**UNITED
          STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 Washington,
          DC 20549
  **Form
                10-Q**
  (Mark
          one)
  **xQuarterly
          Report Under
          Section 13 or 15(d) of The Securities Exchange Act**
 **of
          1934**
  **For
          the quarterly period ending March 31, 2007**
  **oTransition
          Report Under
          Section 13 or 15(d) of The Securities Exchange**
 **Act
          of 1934**
  **For
          the transition period from ______________ to _____________**
  *Commission
          File Number: 0-29613*
  **TIDELANDS
          OIL & GAS CORPORATION**
 (Exact
          name of small business issuer as specified in its charter)
   **Nevada**
                
                **66-0549380**(State
                    of incorporation)
                
                (IRS Employer ID
                    Number)
 
 **1862
          West Bitters Rd., San Antonio, TX 78248**
 (Address
          of principal executive offices)
  **(210)
          764-8642**
 (Issuer's
          telephone number)
  Securities
          registered under Section 12 (b) of the Exchange Act: None
  Securities
          registered under Section 12(g) of the Exchange Act:
  Common
          Stock - $0.001 par value
  Check
          whether the issuer has (1) filed all reports required to be filed by Section
          13
          or 15(d) of the Exchange Act during the past 12 months (or for such shorter
          period the Company was required to file such reports), and (2) has been
          subject
          to such filing requirements for the past 90 days. Yes x No o
  Indicate
          by check mark whether the registrant is a large accelerated filer, an
          accelerated filer, or a non-accelerated filer. See definitions of "accelerated
          filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
          one): Large accelerated filer o,
          Accelerated filer o, Non-accelerated
          filer x
  Indicate
          by check mark whether the registrant is a shell company (as defined by
          Rule
          12b-2of the Exchange Act. Yes oNo
x
  **APPLICABLE
          ONLY TO CORPORATE ISSUERS**
  As
          of May
          18, 2007, there were 102,633,706 shares of Common Stock issued and
          outstanding.
  Transitional
          Small Business Disclosure Format: Yes o    No x
  
 Table
            of Contents


**TIDELANDSOIL
&
GAS
          CORPORATION**
 **FORM
          10-Q**
 
 
 **INDEX**


**Page****PART
                  I** - Financial InformationItem
                  1 - Financial StatementsCondensed
                  Consolidated Balance Sheets as
                  ofMarch
                  31, 2007 and December 31,
                  2006
              F-1Condensed
                  Consolidated Statements of OperationsFor
                  the Three Months Ended March 31, 2007 and
                  2006
              F-2Condensed
                  Consolidated Statements of Cash
                  FlowsFor
                  the Three Months Ended March 31, 2007 and
                  2006
              F-3
                  to F-4Notes
                  to Condensed Consolidated Financial Statements
              F-5
                  to F13Item
                  2 - Management’s Discussion and Analysis or Plan of
                  Operation
              1Item
                  3 - Quantitative and Qualitative Disclosures About Market
                  Risk
              3Item
                  4 - Controls and Procedures
              4**PART
                  II** - Other InformationItem
                  1 - Legal Proceedings
              4Item 1A
                - Risk Factors
              5Item
                  2 - Unregistered Sales of Equity Securities and Use
                  of
                  Proceeds
              5Item
                  3 - Defaults Upon Senior Securities
              6Item
                  4 - Submission of Matters to a Vote of Security
                  Holdings
              6Item
                  5 - Other Information
              6Item
                  6 - Exhibits
              6Signature
              7


Table
          of Contents


**TIDELANDS
                  OIL & GAS CORPORATION****CONDENSEDCONSOLIDATED
                  BALANCE
                  SHEETS****ASSETS**
  **March
                  31,**
              
              **December
                  31,****2007**
              
              **2006****(Unaudited)**Current
                  Assets:Cash
              $
              302,202
              
              $
              367,437Accounts
                  and Other Receivable
              
              284,951
              
              
              388,754Inventory
              
              119,478
              
              
              84,030Prepaid
                  Expenses
              
              95,634
              
              
              148,551Total
                  Current Assets
              
              802,265
              
              
              988,772Property
                  Plant and Equipment, Net
              
              13,147,781
              
              
              12,364,359Other
                  Assets:Deposits
              
              56,858
              
              
              56,708Cash
                  Restricted
              
              53,250
              
              
              52,642Deferred
                  Charges
              
              256,392
              
              
              565,221Goodwill
              
              1,158,937
              
              
              1,158,937Total
                  Other Assets
              
              1,525,437
              
              
              1,833,508Total
                  Assets
              $
              15,475,483
              
              $
              15,186,639**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Current
                  Maturities - Note Payable
              $
              2,599,291
              
              $
              225,000Accounts
                  Payable and Accrued Expenses
              
              1,988,261
              
              
              1,624,752Customer
                  Deposits
              
              8,100
              
              
              0Reserve
                  for Litigation
              
              2,250,000
              
              
              2,250,000Total
                  Current Liabilities
              
              6,845,652
              
              
              4,099,752Due
                  to Related Party
              
              100,000
              
              
              0Long-Term
                  Debt
              
              4,586,315
              
              
              8,934,294Total
                  Liabilities
              
              11,531,967
              
              
              13,034,046Stockholders'
                  Equity:Common
                  Stock, $.001 Par Value per Share,250,000,000
                  Shares Authorized, 98,688,909and
                  86,457,922 Shares Issued and Outstanding atMarch
                  31, 2007 and December 31, 2006 Respectively
              
              98,690
              
              
              86,459Additional
                  Paid-in Capital
              
              50,823,250
              
              
              46,703,202Subscriptions
                  Receivable
              
              (110,000
              )
              
              (220,000
              )Minority
                  Interest
              
              -
              
              
              -Accumulated
                  (Deficit)
              
              (46,868,424
              )
              
              (44,417,068
              )Total
                  Stockholders' Equity
              
              3,943,516
              
              
              2,152,593Total
                  Liabilities and Stockholders' Equity
              $
              15,475,483
              
              $
              15,186,639


See
        Accompanying Notes to Consolidated Financial Statements


F-1
 Table
          of Contents




**TIDELANDS
                  OIL & GAS CORPORATION****CONDENSEDCONSOLIDATED
                  STATEMENTS OF
                  OPERATIONS****(UNAUDITED)**
  **Three
                  Months Ended**
              
