UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

_____________



FORM 10-Q

|           |                                                                                   
|---------- | ----------------------------------------------------------------------------------
|(Mark One)
|[ X ]      | Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 
|           |                                                                                   
|           | For the quarterly period ended September 30, 2008                                 
|           |                                                                                   
|[    ]     | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
|           |                                                                                   
|           | For the transition period from  to                                                



Commission File Number: 0-13597



Shotgun Energy Corporation

(Exact name of small business issuer as specified in its charter)



Nevada

(State or other jurisdiction of incorporation or organization)



88-0195105(I.R.S. Employer Identification No.)



719 30th Ave., Pointe-Calumet

Quebec, Canada, J0N 1G1

(Address of principal executive offices)



514-688-3289

(Issuers telephone number)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes  [ ] No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                                                        |                              
|----------------------------------------------------------------------- | -----------------------------
|Large accelerated filer [ ]                                             | Accelerated filer [ ]        
|Non-accelerated filer [ ]
(Do not check if a smaller reporting company) | Smaller reporting company [X]



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





1



APPLICABLE ONLY TO CORPORATE ISSUERS



On September 30, 2008 there were 17,867,133 shares outstanding of the issuers common stock.







TABLE OF CONTENTS                                                                                                 PAGE



|Item 1.   Financial Statements.                                                                                                                                      | 2 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --
|                                                                                                                                                                     |   
|Balance Sheet as of September 30, 2008 (Unaudited) and December 31, 2007                                                                                             | 3 
|                                                                                                                                                                     |   
|Statements of Operations (Unaudited) For the Three and Nine Months
Ended September 30, 2008
and 2007, and the Period from January 1, 1996
through September 30, 2008 | 4 
|                                                                                                                                                                     |   
|Statements of Cash Flows (Unaudited) For the Nine Months
Ended September 30, 2008 and 2007, and the Period from January 1, 1996
through September 30, 2008           | 5 
|                                                                                                                                                                     |   
|Notes To Condensed Financial Statements (Unaudited).                                                                                                                 | 6 
|                                                                                                                                                                     |   
|Item 2.   Management's Discussion and Analysis or Plan of Operation.                                                                                                 | 17
|                                                                                                                                                                     |   
|Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                                                                                 | 22
|                                                                                                                                                                     |   
|Item 4T  Controls and Procedures                                                                                                                                     | 23
|                                                                                                                                                                     |   
|Part II. OTHER INFORMATION                                                                                                                                           | 23
|                                                                                                                                                                     |   
|Item 1.   Legal Proceedings                                                                                                                                          | 23
|                                                                                                                                                                     |   
|Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                | 24
|                                                                                                                                                                     |   
|Item 3.   Defaults Upon Senior Securities                                                                                                                            | 26
|                                                                                                                                                                     |   
|Item 4.   Submission of Matters to a Vote of Security Holders                                                                                                        | 27
|                                                                                                                                                                     |   
|Item 5.   Other Information                                                                                                                                          | 27
|                                                                                                                                                                     |   
|Item 6.   Exhibits                                                                                                                                                   | 27
|                                                                                                                                                                     |   
|SIGNATURES                                                                                                                                                           | 27





PART I -  FINANCIAL INFORMATION



Item 1. Financial Statements





SHOTGUN ENERGY CORPORATION

(An Exploration Stage Company)

FINANCIAL STATEMENTS

SEPTEMBER  30, 2008

(Unaudited)





2





SHOTGUN ENERGY CORPORATION

(An Exploration Stage Company)



BALANCE SHEETS



September
    30, 2008
    (unaudited)December 31, 2007ASSETSCURRENT ASSETSCash$           13,528$          25,682Taxes recoverable4247,575Accounts receivable1571,320Due from Legacy Wine & Spirits International Ltd.79,22435,534TOTAL CURRENT ASSETS93,33370,111AVAILABLE FOR SALE SECURITIES  related parties680,419635,578DUE FROM GOLDEN SPIRIT ENTERPRISES LTD.32,032149,605OIL AND GAS PROPERTIES,(full cost method of accounting, unproven)1,574,7211,574,721TOTAL ASSETS$      2,380,505$      2,430,015LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities$          472,333$       499,843Due to related parties49,6867,295TOTAL CURRENT LIABILITIES522,019507,138COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYConvertible Preferred:
    -  Class A voting stock, $0.001 par value, 5,000,000 shares authorized---  Class B voting stock, $0.001 par value, 5,000,000 shares authorized--Common stock, $.001 par value, 200,000,000 shares authorized17,867,133 (December 31, 2007  17,372,833) shares issued and outstanding17,86617,372Additional paid-in capital23,707,55223,636,287Deferred Compensation(25,000)(49,000)Deficit accumulated during the exploration stage(17,985,092)(17,727,202)Deficit accumulated prior to the exploration stage(4,460,633)(4,460,633)Accumulated other comprehensive income603,793506,053TOTAL STOCKHOLDERS EQUITY1,858,4861,922,877TOTAL LIABILITIES AND STOCKHOLDERS EQUITY$       2,380,505$     2,430,015


The accompanying notes are an integral part of these financial statements





3





SHOTGUN ENERGY CORPORATION

(An Exploration Stage Company)



INTERIM STATEMENTS OF OPERATIONS



(Unaudited)



Three Months ended September 30, 2008Three Months ended September
    30, 2007Nine Months ended September 30, 2008Nine Months ended September
    30, 2007Cumulative from January 1, 1996 to September
    30, 2008EXPENSESLitigation settlement$                -$                -$               -$               -$    2,291,070Management and consulting fees45,39449,398173,597301,1594,833,379Consulting fees  stock based compensation6,5796,75016,57910,7501,919,869Exploration costs----113,678Loss on settlement of debt----718,784General and administrative35,23532,46177,18193,4982,574,958Professional fees3,47014,26322,32634,2531,060,410Interest expense----98,282Software development costs----737,300LOSS BEFORE THE FOLLOWING90,678102,872289,683439,66014,347,730Interest, Royalty and Other Income(1,071)(3,741)(8,855)(34,235)(79,925)Gain on sale of securities  related party--(22,938)-(22,938)Property option income----(130,000)Write-down of investment in Legacy Wine & Spirits----128,288Write-down of interest in  ACGT Corporation----1,406,000Write-down of interest in oil and gas properties----2,250,937Loss on Iceberg Drive Inn Investment----85,000NET LOSS FOR THE PERIOD$   (89,607)$   (99,131)$  (257,890)$ (405,425)$(17,985,092)BASIC NET LOSS PER SHARE$         (0.01)$        (0.01)$      (0.01)$         (0.01)WEIGHTED AVERAGE COMMON SHARES OUTSTANDING17,795,88017,324,72517,58345218,203,387




The accompanying notes are an integral part of these interim financial statements





4





SHOTGUN ENERGY CORPORATION

(An Exploration Stage Company)

STATEMENTS OF CASH FLOWS

(unaudited)

