##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Amendment No. 1

to
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 001-32438
 JMG Exploration, Inc.
 (Exact Name of Registrant as Specified in its Charter)
 Nevada
    
    20-1373949(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)Suite 2200, 500 4thAvenue S.W.Calgary Alberta, Canada
    
    T2P 2V6(Address of Principal Executive Offices)
    
    (Zip Code)
 
 þ o
  o o þ
 o þ




---



##### Table of Contents



2




---



##### Table of Contents



JMG Exploration, Inc.
 PageNo.Item 1
    
    Part I. Financial InformationConsolidated Financial Statements
    
    5 -  10Consolidate Balance Sheets, as of March 31, 2006(unaudited) and December 31, 2005 (unaudited)
    
    5Consolidated Statements of Operations (unaudited) for the Three months ended March 31, 2006 and 2005, and the period from the date of incorporation July 16, 2004 to March 31, 2006.
    
    6Consolidated Statements of Cash Flows (unaudited) for the Three months ended March 31, 2006 and 2005, and the period from the date of incorporation July 16, 2004 to March 31, 2006.
    
    7Consolidated Statements of Shareholders Equity  (unaudited) for the Three months ended March 31, 2006 and 2005, and the period from the date of incorporation July 16, 2004 to March 31, 2006.
    
    8Consolidated Statements of Comprehensive Loss  (unaudited) for the Three months ended March 31, 2006  and 2005, and the period from the date of incorporation July 16, 2004 to March 31, 2006.
    
    10Notes to Consolidated Financial Statements (unaudited)
    
    11 - 16Item 2
    
    Managements
Discussion and Analysis of Financial Condition and Results of
Operations
    
    16 - 28Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    27Item 4
    
    Controls and Procedures
    
    27Part II. Other InformationItem 1
    
    Legal Proceedings
    
    27Item 1A
    
    Risk Factors
    
    27Item 2
    
    Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    27Item 3
    
    Defaults Upon Senior Securities
    
    27Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    27Item 5
    
    Other Information
    
    27Item 6
    
    Exhibits
    
    27SIGNATURES:EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
 3




---



##### Table of Contents



JMG Exploration, Inc.
 
 PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
March 31, 2006 and 2005 and the period of
Incorporation July 16, 2004 to March 31. 2006.
(Forming a part of Form 10-Q Quarterly Report
to the Securities and Exchange Commission)
 4




---



##### Table of Contents



JMG Exploration, Inc.
 
 CONSOLIDATED BALANCE SHEETS
 
 March 31
    
    December 312006
    
    2005As at
    
    $
    
    $ASSETSCurrentCash and cash equivalents
    
    
    652,136
    
    
    
    1,150,965Accounts receivable
    
    
    2,291,814
    
    
    
    1,284,474Prepaid expenses and deposits
    
    
    161,639
    
    
    
    34,7013,105,589
    
    
    
    2,470,140Other assets
    
    
    230,000
    
    
    
    230,000Property and equipment [note3]
    
    
    15,779,127
    
    
    
    15,073,03919,114,716
    
    
    
    17,773,179LIABILITIES AND STOCKHOLDERS EQUITYCurrentAccounts payable
    
    
    444,523
    
    
    
    845,507Accrued liabilities
    
    
    581,137
    
    
    
    1,660,648Promissory note payable [note 4]
    
    
    1,500,000
    
    
    
    Due to JED Oil Inc. [note 6]
    
    
    1,390,523
    
    
    
    286,9563,916,183
    
    
    
    2,793,111Asset retirement obligations [note7]
    
    
    80,313
    
    
    
    78,6423,996,496
    
    
    
    2,871,753Stockholders equityShare capital [note 5]Common stock  $.001 par value; 25,000,000
shares authorized; 5,086,832 shares issued
and outstanding at March 31, 2006.
    
