**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

 

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**(Mark One)**

 

| **x** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended March 31, 2008**

** **

**OR**

 

| **o** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------------------------|

 

**For the transition period from                to**

 

**Commission file number 001-16749**

 

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**GeoPetro Resources Company**

(Exact name of registrant as specified in itscharter)

 

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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 telephone number, including area code)

 

Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.  Yes  x      No  o.

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated  filer  o          |   | Accelerated filer  o          |
|------------------------------------------------|--------|-----------------------------------------|
|                                           |   |                                    |
| Non-accelerated filer  x             |   | Smaller reporting  company  o |
| (Do not check if a  smaller reporting company) |   |                                    |

 

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

 

There were 32,700,970shares of no par value common stock outstanding on May 13, 2008.

 

 

 

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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 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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**PART I. FINANCIAL INFORMATION**

 

**Item 1.   Financial Statements.**

 

**GEOPETRO RESOURCES COMPANY**

 

**UNAUDITED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                                                                                 | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                 | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| **ASSETS**                                                                                                                                                                 | ** ** | ** **         | ** ** | ** **            | ** ** |
| **Current assets:**                                                                                                                                                        | ** ** | ** **         | ** ** | ** **            | ** ** |
| Cash and cash equivalents                                                                                                                                                  |       | $                  | 3,147,765  |                  | $          | 4,294,565 |   |
| Trade accounts receivable—oil and gas sales                                                                                                                           |       | 848,043            |       | 965,188               |       |
| Accounts receivable—other                                                                                                                                             |       | 535,763            |       | 345,862               |       |
| Prepaid expenses                                                                                                                                                           |       | 97,869             |       | 118,065               |       |
| Total current assets                                                                                                                                                       |       | 4,629,440          |       | 5,723,680             |       |
|                                                                                                                                                                       |       |               |       |                  |       |
| **Oil and gas properties, at cost  (full cost method):**                                                                                                                   | ** ** | ** **         | ** ** | ** **            | ** ** |
| Unevaluated properties                                                                                                                                                     |       | 7,904,289          |       | 5,848,195             |       |
| Evaluated properties                                                                                                                                                       |       | 47,584,533         |       | 47,428,750            |       |
| Less—accumulated depletion  and impairment                                                                                                                            |       | (15,447,683        | )          | (14,917,700           | )          |
| Net oil and gas properties                                                                                                                                                 |       | 40,041,139         |       | 38,359,245            |       |
|                                                                                                                                                                       |       |               |       |                  |       |
| **Furniture, fixtures and  equipment, at cost, net of depreciation**                                                                                                       |       | 23,980             |       | 26,727                |       |
| **Other assets—deposits and other  noncurrent assets**                                                                                                                |       | 7,436              |       | 6,954                 |       |
| **Total Assets**                                                                                                                                                           |       | $                  | 44,701,995 |                  | $          | 44,116,606 |   |
|                                                                                                                                                                       |       |               |       |                  |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                              | ** ** | ** **         | ** ** | ** **            | ** ** |
|                                                                                                                                                                       |       |               |       |                  |       |
| **Current Liabilities:**                                                                                                                                                   | ** ** | ** **         | ** ** | ** **            | ** ** |
| Trade payables                                                                                                                                                             |       | $                  | 826,036    |                  | $          | 666,293 |   |
| Production taxes payable                                                                                                                                                   |       | 168,945            |       | 407,246               |       |
| Other taxes payable                                                                                                                                                        |       | 30,726             |       | 161,032               |       |
| Royalty owners payable                                                                                                                                                     |       | 1,265,584          |       | 979,743               |       |
| Net profits interest payable                                                                                                                                               |       | 280,147            |       | 147,513               |       |
| Total current liabilities                                                                                                                                                  |       | 2,571,438          |       | 2,361,827             |       |
| ** **                                                                                                                                                                 |       |               |       |                  |       |
| **Asset Retirement Obligations**                                                                                                                                           |       | 55,022             |       | 53,726                |       |
|                                                                                                                                                                       |       |               |       |                  |       |
| **Commitments and Contingencies  (Notes 2 and 8)**                                                                                                                         |       | —             |       | —                |       |
|                                                                                                                                                                       |       |               |       |                  |       |
| **Shareholders’ Equity:**                                                                                                                                             |       |               |       |                  |       |
| Common stock, no par value; 100,000,000 shares authorized; 31,950,970  shares issued and outstanding at March 31, 2008 and  December 31, 2007, respectively |       | 52,645,168         |       | 52,645,168            |       |
| Additional paid-in capital                                                                                                                                                 |       | 2,249,465          |       | 2,219,109             |       |
| Treasury stock, at cost, 1,257,043 shares held at March 31, 2008  and December 31, 2007, respectively                                                            |       | (1,152,435         | )          | (1,152,435            | )          |
| Accumulated deficit                                                                                                                                                        |       | (11,666,663        | )          | (12,010,789           | )          |
| Total shareholders’ equity                                                                                                                                            |       | 42,075,535         |       | 41,701,053            |       |
|                                                                                                                                                                       |       |               |       |                  |       |
| **Total Liabilities and  Shareholders’ Equity**                                                                                                                       |       | $                  | 44,701,995 |                  | $          | 44,116,606 |   |
|                                                                                                                                                                            |            |                    |            |                       |            |  |  |  |  |  |  |

 

***See accompanyingnotes to these******unaudited******consolidatedfinancial statements.***

 

3

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**GEOPETRO RESOURCES COMPANY**

 

**UNAUDITED CONSOLIDATED STATEMENTS OFOPERATIONS**

 
| ** **                                                 | ** ** | **Three Months Ended**   | ** ** |
|------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                 | ** ** | **March 31,  2008** | ** ** | **March 31,  2007** | ** ** |
| **Revenues**                                               |       |                     |       |   |   |
| Oil and gas sales                                          |       | $                        | 2,142,598  |   | $ | 1,823,342 |   |
|                                                       |       |                     |       |   |   |
| **Costs and expenses:**                                    |       |                     |       |   |   |
| Lease operating expense                                    |       | 343,823                  |       | 427,277 |   |
| General and administrative                                 |       | 715,423                  |       | 759,356 |   |
| Net profits interest                                       |       | 228,061                  |       | 184,204 |   |
| Depreciation and depletion expense                         |       | 534,430                  |       | 576,942 |   |
| Total costs and expenses                                   |       | 1,821,737                |       | 1,947,779 |   |
|                                                       |       |                     |       |   |   |
| **Income (loss) from operations**                          |       | 320,861                  |       | (124,437 | ) |
|                                                       |       |                     |       |   |   |
| **Other Income and (Expense):**                            |       |                     |       |   |   |
|                                                       |       |                     |       |   |   |
| Interest expense                                           |       | —                   |       | (86,182 | ) |
| Interest income                                            |       | 30,065                   |       | 28,005 |   |
| Total other expense                                        |       | 30,065                   |       | (58,177 | ) |
|                                                       |       |                     |       |   |   |
| **Net Income (Loss) Before Taxes**                         |       | 350,926                  |       | (182,614 | ) |
|                                                       |       |                     |       |   |   |
| Income tax expense                                         |       | (6,800                   | )          | — |   |
|                                                       |       |                     |       |   |   |
| **Net Income (Loss) After Taxes**                          |       | 344,126                  |       | (182,614 | ) |
|                                                       |       |                     |       |   |   |
| **Net Income (Loss) Available to  Common Shareholders**    |       | $                        | 344,126    |   | $ | (182,614 | ) |
|                                                       |       |                     |       |   |   |
| **Earnings (Loss) per Share:**                             |       |                     |       |   |   |
| Basic                                                      |       | $                        | 0.01       |   | $ | (0.01 | ) |
| Diluted                                                    |       | $                        | 0.01       |   | $ | (0.01 | ) |
|                                                       |       |                     |       |   |   |
| **Weighted Average Number of  Common Shares Outstanding:** |       |                     |       |   |   |
| Basic                                                      |       | 31,950,970               |       | 27,526,895 |   |
| Diluted                                                    |       | 33,210,448               |       | 27,526,895 |   |

