UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-KSB**





xAnnual
      Report Pursuant
      to Section 13 or 15(d) of The Securities Exchange Act of 1934




For
      the
      Fiscal Year Ended December 31, 2007




oTransition
      Report
      Pursuant to Section 13or 15(d) of The Securities Exchange Act of
      1934





*Commission
      File Number:* ***0-52718***




**OSAGE
      EXPLORATION & DEVELOPMENT, INC.**


*(Name
      of small business issuer in its charter)*




**Delaware**
            **26-0421736***(State
                of other jurisdiction of incorporation or
                organization)*
            *(I.R.S.
                Employer Identification No.)*





**2445
      Fifth Avenue, Suite 310, San Diego, California 92101**


*(Address
      of principal executive offices) (Zip Code)*





Issuer's
      telephone no.: **(619)
      677-3956**





Securities
      registered pursuant to Section 12(b) of the Exchange Act:
  None





Securities
      registered pursuant to Section 12(g) of the Exchange Act:
  Common





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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 x No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
 Regulation  S-B  contained  in  this  form,
 and no  disclosure  will be contained,  to the best of the
 Registrant's  knowledge,  in definitive proxy or information
      statements  incorporated  by  reference  in Part  III
      of this  Form 10-KSB or any amendment to this Form
      10-KSB.   x





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





State
      the issuer's revenues for its most recent fiscal year. $ 288,255





State
      the aggregate market value of the voting stock held by non-affiliates computed
      by reference  to the price at which the stock was sold,  or the
      average bid and ask  prices  of such  stock  as of a
 specified  date  within  60  days. $19,447,330(Based
      on price per share of $0.75 on March 17, 2008)





** State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date.




**Class**
            **Outstanding
                as of March 17, 2008**Common
                Stock, Par Value $0.0001 per share
            35,959,775





**DOCUMENTS
      INCORPORATED BY REFERENCE**




A
      description of "Documents Incorporated by Reference" is contained in Part III,
      Item 13.




Transitional
      Small Business Disclosure Format.   Yes o  No x









**TABLE
      OF CONTENTS**


PagePART
                  IItem
                  1.
              Description
                  of Business
              
              1Item
                  2.
              Description
                  of Property
              
              4Item
                  3.
              Legal
                  Proceedings
              
              6Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              
              6PART
                  IIItem
                  5.
              Market
                  for Common Equity and Related Stockholder Matters and Small Business
                  Issuer Purchases of Equity Securities
              
              6Item
                  6.
              Management’s
                  Discussion and Analysis or Plan of Operation
              
              7Item
                  7.
              Financial
                  Statements
              
              13Item
                  8.
              Changes
                  In and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              
              13Item
                  8A.
              Controls
                  and Procedures
              
              13Item
                  8B.
              Other
                  Information
              
              14PART
                  IIIItem
                  9.
              Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance with Section 16(a) of the Exchange Act
              
              14Item
                  10.
              Executive
                  Compensation
              
              17Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Management
              
              18Item
                  12.
              Certain
                  Relationships and Related Transactions
              
              20Item
                  13.
              Exhibits
              
              21Item
                  14.
              Principal
                  Accountant Fees and Services
              
              22Signatures.
              
              
              23Financial
                Statements
              
              F-1









**Cautionary
      Statement**




This
      report on Form 10-KSB and the documents or information incorporated by reference
      herein contain forward-looking statements within the meaning of the federal
      securities laws. These forward-looking statements include, among others, the
      following:


·
              our
                  growth strategies;
 ·
              anticipated
                  trends in our business;
 ·
              our
                  ability to make or integrate
                  acquisitions;
 ·
              our
                  liquidity and ability to finance our exploration, acquisition and
                  development strategies;
 ·
              market
                  conditions in the oil and gas industry;
 ·
              the
                  timing, cost and procedure for proposed
                  acquisitions;
 ·
              the
                  impact of government regulation;
 ·
              estimates
                  regarding future net revenues from oil and natural gas reserves
                  and the
                  present value thereof;
 ·
              planned
                  capital expenditures (including the amount and nature
                  thereof);
 ·
              increases
                  in oil and gas production;
 ·
              the
                  number of wells we anticipate drilling in the
                  future;
 ·
              estimates,
                  plans and projections relating to acquired
                  properties;
 ·
              the
                  number of potential drilling locations;
                  and  ·
              our financial position, business strategy and
                other plans
                and objectives for future
                operations.





We
      identify forward-looking statements by use of terms such as “may,” “will,”
“expect,”“anticipate,” “estimate,” “hope,” “plan,” “believe,” “predict,”
“envision,” “intend,” “will,” “continue,” “potential,” “should,” “confident,”
“could” and similar words and expressions, although some forward-looking
      statements may be expressed differently. You should be aware that our actual
      results could differ materially from those contained in the forward-looking
      statements. You should consider carefully the statements under the “Risk
      Factors” section of this report and other sections of this report which describe
      factors that could cause our actual results to differ from those set forth
      in
      the forward-looking statements, and the following factors:


·
              the
                  possibility that our acquisitions may involve unexpected
                  costs;
 ·
              the
                  volatility in commodity prices for oil and
                  gas;
 ·
              the
                  accuracy of internally estimated proved
                  reserves;
 ·
              the
                  presence or recoverability of estimated oil and gas
                  reserves;
 ·
              the
                  ability to replace oil and gas reserves;
 ·
              the
                  availability and costs of drilling rigs and other oilfield
                  services;
 ·
              environmental
                  risks;
 ·
              exploration
                  and development risks;
 ·
              competition;
 ·
              the
                  inability to realize expected value from
                  acquisitions;
 ·
              the
                  ability of our management team to execute its plans to meet its
                  goals;
 ·
              other
                  economic, competitive, governmental, legislative, regulatory, geopolitical
                  and technological factors that may negatively impact our businesses,
                  operations and pricing.





Forward-looking
      statements speak only as of the date of this report or the date of any document
      incorporated by reference in this report. Except to the extent required by
      applicable law or regulation, we do not undertake any obligation to update
      forward-looking statements to reflect events or circumstances after the date
      of
      this report or to reflect the occurrence of unanticipated events.









***Item
      1*** ***.*** ***Description
      of Business***





**Business
      Development** ****




We
      were
      organized September 9, 2004 as Osage Energy Company, LLC, an Oklahoma limited
      liability company. On April 24, 2006 we merged with a non-reporting Nevada
      corporation trading on the pink sheets Kachina Gold Corporation, which was
      the
      entity that survived the merger. The merger was consummated through the issuance
      of 10,000,000 shares of our Common Stock. The financial records of the company
      prior to the merger are those of Osage Energy Company, LLC.





The
      Nevada corporation had been incorporated under the laws of Canada on February
      24, 2003 as First Mediterranean Gold Resources, Inc. The domicile of the company
      was changed to the State of Nevada on May 11, 2004. On May 24, 2004, the name
      of
      the company was changed to Advantage Opportunity Corp.





On
      March
      4, 2005, the Company changed its name to Kachina Gold Corporation. On April
      24,
      2006 Kachina Gold Corporation merged with Osage Energy Company, LLC, and on
      May
      15, 2006 changed its name to Osage Energy Corporation. On July 2, 2007, the
      domicile of the Company was changed to the State of Delaware and in connection
      therewith the name of the Company was changed to Osage Exploration and
      Development, Inc. On February 27, 2008, our stock began trading on the NASDAQ
      OTC Bulletin Board market under the ticker “OEDV.OB”





**Business
      of Issuer**




We
      are an
      oil and natural gas exploration and production company with proved reserves
      and
      existing production. We are headquartered in San Diego, California with a field
      office in Oklahoma City, Oklahoma. In 2005 we purchased 100 percent of the
      working interest in certain producing oil and natural gas leases located in
      Osage County, Oklahoma, referred to herein as the Osage Property, which property
      consists of twenty three wells, ten of which are producing wells, on 480 acres
      from Conquest Exploration Company, LLC and Esso Oil Company of Oklahoma (“Esso”)
      for a total consideration of $103,177. Our agreement with Esso, which owned
      6.25% of Osage, prior to our purchase, was an oral agreement that was not
      reduced to writing. As such, Esso could dispute the sale term and third parties
      may challenge our ownership which would challenge our ability to enforce our
      rights to the portion purchased from Esso. If Esso challenges the sale, we
      may
      be required to retroactively provide Esso with 6.25% of our proceeds received
      from the sale of oil since 2005 (approximately $30,667 through December 31,
      2007) and we may be required to provide Esso with 6.25% of any future proceeds
      received from sale of oil in this property. In addition, third parties,
      including regulatory or governmental bodies may challenge our ownership and/or
      rights in our Osage property. Management does not believe that there is a
      material risk that Esso would dispute the sale term. We operate this property
      and have begun a secondary recovery program to increase current production.
      The
      interest in the Osage property is held by Osage Energy Company, LLC, our wholly
      owned subsidiary.





In
      January 2006, we placed a deposit totaling $82,000 on 100 percent of the working
      interest of a natural gas property consisting of 640 acres located in Hansford
      County, Texas owned by Pearl Resources Corp. The original agreement was signed
      by Mr. Volk, our previous President and CEO, without clear indication that
      it
      was entered into on our behalf of the Company. We have, however, received a
      letter from Mr. Volk acknowledging that the original agreement was for the
      benefit of the Company and that he has never had title to the property or any
      ownership or rights with respect to the property. Management does not believe
      there is a material risk as to the ownership of the property. The agreement
      was
      amended in March 2007 stipulating that unless the Company acquires a contiguous
      lease by June 1, 2007 for $48,000, a second contiguous lease by August 1, 2007
      for $80,000 and place $445,180 in escrow for drilling and completing the first
      well with actual commencement of drilling prior to September 15, 2007, the
      seller has the right to refund 90% of all payments received and void the
      agreement. In September 2007, the seller provided us with an extension until
      June 30, 2008 to fulfill all of our obligations under the agreement. Until
      we
      raise additional capital, we do not anticipate further investments in this
      project and as such, the agreement may be voided by the seller at any time
      after
      June 30, 2008.




1




In
      June
      2007, we entered into an agreement (the “Agreement”) with Gold Oil, Plc (“Gold”)
      and Empesa Petrolera de Servicios y Asesorias, S.A. (“Empesa), whereby we
      farmed-in to the approximately 165 square mile Rosablanca concession in Colombia
      awarded by the Agencia Nacional de Hidrocarburos (“ANH”) to Gold in June, 2007.
      We based our decision to pursue the Rosablanca project based on the seismic
      data
      generated by the ANH that revealed multiple target opportunities. Under the
      Agreement, we are considered the operators of the concession and will pay all
      costs associated with drilling and testing of the first well on the Rosablanca
      project. Revenues generated from the first well will be allocated 50% to us,
      40%
      to Gold and 10% to Empesa. On each additional well, we will contribute 50%
      of
      the costs, Gold will contribute 40% of the costs and Empesa will contribute
      10%
      of the costs. Revenues will be allocated according to the above percentages.
      If
      any party doesn’t contribute its share of the costs, its revenue interest will
      automatically be transferred to the party that provides the capital. In August
      2007, we (i) paid $1,200,000 to Gold representing the funds that Gold had
      previously issued to a trust established by the ANH to use for drilling the
      first well for the Rosablanaca concession and (ii) issued a letter of credit
      in
      the amount of $144,000 for the benefit of Gold’s bank in Colombia representing
      the guarantee required by the ANH. We anticipate that the total cost of drilling
      the first well to be approximately $2,500,000 to $3,000,000, of which $1,200,000
      has already been deposited in trust with the ANH to be used for the first well.
      If we do not complete drilling of the first well by July 3, 2008, and we do
      not
      receive extensions from the ANH, we may lose our entire interest in the
      concession and the $144,000 letter of credit we previously issued. However,
      we
      would be entitled to receive the balance of the $1,200,000 ($1,029,601 as of
      December 31, 2007) deposit that we have in trust with the ANH, if any. After
      drilling the first well, we are required to provide the ANH with a budget and
      program for drilling successive wells. The concession with the ANH shall remain
      in effect as long as we meet our timely obligations to drill each well that
      we
      present to the ANH. We will need to raise additional capital to complete the
      first well.




In
      November 2007, we entered into an agreement to purchase out of bankruptcy a
      working interest in an oil and gas leasehold and producing wellbore in Louisiana
      for a purchase price of $1,400,000. Upon the signing of the agreement, we placed
      a deposit totaling 10% of the total purchase price, or $140,000. The bankruptcy
      court has decided that it is not pursuing the sale at this time and we received
      our entire $140,000 deposit back in March 2008. We have no further obligations
      for this property.





In
      February 2008, we entered into an LOI and issued a $100,000 deposit to acquire
      a
      minority position in certain producing oil and gas assets in Colombia. It’s
      anticipated that the purchase price will consist of cash and equity securities
      consisting of shares of common stock and warrants. We anticipate closing this
      transaction in the second quarter of 2008.




We
      intend
      to focus most of our management and capital resources towards our Colombian
      opportunities including Rosablanca.




We
      anticipate that we will need to raise a minimum of $6,000,000 to provide the
      cash requirements for the next twelve months to commence drilling on our
      Colombian projects as well as complete the acquisition of the minority position
      in the producing property in Colombia. If we are unable to raise the entire
      sum,
      we may lose our Rosablanca concession and our ability to participate in our
      other Colombian projects. At present, our Osage County, Oklahoma production
      is
      only sufficient to cover well operating expenses in Osage and a small portion
      of
      our overhead.





**Distribution
      Methods**




We
      currently only have production operations in Oklahoma. We distribute all of
      the
      oil that we produce in Oklahoma through one customer, Sunoco, Inc. We do not
      have a written agreement with Sunoco. Sunoco picks up oil from our tanks and
      pays us according to market prices at the time the oil is picked up at our
      tanks. There is significant demand for oil and there are several companies
      in
      our area that purchase oil from small oil producers.




2





We
      presently have no production of natural gas. Should we acquire production of
      natural gas, we will seek to enter into distribution agreements that would
      provide for us to tap into the distribution line of a gas distribution company,
      and we would be paid for our gas at the market price at the time of delivery
      less any transportation charge from the gas transmission company. These charges
      can range widely from 5 percent to 30 percent or more of the market value of
      the
      gas depending on the availability of competition and other factors.





**Competitive
      Business Conditions**




Because
      of historic high prices for oil and gas, there are many companies competing
      for
      the leasehold rights to good oil and gas prospects. And, because so many
      companies are exploring for oil and gas, there is a shortage of equipment
      available to do drilling and workover (remedial work on a well to enhance or
      restore production) projects. As many of our competitors are much larger and
      better financed, we are at a disadvantage when we compete for leaseholds and
      equipment, both domestically and in Colombia.





**Source
      and Availability of Raw Materials**




We
      have
      no significant raw materials. However, we make use of numerous oil field service
      companies in the drilling or workover of wells. We currently only produce in
      Oklahoma, where there are numerous oil field service companies.





**Dependence
      on One or a Few Customers**




There
      is
      a ready market for the sale of crude oil or natural gas. We currently sell
      all
      our production to one customer, Sunoco, Inc. However, we believe we could sell
      our production to many different local purchasers, most of whom pay similar
      prices that vary with the international spot market prices.





**Patents,
      Trademarks, Royalties, Etc.**




We
      have
      no patents, trademarks, licenses, concessions, or labor contracts. Currently,
      we
      only pay royalties on our Osage property. We pay monthly royalties of 18.75
      percent of oil and gas sales, net of taxes, to the Osage Nation. If our
      production increases to more than 100 barrels of oil per producing well per
      day,
      the royalty will increase to 20.0%. The leases do not expire, and royalties
      are
      owed as long as there is production on the property.





**Government
      Approvals**




We
      are
      required to get approval from the Oklahoma Corporation Commission, the Texas
      Railroad Commission and the ANH before any work can begin on any well in
      Oklahoma, Texas and Colombia, respectively, and before production can be sold.
      We have all of the required permits on the properties currently in operation.





**Existing
      or Probable Governmental Regulations**




We
      currently are active in the state of Oklahoma and in the country of Colombia.
      The development and operation of oil and gas properties is highly regulated
      by
      states or foreign governments. In some areas of exploration and production,
      the
      United States government or a foreign government regulates the
      industry.





Regulations,
      whether state or federal or international, control numerous aspects of drilling
      and operating oil and gas wells, including the care of the environment, the
      safety of the workers and the public, and the relations with the owners and
      occupiers of the surface lands within or near the leasehold acreage. The effect
      of these regulations, whether state or federal or international, is invariably
      to increase the cost of operations.





The
      costs
      of complying with the state regulations include a permit for drilling a well
      before beginning a project. Other compliance matters have to do with keeping
      the
      property free of oil spills and the plugging of wells when they no longer
      produce. If oil spills are not cleaned up on a timely basis fines can range
      from
      a few dollars to as high as several thousand dollars. We utilize consultants
      and
      independent contractors to visit and monitor our properties in Oklahoma on
      a
      regular basis to prevent mishaps and ensure prompt attention and, if necessary,
      appropriate correction and redmedial activity. The other significant cost of
      compliance with state regulations is the plugging of wells after their useful
      life. In most instances, there is pumping equipment and pipe which can be
      salvaged to offset most if not all of that cost. Plugging a well consists of
      pumping cement into the well bore sufficient to prevent any oil and gas zone
      from ever leaking and contaminating the fresh water supply.




3





**Costs
      and Effects of Compliance with Environmental Laws**




There
      is
      a cost in complying with environmental laws that is associated with each well
      that is drilled or operated, which cost is added to the cost of the operation.
      Each well will have an additional cost associated with plugging and abandoning
      the well when it is no longer commercially viable. The estimated costs of
      dismantlement and abandonment of depleted wells on our Oklahoma property are
      estimated to be approximately $92,000. As of December 31, 2007, we have not
      incurred any dismantlement and abandonment costs. However, we believe that
      the
      salvage value of the equipment on the wells will be sufficient in amount to
      cover any such costs.





**Number
      of Employees**




We
      currently have four full-time employees, including three executives: Kim
      Bradford, our Chief Executive Officer, and President, Greg Franklin, our Chief
      Geologist and Ran Furman, our Chief Financial Officer. Laura Bradford, the
      daughter of our Chief Executive and President serves as our office manager.





***Item
      2.*** ***Description
      of Property***





We
      lease
      approximately 1,386 square feet of modern office space in San Diego, CA as
      corporate headquarters pursuant to a 36 month lease from February 2008. We
      pay
      $3,682 per month for the first 12 months, increasing 3.5% in years 2. In
      addition, we are responsible for any increases in building operating expenses
      beyond 2008 base year operating expenses.





