**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM10-Q**

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**(Mark One)**

**x****                             ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period endedMarch 31, 2007**

**OR**

**o****                                ****TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from             to             **

**Commissionfile number 001-16749**

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**GeoPetro Resources Company**

(Exactname of registrant as specified in its charter)

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| **California**                                            |   | **94-3214487**                       |
|-----------------------------------------------------------|--------|--------------------------------------|
| (State of incorporation)                                  |   | (IRS Employer Identification Number) |
|                                                      |   |                                 |
| **One Maritime Plaza, Suite 700  San Francisco, CA** |   | **94111**                            |
| (Address of principal executive offices)                  |   | (Zip Code)                           |

**(415)398-8186**

(Registrant’s telephonenumber, including area code)

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 forsuch 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.    Yes  x    No  o.

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. (Check one):

Large acceleratedfiler  o    Accelerated filer  o    Non-accelerated filer  x

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

There were 29,547,075 shares of no par value commonstock outstanding on May 15, 2007.

 

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**Table of Contents**

**TABLE OF CONTENTS**
|                                                                                                          |
|----------------------------------------------------------------------------------------------------------|
| PART  I. FINANCIAL INFORMATION                                                                           |
| Item 1.  Financial Statements                                                                       |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations |
| Item 3. Quantitative and Qualitative Disclosures  about Market Risk                                 |
| Item 4. Controls and Procedures                                                                     |
| PART  II. OTHER INFORMATION                                                                              |
| Item 1.  Legal Proceedings                                                                          |
| Item 1A.  Risk Factors                                                                              |
| Item 2. Unregistered Sales of Equity Securities  and Use of Proceeds                                |
| Item 3. Defaults Upon Senior Securities                                                             |
| Item 4. Submission of Matters to a Vote of  Security Holders                                        |
| Item 5.  Other Information                                                                          |
| Item 6.  Exhibits                                                                                   |
| SIGNATURES                                                                                               |
|                                                                                                     |

 

2

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**PARTI. FINANCIAL INFORMATION**

**ITEM 1.                  Financial Statements.**

**GEOPETRO RESOURCESCOMPANYINDEX TO FINANCIAL STATEMENTS**
|                                                                                                                 | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|------------|
| Consolidated Balance Sheets as of March 31, 2007  (unaudited) and December 31, 2006                        |       |       |
|                                                                                                            |       |       |
| Consolidated Statements of Operations for the three  months ended March 31, 2007 and March 31, 2006 (unaudited) |       |       |
|                                                                                                            |       |       |
| Consolidated Statements of Cash Flows for three months  ended March 31, 2007 and March 31, 2006 (unaudited)     |       |       |
|                                                                                                            |       |       |
| Notes to Consolidated Financial Statements                                                                      |       |       |

 

3

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***GEOPETRO RESOURCES COMPANY***

**CONSOLIDATED BALANCE SHEETS**
| ** **                                                                                                                                                                                                                                   | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                                                                                                   | ** ** | **(Unaudited)**              | ** ** | ** **                      | ** ** |
| **ASSETS**                                                                                                                                                                                                                                   | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| **Current Assets:**                                                                                                                                                                                                                          | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Cash and cash  equivalents                                                                                                                                                                                                                   |       | $                            | 987,780    |                            | $          | 734,561 |   |
| Accounts  receivable — oil and gas sales                                                                                                                                                                                                |       | 776,308                      |       | 394,337                         |       |
| Accounts  receivable — other                                                                                                                                                                                                            |       | 70,400                       |       | 115,770                         |       |
| Related party  notes receivable                                                                                                                                                                                                              |       | 1,000,000                    |       | 1,000,000                       |       |
| Prepaid expenses                                                                                                                                                                                                                             |       | 63,938                       |       | 121,413                         |       |
| Total current  assets                                                                                                                                                                                                                        |       | 2,898,426                    |       | 2,366,081                       |       |
|                                                                                                                                                                                                                                         |       |                         |       |                            |       |
| **Oil  and Gas Properties,****at cost (full cost  method):**                                                                                                                                                                                 | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Unevaluated  properties                                                                                                                                                                                                                      |       | 4,808,978                    |       | 4,503,481                       |       |
| Evaluated  properties                                                                                                                                                                                                                        |       | 44,374,441                   |       | 43,701,510                      |       |
| Less—accumulated  depletion and impairments                                                                                                                                                                                             |       | (12,129,208                  | )          | (11,557,257                     | )          |
| Net oil and gas  properties                                                                                                                                                                                                                  |       | 37,054,211                   |       | 36,647,734                      |       |
|                                                                                                                                                                                                                                         |       |                         |       |                            |       |
| **Furniture, Fixtures and  Equipment, at cost, net of depreciation**                                                                                                                                                                         |       | 36,556                       |       | 41,547                          |       |
|                                                                                                                                                                                                                                         |       |                         |       |                            |       |
| **Other  Assets —****deposits and other  noncurrent assets**                                                                                                                                                                            |       | 6,867                        |       | 6,116                           |       |
|                                                                                                                                                                                                                                         |       |                         |       |                            |       |
| **Total Assets**                                                                                                                                                                                                                             |       | $                            | 39,996,060 |                            | $          | 39,061,478 |   |
|                                                                                                                                                                                                                                         |       |                         |       |                            |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                               | ** ** | ** **                   | ** ** | ** **                      | ** ** |
|                                                                                                                                                                                                                                         |       |                         |       |                            |       |
| **Current Liabilities:**                                                                                                                                                                                                                     | ** ** | ** **                   | ** ** | ** **                      | ** ** |
| Trade payables                                                                                                                                                                                                                               |       | $                            | 1,231,328  |                            | $          | 654,427 |   |
| Short term notes  payable                                                                                                                                                                                                                    |       | 1,773,267                    |       | 982,301                         |       |
| Interest payable                                                                                                                                                                                                                             |       | 24,044                       |       | 73,205                          |       |
| Dividends  payable                                                                                                                                                                                                                           |       | —                       |       | 133,438                         |       |
| Production taxes  payable                                                                                                                                                                                                                    |       | 138,834                      |       | 662,905                         |       |
| Other taxes  payable                                                                                                                                                                                                                         |       | 3,616                        |       | 9,206                           |       |
| Royalty owners  payable                                                                                                                                                                                                                      |       | 1,070,977                    |       | 951,271                         |       |
| Net profits  interest payable                                                                                                                                                                                                                |       | 248,321                      |       | 137,589                         |       |
| Total current  liabilities                                                                                                                                                                                                                   |       | 4,490,387                    |       | 3,604,342                       |       |
|                                                                                                                                                                                                                                         |       |                         |       |                            |       |
| **Asset Retirement Obligations**                                                                                                                                                                                                             |       | 50,020                       |       | 48,842                          |       |
| ** **                                                                                                                                                                                                                                   |       |                         |       |                            |       |
| **Commitments and Contingencies  (Note 8)**                                                                                                                                                                                                  |       | —                       |       | —                          |       |
| ** **                                                                                                                                                                                                                                   |       |                         |       |                            |       |
| **Shareholders’ Equity:**                                                                                                                                                                                                               |       |                         |       |                            |       |
| Series AA preferred  stock, no par value; 5,000,000 shares authorized, 0 shares after conversion  on March 28, 2007 and 1,890,710 shares issued and outstanding at December 31,  2006. Liquidation value was $6,750,923 at December 31, 2006 |       | —                       |       | 5,924,068                       |       |
| Common stock, no par  value; 100,000,000 shares authorized 29,359,718 and 27,423,758 shares issued  and outstanding at March 31, 2007 and December 31, 2006, respectively                                                                    |       | 46,092,896                   |       | 40,112,265                      |       |
| Additional paid-in capital                                                                                                                                                                                                                   |       | 1,091,791                    |       | 918,381                         |       |
| Treasury stock, at cost; 1,257,043 shares held at  March 31, 2007 and December 31, 2006, respectively                                                                                                                                        |       | (1,152,435                   | )          | (1,152,435                      | )          |
| Accumulated deficit                                                                                                                                                                                                                          |       | (10,576,599                  | )          | (10,393,985                     | )          |
| Total shareholders’ equity                                                                                                                                                                                                              |       | 35,455,653                   |       | 35,408,294                      |       |
| **Total Liabilities and Shareholders’ Equity**                                                                                                                                                                                          |       | $                            | 39,996,060 |                            | $          | 39,061,478 |   |

 

***See accompanying notes to theseconsolidated financial statements.***

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***GEOPETRO RESOURCES COMPANY***

**CONSOLIDATED STATEMENTS OF OPERATIONS**
| ** **                                                 | ** ** | **For the Three Months  Ended March 31,** | ** ** |
|------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                 | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
| ** **                                                 | ** ** | **(Unaudited)**                                                    | ** ** | **(Unaudited)** | ** ** |
| **Revenues**                                               |       |                                                               |       |   |   |
| Oil and gas sales                                          |       | $                                                                  | 1,823,342  |   | $ | 1,498,453 |   |
|                                                       |       |                                                               |       |   |   |
| **Costs  and expenses:**                                   |       |                                                               |       |   |   |
| Lease operating expense                                    |       | 427,277                                                            |       | 266,223 |   |
| General and administrative                                 |       | 759,356                                                            |       | 548,864 |   |
| Net profits interest                                       |       | 184,204                                                            |       | 158,603 |   |
| Depreciation and depletion expense                         |       | 576,942                                                            |       | 405,197 |   |
| Total costs and expenses                                   |       | 1,947,779                                                          |       | 1,378,887 |   |
|                                                       |       |                                                               |       |   |   |
| **Income  (loss) from operations**                         |       | (124,437                                                           | )          | 119,566 |   |
|                                                       |       |                                                               |       |   |   |
| **Other  Income and (Expense):**                           |       |                                                               |       |   |   |
|                                                       |       |                                                               |       |   |   |
| Interest expense                                           |       | (86,182                                                            | )          | (48,549 | ) |
| Interest income                                            |       | 28,005                                                             |       | 434 |   |
| Total other expense                                        |       | (58,177                                                            | )          | (48,115 | ) |
|                                                       |       |                                                               |       |   |   |
| **Net  Income (Loss) Before Taxes**                        |       | (182,614                                                           | )          | 71,451 |   |
|                                                       |       |                                                               |       |   |   |
| Income tax expense                                         |       | —                                                             |       | (13,991 | ) |
|                                                       |       |                                                               |       |   |   |
| **Net  Income (Loss) After Taxes**                         |       | (182,614                                                           | )          | 57,460 |   |
|                                                       |       |                                                               |       |   |   |
| Preferred stock dividend                                   |       | —                                                             |       | (130,537 | ) |
|                                                       |       |                                                               |       |   |   |
| **Net  Loss Available to Common Shareholders**             |       | $                                                                  | (182,614   | ) | $ | (73,077 | ) |
|                                                       |       |                                                               |       |   |   |
| **Earnings  (Loss) per Share:**                            |       |                                                               |       |   |   |
| Basic                                                      |       | $                                                                  | (0.01      | ) | $ | (0.00 | ) |
| Diluted                                                    |       | $                                                                  | (0.01      | ) | $ | (0.00 | ) |
|                                                       |       |                                                               |       |   |   |
| **Weighted  Average Number of Common Shares Outstanding:** | ** ** | ** **                                                         | ** ** | ** ** | ** ** |
| Basic                                                      |       | 27,526,895                                                         |       | 21,839,538 |   |
| Diluted                                                    |       | 27,526,895                                                         |       | 21,839,538 |   |