 

***See accompanyingnotes to these******unaudited******consolidatedfinancial statements.***

 

4

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**GEOPETRO RESOURCES COMPANY**

 

**UNAUDITED CONSOLIDATED STATEMENTS OFCASH FLOWS**

 
| ** **                                                                                | ** ** | **For the Three Months Ended** | ** ** |
|-------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                | ** ** | **March 31,  2008**       | ** ** | **March 31,  2007** | ** ** |
| **Cash Flows From Operating  Activities:**                                                |       |                           |       |   |   |
|                                                                                      |       |                           |       |   |   |
| Net income (loss)                                                                         |       | $                              | 344,126    |   | $ | (182,614 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by  operating activities: |       |                           |       |   |   |
| Depreciation and depletion                                                                |       | 534,430                        |       | 576,942 |   |
| Share-based compensation expense                                                          |       | 30,355                         |       | 34,935 |   |
| Non-cash interest expense                                                                 |       | —                         |       | 38,742 |   |
| Accretion of discount on asset retirement obligations                                     |       | 1,037                          |       | 707 |   |
| Changes in operating assets and liabilities:                                              |       |                           |       |   |   |
| (Increase) decrease in accounts receivable                                                |       | 117,145                        |       | (381,971 | ) |
| (Increase) decrease in other receivables                                                  |       | (189,901                       | )          | 45,370 |   |
| Decrease in prepaid expenses                                                              |       | 20,196                         |       | 57,475 |   |
| Deposits and other noncurrent assets                                                      |       | (482                           | )          | (750 | ) |
| Increase in trade payables                                                                |       | 159,744                        |       | 576,900 |   |
| Decrease in interest payable                                                              |       | —                         |       | (49,162 | ) |
| Decrease in dividends payable                                                             |       | —                         |       | (133,438 | ) |
| Decrease in production taxes payable                                                      |       | (238,301                       | )          | (524,071 | ) |
| Decrease in other payable                                                                 |       | (130,308                       | )          | (5,590 | ) |
| Increase in royalty owners payable                                                        |       | 285,841                        |       | 119,707 |   |
| Increase in net profit interest payable                                                   |       | 132,636                        |       | 110,732 |   |
| Increase in asset retirement obligations                                                  |       | 259                            |       | 471 |   |
| Net cash provided by operating activities                                                 |       | 1,066,777                      |       | 284,385 |   |
|                                                                                      |       |                           |       |   |   |
| **Cash Flows from Investing  Activities:**                                                |       |                           |       |   |   |
|                                                                                      |       |                           |       |   |   |
| Oil and gas property expenditures                                                         |       | (2,211,876                     | )          | (945,895 | ) |
| Acquisition of furniture, fixtures & equipment                                   |       | (1,701                         | )          | — |   |
| Net cash used in investing activities                                                     |       | (2,213,577                     | )          | (945,895 | ) |
| ** **                                                                                |       |                           |       |   |   |
| **Cash Flows from Financing  Activities:**                                                |       |                           |       |   |   |
|                                                                                      |       |                           |       |   |   |
| Proceeds from sale of common shares, option and warrant exercises,  net                   |       | —                         |       | 71,729 |   |
| Proceeds from promissory notes, net                                                       |       | —                         |       | 1,000,000 |   |
| Payments of loan fee                                                                      |       | —                         |       | (57,000 | ) |
| Repayments of promissory notes                                                            |       | —                         |       | (100,000 | ) |
| Net cash provided by financing activities                                                 |       | —                         |       | 914,729 |   |
|                                                                                      |       |                           |       |   |   |
| **Net Increase (Decrease) in Cash  and Cash Equivalents:**                                |       | (1,146,800                     | )          | 253,219 |   |
|                                                                                      |       |                           |       |   |   |
| **Cash and Cash Equivalents:**                                                            |       |                           |       |   |   |
| Beginning of period                                                                       |       | 4,294,565                      |       | 734,561 |   |
| End of period                                                                             |       | $                              | 3,147,765  |   | $ | 987,780 |   |
|                                                                                      |       |                           |       |   |   |
| **Supplemental Disclosure of Cash  Flow Information:**                                    |       |                           |       |   |   |
| Cash paid for interest                                                                    |       | $                              | —     |   | $ | 47,440 |   |
|                                                                                      |       |                           |       |   |   |
| Cash paid for income taxes                                                                |       | $                              | 6,800      |   | $ | — |   |

 

***See accompanyingnotes to these unaudited consolidated financial statements.***

 

5

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**GEOPETRORESOURCES COMPANY**

 

**NOTES TO UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTS**

 

**1.     BASIS OF PRESENTATION ANDUSE OF ESTIMATES:**

 

The interim consolidatedfinancial statements of GeoPetro Resources Company (“we,” “us,” “our,”“GeoPetro” or the “Company”) are unaudited and contain all adjustments(consisting primarily of normal recurring accruals) necessary for a fairstatement of the results for the interim periods presented. Results for interimperiods are not necessarily indicative of results to be expected for a fullyear or for previously reported periods due in part, but not limited to, thevolatility in crude oil and natural gas commodity prices, interest rates,estimates of reserves, drilling risks, geological risks, transportationrestrictions, the timing of acquisitions, product demand, market competition,interruption in production and our ability to obtain additional capital. Youshould read these consolidated interim financial statements in conjunction withthe audited consolidated financial statements and notes thereto included inGeoPetro’s Annual Report on Form 10-K for the year ended December 31,2007.

 

The accompanying financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States of America (“GAAP”) and include theaccounts of GeoPetro and its wholly-owned subsidiaries. Intercompany accountsand transactions are eliminated. In preparing the accompanying financialstatements, management has made certain estimates and assumptions that affectreported amounts in the financial statements. Actual results may differ fromthose estimates. Significant assumptions are required in the valuation ofproved oil and natural gas reserves, which may affect the amount at which oiland natural gas properties are recorded. The computation of share-basedcompensation expense requires assumptions such as volatility, expected life andthe risk-free interest rate. It is at least reasonably possible these estimatescould be revised in the near term, and these revisions could be material.