We
      lease
      approximately 1,000 square feet of modern office space in Oklahoma City, OK
      consisting of a large conference room, three offices, a drafting room and a
      storage room. The lease is based on a verbal agreement with a third party on
      a
      month-to-month basis for $575.





The
      principal assets of the Company consist of proved and unproved oil and gas
      properties and oil and gas production related equipment. Our oil and gas
      properties are located in the state of Oklahoma and in the country of Colombia.





Developed
      oil and gas properties are those on which sufficient wells have been drilled
      to
      economically recover the estimated reserves calculated for the property.
      Undeveloped properties do not presently have sufficient wells to recover the
      estimated reserves.





The
      Company's estimated future net recoverable oil and gas reserves from proved
      reserves, both developed and undeveloped properties, were assembled by Reddy
      Petroleum Company, independent petroleum engineers, and are as
      follows:





Crude
                Oil
              (BBLS)
            
            Natural
                Gas
              (MCF)December
                31, 2007
            
            
            157,066
            
            
            200,922December
                31, 2006
            
            
            159,717
            
            
            200,439





Using
      year-end oil and gas prices and lease operating expenses, the estimated value
      of
      future net revenues to be derived from the Company’s proved developed oil and
      gas reserves, discounted at 10%, were $7,788,051 at December 31, 2007.




The
        Company’s net oil and gas production after royalty and other working interests
        for the past two years ending December 31, were as follows.
 
 Crude
                  Oil
                (BBLS)
              
              Natural
                  Gas
                (MCF)2007
              
              
              5,649
              
              
              02006
              
              
              2,097
              
              
              0


4




The
      Company’s average sales prices per barrel of crude oil and production costs per
      equivalent barrel for the past two years ending December 31 were as
      follows:





Average
              Sales
                Price
            
            Average
              Production
                Costs2007
            
            $
            67.66
            
            $
            16.982006
            
            $
            63.87
            
            $
            21.64





We
      own
      interests in oil and gas leases in Oklahoma on some of which leases there are
      producing oil and gas wells in which we own part or none of the working
      interest. Our aggregate interests are set forth below.





Productive
                Wells
            
            Developed
                AcreageCounty
            
            Gross
                Wells
            
            Net
                Wells
            
            Gross
                Acreage
            
            Net
                AcreageOsage
                Co. Oklahoma
            
            
            10
            
            
            10
            
            
            480
            
            
            480




Additional
      information on these leases is as follows:





Lease
            
            Date
            
            
            
            CountyName
            
            Entered
            
            Expiration
            
            Location
            
            Royalty
            
            Gross
                AcresOsage
                Hopper 55
            
            
            11-10-04
            
            
            HBP
                Beyond Primary Term
            
            
            Osage
            
            
            18.75
            %
            
            480




The
      above
      schedule is a summary of the leases we own. The lease is with individuals who
      have no affiliations with the Company. It is located within the state of
      Oklahoma in the county indicated. When we indicate the expiration as HBP, it
      means the well is “held by production”. This means that the lease is in
      existence as long as there is production from wells on the property and the
      mineral owners are receiving royalty checks.





Gross
      wells are the total number of oil and gas wells in which we have a working
      interest. Net wells are the ratio of our working interest to the total wells.
      ( **Example:** If we
      own a well which we have sold off 30% interest to other working interest owners,
      then we have 70% left as a net well. That means we have 1 gross well and .7
      net
      wells.) The same example holds true for gross and net acreage.





Productive
      wells are the wells we have that are producing oil and/or natural gas. A
      non-productive well is a well which has a well bore and has not been shut-in
      (cemented in and capped). This well bore may or may not be some time in the
      future be a candidate for a workover. Dry wells are wells which have been
      drilled and there are no oil and gas shows on the logs. No oil or gas will
      ever
      be produced from a dry well.





Exploratory
      wells are wells which are drilled in a non-proved field. Geological studies
      may
      indicate the existence of oil or gas but there has not been any proof by
      previous drilling in the field. Developmental wells are wells drilled or
      reworked in a field where there are previous discoveries of oil and natural
      gas.
      These wells have a much higher probability of being successful than exploratory
      wells.





Developed
      acreage is acreage in which we have leased the mineral rights for oil & gas
      and have drilled or re-worked wells. Undeveloped acreage is acreage we have
      leased but have not yet drilled wells. It is available for future drilling
      programs.




5





**Drilling
      Activity**




The
      following table sets forth, for each of the last three fiscal years by
      geographic areas in Oklahoma, the number of net productive and dry exploratory wells
      drilled and the number of net productive and dry development wells
      drilled.





Net
                Exploratory
              Wells
                Drilled
            
            Net
                Development
              Wells
                DrilledCounty
            
            Productive
            
            Dry
            
            Productive
            
            DryNONE
            
            
            N/A
            
            
            N/A
            
            
            N/A
            
            
            N/A





**Delivery
      Commitments**




We
      are
      not obligated to provide a fixed and determinable quantity of oil or natural
      gas
      in the near future under existing contracts or agreements. Further, during
      the
      last three years we had no significant delivery commitments.




***Item
      3.*** ***Legal
      Proceedings***





Neither
      our Company nor any of its property is a party to, or the subject of, any
      material pending legal proceedings other than ordinary, routine litigation
      incidental to our business.





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




No
      matters were submitted to a vote of our securities holders during the fiscal
      year ended December 31, 2007.





**PART
      II**





***Item
      5.******Market
      for Common Equity and Related Stockholder
      Matters***




Our
      common traded since April 5, 2005 on the Pink Sheets on an unsolicited basis
      only and effective February 27, 2008, our common stock began trading on the
      OTC
      Bulletin Board. Our stock symbol changed from “OSGE.PK” to “OEDV.PK” on July 17,
      2007 and again to OEDV.OB on February 27, 2008. The high and low closing prices,
      as reported by the Pink Sheets and OTC Bulletin Board, are as follows for 2006,
      2007 and for 1 st quarter
      of 2008 through March 17, 2008. The quotations reflect inter-dealer prices,
      without retail mark-up, mark-down or commission and may not represent actual
      transactions.


High
              
              Low2006:
              
              1stQtr.
              
              
              0.01
              
              
              0.0012nd
                  Qtr.
              
              
              0.01
              
              
              0.0013rd
                  Qtr.
              
              
              3.00
              
              
              1.034th
                  Qtr.
              
              
              3.00
              
              
              1.102007:
              
              1st
                  Qtr.
              
              
              3.25
              
              
              1.002nd
                  Qtr.
              
              
              3.25
              
              
              0.753rdQtr.
              
              
              2.55
              
              
              0.404th
                  Qtr.
              
              
              1.55
              
              
              0.502008:
              
              1stQtr.
              
              
              2.00
              
              
              0.70
                  to March 17




6




**Dividends**




We
      have
      declared no cash dividends on our common stock since inception. There are no
      restrictions that limit our ability to pay dividends on our common stock or
      that
      are likely to do so in the future other than the restrictions set forth in
      Section 170(b) of the Delaware General Corporation Law that provides that the
      company may declare and pay dividends upon the shares of its capital stock
      either (1) out of its surplus, as defined in and computed in accordance with
      Sections 154 and 244 of the Delaware General Corporation Law, or (2) in case
      there shall be no such surplus, out of its net profits for the fiscal year
      in
      which the dividend is declared and/or the preceding fiscal year. We
      have
      not declared, paid cash dividends, or made distributions in the past. We do
      not
 anticipate  that  we  will  pay  cash
 dividends  or  make distributions  in the  foreseeable
 future.  We currently intend to retain and reinvest future earnings
      to finance operations.





**Securities
      Authorized for Issuance Under Equity Compensation Plans**




In
      June
      2007, we implemented the 2007 Osage Exploration and Development, Inc. Equity
      Based Compensation Plan (the “Plan”) which allows the reservation of 5,000,000
      shares under the plan. Under this Plan, securities issued may include options,
      SAR and restricted stock. During the year ended December 31, 2007, awards
      totaling 2,600,000 restricted stock were issued to two of our officers upon
      entering into employment agreements with them in November 2007. These shares
      were issued outside of the Plan.





**Holders**





As
      of March 5, 2008, there were approximately 280 holders of record of our common
      stock, which figure does not take into account those shareholders whose
      certificates are held in the name of broker-dealers or other nominee
      accounts.




**Item
      6.****Management’s
      Discussion and Analysis of Operation.**




The
      following information should be read in conjunction with the consolidated
      financial statements and the notes thereto contained elsewhere in this report.
      The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
      for forward-looking statements. Information in this Item 6, "Management's
      Discussion and Analysis or Plan of Operation," and elsewhere in this 10-KSB
      that
      does not consist of historical facts, are "forward-looking statements."
      Statements accompanied or qualified by, or containing words such as "may,"
      "will," "should," "believes," "expects," "intends," "plans," "projects,"
      "estimates," "predicts," "potential," "outlook," "forecast," "anticipates,"
      "presume," and "assume" constitute forward-looking statements, and as such,
      are
      not a guarantee of future performance. The statements involve factors, risks
      and
      uncertainties including those discussed in the “Risk Factors” section contained
      elsewhere in this report, the impact or occurrence of which can cause actual
      results to differ materially from the expected results described in such
      statements. Risks and uncertainties can include, among others, fluctuations
      in
      general business cycles and changing economic conditions; changing product
      demand and industry capacity; increased competition and pricing pressures;
      advances in technology that can reduce the demand for the Company's products,
      as
      well as other factors, many or all of which may be beyond the Company's control.
      Consequently, investors should not place undue reliance on forward-looking
      statements as predictive of future results. The Company disclaims any obligation
      to update the forward-looking statements in this report.




In
      June
      2007, we entered into an agreement with Gold and Empesa, whereby we farmed-in
      to
      the approximately 165 square mile Rosablanca concession in Colombia awarded
      by
      the ANH to Gold in June, 2007. Under the Agreement, we are the operators of
      the
      concession and will pay all costs associated with drilling and testing of the
      first well on the Rosablanca project. Revenues generated from the first well
      will be allocated 50% to us, 40% to Gold and 10% to Empesa. If we do not
      complete drilling and testing of the first well by July 3, 2008, we will lose
      our entire interest in the concession. On each additional well, we will
      contribute 50% of the costs, Gold will contribute 40% of the costs and Empesa
      will contribute 10% of the costs. Revenues will be allocated according to the
      above percentages. If any party doesn’t contribute its share of the costs, its
      revenue interest will automatically be transferred to the party that provides
      the capital. In August 2007, we (i) paid $1,200,000 to Gold representing the
      funds that Gold had previously issued to a trust established by the ANH to
      use
      for drilling the first well for the Rosablanaca concession and (ii) issued
      a
      letter of credit in the amount of $144,000 for the benefit of Gold’s bank in
      Colombia representing the guarantee required by the ANH. We anticipate that
      the
      total cost of drilling the first well to be approximately $2,500,000 to
      $3,000,000, of which $1,200,000 has already been deposited in trust with the
      ANH
      to be used for the first well. In accordance with the ANH, we must spend at
      least $1,200,000 on expenses relating to the first well, the amount already
      deposited in trust, by July 3, 2008. If we do not spend that amount and are
      unable to get any extensions from the ANH, we may lose the $144,000 letter
      of
      credit we previously issued.




7




In
      November 2007, we entered into an agreement to purchase out of bankruptcy a
      working interest in an oil & gas leasehold and producing wellbore in
      Louisiana for a purchase price of $1,400,000. Upon the signing of the agreement,
      we placed a deposit totaling 10% of the total purchase price, or $140,000.
      The
      bankruptcy court has decided that it is not pursuing the sale at this moment
      and
      we received our entire deposit of $140,000 back in March 2008. We have no
      further obligations for this property.




In
      February 2008, we entered into a letter of intent and issued a $100,000 deposit
      to acquire a minority position in certain producing oil and gas assets in
      Colombia. It’s anticipated that the purchase price will consist of cash and
      equity securities consisting of shares of common stock and warrants. We
      anticipate closing this transaction in the second quarter of 2008.





We
      anticipate that we will need to raise a minimum of $6,000,000 to provide the
      cash requirements for the next twelve months to commence drilling in Colombia
      as
      well as complete the acquisition of the minority position in the producing
      property in Colombia. Should we not be able to raise the entire sum, we may
      lose
      our Rosablanca concession and our ability to participate in our other Colombian
      projects. At present, our Osage County, Oklahoma production is only sufficient
      to cover well operating expenses in Osage and a small portion of our overhead.





We
      have
      incurred $95,893 and $85,260 in 2007 and 2006, respectively, in operating
      expenses at the Osage property. The major source of funds for these costs was
      the sale of oil from the Osage property.





We
      have
      made a deposit of $82,000 on a property in Hansford County, Texas. We are
      obligated to incur an additional $573,810 for the property by June 30, 2008
      consisting of purchasing of additional contiguous leases and depositing funds
      in
      escrow for drilling and completion of the first well. If we do not fulfill
      our
      obligations, the seller may void the agreement at any time after June 30, 2008
      and return 90% of all payments received. We do not anticipate incurring
      additional expenses on this property until we have raised sufficient capital
      for
      our Rosablanca project and as such, we may lose 10%, or $8,200 of our initial
      deposit.





As
      of
      December 31, 2007, we have notes receivable due December 2009 totaling $309,875
      that were issued in conjunction with a change of control in December 2006,
      of
      which $239,250 of the notes receivable were from related parties. In December
      2007, Mr. Bradford and Mr. Furman paid in full their notes that had principal
      balances of $151,375 and $9,375, respectively, plus accrued interest. If we
      do
      not collect the balance of the notes receivable, it could have a material impact
      on our cash and impair our ability to execute our business plan.





We
      have
      undertaken steps as part of a plan to improve operations with the goal of
      sustaining our operations for the next twelve months and beyond. These steps
      include (a) raising additional capital and/or obtaining financing; (b)
      increasing our current production in the Osage property and other properties
      and
      (c) controlling overhead and expenses.





8




There
      can
      be no assurance that we will successfully accomplish these steps and it is
      uncertain we will achieve a profitable level of operations and/or obtain
      additional financing. There can be no assurance that any additional financings
      will be available to us on satisfactory terms and conditions, if at all. In
      the
      event we are unable to continue as a going concern, we may elect or be required
      to seek protection from our creditors by filing a voluntary petition in
      bankruptcy or may be subject to an involuntary petition in bankruptcy. To date,
      management has not considered this alternative, nor does management view it
      as a
      likely occurrence.





**Results
      of Operations**





The
       following  table  sets  forth  the  percentage
 relationship  to total revenues of principal  items
 contained in the  statements  of operations of the consolidated
 financial  statements included  herewith  for the two most
      recent fiscal  years  ended  December 31, 2007 and 2006.  It
      should be noted that percentages discussed throughout this analysis are stated
      on an approximate basis.





Fiscal
                Years Ended December 31,2007
            
            2006Amount
            
            Percentage
            
            Amount
            
            PercentageOil
                & Gas Sales
            
            $
            288,255
            
            
            100.0
            %
            $
            100,977
            
            
            100.0
            %Operating
                Expenses
            
            
            95,893
            
            
            33.3
            %
            
            85,260
            
            
            84.4
            %Non
                Cash Compensation Expense
            
            
            239,799
            
            
            83.2
            %
            
            
            
            
            0.0
            %Depreciation
                , Depletion and Accretion
            
            
            7,966
            
            
            2.8
            %
            
            1,664
            
            
            1.6
            %General
                & Administrative Expenses
            
            
            748,860
            
            
            259.8
            %
            
            531,209
            
            
            526.1
            %Total
                Operating Costs and Expenses
            
            
            1,092,518
            
            
            379.0
            %
            
            618,133
            
            
            612.2
            %Operating
                Loss
            
            
            (804,263
            )
            
            -279.0
            %
            
            (517,156
            )
            
            -512.2
            %Other
                Expenses
            
            
            (960,944
            )
            
            -333.4
            %
            
            (82,840
            )
            
            -82.0
            %Loss
                before income Taxes
            
            
            (1,765,207
            )
            
            -612.4
            %
            
            (599,996
            )
            
            -594.2
            %Net
                Loss
            
            
            (1,765,207
            )
            
            -611.9
            %
            
            (599,996
            )
            
            -594.2
            %Comprehensive
                Loss
            
            
            (1,794,138
            )
            
            -621.9
            %
            
            (599,996
            )
            
            -594.2
            %





For
      the Year Ended December 31, 2007 Compared to the Year Ended December 31,
      2006





Revenues
      from oil sales were $288,255, an increase of $187,278, or 185.5%, in the year
      ended December 31, 2007 (“2007”) compared to $100,977 of revenues in the year
      ended December 31, 2006 (“2006”). On a barrel of oil equivalent ("BOE") basis,
      our total production increased to 5,649 BOE in 2007 compared to 2,097 BOE in
      2006 due to the secondary recovery efforts we undertook in 2006. Our average
      price per BOE increased to $67.66 in 2007 from $63.87 in 2006.





Our
      operating expenses, consisting primarily of payments to an independent pumper,
      electricity at the wells, repairs and maintenance as well as supplies and
      materials, were $95,893, representing average operating expense per BOE of
      $16.98 in 2007 and our operating expenses in 2006 were $85,260, or an average
      operating expense per BOE of $40.66. The decrease in the average operating
      expenses per BOE is due principally to the increase in production in our Osage
      property.




9





In
      2007,
      we had non-cash compensation expense relating to the amortization of the value
      of the shares issued to two employees in 2007, compared to zero in 2006. General
      and administrative expenses were $748,860 and $531,209 in 2007 and 2006,
      respectively. The $217,651 increase consisted primarily of an increase of
      $312,399 in salaries due to the hiring of our three officers in 2007, an
      increase of $99,140 of legal and professional fees and an increase of $72,707
      in
      travel expenses related primarily to travel to Colombia.





Depreciation,
      depletion and accretion were $7,966 in 2007 compared to $1,664 for 2006,
      primarily due to the increase in production and increase in capital
      expenditures.





Loss
      from
      operations was $804,263 and $517,156 for 2007 and 2006,
      respectively.





Other
      expenses consist primarily of interest expense. Interest expense was $1,050,628
      and $88,129 in 2007 and 2006, respectively. Interest expense in 2007 consisted
      primarily of $584,204 for the beneficial conversion with various convertible
      debt issuances, $250,000 amortization of the value of the shares issued with
      the
      $250,000 Secured Convertible Debentures and $111,481 for the value of the
      warrants issued with the Convertible Debentures. Interest expenses for 2006
      consisted primarily of $39,331 and $27,123 of the beneficial conversion feature
      and the value of the warrants, respectively, of the Convertible Debentures.





Net
      loss
      was $1,765,207 and $599,996 for 2007 and 2006, respectively.





