UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q (Mark One) þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2009 or oTRANSITION 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) Nevada20-1373949(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification Number)180 South Lake Ave.
Seventh FloorPasadena, California91101(Address of principal executive offices)(Zip Code) Registrants telephone number, including area code:(626) 792-3842 Former name, former address and former fiscal year, if changed from last report.
Not applicable  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.. (Check one):  Large accelerated filer o                                                              Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company)         Smaller reporting companyþ  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No þ  The number of shares outstanding of Registrant’s common stock, par value $0.01, as of May 31, 2010, was 5,188,409.   JMG Exploration, Inc.Index to Form 10-Q Quarterly Report
to the Securities and Exchange Commission


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|        | Part I  Financial Information                                                                                                                                           |  |        
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|Item 1  | Consolidated Financial Statements                                                                                                                                       |  | 3 - 7  
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|        | Consolidated Balance Sheets as of  September 30, 2009 (unaudited) and December 31, 2008.                                                                                |  | 3      
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|        | Consolidated Statements of Operations (unaudited) for the three months ended September 30, 2009 and 2008 and the nine months ended September 30, 2009 and 2008.         |  | 4      
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|        | Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2009 and 2008.                                                                |  | 5      
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|        | Consolidated Statements of Shareholders Equity (unaudited) for the nine months ended September 30, 2009 and the year ended December 31, 2008.                          |  | 6      
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|        | Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended September 30, 2009 and 2008 and the nine months ended September 30, 2009 and 2008. |  | 7      
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|        | Notes to Consolidated Financial Statements (unaudited)                                                                                                                  |  | 8 - 13 
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|Item 2  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                   |  | 14  21
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|Item 3  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                              |  | 21  22
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|Item 4T | Controls and Procedures                                                                                                                                                 |  | 22     
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|        | Part II Other Information                                                                                                                                               |  |        
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|Item 1  | Legal Proceedings                                                                                                                                                       |  | 23     
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|Item 1A | Risk Factors                                                                                                                                                            |  | 23     
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|Item 2  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                             |  | 23     
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|Item 3  | Defaults Upon Senior Securities                                                                                                                                         |  | 23     
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|Item 4  | Submission of Matters to a Vote of Security Holders                                                                                                                     |  | 23     
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|Item 5  | Other Information                                                                                                                                                       |  | 23     
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|Item 6  | Exhibits                                                                                                                                                                |  | 23     

PART I. FINANCIAL INFORMATION  ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS  JMG Exploration, Inc. CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                      |                    |                  
|----------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | -----------------
|                                                                                                                                                      | September 30,
2009 | December 31,
2008
|ASSETS                                                                                                                                                | (unaudited)        |                  
|Current                                                                                                                                               |                    |                  
|Cash and cash equivalents                                                                                                                             | $     27,938       | $    285,259     
|Accounts receivable, net of allowance of $62,100 in 2009 and $69,000 in 2008                                                                          | -                  | 104,048          
|Prepaid expenses                                                                                                                                      | -                  | 14,552           
|Total current assets                                                                                                                                  | 27,938             | 403,859          
|                                                                                                                                                      |                    |                  
|Other assets                                                                                                                                          | -                  | 30,000           
|Loan Receivable, net of allowance of $1,850,000 in 2009 and 2008                                                                                      | 1,150,000          | 1,150,000        
|Oil and gas properties (accounted for under the successful efforts method of accounting), net of depreciation, depletion, amortization and impairment | 234,175            | 415,285          
|                                                                                                                                                      | $  1,412,113       | $ 1,999,144      
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                  |                    |                  
|Current                                                                                                                                               |                    |                  
|Accounts payable                                                                                                                                      | $     162,739      | $    215,243     
|Accrued liabilities                                                                                                                                   | 134,460            | 203,938          
|Due to JED Oil Inc.                                                                                                                                   | 36,211             | 137,390          
|Total current liabilities                                                                                                                             | 333,410            | 556,571          
|Asset retirement obligations                                                                                                                          | 28,414             | 27,571           
|                                                                                                                                                      | 361,824            | 584,142          
|Stockholders equity                                                                                                                                  |                    |                  
|Share capital                                                                                                                                         |                    |                  
|Common stock - $.001 par value; 25,000,000 shares authorized; 5,188,409 shares issued and outstanding                                                 | 5,188              | 5,188            