 

**2.     LIQUIDITY:**

 

We hold working interests inundeveloped leases, seismic options, lease options and foreign concessions andwe have participated in seismic surveys and the drilling of test wells onundeveloped properties. Further leasehold acquisitions and seismic operationsare planned for 2008 and future periods. In addition, exploratory and developmental drilling is scheduled during2008 and future periods on our undeveloped properties.  We anticipate that these exploration activitiestogether with others that may be entered into may impose financial requirementswhich may exceed our existing working capital. We may need to raise additionalequity or enter into new borrowing arrangements to finance our continuedparticipation in planned activities. Further, we have farmed-out certain of ourprojects.  However, if additionalfinancing is not available, we may be compelled to reduce the scope of ourbusiness activities. If we are unable to fund planned expenditures, it may benecessary to forfeit our interest in proposed wells, farm-out our interest inproposed wells, sell a portion of our interests in prospects and use the saleproceeds to fund participation for a lesser interest, reduce general andadministrative expenses, or a combination of all of these factors.

 

**3.     Recently Issued Accounting Pronouncements:**

 

In September 2006, theFASB issued SFAS No. 157, *Fair Value Measurements*,which we adopted on January 1, 2008. SFAS 157 provides a definition of fair value, establishes a frameworkfor measuring fair value, and expands disclosures about fair value measurementsfor future transactions. The adoption of this pronouncement did not impact ourfinancial position or results of operations.

 

In December 2007, the FASB issued SFAS No. 141 (revised2007), *Business Combinations*(“SFASNo. 141R”). SFAS No. 141R, which among other things, establishesprinciples and requirements for how the acquirer in a business combination(i) recognizes and measures in its financial statements the identifiableassets acquired, the liabilities assumed, and any noncontrolling interest inthe acquired business, (ii) recognizes and measures the goodwill acquiredin the business combination or a gain from a bargain purchase, and(iii) determines what information to disclose to enable users of thefinancial statements to evaluate the nature and financial effects of thebusiness combination. SFAS No. 141R is effective for fiscal yearsbeginning on or after December 15, 2008, with early adoption prohibited.This standard will change our accounting treatment for business combinations ona prospective basis.

 

In December 2007, the FASB issued SFAS No. 160, *Noncontrolling Interests in Consolidated FinancialStatements, an Amendment of ARB No. 51* (“SFAS No. 160”).SFAS No. 160 establishes accounting and reporting standards fornoncontrolling interests in a subsidiary and for the deconsolidation of asubsidiary. Minority interests will be recharacterized as noncontrollinginterests and classified as a component of equity. It also establishes a singlemethod of accounting for changes in a parent’s ownership interest in asubsidiary and requires expanded disclosures. This statement is effective forfiscal years beginning on or after December 15, 2008, with early adoption prohibited.We do not expect the adoption of this statement will have a material impact onour financial position or results of operations.

 

InMarch 2008, the FASB issued SFAS No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities*, an amendment ofFASB Statement No. 133. SFAS 161 amends and expands the disclosure requirements of FASBStatement No. 133 with the intent to provide users of financial statementwith an enhanced understanding of (i) how and why an entity usesderivative instruments, (ii) how derivative instruments and the relatedhedged items are accounted for under FASB Statement No. 133 and itsrelated interpretations, and (iii) how derivative instruments and relatedhedged items affect and entity’s financial position, financial performance andcash flows. SFAS No. 161 is effective for financial statements issued foryears and interim periods beginning after November 15, 2008. We do notexpect the adoption of SFAS No. 161 to have a significant effect on our reportedfinancial position or results of operations. 

 

6

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**4.     EARNINGS(LOSS) PER COMMON SHARE:**

 

Basic earnings per shareexcludes dilution and is calculated by dividing net income or loss by theweighted average number of common shares outstanding for the period. Dilutedearnings per share reflects the potential dilution that could occur ifsecurities or other contracts to issue common stock were exercised or convertedinto common stock or resulted in the issuance of common stock that then sharedfrom the earnings of the entity. Potential common shares of 2,906,777 for thethree months ended March 31, 2007 were excluded from the earnings pershare computation because the Company incurred a net loss and wereanti-dilutive. There were 2,196,230 outstanding common stock warrants as wellas 170,000 outstanding common stock options on March 31, 2008 that werenot included in the diluted EPS calculation because the warrants’ and options’exercise prices were greater than the average market price of the commonshares.

 
| ** **                                          | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                          | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
|                                                |       |                                                 |       |   |   |
| Numerator:                                          |       |                                                 |       |   |   |
| Net Income (Loss) Available to Common  Shareholders |       | $                                                    | 344,126    |   | $ | (182,614 | ) |
|                                                |       |                                                 |       |   |   |
| Denominator:                                        |       |                                                 |       |   |   |
| Weighted Average Shares Outstanding                 |       | 31,950,970                                           |       | 27,526,895 |   |
| Outstanding Options                                 |       | 1,192,800                                            |       | Anti-dilutive |   |
| Outstanding Warrants                                |       | 66,678                                               |       | Anti-dilutive |   |
| Average Number of Shares for Diluted  Calculation   |       | 33,210,448                                           |       | 27,526,895 |   |
|                                                |       |                                                 |       |   |   |
| Diluted EPS                                         |       | $                                                    | 0.01       |   | $ | (0.01 | ) |

 

**5.**                 **INCOME TAXES:**

 

The Company files income taxreturns in the U.S. federal jurisdiction and various states.  There arecurrently no federal or state income tax examinations underway. Furthermore, the Company is no longer subject to U.S. federal income tax examinationsby the Internal Revenue Service for tax years before 2005 and for state andlocal tax authorities for tax years before 2002.  The Company does,however, have net operating losses generated in tax years 1997 and after, whichremain open for examination.

 

The Company adopted theprovisions of FASB Interpretation No. 48, Accounting for Uncertainty inIncome Taxes, on January 1, 2007.  The Company does not foresee thetotal amounts of unrecognized tax benefits significantly increasing within thenext 12 months.  Furthermore, no corresponding interest and penalties havebeen accrued as the Company is in a net operating loss position.

 

The Company provides forincome taxes in accordance with Statement of Financial Accounting Standards No. 109,Accounting for Income Taxes (“SFAS 109”). SFAS 109 requires the recognition ofdeferred tax 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 thata tax benefit will not be realized, a valuation allowance is recorded to reducethe deferred tax asset to its realizable value.

 

A valuation allowance hasbeen provided against the Company’s net deferred tax assets as the Companybelieves that it is more likely than not that the net deferred tax assets willnot be realized.

 

The effective tax rate forthe three month period ended March 31, 2008 and for the year ended December 31,2007 is 3.1 percent, and differs from statutory rates primarily due to changesin the valuation allowance.