              **Three
                  Months Ended****March
                  31, 2007**
              
              **March
                  31, 2006**Revenues:Gas
                  Sales and Pipeline Fees
              $
              1,001,882
              
              $
              672,506Construction
                  Services
              
              102,089
              
              
              129,388Total
                  Revenues
              
              1,103,971
              
              
              801,894Expenses:Cost
                  of Sales
              
              567,721
              
              
              376,866Operating
                  Expenses
              
              83,371
              
              
              84,531Depreciation
              
              122,609
              
              
              115,764Interest
              
              346,104
              
              
              111,059Stock-Based
                  Compensation - Related Parties
              
              1,100,000
              
              
              445,000Sales,
                  General and Administrative
              
              1,336,147
              
              
              1,397,942Total
                  Expenses
              
              3,555,952
              
              
              2,531,162(Loss)
                  From Operations
              
              (2,451,981
              )
              
              (1,729,268
              )Interest
                  and Dividend Income
              
              625
              
              
              33,620Net
                  (Loss)
              $
              (2,451,356
              )
              $
              (1,695,648
              )Net
                  (Loss) Per Common Share:Basic
                  and Diluted
              $
              (0.03
              )
              $
              (0.02
              )Weighted
                  Average Number of CommonShares
                  Outstanding
              
              92,573,416
              
              
              79,712,485






See
        Accompanying Notes to Condensed Consolidated Financial
        Statements




F-2
 Table
          of Contents





**TIDELANDS
                  OIL & GAS CORPORATION****STATEMENTSOF
                  CONDENSED CONSOLIDATED CASH
                  FLOWS****(UNAUDITED)****Three
                  Months Ended**
              
              **Three
                  Months Ended****March
                  31, 2007**
              
              **March
                  31, 2006**Cash
                  Flows Provided (Required) ByOperating
                  Activities:Net
                  (Loss)
              $
              (2,451,356
              )
              $
              (1,695,648
              )Adjustments
                  to Reconcile Net (Loss)to
                  Net Cash Provided (Required) ByOperating
                  Activities:Depreciation
              
              122,609
              
              
              115,764Change
                  in Derivative Liability
              
              0
              
              
              0Issuance
                  of Common Stock:For
                  Services Provided - Related Parties
              
              1,100,000
              
              
              445,000For
                  Services Provided - Other
              
              599,033
              
              
              424,500Changes
                  in:Accounts
                  Receivable
              
              103,803
              
              
              128,825Inventory
              
              (35,448
              )
              
              25,599Prepaid
                  Expenses
              
              52,917
              
              
              31,132Deferred
                  Charges
              
              308,829
              
              
              (1,625,458
              )Deposits
              
              (150
              )
              
              (50,000
              )Restricted
                  Cash
              
              (608
              )
              
              (561
              )Accounts
                  Payable and Accrued Expenses
              
              706,753
              
              
              24,626Customer
                  Deposits
              
              8,100
              
              
              0Net
                  Cash Provided (Required) By Operating Activities
              
              514,482
              
              
              (2,176,221
              )Cash
                  Flows Provided (Required)By
                  Investing Activities:Acquisitions
                  of Property, Plant and Equipment
              
              (906,031
              )
              
              (637,301
              )Net
                  Cash (Required) By Investing Activities
              
              (906,031
              )
              
              (637,301
              )




See
        Accompanying Notes to Condensed Consolidated Financial
        Statements





F-3
 Table
          of Contents





**TIDELANDS
                OIL & GAS CORPORATION****STATEMENTS
                OF CONDENSED CONSOLIDATED CASH FLOWS****(CONTINUED)****(UNAUDITED)****Three
                Months Ended**
            ****
            **Three
                Months Ended**
            ********
            **March
                31, 2007**
            ****
            **March
                31, 2006**Cash
                Flows Providedby
                Financing Activities:Proceeds
                from Stock Subscriptions Receivable
            
            0
            
            
            110,000Proceeds
                from Exercise of Stock Option
            
            200,000
            
            
            0Proceeds
                from Long-Term Loans
            
            26,314
            
            
            6,644,502Loan
                from Related Party
            
            100,000
            
            
            (3,606
            )Repayment
                of Loan by Related Party
            
            0
            
            
            0Net
                Cash Provided by Financing Activities
            
            326,314
            
            
            6,750,896Net
                Increase (Decrease) in Cash
            
            (65,235
            )
            
            3,937,374Cash
                at Beginning of Period
            
            367,437
            
            
            1,113,911Cash
                at End of Period
            $
            302,202
            
            $
            5,051,285Supplemental
                Disclosures of Cash Flow Information:Cash
                Payments for Interest
            $
            75,043
            
            $
            84,657Cash
                Payments for Income Taxes
            $
            0
            
            $
            0Non-Cash
                Investing and Financing Activities:Issuance
                of Common Stock:Payments
                of Accrued Expenses & Accounts Payable
            $
            343,244
            
            $
            445,000Conversion
                of Debentures
            
            2,000,000
            
            
            0Cancellation
                of Common Stock:In
                Payment of Stock Subscription
            
            (110,000
            )
            
            0Total
                Non-Cash Investing and Financing Activities
            $
            2,233,244
            
            $
            445,000




See
        Accompanying Notes to Condensed Consolidated Financial
        Statements





F-4
 Table
          of Contents





**TIDELANDS
      OIL & GAS CORPORATION**


**NOTESTO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**


**MARCH
      31, 2007**








NOTE
      1 -BASIS OF PRESENTATION





The
      accompanying unaudited condensed consolidated financial statements for the
      three
      month periods ended March 31, 2007, and 2006, have been prepared in conformity
      with accounting principles generally accepted in the United States of America
      for interim financial information and with the instructions to Form 10-Q and
      Regulation S-X. The financial information as of December 31, 2006, is derived
      from the registrant’s Form 10-K for the year ended December 31, 2006. Certain
      information or footnote disclosures normally included in financial statements
      prepared in accordance with accounting principles generally accepted in the
      United States of America have been condensed or omitted pursuant to the rules
      and regulations of the Securities and Exchange Commission.