|Preferred stock - $.001 par value; 10,000,000 shares authorized; no shares issued and outstanding                                                     | -                  | -                
|Additional paid-in capital                                                                                                                            | 25,307,180         | 25,307,180       
|Share purchase warrants                                                                                                                               | 2,184,452          | 2,184,452        
|Accumulated deficit                                                                                                                                   | (26,420,516)       | (26,055,897)     
|Accumulated other comprehensive earnings                                                                                                              | (26,015)           | (25,921)         
|Total stockholders equity                                                                                                                            | 1,050,289          | 1,415,002        
|                                                                                                                                                      | $   1,412,113      | $ 1,999,144      

The accompanying notes are an integral part of these consolidated financial statements.   2   JMG Exploration, Inc.CONSOLIDATED STATEMENTS OF OPERATIONS  (unaudited)


|                                                              |                                                |                                               |                |               
|------------------------------------------------------------- | ---------------------------------------------- | --------------------------------------------- | -------------- | --------------
|                                                              | For the three month period
ended September 30, | For the nine month period
ended September 30,
|                                                              | 2009                                           | 2008                                          | 2009           | 2008          
|Revenues                                                      |                                                |                                               |                |               
|Gross Revenue                                                 | $    24,000                                    | $    38,526                                   | $    72,000    | $  84,099     
|Less royalties and taxes                                      | (3,300)                                        | (7,643)                                       | (9,900)        | (15,011)      
|                                                              | 20,700                                         | 30,883                                        | 62,100         | 69,088        
|                                                              |                                                |                                               |                |               
|Costs and Expenses                                            |                                                |                                               |                |               
|General and administrative                                    | 99,324                                         | 54,105                                        | 365,883        | 264,752       
|Production expenses                                           | 16,105                                         | 22,789                                        | 42,201         | 75,081        
|Depletion, depreciation, amortization and                     |                                                |                                               |                |               
|Impairment                                                    | 2,165                                          | 275,195                                       | 174,794        | 292,227       
|Accretion on asset retirement obligation                      | 281                                            | 281                                           | 843            | 843           
|                                                              | 117,875                                        | 352,370                                       | 583,721        | 632,903       
|Loss from operations                                          | (97,175)                                       | (321,487)                                     | (521,621)      | (563,815)     
|                                                              |                                                |                                               |                |               
|Other Income and Expense                                      |                                                |                                               |                |               
|Loss on sale of oil and gas properties                        | -                                              | -                                             | -              | (42,297)      
|Interest income                                               | 63                                             | 801                                           | 773            | 50,724        
|Interest expense                                              | -                                              | (260)                                         | (260)          | (714)         
|Other                                                         | 157,289                                        | 16,465                                        | 157,289        | 79,525        
|Provision for income taxes                                    | (800)                                          | -                                             | (800)          | -             
|                                                              | 156,552                                        | 17,006                                        | 157,002        | 87,238        
|Net income (loss)                                             | $   59,377                                     | $    (304,481)                                | $   (364,619)  | $    (476,577)
|Less:  deemed dividend on warrant extension                   | -                                              | -                                             | -              | (280,852)     
|Net income/(loss) applicable to common shareholders           | $    59,377                                    | $    (304,481)                                | $    (364,619) | $    (757,429)
|Basic and diluted weighted average shares outstanding         | 5,188,409                                      | 5,188,409                                     | 5,188,409      | 5,188,409     
|                                                              |                                                |                                               |                |               
|Net income/(loss) for the period per share, basic and diluted | $  0.01                                        | $  (0.06)                                     | $   (0.07)     | $  (0.15)     
|                                                             

The accompanying notes are an integral part of these consolidated financial statements.  3   JMG Exploration, Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the nine month period ended September 30,20092008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss for the period$  (364,619)$  (476,577)Adjustments to reconcile net loss to cash flows from operating activities:Depletion, depreciation, amortization, accretion and impairment175,637293,070Change in allowance for doubtful accounts(6,900)-Loss on disposition of property and equipment6,31642,297Other changes:Decrease in other assets30,0001,541Decrease in accounts receivable110,94885,390Decrease (increase) in prepaid expenses14,552(2,093)Decrease  in accounts payable  and accrued liabilities(121,982)(138,336)Decrease in due to JED Oil Inc.(101,179)(7,005)Cash used in operating activities(257,227)(201,713)CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds on disposition of property-364,986Cash provided by investing activities364,986CASH FLOWS FROM FINANCING ACTIVITIES:--Effect of foreign exchange on cash and cash equivalents(94)23Net increase in cash and cash equivalents(257,321)163,296Cash and cash equivalents, beginning of period285,259163,128Cash and cash equivalents, end of period27,938326,424SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for:Interest$ 710$ 714Income taxes$ 800$ 800SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Extension of warrant expiration date  deemed dividend-$ 280,852   The accompanying notes are an integral part of these consolidated financial statements.  4   JMG Exploration, Inc.  STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY  (unaudited)


|                                                          |              |                 |                            |                         |                      |                                        |          |          
|--------------------------------------------------------- | ------------ | --------------- | -------------------------- | ----------------------- | -------------------- | -------------------------------------- | -------- | ---------
|                                                          | Common Stock | Preferred
Stock | Additional
Paid-in
Capital | Share Purchase Warrants | Accumu-lated Deficit | Accumu-lated
Other Compre-hensive Loss | Total   
|Shares                                                    | Amt         