Foreign
      currency translation loss was $28,931 and $0 for 2007 and 2006, respectively.
      Comprehensive loss was $1,792,633 or an EPS of ($0.06) in 2007, compared to
      comprehensive loss of $599,996, or an EPS of ($0.02) in 2006.





**Liquidity
      and Capital Resources**





At
      December 31, 2007, we had working capital of $1,611,744 consisting primarily
      of
      $1,029,601 in deposits in Colombia for our Rosablanca project, $ 689,545 in
      cash
      and cash equivalents, $147,043 in bank CD pledged for letter of credit, $140,000
      in deposits on a transaction that did not close for which we received the entire
      deposit back in March 2008, $64,632 of prepaid expenses, $33,638 of deferred
      financing costs and $11,541 of accounts receivable, offset by $447,247 of the
      Unsecured Convertible Debenture, representing $1,100,000 face value less
      $652,753 of unamortized discount and $53,491 of accounts payable and accrued
      expenses.





We
      have
      raised in excess of $2,500,000 in gross proceeds through various debt and equity
      financings since January 1, 2007 and have used the majority of the net proceeds
      for costs related to our Rosablanca project in Colombia, as well as for working
      capital purposes and professional fees.





Net
      cash
      used by operating activities totaled $545,453 for 2007 compared to net cash
      used
      by operating activities of $450,732 for 2006. The major components of the net
      cash used in operating activities in 2007 were the net loss of $1,765,207,
      offset by $659,511 amortization of beneficial conversion feature issued with
      various debt financings, $250,000 for the amortization of the value of the
      shares issued in February 2007 with the Secured Convertible Debenture and
      $239,799 for the amortization of the deferred compensation relating to the
      shares issued to two of our officers as part of their employment agreement.
      The
      major component of the net cash used in operating activities for 2006 was the
      net loss of $599,996 offset by $62,500 for the value of shares issued for
      services provided.




10





Net
      cash
      used in investing activities totaled $1,490,628 and $82,000 for 2007 and 2006,
      respectively. Net cash used in investing activities in 2007 consisted primarily
      of $1,029,601 in deposits in the trust account for our Rosablanca project as
      well as $150,464 for investments made in the Rosablanca project. Net cash used
      in investing activities for 2006 consisted primarily of the $82,000 deposit
      made
      on the Hansford property.





Net
      cash
      provided by financing activities totaled $2,754,557 for 2007 and consisted
      primarily of $1,100,000 from the issuance of Unsecured Convertible Promissory
      Note due September 30, 2008, $860,250 from the issuance of 925,000 units,
      consisting of 925,000 shares and 1,387,500 warrants, and $427,500 from the
      issuance of common stock and the proceeds of the $250,000 Secured Convertible
      Debenture, which converted in July 31, 2007. Net cash provided by financing
      activities of $501,687 for 2006 consisted primarily of $349,000 from the
      issuance of the Convertible Debentures and $100,000 from the sale of LLC
      interests.




Net
      operating revenues from our oil production are very sensitive to changes in
      the
      price of oil making it very difficult for management to predict whether or
      not
      we will be profitable in the future.





We
      conduct no product research and development. Any
      expected purchase of significant equipment is directly related to drilling
      operations and the completion of successful wells. .





We
      operate our Osage County, Oklahoma properties through independent contractors
      that operate producing wells for several small oil companies. If we commence
      drilling operations on our Colombian projects or in the Hansford County, TX
      property, we anticipate we will utilize additional employees or independent
      third party drilling contractors and service companies.





We
      are
      responsible for any contamination of land we own or lease. However, we carry
      pollution liability insurance policies, which may limit some potential
      contamination liabilities as well as claims for reimbursement from third
      parties.





We
      currently sell all of our oil production to Sunoco, Inc. However, in the event
      this customer discontinued oil purchases, we believe we can replace this
      customer with other customers who would purchase the oil at terms standard
      in
      the industry.





**Quantitative
      and Qualitative Disclosures about Market Risk**




We
      have
      no material exposure to interest rate changes. We are subject to changes in
      the
      price of oil, which are out of our control. Since 2005, we have sold oil at
      various prices ranging from $47.65 to $93.75





**Effect
      of Changes in Prices**




Changes
      in prices during the past few years have been a significant factor in the oil
      and gas industry. The price received for the oil produced by us fluctuated
      significantly during the last year. Changes in the price that we receive for
      our
      oil and gas is set by market forces beyond our control as well as governmental
      intervention. Average price received by us for a BOE were $67.66 and $63.87
      in
      2007 and 2006, respectively. The volatility and uncertainty in oil and gas
      prices have made it more difficult for a company like us to increase our oil
      and
      gas asset base and become a significant participant in the oil and gas industry.
      We currently sell all of our oil and gas production to one major oil company
      -
      Sunoco, Inc. However, in the event this customer discontinued oil and gas
      purchases, we believe we can replace this customer with other customers who
      would purchase the oil and gas at terms standard in the industry.





**Critical
      Accounting Policies and Estimates**




Management's
      Discussion and Analysis of Financial Condition and Results of Operations
      discusses our consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of these financial statements requires management
      to
      make estimates and assumptions that affect the reported amounts of assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      revenues and expenses during the reporting period. On an on-going basis,
      management evaluates our estimates and judgments, including those related to
      revenue recognition, recovery of oil and gas reserves, financing operations,
      and
      contingencies and litigation.





**Oil
      and Gas Properties**




We
      follow
      the "successful efforts" method of accounting for our oil and gas exploration
      and development activities, as set forth in the Statement of Financial
      Accounting Standards (SFAS) No. 19, as amended, issued by the Financial
      Accounting Standards Board. Under this method, we initially capitalize
      expenditures for oil and gas property acquisitions until they are either
      determined to be successful (capable of commercial production) or unsuccessful.
      The carrying value of all undeveloped oil and gas properties is evaluated
      periodically and reduced if such carrying value appears to have been impaired.
      Leasehold costs relating to successful oil and gas properties remain capitalized
      while leasehold costs which have been proven unsuccessful are charged to
      operations in the period the leasehold costs are proven unsuccessful. Costs
      of
      carrying and retaining unproved properties are expensed as
      incurred.




11





The
      costs
      of drilling and equipping development wells are capitalized, whether the wells
      are successful or unsuccessful. The costs of drilling and equipping exploratory
      wells are capitalized until they are determined to be either successful or
      unsuccessful. If the wells are successful, the costs of the wells remain
      capitalized. If, however, the wells are unsuccessful, the capitalized costs
      of
      drilling the wells, net of any salvage value, are charged to operations in
      the
      period the wells are determined to be unsuccessful.





The
      provision for depreciation and depletion of oil and gas properties is computed
      on the unit-of-production method. Under this method, we compute the provision
      by
      multiplying the total unamortized costs of oil and gas properties including
      future development, site restoration, and dismantlement abandonment costs,
      but
      excluding costs of unproved properties by an overall rate determined by dividing
      the physical units of oil and gas produced during the period by the total
      estimated units of proved oil and gas reserves. This calculation is done on
      a
      country-by-country basis. As of December 31, 2007 and December 31, 2006, all
      of
      our oil production operations are conducted in the United States of America.
      The
      cost of unevaluated properties not being amortized, to the extent there is
      such
      a cost, is assessed quarterly to determine whether the value has been impaired
      below the capitalized cost. The cost of any impaired property is transferred
      to
      the balance of oil and gas properties being depleted. The costs associated
      with
      unevaluated properties relate to projects which were undergoing exploration
      or
      development activities or in which we intend to commence such activities in
      the
      future. We will begin to amortize these costs when proved reserves are
      established or impairment is determined.





In
      accordance with SFAS No. 143, "Accounting for Asset Retirement Obligations,"
      we
      report a liability for any legal retirement obligations on our oil and gas
      properties. The asset retirement obligations represent the estimated present
      value of the amounts expected to be incurred to plug, abandon, and remediate
      the
      producing properties at the end of their productive lives, in accordance with
      state laws, as well as the estimated costs associated with the reclamation
      of
      the property surrounding. The Company determines the asset retirement
      obligations by calculating the present value of estimated cash flows related
      to
      the liability. The asset retirement obligations are recorded as a liability
      at
      the estimated present value as of the asset's inception, with an offsetting
      increase to producing properties. Periodic accretion of the discount related
      to
      the estimated liability is recorded as an expense in the statement of
      operations.





The
      estimated liability is determined using significant assumptions, including
      current estimates of plugging and abandonment costs, annual inflation of these
      costs, the productive lives of wells, and a risk-adjusted interest rate. Changes
      in any of these assumptions can result in significant revisions to the estimated
      asset retirement obligations. Revisions to the asset retirement obligations
      are
      recorded with an offsetting change to producing properties, resulting in
      prospective changes to depletion and depreciation expense and accretion of
      the
      discount. Because of the subjectivity of assumptions and the relatively long
      lives of most of the wells, the costs to ultimately retire the Company's wells
      may vary significantly from prior estimates.




**Revenue
      Recognition**




We
      recognize revenue upon transfer of ownership of the product to the customer
      which occurs when (i) the product is physically received by the customer, (ii)
      an invoice is generated which evidences an arrangement between the customer
      and
      us, (iii) a fixed sales price has been included in such invoice and (iv)
      collection from such customer is probable.





12




**Off-Balance
      Sheet Arrangements**




Our
      Company has not entered into any transaction, agreement or other contractual
      arrangement with an entity unconsolidated with us under which we have





·
            an
                obligation under a guarantee contract,


·
            a
                retained or contingent interest in assets transferred to the
                unconsolidated entity or similar arrangement that serves as credit,
                liquidity or market risk support to such entity for such
                assets,


·
            any
                obligation, including a contingent obligation, under a contract that
                would
                be accounted for as a derivative instrument,
                or


·
            any
                obligation, including a contingent obligation, arising out of a variable
                interest in an unconsolidated entity that is held by us and material
                to us
                where such entity provides financing, liquidity, market risk or credit
                risk support to, or engages in leasing, hedging or research and
                development services with us.





***Item
      7.*** ***Financial
      Statements***





See
      Consolidated Financial Statements beginning on page F-1





***Item
      8.*** ***Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure***





None





***Item
      8A(T).*** ***Controls
      and Procedures***





*(a)
      Disclosure Controls and Procedures.*





The
      Company’s management, including the Company’s principal executive officer and
      principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
      promulgated under the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”). Based upon their evaluation, the principal executive officer
      and principal financial offer concluded that, as of the end of the period
      covered by this report, the Company’s disclosure controls and procedures were
      effective for the purpose of ensuring that the information required to be
      disclosed in the reports that the Company files or submits under the Exchange
      Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s
      management, including its principal executive and principal financial offers,
      as
      appropriate to allow timely decisions regarding required
      disclosure.




*(b)
      Internal Controls Over Financial Reporting.*





**Management’s
      Report on Internal Control Over Financial Reporting**





The
      management of the Company is responsible for establishing and maintaining
      adequate internal control over financial reporting. The internal control process
      has been designed under our supervision to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of the
      Company’s financial statements for external reporting purposes in accordance
      with accounting principles generally accepted in the United States of
      America.





Management
      conducted an assessment of the effectiveness of the Company’s internal control
      over financial reporting as of December 31, 2007, utilizing a top-down, risk
      based approach described in SEC Release No. 34-55929 as suitable for smaller
      public companies.  Based on this assessment, management has determined that
      the Company’s internal control over financial reporting as of December 31, 2007
      is effective.





Our
      internal control over financial reporting includes policies and procedures
      that
      pertain to the maintenance of records that accurately and fairly reflect, in
      reasonable detail, transactions and dispositions of assets; and provide
      reasonable assurances that: (1) transactions are recorded as necessary to permit
      preparation of financial statements in accordance with accounting principles
      generally accepted in the United States; (2) receipts and expenditures are
      being
      made only in accordance with authorizations of management and the directors
      of
      the Company; and (3) unauthorized acquisitions, use, or disposition of the
      Company’s assets that could have a material affect on the Company’s financial
      statements are prevented or timely detected.




13





All
      internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective can
      provide only reasonable assurance with respect to financial statement
      preparations and presentations. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





This
      annual report does not include an attestation report of the Company’s
      independent registered public accounting firm regarding internal control over
      financial reporting. Management’s report was not subject to attestation by the
      Company’s independent registered public accounting firm pursuant to temporary
      rules of the Securities and Exchange Commission that permit the Company to
      provide only management’s report in this annual report.





*(c)
      Changes to Internal Control Over Financial Reporting.*





Except
      as
      indicated herein, there were no changes in the Company’s internal control over
      financial reporting during the three months ended December 31, 2007 that have
      materially affected, or are reasonable likely to materially affect, the
      Company’s internal control over financial reporting.





***ITEM
      8B.*** ***Other
      Information***





None





**Item
      9** **.** Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act.





The
      following table sets forth the names, ages, and offices held by our directors
      and executive officers:





**Name**
            
            **Position**
            
            **Director
                Since**
            
            **Age**Kim
                Bradford
            
            President,
                Chief Executive Officer, Director
            
            February
                2007
            
            55Greg
                Franklin
            
            Chief
                Geologist, Director
            
            May
                2005
            
            51Ran
                Furman
            
            Chief
                Financial Officer, Director
            
            February
                2007
            
            39




A
      list of
      current officers and directors appears above. The directors of the Company
      are
      elected annually by the shareholders. The officers serve at the pleasure of
      the
      board of directors. The directors do not receive fees or other remuneration
      for
      their services, but are reimbursed for their out-of-pocket expenses to attend
      board meetings. All officers have employment contracts with compensation
      arrangements if they resign, retire or are terminated or such occurs as a result
      of a change in control of the Company.





The
      principal occupation and business experience during at least the last five
      years
      for each of the present directors and executive officers of the Company are
      as
      follows:





**Kim
      Bradford** **:** Mr.
      Bradford was elected President and Chief Executive Officer of the Company in
      January 2007 and elected to our board as Chairman effective February 2007.
      Mr.
      Bradford also served as our Chief Financial Officer and Secretary from January
      2007 through November 9, 2007. In August 2005, Mr. Bradford co-founded Catalyst
      Consulting Partners LLC, a California based consulting firm that advises
      publicly traded companies and their management teams on executive search,
      shareholder communications, general media consulting, investor relations,
      website design, and other corporate matters. In 2001, Mr. Bradford co-founded
      Decision Capital Management, LLC, the successor firm to Decision Capital
      Management LP, a Registered Investment Advisor firm which he founded in 1999.
      Prior to founding Decision Capital, Mr. Bradford has been involved in the
      brokerage business for over 25 years, both as an employee of major Wall Street
      firms, such as Merrill Lynch and Morgan Stanley, and as a principal in a NASD
      broker dealer firm specializing exclusively in natural resource based
      investments, such as oil and gas and precious metals mining. Effective February
      2008, Mr. Bradford devotes 100% of his time to Osage. Mr. Bradford is 55 years
      old.




14





**Greg
      L. Franklin** **:** Mr.
      Franklin has been our Chief Geologist since November 9, 2007 and a director
      of
      the Company since May 2005. Mr. Franklin previously served as a consultant
      to
      the Company in the role of a petroleum geologist since February 2005. Mr.
      Franklin has 25 years experience in the search, discovery, management and
      production of Oil and Gas. From March 1999 to February 2005 Mr. Franklin was
      a
      staff geologist for Barbour Energy. Mr. Franklin’s previous experience includes
      positions as Vice President for Gulf Coast Exploration and Development Company
      and geologist with Conoco. Mr. Franklin Graduated with a Bachelor of Science
      in
      Geology from Oklahoma State University 1980. Mr. Franklin is 51 years old.





**Ran
      Furman** **:** Mr.
      Furman has been our Chief Financial Officer and Secretary since November 9,
      2007
      and was elected to our board effective February 2007. Mr. Furman has over 15
      years of transactional experience in corporate finance, capital markets and
      investment banking. Mr. Furman has been an independent consultant since January
      2005 focusing on advising growth companies on corporate finance transactions
      and
      providing interim CFO services. Previously, Mr. Furman served as Chief Financial
      Officer of Island Pacific, Inc. from July 2003 to January 2005 and Chief
      Financial Officer of e.Digital Corporation from September 2001 to July 2003.
      Mr.
      Furman’s prior experience includes Investment Banker at Jesup & Lamont
      Securities, a banker with Bank of Montreal and a staff accountant with Deloitte
      & Touche. Mr. Furman has an MBA from Columbia Business School and a BA in
      accounting from the University of Washington. Mr. Furman also serves as Chief
      Financial Officer and Director of Bonanza Oil & Gas, Inc. Mr. Furman devotes
      approximately 70% of his time to Osage. Mr. Furman is 39 years old.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
      requires our executive officers and directors, and persons who beneficially
      own
      more than ten percent of the Company’s common stock, to file initial reports of
      ownership and reports of changes in ownership with the SEC. Executive officers,
      directors and greater than ten percent beneficial owners are required by SEC
      regulations to furnish us with copies of all Section 16(a) forms they file.
      Based upon a review of the copies of such forms furnished to us and written
      representations from our executive officers and directors, we believe that
      during the year ended 2007, the officers and directors filed all of their
      respective Section 16(a) reports on a timely basis.





**Audit
      Committee**





We
      do not
      have an Audit Committee, as our board of directors during 2007 performed the
      same functions of an Audit Committee, such as: recommending a firm of
      independent certified public accountants to audit the annual financial
      statements; reviewing the independent auditors independence, the financial
      statements and their audit report; and reviewing management's administration
      of
      the system of internal accounting controls. We do not currently have a written
      audit committee charter or similar document.





**Nominating
      Committee**




We
      do not
      have a Nominating Committee or Nominating Committee Charter. Our Board of
      Directors performed some of the functions associated with a Nominating
      Committee. We have elected not to have a Nominating Committee at this time,
      however, our Board of Directors intend to continually evaluate the need for
      a
      Nominating Committee.





15




**Code
      of Conduct**





We
      have
      adopted a written code of conduct that governs all of our officers, directors,
      employees and contractors. The code of conduct relates to written standards
      that
      are reasonably designed to deter wrongdoing and to promote:





(1)
            Honest
                and ethical conduct, including the ethical handling of actual or
                apparent
                conflicts
              of
                interest between personal and professional
                relationships;(2)
            Full,
                fair, accurate, timely and understandable disclosure in reports and
                documents that
              are
                filed with, or submitted to, the Commission and in other public
                communications made
              by
                an issuer;(3)
            Compliance
                with applicable governmental laws, rules and
                regulations;(4)
            The
                prompt internal reporting of violations of the code to an appropriate
                person or persons
              identified
                in the code; and(5)
            Accountability
                for adherence to the code.