Nine months ended September  30, 2008Nine months ended September 30, 2007Cumulative from January 1, 1996 to September 30, 2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss$ (257,890)$  (405,425)$ (17,985,092)Adjustments to reconcile net loss to net cash used in operating activities:- fees and services paid for with common shares31,25064,6973,399,053- other stock-based compensation16,57910,7501,919,468- interest paid for with common shares--80,872- loss on settlement of debt--718,784- software development costs paid for with common shares--600,000- non cash exploration costs--110,000- write-down of interest in oil and gas properties--1,406,000- write-down of investment in Legacy Wine & Spirits International Ltd.--128,288- write-down of interest in ACGT Corporation--2,250,937- loss on Iceberg Drive Inn investment--85,000- (Gain)/loss on sale of securities held for resale  related parties(22,938)(275)(23,213)- non cash option income received in shares--(130,000)- interest accrued on promissory notes receivable-(29,484)(63,136)- other non-cash expenses--2,557,382- net changes in working capital items(19,196)121,950306,286CASH FLOWS USED/PROVIDED BY IN OPERATING ACTIVITIES(252,195)(237,787)(4,639,371)CASH FLOWS FROM INVESTING ACTIVITIESInterest received on promissory notes receivable-41,72663,136Investment in Iceberg Acquisition Corporation--(120,000)Proceeds from sale of securities  related party75,83775076,587Interest in oil and gas properties, net of finders fees-(179,846)(1,522,804)CASH FLOWS USED/PROVIDED BY IN INVESTING ACTIVITIES75,837(137,370)(1,503,081)CASH FLOWS FROM FINANCING ACTIVITIESNet proceeds on sale of common stock47,930100,7504,394,325Net proceeds from common stock subscriptions--633,000Net advances (to) from related parties116,274(56,787)708,655Advances receivable--420,000CASH FLOWS PROVIDED BY FINANCING ACTIVITIES164,20443,9636,155,980NET INCREASE (DECREASE) IN CASH(12,154)(331,194)13,528CASH, BEGINNING OF PERIOD25,682355,009--CASH, END OF PERIOD$       13,528$       23,815$          13,528


Supplemental cash flow information (See Note 8)



The accompanying notes are an integral part of these financial statements



5







SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 1  NATURE OF OPERATIONS



The Company was incorporated as Venture Investments Inc. under the Laws of the State of Nevada on November 29, 1983.  The Company underwent a name change to Asdar Group on December 10, 1987, a name change to Precise Life Sciences Ltd. on April 30, 2002, a name change to Iceberg Brands Corporation on February 18, 2003, a name change to Avalon Gold Corporation on August 28, 2003, a name change to Avalon Energy Corporation on March 22, 2005 and a name change to Shotgun Energy Corporation on September 25, 2007.  The Company was dormant from 1991 to 1996 and currently has no revenue generating operations.  In accordance with SFAS #7, Accounting and Reporting by Development Stage Enterprises , the Company was considered a development stage company since January 1, 1996 and as a result of changing its business focus to acquisition and exploration of resource properties is considered to be an exploration stage company. Expected operations will consist of acquiring oil and gas properties of merit and conducting the necessary exploration to prove the presence of oil or natural gas.



The financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has not generated any revenues or completed development of any commercially acceptable products or services to date and has incurred losses of $22,445,725 since inception, and further significant losses are expected to be incurred in the exploration and development of its resource properties.  The Company will depend almost exclusively on outside capital through the issuance of common shares to finance ongoing operating losses and to fund the acquisition, exploration and development of its resource properties.  The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations.  There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.



NOTE 2  BASIS OF PRESENTATION

The unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation B Article 8 Financial Statements of Smaller Reporting Companies as promulgated by the Securities and Exchange Commission ("SEC").  Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements.  These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2007 indexed in Form 10-KSB.  In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.



6



SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)

NOTE 2  BASIS OF PRESENTATION (cont.)

The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period.  Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company's financial position and results of operations.

Operating results for the nine month period ended  September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

Certain reclassifications have been made to the 2007 financial statement amounts to conform to the 2008 financial statement presentation.

Stock-Based Compensation

On January 1, 2006, the Company adopted the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123(R), Share-Based Payment,(SFAS 123R).  Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees(APB 25), and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation(SFAS 123).  In accordance with APB 25, no compensation cost was required to be recognized for options granted to employees that had an exercise price equal to the market value of the underlying common stock on the date of grant.



The Company adopted SFAS 123R using the modified-prospective-transition method.  Under this method, compensation cost recognized for the year ended December 31, 2006 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of December 31, 2005, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R.  Compensation cost for all periods subsequent to December 31, 2006 includes the estimated fair value of all share-based payments granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital upon adoption of SFAS 123R.  The results for the prior periods have not been restated.



The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force (EITF) in Issue No. 96-18.  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.





7



SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)

_____________________________________________________________________________________

Recent Accounting Pronouncements

In 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No  109 Accounting for Income Taxes.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS 109.  FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company adopted FIN 48 as of January 1, 2007, as required.

There were no interest or general and administrative expenses accrued or recognized related to income taxes for the three months ended September 30, 2008.  The Company has not taken a tax position that would have a material effect on the financial statements or the effective tax rate for the three months ended March 31, 2008 or during the prior three years applicable under FIN 48.  It is determined not to be reasonably possible for the amounts of unrecognized tax benefits to significantly increase or decrease within 12 months of the adoption of FIN 48.  The Company is currently subject to a three year statute of limitations by major tax jurisdictions.



In December 2007, the FASB issued SFAS No. 141R, Business Combinations(SFAS 141R) and SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements  An Amendment of ARB No. 51(SFAS 160). SFAS 141R and160 require most identifiable assets, liabilities, non controlling interests, and goodwill acquired in a business combination to be

recorded at full fair value and require non controlling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with non controlling interest holders. The provisions of SFAS141R and 160 are effective for our fiscal year beginning January 1, 2009. SFAS 141R will be applied to business combinations occurring after the effective date and SFAS 160 will be applied prospectively to all non controlling interests, including any that arose before the effective date. We are currently assessing what impact the adoption of SFAS 141R and 160 will have on our financial

position and results of operations.



On January 1, 2008, we adopted FAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB statement No. 115(FAS 159) but we did not make any fair value elections with respect to any of our eligible assets or liabilities as permitted under the provisions of FAS 159 as of March 31, 2008. In conjunction with the adoption of FAS 159, we also adopted FAS no. 157, Fair Value Measures, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fir value measurements. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted priced included in Level 1 that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input that is significant to the fair value measurement in its fair value measurement in its entirety.



At September 30, 2008, the only asset measured at fair value on a recurring basis is the investment in marketable securities  related parties totalling $680,419 which was estimated using Level 1 inputs, or quoted prices in active markets, as described above.





8





SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 3  AVAILABLE-FOR-SALE SECURITIES  RELATED PARTIES



Golden Spirit

During 2004, the Company received 111,111 restricted Rule 144 shares of Golden Spirit Enterprises Ltd. (Golden Spirit), a public company with directors and significant shareholders in common.  The restricted shares were received as non-refundable consideration pursuant to agreements with Golden Spirit dated November 10, 2004 and December 10, 2004 to acquire certain mineral property interests from the Company.  These agreements were subsequently terminated.

Effective December 31, 2004 the Company recorded, as other comprehensive loss for the year, a $10,000 unrealized loss in the carrying value of its shares of Golden Spirit.  During the years ended December 31, 2005 and 2006 the Company recorded additional unrealized losses in the carrying value of its shares of Golden Spirit totalling $90,000 and $8,889 respectively, which were recorded as other comprehensive loss for those years.  During the year ended December 31, 2007, the Company sold 2,500 shares resulting in a realized gain of $165 and recorded an additional unrealized loss of $473 in 2007. As a result, the carrying value of the available for sale shares of Golden Spirit is $20,638 as at December 31, 2007 ($21,111  2006).