 

***See accompanying notes to theseconsolidated financial statements.***

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***GEOPETRO RESOURCES COMPANY***

**CONSOLIDATED STATEMENTS OF CASH FLOWS**
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                         | ** ** | **March 31,  2007**         | ** ** | **March 31,  2006** | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)**                  | ** ** | **(Unaudited)** | ** ** |
| **Cash  Flows From Operating Activities:**                                         | ** ** | ** **                       | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                | (182,614   | ) | $ | 57,460 |   |
| Adjustments to reconcile net income to net cash provided  by operating activities: |       |                             |       |   |   |
| Depreciation and depletion                                                         |       | 576,942                          |       | 405,197 |   |
| Stock compensation expense                                                         |       | 34,935                           |       | 16,616 |   |
| Non-cash interest expense                                                          |       | 38,742                           |       | 35,398 |   |
| Asset retirement obligations                                                       |       | 707                              |       | 484 |   |
| Changes in operating assets and liabilities:                                       |       |                             |       |   |   |
| (Increase) decrease in accounts receivable                                         |       | (381,971                         | )          | 233,045 |   |
| Decrease in other receivables                                                      |       | 45,370                           |       | 6,154 |   |
| (Increase) decrease in prepaid expenses                                            |       | 57,475                           |       | (91,433 | ) |
| Deposits and other noncurrent assets                                               |       | (750                             | )          | — |   |
| Increase in trade payables                                                         |       | 576,900                          |       | 3,129,718 |   |
| Increase (decrease) in interest payable                                            |       | (49,162                          | )          | 13,151 |   |
| Decrease in dividends payable                                                      |       | (133,438                         | )          | (2,901 | ) |
| Decrease in production taxes payable                                               |       | (524,071                         | )          | (207,574 | ) |
| Decrease in other taxes payable                                                    |       | (5,590                           | )          | (21,072 | ) |
| Increase (decrease) in royalty owners payable                                      |       | 119,707                          |       | (89,276 | ) |
| Increase (decrease) in net profit interest payable                                 |       | 110,732                          |       | (90,955 | ) |
| Increase in asset retirement obligations                                           |       | 471                              |       | — |   |
| Net cash provided by operating activities                                          |       | $                                | 284,385    |   | $ | 3,394,012 |   |
|                                                                               |       |                             |       |   |   |
| **Cash  Flows from Investing Activities:**                                         |       |                             | ** ** | ** ** | ** ** |
| ** **                                                                         |       |                             | ** ** | ** ** | ** ** |
| Oil and gas property expenditures                                                  |       | (945,895                         | )          | (6,423,659 | ) |
| Net cash used in investing activities                                              |       | (945,895                         | )          | (6,423,659 | ) |
|                                                                               |       |                             |       |   |   |
| **Cash  Flows from Financing Activities:**                                         |       |                             | ** ** | ** ** | ** ** |
| ** **                                                                         | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Increase in deposit in trust                                                       |       | —                           |       | (10,867,849 | ) |
| Increase in restricted cash                                                        |       | —                           |       | (2,000,075 | ) |
| Proceeds from sale of common shares, option and warrant  exercises, net            |       | 71,729                           | ** ** | 14,453,657 | ** ** |
| Payments of preferred dividends                                                    |       | —                           |       | (130,537 | ) |
| Proceeds from promissory notes, net                                                |       | 1,000,000                        |       | 1,000,000 |   |
| Payments of loan fee                                                               |       | (57,000                          | )          | (30,000 | ) |
| Repayments of promissory notes                                                     |       | (100,000                         | )          | — |   |
| Deferred offering costs                                                            |       | —                           |       | 881,159 |   |
| Net cash provided by financing activities                                          |       | 914,729                          |       | 3,306,355 |   |
|                                                                               |       |                             |       |   |   |
| **Net  Increase in Cash and Cash Equivalents:**                                    |       | 253,219                          |       | 276,708 |   |
|                                                                               |       |                             |       |   |   |
| **Cash  and Cash Equivalents:**                                                    |       |                             | ** ** | ** ** | ** ** |
| Beginning of period                                                                |       | 734,561                          |       | 914,826 |   |
| End of period                                                                      |       | $                                | 987,780    |   | $ | 1,191,534 |   |
|                                                                               |       |                             |       |   |   |
| **Supplemental  Disclosure of Cash Flow Information:**                             |       |                             |       |   |   |
| Cash paid for interest                                                             |       | $                                | 47,440     |   | $ | — |   |
|                                                                               |       |                             |       |   |   |
| Cash paid for  income taxes                                                        |       | $                                | —     |   | $ | (13,991 | ) |

***Seeaccompanying notes to these consolidated financial statements.***

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***GEOPETRORESOURCES COMPANY***

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited — Prepared by Management)**

**1.             ORGANIZATIONAND NATURE OF OPERATIONS**:

These financialstatements are included herein pursuant to the rules and regulations of theSecurities and Exchange Commission (“SEC”). Certain information and footnotedisclosure normally included in financial statements prepared in accordancewith generally accepted accounting principles have been condensed or omittedpursuant to such rules and regulations. The Company believes the disclosuresmade are adequate to make the information not misleading and recommend thatthese condensed financial statements be read in conjunction with the financialstatements and notes included in our Form 10-K for the year endedDecember 31, 2006. In the opinion of management, the financial statementsherein contain all adjustments, consisting only of normal recurring accruals,necessary for a fair presentation of the results for such periods. The resultsof operations for interim periods are not necessarily indicative of the resultsof operations for the full fiscal year.

*GeoPetro* — GeoPetro Resources Company (“GeoPetro”, “Company” “, “we”or “us”) was originally incorporated asGeoPetro Company under the laws of the State of Wyoming in 1994 to participatein the oil and gas acquisition, exploration, development and productionbusiness in the United States and internationally. GeoPetro Company wassubsequently merged into GeoPetroResources Subsidiary Company, a California corporation, on June 28, 1996.GeoPetro’s name was then changed to GeoPetro Resources Company. GeoPetro’scorporate offices are in San Francisco, California. The accompanyingconsolidated financial statements include the accounts of GeoPetro and itswholly-owned subsidiaries. All significant intercompany accounts andtransactions have been eliminated in consolidation.

*Operations* —Although GeoPetro is not a development stage enterprise, the company has alimited operating history upon which an evaluation of its business prospectscan be based. The risks, expense, and difficulties encountered by early stagecompanies must be considered when evaluating GeoPetro’s business prospects.GeoPetro incurred a net loss of $182,614 and $73,077 for the three months endedMarch 31, 2007 and 2006, and had an accumulated deficit at March 31, 2007 of$10,576,599. GeoPetro expects to make significant capital expenditures in theforeseeable future. Management believes that GeoPetro will be successful inobtaining adequate sources of cash to fund its anticipated capital expendituresthrough the end of 2007 and to follow through with plans for continuedinvestments in oil and gas properties. GeoPetro’s success, in part, depends onits ability to generate additional financing, farm-out certain of its projectsand manage its relations with the companies that provide exploration anddevelopment services. GeoPetro’s success also depends on its ability toeffectively manage growth and develop proven reserves. Additionally, GeoPetro’soperations are subject to all of the environmental and operational risksnormally associated with the oil and gas industry. GeoPetro maintains insurancethat is customary in the industry.

Sinceits inception, GeoPetro has participated as a working interest owner in theacquisition of undeveloped leases, seismic options, lease options and foreignconcessions and has participated in seismic surveys and the drilling of testwells on its undeveloped properties. Further leasehold acquisitions and seismicoperations are planned for 2007 and future periods. In addition, drilling is scheduled during 2007 and futureperiods on GeoPetro’s undeveloped properties. It is anticipated that theseexploration activities together with others that may be entered into may imposefinancial requirements which may exceed the existing working capital ofGeoPetro. Management may raise additional equity and/or debt capital, and hasfarmed-out certain of its projects to finance its continued participation inplanned activities. In the opinion of GeoPetro management, GeoPetro cancontinue as a going concern even if additional financing is unavailable.However, if additional financing is not available, GeoPetro may be compelled toreduce the scope of its business activities. If GeoPetro is unable to fundplanned expenditures, it may be necessary to:

1.                                       forfeit its interest in wells that are proposed tobe drilled;

2.                                       farm-out its interest in proposed wells;

3.                                       sell a portion of its interest in prospects anduse the sale proceeds to fund its participation for a lesser interest; and

4.                                       reduce general and administrative expenses.

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Inorder for GeoPetro to maintain itsinterest in the Indonesian and Australian contract and permit areas, certainwork and expenditure commitments must be met or an extension must be granted bythe applicable governing authority. In the event that GeoPetro does not meetthe commitments and no extensions are granted for meeting the commitments,GeoPetro will forfeit its interest in the contract or permit areas requiring animpairment write-down equal to the capitalized costs recorded for the areaforfeited. This could have a material adverse impact on GeoPetro’s results ofoperations in future periods.

