----

----

| Delaware                                                                      | 65-0967706                                          |
|-------------------------------------------------------------------------------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (I.R.S.                Employer Identification No.) |

----

| PART                I.  FINANCIAL INFORMATION  | 3                                                                                                                                           |
|---------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                                          |                                                                                                                                        |   |
| ITEM                1.                                        | FINANCIAL                STATEMENTS                                                                                                         | 3 |
|                                                          |                                                                                                                                        |   |
|                                                          | Consolidated                Balance Sheets as of September 30, 2007 (unaudited) and December                31,                2006         | 3 |
|                                                          |                                                                                                                                        |   |
|                                                          | Consolidated                Statement of Shareholders’ Equity (unaudited) for the nine months ended                September 30, 2007 | 4 |
|                                                          |                                                                                                                                        |   |
|                                                          | Consolidated                Statements of Operations (unaudited)for the nine months ended September                30, 2007 and 2006        | 4 |
|                                                          |                                                                                                                                        |   |
|                                                          | Consolidated                Statements of Cash Flows (unaudited) for the nine months ended September                30, 2007 and 2006       | 5 |
|                                                          |                                                                                                                                        |   |
|                                                          | Notes                to Consolidated Financial Statements                                                                                   | 6 |
|                                                          |                                                                                                                                        |   |
| ITEM                2.                                        | MANAGEMENT'S                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                                    | 19 |
|                                                          |                                                                                                                                        |   |
| ITEM                3.                                        | CONTROLS                AND PROCEDURES                                                                                                      | 22 |
|                                                          |                                                                                                                                        |   |
|                                                          |                                                                                                                                        |   |
| PART                II. OTHER INFORMATION                | 23                                                                                                                                          |
|                                                          |                                                                                                                                        |   |
| ITEM                1.                                        | LEGAL                PROCEEDINGS                                                                                                            | 23 |
|                                                          |                                                                                                                                        |   |
| ITEM                2.                                        | CHANGES                IN SECURITIES AND USE OF PROCEEDS                                                                                    | 23 |
|                                                          |                                                                                                                                        |   |
| ITEM                3.                                        | DEFAULTS                UPON SENIOR SECURITIES                                                                                              | 23 |
|                                                          |                                                                                                                                        |   |
| ITEM                4.                                        | SUBMISSION                OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                          | 23 |
|                                                          |                                                                                                                                        |   |
| ITEM                5.                                        | OTHER                INFORMATION                                                                                                            | 23 |
|                                                          |                                                                                                                                        |   |
| ITEM                6.                                        | EXHIBITS                AND REPORTS ON FORM 8-K                                                                                             | 24 |

----

PART      I. FINANCIAL INFORMATION

**KODIAK      ENERGY, INC.**

**Consolidated      Balance Sheets**

**(Development      Stage Company Going Concern Uncertainty – Note 1)**

|                                                                                                                                                                         |   | September                30 |       |   | December                31 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|--------|----------------------------|--------|
|                                                                                                                                                                         |   | 2007                        |       |   | 2006                       |   |
|                                                                                                                                                                         |   | (Unaudited)                 |       |   | (Audited)                  |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |
| Assets                                                                                                                                                                       |   |                        |       |   |                       |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |
| Current                Assets:                                                                                                                                               |   |                        |       |   |                       |   |
| Cash                and Short Term Deposits                                                                                                                                  |   | $                           | 7,413,387  |   |                       | $      | 448,346 |   |
| Accounts                Receivable                                                                                                                                           |   |                        | 1,310,049  |   |                       |   | 685,975 |   |
| Prepaid                Expenses and Deposits (Note 3)                                                                                                                        |   |                        | 73,993     |   |                       |   | 196,838 |   |
|                                                                                                                                                                         |   |                        | 8,797,429  |   |                       |   | 1,331,159 |   |
| Other                Assets (Note 4)                                                                                                                                         |   |                        | 116,820    |   |                       |   | 49,860 |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |   |   |
| Capital                Assets (Note 5):                                                                                                                                      |   |                        |       |   |                       |   |   |   |
| Unproved                Oil & Gas Properties Excluded From Amortization – Based On Full Cost                Accounting                                             |   |                        | 22,496,312 |   |                       |   | 1,270,253 |   |
| Furniture                and Fixtures                                                                                                                                        |   |                        | 79,024     |   |                       |   | 55,803 |   |
|                                                                                                                                                                         |   |                        | 22,575,336 |   |                       |   | 1,326,056 |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |   |   |
|                                                                                                                                                                         |   | $                           | 31,489,585 |   |                       | $      | 2,707,075 |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |   |   |
| Liabilities                and Shareholders' Equity                                                                                                                          |   |                        |       |   |                       |   |   |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |   |   |
| Current                Liabilities:                                                                                                                                          |   |                        |       |   |                       |   |   |   |
| Accounts                Payable                                                                                                                                              |   |                        | 1,363,251  |   |                       |   | 585,253 |   |
| Accrued                Liabilities                                                                                                                                           |   |                        | 409,500    |   |                       |   | 273,850 |   |
| Notes                Payable (Note 6)                                                                                                                                        |   |                        | 732,500    |   |                       |   | - |   |
|                                                                                                                                                                         |   |                        | 2,505,251  |   |                       |   | 859,103 |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |   |   |
| Asset                Retirement Obligations (Note 7)                                                                                                                         |   |                        | 108,811    |   |                       |   | 90,911 |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |   |   |
| Deferred                Income Taxes (Note 10)                                                                                                                               |   |                        | 52,012     |   |                       |   | - |   |
|                                                                                                                                                                         |   |                        |       |   |                       |   |   |   |
|                                                                                                                                                                         |   |                        | 2,666,074  |   |                       |   | 950,014 |   |
| Shareholders'                Equity                                                                                                                                          |   |                        |       |   |                       |   |   |   |
| Share                Capital (Note 8):                                                                                                                                       |   |                        |       |   |                       |   |   |   |
| Authorized:                                                                                                                                                                  |   |                        |       |   |                       |   |   |   |
| 300,000,000                (2006 - 100,000,000) Common Shares Par Value .001 Each Issued &                Outstanding 104,907,498 (2006 – 89,946,468)Common Shares |   |                        | 104,907    |   |                       |   | 89,946 |   |
| Shares                Issuable (Note 8)                                                                                                                                      |   |                        | -          |   |                       |   | 538,328 |   |
| Additional                Paid in Capital                                                                                                                                    |   |                        | 34,833,596 |   |                       |   | 5,212,777 |   |
| Other                Comprehensive Loss                                                                                                                                      |   |                        | (212,165   | )      |                       |   | (20,214 | ) |
| Deficit                Accumulated During The Development Stage                                                                                                              |   |                        | (5,902,827 | )      |                       |   | (4,063,776 | ) |
|                                                                                                                                                                         |   |                        | 28,823,511 |   |                       |   | 1,757,061 |   |
|                                                                                                                                                                         |   | $                           | 31,489,585 |   |                       | $      | 2,707,075 |   |