The
      preparation of condensed consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates. In the opinion of management,
      the accompanying financial statements include all adjustments necessary (which
      are of a normal and recurring nature) for the fair presentation of the results
      of the interim periods presented. While the registrant believes that the
      disclosures presented are adequate to keep the information from being
      misleading, it is suggested that these accompanying financial statements be
      read
      in conjunction with the registrant’s audited consolidated financial statements
      and notes for the year ended December 31, 2006, included in the registrant’s
      Form 10-K for the year ended December 31, 2006.





Operating
      results for the three-month period ended March 31, 2007, are not necessarily
      indicative of the results that may be expected for the remainder of the fiscal
      year ending December 31, 2007. The accompanying unaudited condensed consolidated
      financial statements include the accounts of the registrant, its wholly-owned
      subsidiaries, Rio Bravo Energy, LLC, Sonora Pipeline, LLC, Sonterra Energy
      Corporation, Arrecefe Management, LLC, Marea Associates, LP, Reef Ventures,
      LP,
      Reef International, LLC, Reef Marketing, LLC, Terranova Energia S. de R. L.
      de
      C. V., Esperanza Energy, LLC, and Tidelands Exploration & Production
      Corporation. All significant inter-company accounts and transactions have been
      eliminated in consolidation.








F-5
 Table
          of Contents





**TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        2 - GOING
        CONCERN
 
 The
        Company has sustained recurring losses and negative cash flows from operations.
        Over 2006, the Company’s growth had been funded through issuance of convertible
        debentures. As of March 31, 2007, the Company had approximately $302,202
        of
        unrestricted cash. However, the Company has experienced and continues to
        experience negative cash flows from operations, as well as an ongoing
        requirement for substantial additional capital investment. The Company needs
        to
        raise substantial additional capital to accomplish its business plan this
        year
        and over the next several years. The Company is seeking to obtain such
        additional funding through private equity sources, from financial partners
        for
        some of its projects and the possible sale of certain operating assets along
        with a continued reduction of operating expenses. There can be no assurance
        as
        to the availability or terms upon which such financing and capital might
        be
        available or that asset sales will be possible at suitable pricing.
 
 The
        Company’s ability to continue as a going concern will depend on management’s
        ability to successfully implement a business plan which will increase revenues,
        control costs, and obtain additional forms of debt and/or equity financing
        or
        financial partners. These financial statements do not include any adjustments
        that might be necessary if the Company is unable to continue as a going concern.
 
 
 NOTE
        3 - DEBT
        FINANCING
 
 On
        January 20, 2006, the Company completed a private placement of $6,569,750
        of
        convertible debt with six institutional investors. The net proceeds realized
        by
        the Company were $4,949,291 after deduction of legal costs, commissions and
        interest discount. The Company issued original issue discount debentures
        with a
        maturity date of January 20, 2008, and a conversion feature which permitted
        the
        holders to convert into common stock of the Company at a price of $0.87 per
        share. The investors also received three-year “Series A Common Stock Warrants”
to purchase, in the aggregate, 2,491,975 shares of common stock of the Company
        at a conversion price of $0.935 per share. Additionally, the Company issued
        to
        the investors “Series B Common Stock Warrants” which provided for a
        thirteen-month exercise period, at a conversion price of $1.275 per share,
        and
        an aggregate purchase total of 7,551,432 shares of common stock of the
        Company.
 
 
  
 F-6
 Table
            of Contents
 
  **TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        3 - DEBT
        FINANCING (CONTINUED)
  As
        of
        March 31, 2007, two of the six institutional investors had converted $3,586,709
        of their debentures for 4,122,654 shares of the Company’s common stock at $0.87
        per share. In addition, one investor had its $608,750 of debentures redeemed
        by
        the Company as a result of a default. After accounting for the above conversions
        and redemption, $2,374,291 of convertible debentures convertible into 2,729,070
        shares of Tidelands’ common stock at $0.87 per share remain outstanding. On
        February 20, 2007, the “Series B Common Stock Warrants” exercisable at $1.275
        per share for an aggregate purchase total of 7,551,432 shares of the Company’s
        common stock expired.
 
 
 NOTE
        4 - COMMON
        STOCK TRANSACTIONS
 
 On
        January 2, 2007, the Company issued 500,000 shares of its common stock valued
        at
        $135,000 to the former President in accordance with his Severance
        Agreement.
 
 On
        January 11, 2007, the Company issued 589,288 shares of its common stock valued
        at $162,500 to a law firm for 2007 legal services related to securities law
        matters.
 
 On
        January 22, 2007, the current President cancelled 500,000 of his shares of
        the
        Company’s restricted common stock valued at $110,000 which was offset against
        the stock subscription due from him to the Company.
 
 On
        February 2, 2007 and on four other occasions until March 5, 2007, the Company
        issued a total of 2,298,848 shares of its common stock to a holder of its
        Convertible Debentures for conversion of $2,000,000.
 
 On
        February 6, 2007, the Company issued 120,000 shares of its restricted common
        stock valued at $27,000 for 2006 investor public relations
        services.
  On February 13, 2007, the Company issued 500,000 shares of its common stock
        valued at $115,000 each to two Directors for a total of 1,000,000 common
        shares
        valued at $230,000.
 
 On
        February 15, 2007, the Company issued 681,818 shares of its common stock
        valued
        at $150,000 to a law firm for legal services related to the Northern Natural
        Gas
        Company/Betty Lou Sherrin Litigation matter (see NOTE 3 -
        Litigation).
 
 On
        February 21, 2007, the Company issued 69,000 shares of its restricted Company
        stock valued at $14,490 for preparation of a Research Report.
 
 
  
 F-7
 Table
            of Contents
 
 **TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        4 - COMMON
        STOCK TRANSACTIONS (CONTINUED)
 
 On
        March
        1, 2007, the Company issued 642,858 shares of its common stock valued at
        $135,000 each to two Directors for a total of 1,285,716 common shares valued
        at
        $270,000.
 
 On
        March
        8, 2007, the Company issued 2,133,938 shares of its common stock valued at
        $426,787 to a law firm for past and future general and coordinating legal
        services.
 
 On
        March
        12, 2007, the Company issued 952,381 shares to a Director for $200,000 as
        a
        result of his exercise of stock options at $0.21 per share.
 
 On
        March
        14, 2007, the Company issued 1,500,000 shares of its common stock valued
        at
        $300,000 to each of two Directors for a total of 3,000,000 shares valued
        at
        $600,000.
 
