##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission file no. 0-30502
 JOHN D. OIL AND GAS COMPANY
  MARYLAND
    
    94-6542723(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 
     o
 þ o
 þ
 o þ
     DOCUMENTS INCORPORATED BY REFERENCE
  o þ




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PagePART IGlossary of Terms
    
    
    3Item 1:
    
    Description of Business
    
    
    5Item 1A:
    
    Risk Factors
    
    
    8Item 2:
    
    Description of Property
    
    
    13Item 3:
    
    Legal Proceedings
    
    
    17Item 4:
    
    Submission of Matters to a Vote of Security Holders
    
    
    17PART IIItem 5:
    
    Market for Common Equity, Related Stockholder Matters
and Issuers Purchases of Equity Securities
    
    
    17Item 6:
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    18Item 7:
    
    Financial Statements
    
    
    28Item 8:
    
    Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    28Item 8A:
    
    Controls and Procedures
    
    
    29Item 8B:
    
    Other Information
    
    
    29PART IIIItem 9:
    
    Directors, Executive Officers, Promoters, Control Persons and
Corporate Governance; Compliance with Section 16(a) of the
Exchange Act
    
    
    29Item 10:
    
    Executive Compensation
    
    
    29Item 11:
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    29Item 12:
    
    Certain Relationships and Related Transactions, and Director
Independence
    
    
    29Item 13:
    
    Exhibits
    
    
    29Item 14:
    
    Principal Accountant Fees and Services
    
    
    32EX-31.1EX-31.2EX-32.1
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PART I
 
 Glossary of Terms
  Bbl
 Development well.
 Developed acres
 Dry hole or well
 Field
 Gross acres or gross wells
 Mcf
 Mcfe
 Net acres or net wells
 Oil
 Productive well.
 Proved developed reserves
 Proved reserves
 3




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Proved undeveloped drilling location
 Proved undeveloped reserves or PUDs
 Reservoir
 Standardized Measure.
 Successful well
 Undeveloped acreage
 Working interest
 Workover
 4




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Item 1. Description of Business
      Discontinued Operations.
  5




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Operating Partnership.
  Oil and Natural Gas Overview.
  Oil and Natural Gas Competition.
 Oil and Natural Gas Regulations.
  6




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Self-Storage Overview.
  Self-Storage Competition.
 Self-Storage Environmental and Other Regulation .
    Principal Offices.
  7




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Federal Income Tax.
  Employees.
  
 Item 1A. Risk Factors
 Risks Related to Our Oil and Natural Gas Business
 Our Revenues will depend on natural gas prices.
   Natural gas markets are subject to many factors.
  
    
    the domestic and foreign supply of and demand for natural gas;
 
    
    the price and level of foreign imports;
 
    
    the level of consumer product demand;
 
    
    weather conditions;
 
    
    overall domestic and global economic conditions;
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
    
    political and economic conditions in natural gas and oil producing countries, including those in the Middle East and
South America;
 
    
    the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and
production controls;
 
    
    the impact of the U.S. dollar exchange rates on natural gas and oil prices;
 
    
    technological advances affecting energy consumption;
 
    
    domestic and foreign governmental regulations and taxation;
 
    
    the impact of energy conservation efforts;
 
    
    the proximity and capacity of natural gas pipelines and other transportation facilities; and
 
    
    the price and availability of alternative fuels.
  Locations that we decide to drill may not be productive.
  Shortages of drilling rigs, equipment and crews could delay our operations and reduce our revenues.
  Actual quantities and present value of our proved reserves may prove to be lower than we have
estimated.
  Our development operations require substantial capital expenditures.
  9




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We face significant competition.
  We depend on a third party to manage our business.
  Our business depends on gathering and transportation facilities owned by others.
  We depend on a key customer for sales of our natural gas.
  Our business is hazardous.
  10




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The oil and gas industry is highly regulated.
  Risks Related to the Self-Storage Facility Business
  
    
    the Companys ability to increase occupancy and rental rates at its self-storage facilities;
 
    
    the ability to refinance the Companys debts on its self-storage facilities as they come due, including, without
limitation, the Companys maturing long-term debt;
 
    
    changes in local real estate conditions;
 
    
    decreases in occupancy rates; and
 
    
    the Companys ability to sell these two facilities, if business and time warrant in the future.
 Risks Related to the Company
 We have a limited history of operating the oil and gas assets we have acquired.
  Our management team owns a controlling interest in the Company.
  11




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Our management team is subject to various conflicts of interest.
  We may need to raise additional capital, which may not be available to us and may limit our
operations or growth.
  We may not be able to refinance our maturing debt.
  If we fail to develop or maintain an effective system of internal controls, we may not be able to
accurately report our financial results or prevent fraud.
  12




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Item 2. Description of Property
 Oil and Natural Gas Wells
   Net ProductionNatural Gas (Mcf)
    
    
    165,561Oil (BBL)
    