----

**KODIAK      ENERGY, INC.**

**Unaudited      Consolidated Statements of Shareholders’ Equity**

**For      the Nine Months Ended September 30, 2007**

**(Development      Stage Company Going Concern Uncertainty – Note 1)**

|                                        |   | Number                of Common Shares |        |   | Amount |   |    | Additional                Paid in Capital |   |      | Deficit                Accumulated During the Development Stage |   |   | Accumulated                Other Comprehensive Loss |       |   | Shares                Issuable |    |     | Total                Shareholder’s Equity |   |
|---------------------------------------------|--------|----------------------------------------|-------------|--------|--------|--------|---------|-------------------------------------------|--------|-----------|-----------------------------------------------------------------|--------|--------|-----------------------------------------------------|------------|--------|--------------------------------|---------|----------|-------------------------------------------------|--------|
|                                        |   |                                   |        |   |   |   |    |                                      |   |      |                                                            |   |   |                                                |       |   |                           |    |     |                                            |   |
| Balance                at Dec. 31, 2006     |   |                                   |        |   | $      | 89,946 |    |                                      | $      | 5,212,777 |                                                            |   | $      | (4,063,776                                          | )          |   | $                              | (20,214 | )        |                                            | $      | 538,328 |   |   |   |   |
|                                        |   |                                   |        |   |   |   |    |                                      |   |      |                                                            |   |   |                                                |       |   |                           |    |     |                                            |   |   |   |   |   | (1,757,061 | ) |
| Net                loss                     |   |                                   | -           |   |   |   | -       |                                      |   |      | -                                                               |   |   |                                                | (1,839,051 | )      |                           |    | -        |                                            |   |   |   |   |   |   | (1,839,051 | ) |
| Foreign                currency translation |   |                                   | -           |   |   |   | -       |                                      |   |      | -                                                               |   |   |                                                | -          |   |                           |    | (191,951 | )                                               |   |   |   |   |   |   | (191,951 | ) |
| Total                comprehensive loss     |   |                                   |        |   |   |   |    |                                      |   |      |                                                            |   |   |                                                | (1,839,051 | )      |                           |    | (191,951 | )                                               |   |   |   |   |   |   | (2,031,002 | ) |
|                                        |   |                                   |        |   |   |   |    |                                      |   |      |                                                            |   |   |                                                |       |   |                           |    |     |                                            |   |   |   |   |   |   |   |   |
| Issuance                of common stock     |   |                                   | 14,961,030  |   |   |   | 14,961  |                                      |   |      | 29,151,497                                                      |   |   |                                                | -          |   |                           |    | -        |                                            |   |   | (538,328 | ) |   |   | 28,628,130 |   |
| Stock-based                compensation     |   |                                   | -           |   |   |   | -       |                                      |   |      | 469,322                                                         |   |   |                                                | -          |   |                           |    | -        |                                            |   |   |   |   |   |   | 469,322 |   |
| Balance                at Sept. 30, 2007    |   |                                   | 104,907,498 |   |   | $      | 104,907 |                                      |   | $         | 34,833,596                                                      |   |   | $                                                   | (5,902,827 | )      |                           | $       | (212,165 | )                                               |   |   | - |   |   | $ | 28,823,511 |   |

**KODIAK      ENERGY, INC.**

**Unaudited      Consolidated Statements of Operations**

**(Development      Stage Company Going Concern Uncertainty – Note 1)**

|                                                  |   | Three                Months EndedSeptember                30, 2007 |     |   | Three                Months EndedSeptember                30,2006 |   |     | Nine                Months EndedSeptember                30,2007 |   |   | Nine                Months EndedSeptember                30,2006 |   |   | Cumulative Since Inception                Apr. 7, 2004 toSeptember                30,2007 |       |
|-------------------------------------------------------|--------|--------------------------------------------------------------------|----------|--------|-------------------------------------------------------------------|--------|----------|------------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------|------------|
|                                                  |   |                                                               |     |   |                                                              |   |     |                                                             |   |   |                                                             |   |   |                                                                                                     |       |
| REVENUES,                net of royalties             |   | $                                                                  | (202     | )      |                                                              | $      | 10,331   |                                                             |   | $      | 225                                                              |   |   | $                                                                                                        | 10,331     |   |   | $ | 27,359 |   |
|                                                  |   |                                                               |     |   |                                                              |   |     |                                                             |   |   |                                                             |   |   |                                                                                                     |       |   |   |   |   |   |
| EXPENSES                                              |   |                                                               |     |   |                                                              |   |     |                                                             |   |   |                                                             |   |   |                                                                                                     |       |   |   |   |   |   |
| Operating                                             |   |                                                               | 549      |   |                                                              |   | 5,010    |                                                             |   |   | 12,149                                                           |   |   |                                                                                                     | 5,010      |   |   |   | 25,721 |   |
| General                and Administrative             |   |                                                               | 603,697  |   |                                                              |   | 266,867  |                                                             |   |   | 1,178,603                                                        |   |   |                                                                                                     | 700,910    |   |   |   | 2,510,779 |   |
| Stock-based                Investor Relations Expense |   |                                                               | -        |   |                                                              |   | -        |                                                             |   |   | -                                                                |   |   |                                                                                                     | 337,500    |   |   |   | 337,500 |   |
| Stock-based                Compensation               |   |                                                               | 190,239  |   |                                                              |   | -        |                                                             |   |   | 469,322                                                          |   |   |                                                                                                     | -          |   |   |   | 538,491 |   |
| Depletion,                Depreciation and Accretion  |   |                                                               | 12,900   |   |                                                              |   | 446,337  |                                                             |   |   | 35,043                                                           |   |   |                                                                                                     | 451,485    |   |   |   | 1,543,299 |   |
| Interest                Expense                       |   |                                                               | 75,238   |   |                                                              |   | -        |                                                             |   |   | 94,056                                                           |   |   |                                                                                                     | -          |   |   |   | 902,867 |   |
|                                                  |   |                                                               | 882,623  |   |                                                              |   | 718,224  |                                                             |   |   | 1,789,173                                                        |   |   |                                                                                                     | 1,494,905  |   |   |   | 5,858,657 |   |
| Loss                Before Other Expenses             |   |                                                               | (882,825 | )      |                                                              |   | (707,893 | )                                                                |   |   | (1,788,948                                                       | )      |   |                                                                                                     | (1,484,574 | ) |   |   | (5,831,298 | ) |
| Other                Expenses (Income)                |   |                                                               |     |   |                                                              |   |     |                                                             |   |   |                                                             |   |   |                                                                                                     |       |   |   |   |   |   |
| Loss                from valuation adjustment         |   |                                                               | -        |   |                                                              |   | -        |                                                             |   |   | -                                                                |   |   |                                                                                                     | -          |   |   |   | 25,000 |   |
| Interest                Income                        |   |                                                               | (1,400   | )      |                                                              |   | -        |                                                             |   |   | (1,909                                                           | )      |   |                                                                                                     | -          |   |   |   | (5,483 | ) |
|                                                  |   |                                                               | (1,400   | )      |                                                              |   | -        |                                                             |   |   | (1,909                                                           | )      |   |                                                                                                     | -          |   |   |   | 19,517 |   |
| Loss                before income taxes               |   |                                                               | (881,425 | )      |                                                              |   | (707,893 | )                                                                |   |   | (1,787,039                                                       | )      |   |                                                                                                     | (1,474,574 | ) |   |   | (5,850,815 | ) |
|                                                  |   |                                                               |     |   |                                                              |   |     |                                                             |   |   |                                                             |   |   |                                                                                                     |       |   |   |   |   |   |
| Provision                for Deferred Income Taxes    |   |                                                               | (3,468   | )      |                                                              |   | -        |                                                             |   |   | 52,012                                                           |   |   |                                                                                                     | -          |   |   |   | 52,012 |   |
|                                                  |   |                                                               |     |   |                                                              |   |     |                                                             |   |   |                                                             |   |   |                                                                                                     |       |   |   |   |   |   |
| NET                LOSS                               |   | $                                                                  | (877,957 | )      |                                                              | $      | (707,893 | )                                                                |   | $      | (1,839,051                                                       | )      |   | $                                                                                                        | (1,474,574 | ) |   | $ | (5,902,827 | ) |