    
    5,087
    
    
    
    4,997Additional paid-in capital
    
    
    20,544,002
    
    
    
    20,044,296Share purchase warrants
    
    
    2,094,415
    
    
    
    2,151,470Deficit accumulated during the development stage
    
    
    (7,504,597
    )
    
    
    (7,296,640
    )Accumulated other comprehensive loss
    
    
    (20,687
    )
    
    
    (2,697
    )15,118,220
    
    
    
    14,901,42619,114,716
    
    
    
    17,773,179
 The accompanying notes are an integral part of these consolidated financial statements.
 5




---



##### Table of Contents



JMG Exploration, Inc.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
 
 Period from the dateof incorporation onFor the three month period ended
    
    July 16, 2004 toMarch 31,
    
    March 31,2006
    
    2005
    
    2006$
    
    $
    
    $RevenuePetroleum Revenue
    
    
    452,735
    
    
    
    
    
    
    
    1,080,195Interest
    
    
    
    
    
    
    73,323
    
    
    
    185,091452,735
    
    
    
    73,323
    
    
    
    1,265,286ExpensesProduction
    
    
    135,462
    
    
    
    
    
    
    
    325,060General and administrative [note 6]
    
    
    268,495
    
    
    
    256,342
    
    
    
    2,323,267Interest
    
    
    23,897
    
    
    
    
    
    
    
    23,897Stock-based compensation [note 5]
    
    
    24,868
    
    
    
    
    
    
    
    103,457Geophysical and Geological
    
    
    
    
    
    
    
    
    
    
    256,484Depletion, depreciation
    
    
    206,299
    
    
    
    34,316
    
    
    
    4,951,163Accretion on asset retirement
obligation [note 7]
    
    
    1,671
    
    
    
    
    
    
    
    5,056660,692
    
    
    
    290,658
    
    
    
    7,988,384Net loss for the period
    
    
    (207,957
    )
    
    
    (217,335
    )
    
    
    (6,723,098
    )Less: cumulative preferred dividends
    
    
    
    
    
    
    (193,397
    )
    
    
    (781,499
    )Net loss applicable to common
shareholders
    
    
    (207,957
    )
    
    
    (410,732
    )
    
    
    (7,504,597
    )Deficit, beginning of period
    
    
    (7,296,640
    )
    
    
    (1,024,289
    )
    
    
    Deficit, end of period
    
    
    (7,504,597
    )
    
    
    (1,435,021
    )
    
    
    (7,504,597
    )Basic weighted average shares
outstanding [note 5]
    
    
    5,036,049
    
    
    
    250,000
    
    
    
    2,006,227Net loss for the period per share,
basic and diluted [note 5]
    
    
    (0.04
    )
    
    
    (1.64
    )
    
    
    (3.74
    )
 The accompanying notes are an integral part of these consolidated financial statements.
 6




---



##### Table of Contents



JMG Exploration, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Period from thedate ofFor the three month period
    
    incorporation onended
    
    July 16, 2004 toMarch 31,
    
    March 31,2006
    
    2005
    
    2006$
    
    $
    
    $OPERATIONSNet loss for the period
    
    
    (207,957
    )
    
    
    (217,335
    )
    
    
    (6,723,098
    )Adjustments to reconcile net loss to cash flows from
operating activities:Stock-based compensation
    
    
    24,868
    
    
    
    
    
    
    
    103,457Depletion and depreciation and accretion
    
    
    207,970
    
    
    
    34,316
    
    
    
    4,956,219Other changes:Increase (decrease) in accounts receivable
    
    
    791,089
    
    
    
    (14,066
    )
    
    
    282,488Increase in prepaid expenses and deposits
    
    
    (126,938
    )
    
    
    (28,412
    )
    
    
    (161,639
    )Decrease in accounts payable and accrued liabilities
    
    
    (1,844,389
    )
    
    
    (14,402
    )
    
    
    (1,592,223
    )Increase (decrease) in due to JED Oil Inc.
    
    
    (146,349
    )
    
    
    387,540
    
    
    
    140,607Increase in due to related party.
    
    
    
    
    
    
    10,692
    
    
    
    Decrease (increase) in accrued interest on Loan
receivable
    
    
    
    
    
    
    29,229
    
    
    
    (15,815
    )Cash used in operating activities
    
    
    (1,301,706
    )
    
    
    187,562
    
    
    
    (3,010,004
    )INVESTINGRepayment (advance) of loan receivable
    
    
    
    
    
    
    750,000
    
    
    
    (750,000
    )Proceeds on disposition of property
    
    
    
    
    
    
    
    
    
    
    391,249Purchase of property and equipment
    
    
    (1,097,006
    )
    
    
    (2,186,386
    )
    
    
    (18,986,970
    )Increase in other assets
    
    
    
    
    
    
    (75,000
    )
    
    
    (230,000
    )Cash used in investing activities
    
    
    (1,097,006
    )
    
