation of derivatives
                
                
                574,000Increase
                    / decrease in current assets and liabilitiesAccounts
                    receivable
                
                
                (74,884
                )Prepaid
                    expenses and other current assets
                
                
                (304,969
                )Accounts
                    payable and accrued expenses
                
                
                (63,229
                )Cash
                    provided by (used in) operating activities
                
                
                (1,316,091
                )Cash
                    flow from investing activitiesPurchase
                    of oil and gas properties
                
                
                (3,277,123
                )Cash
                    used for investing activities
                
                
                (3,277,123
                )Cash
                    flow from financing activitiesIssuance
                    of common stock and warrants
                
                
                1,800,000Proceeds
                    from note payable
                
                
                100,000Proceeds
                    from convertible notes
                
                
                3,545,000Advance
                    from related party
                
                
                (19,512
                )Cash
                    provided by financing activities
                
                
                5,425,488Net
                    increase in cash
                
                
                832,274Cash
                    at beginning of period
                
                
                145,064Cash
                    at end of period
                
                $
                977,338Supplemental
                    disclosure of cash flow information:Cash
                    paid during the period for:Interest
                
                $
                -Income
                    taxes
                
                $
                -Supplemental
                    non-cash financing transactions:Conversion
                    of notes payable and interest into equity
                
                $
                1,550,302Issuance
                    of common stock for oil and gas property
                
                $
                1,550,302
 
 The
          accompanying notes are an integral part of these condensed consolidated
          financial statements





5
 *Table
            of Contents*





IGN IS
      PETROLEUM GROUP, INC. AND SUBSIDIARY


SELECTED
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


March
      31,
      2006




Note
      1


Basis
      of
      Presentation / Accounting Policies





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and with the
      instructions of Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they
      do
      not include all of the information and footnotes required by accounting
      principles generally accepted in the United States of America for complete
      financial statements. The preparation 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 the reported amount of revenues and expenses during the reporting
      period. Actual results may differ from these estimates. In the opinion of
      management, all adjustments (consisting of normal recurring accruals) considered
      necessary for a fair presentation have been included. Operating results for
      the
      nine month period ended March 31, 2006 are not necessarily indicative of the
      results that may be expected for the year ending June 30, 2006.





In
      June
      2001, the FASB issued SFAS No.143 “Accounting for Asset Retirement Obligations.”
SFAS No. 143 requires that an asset retirement obligation associated with the
      retirement of a tangible long-lived asset be recognized as a liability in the
      period in which a legal obligation is incurred and becomes determinable, with
      an
      offsetting increase in the carrying amount of the associated asset. The cost
      of
      the tangible asset, including the initially recognized asset retirement
      obligation, is depleted such that the cost of the asset retirement obligation
      is
      recognized over the life of the asset. As of March 31, 2006 the Company is
      unable to determine the amount of asset retirement obligation associated with
      its oil and gas properties.





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), *Share
      Based Payment* (“SFAS
      No. 123R”). SFAS No. 123R establishes the financial accounting and
      reporting standards for stock-based compensation plans. As required by SFAS
      No. 123R, If the Company had had stock options which vested during the
      period, the Company would have recognized the cost resulting from all
      stock-based payment transactions including shares issued under its stock option
      plans in the financial statements.




Prior
      to
      January 1, 2006, the Company accounted for stock-based employee compensation
      plans (including shares issued under its stock option plans) in accordance
      with
      APB Opinion No. 25 and followed the pro forma net income, pro forma income
      per share, and stock-based compensation plan disclosure requirements set forth
      in the Statement of Financial Accounting Standards No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      No. 123”).





For
      further information, refer to the financial statements and footnotes thereto
      included in the Company's annual report on Form 10-KSB for the period December
      9, 2004 (inception) to June 30, 2005 as filed with the Securities and Exchange
      Commission.




Note
      2


Nature
      of
      Operations





6
 *Table
          of Contents*




Ignis Petroleum
      Group, Inc., formerly Sheer Ventures, Inc., was incorporated in the State
      of Nevada on April 30, 2004. Ignis Petroleum Corporation, our wholly-owned
      subsidiary, was incorporated in the State of Nevada on December 9, 2004. Ignis
      Petroleum Group, Inc. and the stockholders of Ignis Petroleum Corporation
      consummated a transaction accounted for as a reverse merger on May 16, 2005.





We
      own or
      have the right to acquire working interests in several oil and gas prospects
      in
      the United States onshore Gulf Coast region.





*North
      Wright Field Prospect*





We
      have
      the right to earn 75% of the working interest, which is equal to a 52.5% net
      revenue interest, in oil and gas leases and proposed operations covering the
      North Wright Field Prospect, which is located in Acadia Parish, Louisiana.
      We
      will carry 100% of the costs to drill and test each well drilled on the
      prospect. Bayou City Exploration, Inc. will be the operator of the prospect.
      The
      remaining 25% of the working interest in the prospect will be held by Argyle
      Energy, Inc., who will hold 12.5% of the working interest, and three other
      parties, who collectively will hold 12.5% of the working interest in the
      prospect. We are required to commence drilling operations on the prospect on
      or
      before December 31, 2006, or our interests in the prospect will revert to
      Argyle. The North Wright Field Prospect is currently unproved.





*Acom
      A-6 Prospect*





We
      have
      25% of the working interest, which is equal to an 18.75% net revenue interest,
      in the Acom A-6 Prospect, which is located in Chambers County, Texas. Kerr-McGee
      Oil & Gas Onshore LP, d/b/a KMOG Onshore LP is the operator of the prospect
      and holds the remainder of the working interest. Drilling of this prospect
      commenced in August 2005 and was completed in October 2005. The Acom A-6
      Prospect currently holds proved reserves and is producing oil and gas with
      revenues being earned by us. At this time we are unable to accurately estimate
      the amount of such proved reserves without unreasonable burden.





*Barnett
      Shale Prospect*





We
      have
      the right to earn 12.5% of the working interest, which is equal to a 9.375%
      net
      revenue interest before payout and 10% of the working interest, which is equal
      to a 7.5% net revenue interest after payout, in three wells, the Powell #1,
      the
      Powell #2, and the Inglish Sisters #3 in the Barnett Shale trend located in
      Greater Fort Worth Basin, Texas through an
      agreement with Rife Energy Operating, Inc. of Fort Worth, Texas. The three
      wells
      have been drilled (See Note 7). We and Rife Energy Operating also plan to
      evaluate other shale gas projects outside of the Greater Fort Worth Basin. The
      Barnett Shale Prospect is currently unproved.





*Crimson
      Bayou Prospect*





We
      have
      the right to earn 25% of the working interest, which is
      equal to a 17.88% net revenue interest, in the
      test well before payout and 20% of the working interest, which
      is
      equal to a 14.3% net revenue interest, after
      payout in the Crimson Bayou Prospect, which is located in Iberville Parish,
      Louisiana. Range
      Production I, L.P. is the operator of the prospect and will hold the remainder
      of the working interest. Drilling
      of the first test well on the prospect is expected to commence in August 2006. The
      Crimson Bayou Prospect is currently unproved.