InJuly 2005, GeoPetro entered into agreements with unaffiliated companies thathave purchased and are operating a dedicated gas treatment plant and relatedpipelines to process and transport GeoPetro’s gas from the Madisonville Projectin Madison County, Texas. These agreements are discussed in detail inNote 10 to the financial statements included in our Form 10-K forthe year ended December 31, 2006. Inconnection with the Madisonville Project, GeoPetro re-completed an existingwell for production from the Rodessa formation interval at approximately 11,800feet of depth and completed an injection well for disposal of waste gasses fromthe production well. GeoPetro initiated gas sales from the Madisonville Projectin May 2003. A second well was drilled, tested and completed during 2004and is presently producing on a restricted rate awaiting a planned expansion ofthe gas treatment plant.  Two additionaldevelopment wells were drilled during 2006. Another well is planned fordrilling during late 2007 in the Madisonville Project.

Otherthan the above work and expenditurecommitments, the timing of most of GeoPetro’s capital expenditures isdiscretionary. GeoPetro has no material long-term commitments associated withits capital expenditure plans or operating agreements. Consequently, GeoPetrohas a significant degree of flexibility to adjust the level of suchexpenditures as circumstances warrant. The level of capital expenditures willvary in future periods depending on the success of exploratory drillingactivities, gas and oil price conditions and other related economic factors.

**2.             SUMMARY OF SIGNIFICANTACCOUNTING POLICIES**:

*U.S. GAAP —*The Company’s financialstatements have been prepared in accordance with accounting principlesgenerally accepted within theUnited States of America (“U.S. GAAP”).

*Use of Estimates and Significant Estimates —*Certain amounts in GeoPetro’s financial statements are based uponsignificant estimates, including oil and gas reserve quantities which form thebasis for the calculation of depreciation, depletion, amortization andimpairment of oil and gas properties. Actual results could materially differfrom those estimates.

*Oil and Gas Properties* — GeoPetro follows the full cost method ofaccounting for oil and gas producing activities and, accordingly, capitalizesall costs incurred in the acquisition, exploration, and development of provedoil and gas properties, including the costs of abandoned properties, dry holes,geophysical costs, and annual lease rentals. All general corporate costs areexpensed as incurred. In general, sales or other dispositions of oil and gasproperties are accounted for as adjustments to capitalized costs, with no gainor loss recorded. Amortization of evaluated oil and gas properties is computedon the units of production method based on all proved reserves on a country bycountry basis. Unevaluated oil and gas properties are assessed for impairmenteither individually or on an aggregate basis. The net capitalized costs ofevaluated oil and gas properties(full cost ceiling limitation) are not to exceed their related estimated futurenet revenues discounted at 10%, and the lower of cost or estimated fair valueof unproved properties, net of tax considerations.

*Joint Ventures* — Some exploration andproduction activities are conducted jointly with others and, accordingly, theaccounts reflect only GeoPetro’s proportionate interest in such activities.

*Revenue Recognition* — Revenue isrecognized upon delivery of oil and gas production and is shown net ofapplicable royalty payments, processing and transportation fees. In addition, the Company recognizes revenuefrom the Madisonville Field net of applicable fees to gather, treat andtransport the Company’s natural gas production. The applicable fees are paid tounrelated third parties. Revenue from the Madisonville Field is recognized whenthe price for gas delivered becomes fixed and determinable. The price for gasdelivered to the purchaser, Madisonville Gas Processing LP (“MGP”), becomesfixed and determinable after the gas has been gathered, treated, andtransported to a common carrier pipeline where it is then resold by MGP to thecommon carrier pipeline on a spot market basis. The proceeds from the sale ofthe gas are deposited directly into an escrow account under the joint signaturecontrol of the Company and MGP. The fees to gather, treat and transport the gasare distributed to MGP in accordance with agreements between them and theCompany. The remaining net proceeds are distributed to the Company.

*Asset Retirement Obligation* — In accordance with Statement of FinancialAccounting Standards No. 143, *Accountingfor Asset Retirement Obligations* (“SFAS 143”), the fair valueof an asset retirement cost, and corresponding liability, 

8

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shouldbe recorded as part of the cost of the related long-lived asset andsubsequently allocated to expense using a systematic and rational method.GeoPetro recorded an asset retirement obligation to reflect GeoPetro’s legalobligations related to future plugging and abandonment of its oil and gaswells. GeoPetro estimated the expected cash flow associated with the obligationand discounted the amount using acredit-adjusted, risk-free interest rate. At least annually, GeoPetroreassesses the obligation to determine whether a change in the estimatedobligation is necessary. GeoPetro evaluates whether there are indicators thatsuggest the estimated cash flows underlying the obligation have materiallychanged. Should those indicators suggest the estimated obligation hasmaterially changed, GeoPetro will accordingly update its assessment.

|                                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| Asset retirement  obligations, beginning of period |       | $                  | 48,842     |                  | $          | 26,641 |   |
| Liabilities  incurred                              |       | 471                |       | 19,537                |       |
| Accretion  expense                                 |       | 707                |       | 2,664                 |       |
| Asset retirement  obligations, end of period       |       | $                  | 50,020     |                  | $          | 48,842 |   |

*Furniture, Fixtures and Equipment —*Furniture,fixtures and equipment are stated at cost. Depreciation is provided onfurniture, fixtures and equipment using the straight-line method over anestimated service life of three to seven years.

*Income Taxes* — GeoPetro accounts for income taxes usingthe asset and liability method wherein deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenfinancial statement carrying amounts of existing assets and liabilities andtheir respective tax bases. Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the years inwhich the temporary differences are expected to be recovered or settled.Because management has determined that realization of deferred tax assets isnot likely, the net deferred tax assets are fully reserved.

*Concentrations of Credit Risk* — Credit risk represents the accounting lossthat would be recognized at the reporting date if counterparties failedcompletely to perform as contracted. Concentrations of credit risk (whether onor off balance sheet) that arise from financial instruments exist for groups ofcustomers or counterparties when they have similar economic characteristicsthat would cause their ability to meet contractual obligations to be similarlyaffected by changes in economic or other conditions described below. The creditrisk amounts for cash and accounts receivable do not take into account thevalue of any collateral or security.

GeoPetromaintains several cash accounts with three financial institutions. Accounts ateach institution are insured by the Federal Deposit Insurance Corporation up to$100,000. As of March 31, 2007, the uninsured bank balance was $1,022,458.GeoPetro has not experienced any losses in such accounts and believes it is notexposed to any significant credit risk.

Forthe three months ended March 31, 2007 and year ended December 31, 2006, theCompany had sales to customers exceeding 10% of total sales as follows:

|            | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------|------------|------------------------------|------------|---------------------------------|------------|
| Customer A |       | 57                           | %          | 79                              | %          |
| Customer B |       | 43                           | %          | 21                              | %          |

AtMarch 31, 2007, the Company had accounts receivable balances from Customer Bof  $776,308, or 92%, and from Customer Aof  $394,337 or 77% at December 31, 2006of total accounts receivable respectively.

*Allowance for Doubtful Accounts* — Trade accounts receivable are recorded atnet realizable value. If the financial condition of GeoPetro’s customers wereto deteriorate, resulting in an impairment of their ability to make payments,additional allowances may be required. Delinquent trade accounts receivable arecharged against the allowance for doubtful accounts once uncollectibility hasbeen determined. The allowance is determined through an analysis of thepast-due status of accounts receivable and assessments of risk that are basedon historical trends and an evaluation of the impact of current and projectedeconomic conditions. There was no activity in the allowance for doubtful accountsas of March 31, 2007 and December 31, 2006.

9

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*Fair Value of Financial Instruments* — The estimated fair values for financialinstruments are determined at discrete points in time based on relevant marketinformation. These estimates involve uncertainties and cannot be determinedwith precision. For certain of GeoPetro’s financial instruments, includingcash, accounts receivable, accounts payable and current portion of notespayable, the carrying amounts approximate fair value due to their maturities.

*Stock-Based Compensation* — Effective January 1, 2006, theCompany adopted the fair value recognition provisions of Statement of FinancialAccounting Standard 123(R) “*Share-BasedPayment”* (“SFAS 123(R)”) using the modified prospective transitionmethod. In addition, the Securities and Exchange Commission issued StaffAccounting Bulletin No. 107 “*Share-BasedPayment*” (“SAB 107”) in March, 2005, which provides supplementalSFAS 123(R) application guidance based on the views of the SEC. Under themodified prospective transition method, compensation cost recognized in the threemonths ended March 31, 2007 includes: (a) compensation cost for allshare-based payments granted prior to, but not yet vested as of January 1,2006, based on the grant date fair value estimated in accordance with theoriginal provisions of SFAS No. 123, and (b) compensation cost forall share-based payments granted beginning January 1, 2006, based on the grantdate fair value estimated in accordance with the provisions of SFAS 123(R). Inaccordance with the modified prospective transition method, results for priorperiods have not been restated.

The adoption of SFAS123(R) resulted in stock compensation expense for the three months ended March31, 2007 $34,935 to income from continuing operations and income before incometaxes, of which the entire amount was recorded to general and administrativeexpenses. The Company did not recognize a tax benefit from the stockcompensation expense because the Company considers it is more likely than notthat the related deferred tax assets, which have been reduced by a fullvaluation allowance, will not be realized.