During the nine month period ended September 30, 2008, the Company sold 10,000 shares resulting in a realized loss of $800  and recorded an additional unrealized loss of $9,849 to September 30, 2008. As a result, the carrying value of the available for sale shares of Golden Spirit is $7,889 as at September 30, 2008 ($20,638  December 31, 2007).

Legacy

During 2003 the Company settled an outstanding debt receivable of $122,988 from Legacy Mining Ltd. (Legacy) for the issue of 1,229,880 restricted shares of Legacy representing a then 9.8% interest in Legacy. During 2004, the Company wrote this investment down to $1 because management determined that it was not recoverable within a reasonable period of time.

Effective December 31, 2007 the Company recorded, as other comprehensive income for the year, a $604,440 unrealized gain in the carrying value of its shares of Legacy. As a result, the carrying value of the available for sale shares of Legacy Mining is $614,940 as at December 31, 2007 ($1  2006).

During the nine month period ended September 30, 2008, the Company sold 90,000 shares resulting in a realized gain of $23,738  and recorded an additional unrealized gain of $108,589 to September 30, 2008. As a result, the carrying value of the available for sale shares of Legacy Mining is $672,529 as at September 30, 2008 ($614,940  December 31, 2007).

Available for sale securities  related parties include the following:



|                                                                 |                 |                  
|---------------------------------------------------------------- | --------------- | -----------------
|                                                                 | September30,    | December 31,     
|                                                                 | 2008            | 2007             
|1,139,880  (2007-1,229,880) shares of Legacy Mining Ltd.         | $       672,530 | $         614,940
|98,611  (2007- 111,111) shares of Golden Spirit Enterprises Ltd. | 7,889           | 20,638           
|                                                                 | $      680,419  | $         635,578





9





SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)

NOTE 4  OIL AND GAS PROPERTIES



Oil and gas properties include the following:

|                                                                       |                |             
|---------------------------------------------------------------------- | -------------- | ------------
|                                                                       | September 30 , | December 31,
|                                                                       | 2008           | 2007        
|Acquisition and exploration costs, unproved, not subject to depletion. | $  1,574,721   | $  1,574,721
|                                                                       |                |             

The Company's oil and gas activities are currently conducted in the United States. The following is a description of the Companys oil and gas acquisition and exploration activities:



Harvester Property, California, USA:

The Company owns a 2% royalty interest carried at a nominal value of $1 due to the uncertainty of realization.



LAK Ranch Oil Project, Wyoming, USA:

The Company owns a 0.7% gross overriding royalty interest on 6,360 acres of oil and natural gas rights located in the Powder River Basin of eastern Wyoming carried at a nominal value of $1 due to the uncertainty of realization.



Uinta Basin Property, Utah:

On October 26, 2004, the Company entered into a Letter of Intent with Pioneer Oil and Gas (Pioneer), whereby the Company could acquire an undivided Eighty-Five Percent (85%) working interest and an undivided Sixty-Eight (68%) net revenue interest in 13,189 acres located in Wasatch County, Utah, known as the Uinta Basin.  The Company paid Pioneer a deposit of $50,000 for the exclusive right to enter into a Participation Agreement with Pioneer on or before January 18, 2005.



On January 18, 2005, the Company entered into the Participation Agreement with Pioneer as described above.  The total consideration paid to Pioneer, including the $50,000 deposit described above, was $706,279.  In addition, the Company issued 1,200,000 restricted common shares valued at $264,000 on February 7, 2005 as finders fees to certain third parties who were responsible for tabling the Uinta Basin Overpressured Gas Project to the Company.  The Company has also committed to paying a 1.5% gross royalty on all revenue received by it from the Uinta Basin Project.  (Refer to Note 7(2)(a) (d)).



As part of the agreement, Pioneer has agreed to provide the Company with 2-D seismic data crossing the acreage.  Any additional seismic that Pioneer or the Company may mutually agree to acquire over the acreage shall be paid for entirely by the Company with the parties owning the data in the same proportion as their working interest in the acreage.  In addition, the Company will be required to drill an initial test well at a location on the acreage mutually agreed upon by Pioneer and the Company.  The Company will serve as the Operator in drilling the acreage.



10





SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 4  OIL AND GAS PROPERTIES (cont)



The Company shall pay One Hundred Percent (100%) of all costs of drilling the first two wells drilled on the acreage along with 100% of all costs of logging or testing the wells.  If either of the first two test wells is deemed a dry hole, the Company shall pay One Hundred Percent (100%) of all costs of plugging and abandoning such well(s) and restoration of the surface upon which the well(s) reached its authorized depth and completion of all tests deemed necessary by the Operator.  If the Company elects to complete either or both of the first two wells drilled on the acreage, the Company shall pay One Hundred Percent (100%) of all completion costs through the tanks along with any costs associated to hook up the well(s) to pipeline for the well(s) to be capable of producing into a commercial pipeline for sale.  After the first two wells drilled, if productive, are hooked-up to a pipeline and capable of producing oil and gas in commercial quantities, the Company shall pay 85% of all costs of operating the first two wells and Pioneer shall pay 15% of the operation costs of such wells as reflected in their working interest ownership in such wells.  The Company is required to drill a well on the acreage before November 1, 2010, or the acreage acquired will revert back to Pioneer.  During the year ended December 31, 2007 the Company incurred $508,435 (2006 -$50,525) on initial exploration of the property. No costs were incurred during the nine months ended September 30, 2008. (2007 - $230,371)

NOTE 5  DEFERRED COMPENSATION

On November 1, 2006, the Company entered into an agreement with 1063244 Alberta Ltd., (1063244), a private company owned by an individual who is in management of the Company, with a two year term, whereby the company will provide consulting services to the Company (valued at $48,000) in exchange for 160,000 restricted shares of the Company's common stock. The consultant will provide Corporate business development and strategy for the Company in connection with the Company's oil & gas exploration and development in the Uinta Basin, Utah.

On August 15, 2007, the Company entered into an agreement with Palisades Financial Ltd., (Palisades) a private company owned by a significant shareholder of the Company, for a four year term, whereby Palisades Financial Ltd. will provide investor relations services to the Company (valued at $32,000) in exchange for 133,333 restricted shares of the Companys common stock. Palisades will provide such services as researching, editing and generating a company profile, relaying the Companys business perspectives and distribution of corporate updates, including press releases.



The Company has been amortizing the costs of these services over the respective terms of the contracts.  At September 30, 2008, the unamortized portion of the deferred compensation totalled $25,000 (December 31, 2007 - $49,000).



NOTE 6 - STOCKHOLDERS EQUITY

On September 4, 2007, the Registrant held a Special Meeting whereby the Board of Directors, by unanimous consent, adopted, effective September 25, 2007, the following amendments to its Articles of Incorporation:



Name Change. The Registrant announces that majority of the shareholders entitled to vote on such matters approved a change of name from Avalon Energy Corporation to Shotgun Energy Corporation  In addition, approval was obtained to restructure the issued capital through a reverse split of the outstanding issued shares, the ratio of split to be one-for-three (1:3).  On September 11, 2007, a Certificate of Amendment to its Articles of Incorporation was filed with the State of Nevada changing the name to Shotgun Energy Corporation and declaring a one-for-three (1:3) reverse stock split.





11





SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 6 - STOCKHOLDERS EQUITY



Change of Symbol and CUSIP Number.Commensurate with the name change, Registrant also took the necessary steps to change its symbol and CUSIP Number. Therefore, the CUSIP Number has changed from 05343W 10 4 to 825358 10 4. Effective at the opening of business on September 25, 2007, the symbol changed from AVLN to SGNE.