 On
        March
        19, 2007, the Company issued 100,000 shares of its restricted common stock
        valued at $26,500 to an employee of a subsidiary as a stock bonus.
 
 
 NOTE
        5 - RELATED
        PARTY TRANSACTION
 
 During
        the quarter, the Company issued 2,642,858 shares of common stock valued at
        $550,000 to each of its two outside Directors.  In addition to their
        customary duties as directors, these board members provided regular and ongoing
        management services to the Company.  This compensation to the two outside
        Directors represents their compensation for 2007.
 
  
 F-8
 Table
            of Contents
 
 **TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        6 - LITIGATION
 
 **Matter
        No. 1:**
 On
        January 6, 2003, we were served as a third party defendant in a lawsuit titled
        Northern Natural Gas Company vs. Betty Lou Sheerin vs. Tidelands Oil & Gas
        Corporation, ZG Gathering, Ltd. and Ken Lay, in the 150th Judicial District
        Court, Bexar County, Texas, Cause Number 2002-C1-16421. The lawsuit was
        initiated by Northern Natural Gas (“Northern”) when it sued Betty Lou Sheerin
        (“Sheerin”) for her failure to make payments on a note she executed payable to
        Northern in the original principal amount of $1,950,000. Northern's suit
        was
        filed on November 13, 2002. Sheerin answered Northern's lawsuit on January
        6,
        2003. Sheerin's answer generally denied Northern's claims and raised the
        affirmative defenses of fraudulent inducement by Northern, estoppel, waiver
        and
        the further claim that the note does not comport with the legal requirements
        of
        a negotiable instrument. Sheerin seeks a judicial ruling that Northern be
        denied
        any recovery on the note. Sheerin's answer included a counterclaim against
        Northern, ZG Gathering, and Ken Lay generally alleging, among other things,
        that
        Northern, ZG Gathering, Ltd. and Ken Lay, fraudulently induced her execution
        of
        the note. Northern has filed a general denial of Sheerin's counterclaims.
        Sheerin's answer included a third party cross claim against Tidelands Oil
        and
        Gas Corporation (“Tidelands”).  She
        alleges that Tidelands entered into an agreement to purchase the Zavala
        Gathering System from ZG Gathering Ltd. and that, as a part of the agreement,
        Tidelands agreed to satisfy all of the obligations due and owing to Northern,
        thereby relieving Sheerin of all obligations she had to Northern on the
        $1,950,000 promissory note in question. Tidelands and Sheerin agreed to delay
        the Tidelands' answer date in order to allow time for mediation of the case.
        Tidelands participated in mediation on March 11, 2003. The case was not settled
        at that time. Tidelands answered the Sheerin suit on March 26, 2003. Tidelands'
        answer denies all of Sheerin's allegations.
 
 On
        May 24
        and June 16, 2004 respectively, Betty Lou Sheerin filed her first and second
        amended original answer, affirmative defenses, special exceptions and second
        amended original counterclaim, second amended original third party cross-actions
        and requests for disclosure. In these amended pleadings, she sued Michael
        Ward,
        Royis Ward, James B. Smith, Carl Hessel and Ahmed Karim in their individual
        capacities. Her claims against these individuals are for fraud, breach of
        contract, breach of the Uniform Commercial Code, breach of duty of good faith
        and fair dealing and conversion. Sheerin has now non-suited her claims against
        Michael Ward, Royis Ward, and James B. Smith.
 
 
 F-9
 Table
            of Contents
  
 
 **TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        6 - LITIGATION
        (CONTINUED)
 
 **Matter
        No. 1: (Continued)**
 In
        September 2002, as a pre-closing deposit to the purchase of the Zavala Gathering
        System, the Company executed a $300,000 promissory note to Betty L. Sheerin,
        a
        partner of ZG Gathering, Ltd. In addition, the Company issued 1,000,000 shares
        of its common stock to various partners of ZG Gathering, Ltd. On December
        3,
        2003, Sheerin filed a separate lawsuit against Tidelands in the 150th District
        Court of Bexar County, Texas on this promissory note seeking a judgment against
        Tidelands for the principle amount of the note, plus interest. On December
        29th,
        2003, Tidelands answered this lawsuit denying liability on the note. On April
        1,
        2004, Tidelands filed a plea in abatement asking the court to dismiss or
        abate
        Sheerin's lawsuit on the $300,000 promissory note as it was related to and
        its
        outcome was dependent on the outcome of the Sheerin third party cross action
        against Tidelands in Cause Number 2002-C1-16421. The Company believes that
        the
        promissory note and shares of common stock should be cancelled based upon
        the
        outcome of the litigation described above. Accordingly, our financial statements
        reflect this belief.
  On
        September 15, 2004 and again on October 15, 2004 respectively, Sheerin amended
        her pleadings to include a third and fourth amended third party cross action
        against Tidelands adding a claim for the $300,000 promissory note. In these
        amended pleadings, Sheerin also deleted her claims against Carl Hessel and
        Ahmed
        Karim (“Company Directors”). After adding the claim on the $300,000 promissory
        note to the third party claims of Sheerin against Tidelands in Cause No.
        2002-C1-16421, Sheerin dismissed Cause Number 2002-C1-16421.
 
 Tidelands
        won a partial summary judgment against Sheerin as to all of her tort claims
        pled
        against Tidelands, save and except only her claim for conversion of 500,000
        shares of Tidelands stock.
 
 Sheerin
        seeks damages against Tidelands for indemnity for any sums found to be due
        from
        her to Northern, unspecified amounts of actual damages, statutory damages,
        unspecified amounts of exemplary damages, attorneys fees, costs of suit,
        and
        prejudgment and post judgment interest.
 
 
  
 F-10
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            of Contents
 
 **TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        6 - LITIGATION
        (CONTINUED)
  **Matter
        No. 1: (Continued)**
 On
        August
        5, 2005, Northern filed its Fourth Amended Original Petition which, for the
        first time, named Tidelands as a defendant to Northern. Northern seeks to
        impose
        liability on Tidelands for $1,950.000 promissory note signed by McDay Energy
        Partners, Ltd. (the predecessor to ZG Gathering, Ltd.) and Sheerin and the
        $1,700,000 promissory note signed by McDay only. Northern contends that
        Tidelands is alternatively liable to Northern for payment of both such
        promissory notes totaling $3,709,914 plus interest because Northern is a
        third
        party beneficiary under a December 3, 2001 purchase and sale agreement between
        ZG Gathering, Ltd., and Tidelands claiming that in such agreement Tidelands
        agreed to assume and satisfy all indebtedness due and owing Northern by Sheerin
        and ZG Gathering, Ltd. Northern also claims that it is entitled to foreclosure
        of a lien on the gas gathering system and pipeline that was the subject of
        the
        promissory notes in question. Tidelands won a summary judgment motion it
        filed
        against Northern and the court has now dismissed Northern's claims against
        Tidelands.
 