    
    (1,511,386
    )
    
    
    (19,575,721
    )FINANCINGIssue of common shares, net of issue costs
    
    
    417,873
    
    
    
    
    
    
    
    20,445,632Issue of preferred shares
    
    
    
    
    
    
    
    
    
    
    Issue of share purchase warrants
    
    
    
    
    
    
    
    
    
    
    2,094,415Preferred share dividends
    
    
    
    
    
    
    (195,000
    )
    
    
    (781,499
    )Issue of promissory note
    
    
    1,500,000
    
    
    
    
    
    
    
    1,500,000Cash provided by financing activities
    
    
    1,917,873
    
    
    
    (195,000
    )
    
    
    23,258,548Effect of foreign exchange on cash and cash equivalents
    
    
    (17,990
    )
    
    
    (35
    )
    
    
    (20,687
    )Net (decrease) increase in cash and cash equivalents
    
    
    (498,829
    )
    
    
    (1,518,859
    )
    
    
    652,136Cash and cash equivalents, beginning of period
    
    
    1,150,965
    
    
    
    5,040,800
    
    
    
    Cash and cash equivalents, end of period
    
    
    652,136
    
    
    
    3,521,941
    
    
    
    652,136
  The accompanying notes are an integral part of these consolidated financial statements.
 7




---



##### Table of Contents



JMG Exploration, Inc.
 
 STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY
 
  Shares
    
    Total#
    
    $Common stock, $.001 par value:Balance at July 16, 2004 and December 31, 2004.
    
    
    250,000
    
    
    
    1,000,000Preferred shares converted to common stock
    
    
    1,950,000
    
    
    
    7,792,225Issuance of common stock, stock issued for cash pursuant to
initial public offering
    
    
    2,185,000
    
    
    
    11,143,500Warrants exercised for common stock
    
    
    612,578
    
    
    
    3,042,828Share issue costs
    
    
    
    
    
    
    (861,254
    )Portion of proceeds attributed to share purchase warrants.
    
    
    
    
    
    
    (2,146,595
    )Balance at December 31, 2005
    
    
    4,997,578
    
    
    
    19,970,704Warrants exercised for common stock
    
    
    89,254
    
    
    
    420,770Share issue costs
    
    
    
    
    
    
    (2,897
    )Portion of proceeds attributed to share purchase warrants.
    
    
    
    
    
    
    57,055Balance at March 31, 2006
    
    
    5,086,832
    
    
    
    20,445,632Additional paid in capitalBalance, July 16, 2004 (inception) and December 31, 2004
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    78,589Balance at December 31, 2005
    
    
    
    
    
    
    78,589Stock-based compensation
    
    
    
    
    
    
    24,868Balance at March 31, 2006
    
    
    
    
    
    
    103,457Preferred stock, $.001 par value:Balance at December 31, 2004
    
    
    1,950,000
    
    
    
    7,792,225Preferred shares converted to common stock
    
    
    (1,950,000
    )
    
    
    (7,792,225
    )Balance at December 31, 2005 and March 31, 2006
    
    
    
    
    
    
    
 8




---



##### Table of Contents



Share purchase warrants:Balance at December 31, 2004
    
    
    487,500
    
    
    
    4,875Share purchase warrants: issued pursuant to
initial public offering $5.00
    
    
    2,185,000
    
    
    
    693,866Share purchase warrants: issued pursuant
conversion preferred shares $4.25
    
    
    1,950,000
    
    
    
    1,816,766Warrants exercised for common stock
    
    
    (612,578
    )
    
    
    (364,037
    )Balance at December 31, 2005
    
    
    4,009,922
    
    
    
    2,151,470Warrants exercised for common stock
    
    
    (89,254
    )
    
    
    (57,055
    )Balance at March 31, 2006
    
    
    3,920,668
    
    
    
    2,094,415Deficit:Balance at beginning of period July 16, 2004.
    
    
    
    
    
    
    Net loss for the period to December 31, 2004
    
    
    
    
    
    
    (701,132
    )Preferred share dividends
    
    
    
    
    
    
    (323,157
    )Balance at December 31, 2004
    
    
    
    
    
    
    (1,024,289
    )Net loss for the twelve-month period ended
December 31, 2005
    
    
    
    
    
    
    (5,814,009
    )Preferred share dividends
    
    
    
    
    
    
    (458,342
    )Balance at December 31, 2005
    
    
    
    
    
    
    (7,296,640
    )Net loss for the three month period ended
March 31, 2006
    
    
    
    
    
    
    (207,957
    )Balance at March 31, 2006
    
    
    
    
    
    
    (7,504,597
    )Accumulated other comprehensive incomeBalance at beginning of period July 16, 2004.
    