    
    1,016Natural Gas Equivalent (Mcfe)
    
    
    171,654Net Sales
Natural Gas
    
    $
    1,312,457Oil
    
    
    52,040Total Sales
    
    $
    1,364,497Average Sale PriceNatural Gas (Mcf)
    
    $
    7.93Oil (BBL)
    
    $
    51.25Natural Gas Equivalent (Mcfe)
    
    $
    7.95Average Unit Costs per McfeWell operating expenses
    
    $
    91,439Average Cost/Mcfe
    
    $
    0.53
 Estimated Proved Reserves.
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Natural Gas
    
    
    Oil(MCF)
    
    
    (BBLs)Balance, January 1, 2006
    
    
    
    
    
    
    Revision of previous estimates
    
    
    
    
    
    
    Extensions and discoveries
    
    
    1,514,200
    
    
    
    15,800Production
    
    
    (165,600
    )
    
    
    (1,000
    )Balance, December 31, 2006
    
    
    1,348,600
    
    
    
    14,800Proved developed reserves:December 31, 2006
    
    
    1,348,600
    
    
    
    14,800
 Productive Wells.
 Gross
    
    
    NetProductive Wells:Operated
    
    
    21
    
    
    
    20Non-Operated Properties
    
    
    
    
    
    
    Total
    
    
    21
    
    
    
    20
 Drilling Activity.
 Gross
    
    
    NetGross wells:Productive
    
    
    21
    
    
    
    20Dry
    
    
    1
    
    
    
    1Total
    
    
    22
    
    
    
    21
 Developed and Undeveloped Acreage.
 Developed Acreage
    
    Undeveloped AcreageGross
    
    Net
    
    Gross
    
    NetGeographic Area:Ohio
    
    
    807
    
    
    
    797
    
    
    
    6,568
    
    
    
    6,568
 Present Activities.
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Leases.
 Insurance.
 Depreciation.
 Self-Storage Facilities
    Property Management.
 Leases.
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Insurance.
 Mortgages.
  Depreciation.
 Investment Policy
  Activities of the Company.
 
    
    issue senior securities;
    
    borrow money;
    
    make loans;
    
    underwrite securities of other issuers;
    
    engage in the purchase or sale of investments;
    
    offer securities in exchange for property;
    
    repurchase or otherwise reacquire its shares or other securities; and
    
    furnish annual reports and other reports to stockholders which contain
annual audited financial statements.
  16




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Investment Strategy
 
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 PART II
 
 Item 5. Market for Common Equity, Related Stockholder Matters and Issuers Purchases of Equity
Securities.
 Market Information.
  HIGH
    
    LOW2006First Quarter
    
    $
    1.00
    
    
    $
    0.40Second Quarter
    
    
    0.80
    
    
    
    0.60Third Quarter
    
    
    1.20
    
    
    
    0.61Fourth Quarter
    
    
    0.80
    
    
    
    0.522005First Quarter
    
    $
    0.63
    
    
    $
    0.49Second Quarter
    
    
    0.65
    
    
    
    0.35Third Quarter
    
    
    0.85
    
    
    
    0.35Fourth Quarter
    
    
    0.85
    
    
    
    0.60
 17




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Record Holders.
 Dividends.
  Issuance of Common Stock
    Purchases of Common Stock.
  
 Item 6. Managements Discussion and Analysis or Plan of Operation
   18




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Significant Accounting Policies
  Principles of Consolidation
  Cash and Cash Equivalents
  Accounts Receivable
   19




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Property and Equipment
      Asset Impairment
  Asset Retirement Obligation
 Accounting for Asset Retirement Obligations
 20




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Revenue Recognition
   Comprehensive Income
 Reporting Comprehensive Income
 Stock-Based Compensation
  Accounting for Stock Issued to Employees
 Use of Estimates
  21




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Cash-flow Statement
  Fair Value of Financial Instruments
  Derivative Instruments
  Liquidity and Capital Resources
  22




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23




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Payments Due by PeriodContractual Obligations
    
    Less than 1 year
    
    1-3 years
    
    TotalLong-Term Debt
    
    $
    125,307
    
    
    $
    2,064,802
    
    
    $
    2,190,109Line of Credit
    
    
    3,085,000
    
    
    
    
    
    
    
    3,085,000Operating Lease*
    
    
    16,200
    
    
    
    20,250
    
    
    
    36,450Total Contractual
Cash Obligations
    
    $
    3,226,507
    
    
    $
    2,085,052
    
    
    $
    5,311,559
 
 *
    
    The operating lease for office space was renegotiated on April 1, 2006 with a three year term
ending March 2009, at a rental of $1,350 per month, which is reflected in the above table. Material Changes in Results of Operations
  24




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Revenues from Continuing Operations
  Expenses from Continuing Operations
         25