----

**KODIAK      ENERGY, INC.**

**Unaudited      Consolidated Statements of Cash Flows**

**(Development      Stage Company Going Concern Uncertainty – Note 1)**

|                                                                                                      |   | Three                Months Ended September 30,2007 |       |   | Three                Months Ended September 30,2006 |   |       | Nine                Months Ended September 30,2007 |   |   | Nine                Months Ended September 30,2006 |   |   | Cumulative                Since Inception April 7, 2004 to September 30,2007 |       |
|-----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|--------|-----------------------------------------------------|--------|------------|----------------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|------------------------------------------------------------------------------|------------|
| OPERATING                ACTIVITIES                                                                       |   |                                                     |       |   |                                                |   |       |                                               |   |   |                                               |   |   |                                                                         |       |
| NET                LOSS                                                                                   |   | $                                                        | (877,957   | )      |                                                | $      | (707,893   | )                                                  |   | $      | (1,839,051                                         | )      |   | $                                                                            | (1,484,574 | ) |   | $ | (5,902,827 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities: |   |                                                     |       |   |                                                |   |       |                                               |   |   |                                               |   |   |                                                                         |       |   |   |   |   |   |
| Depletion,                Depreciation and Accretion                                                      |   |                                                     | 12,900     |   |                                                |   | 446,337    |                                               |   |   | 35,043                                             |   |   |                                                                         | 451,485    |   |   |   | 1,543,299 |   |
| Interest                Expense                                                                           |   |                                                     | (18,818    | )      |                                                |   | -          |                                               |   |   | -                                                  |   |   |                                                                         | -          |   |   |   | 808,811 |   |
| Stock-Based                Investor Relations Expense                                                     |   |                                                     | -          |   |                                                |   | -          |                                               |   |   | -                                                  |   |   |                                                                         | 337,500    |   |   |   | 337,500 |   |
| Stock-Based                Compensation                                                                   |   |                                                     | 190,239    |   |                                                |   | -          |                                               |   |   | 469,322                                            |   |   |                                                                         | -          |   |   |   | 538,491 |   |
| Provision                for Deferred Income Taxes                                                        |   |                                                     | (3,468     | )      |                                                |   | -          |                                               |   |   | 52,012                                             |   |   |                                                                         | -          |   |   |   | 52,012 |   |
| Contributions                to Capital                                                                   |   |                                                     | -          |   |                                                |   | -          |                                               |   |   | -                                                  |   |   |                                                                         | -          |   |   |   | 900 |   |
| Changes                in Non-Cash Working Capital (Note 16)                                              |   |                                                     | (15,335    | )      |                                                |   | (293,614   | )                                                  |   |   | (94,523                                            | )      |   |                                                                         | (289,314   | ) |   |   | 36,255 |   |
| Net                Cash Used In Operating Activities                                                      |   |                                                     | (712,439   | )      |                                                |   | (555,170   | )                                                  |   |   | (1,377,197                                         | )      |   |                                                                         | (984,903   | ) |   |   | (2,585,559 | ) |
|  Investment                Activities:                                                               |   |                                                     |       |   |                                                |   |       |                                               |   |   |                                               |   |   |                                                                         |       |   |   |   |   |   |
| Additions                To Capital Assets                                                                |   |                                                     | (2,176,090 | )      |                                                |   | (1,011,208 | )                                                  |   |   | (7,071,453                                         | )      |   |                                                                         | (1,852,370 | ) |   |   | (9,922,900 | ) |
| Additions                To Other Assets                                                                  |   |                                                     | (61,740    | )      |                                                |   | (305       | )                                                  |   |   | (66,960                                            | )      |   |                                                                         | (405       | ) |   |   | (116,820 | ) |
| Net                Cash Used In Investment Activities                                                     |   |                                                     | (2,237,830 | )      |                                                |   | (1,011,513 | )                                                  |   |   | (7,138,413                                         | )      |   |                                                                         | (1,852,775 | ) |   |   | (10,039,720 | ) |
|                                                                                                      |   |                                                     |       |   |                                                |   |       |                                               |   |   |                                               |   |   |                                                                         |       |   |   |   |   |   |
| Financing                Activities Shares Issued and Issuable                                            |   |                                                     | 8,926,576  |   |                                                |   | 90,000     |                                               |   |   | 12,372,602                                         |   |   |                                                                         | 3,133,941  |   |   |   | 16,950,832 |   |
| Proceeds                of Notes Payable                                                                  |   |                                                     | 300,000    |   |                                                |   | -          |                                               |   |   | 3,300,000                                          |   |   |                                                                         | -          |   |   |   | 3,300,000 |   |
| Net                Cash Provided By Financing Activities                                                  |   |                                                     | 9,226,576  |   |                                                |   | 90,000     |                                               |   |   | 15,672,602                                         |   |   |                                                                         | 3,133,941  |   |   |   | 20,250,832 |   |
|                                                                                                      |   |                                                     |       |   |                                                |   |       |                                               |   |   |                                               |   |   |                                                                         |       |   |   |   |   |   |
| Foreign                Currency Translation                                                               |   |                                                     | 126,358    |   |                                                |   | (3,825     | )                                                  |   |   | (191,951                                           | )      |   |                                                                         | (733       | ) |   |   | (212,165 | ) |
| Net                Cash Increase (Decrease)                                                               |   |                                                     | 6,149,949  |   |                                                |   | (1,480,507 | )                                                  |   |   | 6,965,041                                          |   |   |                                                                         | 291,530    |   |   |   | 7,413,387 |   |
| Cash                beginning of period                                                                   |   |                                                     | 1,263,438  |   |                                                |   | 1,962,688  |                                               |   |   | 448,346                                            |   |   |                                                                         | 190,651    |   |   |   | - |   |
|                                                                                                      |   |                                                     |       |   |                                                |   |       |                                               |   |   |                                               |   |   |                                                                         |       |   |   |   |   |   |
| Cash                end of period                                                                         |   | $                                                        | 7,413,387  |   |                                                | $      | 482,181    |                                               |   | $      | 7,413,387                                          |   |   | $                                                                            | 482,181    |   |   | $ | 7,413,387 |   |