 On
        November 28, 2005, ZG Gathering, Ltd. and ZG Pipeline Management ("ZG") filed
        its answer to Northern's Fifth Amended Petition, its counter-claim against
        Northern, and its answer and cross claim against Tidelands. ZG contends that
        the
        promissory notes given by ZG and Sheerin to Northern were procured by Northern's
        fraudulent misrepresentations and it claims unspecified amounts of damages
        against Northern. ZG's cross action against Tidelands claims Tidelands entered
        into an agreement to purchase the Zavala Gathering System from ZG and that,
        as
        part of that agreement, Tidelands agreed to satisfy the $3,700,914 Northern
        indebtedness of ZG, and to defend, indemnify, and hold ZG and Sheerin harmless
        from such indebtedness, to pay off a Sheerin loan of $300,000, and to issue
        1
        million shares of Tidelands’ stock, of which 500,000 was to be free trading
        shares. ZG claims that Tidelands breached this agreement by failing to satisfy
        the Northern indebtedness, failing to defend and indemnify it from such debt,
        failing to pay off the $300,000 note, failing to issue the free trading shares
        in Tidelands, and by placing a stop transfer order on the restricted stock
        that
        was issued by Tidelands. ZG seeks specific performance of the agreement,
        recovery of an unspecified amount of damages, and its attorney's fees.
 
 On
        March
        6, 2006, the Court granted Tidelands’ motion for summary judgment against
        Northern and dismissed Northern’s suit against Tidelands. On March 16, 2006, the
        Court denied Tidelands’ motion for summary judgment against Sheerin on
        Tidelands’ affirmative defense of mutual mistake. On July 19, 2006, the Court
        denied ZG’s motion for summary judgment to strike Tidelands’ affirmative defense
        of mutual mistake.
 
 
  
  F-11
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            of Contents
 **TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        6 - LITIGATION
        (CONTINUED)
 
 **Matter
        No. 1: (Continued)**
 The
        trial
        date has been extended to July 9, 2007, by mutual agreements of the litigants
        unless a settlement is reached before that date. The parties are currently
        in
        advanced settlement negotiations and the Company is hopeful that an agreement
        will be concluded in the near future. Based on negotiations, the Company
        has
        reserved $2,250,000 as an estimated litigation settlement and that amount
        has
        been included in this report.
 
 **Matter
        No. 2:**
 Cause
        No.
        GN 500948, Goodson Builders, Ltd., Plaintiff, vs. Jim Blackwell, BNC
        Engineering, Et. Al, Defendants, was filed April 7, 2005, in the 345th District
        Court of Travis County, Texas. This case involves a claim that Defendant
        Toll
        Brothers Property, LP (“Toll Brothers”) sold Plaintiff Goodson Builder, Ltd.
        (“Plaintiff” or “Goodson”) property without disclosing a propane easement.
        Plaintiff sued Sonterra Energy Corp. (“Sonterra”) for trespassing through the
        use of the easement. Goodson’s primary claim is against the seller for fraud and
        non-disclosure. Toll Brothers has responded with a claim for sanctions because
        the claim is frivolous. Toll Brothers offers a witness who is Plaintiff’s former
        employee and took pictures of the propane tank prior to the Plaintiff’s
        purchase. Goodson seeks damages in the hundreds of thousands of dollars.
        Insurance would not cover these damages.
 
 The
        case
        is pending summary judgment. The Company is contesting the case vigorously;
        however, the Company is willing to settle if the Plaintiff is willing to
        drop
        the claim.
 
 **Matter
        No. 3:**
 Cause
        No.
        GM 501625, Senna Hills, Ltd., Plaintiff, vs. Sonterra Energy Corp., Defendant,
        was filed in the 53rd Judicial District of Travis County, Texas and Cause
        No. GN
        501626, HBH Development Co., LLC, Plaintiff, vs. Sonterra Energy Corp.,
        Defendant, was filed in the 98 th Judicial
        District Court of Travis County, Texas. The above matters were each filed
        against Sonterra in May 2005 and involve the same claims arising from the
        same
        propane service agreement. In each case, the plaintiff initially brought
        claims
        against Sonterra arising from Sonterra’s failure, as an assignee of the
        agreement, to pay easement use fees to the plaintiff. Sonterra obtained summary
        judgment as to the plaintiffs’ respective breach of contract and failure of
        assignment claims arising from the failure to pay easement use fees. The
        cases
        were not, however, fully dismissed because the plaintiffs added new causes
        of
        action for failure to pay easement use fees, claims for unpaid developer
        bonus,
        reformation of the agreements to require payment of easement use fees and
        alleged failure of assignment. These separate lawsuits have since been
        consolidated into one suit for purposes of pretrial and trial. The May 2007
        trial date has been continued and will likely be reset in September 2007.
 
 
 
 
 F-12
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            of Contents
  
  **TIDELANDS
        OIL & GAS CORPORATION**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 
 NOTE
        6 - LITIGATION
        (CONTINUED)
 
 **Matter
        No. 3: (Continued)**
 In
        accordance with Statement of Financial Accounting Standards No. 5, “Accounting
        for Contingencies,” management has reached the conclusion that there is a remote
        possibility that the claims enumerated in Matters No. 2 and 3 above would
        be
        upheld at trial and has also determined that the amount of the claims cannot
        be
        reasonably estimated. Accordingly, the Company’s financial statements reflect no
        accrual of a loss contingency with respect to these legal matters.
 