|                                                          | #            | $               | $                          | $                       | $                    | $                                      | $        | $        
|Balance at December 31, 2007                              | 5,188,409    | 5,188           | -                          | 24,908,138              | 2,184,452            | (24,974,628)                           | (25,994) | 2,097,156
|Stock based compensation                                  | -            | -               | -                          | 6,829                   | -                    | -                                      | -        | 6,829    
|Extension of warrant expiration dates to January 15, 2009 | -            | -               | -                          | 280,852                 | -                    | (280,852)                              | -        | -        
|Extension of warrant expiration dates to January 15, 2010 | -            | -               | -                          | 111,361                 | -                    | (111,361)                              | -        | -        
|Net loss for the year ended December 31, 2008             | -            | -               | -                          | -                       | -                    | (689,056)                              | -        | (689,056)
|Foreign exchange translation                              | -            | -               | -                          | -                       | -                    | -                                      | 73       | 73       
|Balance at December 31, 2008                              | 5,188,409    | 5,188           | -                          | 25,307,180              | 2,184,452            | (26,055,897)                           | (25,921) | 1,415,002
|Net loss for the nine months ended September 30, 2009     | -            | -               | -                          | -                       | -                    | (364,619)                              | -        | (364,619)
|Foreign exchange translation                              | -            | -               | -                          | -                       | -                    | -                                      | (94)     | (94)     
|Balance at September 30, 2009 (unaudited)                 | 5,188,409    | 5,188           | -                          | 25,307,180              | 2,184,452            | (26,420,516)                           | (26,015) | 1,050,289
|                                                         

The accompanying notes are an integral part of these consolidated financial statements.  5   JMG Exploration, Inc.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  (unaudited)


|                                           |                                        |                                       |              |                | 
|------------------------------------------ | -------------------------------------- | ------------------------------------- | ------------ | -------------- | 
|                                           | Three month period ended
September 30, | Nine month period ended
September 30,
|                                           | 2009                                   | 2008                                  | 2009         | 2008          
|                                           |                                        |                                       |              |               
|Net income (loss) for the period           | $  59,377                              | $ (304,481)                           | $  (364,619) | $    (757,429)
|Other comprehensive income (loss):         |                                        |                                       |              |               
|Foreign exchange translation adjustment    | 7                                      | 28                                    | (94)         | 23            
|Comprehensive income (loss) for the period | $  59,384                              | $  (304,453)                          | $  (364,713) | $  (757,406)  

The accompanying notes are an integral part of these consolidated financial statements.     6   JMG Exploration, Inc. Notes to Consolidated Financial Statements (Unaudited) 1.    INCORPORATION, NATURE OF OPERATIONS, AND GOING CONCERN JMG Exploration, Inc. was incorporated under the laws of the State of Nevada on July 16, 2004 for the purpose of exploring for oil and natural gas in the United States and Canada. All of the properties under development, with the exception of the Pinedale natural gas wells, have not met with developmental objectives and have been sold as of January 2008. As of September 30, 2009, we had an accumulated deficit of $26,420,516 and have insufficient working capital to fund development and exploratory drilling opportunities. Following the collection of our loan receivable in May 2010, JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2011. Raising additional capital is not considered a viable strategy JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party. The Companys consolidated financial statements are presented on a going concern basis. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.  2. SIGNIFICANT ACCOUNTING POLICIES  These interim consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods, on a basis that is consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited financial statements and the summary of significant accounting policies and notes thereto included in the Companys audited financial statements for the years ended December 31, 2008 and 2007. Critical accounting estimates In the preparation of the financial statements, it was necessary to make certain estimates that were critical to determining our assets, liabilities and net income. None of these estimates affect the determination of cash flow but do have a significant impact in the determination of net income. The most critical of these estimates is the reserves estimations for oil and gas properties and the valuation allowance for the securities held as collateral for our loan receivable. At December 31, 2007, JMG engaged an independent engineering firm to evaluate 100% of our developed oil and gas reserves and prepare a report thereon. Their report was utilized in the calculations of depletion and depreciation expense. The estimation of the reserve volumes and future net revenues set out in the report is complex and subject to uncertainties and interpretations. Judgments are based upon engineering data, projected future rates of production, forecasts of commodity prices, and the timing of future expenditures. Inevitably the estimates of reserve volumes and future net revenues will vary over time as new data becomes available and estimates of future net revenues do not represent fair market value. For the year ended December 31, 2008 and for the three and nine months ended September 30, 2009, JMG adjusted the 2007 reserve information per this report based on 2008 and 2009 production, current prices for natural gas and a review of other assumptions utilized in the 2007 reserve report. In order to evaluate the valuation of the securities held as collateral for our loan receivable, JMG  engaged a financial consultant with international expertise.  7   The following significant accounting policies outline the major policies involving critical estimates. Successful-efforts method of accounting Our business is subject to special accounting rules that are unique to the oil and gas industry. There are two allowable methods of accounting for oil and gas business activities: the successful-efforts method and the full-cost method. Under the successful-efforts method, costs such as geological and geophysical, exploratory dry holes and delay rentals are expensed as incurred whereas under the full-cost method these types of charges are capitalized. Under the successful-efforts method of accounting, all costs of property acquisitions and drilling of exploratory wells are initially capitalized. If a well is unsuccessful, the capitalized costs of drilling the well, net of any salvage value, are charged to expense. If a well finds oil and natural gas reserves that cannot be classified as proved within a year after discovery, the well is assumed to be impaired and the capitalized costs of drilling the well, net of any salvage value, are charged to expense. The capitalized costs of unproven properties are periodically assessed to determine whether their value has been impaired below the capitalized cost, and if such impairment is indicated, a loss is recognized. We consider such factors as exploratory results, future drilling plans and lease expiration terms when assessing unproved properties for impairment. For each field, an impairment provision is recorded whenever events or circumstances indicate that the carrying value of those properties may not be recoverable from estimated future net revenues. The impairment provision is measured as the excess of carrying value over the fair value. Fair value is defined as the present value of the estimated future net revenue from total proved and risked-adjusted probable reserves over the economic life of the reserves, based on year end oil and gas prices, consistent with price and cost assumptions used for acquisition evaluations. Geological and geophysical costs and costs of retaining undeveloped properties are expensed as incurred. Expenditures for maintenance and repairs are charged to expense, and renewals and betterments are capitalized. Upon disposal, the asset and related accumulated depreciation and depletion are removed from the accounts, and any resulting gain or loss is reflected currently in income or loss. Costs of development dry holes and proved leaseholds are depleted on the unit-of-production method using proved developed reserves