Note
      3


Acquisition





On
      May
      16, 2005, pursuant to a Stock Exchange Agreement dated May 11, 2005, we issued
      9,600,000 restricted shares of our common stock in exchange for all 1,600,000
      issued and outstanding shares of common stock of Ignis Petroleum Corporation.
      As
      a result of this transaction Ignis Petroleum Corporation became a wholly owned
      subsidiary. The completed stock exchange was accounted for as a reverse
      acquisition in accordance with Statement of Financial Accounting Standards
      No.
      141 (“SFAS 141”), “Business Combinations” in which we were acquired by Ignis
      Petroleum Corporation. Also on May 16, 2005, pursuant to a Stock Purchase
      Agreement dated May 11, 2005, D.B. Management Ltd., a corporation owned and
      controlled by Doug Berry, who was our president and sole director at that time,
      sold 11,640,000 shares of our common stock to six individuals, including Philipp
      Buschmann, the sole officer and director of Ignis Petroleum Corporation for
      $0.0167 per share for a total purchase price of $194,000.





7
 *Table
            of Contents*





Note
      4


Property
      and equipment





Oil
      and
      gas properties consisted of the following at March 31, 2006:





Oil
                and gas properties:Proved
            
            $
            1,801,819Unproved
            
            
            5,234,8647,036,683Less
                depletion allowance
            
            
            161,331$
            6,875,352




In
      June
      2001, the FASB issued SFAS No.143 “Accounting for Asset Retirement Obligations.”
SFAS No. 143 requires that an asset retirement obligation associated with the
      retirement of a tangible long-lived asset be recognized as a liability in the
      period in which a legal obligation is incurred and becomes determinable, with
      an
      offsetting increase in the carrying amount of the associated asset. The cost
      of
      the tangible asset, including the initially recognized asset retirement
      obligation, is depleted such that the cost of the asset retirement obligation
      is
      recognized over the life of the asset. As of March 31, 2006 the Company is
      unable to determine the amount of asset retirement obligation associated with
      its oil and gas properties.








Note
      5


Income
      Taxes





Potential
      benefits of income tax losses are not recognized in the accounts until
      realization is more likely than not. We have incurred net operating losses
      of
      approximately $2,617,000 for the nine months ended March 31, 2006. Pursuant
      to
      SFAS No. 109 we are required to compute tax asset benefits for net operating
      losses carried forward. Potential benefit of net operating losses have not
      been
      recognized in these financial statements because we cannot be assured it is
      more
      likely than not we will utilize the net operating losses carried forward in
      future years.





The
      components of the net deferred tax asset at March 31, 2006, and the effective
      tax rate and the elected amount of the valuation allowance are indicated below:




Net
                Operating Tax Loss
            
            $
            2,617,000Effective
                Tax Rate
            
            
            34
            %Deferred
                tax asset
            
            $
            890,000Valuation
                allowance
            
            $
            (890,000
            )Net
                Deferred Tax Asset
            
            $
            -




8
 *Table
            of Contents*





Note
      6


Convertible
      Notes





To
      obtain
      funding for our ongoing operations, we entered into a
      securities purchase agreement with Cornell Capital Partners, LP, an accredited
      investor, on January 5, 2006 and amended and restated on February 9, 2006 and
      April 28, 2006, for the sale of $5,000,000 in secured convertible debentures
      and
      12,000,000 warrants (5,774,592 issued as of March 31, 2006) (See Note
      7). Cornell Capital will provide us with an aggregate of $5,000,000 as
      follows:




·
              $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 (See Note
                  7).




Out
      of
      the $5 million in gross proceeds we will receive from Cornell Capital upon
      issuance of all the secured convertible debentures, the following fees payable
      in cash will be deducted in connection with the transaction:





·
            $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.





Thus,
      we
      will receive total net proceeds of $4,330,000 (after the April 28, 2006
      disbursement) from the issuance of secured convertible debentures to Cornell
      Capital, prior to any other expenses we have or will incur in connection with
      the transaction. In connection with the issuance of secured convertible
      debentures to Cornell Capital, we were required under our placement agency
      agreement with Stonegate Securities, Inc. to issue to affiliates of Stonegate
      75,000 shares of our common stock and 5-year warrants to purchase 400,000 shares
      of our common stock at an exercise price of $1.25. (See Note 7)





The
      secured convertible debentures
      bear interest at 7%, mature three years from the date of issuance, and are
      convertible into our common stock, at the selling stockholder’s option, at the
      lower of (i) $0.93 or (ii) 94% of the lowest volume weighted average prices
      of
      our common stock, as quoted by Bloomberg, LP, during the 30 trading days
      immediately preceding the date of conversion. Accordingly, there is no limit
      on
      the number of shares into which the secured convertible debentures may be
      converted. As of May 1, 2006, the lowest intraday trading price for our common
      stock during the preceding 30 trading days as quoted by Bloomberg, LP was $0.95
      and, therefore, the conversion price for the secured convertible debentures
      was
      $0.893. Based on this conversion price, the $5,000,000 in secured convertible
      debentures, excluding interest, were convertible into 5,599,105 shares of our
      common stock. The conversion price of the secured convertible debentures will
      be
      adjusted in the following circumstances:





·
            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;





9
 *Table
            of Contents*





·
            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.





In
      connection with the securities purchase agreement, as amended and restated,
      we
      issued Cornell Capital warrants to purchase 6,000,000 shares of our common
      stock
      exercisable for a period of five years at an exercise price of $0.81 and
      warrants to purchase 6,000,000 shares of our common stock, exercisable for
      a
      period of five years at an exercise price of $0.93 (5,774,592
      issued as of March 31, 2006) (See Note 7) .
      We have
      the option to force the holder to exercise the warrants, as long as the shares
      underlying the warrants are registered pursuant to an effective registration
      statement, if our closing bid price trades above certain levels. If the closing
      bid price of our common stock is greater than or equal to $1.10 for a period
      of
      15 consecutive trading days prior to the forced conversion, we can force the
      warrant holder to exercise the warrants exercisable at a price of $0.81. If
      the
      closing bid price of our common stock is greater than or equal to $1.23 for
      a
      period of 15 consecutive trading days prior to the forced conversion, we can
      force the warrant holder to exercise the warrants exercisable at a price of
      $0.93.





In
      connection with the exercise of any of the warrants issued to Cornell Capital,
      we are required under our placement agency agreement with Stonegate Securities,
      Inc. to pay a fee to Stonegate equal to five percent (5%) of the gross proceeds
      of any such exercise.





Cornell
      Capital has agreed
      to
      restrict its ability to convert the secured convertible debentures or exercise
      the warrants and receive shares of our common stock such that the number of
      shares of common stock held by it and its affiliates after such conversion
      does
      not exceed 4.99% of the then issued and outstanding shares of common
      stock. **** If
      the
      conversion price is less than $0.93, Cornell
      Capital may not
      convert more than $425,000 of secured convertible debentures in any month,
      unless we waive such restriction. In the event that the conversion price is
      equal to or greater than $0.93, there is no restriction on the amount Cornell
      Capital can
      convert in any month.





We
      have
      the right, at our option, with three business days advance written notice,
      to
      redeem a portion or all amounts outstanding under the secured convertible
      debentures prior to the maturity date if the closing bid price of our common
      stock, is less than $0.93 at the time of the redemption. In the event of a
      redemption, we are obligated to pay an amount equal to the principal amount
      being redeemed plus a 15% redemption premium, and accrued interest.