----

----

----

----

|                                                             |   | September                30, |    |   | December                31, |   |
|------------------------------------------------------------------|--------|------------------------------|---------|--------|-----------------------------|--------|
|                                                             |   | 2007                         |    |   | 2006                        |   |
|                                                             |   |                         |    |   |                        |   |
| Alberta                Energy and Utility Board Drilling Deposit |   | $                            | 86,300  |   |                        | $      | 23,808 |   |
| Alberta                Energy Royalty Deposit                    |   |                         | 4,706   |   |                        |   | 4,074 |   |
| British                Columbia Oil and Gas Commission Deposit   |   |                         | 25,814  |   |                        |   | 21,978 |   |
|                                                             |   |                         |    |   |                        |   |   |   |
|                                                             |   | $                            | 116,820 |   |                        | $      | 49,860 |   |

|                                   |   |   |       |   | Accumulated                Depreciation |   |      | Net                Book Value September 30, |   |
|----------------------------------------|--------|--------|------------|--------|-----------------------------------------|--------|-----------|---------------------------------------------|--------|
|                                   |   | Cost   |       |   | and                Depletion            |   |      | 2007                                        |   |
| Oil                and Gas Properties: |   |   |       |   |                                    |   |      |                                        |   |
|                                   |   |   |       |   |                                    |   |      |                                        |   |
| Canada                                 |   | $      | 17,330,711 |   |                                    | $      | 1,476,657 |                                        |   | $ | 15,854,054 |   |
| United                States           |   |   | 6,642,258  |   |                                    |   | -         |                                        |   |   | 6,642,258 |   |
|                                   |   |   |       |   |                                    |   |      |                                        |   |   |   |   |
| Sub-total                              |   |   | 23,972,969 |   |                                    |   | 1,476,657 |                                        |   |   | 22,496,312 |   |
|                                   |   |   |       |   |                                    |   |      |                                        |   |   |   |   |
| Furniture                and Fixtures  |   |   | 121,744    |   |                                    |   | 42,720    |                                        |   |   | 79,024 |   |
|                                   |   |   |       |   |                                    |   |      |                                        |   |   |   |   |
| Total                                  |   | $      | 24,094,713 |   |                                    | $      | 1,519,377 |                                        |   | $ | 22,575,336 |   |

----

|                                   |   |   |      |   | Accumulated                Depreciation |   |      | Net                Book Value December 31, |   |
|----------------------------------------|--------|--------|-----------|--------|-----------------------------------------|--------|-----------|--------------------------------------------|--------|
|                                   |   | Cost   |      |   | And                Depletion            |   |      | 2006                                       |   |
| Oil                and gas Properties: |   |   |      |   |                                    |   |      |                                       |   |
|                                   |   |   |      |   |                                    |   |      |                                       |   |
| Canada                                 |   | $      | 2,182,075 |   |                                    | $      | 1,476,657 |                                       |   | $ | 705,418 |   |
| United                States           |   |   | 564,835   |   |                                    |   | -         |                                       |   |   | 564,835 |   |
|                                   |   |   |      |   |                                    |   |      |                                       |   |   |   |   |
| Sub-total                              |   |   | 2,746,910 |   |                                    |   | 1,476,657 |                                       |   |   | 1,270,253 |   |
|                                   |   |   |      |   |                                    |   |      |                                       |   |   |   |   |
| Furniture                and Fixtures  |   |   | 69,564    |   |                                    |   | 13,761    |                                       |   |   | 55,803 |   |
|                                   |   |   |      |   |                                    |   |      |                                       |   |   |   |   |
| Total                                  |   | $      | 2,816,474 |   |                                    | $      | 1,490,418 |                                       |   | $ | 1,326,056 |   |