 

**6.**                 **COMMON STOCK OPTIONS*:***

 

There were no materialchanges to common stock options from those disclosed in the audited annualconsolidated financial statements for the year ended December 31, 2007.The options outstanding as of March 31, 2008 have the followingcontractual lives:

 

7

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| **Number of  Options  Outstanding** | ** ** | **Number of  Options  Exercisable** | ** ** | **Exercise  Prices** | ** ** | **Weighted Average  Remaining  Contractual Life** | ** ** |
|------------------------------------------|------------|------------------------------------------|------------|----------------------|------------|-------------------------------------------------------------|------------|
| 750,000                                  |       | 750,000                                  |       | 0.50                 |       | 0.08                                                        |       |
| 1,750,000                                |       | 1,400,000                                |       | 2.10                 |       | 5.18                                                        |       |
| 150,000                                  |       | 30,000                                   |       | 3.85                 |       | 3.04                                                        |       |
| 10,000                                   |       | 6,000                                    |       | 4.25                 |       | 1.76                                                        |       |
| 10,000                                   |       | 4,000                                    |       | 6.25                 |       | 2.19                                                        |       |
| 2,670,000                                |       | 2,190,000                                |       |                 |       |                                                        |       |

 

The total intrinsic value ofoptions outstanding was approximately $2,875,000 and $10,841,000 at March 31,2008 and 2007 respectively. The intrinsic value for exercisable options was$2,640,500 and $9,043,120 at March 31, 2008 and 2007, respectively.

 

As of March 31, 2008,there are 2,190,000 options which are exercisable. The remaining 480,000options will become exercisable over the next four years. The stockcompensation expense related to the unvested awards is $283,254.

 

**7.**                 **COMMON STOCK WARRANTS*:***

 

Therewere no new warrants issued during the first quarter of 2008.

 

**8.**                 **COMMITMENTS ANDCONTINGENCIES*:***

 

There are no materialchanges to commitments and contingencies from those disclosed in the auditedannual consolidated financial statements for the year ended December 31,2007 except as disclosed in Note 8 herein, and as follows:

 

*South Dry Hollow Prospect, Lavaca County, Texas*—On February 26, 2008, the Company’ssubsidiary, South Texas GeoPetro LLC, entered into a participation agreementwherein it acquired a 15% non-operated working interest in the South Dry HollowProspect, which is located in Lavaca County, Texas. On February 25, 2008,the Company paid a $150,000 prospect fee and advanced $1.1 million to drill theEichhorn #1 Well. The Eichorn #1 Well shall be drilled to a total depthsufficient to test the Rochelle Sand, the top of which is at a stratigraphicequivalent depth of approximately 16,650 feet.

 

**9.**                 **SUBSEQUENT EVENTS*:***

 

On April 25, 2008, anofficer and director exercised options to purchase 750,000 shares of commonstock at an exercise price of $0.50 per share. The options were granted on April 30,1996 and had an expiration date of April 30, 2008.

 

8

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**Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

*The following discussion and analysis should be read inconjunction with accompanying financial statements and related notes includedelsewhere in this report. It contains forward looking statements that reflectour future plans, estimates, beliefs and expected performance. The forwardlooking statements are dependent upon events, risks and uncertainties that maybe outside our control. Our actual results could differ materially from thosediscussed in these forward looking statements.*

 

*Factors that could cause or contribute to such differencesinclude, but are not limited to, market prices for natural gas and oil,economic and competitive conditions, regulatory changes, estimates of provedreserves, potential failure to achieve production from development drilling projects,capital expenditures and other uncertainties, as well as those factorsdiscussed below and elsewhere in this report, particularly in “Risk Factors”and “Cautionary Notes Regarding Forward Looking Statements”, all of which aredifficult to predict and which expressly qualify all subsequent oral andwritten forward-looking statements attributable to us or persons acting on ourbehalf. In light of these risks, uncertainties and assumptions, the forwardlooking events discussed may not occur. We do not have any intention orobligation to update forward-looking statements included in this report afterthe date of this report, except as required by law.*

 

**Overview**

 

We are an oil and gas company in the business ofexploring and developing oil and natural gas reserves on a worldwide basis.Since inception, we have conducted leasehold acquisition, exploration anddrilling activities on our North American, Australian and Indonesian prospects.These projects currently encompass approximately 372,317 gross (158,401net) acres, consisting of mineral leases, production sharing contracts andexploration permits that give us the right to explore for, develop and produceoil and natural gas. Most of these properties are in the exploration, appraisalor development drilling phase and have not begun to produce revenue from thesale of oil and natural gas. Excluding minor interest and dividend income, ouronly significant cash inflows until 2003 were the recovery of capital investedin projects through sale or other divestiture of interests in oil and gasprospects to industry partners.

 

Since 2003, substantially all of our revenue hasbeen generated from natural gas sales derived from the Magness #1, the Fannin#1, and the Mitchell #1 wells in the Madisonville Field in East Texas underspot gas purchase contracts at market prices. Natural gas sales from theMadisonville Field are expected to account for substantially all of ourrevenues for 2008. We expect the majority of our capital expenditures in 2008to be spent on  the Madisonville Project.

 

9

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**Results of Operations**

 

The financial information with respect to the threemonths ended March 31, 2008 and 2007 that is discussed below is unaudited.In the opinion of management, such information contains all adjustments,consisting only of normal recurring accruals, necessary for a fair presentationof the results for such periods.  Theresults of operations for interim periods are not necessarily indicative of theresults of operations for the full fiscal years.

 
| ** **                                                 | ** ** | **Three Months Ended**  | ** ** |
|------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                 | ** ** | **March 31, 2008** | ** ** | **March 31, 2007** | ** ** |
| ** **                                                 | ** ** | **(unaudited)**         | ** ** | **(unaudited)** | ** ** |
| **Consolidated  Statement of Operations:**                 |       |                    |       |   |   |
| **Revenues**                                               |       | $                       | 2,142,598  |   | $ | 1,823,342 |   |
| **Lease operating expense**                                |       | 343,823                 |       | 427,277 |   |
| **General and administrative**                             |       | 715,423                 |       | 759,356 |   |
| **Net profits expense**                                    |       | 228,061                 |       | 184,204 |   |
| **Depreciation and depletion expense**                     |       | 534,430                 |       | 576,942 |   |
| **Earnings (loss) from operations**                        |       | 320,861                 |       | (124,437 | ) |
| **Net income (loss)**                                      |       | 344,126                 |       | (182,614 | ) |
| **Net income (loss) attributable to common  shareholders** |       | $                       | 344,126    |   | $ | (182,614 | ) |

 

**Revenue and Operating Trends in 2008**

 

We developed an onsite plan to treat and removeimpurities from the Madisonville Project natural gas in order to meetpipeline-quality specifications. The Madisonville Project is located in East Texas.In 2003, the construction and installation of a natural gas treatment plantwith a designed capacity of 18 million cubic feet of gas per day (“MMcf/d”) andassociated pipeline and gathering facilities were completed. The treatmentplant and associated pipeline and gathering facilities are owned by anunaffiliated third party.

