UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-KSB





xANNUAL REPORT UNDER SECTION 13 OR
15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934




For the
fiscal year ended December
31, 2007




 ̈TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF


THE
SECURITIES EXCHANGE


ACT
OF 1934





Commission
File Number:  333-138806




MOGUL
ENERGY INTERNATIONAL, INC.


(Exact
name of small business issuer as specified in its charter)





Delaware
            
            98-0461623(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (IRS
      Employer Identification No.)





520 Pike Street, Suite
2210


Seattle,
WA 98101


(Address
of principal executive offices)




(206)
357-4220


(Issuer's
telephone number)




SECURITIES
REGISTERED PURSUANT TO SECTION 12(B)


OF THE EXCHANGE
ACT:




None




SECURITIES
REGISTERED PURSUANT TO SECTION 12(G)


OF THE EXCHANGE
ACT:





Common
Stock


(Title of
Class)




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  ̈





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter periods that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes x No  ̈.





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB  ̈.





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  ̈No x










The
issuer had no revenues for the fiscal year ended December 31, 2007.





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by


reference
to the price at which the common equity was sold, or the average bid and asked
prices of such common


equity,
as of a specified date within 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)





Note: If
determining whether a person is an affiliate will involve an unreasonable effort
and expense, the issuer


may
calculate the aggregate market value of the common equity held by non-affiliates
on the basis of reasonable


assumptions,
if the assumptions are stated.





47,165,987
common shares @ $0.13 (1) =
$6,131,578.31


(1)Average of bid and ask closing prices on March 31, 2008.





(ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS)





Check
whether the issuer has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the


Exchange
Act after the distribution of securities under a plan confirmed by a court. Yes
 ̈No  ̈N/A





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)




State the
number of shares outstanding of each of the issuer's classes of equity stock, as
of the latest practicable date.




47,165,987
common shares issued and outstanding as of March 31, 2008




DOCUMENTS INCORPORATED BY
REFERENCE




If the
following documents are incorporated by reference, briefly describe them and
identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which
the document is incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24,
1990).




Transitional
Small Business Disclosure Format (Check one): Yes  ̈No
x







Table of ContentsPART
      IITEM
      1.
            DESCRIPTION OF BUSINESS
            4ITEM
      2.
            DESCRIPTION OF PROPERTY
            14ITEM
      3.
            LEGAL PROCEEDINGS
            15ITEM
      4.
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
            15PART
      IIITEM
      5.
            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS
            15ITEM
      6.
            MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION
            16ITEM
      7
            FINANCIAL STATEMENTS
            20ITEM
      8.
            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
            21ITEM
      8A.
            CONTROLS AND PROCEDURES
            22ITEM
      8B.
            OTHER INFORMATION
            22PART
      IIIITEM
      9.
            DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
            22ITEM
      10
            EXECUTIVE COMPENSATION
            25ITEM
      11.
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS
            26ITEM
      12.
            CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS
            27ITEM
      13.
            EXHIBITS
            28ITEM
      14
            PRINCIPAL ACCOUNTANT FEES AND SERVICES
            29SIGNATURES


Table of Contents


Mogul
Energy International, Inc.


(an
exploration stage enterprise)









PART
I








ITEM
1.                     DESCRIPTION OF BUSINESS.





Forward-Looking
Statements





This
annual report on Form 10-KSB contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events and/or our future financial
performance.  Generally, you can identify forward-looking statements
by terminology such as “intends,” "may", "should", "expects", "plans",
"anticipates", "believes", "estimates", "predicts", or "potential" or the
negative of these terms or other comparable terminology. To the extent that such
statements are not recitations of historical fact, such statements constitute
forward-looking statements that, by definition, involve risks and
uncertainties.  These statements reflect only our current expectations
and involve known and unknown risks, uncertainties and other factors, many of
which are unforeseen, including the risks in the section entitled "Risk
Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.





Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements.  You should not place undue reliance on these
forward-looking statements.  These forward-looking statements are
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
section 21E of the Securities Exchange Act of 1934, as amended, and are intended
to be covered by the safe harbors created thereby.  Except as required
by applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.





In this
annual report, unless otherwise specified, all references to "common shares"
refer to common shares in the capital of our company and the terms "we", "us,"
and "our" mean Mogul Energy International, Inc. (the “Company”).





Business
Development





We are a
Delaware corporation formed on July 25, 2005, with our principal place of
business in the State of Washington.  We are an independent oil and
gas exploration company established to take advantage of the low cost
acquisition opportunities near other producing and proven oil fields. Since our
formation, we have engaged in only limited activities related to the acquisition
of our property rights and financing activities. To date, we have not generated
any operating revenues.  The address of our website is www.mogulenergy.com.
Information on our website is not part of this report.





Our
strategy is to expand through an aggressive plan of development of our current
properties and, if warranted, the acquisition and development of properties that
have:





§
            Low
      entry cost as measured on a dollar per barrel for proven and potential
      reserves;


§
            Ready
      access to infrastructure allowing for production within a short time
      period without significant capital commitments;
  and


§
            Ready
      access to local and export markets without the need for immediate
      investment in pipeline construction
projects.





Initially,
we intend to use of third-party providers to engage in most if not all of our
oil and gas producing activities.


4
 Table of Contents


Business
of the Issuer





The Company is in the oil and gas
exploration business.  Our business plan is focused on a strategy for
maximizing the long-term exploration and development of our petroleum
prospecting concessions in Saskatchewan, Canada and in the Gulf of Suez, Egypt.
To date, execution of our business plan has largely focused on the acquisition
of petroleum concessions in Canada and Egypt, as well as a prior drilling
program on the Fairlight Prospect in Saskatchewan, and a drilling program on the
EWA Concession in the Gulf of Suez. We intend to establish a going forward
exploration and development plan.  In the near term, we are focusing
on the Freehold Properties in Saskatchewan, Canada.  Other than the
acquisition of our property interests, the drilling program on the Fairlight
Prospect, and the drilling program on the EWA Concession, we have not engaged in
any substantive business operations to date. We have engaged only in
preliminary, exploratory
activities, review of data pertaining to our properties, and the establishment
of initial exploration plans.





Employees





In
addition to our directors and officers we also have a full-time employee, and we
hire independent contractor consultants as required. We will continue to
outsource any additional contracts as needed.  If we are successful in our
initial and any subsequent drilling programs we may retain additional employees
or contractors.





ITEM
1A.                  RISK FACTORS.





Much of
the information included in this annual report includes or is based upon
estimates, projections or other "forward-looking statements".  Such
forward-looking statements include any projections or estimates made by us and
our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions, or other future
performance suggested herein. We undertake no obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of such statements.  Such estimates, projections or other
"forward-looking statements" involve various risks and uncertainties as outlined
below. We caution readers of this annual report that important factors in some
cases have affected and, in the future, could materially affect actual results
and cause actual results to differ materially from the results expressed in any
such estimates, projections or other "forward-looking statements".





You
should carefully consider the risks described below before purchasing our shares
of our common stock. Our most significant risks and uncertainties are described
below; if any of the following risks actually occur, our business, financial
condition, or results or operations could be materially adversely affected, the
trading of our common stock could decline, and you may lose all or part of your
investment therein. You should acquire shares of our common stock only if you
can afford to lose your entire investment.





Risks
Associated With Our Business





We
have a limited operating history which makes your evaluation of our business
difficult. We have incurred losses in recent periods for start-up efforts and
may incur losses in the future.





We were
organized on July 25, 2005, and have only recently acquired our interests in the
Canadian Property Interests in Saskatchewan and the Egyptian Concession.
 For the period from July 25, 2005 (inception) to December 31, 2007, we
incurred an operating loss of $2,040,761.  For the year ended December 31,
2006, we incurred an operating loss of $2,176,540.  For the period
from July 25, 2005 to December 31, 2007, we incurred an operating loss of
$4,354,221.  We expect to incur substantial operating losses for the
foreseeable future, as well.





For the
period July 25, 2005 (inception) to December 31, 3007, our cumulative deficit
was $4,354,221. We are in the exploration stage of our business development.
Other than the acquisition of our property interests, the drilling program on
the Fairlight Prospect, and the drilling program on the EWA Concession, we have
not engaged in any substantive business operations to date. We have engaged only
in preliminary,
exploratory activities, review of data pertaining to our properties, and the
establishment of initial exploration plans. Our preliminary exploratory
activities have, to date, resulted in one “dry-hole” drilled on the Fairlight
Prospect and one non-commercial hole drilled on the EWA Concession. We have a
very limited operating history upon which you can evaluate our business and
prospects.  Accordingly, you
should consider and evaluate our business prospects by considering the risks
associated with our early stage status and lack ofoperational
experience.


5
 Table of Contents


We
expect to face many of the typical challenges of a startup
business.





We were
only recently organized and have been in operation for just over two years.
Accordingly, a startup business like ours faces a number of challenges. For
example, engaging the services of qualified support personnel and related
consultants and other experts is very important in the oil and gas exploration
business, and there is keen competition for the services of these experts,
consultants, and support personnel. Equally important in the oil and gas
exploration business is the establishment of initial exploration plans for
drilling prospects, and the efficient analysis of relevant
information.  Establishing and maintaining budgets and appropriate
financial controls is also very important to a startup business. If we fail to
address one or more of these activities, or curb operating losses, our ability
to carry out our business plan may be materially impaired.




The
oil and gas exploration business involves many operating risks that can cause
substantial losses.




Numerous
risks affect our drilling activities, including the risk of drilling
non-productive wells or dry holes. To date, we have completed drilling on two
wells – one on the Fairlight Prospect and one on the EWA Concession – and both
wells were non-commercial “dry holes.” The cost of drilling, completing and
operating wells, and of installing production facilities and pipelines is often
uncertain.  Also, our drilling operations could diminish or cease due
to a number of factors, including any of the following:





•
            title
      problems;





•
            weather
      conditions;





•
            fires;





•
            explosions;





•
            blow-outs
      and surface cratering;





•
            uncontrollable
      flows of underground natural gas, oil and formation
  water;





•
            natural
      disasters;





•
            pipe
      or cement failures;





•
            casing
      collapses;





•
            embedded
      oilfield drilling and service
tools;





•
            abnormally
      pressured formations;





•
            environmental
      hazards such as natural gas leaks, oil spills, pipeline ruptures and
      discharges of toxic gases;





•
            noncompliance
      with governmental requirements; or





•
            shortages
      or delays in the delivery or availability of material, equipment or
      fabrication yards.




Moreover,
our offshore operations with respect to the Egyptian Concession are also subject
to a variety of operating risks peculiar to the marine environment, such as
capsizing, collisions and damage or loss from hurricanes or other adverse
weather conditions. These conditions can cause substantial damage to facilities
and interrupt production. As a result, we could incur substantial liabilities
that could reduce or eliminate the funds available for exploration, development
or leasehold acquisitions, or result in loss of equipment and
properties.  Given our limited financial resources, the occurrence of
any one or more of the foregoing events would have a material adverse affect on
our operations and the market price of our common stock.





Our
foreign operations subject us to additional risks, including currency
fluctuations which may periodically affect our financial position and
results.




Our
property interests and operations in Canada and Egypt are subject to the various
risks inherent in foreign operations. These risks include the following:


6
 Table of Contents





•
            currency
      restrictions and exchange rate
fluctuations;





•
            risks
      of increases in taxes and governmental royalties and renegotiation of
      contracts with governmental entities;
and





•
            changes
      in laws and policies governing operations of foreign-based
      companies.




We
maintain our accounts in US and Canadian currencies and make certain payments in
the currency of Egypt and are therefore subject to currency fluctuations and
such fluctuations may periodically affect our financial position and results. We
do not engage in currency hedging activities.  United States laws and
policies on foreign trade, taxation and investment may also adversely affect our
international operations. In addition, if a dispute arises from foreign
operations, foreign courts may have exclusive jurisdiction over the dispute, or
we may not be able to subject foreign persons to the jurisdiction of United
States courts.  There is no assurance that the laws, regulations,
policies or current administrative practices of any government body,
organization or regulatory agency in Canada or Egypt or any other jurisdiction,
will not be changed, applied or interpreted in a manner which will fundamentally
alter the ability of our company to carry on our business in Canada or
Egypt.





The
actions, policies or regulations, or changes thereto, of any government body or
regulatory agency, or other special interest groups, may have a detrimental
effect on us. Any or all of these situations may have a negative impact on our
ability to operate and/or our profitability in Canada or Egypt.





There
are risks associated with our proposed operations in Egypt.





Special
risks may be associated with our efforts to undertake operations in the Arab
Republic of Egypt. Such operations will be subject to political, economic and
other uncertainties, including among other things, the risk of war, revolution,
border disputes, expropriation, forced renegotiation or modification of any
existing agreement, import, export and transportation regulations, tariffs,
taxation policy, including royalty and tax increases and retroactive tax claims,
exchange controls, currency fluctuations and other uncertainties arising out of
the Arab Republic of Egypt's sovereignty over our operations. If, as a result of
political or economic instability, a new government was put in place or new
policies assuming a more hostile attitude toward foreign investment were
adopted, such events could result in the voiding of our pre-existing agreements
and or the expropriation of our assets.





We
may not be able to obtain sufficient drilling equipment and experienced
personnel to conduct our operations.




In
periods of increased drilling activity resulting from high commodity prices,
demand exceeds availability for drilling rigs, drilling vessels, supply boats
and personnel experienced in the oil and gas industry in general, and the
offshore oil and gas industry in particular. This may lead to difficulty and
delays, especially in light of our limited resources and operations, in
consistently obtaining services and equipment from vendors, obtaining drilling
rigs and other equipment at favorable rates, and scheduling equipment
fabrication at factories and fabrication yards. This, in turn, may lead to
projects being delayed or experiencing increased costs.




Third
party operators of the properties in which we have an interest may act in ways
that are not in our best interests.




Except in
regards to the Freehold Properties, we do not act as the operator with respect
to the properties in which we have an interest. Other companies may operate all
or a portion of the oil and natural gas properties in which we have an interest,
such as the EWA Concession. As a result, we have limited influence over
operations on some of those properties or their associated costs. Our limited
influence on non-operated properties could result in the following:




•
            the
      operator may initiate exploration or development projects on a different
      schedule than we prefer;





•
            the
      operator may propose to drill more wells or build more facilities on a
      project than we have funds for, which may mean that we cannot participate
      in those projects or share in a substantial share of the revenues from
      those projects; and





•
            if
      the operator refuses to initiate an exploration or development project, we
      may not be able to pursue the
project.


7
 Table of Contents


Any of
these events could significantly affect our anticipated exploration and
development activities and the economic value of those properties to us as well
as the market price, if any, of our common stock.




The success of
our business depends upon our ability to find, develop and acquire oil and gas
reserves.





To date
we have not established reserves on any of our properties; in fact, the two
wells on which we completed drilling were “dry holes.” We now plan on
implementing further exploratory activities on our Freehold Properties in the
future. There is, however, no guarantee that such exploratory activities will
lead to the identification of additional drill sites or, if identified and wells
are drilled, that we will find reserves that we can economically produce. Future
drilling activities will subject us to many risks, including the risk that we
will not find commercially productive reservoirs. Drilling for oil and natural
gas can be unprofitable, not only as a result of dry holes, which we have
experienced, but also from productive wells that do not produce sufficient oil
to return a profit. Also, title problems, weather conditions, governmental
requirements and shortages or delays in the delivery of equipment and services
can delay our drilling operations or result in their cancellation. The cost of
drilling, completing and operating wells is often uncertain, and not all wells
produce oil and gas. As a result, we may not recover all or any portion of our
investment.