    
    
    
    
    
    Balance December 31, 2004
    
    
    
    
    
    
    Foreign exchange translation adjustment
    
    
    
    
    
    
    (2,697
    )Balance at December 31, 2005
    
    
    
    
    
    
    (2,697
    )Foreign exchange translation adjustment
    
    
    
    
    
    
    (17,990
    )Balance at March 31, 2006
    
    
    
    
    
    
    (20,687
    )Total stockholders equity at March 31, 2006
    
    
    
    
    
    
    (15,118,220
    )
 The accompanying notes are an integral part of these consolidated financial statements.
 9




---



##### Table of Contents



JMG Exploration, Inc.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
 For the periodfrom the date ofincorporation onFor the three month period ended
    
    July 16, 2004 toMarch 31,
    
    March 31,2006
    
    2005
    
    2006$
    
    $
    
    $Net loss for the period
    
    
    (207,957
    )
    
    
    (217,335
    )
    
    
    (6,723,098
    )Other comprehensive income:Foreign exchange translation
adjustment
    
    
    (17,990
    )
    
    
    (35
    )
    
    
    (20,687
    )Comprehensive loss for the period
    
    
    (225,947
    )
    
    
    (217,370
    )
    
    
    (6,743,785
    )
 The accompanying notes are an integral part of these consolidated financial statements.
 10




---



##### Table of Contents



1. INCORPORATION AND NATURE OF OPERATIONS
      2. SIGNIFICANT ACCOUNTING POLICIES
   Change in Accounting Principle
  11




---



##### Table of Contents



Period from thedate ofincorporation onThree-month
    
    Year ended
    
    July 16, 2004 toperiod ended
    
    December 31,
    
    December 31,March 31, 2006
    
    2005
    
    2004Net Loss, as reported
    
    $
    207,957
    
    
    $
    6,272,351
    
    
    $
    7,504,597Add: Stock-based employees and
directors compensation expenses
included in reported net loss,
net of related tax effects
    
    $
    2,346
    
    
    $
    
    
    
    $
    2,346Deduct: Total stock-based
employees and directors
compensation expenses determined
under fair value based method
for all awards, net of related
tax effects
    
    $
    2,346
    
    
    $
    213,634
    
    
    $
    215,980Pro Forma Net Loss
    
    $
    207,957
    
    
    $
    6,058,717
    
    
    $
    7,290,963Loss per share:Basic and dilutedas reported
    
    $
    0.04
    
    
    $
    2.97
    
    
    $
    3.74Basic and dilutedpro forma
    
    $
    0.04
    
    
    $
    2.87
    
    
    $
    3.63
 12




---



##### Table of Contents



3. PROPERTY AND EQUIPMENT
  March 31, 2006
    
    December 31, 2005Accumulateddepletion,depreciation andCost
    
    accretion,
    
    Net book value
    
    Net book value$
    
    $
    
    $
    
    $Petroleum and
natural gas
properties
    
    
    14,685,276
    
    
    
    4,896,703
    
    
    
    9,788,573
    
    
    
    9,014,228Undeveloped Land
    
    
    5,816,167
    
    
    
    
    
    
    
    5,816,167
    
    
    
    5,868,691Other assets
    
    
    227,317
    
    
    
    52,930
    
    
    
    174,387
    
    
    
    190,12020,728,760
    
    
    
    4,949,633
    
    
    
    15,779,127
    
    
    
    15,073,039
 4. PROMISSARY NOTE
  5. SHARE CAPITAL
 a) Authorized
  b) Issued and outstanding
 AdditionalCapital
    
    Paid-inStock
    
    Capital
    
    Total#
    
    $
    
    $
    
    $Common Stock, $.001 par value:Balance, at July 16, 2004 and
December 31, 2004
    
    
    250,000
    
    
    
    250
    
    
    
    999,750
    
    
    
    1,000,000Preferred shares converted to
common stock
    
    
    1,950,000
    
    
    
    1,950
    
    
    
    7,790,275
    
    
    