(1)   2008 Stock Transactions



During the nine months ended September 30, 2008:



(a) On January 4, 2008 , the Company issued a total of 200,000 common shares pursuant to the Companys 2007 Stock Incentive and Option Plan at $0.13 per share for total proceeds of $26,000.



(b)  On February 27, 2008 the Company issued 50,000 restricted common shares valued at $5,500 to a director for his current services.



(c) On July 21, 2008 , the Company issued a total of 219,300 common shares pursuant to the Companys 2007 Stock Incentive and Option Plan at $0.10 per share for total proceeds of $21,930.



(d) On September 16, 2008 the Company issued 25,000 restricted common shares valued at $1,750 to a director for his current services.



(2)   2007 Stock Transactions



During the nine months ended September 30, 2007:



(a) The Company issued 3,333 common shares valued at $900 pursuant to a Consulting Agreement with a member of its Advisory Board to perform a minimum of two days consulting services during the period January 15, 2007 to February 15, 2007.



(b) The Company issued 133,333 restricted common shares valued at $32,000 pursuant to a Consulting Agreement with a non-related individual dated June 12, 2007, for ongoing consulting services provided to the Company.



(c) The Company issued a total of 266,667 common shares pursuant to the Companys 2005 Stock Incentive and Option Plan at $0.30 per share for total proceeds of $80,000.



(d) The Company issued a total of 66,667 common shares pursuant to the Companys 2006 StockIncentive and Option Plan at $0.30 per share for total proceeds not yet received of $20,000



(e) The Company issued 133,333 restricted common shares valued at $32,000 pursuant to a Investor Relations Agreement with related party dated August 15, 2007, for ongoing consulting services provided to the Company.



12





SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 6 - STOCKHOLDERS EQUITY (cont)





(f)  The Company issued a total of 16,667 common shares pursuant to the Companys 2005 Stock Incentive and Option Plan at $0.30 per share for total proceeds of $5,000.



(g)  The Company issued a total of 75,000 common shares pursuant to the Companys 2007 Stock Incentive and Option Plan at $0.21 per share for total proceeds of $15,750.



During the period, the Company placed on stop transfer on a total of 333,333 shares valued at $125,000 previously issued to two consultants until management is satisfied with the performance of the Consultants earning these shares. The Company will determine by December 31, 2007 if these shares are to be released or returned to the Company for cancellation and return to treasury.





(3)

2008 Stock Options



During the nine months ended September 30, 2008, the Company granted a total of 419,300, 5 year common stock options exercise prices between $0.10 and $0.13 per share.  The Company recognized stock-based compensation of $16,579 in accordance with SFAS 123R which represented the fair value of stock options granted to consultants in exchange for services rendered to the Company.





(a)

The Companys stock option activity is as follows:



|                            |                   |                                 |                                            
|--------------------------- | ----------------- | ------------------------------- | -------------------------------------------
|                            | Number of options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life
|Balance, December 31, 2006  | -                 |                                 |                                            
|Granted during 2007         | 601,667           | 0.21                            | 5 years                                    
|Exercised during 2007       | (601,667)         | -                               |                                            
|Balance, December 31, 2007  | -                 |                                 |                                            
|Granted during 2008         | 419,300           | 0.13                            | 5 years                                    
|Exercised during 2008       | (419,300)         |                                 |                                            
|Balance, September 30, 2008 | -                 |                                 |                                            



(b)

As of September 30, 2008, there were 1,141,667 stock options available for grant under the Companys 2006 Stock Incentive and Option Plan.



(c)

As of September 30, 2008, there were 1,539,033 stock options available for grant under the Companys 2007 Stock Incentive and Option Plan.





13







SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 6 - STOCKHOLDERS EQUITY (cont)





(4)

2007 Stock Options



On October 2, 2006, the Company issued 1,925,000 common shares from the exercise of options pursuant to option grants under the Companys 2005 Stock Option and Incentive Plan and 141,667 common shares from the exercise of options pursuant to option grants under the Companys 2006 Stock Option and Incentive Plan.  All shares were issued at an exercise price of $0.10 per share. As consideration, the Company issued promissory notes to the optionees totalling $620,000. The promissory notes were repayable in six months and bear interest at 10%. The Company received $26,226 in interest during the nine months ended September 30, 2007 and has recorded $3,258 in additional accrued interest on the promissory notes. During the period, three of the four optionees elected to return their shares to the Company for cancellation. A total of 1,700,000 shares were returned to the Company for cancellation. The remaining promissory note for 366,667 shares valued at $110,000 (excluding accrued interest of $3,258) has been extended to December 31, 2007.



(a) The Companys stock option activity is as follows:



|                                                   |                   |                                 |                                            
|-------------------------------------------------- | ----------------- | ------------------------------- | -------------------------------------------
|                                                   |                   |                                 |                                            
|                                                   | Number of options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life
|Balance, December 31, 2005                         | -                 |                                 |                                            
|Granted during 2006                                | 2,266,667         | 0.10                            | 5 years                                    
|Exercised during 2006                              | (2,266,667)       | -                               |                                            
|Granted during 2007                                | 108,334           | 0.10                            | 5 years                                    
|Exercised during 2007                              | (108,334)         | -                               |                                            
|Balance, December 31, 2006 and September 30, 2007. | -                 | $                         -     | -                                          



(b)  On September 29, 2006, the Company filed a Registration Statement on Form S-8 to cover up to 4,200,000 shares of common stock to be issued pursuant to the Companys 2006 Stock Incentive and Option Plan (the Plan).  These shares are to be issued when required from authorized and unissued common stock of the Company. The purpose of the plan is to provide the opportunity for eligible employees, consultants and members of the Board of Directors to increase their proprietary interest in the Company and as an incentive for them to remain in the service of the Company. The option price is set at the fair market value of the common stock at the date of issue. The term of the options, once granted, is not to exceed five years.



(c)   As of September 30, 2007, there were 1,141,667 stock options available for grant under the Companys 2006 Stock Incentive and Option Plan.







14







SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 6 - STOCKHOLDERS EQUITY (cont)



(d)   On September 14, 2007, the Company filed a Registration Statement on Form S-8 to cover up to 2,000,000 shares of common stock to be issued pursuant to the Companys 2007 Stock Incentive and Option Plan (the Plan).  These shares are to be issued when required from authorized and unissued common stock of the Company. The purpose of the plan is to provide the opportunity for eligible employees, consultants and members of the Board of Directors to increase their proprietary interest in the Company and as an incentive for them to remain in the service of the Company. The option price is set at the fair market value of the common stock at the date of issue. The term of the options, once granted, is not to exceed five years.



(e)    As of September 30, 2007, there were 1,958,333 stock options available for grant under the Companys 2007 Stock Incentive and Option Plan.



NOTE 7  RELATED PARTY TRANSACTIONS



During the nine months ended September 30, 2008, the Company incurred $9,731 (2007 -$17,885) in management fees to directors. Of this amount, $7,250 represents the value of 75,000 restricted shares issued to two Directors. As at September 30, 2008 the Company owes $9,000 in management fees.



During the nine months ended September 30, 2008, the Company incurred $20,534 (2007 - $19,131) in rent and office expenses to a private company controlled by a shareholder.



During the nine months ended September 30, 2008, the Company incurred $47,724, (2007 - $52,399) in consulting fees, the majority of it which is to a shareholder who is part of management and $16,859 (2007 - $10,509) in professional fees to employees.