**Involvement
      in Certain Legal Proceedings**





No
      director, person nominated to become a director, executive officer, promoter
      or
      control persons of our company has been involved during the last five years
      in
      any of the following events that are material to an evaluation of his ability
      or
      integrity:





·
            Bankruptcy
                petitions filed by or against any business of which such person was
                a
                general partner or executive officer either at the time of the bankruptcy
                or within two years prior to that
                time.





·
            Conviction
                in a criminal proceeding or being subject to a pending criminal proceeding
                (excluding traffic violations and other minor
                offenses).





·
            Being
                subject to any order, judgment or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring or suspending or otherwise limiting
                his
                involvement in any type of business, securities or banking activities,
                or





·
            Being
                found by a court of competition jurisdiction (in a civil action),
                the
                Securities and Exchange Commission or the Commodities Futures Trading
                Commission to have violated a federal or state securities or commodities
                law, and the judgment has not been reversed, suspended or
                vacated.





**Compensation
      Committee**





We
      currently do not have a compensation committee of the Board of Directors. Until
      a formal committee is established, if at all, our entire board of directors
      will
      review all forms of compensation provided to our executive officers, directors,
      consultants and employees including stock compensation and loans.




16





**Item
      10** **.** **Executive
      Compensation**





During
      the last three fiscal years, the following executive officers of our company
      have received total annual salary and bonus exceeding $100,000:





SUMMARY
                COMPENSATION TABLEName
                and principal position
            
            Year
            
            Salary
            
            Bonus
            
            Stock
                Awards
            
            Nonequity
                incentive plan compensation
            
            Nonqualified
                deferred compensation earnings
            
            All
              other
                compensation (1)
            
            TotalKim
                Bradford
              President
                & CEO
            
            
            2007
            
            $
            16,615
            
            $
            150,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            166,615Charles
                F. Volk, Jr
              President
                & CEO
            
            
            2007
              2006
              2005
            
            $
              $
              $
            0
              126,142
              49,200
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            $
              $
              $
            0
              126,142
              49,200Greg
                Franklin
              Chief
                Geologist
            
            
            2007
            
            $
            13,846
            
            
            
            
            $
            2,300,000
            
            
            0
            
            
            0
            
            $
            54,000
            
            $
            2,367,846Ran
                Furman
              CFO
            
            
            2007
            
            $
            11,769
            
            
            0
            
            $
            690,000
            
            
            0
            
            
            0
            
            $
            62,500
            
            $
            764,269





(1)
            Represents
                amounts earned by Mr. Franklin and Mr. Furman as consultants to the
                Company prior to becoming
                employees.





On
      November 9, 2007, the Company entered into employment agreements with our three
      officers: Kim Bradford to serve as President and Chief Executive Office, Greg
      Franklin to serve as Chief Geologist and Ran Furman to serve as Chief Financial
      Officer of the Company. All of the agreements are for two years ending November
      30, 2009 (“Employment Period”) and all allow the officers to be eligible for an
      annual bonus as determined by the Board of Directors. In the event that any
      officer’s employment is terminated for a Change of Control, then he shall be
      eligible to receive, in one lump payment, the greater of (i) annual base salary
      in effect immediately prior to the Change of Control and (ii) the remaining
      base
      salary in effect immediately prior to the Change of control owed to the officer
      until the end of the Employment Period.





Mr.
      Bradford’s employment agreement includes an annual base salary of $144,000 and a
      signing bonus of $150,000. Mr. Franklin’s employment includes an annual base
      salary of $120,000 and a signing bonus of 2,000,000 shares of the Company’s
      Stock, which shall vest as to 100% on January 1, 2009. Mr. Furman’s employment
      agreement includes an annual base salary of $102,000 and a signing bonus of
      600,000 shares of the Company’s Stock, which shall vest as to 100% of January 1,
      2009.





We
      do not
      have any other contractual arrangements with our executive officers, promoters
      or directors, nor do we have any compensatory arrangements with our executive
      officers, promoters or directors other than as described below.





Charles
      Volk, Jr. resigned as President and Chief Executive Officer of the Company
      on
      January 23, 2007. Mr. Volk, Jr. is considered a promoter of the Company and
      has
      received a total of 4,301,501 shares from the Company. Of these shares, Mr.
      Volk, Jr. received 3,942,501 shares of stock in conjunction with the acquisition
      of Osage Energy Company, LLC.





**Outstanding
      Equity Awards at Fiscal Year-End**




Option
                Awards
            
            Stock
                AwardsName
              (a)
            
            Number
                of Securities Underlying Unexercised Options (#) Exercisable
              (b)
            
            Number
                of Securities Underlying Unexercised Options (#)
                Unexercisable
              (c)
            
            Equity
                Incentive Plan Awards Number of Securities Underlying Unexercised
                Unearned
                Options (#)
              (d)
            
            Option
                Exercise Price
              ($)
              (e)
            
            Option
                Expiration Date
              (f)
            
            Number
                of Shares or Units of Stock That Have Not Vested (#)
              (g)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested ($)
              (h)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested (#)
              (i)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested ($)
              (j)Greg
                Franklin
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            
            
            
            
            2,000,000
            
            $
            2,260,000,
            
            
            2,000,000-
            
            
            —Ran
                Furman
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            
            
            
            
            600,000
            
            $
            678,000,
            
            
            2,000,000-
            
            
            —




17





***Item
      11.*** ***Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters***





The
      following table shows information as of March 17, 2008 with respect to each
      beneficial owner of more than five percent of the Company’s Common
      Stock:








Name
                and Address of
              Beneficial
                Owner
            
            Common
                Stock
              Beneficially
                Owned
            
            Percent
              of
                ClassKim
                Bradford [1]
              888
                Prospect St, Suite 210
              La
                Jolla, CA 92037
            
            
            6,055,000
            
            
            16.8
            %Charles
                F. Volk, Jr. [2]
              29
                Lupine Ave. #C
              San
                Francisco, CA 94118
            
            
            3,961,501
            
            
            11.0
            %Paul
                DiFrancesco [3]
              888
                Prospect St., Suite 210
              La
                Jolla, CA 92037
            
            
            3,140,000
            
            
            8.7
            %Greg
                L. Franklin [2]
              13400
                Thomson Road
              Edmond,
                OK 73013
            
            
            3,000,000
            
            
            8.3
            %Vision
                Opportunity Master Fund, Ltd. [4]
              c/o
                BISYS Hedge Fund Services
              P.O.
                Box 1748
              27
                Hospital Road, 5thFloor
              Grand
                Cayman KY1-1109
              Cayman
                Islands
            
            
            2,650,000
            
            
            7.4
            %Babcock
                Trust [5]
              Attn:
                Kevin Keen
              235
                Montgomery Street, #930
              San
                Francisco, CA 94101
            
            
            1,900,000
            
            
            5.3
            %





The
      percentage ownership is based on 35,959,775 shares outstanding at March 17,
      2008





[1]
      Kim
      Bradford was elected CEO and President of the Company on January 23, 2007 and
      then elected to be Chairman effective February 7, 2007. Mr. Bradford also served
      as Chief Financial Officer and Secretary of the Company from January 23, 2007
      through November 9, 2007.




[2]
      Charles Volk resigned as CEO and President of the
      Company on January 23, 2007 and then resigned from the board effective February
      7, 2007.




18






[3]
      Paul
      DiFrancesco was a partner of Kim Bradford in Catalyst Consulting Partners,
      LLC
      and Decision Capital Management, LLC.




[4]
      Information is derived from Schedule 13G/A filed by Vision Capital Advisors,
      LLC
      (the “Investment Manager”), who serve as investment manager to Vision
      Opportunity Master Fund, Ltd. (the “Master Fund”), the record owner of the
      securities. Adam Benowitz is the managing member of the Investment Manager
      and
      the Master Fund’s portfolio manager and disclaims beneficial ownership except to
      the extent of its pecuniary interest therein.





The
      following table shows information as of March 17, 2008 with respect to each
      of
      the beneficial owners of the Company’s Common Stock by its executive officers,
      directors and nominee individually and as a group:





Name
                and Address
            
            Position
            
            Common
                Stock
              Beneficially
                Owned
            
            Percent
              of
                Shares
            
            Term
                of OfficeKim
                Bradford [1]
              888
                Prospect St, Suite 210
              La
                Jolla, CA 92037
            
            
            President,
                CEO
              and
                Chairman
            
            
            6,055,000
            
            
            16.8
            %
            
            November
                2009Greg
                L. Franklin [2]
              13400
                Thomson Road
              Edmond,
                OK 73013
            
            
            Chief
                Geologist and Director
            
            
            3,000,000
            
            
            8.3
            %
            
            November
                2009Ran
                Furman [3]
              888
                Prospect St., Suite 210
              La
                Jolla, CA 92037
            
            
            Chief
                Financial Officer and Director
            
            
            975,000
            
            
            2.7
            %
            
            November
                2009Officers
                and directors as
              a
                group (3 persons)
            
            
            
            
            
            10,030,000
            
            
            27.9
            %





The
      percentage ownership is based on 35,959,775 shares outstanding at March 17,
      2008.





[1]
      Kim
      Bradford was elected CEO and President of the Company on January 23, 2007 and
      then elected to be Chairman effective February 7, 2007. Mr. Bradford also served
      as Chief Financial Officer of the Company and Secretary from January 23, 2007
      through November 9, 2007 at which time, Mr. Furman became our Chief Financial
      Officer and Secretary.




[2]
      Greg
      Franklin was elected to the board effective May 5, 2005 and became our Chief
      Geologist on November 9, 2007




[3]
      Ran
      Furman was elected to the board effective February 7, 2007 and became Chief
      Financial Officer November 9, 2007.





There
      are
      no family relationships among the directors and executive officers.





**Changes
      in Control**




On
      December 28, 2006, a change of control occurred when Kim Bradford, our CEO,
      President and Chairman, along with Ran Furman, our Chief Financial Officer
      and a
      director and Paul DiFrancesco, a former partner of Kim Bradford in Catalyst
      Consulting Partners, LLC and Decision Capital Management, LLC and other
      investors entered into a transaction with the Company whereby for a $470,875
      promissory note, the Company issued a total of 18,835,000 shares of Common
      Stock, or approximately 64% of the total shares outstanding. The shares were
      valued based on the approximate asset value per share prior to the transaction.
      Of the $470,875 promissory notes issued by the investor to the Company, Mr.
      Bradford, Mr. DiFrancesco and Mr. Furman issued a note in the amount of
      $151,375, $78,500 and $9,375, respectively, for the purchase of 6,055,000,
      3,140,000 and 375,000 shares respectively. In December 2007, Mr. Bradford and
      Mr. Furman paid in full their notes plus accrued interest. In conjunction with
      this change of control, two of our three directors, Charles Volk and Charles
      Lamberson, resigned, and Kim Bradford and Ran Furman were elected as directors.




19





***Item
      12*** ***.***  ***Certain
      Relationships and Related Transactions***





During
      the past two years, Osage Exploration and Development, Inc. as well as Osage
      Energy Company LLC have utilized the services of Greg Franklin, one of our
      directors, for various geological and administrative services. The Company
      paid
      $37,650 and $76,150 in 2005 and 2006, respectively for these services. The
      Company believes that it has paid market rates for these services. On January
      1,
      2007, the Company entered into a 12 month geological consulting agreement with
      Mr. Franklin for various geological and operational advisory services at a
      cost
      of $6,000 per month, which as of August 1, 2007, was increased to $8,000 per
      month, which the Company believes is equivalent to those it may receive from
      an
      unaffiliated third party. Effective November 9, 2007, Mr. Franklin became our
      Chief Geologist pursuant to an employment agreement as more fully described
      above in item 10.





On
      February 1, 2007, the Company entered into a four-month financial consulting
      agreement, automatically renewable for another four months, with Ran Furman,
      one
      of our directors, for various financial and accounting advisory services at
      a
      cost of $6,250 per month, which the Company believes is equivalent to those
      it
      may receive from an unaffiliated third party. Effective November 9, 2007, Mr.
      Furman became our Chief Financial Officer pursuant to an employment agreement
      as
      more fully described above it item 10.




On
      February 1, 2007, the Company entered into a month-to-month lease on its
      corporate headquarters with Catalyst Consulting Partners, LLC, a company owned
      in part by Kim Bradford, our President, CEO and Chairman, at a cost of $500
      per
      month, which the Company believes to be at market rate. Mr. DiFrancesco, a
      principal shareholder, was a partner in Catalyst Consulting Partners, LLC.
      Effective February, 2008, we have terminated this lease.





On
      December 28, 2006, a change of control occurred when Kim Bradford, our CEO,
      President and Chairman, along with Ran Furman, our Chief Financial Officer
      and
      one of our directors, Paul DiFrancesco, a partner of Kim Bradford in Catalyst
      Consulting Partners, LLC and Decision Capital Management, LP and other investors
      entered into a transaction with the Company whereby for a $470,875 promissory
      note, the Company issued a total of 18,835,000 shares of Common Stock, or
      approximately 64% of the total shares outstanding. Of the $470,875 promissory
      notes issued by the investors to the Company, Mr. Bradford, Mr. DiFrancesco
      and
      Mr. Furman issued notes in the amount of $151,375, $78,500 and $9,375,
      respectively, for the purchase of 6,055,000, 3,140,000 and 375,000 shares
      respectively. The promissory notes carry an 8% interest rate, with interest
      and
      principal due at maturity, December 2009 and are secured by a pledge of shares
      issued. The shares were valued based on the approximate asset value per share
      prior to the transaction. In December 2007, Mr. Bradford and Mr. Furman paid
      in
      full their notes plus accrued interest. In conjunction with this change of
      control, two of our three directors, Charles Volk and Charles Lamberson,
      resigned, and Kim Bradford and Ran Furman joined Greg Franklin as directors.





Beginning
      January 1, 2008, Laura Bradford, a daughter of Kim Bradford, our CEO and
      President, serves as the Company’s administrative assistant at a salary of
      $36,000 per year, which we believe to be market rate. During the year ended
      December 31, 2007, Laura Bradford worked part time as an independent contractor
      in her position and received total compensation of $2,165.




Outside
      of the above transactions, there have been no transactions during the last
      two
      years, or proposed transactions, to which we were or are to be a party in which
      any of the following persons had or is to have a direct or indirect material
      interest:





·
            any
                officer or director;


·
            any
                nominee for election as a director;


·
            any
                beneficial owner of more than five percent of our voting
                securities;


·
            any
                member of the immediate family of any of the above
                persons.




20


Our
      Board
      of Directors is made up of Kim Bradford, our President, Chief Executive Officer
      and Chief Financial Officer, Greg Franklin, our Chief Geologist and Ran Furman,
      our Chief Financial Officer. Our common stock trades on the Over-the-Counter
      Bulletin Board. Because we are traded on the Over-the-Counter Bulletin Board,
      we
      are not currently subject to corporate governance standards of listed companies,
      which require, among other things, that the majority of the board of directors
      be independent.





Since
      we
      are not currently subject to corporate governance standards relating to the
      independence of our directors, we choose to define an "independent" director
      in
      accordance with applicable independence standards required of issuers listed
      on
      the NASDAQ Capital Market. NASDAQ Marketplace Rule 4200(a)(15) defines an
      "Independent director" as a person other than an executive officer or employee
      of the company or any other individual having a relationship which, in the
      opinion of the issuer's board of directors, would interfere with the exercise
      of
      independent judgment in carrying out the responsibilities of a director. At
      this
      time, the Board has determined that none of its employee directors are
      independent under the above definition.





***Item
      13*** ***.*** ***Exhibits***





**Exhibit
                No.**
            
            **Description**2.1
            
            Plan
                of Reorganization and Agreement of Merger, dated June 18, 2007
                (1)3.1
            
            Articles
                of Incorporation of Osage Exploration and Development, Inc.
                (1)3.2
            
            Bylaws
                of Osage Exploration and Development, Inc. (1)10.1
            
            Agreement
                for Acquisition of Oil and Gas Leaseholds between Conquest Exploration
                Company, LLC, David Farmer, Charles Volk, Jr. and Osage Energy Company,
                LLC dated November 10, 2004. (1)10.2
            
            Assignment
                and Bill of Sale between Conquest Exploration Company, LLC and Osage
                Energy Company, LLC dated January 24, 2005. (1)10.3
            
            $250,000
                Note and Security Agreement with Vision Opportunity Master Fund,
                Ltd.
                dated February 13, 2007. (1)10.4
            
            $1,100,000
                Unsecured Convertible Promissory Note with Marie Baier Foundation
                dated
                July 16, 2007. (2)10.5
            
            Form
                of Warrant issued to Marie Baier Foundation in connection with the
                $1,100,000 Unsecured Convertible Promissory Note. (2)10.6
            
            Rosa
                Blanca Carried Interest Agreement dated June 21, 2007. (3)10.7
            
            2007
                Equity Based Compensation Plan (4)10.8
            
            Purchase
                and Sale Agreement for the purchase of the Hansford Property
                (4)10.8.1
            
            Extension
                Agreement with Pearl Resources, Corp. for the Hansford Property
                (5)10.8.2
            
            Letter
                from Charles Volk regarding Ownership of the Hansford Property
                (6)10.9
            
            Consulting
                Agreement dated January 1, 2007 with Greg Franklin (4)10.10
            
            Consulting
                Agreement dated February 1, 2007 with Ran Furman (4)10.11
            
            Form
                of Stock Subscription Receivable dated December 28, 2006
                (4)10.11.1
            
            Form
                of Amendment #1 to Stock Subscription Receivable dated August 1,
                2007
                (4)10.12
            
            Oil
                and Gas Mining Lease with the Osage Nation dated July 21, 1999
                (4)10.13
            
            Office
                lease agreement with Catalyst Consulting Partners, LLC
                (4)10.14
            
            Employment
                Agreement with Kim Bradford, President and CEO (7)10.15
            
            Employment
                Agreement with Greg Franklin, Chief Geologist (7)10.15.1
            
            Restricted
                Stock Agreement with Greg Franklin, Chief Geologist (7)10.16
            
            Employment
                Agreement with Ran Furman, Chief Financial Officer (7)10.16.1
            
            Restricted
                Stock Agreement with Ran Furman, Chief Financial Officer
                (7)10.17
            
            Office
                Lease, dated February 1, 2008, by and between Osage Exploration &
                Development, Inc. and Fifth & Laurel Associates, LLC.
                (8)21.1
            
            List
                of Subsidiaries (4)31.1
            
            Certification
                of Chief Executive pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated
                under the Securities and Exchange Act of 1934, as
                amended.31.2
            
            Certification
                of Chief Financial pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated
                under the Securities and Exchange Act of 1934, as
                amended.