    7,792,225
 13




---



##### Table of Contents



AdditionalCapital
    
    Paid-inStock
    
    Capital
    
    Total#
    
    $
    
    $
    
    $Issued for cash, pursuant to
initial public offering
    
    
    2,185,000
    
    
    
    2,185
    
    
    
    11,141,315
    
    
    
    11,143,500Warrants exercised for common
stock
    
    
    612,578
    
    
    
    612
    
    
    
    3,042,216
    
    
    
    3,042,828Share Issue Costs
    
    
    
    
    
    
    
    
    
    
    (861,254
    )
    
    
    (861,254
    )Portion of proceeds
attributed to share purchase
warrants
    
    
    
    
    
    
    
    
    
    
    (2,146,595
    )
    
    
    (2,146,595
    )Balance at December 31, 2005
    
    
    4,997,578
    
    
    
    4,997
    
    
    
    19,965,707
    
    
    
    19,970,704Warrants exercised for common
stock
    
    
    89,254
    
    
    
    90
    
    
    
    420,680
    
    
    
    420,770Share Issue Costs
    
    
    
    
    
    
    
    
    
    
    (2,897
    )
    
    
    (2,897
    )Portion of proceeds
attributed to share purchase
warrants
    
    
    
    
    
    
    
    
    
    
    57,055
    
    
    
    57,055Balance at March 31, 2006
    
    
    5,086,832
    
    
    
    5,087
    
    
    
    20,440,545
    
    
    
    20,445,632Preferred Stock:Balance, at July 16, 2004
and December 31, 2004
    
    
    1,950,000
    
    
    
    1,950
    
    
    
    7,798,050
    
    
    
    7,800,000Preferred shares converted to
common stock
    
    
    (1,950,000
    )
    
    
    (1,950
    )
    
    
    (7,790,275
    )
    
    
    (7,792,225
    )Share issue costs, net of tax
    
    
    
    
    
    
    
    
    
    
    (2,900
    )
    
    
    (2,900
    )Portion of proceeds
attributed to share purchase
warrants
    
    
    
    
    
    
    
    
    
    
    (4,875
    )
    
    
    (4,875
    )Balance at December 31, 2005
and March 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share Purchase WarrantsBalance, at July 16, 2004 and
December 31, 2004
    
    
    487,500
    
    
    
    
    
    
    
    
    
    
    
    4,875Issued pursuant to initial
public offering
    
    
    2,185,000
    
    
    
    
    
    
    
    
    
    
    
    693,866Issued pursuant to conversion
of preferred shares
    
    
    1,950,000
    
    
    
    
    
    
    
    
    
    
    
    1,816,766Warrants exercised for common
stock
    
    
    (612,578
    )
    
    
    
    
    
    
    
    
    
    
    (364,037
    )Balance at December 31, 2005
    
    
    4,009,922
    
    
    
    
    
    
    
    
    
    
    
    2,151,470Warrants exercised for common
stock
    
    
    (89,254
    )
    
    
    
    
    
    
    
    
    
    
    (57,055
    )Balance at March 31, 2006
    
    
    3,920,668
    
    
    
    
    
    
    
    
    
    
    
    2,094,415Total
    
    
    
    
    
    
    5,087
    
    
    
    20,440,475
    
    
    
    22,540,044
 c) Stock options
  14




---



##### Table of Contents



Weightedaverage exerciseNumber of
    
    
    priceoptions
    
    
    $Outstanding as at December 31, 2004
    
    
    260,000
    
    
    
    4.00Granted   April 5, 2005
    
    
    387,750
    
    
    
    5.00Granted  July 21, 2005
    
    
    79,500
    
    
    
    5.00Granted
 August 19, 2005
    
    
    1,500
    
    
    
    15.25Granted
 August 29, 2005
    
    
    5,000
    
    
    
    14.74Granted
 November 1, 2005
    
    
    10,000
    
    
    
    12.25Cancelled
    
    
    (260,000
    )
    
    
    4.00Cancelled
    
    
    (4,500
    )
    
    
    5.00Options outstanding as at December 31, 2005
    
    
    479,250Cancelled
    
    
    (32,500
    )
    
    
    5.00Options outstanding as at March 31, 2006
    
    
    446,750Exercisable as at March 31, 2006
    
    
    250,000
    
    
    
    5.00
 d) Stock  based Compensation
  Share-Based Payment Accounting for
Stock-Based Compensation Accounting for Stock
Issued to Employees Statement of Cash Flows requires
   e) Loss per share
  15