on a field basis. The depreciation of capitalized production equipment, drilling costs and asset retirement obligations is based on the unit-of-production method using proved developed reserves on a field basis. To economically evaluate our future proved oil and natural gas reserves, if any, independent engineers must make a number of assumptions, estimates and judgments that they believe to be reasonable based upon their expertise and professional guidelines. Were the independent engineers to use differing assumptions, estimates and judgments, then our financial condition and results of operations could be affected. We would have lower revenues in the event revised assumptions, estimates and judgments resulted in lower reserve estimates, since the depletion and depreciation rate would then be higher. A write-down of excess carrying value also might be required. Similarly, we would have higher revenues and net profits in the event the revised assumptions, estimates and judgments resulted in higher reserve estimates, since the depletion and depreciation rate would then be lower. Proved Oil and Gas Reserves Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. The estimated quantities of proved crude oil, natural gas liquids and natural gas are derived from geological and engineering data that demonstrate with reasonable certainty the amounts that can be recovered in future years from known reservoirs under existing economic and operating conditions. Reserves are considered proved if they can be produced economically as demonstrated by either actual production or conclusive formation tests. The oil and gas reserve estimates are made using all available geological and reservoir data as well as historical production data. Estimates are reviewed and revised as appropriate. Revisions occur as a result of changes in prices, costs, fiscal regimes, reservoir performance or a change in the Companys plans.  8   Long-lived assets When assets are placed into service, we make estimates with respect to their useful lives that we believe are reasonable. However, factors such as competition, regulation or environmental matters could cause us to change our estimates, thus impacting the future calculation of depreciation and depletion. We evaluate long-lived assets for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived assets carrying value exceeds its fair value. Estimates of future discounted cash flows and fair value of assets require subjective assumptions with regard to future operating results and actual results could differ from those estimates. Impairment of Long-Lived Assets If estimated undiscounted cash flows are insufficient to recover the net capitalized costs related to proved properties, then we recognize an impairment charge in income from operations equal to the difference between the net capitalized costs related to unproved properties and their estimated fair values based on the present value of the related estimated future net cash flows. Undeveloped oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Asset Retirement Obligations We have adopted ASC 410 Asset Retirement and Environmental Obligations from inception. The net estimated costs are discounted to present values using a credit-adjusted, risk-free rate over the estimated economic life of the properties. These costs are capitalized as part of the cost of the related asset and amortized. The associated liability is classified as a long-term liability and is adjusted when circumstances change and for the accretion of expense which is recorded as a component of depreciation and depletion. Stock-based compensation The Company records stock-based compensation in accordance with the fair value recognition provisions of ASC 718 CompensationStock Compensation. Contingencies In the future, we may be subject to adverse proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We will be required to assess the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to developments in each matter or changes in approach such as a change in settlement strategy in dealing with these potential matters  Cash and Cash Equivalents The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.  Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 (up to $250,000 through December 31, 2013).  The company has not experienced any losses in such accounts and does not believe that it is exposed to any significant credit risk on cash.  Income (loss) per Common Share Income (loss) per share (EPS) is computed based on weighted average number of common shares outstanding and excludes any potential dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, which would then share in the earnings of the Company. The shares issuable upon the exercise of stock options and warrants are excluded from the calculation of net income (loss) per share for the three and nine months ended September 30, 2009 and 2008 because their effect would be antidilutive. The following shares were accordingly excluded from the net income (loss) per share calculation.  9    Three month period ended
September 30,Nine month period ended
September 30,2009200820092008Stock warrants4,062,5514,062,5514,062,5514,062,551Stock options473,333473,333473,333473,333Total share excluded4,535,8844,535,8844,535,8844,535,884  Income Taxes The Company files income tax returns in the U.S. federal jurisdiction and various states. There are currently no income tax examinations underway for these jurisdictions, although the tax years ended December 31, 2008, 2007 and 2006 are all still open for examination. The Company provides for income taxes in accordance with ASC 740 Income Taxes  (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities.  Where it is more likely than not that a tax benefit will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its realizable value. A valuation allowance has been provided against the Companys net deferred tax assets as the Company believes that it is more likely than not that the net deferred tax assets will not be realized.  As a result of this valuation allowance, the effective tax rate for the of the nine months ended September 30, 2009 and for the year ended December 31, 2008 is zero percent. Allowance for Doubtful Accounts Trade accounts receivable are recorded at net realizable value. If the financial condition of JMGs customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Delinquent trade accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The need for an allowance is determined through an analysis of the past-due status of accounts receivable and assessments of risk that are based on historical trends and an evaluation of the impact of current and projected economic conditions. The allowance for doubtful accounts was $62,100 and $69,000 as of September 30, 2009 and December 31, 2008, respectively. Fair Value of Financial Instruments The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information and other data. These estimates involve uncertainties and cannot be determined with precision. For certain of JMGs financial instruments, including cash, accounts receivable, loan receivable and accounts payable, the carrying amounts approximate fair value. See footnote 8.  Recent Accounting Pronouncements In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162 (the Codification, or ASC Topic 105).  ASC Topic 105 is the sole source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  All other non-grandfathered accounting literature is considered non-authoritative.  Following the adoption of the Codification, the FASB now issues Accounting Standards Updates, which the FASB will not consider as authoritative in their own right, but which will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification.  The new authoritative guidance under ASC Topic 105 became effective for periods ending on or after September 15, 2009, and did not have a material impact on the Companys consolidated financial statements.  10   New authoritative accounting guidance under FASB ASC Topic 805, Business Combinations (ASC Topic 805), requires the acquiring entity in a business combination to recognize and measure all assets and liabilities assumed in the transaction and any non-controlling interest in the acquiree at fair value as of the acquisition date.  ASC Topic 805 changes the way the Company accounts for acquisitions of oil and gas properties.  Such acquisitions may now be treated as business combinations, which, if applicable, will require transaction costs to be expensed as incurred, may generate gains or losses due to changes between the effective and closing dates of acquisitions, and may require possible recognition of goodwill given differences between the purchase price and fair value of assets received.  ASC Topic 805 further amends the initial recognition and measurement, subsequent measurement and accounting, and disclosures of assets and liabilities arising from contingencies in a business combination.  The new authoritative guidance under ASC Topic 805 became effective for the Company on January 1, 2009, and the impact on the Companys consolidated financial statements will largely be dependent on the size and nature of the business combinations completed.  There have not been any significant acquisitions of oil and gas properties since adoption of ASC Topic 805. New authoritative accounting guidance under FASB ASC Topic 810, Consolidation (ASC Topic 810), established accounting and reporting standards that require noncontrolling interests to be reported as a component of equity along with any changes in the parents ownership interest.  The new authoritative guidance under ASC Topic 810 became effective for the Company on January 1, 2009, and did not have a material impact on the Companys consolidated financial statements. New authoritative accounting guidance under FASB ASC Topic 825, Financial Instruments (ASC Topic 825), requires the Company to include disclosures about the fair value of its financial instruments whenever it issues financial information for interim reporting periods and annual reporting periods, whether recognized or not recognized in the statement of financial position.  