In
      connection with the second amended and restated securities purchase agreement,
      we also entered into a second amended and restated registration rights agreement
      providing for the filing, within five days of April 28, 2006, of a registration
      statement with the Securities and Exchange Commission registering the common
      stock issuable upon conversion of the secured convertible debentures and
      warrants. We are obligated to use our best efforts to cause the registration
      statement to be declared effective no later than 130 days after filing and
      to
      insure that the registration statement remains in effect until the earlier
      of
      (i) all of the shares of common stock issuable upon conversion of the secured
      convertible debentures have been sold or (ii) January 5, 2008. In the event
      of a
      default of our obligations under the registration rights agreement, including
      our agreement to file the registration statement no later than May 3, 2006,
      or
      if the registration statement is not declared effective by September 5, 2006,
      we
      are required pay to Cornell Capital, as liquidated damages, for each month
      that
      the registration statement has not been filed or declared effective, as the
      case
      may be, either a cash amount or shares of our common stock equal to 2% of the
      liquidated value of the secured convertible debentures.





10
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            of Contents*




In
      connection with the securities
      purchase agreement, we executed a security agreement in favor of the investor
      granting them a first priority security interest in all of our goods, inventory,
      contractual rights and general intangibles, receivables, documents, instruments,
      chattel paper, and intellectual property. The security agreement states that
      if
      an event of default occurs under the secured convertible debentures or security
      agreements, the investor has the right to take possession of the collateral,
      to
      operate our business using the collateral, and have the right to assign, sell,
      lease or otherwise dispose of and deliver all or any part of the collateral,
      at
      public or private sale or otherwise to satisfy our obligations under these
      agreements.





We
      also
      pledged 18,750,000 shares of common stock to secure the obligations incurred
      pursuant to the securities purchase agreement, as amended and restated.





In
      accordance with Statement of Financial Accounting Standards No. 133,
‘Accounting for Derivative Instruments and Hedging Activities’,
      (“FASB 133”), we determined that the conversion feature of the secured
      convertible debentures met the criteria of an embedded derivative and therefore
      the conversion feature of the debt needed to be bifurcated and accounted for
      as
      a derivative. Due to the reset provisions of the secured convertible debentures,
      the debt does not meet the definition of “conventional convertible debt” because
      the number of shares which may be issued upon the conversion of the debt is
      not
      fixed. Therefore, the conversion feature fails to qualify for equity
      classification under EITF 00-19, and must be accounted for as a derivative
      liability.





The
      $4,000,000 face amount of the secured convertible debentures outstanding as
      of
      March 31, 2006 was stripped of its conversion feature due to the accounting
      for
      the conversion feature as a derivative, which was recorded using the residual
      proceeds method, whereby any remaining proceeds after allocating the proceeds
      to
      the warrants and conversion option would be attributed to the debt. The
      beneficial conversion feature (an embedded derivative) included in these secured
      convertible debentures resulted in an initial debt discount of $999,800. At
      March 31, 2006, we revalued this derivative liability, For the nine months
      ended
      March 31, 2006, after adjustment, we recorded a loss on valuation of derivative
      liability of $574,200. The associated warrants are exercisable for 5,774,592
      shares of common stock at exercise prices between $0.93 and $0.81 per share
      (a
      total of 12,000,000 shares per the April 28, 2006 ammendement) (See Note 7).
      The
      warrants, which expire five years after issuance, were assigned a value of
      $966,000, estimated using the Black-Scholes valuation model. The following
      assumptions were used to determine the fair value of the warrants using the
      Black-Scholes valuation model: a term of five years, risk-free rate of 5.00%,
      volatility of 42%, and dividend yield of zero. In accordance with EITF No.
      00-19, EITF No. 00-27, *Application
      of Issue No. 98-5 to Certain Convertible Instruments* ,
      the
      values assigned to both the debenture, conversion feature and the warrants
      were
      allocated based on their fair values. The amount allocated as a discount on
      the
      secured convertible debentures for the value of the warrants and conversion
      option will be amortized to interest expense, using the effective interest
      method, over the term of thesecured convertible debentures. The holders of
      the
      secured convertible debentures and warrants have registration rights that
      required the Company to file a registration statement with the Securities and
      Exchange Commission to register the resale of the common stock issuable upon
      conversion of the debenture or the exercise of the warrants. Under EITF No.
      00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock* ,
      the
      ability to register stock was deemed to be outside of the Company’s control.
      Accordingly, the initial aggregate fair value of the derivatives (embedded
      and
      free-standing) of $999,800 was recorded as a derivative liability in the
      consolidated balance sheet, and is marked to market at the end of each reporting
      period. At March 31, 2006, this derivative liability was $1,574,000. During
      the
      nine months ended March 31, 2006, the recording of this derivative liability
      associated with this debt financing resulted in a non-cash loss of $574,200
      which was reflected in the consolidated statement of operations for the nine
      months ended March 31, 2006. Additionally,
      the initial aggregate fair value of the warrants of $966,000 was recorded as
      an
      accrued warrant liability in the consolidated balance sheet. For the nine months
      ended March 31, 2006, amortization of the discount on debenture amounted to
      $163,800.





11
 *Table
            of Contents*





The
      convertible debenture liability is as follows at March 31, 2006:







Convertible
                debentures payable
            
            $
            4,000,000Less:
                unamortized discount on debentures
            
            
            (1,802,000
            )Convertible
                debentures, net
            
            $
            2,198,000







Note
      7


Stockholders’
      Equity





On
      January 5, 2006, we issued 75,000 shares to three affiliates of Stonegate
      Securities, Inc., for compensation relating to Stonegate acting as our placement
      agent. The shares were issued in reliance on the exemption provided by Rule
      506
      and/or Section 4(2) of the Securities Act. (See note 6).  No
      underwriters were used. These shares were valued at $57,000 or $0.76 per share,
      the fair market value of the common stock at the date of grant.





On
      January 20, 2006, we issued 30,000 shares of common stock to Roger A. Leopard
      for services to us as a director. This issuance is considered exempt pursuant
      to
      Rule 506 and/or Section 4(2) of the Securities Act. No underwriters were used.
      These shares were valued at $31,500 or $1.05 per share, the fair market value
      of
      the common stock at the date of grant.





On
      January 20, 2006, we issued 30,000 shares of common stock to Geoff Evett for
      services to us as a director. This issuance is considered exempt pursuant to
      Rule 506 and/or Section 4(2) of the Securities Act. No underwriters were used.
      These shares were valued at $31,500 or $1.05 per share, the fair market value
      of
      the common stock at the date of grant.





On
      February 9, 2006, we issued 10,000 shares of common stock to Timothy Hart for
      services to us as an officer. This issuance is considered exempt pursuant to
      Rule 506 and/or Section 4(2) of the Securities Act. No underwriters were used.
      These shares were valued at $15,000 or $1.50 per share, the fair market value
      of
      the common stock at the date of grant.





On
      February 9, 2006, we issued 192,188 shares of common stock to our advisors
      for
      services to us as advisors. This issuance is considered exempt pursuant to
      Rule
      506 and/or Section 4(2) of the Securities Act. No underwriters were used. These
      shares were valued at $288,282 or $1.50 per share, the fair market value of
      the
      common stock at the date of grant.