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Loss from Continuing Operations
  Income from Discontinued Operations
  Net Income (Loss)
  Interest Rate Risk
   Off-Balance Sheet Arrangements
  Forward-Looking Statements
  
    
    business strategy;
 
    
    financial strategy;
 
    
    drilling locations;
 
    
    natural gas and oil reserves;
 
    
    realized natural gas and oil prices;
 
    
    production volumes;
 
    
    lease operating expenses, general and administrative expenses and finding and development costs;
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
    
    future operating results; and
 
    
    plans, objectives, expectations and intentions.
   Income Taxes
    Recently Issued Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No.
109 Accounting for Income Taxes
 27




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Fair Value Measurements
 Considering the Effects
of Prior Year Misstatements in Current Year Financial Statements
 Employers Accounting for Defined Benefit
Pension and Other Post Retirement Plans
 The Fair Value Option for Financial Assets
and Financial Liabilities-Including an Amendment of FASB Statement No. 115
 
 Item 7. Financial Statements
  
 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
   28




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Item 8A. Controls and Procedures
  
 Item 8B. Other Information
  
 PART III
 
 Item 9. Directors, Executive Officers and Control Persons; Compliance with Section 16 (a) of the
Exchange Act
  
 Item 10. Executive Compensation
  
 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 12. Certain Relationships and Related Transactions
  
 Item 13. Exhibits
 NO.
    
    DESCRIPTION(In accordance with Item 601 of Regulation S-B)
 Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger, dated as of December 28, 1999, by and among Meridian Point
Realty Trust 83, the Company and Liberty Self-Stor Limited Partnership (Exhibits A and B
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Exhibit No.
    
    Descriptionto the Agreement and Plan of Merger are Exhibits 3.1 and 3.2, respectively) (Filed as
Exhibit 2.1 to Registrants Form 8-K dated January 12, 2000 and incorporated herein
by reference.)3.1
    
    Articles of Incorporation of the Company (Filed as Exhibit 3.1 to Registrants Form 8-K dated
January 12, 2000 and incorporated herein by reference.)3.2
    
    Articles of Amendment of Articles of Incorporation of the Company dated June 27, 2005(Filed
as Exhibit 3.1 to Registrants Form 8-K dated July 1, 2005 and incorporated herein by
reference.)3.3
    
    Bylaws of the Company (Filed as Exhibit 3.2 to Registrants Form 8-K dated January 12, 2000
and incorporated herein by reference.)4.1
    
    Registration Rights Agreement between the Company and the Richard M. Osborne Trust dated
February 28, 2006 (Filed as Exhibit 4.1 to Registrants Form 8-K dated February 24, 2006 and
incorporated herein by reference.)9.1
    
    Voting Trust Agreement between the Company, Richard M. Osborne and Gregory J. Osborne dated
February 16, 2006 (Filed as Exhibit 7.1 to Registrants Form SC 13D/A dated April 11, 2006 and
incorporated herein by reference.)10.1
    
    1999 Stock Option and Award Plan of the Company (Filed as Exhibit 10.1 to Registrants Form
8-K dated January 12, 2000 and incorporated herein by reference.)10.2
    
    Lease between OsAir, Inc. and the Company(Filed as Exhibit 10.2 to Registrants Form 8-K
dated January 12, 2000 and incorporated herein by reference.)10.3
    
    Agreement of Limited Partnership of LSS I Limited Partnership, dated December 29, 1999.
(Filed as Exhibit 10.3 to Registrants Form 8-K dated January 12, 2000 and incorporated herein
by reference.)10.4
    
    Cost Sharing Agreement, by and between Liberty Self-Stor, Ltd. and Liberty Self-Stor II, Ltd.
dated December 28, 1999 (Filed as Exhibit 10.7 to Registrants Form 10-KSB, dated March 15,
2000 and incorporated herein by reference.)10.5
    
    Contract among Acquiport/Amsdell I Limited Partnership and/or its nominee, Liberty Self-Stor,
Ltd. and Liberty Self-Stor II, Ltd dated September 7, 2004 (Filed as Exhibit 10.1 to
Registrants Form 8-K dated September 10, 2004 and incorporated herein by reference)10.6
    
    Amended and Restated First Amendment to Agreement of Limited Partnership of LSS I Limited
Partnership dated March 29, 2006 (Filed as Exhibit 10.9 to Registrants form 10-KSB, dated
March 31, 2006 and incorporated herein by reference)10.7
    
    Stock Subscription Agreement between the Company and the Richard M. Osborne Trust dated
February 28, 2006 (Filed as Exhibit 10.1 to Registrants Form 8-K dated March 2, 2006 and
incorporated herein by reference.)10.8
    
    Stock Subscription Agreement between the Company and Terence P. Coyne dated February 28, 2006
(Filed as Exhibit 10.2 to Registrants Form 8-K dated March 2, 2006 and incorporated herein
by reference.)
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Exhibit No.
    