----

|                                                              |   | 2007   |      |   | 2006   |   |
|-------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                              |   |   |      |   |   |   |
| Advances                during the nine months ended September 30 |   | $      | 3,300,000 |   |   | $      | Nil |   |
| Amount                repaid September 28                         |   |   | 2,567,500 |   |   |   | Nil |   |
|                                                              |   |   |      |   |   |   |   |   |
| Balance                September 30                               |   | $      | 732,500   |   |   | $      | Nil |   |

| Asset                Retirement Obligations, December 31, 2005  |   | $      | -       |   |
|-----------------------------------------------------------------|--------|--------|---------|--------|
| Obligations                incurred                             |   |   | 86,193  |   |
| Accretion                                                       |   |   | 4,718   |   |
| Asset                retirement obligations, December 31, 2006  |   |   | 90,911  |   |
| Obligations                incurred                             |   |   | 11,796  |   |
| Accretion                                                       |   |   | 6,104   |   |
| Asset                retirement obligations, September 30, 2007 |   | $      | 108,811 |   |

| Issued                                             |   | Number |        |   | Par                Value |   |    | Additional                Paid in Capital |   |
|----------------------------------------------------|--------|--------|-------------|--------|--------------------------|--------|---------|-------------------------------------------|--------|
| Balance                December 31, 2005           |   |   | 474,028     |   |                     | $      | 474     |                                      |   | $ | 834,561 |   |
| Private                Placement, net of costs(a)  |   |   | 16,000,000  |   |                     |   | 16,000  |                                      |   |   | 756,655 |   |
| Private                Placement, net of costs(b)  |   |   | 933,324     |   |                     |   | 933     |                                      |   |   | 1,259,067 |   |
| Issued                for service(c)               |   |   | 1,000,000   |   |                     |   | 1,000   |                                      |   |   | 40,189 |   |
| 2:1                Stock split(d)                  |   |   | 18,407,362  |   |                     |   | 18,407  |                                      |   |   | (18,407 | ) |
| Issued                for service, net of costs(e) |   |   | 7,500,000   |   |                     |   | 7,500   |                                      |   |   | 314,474 |   |
| 2:1                Stock split(f)                  |   |   | 44,314,714  |   |                     |   | 44,315  |                                      |   |   | (44,315 | ) |
| Private                Placement, net of costs(g)  |   |   | 1,130,000   |   |                     |   | 1,130   |                                      |   |   | 1,766,130 |   |
| Private                Placement, net of costs(h)  |   |   | 187,500     |   |                     |   | 187     |                                      |   |   | 235,254 |   |
| Stock-based                compensation (note 9)   |   |   | -           |   |                     |   | -       |                                      |   |   | 69,169 |   |
| Balance                December 31, 2006           |   |   | 89,946,928  |   |                     |   | 89,946  |                                      |   |   | 5,212,777 |   |
| Private                Placement, net of costs (h) |   |   | 30,000      |   |                     |   | 30      |                                      |   |   | 38,298 |   |
| Private                Placement, net of costs (i) |   |   | 440,000     |   |                     |   | 440     |                                      |   |   | 499,560 |   |
| Private                Placement, net of costs (j) |   |   | 420,000     |   |                     |   | 420     |                                      |   |   | 474,580 |   |
| Private                Placement, net of costs (k) |   |   | 2,447,900   |   |                     |   | 2,448   |                                      |   |   | 2,777,427 |   |
| Private                Placement, net of costs (l) |   |   | 2,756,000   |   |                     |   | 2,756   |                                      |   |   | 6,218,489 |   |
| Private                Placement, net of costs (l) |   |   | 1,866,670   |   |                     |   | 1,867   |                                      |   |   | 5,150,143 |   |
| Private                Placement (m)               |   |   | 7,000,000   |   |                     |   | 7,000   |                                      |   |   | 13,993,000 |   |
| Stock-based                compensation (note 9)   |   |   | -           |   |                     |   | -       |                                      |   |   | 469,322 |   |
| Balance                September 30, 2007          |   |   | 104,907,498 |   |                     | $      | 104,907 |                                      |   | $ | 34,833,596 |   |

----

|                                               |   | 2007   |     |   | 2006   |   |
|----------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                               |   | Number |     |   | Value  |   |   | Number |   |   | Value |   |
|                                               |   |   |     |   |   |   |   |   |   |   |   |   |
| Opening                Balance                     |   |   | 470,000  |   |   | $      | 538,328 |   |   |   | 16,000,000 |   |   | $ | 773,637 |   |
| Issued                during the period            |   |   | (470,000 | )      |   |   | (538,328 | ) |   |   | (16,000,000 | ) |   |   | (773,637 | ) |
| Private                Placement, net of costs (h) |   |   | -        |   |   |   | - |   |   |   | 30,000 |   |   |   | 38,768 |   |
| Private                Placement, net of costs (i) |   |   | -        |   |   |   | - |   |   |   | 440,000 |   |   |   | 499,560 |   |
|                                               |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Closing                Balance                     |   |   | -        |   |   | $      | - |   |   |   | 470,000 |   |   | $ | 538,328 |   |