Note
      8


Subsequent
      Events




Convertible
      Debentures





On
      April
      28, 2006, we amended our securities purchase agreement with Cornell Capital
      Partners, L.P. to accelerate issuance and sale of the final $1,000,000 of the
      $5,000,000 in 7% secured convertible debentures issuable by us under the
      agreement. In connection with the amendment to the securities purchase
      agreement, we agreed to issue Cornell warrants to purchase an additional
      6,225,408 shares of our common stock bringing the total issuable to 12,000,000
      shares. (See Note 6).




Oil
      and
      Gas Properties





*Barnett
      Shale*





On
      April
      19, 2006 we began production at the Inglish Sisters #3 well in the Barnett
      Shale. We will begin recording revenue from this well beginning in April 2006.
      This well is the first of three wells in which we are participating. The other
      two wells have been completed and are awaiting hook-up




*Sherburne
      Prospect*





On
      May 5,
      2006 we entered into a participation agreement to drill the Sherburne Field
      Development prospect, located in Pointe Coupee Parish, Louisiana. Under the
      terms of the agreement, we will pay 15% of the drilling, testing and completion
      costs. Upon completion we will earn 15% of the working interest in the well
      before payout and 11.25% of the working interest in the well after payout.
      The Sherburne prospect is currently unproved.





12
 *Table
            of Contents*





*Barnett
      Crossroads Prospect*




The
      Wefel
      Family Trust 19-1 #1 well, located in Escambia County, Alabama, commenced
      drilling operations on March 20, 2006 and reached a total depth of 14,600 feet
      on April 25, 2006. We found shows of oil and gas in three separate dolomite
      stringers within the 400-foot target Smackover formation. The amount of
      recoverable reserves; however, was deemed to be less than necessary to warrant
      a
      commercial completion and we decided to plug and abandon the well. A total
      of
      approximately $2,800,000 will be expensed in April 2006 in connection with
      this
      transaction.




13
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            of Contents*





ITE M
      2.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.





Forward-looking
      Statement and Information





We
      are
      including the following cautionary statement in this Form 10-QSB for any
      forward-looking statements made by, or on behalf of, us. Certain statements
      contained herein and other materials we file with the Securities and Exchange
      Commission 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 and, accordingly, involve risks and uncertainties which could
      cause actual results or outcomes to differ materially from those expressed
      in
      the forward-looking statements. Forward-looking statements include statements
      concerning plans, objectives, goals, strategies, expectations, future events
      or
      performance and underlying assumptions and other statements which are other
      than
      statements of historical facts. Forward looking statements are accompanied
      by
      words such as “may”, “will”, “could”, “should”, “anticipate”, “believe”,
“budgeted”, “expect”, “intend”, “plan”, “project”, “potential”, “estimate”, or
“future” or variations thereof or similar statements. Our expectations, beliefs
      and projections are expressed in good faith and are believed by us to have
      a
      reasonable basis, including without limitation, management's examination of
      historical operating trends, data contained in our records and other data
      available from third parties, but we cannot assure you that management's
      expectations, beliefs or projections will result or be achieved or accomplished.





Introduction




For
      the
      period December 9, 2004 (inception) to June 30, 2005, our auditors, in Note
      2 of
      the Financial Statements from the Form 10-KSB, have noted that there is
      substantial doubt about our ability to continue as a going concern. Our
      existence is dependent upon management funding operations and raising sufficient
      capital. At this point in time it is impossible to state an amount of profitable
      operations and/or additional funding which we believe would remove the going
      concern opinion.





We
      do not
      have any historical business operations. We have neither a history of earnings
      nor have we paid dividends. We are unlikely to realize earnings or pay dividends
      in the immediate or foreseeable future.




RESULTS
      OF OPERATIONS


NINE
      MONTHS ENDED MARCH 31, 2006




Revenues
      for the nine months ended March 31, 2006 were $427,337. Revenue was a result
      of
      production of crude oil and natural gas at the Acom A-6 Prospect, located in
      Chambers County, Texas.




We
      incurred operating expenses in the amount of $2,219,406 for the nine months
      ended March 31, 2006.




Depletion
      expense was $161,331 for the nine months ended March 31, 2006. Depletion expense
      is related to the Acom A-6 prospect.




General
      and administrative expenses of $2,058,075 were mainly comprised of payroll
      expenditures of $398,000 (of which $207,000 was a non-cash issuance of our
      common stock), professional fees of $1,266500 (of which $794,000 was a non-cash
      issuance of our common stock), advertising of $154,000, rent expense of $43,600,
      travel expenses of $89,300, and other office and related expenses of
      $106,675.




We
      incurred interest expense of $251,354 of which $163,800 represented amortization
      of the discount associated with the convertible debentures. In addition, we
      incurred a charge of $574,000 in connection with valuing our derivative
      liability to actual at March 31, 2006. Both the amortization of the discount
      and
      the charge related to the derivative liability are non-cash
      charges.





14
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            of Contents*





THREE
      MONTHS ENDED MARCH 31, 2006 AND 2005





Revenues
      for the three months ended March 31, 2006 were $203,404. Revenue was a result
      of
      production of crude oil and natural gas at the Acom A-6 Prospect, located in
      Chambers County, Texas. There were no revenues for the three months ended March
      31, 2005.




We
      incurred operating expenses in the amount of $886,164 and $99,204 for the three
      months ended March 31, 2006 and 2005, respectively.




Depletion
      expense was $132,431 for the three months ended March 31, 2006. Depletion
      expense is related to the Acom A-6 prospect.




General
      and administrative expenses of $753,733 for the three months ended March 31,
      2006 were mainly comprised of payroll expenditures of $60,000, professional
      fees
      of $542,000, (of which $366,000 was a non-cash issuance of our common stock),
      rent expense of $21,570, travel expenses of $44,100, and other office and
      related expenses of $86,063. For the three months ended March 31, 2005 we were
      inactive and our expenses consisted of salaries and professional
      fees.




We
      incurred interest expense of $221,937 of which $178,000 represented amortization
      of the discount associated with the convertible debentures. In addition, we
      incurred a charge of $574,000 in connection with valuing our derivative
      liability to actual at March 31, 2006. Both the amortization of the discount
      and
      the charge related to the derivative liability are non-cash
      charges.




PLAN
      OF
      OPERATION




Our
      strategy is to identify and acquire prospects with attractive return potential
      and significant in-field development and expansion opportunities. We hope to
      accomplish this through a disciplined approach and a rigorous process of
      screening and evaluating projects. We seek to apply the most advanced
      technologies and methods with staff, consultants, and operating partners having
      proven track records. Our strategy emphasizes the following core
      elements:





·
            Focused
                geography;


·
            Technological
                expertise;


·
            Experienced
                team;


·
            Prospects
                with attractive risk to reward
                balance;


·
            Control
                over value-added activities; and


·
            Conservative
                financial and cost structure.





*Focused
      Geography*





We
      intend
      to focus on specific geographic areas primarily along the onshore United States
      Gulf Coast. We believe that substantial undiscovered reserves remain in this
      region. Because of significant existing 3-D seismic data, numerous industry
      participants are currently engaged in the reprocessing and review of this data
      to identify prospective acreage. In addition, many of the major and large
      independent oil companies are focusing less on such areas as they are engaged
      in
      seeking “elephant” fields in the offshore and international areas. At present we
      own several prospects and we intend to initially focus our resources primarily
      to develop those opportunities. In the future, we intend to generate prospects
      both internally and in partnership with others to take advantage of
      area-specific expertise gained by exploration specialists over the past few
      decades.