    Description10.9
    
    Letter agreement between the Company and Great Plains Exploration, LLC relating to the
transfer of oil and gas wells dated as of January 1, 2006 (Filed as Exhibit 10.1 to
Registrants Form 10-QSB dated March 31, 2006 and incorporated herein by reference.)10.10
    
    Oil and Gas Operations and Sale Agreement between the Company and Great Plains Exploration,
LLC dated as of January 1, 2006 (Filed as Exhibit 10.2 to Registrants Form 10-QSB dated March
31, 2006 and incorporated herein by reference.)10.11
    
    Amendment No 1 to Oil and Gas Operations and Sale Agreement between the Company and Great
Plains Exploration, LLC dated as of November 14, 2006 (Filed as Exhibit 10.4 to Registrants
Form 10-QSB dated September 30, 2006 and incorporated by reference.)10.12
    
    Revolving Demand Note of the Company payable to the Richard M. Osborne Trust dated as of
January 1, 2006 (Filed as Exhibit 10.3 to Registrants Form 10-QSB dated March 31, 2006 and
incorporated herein by reference.)10.13
    
    Purchase and Sale Agreement between the Company and Buckeye Storage of Gahanna LLC dated as
of October 5, 2006 (Filed as Exhibit 10.1 to Registrants Form 8-K dated October 12, 2006 and
incorporated herein by reference.)10.14
    
    Loan Agreement between the Company, Richard M. Osborne and Charter One Bank, N.A. dated as
of September 28, 2006 (Filed as Exhibit 10.1 to Registrants Form 8-K dated October 3, 2006
and incorporated herein by reference.)10.15
    
    Revolving Term Note of Company in favor of Charter One Bank, N.A., dated as of September 28,
2006 (Filed as Exhibit 10.2 to Registrants Form 8-K dated October 3, 2006 and incorporated
herein by reference.)10.16
    

Modification
Agreement between the Company, Richard M. Osborne and Charter One Bank, N.A.,
effective as of February 20, 2007 (Filed as Exhibit 10.1 to Registrants Form 8-K dated
February 26, 2007 and incorporated herein by reference.)10.17
    
    Security Agreement between theCompany, Richard M. Osborne and Charter One Bank, N.A.,
effective as of February 20, 2007 (Filed as Exhibit 10.2 to Registrants Form 8-K dated
February 26, 2007 and incorporated herein by reference.)31.1*
    
    Section 302 Certification of Chairman of the Board and Chief Executive Officer (principal
executive officer) pursuant to the Sarbanes-Oxley Act of 200231.2*
    
    Section 302 Certification of Chief Financial Officer (principal financial officer) pursuant
to the Sarbanes-Oxley Act of 200232.1*
    
    Certification of Chairman of the Board and Chief Executive Officer (principal executive
officer) and Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith 31




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Item 14. Principal Accountant Fees and Services
  32




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Dated: April 2, 2007
    
    JOHN D. OIL AND GAS COMPANYBy: /s/ Richard M. OsborneRichard M. Osborne 
Chairman and Chief Executive Officer
(Principal Executive Officer)
  /s/ Richard M. Osborne

Richard M. Osborne
    
    
    
    Dated: April 2, 2007Chairman, Chief Executive Officer and Director(Principal Executive Officer)/s/ C. Jean Mihitsch

C. Jean Mihitsch
    
    
    
    Dated: April 2, 2007Chief Financial Officer(Principal Financial and Accounting Officer)/s/ Steven A. Calabrese

Steven A. Calabrese
    
    
    
    Dated: April 2, 2007Director/s/ Terence P. Coyne

Terence P. Coyne
    
    
    
    Dated: April 2, 2007Director/s/ Richard T. Flenner Jr.

Richard T. Flenner
    
    
    
    Dated: April 2, 2007Director/s/ Mark D. Grossi

Mark D Grossi
    
    
    
    Dated: April 2, 2007Director
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/s/ Marc C. Krantz
    
    
    
    Dated: April 2, 2007Marc C. KrantzSecretary and Director/s/ Gregory J. Osborne

Gregory J. Osborne
    
    
    
    Dated: April 2, 2007President and Director/s/ James R. Smail

James R. Smail
Director
    
    
    
    Dated: April 2, 2007/s/ Thomas J. Smith

Thomas J. Smith
    
    
    
    Dated: April 2, 2007Director
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Report of Independent Registered Public Accounting Firm
 
     
 35




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Report of Independent Registered Public Accounting Firm
 
     
 36




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December 31, 2006
    
    
    December 31, 2005ASSETSCurrent Assets:Cash
    
    $
    23,892
    
    
    $
    878,613Accounts Receivable
    
    
    18,080
    
    
    
    1,324Accounts Receivable from related parties
    
    
    745,302
    
    
    
    59,632Available for Sale Securities
    
    
    438,422
    
    
    
    Assets Held for Sale
    
    
    
    
    
    
    204,762Other Current Assets
    
    
    31,127
    
    
    