If
we do not establish reserves and or obtain additional financing, we may not be
able to satisfy our substantial capital requirements and may be required to
cease or curtail our operations.




If we
identify additional drilling targets, we require substantial capital to continue
our drilling program with respect to the Freehold Properties and EWA Concession.
In addition, our ongoing capital requirements consist primarily of the following
items:




•
            funding
      our 2008 capital and exploration
budget;





•
            other
      allocations for acquisition, development, production, exploration and
      abandonment of oil and natural gas
reserves.




If we
cannot generate sufficient cash flow from operations or raise funds externally
in the amounts and at the times needed, we may not be able to discover reserves
or meet our financial obligations.  If we are unable to obtain such
financing when needed, on commercially reasonable terms, we may be required to
cease or curtail our operations which could have a materially adverse impact on
the market price of our stock.





The
potential profitability of oil and gas ventures depends upon factors beyond the
control of our company.  A decline in oil and gas prices will
adversely affect our ability to obtain additional financing we will require in
order to undertake our future drilling activities.





To date
we have funded our capital requirements primarily from the offer and sale of our
equity securities through the offer and sale of our common stock.  We
will need to raise additional capital to fund any future drilling
activities.  Our ability to do so may be adversely affected by any
decrease of prices of, and demand for, natural gas and oil. Historically, the
markets for natural gas and oil have been volatile and this volatility is likely
to continue in the future. The potential profitability of oil and gas properties
is dependent upon many factors beyond our control.  Prices for natural
gas and oil may fluctuate widely in response to relatively minor changes in the
supply of and demand for natural gas and oil, market uncertainty and a variety
of additional factors that are beyond our control, such as:




•
            the
      price of foreign imports;





•
            overall
      domestic and global economic
conditions;





•
            political
      and economic conditions or hostilities in oil producing regions, including
      the Middle East;





•
            the
      ability of the members of the Organization of Petroleum Exporting
      Countries to agree to and maintain oil price and production
      controls;





•
            weather
      conditions;


8
 Table of Contents


•
            domestic
      and foreign governmental
regulations;





•
            development
      of alternate technologies; and





•
            the
      price and availability of alternative
fuels.




If we are
unable to obtain such financing when needed, on commercially reasonable terms,
we may be required to cease or curtail our operations which could have a
materially adverse impact on the market price of our
stock.   Additionally, due to world-wide economic uncertainty,
the availability and cost of funds for production and other expenses have become
increasingly difficult, if not impossible, to project. These changes and events
may materially affect our financial performance.  Moreover, the
marketability of oil and gas which may be acquired or discovered will be
affected by numerous factors beyond our control. These factors include the
proximity and capacity of oil and gas pipelines and processing equipment, market
fluctuations of prices, taxes, royalties, land tenure, allowable production and
environmental protection. The extent of these factors cannot be accurately
predicted but the combination of these factors may result in our company not
receiving an adequate return on invested capital.





We
will continue to pursue acquisitions and dispositions which if consummated could
adversely affect our cash flow and liquidity.




We will
continue to seek opportunities to generate value through the purchase and sale
of properties. We examine potential transactions on a regular basis, depending
on market conditions, available opportunities and other factors. Dispositions of
portions of our existing business or properties would be intended to result in
the realization of immediate value but would consequently result in lower cash
flows over the longer term unless the proceeds are reinvested in more productive
assets.




We
face competition from a large number of companies many of which have resources
far in excess of ours.




The oil
and gas industry is highly competitive. We compete with major and independent
oil and natural gas companies as well as smaller companies who are better
financed than we are, for property acquisitions. We also compete for equipment
and labor required for us to develop and exploit our properties. Many of our
competitors have substantially greater financial and other resources than we do.
As a result, those competitors may be better able to withstand sustained periods
of unsuccessful drilling. In addition, larger competitors may be able to absorb
the burden of any changes in applicable laws and regulations more easily than we
can, which would adversely affect our competitive position. These competitors
may be able to pay more for exploratory prospects and productive oil and natural
gas properties and may be able to define, evaluate, bid for and purchase a
greater number of properties and prospects than we can. Our ability to explore
for oil and natural gas prospects and to acquire additional properties in the
future will depend on our ability to conduct operations and to evaluate and
select suitable properties and transactions in this highly competitive
environment. Moreover, the oil and natural gas industry itself competes with
other industries in supplying the energy and fuel needs of industrial,
commercial and other consumers. Increased competition causing oversupply or
depressed prices could greatly affect our operational revenues.




Oil
and gas operations, including our contemplated drilling activities, are subject
to comprehensive regulation which may cause substantial delays or require
capital outlays in excess of those anticipated causing an adverse effect on our
company.




Our oil
and gas operations in Canada and Egypt are subject to local laws relating to the
protection of the environment, including laws regulating removal of natural
resources from the ground and the discharge of materials into the environment.
Oil and gas operations are also subject to local laws and regulations which seek
to maintain health and safety standards by regulating the design and use of
drilling methods and equipment. Various permits from government bodies are
required for drilling operations to be conducted; no assurance can be given that
such permits will be received. Environmental standards imposed by local
authorities may be changed and any such changes may have material adverse
effects on our activities. Moreover, compliance with such laws may cause
substantial delays or require capital outlays in excess of those anticipated,
thus causing an adverse effect on us. Additionally, we may be subject to
liability for pollution or other environmental damages which we may elect not to
insure against due to prohibitive premium costs and other reasons. To date we
have not been required to spend any material amount on compliance with
environmental regulations. However, we may be required to do so in future and
this may affect our ability to expand or maintain our operations.


9
 Table of Contents




If
we do not adequately manage the risks associated with conducting business in
foreign countries our business operations will suffer.





A part of
our business strategy is to seek to acquire and develop leases and operations in
foreign countries. If we are able to implement such strategy, we may experience
difficulty in managing international operations as a result of technical
problems, distance, language and cultural differences. There are significant
risks inherent in doing business on an international level, such as, political
and economic instability, civil unrest, crime, unexpected changes in regulatory
requirements, trade barriers, difficulties in staffing and managing foreign
operations, fluctuations in foreign currency exchange rates, longer payment
cycles, problems in collecting amounts due, difficulty in enforcing contracts,
seasonal fluctuation in business activity and potential adverse tax
consequences. If any of such risks materialize we may have little or no ability
to manage them or avert any consequences there from and our business may suffer
as a result.





Our
rights in and to the Egyptian Concession are subject to the approval of the
Egyptian government and we may need to terminate or curtail our operations if a
required future license or agreement cannot be obtained.





Our rights in and to the
Egyptian Concession are subject to our obtaining governmental
approval.  If such approval is not obtained (or if obtained,butsubsequently revoked), our
planned operations may be substantially curtailed.Our interest in
the exclusive concession for the exploitation of petroleum and natural gas in
and throughout the Egyptian Concession is governed by the Concession Agreement
and those other licenses and agreements that maybe required thereunder, but
which are unknown to us at this time. We can provide no assurance that we will
be able to maintain any existing license or agreement or that any existing
license or agreement may not be materially varied or that we will be able to
acquire any required license or agreement, and if any of our existing licenses
or agreements are varied or if we are not successful in maintaining and
acquiring other necessary licenses or agreements we may be forced to terminate
or curtail our business efforts in Egypt.


We
have not established any reserves on any of our properties.  As our
properties are in the exploration stage there can be no assurance that we will
establish commercial discoveries on our properties.





Although
we have drilled an exploratory well on the EWA Concession and on the Fairlight
Prospect (both of which were “dry holes”), we have not established any reserves
on any of properties.  Exploration for economic reserves of oil and
gas is subject to a number of risk factors. Few of the properties that are
explored are ultimately developed into producing oil and/or gas wells. Our
properties are in the exploration stage only and are without proven reserves of
oil and gas. There can be no assurance that we will establish commercial
discoveries on any of our properties.





We
do not currently maintain insurance against potential losses and unexpected
liabilities.





Our
operations are subject to inherent casualty risks such as blowouts, fires,
explosions and marine hazards. If any such event occurred, we could be subject
to substantial financial losses due to personal injury, property damage,
environmental discharge, or suspension of operations. The impact on us of one of
these events could be significant. We do not presently have any insurance
coverage as to such potential casualties and, even if we were to obtain such
insurance coverage, there is no assurance that such coverage will be adequate to
protect us against all operational risks.





Although
we may purchase insurance at levels we believe to be customary for a company of
our size in our industry, we are not fully insured against all risks incident to
our business. For some risks, we may not obtain insurance if we believe the cost
of available insurance is excessive relative to the risks presented. In
addition, pollution and environmental risks generally are not fully insurable.
If a significant accident or other event occurs and is not fully covered by
insurance, it could adversely affect our operations and financial
condition.





We
are dependent on retaining our senior management and key personnel and the loss
of any of our key management personnel would have an adverse impact on future
development and could impair our ability to succeed.





To a
large extent, we depend on the services of the founders of the company, and
other senior management, advisors, joint partners and personnel. These
individuals have critical and unique knowledge of our operations that facilitate
the evaluation and acquisitions of existing and potential properties in Canada
and Egypt.  We face competition for qualified personnel from numerous
industry sources, and there can be no assurance that we will be able to attract
and retain qualified personnel on acceptable terms.  We do not have
key man insurance on any of our employees.  The loss of these
experienced personnel could have a material adverse impact on our financial
condition or operations, including our ability to compete in Canada or
Egypt.  Except as to Mr. Pratt, we do not have any formal agreements
with these individuals nor do we maintain any insurance against the loss of
services by any of these individuals.


10
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We
will be required to rely upon services provided to us by third
parties.





We expect
to be totally dependent upon third-party providers to enable us to engage in all
of our business activities. Such parties may include, but may not be limited to,
consultants engaged to provide reserve calculations, seismic interpretation and,
to the extent required, third party drilling contractors. Accordingly, we will
be required to establish and maintain strategic relationships with a wide array
of third party providers in order to engage in any meaningful business activity.
If we are unable to establish and maintain relationships with such third party
providers our business prospects will be impaired.





Our
write-downs of the carrying values of oil and natural gas properties may
adversely affect our earnings.





We are in
the early stages of the exploration and development of unproven properties in
Canada and Egypt. We have adopted the “full cost method” of
accounting for acquisition, exploration and assessment of exploration
properties. Early exploration and the costs including rights to explore,
geological and geophysical studies, exploratory drilling and activities in
relation to evaluating the technical and feasibility and commercial viability of
extracting the oil and gas from the target properties are reasonably viewed
necessary to evaluate and determine probable and proven reserves on the
properties.





We
currently have two full-cost pools, Canada and Egypt. Depletion and amortization
of the full-cost pools will be computed using the units of production method
based on proven reserves, if any, as determined by the aforementioned
activities.





In
accordance with the full cost method of accounting, all costs associated with
oil and gas property development and investment are capitalized on a
project-by-project basis pending determination of the feasibility of the
project. Costs incurred include appropriate technical and administrative
expenses but not general overheads. Investments in unproven properties and major
development projects are not amortized until proven reserves associated with the
projects can be determined. If an oil and gas property development project is
successful, the related expenditures will be transferred to tangible assets and
amortized over the estimated life of the reserves on a unit of production
method. Where a project is abandoned or considered to be of no further
commercial value to the company, the related costs will be written
off.





Unevaluated
oil and gas costs are assessed at each period end and where there are
indications of impairment the related costs will be written off. The
recoverability of unevaluated oil and gas costs is dependent upon the discovery
of economically recoverable reserves, our ability to obtain necessary financing
to complete the development of reserves and future profitable production or
proceeds from the disposition of recoverable reserves.




Terrorist
attacks and threats or actual war may negatively affect our business, financial
condition and results of operations.





Our
business is affected by general economic conditions and fluctuations in consumer
confidence and spending, which can decline as a result of numerous factors
outside of our control, such as terrorist attacks and acts of war. Recent
terrorist attacks in the United States of America, as well as events occurring
in response to or in connection with them, including future terrorist attacks
against United States targets, rumors or threats of war, actual conflicts
involving the United States of America or its allies, or military or trade
disruptions impacting our suppliers or our customers, may adversely impact our
operations. Strategic targets such as energy-related assets may be at greater
risk of future terrorist attacks than other targets in the United States of
America. These occurrences could have an adverse impact on energy prices,
including prices for our natural gas and crude oil production. In addition,
disruption or significant increases in energy prices could result in
government-imposed price controls. It is possible that any or a combination of
these occurrences could have a material adverse effect on our business,
financial condition and results of operations.


11
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We
will require additional financing to sustain our operations and without it we
will not be able to continue operations.  Our ability to obtain such
additional funding will determine our ability to continue as a going concern.
Our financial statements do not include any adjustments that might result from
the outcome of this uncertainty.





There is
substantial doubt about our ability to continue as a going concern due to the
losses incurred since inception, our accumulated deficit, and lack of
revenues.Our
company has a limited operating history and is considered in the development
stage. The success of our company is significantly dependent on a successful
drilling, completion and production program. Our company’s operations will be
subject to all the risks inherent in the establishment of a developing
enterprise and the uncertainties arising from the absence of a significant
operating history. No assurance can be given that we may be able to operate on a
profitable basis. We are in the development stage and potential investors should
be aware of the difficulties normally encountered by enterprises in the
development stage. There can be no assurance that our business plan will prove
successful, and no assurance that we may be able to operate profitably, if at
all.





There is
no assurance that actual cash requirements will not exceed our estimates, in
which case we will require additional financing to further explore and if
warranted bring our properties into commercial operation, finance working
capital, and pay for operating expenses and capital requirements until we
achieve a positive cash flow.  There can be no assurance that, if
required, any such financing will be available upon terms and conditions
acceptable to us, if at all. Our inability to obtain additional financing in a
sufficient amount when needed and upon terms and conditions acceptable to us
could have a materially adverse effect upon our company. We will need funds
sufficient to meet our immediate needs and will require further funds to finance
the development of our company. There can be no assurance that such funds will
be available or available on terms satisfactory to us. If additional funds are
raised by issuing equity securities, further dilution to existing or future
shareholders is likely to result. If adequate funds are not available on
acceptable terms when needed, we may be required to delay, scale back or
eliminate the development of our company.  All or a portion of our
interest in our properties may be lost if we are unable to obtain significant
additional financing, as we are required to make significant expenditures on the
exploration and development of our properties.  Inadequate funding
could also impair our ability to compete in the marketplace, which may result in
the dissolution of our company.





Because
of the early stage of development and the nature of our business, our securities
are considered highly speculative.





Our
securities must be considered highly speculative, generally because of the
nature of our business and the early stage of our development. We are engaged in
the business of exploring and, if warranted, developing commercial reserves of
oil and gas. Our properties are in the exploration stage only and are without
known reserves of oil and gas, and there can be no assurance that we will
establish commercial discoveries on our properties.  We have not
generated any revenues nor have we realized a profit from our operations to date
and there is little likelihood that we will generate any revenues or realize any
profits in the short term. Any profitability in the future from our business
will be dependent upon locating and developing economic reserves of oil and gas,
which itself is subject to numerous risk factors as set forth herein. Since we
have not generated any revenues, we will have to raise additional monies through
the sale of our equity securities or debt in order to continue our business
operations.





Our
management team does not have extensive experience in public company matters,
which could impair our ability to comply with legal and regulatory
requirements.