The new authoritative guidance under ASC Topic 825 became effective for the Company on April 1, 2009, and did not have a material impact on the Companys consolidated financial statements. New authoritative accounting guidance under FASB ASC Topic 855, Subsequent Events (ASC Topic 855), established general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  ASC Topic 855, as amended, requires SEC filers to evaluate subsequent events through the date on which financial statements are issued.  The adoption of this pronouncement did not have a material impact on our consolidated financial statements. On December 31, 2008, the SEC published final rules and interpretations updating its oil and gas reporting requirements.  Many of the revisions are updates to definitions in the existing oil and gas rules to make them consistent with the petroleum resource management system, which is a widely accepted standard for the management of petroleum resources that was developed by several industry organizations.  Key revisions include changes to the pricing used to estimate reserves, the ability to include nontraditional resources in reserves, the use of new technology for determining reserves, and permitting disclosure of probable and possible reserves.  The SEC will require companies to comply with the amended disclosure requirements for registration statements filed after January 1,2010, and for annual reports for fiscal years ending on or after December 31, 2009.  The Company adopted these new rules and interpretations as of December 31, 2009. The FASB aligned ASC Topic 932 with all of the aforementioned SEC requirements by issuing ASC Update 2010-03.  The Company has adopted the new authoritative guidance as of December 31, 2009 and for the Companys 2009 Annual Report on Form 10-K. In January 2010, the FASB issued ASC Update 2010-06, Fair Value Measurements and Disclosures (ASC Update 2010-06), that requires additional disclosures about the different classes assets and liabilities measured at fair value, the valuation techniques and inputs used, the fair value measurements of the activity in Level 3 on a gross basis and the transfers between Levels 1and 2. This new authoritative guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures regarding gross activity in the Level 3 rollforward, which are effective for the Company as of January 1, 2011.  The adoption of ASC Update 2010-06 will not have a material impact on the Companys financial statements.  11   3.  LOAN RECEIVABLE In conjunction with a September 5, 2007 Share Exchange Agreement with the shareholders of Newco Group Limited, JMG provided Newco a $3,000,000 loan to enable Newco to purchase additional shares in Iris representing approximately a 39% equity interest in Iris (excluding the 14.5% equity interest already owned by Newco).  As security for the loan, JMG received a security interest in the ordinary shares of Iris purchased by Newco with the proceeds of the JMG loan. As further security for the loan, JMG received an irrevocable proxy from ESAPI Ltd., a company organized under the laws of the Commonwealth of the Bahamas (ESAPI), granting to JMG the right to vote the shares of Iris currently owned by Newco that have been pledged to ESAPI by Newco as security for a loan by ESAPI to Newco. Newco has been determined to be a variable interest entity, however as JMG is not the primary beneficiary, the financial position and results of operations for Newco are not consolidated with JMG. On January 4, 2008, JMG elected to exercise its right under the Share Exchange Agreement to terminate such agreement. After a series of extensions, on July 22, 2008 JMG issued a formal notice of default to Newco and started the process of transferring into the name of JMG shares of Iris which JMG held as security for the loan and which were registered in the name of Newco. Due to concerns regarding the underlying value of Iris, JMG recorded a valuation allowance of $1,850,000 as of December 31, 2007 and reduced the value of the Newco Note receivable and underlying Iris shares to $1,150,000. On November 11, 2009 the parties entered into a settlement agreement. See footnote 10: Subsequent Events. 4.  PROPERTY AND EQUIPMENT Depletion, depreciation, amortization and impairment expense was $(25,508) and $275,195 for the three months ended September 30, 2009 and 2008, and $147,121 and $292,227 for the nine months ended September 30, 2009 and 2008. Undeveloped land and other assets not related to petroleum and natural gas properties were excluded from the depletion calculation. Oil and gas properties (accounted for under the successful efforts method of accounting)  September 30,
2009December 31,
2008(unaudited)Petroleum and natural gas properties$  3,019,397$ 1,993,962Undeveloped Properties445,6451,477,396Accumulated depletion, depreciation, amortization and impairment(3,230,867)(3,056,073)$     234,175$    415,285  5.  RELATED PARTY TRANSACTIONS  JED Oil Inc. On August 1, 2004 the Company entered into a technical services agreement with JED Oil Inc. (JED). Under the Agreement, JED provides all required personnel, office space and equipment, at standard industry rates for similar services. JED is considered an affiliate, because of its ownership interest in us and because two of our directors are directors of JED. This agreement was terminated on January 1, 2006; it was replaced by a joint services agreement, which operates to provide the above services on an as needed basis. In 2008 JED ceased providing any services under this agreement and any expenditures or amounts payable to JED were due to their role as the operator of the Pinedale natural gas wells through December 31, 2008.  JED paid on behalf of the Company a total of $0 and $17,586 for the three month period ended September 30, 2009 and 2008, respectively, for capital related expenditures and production expenses. JED paid on  12   behalf of the Company a total of $0 and $77,492, respectively, for the nine month period ended September 30, 2009 and 2008 for capital related expenditures and production expenses.  During the three and nine month periods ended September 30, 2009 and 2008, the Company entered into the following transactions with JED:  · JED paid on behalf of the Company a total of $0 and $17,586 for the three month period ended September 30, 2009 and 2008 for operating costs and capital related expenditures. JED incurred no expenses from drilling and other costs related to JMG properties for the three month period ended September 30, 2009 and 2008.  · JED paid on behalf of the Company a total of $0 and $60,630 for the nine month period ended September 30, 2009 and 2008 for operating costs and capital related expenditures JED incurred no expenses from drilling and other costs related to JMG properties for the nine month period ended September 30, 2009 and 2008. In connection with these transactions the total amount payable to JED was $36,211 at September 30, 2009. Skeehan & Company Joseph Skeehan, the a director  of JMG is also the owner of Skeehan & Company, a professional service corporation that engages in accounting, finance and consulting services to small to mid-sized companies and organizations primarily in Southern California since 1980. In conjunction with the maintenance of accounting records and the preparation of financial statements and regulatory filings, Skeehan & Company was paid a total of $14,320 and $40,837 during the three and nine month periods ended September 30, 2009, respectively. No balance is due Skeehan & Company as of September 30, 2009.  6. ASSET RETIREMENT OBLIGATION As of September 30, 2009, the estimated present value of the Companys asset retirement obligation was $28,414 based on estimated future cash requirements of $20,443, determined using a credit adjusted risk free interest rate of 8.5% over the economic life of the properties, an inflation rate of 2.0%, and an estimated life until repayment of 5-10 years. Accretion of $281 and $843 was recorded for the three and nine month periods ending September 30, 2009, respectively.  Asset retirement obligations at December 31, 2008$27,571Accretion expense843Asset retirement obligations at September 30, 2009$28,414  7. DEEMED DIVIDEND ON WARRANT EXTENSION On January 4, 2008 the Company extended the expiration dates of its outstanding warrants to January 15, 2009. A total of 369,249 $6.00 warrants and 1,739,500 $4.25 warrants were to expire on December 31, 2006, and 1,763,802 $5.00 warrants were to expire on August 24, 2006. The deemed dividend of $280,852 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. On December 17, 2008 the Company extended the expiration dates of its outstanding warrants to January 15, 2010. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2009. A deemed dividend of $111,361 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. No warrants were extended in 2007. See footnote 10: Subsequent Events.  13    8. FAIR VALUE MEASUREMENTS  The fair value hierarchy established byASC 820 “Fair Value Measurements and Disclosures” prioritizes the inputs used in valuation techniques into three levels as follows:  ·Level 1 – Observable inputs – unadjusted quoted prices in active markets for identical assets and liabilities;  ·Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data; and  ·Level 3 – Unobservable inputs  includes amounts derived from valuation models where one or more significant inputs are unobservable.  