During the nine months ended September 30, 2008, two companies controlled by significant shareholders earned $24,000 (2007 - $30,166) and a company controlled by a shareholder earned $Nil (2007 - $2,292) from the Company, pursuant to prepaid services agreements.



At September 30, 2008, an amount of $32,032 (December 31, 2007 - $149,605) was receivable from Golden Spirit.  These amounts are non-interest bearing and have no specific terms of repayment.

At September 30, 2008, an amount of $79,224 (December 31, 2007 - $35,534) was receivable from Legacy Wine & Spirits International Ltd.  These amounts are unsecured, non-interest bearing and are due and payable on or before December 31, 2008.

At September 30, 2008, the following amounts are due to related parties:

|                         |   |               |   |                  
|------------------------ | - | ------------- | - | -----------------
|                         |   | June 30,
2008 |   | December 31, 2007
|                         |   |               |   |                  
|Director                 | $ | 9,000         | $ | 9,000            
|Significant shareholders |   | 40,686        |   | (1,705)          
|                         | $ | 49,686        | $ | 7,295            



All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.



15





SHOTGUN  ENERGY CORPORATION

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

September 30, 2008

(unaudited)



NOTE 8  SUPPLEMENTAL CASH FLOW INFORMATION



|                                 |                                      |                              
|-------------------------------- | ------------------------------------ | -----------------------------
|                                 | Nine months ended
September 30, 2008 | Year  ended
December 31, 2007
|Cash paid during the period for: |                                      |                              
|Interest                         | $                 -                  | $                 -          
|Income taxes                     | $                 -                  | $                 -          





NOTE 9  COMMITMENTS AND CONTINGENCIES



On February 21, 2002, the Company issued 350,000 shares valued at $119,000 to Empire Sterling Corporation for services to be rendered with respect to the acquisition of ACGT Corporation (ACGT).  The shares were to be held in trust and not sold until all necessary financing was in place to complete the ACGT acquisition. Empire Sterling Corporation breached the trust agreement and the Company placed a stop transfer on these shares and requested they be returned to the Company. Empire Sterling Corporation failed to return the share certificate and as such, the Company commenced court proceedings against the principals of Empire Sterling Corporation. The Company argued for an interim injunction against all parties and was successful. On May 9, 2002, the Court ordered Empire Sterling Corporation to deposit the shares with the Court pending judicial disposition.  The Company continued to file legal process claiming ownership of the shares and breach of trust inter alia. The Company was successful and has now applied to have the share certificates released and subsequently cancelled. As of June 30, 2008, the Company is still in the process of having the certificates released.



In February, 2008, the Company received a demand notice from CGG Veritas for failure to pay an outstanding balance of $317,380 pursuant to a Master Agreement and Job Supplement for the Shotgun Draw 2D Seismic Program in Utah. In accordance with Section 15.3 of the Master Agreement and Job Supplement dated March 21, 2007, CGG has demanded payment by April 25, 2008. If CGG Veritas is forced to proceed with litigation of this matter, it will seek reimbursement of its attorneys fees and expenses related to the litigation. The Company is currently examining various alternatives to resolve this matter. CGG Veritas has not proceeded with litigation as of September 30, 2008.



As of August 1, 2002, Shotgun Energy Corporation. has leased 1250 sq. ft of office space from Holm Investments Ltd. at $2,050 per month for a period of 3 years and has been renewed for an additional 3 years at $2,050 per month. The current tenancy agreement expires August 1, 2008 and was renewed for 3 additional years at $2,200 per month.





16





Item 2. Managements Discussion and Analysis or Plan of Operation.

The following should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.



Our Company, Shotgun Energy Corporation, was formed under the laws of the State of Nevada on November 29, 1983 under the name Venture Group, Inc. On February 11, 1986, an amendment to the Articles of Incorporation was filed changing the corporate name to Asdar Corporation. On December 10, 1987, another amendment to the Articles of Incorporation was filed changing the corporate name to Asdar Group.  On February 18, 2001, Asdar Group filed a Certificate of Reinstatement with the Secretary of State of Nevada. On April 30, 2002, another amendment to the Articles of Incorporation was filed changing the corporate name to Precise Life Sciences Ltd. Additional amendments to the Articles of Incorporation were filed changing the corporate name as follows:



February 18, 2003 -       Iceberg Brands Corporation

August 28, 2003 -          Avalon Gold Corporation

March 22, 2005 -           Avalon Energy Corporation

September 25, 2007 -    Shotgun Energy Corporation



Our Company holds (1) an undivided Eighty-Five Percent (85%) working interest and an undivided Sixty-Eight (68%) net revenue interest in 13,189 acres located in Wasatch County, Utah, known as the "Uinta Basin" and (2) a 0.7% gross overriding royalty interest on 6,360 acres of oil and natural gas rights located in the Powder River Basin of eastern Wyoming.



Our Oil and Gas Properties



The Wyoming Property.



The Company owns a 0.7% gross overriding royalty interest on 6,360 acres of oil and natural gas rights located in the Powder River Basin of eastern Wyoming carried at a nominal value of $1 due to the uncertainty of realization.



Derek Oil and Gas Corporation, a public company and the operator, now holds a 95% working interest in the LAK Ranch project and is the project operator. The LAK Ranch Project is a strong fit for Derek's corporate focus of using enhanced oil recovery (EOR) techniques to develop new production from reservoirs in North America. Derek and its partner, SEC Oil and Gas Partnership are confident in the ability of Derek's management to drive this project forward as promptly as possible in 2007.



Based on Shotguns ongoing agreement with respect to the LAK Ranch,  if Derek sells any or all of its interest in the LAK Ranch Property, it will pay to Shotgun, subject to adjustments, 7.5% of the net sales proceeds on the first USD $7,500,000 and 1% on any balance over and above USD$7,500,000.



17



The LAK Ranch field, originally discovered in the 1920s, covers approximately 7,500 acres in the Powder River basin. Historically, oil production has been sporadic from a limited number of wells completed in the Newcastle Sand due to the abnormally low reservoir temperature in this part of the basin. However, the oil contains high levels of naphtha and the viscosity should respond dramatically to the application of heat through steam injection. To date, Derek has completed SAGD test well pair that was drilled to a depth of 1,000 feet and 1,800 feet horizontally into the Newcastle sand formation. More than 5,000 barrels of oil were recovered in limited preliminary testing. Shotgun, through its predecessor Asdar has received royalty payments from the sale of every barrel of oil sold to date.

The Company has received $2,804 in oil royalties for the nine month period ended September 30, 2008

(2007 - $Nil).



Derek Oil and Gas Corporation has the following plans for the Property over the next twelve months:

-

Increase overall production as reservoir heats up from the 12 well program.

-

Purchase, permit and install another steam generator to provide more steam into the reservoir.

-

Conduct another drilling program in 2008 to increase production, earnings, and cash flow per share, thereby increasing shareholder value.

-

Continue modifying the long term economic & development plan as new reservoir information is received.

Currently, Derek has moved two 50 MM Btu/hr generators and ancillary equipment to the LAK Ranch site. The generators have been placed on a permanent pad and all materials to house the two generators have been delivered. Management expects to refurbish, reassemble, install the generators in a building and have at least one generator on-line by January 2009. These generators will give the Company's current steam generating capacity a six-fold increase. Dereks Chief Operating Officer and steam recovery expert, has previously identified the lack of steam capacity as the main factor for the lack of production response from the Company's pilot wells drilled in 2007.