Thefair value of each option grant was estimated on the date of grant using theBlack-Scholes option pricing model with the following weighted-averageassumptions used for grants in 2003 and 2005: risk-free, weighted-averageinterest rates ranging from 2.52 to 3.75 percent, expected dividend yieldof 0 percent, expected life of 5 years from the date of grant, andexpected volatility of 10 and 25 percent. After the initial publicoffering on March 30, 2006, an expected volatility factor of 58% was used forthe newly issued common stock options and the extension of common stock optionsand warrants. A newly issued stock option is an option that was granted on orafter March 30, 2006 or a previously granted stock option or warrant that ismodified on or after March 30, 2006. The fair value of all newly issued stockoptions grants in 2006 is estimated using the Black-Scholes option pricingmodel with the following weighted average assumptions used for grants andmodifications of prior grants made on or after March 30, 2006 for the threemonths ended March 31, 2007: risk-free, weighted average interest rate of 4.9percent based on the U.S. Treasury yield curve in effect at the time of grant,expected dividend yield of 0 percent, expected life of 5 years from the date ofgrant (the remaining term of the option in the case of option extensions), andexpected volatility of 58%. GeoPetro selected 10 publicly traded “small cap”companies whose primary business is oil and gas exploration andproduction.  Small cap, for purposes ofthis analysis, is defined as companies with a market capitalization under $1billion.  From this peer group of similarcompanies, GeoPetro randomly selected 10 companies and derived expectedvolatility factors for the most recent completed fiscal years for each entityas reported in their recently filed 10K or 10KSB Annual Reports with theSecurities and Exchange Commission. Where the expected volatilities were expressed as a range, a simpleaverage of the range is used as an expected volatility for that entity.

Adescription of the common stock options outstanding as of March 31, 2007 areincluded in Note 6.

*Income (Loss) Per Common Share —*Basic earnings per share excludes dilution and is calculated by dividingnet income or loss by the weighted average number of common shares outstandingfor the period. Diluted earnings per share reflects the potential dilution thatcould occur if securities or other contracts to issue common stock wereexercised or converted into common stock or resulted in the issuance of commonstock that then shared from the earnings of the entity. Potential common sharesfor the periods ended March 31, 2007 and 2006 were excluded from the earningsper share computation because the Company incurred net losses and wereanti-dilutive.

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|                                                     | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                          | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| Net Income  (Loss) and Adjustments:                 |       |                                                 |       |   |   |
| Net Income  (Loss) Available to Common Shareholders |       | $                                                    | (182,614   | ) | $ | (73,077 | ) |
| Adjustments                                         |       | Anti-dilutive                                        |       | Anti-dilutive |   |
| Net Earnings  (Loss) for Diluted Calculation        |       | $                                                    | (182,614   | ) | $ | (73,077 | ) |
|                                                |       |                                                 |       |   |   |
| Shares:                                             |       |                                                 |       |   |   |
| Weighted Average  Shares Outstanding                |       | 27,526,895                                           |       | 21,839,538 |   |
| Outstanding  Options                                |       | Anti-dilutive                                        |       | Anti-dilutive |   |
| Series A  Preferred Stock - Conversion              |       | Anti-dilutive                                        |       | Anti-dilutive |   |
| Outstanding  Warrants                               |       | Anti-dilutive                                        |       | Anti-dilutive |   |
| Average Number  of Shares for Diluted Calculation   |       | 27,526,895                                           |       | 21,839,539 |   |
| Diluted EPS                                         |       | $                                                    | (0.01      | ) | $ | (0.00 | ) |

*Cash Equivalents —*Cash and cash equivalents include cash on hand, amounts held in banksand highly liquid investments purchased with an original maturity of threemonths or less.

*New Accounting Pronouncements**---*** In July 2006, the FinancialAccounting Standards Board (“FASB”) issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes*(FIN48). It became effective for the Company on January 1, 2007. FIN 48clarifies the accounting for income taxes by prescribing a minimum recognitionthreshold that a tax position is required to meet before being recognized inthe financial statements. FIN 48 also provides guidance on measurement,classification, interim accounting and disclosure. We adopted FIN 48 effectiveJanuary 1, 2007 (See Note 8).

In September 2006, FASBissued SFAS No. 157, *Fair ValueMeasurements*. SFAS No. 157 defines fair value, establishes aframework for measuring fair value, and expands disclosure requirementsregarding fair value measurement. Where applicable, this statement simplifiesand codifies fair value related guidance previously issued within GAAP.Although this statement does not require any new fair value measurements, itsapplication may, for some entities, change current practice. SFAS No. 157will be effective for the Company beginning January 1, 2008. The adoptionof SFAS No. 157 is not expected to have a material impact on our financialstatements.

In February 2007,the FASB issued SFAS No. 159, *The FairValue Option for Financial Assets and Financial Liabilities*, whichpermits entities to choose to measure many financial instruments and certainother items at fair value. The objective is to improve financial reporting byproviding entities with the opportunity to mitigate volatility in reportedearnings caused by measuring related assets and liabilities differently withouthaving to apply complex hedge accounting provisions. SFAS No. 159 appliesto all entities and is effective for fiscal years beginning after November 15,2007. Adoption of SFAS No. 159 is not required for these financialstatements, and we are currently determining the impact, if any, that SFASNo. 159 will have on our future financial statements.

**3.             SHORT TERM NOTES PAYABLE**:

Shortterm notes payable at three months ended March 31, 2007 and December 31,2006 consisted of the following:

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|                                                                                                                                                                                                                          | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Promissory note  dated January 31, 2006, payable to Pinehill Capital; collateralized with an  undivided 5% of the net cash flow in GeoPetro’s Madisonville Project; payable  on or before October 31, 2007 (a) |       | $                            | 1,000,000  |                            | $          | 1,000,000 |   |
|                                                                                                                                                                                                                     |       |                         |       |                            |       |
| Promissory note  dated February 1, 2007 payable on or before October 31, 2007 (b)                                                                                                                                        |       | 500,000                      |       | —                          |       |
|                                                                                                                                                                                                                     |       |                         |       |                            |       |
| Promissory note  dated February 6, 2007 payable on or before October 31, 2007 (c)                                                                                                                                   |       | 300,000                      |       | —                          |       |
|                                                                                                                                                                                                                     |       |                         |       |                            |       |
| Promissory note  dated February 1, 2007 payable on or before October 31, 2007 (d)                                                                                                                                   |       | 100,000                      |       | —                          |       |
|                                                                                                                                                                                                                     |       | 1,900,000                    |       | 1,000,000                       |       |
|  Less discount on promissory notes                                                                                                                                                                                  |       | (126,733                     | )          | (17,699                         | )          |
|                                                                                                                                                                                                                     |       | $                            | 1,773,267  |                            | $          | 982,301 |   |

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(a)          The Company issued a $1,000,000 short term promissory note on January31, 2006 with a maturity date of January 31, 2007.  The note may be repaid at any time withoutpenalty.  In the event the note is notrepaid by the maturity date, the Company has agreed to dedicate 5% of the netcash flow from the Madisonville Project in Texas toward the repayment of thenote and any accrued interest thereon. In connection with the note, the Company paid a loan origination fee of$30,000 and granted a three-year warrant exercisable to purchase 150,000 CommonShares at $3.50 per share. The fair value of the warrants on the date ofissuance, $182,390, as well as the $30,000 loan origination fee, was recordedas a debt discount and is being amortized over the life of the promissory note.On February 1, 2007, the maturity date was extended to October 31, 2007.The Company has paid $80,000 accrued interest thru January 31, 2007. In connection with the extension, the Company paida loan extension fee of $30,000 and granted a three-year warrant exercisable topurchase 50,000 Common Shares at $3.50 per share. The fair value of thewarrants on the date of issuance, $57,242, together with the $30,000 loanextension fee, were recorded as a debt discount and are being amortized overthe life of the promissory note.  As ofMarch 31, 2007, the unamortized debt discount was $67,855.

(b)         The Company issued a $500,000 short term promissory note payable onFebruary 1, 2007 with a maturity date of October 31, 2007.  The note may be repaid at any time withoutpenalty.  The principal plus accruedinterest on the note are due on the maturity date. In connection with the note, the Company paid a loan originationfee of $15,000 and granted a three-year exercisable warrant to purchase 25,000Common Shares at $3.50 per share. The fair value of the warrants on the date ofissuance, $27,072, as well as the $15,000 loan origination fee, was recorded asa debt discount and is being amortized over the life of the promissory note. Asof March 31, 2007, the unamortized debt discount was $32,723.

(c)          The Company issued a $300,000 short term promissory note payable onFebruary 6, 2007 with a maturity date of October 31, 2007.  The note may be repaid at any time withoutpenalty. The principal plus accrued interest on the note are due on thematurity date. In connection with the note, the Company paid a loan originationfee of $9,000 and granted a three-year exercisable warrant to purchase 15,000Common Shares at $3.50 per share. The fair value of the warrants on the date ofissuance, $16,214, as well as the $9,000 loan origination fee, was recorded asa debt discount and is being amortized over the life of the promissory note. Asof March 31, 2007, the unamortized debt discount was $19,611.

(d)         The Company issued a $100,000 short term promissory note payable onFebruary 1, 2007 with a maturity date of October 31, 2007.  The note may be repaid at any time withoutpenalty. The principal plus accrued interest on the note are due on thematurity date. In connection with the note, the Company paid a loan originationfee of $3,000 and granted a three-year exercisable warrant to purchase 5,000Common Shares at $3.50 per share. The fair value of the warrants on the date ofissuance, $5,414, as well as the $3,000 loan origination fee, was recorded as adebt discount and is being amortizedover the life of the promissory note. As of March 31, 2007, the unamortizeddebt discount was $6,544.

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**4.             RELATED PARTY TRANSACTIONS**:

There were no material changes in related partytransactions from those disclosed in the audited annual consolidated financialstatements for the year ended December 31, 2006, except:

OnFebruary 12, 2007, Stuart J. Doshi, President and CEO, loaned $100,000 to theCompany.  The note bears interest at 8%annually and is payable on demand.  Thenote plus accrued interest was repaid on March 28, 2007.

On June7, 2006, the Company loaned $1,000,000 to G. Carter Sedanoui, a 5% shareholder,evidenced by a short term promissory note payable to the Company with anoriginal maturity date of March 31, 2007. On March 30, 2007, the Companyextended the maturity date of the note to June 30, 2007.

**5.             SHAREHOLDERS’ EQUITY**:

GeoPetro’s articles of incorporation allow for theissuance of 100,000,000 shares of common stock, 1,000,000 shares ofSeries A preferred stock (“Series A Stock”), 5,000,000 shares ofSeries AA preferred stock (“Series AA Stock”), and an additional 44,000,000shares of preferred stock which may be issued from time to time in one or moreseries.