|   | (a) | On                January 13, 2006, 16,000,000 shares of common stock were issued pursuant                to two private placements that closed December 22, 2005 (13,650,000                shares                for gross proceeds of $300,000) and December 30, 2005 (910,000 shares,                for                gross proceeds of $500,000) respectively, recorded as “Shares Issuable” at                December 31, 2005 in the amount of $773,637 (net of share issue costs                of                $26,363) as the share certificates were not issued until January                13,                2006. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | In                January, 2006, the Company closed a private placement for 933,324                common                shares at a price of $1.50 per share for gross proceeds of $1,400,000.                Share issue costs associated with this private placement totaled                $140,000. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | In                January, 2006, the Company issued 1,000,000 shares to settle debt                of                $41,189 pursuant to the stock for services compensation plan. A beneficial                conversion feature of $808,811 was calculated on the debt for the                year                ended December 31, 2005 representing the difference between the conversion                price and the fair value of the common stock at the commitment date.                This                amount was recorded as interest expense and an increase in additional                paid                in capital for the year ended December 31,                2005. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | On                February 20, 2006 the Company’s stock split forward by paying a stock                dividend to our existing shareholders. All shareholders of record                on                February 14, 2006 received 1 dividend share for every share they                owned                amounting to 18,407,362 shares of common stock                issued. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | During                2006, the Company issued 7,500,000 common shares, pursuant to an                S8                registration, for services provided to the Company that have been                recorded                under the provisions of SFAS No. 123R relating to transactions with                non-employees where the fair value of the investor relations services                rendered has been recorded as General & Administrative Expense and an                increase in Additional Paid In Capital (less share issue costs of                $15,526.                The recorded value of the transaction was $337,500 and was based                on the                value of the invoices rendered for the services provided and an allowance                for the lack of liquidity in the market for the Company’s common shares.                These transactions were in the normal course of business and agreed                to by                the non-employees and the Company based on negotiation and accordingly                had                been measured at the exchange                amounts. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (f) | On                May 1, 2006 the Company’s stock split forward by paying a stock dividend                to our existing shareholders. All shareholders of record on April                28, 2006                received 1 dividend share for every share they owned amounting to                44,314,714 shares of common stock                issued. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g) | In                June 2006 the Company closed a private placement for 1,130,000 units                at a                price of $1.70 per unit for gross proceeds of $1,921,000. Each unit                entitled the subscriber to one common share of the Company and one                warrant. Share issue costs associated with this private placement                totaled                $153,740. Each warrant entitles the warrant holder to exchange one                warrant                for one common share at a price of $2.70 until June 30, 2008 and                for $3.50                until June 30, 2009. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (h) | In                December 2006, the Company closed private placements for 54,375 units                (217,050 common shares) at a price per unit of $6.40 Cdn. ($1.60                Cdn. per                share) for aggregate proceeds of $348,000. Each unit entitles the                subscriber to three flow-through common shares and one common share.                The                flow-through shares entitle the holder to a Canadian Exploration                Expense                deduction under the Canada Income Tax Act. Of these shares, 30,000                were                classified, net of share issue costs of $38,328, as Shares To Be                Issued as                at December 31, 2006 as the share certificates were not issued until                February, 2007. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | On                December 22, 2006, the Company received proceeds for a private placement                of 440,000 units at a price of $1.25 per unit that closed on February                20,                2007 for gross proceeds of $550,000. Each unit entitled the subscriber                to                one common share of the Company and one warrant. These common shares                were                classified, net of share issue costs of $50,000, as Shares To Be                Issued as                at December 31, 2006 as the share certificates were not issued until                January, 2007. Each warrant entitles the warrant holder to exchange                one                warrant for one common share at a price at a price of $1.50 until                December                22, 2008. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (j) | On                February 20, 2007, the Company closed a private placement for 420,000                units at a price of $1.25 per unit for gross proceeds of $525,000.                Each                unit entitled the subscriber to one common share of the Company and                one                warrant. Each warrant entitles the warrant holder to exchange one                warrant                for one common share at a price at a price of $1.50 until February                20,                2009. Share issue costs associated with this private placement totaled                $50,000. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (k) | On                May 10, 2007, the Company closed a private placement for 2,447,900                units                at a price of $1.25 per unit for gross proceeds of $3,059,875. Each                unit                entitled the subscriber to one common share of the Company and one                warrant. Each warrant entitles the warrant holder to exchange one                warrant                for one common share at a price at a price of $1.50 until May 10,                2009.                Share issue costs associated with this private placement totaled                $280,000. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (l) | On                September 28, 2007, the Company closed a brokered private placement                offering for an aggregate of 4,622,670 common shares for aggregate                gross                proceeds of $12,490,010. Of the total number of shares, 2,756,000                were                sold at a purchase price of $2.50 per share for gross proceeds of                $6,890,000 and 1,866,670 were sold at a purchase price of $3.00 for                gross                proceeds of $5,600,010. The shares sold at $3.00 were sold on the                basis                that the Company would provide the purchaser a Canadian tax flow                through                advantage. Share issue costs associated with this offering totaled                $1,116,756. In connection with the offering, the broker was granted                warrants to purchase, until March 28, 2009, (i) 220,480 common shares                of                the Company at a price of $2.50 per share and (ii) 149,334 common                shares                of the Company at a price of $3.00 per share. The broker was also                was also                granted a right of first refusal for future securities offerings                in Canada                and investment banking and advisory rights for a period of 18 months.                The                Company will seek a listing on the Toronto Venture Stock Exchange                for its                common shares. If the Company does not have such listing in place                by                December 28, 2007, then it will pay in cash to the September 28,                2007                private placement investors a penalty amount of 2% per month until                such                listing is achieved. The penalty provision is not limited as to time                or                amount. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (m) | On                September 28, 2007, the Company issued 7,000,000 common shares valued                at                $14,000,000 ($2.00 per share) as partial consideration for the acquisition                of certain undeveloped oil and gas properties in Canada and the United                States. The Company also committed to issue up to an additional 11,000,000                common shares of the Company upon the achievement of certain milestones                in                connection with the acquired properties as set out in Note                5. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   | Exercise                 |   |   | Equivalent                Shares |      |       | Weighted                Average Years to |       |   | Option                Shares |   |
|----------------------------------------------------|--------|--------------------------|--------|--------|----------------------------------|-----------|------------|------------------------------------------|------------|--------|------------------------------|--------|
|                                               |   | Price                ($) |   |   | Outstanding                      |      |       | Expiry                                   |       |   | Vested                       |   |
|                                               |   |                     |   |   |                             |      |       |                                     |       |   |                         |   |
| Stock                Option Plan                   |   | $1.28-$2.74              |   |   |                             | 2,035,000 |       |                                     |  4.26 |   |                         | Nil    |   |
| June                2006 Warrants                  |   | $2.70-$3.50              |   |   |                             | 1,130,000 |       |                                     |  3.75 |   |                         |   | - |   |
| February                2007 Warrants              |   | $1.50                    |   |   |                             | 860,000   |       |                                     |  1.39 |   |                         |   | - |   |
| May                2007 Warrants                   |   | $1.50                    |   |   |                             | 2,447,900 |       |                                     |  1.51 |   |                         |   | - |   |
| September                2007 Warrants             |   | $2.50                    |   |   |                             | 220,480   |       |                                     |  1.49 |   |                         |   | - |   |
| September                2007 Warrants             |   | $3.00                    |   |   |                             | 149,334   |       |                                     |  1.49 |   |                         |   | - |   |
| Thunder                Acquisition (Notes 5 and 8) |   |                     |   |   |                             |      | 11,000,000 |                                     |       |   |                         |   |   |   |   |   |
| Total                Shares Reserved               |   |                     |   |   |                             |      | 17,842,714 |                                     |       |   |                         |   |   |   |   |   |

----

|                                            | Expiry                   |   | Number                of Option |      |   | Weighted                Average Exercise |   |
|-------------------------------------------------|--------------------------|--------|---------------------------------|-----------|--------|------------------------------------------|--------|
|                                            | Date                     |   | Shares                          |      |   | Price                                    |   |
|                                            |                     |   |                            |      |   |                                     |   |
| Balance                December 31, 2005        |                     |   |                            | -         |   |                                     |   | - |   |
|                                            |                     |   |                            |      |   |                                     |   |   |   |
| Options                Granted October 23, 2006 | Oct                23/11 |   |                            | 1,280,000 |   |                                     | $      | 1.50 |   |
| Options                Cancelled                |                     |   |                            | (280,000  | )      |                                     | $      | 1.50 |   |
| Options                Granted December 1, 2006 | Dec                1/11  |   |                            | 125,000   |   |                                     | $      | 1.28 |   |
| Balance                December 31, 2006        |                     |   |                            | 1,125,000 |   |                                     | $      | 1.48 |   |
|                                            |                     |   |                            |      |   |                                     |   |   |   |
| Options                Granted January 3, 2007  | Jan                3/12  |   |                            | 280,000   |   |                                     | $      | 1.29 |   |
| Options                Granted February 1, 2007 | Feb                1/12  |   |                            | 100,000   |   |                                     | $      | 1.35 |   |
| Options                Granted April 2, 2007    | Apr                2/12  |   |                            | 300,000   |   |                                     | $      | 1.75 |   |
| Options                Granted August 1, 2007   | Aug                1/12  |   |                            | 230,000   |   |                                     | $      | 2.74 |   |
| Balance                September 30, 2007       |                     |   |                            | 2,035,000 |   |                                     | $      | 1.63 |   |