JMGs loan receivable is the only financial instrument of JMG recorded at fair value as of September 30, 2009. In accordance with ASC 820, JMG has classified its loan receivable as having Level 3 characteristics as a result of the inputs used to determine its fair values. The collateral for the loan receivable is stock in a privately owned corporation headquartered in New Delhi, India and for which no quoted prices or other observable inputs as specified under Levels 1 and 2 are available. Accordingly, JMG retained a financial consultant and obtained an independent valuation analysis of Iris based on Iris financial information through September 30, 2008 and relevant industry and competitor information. The financial consultant employed a weighted average of four different methods in its valuation of Iris. The weighted average factor assigned to the results of each method were based on how likely one method over another was likely to be used for valuing Iris as of the date of the valuation: · Capital Approach (10% weighted average); · M&A Multiple Approach (35% weighted average); · Comparable Public Company Approach (30% weighted average); and · Liquidation Approach (25% weighted average).  The invested capital approach assumes that a buyer is willing to purchase the enterprise only for what the seller has invested into it or a reasonable multiple of such value. The M&A multiple approach assumes that a third-party buyer, whether a financial buyer or an industry competitor, is willing to purchase the enterprise at prevailing market prices where similar enterprises have been purchased whole or for the very substantial majority of the capital stock. The comparable public company approach assumes an enterprise can sell its stock to the public for a price equivalent to where other publicly listed industry players are trading.The liquidation approach simply assumes that the enterprise cannot meet its immediate cash needs and all tangible assets are sold to meet obligations with the remainder paid to shareholders. The resultant weighted average valuation of Iris was then further reduced by 20% to factor in the potential discount for a minority interest position. As a result of this analysis, JMG recorded a valuation allowance of $1,850,000 as of December 31, 2007 and reduced the book value of the Iris shares to $1,150,000. JMG management considers the assumptions utilized in the independent valuation analysis to be also relevant as of September 30, 2009 and 2008. See footnote 10: Subsequent Events for settlement and collection of the loan receivable. 9. PINEDALE NATURAL GAS PROPERTY LITIGATION On July 16, 2009,Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench Of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and  Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their royalty interest in such  production. We have accrued production revenues based on historical production data but have fully reserved accounts receivable from NEO pending the outcome of the litigation.  14   Management believes that NEOs failure to remit JMGs share of the production revenue is ungrounded, that JMG will prevail in the litigation and that no further impairment of the Pinedale natural gas property is warranted. 10.SUBSEQUENT EVENTS On January 8, 2010 JMG extended the expiration dates of all warrants, except those issued to our underwriters, to January 15, 2011. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2010. A deemed dividend of $638,804 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. On January 26, 2010 JMG cancelled 473,333 common stock options outstanding at an average exercise price of $3.00 per share and issued 455,000 new options at an exercise price of $0.22 per share and which expire in five years. With respect to the issuance of the new stock options, JMG incurred stock based compensation expense of $73,673 for the quarter. On November 11, 2009 JMG entered into a Settlement Agreement between Newco and Iris. The Settlement Agreement provided that all rights, claims and demands of all parties are settled in full upon JMGs surrender of 1,427,665 shares of Iris held as collateral for the loan and JMGs receipt of $1,900,000. Payment to JMG and the transfer of the shares was received in May 2010. JMG reduced its valuation allowance by $750,000 in the 4th quarter 2009.  15   ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  The following Managements Discussion and Analysis of financial results as provided by the management of JMG Exploration, Inc. (JMG) should be read in conjunction with the unaudited consolidated financial statements and notes for the three and nine month periods ended September 30, 2009, the audited financial statements and accompanying notes for the years ended December 31, 2008 and 2007 and the managements discussion and analysis for the years ended December 31, 2008 and 2007.  FORWARD-LOOKING STATEMENTS This report includes forward-looking statements. All statements other than statements of historical facts contained herein, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words believe, may, will, estimate, continue, anticipate, intend, should, plan, expect and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions as described in Risk Factors in our annual report on Form 10-K for the year ended December 31, 2008. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Statements relating to reserves are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this Form 10-Q are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements contained in this Form 10-Q are expressly qualified by this cautionary statement. In the presentation of the Form 10-Q, JMG uses terms that are universally applied in analyzing corporate performance within the oil and gas industry for which regulators require that we provide disclaimers. Barrel of Oil Equivalent (BOE) The oil and gas industry commonly expresses production volumes and reserves on a barrel of oil equivalent basis (BOE) whereby natural gas volumes are converted at the ratio of six thousand cubic feet to one barrel of oil. The intention is to sum oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. Throughout this Form 10-Q, JMG has used the 6:1 BOE measure which is the approximate energy equivalency of the two commodities at the burner tip. BOE does not represent a value equivalency at the plant gate, which is where JMG sells its production volumes, and therefore may be a misleading measure if used in isolation.  Overview JMG Exploration, Inc. was incorporated under the laws of the State of Nevada on July 16, 2004 for the purpose of exploring for oil and natural gas in the United States and Canada. In August 2004, two private placements totaling $8.8 million were completed and exploration activities commenced. As discussed below, all of the properties under development, with the exception of the Pinedale natural gas wells, have not met with developmental objectives and have been sold as of January 2008.  16   As of September 30, 2009, we had an accumulated deficit of $26,420,516 and have insufficient working capital to fund development and exploratory drilling opportunities. Following the collection of our loan receivable in May 2010, JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2011. Raising additional capital is not considered a viable strategy JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party.   Results of operations Revenue.Our revenue is dependent upon success in finding and developing oil and natural gas reserves. Our ownership interest in the production from these properties is measured in BOE per day, a term that encompasses both oil and natural gas production. Revenues were $20,700 and $30,833 for the three months ended September 30, 2009 and 2008, and $­­62,100 and $69,088 for the nine months ended September 30, 2009 and 2008, respectively. Revenues for the nine months ended September 30, 2008 had one month of oil revenues from property sold January 31, 2008. All other revenues are from the Pinedale natural gas operations. On July 16, 2009,Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench Of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and  Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their royalty interest in such  production. We have accrued production revenues based on historical production data but have fully reserved accounts receivable from NEO pending the outcome of the litigation. Management believes that NEOs failure to remit JMGs share of the production revenue is ungrounded, that JMG will prevail in the litigation and that no further impairment of the Pinedale natural gas property is warranted. We may use derivative financial instruments when we deem them appropriate to hedge exposure to changes in the price of crude oil, fluctuations in interest rates and foreign currency exchange rates. JMG currently does not have any financial derivative contracts or fixed price contracts in place. General and administrative expense.General and administrative expense relates to compensation and overhead for executive officers and fees for general operational and administrative services. We have contracted out all field personnel and equipment necessary for development activities, and for related administrative functions. General and administrative expense was $99,324 and $54,105 for the three months ended September 30, 2009 and 2008, and $365,883 and $264,752 for the nine months ended September 30, 2009 and 2008, respectively. Expenses consist principally of salaries, consulting fees and office costs. The increase in general and administrative expense from the corresponding periods in the previous year was principally due to increased audit and legal fees. Production expense.Production costs include operating costs associated with field activities and geophysical and geological expense. Under the successful-efforts method, costs such as geological and geophysical, exploratory dry holes and delay rentals are expensed as incurred. Production expenses were $16,105 and $22,789 for the three months ended September 30, 2009 and 2008, and $42,201 and $75,081 for the nine months ended September 30, 2009 and 2008, respectively. The decrease in production expense for the three and nine months ended September 30, 2009 from the corresponding periods in the previous year was principally due to the sale of oil and gas assets in North Dakota on January 31, 2008. Depletion, depreciation, amortization and impairment expense.Depletion, depreciation, amortization and impairment expense were $2,165 and $275,195 for the three months ended September 30, 2009 and 2008, and $174,794 and $292,228 for the nine months ended September 30, 2009 and 2008, respectively. An impairment reserve against developed property of $208,983 was accrued during the quarter ended September 30, 200 and an impairment reserve against undeveloped property of $169,000 was recorded during the quarter ended March 31, 2009.  