21




32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer)32.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer)




(1)
            Incorporated
                by reference to Osage’s Form 10-SB filed July 6,
                2007


(2)
            Incorporated
                by reference to Osage’s Form 8-k filed July 17,
                2007


(3)
            Incorporated
                by reference to Osage’s Form 8-k filed August 13,
                2007


(4)
            Incorporated
                by reference to Osage’s Form 10-SB Amendment No. 1 filed August 27,
                2007


(5)
            Incorporated
                by reference to Osage’s Form 10-SB Amendment No. 2 filed October 15,
                2007


(6)
            Incorporated
                by reference to Osage’s Form 10-SB Amendment No. 3 filed November 19,
                2007


(7)
            Incorporated
                by reference to Osage’s Form 10-SB Amendment No. 5 filed December 28,
                2007


(8)
            Incorporated
                by reference to Osage’s Form 8-k filed March 4,
                2008




**Item
      14. Principal Accountant Fees and Services**





Selection
      of our Independent Registered Public Accounting Firm is made by the Board of
      Directors. GPKM LLP has been selected as our Independent Registered Public
      Accounting Firm for the current fiscal year. All audit and non-audit services
      provided by GPKM LLP are pre-approved by the Board of Directors which gives
      due
      consideration to the potential impact of non-audit services on auditor
      independence.





In
      accordance with Independent Standard Board Standards No. 1 (Independence
      Discussion with Audit Committees), we received a letter and verbal communication
      from GPKM LLP that it knows of no state of facts which would impair its status
      as our independent public accountants. The Board of Directors has considered
      whether the non-audit services provided by GPKM LLP are compatible with
      maintaining its independence and has determined that the nature and substance
      of
      the limited non-audit services have not impaired GPKM LLP s status as our
      Independent Registered Public Accounting Firm.





**AUDIT
      FEES**





The
      aggregate fees billed and anticipated by our auditor for professional services
      rendered for the audit of our annual financial statements and for the reviews
      of
      the financial statements included in our Quarterly Reports on Form 10-QSB during
      fiscal years ended December 31, 2006 and December 31, 2007 were approximately
      $61,000 and $62,500, respectively.





**TAX
      FEES**





Our
      auditors did not bill us for any tax services during fiscal years 2007 and
      2006.





**ALL
      OTHER FEES**





Our
      auditors did not bill us for any other services during fiscal years 2007 and
      2006.




22




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**OSAGE
      EXPLORATION & DEVELOPMENT, INC.**


BY:  /S/
                KIM BRADFORDKim
                Bradford
              President
                and C.E.O.Dated:
              March 31, 2008


BY:  /S/
              RAN FURMANRan
                Furman
              Chief
                Financial OfficerDated:
                March 31, 2008




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.





**Signature**
            
            **Title**
            
            **Date**/s/
                KIM BRADFORD
              Kim
                Bradford
            
            President,
                C.E.O. and Chairman
              (Principal
                Executive Officer)
            
            March
                31, 2008/s/
                RAN FURMAN
              Ran
                Furman
            
            Principal
                Financial Officer and
              Accounting
                Officer and Director
            
            March
                31, 2008/s/
                GREG FRANKLIN
              Greg
                Franklin
            
            Chief
                Geologist and Director
            
            March
                31, 2008




23




**OSAGE
      EXPLORATION AND DEVELOPMENT, INC.**


**INDEX
      TO FINANCIAL STATEMENTS**





Set
      forth below are the following consolidated financial statements for our company
      for the years ended December 31, 2007 and 2006:




PageReport
                  of Independent Accountant
              
              
              F-1Consolidated
                  Balance Sheets as of December 31, 2007 and 2006
              
              
              F-2Consolidated
                  Statements of Operations for Years Ended December 31, 2007 and
                  2006
              
              
              F-3Consolidated
                  Statements of Stockholders’ Equity (Deficit) from December 31, 2005 to
                  December 31, 2007
              
              
              F-4Consolidated
                  Statements of Cash Flows for Years Ended December 31, 2007 and
                  2006
              
              
              F-5Notes
                  to Consolidated Financial Statements
              
              
              F-6


REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and Shareholders


Osage
      Exploration and Development, Inc. and Subsidiary


La
      Jolla,
      CA





We
      have
      audited the accompanying consolidated balance sheets of Osage Exploration and
      Development, Inc. and Subsidiary (Company), as of December 31, 2007 and December
      31, 2006, and the related consolidated statements of operations, stockholders'
      equity, and cash flows for each of the two years ended December 31, 2007 and
      2006. These consolidated financial statements are the responsibility of the
      Company's management. Our responsibility is to express an opinion on the
      consolidated financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. The Company is not
      required to have, nor were we engaged to perform, an audit of internal control
      over financial reporting. Our audits included consideration of internal control
      over financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. An audit includes examining, on a test basis, evidence supporting
      the
      amounts and disclosures in the financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall financial statement presentation.
      We believe that our audits provide a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Osage Exploration and
      Development, Inc. and Subsidiary as of December 31, 2007, and the results of
      their operations and their cash flows for the years ended December 31, 2007
      and
      2006, in conformity with accounting principles generally accepted in the United
      States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 1 to the
      consolidated financial statements, the Company has suffered recurring losses
      from operations and has an accumulated deficit of $2,413,373 as of December
      31,
      2007. These conditions raise substantial doubt about the Company's ability
      to
      continue as a going concern. Management's plans in regard to these matters
      are
      also described in Note 1 to the consolidated financial statements. The
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





GOLDMAN
      PARKS KURLAND MOHIDIN, LLP Encino,
        California


March
      14,
      2008




F-1




OSAGE
                  EXPLORATION AND DEVELOPMENT, INC.CONSOLIDATED
                  BALANCE SHEETSAs
                  of December 31, 2007 and December 31, 2006
  2007
              
              2006**ASSETS**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              689,545
              
              $
              -Prepaid
                  Expenses
              
              
              64,632
              
              
              -Colombian
                  Deposits (Note 5)
              
              
              1,029,601
              
              
              -Bank
                  CD pledged for Letter of Credit (Note 7)
              
              
              147,043
              
              
              -Deposits
                  (Note 6)
              
              
              140,000Accounts
                  Receivable
              
              
              11,541
              
              
              14,399Deferred
                  Financing Costs
              
              
              33,638
              
              
              -Total
                  Current Assets
              
              
              2,116,000
              
              
              14,399Property
                  and Equipment, at cost (Note 4):Oil
                  and gas properties and equipment
              
              
              253,641
              
              
              103,177Capitalized
                  asset retirement costs
              
              
              13,675
              
              
              13,675Other
                  property & equipment
              
              
              23,520
              
              
              -Less:
                  accumulated depletion, depreciation
              
              
              290,836
              
              
              116,852and
                  amortization
              
              
              (10,761
              )
              
              (2,795
              )280,075
              
              
              114,057Bank
                  CD pledged for Bond
              
              
              30,000
              
              
              30,000Deposits
                  (Note 6)
              
              
              82,000
              
              
              82,000Total
                  Assets
              
              $
              2,508,075
              
              $
              240,456**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Accounts
                  payable
              
              $
              53,491
              
              $
              22,534Bank
                  overdraft
              
              
              
              
              
              4,138Accrued
                  expenses
              
              
              
              
              
              20,307Current
                  Maturity of Promissory Note (Note 11)
              
              
              3,518
              
              
              -Convertible
                  Debt, net of $652,753 and $185,976 ofunamortized
                  discount (Note 8 and 10)
              
              
              447,247
              
              
              67,836Total
                  Current Liabilities
              
              
              504,256
              
              
              114,815Promissory
                  Note, net of Current Maturity (Note 11)
              
              
              7,289Liability
                  for Asset Retirement Obligations (Note 14)
              
              
              16,547
              
              
              15,043Commitments
                  and Contingencies (Note 12)Stockholders'
                  Equity:Common
                  stock, $0.0001 par value, 190,000,000 sharesauthorized;
                  35,959,775 and 29,484,858 shares
              
              
              3,595
              
              
              2,948issued
                  and outstanding as of December 31, 2007and
                  December 31, 2006, respectively.Additional-Paid-in-Capital
              
              
              7,478,768
              
              
              1,226,691Deferred
                  Compensation
              
              
              (2,750,201
              )Stock
                  Purchase Notes Receivable
              
              
              (309,875
              )
              
              (470,875
              )Accumulated
                  Deficit
              
              
              (2,413,373
              )
              
              (648,166
              )Accumulated
                  Other Comprehensive Loss -Currency
                  Translation Loss
              
              
              (28,931
              )
              
              -1,979,983
              
              
              110,598Total
                  Liabilities and Stockholders' Equity
              
              $
              2,508,075
              
              $
              240,456
  The
                  accompanying notes are an integral part of these consolidated financial
                  statements.





F-2




OSAGE
                  EXPLORATION AND DEVELOPMENT, INC.CONSOLIDATED
                  STATEMENTS OF OPERATIONSFor
                  the Years Ended December 31, 2007 and 2006
  2007
              
              2006Operating
                  RevenuesOil
                  & Gas Sales
              
              $
              288,255
              
              $
              100,977Total
                  Operating Revenues
              
              
              288,255
              
              
              100,977Operating
                  Costs and ExpensesOperating
                  Expenses
              
              
              95,893
              
              
              85,260Depreciation,
                  Depletion and Accretion
              
              
              7,966
              
              
              1,664Non
                  Cash Compensation Expense
              
              
              239,799General
                  and Administrative
              
              
              748,860
              
              
              531,209Total
                  Operating Costs and Expenses
              
              
              1,092,518
              
              
              618,133Operating
                  (Loss)
              
              
              (804,263
              )
              
              (517,156
              )Other
                  Income (Expenses):Interest
                  Income
              
              
              89,684
              
              
              1,714Interest
                  Expense
              
              
              (1,050,628
              )
              
              (88,129
              )Other
              
              
              
              
              
              3,575(Loss)
                  before Income Taxes
              
              
              (1,765,207
              )
              
              (599,996
              )Provision
                  for Income Taxes
              
              
              -
              
              
              -Net
                  (Loss)
              
              
              (1,765,207
              )
              
              (599,996
              )Other
                  Comprehensive Income, net of tax:Foreign
                  Currency Translation Adjustment
              
              
              (28,931
              )Other
                  Comprehensive Income
              
              
              (28,931
              )
              
              -Comprehensive
                  (Loss)
              
              $
              (1,794,138
              )
              $
              (599,996
              )Basic
                  and Diluted Loss per Share
              
              $
              (0.06
              )
              $
              (0.02
              )Weighted
                  average number of common shareand
                  common share equivalents used tocompute
                  basic and dilluted Loss per Share
              
              
              32,002,893
              
              
              29,273,124The
                  accompanying notes are an integral part of these consolidated financial
                  statements.




F-3


OSAGE
                  EXPLORATION AND DEVELOPMENT, INC.CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS' EQUITYFor
                  the Years Ended December 31, 2007 AND 2006
  AccumulatedCommon
              
              
              
              Additional
              
              Stock
              
              
              
              
              
              OtherStock
              
              
              
              Paid-In
              
              Purchase
              
              Accumulated
              
              Deferred
              
              Comprehensive
              
              TotalShares
              
              Amount
              
              Capital
              
              Not
                  Receivable
              
              Deficit
              
              Compensation
              
              Loss
              
              Equity**Balance
                  at December 31, 2005**
              
              
              **28,835,000**
              
              **$**
              **2,883**
              
              **$**
              **663,951**
              
              **$**
              **(470,875**
              **)**
              **$**
              **(48,170**
              **)**
              
              
              
              **$**
              **-**
              
              **$**
              **147,789**Acquire
                  Osage Energy LLC
              
              
              602,858
              
              
              60
              
              
              (60
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Equity
                  contributions
              
              
              
              
              
              
              
              
              22,687
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              22,687Sale
                  of LLC interests
              
              
              
              
              
              
              
              
              100,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              100,000Issue
                  Shares in Unit Offering
              
              
              22,000
              
              
              2
              
              
              29,998
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              30,000Warrants
                  issued with Convertible Debt
              
              
              
              
              
              
              
              
              138,604
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              138,604Beneficial
                  Conversion of Convertible Debt
              
              
              
              
              
              
              
              
              209,014
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              209,014Shares
                  issued for services
              
              
              25,000
              
              
              3
              
              
              62,498
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              62,500Net
                  (Loss) for the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (599,996
              )
              
              
              
              
              
              
              
              (599,996
              )**Balance
                  at December 31, 2006**
              
              
              **29,484,858**
              
              
              **2,948**
              
              
              **1,226,691**
              
              
              (470,875
              )
              
              (648,166
              )
              
              **-**
              
              
              **-**
              
              
              **110,598**Shares
                  issued for Convertible Debenture
              
              
              362,417
              
              
              36
              
              
              382,664
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              382,700Shares
                  issued with Secured Convertible Debt
              
              
              300,000
              
              
              30
              
              
              249,970
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              250,000Payment
                  on Stock Purchase Notes Receivable
              
              
              
              
              
              
              
              
              
              
              
              161,000
              
              
              
              
              
              
              
              
              
              
              
              161,000Issue
                  of Shares
              
              
              1,187,500
              
              
              119
              
              
              427,381
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              427,500Issue
                  of Shares in Unit Offering
              
              
              925,000
              
              
              93
              
              
              860,158
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              860,250Beneficial
                  Conversion of Unsecured Convertible Promissory Note
              
              
              
              
              
              
              
              
              1,067,274
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,067,274Issue
                  of Shares for Note and accrued interest conversion
              
              
              1,100,000
              
              
              110
              
              
              274,890
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              275,000Foreign
                  Exchange Translation Adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (28,931
              )
              
              (28,931
              )Issue
                  of Shares - Compensation Expense
              
              
              2,600,000
              
              
              260
              
              
              2,989,740
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,990,000Deferred
                  Compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,750,201
              )
              
              
              
              
              (2,750,201
              )Net
                  (Loss) for the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,765,207
              )
              
              
              
              
              
              
              
              (1,765,207
              )**Balance
                  at December 31, 2007**
              
              
              **35,959,775**
              
              **$**
              **3,595**
              
              **$**
              **7,478,768**
              
              **$**
              (309,875
              )
              **$**
              (2,413,373
              )
              **$**
              (2,750,201
              )
              **$**
              (28,931
              )
              **$**
              **1,979,983**


The
        accompanying notes are an integral part of these consolidated financial
        statements.





F-4


OSAGE
                  EXPLORATION AND DEVELOPMENT, INC.CONSOLIDATED
                  STATEMENTS OF CASH FLOWSFor
                  the Years Ended December 31, 2007 and 2006
  2007
              
              2006Cash
                  flows from Operating Activities:Net
                  (Loss)
              
              $
              (1,765,207
              )
              $
              (599,996
              )Adjustments
                  to reconcile net (loss) to net cashused
                  by operating activites:Beneficial
                  Conversion of Convertible Debenture
              
              
              659,511
              
              
              39,331Amortization
                  of Deferred Compensation
              
              
              239,799Increase/(Decrease)
                  in Accrued Interest
              
              
              (20,307
              )
              
              20,307Amortization
                  of shares issued with Secured Convertible Debentures
              
              
              250,000Amortization
                  of Warrants issued with Convertible Debenture
              
              
              111,481
              
              
              27,123Accretion
                  of Asset Retirment Obligation
              
              
              1,504
              
              
              1,368Amortization
                  of Deferred Financing Costs
              
              
              (33,638
              )Issuance
                  of shares for Accrued Interest
              
              
              58,700Issuance
                  of shares for services provided
              
              
              
              
              
              62,500Provision
                  for depletion, depreciationamortization
                  and valuation allowance
              
              
              7,966
              
              
              1,664Changes
                  in operating assets and liabitlies:(Increase)
                  in accounts receivable
              
              
              2,858
              
              
              (7,118
              )(Increase)
                  in prepaid expenses
              
              
              (64,632
              )Increase/(Decrease)
                  in bank overdraft
              
              
              (4,138
              )
              
              4,138Increase/(decrease)
                  in accounts payable and accrued expenses
              
              
              10,650
              
              
              (49
              )Net
                  cash used by operating activities
              
              
              (545,453
              )
              
              (450,732
              )Cash
                  flows from Investing Activities:Deposits
                  made on Oil & Gas Properties
              
              
              (140,000
              )
              
              (82,000
              )Bank
                  CD pledged for Letter of Credit
              
              
              (144,000
              )Interest
                  earned on Bank CD pledged for Letter of Credit
              
              
              (3,043
              )Investment
                  in Colombian Deposits
              
              
              (1,029,601
              )Investments
                  made on Colombian Oil & Gas Properties
              
              
              (150,464
              )Capital
                  expenditures
              
              
              (23,520
              )Net
                  cash used in investing activities
              
              
              (1,490,628
              )
              
              (82,000
              )Cash
                  flows from Financing Activities:Payments
                  made on behalf of Company
              
              
              
              
              
              22,687Proceeds
                  from sale of LLC interests
              
              
              
              
              
              100,000Proceeds
                  from issuance of Unsecured Convertible Debenture
              
              
              1,100,000Payment
                  of Debt Offering Costs
              
              
              (55,000
              )Proceeds
                  from issuance of Secured Convertible Debenture
              
              
              250,000Proceeds
                  from payment on Stock Purchase Notes Receivable
              
              
              161,000Proceeds
                  from issuance of Stock and Warrant Units
              
              
              860,250
              
              
              30,000Proceeds
                  from issuance of Common Stock
              
              
              427,500Proceeds
                  from issuance of Convertible Debenture
              
              
              
              
              
              349,000Proceeds
                  from issuance of Promissory Note
              
              
              13,046Payments
                  on Promissory Notes
              
              
              (2,239
              )Net
                  cash provided by financing activities
              
              
              2,754,557
              
              
              501,687Effect
                  of exchange rate on cash and cash equivalents
              
              
              (28,931
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              689,545
              
              
              (31,045
              )Cash
                  and Cash equivalents beginning of the year
              
              
              -
              
              
              31,045Cash
                  and Cash equivalents at end of year
              
              $
              689,545
              
              $
              -SUPPLEMENTAL
                  CASH FLOW INFORMATION:Cash
                  Payments for Interest
              
              $
              43,684
              
              
              0Cash
                  Payment for Taxes
              
              
              0
              
              
              0Non-Cash
                  Transactions:Shares
                  issued for Stock Purchase Note Receivable
              
              
              
              
              $
              470,875Shares
                  issued with Secured Convertible Debenture
              
              
              250,000Purchase
                  of truck for Promissory Note
              
              
              13,046Shares
                  issued upon conversion of Secured Convertible Debentureand
                  accrued interest
              
              
              275,000The
                  accompanying notes are an integral part of these consolidated financial
                  statements.