Our
management team has had limited U.S. public company management experience or
responsibilities, which could impair our ability to comply with legal and
regulatory requirements, such as the Sarbanes-Oxley Act of 2002 and applicable
federal securities laws including filing on a timely basis required reports and
other required information. Our management may not be able to implement and
affect programs and policies in an effective and timely manner that adequately
respond to increased legal or regulatory compliance and reporting requirements
imposed by such laws and regulations. Our failure to comply with such laws and
regulations could lead to the imposition of fines and penalties and further
result in the deterioration of our business.





Our
compliance with changing laws and rules regarding corporate governance and
public disclosure may result in additional expenses to us which, in turn, may
adversely affect our ability to continue our operations.





Keeping
abreast of, and in compliance with, changing laws, regulations and standards
relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002, new SEC regulations and, in the event we are ever
approved for listing on either NASDAQ or a registered exchange, NASDAQ and stock
exchange rules, will require an increased amount of management attention and
external resources. We intend to continue to invest all reasonably necessary
resources to comply with evolving standards, which may result in increased
general and administrative expenses and a diversion of management time and
attention from revenue-generating activities to compliance activities. This
could have an adverse impact on our ongoing operations.


12
 Table of Contents


Our
proposed business raises potential conflicts of interests between certain of our
officers and directors and us.




Certain
of our directors are or may become directors of other oil and gas companies and,
to the extent that such other companies may participate in ventures in which we
may participate, our directors may have a conflict of interest in negotiating
and concluding terms regarding the extent of such participation by us and such
other companies. In addition, directors may present potential prospects to such
other companies rather than presenting the opportunities to us. We have not
established any mechanisms regarding the resolution of any such conflict if it
were to arise; accordingly, there is no assurance that any such conflict will be
resolved in a manner that would not be adverse to our interest.




Moreover,
since our inception, we have acquired our property interests from entities
controlled by or in which certain of our shareholders and directors have or may
have an interests. We did not seek to obtain an independent evaluation of the
fairness of the terms and conditions related to our acquisition of these
properties. Such terms and conditions may prove to be financially more onerous
than if we had acquired such properties from unrelated third parties; and,
ultimately may result in the loss of our interests in such
properties.





We
have agreements in respect of our properties, but our properties may be subject
to prior unregistered agreements, or transfers which have not been recorded or
detected through title searches, and are subject to a governmental right of
participation, resulting in a possible claim against any future revenues
generated by such properties.





We have
agreements with respect to our oil and gas properties and we believe our
interests are valid and enforceable, although we have not obtained an opinion of
counsel or any similar form of title opinion to that effect.  These
agreements do not guarantee title against all possible claims. The properties
may be subject to prior unregistered agreements, or transfers which have not
been recorded or detected through title research.  If the interests in
our properties are challenged, we may have to expend funds defending any such
claims and may ultimately lose some or all of any revenues generated from the
properties if we lose our interest in such properties.





A
majority of our directors and officers are located outside the United States,
with the result that it may be difficult for investors to enforce within the
United States any judgments obtained against us or any of our directors or
officers.





A
majority of our directors and officers are nationals and/or residents of
countries other than the United States, and all or a portion of such persons’
assets are located outside the United States. As a result, it may be difficult
for investors to enforce within the United States any judgments obtained against
us or our officers or directors, including judgments predicated upon the civil
liability provisions of the securities laws of the United States or any state
thereof. Consequently, you may be effectively prevented from pursuing remedies
under United States federal securities laws against our directors or
officers.




Risks
Related to our Common Stock





Investors’
interests in our company will be diluted and investors may suffer dilution in
their net book value per share if we issue additional shares or raise funds
through the sale of equity securities.





Our
constating documents authorize the issuance of 100,000,000 shares of common
stock, each with a par value of $0.001. In the event that we are required to
issue any that additional shares or enter into private placements to raise
financing through the sale of equity securities, investors’ interests in our
company will be diluted and investors may suffer dilution in their net book
value per share depending on the price at which such securities are sold. If we
issue any such additional shares, such issuances also will cause a reduction in
the proportionate ownership and voting power of all other shareholders. Further,
any such issuance may result in a change in our control.


13
 Table of Contents


We
do not intend to pay dividends for the foreseeable future.





We
currently intend to retain future earnings, if any, to support the development
and expansion of our business and do not anticipate paying cash dividends in the
foreseeable future. Our payment of any future dividends will be at the
discretion of our board of directors after taking into account various factors,
including but not limited to our financial condition, operating results, cash
needs, growth plans and the terms of any credit agreements that we may be a
party to at the time. Accordingly, investors must rely on sales of their common
stock after price appreciation, which may never occur, as the only way to
realize their investment. Investors seeking cash dividends should not purchase
the shares offered by the Selling Shareholders pursuant to this
prospectus.





We
may conduct further offerings in the future in which case your shareholdings
will be diluted.





Since our
inception, we have relied on such equity sales of our common stock to fund our
operations. We may conduct further equity offerings in the future to finance our
current projects or to finance subsequent projects that we decide to undertake.
If common stock is issued in return for additional funds, the price per share
could be lower than that paid by our current stockholders. We anticipate
continuing to rely on equity sales of our common stock in order to fund our
business operations. If we issue additional stock, your percentage interest in
us will be diluted. The result of this could reduce the value of your
stock.




We
may issue preferred stock which may have greater rights than our common
stock.





We are
permitted in our charter to issue up to 10,000,000 shares of
preferred stock. Currently no preferred shares are issued and outstanding;
however, we can issue shares of our preferred stock in one or more series and
can set the terms of the preferred stock without seeking any further approval
from our common shareholders. Any preferred stock that we issue may rank ahead
of our common stock in terms of dividend priority or liquidation premiums and
may have greater voting rights than our common stock. In addition, such
preferred stock may contain provisions allowing them to be converted into shares
of common stock, which could dilute the value of common stock to current
shareholders and could adversely affect the market price, if any, of our common
stock.





Our
common stock is a "penny stock," and because "penny stock” rules will apply, you
may find it difficult to sell the shares of our common stock you acquired in
this offering.





Our
common stock is a “penny
stock,” as that term is defined under Rule 3a51-1 of the Securities
Exchange Act of 1934. Generally, a "penny stock" is a common
stock that is not listed on a securities exchange and trades for less than $5.00
a share. Prices in our stock often are not available to buyers and sellers and
the market may be very limited. Penny stocks in start-up companies are among the
riskiest equity investments. Broker-dealers who sell penny stocks must provide
purchasers of these stocks with a standardized risk-disclosure document prepared
by the U.S. Securities & Exchange Commission. The document provides
information about penny stocks and the nature and level of risks involved in
investing in the penny stock market. A broker must also give a purchaser, orally
or in writing, bid and offer quotations and information regarding broker and
salesperson compensation, make a written determination that the penny stock is a
suitable investment for the purchaser, and obtain the purchaser's written
agreement to the purchase. Many brokers choose not to participate in penny stock
transactions. Because of the penny stock rules, there is less trading activity
in penny stocks and you are likely to have difficulty selling your
shares.





ITEM
2.                     DESCRIPTION OF PROPERTY.





Our principal office is located at 520
Pike Street, Suite 2210, Seattle, Washington, USA 98101.  We also have
administrative offices located at 207 West Hastings Street, #1111, Vancouver,
British Columbia, Canada V6B 1H7.  Both of these offices are
leased.  We lease office space in Seattle, Washington, from The Law
Office of Mussehl & Khan, a law firm in which Mohammad Khan (one of our
officers) and Robert C. Mussehl (one of our directors) are partners. The lease
payments are currently $425 per month. The office lease may be terminated by
either party upon 30 days notice to the other.  The Vancouver location
is leased for CDN$475 per month, renewable annually.  Our premises are
adequate for our current operations, and we do not anticipate that we will
acquire or lease additional premises in the foreseeable future.





We
currently hold petroleum leases and a concession in two major areas, as
follows:  a one hundred percent (100%) interest in approximately 9,300
acres situated in South East Saskatchewan acquired under sixty-eight (68)
separate freehold oil and gas leases (the “Freehold Properties”); and a twenty
percent (20%) working interest in the East Wadi Araba (EWA) Concession located
in the Gulf of Suez, covering approximately 295 square kilometers in the
sovereign territory of the Arab Republic of Egypt (the “EWA
Concession”).  We recently completed drilling on the EWA-4X
exploration well on the Egyptian Concession.  The results of the
drilling on the EWA 4X did not provide evidence of economic hydrocarbon
accumulations, thus no testing is planned and the well has been electric
wire-line logged, plugged and abandoned.  We currently have no
drilling program underway on the Freehold Properties, but expect to continue our
drilling program in the future.  We previously drilled a dry well on
Saskatchewan P&NG Lease PN 46794 (“the Fairlight Prospect”).  Our
fifty percent (50%) interest in the Fairlight Prospect has expired and has not
been renewed.  Because of the Fairlight Prospect’s proximity to our
Freehold Properties, we believe that the information gathered from our drilling
activities on the Fairlight Prospect will be of assistance in planning our
exploration and drilling activities on the Freehold Properties.  We
have yet to establish any reserves on our properties.


14
 Table of Contents


ITEM
3.               
      LEGAL
PROCEEDINGS.





We know
of no material, active, or pending legal proceedings in which we are a party,
nor are we involved as a plaintiff in any material proceeding or pending
litigation. There are no proceedings in which any of our directors, officers or
affiliates, or any registered beneficial shareholder, is an adverse party or has
a material interest adverse to our interest.








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





None during the period of this
report.








PART
II





ITEM
      5.
            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND
      SMALL BUSINESS ISSUER PURCHASES OF EQUITY
  SECURITIES.





Market
Information





Our common stock currently trades on
the Over-the-Counter Bulletin Board (OTCBB) under the symbol
“MGUY.”  As of March 31, 2008, there were 47,165,987 common
shares issued and outstanding.





Our stock began trading on the OTCBB
on July 11, 2007.  Following are the high and low sales prices by
quarter since that time:





OTC Bulletin Board Sales Prices
      for MGUYQuarter
      Ended
            High
            LowSeptember
      30, 2007
            0.56
            0.10December
      31, 2007
            0.20
            0.09





The
closing price of our stock on March 31, 2008 was $0.13.





Holders





As of
December 31, 2007, there were at least 61 shareholders of record of the
Company’s common stock.  The transfer agent and registrar for our
common stock is Holladay Stock Transfer, 2939 North 67th Place,
Scottsdale, Arizona 85251 (Tel: (480) 481-3940, Fax: (480)
481-3941).





Dividends





To date
the Company has the Company has not declared or paid cash dividends on our
capital stock and do not anticipate paying any cash dividends in the foreseeable
future, but intend to retain our capital resources for reinvestment in our
business. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements and other factors as the
board of directors deems relevant. Our board of directors has the right to
authorize the issuance of preferred stock, without further stockholder approval,
the holders of which may have preferences over the holders of the common stock
as to payment of dividends.


15
 Table of Contents


Securities
Authorized for Issuance Under Equity Compensation Plans





The Company’s Board of Directors
approved a 2007 Stock Incentive Plan on or about August 8, 2007, which
authorized the issuance to management and employees of up to 4,000,000 shares of
the Company’s common stock.  To date, the Board has approved the
issuance of options to purchase 2,250,000 of the Company’s common stock at a
price of $0.30 per share, expiring August 7, 2012.  The options vest
sequentially over a one-year period that commenced on August 8,
2007.





Recent
Sales of Unregistered Securities





On March
3, 2008, the Company sold 50,000 shares of common stock at $0.15 per
share.  We believe that the transaction is exempt from registration
pursuant to Regulation S, as promulgated under the United States Securities Act
of 1933, as amended (the “Securities Act”).  The securities to which
this offering relate have not been registered under the Securities Act, and were
not offered or sold directly or indirectly within the United States or to or for
the account or benefit of U.S. Persons (as defined in Regulation
S).  The securities were sold only to persons who are not U.S. Persons
and who otherwise satisfy the requirements of the applicable securities laws of
the jurisdiction of their residency.





There
have been no other sales of unregistered securities since the Company’s last
report of such sales on Form 8-K dated February 14, 2008.




Purchases
of Equity Securities by the Issuer and Affiliated Purchasers






We did
not purchase any of our shares of common stock or other securities during our
fiscal year ended December 31, 2007.




ITEM
6.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION.
 
 Plan of Operation
 
 We do not anticipate any significant
changes to the number of employees.
 
 Cash Requirements
 
 For the next 12 months we plan toinitiate adrilling program and explore for
petroleum and natural gas on theFreehold Properties in
Saskatchewan.We do not have plans to
continue our drilling program in Egypt at this time.
 
 We will require additional funds to
implement our growth strategy in our oil and gas exploration operations. These
funds may be raised through equity financing, debt financing, or other sources,
which may result in further dilution in the equity ownership of our shares.
There is still no assurance that we will be able to maintain operations at a
level sufficient for an investor to obtain a return on his investment in our
common stock. Further, we may continue to be unprofitable.
 
 Over the next twelve months we intend to
use all available funds toconduct a drilling program on the
Freehold Properties.  We estimate that the following funding will be
required over the next twelve months to conduct the drilling program onthe oil and gas leases that
form the Freehold Properties:
 
 Estimated
Funding Required During the Next Twelve Months
 Drilling &
      Development
              
              $
              1,500,000
              
              to
              
              $
              1,750,000Offering Costs &
      Expenses
              
              $
              100,000
              
              to
              
              $
              150,000General Corporate
      Expenses
              
              $
              400,000
              
              to
              
              $
              500,000Working
    Capital
              
              $
              300,000
              
              to
              
              $
              400,000Total
              
              $
              2,300,000
              
              to
              
              $
              2,800,000
 
 
 The
minimum expenditures noted above will allow us to drill three non-contingent oil and
gas prospects and pay for general and administrativeexpenses.While ourhistoricfocus has beenonthe exploration and development of the
EWA Concession and the Freehold Properties, over the next twelve months, we plan
to focus substantially on the Freehold
Properties.  Becauseour minimum estimated funding for the
next twelve months is
estimated to be between $2,300,000 to $2,800,000,and our total current assets as atDecember 31, 2007,
were$718,080, wewill be required to raise
additional funds at the
present time.In
the event that we are able to raise further funds, we will primarily expend such
funds as described above
 
 As at
December 31, 2007, we had total assets of $1,997,378, compared to $1,256,672 for
the prior period.  Current assets includes $454,824 for subscriptions
related to the issuance of 2,526,800 common shares of the Company subscribed for
but not yet issued as of December 31, 20007.  Non-Current assets
increased as the Company increased its interest in its Canadian Freehold
properties to 100% by acquiring the interests of Mogul Energy Ltd. and
Transpacific Petroleum Corp. in leases previously held jointly through the
issuance of 1,000,000 shares with a fair market value of $400,000 to each
party.  All Cash held in trust from the previous period been spent on
our drilling program on the EastWadi Araba (“EWA”) Concession in
Egypt.
 
 During
the period, capitalized costs of $1,302,177, as compared to $764,719 for the
prior year, were recognized as impaired and expensed.  Of these
expensed costs for the year, $1,264,317 was due to a dry hole drilled on the EWA
Concession.  The EWA Concession remains unproven for commercially
recoverable hydrocarbons.  An additional charge was taken of $37,860
pertaining to acquisition costs on our Freehold Properties in Saskatchewan due
to leases opted for but for which contracts were never entered into or
discharged.  During 2006, the Company
recognized an impairment charge of $764,719 due to a dry hole drilled on the
Fairlight Prospect in Saskatchewan.  The lease for Fairlight Prospect
subsequently expired on March 31, 2007.