 
 
 F-13
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            of Contents
  **Item2.
          Management's Discussion and Analysis of Financial Condition
          and Results of Operation**
  **Forward-Looking
          Statements**
  We
          have
          included forward-looking statements in this report. For this purpose, any
          statements contained in this report that are not statements of historical
          fact
          may be deemed to be forward looking statements. Without limiting the foregoing,
          words such as "may", "will", "expect", "believe", "anticipate", "estimate",
          "plan" or "continue" or the negative or other variations thereof or comparable
          terminology are intended to identify forward-looking statements. These
          statements by their nature involve substantial risks and uncertainties,
          and
          actual results may differ materially depending on a variety of factors.
          Factors
          that might cause forward-looking statements to differ materially from actual
          results include, among other things, overall economic and business conditions,
          demand for the Company's products, competitive factors in the industries
          in
          which we compete or intend to compete, natural gas availability and cost
          and
          timing, impact and other uncertainties of our future acquisition
          plans.
  **Business
          Overview**
 Our
          products and services are primarily focused on development and operation
          of
          transportation, processing, distribution and storage projects of natural
          gas and
          natural gas liquids in the northeastern states of Mexico (Coahuila, Nuevo
          Leon
          and Tamaulipas) and the states of Texas and California in the United States
          of
          America.
  We
          derive
          our revenue from transportation fees from delivery of natural gas to Conagas,
          the local distribution company in Piedras Negras, Coahuila, through the
          pipeline
          owned by Reef Ventures, L.P. and the sale of propane gas to residential
          customers through the assets owned by Sonterra Energy Corporation. Sonterra
          also
          designs and constructs residential propane delivery systems for new residential
          developments in Central Texas. We derive revenue from this activity in
          two ways,
          the first being from construction revenue for yard lines and meter sets
          installed to a homeowner's lot, and the second being the sale of LPG gas
          to
          customers in the residential subdivisions. Sonterra Energy Corporation
          has
          recently begun performing construction services for third party utility
          companies in order to more efficiently utilize its existing expertise and
          assets .
  **Recent
          Developments**
  In
          the
          three months ended March 31, 2007, certain significant developments occurred
          with respect to the businesses operated by the Company.
  On
          January 31, 2007, Sonora Pipeline LLC (“Sonora”) filed an application before the
          Federal Energy Regulatory Commission for certificate of convenience and
          necessity to construct and operate the Mission and Progreso International
          Pipelines including application for two presidential permits for a cross-border
          connection to the planned Terranova Energia pipelines in Mexico. Sonora
          continues to respond to FERC inquiries and analysis with respect to these
          applications and has asked the FERC to grant the authorizations requested
          in the
          applications by July 1, 2007. The current catalog of FERC correspondence
          for
          Sonora’s activities is located at www.ferc.gov under
          Docket No. PF07-74 et sequence.
  On
          March
          7, 2007, Esperanza Energy LLC (“Esperanza”) announced plans to file applications
          with state and federal agencies to build a floating liquefied natural gas
          (LNG)
          receiving facility 15 miles off the Port of Long Beach, California. The
          project,
          named Port Esperanza, will bring natural gas to the Southern California
          marketplace. Esperanza plans to formally file its application in late 2007.
          The
          LNG receiving facility has attracted the commercial interest of several
          parties
          who could participate as co-venturers and/or gas purchasers. More information
          is
          available at www.esperanza-energy.com .
  
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  **Results
          of Operations**
 
 THREE
          MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31,
          2006
 
 REVENUES:
          The Company reported revenues of $1,103, 971 for the three months ended
          March
          31, 2007 as compared with revenues of $801,894 for the three months ended
          March
          31, 2006, which is a 37% increase in revenue for the three months ended
          March
          31, 2007 compared to the three months ended March 31, 2006. Revenues from
          Reef
          Ventures, LP decreased to $41,508 for the three months ended March 31,
          2007
          compared to $58,589 for the three months ended March 31, 2006. The decrease
          was
          due to lower volumes of gas transported in Mexico through the 12 inch natural
          gas pipeline owned by Reef Ventures, LP. Revenues from Sonterra Energy
          Corporation increased to $1,045,776 for the three months ended March 31,
          2007
          compared to $743,305 for the three months ended March 31, 2006. Gas sales
          at
          Sonterra increased to $943,687 for the three months ended March 31, 2007
          compared to $613,917 for the three months ended March 31, 2006. The increase
          in
          gas sales was primarily due to an increase in total customers served by
          Sonterra
          Energy Corporation. Construction services revenues at Sonterra decreased
          to
          $102,089 for the three months ended March 31, 2007 compared to $129,388
          for the
          three months ended March 31, 2006.
 
 TOTAL
          COSTS AND EXPENSES: Total costs and expenses increased to $3,555,952 for
          the
          three months ended March 31, 2007 compared to $2,531,162 for the three
          months
          ended March 31, 2006. The most significant increase occurred in stock based
          compensation due to issuances of common stock for services of directors.
 
 COST
          OF
          SALES: Cost of sales increased to $567,721 for the three months ended March
          31,
          2007 compared to $376,866 for the three months ended March 31, 2006. The
          increase was due almost entirely to increased cost and volume of propane
          sold
          through our Sonterra Energy Corporation subsidiary.
 
 OPERATING
          EXPENSES: Operating expenses decreased to $83,371 for the three months
          ended
          March 31, 2007 compared to $84,531 for the three months ended March 31,
          2006.
          This decrease was attributable to slightly reduced operating costs from
          Sonterra
          Energy Corporation. Depreciation Expense increased to $122,609 for the
          three
          months ended March 31, 2007 compared to $115,674 for the three months ended
          March 31, 2006. The increase in depreciation expense is primarily from
          the
          additions of depreciable property in Sonterra Energy Corporation and our
          Tidelands Exploration & Production Corporation subsidiary.
 
 INTEREST
          EXPENSE: Interest expense increased to $346,104 for the three months ended
          March
          31, 2007 compared to $111,059 for the three months ended March 31, 2006.
          The
          increase resulted primarily from additional interest expense associated
          with the
          issuance of convertible debentures in the financing described in Footnote
          3 to
          Condensed Consolidated Financial Statements for the three months ended
          March 31,
          2007.
 