    9,391Total Current Assets
    
    
    1,256,823
    
    
    
    1,153,722Property and Equipment, Net
    
    
    8,239,080
    
    
    
    3,779,627Minority Interest Receivable
    
    
    
    
    
    
    391,672Other Assets
    
    
    47,577
    
    
    
    35,011TOTAL ASSETS
    
    $
    9,543,480
    
    
    $
    5,360,032LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Line of Credit
    
    $
    3,085,000
    
    
    $
    Current maturities of long-term debt
    
    
    125,307
    
    
    
    112,843Note Payable to related party
    
    
    
    
    
    
    591,910Accounts Payable
    
    
    947,084
    
    
    
    375,280Accounts Payable to related parties
    
    
    7,595
    
    
    
    16,422Accrued expenses
    
    
    326,677
    
    
    
    280,194Total Current Liabilities
    
    
    4,491,663
    
    
    
    1,376,649Long term debt, net of current maturities
    
    
    2,064,802
    
    
    
    2,178,484Asset Retirement Obligation
    
    
    90,324
    
    
    
    Other long-term liabilities
    
    
    
    
    
    
    8,129Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Serial preferred stock  $.001 par value: 2,000,000
shares authorized, no shares issued and outstanding
    
    
    
    
    
    
    Common Stock  $.001 par value: 50,000,000 shares
authorized; 8,998,180 and 3,081,541 shares issued and
outstanding, respectively
    
    
    9,000
    
    
    
    3,082Paid-in capital
    
    
    28,854,586
    
    
    
    25,798,779Accumulated Deficit
    
    
    (25,966,929
    )
    
    
    (24,005,091
    )Accumulated other comprehensive income
    
    
    34
    
    
    
    Total Shareholders Equity
    
    
    2,896,691
    
    
    
    1,796,770TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    9,543,480
    
    
    $
    5,360,032
  37




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2006
    
    
    2005RevenuesOil and Gas Sales
    
    $
    1,364,497
    
    
    $
    Self-Storage operation revenues
    
    
    561,238
    
    
    
    521,876Interest and other
    
    
    1,941
    
    
    
    27,826Total revenues
    
    
    1,927,676
    
    
    
    549,702Operating expensesInterest
    
    
    256,684
    
    
    
    222,963Property taxes and insurance
    
    
    148,534
    
    
    
    147,295Self-Storage property operating expense
    
    
    171,600
    
    
    
    207,667Oil and Gas production costs
    
    
    91,439
    
    
    
    Legal and professional fees
    
    
    228,253
    
    
    
    244,245General and administrative
    
    
    603,369
    
    
    
    696,326Impairments
    
    
    1,013,520
    
    
    
    Depreciation, depletion and amortization
    
    
    943,256
    
    
    
    178,989Total Operating expenses
    
    
    3,456,655
    
    
    
    1,697,485Loss from continuing operations before income taxes and minority interest
    
    
    (1,528,979
    )
    
    
    (1,147,783
    )Provision for income taxes  current
    
    
    41,187
    
    
    
    Minority interest
    
    
    391,672
    
    
    
    (803,448
    )Loss from continuing operations
    
    
    (1,961,838
    )
    
    
    (344,335
    )Income from discontinued operations, net of minority interest of $192,340
    
    
    
    
    
    
    82,431Gain on sale of assets from discontinued operations, net of minority
interest of $4,783,955
    
    
    
    
    
    
    2,050,265Income from discontinued operations
    
    
    
    
    
    
    2,132,696Net Income (Loss)
    
    $
    (1,961,838
    )
    
    $
    1,788,361Other comprehensive income (loss):Change in fair value of cash flow hedges, net of minority
interest of $($111,619)
    
    
    
    
    
    
    (47,838
    )Change in fair value of available for sale securities
    
    
    34
    
    
    
    Comprehensive Income (Loss)
    
    $
    (1,961,804
    )
    
    $
    1,740,523Weighted Average Basic Shares Outstanding
    
    
    7,285,434
    
    
    
    3,082,255Weighted Average Diluted Shares Outstanding
    
    
    7,285,434
    
    
    
    3,087,890Loss per
common share from continuing operations  basic and diluted
    
    $
    (0.27
    )
    
    $
    (0.11
    )Earnings per
common share from discontinued operations  basic and diluted
    
    
    
    
    
    
    0.69(Loss) earnings per common share  basic and diluted
    
    $
    (0.27
    )
    
    $
    0.58
  38




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##### Table of Contents



AccumulatedOtherComprehensiveCommon Stock
    
    
    Paid-in Capital
    
    
    Accumulated Deficit
    
    
    Income (Loss)
    
    
    TotalBalance at December 31, 2004
    
    $
    3,083
    
    
    $
    25,799,229
    
    
    $
    (25,176,918
    )
    
    $
    47,838
    
    
    $
    673,232Redemption of Common Stock
    
    
    (1
    )
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    (451
    )Cash Dividends of $0.20 per share
    