16
 Table of Contents


As at December 31, 2007, we had
$1,424,090 in current liabilities. Our financial statements report a net loss of
$2,040,761 for the year ended December 31, 2007, compared to $1,599,366 in
current liabilities and a net loss of $2,176,540 for the year ended December 31,
2006.   While our total liabilities decreased by approximately
$136,000, we owed a related party $680,033 for cash calls received from our
Operator for drilling and abandonment costs related to our operations on the EWA
Concession.  Loans to officers and directors
decreased.  Loans to shareholders decreased during the period by
$410,000 through the issuance of 1,366,667 units of the Company’s common
shares.  This increased the amount of shares and warrants
outstanding.  During the prior year the Company incurred and settled a
lawsuit for $20,000 and 2,000,000 common shares that had a fair market value of
$800,000.  General and administrative expenses increased from $591,821
at year end 2006 to $738,584 at year ended 2007.  This was primarily
due to a noncash charge of $117,000 due to the charges related to compensation
costs for the Company’s employee stock option plan.
 
 We have suffered recurring losses from
operations. The continuation of our company is dependent upon our company
attaining and maintaining profitable operations and raising additional capital.
In this regard we have raisedand will need to continue to raiseadditional capitalas discussedabove.
 
 The continuation of our business is
dependent upon obtaining further financing, a successful program of acquisition
and exploration, and, finally, achieving a profitable level of operations. The
issuance of additional equity securities by us could result in a significant
dilution in the equity interests of our current stockholders. Obtaining
commercial loans, assuming those loans would be available, will increase our
liabilities and future cash commitments.
 
 There are no assurances that we will be
able to obtain further funds required for our continuedoperations. As noted
herein, we are pursuing various financing alternativesto meet our immediate and long-term
financial requirements. There can be no assurance that additional financing will
be available to us when needed or, if available, that it can beobtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
we will be unable to conduct our operations as planned, and wewill not be able to meet our other
obligations as they become due. In such event, we will be forced to scale down
or perhaps even cease our operations.




Milestones





Subject
to the availability of sufficient funds, we hope to achieve the following
milestones in the exploration and development of our Freehold Properties over
the next twelve months:





•
            Complete
      drilling of the 3 wells on the Freehold Properties.  The outcome
      of the drilling of the wells on the Freehold Properties may result in a
      commercial oil and gas discovery or the information obtained from drilling
      the wells will assist the company in making future decisions about
      exploration and development.





Purchase
of Significant Equipment





We do not
intend to purchase any significant equipment (excluding oil and gas activities)
over the next twelve months ending December 31, 2008.





Going
Concern





We have
suffered recurring losses from operations. The continuation of our company as a
going concern is dependent upon our company attaining and maintaining profitable
operations and raising additional capital. The financial statements do not
include any adjustment relating to the recovery and classification of recorded
asset amounts or the amount and classification of liabilities that might be
necessary should our company discontinue operations.





Due to
the uncertainty of our ability to meet our current operating expenses and the
capital expenses noted above, in their report on the annual financial statements
for the period ended December 31, 2007, our independent auditors included an
explanatory paragraph regarding concerns about our ability to continue as a
going concern. Our financial statements for the period ended December 31, 2007,
contain additional note disclosures describing the circumstances that lead to
this disclosure by our independent auditors.


17
 Table of Contents


The
continuation of our business is dependent upon us raising additional financial
support. The issuance of additional equity securities by us could result in a
significant dilution in the equity interests of our current stockholders.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.





There are
no assurances that we will be able to obtain further funds required for our
continued operations. As noted herein, we are pursuing various financing
alternatives to meet our immediate and long-term financial requirements. There
can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
we will be unable to conduct our operations as planned, and we will not be able
to meet our other obligations as they become due. In such event, we will be
forced to scale down or perhaps even cease our operations.





Recently
Issued Accounting Standards




In July
2006, the FASB issued FASB Interpretation No. 48,“Accountingfor Uncertainty in Income Taxes, an
interpretation of FASB Statements No. 109” . FIN 48 clarifies the
accounting for uncertainty in income taxes by prescribing a two-step method of
first evaluating whether a tax position has met a more likely than not
recognition threshold and second, measuring that tax position to determine the
amount of benefit to be recognized in the financial statements. FIN 48 provides
guidance on the presentation of such positions within a classified statement of
financial position as well as on derecognition, interest and penalties,
accounting in interim periods, disclosure, and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of this
statement in fiscal 2007 did not have a material effect on our company's
financial statements.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value measurements. SFAS 157
defines fair value, establishes a framework for measuring fair value in
Generally Accepted Accounting Principles (GAAP), and expands disclosures about
fair value measurements. SFAS 157 applies under other accounting pronouncements
that require or permit fair value measurements and does not require any new fair
value measurements. The provisions of SFAS 157 are effective for fair value
measurements made in fiscal years beginning after November 15, 2007. We are
currently evaluating the impact of adopting SFAS No. 157 but do not expect that
it will have a material effect on our financial statements.





In
September 2006, the FASB issued SFAS No. 158, “Employers’Accountingfor Defined Benefit Pension and
Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106,
and 132(R)”. This statement requires employers to recognize the over
funded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit organization. This
statement also requires an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. The provisions of SFAS 158 are effective for employers with publicly
traded equity securities as of the end of the fiscal year ending after December
15, 2006. The adoption of this statement did not have a material effect on our
company's future reported financial position or results of
operations.





In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “The Fair Value Option
for Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115 ”. This statement permits entities to choose to measure
many financial instruments and certain other items at fair value. Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option. However, the amendment to SFAS No. 115 “Accountingfor Certain Investments in Debt and
Equity Securities ” applies to all entities with available-for-sale and
trading securities. SFAS No. 159 is effective as of the beginning of an entity’s
first fiscal year that begins after November 15, 2007. Early adoption is
permitted as of the beginning of a fiscal year that begins on or before November
15, 2007, provided the entity also elects to apply the provision of SFAS No.
157, “Fair Value
Measurements”.





We do not
expect that any of these recently issued accounting standards have a material
effect on our company’s financial statements.


18
 Table of Contents


Application
of Critical Accounting Policies





Our
audited financial statements and accompanying notes are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) used in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our financial statements is critical to an understanding of our
financials.





Oil
and Gas Properties





We follow
the full cost method of accounting for our oil and gas operations. Under this
method, all cost incurred in the acquisition, exploration and development of oil
and gas properties are capitalized in one cost center, including certain
internal costs directly associated with such activities. Proceeds from sales of
oil and gas properties are credited to the cost center with no gain or loss
recognized unless such adjustments would significantly alter the relationship
between capitalized costs and proved oil and gas reverses.





If
capitalized costs, less related accumulated amortization and deferred income
taxes, exceed the “full cost ceiling”, the excess is expensed in the period such
excess occurs. The “full cost ceiling” is determined based on the present value
of estimated future net revenues attributable to proved reserves, using current
product prices and operating costs at the balance sheet date plus the lower of
cost and fair value of unproved properties within the cost center.





Costs of
oil and gas properties are amortized using the unit-of-production method based
upon estimated proven oil and gas reserves upon the commencement of production.
The significant unproven properties are excluded from the costs subject to
depletion.




As at
December 31, 2007, we do not have any proved reserves.





Stock
Based Compensation





We
implemented the following new critical accounting policy related to our
stock-based compensation.  Beginning August 8, 2007, we began accounting
for Stock options under the provisions of Financial Accounting Standards No. 123
(revised 2004), “Share-Based Payment” (FAS 123(R)), which requires the
recognition of the fair value of stock-based compensation. Under the fair value
recognition provisions for FAS 123(R), stock-based compensation cost is
estimated at the grant date based on the fair value of the awards expected to
vest and recognized as expense ratably over the requisite service period of the
award. We were already using the fair value method under SFAS 123 and the main
difference is the estimation of forfeitures in order to estimate the awards not
expected to vest. We have used the Black-Scholes valuation model to estimate
fair value of our stock-based awards which requires various judgmental
assumptions including estimating stock price volatility and expected life. Our
computation of expected volatility is based upon historical volatility. In
addition, we consider many factors when estimating expected life, including
types of awards and historical experience.





Off-balance
Sheet Arrangements





We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.


19
 Table of Contents


ITEM
7.                      FINANCIAL STATEMENTS.





Mogul
Energy International, Inc.


(an
exploration stage company)





Financial
Statement Index




IndexReport
      of Independent Registered Public Accounting Firm
            F–1Balance
      Sheets
            F–2Statements
      of Operations
            F–3Statement
      of Shareholders’ Equity
            F–4Statements
      of Cash Flows
            F–5Notes
      to the Financial Statements
            F–7


20
 Table of Contents


Report
of Independent Registered Public Accounting Firm





Shareholders
and Board of Directors


Mogul
Energy International, Inc.


(an
exploration stage company)


Seattle,
WA





We have
audited the accompanying balance sheets of Mogul Energy International, Inc., a
Delaware corporation, as of December 31, 2007 and December 31, 2006, and the
related statements of operations, shareholders' equity and cash flows for the
years then ended, and for the period from July 25, 2005 (inception) to December
31, 2007. These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.   We believe that our audit provides a reasonable
basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mogul Energy International, Inc.
(an exploration stage company) as of December 31, 2007 and December 31, 2006,
and the results of its operations and its cash flows for the years then ended,
and for the period from July 25, 2005 (inception) to December 31, 2007 in
conformity with accounting principles generally accepted in the United States of
America.





The
accompanying financial statements referred to above have been prepared assuming
that the Company will continue as a going concern.  As discussed in
Note 2 to the financial statements, the Company is in the exploration stage, has
not yet achieved profitable operations and is dependent on its ability to raise
capital from stockholders or other sources to sustain operations. These factors,
along with other matters set forth in Note 2, raise substantial doubt that the
Company will be able to continue as a going concern.  Management’s
plan to address these matters is disclosed in Note 2.  The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





As
discussed in Note 10 to the financial statements, in April 2007 an error in
applying Regulation S-X, Rule 4-10(c) was discovered resulting in an
overstatement of assets as of December 31, 2006, and an understatement of the
2006 operating loss in the amount of $764,719. The 2006 financial statements
have been restated to correct this error.





Jorgensen
& Co.






(a
registered public accounting firm)


April 8,
2007


Bellevue,
Washington


Table of Contents


Mogul
Energy International, Inc.


(an
exploration stage enterprise)


Balance
Sheets


(expressed
in U.S. dollars)







December
      31,
              2007
            
            
            December
      31,
              2006Assets:CurrentCash
            
            $
            227,226
            
            
            $
            29,756Receivable
            
            
            35,744
            
            
            
            28,196Subscriptions
      receivable
            
            
            454,824
            
            
            
            -Prepaid
            
            
            286
            
            
            
            -Total
      current assets
            
            
            718,080
            
            
            
            57,952Non-currentFunds
      held in trust
            
            
            -
            
            
            
            604,479Equipment
      – net
            
            
            1,055
            
            
            
            3,125Exploration
      and evaluation
            
            
            1,278,243
            
            
            
            591,116Total
      non-current assets
            
            
            1,279,298
            
            
            
            1,198,720Total
      Assets
            
            $
            1,997,378
            
            
            $
            1,256,672Current
      Liabilities:Accounts
      payable
            
            $
            465,942
            
            
            $
            394,836Cash
      call payable – exploration
            
            
            680,033
            
            
            
            -Due
      to officers and directors
            
            
            178,125
            
            
            
            204,540Loans
      from shareholders
            
            
            99,990
            
            
            
            179,990Litigation
      payable
            
            
            -
            
            
            
            820,000Total
      current liabilities
            
            $
            1,424,090
            
            
            $
            1,599,366Contingencies
      and commitments
            
            
            -
            
            
            
            -Shareholders’
      Equity:Deficit
      accumulation during exploration stage
            
            $
            (4,354,221
            )
            
            $
            (2,313,459
            )Common
      stock $0.0001 par value, 100,000,000 shares authorized, 42,367,593 shares
      o/s.
            
            
            4,236
            
            
            
            3,449Additional
      paid-in capital
            
            
            4,498,832
            
            
            
            1,904,816Warrants
      & Options: 625,000 Series A warrants; 1,396,667 Series B warrants;
      2,250,000 ESOP;106,055 Broker warrants o/s
            
            
            462,624
            
            
            
            62,500Preferred:
      10,000,000 shares authorized, non issued
            
            
            -
            
            
            
            -Foreign
      exchange adjustment
            
            
            (38,183
            )
            
            
            -Total
      Shareholders’ Equity
            
            
            573,288
            
            
            
            (342,694
            )Total
      Shareholders’ Equity and Liabilities
            
            $
            1,997,378
            
            
            $
            1,256,672




(The
accompanying notes are an integral part of these financial
statements)




F-2
 Table of Contents





Mogul
Energy International, Inc.


(an
exploration stage enterprise)


Statements
of Operations


(expressed
in U.S. dollars)




Year
      ended
              December
      31, 2007
            
            
            Year
      ended
              December
      31, 2006
            
            
            Cumulative
      from
              July
      25, 2005
              (inception)
      to
              December
      31, 2007RevenueDeferred
      revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -Expenses:General
      and administrative
            
            $
            (738,584
            )
            
            $
            (591,821
            )
            
            $
            (1,467,326
            )Impairment
            
            
            (1,302,177
            )
            
            
            (764,719
            )
            
            
            (2,066,895
            )Settlement
      of lawsuit
            
            
            -
            
            
            
            (820,000
            )
            
            
            (820,000
            )Net
      loss for the periods
            
            $
            (2,040,761
            )
            
            $
            (2,176,540
            )
            
            $
            (4,354,221
            )Basic
      and diluted loss per share
            
            $
            (0.05
            )
            
            $
            (0.07
            )Weighted
      average common shares outstanding
            
            
            37,449,327
            
            
            
            32,472,032





(The
accompanying notes are an integral part of these financial
statements)


F-3
 Table of Contents


Mogul
Energy International, Inc.


(an
exploration stage enterprise)


Statement
of Shareholders’ Equity


(expressed
in U.S. dollars)











Number
      of
              Common
      shares
            
            
            Par
      Value
            
            
            Additional
              Paid
      in Capital
            
            
            Warrant
              &
      Options
            
            
            Translation
              Adjustment
            
            
            Deficit
              Accumulated
      During
              Exploration
      Stage
            
            
            TotalsShares
      issued at $0.001
            
            
            29,264,310
            
            
            
            2,926
            
            
            
            26,338
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            29,264Shares
      issued at $0.15
            
            
            590,000
            
            
            
            59
            
            
            
            88,441
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            88,500Shares
      issued at $0.40
            
            
            717,500
            
            
            
            72
            
            
            
            286,928
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            287,000Net
      loss for period
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            (136,919
            )
            
            
            (136,919
            )12/31/2005
      balances
            
            
            30,571,810
            
            
            $
            3,057
            
            
            $
            401,707
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (136,919
            )
            
            $
            267,845Shares
      issued at $0.40
            
            
            2,665,000
            
            
            
            267
            
            
            
            1,065,734
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,066,001Units
      (Shs & wnts) at $0.40
            
            
            1,250,000
            
            
            
            125
            
            
            
            437,375
            
            
            
            62,500
            
            
            
            -
            
            
            
            -
            
            
            
            500,000Net
      loss for the year
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,176,540
            )
            
            
            (2,176,540
            )12/31/2006
      balances
            
            
            34,486,810
            
            
            $
            3,449
            
            
            $
            1,904,816
            
            
            $
            62,500
            
            
            $
            -
            
            
            $
            (2,313,459
            )
            
            $
            (342,694
            )Shares
      for lawsuit @$0.40
            
            
            2,000,000
            
            
            
            200
            
            
            
            799,800
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            800,000Shares
      for cash
            
            
            2,045,334
            
            
            
            204
            
            
            
            280,879
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            281,083Subscribed
      shares @$0.18
            
            
            -
            
            
            
            -
            
            
            
            462,324
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            462,324Sh
      and opt for debt for cash
            
            
            3,366,667
            
            
            
            337
            
            
            
            1,168,663
            
            
            
            267,500
            
            
            
            -
            
            
            
            -
            
            
            
            1,436,500Sh
      and opt for services
            
            
            468,786
            
            
            
            46
            
            
            
            116,350
            
            
            
            132,624
            
            
            
            -
            
            
            
            -
            
            
            
            249,020Deferred
      Compensation
            
            
            -
            
            
            
            -
            
            
            
            (234,000
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (234,000
            )Translation
      adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (38,183
            )
            
            
            -
            
            
            
            (38,183
            )Net
      loss for the year
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,040,762
            )
            
            
            (2,040,762
            )12/31/2007
      balances
            
            
            42,367,597
            
            
            $
            4,236
            
            
            $
            4,498,832
            
            
            $
            462,624
            
            
            $
            (38,183
            )
            
            $
            (4,354,221
            )
            
            $
            (573,288
            )





(The
accompanying notes are an integral part of these financial
statements)


F-4
 Table of Contents




Mogul
Energy International, Inc.