 

In2005 we secured a commitment from Madisonville Gas Processing, LP (“MGP”) toinstall and make operational additional treating facilities capable of treating50 MMcf/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.  InOctober 2007, MGP informed us that they had partially completedconstruction of the additional treating facilities.  Subsequently in November 2007,MGP commenced phase-in of the additional treating capacity reaching a temporarypeak inlet volume of 21 mmcf/d out of the total contracted 50 mmcf/d designcapacity at such facilities. However, operations at the additional treatingfacilities were suspended by MGP in December 2007 in order to make thenecessary modifications to effectively deal with the presence of diamondoids inthe gas stream produced from the Rodessa Formation. A diamondoid is arare, naturally occurring compound that can segregate out of the gas streamupon a decrease in temperature and pressure and as such, could causeoperational problems for the nitrogen rejection portion of theadditional treating facilities.  MGP has obtained a detailed laboratorycomposition analysis of the diamondoids and is currently finalizing plans formodifications to the operating system. MGP indicates that removal of the diamondoids will requireflowing the natural gas stream through a hydrocarbon contactor after the gasstream has had the hydrogen sulfide and carbon dioxide removed.  Through this contactor process, the hydrocarbonwill absorb the diamondoids from the gas stream prior to entry into thenitrogen removal tower.  MGP expects to complete installation of thesystem modifications required in the new plant by the third quarter of2008.  In the meantime, the existing, inservice portion of the plant continues to treat approximately 15 million cubicfeet per day of inlet gas.

 

Upon completion of the phase-in, we expect to produceour wells at a higher rate as the well rates have previously been restricteddue to capacity limitations in the gas treatment plant. In addition, we expectto fracture stimulate the Wilson Well in late 2008, and provided suchstimulation is successful, we will place the Wilson Well on production.

 

10

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In addition, our contract with MGP provides that forthe first 18,000 Mcf/d of gas measured and delivered to the inlet flange of thegas treatment plant, MGP will receive a treating fee of $1.50 per thousandcubic feet (“Mcf”) (this fee is presently $1.55 per Mcf adjusted forinflation). For any gas volumes in excess of 18,000 Mcf/d of gas delivered tothe inlet flange of the gas treatment plant, the treating fee received by MGPis reduced from $1.50 to $1.10 per Mcf ($1.14 per Mcf adjusted for inflation).We record our revenues net of these treating fees. Thus, if we are able toincrease our inlet production volumes over 18 MMcf/d on a sustained basis, we expectto experience a disproportionately higher increase in revenue due to loweraverage treating fees per Mcf.

 

While there can be no assurance, the higherproduction rates from our wells combined with the lower average treating feesper Mcf, may result in higher net production and increased revenue during 2008as compared to 2007 and prior periods.

 

**Industry Overview for the three months ended March 31,2008**

 

The first quarter of 2008 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 31, 2008, was $9.05 per Mcf versus $6.81 per Mcf as of December 31,2007. Higher natural gas prices this year and next reflect continuedstrong demand, high oil prices, and the need to replenish more stocks this yearthan last year, among otherfactors.

 

**Company Overview for the three months ended March 31,2008**

 

Our net income after taxes for the quarter ended March 31,2008 was $344,126. From our inception, through mid-2003, we only receivednominal revenues from our oil and natural gas activities, while incurringsubstantial acquisition and exploration costs and overhead expenses which haveresulted in an accumulated deficit through March 31, 2008 of $11,666,663.Commencing in May 2003, we placed our Madisonville Project intoproduction. Substantially all of our oil and natural gas sales for the quarterended March 31, 2008 were derived from our Madisonville Project, fromthree producing wells, the UMC Ruby Magness #1 well (the “Magness Well”), theAngela Farris Fannin #1 well (the “Fannin Well”), and the Mitchell #1 well (the“Mitchell Well”).

 

**Comparison of Results of Operations for the three monthsended March 31, 2008 and 2007**

 

During the three months ended March 31, 2008,we had oil and natural gas revenues of $2,142,598. Our net production was450,650 Mcf of natural gas at an average price of $4.75 per Mcf. During thethree months ended March 31, 2007, we had oil and natural gas revenues of$1,823,342. Our net production for the three months ended March 31, 2007was 522,996 Mcf at an average price of $3.49 per Mcf. Revenues increased in thethree months ended March 31, 2008 as compared to the prior year period dueto higher natural gas prices and despite 14% lower production volumes. Naturalgas prices were approximately 36% higher for the three months ended March 31,2008 versus the same period in 2007.

 

11

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During the three months ended March 31, 2008,we incurred lease operating expense of $343,823. Our average lifting cost forthe 2008 period was $0.76 per Mcf. During the three months ended March 31,2007, we incurred lease operating expense of $427,277. Our average lifting costfor the 2007 period was $0.82 per Mcf. The average lifting cost per Mcf in 2007was higher due to workovers performed on the Magness well during that period.

 

During the three months ended March 31, 2008,we incurred net profits interest expense of $228,061 associated with theMagness, the Fannin, and the Mitchell wells as compared to $184,204 during thethree months ended March 31, 2007. The 24% increase resulted from highergas prices in the three months ended March 31, 2008 versus 2007. The netprofit interest is 12.5% of the net operating profit from our Magness, Fannin,and Mitchell wells.

 

General and administrative (“**G&A**”) expenses for the three monthsended March 31, 2008 were $715,423 compared to $759,356 for the threemonths ended March 31, 2007. This represents a $43,933 or 6% decrease overthe prior year period. The higher G&A expense incurred in 2007 was dueprimarily to costs associated with our initial SEC registration and AmericanStock Exchange listing.

 

Depreciation, depletion and amortization expense (“DD&A”)for the three months ended March 31, 2008 was $534,430 as compared to$576,942 in the same period of 2007, which amounts primarily representamortization of the oil and gas properties for the three months ended March 31,2008 and 2007, respectively. The 7% decrease was due to lower net production inthe three months period of 2008.

 

Income from operations totaled $320,861 for thethree months ended March 31, 2008 as compared to loss from operations of$124,437 for the three months ended March 31, 2007. The increase in theincome from operations was due primarily to higher gas prices and lowerexpenses.

 

Other income for the three months ended March 31,2008 and 2007 consisted of interest income in the amount of $30,065 and$28,005, respectively. Interest income increased due primarily to higheraverage cash and cash equivalent balances during the 2008 period as compared tothe 2007 period.

 

During the three months ended March 31, 2008and 2007, we incurred interest expense of $0 and $86,182, respectively. We hadno outstanding debt during the first quarter of 2008 since all loans were paidin full in October 2007.

 

Net income before taxes for the three months ended March 31,2008 was $350,926 as compared to net loss before taxes of $182,614 for thethree months ended March 31, 2007. The increase in net income during thethree months ended March 31, 2008 was primarily due to higher gas priceand lower expenses.