During the three months ended March 31, 2007, the following issuances of common stockwere made:

|                                       | ** ** | **Preferred Stock   Series AA** | ** ** | **Common Stock** | ** ** |
|---------------------------------------|------------|------------------------------------------------|------------|-----------------------|------------|
| ** **                            | ** ** | **Shares**                                     | ** ** | **Amount**            | ** ** | **Shares** | ** ** | **Amount** | ** ** |
| Balances,  December 31, 2006          |       | 1,890,710                                      |       | $                     | 5,924,068  |   | 27,423,758 |   | $ | 40,112,265 |   |
| Issuance of  common stock for cash    |       | —                                         |       | —                |       | 45,250 |   | 56,563 |   |
| Series AA  preferred stock conversion |       | (1,890,710                                     | )          | (5,924,068            | )          | 1,890,710 |   | 5,924,068 |   |
| Balances, March 31,  2007             |       | —                                         |       | $                     | —     |   | 29,359,718 |   | $ | 46,092,896 |   |

 

*Conversion of Series A Stock —*On March 28, 2007, all1,890,710 of the Company’s outstanding shares of Series AA Stockautomatically converted into 1,890,710 shares of our common stock, no par valueper share.  Under the Company’s Amendedand Restated Articles of Incorporation, and as more fully described in Note 7included in our Form 10K for the year ended December 31, 2006, theSeries AA stock automatically converts into common shares on a one-for-oneshare basis effective the first trading day after the reported high sellingprice for our common shares is at least $5.25 per share for any consecutive tentrading days, which condition was met on March 27, 2007.  Dividends accrued on the Series AA Stock at arate of $0.28 per annum, per share, while the Series AA Stock wasoutstanding.  In 2006, dividends paid onthe Series AA Stock totaled $529,400. Pursuant to the terms of the Series AAStock, no dividends are payable for the first quarter of 2007.

**6.             COMMON STOCK OPTIONS**:

There were no material changesto common stock options from those disclosed in the audited annual consolidatedfinancial statements for the year ended December 31, 2006.  Theoptions outstanding as of March 31, 2007 have the following contractuallives:

| Number of  Options  Outstanding | ** ** | **Number of  Options  Exercisable** | ** ** | **Exercise  Prices** | ** ** | **Weighted Average  Remaining  Contractual Life** | ** ** |
|--------------------------------------|------------|------------------------------------------|------------|----------------------|------------|-------------------------------------------------------------|------------|
| 750,000                              |       |                                     | 750,000    |                 | 0.50       |                                                        | 1.08       |   |
| 1,290,000                            |       |                                     | 1,290,000  |                 | 2.00       |                                                        | 0.75       |   |
| 1,750,000                            |       |                                     | 1,070,000  |                 | 2.10       |                                                        | 6.18       |   |
| 150,000                              |       |                                     | 0          |                 | 3.85       |                                                        | 4.05       |   |
| 10,000                               |       |                                     | 4,000      |                 | 4.25       |                                                        | 2.76       |   |
| 10,000                               |       |                                     | 2,000      |                 | 6.25       |                                                        | 3.20       |   |
| 3,960,000                            |       |                                     | 3,116,000  |                 |       |                                                        |       |   |

 

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As of March 31, 2007, there are 3,116,000 optionswhich are exercisable. The remaining 844,000 options will become exercisableratably over the next four years.

**7.             COMMON STOCK WARRANTS**:

On February 12, 2007, the Company issued a two-yearexercisable common stock warrant to purchase 20,000 Common Shares at $3.50 pershare to an unaffiliated third party for geophysical services. The purchaseright under the warrant has an expiration date of February 12, 2009 unless terminatedearlier in accordance with the stock warrant purchase agreement.

OnFebruary 28, 2007, the Company issued a two-year exercisable common stockwarrantto purchase 5,000 CommonShares at $4.51 per share to the same party as above for geophysical services.The purchase right under the warrant has an expiration date of February 28,2009 unless terminated earlier in accordance with the stock warrant purchaseagreement.

The fairvalue of the warrants totalled $32,533 and was capitalized in oil and gasproperties as part of the U.S. cost pool.

Inaddition, during the three months ended March 31, 2007, the Company issuedcommon stock warrants in connection with promissory notes payable.  These warrant issuances are discussed in Note3.

**8.****                                      INCOME TAXES**:

TheCompany adopted the provisions of FASB Interpretation No. 48, Accounting forUncertainty in Income Taxes, on January 1, 2007. As a result of the adoption ofFIN 48, the Company has unrecognized tax benefits of $86,000 as of the date ofadoption. No corresponding interest and penalties have been accrued as theCompany is in a net operating loss position.

TheCompany files income tax returns in the U.S. federal jurisdiction and variousstates.  There is currently a federalincome tax audit for the 2004 tax year in progress.   There are currently no other federal orstate income tax examinations underway for these jurisdictions.  Furthermore, the Company is no longer subjectto U.S. federal income tax examinations by the Internal Revenue service for taxyears before 2003 and for state and local tax authorities for years before2002.  The Company does, however, havenet operating losses generated in tax years 1995 and after, which remain openfor examination.

TheCompany provides for income taxes in accordance with Statement of FinancialAccounting Standards No. 109, Accounting for Income Taxes (“SFAS 109”).  SFAS 109 requires the recognition of deferredtax assets and liabilities for the expected future tax consequences oftemporary differences between the financial statement carrying amounts and thetax basis of the assets and liabilities. Where it is more likely than not that a tax benefit will not berealized, a valuation allowance is recorded to reduce the deferred tax asset toits realizable value.

Avaluation allowance has been provided against the Company’s net deferred taxassets as the Company believes that it is more likely than not that the netdeferred tax assets will not be realized. As a result of this valuation allowance, the effective tax rate for thefirst quarter of 2007 and for the year ended December 31, 2006 is zeropercent.

**9.****                                      COMMITMENTS AND CONTINGENCIES**:

There were no material changesto commitments and contingencies from those disclosed in the auditedannual   consolidated financialstatements for the year ended December 31, 2006 except as disclosed in Note 8herein, and as follows:

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*SalaryIncreases —*On December 18, 2006, the independent membersof the board of directors, acting on the recommendations of Stuart J. Doshi, thePresident and CEO, voted to increase the salaries of Messrs. Creel andSteinhauser, officers of the Company, to $163,200 annually effective January 1,2007.

**10.          SUBSEQUENT EVENTS**:

On April25 and May 9, 2007, an officer and director exercised warrants to purchase80,000 and 70,000 shares of common stock, respectively, at an exercise price of$2.00 per share. The warrants were granted on June 18, 2000 and had anexpiration date of June 30, 2007.

On May 11and May 14, 2007, 12,357 and 25,000 shares of common stock, respectively,were issued for gross and net proceeds of $130,750 pursuant to the exercise ofwarrants.

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**ITEM 2.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

*The following discussion and analysis should beread in conjunction with accompanying financial statements and related notesincluded elsewhere in this report. It contains forward looking statements thatreflect our future plans, estimates, beliefs and expected performance. Theforward looking statements are dependent upon events, risks and uncertaintiesthat may be outside our control. Our actual results could differ materiallyfrom those discussed in these forward looking statements. Factors that couldcause or contribute to such differences include, but are not limited to, marketprices for natural gas and oil, economic and competitive conditions, regulatorychanges, estimates of proved reserves, potential failure to achieve productionfrom development drilling projects, capital expenditures and otheruncertainties, as well as those factors discussed below and elsewhere in thisreport, particularly in “Risk Factors” and “Cautionary Notes Regarding ForwardLooking Statements”, all of which are difficult to predict and which expresslyqualify all subsequent oral and written forward-looking statements attributableto us or persons acting on our behalf. In light of these risks, uncertaintiesand assumptions, the forward looking events discussed may not occur. We do nothave any intention or obligation to update forward-looking statements includedin this report after the date of this report, except as required by law.*

**Overview**

GeoPetroResources Company (the “Company”, “we” or “us”) is a California incorporatedoil and gas company in the business of exploring and developing oil and naturalgas reserves on a worldwide basis. Since inception, we have conducted leaseholdacquisition, exploration and drilling activities on our North American,Australian and Indonesian prospects. These projects currently encompassapproximately 1.56 million gross (396,080 net) acres, consisting ofmineral leases, production sharing contract and exploration permits that giveus the right to explore for, develop and produce oil and natural gas. Most ofthese properties are in the exploration, appraisal or development drillingphase and have not begun to produce revenue from the sale of oil and naturalgas. Excluding minor interest and dividend income, our only significant cashinflows until 2003 were the recovery of capital invested in projects throughsale or other divestiture of interests in oil and gas prospects to industrypartners.

Since 2003, substantially all of our revenue has beengenerated from natural gas sales derived from the Magness #1 and the Fannin#1wells in the Madisonville Field in East Texas under spot gas purchase contractsat market prices. Natural gas sales from the Madisonville Field are expected toaccount for substantially all of our revenues for 2007. We expect the majorityof our capital expenditures in 2007 to be the costs of drilling and completingwells in the Madisonville Field.