(an
exploration stage enterprise)


Statements
of Cash Flows


(expressed
in U.S. dollars)





For
      the Year
              ended
      December 31
            
            
            Cumulative
      from
              July
      25, 2005
              (inception)2007
            
            
            2006
            
            
            to
      December 312007Operating
      ActivitiesNet
      loss for periods
            
            $
            (2,040,762
            )
            
            $
            (2,176,540
            )
            
            $
            (4,354,221
            )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      expense (office)
            
            
            2,070
            
            
            
            2,077
            
            
            
            5,154Impairment
            
            
            1,302,177
            
            
            
            764,719
            
            
            
            2,066,897Shares
      and options for services
            
            
            249,020
            
            
            
            -
            
            
            
            249,020Changes
      in non-cash working capitalAccounts
      payables (decrease) increase
            
            
            71,106
            
            
            
            352,409
            
            
            
            465,942Receivable
      increase
            
            
            (7,548
            )
            
            
            (24,428
            )
            
            
            (35,477
            )Prepaid
            
            
            (286
            )
            
            
            -
            
            
            
            (286
            )Litigation
      payable
            
            
            (820,000
            )
            
            
            820,000
            
            
            
            -Cash
      used in operations
            
            
            (1,244,223
            )
            
            
            (261,763
            )
            
            
            (1,602,971
            )Investing
      ActivitiesFunds
      held in escrow/trust
            
            
            604,479
            
            
            
            (604,479
            )
            
            
            -Purchase
      equipment
            
            
            -
            
            
            
            (3,187
            )
            
            
            (6,209
            )Deposit
      for exploration property
            
            
            -
            
            
            
            77,441
            
            
            
            -Exploration
      and evaluation
            
            
            (1,189,304
            )
            
            
            (1,204,845
            )
            
            
            (2,737,627
            )Cash
      used for investing activities
            
            
            (584,825
            )
            
            
            (1,735,070
            )
            
            
            (3,351,349
            )Financing
      ActivitiesDue
      to officers and directors
            
            
            (26,415
            )
            
            
            167,716
            
            
            
            178,125Related
      party payables
            
            
            -
            
            
            
            (12,691
            )
            
            
            -Cash
      call payable
            
            
            680,033
            
            
            
            -
            
            
            
            680,033Loans
      from shareholders
            
            
            (80,000
            )
            
            
            179,990
            
            
            
            99,990Sale
      of equity securities
            
            
            281,083
            
            
            
            1,566,000
            
            
            
            4,261,848Shares
      and option for debt for cash
            
            
            410,000
            
            
            
            -
            
            
            
            -Shares
      issued for litigation payable
            
            
            800,000
            
            
            
            -
            
            
            
            -Cash
      from financing activities
            
            
            2,064,701
            
            
            
            1,901,016
            
            
            
            5,219,996Foreign
      exchange adjustment
            
            
            (38,183
            )
            
            
            -
            
            
            
            (38,450
            )Increase
      (Decrease) in cash during
            
            
            197,470
            
            
            
            (95,817
            )
            
            
            265,676Cash
      beginning of periods
            
            
            29,756
            
            
            
            125,573
            
            
            
            -Cash
      at end of periods
            
            $
            227,226
            
            
            $
            29,756
            
            
            $
            227,226Interest
      and taxes paid during period
            
            None
            
            
            None
            
            
            None





(The
accompanying notes are an integral part of these financial
statements)


F-5
 Table of Contents





Mogul
Energy International, Inc.


(an
exploration stage enterprise)


Statement
of Cash Flows


Supplemental
Information




Cumulative
      from
              July
      25, 2005
              (inception))
              to
      December 31 ,2007Supplemental
      disclosure of non-cash working capital activities:-Issue 2,000,000
      shares of common stock to settle lawsuit
            
            $
            800,000-Issued
       178,07 7 shares of common stock as compensation
            
            $
            66,000-Issued
      290,709 shares of common stock as payment for services
            
            $
            50,396-Issued
      1,366,669 shares of common stock and options to repay shareholders
      loans
            
            $
            410,000-Issued
      2,000,000 shares of common stock for Resource Property
            
            $
            800,000





(The
accompanying notes are an integral part of these financial
statements)


F-6
 Table of Contents


NOTE
1 - Organization and Nature of Business





Mogul
Energy International, Inc. (Company) was formed as a Delaware corporation on
July 25, 2005 to engage in the business of oil and gas
exploration.  The Company’s business activities included financing and
acquiring drilling prospects and exploration for oil and gas.





The
Company acquires low entry cost exploration prospects, as measured on a dollar
per barrel for proven and potential reserves in proximity to producing oil
fields, and exploring for oil and gas reserves.





NOTE
2 - Accounting Policies





Financial
Statement Presentation and Going Concern





The
Company is considered an exploration stage corporation because it has had no
revenues from its intended principal business and has not yet achieved
commercial production.





The
Company has working capital deficiency, a history of operating losses, and a
$4,354,221 accumulated deficit on December 31, 2007.  These matters
raise substantial doubt about the ability of the Company to continue as a going
concern. Management plans to address these matters through the sale of
additional shares of its common stock and/or additional borrowings to finance
the Company’s operations.





Although
there is no assurance that the Company will be successful in these actions,
management believes that it will be able to secure the necessary financing to
continue operations for the foreseeable future.  Accordingly, these
financial statements do not reflect adjustments to the carrying value of assets
and liabilities, the reported expenses and balance sheet classifications used
that would be necessary if the going concern assumption were not
appropriate.  Such adjustments, if needed, would be material and would
have an adverse effect on the ability of the Company to continue as a going
concern.





Use
of Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires use of estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets and liabilities and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Because of various factors affecting future costs and operations, actual results
could differ from estimates. Principal estimates used in the preparation of the
financial statements include estimates for carrying amounts of exploration
properties, the realizable value of capitalized resource properties including
exploration and evaluation costs as well as amounts recorded for impairment
related to these capitalized resources. Future operations will be affected to
the extent there are material differences between the estimated and actual
amounts.





Oil
and Gas Properties





The
Company utilizes the full-cost method of accounting for the exploration of its
oil and gas properties. Under this method, the Company capitalizes all costs
associated with acquisition, exploration and development of oil reserves,
including leasehold acquisition costs, geological and geophysical expenditures,
lease rentals on undeveloped properties, directly related overhead costs and
related asset retirement costs and costs of drilling exploratory productive and
non-productive wells into full cost pools on a country-by-country basis. The
Company currently has two full-cost pools, Canada and Egypt.





The
Company applies a ceiling test quarterly to the capitalized costs in its full
cost pools. Amounts in excess of the ceiling test limits are charged to
operations as impairment expense in the period of the test until proven reserves
are available. The ceiling test limits such cost to the estimated present value,
using a ten percent discount rate, of the future net revenue from any proved
reserves, based on the existing economic and operating conditions. Specifically,
the ceiling test is calculated so that capitalized cost, less accumulated
depletion and related deferred income tax, do not exceed an amount (the ceiling)
equal to the sum of: (A) The present value of estimated future net revenue
computed by applying current prices of any oil and gas reserves (with
consideration of price changes only to the extent provided by
contractual  arrangements) to estimated future production of proved
oil and gas reserves as of the date of the latest balance sheet presented, less
estimated future expenditures (based on current cost) to be incurred in
developing and producing the proved reserves computed using a discount factor of
ten percent and assuming continuation of existing economic conditions; plus (B)
the cost of property not being amortized; plus (C) the lower of cost or
estimated fair value of unproven properties included in the costs being
amortized; less (D) income tax effects related to differences between the book
and tax basis of the property.


F-7
 Table of Contents


For
unproven properties, the Company excludes from capitalized costs subject to
depletion, all costs directly associated with the acquisition and evaluation of
the unproved property until it is determined whether or not proved reserves can
be assigned to the property. Until such a determination is made, the Company
assesses the property at least annually to ascertain whether impairment has
occurred. In assessing impairment the Company considers factors such as
historical experience and other data such as primary lease terms of the
property, average holding periods of unproved property, and geographic and
geologic data. The Company adds the amount of impairment assessed to the cost to
be amortized subject to the ceiling test. At December 31, 2007, the Company had
no properties with proven reserves and recorded impairment charge of $37,860 for
contracts either discharged or never entered into on its Canadian cost pool and
an impairment charge of $1,264,317 for cost capitalized in relation to a dry
hole in the Egyptian cost pool.





Oil and
gas property costs are considered tangible assets consistent with the views set
forth in Emerging Issues Task Force Issue 04-02.





Revenue
Recognition





The
Company will recognize petroleum and natural gas revenues from its interests in
producing wells as petroleum and natural gas is produced and sold from these
wells and ultimate collection is reasonably assured.





Cash




Cash,
demand deposits and investment securities with maturities of no more than 90
days are considered cash for financial reporting purposes.





Goods
and Services Tax Receivables (GST)





The
Company was owed $35,744 as of December 31, 2007 related to the Canadian GST
tax. Management expects that the full amount to be paid (refunded) within 12
months of the balance sheet date. Due to the nature of this receivable
Management does not consider an allowance for uncollectible to be
necessary.





Equipment





The
Company capitalizes the costs of equipment during the year placed in service,
and depreciates these assets over three years using the straight-line method.
During 2007 and 2006, the Company capitalized purchases of office equipment of
$3,187 and $3,022, respectively.  No equipment has been acquired and
capitalized in 2007.





Abandonment
Costs





Liabilities
for costs to abandon exploration properties are estimated and reflected in the
financial statements in the
period that exploratory drilling activities commence with a corresponding amount
added to exploration costs. The amount recognized is the present value of the
estimated future expenditure determined in accordance with local conditions and
requirements. Change in the present value of the estimated expenditure is
reflected as an adjustment to the provision and the capitalized exploration
costs. A provision for abandonment costs is recognized at the commencement of
production, or in the period the decision is made to abandon unsuccessful
properties. As of December 31, 2007, the Company had no production, or proven or
probable reserves or abandonment costs.





Foreign
Exchange Rate





The
Company’s functional and reporting currency is the United States
Dollar.  Transactions denominated in foreign currencies are translated
into US dollars at the rate of exchange in effect at the date of the
transaction.  Monetary assets and liabilities denominated in foreign
currencies have been translated into US dollars at the rate of exchange in
effect at the balance sheet date with the impact reflected as the cumulative
translation adjustment in the equity section of the balance sheet, a foreign
exchange translation adjustment of $38,183.  Losses resulting from
translation are included in the determination of income. Gains from currency
transactions of $1,903 and $4,548 were accounted for as a reduction of general
and administrative expenses during 2007 and 2006, respectively.





Income
Taxes





The
Company accounts for income taxes in accordance with the Statement of Financial
Accounting Standards No. 109, which requires, among other things, that the
Company can provide a net deferred tax asset or liability equal to the expected
future tax benefit or expense of temporary reporting differences between book
and tax accounting and any available operating loss carry-forward.  On
December 31, 2007, the Company had a net operating loss carry-forward of
approximately $1,578,921 ($3,089,905, less $706,000 and $804,984 in losses
flowed through to Canadian investors 2006 and 2007 respectively), available to
reduce income taxes in future years. Because of the uncertainties surrounding
the realization of any economic benefit related to the deferred net loss
carry-forward, an allowance account has been established so that no future
benefit is reflected as an asset at December 31, 2007.


F-8
 Table of Contents


Share
Issue Costs





Finder’s
fees and commissions paid to agents and underwriters and share issue costs such
as legal, accounting, auditing, and printing costs incurred on the issuance of
shares are charged directly to share capital.





Stock-based
Compensation




The
Company has adopted the fair value recognition provisions of SFAS No. 123R
“Share Based Payments”, using the modified retrospective transition method. The
Company has not issued any stock options since its inception. Accordingly, there
was no effect on the Company’s reported loss from operations, cash flows or loss
per share as a result of SFAS No. 123R.





NOTE
3 - Related Party Transactions





On June
29, 2005, the Company acquired the right to acquire an option for a 20%
working-interest in the EWA Concession (see note 5) from Mogul Energy Ltd. (MEL)
for $75,000. The Company subsequently exercised this option. MEL’s president, a
close family member of the Company’s president, owned 26% of the Company’s
outstanding shares as of December 31, 2006.  Also, MEL’s president is
a major shareholder and Board member of Sea Dragon Energy Inc.





Sea
Dragon Energy Inc. acquired the right to acquire a 40% working-interest in the
EWA Concession from MEL on April 13th, 2006.
The Company together with Sea Dragon Energy Inc. met the requirement for the EWA
Concession by depositing $2,000,000 with an escrow agent.  Also,
accounting and administrative work for the Company, MEL and Sea Dragon Energy
Inc. are conducted by the same individuals from office space located in
Vancouver, British Columbia.





On
November 8, 2005, the Company acquired a 50% working-interest in the Fairlight
prospect, with MEL retaining a 25% carried-interest.





The
Company and MEL have entered into an agreement with Transpacific Petroleum Corp.
(Transpacific) to be the Operator for oil and gas exploration of the Fairlight
prospect. Under the terms of this agreement, the Company is obligated to pay the
expenses incurred by the Operator for exploration and related work on this
prospect. As consideration for being the Operator, Transpacific received from
MEL a 25% carried-interest in the Fairlight prospect for the first exploration
well, and a 25% working-interest thereafter.





The
Company owed its officers and directors $178,125 at December 31, 2007, including
$92,949 for noninterest bearing short-term loans and $47,700 for accrued
salaries. The remainder is owed to the president of the Company for unreimbursed
travel expenses incurred on behalf of the Company.





The
Company also owes two shareholders $99,990 for demand loans made to the
Company.





The
Company owes Sea Dragon Energy Inc (Sea Dragon) $680,033 for a cash call
payable, representing cash calls required to be paid by the Company to fulfill
its 1/3rd working
interest in the exploration program on the EWA Concession in 2007 (Note 5).
These cash calls were paid by Sea Dragon on the Company’s behalf.  The
payable is to be satisfied through the completion of the Sale and Purchase
Agreement between Egypt Oil Holdings and the Company (Note 12).  The
amount payable is noninterest bearing, unsecured, and has no other specific
terms or conditions.