    
    
    
    
    
    
    
    
    
    (616,534
    )
    
    
    
    
    
    
    (616,534
    )Net Income
    
    
    
    
    
    
    
    
    
    
    1,788,361
    
    
    
    
    
    
    
    1,788,361Change in fair value of cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,838
    )
    
    
    (47,838
    )Balance at December 31, 2005
    
    $
    3,082
    
    
    $
    25,798,779
    
    
    $
    (24,005,091
    )
    
    $
    
    
    
    $
    1,796,770Common Stock issued in Private
Placement, net of offering costs
    
    
    4,800
    
    
    
    2,361,570
    
    
    
    
    
    
    
    
    
    
    
    2,366,370Common Stock issued for Director
Compensation
    
    
    14
    
    
    
    9,986
    
    
    
    
    
    
    
    
    
    
    
    10,000Restricted Common Stock Award
    
    
    2
    
    
    
    1,892
    
    
    
    
    
    
    
    
    
    
    
    1,894Common Stock issued in exchange for debt
    
    
    1,102
    
    
    
    682,359
    
    
    
    
    
    
    
    
    
    
    
    683,461Net Loss
    
    
    
    
    
    
    
    
    
    
    (1,961,838
    )
    
    
    
    
    
    
    (1,961,838
    )Change in fair market value of
available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    34Balance at December 31, 2006
    
    $
    9,000
    
    
    $
    28,854,586
    
    
    $
    (25,966,929
    )
    
    $
    34
    
    
    $
    2,896,691
  39




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##### Table of Contents



2006
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    (1,961,838
    )
    
    $
    1,788,361Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activitiesDepreciation, depletion and amortization
    
    
    943,256
    
    
    
    178,989Gain on sale of furniture and fixtures
    
    
    (4,079
    )
    
    
    Minority interest
    
    
    391,672
    
    
    
    (803,448
    )Impairments
    
    
    1,013,520
    
    
    
    Common Stock issued as Compensation
    
    
    11,894
    
    
    
    Distributions to minority interest
    
    
    
    
    
    
    (6,014,305
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (764,558
    )
    
    
    211,724Other current assets
    
    
    (21,736
    )
    
    
    (6,529
    )Other assets
    
    
    (16,660
    )
    
    
    5,001Accounts payable
    
    
    789,771
    
    
    
    (164,678
    )Accrued expenses
    
    
    51,748
    
    
    
    (195,336
    )Other liabilities
    
    
    (1,118
    )
    
    
    (4,432
    )Change in Discontinued Operations, as revised
    
    
    
    
    
    
    (2,284,488
    )Net cash provided by (used in) operating activities
    
    
    431,872
    
    
    
    (7,289,141
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (22,969
    )
    
    
    (56,012
    )Expenditures for oil and gas wells
    
    
    (6,106,347
    )
    
    
    Purchases of securities
    
    
    (438,388
    )
    
    
    Change in Discontinued Operations, as revised
    
    
    
    
    
    
    33,476,273Net cash (used in) provided by investing activities
    
    
    (6,567,704
    )
    
    
    33,420,261Cash flows from financing activities:Net Proceeds from common stock private placement
    
    
    2,366,370
    
    
    
    Dividends paid to shareholders
    
    
    
    
    
    
    (616,534
    )Distributions to dissenting shareholders
    
    
    
    
    
    
    (451
    )Principal payments on long term debt
    
    
    (101,218
    )
    
    
    (130,923
    )Principal payments to related party
    
    
    (819,041
    )
    
    
    (708,090
    )Borrowings from related party
    
    
    750,000
    
    
    
    Net Borrowings on line of credit
    
    
    3,085,000
    
    
    
    Change in Discontinued Operations, as revised
    
    
    
    
    
    
    (24,193,427
    )Net cash provided by (used in) financing activities
    
    
    5,281,111
    
    
    
    (25,649,425
    )Net (decrease) increase in cash
    
    
    (854,721
    )
    
    
    481,695Cash, beginning of period
    
    
    878,613
    
    
    
    396,918Cash, end of period
    
    $
    23,892
    
    
    $
    878,613
  40




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##### Table of Contents



1. Summary of Significant Accounting Policies
 General
      41




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##### Table of Contents



Principles of Consolidation
  Cash and Cash Equivalents
  Accounts Receivable
   Property and Equipment
    42




---



##### Table of Contents



Asset Impairment
  Asset Retirement Obligation
 Accounting for Asset Retirement Obligations
  Asset retirement obligations, beginning of the year
    
    $
    Liabilities incurred during the year
    
    
    85,069Liabilities settled during the year
    
    
    Accretion expense
    
    
    5,255Asset retirement obligations, end of the year
    
    $
    90,324
 Revenue Recognition
   43




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##### Table of Contents



2007
    
    $
    207,8802008
    
    
    163,3802009
    
    
    157,9802010
    
    
    108,7202011
    
    
    36,443$
    674,403
  Comprehensive Income
 Reporting Comprehensive Income
 Stock-Based Compensation
   44