F-5





OSAGE
      EXPLORATION AND DEVELOPMENT, INC. AND SUBSIDIARY


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      Years ended December 31, 2007 and 2006





1.
      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





NATURE
      OF
      OPERATIONS AND BUSINESS COMBINATION





Osage
      Exploration and Development, Inc. ("Osage" or "the Company") is an independent
      energy company engaged primarily in the acquisition, development, production
      and
      the sale of oil, gas and natural gas liquids. The Company's production
      activities are located in the United States of America. The principal executive
      offices of the Company are located at 2445 Fifth Avenue, Suite 310, San Diego,
      CA 92101. Osage was organized September 9, 2004 as Osage Energy Company, LLC,
      (“Osage LLC”) an Oklahoma limited liability company. On April 24, 2006 we merged
      with a non-reporting, Nevada corporation trading on the pink sheets, Kachina
      Gold Corporation, which was the entity that survived the merger, through the
      issuance of 10,000,000 shares of our Common Stock. The merger has been accounted
      for as a recapitalization of Osage LLC rather than a business combination.
      Accordingly, no pro forma disclosure is made. The historical financial
      statements are those of Osage LLC.





The
      Nevada shell corporation had been incorporated under the laws of Canada on
      February 24, 2003 as First Mediterranean Gold Resources, Inc. The domicile
      of
      the Company was changed to the State of Nevada on May 11, 2004. On May 24,
      2004,
      the name of the Company was changed to Advantage Opportunity Corp. On March
      4,
      2005, the Company changed its name to Kachina Gold Corporation (“KGC”). On April
      24, 2006 Kachina Gold Corporation merged with Osage Energy Company, LLC, and
      on
      May 15, 2006 changed its name to Osage Energy Corporation. On July 2, 2007,
      the
      Company changed its name to Osage Exploration and Development, Inc. and changed
      its domicile to the State of Delaware. On February 27, 2008, the Company’s
      common stock began trading on the Over-the-Counter Bulletin Board under the
      symbol “OEDV.OB.”





The
      Company has incurred significant losses and had negative cash flow from
      operations in each of the last two years and has an accumulated deficit of
      $2,413,373 at December 31, 2007 and $648,166 at December 31, 2006. Substantial
      portions of the losses are attributable to legal and professional fees as well
      as interest expense. The Company's operating plans require additional funds
      that
      may take the form of debt or equity financings. There can be no assurance that
      any additional funds will be available. The Company's ability to continue as
      a
      going concern is in substantial doubt and is dependent upon achieving a
      profitable level of operations and obtaining additional financing.





Management
      of our Company has undertaken steps as part of a plan to improve operations
      with
      the goal of sustaining our operations for the next twelve months and beyond.
      These steps include (a) raising additional capital and/or obtaining financing
      ;
      (b) increasing our current production; and (c) controlling overhead and
      expenses.





There
      can
      be no assurance the Company can successfully accomplish these steps and it
      is
      uncertain the Company will achieve a profitable level of operations and obtain
      additional financing. There can be no assurance that any additional financings
      will be available to the Company on satisfactory terms and conditions, if at
      all. In the event we are unable to continue as a going concern, we may elect
      or
      be required to seek protection from our creditors by filing a voluntary petition
      in bankruptcy or may be subject to an involuntary petition in bankruptcy. To
      date, management has not considered this alternative, nor does management view
      it as a likely occurrence.





These
      consolidated financial statements do not give effect to any adjustments which
      would be necessary should the Company be unable to continue as a going concern
      and therefore be required to realize its assets and discharge its liabilities
      in
      other than the normal course of business and at amounts different from those
      reflected in the accompanying consolidated financial statements.




F-6





BASIS
      OF
      CONSOLIDATION





The
      consolidated financial statements include the accounts of Osage and its wholly
      owned subsidiary, Osage Energy Company, LLC. Accordingly, all references herein
      to Osage or the Company include the consolidated results. All significant
      inter-company accounts and transactions were eliminated in consolidation.





RISK
      FACTORS RELATED TO CONCENTRATION OF SALES AND PRODUCTS





The
      Company's future financial condition and results of operations will depend
      upon
      prices received for its oil and natural gas and the costs of finding, acquiring,
      developing and producing reserves. Prices for oil and natural gas are subject
      to
      fluctuations in response to changes in supply, market uncertainty and a variety
      of other factors beyond the Company's control. These factors include worldwide
      political instability (especially in the Middle East), the foreign supply of
      oil
      and natural gas, the price of foreign imports, the level of consumer product
      demand and the price and availability of alternative fuels.





USE
      OF
      ESTIMATES





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America (“US GAAP”) requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from those
      estimates. Management used significant estimates in determining the carrying
      value of its oil and gas producing assets and the associated depreciation and
      depletion expense related to sales' volumes. The significant estimates included
      the use of proved oil and gas reserve volumes and the related present value
      of
      estimated future net revenues there-from (See Note 21: Supplemental Information
      About Oil and Gas Producing Activities).





CASH
      AND
      CASH EQUIVALENTS





Cash
      and
      cash equivalents consist of short-term, highly liquid investments readily
      convertible into cash with an original maturity of three months or less.





FAIR
      VALUE OF FINANCIAL INSTRUMENTS





The
      Company measures its financial assets and liabilities in accordance with US
      GAAP. For certain of the Company's financial instruments, including accounts
      receivable (trade and related party), notes receivable and accounts payable
      (trade and related party), and accrued expenses, the carrying amounts
      approximate fair value due to their short maturities. The amounts owed for
      notes
      payable also approximate fair value because interest rates and terms offered
      to
      the Company are at current market rates.





CONCENTRATION
      OF CREDIT RISK





Financial
      instruments that potentially subject the Company to concentrations of credit
      risk are: cash and accounts receivable arising from its normal business
      activities. The Company places its cash in what it believes are credit-worthy
      financial institutions. However, the Company’s cash balances have exceeded the
      FDIC insured levels at various times during 2006 and 2007. The Company did
      not
      have any cash balances in excess of federally insured limits as of December
      31,
      2006. At December 31, 2007, the Company had $580,539 in cash in excess of
      federally insured limits. The Company maintains cash accounts only at large,
      high quality financial institutions and believes the credit risk associated
      with
      cash held in back exceeding the FDIC insured levels is remote.





The
      Company currently sells all of its oil production to one customer, Sunoco,
      Inc.
      However, the Company believes it can sell all its production to many different
      purchasers, most of whom pay similar prices that vary with the international
      spot market prices. The Company controls credit risk related to accounts
      receivable through credit approvals, credit limits and monitoring procedures.
      The Company routinely assesses the financial strength of its customers and,
      based upon factors surrounding the credit risk, establishes an allowance, if
      required, for uncollectible accounts and, as a consequence, believes that its
      accounts receivable credit risk exposure beyond such allowance is limited.
      The
      Company had no allowance as of December 31, 2007 and December 31, 2006. The
      analysis was based on its evaluation of specific customers' balances and the
      collectibility thereof.




F-7





OIL
      AND
      GAS PROPERTIES





Osage
      is
      an exploration and production oil and natural gas company with proved reserves
      and existing production. In 2005 we purchased 100% of the working interest
      in
      certain producing oil and natural gas leases located in Osage County, Oklahoma,
      referred to herein as the Osage Property, which property consists of twenty
      three wells, ten of which are producing, on 480 acres. We operate this property
      and in 2006, begun a secondary recovery program to increase current production.





In
      January of 2006, we placed a deposit totaling $82,000 on approximately 85%
      of
      the working interest of a natural gas property consisting of 640 acres located
      in Hansford County, Texas owned by Pearl Resources Corp. We have until June
      30,
      2008 to fulfill our obligations to the seller, consisting of acquiring two
      contiguous leases for a total of $128,000, placing $445,180 in escrow for
      drilling and completing the first well and actual commencement of drilling.
      If
      we are unable to fulfill our obligations, the seller has the right to refund
      90%
      of all payments received and void the agreement.





The
      Company follows the "successful efforts" method of accounting its oil and gas
      exploration and development activities, as set forth in the Statement of
      Financial Accounting Standards (“SFAS”) No. 19, as amended, issued by the
      Financial Accounting Standards Board. Under this method, the Company initially
      capitalizes expenditures for oil and gas property acquisitions until they are
      either determined to be successful (capable of commercial production) or
      unsuccessful. The carrying value of all undeveloped oil and gas properties
      is
      evaluated periodically and reduced if such carrying value appears to have been
      impaired. Leasehold costs relating to successful oil and gas properties remain
      capitalized while leasehold costs which have been proved unsuccessful are
      charged to operations in the period the leasehold costs are proved unsuccessful.
      Costs of carrying and retaining unproved properties are expensed as
      incurred.





The
      costs
      of drilling and equipping development wells are capitalized, whether the wells
      are successful or unsuccessful. The costs of drilling and equipping exploratory
      wells are capitalized until they are determined to be either successful or
      unsuccessful. If the wells are successful, the costs of the wells remain
      capitalized. If, however, the wells are unsuccessful, the capitalized costs
      of
      drilling the wells, net of any salvage value, are charged to operations in
      the
      period the wells are determined to be unsuccessful.





The
      provision for depreciation and depletion of oil and gas properties is computed
      by the unit-of-production method. Under this method, the Company computes the
      provision by multiplying the total unamortized costs of oil and gas properties
      including future development, site restoration, and dismantlement abandonment
      costs, but excluding costs of unproved properties by an overall rate determined
      by dividing the physical units of oil and gas produced during the period by
      the
      total estimated units of proved oil and gas reserves. This calculation is done
      on a country-by-country basis. As of December 31, 2007, the Company's oil
      production operations are conducted in the United States of America and in
      the
      country of Colombia. The cost of unevaluated properties not being amortized,
      to
      the extent there is such a cost, is assessed quarterly to determine whether
      the
      value has been impaired below the capitalized cost. The costs associated with
      unevaluated properties relate to projects which were undergoing exploration
      or
      development activities or in which the Company intends to commence such
      activities in the future. The Company will begin to amortize these costs when
      proved reserves are established or impairment is determined. Management believes
      no such impairment exists at December 31, 2007 and December 31,
      2006.





In
      accordance with SFAS No. 143, "Accounting for Asset Retirement Obligations",
      the
      Company reports a liability for any legal retirement obligations on its oil
      and
      gas properties. The asset retirement obligations represent the estimated present
      value of the amounts expected to be incurred to plug, abandon, and remediate
      the
      producing properties at the end of their productive lives, in accordance with
      state laws, as well as the estimated costs associated with the reclamation
      of
      the property surrounding. The Company determines the asset retirement
      obligations by calculating the present value of estimated cash flows related
      to
      the liability. The asset retirement obligations are recorded as a liability
      at
      the estimated present value as of the asset's inception, with an offsetting
      increase to producing properties. Periodic accretion of the discount related
      to
      the estimated liability is recorded as an expense in the statement of
      operations.




F-8





The
      estimated liability is determined using significant assumptions, including
      current estimates of plugging and abandonment costs, annual inflation of these
      costs, the productive lives of wells, and a risk-adjusted interest rate. Changes
      in any of these assumptions can result in significant revisions to the estimated
      asset retirement obligations. Revisions to the asset retirement obligations
      are
      recorded with an offsetting change to producing properties, resulting in
      prospective changes to depletion and depreciation expense and accretion of
      the
      discount. Because of the subjectivity of assumptions and the relatively long
      lives of most of the wells, the costs to ultimately retire the Company's wells
      may vary significantly from prior estimates.





OTHER
      PROPERTY AND EQUIPMENT





Non-oil
      and gas producing properties and equipment are stated at cost; major renewals
      and improvements are charged to the property and equipment accounts; while
      replacements, maintenance and repairs, which do not improve or extend the lives
      of the respective assets, are expensed currently. At the time property and
      equipment are retired or otherwise disposed of, the asset and related
      accumulated depreciation accounts are relieved of the applicable amounts. Gains
      or losses from retirements or sales are credited or charged to
      operations.





Depreciation
      for non-oil and gas properties is recorded on the straight-line method at rates
      based on estimated useful lives ranging from three to fifteen years of the
      assets.





IMPAIRMENT
      OF LONG-LIVED ASSETS





Effective
      January 1, 2002, the Company adopted SFAS No. 144, “Accounting for the
      Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses
      financial accounting and reporting for the impairment or disposal of long-lived
      assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived
      Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and
      reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations
      for a Disposal of a Segment of a Business.” The Company periodically evaluates
      the carrying value of long-lived assets to be held and used in accordance with
      SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived
      assets used in operations when indicators of impairment are present and the
      undiscounted cash flows estimated to be generated by those assets are less
      than
      the assets’ carrying amounts. In that event, a loss is recognized based on the
      amount by which the carrying amount exceeds the fair market value of the
      long-lived assets. Loss on long-lived assets to be disposed of is determined
      in
      a similar manner, except that fair market values are reduced for the cost of
      disposal. Based on its review, the Company believes that, as of December 31,
      2007 and December 31, 2006, there were no significant impairments of its
      long-lived assets.





REVENUE
      RECOGNITION





The
      Company recognizes revenue upon transfer of ownership of the product to the
      customer which occurs when (i) the product is physically received by the
      customer, (ii) an invoice is generated which evidences an arrangement between
      the customer and the Company, (iii) a fixed sales price has been included in
      such invoice, and (iv) collection from such customer is probable.





STOCK
      BASED COMPENSATION





The
      Company accounts for its stock-based compensation in accordance with SFAS No.
      123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.”  The
      Company recognizes in the statement of operations the grant-date fair value
      of
      stock options and other equity-based compensation issued to employees and
      non-employees.  For
      stock-based awards the value is based on the market value for the stock on
      the
      date of grant and if the stock has restrictions as to transferability a discount
      is provided for lack of tradability. Stock option awards are valued using the
      Black-Scholes option-pricing model. For shares issued for services or property,
      the value is based on the market value for the stock on the date of grant.




F-9





In
      2007,
      we issued 2,600,000 shares of restricted stock to two of our employees. The
      shares were valued at the stock price at the time of issuance of $1.15 or a
      total value of $2,900,000. As the shares vest on January 1, 2009, we have
      recorded compensation expense of $239,799 in 2007 and have unrecognized deferred
      compensation of $2,750,201, which we anticipate will be expensed as following:
      $2,747,738 in 20008 and $7,494 in 2009.





No
      stock
      options or stock-based awards were issued in 2006 and thus no compensation
      expense arising from stock options or stock-based awards was recognized in
      2006.





INCOME
      TAXES





Provisions
      for income taxes are based on taxes payable or refundable for the current year
      and deferred taxes on temporary differences between the amount of taxable income
      and pretax financial income and between the tax bases of assets and liabilities
      and their reported amounts in the financial statements.





Deferred
      tax assets and liabilities are included in the financial statements at currently
      enacted income tax rates applicable to the period in which the deferred tax
      assets and liabilities are expected to be realized or settled as prescribed
      in
      SFAS No. 109, "Accounting for Income Taxes". As changes in tax laws or rates
      are
      enacted, deferred tax assets and liabilities are adjusted through the provision
      for income taxes.





Deferred
      tax assets are reduced by a valuation allowance when, in the opinion of
      management, it is more likely than not that some portion or all of the deferred
      tax assets will not be recognized. The Company has recorded a 100% valuation
      allowance as of December 31, 2007 and December 31, 2006.





Accounting
      for Uncertainty in Income Taxes





FASB
      Interpretation 48 prescribes a recognition threshold and a measurement attribute
      for the financial statement recognition and measurement of a tax position taken
      or expected to be taken in a tax return. Benefits from tax positions should
      be
      recognized in the financial statements only when it is more likely than not
      that
      the tax position will be sustained upon examination by the appropriate taxing
      authority that would have full knowledge of all relevant information. The amount
      of tax benefits to be recognized for a tax position that meets the
      more-likely-than-not recognition threshold is measured as the largest amount
      of
      benefit that is greater than fifty percent likely of being realized upon
      ultimate settlement. Tax benefits relating to tax positions that previously
      failed to meet the more-likely-than-not recognition threshold should be
      recognized in the first subsequent financial reporting period in which that
      threshold is met or certain other events have occurred. Previously recognized
      tax benefits relating to tax positions that no longer meet the
      more-likely-than-not recognition threshold should be derecognized in the first
      subsequent financial reporting period in which that threshold is no longer
      met.
      Interpretation 48 also provides guidance on the accounting for and disclosure
      of
      tax reserves for unrecognized tax benefits, interest and penalties and
      accounting in interim periods. The Company adopted Interpretation 48 in 2007
      which did not have a material impact on the Company’s consolidated financial
      statements.





EARNINGS
      PER SHARE





The
      Company uses SFAS No. 128, "Earnings Per Share" for calculating the basic and
      diluted earnings (loss) per share. Basic earnings (loss) per share is computed
      by dividing net income (loss) attributable to common stockholders by the
      weighted average number of common shares outstanding. Diluted earnings (loss)
      per share is computed similar to basic earnings (loss) per share except that
      the
      numerator is increased by the amount of interest expense attributable to the
      Convertible Debentures and the denominator is increased to include the number
      of
      additional common shares that would have been outstanding if the potential
      common shares had been issued and if the additional common shares were dilutive.
      Due to the net loss reported by the Company, the effect of including shares
      attributable to the conversion of the Convertible Debentures and stock warrants
      would have been antidilutive. The issuance of these shares has been treated
      as a
      recapitalization of the Company. Accordingly, all per share data has been
      retroactively restated.




F-10




NEW
      ACCOUNTING PRONOUNCEMENTS





**Recent
      Pronouncements**





Fair
      Value Measurements





In
      September 2006, the FASB issued SFAS No. 157, *“* Fair
      Value Measurements, *”* which
      establishes a framework for measuring fair value, and expands disclosures about
      fair value measurements required under the accounting pronouncements, but does
      not change existing guidance as to whether or not an instrument is carried
      at
      fair value. Additionally, it establishes a fair value hierarchy that prioritizes
      the information used to develop those assumptions. SFAS No. 157 is effective
      for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Earlier application is
      encouraged, provided that the reporting entity has not yet issued financial
      statements for fiscal year, including financial statements for an interim period
      within the fiscal year. The Company is currently evaluating the impact, if
      any,
      that SFAS No. 157 will have on its consolidated financial
      statements.





Defined
      Benefit Pension and Other Postretirement Plans





In
      September 2006, the FASB, issued SFAS No. 158, “Employers’ Accounting for
      Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
      Statements No. 87, 88, 106, and 132R,” which requires employers to recognize the
      underfunded or overfunded status of a defined benefit postretirement plan as
      an
      asset or liability in its statement of financial position and to recognize
      changes in the funded status in the year in which the changes occur through
      accumulated other comprehensive income. Additionally, SFAS No. 158 requires
      employers to measure the funded status of a plan as of the date of its year-end
      statement of financial position. The new reporting requirements and related
      new
      footnote disclosure rules of SFAS No. 158 are effective for fiscal years ending
      after December 15, 2006. We adopted the provisions of SFAS No. 158 for the
      year
      end 2006, and the effect of recognizing the funded status in accumulated other
      comprehensive income was not significant. The new measurement date requirement
      applies for fiscal years ending after December 15, 2008.