15
 *Table
            of Contents*





*Technological
      expertise*





We
      seek
      to explore and add reserves primarily through the use of advancing technologies
      such as advanced 3-D seismic visualization and interpretation techniques, and
      sub-surface and production information from nearby wells. These techniques
      enable our exploration team and partners to analyze and reprocess 3-D seismic
      information to identify important attributes or patterns in the data that were
      overlooked using 2-D seismic or less-advanced processing techniques. Such
      technology also enables us to better place our wells to maximize field
      production while minimizing costs. We are also focusing on prospects analogous
      to nearby prolific fields within similar geological formations.





The
      application of new and evolving technologies has resulted in greater economic
      success in oil and gas exploration. These technologies are best tapped and
      applied by teams of experienced operators and specialist consultants. We are
      taking such an approach. Three-dimensional (3-D) seismic is one technology
      that
      continues to allow geoscientists to better identify reserves that can be
      targeted for development. The use of 3-D seismic, coupled with maturing time-
      and depth stack data-processing techniques, is revealing previously-hidden
      fault
      blocks and showing more precisely, potentially highly productive pay zones.
      3-D
      seismic allows geoscientists to more accurately tie well log data from nearby
      discoveries to the seismic information and place new wells more accurately,
      thereby resulting in more productive developments at lower costs. Advances
      in
      well engineering have also contributed to lowering well costs. For example,
      better casing design and selection and control of drilling fluids allow wells
      to
      be “purpose built,” thus reducing the chance of well problems while enhancing
      production performance. The combination of greater drilling success, purpose
      built well designs and higher oil and gas prices are expected to continually
      provide us with return-rich opportunities. The use of this technology and the
      results in nearby producing fields cannot guarantee that hydrocarbons will
      be
      present, or if present, in commercial quantities in our projects.





*Experienced
      team*





We
      have
      assembled a highly talented team of professionals with executive, exploration,
      engineering and financial experience. We intend to employ personnel with
      specialized geological, geophysical and other technical expertise to carry
      out
      the most crucial value-added functions. We seek to attract and retain a
      high-quality workforce by offering an entrepreneurial team-oriented environment,
      equity ownership and performance-based compensation programs. Please see
“Directors and Executive Officers” for a complete discussion of the members of
      our management team.




*Prospects
      with attractive risk to reward balance*





We
      plan
      to grow reserves through drilling a balanced portfolio of prospects. We will
      retain the majority of the interests in those prospects that we believe will
      have a highly attractive risk to reward balance and where we have high
      confidence in its success. Such prospects will have a high expected net present
      value relative to capital investment. Additionally, we will sell a portion
      of
      our interests in prospects that involve higher costs and greater risks, to
      industry partners. This will mitigate our exploration risk and fund the
      anticipated capital requirements and will enable us to gain access, through
      trades of property interest, to our partners’ prospects in order to diversify
      our exploratory program.





*Control
      over value-added activities*





In
      our
      participation agreements with industry partners, we seek to exercise control
      over what we believe are the most critical functions in the exploration process.
      These functions include:





·
            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.





Our
      approach is to perform the day to day field operations activities by contracting
      experienced operators with proven track records.




16
 *Table
          of Contents*




*Conservative
      financial and cost structure*




We
      believe that a conservative financial structure is crucial to consistent,
      positive financial results. This has benefits
      for the management of cyclical swings in the industry and enables us to move
      quickly to take advantage of acquisition and drilling opportunities. In order
      to
      maximize our financial flexibility while improving overall stockholder returns,
      we plan to maintain a conservative debt-to-capital ratio. We seek to fund most
      of our ongoing capital expenditures from operating cash flow, reserving our
      debt
      capacity for potential investment opportunities that will profitably add to
      our
      program. Part of a sound financial structure is constant attention to costs,
      both operating and overhead. We will work to control our operating and overhead
      costs, and institute a formal, disciplined capital budgeting process. We will,
      wherever practicable, use partnerships to leverage our resources and enhance
      our
      ability to meet objectives.





*Planned
      Projects*





The
      table
      below outlines specific oil and gas projects that we have planned for the
      remainder of calendar year 2006 and the estimated time to for us to drill the
      test well to casing point or complete the test well and begin production on
      each
      of our prospects. We anticipate raising an addition $5 million during calendar
      year 2006 to conduct our planned operations. We currently do not have any
      contracts, plans or commitments for any additional financing. There is no
      guarantee that we will be successful in raising additional funds on terms that
      are acceptable to us, if at all. If we are unable to raise additional funds,
      we
      will be forced to reduce or eliminate the drilling activities outlined below.




**Prospect**
              **Activity
                  planned in 2006**
              **Expected
                  Date to Reach Casing Point**
                **for
                  Test Well on Prospect****or
                  Complete**
                **and
                  Begin Production**Barnett
                  Shale
              Finish
                  completion of two wells and continue production on one
                  well.
              April
                  2006Crimson
                  Bayou
              Complete
                  drilling one test well, analyze log and consider completing the
                  well and
                  beginning production.
              August
                  2006Sherburne
                  Prospect
              Complete
                  drilling one test well, analyze log and consider completing the
                  well and
                  beginning production.
              August
                  2006North
                  Wright Field
              Plan
                  a test well and obtain permitting.
              2007





The
      table
      below outlines the following:





·
            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.





If
      we are
      not satisfied with the results of our test wells on any of the prospects, we
      will not complete such well and no additional wells will be drilled on such
      prospect unless we decide to drill a substitute test well. If we are unable
      to
      raise an addition $5 million in gross proceeds from Cornell Capital or other
      sources during calendar year 2006, we will be forced to slow down or stop our
      drilling activities and the costs outlined below will be reduced
      accordingly.





17
 *Table
            of Contents*




**Prospect**
            **Estimated
                Costs**
              **Incurred
                To Date,**
              **Including**
              **Acquisition
                and**
              **Drilling
                Costs**
            **Estimated**
              **Remaining**
              **Costs
                to Drill**
              **Test
                Well to**
              **Casing
                Point**
            **Estimated**
              **Costs
                to**
              **Complete
                Test**
              **Well
                and Begin**
              **Production,
                if**
              **Deemed**
              **Advisable**
            **Estimated**
              **Total
                Cost of**
              **Proposed**
              **Drilling
                on**
              **Prospect**
            **Estimated**
              **Percentage**
              **of
                Total**
              **Costs
                to be**
              **Incurred**
              **through**
              **December**
              **31,
                2006**Acom
                A-6
            $1,800,000
            -0-
            -0-
            $1,800,000
            100%Barnett
                Crossroads
            $1,900,000
                in cash, plus 925,000 shares of our common stock valued at
                $650,000
            -0-
            -0-
            $2,550,000
            100%Barnett
                Shale
            $550,000
            -0-
            -0-
            $550,000
            100%Sherburne
                Prospect
            $75,000
            $250,000
            $125,000
            $450,000
            100%Crimson
                Bayou
            $100,000
            $600,000
            $500,000
            $1,200,000
            100%North
                Wright Field
            $70,000
                in cash, plus 2,575,000 shares of our common stock valued at
                $1,896,000.
            $7,500,000
            $900,000
            $10,366,000
            10%TOTAL:
            $7,041,000
            $8,350,000
            $1,525,000
            $16,916,000





LIQUIDITY
      AND CAPITAL RESOURCES





As
      of
      March 31, 2006, we had working capital deficit of $168,960. For the nine months
      ended March 31, 2006, we generated a net cash flow deficit from operating
      activities of $1,316,091. Cash used in investing activities totaled $3,277,123,
      which was utilized for the purchase of oil and gas properties. Cash provided
      by
      financing activities totaled $5,425,488, of which $1,800,000 was from the sale
      of shares of common stock and warrants and $3,545,000 was from the sale of
      convertible debentures.