 

Income tax expense for the three months ended March 31,2008 was $6,800 compared to $0 in the same period of 2007. The increased incometax expense was due to alternative minimum tax incurred in the first quarter of2008.

 

**Recent Developments**

 

On April 25, 2008, an officer and directorexercised options to purchase 750,000 shares of common stock at an exerciseprice of $0.50 per share. The options were granted on April 30, 1996 andhad an expiration date of April 30, 2008.

 

On February 26, 2008, the Company’s subsidiary,South Texas GeoPetro LLC, entered into a participation agreement wherein itacquired a 15% non-operated working interest in the South Dry Hollow Prospect,which is located in Lavaca County, Texas. On February 25, 2008, theCompany paid a $150,000 prospect fee and advanced $1.1 million to drill theEichhorn #1 Well. The Eichorn #1 Well was drilled to a depth of approximately16,650 feet and is currently being evaluated for production.

 

12

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**Liquidity and Capital Resources**

 

We had a working capitalsurplus of $2,058,001 at March 31, 2008 versus $3,361,853 at December 31,2007. Our working capital decreased during three months ended March 31,2008 due primarily to our participation in the drilling of a well in SouthTexas.

 

We have historically financedour business activities principally through issuances of common shares,promissory notes and common share purchase warrants in private placements andan initial public offering. However, during the three months ended March 31,2008, we had no financing activities. These financings are summarized asfollows:

 
| ** **                                                      | ** ** | **Three Months Ended**  | ** ** |
|-----------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                      | ** ** | **March 31, 2008** | ** ** | **March 31, 2007** | ** ** |
| Proceeds  from sale of common shares and warrant exercises, net |       | $                            | —     |   | $ | 71,729 |   |
| Proceeds  from promissory notes                                 |       | —                       |       | 1,000,000 |   |
| Payment of  loan fee                                            |       | —                       |       | (57,000 | ) |
| Repayment of  related party note                                |       | —                       |       | (100,000 | ) |
|                                                            |       |                         |       |   |   |
| Net cash  provided by financing activities                      |       | $                            | —     |   | $ | 914,729 |   |

 

The net proceeds of our equityfinancings have been primarily invested in oil and natural gas propertiestotaling $2,211,876 and $945,895 for the three months ended March 31, 2008and 2007, respectively.

 

Our cash balance at March 31,2008 was $3,147,765 compared to a cash balance of $4,294,565 at December 31,2007. The change in our cash balance is summarized as follows:

 
| Cash balance  at December 31, 2007       |   | $4,294,565 |   |
|-----------------------------------------------|--------|------------|--------|
| Sources of  cash:                             |   |       |   |
| Cash provided by operating activities         |   | 1,066,777  |   |
| Total sources of cash including cash on  hand |   | 5,361,342  |   |
|                                          |   |       |   |
| Uses of  cash:                                |   |       |   |
| Cash used in investing activities:            |   |       |   |
| Oil and natural gas property expenditures     |   | (2,211,876 | )      |
| Furniture, fixtures and equipment             |   | (1,701     | )      |
| Total uses of cash                            |   | (2,213,577 | )      |
|                                          |   |       |   |
| Cash balance  at March 31, 2008          |   | $3,147,765 |   |

 

Our current cash and cash equivalents andanticipated cash flow from operations may not be sufficient to meet our workingcapital, capital expenditures and growth strategy requirements for theforeseeable future. See “Outlook for 2008” for a description of our expectedcapital expenditures for 2008. If we are unable to generate revenues necessaryto finance our operations over the long-term, we may have to seek additionalcapital through the sale of our equity or borrowing. As noted in “RecentDevelopments,” we periodically borrow funds pursuant to short term promissorynotes to finance our activities.

 

As discussed in the “Outlook for 2008”, we areforecasting capital expenditures of $26.2 million during 2008. We will need toobtain adequate sources of cash to fund our anticipated capital expendituresthrough the end of 2008 and to follow through with plans for continuedinvestments in oil and gas properties. Our success, in part, depends on ourability to generate additional financing and farm-out certain of our projects.

 

Since our inception, we have participated as aworking interest owner in the acquisition of undeveloped leases, seismicoptions, lease options and foreign concessions and have participated in seismicsurveys and the drilling of test wells on our undeveloped properties. Furtherleasehold acquisitions, drilling and seismic operations are planned for 2008and future periods. In addition, exploratory and development drilling isscheduled during 2008 and future periods on our undeveloped properties. It isanticipated that these exploration activities together with others that may beentered into will impose financial requirements which will exceed our existingworking capital. We may raise additional equity and/or debt capital, and we mayfarm-out certain of our projects to finance our continued participation inplanned activities. However, if additional financing is not available, we maybe compelled to reduce the scope of our business activities. If we are unableto fund planned expenditures, it may be necessary to:

 

1.                  forfeit our interest in wells that areproposed to be drilled;

 

2.                  farm-out our interest in proposed wells;

 

3.                  sell a portion of our interest in prospectsand use the sale proceeds to fund our participation for a lesser interest; and

 

4.                  reduce general and administrative expenses.

 

13

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**ContractualObligations**

 

Wehave assumed various contractual obligations and commitments in the normalcourse of our operations and financing activities.  We have described these obligations andcommitments in our “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” section in our Annual Report on Form 10-K forthe year ended December 31, 2007. There were no material changes to our contractual obligations since December 31,2007.

 

**Off Balance Sheet Arrangements**

** **

From time to time, we enter into off-balance sheetarrangements and transactions that can give rise to off-balance sheetobligations. As of March 31, 2008, our off-balance sheet arrangements andtransactions include operating lease agreements and gas transportation commitments.We do not believe that these arrangements are reasonably likely to materiallyaffect our liquidity or availability of, or requirements for, capitalresources.

 

**Financial Instruments**

 

We currently have no natural gas price financialinstruments or hedges in place. Similarly, we have no financial derivatives.Our natural gas marketing contracts use “spot” market prices. Given theuncertainty of the timing and volumes of our natural gas production this year,we do not currently plan to enter into any long term fixed-price natural gascontracts, swap or hedge positions, other gas financial instruments orfinancial derivatives in 2008.

 

**Outlook for 2008/2009**

 

Depending on capital availability, we areforecasting capital spending of up to approximately $26.2 million duringthe year 2008/2009, allocated as follows:

 

1.                       Madisonville Project, Madison County, Texas.Approximately $13.5 million may be expended in the Madisonville Field areaas follows: $1.5 million toward the fracture stimulation and hook up costs ofthe Wilson Well and $12.0 million toward the drilling of a deep well.

 

2.                       Central Alberta Project. Up to approximately$2.7 million may be expended to drill an exploratory well in the SwanHills Prospect.

 

3.                       Cook Inlet, Alaska. Up to $5.0 million may beexpended toward the drilling and completion of one exploratory well and anadditional $2.0 million to be utilized for land acquisition and geologic andgeophysical costs.