 SALES,
          GENERAL AND ADMINISTRATIVE: Sales, General and Administrative Costs (including
          Stock-Based Compensation) increased to $2,436,147 for the three months
          ended
          March 31, 2007 compared to $1,842,942 for the three months ended March
          31, 2006.
          Staff and Officer Salaries and Officer Stock Bonuses decreased by $926,332
          for
          the three months ended March 31, 2007 compared to the three months ended
          March
          31, 2006. This was a result of staff reductions undertaken in the fourth
          quarter
          of 2006. Director compensation for corporate management and reorganization
          efforts and legal fees associated primarily with litigation expenses were
          paid
          by issuance of common stock in the amount of $1,658,043 for the three months
          ended March 31, 2007. Of the total Sales, General and Administrative Costs
          (including stock based compensation of directors) of $2,436,147 for the
          three
          months ended March 31, 2007, $1,672,533 of these costs were paid by issuance
          of
          common stock and the remaining $763,614 of costs were paid with
          cash.
 
 INTEREST
          AND DIVIDEND INCOME: Interest and Dividend income decreased to $625 for
          the
          three months ended March 31, 2007 as compared to $33,620 for the three
          months
          ended March 31, 2006 due to lower cash balances held in interest bearing
          accounts during the three months ended March 31, 2007.
 
 NET
          LOSS:
          Net loss of ($2,451,356) for the three months ended March 31, 2007 represents
          an
          increase in loss of $755,708 as compared to net loss of ($1,695,648) for
          the
          three months ended March 31, 2006. This increased loss was primarily due
          to the
          increased issuance of common stock by the Company for directors’ services and
          legal fees.
 
 LIQUIDITY
          AND CAPITAL RESOURCES: The independent auditors report on our March 31,
          2007
          financial statements included in this Form 10-Q states that our difficulty
          in
          generating sufficient cash flow to meet our obligations and sustain operations
          raises substantial doubts about the our ability to continue as a going
          concern.
  2
 Table
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  With
          regard to liquidity and adequacy of capital resources, the Company will
          need
          additional equity or debt financing during the second quarter of 2007.
          Management plans to raise additional capital through debt and common stock
          offerings and to pursue all available financing alternatives in this regard.
          Management may also consider a variety of potential partnership or strategic
          alliances to strengthen its financial position. Additional funding for
          the
          permit process for the offshore LNG regas terminal in Southern California
          will
          be needed by the third quarter of 2007. Furthermore, the Company will need
          to
          raise additional capital to fund ongoing development activities for our
          Mexican
          subsidiary, Terranova Energia and also to fund operating overhead at the
          parent
          company level and the possible cost of a litigation settlement or adverse
          verdict if a pending case goes to trial. New issuance of common stock and
          debt
          sufficient to retire the outstanding debentures and to provide additional
          required capital is being actively pursued by the Company. No assurance
          can be
          made that such capital can be acquired in a timely fashion or at all.
          Furthermore, if capital is available through these sources, if may be at
          terms
          that are disadvantageous to the Company and its shareholders.
  In
          light
          of these possible outcomes and the current cash resources available for
          the
          sustenance of corporate operations, management has taken action to reduce
          overhead costs and otherwise conserve cash resources for the Company including
          the use of stock issuances, when feasible, to pay for services rendered
          to the
          Company.
  Direct
          capital expenditures during the three months ended March 31, 2007, totaled
          $906,031. The capital expenditures were composed of increased pre-construction
          costs regarding potential international pipeline crossings and storage
          facilities in Mexico, pre-construction costs regarding an offshore LNG
          terminal
          in Southern California, additional machinery and equipment for the operation
          of
          the Sonterra Energy Corporation propane systems and an investment in a
          natural
          gas pipeline and nearby leases for development. Total debt decreased from
          $13,034,046 at December 31, 2006, to $11,531,967 at March 31, 2007. The
          decrease
          in total debt is due primarily to the conversion of $2,000,000 of convertible
          debentures from the financing transaction of January 20, 2006 into common
          stock
          and was offset by an increase in accounts payable. Net loss for the three
          months
          ended March 31, 2007, was ($2,451,356) an increase in net loss of 44.6%
          from the
          net loss of ($1,695,648) for the three months ended March 31, 2006. Basic
          and
          diluted net loss per common share increased to ($0.03) for the three months
          ended March 31, 2007, as compared to ($0.02) for the three months ended
          March
          31, 2006. The net loss per share calculation for the three months ended
          March
          31, 2007, included an increase in actual and equivalent shares
          outstanding.
  **Item3.
          Quantitative and Qualitative Disclosures About Market
          Risk**
  **Cash
          and Cash Equivalents**
 We
          have
          historically invested our cash and cash equivalents in short-term, fixed
          rate,
          highly rated and highly liquid instruments which are reinvested when they
          mature
          throughout the year. Although our existing investments are not considered
          at
          risk with respect to changes in interest rates or markets for these instruments,
          our rate of return on short-term investments could be affected at the time
          of
          reinvestment as a result of intervening events. As of March 31, 2007, we
          had
          cash and cash equivalents aggregated $302,202.
  The
          Company does not issue or invest in financial instruments or their derivatives
          for trading or speculative purposes. The operations of the Company are
          conducted
          primarily in the United States, and, are not subject to material foreign
          currency exchange risk. Although the Company has outstanding debt and related
          interest expense, market risk of interest rate exposure in the United States
          is
          currently not material.
  **Debt**
  The
          interest rate on our Impact International debt obligation is generally
          determined based on the prime interest rate plus two percent and may be
          subject
          to market fluctuation as the prime rate changes.
  3
 Table
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  **Item4.
          Controls and Procedures**
  **Evaluation
          Of Disclosure Controls And Procedures**
  James
          B.
          Smith, our Chief Executive Officer and Chief Financial Officer (Principal
          Executive Officer and Principal Financial Officer) performed an evaluation
          of
          the Company’s disclosure controls and procedures, as that term is defined in
          Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the
“Exchange
          Act”), as of March 31, 2007 and has concluded that such disclosure controls
          and
          procedures are effective to ensure that information required to be disclosed
          in
          our periodic reports filed under the Exchange Act is recorded, processed,
          summarized and reported within the time periods specified by the Securities
          and
          Exchange Commission’s rules and forms.
  **Changes
          In Internal Control Over Financial Reporting**
  During
          the quarter ended March 31, 2007, there were no changes in the Company’s
          internal control over financial reporting that have materially affected,
          or are
          reasonably likely to materially affect, the Company’s internal control over
          financial reporting.
  **Limitations**
  Our
          management, including our Principal Executive Officer and Principal Financial
          Officer, does not expect that our disclosure controls or internal controls
          over
          financial reporting will prevent all errors or all instances of fraud.
          However,
          we believe that our disclosure controls and procedures are designed to
          provide
          reasonable assurance of achieving this objective. A control system, no
          matter
          how well designed and operated, can provide only reasonable, not absolute,
          assurance that the control system's objectives will be met. Further, the
          design
          of a control system must reflect the fact that there are resource constraints,
          and the benefits of controls must be considered relative to their costs.
          Because
          of the inherent limitations in all control systems, no evaluation of controls
          can provide absolute assurance that all control issues and instances of
          fraud,
          if any, within our Company have been detected. These inherent limitations
          include the realities that judgments in decision-making can be faulty,
          and that
          breakdowns can occur because of simple error or mistake. Controls can also
          be
          circumvented by the individual acts of some persons, by collusion of two
          or more
          people, or by management override of the controls. The design of any system
          of
          controls is based in part upon certain assumptions about the likelihood
          of
          future events, and any design may not succeed in achieving its stated goals
          under all potential future conditions. Over time, controls may become inadequate
          because of changes in conditions or deterioration in the degree of compliance
          with policies or procedures. Because of the inherent limitation of a
          cost-effective control system, misstatements due to error or fraud may
          occur and
          not be detected.
  **PART
          II - OTHER INFORMATION**
  **Item
          1. LegalProceedings**
  Except
          as
          set forth below, there have been no material changes to the legal proceeding
          or
          investigations reported in Part I, Item 3 - "Legal Proceedings" in the
          Company's
          Form 10-K filed with the SEC on April 17, 2007 (the "Prior 10-K"). Other
          than as
          set forth below and in the Prior 10-K, the Company is not a party to any
          material pending legal proceeding.
  **Matter
          No. 1**
 As
          described in the Prior 10-K and in Note 6 above to the Company’s condensed
          consolidated financial statements, the Company is a party to a pending
          lawsuit titled
          Northern Natural Gas Company vs. Betty Lou Sheerin vs. Tidelands Oil & Gas
          Corporation, ZG Gathering, Ltd. and Ken Lay, in the 150th Judicial District
          Court, Bexar County, Texas, Cause Number 2002-C1-16421. During the quarter
          ended
          March 31, 2007, the trial date has been extended to July 9, 2007, by mutual
          agreements of the litigants unless a settlement is reached before that
          date. The
          parties are currently in advanced settlement negotiations and the Company
          is
          hopeful that an agreement will be concluded in the near future. Based on
          negotiations, the Company has reserved $2,250,000 as an estimated litigation
          settlement and that amount has been included in this report.
  4
 Table
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  **Item1A.
          Risk Factors**
  During
          the quarter ended March 31, 2007, there were no material changes to the
          risk
          factors described in Part I, Item 1A “Risk Factors” of the Company’s Annual
          Report on Form 10-K for the fiscal year ended December 31,
          2006.
  **Item
          2. UnregisteredSales of Equity Securities and Use of
          Proceeds**
 