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##### Table of Contents



2006
    
    
    2005Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    135,000
    
    
    $
    0.56
    
    
    
    135,000
    
    
    $
    0.56Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    100,000
    
    
    
    0.56
    
    
    
    Outstanding at end of year
    
    
    35,000
    
    
    $
    0.56
    
    
    
    135,000
    
    
    $
    0.56Options available for grant
    
    
    265,000
    
    
    
    
    
    
    
    165,000Exercisable at end of year
    
    
    35,000
    
    
    $
    0.56
    
    
    
    135,000
    
    
    $
    0.56
 Income Taxes
   Use of Estimates
    45




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##### Table of Contents



Cash-flow Statement
  Fair Value of Financial Instruments
  
 Derivative Instruments
  Recently Issued Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No.
109 Accounting for Income Taxes
 Fair Value Measurements
 46




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##### Table of Contents



Considering the Effects
of Prior Year Misstatements in Current Year Financial Statements
 Employers Accounting for Defined Benefit
Pension and Other Post Retirement Plans
 The Fair Value Option for Financial Assets
and Financial Liabilities-Including an Amendment of FASB Statement No. 115
 2. Stockholders Equity
    3. Property and Equipment
  2006
    
    
    2005Oil and Gas Properties:Proved Properties
    
    $
    5,328,224
    
    
    $
    Unproved Properties
    
    
    582,920
    
    
    
    Accumulated Depletion
    
    
    (722,204
    )
    
    
    Total Oil and Gas Properties
    
    
    5,188,940
    
    
    
    
 47




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##### Table of Contents



2006
    
    
    2005Other Property and Equipment:Land
    
    
    685,926
    
    
    
    481,164Building and Improvements
    
    
    3,203,608
    
    
    
    3,935,928Furniture and Equipment
    
    
    218,182
    
    
    
    224,054Accumulated Depreciation
    
    
    (1,057,576
    )
    
    
    (861,519
    )Total Other Property and Equipment, Net
    
    
    3,050,140
    
    
    
    3,779,627Property and Equipment, Net
    
    $
    8,239,080
    
    
    $
    3,779,627
  4. Available for Sale Securities
  5. Discontinued Operations
  December 31, 2005RevenuesRevenues from real estate operations
    
    $
    1,270,645Operating expensesInterest expense
    
    
    348,762Property taxes and insurance
    
    
    172,064Property operating expense
    
    
    354,401Legal and professional fees
    
    
    5,387General and administrative
    
    
    32,602Depreciation and amortization
    
    
    82,658Total expenses
    
    
    995,874Income from discontinued operations before minority
interest and gain on sale of eighteen sites, net of
minority interest
    
    
    274,771Minority interest
    
    
    (192,340
    )Income before gain on sale, net
    
    
    82,431Gain on sale
of eighteen sites, net of minority interest of $4,783,955
    
    
    2,050,265Income from discontinued operations
    
    $
    2,132,696
 6. Line of Credit and Long-Term Debt
  48




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##### Table of Contents



CurrentSite
    
    Interest Rate
    
    
    Maturity
    
    
    Interest
    
    
    Outstanding BalancesReference
    
    Index
    
    
    Date
    
    
    Rate
    
    
    December 31, 2006
    
    
    December 31, 2005Gahanna
    
    Prime
    
    
    3-01-09
    
    
    
    8.25
    %
    
    $
    716,907
    
    
    $
    734,932Painesville
    
    30 day LIBOR plus 2.50%
    
    
    3-30-09
    
    
    
    7.85
    %
    
    
    1,473,202
    
    
    
    1,556,395Long-Term Debt Total
    
    
    2,190,109
    
    
    
    2,291,327Less current maturities
    
    
    125,307
    
    
    
    112,843Long-Term debt, net of current maturities
    
    $
    2,064,802
    
    
    $
    2,178,484
  2007
    
    $
    125,3072008
    
    
    135,6712009
    
    
    1,929,131$
    2,190,109
    7. Notes Payable to Related Party
  49




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##### Table of Contents



8. Earnings/Loss Per Share
    For the YearsEnded December 31,2006
    
    
    2005Weighted average number of common shares outstanding
used in basic earnings per common share calculation7,285,434
    
    
    
    3,082,255Dilutive effect of stock options
    
    
    
    
    
    
    5,635Dilutive
effect of Class A Limited Partnership interests
    
    
    
    
    
    
    Weighted average number of common shares outstanding
adjusted for effect of dilutive options and Class A
convertible stock used in diluted EPS calculation
    
    
    7,285,434
    
    
    
    3,087,890Loss from continuing operations
    
    $
    (1,961,838
    )
    
    $
    (344,335
    )Income from discontinued operations
    
    
    
    
    