Fair
      Value Option for Financial Assets and Financial Liabilities





In
      February of 2007 the FASB issued SFAS No. 159, “ The
      Fair
      Value Option for Financial Assets and Financial Liabilities —Including
      an amendment of FASB Statement No. 115.” The statement permits entities to
      choose to measure many financial instruments and certain other items at fair
      value. The objective is to improve financial reporting by providing entities
      with the opportunity to mitigate volatility in reported earnings caused by
      measuring related assets and liabilities differently without having to apply
      complex hedge accounting provisions. The statement is effective as of the
      beginning of an entity’s first fiscal year that begins after November 15, 2007.
      The Company is analyzing the potential accounting treatment.





Recent
      Pronouncements





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the
      overfunded or underfunded status of a defined benefit postretirement plan (other
      than a multiemployer plan) as an asset or liability in its statement of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity or
      changes in unrestricted net assets of a not-for-profit organization. This
      statement also requires an employer to measure the funded status of a plan
      as of
      the date of its year-end statement of financial position, with limited
      exceptions. The provisions of SFAS No. 158 are effective for employers with
      publicly traded equity securities as of the end of the fiscal year ending after
      December 15, 2006. The adoption of this statement had no effect on the Company‘s
      reported financial position or results of operations.




F-11




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements“. The
      objective of SFAS No. 157 is to increase consistency and comparability in fair
      value measurements and to expand disclosures about fair value measurements.
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any new
      fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on the
      Company‘s future reported financial position or results of
      operations.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities“. This Statement permits entities to
      choose to measure many financial assets and financial liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007. The Company is currently assessing the impact
      of SFAS No. 159 on its financial position and results of
      operations.





In
      June
      2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
      Nonrefundable Advance Payments for Goods or Services Received for use in Future
      Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
      nonrefundable advance payments for goods or services that used or rendered
      for
      research and development activities should be expensed when the advance payment
      is made or when the research and development activity has been performed.
      Management is currently evaluating the effect of this pronouncement on financial
      statements.





In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
      enterprise accounts for the acquisition of a business. SFAS No. 141
      (Revised 2007) requires an acquiring entity to recognize all the assets acquired
      and liabilities assumed in a transaction at the acquisition-date fair value,
      with limited exceptions, and applies to a wider range of transactions or events.
      SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
      after December 15, 2008 and early adoption and retrospective application is
      prohibited.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements”, which is an amendment of Accounting Research
      Bulletin (“ARB”) No. 51.  This statement clarifies that a
      noncontrolling interest in a subsidiary is an ownership interest in the
      consolidated entity that should be reported as equity in the consolidated
      financial statements.  This statement changes the way the consolidated
      income statement is presented, thus requiring consolidated net income to be
      reported at amounts that include the amounts attributable to both parent and
      the
      noncontrolling interest.  This statement is effective for the fiscal
      years, and interim periods within those fiscal years, beginning on or after
      December 15, 2008.  Based on current conditions, the Company does not
      expect the adoption of SFAS 160 to have a significant impact on its results
      of
      operations or financial position.





2.
      ACQUISITION:





In
      2005
      we purchased 100% of the working interest in certain producing oil and natural
      gas leases located in Osage County, Oklahoma, referred to herein as the Osage
      Property, which property consists of ten wells on 480 acres for a total
      consideration of $103,177. We operate this property and in 2006, begun a
      secondary recovery program to increase current production.





3.
      GEOGRAPHICAL INFORMATION





The
      following table sets forth revenues for the periods reported and assets by
      geographic location:





United
                States
            
            Colombia
            
            ConsolidatedDecember
                31, 2007:Revenues
            
            $
            288,255
            
            $
            0
            
            $
            253,641Long
                Lived Assets
            
            
            126,697
            
            
            150,464
            
            $
            277,161December
                31, 2006:Revenues
            
            $
            100,977
            
            $
            0
            
            $
            100,977Long
                Lived Assets
            
            
            103,177
            
            
            0
            
            
            103,177




F-12




4.
      OIL
      AND GAS PROPERTIES





Oil
      and
      gas properties consisted of the following as of December 31, 2007 and December
      31, 2006:





December
                31, 2007
            
            December
                31, 2006Properties
                subject to amortization
            
            $
            103,177
            
            $
            103,177Properties
                not subject to amortization
            
            
            150,464
            
            
            0Capitalized
                asset retirement costs
            
            
            13,675
            
            
            13,675Accumulated
                depreciation and depletion
            
            
            (6,119
            )
            
            (2,795
            )Oil
                and gas properties, net
            
            $
            261,197
            
            $
            114,057





Depreciation
      and depletion expense for oil & gas properties totaled $3,324 and $1,664 for
      2007 and 2006, respectively.





5.
      COLOMBIAN DEPOSITS





In
      June
      2007, we entered into an agreement (the “Agreement”) with Gold Oil, Plc (“Gold”)
      and Empesa Petrolera de Servicios y Asesorias, S.A. (“Empesa), whereby we
      farmed-in to the approximately 165 square mile Rosablanca concession in Colombia
      awarded by the Agencia Nacional de Hidrocarburos (“ANH”) to Gold in June 2007.
      In August 2007, we (i) paid $1,200,000 to Gold representing the funds that
      Gold
      had previously issued to a trust established by the ANH to use for drilling
      the
      first well for the Rosablanaca concession and (ii) issued a letter of credit
      in
      the amount of $144,000 for the benefit of Gold’s bank in Colombia representing
      the guarantee required by the ANH. We anticipate that the total cost of drilling
      the first well to be approximately $2,500,000 to $3,000,000, of which $1,200,000
      has already been deposited in trust with the ANH to be used for the first well.
      The balance in the trust deposit account as of December 31, 2007 is $1,029,601.





6.
      DEPOSITS





In
      January 2006 we placed a deposit totaling $82,000 on approximately 85% of the
      working interest of a natural gas property consisting of 640 acres located
      in
      Hansford County, Texas. The agreement was amended in March 2007 stipulating
      that
      unless we acquired a contiguous lease by June 1, 2007 at a cost of $48,000,
      a
      second contiguous lease by August 1, 2007 for $80,000 and place $445,180 in
      escrow for drilling and completing the first well with actual commencement
      of
      drilling prior to September 15, 2007, the seller shall have the right to refund
      90% of the initial purchase price and void the agreement. In September 2007,
      the
      seller provided us with an extension until June 30, 2008 to fulfill all of
      our
      obligations under the agreement. Until we raise additional capital, we do not
      anticipate further investments in this project and as such, the agreement may
      be
      voided by the seller at any time after June 30, 2008.





In
      November 2007, we entered into an agreement to purchase out of bankruptcy a
      working interest in an oil & gas leasehold and producing wellbore in
      Louisiana for a purchase price of $1,400,000. Upon the signing of the agreement,
      we placed a deposit totaling 10% of the total purchase price, or $140,000.
      The
      bankruptcy court has decided that it is not pursuing the sale at this moment
      and
      we received our entire deposit of $140,000 back on March 1, 2008. We have no
      further obligations for this property.




F-13





7.
      BANK
      CD PLEDGED FOR LETTER OF CREDIT





In
      August
      2007, we placed $144,000 as a certificate of deposit with a bank as collateral
      for the $144,000 letter of credit required by the ANH as more fully described
      in
      footnote 4 above. If we do not complete drilling and testing of the first well
      in the Rosablanca concession by July 3, 2008, and we do not receive extensions
      from the ANH, we may lose our entire interest in the concession and the $144,000
      letter of credit we previously issued. The balance, including accrued interest,
      in the Bank CD as of December 31, 2007 is $147,043.





8.
      CONVERTIBLE DEBENTURES





From
      February 2006 through October 2006, we issued Convertible Debentures with
      three-year detachable warrants to accredited investors for gross proceeds of
      $349,000. The Convertible Debentures mature one year from issuance, carried
      a
      10% interest rate and were convertible at $1.20 per share for $263,000 of the
      Convertible Debentures, $0.75 as to $50,000 of the Convertible Debentures and
      $0.80 as to $36,000 of the Convertible Debentures. As of December 31, 2006,
      we
      had $349,000 of Convertible Debentures outstanding and accrued interest of
      $20,302. All of the Convertible Debentures, including accrued interest on
      $337,000 of the Convertible Debentures, converted in January and February 2007
      into 362,417 shares of our Common Stock. In May 2007, we paid $1,200 of interest
      on $12,000 of the Convertible Debentures.





Pursuant
      to EITF 98-5, "Accounting for Convertible Securities with Beneficial Conversion
      Features or Contingently Adjustable Conversion Ratios" and EITF 00-27,
“Application of Issue No. 98-5 in Certain Convertible Instruments,” based on
      relative fair values of the warrant and the debt, the proceeds from the debt
      were allocated to the warrant and the debt on a relative fair value basis.
      We
      recorded $209,014 upon the issuance of the Convertible Debentures attributable
      to the beneficial conversion feature as additional paid in capital. The discount
      was amortized using the effective interest rate method over the term of the
      indebtedness. The warrants are exercisable for a period of three years with
      an
      exercise price of $2.40, for $299,000 of the Convertible Debentures, and $1.50
      as to $50,000 of the Convertible Debenture. Using the Black Scholes pricing
      model, with volatility of 80.0%, risk-free rate of 4.61% to 5.15% and a 0%
      dividend yield, the warrants were determined to have a fair value of $138,604
      and were recorded as additional paid in capital.





9.
      SECURED CONVERTIBLE DEBENTURE





On
      February 16, 2007, we issued a $250,000 Secured Convertible Debenture and
      300,000 shares of common stock to an institutional investor for gross proceeds
      of $250,000. The Debenture matured July 31, 2007, has a 10% interest rate with
      a
      minimum interest amount of $25,000 due at Maturity, and is convertible, in
      whole
      or in part, into shares of common stock at a conversion price $0.25 per share.
      The shares issued in conjunction with the Secured Convertible Debenture were
      valued at $250,000 based on the price of the stock issued at the most recent
      private placement offering and were recorded as additional pain in capital.
      The
      discount of $250,000 was being amortized using the effective interest rate
      method over the term of the indebtedness. Pursuant to EITF 98-5, "Accounting
      for
      Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios", we recorded an interest expense of $0 upon the
      issuance of the Secured Convertible Debentures attributable to the beneficial
      conversion feature as the value of the shares exceeded the face value of the
      Secured Convertible Debenture. On July 31, 2007, the Secured Convertible
      Debenture and the $25,000 minimum interest amount were converted into 1,100,000
      shares of common stock. The actual effective interest rate, which includes
      the
      value of the shares as well as the minimum interest amount of $25,000, was
      241.5%.





10.
      UNSECURED CONVERTIBLE PROMISSORY NOTE





In
      July
      2007, we issued a $1,100,000 unsecured convertible promissory note (“Unsecured
      Convertible Promissory Note”) to one institutional investor for gross proceeds
      of $1,100,000. The Unsecured Convertible Promissory Note matures September
      30,
      2008, has an 8% interest rate, payable in cash quarterly, and is convertible,
      in
      whole or in part, into units, with each unit (“Unit”) priced at $1.00 and
      consisting of one share of common stock and one warrant, exercisable at $1.25
      per share maturing three years from issuance. We may prepay the Unsecured
      Convertible Promissory Note at any time prior to maturity with no penalty.
      We
      may, but only at maturity, elect to repay the Unsecured Convertible Promissory
      Note in Units valued at $1.00 per Unit. Pursuant to EITF 98-5, "Accounting
      for
      Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios" and EITF 00-27, “Application of Issue No. 98-5 in
      Certain Convertible Instruments,” we recorded $1,067,274 upon the issuance of
      the Unsecured Convertible Promissory Note attributable to the beneficial
      conversion feature as additional paid in capital. The discount is being
      amortized using the effective interest rate method over the term of the
      indebtedness.




F-14





11.
      PROMISSORY NOTE





On
      April
      27, 2007, we purchased a truck to be used by our pumper in our Oklahoma
      properties by issuing a promissory note (the “Promissory Note”) to a bank
      secured by the truck. The Promissory Note matures October 27, 2010, has a
      variable interest rate of Prime plus 1.0%, and has monthly principal and
      interest payments totaling $366. As of December 31, 2007, the interest rate
      on
      the Promissory Note was 8.25%.





The
      following table summarizes the balance of the note at December 31,
      2007:




Promissory
                Note Outstanding at December 31, 2007
            
            $
            10,807Less
                Current Portion
            
            
            3,518$
            7,289





12.
      COMMITMENTS AND CONTINGENCIES





Pursuant
      to our Agreement with Gold and Empesa, we are considered the operators of the
      concession and will pay all costs associated with drilling and testing of the
      first well on the Rosablanca project. If we do not complete drilling and testing
      of the first well by July 3, 2008, and we do not receive extensions from the
      ANH, we may lose our entire interest in the concession and the $144,000 letter
      of credit we previously issued. However, we would be entitled to receive the
      balance of the $1,200,000 deposit ($1,029,601 as of December 31, 2007) that
      we
      have in trust with the ANH. After drilling the first well, we are required
      to
      provide the ANH with a budget and program for drilling successive wells. The
      concession with the ANH shall remain in effect as long as we meet our time
      obligations to drill each well that we present to the ANH. We anticipate that
      we
      will need to raise at least $2,000,000 of additional capital to complete the
      first well.




In
      February 2008, we entered into an LOI and issued a $100,000 deposit to acquire
      a
      minority position in certain producing oil and gas assets in Colombia. It’s
      anticipated that the purchase price will consist of cash and equity securities
      consisting of shares of common stock and warrants. We anticipate closing this
      transaction in the second quarter of 2008.





ENVIRONMENT





Osage,
      as
      owner and operator of oil and gas properties, is subject to various federal,
      state, and local laws and regulations relating to discharge of materials into,
      and protection of, the environment. These laws and regulations may, among other
      things, impose liability on the owner of real property and the lessee under
      oil
      and gas leases for the cost of pollution clean-up resulting from operations,
      subject the owner/lessee to liability for pollution damages and impose
      restrictions on the injection of liquids into subsurface strata.




F-15





Although
      Company environmental policies and practices are designed to ensure compliance
      with these laws and regulations, future developments and increasing stringent
      regulations could require the Company to make additional unforeseen
      environmental expenditures





The
      Company maintains insurance coverage that it believes is customary in the
      industry, although it is not fully insured against all environmental
      risks.





The
      Company is not aware of any environmental claims existing as of December 31,
      2007, that would have a material impact on its consolidated financial position
      or results of operations. There can be no assurance, however, that current
      regulatory requirements will not change, or past non-compliance with
      environmental laws will not be discovered on the Company's
      property.





LAND
      RENTALS AND OPERATING LEASES





In
      February 2008, the Company entered into a 36 month lease for its corporate
      offices in San Diego. The lease is initially for $3,682 per month for the first
      year, increasing to $3,800 and $3,923 in the second and third year respectively.
      The lease is guaranteed by Mr. Bradford, our President and CEO. Nocompensation
      was given to Mr. Bradford for his guarantee. In addition, the Company is
      responsible for all operating expenses and utilities. Outside of the San Diego
      lease, the Company’s Oklahoma office and all equipment leased are under
      month-to-month operating leases.





Future
      minimum rental payments required as of December 31, 2007 under operating leases
      are as follows by year:





Year
            
            
            Amount2008
            
            $
            40,5002009
            
            $
            45,4842010
            
            $
            46,9502011
            
            $
            3,923Totals
            
            $
            136,857





Rental
      expense charged to operations totaled $12,225 and $3,407 for 2007 and 2006,
      respectively.





LEGAL
      PROCEEDINGS





The
      Company is not a party to any litigation that has arisen in the normal course
      of
      its business and that of its subsidiaries.





13.
      OTHER
      EQUITY TRANSACTIONS





2006
      Unit Offering




On
      June
      15, 2006, for gross proceeds of $15,000, we issued 11,000 shares of common
      stock
      and 11,000 warrants, exercisable at $3.00 per share maturing on June 15, 2009
      to
      Edward Horwich.





On
      July
      13, 2006, for gross proceeds of $15,000, we issued 11,000 shares of common
      stock
      and 11,000 warrants, exercisable at $3.00 per share maturing on June 15, 2009
      to
      Robert Plyler.





Shares
      Issued for Services




On
      November 28, 2006, we issued 25,000 shares of common stock to Viewpoint
      Securities, LLC in full payment for consulting services provided totaling
      $62,500. The shares were valued using the market price of our stock.





Notes
      Receivable




On
      December 28, 2006, we sold 18,835,000 shares of our common stock at a price
      of
      $0.025 per share, for a total of $470,875, to the following individuals and
      entities that paid for the stock through the issuance of a note receivable.
      The
      notes receivable have an 8% annual interest rate and principal and interest
      are
      due on December 28, 2009. The Notes Receivable had a balance of $309,875 at
      December 31, 2007 and $470,875 at December 31, 2006. The issuance of these
      shares has been treated as a recapitalization of the Company. Accordingly,
      all
      per share data has been retroactively restated.




F-16





Name
            
            Shares
            
            Note
                ReceivableKim
                Bradford
            
            
            6,055,500
            
            $
            151,375Paul
                DiFrancesco
            
            
            3,140,000
            
            $
            78,500Babcock
                Trust
            
            
            1,900,000
            
            $
            47,500Rhone
                International
            
            
            1,500,000
            
            $
            37,500JK
                Advisors, Inc.
            
            
            1,485,000
            
            $
            37,125Llanerch,
                LLC
            
            
            1,485,000
            
            $
            37,125Lafayette
                Capital, LLC
            
            
            1,485,000
            
            $
            37,125Pointblank
                Trading, LLC
            
            
            1,400,000
            
            $
            35,000Ran
                Furman
            
            
            375,000
            
            $
            9,375Variable
                Assets
            
            
            10,000
            
            $
            250Totals
            
            
            18,835,000
            
            $
            470,875





Mr.
      Bradford, Mr. DiFrancesco, a partner of Mr. Bradford in Catalyst Consulting
      Partners and Decision Capital Management, LP and Mr. Furman, one of our
      directors purchased 6,055,000, 3,140,000 and 375,000 shares of our Common Stock,
      respectively by issuing notes to us in the amounts of $151,375, $78,500 and
      $9,375, respectively. As a result of this transaction, a total of $239,250
      of
      the $470,875 note, is due from related parties. In December 2007, Mr. Bradford
      and Mr. Furman paid in full their notes plus accrued interest.