Other
disclosures involving related parties are found throughout the notes to the
financial statements.





NOTE
4 - Capital Stock





Common
Stock





The
Company’s authorized shares have no conversion rights and are not subject to
redemption or to any sinking fund provisions. All shares of common stock are
entitled to share equally in any dividends and in any liquidation of the
Company. The Company’s common shares do not carry either cumulative voting or
preemptive rights. During 2006, 1,765,000 shares were issued on a Flow-through
basis pursuant to the income tax laws of Canada (Income Tax Act
(Canada)).


F-9
 Table of Contents


During
2006, the Company issued 1,250,000 units consisting of one share of common stock
and one Series A Warrant. The Series A warrants are not transferable. Two of
these warrants and $0.50 can be exchanged for one share of common stock. These
warrants expire on April 18, 2008, and all 1,250,000 warrants were outstanding
at December 31, 2007.





On August
8th,
2007 the Company approved a stock incentive plan and granted 2,250,000 stock
options to executive officers, directors and employees.  The fair
value of the stock options was $229,500.





On August
28, 2007 the company issued 1,366,667 units valued at $0.30 per share to repay a
shareholder loan of $410,000.  Each unit was made up of one common
share and one Class B warrant.  Each Class B warrant allows the holder
to purchase one share of the Company’s stock at $0.40 per share for a period of
two years.  The fair value of the shares was $369,000 and the fair
value of the Class B warrants was $41,000.





On
November 12, 2007, the Company issued a press release pursuant to Rule 135c
(“Rule 135c”) of the United States Securities Act of 1933 (the “Securities
Act”), as amended, announcing its intention to conduct two private placements of
its common stock to investors in Canada:  one offering on a flow-through
basis, pursuant to the Income Tax Act (Canada), and another non-flow-through
offering.  The Company expects to raise approximately $3 million through
the private placements.  The shares to be issued under the private
placements have not been registered under the Securities Act and may not be
offered or sold directly or indirectly within the United States or to or for the
account or benefit of U.S. Persons (as such term is defined in Regulation S as
promulgated under the Securities Act) absent registration or an applicable
exemption from registration.  The Company believes that the shares, which
will be sold only to persons who are not U.S. Persons, are exempt from
registration under Regulation S.





In
connection with the November 12th, 2007
press release, announcing the intention of the Company to conduct two private
placements of its common stock to investors in Canada: one offering on a flow
through basis and the other on a non-flow-through basis.  On December
31, 2007 the company issued 1,945,334 on a Flow-through basis pursuant to the
income tax laws of Canada (Income Tax Act (Canada)) at a price of $0.18 for one
common share of the company.  Total proceeds of the offering were
$281,083 on December 31, 2007.  An additional 2,526,800 common shares
had been subscribed for as of December 31, 2007 and cash of 454,824 had been
received for the flow-through shares were issued subsequent to December 31,
2007.  Share issuance costs amounted to $83,977.  In
connection with this issue the company issued 106,055 finders’ fee
warrants.  Each warrant allows the holder to purchase one common share
of the company for $0.20 per common share for a period of two
years.  The fair value of the warrants was $8,124 calculated using the
Black-Scholes method: risk free rate 3.05%, share price $0.18, strike price
$0.20, volatility 83% and dividend yield 0.00.





On
December 31, 2007 the company issued 100,000 shares for $0.15 per common share
for total proceeds of $15,000.





Warrant
and Options





The
following are details related to warrants issued by the company to
shareholders:





December 31, 2007
            
            
            December 31, 2006Shares
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Shares
            
            
            Weighted
              Average
              Exercise
              PriceOutstanding
      warrannts at beginning of the period
            
            
            625,000
            
            
            $
            0.10
            
            
            
            625,000
            
            
            $
            0.10Warrants
      Granted
            
            
            1,396,669
            
            
            $
            0.03ExercisedForfeitedExpiredOutstanding
      at the end of period
            
            
            2,021,669
            
            
            $
            0.05
            
            
            
            625,000
            
            
            $
            0.10





Fair
Value Assumptions – The fair value of warrants and options granted is estimated
on the date granted using the Black-Scholes option pricing model with following
weighted average assumptions used for the grants:





1.
            For
      the period ended September 30, 2007, risk free interest rates ranging from
      3.73% to 4%, expected dividend yields of zero, expected life ranging from
      two years, and expected volatility ranging from 2% to
  51%.


F-10
 Table of Contents


2.
            For
      the year ended December 31, 2006 the valuation of the warrants was
      estimated on a reasonability test as the stock was not publicly traded at
      that time.





The
following are details related to warrants issued by the company as finders’
fees:





December 31, 2007Shares
            
            
            Weighted
              Average
              Exercise
              PriceWarrants
      Granted
            
            
            106,055
            
            
            $
            0.20ExercisedForfeitedExpiredOutstanding
      at the end of period
            
            
            106,055
            
            
            $
            0.20








For the
period ended December 31, 2007,  risk free rate was 3.05%, expected
dividend yield of zero, expected life of 2 years, and expected volatility of
82%. A summary of the status of the warrants under various agreements follows
during fiscal 2007:





Warrants
      Outstanding
            
            
            Warrants
      ExercisableRange
      of
              Exercise
      Prices
            
            
            Number
              Outstanding
            
            
            Weighted
              Average
              Remaining
              Contractual
              Life
      (years)
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Number
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price$
            0.40
            
            
            
            1,396,669
            
            
            
            2.00
            
            
            $
            0.40
            
            
            
            1,396,669
            
            
            $
            0.40





.For year
ended December 31, 2006





Warrants
      Outstanding
            
            
            Warrants
      ExercisableRange
      of
              Exercise
      Prices
            
            
            Number
              Outstanding
            
            
            Weighted
              Average
              Remaining
              Contractual
              Life
      (years)
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Number
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price$
            0.50
            
            
            
            625,000
            
            
            
            0.63
            
            
            $
            0.50
            
            
            
            625,000
            
            
            $
            0.50





Employee
Stock Option Plan





On August
7th,
2007 the Company granted 2,250,000options to Directors and employees of the
Company.  These options vest at a rate of 20% per
quarter.  To date 900,000 options have vested.  The
following table summarizes the continuity of the Company’s stock
options:





December 31, 2007Options
            
            
            Weighted
              Average
              Exercise
      PriceOptions
      outstanding
            
            
            900,000
            
            
            $
            0.30Exercised
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -Outstanding
      at the end of period
            
            
            900,000
            
            
            $
            0.30





The fair
value of the options was calculated using the Black Scholes method: risk free
rate 3.73%, share price $0.28, strike price $0.30, volatility 51% and dividend
yield 0.00.





Compensation
charges associated with the employee stock option plan in the amount of $117,000
is included in the statement of operations for the year ended December 31,
2007.





Preferred
Stock





The
Company’s Articles of Incorporation authorize its Board of Directors, without
approval from the common shareholders, to issue 10,000,000 shares of preferred
stock in any series, rights and preferences as determined by the Board.
Preferred shares may be issued that: have greater voting rights than the common
stock, diluting the value of any outstanding shares of common
stock.


F-11
 Table of Contents


NOTE
5 - Oil and Gas Properties





Working-interests
owned by the Company are the rights to drill, produce and conduct operating
activities on the property and to a share of any production subject to all
related royalties, overriding royalties and other burdens, and to all costs of
exploration, development and operations and all risks. Of the working-interest
at December 31, 2007, $75,000 relates to the East Wadi Araba Concession (EWA
Concession). At December 31, 2007 a further $1,264,317 classified as impaired
and expensed due to a dry hole on property with unproven reserves, in the Egypt
cost pool.  As of December 31, 2007 Canadian Freehold properties
consist of $1,203,240 At December 31, 2007 acquisition cost
of  $37,860 was classified as impaired and expensed relating to
options on contracts entered into but either discharged or never elected. During
2006,  $764,719 was classified as impaired and expensed due to a dry
hole, in the Canadian cost pool.





EWA
Concession





The EWA
Concession is located in the East Wadi Araba area of the Gulf of Suez and is
part of the sovereign territory of the Arab Republic of Egypt (A.R.E.). The EWA
Concession covers an area for exploration about 294 square kilometers.
Subsequent to the balance sheet date, the Company exercised its option to
acquire a 20% working-interest in the EWA Concession, which was originally
acquired from MEL.





The Concession
Agreement





The
Concession Agreement for Petroleum Exploration and Exploitation (Concession
Agreement) dated April 7, 2002 is an agreement between Dover Investments Limited
(Dover), A.R.E, and the Egyptian General Petroleum Corporation (EGPC). The
Concession Agreement gives Dover certain rights and interests for the exclusive
exploitation of petroleum and natural gas in and throughout the EWA
Concession.





Farmout
Agreement





The
parties to the August 6, 2005 Binding Farm-Out Agreement (Farmout Agreement),
include Dover, MEL, Transpacific and Dr. Ghareeb M. Awad (the president of
Transpacific). Under the Farmout Agreement, MEL was assigned 85%
working-interest in the Concession Agreement, subject to the satisfaction of
certain conditions, with Dover retaining a 15% carried-interest. Under a
separate agreement dated August 7, 2005, MEL assigned a 25% carried-interest in
the Concession Agreement to Transpacific. Dover, MEL and Transpacific are each
organized under the laws of Canada.





On April
13, 2006, the Farmout Agreement was amended so that an obligation to deposit
$2,000,000 with an escrow agent replaced the requirement of a Letter of
Guarantee. In satisfaction of the amended agreement, $2,000,000 was deposited
with an escrow agent on April 21, 2006, the Company contributing $667,000 and
Sea Dragon Energy Inc. contributing $1,333,000.





On August
1, 2006 the funds were transferred, as per the Amending Agreement dated April
13, 2006, to the National Bank of Abu Dhabi in Egypt.  These funds
will be used at the discretion of the operator, Dover Investments Limited, to
drill the first well required on the concession by July 17, 2007 as per the
extension agreement dated January 24, 2007 (See Note 9).





After
amending the Farmout Agreement on April 13, 2006, the ownership interests in the
EWA Concession are as follows:




Sea
      Dragon Energy Inc.
            40%
      Working-interestMogul
      Energy International, Inc.
            20%
      Working-interestTranspacific
      Petroleum Corp.
            25%
      Carried-interestDover
      Investments Limited
            15%
      Carried-interest





The
Company’s portion of the letter of guarantee was satisfied by the deposit of
$667,000 formerly held in trust to secure the working interest in the Egyptian
Concession.  As per agreement these funds are currently held jointly
by Dover and Sea Dragon at the National Bank of Abu Dhabi in Egypt and will be
used to carry out exploration activities on the EWA Concession.  Dover
is the current operator of the project in Egypt.





In the
event of a commercial discovery the parties to the April 13th Farmout
Agreement are entitled to recover all costs, expenses and expenditures in
respect of the exploration, development and related operations out of 30% of all
petroleum produced and saved respective of each parties percentage interest in
the Agreement (Cost Recovery Petroleum).  Past exploration costs which
have been approved by EGPC are approximately US$ 8 million of which the Company
will be entitled to 20% recovered through oil profits.


F-12
 Table of Contents


The
remaining 70% of petroleum is divided between the Egyptian General Petroleum
Corporation (EGPC) and the parties to the Farmout Agreement as
follows:




Crude Oil and
      Gas
            EGPC
            Parties
      to
              Farmout
              AgreementUp
      to 25,000 BOPD
            75%
            25%Greater
      than 25,000 BOPD
            80%
            20%





An
Extension Agreement was executed on January 24, 2007 between Dover Investments
Limited, Transpacific, Mogul Energy Ltd., Dr. Awad, Sea Dragon Energy Inc. and
Mogul Energy International, Inc. allowing Sea Dragon Energy Inc. and Mogul
Energy International, Inc. until July 17, 2007 to complete the first well, and
until July 17, 2009 to complete a second and to third well subject to the
approval from EGPC and ARE.





Exploratory Drilling on EWA
Concession





On
September 18, 2007, the Company received notification from the project
operator, Dover, that the deviated onshore EWA-4X well penetrated a
Carboniferous Nubia formation with several potential sandstone
reservoirs.  None of these potential reservoirs provided indications
of economic hydrocarbon accumulations.  The well was electric
wire-line logged and prepared for final plugging and abandonment.  The
EWA Concession is being retained and no impairment was recognized during the
period.  Costs of $1,339,317 incurred to date primarily consist of
materials and drilling, geological and geophysical consulting fees and general
and administrative related to exploration activities in Egypt.





During
2007, the Company’s interest in the original escrow balance amount was reduced
to a nominal value with the $604,146 difference added to exploration
costs.  Additional costs related to the of $680,033 are classified as
amounts payable and are payable to Sea Dragon and relate to costs associate to
drilling the exploratory well that have been paid for by Sea Dragon on Mogul’s
behalf.  The payable is to be paid off based on the terms of the Sale
and Purchase Agreement between Egypt Oil Holdings Ltd. (EOH) and Mogul for the
acquisition of Moguls 20% working interest being acquired by EOH (See Subsequent
Event Note).





Canadian
Property Interests





Exploratory
Drilling





On May
28, 2006 a drill stem test at exploratory well no. 1 (the Fairlight Prospect)
was concluded. The aggregate capitalized cost for this test well was $764,719.
No hydrocarbons were recovered although certain shows were encountered during
drilling. The well has been plugged and abandoned.  No further
exploration on the Fairlight Prospect is planned and the lease on this specific
property will expire on March 31, 2007 and will not be renewed. Data gained from
the well has been evaluated to determine further exploration plans on the
Freehold Properties.  Costs of this dry hole exceeded the cost ceiling
test for the cost pool, resulting in an impairment charge to operations for 2006
for the full aggregate cost of the exploratory well.





Freehold
LeaseAcquisitions





The
company has continued to acquire mineral rights in what it refers to as its
Freehold Properties.  Costs for acquisition and purchase of these
leases account for approximately $1,203,247.  The Company currently
holds the oil and gas mineral rights to approximately 9,300 acres.





The
Company held a 50% working-interest in an additional 9,300
acres.  During 2007, the company entered into agreements with both
Transpacific and MEL giving it 100% interest in these properties (See Note
9).  These properties are leases for 3 years with a lump sum rental
fee plus a royalty of 15% of all leased substances produced, saved and sold if
used by the lessee less any expenses reasonably incurred (including a reasonable
rate of return) for separating, treating, processing, compressing and
transporting leased substances to the point of sale beyond the wellhead. There
is no obligation to do any work on these leased lands.





On
January 24, 2007 Mogul Energy Ltd. Agreed to assign its 25% interest in all
mineral interests in lands referred to as the Freehold Properties to Mogul
Energy International, Inc. in consideration for 1,000,000 shares of the
Company’s common stock.  Thereby, giving MEI a 100% interest in the
9,300 acres collectively referred to as the Freehold Properties.  The
fair value of the 1,000,000 common shares received by Mogul Energy Ltd. is
$400,000.


F-13
 Table of Contents


Mogul
Energy International, Inc. is the sole operator of the Freehold
Properties.





NOTE
6 - Commitments





Office
Lease





The
Company rents office space from a Director of the Company on a month-to-month
basis for $390 per month.




NOTE
7 - Contingencies





Environmental
Uncertainties





The
Company may be exposed to financial risks in the oil and gas exploration
business for pollution or hazards against which it cannot adequately insure or
which it may elect not to insure. Incurring any such liability may have a
material adverse effect on our financial position and operations.