We
      expect
      significant capital expenditures through the end of calendar year 2006,
      contingent upon raising capital. These anticipated expenditures are for seismic
      data acquisitions, land and drilling rights acquisitions, drilling programs,
      overhead and working capital purposes. We have sufficient funds to conduct
      our
      operations for approximately two months under our current drilling plan without
      additional external capital or improved operating income. We anticipate that
      we
      will need approximately $5 million to continue our planned operations for the
      next 12 months, depending on revenues from operations. Additional financing
      may
      not be available in amounts or on terms acceptable to us, if at all. If we
      are
      unable to secure additional capital, we will be forced to slow or stop our
      drilling activities.





By
      reducing our drilling activity to a level consistent with our current capital
      resources, we believe we could continue to operate our business for at least
      12
      months. However, if during that period or thereafter, we are not successful
      in
      generating sufficient liquidity from operations or in raising sufficient capital
      resources, on terms acceptable to us, this could have a material adverse effect
      on our business, results of operations liquidity and financial
      condition.





18
 *Table
            of Contents*





We
      presently do not have any available credit, bank financing or other external
      sources of liquidity. Due to our brief history and historical operating losses,
      our operations have not been a source of liquidity. We will need to obtain
      additional capital in order to expand operations and become profitable. In
      order
      to obtain capital, we may need to sell additional shares of our common stock
      or
      borrow funds from private lenders. We cannot assure you that we will be
      successful in obtaining additional funding.





We
      will
      still need additional investments in order to continue operations to cash flow
      break even. Additional investments are being sought, but we cannot guarantee
      that we will be able to obtain such investments. Financing transactions may
      include the issuance of equity or debt securities, obtaining credit facilities,
      or other financing mechanisms. However, the trading price of our common stock
      and a downturn in the U.S. stock and debt markets could make it more difficult
      to obtain financing through the issuance of equity or debt securities. Even
      if
      we are able to raise the funds required, it is possible that we could incur
      unexpected costs and expenses, fail to collect significant amounts owed to
      us,
      or experience unexpected cash requirements that would force us to seek
      alternative financing. Further, if we issue additional equity or debt
      securities, stockholders may experience additional dilution or the new equity
      securities may have rights, preferences or privileges senior to those of
      existing holders of our common stock. If additional financing is not available
      or is not available on acceptable terms, we will have to curtail our
      operations.





To
      date,
      we have generated minimal revenues from our oil and gas properties and have
      incurred operating losses in every quarter. Our registered independent auditors
      have stated in their report dated October 11, 2005, that we are dependent on
      outside financing, lack sufficient working capital, and have incurred recurring
      losses from operations. These factors among others may raise substantial doubt
      about our ability to continue as a going concern.





To
      obtain
      funding for our ongoing operations, we entered into a
      securities purchase agreement with Cornell Capital Partners, LP, an accredited
      investor, on January 5, 2006 and amended and restated on February 9, 2006 and
      April 28, 2006, for the sale of $5,000,000 in secured convertible debentures
      and
      12,000,000 warrants. Cornell Capital provided us with an aggregate of $5,000,000
      as follows:




·
              $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.




Out
      of
      the $5 million in gross proceeds we received from Cornell Capital upon issuance
      of the secured convertible debentures, the following fees payable in cash have
      been deducted in connection with the transaction:





·
            $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.





Thus,
      we
      received net proceeds of $4,330,000 from the issuance of secured convertible
      debentures to Cornell Capital, prior to any other expenses we have or will
      incur
      in connection with the transaction. In connection with the issuance of secured
      convertible debentures to Cornell Capital, we were required under our placement
      agency agreement with Stonegate Securities, Inc. to issue to affiliates of
      Stonegate 75,000 shares of our common stock and 5-year warrants to purchase
      400,000 shares of our common stock at an exercise price of $1.25.





The
      secured convertible debentures
      bear interest at 7%, mature three years from the date of issuance, and are
      convertible into our common stock, at the selling stockholder’s option, at the
      lower of (i) $0.93 or (ii) 94% of the lowest volume weighted average prices
      of
      our common stock, as quoted by Bloomberg, LP, during the 30 trading days
      immediately preceding the date of conversion. Accordingly, there is no limit
      on
      the number of shares into which the secured convertible debentures may be
      converted. As of May 1, 2006, the lowest intraday trading price for our common
      stock during the preceding 30 trading days as quoted by Bloomberg, LP was $0.95
      and, therefore, the conversion price for the secured convertible debentures
      was
      $0.893. Based on this conversion price, the $5,000,000 in secured convertible
      debentures, excluding interest, were convertible into 5,599,105 shares of our
      common stock. The conversion price of the secured convertible debentures will
      be
      adjusted in the following circumstances:





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·
            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.





In
      connection with the securities purchase agreement, as amended and restated,
      we
      issued Cornell Capital warrants to purchase 6,000,000 shares of our common
      stock
      exercisable for a period of five years at an exercise price of $0.81 and
      warrants to purchase 6,000,000 shares of our common stock, exercisable for
      a
      period of five years at an exercise price of $0.93. 6 million of the warrants
      were issued upon closing on January 5, 2006 and the other 6 million were issued
      on April 28, 2006 in connection with amending and restating our securities
      purchase agreement. We have the option to force the holder to exercise the
      warrants, as long as the shares underlying the warrants are registered pursuant
      to an effective registration statement, if our closing bid price trades above
      certain levels. If the closing bid price of our common stock is greater than
      or
      equal to $1.10 for a period of 15 consecutive trading days prior to the forced
      conversion, we can force the warrant holder to exercise the warrants exercisable
      at a price of $0.81. If the closing bid price of our common stock is greater
      than or equal to $1.23 for a period of 15 consecutive trading days prior to
      the
      forced conversion, we can force the warrant holder to exercise the warrants
      exercisable at a price of $0.93.





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In
      connection with the exercise of any of the warrants issued to Cornell Capital,
      we are required under our placement agency agreement with Stonegate Securities,
      Inc. to pay a fee to Stonegate equal to five percent (5%) of the gross proceeds
      of any such exercise.





Cornell
      Capital has agreed
      to
      restrict its ability to convert the secured convertible debentures or exercise
      the warrants and receive shares of our common stock such that the number of
      shares of common stock held by it and its affiliates after such conversion
      does
      not exceed 4.99% of the then issued and outstanding shares of common
      stock. **** If
      the
      conversion price is less than $0.93, Cornell
      Capital may not
      convert more than $425,000 of secured convertible debentures in any month,
      unless we waive such restriction. In the event that the conversion price is
      equal to or greater than $0.93, there is no restriction on the amount that Cornell
      Capital can
      convert in any month.