2. The California Property.



The Company owns a 2% royalty interest in the Harvester Property carried at a nominal value of $1 due to the uncertainty of realization.



3. The Utah Property.



On October 26, 2004, the Company entered into a letter of intent with Pioneer Oil and Gas ("Pioneer"), a Utah Corporation for the exclusive right to enter into a Participation agreement with Pioneer on or before January 18, 2005. The Company advanced Pioneer a $50,000 non-refundable deposit and in return was pledged an exclusivity period to carry out its due diligence with respect to acquiring certain overpressured gas leases in the Uinta Basin, Utah. On January 18, 2005, the Company entered into a Participation Agreement with Pioneer to acquire an undivided Eighty-Five Percent (85%) working interest and an undivided Sixty-Eight (68%) net revenue interest in 13,189 acres located in Wasatch County, Utah, known as the "Uinta Basin".



The Company had an independent title search conducted on the acreage involved in the Participation Agreement and determined that Pioneer had good and marketable title to the leases. As such, on January 18, 2005, the Participation Agreement was duly signed and the balance of $656,279 was delivered to Pioneer to complete the closing. The total consideration paid to Pioneer to acquire the 13,189 acres was $706,279.





18



In addition, certain non-related parties were responsible for tabling the Uinta Basin Over-pressured Gas Project to the Company.  The Company issued 1,200,000 restricted common shares valued at $264,000 on February 7, 2005 to these parties for their efforts resulting in the acquisition of 13,189 acres in Wasatch County, Utah.



The Company has spent a total of $970,279 in acquisition costs and $604,442 in development costs on the Uinta property to date. On January 4, 2007, the USDA Forest Service decided to allow Shotgun Energy to conduct their first proposed seismic exploration project. Shotguns project would consist of approximately 7 miles of 2D seismic exploration in the Strawberry Peak and Shotgun Draw area of the South Unit of the Ashley National Forest.  Due to seasonal access constraints, it is expected that the project would not begin until summer of 2007.  Recording sensors would be placed along the seismic lines every 22 feet, with surface cables connecting the sensors to a central recording station (large truck).  Recording sensors consist of a small microphone, attached to a metal stake.  Shot-holes would also be drilled along the seismic line, every 330 feet, to a depth of about 60 feet.  Drill holes would be loaded with a small explosive charge, backfilled with cuttings and swelling clays, and then shot to produce seismic energy.  Drilling of the shot holes would be conducted using small portable drilling rigs, transported from site to site by either buggy or helicopter.  Along existing roads, buggy drills would be used, whereas helicopter drills would be used on steep topography away from existing roads. Access to the seismic line off of existing roads would be by helicopter, by foot, or by ATV.  No new roads would be required, and no vegetation would need to be cleared or removed.  After completion, all recording sensors and surface cables would be removed.  The entire operation is expected to last about 10 days. The Company is currently accepting bids to complete the first seismic line. The Company has accepted a bid from CGG Veritas of Houston to complete the first seismic line. Preparations for the Vibrator Seismic Shoot continue on schedule with the surveying work having been completed the week of August 6, 2007.  The vibrator seismic line will be shot under the direction of Veritas DGC Land Inc of Denver covering eight miles along the forest road.  The line travels in an east west direction over the southwestern edge of the property and after cutting the north-west regional fault, swings north-north-east along Twelve Hundred Dollar Ridge spanning the property in that direction and crossing two of the three well locations. This ridge is sub-parallel to the north-south regional fault which also represents possible stratigraphic closure for shallower target horizons. In October, 2007, we confirm the completion of the 2D Seismic Shoot despite inconsistent weather conditions.



The cost of the seismic program was approximately $350,000. The results of the 2D Seismic program will be processed along with available data from a previous Texaco Seismic shoot which will add to the confidence in the interpretation of the data. In addition, the Company is starting to work on public scoping for the second proposed seismic line (with vibrator trucks).



As part of the agreement, Pioneer has agreed to provide the Company with 2-D seismic data crossing the acreage, on a confidential basis. Any additional seismic that Pioneer or the Company may mutually agree to acquire over the acreage shall be paid entirely by the Company with the parties owning the data in the same proportion as their working interest in the acreage. In addition, the Company will be required to drill an initial test well at a location on the acreage mutually agreed upon by Pioneer and the Company. The Company will serve as the Operator in drilling the acreage and must drill the initial well prior to November 1, 2010.



The Company shall pay One Hundred Percent (100%) of all costs of drilling the first two wells drilled on the acreage along with 100% of all costs of logging or testing the wells.  If either of the first two test wells is deemed a dry hole, the Company shall pay One Hundred Percent (100%) of all costs of plugging and abandoning such well(s) and restoration of the surface upon which the well(s) reached its authorized depth and completion of all tests deemed necessary by the Operator.



19





If the Company elects to complete either or both of the first two wells drilled on the acreage, the Company shall pay One Hundred Percent (100%) of all completion costs through the tanks along with any costs associated to hook up the well(s) to pipeline for the well(s) to be capable of producing into a commercial pipeline for sale.  If the Company does not wish to participate in an

attempted completion of a well, the Company shall so notify Pioneer within Twenty-Four (24) hours (excluding Saturday, Sunday and legal holidays) after reaching Casing Point and all electric logs have been received, at which time the provisions of Article VI of the Operating Agreement shall govern such completion attempt.



After the first two wells are drilled and if productive are hooked-up to a pipeline and capable of producing oil and gas in commercial quantities, the Company shall pay 85% of all costs of operating the first two wells and Pioneer shall pay 15% of the operation costs of such wells as reflected in their working interest ownership in such wells.



Subsequent wells drilled after the first two wells on the Contract Acreage shall require Pioneer to either farm out its interest on a well by well basis under Article VI herein or participate or not participate for its interest in the well pursuant to the provisions contained in the Operating Agreement.



During 2004, the Company received 111,111 restricted Rule 144 shares of Golden Spirit Enterprises Ltd. (Golden Spirit), a public company with directors and significant shareholders in common.  The restricted shares were received as non-refundable consideration pursuant to agreements with Golden Spirit dated November 10, 2004 and December 10, 2004 to acquire certain mineral property interests from the Company.  These agreements were subsequently terminated.



Available for Sale Securities  related parties.



Golden Spirit



During 2004, the Company received 111,111 restricted Rule 144 shares of Golden Spirit Enterprises Ltd. (Golden Spirit), a public company with directors and significant shareholders in common.  The restricted shares were received as non-refundable consideration pursuant to agreements with Golden Spirit dated November 10, 2004 and December 10, 2004 to acquire certain mineral property interests from the Company.



These agreements were subsequently terminated.



Effective December 31, 2004 the Company recorded, as other comprehensive loss for the year, a $10,000 unrealized loss in the carrying value of its shares of Golden Spirit.  During the years ended December 31, 2005 and 2006 the Company recorded additional unrealized losses in the carrying value of its shares of Golden Spirit totaling $90,000 and $8,889 respectively, which were recorded as other comprehensive loss for those years.  During the year ended December 31, 2007, the Company sold 2,500 shares resulting in a realized gain of $165 and recorded an additional unrealized loss of $473 in 2007. As a result, the carrying value of the available for sale shares of Golden Spirit is $20,638 as at December 31, 2007 ($21,111  2006).



During the nine month period ended September 30, 2008, the Company sold 10,000 shares resulting in a realized loss of $800 and recorded an additional unrealized loss of $9,849 to September 30, 2008. As a result, the carrying value of the available for sale shares of Golden Spirit is $7,889 as at September 30, 2008 ($20,638  December 31, 2007).