Governmental
Regulations and Licensing





The
Company’s rights in and to the EWA Concession are subject to obtaining
governmental approvals; if such approvals are not obtained, the Company’s
planned operations will be substantially curtailed.





In order
to drill for, recover, transport or sell any gas or oil from the properties
subject to the Company’s drilling rights, the Company will generally be required
to obtain additional licenses and permits and enter into agreements with various
landowners and/or government authorities. The issuance of these permits and
licenses generally will be contingent upon the consent of the governmental
authority having jurisdiction over the property, which entities have broad
discretion in determining whether or not to grant such authority. These
licenses, permits, and agreements will generally contain numerous restrictions
and require payment of development and exploration fees and royalties typically
based on the recoverable reserves or expenditures. The amount of any such fee
and royalties and other terms will determine in part, the commercial viability
of any extraction prospect.





NOTE
8 - Loss Per Share





Loss per
share is calculated using the weighted average number of shares issued during
the relevant period. The weighted average number of common shares is 37,449,327
and 6,923,307shares for the periods ended December 31, 2007 and 2006
respectively.





NOTE
9 - Capitalized costs relating to the oil and gas acquisitions and exploration
activity




CanadaCosts atDec. 31,
      2006
            
            $
            441,103
            
            
            $
            -Additions:Exploration
            
            $
            -Lease
      property acquisition costs
            
            $
            800,000Less
      impairment during 2007
            
            
            (37,860
            )At
      Dec. 31, 2007
            
            
            
            
            
            
            -Provided
      during the period
            
            
            
            
            
            
            -Net
      book value December 31, 2007
            
            
            
            
            
            $
            1,203,243EgyptCost atDec. 31,
      2006
            
            $
            150,013Additions:Exploration
      costs capitalized
            
            
            1,189,304Less
      Impairment during 2007
            
            
            (1,264,317
            )At
      December 31, 2007
            
            
            
            
            
            
            -Provided
      during the period
            
            
            
            
            
            
            -Net
      book value December 31, 2007
            
            
            
            
            
            
            75,000Total
      net book value at December 31, 2007
            
            
            
            
            
            $
            1,278,243


F-14
 Table of Contents


Note
10– Restatement





Based
      on a review of the impairment test under full cost accounting, the
      December 31, 2006 financial statements have been restated to reflect a
      correction of an error in applying the ceiling test specified by
      Regulation S-X, Rule 4-10(c) to the exploration and evaluation asset as of
      December 31, 2006.





As a
result of implementing the correct application of impairment test under
Regulation S-X, Rule 4-10(c), the restated December 31, 2006 financial
statements reflect an increased impairment charge and net loss from operations
in the amount of $764,719, resulting in an increase of net loss per share from
$(0.03) to $(0.07) for the year ended December 31, 2006, as restated. In
addition, exploration and evaluation assets and net assets decreased by
$764,719; and the December 31, 2006 retained deficit was increased by $764,719.
Cash flow from operating activities was not affected for the year ended December
31, 2006, however, a line item in the amount of $764,719 has been included to
reconcile net loss from operation to cash flow from operations for the year
ended December 31, 2006. Respective corrections were made for the restated
cumulative amounts for the period from inception to December 31, 2006. The
correct application of the impairment test did not affect any period other than
the year ended December 31, 2006.





NOTE
11 – Litigation Settlement





The
litigation filed by Dr. Ghareeb Awad and Transpacific Petroleum Corp. was
settled out of court on January 24, 2007.  Under the terms of the
settlement the Company agreed to issue 1,000,000 shares of common stock to Dr.
Awad and to issue 1,000,000 common shares and pay $20,000 cash to Transpacific
for the use of Transpacific’s EWA Seismic Mapping and interpreted Seismic
Sections and additional technical information and for the signing by Dr. Awad
and Transpcific to the Extension Agreement.   The fair value of
the 2,000,000 shares is estimated to be $800,000 based on the most recent cash
per share issuance of the Company’s common shares




NOTE
12 – Subsequent Events (Unaudited)





On
January 5, 2008 Dover Investments Ltd., the current operator on the EWA
Concession, entered into the Second Extension for the EWA Concession and the
relinquishment of 25% of the original Concession.  The extension was
pursuant to Sea Dragon putting in place a Letter of Guarantee of
US$3,483,114.  This was completed on January 15, 2008 within the time
allowable by EGPC.  As a result the Extension has been
granted.





The
Company has entered into an agreement with Egypt Oil Holdings Ltd. (“EOH”), a
Company incorporated under the Canadian Business Corporations Act on October 22,
2007 will acquire, though two Sale and Purchase agreements a 20% interest in the
EWA Concession from Mogul for 4,000,000 common shares and CDN$100,000
(USD$98,000), and a further 15% in the EWA Concession from the Dover Group for
5,000,000 shares of EOH’s common stock and Thereby, giving EOH a 35% interest in
the EWA Concession.




Sea
Dragon and EOH, have entered into a share exchange agreement effective March 21,
2008, to which Mogul is party.  Sea Dragon will issue to EOH,
24,000,000 common shares of Sea Dragon in exchange for all of the issued and
outstanding common shares of EOH.  EOH will become a fully owned
subsidiary of the Company upon completion of the share exchange.  Upon
the execution of the aforementioned agreements Sea Dragon will be the beneficial
holder of a 75% interest in the EWA concession.  Mogul, as a result of
the aforementioned agreements, will hold 4,000,000 shares of Sea
Dragon.





In
multiple closing subsequent to December 31, 2007 in relation to the
non-flow-through financing as outlined in the news release of November 12, 2007
the company has raised an additional $364,950 through the issuance of 2,433,000
shares at a price of $0.15 per common share.







ITEM
      8.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      ANDFINANCIAL DISCLOSURE.





None.


21
 Table of Contents


ITEM
8A.                   CONTROLS AND PROCEDURES.





As
required by Rule 13a-15 under the Exchange Act, as of the end of the period
covered by this report, being December 31, 2007, we evaluated the effectiveness
of the design and operation of our disclosure control and procedures. We are
responsible for establishing and maintaining adequate internal controls and
procedures for the financial reporting of our company. Disclosure control and
procedures are the controls and other procedures that we designed to ensure that
we record, process, summarize and report in a timely manner, the information we
must disclose in reports that we file with or submit to the SEC. Since his
appointment in September 29, 2005, Naeem Tyab, our President, and other
management and officers have implemented measures to revise and improve our
internal controls and procedures to increase our effectiveness. In addition,
further changes will be implemented over the ensuing year to ensure compliance
with internal policies and to evaluate on an ongoing basis the effectiveness of
our policies and improved disclosure control and procedures as they relate to
Section 404 of the Sarbanes-Oxley Act of 2002. In particular, as part of this
program we have engaged an independent accounting firm experienced in GAAP to
review and to advise in respect to the preparation of our financial statements,
and to provide accounting counsel on various matters relating thereto on an
ongoing basis. Further, we have also engaged independent accounting counsel with
experience in matters relating to taxation on a multi-jurisdictional level, to
advise and ensure the adequacy and accuracy of our tax reporting and disclosure
and that we are in compliance in this regard. In addition to the foregoing we
are continuing to implement further improvements to our internal controls and in
particular, to segregate accounting and financial reporting duties. There have
been no changes in our internal control over financial reporting during our
first fiscal year that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting, except as
discussed herein.





This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management’s report in this annual report.





ITEM
8B.                    OTHER INFORMATION.





The
Company has signed an Agreement of Purchase and Sale (the “Agreement”) with
Egypt Oil Holdings Ltd. (“Egypt Oil”), Sea Dragon Energy Inc. (“Sea Dragon”),
and Dover Investments Limited (“Dover”), and a related Share Exchange
Agreement.  The Agreement is still subject to a number of
factors.  Under the Agreement, Mogul agrees to sell its 20% working
interest in the East Wadi Araba (EWA) Concession in the Gulf of Suez, Egypt in
exchange for satisfaction of its outstanding liabilities (the “Debt Obligation”)
relating to the Company’s recent drill program on the EWA Concession and a cash
payment of US$100,000 and equity participation in the purchaser in the amount of
4 million (4,000,000) shares.  The Company estimates that the Debt
Obligation to be covered by the Agreement will be at least
US$650,000.  The Company will be seeking shareholder approval of the
Agreement once the transaction closes.





Sea
Dragon, Egypt Oil and Dover are private Canadian corporations.  Sea
Dragon and Dover have working and carried interests, respectively, in the EWA
Concession.  Certain of the Mogul’s management and significant
shareholders are also management and shareholders of Sea Dragon Energy
Inc.




ITEM
      9.
            DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
      CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
      ACT.





Directors,
Executive Officers, Promoters and Control Persons





The
following table and text set forth the names and ages of all directors and
executive officers of the Company as of the date of this report. The Board of
Directors is comprised of only one class. All of the directors will serve until
the next annual meeting of shareholders and until their successors are elected
and qualified, or until their earlier death, retirement, resignation or removal.
Executive officers serve at the discretion of the Board of Directors, and are
appointed to serve by the Board of Directors. Also provided herein are brief
descriptions of the business experience of each director and executive officer
during the past five years and an indication of directorships held by each
director in other companies subject to the reporting requirements under the
Federal securities laws.


22
 Table of Contents





Name
            Age
            Position
            Held Position
      SinceNaeem
      Tyab
            41
            President
      and Director
            September
      29, 2005Ernie
      Pratt
            57
            Director
            October
      2, 2006Sohail
      S. K. Kiani
            45
            Executive
      Vice President
            September
      29, 2005Robert
      C. Mussehl
            69
            Director
            August
      11, 2005Mohammad
      Khan
            30
            Treasurer
            September
      29, 2005




Business
Experience and Educational Background





The
following represents a summary of the business history of each of the named
individuals for the last five years:




Mr. Naeem Tyab - President and
Director




Mr. Tyab
has been the president and a director of the Company since September 29, 2005.
Between April 2002 and prior to his appointment as president of our Company Mr.
Tyab acted as an independent consultant to a number of public and private oil
and gas companies in relation to their financing and acquisition activities.
Prior thereto and from December 1997 to March 2002, Mr. Tyab was involved in the
venture capital and investment banking industry in his capacity as a registered
representative for a Canadian based securities dealer.




Mr. Sohail S. K. Kiani-
Executive Vice President




Mr. Kiani
has been the executive vice president of the Company since September 29, 2005.
For the previous four years Mr. Kiani has been an independent financial services
consultant specializing in the energy sector. In addition, from July 2001 to
October 2005, Mr. Kiani was a director and executive vice president for
Oracle Energy Corp. (TSX:V). Mr. Kiani graduated from the University of
Massachusetts with a Bachelor degree.




Mr.
Ernie Pratt - Director





During
the past 5 years Mr. Pratt has acted as President of Lateral Development Group
Ltd., a technical consulting company focused on Canadian and International oil
and gas exploration projects. Mr. Pratt has in excess of 32 years experience in
development and management of oil and gas exploration and development programs
in Canadian frontier areas, in western Canada and internationally. Mr. Pratt
graduated from the University of Alberta with a Masters of Science Degree with
specialization in Geology. He is a member of the Association of Professional
Engineers, Geologists and Geophysicists of Alberta and the American Association
of Petroleum Geologists.





Mr.
Robert C. Mussehl - Director




Since
2004 Mr. Mussehl
has been a principal partner in the law firm of Mussehl and Khan, located in
Seattle, Washington. Mr. Mussehl’s practice involves the representation of
injured persons, medical negligence and sports law. For the prior three years,
from 2000 to 2003, Mr. Mussehl practiced personal injury law with Mussehl and
Rosenberg in Seattle, Washington. Mr. Mussehl holds a B.A. in
Political Science fromAmericanUniversityinWashington,DCand a J.D. from American
University School of Law.




Mohammad
Khan - Treasurer




Since 2004, Mr. Khan has been
a principal partner in the law firm of Mussehl and Khan located inSeattle,Washington. Mr. Khan's practice
involvescorporate law and business immigration. From 2003 to 2004, Mr. Khan
practiced law with the firm of Choquette Law Group, inSeattle,Washington. From1999 to 2002, Mr. Khan
attended Seattle University School of Law in Seattle, Washington where he
obtained his J.D. Mr. Khan also holds a B.A. in History from University of
Washington.





All
directors hold office until the next annual meeting of stockholders and until
their successors have been duly elected and qualified. There are no agreements
with respect to the election of directors. We do not compensate our directors
for service on the board of directors or any committee thereof. As of the date
hereof, no director has accrued any expenses or compensation. Officers are
appointed annually by the board of directors and each executive officer serves
at the discretion of the board of directors. We do not have any standing
committees at this time.





Family
Relationships




There are
no family relationships among any of our directors, executive officers and other
key personnel other than Naeem Tyab and Mohammad Khan who are
cousins.  Mr. Parvez Tyab, who owns the largest number of our issued
and outstanding shares, is Naeem Tyab’s brother and Mohammad Khan’s
cousin.


23
 Table of Contents


Involvement
in Certain Legal Proceedings





During
the past five years none of our directors, executive offices, promoters or
control persons was:




·
            the
      subject of any bankruptcy petition filed by or against any business of
      which such person was a general partner or executive officer either at the
      time of the bankruptcy or within two years prior to that
    time;


·
            convicted
      in a criminal proceeding or is subject to a pending criminal proceeding
      (excluding traffic violations and other minor
  offenses);


·
            subject
      to any order, judgment, or decree, not subsequently reversed, suspended or
      vacated, of any court of competent jurisdiction, permanently or
      temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or


·
            found
      by a court of competent jurisdiction (in a civil action), the Commission
      or the Commodity Futures Trading Commission to have violated a federal or
      state securities or commodities
law.




Compliance
with Section 16(a) of the Act




Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
officers and directors and persons who own more than 10% of a registered class
of our equity securities to file with the Securities and Exchange Commission
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership of our shares of common stock and
other equity securities, on Forms 3, 4 and 5, respectively. Executive officers,
directors and greater than 10% shareholders are required by the Securities and
Exchange Commission regulations to furnish us with copies of all Section 16(a)
reports they file.




Based
solely on our review of the copies of such forms received by our company, or
written representations from certain reporting persons that no Form 5s were
required for those persons, we believe that, during the fiscal year ended
December 31, 2007, all filing requirements applicable to our officers, directors
and greater than 10% beneficial owners as well as our officers, directors and
greater than 10% beneficial owners of our subsidiaries were complied with, with
the exception of the following:




Name
            Number
      of
              Late
      Reports
            Number
      of Transactions Not
              Reported
      on a Timely Basis
            Failure
      to File
              Required
      FormsNaeem
      Tyab
            1
            1
            0Parvez
      Tyab
            1
            0
            0Sohail
      Kiani
            0
            0
            1(1)Ernie
      Pratt
            0
            0
            1(1)Robert
      Mussehl
            1
            0
            0Mohammad
      Khan
            0
            0
            1(1)




(1)
            As
      of December 31, 2007, these persons had not filed a Form 3 - Initial
      Statement of Beneficial Ownership of
Securities.  Code
of Ethics





The Company has adopted a Code of
Ethics regarding disclosure of material nonpublic information that applies to
the Company’s principal executive officer, principal financial officer,
principal accounting officer, and persons performing similar
functions.  Upon request, the Company will provide without charge any
person with a copy of the Code of Ethics.  Requests may be made in
writing to the Company by mail sent to either of its offices.  Due to
the small size of the Company’s active management personnel, the Company has not
adopted a broad scope Code of Ethics to date.