**Results of Operations**

The financial information with respect to the threemonths ended March 31, 2007 and 2006 that is discussed below is unaudited. Inthe opinion of management, such information contains all adjustments,consisting only of normal recurring accruals, necessary for a fair presentationof the results for such periods. The results of operations for interim periodsare not necessarily indicative of the results of operations for the full fiscalyear.
| ** **                                                 | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                 | ** ** | **March 31, 2007**     | ** ** | **March 31, 2006** | ** ** |
| ** **                                                 | ** ** | **(unaudited)**                  | ** ** | **(unaudited)** | ** ** |
| **Consolidated Statement of  Operations:**                 |       |                             |       |   |   |
| **Revenues**                                               |       | $                                | 1,823,342  |   | $ | 1,498,453 |   |
| **Lease  operating expense**                               |       | 427,277                          |       | 266,223 |   |
| **General  and administrative**                            |       | 759,356                          |       | 548,864 |   |
| **Net  profits expense**                                   |       | 184,204                          |       | 158,603 |   |
| **Depreciation  and depletion expense**                    |       | 576,942                          |       | 405,197 |   |
| **Earnings  (loss) from operations**                       |       | (124,437                         | )          | 119,566 |   |
| **Net  income (loss)**                                     |       | (182,614                         | )          | 57,460 |   |
| **Net income (loss) attributable  to common shareholders** |       | $                                | (182,614   | ) | $ | (73,077 | ) |

**Revenue and Operating Trends in 2007**

As discussed in the “Properties — Texas — MadisonvilleProject” section in our Annual Report on Form 10-K for the year endedDecember 31, 2006, in order to produce the gas reserves from the RodessaFormation, we developed an onsite plan to treat and remove impurities from theMadisonville Project natural gas in order to meet pipeline-qualityspecifications. In 2003, the construction and 

16

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installation of a natural gas treatment plant with adesigned capacity of 18 MMcf/d and associated pipeline and gathering facilitieswere completed.  The treatment plant andassociated pipeline and gathering facilities are owned by an unaffiliated thirdparty. The natural gas plant is currently treating approximately 16.5 MMcf/d ofinlet natural gas from our Magness and Fannin Wells.  

In 2005 we secured a commitment from MGP to installand make operational additional treating facilities capable of treating 50MMcf/d, which combined with the capacity of the current in-service treatingfacilities will represent a total designed treating capacity of 68 MMcf/d forthe Madisonville treatment plant.   Representatives of MGP have indicated that they expect the fullexpansion of the treatment plant to 68 MMcf/d capacity can be in place andoperational by the second quarter of 2007.

Upon completion of the plant expansion, we expect toproduce our Fannin Well at a higher rate as the well rate has previously beenrestricted due to capacity limitations in the gas treatment plant.  We also expect to commence production fromour Mitchell Well, which is currently shut-in awaiting the plantexpansion.  In addition, later in 2007 weexpect to fracture stimulate the Wilson Well, and provided such stimulation issuccessful, we will place the Wilson Well on production.

Inaddition, our contract with MGP provides that for the first 18,000 Mcf/d of gasmeasured and delivered to the inlet flange of the gas treatment plant, we willpay MGP a treating fee of $1.50 per Mcf (this fee is presently $1.55 per Mcfadjusted for inflation).  For any gasvolumes in excess of 18,000 Mcf/d of gas delivered to the inlet flange of thegas treatment plant, the treating fee we pay to MGP is reduced from $1.50 to$1.10 per Mcf ($1.14 per Mcf adjusted for inflation).  We record our revenues net of these treatingfees.  Thus, if we are able to increaseour inlet production volumes over 18 MMcf/d on a sustained basis, we expect toexperience a disproportionately higher increase in revenue due to lower averagetreating fees per Mcf.

While there can be no assurance, the higher productionrates from our wells combined with the lower average treating fees per Mcf, mayresult in higher net production and increased revenue during later periods in2007 as compared to the first quarter of 2007 and prior periods.

**IndustryOverview for the three months ended March 31, 2007**

The first quarter of 2007 saw strengthening naturalgas prices. The Houston Ship Channel price, the index price prevailing in thelocale of our Madisonville Project in Madison County, Texas, as quoted in GasDaily as of March 30, 2007, was $6.80 versus $5.40 as of December 29, 2006. Natural gas prices improved during the quarter due to higher demandinduced by cold temperatures experienced in many parts of theUnited States, among other factors.

**Company Overviewfor the three months ended March 31, 2007**

Our net loss after taxes for the quarter ended March31, 2007 was $182,614.  From ourinception, through mid-2003, we only received nominal revenues from our oil andnatural gas activities, while incurring substantial acquisition and explorationcosts and overhead expenses which have resulted in an accumulated deficitthrough March 31, 2007 of $10,576,599. Commencing in May 2003, we placedour Madisonville Project into production. Substantially all of our oil andnatural gas sales for the quarter ended March 31, 2007 were derived from ourMadisonville Project, from two producing wells, the UMC Ruby Magness #1 well(the “Magness Well”) and the Angela Farris Fannin #1 well (the “Fannin Well”).

**Comparison ofResults of Operations for the three months ended March 31, 2007and 2006**

During the three months ended March 31, 2007, we hadoil and natural gas revenues of $1,823,342. Our net production was 522,996 thousandcubic feet (Mcf) of natural gas at an average price of $3.49 per Mcf.  

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During the three months endedMarch 31, 2006, we had oil and natural gas revenues of $1,498,453.  Our net production for the three months endedMarch 31, 2006 was 468,578 Mcf at an average price of $3.20 per Mcf.  Revenues increased in the three months endedMarch 31, 2007 as compared to the prior year period due to higher gas pricesand****12% higher production volumes.  Prices were approximately 9% higher for thethree months ended March 31, 2007 versus the same period in 2006.

During the three months ended March 31, 2007, weincurred lease operating expenses of $427,277. Our average lifting cost for the2007 period was $0.82 per Mcf. During the three months ended March 31, 2006, weincurred lease operating expenses of $266,223. Our average lifting cost for the2006 period was $0.57 per Mcf. The higher average lifting cost in first quarter2007 was due to a workover done on the Magness well and production taxesattributable to the Fannin #1 well. The Fannin #1 well was not placed onproduction until March 2006. The production for the Magness and the Fanninwells is at present limited to the current treatment plant’s capacity of up to18,000 Mcf/d.  Therefore, the productionfrom the Fannin #1 and the Magness #1 wells is limited to a rate that is belowthe combined productive flow capability of the wells.  A majority of the lease operating costs arefixed costs such as chemical treatments for the wells, insurance, ad valoremtax, and salaries paid to the field personnel. During the three months endedMarch 31, 2007, the total lease operating costs for the Magness #1 well were$171,565 versus $229,008 in the same period of 2006. The net production of theMagness #1 well was 171,303 Mcf for the three months ended March 31, 2007compared to 376,181 Mcf in same period of 2006. Most of the production decreaseis attributable to natural declines.  Asa result, the average lifting cost for the Magness #1 well was $1.00 per Mcffor the three months ended March 31, 2007 versus $0.61 per Mcf in the sameperiod of 2006.  The average lifting costfor the Fannin #1 well was $0.73 per Mcf for the three months ended March 31,2007.  The Fannin #1 well’s averagelifting cost was lower than the Magness #1 well due mainly to the cost of theMagness #1 workover performed in the first quarter of 2007.

During the three months ended March 31, 2007, weincurred net profits interest expense of $184,204 associated with the Magnessand the Fannin wells as compared to $158,603 during the three months endedMarch 31, 2006. The 16% increase resulted from higher gas prices as well ashigher production volumes in the three months ended March 31, 2007 versus 2006.The net profits interest is 12.5% of the net operating profits from our Magnessand Fannin wells.

General and administrative expenses for the threemonths ended March 31, 2007 were $759,356 compared to $548,864 for the threemonths ended March 31, 2006. This represents a $210,492 increase over the prioryear period due primarily to U.S. and Canada public company filling fees, andcosts associated with our SEC registration statement, listing on the AmericanStock Exchange and ongoing filing requirements.

Depreciation, depletion and amortization expense (“DD&A”)for the three months ended March 31, 2007 was $576,942 as compared to $405,197in the same period of 2006, which amounts primarily represent amortization ofthe U.S. full cost pool for the three months ended March 31, 2007 and2006, respectively. The increase was due to higher net production in the threemonths period of 2007 and an increase in the amount of capitalized cost in theU.S. full cost pool.

Loss from operations totaled $124,437 for the threemonths ended March 31, 2007 as compared to income from operations of $119,566for the three months ended March 31, 2006. The increase in the loss fromoperations was due primarily to higher lease operating, general andadministrative and depletion costs.

Other income for the three months ended March 31, 2007and 2006 consisted of interest income in the amount of $28,005 and $434,respectively. The reason for the increased interest income was higher averagecash and cash equivalent balances during the 2007 period as compared to 2006period.

During the three months ended March 31, 2007 and 2006,we incurred interest expense of $86,182 and $48,549, respectively. The higherinterest expense in the current period was due to short-term borrowings whichwere incurred to complete the Mitchell well as well as a workover performed onthe Magness well.

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Net loss before taxes for the three months ended March31, 2007 was $182,614 as compared to net income before taxes of $71,451 for thethree months ended March 31, 2006. The net loss during 2007 was primarily dueto higher lease operating, general and administrative and depletion costs.

Income tax expense for the three months ended March31, 2007 was $-0- compared to $13,991 in the same period of 2006. The decreasedincome tax expense was due to net loss occurred in the three months ended March31, 2007.

**Recent Developments**

On September 29, 2006, we sold to CNPC 70% of ourshareholding in C-G Bengara and our interest in the Bengara Block, reducing ourinterest from 40% to 12%. CNPC is a wholly owned subsidiary of CNPC (Hong Kong)Ltd. who is party to the agreements as guarantor. CNPC (Hong Kong) Ltd. is apublicly held company based in Hong Kong and its shares trade on the Hong KongStock Exchange under the listing number 0135.HK. CNPC (Hong Kong) Ltd. is a 52%owned subsidiary of the China National Petroleum Company based in Beijing, PRC.See the “Properties—Description of Properties—Indonesia” section in our AnnualReport on Form 10K for the year ended December 31, 2006.

During 2006, our wholly-owned subsidiary, Redwood EnergyProduction, L.P. (“**Redwood LP**”),was a defendant in two lawsuits, titled the “Miller Lawsuit” and “Redwood vs.George Mejlaender.” To avoid the costs of continued litigation, Redwood LP, theMiller plaintiffs and the Mejlaender plaintiffs, through mediation, enteredinto a binding settlement agreement on June 1, 2006 to resolve all oftheir disputes. Under the terms of the settlement, Redwood LP paid theplaintiffs $1,100,000 in cash upon the closing of the settlement, executed a 6%promissory note in favor of the Miller and Mejlaender plaintiffs with aDecember 29, 2006 maturity date in the amount of $900,000 secured by Redwood LP’sinterest in the Magness Well, and assigned the plaintiffs overriding royaltyinterests of 2% in the Magness Well, 2% in the Fannin Well, 0.75% in the WilsonWell, and agreed to assign 0.5%, 0.3% and 0.2% in the first, second and thirdwells, respectively, in the event these wells are drilled and completed byRedwood LP below the Rodessa-Sligo Interval. The plaintiffs have assigned toRedwood LP any and all ownership interests they may have had in theMadisonville Prospect below the top of the Rodessa-Sligo Interval and conveyedall of their overriding royalty interests in the Madisonville Prospect in theRodessa-Sligo Interval and below. The combined $2.0 million has been recordedto evaluated oil and gas properties. On December 28, 2006, we paid the 6%promissory note, plus accrued interest, in full.