 

4.                       Indonesia. Up to $3.0 million may be expendedtoward the drilling, completion and testing of wells as well as the acquisitionof seismic data in the Bengara II PSC as well as acquisition costs associatedwith new ventures.

 

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. Wecurrently do not have sufficient working capital to fund all of the capitalexpenditure listed above. See “Liquidity and Capital Resources.”

 

We expect commodity prices to be volatile,reflecting the current tight supply and demand fundamentals for North Americannatural gas and world crude oil. Political events around the world, which aredifficult to predict, will continue to influence both oil and gas prices.Higher prices for oil and gas often lead to higher levels of drilling activitywhich in turn lead to higher costs to explore, develop and acquire oil and gasreserves due to greater competition for resources and supplies. These highercosts could affect the returns on our capital expenditures. Higher crude pricescould also help keep natural gas prices high by keeping alternative fuels, suchas heating oil and residual fuel, expensive.

 

**Impact of Inflation & ChangingPrices**

 

We are highly dependent upon natural gas pricing. Amaterial decrease in current and projected natural gas prices could impair ourability to raise additional capital on acceptable terms. Likewise, a materialdecrease in current and projected natural gas prices could also impact ourrevenues and cash flows. This could impact our ability to fund futureactivities.

 

GeoPetro anticipates an increase in gas price in2008 from 2007. This would have a materially positive impact on our cash flowand revenues.

 

14

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Changing prices have had a significant impact oncosts of drilling and completing wells, particularly in the Madisonville Fieldarea where we are currently the most active. The estimated cost of drilling andcompleting a Rodessa formation well at approximately 12,300 feet of depth hasincreased from $3.0 million in 2001 to $7.5 million in 2008 due to higher costsassociated with tubular goods, well equipment, and day rates for drillingcontracts, 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 financial statements have beenprepared by management in accordance with U.S. GAAP. We refer you to thecorresponding section in Part II, Item 7 and the notes to the consolidatedfinancial statements of our Annual Report on Form 10-K for the year ended December 31,2007 for the description of critical accounting policies and estimates.

 

**Risks and Uncertainties**

 

There are a number of risks that face participantsin the U.S., Canadian and international oil and natural gas industry, includinga number of risks that face us in particular. Accordingly, there are risksinvolved in an ownership of our securities. See “Risk Factors” in our AnnualReport on Form 10-K for the year ended December 31, 2007 for adescription of the principal risks faced by us.

 

**Item 3. Quantitative and Qualitative DisclosuresAbout Market Risk**

 

We are exposed to market risks arising from fluctuatingprices of crude oil, natural gas and interest rates as discussed below.

 

*Commodity Risk.*  Our major commodity price riskexposure is to the prices received for our natural gas production. Realizedcommodity prices received for our production are the spot prices applicable tonatural gas in the East Texas region. Prices received for natural gas arevolatile and unpredictable and are beyond our control. For the first quarterended March 31, 2008, a 10% change in the prices received for natural gasproduction would have had an approximate $700,000 impact on our revenues.

 

*Currency TranslationRisk.  *Becauseour revenues and expenses are primarily in U.S. dollars, we have littleexposure to currency translation risk, and, therefore, we have no plans in the foreseeablefuture to implement hedges or financial instruments to manage internationalcurrency changes.

 

*Hedging.* We did not enter into any hedgingtransactions during the three months ended March 31 2008 and 2007.

 

**Item 4. Controls and Procedures**

 

**Evaluation of Disclosure Controls and Procedures**

 

Based on their evaluation as of the end of the firstquarter ended March 31, 2008, our Chief Executive Officer and ChiefFinancial Officer have concluded that our disclosure controls and procedures(as defined in Rules 13a-15(e) and 15d-15(e) under the ExchangeAct) are effective to ensure that information required to be disclosed inreports that we file or submit under the Exchange Act are recorded, processed,summarized and reported within the time periods specified in the SEC’s rules andforms and in providing reasonable assurance that information required to bedisclosed by the Company in such reports is accumulated and communicated to theCompany’s management, including its Chief Executive Officer and Chief FinancialOfficer, as appropriate to allow timely decisions regarding requireddisclosures.

 

During the most recent fiscal quarter, there havebeen no changes in our internal control over financial reporting that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

15

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**PART II.OTHER INFORMATION**

 
| **Item 1.  Legal Proceedings.** |
|------------------------------------------------|

 

From time to time, we are party to litigation orother legal and administrative proceedings that we consider to be a part of theordinary course of our business. Currently, we are not involved in any legalproceedings nor are we party to any pending or threatened claims that could,individually or in the aggregate, reasonably be expected to have a materialadverse effect on our financial condition, cash flow 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 31,2007, referred to as our 2007 Annual Report. An investment in our securities involvesvarious risks. When considering an investment in our company, you shouldconsider carefully all of the risk factors described in our 2007 Annual Report.These risks and uncertainties are not the only ones facing us and there may beadditional matters that we are unaware of or that we currently considerimmaterial.

 

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

** **

**Unregistered Sales of Securities**

 

There were no sales of unregistered securitiesduring the period ended March 31, 2008.

** **

**Use of Proceeds**

 

On our registration statement on Form S-1 (Reg. No. 333-135485)we registered up to 16,499,991 shares of our common stock, no par value pershare, including 4,301,355 shares of common stock issuable upon exercise ofwarrants and options, for resale by selling shareholders. The registrationstatement was declared effective by the Securities and Exchange Commission in February 2007.The offering commenced on in February 2007 and has not terminated. On ourregistration statement on Form S-1 (Reg. No. 333-146557) weregistered up to 2,002,599 shares of outstanding common stock and the resale ofup to 780,857 shares of common stock issuable upon exercise of warrants, forresale by selling shareholders. The registration statement was declaredeffective by the Securities and Exchange Commission in October 2007. Theoffering commenced in October 2007 and has not terminated. We will notreceive any proceeds from the sale of our common stock by the sellingshareholders under the registration statements; however if all warrants andoptions to acquire our common stock being registered thereunder are exercised,we will realize cash proceeds of approximately $13,312,974, which we expect touse for general working capital purposes and the drilling of wells in ourTexas, Alaska, California and Indonesian prospects.

 

If less than the $13,312,974 proceeds are realized from the exercise ofsuch warrants and options, the proceeds will be spent in the following order ofpriority:

 

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

 

2.    Madisonville Project, Madison County, Texas. Up toapproximately $10 million will be expended in the Madisonville Field areatowards the drilling and completion of one deep exploratory well location to anestimated depth of 18,000 feet.

 

3.    General working capital.

 

We do not know if, or how many, of the warrants or options will beexercised. This is our best estimate of our use of proceeds generated from thepossible exercise of warrants or options based on the current state of ourbusiness operations, our current plans and current economic and industryconditions. Any changes in the projected use of proceeds will be made at thesole discretion of our board of directors.