    $
    2,132,696Net (Loss) income
    
    $
    (1,961,838
    )
    
    $
    1,788,361Basic and Diluted:Loss per common share from continuing operations
    
    ($
    0.27
    )
    
    ($
    0.11
    )Earnings per common share from discontinued operations
    
    
    
    
    
    $
    0.69(Loss) Earnings per common share, net
    
    ($
    0.27
    )
    
    $
    0.58
  50




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##### Table of Contents



9. Income Taxes
  2006Amount
    
    
    %Provision(benefit) based on the federal statutory rate
    
    $
    (520,000
    )
    
    
    (34.0
    %)Increase in valuation allowance
    
    
    561,100
    
    
    
    36.7
    %$
    41,100
    
    
    
    2.7
    %
  Deferred tax assetsNet operating loss carry forwards
    
    $
    2,649,000AMT credit
    
    
    41,100Total deferred tax assets
    
    
    2,690,100Deferred tax liabilitiesOil and gas properties, principally
due to differences in
depreciation, depletion and
amortization
    
    
    (1,593,000
    )Net deferred
tax assets
    
    
    1,097,100Valuation
allowance
    
    
    (1,097,100
    )Net deferred tax assets
    
    $
    
   10. Other Related Party Transactions
  51




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##### Table of Contents



11. Financial Information Relating to Industry Segments
  52




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##### Table of Contents



Oil and Gas
    
    
    Self-StorageTwelve Months ended December 31, 2006
    
    Production
    
    
    Facilities
    
    
    TotalRevenues from external customers
    
    $
    1,364,497
    
    
    $
    561,238
    
    
    $
    1,925,735Interest revenue
    
    
    1,658
    
    
    
    283
    
    
    
    1,9411,366,155
    
    
    
    561,521
    
    
    
    1,927,676Depreciation, depletion and amortization
    
    
    750,851
    
    
    
    192,405
    
    
    
    943,256Property Operating Costs
    
    
    91,439
    
    
    
    171,600
    
    
    
    263,039Other Operating expenses
    
    
    775,081
    
    
    
    205,075
    
    
    
    980,156Impairment and dry well costs
    
    
    280,262
    
    
    
    733,258
    
    
    
    1,013,520Interest expense
    
    
    81,759
    
    
    
    174,925
    
    
    
    256,6841,979,392
    
    
    
    1,477,263
    
    
    
    3,456,655Net (Loss) before minority interest
    
    
    (613,237
    )
    
    
    (915,742
    )
    
    
    (1,528,979
    )Provision for income taxes  current
    
    
    41,187
    
    
    
    
    
    
    
    41,187Minority Interest
    
    
    
    
    
    
    391,672
    
    
    
    391,672Net (Loss)
    
    $
    (654,424
    )
    
    $
    (1,307,414
    )
    
    $
    (1,961,838
    )Property and Equipment additions
    
    $
    6,106,347
    
    
    $
    22,969
    
    
    $
    6,129,316Total Assets
    
    $
    6,530,616
    
    
    $
    3,012,864
    
    
    $
    9,543,480
  12. Commitments and Contingencies
 Environmental Matters
  Oil and Gas Contracts
  53




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##### Table of Contents



13. Supplemental Disclosures About Oil and Natural Gas Producing Activities  Unaudited
 Estimated Proved Reserves
   Natural Gas
    
    Oil(MCF)
    
    (BBLs)Balance, January 1, 2006
    
    
    
    
    
    
    Revision of previous estimates
    
    
    
    
    
    
    Extensions and discoveries
    
    
    1,514,200
    
    
    
    15,800Production
    
    
    (165,600
    )
    
    
    (1,000
    )Balance, December 31, 2006
    
    
    1,348,600
    
    
    
    14,800Proved developed reserves:December 31, 2006
    
    
    1,348,600
    
    
    
    14,800
 Capitalized Costs Relating to Oil and Gas Producing Activities
 December 31, 2006Proved oil and gas properties
    
    $
    5,328,224Unproved oil and gas properties
    
    
    582,920Total
    
    
    5,911,144Accumulated depreciation, depletion and amortization
    
    
    (722,204
    )Net capitalized costs
    
    $
    5,188,940
 Costs Incurred in Oil and Gas Producing Activities
 December 31, 2006Property acquisition costs
    
    $
    14,177Development costs
    
    $
    5,896,967
 54




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##### Table of Contents



Standardized Measure of Discounted Future Net Cash Flows at December 31, 2006 (In thousands of
dollars)
 Future cash inflows from sales of oil and gas
    
    $
    10,100Future production and development costs
    
    
    (3,902
    )Future asset retirement obligations
    
    
    (90
    )Future income tax expense
    
    
    (2,000
    )Future net cash flows
    
    
    4,108Future net cash flows 10% annual discount for estimated timing of cash flows
    
    
    (1,301
    )Standardized measure of discounted future net cash flows
    
    $
    2,807
   55