We
      have
      the right, at our option, with three business days advance written notice,
      to
      redeem a portion or all amounts outstanding under the secured convertible
      debentures prior to the maturity date if the closing bid price of our common
      stock, is less than $0.93 at the time of the redemption. In the event of a
      redemption, we are obligated to pay an amount equal to the principal amount
      being redeemed plus a 15% redemption premium, and accrued interest.





In
      connection with the second amended and restated securities purchase agreement,
      we also entered into a second amended and restated registration rights agreement
      providing for the filing, within five days of April 28, 2006, of a registration
      statement with the Securities and Exchange Commission registering the common
      stock issuable upon conversion of the secured convertible debentures and
      warrants. We are obligated to use our best efforts to cause the registration
      statement to be declared effective no later than 130 days after filing and
      to
      insure that the registration statement remains in effect until the earlier
      of
      (i) all of the shares of common stock issuable upon conversion of the secured
      convertible debentures have been sold or (ii) January 5, 2008. In the event
      of a
      default of our obligations under the registration rights agreement, including
      our agreement to file the registration statement no later than May 3, 2006,
      or
      if the registration statement is not declared effective by September 5, 2006,
      we
      are required pay to Cornell Capital, as liquidated damages, for each month
      that
      the registration statement has not been filed or declared effective, as the
      case
      may be, either a cash amount or shares of our common stock equal to 2% of the
      liquidated value of the secured convertible debentures.





In
      connection with the securities purchase agreement, we executed a security
      agreement in favor of the investor granting them a first priority security
      interest in all of our goods, inventory, contractual rights and general
      intangibles, receivables, documents, instruments, chattel paper, and
      intellectual property. The security agreement states that if an event of default
      occurs under the secured convertible debentures or security agreements, the
      investor has the right to take possession of the collateral, to operate our
      business using the collateral, and have the right to assign, sell, lease or
      otherwise dispose of and deliver all or any part of the collateral, at public
      or
      private sale or otherwise to satisfy our obligations under these
      agreements.





We
      also
      pledged 18,750,000 shares of common stock to secure the obligations incurred
      pursuant to the securities purchase agreement, as amended and restated.







ITEM
      3.
      CONTROLS AND PROCEDURES.





a)
            Evaluation
                of Disclosure Controls and Procedures. As of March 31, 2006, our
                management carried out an 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 system of
                disclosure controls and procedures pursuant to the Securities and
                Exchange
                Act, Rule 13a-15(e) and 15d-15(e) under the Exchange Act).  Based
                upon that evaluation, our Chief Executive Officer and Chief Financial
                Officer concluded that our disclosure controls and procedures were
                effective, as of March 31, 2006, to insure that information disclosed
                by
                us in reports we file or submit under the Securities Exchange Act
                of 1934
                is recorded, processed, summarized and reported within the time periods
                specified in the Securities and Exchange commissions rules and forms;
                and
                is accumulated and communicated to our management, including our
                Chief
                Executive Officer and our Chief Financial
                Officer.





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b)
            Changes
                in internal controls. There were no changes in internal controls
                over
                financial reporting, known to the Chief Executive Officer or Chief
                Financial Officer that occurred during the period covered by this
                report
                that has materially affected, or is reasonalbly likely to materially
                effect, our internal control over financial
                reporting.







PAR T
      II -
      OTHER INFORMATION





ITE M
      2.
      UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
      PROCEEDS





On
      January 5, 2006, and amended and restated on February 9, 2006 and April 28,
      2006, we entered into a securities purchase agreement with Cornell Capital
      Partners, LP for the sale of $5,000,000 in secured convertible debentures and
      12,000,000 warrants. We have issued all of the secured convertible debentures.
      The warrants
      entitle Cornell Capital to purchase 6,000,000 shares of our common stock
      exercisable for a period of five years at an exercise price of $0.81 and
      6,000,000 shares of our common stock exercisable for a period of five years
      at
      an exercise price of $0.93. All of the warrants were issued on January 5,
      2006. The
      debentures and warrants were issued in reliance on the exemption provided by
      Rule 506 and/or Section 4(2) of the Securities Act. No underwriters were
      used.





On
      January 5, 2006, we issued 75,000 shares to three affiliates of Stonegate
      Securities, Inc., for compensation relating to Stonegate acting as our placement
      agent. The shares were issued in reliance on the exemption provided by Rule
      506
      and/or Section 4(2) of the Securities Act.





On
      January 20, 2006, we issued 30,000 shares of common stock to Roger A. Leopard
      for services to us as a director. This issuance is considered exempt pursuant
      to
      Rule 506 and/or Section 4(2) of the Securities Act.





On
      January 20, 2006, we issued 30,000 shares of common stock to Geoff Evett for
      services to us as a director. This issuance is considered exempt pursuant to
      Rule 506 and/or Section 4(2) of the Securities Act.





On
      February 9, 2006, we issued 10,000 shares of common stock to Timothy Hart for
      services to us as an officer. This issuance is considered exempt pursuant to
      Rule 506 and/or Section 4(2) of the Securities Act.





On
      February 9, 2006, we issued 192,188 shares of common stock to our advisors
      for
      services to us as advisors. This issuance is considered exempt pursuant to
      Rule
      506 and/or Section 4(2) of the Securities Act.





All
      of
      the above offerings and sales were deemed to be exempt under rule 506 of
      Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
      No
      advertising or general solicitation was employed in offering the securities.
      The
      offerings and sales were made to a limited number of persons, all of whom were
      accredited investors, business associates of Ignis Petroleum Group, Inc. or
      directors or executive officers of ours and transfer was restricted by us in
      accordance with the requirements of the Securities Act of 1933. In addition
      to
      representations by the above-referenced persons, we have made independent
      determinations that all of the above-referenced persons were accredited or
      sophisticated investors, and that they were capable of analyzing the merits
      and
      risks of their investment, and that they understood the speculative nature
      of
      their investment. Furthermore, all of the above-referenced persons were provided
      with access to our Securities and Exchange Commission filings. Except as
      expressly set forth above, the individuals and entities to whom we issued
      securities as indicated in this section of the registration statement are
      unaffiliated with us.





22
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ITEM
      4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
      HOLDERS.




On
        January 30, 2006, holders of a majority of the approximately 49,656,979 shares
        of our common stock then outstanding approved and/or ratified by written
        consent
        in lieu of a special meeting the following actions:
 
 ·
              an
                  amendment to our Articles of Incorporation, as amended, to increase
                  the
                  number of authorized shares of common stock from 75,000,000 to
                  300,000,000
                  and to authorize the creation of 5,000,000 shares of “blank check”
                  preferred stock;
 
 ·
              the
                  adoption of the Ignis Petroleum Group, Inc. 2006 Incentive Stock
                  Plan and
                  the authorization 5,000,000 shares of common stock for issuance
                  of stock
                  awards and stock options
                  thereunder;
 
 ·
              the
                  election of Michael P. Piazza, Philipp Buschmann, Geoffrey Lowndes
                  Evett
                  and Roger A. Leopard as members of our board of directors, all
                  of which
                  were serving as directors prior to the execution of the written
                  consent
                  and continued to serve in that capacity thereafter;
                  and
 
 ·
              the
                  appointment of De Meo, Young McGrath as our independent registered
                  public
                  accounting firm for the year ending June 30, 2006.