 

**Item 3.  Defaults UponSenior Securities**

 

**               **Not applicable.

 

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

 

                Notapplicable

 

**Item 5.  OtherInformation.**

 

                Notapplicable

 

**Item 6.  Exhibits**

 

16

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| **Exhibit   Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1 (2)                   |       | Amended  and Restated Articles of Incorporation of GeoPetro Resources Company                                                                                                                                                                                                                                                                                                                                            |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.2 (8)                   |       | Second  Amended and Restated Bylaws of the GeoPetro Resources Company                                                                                                                                                                                                                                                                                                                                                    |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.1 (2)                   |       | Form of  Warrant issued by GeoPetro Resources Company to various investors on various  dates.                                                                                                                                                                                                                                                                                                                       |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.2 (3)                   |       | Specimen  Common Stock Certificate                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.3                       |       | Form of  common stock purchase warrant issued to various investors dated  August 13, 2007 (filed as exhibit 4.1 to the Company’s Report on  Form 8-K as filed with the Securities and Exchange Commission on  August 16, 2007, and incorporated herein by reference)                                                                                                                            |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.4                       |       | Registration  Rights Agreement between GeoPetro Resources Company and various investors  dated August 13, 2007 (filed as Exhibit B to the Form of Unit  Subscription Agreement dated August 13, 2007 filed as Exhibit 10.20  to the Company’s Report on Form 8-K as filed with the Securities and  Exchange Commission on August 16, 2007 and incorporated herein by  reference) |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.5 (6)                   |       | Placement  Agent Warrant dated August 13, 2007                                                                                                                                                                                                                                                                                                                                                                      |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.1 (2)                  |       | Joint  Venture Agreement Bengara II, Dated January 1, 2000                                                                                                                                                                                                                                                                                                                                                          |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.2 (2)                  |       | Production  Sharing Contract Bengara II, Dated December 4, 1997                                                                                                                                                                                                                                                                                                                                                     |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.4 (2)                  |       | Exploration  Permit#408, Dated July 2, 1997                                                                                                                                                                                                                                                                                                                                                                         |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.5 (2)                  |       | Madisonville  Field Development Agreement Dated August 1, 2005                                                                                                                                                                                                                                                                                                                                                      |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.6 (2)                  |       | Alaska  Cook Inlet Option dated April 20, 2005                                                                                                                                                                                                                                                                                                                                                                      |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.7 (2)†            |       | The  2001 Stock Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                           |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.8 (2)†            |       | The  2004 Stock Option and Appreciation Rights Plan                                                                                                                                                                                                                                                                                                                                                                      |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.9 (2)†            |       | 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 (2)†           |       | David  Creel Employment Agreement, Dated April 28, 1998 and amendments dated  June 15, 2000, May 12, 2003 and January 1, 2005                                                                                                                                                                                                                                                                        |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.11 (2)†           |       | J.  Chris Steinhauser Employment Agreement, Dated June 19, 2000 and  amendments dated December 12, 2002 and January 1, 2005                                                                                                                                                                                                                                                                               |
|                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.12 (2)                 |       | Office  Lease Agreement, Dated effective March 1, 2004                                                                                                                                                                                                                                                                                                                                                              |

 

17

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| 10.13 (4)       |   | Form of  Subscription Agreement for GeoPetro Resources Company stock executed by  various investors on various dates.              |
|-----------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                    |
| 10.19 (5)       |   | Shares  Sale & Purchase Agreement Dated September 29, 2006                                                                |
|            |   |                                                                                                                                    |
| 10.20 (6)       |   | Form of  Unit Subscription Agreement Dated August 13, 2007                                                                    |
|            |   |                                                                                                                                    |
| 10.22 (6)       |   | Promissory  Note to Stuart Doshi dated February 12, 2007                                                                           |
|            |   |                                                                                                                                    |
| 10.23 (7)† |   | Third  Amendment to J. Chris Steinhauser Employment Agreement dated  December 18, 2007                                             |
|            |   |                                                                                                                                    |
| 31.1 (1)        |   | Rule 13a-14(a)/15d-14(a) Certification  of Chief Executive Officer.                                                           |
|            |   |                                                                                                                                    |
| 31.2 (1)        |   | Rule 13a-14(a)/15d-14(a) Certification  of Chief Financial Officer.                                                           |
|            |   |                                                                                                                                    |
| 32.1 (1)        |   | Certification  of Chief Executive Officer and Chief Financial Officer of GeoPetro Resources  Company pursuant to 18 U.S.C. § 1350. |

----

| (1)    |   | Filed  herewith.                                                                                                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                      |
| (2)    |   | Filed  as the identically numbered exhibit to the Registration Statement on  Form S-1, (No. 333-135485), as filed with the Securities and  Exchange Commission on June 30, 2006, and incorporated herein by  reference.    |
|   |   |                                                                                                                                                                                                                                      |
| (3)    |   | Filed  as the identically numbered exhibit to the Registration Statement on  Form S-1, (No. 333-135485), as filed with the Securities and  Exchange Commission on January 31, 2007, and incorporated herein by  reference. |
|   |   |                                                                                                                                                                                                                                      |
| (4)    |   | Filed  as Exhibit 10.14 to the Registration Statement on Form S-1  (No. 333-135485) as filed with the Securities and Exchange Commission on  June 30, 2006, and incorporated herein by reference.                     |
|   |   |                                                                                                                                                                                                                                      |
| (5)    |   | Filed  as the identically numbered exhibit to the Registration Statement on  Form S-1 (No. 333-135485), as filed with the Securities and  Exchange Commission on January 9, 2007, and incorporated herein by  reference.   |
|   |   |                                                                                                                                                                                                                                      |
| (6)    |   | Filed  as the identically numbered exhibit to the Registration Statement on  Form S-1 (No. 333-146557), as filed with the Securities and  Exchange Commission on October 9, 2007, and incorporated herein by  reference.   |
|   |   |                                                                                                                                                                                                                                      |
| (7)    |   | Filed  as Exhibit 10.1 to the Company’s Report on Form 8-K, as filed with  the Securities and Exchange Commission on December 21, 2007 and  incorporated herein by reference.                                         |
|   |   |                                                                                                                                                                                                                                      |
| (8)    |   | Filed  as the identically numbered exhibit to the Registration Statement on Form S-1  (No. 333-135485), as filed with the Securities and Exchange Commission  on April 25, 2008, and incorporated herein by reference.     |
|   |   |                                                                                                                                                                                                                                      |
| † |   | Indicates  a management or compensatory plan or arrangement                                                                                                                                                                               |

 

18

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized, on May 13, 2008.

 
|   | **GEOPETRO RESOURCES COMPANY** |
|--------|--------------------------------|
|   | By:                            | /s/  Stuart J. Doshi |
|   |                           | Stuart  J. Doshi |
|   |                           | Chairman  of the Board of Directors, President andChief Executive Officer |
|   |                           |   |
|   | By:                            | /s/  J. Chris Steinhauser |
|   |                           | J.  Chris Steinhauser |
|   |                           | Vice  President of Finance and |
|   |                           | Chief  Financial Officer, Principal |
|   |                           | Accounting  Officer and Director |

 

19

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