20







Legacy

During 2003 the Company settled an outstanding debt receivable of $122,988 from Legacy Mining Ltd. (Legacy) for the issue of 1,229,880 restricted shares of Legacy representing a then 9.8% interest in Legacy.



During 2004, the Company wrote this investment down to $1 because management determined that it was not recoverable within a reasonable period of time.



Effective December 31, 2007 the Company recorded, as other comprehensive income for the year, a $604,440 unrealized gain in the carrying value of its shares of Legacy. As a result, the carrying value of the available for sale shares of Legacy Mining is $614,940 as at December 31, 2007 ($1  2006).



During the nine month period ended September 30, 2008, the Company sold 90,000 shares resulting in a realized gain of $23,738  and recorded an additional unrealized gain of $108,589 to September 30, 2008. As a result, the carrying value of the available for sale shares of Legacy Mining is $672,529 as at September 30, 2008 ($614,940  December 31, 2007).

Available for sale securities  related parties include the following:



|                                                                 |                 |                  
|---------------------------------------------------------------- | --------------- | -----------------
|                                                                 | September30,    | December 31,     
|                                                                 | 2008            | 2007             
|1,139,880  (2007-1,229,880) shares of Legacy Mining Ltd.         | $       672,530 | $         614,940
|98,611  (2007- 111,111) shares of Golden Spirit Enterprises Ltd. | 7,889           | 20,638           
|                                                                 | $      680,419  | $         635,578





Liquidity and Capital Resources.



For the nine month period ended September 30, 2008, we had total assets of $2,380,505 including cash of $13,528 taxes recoverable of $424, accounts receivable of $157 and a short term receivable from Legacy Wine & Spirits International Ltd. at a value of $79,224.  We have $1,574,721 invested in oil and gas properties, which is represented by $1,574,719 for 13,189 acres of gas leases located in Utah, $1 for an oil and gas interest located in Wyoming and $1 for an oil and gas interest located in San Joaquin, California.  We have available for sale securities with a fair value of $680,419 as at September 30, 2008 and a long-term receivable from Golden Spirit Enterprises Ltd. at a value of $32,032. As of December 31, 2007, we had total assets of $2,430,015. The decrease in assets is primarily due to an decrease in the value of related companies receivables and cash.



At September 30, 2008, we had current liabilities of  522,019, which was represented by accounts payable and accrued liabilities of $472,333 and $49,686 due to related parties. As of December 31, 2007 we had current liabilities of $507,138. The slight increase in liabilities was a result of an increase in related party payables.  At September 30, 2008, we had a working capital deficiency of $428,686. (December 31, 2007 - $437,027).



We do not believe that our current cash resources will be able to maintain our current operations for an extended period of time.  We will be required to raise additional funds or arrange for additional financing over the next 12 months to adhere to our development schedule.  No assurance can be given, however, that we will have access to additional cash in the future, or that funds will be available on acceptable terms to satisfy our working capital requirements. If we are not able to arrange for additional funding or if our officers, directors and shareholders stop advancing funds to us, we may be forced to make other arrangements for financing such as loans or entering into strategic alliances. We have not identified any alternative sources of financing.



Results of Operations



We have not yet realized any revenue from operations to date. Loss from operations for the three month period ended September 30, 2008 was $89,607 (2007 - $99,131). This decrease in loss was due to a decrease in professional fees.





21





From inception to September 30, 2008 our Company has incurred cumulative net losses of $22,445,725 resulting primarily from the write-down of $1,406,000 in its interests in oil and gas properties, write-down of $2,250,937 in its interest in ACGT Corporation, write-down of its investment in Legacy Wine & Spirits International Ltd. and also as a result of selling, general and administrative expenses including a litigation settlement of $2,291,070; management and consulting fees of $4,833,379, office and general expenses of $2,574,958; professional fees of $1,060,410; interest expense of $98,282 and software development costs of $737,300. In addition, we received $130,000 in property option income as a recorded value of certain restricted shares in Golden Spirit Enterprises Ltd. (See Item 2, Utah property) $79,925 in interest and royalty income and a gain on the sale of securities  related parties of $22,938.



The cash and equivalents constitute our present internal sources of liquidity.



Because we are not generating any significant revenues, our only external source of liquidity is the sale of our capital stock and any advances from officers, directors or shareholders.



Our Plan of Operation for the Next Twelve Months



We do anticipate that we will need to raise additional capital within the next 12 months in order to continue as a going concern.  We will need to fund the next phase of the Shotgun Draw, Uinta basin Overpressured Gas Project which include an environmental study and permitting and preparation costs to initiate drilling of a gas well.  To the extent that additional capital is raised through the sale of equity or equity- related securities, the issuance of such securities could result in dilution of our stockholders.  There can be no assurance that additional funding will be available on favorable terms, if at all.  If adequate funds are not available within the next 12 months, we may be required to curtail our operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our assets that we would not otherwise relinquish.



Shotgun Energy Corporation does anticipate some expenditures within the next 12 months for its Uinta Basin Property as explained above. The Company may elect to raise funds for potential drilling through equity financing or possible joint venture partnerships. Shotgun Energy Corporation does not anticipate any significant exploration costs within the next 12 months, nor does the Shotgun Energy Corporation anticipate that it will lease or purchase any significant equipment within the next 12 months. Shotgun Energy Corporation does not anticipate a significant change in the number of its employees within the next 12 months.





Off-Balance Sheet Arrangements



Our company has not entered into any off balance sheet arrangements.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



As of September 30, 2008, we had cash in the amount of $13,528. We have not generated any revenues since inception and have incurred a net loss of $22,445,725 from our inception on January 1, 1996 to September 30, 2008. Our current operating funds are insufficient to cover an environmental study and permitting and preparation costs to initiate drilling of a gas well. It will have to obtain funds through entering into arrangements with collaborative partners or others to accomplish these expenditures. However, we do not have any specific plans for raising the required funds. There is no assurance that we



will be able to raise sufficient funding from the sale of our common stock to fund our anticipated exploration expenditures.





22



Item 4T Controls and Procedures.

An evaluation was conducted by our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2008. Based on that evaluation, the CEO and CFO concluded that our controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

This quarterly report does not include a report of managements assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.



PART II - OTHER INFORMATION



ITEM 1. Legal Proceedings



1. On February 21, 2002, the Company issued 350,000 shares valued at $119,000 to Empire Sterling Corporation for services to be rendered with respect to the acquisition of ACGT Corporation.  The shares were to be held in trust and not sold until all necessary financing was in place to complete the ACGT acquisition. Empire Sterling Corporation breached the trust agreement and the Company placed a stop transfer on these shares and requested they be returned to the Company. Empire Sterling Corporation failed to return the share certificate and as such, the Company commenced court proceedings against the principals of Empire Sterling Corporation. The Company argued for an interim injunction against all parties and was successful. On May 9, 2002, the Court ordered Empire Sterling Corporation to deposit the shares with the Court pending judicial disposition.  The Company continued to file legal process claiming ownership of the shares and breach of trust inter alia. The Company was successful and has now applied to have the share certificate released and subsequently cancelled.  As of September 30, 2008, the Company is still in the legal process of having the certificate released.