17   Accretion expense.As of September 30, 2009, the estimated present value of the Companys asset retirement obligation was $28,414 based on estimated future cash requirements of $20,443, determined using a credit adjusted risk free interest rate of 8.5% over the economic life of the properties, an inflation rate of 2.0%, and an estimated life until repayment of 5-10 years. Accretion expense of $281 and $843 was recorded for the three and nine month periods ending September 30, 2009. Accretion expense of $281 and $843 was recorded for the three and nine month periods ending September 30, 2008. Loss on sale of oil and gas properties.On January 31, 2008, JMG sold its interest in the Fellows project for $364,987, resulting in a loss of $42,297. Interest income. Interest income was $63 and $801 for the three month period ending September 30, 2009 and 2008, and $773 and $50,724 for the nine month period ending September 30, 2009 and 2008, respectively. Interest income decreased due to no longer accruing interest or fees on the loan receivable.  Interest expense. Interest expense was $0 and $260 for the three month period ending September 30, 2009 and 2008, and was $260 and $714 for the nine month period ending September 30, 2009 and 2008, respectively. The decrease is due to changes in the amount of insurance premiums being financed. Deemed dividend on warrant extension.On January 4, 2008 the Company extended the expiration dates of its outstanding warrants to January 15, 2009. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2008. A deemed dividend of $280,852 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. On December 17, 2008 the Company extended the expiration dates of its outstanding warrants to January 15, 2010. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2009. A deemed dividend of $111,361 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. Income taxes.The Company files income tax returns in the U.S. federal jurisdiction and various states. There are currently no income tax examinations underway for these jurisdictions, although the tax years ended December 31, 2008, 2007 and 2006 are all still open for examination. The Company provides for income taxes in accordance with ASC 740 Income Taxes  (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities.  Where it is more likely than not that a tax benefit will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its realizable value. A valuation allowance has been provided against the Companys net deferred tax assets as the Company believes that it is more likely than not that the net deferred tax assets will not be realized.  As a result of this valuation allowance, the effective tax rate for the nine months ended September 30, 2009 and for the year ended December 31, 2008 is zero percent.  Liquidity and capital resources At September 30, 2009, we had $27,938 in cash and cash equivalents. Since our incorporation, we have financed our operating cash flow needs through private and public offerings of equity securities. JMG has the following warrants outstanding as of September 30, 2009:   18


|                                                   |                    |                |                  |                 | 
|-------------------------------------------------- | ------------------ | -------------- | ---------------- | --------------- | 
|                                                   | Number
of warrants | Exercise price | Maximum
proceeds | Expiration Date
|Warrants issued in private placement               | 369,249            | $6.00          | 2,215,494        | 01/15/2010     
|Warrants issued upon conversion of preferred stock | 1,739,500          | $4.25          | 7,392,875        | 01/15/2010     
|Warrants issued our initial public offering        | 1,763,802          | $5.00          | 8,819,010        | 01/15/2010     
|Warrants issued to our underwriters                | 190,000            | $7.00          | 1,330,000        | 08/03/2010     
|Total                                              | 4,062,551          | various        | 19,757,379       | various        

On January 8, 2010 the Company extended the expiration dates of its outstanding warrants to January 15, 2011. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2010. A deemed dividend of $638,804 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. As of September 30, 2009, we had an accumulated deficit of $26,420,516 and have insufficient working capital to fund development and exploratory drilling opportunities. Following the collection of our loan receivable in May 2010, JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2011. Raising additional capital is not considered a viable strategy JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party.  Cash flow used in operations.Cash utilized by operating activities was $(257,227) and $(201,713) for the nine months ended September 30, 2009 and 2008, respectively. The use of cash for the nine months ended September 30, 2009 was principally attributable to a net loss of $364,619 adjusted by a decrease in accounts payable and accrued liabilities of $121,982 and a decrease in amounts due to JED Oil of $101,179. These cash requirements were offset by a decrease in accounts receivable of $110,948, a decrease in other assets of $30,000, a decrease in prepaid expenses of $14,552 and loss on disposition of property and equipment of $6,316 which did not collectively utilize cash. The use of cash for the nine months ended September 30, 2008 was principally attributable to net loss of $476,577 which was increased by the loss on sale of property and equipment of $42,297 and the cash requirements related to the decrease in accounts payable of $138,336 and the decrease in amounts due to JED Oil of $7,005. These cash requirements were offset by a decrease in accounts receivable of $85,390 which provided cash and depletion, depreciation expense of $293,070, decrease in other assets of $1,541 and a decrease in amounts due to JED Oil of $7,005 which did not utilize cash. Cash flow used in investing activities.Cash provided by investing activities was $0 and $364,986 for the nine months ended September 30, 2009 and 2008, respectively. Cash provided by investing activities for the nine months ended September 30, 2008 was principally attributable to proceeds of $364,987 from the sale of oil and gas property and increase in other assets of $1,541. Cash flow used in financing activities.No cash was provided or utilized by financing activities for the nine months ended September 30, 2009 and 2008. Changes in critical accounting estimates Stock-based compensation Effective January 1, 2006, the Company adopted the fair value recognition provisions of ASC 718 CompensationStock Compensation, using the modified-prospective-transition method.  Under that transition method, compensation cost recognized effective January 1, 2007 includes:  (a) compensation cost for share-based options granted to employees and directors prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-  19   date fair value estimated in accordance with the provisions of  ASC 718. Results for prior periods have not been restated. Contingencies In the future, we may be subject to adverse proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We will be required to assess the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to developments in each matter or changes in approach such as a change in settlement strategy in dealing with these potential matters. Contractual obligations and commitments None. Related Party Transactions JED Oil, Inc. On August 1, 2004 the Company entered into a technical services agreement with JED Oil Inc. (JED). Under the Agreement, JED provides all required personnel, office space and equipment, at standard industry rates for similar services. JED is considered an affiliate, because of its ownership interest in us and because two of our directors are directors of JED. This agreement was terminated on January 1, 2006; it was replaced by a joint services agreement, which operates to provide the above services on an as needed basis. In 2008 JED ceased providing any services under this agreement and any expenditures or amounts payable to JED were due to their role as the operator of the Pinedale natural gas wells through December 31, 2008.  JED paid on behalf of the Company a total of $0 and $17,586 for the three month period ended September 30, 2009 and 2008, respectively, for capital related expenditures and production expenses. JED paid on behalf of the Company a total of $0 and $77,492, respectively, for the nine month period ended September 30, 2009 and 2008 for capital related expenditures and production expenses.  During the three and nine month periods ended September 30, 2009 and 2008, the Company entered into the following transactions with JED:  · JED paid on behalf of the Company a total of $0 and $17,586 for the three month period ended September 30, 2009 and 2008 for operating costs and capital related expenditures. JED incurred no expenses from drilling and other costs related to JMG properties for the three month period ended September 30, 2009 and 2008.  · JED paid on behalf of the Company a total of $0 and $60,630 for the nine month period ended September 30, 2009 and 2008 for operating costs and capital related expenditures JED incurred no expenses from drilling and other costs related to JMG properties for the nine month period ended September 30, 2009 and 2008.  In connection with these transactions the total amount payable to JED was $36,211 at September 30, 2009. Skeehan & Company.Joseph Skeehan, a director of JMG is also the owner of Skeehan & Company, a professional service corporation that engages in accounting, finance and consulting services to small to mid-sized companies and organizations primarily in Southern California since 1980. In conjunction with the maintenance of accounting records and the preparation of financial statements and regulatory filings, Skeehan & Company was paid a total of $14,320 and $40,837 during the three and nine month periods ended September 30, 2009, respectively. No balance is due Skeehan & Company as of September 30, 2009.  Outlook and Proposed Transactions As of September 30, 2009, we had an accumulated deficit of $26,420,516 and have insufficient working capital to fund development and exploratory drilling opportunities. Following the collection of our loan receivable in May 2010, JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2011. Raising additional capital is not considered a viable strategy JMG is  20   presently exploring a range of strategic alternatives, including the possible sale or merger with another party. Subsequent Events  On January 8, 2010 JMG extended the expiration dates of all warrants, except those issued to our underwriters, to January 15, 2011. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2010. A deemed dividend of $638,804 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model. On January 26, 2010 JMG cancelled 473,333 common stock options outstanding at an average exercise price of $3.00 per share and issued 455,000 new options at an exercise price of $0.22 per share and which expire in five years. With respect to the issuance of the new stock options, JMG incurred stock based compensation expense of $73,673 for the quarter. On November 11, 2009 JMG entered into a Settlement Agreement between Newco and Iris. The Settlement Agreement provided that all rights, claims and demands of all parties are settled in full upon JMGs surrender of 1,427,665 shares of Iris held as collateral for the loan and JMGs receipt of $1,900,000. Payment to JMG and the transfer of the shares was received in May 2010. JMG reduced its valuation allowance by $750,000 in the 4th quarter 2009. Item 3. Quantitative and Qualitative Disclosures About Market Risk  We are exposed to all of the normal market risks inherent within the oil and natural gas industry, including commodity price risk, foreign-currency rate risk, interest rate risk and credit risk. We plan to manage our operations in a manner intended to minimize our exposure to such market risks.  Credit Risk.Credit risk is the risk of loss resulting from non-performance of contractual obligations by a customer or joint venture partner. Our accounts receivable are from the operator of our Pinedale natural gas interest and is subject to normal industry credit risk. Our loan receivable is due to an advance related to a now terminated merger agreement. We have foreclosed on the loan and are in the process of having the collateral for the loan, the securities of Iris Computers Ltd., transferred to the name of JMG. We retained a financial consultant with international expertise to evaluate the valuation of the securities held as collateral for our loan receivable and recorded a recorded a valuation allowance of $1,850,000 as of December 31, 2007. The transfer of the collateral to JMG is currently disputed by Iris and any settlement may impair JMGs security position further. JMG may receive an illiquid minority stock position in a privately held Indian company which could further deteriorate over time due to the state of the Indian economy and the financial position and results of operations of Iris. In May 2010 JMG received $1.9 million in payment in full of the loan pursuant to a November 2009 settlement agreement and reduced its valuation allowance by $750,000 in the 4th quarter 2009.  Market Risk.We are exposed to market risk from fluctuations in the market price of natural gas. Natural gas is a commodity and its price is subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the market for natural gas has been volatile. This market will likely continue to be volatile in the future. The prices we may receive for any future production, and the levels of this production, depend on numerous factors beyond our control.  Interest Rate Risk.Interest rate risk will exist principally with respect to any future indebtedness that bears interest at floating rates. At September 30, 2009, we had no long-term indebtedness and do not contemplate utilizing indebtedness as a means of financing operations.   21   Item 4T. Controls and Procedures Evaluation of Disclosure Controls and Procedures We conducted an evaluation under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures.  The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms.  Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.  Based on this evaluation, our Chief Executive and Financial Officer concluded as of September 30, 2009 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses discussed immediately below. In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements were prepared in accordance with generally accepted accounting principles.  Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented. Material Weaknesses and Related Remediation Initiatives Set forth below is a summary of the various significant deficiencies which caused management to conclude that we had the material weaknesses identified above.  Through the efforts of management, external consultants and our Audit Committee, we have developed a specific action plan to remediate the material weaknesses.  We expect that all control deficiencies and material weaknesses will be remediated by December 31, 2009. We did not effectively implement comprehensive entity-level internal controls, as discussed below:  · Financial Close Process.  JMG lacks personnel with sufficient competence in US generally accepted accounting principles and SEC reporting requirements to ensure proper and timely evaluation of the Companys activities and transactions.  · Financial Close Process.  JMG only prepares financial statements on a quarterly basis which increases the potential that any unusual activities or transactions will not be detected on a timely basis.  · Cash Disbursement Process.  Our accounting personnel performed all bookkeeping activities including cash disbursements, cash receipts, and monthly bank reconciliation. The lack of segregation of duties in this area increased the potential that any fraud would not be detected on a timely basis.  · Cash Disbursement Process.   Payments to related parties were not subject to review and approval by independent parties which increased the potential that any improper distributions would not be detected on a timely basis.  · Reporting Deficiencies.  We did not perform timely and sufficient internal or external reporting of our progress and evaluation of prior year material weaknesses or the current fiscal year internal control deficiencies.   22   Remediation of Internal Control Deficiencies and Expenditures The above material weaknesses did not result in adjustments to our consolidated financial statements for the nine months ended September 30, 2009. It is reasonably possible that, if not remediated, one or more of the material weaknesses described above could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period. We have developed specific action plans for each of the above material weaknesses. In addition, our audit committee has authorized the hiring of additional consultants, as necessary, to ensure that we have the depth and experience to remediate the above listed material weaknesses.  We estimate that the all of the above listed material weaknesses can be remediated without a significant increase in operating costs. Through these steps, we believe that we are addressing the deficiencies that affected our internal control over financial reporting as of September 30, 2009, however, the changes will not be implemented until December 31, 2009. We intend to continue to evaluate and strengthen our internal control over financial reporting systems. These efforts require significant time and resources.  If we are unable to establish adequate internal control over financial reporting systems, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our SEC reporting obligations. Changes in Internal Control Over Financial Reporting There was no change in JMGs internal control over financial reporting during the nine months ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect, JMGs internal control over financial reporting.     23   Part II. Other Information  Item 1. Legal Proceedings  There are no material outstanding or threatened legal claims by or against us.  Item 1A. Risk Factors There have been no material changes to the information included in response to Item 1A. Risk Factors in our 2008 Annual Report on Form 10-K.   Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities None   Item 3. Defaults Upon Senior Securities None   Item 4. Submission of Matters to a Vote of Security Holders None   Item 5. Other Information None   Item 6. Exhibits (a) Exhibitsrequired by Item 601 of Regulation S-K are as follows:  Exhibit 31.1  Certification of Chief Executive and Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended  Exhibit 32.1  Certification of Chief Executive and Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    24   SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  JMG Exploration, IncDate: July 23, 2010/s/ Justin YorkeJustin YorkeChief Executive Officer, Chief Financial Officer, and President    25