In February 2007, we borrowed $900,000 pursuant tothree promissory notes bearing interest at 8% per annum.  The notes mature on October 31, 2007.  In connection with these notes, we paid loanorigination fees totaling $27,000 and issued three year warrants exercisable topurchase 45,000 shares of our common stock at $3.50 per share which expire inFebruary 2009.

InFebruary 2007, we received anextension of the maturity date of our promissory note for $1,000,000 payable toPine Hill Capital, LLC to October 31, 2007. In connection with the extension, wepaid a loan extension fee of $30,000 and granted a three-year warrant topurchase 50,000 shares of our common stock at $3.50 per share.  If we do not repay the note by October 31,2007, we are required to dedicate 5% of our net cash flow from the MadisonvilleProject located in Madison County, Texas, toward the unpaid principal and allaccrued and unpaid interest on the note, until all such amounts are paid infull.  Net cash flow means our grossrevenues, less royalties, production taxes and net profits interest expense.

In February 2007, Stuart J. Doshi, President and CEO,loaned $100,000 to us pursuant to a promissory note bearing interest at 8% perannum, payable upon demand. We repaid the note plus accrued interest on March28, 2007.

On June 7, 2006, we loaned $1,000,000 to G. CarterSednaoui, a 5% shareholder, evidenced by a full-recourse short-term promissorynote payable to us with an original maturity date of March 31, 2007.  On March 30, 2007, we extended the maturitydate of the note to June 30, 2007.

On March 28, 2007, all 1,890,710 of our outstandingshares of our Series AA Stock automatically converted into 1,890,710 shares ofour common stock. Under our Amended and Restated Articles of 

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Incorporation,the Series AA stock automatically converts into common shares on a one-for-oneshare basis effective the first trading day after the reported high sellingprice for our common shares is at least $5.25 per share for any consecutive tentrading days, which condition was met on March 27, 2007. As a result of theconversion of our Series AA stock to common stock on March 28, 2007, dividendson the Series AA Stock ceased accruing on December 31, 2006. In 2006, dividendspaid on the Series AA Stock totaled $529,400.

On April 25, 2007 and May 9, 2007, an officer and directorexercised warrants to purchase 80,000 and 70,000 shares of common stock at anexercise price of $2.00 per share. The warrants were granted on June 18,2000 and had an expiration date of June 30, 2007.

On May 11 and May 14, 2007, we issued 12,357 and25,000 shares of common stock at an exercise price of $3.50 per share inconnection with warrant exercises.

**Liquidity andCapital Resources**

We had a working capital deficit of $1,591,961 versus$1,238,261 at March 31, 2007 and December 31, 2006, respectively. Ourworking capital decreased during three months ended March 31, 2007 dueprimarily to costs associated with: our SEC registration, our listing on theAmerican Exchange and the Mitchell well’s hookup costs.

We have historically financed our business activitiesthrough March 31, 2007 principally through issuances of common shares,promissory notes and common stockpurchase warrants in private placements. These financings are summarized asfollows:
| ** **                                                      | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                      | ** ** | **March 31, 2007**     | ** ** | **March 31, 2006** | ** ** |
| Increase in  deposit in trust                                   |       | $                                | —     |   | $ | (10,867,849 | ) |
| Increase in  restricted cash                                    |       | —                           |       | (2,000,075 | ) |
| Proceeds from  sale of common shares and warrant exercises, net |       | 71,729                           |       | 14,453,657 |   |
| Payment on  preferred dividends                                 |       | —                           |       | (130,537 | ) |
| Repayments of  promissory notes                                 |       | (100,000                         | )          | — |   |
| Proceeds from  promissory notes                                 |       | 1,000,000                        |       | 1,000,000 |   |
| Payment of loan  fee                                            |       | (57,000                          | )          | (30,000 | ) |
| Deferred  offering costs                                        |       | —                           |       | 881,159 |   |
| Net cash  provided by financing activities                      |       | $                                | 914,729    |   | $ | 3,306,355 |   |

 

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The net proceeds of our financings have been primarilyinvested in oil and natural gas properties totaling $945,895, and $6,423,659for the three months ended March 31, 2007 and 2006, respectively.

Our cash balance at March 31, 2007 was $987,780compared to a cash balance of $734,561 at December 31, 2006. The change inour cash balance is summarized as follows:
| Cash balance at  December 31, 2006           |   | $         | 734,561 |   |
|----------------------------------------------|--------|-----------|---------|--------|
| Sources of cash:                             |   |      |    |
| Cash provided by operating activities        |   | 284,385   |    |
| Cash provided by financing activities        |   | 914,729   |    |
|                                         |   |      |    |
| Total sources of cash including cash on hand |   | 1,933,675 |    |
|                                         |   |      |    |
| Uses of cash:                                |   |      |    |
| Cash used in investing activities:           |   |      |    |
| Oil and natural gas property expenditures    |   | (945,895  | )       |
| Total uses of cash                           |   | (945,895  | )       |
|                                         |   |      |    |
| Cash balance at March  31, 2007              |   | $         | 987,780 |   |

 

Our current cash and cash equivalents and anticipatedcash flow from operations may not be sufficient to meet our working capital,capital expenditures and growth strategy requirements for the foreseeablefuture.  See “Outlook for 2007” for adescription of our expected capital expenditures for 2007. If we are unable togenerate revenues necessary to finance our operations over the long-term, wemay have to seek additional capital through the sale of our equity orborrowing. As noted in “Recent Developments,” we periodically borrow fundspursuant to short term promissory notes to finance our activities.

**Contractual Obligations**

We have assumed various contractual obligations andcommitments in the normal course of our operations and financing activities. Wehave described these obligations and commitments in our “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”section in our Annual Report on Form 10-K for the year ended December 31,2006. There were no material changes to our contractual obligations sinceDecember 31, 2006.

**Income Taxes**

As of December 31, 2006, we had net operatingloss (NOL) carryforwards of approximately $22,932,000 for federal income taxpurposes beginning to expire in 2010 and $10,926,000 for state income taxpurposes which began to expire in 2006.

A significant change in our ownership may limit ourability to use these NOL carryforwards. Statement of Financial AccountingStandards No. 109, Accounting for Income Taxes, requires that the taxbenefit of such net operating loss be recorded as an asset. AtDecember 31, 2006, we had net deferred tax assets of approximately$3.7 million related to the NOL and other temporary differences. We haverecorded a full valuation allowance of $3.7 million at December 31,2006, due to uncertainties surrounding the realizability of the deferred taxasset.

Effective January 1, 2007, we adopted the provisionsof FASB interpretation No. 48, Accounting for Uncertainty in Income Taxes, thedetail of which is included in Note 8.

**Off BalanceSheet Arrangements**

As of March 31, 2007, we had no off balance sheetarrangements. 

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**FinancialInstruments**

We have not committed any forward sales of our naturalgas and do not employ any other financial instruments.

**Outlook for 2007**

Depending on capital availability, we are forecastingcapital spending of up to approximately $16.0 million in 2007, allocatedas follows:

1.                                       Madisonville Project, Madison County, Texas.Approximately $11.0 million will be expended in the Madisonville Fieldarea as follows: $10,000,000 to drill a deep well location, and $1,000,000 tobe utilized for land acquisition, engineering and permitting.

2.                                       Alaska Cook Inlet Project, up to approximately$3.0 million will be expended for the drilling of pilot program wells.

3.                                       Central Alberta Reef Project. Up to approximately$2.0 million will be expended to drill exploratory wells and acquire 3-D seismic data.

We may, in our discretion, decide to allocateresources towards other projects in addition to or in lieu of, those listedabove should other opportunities arise and as circumstances warrant.

We expect commodity prices to be volatile, reflectingthe current tight supply and demand fundamentals for North American natural gasand world crude oil. Political events around the world, which are difficult topredict, will continue to influence both oil and gas prices. Higher prices foroil and gas often lead to higher levels of drilling activity which in turn leadto higher costs to explore, develop and acquire oil and gas reserves due togreater competition for resources and supplies. These higher costs could affectthe returns on our capital expenditures. Higher crude prices could also helpkeep natural gas prices high by keeping alternative fuels, such as heating oiland residual fuel, expensive.

**Impact of Inflation &Changing Prices**

We are highly dependent upon natural gas pricing.  A material decrease in current and projectednatural gas prices could impair our ability to raise additional capital onacceptable terms.  Likewise, a materialdecrease in current and projected natural gas prices could also impact ourrevenues and cash flows.  This couldimpact our ability to fund future activities.

Changing prices have had a significant impact on costsof drilling and completing wells, particularly in the Madisonville Field areawhere we are currently the most active. The impact is due to higher costs associated with tubular goods, wellequipment, and day rates for drilling contracts, among other factors.  These higher costs have impacted and willcontinue to impact our income from operations in the form of higher depletionexpense.

**Critical Accounting Estimates**

Our consolidated financialstatements have been prepared by management in accordance with U.S. GAAP.  We refer you to the corresponding section inPart II, Item 7 and the notes to the consolidated financial statements ofour Annual Report on Form 10-K for the year ended December 31, 2006 for adescription of critical accounting policies and estimates.

**Risks andUncertainties**

There are a number of risks that face participants inthe U.S., Canadian and international oil and natural gas industry, including anumber of risks that face us in particular. Accordingly, there are risks 

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involved in an ownershipof our securities.  See “Risk Factors” inour Annual Report on Form 10-K for the year ended December 31, 2006 for adescription of the principal risks faced by us.