 The
          Company made the following issuances of unregistered securities during
          the
          quarter ended March 31, 2007 (not previously reported in a Form
          8-K):
 
 On
          February 6, 2007, the Company issued 120,000 shares of its restricted common
          stock valued at $27,000 for 2006 investor public relations
          services.
 
 On
          February 21, 2007, the Company issued 69,000 shares of its restricted Company
          stock valued at $14,490 for preparation of a Research Report.
 
 On
          March
          19, 2007, the Company issued 100,000 shares of its restricted common stock
          valued at $26,500 to an employee of a subsidiary as a stock bonus.
 
 No
          commissions were paid in connection with any of these sales. We did not
          employ
          any form of general solicitation or advertising in connection with the
          offer and
          sale of the securities described below. Except as otherwise noted above,
          the
          offer and sale of the securities listed below were made in reliance on
          the
          exemption from registration provided by Section 4(2) of the Securities
          Act
          and/or Regulation D promulgated by the Securities and Exchange Commission
          as
          transactions by an issuer not involving any public offering.
 
 The
          Company did not make any purchases of its common stock during the quarter
          ended
          March 31, 2007. However, on January 22, 2007, the current President cancelled
          500,000 of his shares of the Company’s restricted common stock valued at
          $110,000, which was offset by cancellation of the stock subscription due
          from
          him to the Company.
  5
 Table
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  **Item
          3. DefaultsUpon Senior Securities**
  None.
  **Item
          4. Submission of Matters to a Vote of Security Holders**
  No
          matters were submitted to a vote of security holders during the quarter
          covered
          by this report.
  **Item
          5. Other Information**
  None.
  **Item
          6. Exhibits**
 **Exhibit**
                
                **Description**
                
                **Location
                    of Exhibit**10.1
                
                Employment
                    Agreement with James B. Smith*
                
                Incorporated
                    by reference to Exhibit 10.1 to 8-K filed April 3, 200710.2
                
                2007
                    Non-Qualified Stock Grant and Option Plan *
                
                Incorporated
                    by reference to Exhibit 10.1 of Form 8-K filed on February 16,
                    200710.3
                
                Form
                    of Option Grant under 2007 Non-Qualified Stock Grant and Option
                    Plan
                    *
                
                Incorporated
                    by reference to Exhibit 10.2 of Form 8-K filed on February 16,
                    200710.4
                
                Form
                    of Stock Award Agreement under 2007 Non-Qualified Stock Grant
                    and Option
                    Plan *
                
                Incorporated
                    by reference to Exhibit 10.3 of Form 8-K filed on February 16,
                    200731.1
                
                Chief
                    Executive Officer and Chief Financial Officer Section 302 Certification
                    pursuant to Sarbanes - Oxley Act.
                
                Included
                    with this filing32.1
                
                Chief
                    Executive Officer-Section 906 Certification pursuant To Sarbanes-Oxley
                    Act
                
                Furnished
                    herewith
 *
          Management or compensatory plan or arrangement.
  6
 Table
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  **SIGNATURES**
  Pursuant
          to the requirements of the Securities Exchange Act of 1934, the Company has duly
          caused this report to be signed on its behalf by the undersigned thereunto
          duly
          authorized.
 
 **TIDELANDS
                    OIL & GAS CORPORATION**Date: May
                    18, 2007
                By:
                /s/  James
                    B.
                    SmithJames
                    B. Smith, President and Chief Executive
                    Officer
 
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