---



##### Table of Contents



6. RELATED PARTY TRANSACTIONS
    7. ASSET RETIREMENT OBLIGATION
  Asset retirement obligation at December 31, 2005
    
    $
    78,642Liabilities incurred
    
    
    Liabilities settled
    
    
    Accretion expense
    
    $
    1,671Asset retirement obligation at March 31, 2006
    
    $
    80,313
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 JMG Exploration, Inc
Managements Discussion and Analysis or Plan of Operation
 .
 FORWARD-LOOKING STATEMENTS
  16




---



##### Table of Contents



Barrel of Oil Equivalent (BOE) 
 Overview
     nd
 17




---



##### Table of Contents



bona fide
   Financial operations overview
 Q1
    
    
    Q12006
    
    
    2005
    
    
    ChangePetroleum and natural gas revenue
    
    
    453
    
    
    
    
    
    
    
    453Net loss
    
    
    (208
    )
    
    
    (217
    )
    
    
    9Per share basic and diluted
    
    
    (0.04
    )
    
    
    (1.64
    )
    
    
    1.60Exit production rate (boe/d)
    
    
    132
    
    
    
    
    
    
    
    132Weighted average number of shares
outstanding   basic
    
    
    5,036
    
    
    
    250
    
    
    
    4,786
 Quarterly Information
 Quarterly information(In US$ thousands, except per share data)Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q22006
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2004
    
    
    2004Revenue
    
    
    453
    
    
    
    286
    
    
    
    334
    
    
    
    7
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (208
    )
    
    
    (4,435
    )
    
    
    (695
    )
    
    
    (467
    )
    
    
    (217
    )
    
    
    (627
    )
    
    
    (74
    )
    
    
    Per share,
basic and
diluted
    
    
    (0.04
    )
    
    
    (0.91
    )
    
    
    (0.26
    )
    
    
    (2.65
    )
    
    
    (1.64
    )
    
    
    (3.24
    )
    
    
    (0.30
    )
    
    
    
 18




---



##### Table of Contents



2 Year Summary
 Summarized financial and operational data
 (In US$ thousands except for volumes and per share amounts)
 Period ended March 31,2006
    
    
    2005Revenue
    
    
    453
    
    
    
    Net loss
    
    
    (208
    )
    
    
    (217
    )Net loss per share  basic and diluted
    
    
    (0.04
    )
    
    
    (1.64
    )Weighted average number of shares  basic and diluted
    
    
    5,036
    
    
    
    250Total assets
    
    
    19,115
    
    
    
    8,683Total long-term debt
    
    Nil
    
    Nil
 Results of operations
 Revenue.
 Three-month period ended March 31, 2006 compared to three month period ended March 31, 2005 and
period from incorporation July 16, 2004 to March 31, 2006.
 Period from the date ofThree month period ended
    
    
    
    incorporation on July 16,March 31,
    
    Percentage
    
    2004 to March 31,For the
    
    2006
    
    2005
    
    Increase
    
    2006Production (Boe)
    
    
    8,617
    
    
    
    
    
    
    
    100
    %
    
    
    19,956Average Price
    
    $
    52.54
    
    
    
    
    
    
    
    
    
    
    $
    54.13Revenues
    
    $
    452,735
    
    
    
    
    
    
    
    100
    %
    
    $
    1,080,195
  2006
    
    2005March 31,
    
    December 31,West Texas Intermediate grade crude oil, per
barrel
    
    $
    62.69
    
    
    $
    59.78
  19




---



##### Table of Contents



Interest income
 Production expense.
 Three-month period ended March 31, 2006 compared to three month period ended March 31, 2005 and
period from incorporation July 16, 2004 to March 31, 2006.
 Period from thedate ofThree month
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    incorporation onperiod ended
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    Percentage
    
    July 16, 2004 to
    
    % ofMarch 31,
    
    2006
    
    revenue
    
    2005
    
    revenue
    
    Increase
    
    March 31, 2006
    
    revenueProduction expense
    
    $
    135,462
    
    
    
    29.9
    %
    
    
    
    
    
    
    
    
    
    
    100
    %
    
    $
    325,060
    
    
    
    30.1
    %Production expense
per Boe:
    