The
      balance of the note receivable of $231,625, representing, 9,265,000 shares
      of
      common stock, were purchased by accredited investors and institutional investors
      who are not officers or directors of the company.





2007
      Unit Offering




In
      June
      2007 and July 2007, for gross proceeds of $925,000, we issued 925,000 shares
      of
      common stock and 1,387,500 warrants, exercisable at $1.50 per share expiring
      on
      June 30, 2010 to one accredited investor and two institutional investors.





Common
      Stock Offering




In
      April
      and May 2007, we issued 1,187,500 shares of our common stock at a price per
      share of $0.40 to six accredited investors and entities for a total
      consideration of $475,000.





In
      all
      instances of the above sales, the sales were made under the exemption from
      registration provided by Regulation D, Rule 506. The purchasers were either
      officers or directors of our company, accredited investors with whom we had
      a
      preexisting relationship or institutional investors. The sales were not
      accompanied by any public solicitation or public advertising. The sales were
      made by officers of our company who received no compensation, director or
      indirect, for effecting the sales, with the exception of the 2007 Unit Offering
      and the 2007 Common Stock Offering, which were made by Viewpoint Securities,
      LLC, who received commissions totaling $103,000.





STOCK
      OPTIONS





In
      June
      2007, Osage implemented the 2007 Osage Exploration and Development, Inc. Equity
      Based Compensation plan (“2007 Plan”). As of December 31, 2007, no shares or
      options have been issued under the 2007 Plan. In 2007, we issued 2,600,000
      shares to two of our officers in conjunction with their employment agreement
      outside of the 2007 Plan.




F-17





OTHER
      DILUTIVE SECURITIES





As
      of
      December 31, 2007, Osage has outstanding dilutive securities, a summary of
      such
      securities follows:





Range
                of conversion/exercise
              Price
            
            Underlying
                shares ofCommon
                Stock
            
            Average
                remainingcontractual
                life
            
            Weighted
                Averageexercise
                pricesWarrants
                granted with financing agreements
            
            $
            1.50
                - $3.00
            
            
            1,756,917
            
            
            2.27
                years
            
            $
            1.46Unsecured
                Convertible Promissory Note*(1)*
            
            $
            1.00
            
            
            1,100,000Unsecured
                Convertible Promissory Note*(1)*
            
            $
            1.25
            
            
            1,100,000
            
            
            3.0
                years from conversion
            
            $
            1.25Total
            
            
            
            
            
            3,756,917





(1)
            The
                Unsecured Convertible Promissory Note matures September 30, 2008
                and is
                convertible into 1,100,000 units, with each unit (“Unit”) consisting of
                one share of common stock and one warrant, exercisable at $1.25 per
                share
                maturing three years from issuance.





A
      summary
      of outstanding dilutive securities as of December 31, 2006 is as follows:





Range
                of conversion/exercise
              Price
            
            Underlying
                shares ofCommon
                Stock
            
            Average
                remainingcontractual
                life
            
            Weighted
                Averageexercise
                pricesWarrants
                granted with financing agreements
            
            $
            1.50
                - $3.00
            
            
            369,417
            
            
            2.42
                years
            
            $
            2.26Convertible
                Debentures
            
            $
            0.75
                - $1.20
            
            
            347,417Total
            
            
            
            
            
            716,834





14.
      INCOME TAXES





Following
      is a reconciliation of the Federal statutory rate to the effective income tax
      rate for the years ended December 31, 2007 and December 31, 2006:





December
                31, 2006
            
            December
                31, 2007Federal
                income tax rate
            
            
            34.0
            %
            
            34.0
            %State
                income taxes, net of federal benefit
            
            
            6.0
            %
            
            6.0
            %Utilization
                of NOL carry forwardEffect
                of valuation allowance
            
            
            (40.0
            %)
            
            (40.0
            %)Effective
                income tax rate
            
            
            0.0
            %
            
            0.0
            %





At
      December 31, 2007, Osage had net operating loss carry forwards of approximately
      $2,400,000 which expire at various dates through 2025.




F-18





Deferred
      tax assets and liabilities reflect the net tax effect of temporary differences
      between the carrying amount of assets and liabilities for financial reporting
      purposes and amounts used for income tax purposes. Significant components of
      Osage’s deferred tax assets and liabilities are as follows at December 31,
      2007:





2007Deferred
                tax assets:Net
                operating loss carry forward
            
            $
            2,413,373Less:
                valuation allowance
            
            
            (2,413,373
            )Deferred
                tax liability
            
            $
            0


The
      non-current portions of the deferred tax asset and the deferred tax liability
      accounts offset each other in the Company's consolidated balance
      sheet.





The
      Company’s tax obligations began with the acquisition of Osage LLC in April 2006.
      On a pro-forma basis, for the year ended 2007 and 2006, assuming the Company
      was
      an entity subject to taxes since 2005, the effective tax rate would have also
      been zero.





15.
      RELATED PARTY TRANSACTIONS





During
      2006 and 2005, Osage Exploration and Development, Inc. as well as Osage Energy
      Company LLC have utilized the services of Franklin Energy Investments, a company
      owned by Mr. Franklin, one of our directors, for various geological and
      administrative services. The Company paid $37,650 and $76,150 in 2005 and 2006,
      respectively for these services. The Company believes that it has paid market
      rates for these services. In January 2007, the Company entered into a
      twelve-month consulting agreement with Mr. Franklin for geological services
      at a
      cost of $6,000 per month, which as of August 1, 2007, was increased to $8,000
      per month, which the Company believes is equivalent to those it may receive
      from
      an unaffiliated third party. Effective November 9, 2007, Mr. Franklin became
      our
      Chief Geologist pursuant to an employment agreement.





In
      February, 2007, the Company entered into a four month financial consulting
      agreement, automatically renewable for another four months, with Mr. Furman,
      one
      of our directors, for various financial and accounting advisory services at
      $6,250 per month, which the Company believes is equivalent to those it may
      receive from an unaffiliated third party. Effective November 9, 2007, Mr. Furman
      became our Chief Financial Officer pursuant to an employment agreement.





On
      February 1, 2007, the Company entered into a month-to-month lease on its
      corporate headquarters with a company owned in part by Kim Bradford, our
      President, CEO and Chairman, at $500 per month, which the Company believes
      to be
      at market rate.





On
      December 28, 2006, Mr. Bradford, Mr. DiFrancesco, a partner of Mr. Bradford
      in
      Catalyst Consulting Partners and Decision Capital Management, LP and Mr. Furman,
      one of our directors purchased 6,055,000, 3,140,000 and 375,000 shares of our
      Common Stock, respectively by issuing notes to us in the amounts of $151,375,
      $78,500 and $9,375, respectively. As a result of this transaction, a total
      of
      $239,250 of the $470,875 note, is due from related parties. In December 2007,
      Mr. Bradford and Mr. Furman paid in full their notes plus accrued interest.





16.
      MAJOR
      CUSTOMER





During
      the years ended December 31, 2007 and 2006, one customer, Sunoco, Inc.,
      accounted for 100.0% of our total oil and gas sales.





17.
      ASSET
      RETIREMENT OBLIGATIONS





The
      Company recognizes a liability at discounted fair value for the future
      retirement of tangible long-lived assets and associated assets retirement cost
      associated with the petroleum and natural gas properties. The fair value of
      the
      liability is capitalized as part of the cost of the related asset and amortized
      to expense over its useful life. The liability accretes until the date of
      expected settlement of the retirement obligations. The related accretion expense
      is recognized in the statement of operations. The provision will be revised
      for
      the effect of any changes to timing related to cash flow or undiscounted
      abandonment costs. Actual expenditures incurred for the purpose of site
      reclamation are charged to the asset retirement obligations to the extent that
      the liability exists on the balance sheet. Differences between the actual costs
      incurred and the fair value of the liability recorded are recognized in income
      in the period the actual costs are incurred.




F-19





There
      are
      no legally restricted assets for the settlement of asset retirement obligations.
      No income tax is applicable to the asset retirement obligation as of December
      31, 2007 and 2006, because the Company records a valuation allowance on
      deductible temporary differences due to the uncertainty of its realization.
      A
      reconciliation of the Company's asset retirement obligations from the periods
      presented is as follows:





Year
                EndedDecember
                31, 2007
            
            December
                31, 2006Beginning
                Balance
            
            $
            13,675
            
            $
            13,675Incurred
                during the periodAdditions
                for new wellsAccretion
                expense
            
            
            2,872
            
            
            1,368Ending
                Balance
            
            $
            16,547
            
            $
            15,043





18.
      CHANGE IN CONTROL OF REGISTRANT





On
      December 28, 2006, a change of control occurred when Kim Bradford, our CEO
      and
      President, along with Ran Furman, one of our directors, Paul DiFrancesco, a
      partner of Kim Bradford in Catalyst Consulting Partners and Decision Capital
      Management, LP and other investors entered into a transaction with the Company
      whereby for a $470,875 promissory note, the Company issued a total of 18,835,000
      shares of Common Stock, or approximately 64% of the Company’s outstanding common
      stock as of December 31, 2006. The promissory notes carry an 8% interest rate,
      with interest and principal due at maturity, December 2009 and are secured
      by a
      pledge of shares issued. In December 2007, Mr. Bradford and Mr. Furman paid
      in
      full their notes plus accrued interest. In conjunction with the change of
      control, on January 23, 2007, Mr. Volk, Jr. resigned as President and CEO of
      the
      Company and Mr. Bradford was elected as President and CEO of the Company for
      a
      one year term.





19.
      CHANGE IN DIRECTORS OF REGISTRANT





Effective
      February 7, 2007, Mr. Lamberson resigned as director of the Company and Mr.
      Volk
      and Mr. Franklin elected Mr. Bradford to fill the director vacancy created.
      Mr.
      Volk then resigned as a director of the Company and Mr. Bradford and Mr.
      Franklin elected Mr. Furman to fill the director vacancy created. Mr. Franklin
      and Mr. Furman then elected to Mr. Bradford to the chairman of the board of
      the
      company.





20.
      SUBSEQUENT EVENTS





In
      February 2008, we entered into an LOI and issued a $100,000 deposit to acquire
      a
      minority position in certain producing oil and gas assets in Colombia. It’s
      anticipated that the purchase price will consist of cash and equity securities
      consisting of shares of common stock and warrants. We anticipate closing this
      transaction in the second quarter of 2008.





On
      February 28, 2007, our common stock began trading on the Over-the-Counter
      Bulletin Board under the symbol OEDV.OB.




F-20





21.
      SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS PRODUCING ACTIVITIES
      (UNAUDITED)





Osage’s
      independent engineers, Reddy Petroleum Company, prepared reserve estimates
      for
      the year-end reports for 2007. Management cautions that there are many inherent
      uncertainties in estimating proved reserve quantities and related revenues
      and
      expenses, and in projecting future production rates and the timing and amount
      of
      development expenditures. Accordingly, these estimates will change, as future
      information becomes available.





Proved
      oil and gas reserves are the estimated quantities of crude oil, condensate,
      natural gas and natural gas liquids which geological and engineering data
      demonstrate with reasonable certainty to be recoverable in future years from
      known reservoirs under existing economic and operating conditions, i.e. prices
      and costs as of the date the estimate is made. Prices include consideration
      of
      changes in existing prices provided only by contractual agreements, but not
      on
      escalations based upon future conditions





Proved
      developed reserves are those reserves expected to be recovered through existing
      wells with existing equipment and operating methods.





SFAS
      No.
      19, "Financial Accounting and Reporting by Oil and Gas Producing Companies",
      as
      amended, requires disclosure of certain financial data for oil and gas
      operations and reserve estimates of oil and gas. This information, presented
      here, is intended to enable the reader to better evaluate the operations of
      the
      Company. All of the Company's oil and gas reserves are located in the United
      States.





The
      aggregate amounts of capitalized costs relating to oil and gas producing
      activities and the related accumulated depletion, depreciation, and amortization
      and valuation allowances as of December 31, 2007 and 2006 are as
      follows:





2007
            
            2006Proved
                Properties
            
            $
            103,177
            
            $
            103,177Unproved
                properties being amortizedUnproved
                properties not being amortized
            
            
            150,464Capitalized
                asset retirement costs
            
            
            13,675
            
            
            13,675Accumulated
                depletion, depreciation,amortization
                and valuation allowances
            
            
            (9,065
            )
            
            (2,795
            )$
            258,251
            
            $
            114,057





Estimated
      quantities of proved developed and undeveloped reserves of crude oil and natural
      gas, all of which are located within the United States, as well as changes
      in
      proved developed and undeveloped reserves during the past two years are
      indicated below:





2007
            
            2006Oil
              (BBLS)
            
            Gas
              (MCF)
            
            Oil
              (BBLS)
            
            Gas
              (MCF)Proved
                developed and undeveloped reserves:Beginning
                of year
            
            
            159,717
            
            
            200,439
            
            
            150,136
            
            
            200,271Revisions
                of previous estimates
            
            
            2,999
            
            
            483
            
            
            11,678
            
            
            168Improved
                recoveryPurchases
                of minerals in placeExtensions
                and discoveriesProduction
            
            
            (5,650
            )
            
            
            
            
            (2,097
            )Sales
                of minerals in placeEnd
                of year
            
            
            157,066
            
            
            200,922
            
            
            159,717
            
            
            200,439Proved
                developed reserves:Beginning
                of year
            
            
            159,717
            
            
            200,439
            
            
            150,136
            
            
            200,271End
                of Year
            
            
            157,066
            
            
            200,922
            
            
            159,717
            
            
            200,439




F-21




The
      foregoing estimates have been prepared by the Company from data prepared by
      an
      independent petroleum engineer in respect to certain producing properties.
      Revisions in previous estimates as set forth above resulted from analysis of
      new
      information, as well as from additional production experience or from a change
      in economic factors.





The
      reserve estimates are believed to be reasonable and consistent with presently
      known physical data concerning size and character of the reservoirs and are
      subject to change as additional knowledge concerning the reservoirs becomes
      available.





There
      are
      no reserves attributable to partnership or minority interests at December 31,
      2007 or December 31, 2006.





The
      present value of estimated future net revenues of proved developed reserves,
      discounted at 10%, were as follows:





December
                31,2007
            
            2006Proved
                developed and undeveloped reserves (Present value before income
                taxes)
            
            $
            7,788,051
            
            $
            6,213,314





Depletion,
      depreciation and accretion per equivalent unit of production was $0.47 for
      2007
      and 2006.





SFAS
      No.
      69, "Disclosures About Oil and Gas Producing Activities", requires certain
      disclosures of the costs and results of exploration and production activities
      and established a standardized measure of oil and gas reserves and the
      year-to-year changes therein.





In
      addition to the foregoing disclosures, SFAS No. 69 established a "Standardized
      Measure of Discounted Future Net Cash Flows and Changes Therein Relating to
      Proved Oil and Gas Reserves".





Costs
      incurred, both capitalized and expensed, for oil and gas property acquisition,
      exploration and development for the years ended December 31, 2007 and 2006
      are
      as follows:





December
                31, 2007:
            
            USA
            
            Colombia
            
            ConsolidatedProperty
                acquisition costs
            
            
            0
            
            
            0
            
            
            0Exploration
                costs
            
            
            
            
            
            150,464
            
            
            150,464Development
                costs
            
            
            0
            
            
            0
            
            
            0Asset
                retirement costs
            
            
            0
            
            
            0
            
            
            0




December
                31, 2006:
            
            USA
            
            Colombia
            
            ConsolidatedProperty
                acquisition costs
            
            
            0
            
            
            0
            
            
            0Exploration
                costs
            
            
            0
            
            
            0
            
            
            0Development
                costs
            
            
            0
            
            
            0
            
            
            0Asset
                retirement costs
            
            
            0
            
            
            0
            
            
            0




The
      results of operations for oil and gas producing activities for the years ended
      December 31, 2007 and 2006 were as follows:





2007
            
            2006Sales
            
            $
            288,255
            
            $
            100,977Production
                Costs
            
            
            95,893
            
            
            85,260Exploration
                CostsDepletion,
                depreciation, amortization and valuation allowance
            
            
            3,324
            
            
            1,664Income
                Tax Provision
            
            
            75,615
            
            
            5,621Results
                of operations from production activities
            
            $
            113,424
            
            $
            8,432




F-22




For
      2006
      and 2007, all results of operations for oil and gas producing activities were
      conducted in the U.S. The following information at December 31, 2007 and for
      the
      years ended December 31, 2007 and 2006, sets forth standardized measures of
      the
      discounted future net cash flows attributable to the Company's proved oil and
      gas reserves.





Future
      cash inflows were computed by applying year-end prices of oil and gas (with
      consideration of price changes only to the extent provided by contractual
      arrangements) and using the estimated future expenditures to be incurred in
      developing and producing the proved reserves, assuming continuation of existing
      economic conditions.





Future
      income tax expenses were computed by applying statutory income tax rates to
      the
      difference between pretax net cash flows relating to the Company's proved oil
      and gas reserves and the tax basis of proved oil and gas properties and
      available operating loss and excess statutory depletion carryovers reduced
      by
      investment tax credits. Discounting the annual net cash flows at 10% illustrates
      the impact of timing on these future cash flows.





The
      following table presents the standardized measure of discounted estimated net
      cash flows relating to proved oil and gas reserves for the years ended December
      31, 2007 and 2006:




2007
              
              2006Future
                  cash inflows
              
              $
              13,185,804
              
              $
              10,785,114Future
                  production costs
              
              
              2,354,360
              
              
              2,035,763Future
                  development costs
              
              
              175,000
              
              
              25,000Future
                  abandonment costs
              
              
              92,000
              
              
              92,000Future
                  income tax expense
              
              
              4,225,778
              
              
              3,452,940Future
                  net cash flow
              
              
              6,338,666
              
              
              5,179,41110%
                  annual discount for estimated timingOf
                  cash flows
              
              
              2,514,204
              
              
              1,488,846Standardized
                  measure of discountedFuture
                  net cash flow
              
              $
              3,824,462
              
              $
              3,690,565




The
      principal changes in the standardized measure of discounted future net cash
      flows during the year ended December 31, 2007 were as follows:





ExtensionsRevisions
              of
              previous estimatesPrice
                changes
            
            $
            2,556,912Quantity
                changes
            
            
            (168,934
            )Change
                in production rates, timing andOther
            
            
            (1,438,887
            )Development
                costs incurredChanges
                in estimated future developmentCosts
            
            
            150,000Sales
                of oil and gas, net of productionCosts
            
            
            (192,362
            )Accretion
                of discountNet
                change in income taxes
            
            
            (772,832
            )Net
                Increase
            
            $
            133,897




F-23