Directors





Our Board
of directors consists of three members. Directors serve for a term of one year
and stand for election at our annual meeting of shareholders. Pursuant to our
Bylaws, any vacancy occurring in the Board of directors, including a vacancy
created by an increase in the number of directors, may be filled by the
shareholders or by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of directors. A director elected to fill
a vacancy shall hold office only until the next election of directors by the
shareholders. If there are no remaining directors, the vacancy shall be filled
by the shareholders.





At a
meeting of shareholders, any director or the entire Board of directors may be
removed, with or without cause, provided the notice of the meeting states that
one of the purposes of the meeting is the removal of the director. A director
may be removed only if the number of votes cast to remove him exceeds the number
of votes cast against removal.


24
 Table of Contents


Committees




All
proceedings of the board of directors for the year ended December 31, 2007, were
conducted by resolutions consented to in writing by the board of directors and
filed with the minutes of the proceedings of the directors. Our company
currently does not have nominating or audit committees or committees performing
similar functions nor does our company have a written nominating or audit
committee charter. Our board of directors does not believe that it is necessary
to have such committees because it believes that the functions of such
committees can be adequately performed by the board of directors.  The
Company does have a compensation committee currently comprised of three persons,
including Naeem Tyab.  The Compensation Committee does not currently
have a charter.





Audit
Committee Financial Expert





Our board
of directors has determined that we do not have a board member that qualifies as
an "audit committee financial expert" as defined in Item 401(e) of Regulation
S-B, nor do we have a board member that qualifies as "independent" as the term
is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act
of 1934, as amended, and as defined by Rule 4200(a)(14) of the NASD
Rules.





We
believe that our board of directors is capable of analyzing and evaluating our
financial statements and understanding internal controls and procedures for
financial reporting. The board of directors of our company does not believe that
it is necessary to have an audit committee because management believes that the
functions of an audit committee can be adequately performed by the board of
directors. In addition, we believe that retaining an independent director who
would qualify as an "audit committee financial expert" would be overly costly
and burdensome and is not warranted given the stage of our development and the
fact that we have not generated any positive cash flows from operations to
date.







ITEM
10.                   EXECUTIVE COMPENSATION.





The
following table summarizes the compensation of our President (Principal
Executive Officer) and other officers and directors who received compensation
during the period from July 25, 2005 to (inception) to December 31,
2007.




SUMMARY
      COMPENSATION TABLEName
      and principal position
            
            Year
            
            
            Salary
            
            
            Bonus
            
            
            Stock
              Awards
            
            
            Option
              Awards
            
            
            Non-Equity
              Incentive
              Plan
              Compensation
            
            
            Nonqualified
              Deferred
              Compensation
              Earnings
            
            
            All
              Other
              Compensation
            
            
            Total12/31
            
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)Naeem Tyab
      (1)
            
            2005
            
            
            $
            24,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            24,000President
            
            2006
            
            
            $
            72,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            72,0002007
            
            
            $
            72,000
            
            
            
            0
            
            
            
            0
            
            
            $
            52,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            124,000Sohail S. K. Kiani
      (2)
            
            2005
            
            
            $
            16,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            16,000Executive
      Vice President
            
            2006
            
            
            $
            8,483
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            8,4832007
            
            
            $
            2,863
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            2,863Ernie Pratt
      (3)
            
            2005
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Director
            
            2006
            
            
            $
            6,000
            
            
            
            0
            
            
            $
            18,000
            (4)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            24,000
            (4)2007
            
            
            $
            24,000
            
            
            
            0
            
            
            
            0
            
            
            $
            13,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            37,000Robert C. Mussehl
      (5)
            
            2005
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Director
            
            2006
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            02007
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Mohammad Khan
      (6)
            
            2005
            
            
            $
            14,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            14,000Treasurer
            
            2006
            
            
            $
            42,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            42,0002007
            
            
            $
            21,000
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            21,000


25
 Table of Contents


(1)
Effective as of September 29, 2005.


(2)
Effective as of September 29, 2005.


(3)
Effective as of October 2, 2006.


(4) The
Company originally agreed to pay Mr. Pratt $2,000 a month in cash and $6,000 a
month in stock.  However, the Company subsequently renegotiated with
Mr. Pratt to replace his share compensation with an option grant in an amount to
be determined in the near future.  45,000 shares were issued to Mr.
Pratt in respect of his 2006 compensation, but they are being cancelled by the
Company and will be replaced by an option grant.


(5)
Effective as of August 11, 2005.


(6)
Effective as of September 29, 2005.





As of
December 31, 2007, Naeem Tyab has unvested options to purchase 600,000 shares of
the Company’s common stock, and Ernie Pratt has unvested options to purchase
150,000 shares of the Company’s common stock.





Compensation
of Directors





We
reimburse our directors for expenses incurred in connection with attending board
meetings.




Except as
set forth above, we have no formal plan for compensating our directors for their
service in their capacity as directors, although such directors are expected in
the future to receive stock options to purchase common shares as awarded by our
board of directors or (as to future stock options) a compensation committee.
Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at meetings of our
board of directors. Our board of directors may award special remuneration to any
director undertaking any special services on our behalf other than services
ordinarily required of a director.








ITEM
      11.
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      ANDRELATED STOCKHOLDER MATTERS.





The
following table provides the names and addresses of each person known to own
directly or beneficially more than a 5% of the outstanding common stock (as
determined in accordance with Rule 13d-3 under the Exchange Act) as of March 31,
2008 and by our officers and directors, individually and as a group. Except as
otherwise indicated, all shares are owned directly.





Security
Ownership of Certain Beneficial Owners





Name
      and Address of
              Beneficial
      Owner
            Shares
            Percent(1)Parvez
      Tyab
              Shareholder
              1112
      – 207 West Hasting Street
              Vancouver,
      B.C., Canada
              V6B
      1H7
            10,000,000(2)
            21.2%




(1) Based
on 47,165,987shares of common stock
outstanding as of March 31, 2008.


(2)
Includes 9,000,000 shares held in the name of Parvez Tyab and 1,000,000 held by
Mogul Energy Ltd., which shares Mr. Tyab is deemed to beneficially
own.





Security
Ownership of Management





Name
      and Address ofBeneficial Owner
            
            Shares
            
            
            Percent(1)Naeem
      Tyab
            
            
            1,638,889
            (2)
            
            
            3.5
            %Sohail
      Kiani
            
            
            500,000
            
            
            
            1.1
            %Ernie
      Pratt
            
            
            0
            (3)
            
            
            0
            %Robert
      Mussehl
            
            
            50,000
            
            
            
            0.1
            %Mohammad
      Khan
            
            
            2,100,000
            
            
            
            4.5
            %All Officers and Directors as a
      group (5 persons)
            
            
            4,288,229
            
            
            
            9.1
            %


26
 Table of Contents


(1)
            Based
      on 47,165,987shares of common
      stock outstanding as of March 31,
2008.


(2)
            Naeem
      Tyab has the right to acquire 800,000 shares within 60 days pursuant to an
      option grant on August 8, 2007.


(3)
            Ernie
      Pratt has the right to acquire 200,000 shares within 60 days pursuant to
      an option grant on August 8, 2007.





Securities
Authorized for Issuance Under Equity Compensation Plans





The Company adopted a 2007 Stock
Incentive Plan (the “Plan”) which has not been previously approved by the
Company’s shareholders.  The Plan provides for the issuance of options
to purchase 4,000,000 shares of the Company’s common stock at an exercise price
of $0.30.  As of December 31, 2007, the Company had issued options to
purchase 2,250,000 shares under the Plan, and options to purchase 1,750,000
shares of common stock remain available for future issuance under the
Plan.  Options awarded under the Plan vest over
one-year.  The options awarded by the Company to date were all made on
August 8, 2007.








ITEM
      12.
            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.





Transactions
with Related Persons, Promoters, and Certain Control Persons





The
following “Certain Relationships and Related Transactions” represent material
transactions in which any related person had or will have a direct or indirect
material interest, which are known to the Company’s current management
team.  There may however be various other material transactions
regarding the Company which the Company’s current management is not aware
of.





The
Company is proposing a transaction as described above in Item 8B – Other
Information, wherein the Company would agree to sell its 20% working interest in
the East Wadi Araba (EWA) Concession in the Gulf of Suez, Egypt, in exchange for
satisfaction of its outstanding liabilities relating to the drill program on the
EWA Concession and a cash payment and equity participation in Sea Dragon Energy
Inc.  Sea Dragon is a private Canadian corporation.  Sea
Dragon has a working interest in the EWA Concession.  Certain related
persons of the Company have or will have a direct or indirect material interest
in the transaction.  Parvez Tyab is a related person of the Company on
the basis that he owns approximately 21.2% of the common stock of the Company,
and he is the brother of the Company’s President and Director, Naeem
Tyab.  Parvez Tyab is a Director of Sea Dragon Energy Inc., and is the
beneficial owner of more than 5% of the common stock of Sea Dragon, through his
ownership of Mogul Energy Ltd.  The value of the transaction is
undetermined at this time.  Various other related persons of the
Company who are immediate family members of Naeem Tyab and/or Parvez Tyab have
or will have a direct or indirect material interest in the transaction by virtue
of their shareholdings in the Company and in Sea Dragon.





Naeem
Tyab purchased 138,889 shares of the Company’s common stock on December 31,
2007.





Director
Independence




Our
directors are not independent.  This determination of director
independence was made using the definition of “independent director” contained
under Rule 4200(a)(15) of the Rule of National Association of Securities
Dealers.




27
 Table of Contents


ITEM
13.                   EXHIBITS.








Exhibit


Number





(3)           (i)
Articles of Incorporation; and (ii) Bylaws





3.1           Certificate
of Incorporation (1)*


3.2           By-laws
(1)*


3.3           Form
of Registration Rights Agreement with the Selling Shareholders (1)*


3.4           Form
of Subscription Agreement ($0.001) (2)*


3.5           Form
of Subscription Agreement ($0.15) (2)*


3.6           Form
of Subscription Agreement ($0.40) dated for reference July 28, 2005
(2)*


3.7           Form
of Subscription Agreement($0.40) dated for reference October 31, 2005
(2)*


3.8           Form
of Subscription Agreement ($0.40) dated for reference January 19, 2006
(2)*


3.9           Form
of Flow Through Subscription Agreement ($0.40) dated for reference February 8,
2006 (2)*


3.10         Form
of Subscription Agreement for Unit Offering dated for reference April 11, 2006
(2)*


3.11         Form
of Subscription Agreement ($0.15) dated for reference December 12, 2007
(incorporated by reference from our Current Report on Form 8-K filed on February
15, 2008)*


3.12         Form
of Flow Through Subscription Agreement ($0.18) dated for reference December 12,
2007 (incorporated by reference from our Current Report on Form 8-K filed on
February 15, 2008)*





(4)           Instruments
Defining the Rights of Security Holders





4.1           2007
Stock Incentive Plan (incorporated by reference from our Current Report on Form
8-K filed on August 10, 2007)*





5.1           Opinion
of Sierchio Greco & Greco, LLP (3)*





10           Material
Contracts


10.1         A
Binding Farm-Out Agreement East Wadi Araba Concession dated August 6, 2005
(1)*


10.2         A
Binding Joint Venture Agreement - Egypt dated August 7, 2005 (1)*


10.3         Farm-Out
Agreement dated September 29, 2005 (1)*


10.4         Farm-out
Agreement dated November 8, 2005 (1)*


10.5         Assignment
Agreement-East Wadi Araba Concession dated December 9, 2005 (1)*


10.6         Assignment
Agreement dated December 9, 2005 (1)*


10.7         Amendment
to Binding Farm-Out Agreement East Wadi Araba Concession-Egypt dated March 30,
2006 (1)*


10.8         Assignment
Agreement dated April 4, 2006 (1)*


10.9         Concession
Agreement for Petroleum Exploration and Exploitation (the "Concession Agreement")
between Dover, the Arab Republic of Egypt and the Egyptian General Petroleum
Corporation (“EGPC”)
dated July 18, 2002 (1)*


10.10       East
Wadi Araba Concession - Gulf of Suez, Egypt Amending Agreement dated April 13,
2006 (1)*


10.11       Deed
of Assignment submitted May 30, 2006 (1)*


10.12       A
Binding Agreement dated April 14, 2005 (1)*


10.13       Agreement
dated October 2, 2006 with Ernie Pratt (2,3)*


10.14       Office
Lease Agreement as amended (2)*


10.15       Promissory
note dated April 1, 2006 in the aggregate amount of $113,791.35
(2)*


10.16       Assignment
Agreement dated January 24, 2007 (2)*


10.17       Letter
of Intent dated July 30, 2007 (incorporated by reference from our Current Report
on Form 8-K filed on August 7, 2007)*


10.18       Form
of Stock Option Agreement (incorporated by reference from our Current Report on
Form 8-K filed on August 10, 2007)*




23.1         Consent
of Sierchio Greco & Greco, LLP (included in Exhibit 5.1) (3)*


23.2         Consent
of Jorgensen & Co. (incorporated by reference from our Registration
Statement on Form SB-2/A filed on May 8,
2007)  (1,2,3,4)*


23.3         Consent
of Chapman Petroleum Engineering Ltd. (1,2,3,4)*




31.1         Certification
of Principal Executive Officer pursuant to Section 302


31.2    
    Certification of Principal Financial and
Accounting Officer pursuant to Section 302


32.1  
      Certification of Principal Executive Officer
and Principal Financial and Accounting Officer pursuant to Section
1350




99.1         List
of Freehold Properties Leases (1)*


99.2         Evaluation
of Resource Potential East Wadi Araba Concession, Offshore Gulf of Suez, Egypt
(1)*


99.3         Settlement
Agreement dated January 24, 2007 (2)*





*
Previously filed.


1 Filed
with our Registration Statement on Form SB-2 filed on November 17,
2006.


2 Filed
with our Registration Statement on Form SB-2/A filed on February 6,
2007.


3 Filed
with our Registration Statement on Form SB-2/A filed on March 29,
2007.


4 Filed
with our Registration Statement on Form SB-2/A filed on April 25,
2007.


28
 Table of Contents


ITEM
14.                   PRINCIPAL ACCOUNTANT FEES AND SERVICES.




Audit
Fees




The
aggregate fees billed by Jorgensen & Co., Certified Public Accountants, for
professional services rendered for the audit of our annual financial statements,
for review of our quarterly interim financial statements on Form 10-QSB, and in
connection with statutory and regulatory filings were $ 25,201.47 for the fiscal
year ended December 31, 2007 and $ 22,750 for the fiscal year ended December 31,
2006. This category also includes the review of interim financial statements and
services in connection with registration statements and other filings with the
Securities and Exchange Commission.




Tax
Fees




The
aggregate fees billed by Jorgensen & Co., Certified Public Accountants, for
professional services rendered for tax compliance, tax advice, and tax planning
services were $ 0  for the fiscal year ended December 31, 2007 and $
500 for the fiscal year ended December 31, 2006.




All
Other Fees




The
aggregate fees billed by Jorgensen & Co., Certified Public Accountants, for
professional services rendered for other services were $ 0  for the
fiscal year ended December 31, 2007 and $ 250 for the fiscal year ended December
31, 2006.






SIGNATURES




In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




MOGUL
ENERGY INTERNATIONAL, INC.







/s/ Naeem
Tyab





By: Naeem
Tyab, President


(Principal
Executive Officer)





Dated:  April
15, 2008







/s/
Mohammad Khan





By:
Mohammad Khan, Treasurer


(Principal
Financial Officer)





Dated:  April
15, 2008






29