    $
    15.72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    16.29
 General and administrative expense.
 Three-month period ended March 31, 2006 compared to three month period ended March 31, 2005 and
period from incorporation July 16, 2004 to March 31, 2006.
 Period from the dateof incorporation onPercentage
    
    July 16, 2004 toThree month period ended March 31,
    
    2006
    
    2005
    
    Increase
    
    March 31, 2006General and administrative expense
    
    $
    268,495
    
    
    $
    256,342
    
    
    
    5
    %
    
    $
    2,323,267
 Stockbased Compensation.
 20




---



##### Table of Contents



Geophysical and geological expense.
 Depletion, depreciation expense.
 Three-month period ended March 31, 2006 compared to three month period ended March 31, 2005 and
period from incorporation July 16, 2004 to March 31, 2006.
 Period from thedate ofThree month
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    incorporation onperiod ended
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    Percentage
    
    July 16, 2004 to
    
    % ofMarch 31,
    
    2006
    
    revenue
    
    2005
    
    revenue
    
    Increase
    
    March 31, 2006
    
    revenueDepletion,
depreciation
expense
    
    $
    206,299
    
    
    
    45.6
    %
    
    $
    34,316
    
    
    
    
    
    
    
    501
    %
    
    $
    4,951,163
    
    
    
    458.4
    %Depletion,
depreciation
expense per Boe:
    
    $
    23.94
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    248.10
 Accretion expense.
 Preferred dividend.
 Income taxes.
 21




---



##### Table of Contents



Earnings (Loss).
 Three-month period ended March 31, 2006 compared to three month period ended March 31, 2005 and
period from incorporation July 16, 2004 to March 31, 2006.
 Period from thedate ofincorporation on% of
    
    
    
    
    
    Percentage
    
    July 16, 2004 to
    
    % ofFor the three month period ended March 31,
    
    2006
    
    revenue
    
    2005
    
    Decrease
    
    March 31, 2006
    
    revenueNet loss
    
    ($
    207,957
    )
    
    
    (45.9
    %)
    
    ($
    217,335
    )
    
    
    (4.32
    %)
    
    
    (6,723,098
    )
    
    
    (622.4
    %)Per share informationNet loss per share
    
    ($
    0.04
    )
    
    
    
    
    
    ($
    1.64
    )
    
    
    
    
    
    
    (3.74
    )Average number of
shares outstanding
    
    
    5,036,049
    
    
    
    
    
    
    
    250,000
    
    
    
    
    
    
    
    2,006,227
 Capital Expenditures
  Liquidity and capital resources
 Cash flows and capital expenditures
    Numberof warrants
    
    Exercise
    
    MaximumWarrant summary as of March 31, 2006.
    
    outstanding
    
    price
    
    proceedsWarrants issued in the preferred stock private placement
    
    
    375,187
    
    
    $
    6.00
    
    
    $
    2,251,122Warrants issued upon conversion of preferred stock
    
    
    1,739,500
    
    
    
    4.25
    
    
    $
    7,392,875Warrants issued our initial public offering
    
    
    1,805,981
    
    
    
    5.00
    
    
    $
    9,029,9053,920,668
    
    
    $
    4.25 - $6.00
    
    
    $
    18,673,902
 22




---



##### Table of Contents



Cash flow used in operations.
  Cash
flow used in investing activities.
 Cash flow used in financing activities.
  Changes in critical accounting estimates
 Stock-based compensation
  23




---



##### Table of Contents



Contingencies
  Contractual obligations and commitments
  Related Party Transactions
    24




---



##### Table of Contents



Qualitative and Quantitative Disclosures about Market and Credit Risk
  Credit Risk.
 Market Risk.
 Interest Rate Risk.
 Outlook and Proposed Transactions
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  25




---



##### Table of Contents



.
   Changes in Internal Control Over Financial Reporting
  26




---



##### Table of Contents



Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 (a) Exhibits
 ExhibitNumber31.1
    
    
    Certification of Herman S. Hartley, Chief Executive Officer of
Registrant, pursuant to Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Joanne R. Finnerty, Chief Financial Officer
of Registrant, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    
    Certification of Herman S. Hartley, Chief Executive Officer of
Registrant, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Joanne R. Finnerty, Chief Financial Officer
of Registrant, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 27




---



##### Table of Contents



SIGNATURES
  JMG Exploration, IncDate: September 12, 2006
/s/ David C. HoDavid C. HoActing Chief Financial Officer 28