|                                                  |   | 2007                   |   |   | 2006                   |   |
|-------------------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                                  |   |                   |   |   |                   |   |
| Risk                free interest rate                |   |  3.94-4.57%       |   |   |  3.74-4.11%       |   |
| Expected                holding period                |   | 3                years |   |   | 3                years |   |
| Share                price volatility                 |   |  75%              |   |   |  75%              |   |
| Estimated                annual common share dividend |   |  -                |   |   |  -                |   |

----

|                                                   |   | 2007   |     |   | 2006   |   |      | Cumulative |   |
|--------------------------------------------------------|--------|--------|----------|--------|--------|--------|-----------|------------|--------|
| Income                tax benefit at statutory rate    |   | $      | 638,000  |   |   | $      | 1,080,000 |       |   | $ | 2,137,000 |   |
| Permanent                Differences                   |   |   | 2,000    |   |   |   | (132,000  | )          |   |   | (410,000 | ) |
| State                tax benefit, net of federal taxes |   |   | 28,000   |   |   |   | 1,000     |       |   |   | 40,000 |   |
| Foreign                taxes, net of federal benefit   |   |   | (64,000  | )      |   |   | 12,000    |       |   |   | (49,000 | ) |
| Change                in valuation allowance           |   |   | (604,000 | )      |   |   | (961,000  |       |   |   | (1,718,000 | ) |
|                                                   |   |   |     |   |   |   |      |       |   |   |   |   |
| Income                tax benefit at effective rate    |   | $      | -        |   |   | $      | -         |       |   | $ | - |   |

|                                                                  |   | 2007   |       |   | 2006   |   |
|-----------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Deferred                tax assets                                    |   |   |       |   |   |   |
| Deferred                costs                                         |   | $      | -          |   |   | $      | 443,000 |   |
| Deferred                deduction on stock-based Compensation expense |   |   | 183,000    |   |   |   | 24,000 |   |
| Net                operating loss carryover                           |   |   | 3,460,000  |   |   |   | 647,000 |   |
|                                                                  |   |   |       |   |   |   |   |   |
| Total                deferred tax asset                               |   |   | 3,643,000  |   |   |   | 1,114,000 |   |
|                                                                  |   |   |       |   |   |   |   |   |
| Deferred                Tax liabilities                               |   |   |       |   |   |   |   |   |
| U.S.                                                                  |   |   | 1,873,000  |   |   |   | - |   |
| Canadian                                                              |   |   | 52,000     |   |   |   | - |   |
|                                                                  |   |   |       |   |   |   |   |   |
| Total                deferred tax liabilities                         |   |   | 1,925,000  |   |   |   | - |   |
|                                                                  |   |   |       |   |   |   |   |   |
| Net                deferred tax asset before valuation allowance      |   |   | 1,718,000  |   |   |   | 1,114,000 |   |
| Less                valuation allowance                               |   |   | (1,718,000 | )      |   |   | (1,114,000 | ) |
|                                                                  |   |   |       |   |   |   |   |   |
| Net                deferred tax asset                                 |   | $      | -          |   |   | $      | - |   |

----

|                                                          |   | **Three                Months Ended September 30,** |       |   | **Three                Months Ended September 30,** |   |       | **Nine                Months Ended September 30,** |   |   | **Nine                Months Ended September 30,** |   |
|---------------------------------------------------------------|--------|-----------------------------------------------------|------------|--------|-----------------------------------------------------|--------|------------|----------------------------------------------------|--------|--------|----------------------------------------------------|--------|
|                                                          |   | **2007**                                            |       |   | **2006**                                            |   |       | **2007**                                           |   |   | **2006**                                           |   |
|                                                          |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |
| **Numerator:**                                                |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |
| Numerator                for basic and diluted loss per share |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |
|                                                          |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |
| Net                Loss                                       |   | $                                                   | (877,957   | )      |                                                | $      | (707,893   | )                                                  |   | $      | (1,839,051                                         | )      |   | $ | (1,484,574 | ) |
| **Denominator:**                                              |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
| Denominator                for basic loss per share           |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
|                                                          |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
| Weighted                average shares outstanding            |   |                                                | 93,663,368 |   |                                                |   | 89,759,428 |                                               |   |   | 92,380,591                                         |   |   |   | 63,327,073 |   |
|                                                          |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
| In                the money stock options                     |   |                                                | 922,311    |   |                                                |   | -          |                                               |   |   | 776,162                                            |   |   |   | - |   |
| In                the money warrants                          |   |                                                | 1,763,788  |   |                                                |   | -          |                                               |   |   | 968,930                                            |   |   |   | - |   |
| Contingent                Thunder shares                      |   |                                                | 146,739    |   |                                                |   | -          |                                               |   |   | 49,451                                             |   |   |   | - |   |
|                                                          |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
| Denominator                for diluted loss per share         |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
|                                                          |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
| Weighted                average shares outstanding            |   |                                                | 96,496,206 |   |                                                |   | 89,759,428 |                                               |   |   | 94,195,133                                         |   |   |   | 63,327,073 |   |
|                                                          |   |                                                |       |   |                                                |   |       |                                               |   |   |                                               |   |   |   |   |   |
| **Basic                and diluted loss per share**           |   | $                                                   | (0.01      | )      |                                                | $      | (0.01      | )                                                  |   | $      | (0.02                                              | )      |   | $ | (0.02 | ) |