**ITEM 3.  Quantitativeand Qualitative Disclosures About Market Risk**

We are exposed to market risks arising fromfluctuating prices of crude oil, natural gas and interest rates as discussedbelow.

*Commodity Risk.*   Our major commodity price risk exposureis to the prices received for our natural gas production. Realized commodityprices received for our production are the spot prices applicable to naturalgas in the East Texas region. Prices received for natural gas are volatile andunpredictable and are beyond our control. For the first quarter ended March 31,2007, a 10% change in the prices received for natural gas production would havehad an approximate $800,000 impact on our revenues.

*Currency TranslationRisk.**  *Because our revenues and expensesare primarily in U.S. dollars, we have little exposure to currencytranslation risk, and, therefore, we have no plans in the foreseeable future toimplement hedges or financial instruments to manage international currencychanges.

*Hedging.*We did not enter into any hedging transactions during the three months endedMarch 31, 2007 and the year ended December 31 2006.

**ITEM 4.  Controlsand Procedures**

***Evaluation ofDisclosure Controls and Procedures***

Based on an evaluation carried out under thesupervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer, as of the end of the periodcovered by this report, our Chief Executive Officer and Chief Financial Officerbelieve that our disclosure controls and procedures, as defined in SecuritiesExchange Act Rules 13a-15(e) and 15d-15(e), were, as of the end of the periodcovered by this report, to the best of their knowledge, effective.

***Changes in InternalControl Over Financial Reporting***

There has been no change in our internal control overfinancial reporting during the first fiscal quarter of 2007 that has materiallyaffected, or is reasonably likely to materially affect, our internal controlover financial reporting.

**PARTII. OTHER INFORMATION**

**Item 1.**                    **LegalProceedings.**

From time to time, we areparty to litigation or other legal and administrative proceedings that weconsider to be a part of the ordinary course of our business. Currently, we arenot involved in any legal proceedings nor are we party to any pending orthreatened claims that could, individually or in the aggregate, reasonably beexpected to have a material adverse effect on our financial condition, cashflow or results of operations.

**Item 1A.**                 **Risk Factors.**

As of the date of this filing, there have been nomaterial changes from the risk factors previously disclosed in our “RiskFactors” in our Annual Report on Form 10-K for the year ended December 31,2006, referred to as our 2006 Annual Report. An investment in our securitiesinvolves various risks. When considering an investment in our company, youshould consider carefully all of the risk factors described in our 2006 AnnualReport. These risks and uncertainties are not the only ones facing us and theremay be additional matters that we are unaware of or that we currently considerimmaterial. All of these could 

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adversely affect our business, financial condition,results of operations and cash flows and, thus, the value of an investment inour company.

**Item 2.**                    **Unregistered Sales of Securities and Use of Proceeds.**

**Unregistered Sales of Securities**

During February 2007, we issued a total of$900,000 in unsecured 8% promissory notes due October 31, 2007 to threeaccredited investors. The private placement issuances of the unsecuredpromissory notes were exempt from the registration requirements of theSecurities Act pursuant to Section 4(2) of the Securities Act and Rule 506 ofRegulation D. The investors in the private placements were accreditedinvestors, as defined in Rule 501(a). We did not accomplish the offer or saleof the securities sold in the private placement through any manner of generalsolicitation or general advertising. We made available to the investor, priorto purchase, the opportunity to ask questions and receive answers concerningthe terms and conditions of the private placement.

**Use ofProceeds**

Our registration statement on Form S-1 (Reg. No.333-135485) registered up to 16,499,991 shares of our common stock, no parvalue per share, including 5,943,105 shares of common stock issuable uponexercise of warrants and options, for resale by selling shareholders. Theregistration statement was declared effective by the Securities and ExchangeCommission on February 8, 2007. The offering commenced on February 8, 2007 andhas not terminated. We will not receive any proceeds from the sale of ourcommon stock by the selling shareholders under the registration statement;however if all warrants and options to acquire our common stock beingregistered thereunder are exercised, we will realize cash proceeds ofapproximately $14,019,681, which we expect to use for general working capitalpurposes and the drilling of wells in our Texas, Alaska, California andIndonesian prospects.

If less than the $14,019,681 proceeds are realizedfrom the exercise of such warrants and options, the proceeds will be spent inthe following order of priority:

1.             AlaskaCook Inlet Project, up to approximately $3.0 million will be expended for thedrilling of pilot program wells.

2.             MadisonvilleProject, Madison County, Texas. Up to approximately $10 million will beexpended in the Madisonville Field area towards the drilling and completion ofone deep exploratory well location to an estimated depth of 18,000 feet.

3.             Generalworking capital.

We do not know if, or how many, of the warrants oroptions will be exercised. This is our best estimate of our use of proceedsgenerated from the possible exercise of warrants or options based on thecurrent state of our business operations, our current plans and currenteconomic and industry conditions. Any changes in the projected use of proceedswill be made at the sole discretion of our board of directors.

**Item 3.**                    **Defaults Upon Senior Securities.**

Not applicable.

**Item 4.**                    **Submission of Matters to a Vote of the Security Holders.**

Not applicable.

**Item 5.**                    **Other Information.**

Not applicable

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**Item 6.                    Exhibits.**
| Exhibit  Number    | ** ** | **Description**                                                                                                                                                                                              |
|--------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   3.1**  |       | Amended and Restated Articles of Incorporation of  GeoPetro Resources Company                                                                                                                                |
|   3.2*** |       | Amended and Restated Bylaws of the GeoPetro  Resources Company                                                                                                                                               |
|   4.1**  |       | Form of Warrant issued by GeoPetro Resources  Company to various investors on various dates.                                                                                                            |
|   4.2**  |       | Specimen Common  Stock Certificate                                                                                                                                                                           |
| 10.1**             |       | Joint Venture Agreement Bengara II, Dated  January 1, 2000                                                                                                                                              |
| 10.2**             |       | Production Sharing Contract Bengara II, Dated  December 4, 1997                                                                                                                                         |
| 10.3**             |       | Joint Venture Agreement—Whicher Range, Dated  October 28, 1996                                                                                                                                     |
| 10.4**             |       | Exploration Permit #408, Dated July 2, 1997                                                                                                                                                             |
| 10.5**             |       | Madisonville Field Development Agreement Dated  August 1, 2005                                                                                                                                          |
| 10.6**             |       | Alaska Cook Inlet Option dated April 20, 2005                                                                                                                                                           |
| 10.7**†       |       | The 2001 Stock Incentive Plan                                                                                                                                                                                |
| 10.8**†       |       | The 2004 Stock Option and Appreciation Rights Plan                                                                                                                                                           |
| 10.9**†       |       | Stuart Doshi Employment Agreement, Dated  July 28, 1997 (effective July 1, 1997) and amendments dated January 11,  2001, July 1, 2003, April 20, 2004, May 9, 2005, July 28, 2005 and January  30, 2006 |
| 10.10**†      |       | David Creel Employment Agreement, Dated April 28,  1998 and amendments dated  June 15, 2000, May 12, 2003 and  January 1, 2005                                                                |
| 10.11**†      |       | J. Chris Steinhauser Employment Agreement, Dated  June 19, 2000 and amendments datedDecember 12, 2002 and January 1,  2005                                                                    |
| 10.12**            |       | Office Lease Agreement, Dated effective  March 1, 2004                                                                                                                                                  |
| 10.13**            |       | Promissory Note to Pinehill Capital Inc., Dated  January 31, 2006                                                                                                                                       |
| 10.14**            |       | Form of Subscription Agreement for GeoPetro  Resources Company stock executed by various investors on various dates.                                                                                    |
| 10.15**            |       | Promissory Note between GeoPetro Resources Company  and G. Carter Sednaoui, Dated June 7, 2006                                                                                                          |
| 10.16**            |       | Flow-Through Share Agreement between GeoPetro  Resources Company and GeoPetro Canada Ltd., Dated March 30, 2006                                                                                         |
| 10.17**            |       | Form of Flow-Through Share Agreement between  GeoPetro Resources Company and various investors, Dated March 30, 2006                                                                               |
| 10.18**            |       | Promissory Notes between GeoPetro Resources Company  and Stuart J. Doshi, various dates                                                                                                                      |
| 10.19**            |       | Shares Sale & Purchase Agreement Dated September  29, 2006                                                                                                                                               |
| 21.1***            |       | List of Subsidiaries of GeoPetro                                                                                                                                                                             |
| 31.1*              |       | Rule 13a-14(a)/15d-14(a) Certification of Chief  Executive Officer.                                                                                                                                          |
| 31.2*              |       | Rule 13a-14(a)/15d-14(a) Certification of Chief  Financial Officer.                                                                                                                                          |
| 32.1*              |       | Certification of Chief Executive Officer and Chief  Financial Officer of GeoPetro Resources Company pursuant to 18 U.S.C. § 1350.                                                                       |

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*                 Filedherewith

**          Filedas the identically numbered exhibit to the Registration Statement onForm S-1, as amended (No. 333-135485), as filed with the Securitiesand Exchange Commission on June 30, 2006, and incorporated herein by reference.

***   Filedas the identically numbered exhibit to the Annual Report on Form 10K, as filedwith the Securities and Exchange Commission on April 2, 2007, and incorporatedherein by reference.

†                  Indicatesa management contract or compensatory plan or arrangement.

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

| Signature                 | ** ** | **Title**                                                            | ** ** | **Date**     |
|---------------------------|------------|----------------------------------------------------------------------|------------|--------------|
| /s/ Stuart J.  Doshi      |       | Chairman of the  Board, President                                    |       | May 15, 2007 |
| Stuart J. Doshi           |       | and Chief  Executive Officer                                         |       |         |
|                      |       |                                                                 |       |         |
| /s/ David V.  Creel       |       | Vice President  of Exploration and                                   |       | May 15, 2007 |
| David V. Creel            |       | Director                                                             |       |         |
|                      |       |                                                                 |       |         |
| /s/ J. Chris  Steinhauser |       | Vice President  of Finance and                                       |       | May 15, 2007 |
| J. Chris  Steinhauser     |       | Chief Financial  Officer, Principal  Accounting Officer and Director |       |         |

 

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