ITEM
      6. EXHIBITS.





The
      following are exhibits to this report:





Exhibit
                No.
            Description





3.1
            Articles
                of Incorporation and amendments, filed as an exhibit to the annual
                report
                on Form 10-KSB filed with the Securities and Exchange Commission
                on
                October 13, 2005 and incorporated herein by
                reference.





3.2
            Certificate
                of Amendment to Articles of Incorporation, filed with the Nevada
                Secretary
                of State on April 5, 2006 filed
                as an exhibit to the registration statement on Form SB-2 filed with
                the
                Securitites and Exchange Commission on May 3, 2006 and incorporated
                herein
                by reference.





3.3
            Bylaws
                of the Company, filed as an exhibit to the annual report on Form
                10-KSB
                filed with the Securities and Exchange Commission on October 13,
                2005 and
                incorporated herein by reference.





4.1
            Amended
                and Restated Securities Purchase Agreement, dated April 28, 2006,
                by and
                between Ignis Petroleum Group, Inc. and Cornell Capital Partners,
                LP,filed
                as an exhibit to the current report on Form 8-K, filed with the Securities
                and Exchange Commission on May 1, 2006 and incorporated herein by
                reference.





4.2
            Secured
                Convertible Debenture issued to Cornell Capital Partners, LP by Ignis
                Petroleum Group, Inc., dated January 5, 2006,filed
                as an exhibit to the current report on Form 8-K filed with the Securities
                and Exchange Commission on January 10, 2006 and incorporated herein
                by
                reference.





4.3
            Warrant
                to purchase 3,086,420 shares of Common Stock, dated January 5, 2006,
                issued to Cornell Capital Partners, LP,filed
                as an exhibit to the current report on Form 8-K filed with the Securities
                and Exchange Commission on January 10, 2006 and incorporated herein
                by
                reference.





4.4
            Warrant
                to purchase 2,688,172 shares of Common Stock, dated January 5, 2006,
                issued to Cornell Capital Partners, LP,filed
                as an exhibit to the current report on Form 8-K filed with the Securities
                and Exchange Commission on January 10, 2006 and incorporated herein
                by
                reference.





4.5
            Amended
                and Restated Registration Rights Agreement, dated April 28, 2006,
                by and
                between Ignis Petroleum Group, Inc. and Cornell Capital Partners,
                LP,filed
                as an exhibit to the current report on Form 8-K, filed with the Securities
                and Exchange Commission on May 1, 2006 and incorporated herein by
                reference.





4.6
            Amended
                and Restated Security Agreement, dated February 9, 2006, by and between
                Ignis Petroleum Group, Inc. and Cornell Capital Partners, LP,filed
                as an exhibit to the registration statement on Form SB-2, file number
                333-131774, filed with the Securities and Exchange Commission on
                February
                10, 2006 and incorporated herein by
                reference.





4.7
            Insider
                Pledge and Escrow Agreement, dated January 5, 2006, by and among
                Ignis
                Petroleum Group, Inc., Cornell Capital Partners, LP, Philipp Buschmann,
                Michael Piazza and David Gonzalez, Esq. as escrow agent,filed
                as an exhibit to the current report on Form 8-K filed with the Securities
                and Exchange Commission on January 10, 2006 and incorporated herein
                by
                reference.





23
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4.8
            Pledge
                and Escrow Agreement, dated January 5, 2006, by and among Ignis Petroleum
                Group, Inc., Cornell Capital Partners, LP and David Gonzalez, Esq.
                as
                escrow agent,filed
                as an exhibit to the current report on Form 8-K filed with the Securities
                and Exchange Commission on January 10, 2006 and incorporated herein
                by
                reference.





4.9
            Escrow
                Termination Agreement, dated February 9, 2006, by and among Ignis
                Petroleum Group, Inc., Cornell Capital Partners, LP and David Gonzalez,
                Esq.,filed
                as an exhibit to the registration statement on Form SB-2, file number
                333-131774, filed with the Securities and Exchange Commission on
                February
                10, 2006 and incorporated herein by
                reference.





4.10
            Secured
                Convertible Debenture issued to Cornell Capital Partners, LP by Ignis
                Petroleum Group, Inc., dated February 9, 2006,filed
                as an exhibit to the registration statement on Form SB-2, file number
                333-131774, filed with the Securities and Exchange Commission on
                February
                10, 2006 and incorporated herein by
                reference.





4.11
            Irrevocable
                Transfer Agent Instructions, dated January 5, 2006, by and among
                Ignis
                Petroleum Group, Inc. and David Gonzalez, Esq.filed as an exhibit to the amended registration statement on Form
                SB-2/A,
                file number 333-131774, filed with the Securities and Exchange Commission
                on April 14, 2006 and incorporated herein by
                reference.





4.12
            Secured
                Convertible Debenture issued to Cornell Capital Partners, LP by Ignis
                Petroleum Group, Inc., dated April 28, 2006,filed
                as an exhibit to the current report on Form 8-K, filed with the Securities
                and Exchange Commission on May 1, 2006 and incorporated herein by
                reference.





4.13
            Warrant
                to purchase 3,086,420 shares of Common Stock, dated April 28, 2006,
                issued
                to Cornell Capital Partners, LP,filed
                as an exhibit to the current report on Form 8-K, filed with the Securities
                and Exchange Commission on May 1, 2006 and incorporated herein by
                reference.





4.14
            Warrant
                to purchase 2,688,172 shares of Common Stock, dated April 28, 2006,
                issued
                to Cornell Capital Partners, LP,filed
                as an exhibit to the current report on Form 8-K, filed with the Securities
                and Exchange Commission on May 1, 2006 and incorporated herein by
                reference.





4.15
            Form
                of warrants issued to Petrofinanz GmbH filed as exhibit to the
                registration statement on Form SB-2 filed with the Securities and
                Exchange
                Commission on May 3, 2006 and incorporated herein by
                reference.





4.16
            Form
                of warrants to be issued to Robert R. Blakely, Scott R. Griffith
                and
                Robert R. Blakely filed as exhibit to the registration statement
                on Form
                SB-2 filed with the Securities and Exchange Commission on May 3,
                2006 and
                incorporated herein by reference.




*10.5
            Subscription
                Purchase Agreement, dated January 9, 2006, by and between Ignis Petroleum
                Corporation and Provident Oil and Gas Partners #1 regarding Barnett
                Shale
                Prospect




10.6
              2006
                  Incentive Stock Plan of Ignis Petroleum Group, Inc. adopted January
                  20,
                  2006, filed as an exhibit to the definitive information statement
                  on
                  Schedule 14C filed with the Securities and Exchange Commission
                  on March
                  16, 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





24
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            of Contents*





SIG NATURES





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.








Ignis
                Petroleum Group, Inc. (Registrant)Date:
                May 22, 2006
            
            By:
            /s/
                Michael PiazzaMichael
                Piazza,President,
                Chief Executive Officer and
                Treasurer






25