----

|                                |   | Three                Months Ended Sept. 30, 2007 |      |   | Nine                Months Ended Sept. 30, 2007 |   |
|-------------------------------------|--------|--------------------------------------------------|-----------|--------|-------------------------------------------------|--------|
|                                |   | U.                S.                             |      |   | Canada                                          |   |   | Total |   |   | U.                S. |   |   | Canada |   |   | Total |   |
| Revenue                             |   | $                                                | -         |   |                                            |   | (202 | ) |   |   | (202 | ) |   |   | - |   |   |   | 225 |   |   |   | 225 |   |
| Net                Loss             |   |                                             | 18,007    |   |                                            |   | 859,950 |   |   |   | 877,957 |   |   |   | 30,563 |   |   |   | 1,808,488 |   |   |   | 1,839,051 |   |
| Capital                Assets       |   |                                             | 6,642,258 |   |                                            |   | 15,933,076 |   |   |   | 22,575,336 |   |   |   | 6,642,258 |   |   |   | 15,933,078 |   |   |   | 22,575,336 |   |
| Total                Assets         |   |                                             | 6,731,635 |   |                                            |   | 24,757,950 |   |   |   | 31,489,585 |   |   |   | 6,731,635 |   |   |   | 24,757,950 |   |   |   | 31,489,585 |   |
| Capital                Expenditures |   |                                             | 6,052,373 |   |                                            |   | 8,979,643 |   |   |   | 15,032,016 |   |   |   | 6,077,423 |   |   |   | 15,170,182 |   |   |   | 21,247,605 |   |

|                                |   | Three                Months Ended Sept. 30, 2006 |    |   | Nine                Months Ended Sept. 30, 2006 |   |
|-------------------------------------|--------|--------------------------------------------------|---------|--------|-------------------------------------------------|--------|
|                                |   | U.                S.                             |    |   | Canada                                          |   |   | Total |   |   | U.                S. |   |   | Canada |   |   | Total |   |
| Revenue                             |   | $                                                | -       |   |                                            |   | 10,331 |   |   |   | 10,331 |   |   |   | - |   |   |   | 10,331 |   |   |   | 10,331 |   |
| Net                Loss             |   |                                             | 10,833  |   |                                            |   | 697,060 |   |   |   | 707,893 |   |   |   | 13,500 |   |   |   | 1,471,075 |   |   |   | 1,484,574 |   |
| Capital                Assets       |   |                                             | 248,871 |   |                                            |   | 1,239,613 |   |   |   | 1,488,484 |   |   |   | 248,871 |   |   |   | 1,239,613 |   |   |   | 1,488,484 |   |
| Total                Assets         |   |                                             | 564,873 |   |                                            |   | 2,001,746 |   |   |   | 2,566,619 |   |   |   | 564,873 |   |   |   | 2,001,746 |   |   |   | 2,566,619 |   |
| Capital                Expenditures |   |                                             | 116,871 |   |                                            |   | 268,714 |   |   |   | 385,585 |   |   |   | 116,871 |   |   |   | 1,492,987 |   |   |   | 1,609,858 |   |

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|                                 |   | Three                Months Ended Sept. 30, |   |   | Three                Months Ended Sept. 30, |   |     | Nine                Months Ended Sept. 30, |   |   | Nine                Months Ended Sept. 30, |   |   | Cumulative                Since Inception April 7, 2004 to Sept. 30, |     |
|--------------------------------------|--------|---------------------------------------------|--------|--------|---------------------------------------------|--------|----------|--------------------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------------------------------------------|----------|
|                                 |   | 2007                                        |   |   | 2006                                        |   |     | 2007                                       |   |   | 2006                                       |   |   | 2007                                                                 |     |
|                                 |   |                                        |   |   |                                        |   |     |                                       |   |   |                                       |   |   |                                                                 |     |
| Operating                Activities: |   |                                        |   |   |                                        |   |     |                                       |   |   |                                       |   |   |                                                                 |     |
| Accounts                Receivable   |   | $                                           | 18,973 |   |                                        |   | (74,879  | )                                          |   |   | (42,256                                    | )      |   |                                                                 | (177,074 | ) |   |   | (75,092 | ) |
| Prepaid                Expenses      |   |                                        | 7,004  |   |                                        |   | 7,344    |                                       |   |   | (30,272                                    | )      |   |                                                                 | 33,733   |   |   |   | (78,167 | ) |
| Accounts                Payable      |   |                                        | 1,749  |   |                                        |   | (27,319  | )                                          |   |   | 8,899                                      |   |   |                                                                 | (17,180  | ) |   |   | 122,304 |   |
| Accrued                Liabilities   |   |                                        | 8,893  |   |                                        |   | (198,760 | )                                          |   |   | (30,894                                    | )      |   |                                                                 | (87,604  | ) |   |   | 42,210 |   |
| Convertible                Debt      |   |                                        | -      |   |                                        |   | -        |                                       |   |   | -                                          |   |   |                                                                 | (41,189  | ) |   |   | - |   |
|                                 |   |                                        |   |   |                                        |   |     |                                       |   |   |                                       |   |   |                                                                 |     |   |   |   |   |   |
| Total                                |   | $                                           | 36,619 |   |                                        |   | (293,614 | )                                          |   |   | (94,523                                    | )      |   |                                                                 | (289,314 | ) |   |   | 11,255 |   |

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On      September 28, 2007, pursuant to subscription agreements, the      Company closed brokered private placement financings with investors for      2,756,000 common shares at a price of $2.50 per share and 1,866,670 flow through      common shares at a price of $3.00 per share for gross proceeds of $6,887,244      and      $5,598,143 respectively. In connection with these offerings, the broker was      granted warrants to purchase, until March 28, 2009, 220,480 common shares at      a      per share price of $2.50 and 149,334 common shares at a per share price of      $3.00,

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ITEM      6. EXHIBITS AND REPORTS ON FORM 8-K

|  | 31.1 - | Certification                of Chief Executive Officer Pursuant to Section 302 of                the Sarbanes-Oxley Act of 2002 |
|--|-------------|---------------------------------------------------------------------------------------------------------------------------------------|

|  | 31.2 - | Certification                of Chief Financial Officer to Section 302 of the Sarbanes-Oxley Act                of                2002 |
|--|-------------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | 32                   - | Certification                of Chief Executive Officer and Chief Financial Officer Pursuant to                Section                906 of the Sarbanes-Oxley Act of                2002 |
|--------|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**REPORTS      ON FORM 8-K**

On      April 17, 2007 we filed an 8K under item 8.01      Other Events

|                                    | KODIAK                ENERGY, INC. |
|-----------------------------------------|------------------------------------|
|                                    | (Registrant)                       |
|                                    |                               |   |
|                                    |                               |   |
| Dated:                November 14, 2007 | By:                                | /s/  Mark                Hlady                                                   |
|                                    |                               | Mark                Hlady |
|                                    |                               | CEO,                and Chairman |

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