In February, 2008, the Company received a demand notice from CGG Veritas for failure to pay an outstanding balance of $317,380 pursuant to a Master Agreement and Job Supplement for the Shotgun Draw 2D Seismic Program in Utah. In accordance with Section 15.3 of the Master Agreement and Job Supplement dated March 21, 2007, CGG has demanded payment by April 25, 2008. If CGG Veritas is forced to proceed with litigation of this matter, it will seek reimbursement of its attorneys fees and expenses related to the litigation. The Company is currently in examining various alternatives to resolve this matter .CGG Veritas has not proceeded with litigation as of September 30, 2008.



ITEM 1A. Risk Factors



Not Applicable



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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds



(1)   2008 Stock Transactions



During the nine months ended September 30, 2008:



(a) On January 4, 2008 , the Company issued a total of 200,000 common shares pursuant to the Companys 2007 Stock Incentive and Option Plan at $0.13 per share for total proceeds of $26,000.



(b)  On February 27, 2008 the Company issued 50,000 restricted common shares valued at $5,500 to a director for his current services.



(c) On July 21, 2008 , the Company issued a total of 219,300 common shares pursuant to the Companys 2007 Stock Incentive and Option Plan at $0.10 per share for total proceeds of $21,930.



(d) On September 16, 2008 the Company issued 25,000 restricted common shares valued at $1,750 to a director for his current services.



(2)   2007 Stock Transactions



During the nine months ended September 30, 2007:



(a) The Company issued 3,333 common shares valued at $900 pursuant to a Consulting Agreement with a member of its Advisory Board to perform a minimum of two days consulting services during the period January 15, 2007 to February 15, 2007.

(b) The Company issued 133,333 restricted common shares valued at $32,000 pursuant to a Consulting Agreement with a non-related individual dated June 12, 2007, for ongoing consulting services provided to the Company.

(c) The Company issued a total of 266,667 common shares pursuant to the Companys 2005 Stock Incentive and Option Plan at $0.30 per share for total proceeds of $80,000.



(d) The Company issued a total of 66,667 common shares pursuant to the Companys 2006 Stock Incentive and Option Plan at $0.30 per share for total proceeds not yet received of $20,000.

(e)  The Company issued 133,333 restricted common shares valued at $32,000 pursuant to a Investor  Relations Agreement with related party dated August 15, 2007, for ongoing consulting services provided to the Company.

(f)  The Company issued a total of 16,667 common shares pursuant to the Companys 2005 Stock Incentive and Option Plan at $0.30 per share for total proceeds of $5,000.

(g)  The Company issued a total of 75,000 common shares pursuant to the Companys 2007 Stock Incentive and Option Plan at $0.21 per share for total proceeds of $15,750.





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During the period, the Company placed on stop transfer on a total of 333,333 shares valued at $125,000 previously issued to two consultants until management is satisfied with the performance of the Consultants earning these shares. The Company will determine by December 31, 2007 if these shares are to be released or returned to the Company for cancellation and return to treasury.



(3)

2008 Stock Options



During the nine months ended September 30, 2008, the Company granted a total of 419,300, 5 year common stock options exercise prices between $0.10 and $0.13 per share.  The Company recognized stock-based compensation of $16,579 in accordance with SFAS 123R which represented the fair value of stock options granted to consultants in exchange for services rendered to the Company.





(a)

The Companys stock option activity is as follows:



|                            |                   |                                 |                                            
|--------------------------- | ----------------- | ------------------------------- | -------------------------------------------
|                            | Number of options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life
|Balance, December 31, 2006  | -                 |                                 |                                            
|Granted during 2007         | 601,667           | 0.21                            | 5 years                                    
|Exercised during 2007       | (601,667)         | -                               |                                            
|Balance, December 31, 2007  | -                 |                                 |                                            
|Granted during 2008         | 419,300           | 0.13                            | 5 years                                    
|Exercised during 2008       | (419,300)         |                                 |                                            
|Balance, September 30, 2008 | -                 |                                 |                                            



(b)

As of September30, 2008, there were 1,141,667 stock options available for grant under the Companys 2006 Stock Incentive and Option Plan.



(c)

As of September 30, 2008, there were 1,539,033 stock options available for grant under the Companys 2007 Stock Incentive and Option Plan.







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(4)

2007 Stock Options



On October 2, 2006, the Company issued 1,925,000 common shares from the exercise of options pursuant to option grants under the Companys 2005 Stock Option and Incentive Plan and 141,667 common shares from the exercise of options pursuant to option grants under the Companys 2006 Stock Option and Incentive Plan.  All shares were issued at an exercise price of $0.10 per share. As consideration, the Company issued promissory notes to the optionees totaling $620,000. The promissory notes were repayable in six months and bear interest at 10%. The Company received $26,226 in interest during the nine months ended September 30, 2007 and has recorded $3,258 in additional accrued interest on the promissory notes. During the period, three of the four optionees elected to return their shares to the Company for cancellation. A total of 1,700,000 shares were returned to the Company for cancellation. The remaining promissory note for 366,667 shares valued at $110,000 (excluding accrued interest of $3,258) has been extended to December 31, 2007.





(a) The Companys stock option activity is as follows:



|                                                   |                   |                                 |                                            
|-------------------------------------------------- | ----------------- | ------------------------------- | -------------------------------------------
|                                                   |                   |                                 |                                            
|                                                   | Number of options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life
|Balance, December 31, 2005                         | -                 |                                 |                                            
|Granted during 2006                                | 2,266,667         | 0.10                            | 5 years                                    
|Exercised during 2006                              | (2,266,667)       | -                               |                                            
|Granted during 2007                                | 108,334           | 0.10                            | 5 years                                    
|Exercised during 2007                              | (108,334)         | -                               |                                            
|Balance, December 31, 2006 and September 30, 2007. | -                 | $                         -     | -                                          



(b)  On September 29, 2006, the Company filed a Registration Statement on Form S-8 to cover up to 4,200,000 shares of common stock to be issued pursuant to the Companys 2006 Stock Incentive and Option Plan (the Plan).  These shares are to be issued when required from authorized and unissued common stock of the Company. The purpose of the plan is to provide the opportunity for eligible employees, consultants and members of the Board of Directors to increase their proprietary interest in the Company and as an incentive for them to remain in the service of the Company. The option price is set at the fair market value of the common stock at the date of issue. The term of the options, once granted, is not to exceed five years.



(c)   As of September 30, 2007, there were 1,141,667 stock options available for grant under the Companys 2006 Stock Incentive and Option Plan.







ITEM 3.  Defaults Upon Senior Securities



None.



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ITEM 4. Submission of Matters to Vote of Security Holders



None.











ITEM 5.  Other Information



On August 7, 2008, Janice Chow, a businesswoman based in Hong Kong joined the Board of Directors of the Company.  Long time director and former President, Robert Klein has resigned as a director of the Company to pursue other business interests.







ITEM 6. EXHIBITS



Exhibit 31.1 - Section 906 Certification of Periodic Report of the Chief Executive Officer.



Exhibit 31.2 - Section 906 Certification of Periodic Report of the Chief Financial Officer.



Exhibit 32.1 - Section 302 Certification of Periodic Report of the Chief Executive Officer.



Exhibit 32.2 - Section 302 Certification of Periodic Report of the Chief Financial Officer.









SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |                                
|---------------------- | -------------------------------
|                       |                                
|                       | SHOTGUN ENERGY CORPORATION     
|                       |                                
|                       |                                
|Date: November 14,2008 | By:   /s/ M. Scheive           
|                       | Marc Scheive                   
|                       | President and C.E.O            
|                       |                                
|Date: November14,2008  | By:   /s/ J. Chow              
|                       | Janice Chow                    
|                       | Secretary. Treasurer and C.F.O.



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